Barry Andrews (Dún Laoghaire, Fianna Fail)
Link to this: Individually | In context

Question 108: To ask the Minister for Finance the implications for the Revenue Commissioners of abolishing the two different types of diesel; and his views on whether there should be a rebate system for vouched fuel used for agricultural machinery in view of the extent of the activity in fuel laundering and the damage to the environment from the by-product of this activity. [4771/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

I assume that the question concerns the implications of unifying into one rate of mineral oil tax the present two-tier rate structure for diesel and converting the existing low rate regime into a repayment system. Such a system would not rely on colour or chemical marking of diesel fuel.

Diesel is currently taxed at €368.05 per 1,000 litres in respect of auto use and at a lower rate of €47.36 per 1,000 litres for other use. The low rate diesel is marked with a chemical and dye, which gives it a green colour, and is known as marked gas oil — MGO. While it is used in agricultural machinery and tractors, it is also widely used for commercial and domestic central heating, for off-road and special purpose vehicles such as dumpers, concrete pumping vehicles, mobile well drilling vehicles, mobile cranes, bulldozers and diggers, for trains, for other industrial and construction machinery such as generators and compressors, and in boats. In 2005 consumption of MGO was approximately 1.6 billion litres.

The present system allows misuse of MGO in vehicles to be detected by means of a visual check of colour and a laboratory check for the chemical marker. There were 173 convictions obtained for marked oil offences in 2005 and fines totalling €175,704 were imposed. A further 1,326 offences were settled on payment of penalties totalling €986,720.

Fuel laundering is a fraudulent activity involving the removal of the chemical marker and dye from the fuel in order to make it difficult to distinguish it from unmarked auto-diesel. However, as the MGO has a higher sulphur content than auto-diesel, it is still possible for Revenue enforcement staff to identify laundered fuel using specialised roadside detection equipment backed up with laboratory chemical analysis. In 2005 a total of 127 detections of laundered oil were made across 12 counties, which included: 21 retail outlets-oil distributors; 71 hauliers; 35 others; five tankers seized; 311,404 litres of laundered oil seized; and €155,328 taken in penalties from Northern Ireland hauliers.

Prosecutions in 2005 for laundered oil included eight filling stations and 25 other cases have been reported for prosecution, including ten hauliers. Six convictions were obtained in 2005 and penalties totalling €5,950 and one custodial sentence, of 18 months suspended for three years, were imposed.

While acknowledging that laundering is an unacceptable fraudulent activity which can cause environmental damage, a single rate repayment-based regime as proposed would only succeed if a reciprocal measure in the UK was in place as most of the laundered oil is produced from UK MGO — red diesel — which is cheaper than our MGO. Even if the UK also made such a change, there are other serious drawbacks involved.

I am informed by the Revenue Commissioners that a repayment system would involve an enormous burden on Revenue resources in the compliance, processing and audit areas in view of the diversity and number of users of MGO. In addition, all users of low rate diesel would suffer the cash flow burden of a requirement to pay the full rate in the first instance and would also have to maintain systems to claim subsequent repayments and to keep records for Revenue audit purposes.

Furthermore, in Revenue's experience repayment regimes are inherently vulnerable to abuse and attract the attention of criminal elements, such as those involved in oil laundering. A scheme on the lines suggested would be vulnerable to extensive fraud by opening new possibilities for diversion to high-rate auto use that would be extremely difficult or even impossible to detect and prosecute.

Revenue is taking a vigorous approach to oil laundering transactions and a major national project, which will target mineral oil retail outlets and large-scale users and focus on identifying the supply chain, is being put in place this year.

Brian O'Shea (Waterford, Labour)
Link to this: Individually | In context

Question 109: To ask the Minister for Finance if the payment of a standing charge for refuse service to a local authority qualifies for tax relief; and if he will make a statement on the matter. [4781/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

It is not clear from the Deputy's question whether the standing charge referred to is in respect of commercial or domestic refuse service.

As regards a charge by a local authority for commercial refuse, I am informed by the Revenue Commissioners that such a charge would, if laid out for the purposes of the business, qualify as a business expenses in arriving at taxable business profits.

As regards a charge in respect of domestic refuse service, I am informed by the Revenue Commissioners that tax relief at the lower rate of tax — 20% — is available in respect of service charges paid to a local authority. The local authority services charges to which the relief applies are domestic water supply, domestic refuse collection and domestic sewage disposal.

The relief for domestic service charges is granted on a previous year basis, for example, services charges paid in 2005 qualify for tax relief in 2006, and the conditions attaching to such relief are that: (a) all service charges imposed by the local authority under either the Local Government (Financial Provisions) (No. 2) Act 1983 or section 65A of the Public Health (Ireland) Act 1878, as amended, on the individual's premises are paid in full and on time; (b) arrears of all service charges from earlier years must be cleared in accordance with the relevant local authority conditions; and (c) the local authority must be advised of the PPS number of the individuals liable for the service charges.

Denis Naughten (Longford-Roscommon, Fine Gael)
Link to this: Individually | In context

Question 110: To ask the Minister for Finance the maximum value of cash which can be transferred to a favourite niece or nephew which is exempt under inheritance tax; when this level was last increased; the plans he has to increase this threshold; and if he will make a statement on the matter. [4871/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

For the purpose of gift and inheritance tax, the relationship between the person who provided the gift or inheritance, who is the disponer, and the person who received the gift or inheritance, who is the beneficiary, determines the maximum tax-free threshold — known as the group threshold. Three group thresholds exist, which are indexed annually by reference to the consumer price index. The indexed group thresholds for 2004, 2005 and 2006 are set out in the following table.

The current threshold for gifts-inheritances made to a niece or nephew of the disponer is €47,816 and where the value of the gift or inheritance is greater than this, a single low rate of 20% applies to the excess.

Favourite niece-nephew relief is available to certain nephews and nieces who take a gift or an inheritance of a business or farm from the disponer. If the niece-nephew qualifies for the relief, he-she is treated as a child of the disponer for CAT purposes, and instead of a Group B threshold — currently €47,815 — is entitled to a Group A threshold — currently €478,155 — for the business or farm assets only. This means that if a gift or inheritance includes business-farm and non-business/farm assets the Group B threshold will apply to the non-business-farm assets and the Group A threshold will apply to the business-farm assets.

In order to qualify for the relief, the applicant must be a child of a brother or sister of the disponer — in other words, a nephew-niece in law will not qualify — and he-she must have worked substantially on a full-time basis for the disponer for a minimum of five years ending on the date of the gift or inheritance.

This relief is intended to take account of the close working relationship that exists between certain nieces-nephews and their uncles-aunts. It is not intended to apply generally to all gifts or inheritances taken by nieces-nephews, and applying the relief to all such disposals would run counter to the Government's policy of broadening the tax base in order to keep direct tax rates low.