Peadar Tóibín (Meath West, Sinn Fein)
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Question 38: To ask the Minister for Finance if he will meet with a bus transport business in County Meath that is suffering due to a number of issues such as fuel costs, lack of rebates and inability to claim back VAT; and if he will make a statement on the matter. [22235/12]

Michael Noonan (Limerick City, Fine Gael)
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Ireland, as with other countries, has experienced an increase in the cost of petrol and auto-diesel. This is an international phenomenon driven by a number of factors including the price of oil on international markets, exchange rates, production costs and refining costs. The rise in oil prices over recent periods reflected additional factors such as geopolitical uncertainty in Northern Africa and the Middle East with potential supply disruptions. The excise rates (including the carbon charge) in Ireland on motor fuels are 58.8 cent per litre of petrol and 47.9 cent per litre of auto-diesel. However, our rates remain lower than many of our main trading partners and significantly lower than our nearest neighbour the UK. The rates for petrol and auto-diesel were increased with effect from 7 December 2011, arising from an increase in the carbon charge for those fuels from €15 to €20 per tonne of CO2 emitted. This represented an increase of less than 1.5 cent per litre in the case of petrol and just over 1.5 cent per litre in the case of diesel, when VAT is included. The rate of VAT that applies to those fuels increased from 21% to 23% with effect from 1 January 2012.

A derogation under EU Directive 2003/96 on Energy Taxation allowed the application of a reduced rate of Mineral Oil Tax to fuel used for the purposes of certain road passenger services. That derogation has expired and the arrangement was, therefore, terminated by the Finance Act 2008. It would not be possible, having regard to the relevant provisions of EU law, to re-introduce a scheme of that nature for those services.

Passenger transport services are exempt from VAT. This means that that VAT is not charged on the passenger service and the passenger transport provider cannot claim input deductibility on any VAT incurred on costs related to their business, including any VAT paid on fuel costs. As such, the supply of fuel is subject to VAT at the standard rate of 23%.

The exemption from VAT on passenger transport services is the subject of a derogation from the normal VAT rules, where passenger transport is normally subject to VAT at either the standard or reduced rates. Under the EU VAT Directive it is not possible to allow persons who supply exempt services to claim VAT input deductibility, this would equate to zero-rated treatment and zero rated treatment can only apply to those goods and services that were subject to the zero rate on 1 January 1991. In this regard it is not possible to allow passenger transport providers to claim the VAT incurred on their fuel costs. In light of this information, if the company in question wishes to contact my office, I will arrange a meeting with my officials.