Michael Healy-Rae (Kerry South, Independent)
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Question 142: To ask the Minister for Finance if the rate of VAT on agricultural diesel will be reduced in view of the fact that farmers and contractors cannot afford the high cost of fuel at the moment; and if he will make a statement on the matter. [3630/12]

Michael Noonan (Limerick City, Fine Gael)
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I would point out marked gas oil, or green diesel, is subject to VAT at the 13.5% reduced VAT rate in accordance with paragraph 17(4) of Schedule 3 to the VAT Consolidation Act 2010. While the reduced rate applies to agricultural diesel in Ireland, the majority of EU Member States apply much higher VAT rates to agricultural diesel than Ireland. Ireland can avail of this reduced rate because of a provision, under Article 118 of the EU VAT Directive that provides that where a reduced rate applied to a good or service on 1 January 1991, Member States can continue to avail of that reduced rate. However, this provision is restricted in that only a rate of 12% or more may apply to domestic fuels. Furthermore, as the VAT Directive provides that Member States may only avail of two reduced VAT rates, and Ireland already applies two reduced VAT rates of 9% and 13.5%, it is not possible to introduce a third VAT rate on agricultural diesel.