Ann Phelan (Carlow-Kilkenny, Labour)
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Question 36: To ask the Minister for Finance if, in view of the substantial revenue loss to the State from the illegal laundering and resale of diesel and kerosine fuels and the huge costs attached to policing the criminal industry around this issue, he will consider using other methods of subsidising agricultural and other legitimate users of those fuels. [29368/11]

Michael Noonan (Limerick City, Fine Gael)
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Marked gas oil, commonly known as green diesel, is subject to Mineral Oil Tax at the rate of €88.66 per 1,000 litres, while the rate for auto-diesel is €465.70 per 1,000 litres. In addition, marked gas oil is subject to a lower VAT rate of 13.5 per cent. The resulting total tax differential is around 50 cent a litre. Marked kerosene is subject to a rate of Mineral Oil Tax, €38.02 per 1,000 litres, which is also considerably lower than that for auto-diesel. This difference in rates offers a considerable incentive for oil laundering. The Revenue Commissioners, who are responsible for collection of Mineral Oil Tax and the control of mineral oils, are very aware of the threat posed by laundered fuel, and undertake a multi-faceted programme of enforcement action to counter it (see details below).

It is assumed that the Deputy's question envisages a movement away from the current system of marking of oil to which a reduced rate of tax applies, to one in which certain users would be given refunds of part of the Mineral Oil Tax paid on oil consumed by them. This would, however, involve the establishment of an extensive repayments system, which would give rise to a considerable administrative burden and costs for oil traders, users and Revenue. It is important to note that marked gas oil has a number of uses such as agricultural diesel, home heating oil among others. Moreover, repayment systems are vulnerable to abuse and likely to be exploited by criminal elements, such as those currently involved in oil laundering. In addition, as oil can also be laundered from UK marked gas oil, a move away from marking would not eliminate the problem of oil laundering unless the UK were to do likewise. For these reasons, the intention is to ensure that controls relating to the sale and distribution of oils, and enforcement action in combating illegal oil laundering activity are as effective as possible.

Mineral Oil Enforcement

Revenue employs a broad range of compliance and enforcement strategies to detect and counteract illegal practices involving mineral oils. These include ongoing analysis of the nature and extent of the problem; development and sharing of intelligence with agencies on both sides of the border; the conduct of intelligence driven operations using covert surveillance to identify oil laundry locations; seizure of illicit product, laundering equipment and vehicles; physical sampling at road checkpoints; and prosecution of those involved in illegal activities in relation to mineral oils.

In 2010, Revenue enforcement staff detected four oil-laundering plants in this jurisdiction and seized 228,000 litres of laundered oil. In addition, nine retailers were found dealing in laundered oil and eight haulage companies were detected using it in their vehicles. There were four Court convictions last year for laundered oil offences. So far this year, nine oil laundries and 327,000 litres of laundered fuel have been seized, together with nine oil tankers and twenty-nine other vehicles. Thirteen persons were arrested in the course of these operations and files have been sent to the Director of Public Prosecutions, who has to date issued directions to prosecute on indictment in respect of two of the cases. Revenue will maintain its programme of stringent action against this illegal trade, and will continue to work closely with Her Majesty's Revenue and Customs in Northern Ireland to address the problem on an all-island basis.

Legal changes have been introduced over recent years to support Revenue's work in this area, including a power to raise assessments on companies and individuals in respect of evaded excise duty. As well as this, the Finance Act 2010 provided for a substantial increase in the fine that may be imposed where a person is convicted on indictment of an offence relating to mineral oils: the previous fine of €12,695 was replaced by a fine not exceeding €126,970. Other possible changes to the law, in particular from the point of view of control of the supply of oil, will be considering in the forthcoming Finance Bill process and in addition, the potential development of an enhanced fuel marker is being considered.