Agriculture, Food and the Marine | To ask the Minister for Agriculture; Food and the Marine the steps that he can take to alleviate the massive rise in fuels costs affecting the agri-food sector which in turn will later in the year contribute to food cost inflation
To ask the Minister for Agriculture; Food and the Marine the steps that he can take to alleviate the massive rise in fuels costs affecting the agri-food sector which in turn will later in the year contribute to food cost inflation; if he will ensure that diesel costs in particular to the farming sector are brought back into line with previous moderate levels; and if he will make a statement on the matter.
In the context of the Ukrainian crisis, significant implications are being seen across all sectors, including the agri-food sector. At farm level, the crisis is already impacting very significantly on the price of fertiliser, animal feed and fuel.
While primary responsibility for the taxation of fuel is with the Minister for Finance, I continue to work closely with him to ensure that the tax code reflects the Government’s priorities for the agri-food sector and the economy generally.
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 Marked Gas Oil (MGO) that are used as motor or heating fuels. Gas oil that qualifies for a reduced rate of MOT is marked green and is usually referred to as MGO, green diesel or agricultural diesel.
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”. The current rate of MOT on MGO is €111.14 per 1000 litres. This compares very favourably to the current rate applied to auto diesel which is €405.38 per 1000 litres.
In March this year, the Minister for Finance reduced the rate on MGO by 2 cents per litre inclusive of VAT from 10 March. The Minister for Finance has also provided for an additional 3 cent (VAT inclusive) reduction in MOT for MGO with effect from 1 May until Budget night in October. This brings the total reduction to 5 cent, reducing the non-carbon component, or excise, to nil.
It should be noted that those who incur expenses in relation to farm diesel in the course of farming or the trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.
I would also note that Section 664A of the Taxes Consolidation Act 1997 provides further relief on expenditure incurred by farmers in respect of an increase in the carbon tax on farm diesel. It is an additional tax measure for farmers introduced in Budget 2012 which compensates increases in the carbon tax from the 2012 base rate of €15 per tonne of CO2 emission.
This measure means that a farmer may take an income tax or corporation tax deduction for farm diesel (including any carbon tax charged in respect of the diesel) and then a further deduction for farm diesel which is equal to the difference between the carbon tax charged and the carbon tax that would have been charged had it been calculated at the rate of €41.30 per 1,000 litres of farm diesel (the 2012 baseline).
My colleagues across Government and I continue monitor the situation closely.
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