Ciarán Ahern (Dublin South West, Labour)
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370. To ask the Minister for Finance if he is satisfied that Ireland’s aviation sector enjoys multiple tax exemptions despite rising carbon emissions; if he is aware that research suggests that the introduction of an air travel levy modelled on the UK’s air passenger duty could generate €6.3 billion in revenue over five years; if he will consider introducing such a levy; and if he will make a statement on the matter. [63731/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland’s excise duty treatment of aviation fuel is governed by European Union law as set out in Directive 2003/96/EC, commonly known as the Energy Tax Directive (ETD). ETD provisions on liquid fuels are transposed into national law in Chapter 1 of Part 2 of Finance Act 1999 (as amended). This legislation provides for the application of excise duty in the form of Mineral Oil Tax (MOT) on liquid fuels, including those used for aviation. Current and historic MOT rates are published on Revenue’s website at www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf.

Heavy oil, or aviation kerosene/jet fuel, is the predominant fuel for commercial aviation. The current MOT rate on jet fuel is €615.76 per 1,000 litres. The ETD mandates a full exemption from excise for jet fuel used for commercial aviation, except where a Member State has a bilateral agreement with another Member State to tax fuel for intra-community flights. Ireland has no such agreements, so the exemption applies to all jet fuel used for commercial aviation, including for domestic, intra-community and international flights. I am advised by Revenue that based on volumes declared as exempt on MOT returns, the total MOT amount relieved on jet fuel used for commercial air navigation in 2024 is estimated at €944.1m, and at €928.6m to end October this year.

Light oil, or aviation gasoline, is much less commonly used in commercial aviation. The current MOT rate on aviation gasoline is €706.14 per 1,000 litres. Under the ETD, Member States may partially or fully relieve aviation gasoline used for commercial aviation from taxation. Ireland has opted to partially relieve MOT on aviation gasoline used in commercial aviation. The relief operates by way of repayment at a rate of €232.27 per 1,000 litres, which means the effective MOT rate is currently €473.87 per 1,000 litres. I am advised by Revenue that based on repayment claims, the total MOT relieved on aviation gasoline used in commercial aviation was €0.1m in 2024, and similar levels are expected this year.

The MOT reliefs for aviation fuels do not apply to fuels used for private pleasure, or non-commercial, air navigation. Further information on MOT on aviation fuels is published on Revenue’s website at www.revenue.ie/en/companies-and-charities/excise-and-licences/mineral-oil-tax/aviation-fuels/index.aspx.

As the Deputy may be aware, in July 2021 the EU Commission published a proposal to revise the ETD which included changes to the current exemption on taxation of intra EU commercial aviation fuel. Negotiations on the revision proposal are ongoing.

In relation to Value Added Tax (VAT), the VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law is obliged to comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within certain categories to which Member States may apply a lower rate or an exemption. Furthermore, the EU VAT Directive allows a Member State to maintain historic arrangements subject to certain strict conditions. The supply of aviation fuels is not included in the categories of goods and services on which the EU VAT Directive allows a lower rate of VAT. Instead, the EU VAT Directive allows an exemption from VAT on the supply of goods for the fuelling of aircraft used by airlines operating chiefly on international routes (e.g. an international airline). Ireland also maintains an existing historic arrangement for aviation kerosene/jet fuel.

On this basis, Ireland applies the zero rate of VAT to aviation fuels, where they are supplied for fuelling an aircraft used by airlines operating for reward chiefly on international routes (e.g. an international airline). However, different rates apply if these fuels are supplied for other purposes or customers (e.g. private planes). In these cases, the standard rate of VAT (currently 23%) applies to supplies of aviation fuels, other than aviation kerosene/jet fuel where the reduced rate of VAT (currently 13.5%) applies as provided for under the historic arrangement.

With regard to potential revenue from an air travel levy, I am informed by Revenue that they do not hold any data in relation to airline ticket sales or flight data. There is no requirement for Revenue to collect this type of information for tax or compliance purposes and therefore they have no basis on which to estimate the revenue that would be raised by the introduction of a levy on the sale of airline tickets into and out of Ireland.

While there has been no formal analysis conducted on the potential yield arising from an air passenger duty similar to that implemented in the UK, the Deputy may wish to note that an EU study published in 2021 assessed the potential impacts of introducing , inter alia, a ticket tax on intra-EEA flights and ticket tax on extra-EEA flights) in which Ireland and other islands were used as case studies. This paper is available at the following address: taxation-customs.ec.europa.eu/system/files/2021-07/Aviation-Taxation-Report.pdf.

Further to this, in October 2022, the ESRI also published a research paper which explores the sectoral, economic, environmental and distributional impacts of several aviation taxation options, including a passenger tax. This paper is available on the ESRI website as set out: www.esri.ie/publications/the-impacts-of-aviation-taxation-in-ireland-0.

My Department is committed to its role in using taxation as one of the policy levers which can contribute to Ireland meeting our emission reduction targets. Tax policy with regard to behavioural change, and emissions, is kept under review as part of the Tax Strategy Group (TSG) and Budgetary cycle.