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Catherina Cunnane
Catherina Cunnane
Catherina Cunnane hails from a sixth-generation drystock and specialised pedigree suckler enterprise in Co. Mayo. She currently holds the positions of editor and general manager at That's Farming, having joined the firm during its start-up phase in 2015.
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Minister asked why farmers are not exempt from carbon tax

Tipperary-based Sinn Féin TD, Martin Browne, has asked the Minister for Finance, Paschal Donohoe, for his views on “farmers having to pay carbon tax while fishing boat operators do not have to do so”.

He also called on the minister to express his views on “this discrepancy given the technologically advanced tractors and other machinery farmers are investing in”. The TD raised the parliamentary question last week.

In his opening statement, Minister Donohoe said that Ireland has based its excise duty treatment of fuel used for motor and heating purposes on European Union law.

This is set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the Energy Tax Directive.

MOT rates 

Mineral Oil Tax (MOT) is an excise duty comprising a carbon and a non-carbon component.

Furthermore, the carbon component is often referred to as carbon tax. However, he stated it is one part of the overall tax that applies to mineral oils and other fuels used for motor and heating purposes. MOT, as applied in Ireland, is subject to the requirements of the Energy Tax Directive.

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“I am taking it that the Deputy, in referring to ‘carbon tax’, is enquiring about the application of MOT to agricultural purposes compared to the exemption from MOT that applies in the case of fuel used for fishing boat operators.”

“The main agriculture exposure to excise duty comes from the fuel inputs primarily through the use of marked gas oil, which is currently subject to a rate of MOT of 11.8c/L. This compares to the current full rate of MOT for auto diesel used as a propellant of 51.5c/L.”

“I also note that when my predecessor increased carbon tax in Budget 2012, he made provision for a double income tax relief for farmers to compensate for the increase. This relief continues to apply.”

Tax education regarding farm diesel

He said that individuals and companies that carry on a trade of farming are entitled to claim an income tax or corporation tax deduction regarding farm diesel.

“The legislation provides 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).”

“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 4.1 cent per litre of farm diesel (the 2012 baseline).”

Recently, Independent TD, Michael Fitzmaurice, warned that a further increase in carbon tax in May 2021 will see agricultural diesel prices rise to 70c/L.

Fishing boat operators

He stated that in the case of fishing boat operators, the requirements of the Energy Tax Directive apply.

The minister added that the directive provides for a mandatory exemption from taxation on all fuels that are used for navigation within community waters, other than fuels used for private pleasure navigation.

“This is binding on Ireland and all other EU member states and means that fuels used for sea-fishing and for commercial freight and passenger vessels must be exempt from taxation under the Directive.”

“In line with the directive, Ireland’s MOT legislation provides for a full relief from MOT for fuel used for commercial sea navigation, including sea-fishing.”

“I am advised by Revenue that, subject to conditions, this relief is operated by way of remission or repayment through Revenue’s online services.” Minister Donohoe concluded.

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