Stephen Donnelly (Wicklow, Independent)
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Question 137: To ask the Minister for Finance the justification for and operational details of the so called green diesel system; and if he will provide any analysis done by his Department on the viability of moving from this system to one offering rebates for agricultural fuel.; and if he will make a statement on the matter. [22595/12]

Michael Noonan (Limerick City, Fine Gael)
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EU Directive 2003/96, which lays down requirements for the taxation of energy products and electricity, permits diesel used for certain industrial and commercial purposes to be subjected to a lower rate of energy tax than that applied to auto-diesel. Those purposes include agricultural, horticultural and piscicultural works and in forestry, in stationary motors and in plant and machinery used in construction, civil engineering and public works. The Directive stipulates also that diesel used for certain other purposes, such as sea fisheries and commercial navigation, must be exempted from energy tax. Where diesel is released for consumption subject to a lower rate of energy tax, or is exempted from that tax, the fuel concerned may not be used as auto-diesel and must be marked, in accordance with EU Directive 95/60 and its associated Decisions, to distinguish it from auto-diesel. The corresponding provisions of Irish law are contained in the Mineral Oil Tax Regulations 2001: a specified substance and a blue dye must be added to the fuel, and result in a green colouring.

The laundering of marked fuel to remove the marker from it, and the subsequent sale of the laundered fuel as auto-diesel, is the principal form of criminality in the fuel market, and combating it is a key priority for the Revenue Commissioners. Extensive enforcement action has been taken against both fuel launderers and those selling laundered fuel, resulting in detection and seizure of laundries and closure of fuel stations. This important work will continue, and Revenue will be assisted in it by the legislative action which I took in the recent Finance Act to enhance the control and supervision of the supply chain for fuels. In addition, I am informed that the Revenue Commissioners are currently working in close cooperation with HMRC in the UK on obtaining a fuel marker that would be more resistant to laundering.

The suggestion has been made that the present system of marking diesel for non-auto use should be replaced by one in which all diesel would be subject to the same rate of Mineral Oil Tax, with repayment arrangements for certain users. A system of that kind would, however, give rise to additional administrative work for the fuel users concerned, and for the Revenue Commissioners, who would have to deal with large numbers of claims from farmers, agricultural contractors, households which use marked fuel for heating and all other users of such fuel. It would also impose cash flow costs on users and could be open to fraud and abuse. The focus, therefore, is on strengthening the existing system for taxing diesel at differential rates, through enhanced supply chain controls, the acquisition of a more effective fuel marker, and continued robust enforcement action.