Pearse Doherty (Donegal, Sinn Fein)
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260. To ask the Minister for Finance the estimated cost of reducing excise duty on home heating oil to €0 per 1,000 litres to the end of August 2022 and the end of December 2022 respectively. [15953/22]

Pearse Doherty (Donegal, Sinn Fein)
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261. To ask the Minister for Finance the minimum levels of excise duty that may apply to petrol, diesel and home heating oil respectively in accordance with the EU Energy Directive; the current rates that apply to each; and the estimated cost of reducing each to the minimum allowable levels to end of August 2022 and the end of December 2022 respectively. [15954/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 260 and 261 together.

Ireland’s taxation of fuel is governed by European Union law as set out in Directive 2003/96/EC, commonly known as the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. ETD provisions on mineral oils are transposed into national law in Finance Act 1999 (as amended). Finance Act 1999 provides for the application of excise duty, in the form of Mineral Oil Tax (MOT), to specified mineral oils, such as petrol, diesel, and kerosene, that are used as motor or heating fuels. MOT is comprised of a non-carbon component and a carbon component. The carbon component is commonly referred to as carbon tax and the non-carbon component is often referred to as “excise”, “fuel excise” or “fuel duty”. In complying with ETD minimum rates, total MOT rates are taken into account.

I will deal with the Deputy’s questions regarding MOT rates and ETD minimum rates for each of the fuel types individually.

Firstly, in relation to petrol the Deputy will be aware that, in response to the current fuel crisis, I recently introduced a significant reduction in the MOT rate effective from 10 March this year until the end of August. Inclusive of VAT this cut amounts to 20 cents on each litre of petrol. I also brought forward legislation in Finance Act 2021 to provide for a temporary reduction of 1 cent per litre inclusive of VAT to MOT on petrol. This reduction is to come into effect on 1 April and will run to 11 October this year. I took this step to partially offset the expected rise in fuel costs arising from an increase in the Biofuel Obligation for transport fuels proposed by my colleague the Minister for Transport. MOT rates on petrol are summarised in the table below, along with comparisons with the ETD minimum rate.

With regards to auto-diesel, I recently introduced a reduction of 15 cents inclusive of VAT to the MOT rate effective from 10 March through to the end of August. This is in addition to the temporary reduction of 1 cent per litre inclusive of VAT, to offset biofuel costs, provided for in Finance Act 2021 and to come into effect on 1 April until 11 October this year. These rate changes are summarised in the table below, along with comparisons with the ETD minimum rate.

It is important to note that the effective MOT rate on auto-diesel that must be considered in ensuring compliance with the ETD includes the maximum MOT rate repayable under the Diesel Rebate Scheme (DRS), currently €75.00/1,000 litres. This means that the current effective MOT rate on auto-diesel is only marginally above the ETD minimum. From 1 April until 1 September 2022 the difference between the ETD minimum and the effective MOT rate on auto-diesel will be negligible; €0.38/1,000 litres or 0.038 cents/litre.

Kerosene used for heating purposes attracts a reduced rate of MOT which is comprised entirely of a carbon component. The ETD minimum rate of taxation on kerosene used for heating purposes is set at zero. When introducing the 10-year carbon tax trajectory in 2020, I deliberately scheduled rate changes on heating fuels to come into effect at the end of the winter heating season. Therefore, the next scheduled increase in the carbon component of MOT on non-propellant fuels such as kerosene will come into effect on 1 May. The current kerosene MOT rate, the rate effective for one year from 1 May 2022 and comparison with the ETD minimum are set out in the table below.

Finally, while kerosene is the predominant oil used for heating, gas oil (diesel) is also used. Where gas oil is used for heating the ETD minimum tax rate is €21.00 per 1,000 litres. Gas oil that qualifies for a reduced rate of MOT is marked green and is usually referred to as Marked Gas Oil (MGO) or green diesel. When providing for cuts to MOT rates earlier this month I reduced the rate on MGO by 2 cents per litre inclusive of VAT from 10 March. I also provided for the overall rate on MGO to be set at the 2021 level from 1 May until the end of August this year, instead of an increased rate legislated for in Finance Act 2020. These rates are detailed in the table below with ETD comparisons.

I am advised by Revenue that the cost of reducing MOT on petrol, auto-diesel, heating kerosene and MGO to the relevant ETD minima for periods to the end of August 2022 and to the end of December 2022 are estimated at the amounts set out in the table below. The estimated costs of reducing MOT on auto-diesel are based on effective MOT rates to end 2022 which take account of the maximum DRS repayment rate of €75.00/1,000 litres. As taxpayers are not required to provide details of their economic activity or supplies in their periodic tax returns it is not possible to provide the actual VAT loss due of these reductions. However, using tax returns and third-party data an estimate of the VAT loss is provided in the table below.

I am further advised by Revenue that these estimates are based on levels of consumption in 2021, projected forward based on growth rates as anticipated by my Department in Budget 2022. Therefore, they may not fully reflect the current levels of uncertainty in the market for fuels. MGO is used for non-heating purposes, such as in agricultural tractors, and data broken down by usage type is not available. Therefore, the estimates for reducing MOT on MGO reflect all qualifying uses.

MOT receipts, including both carbon and non-carbon components, for all mineral oils for the years 2017 to 2020 are published on the Revenue website at: www.revenue.ie/en/corporate/documents/statistics/excise/net-receipts-by-commodity.pdf.

Current MOT rates for mineral oils and vehicle gas are published on the Excise Duty rates page on Revenue’s website. Further details, including rates prior to 10 March 2022, are available in the Tax and Duty Manual on Excise Duty Rates on Energy Products and Electricity which is also published on Revenue’s website.