Michael Noonan (Limerick City, Fine Gael)
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Irish VAT law does not provide for a VAT rebate for diesel or petrol.  The different treatment of VAT as regards petrol and diesel relates to the VAT input deductibility entitlement of VAT registered taxpayers. 

Businesses who make supplies that are charged to VAT are entitled to claim input VAT on their business expenses.  VAT registered persons are entitled to claim the cost of VAT on the purchase of diesel used in the course of their business, as is the case with most business costs. 

However, section 60 of the VAT Consolidation Act 2010 prohibits VAT deductibility by businesses on certain goods and services which, by their ubiquitous nature, are not easily distinguishable from general non-business use.  This is for anti-avoidance reasons.

Expenditure on petrol, as well expenditure on food, drink, accommodation, and entertainment is specifically excluded from deductibility entitlement, even where the petrol or other goods and services are acquired or used for the purpose of a taxable business. 

Under Article 176 of the EU VAT Directive, Ireland can retain certain restrictions on VAT deductibility that were in place before 1979.   As VAT input deductibility has been restricted on petrol since 1972 Ireland can retain that block on deductibility. While it is legally possible to apply the normal rules of VAT deductibility to petrol, once the block on deductibility is eased or removed it would not be possible to reintroduce it.   There is a case for petrol and diesel to be treated equally in terms of input deductibility entitlements as there is a greater level of diesel run personal motor vehicles in operation today than in the past.  However, the provisions of Article 176 prohibit the application of a new deductibility restriction on diesel expenditure.  As the anti-avoidance concerns regarding petrol expenditure deductibility continue, the restriction on VAT deductibility remains valid.

A Low Emissions Vehicle Taskforce has been established further to a commitment in the Programme for Partnership Government and is considering a number of options to incentivise the uptake of low emissions vehicles and one of the issues being examined is the potential refund of VAT on petrol.  At this stage work of the group is ongoing.