Joe McHugh (Donegal North East, Fine Gael)
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Question 69: To ask the Minister for Finance the measures he plans to put in place to prevent the influx of coal produce with high sulphur content from Northern Ireland that will follow the increase of VAT on coal from 13.5% as recommended in the Commission on Taxation Report 2009 in view of the fact that VAT on coal in Northern Ireland is 5%; and if he will make a statement on the matter. [39815/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would point out that the Report of the Commission on Taxation does not contain a recommendation to increase the VAT rate applicable to coal. I have no plans to increase the VAT rate that applies to home heating fuels.

With regard to the differential between the VAT rate applicable to coal in Ireland and the UK, under EU law Member States can retain certain reduced rates provisions which they had in existence on 1 January 1991 but cannot introduce any new provisions and once moved an item cannot be returned to that rate. As Ireland implemented a reduced rate of not less than 12% on home heating fuels, including coal, in 1991 we can retain that reduced rate but the rate cannot go below 12%. In 1991 the UK applied a zero rate to such fuels and under a similar derogation they are entitled to apply a reduced rate to coal, which can be as low as 5%. In this context, EU law does not allow for Ireland to have the same reduced rate of VAT on fuels as applies in the UK.

With regard to legislation governing coal produce and distribution, I have been informed by the Department of the Environment, Heritage and Local Government that S.I. 118/1998 of the Air Pollution Act, 1987 (Marketing, Sale and Distribution of Fuels) Regulations, 1998 provides a ban on the marketing, sale and distribution of bituminous coal in sixteen towns and cities around the country. This includes: Dublin since 1990; Cork since 1995; Arklow, Drogheda, Dundalk, Limerick and Wexford since 1998; Celbridge, Galway, Leixlip, Naas and Waterford since 2000; and Bray, Kilkenny, Sligo and Tralee since 2003.

The aim of these Regulations is to provide for the improvement of air quality in urban areas by restricting the sale of bituminous, or smoky, fuel within such areas. To date the ban has been largely successful and has led to a significant improvement in air quality in these areas.

In addition, in October 2008 the Solid Fuel Trade Group (SFTG Ltd) and the former Minister of State at the Department of Environment, Heritage and Local Government, Mr Michael Kitt, T.D., signed a new voluntary agreement to maintain low levels in the sulphur emissions of bituminous coal and petcoke, and to maintain existing limitations, through smokeless zones, on the marketing, sale and distribution of solid fuels. The agreement also provides that in the towns and environs of Athlone, Carlow, Clonmel and Ennis, SFTG Ltd. will maintain the smokeless fuel market penetration level of 75%, as a percentage of overall solid fuel sales, as set out in previous agreements. These four towns are additional to those already covered by smokeless zones.

In general, local authorities carry out spot checks on fuel retailers to ensure compliance with the ban. Cork County Council is pending prosecution of a retailer who sold bituminous coal in restricted areas to customers who claim to live outside the restricted area.

The Department of the Environment, Heritage and Local Government is planning to place a joint advertisement with the Department of Social and Family Affairs later this month in selected local and regional newspapers. This advertisement will remind fuel retailers of the ban and that local authorities are empowered to take enforcement action. The advertisement will also refer to the Smokeless Fuel Allowance, which is an allowance paid by the Department of Social and Family Affairs to low-income households to help them meet the extra costs of using smokeless or low smoke fuels in certain parts of the country. The amount paid is €3.90 per week for 32 weeks of the year.