For Oral Answer on : 10/11/2022
Question Number(s): 128 Question Reference(s): 55885/22
Asked by: David Stanton T.D.
To ask the Minister for Finance the way that the fishing industry is being supported through taxation measures to mitigate the high cost of fuel; his further plans, if any, in this regard; and if he will make a statement on the matter.
At the outset, the Deputy should note that two taxes apply to fuel supplies: excise duty, in the form of Mineral Oil Tax (MOT), and Value-Added Tax (VAT).
Ireland’s excise regime for 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. Finance Act 1999 provides for the application of excise duty, in the form of MOT, to specified mineral oils, such as petrol, diesel, and kerosene that are used as motor or heating fuels.
The standard rate of MOT, currently €425.45 per 1,000 litres, applies to diesel used in road vehicles. Other uses of diesel, such as in agricultural tractors, qualify for a reduced MOT rate of €111.14 per 1,000 litres. Certain uses of diesel, including commercial sea navigation/fishing, are fully exempted from MOT. By contrast, the standard rate of MOT applies to diesel used for non-commercial sea navigation/fishing. As there is already a full relief, there is no scope to further reduce the MOT rate in respect of diesel used for commercial sea navigation/fishing. Section 100(2)(a) of Finance Act 1999 provides that a full repayment of MOT may be claimed on tax-paid diesel used for commercial sea navigation/fishing.
In relation to VAT, the VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must 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 categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate from VAT. Within its rates structure, the EU VAT Directive also allows for historic VAT treatment to be maintained under certain conditions on certain goods and services not provided for in Annex III. Currently Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%. Ireland also holds a number of derogations, under which it is permitted to retain some historic VAT arrangements, under strict conditions. One of these arrangements that Ireland retains is the application of one of the reduced rates of VAT, currently 13.5%, to the supply of certain fuels including diesel for marine use, referred to as marine diesel. Under the Directive this rate cannot be reduced below 12% nor would it be permitted to reduce the rate to 12% for one item alone (for example, marine diesel) without also changing the rate for all the other goods and services that are currently charged at the 13.5% rate. Notwithstanding this, there is another VAT relief that will be of interest to the Deputy. Under the Value-Added Tax (Refund of Tax) (No. 16) Order, 1983 (S.I. No. 324 of 1983), VAT unregistered fishers can claim a repayment of VAT paid on the purchase or importation of marine diesel for use on a registered sea-fishing vessel. Under the standard rules in the VAT regime, VAT-registered fishers can recover VAT on their inputs, including their use of diesel for fishing. Therefore, fishers are already entitled to recover VAT on their diesel for fishing vessels, so there is no scope for further relief.
I am advised by Revenue that a guide to the commercial sea navigation reliefs described above is available at https://www.revenue.ie/en/tax-professionals/tdm/excise/mineral-oil-tax-and-carbon-charges/mineral-oil-manuals/commercial-sea-navigation-relief-guide.pdf