Will Ireland be next to close the diesel-petrol tax gap?

Ireland has moved a step closer to becoming the latest European nation to equalise taxation on petrol and diesel. A paper from an interdepartmental committee of the Irish government has proposed a way to wipe out the 22% tax advantage diesel currently enjoys over petrol. The paper justifies the move on air quality and climate change grounds.

Tax on diesel in Ireland is currently 22% less than on petrol. In monetary terms, that is €0.1087, so the report proposes a five-year plan for diesel to rise by €0.0218 per year starting in 2017. The paper says: ‘By sending the signal that this policy will be implemented gradually over a number of years this will minimise the impact on competitiveness as it allows scope for decisions by businesses, who are the primary users of diesel, over the medium-term to be future-proofed.’

The additional revenue over the five-year phase-in period would come to around €330 million cumulatively, although some money could be given back if international oil prices rose.

The paper was released in mid-July and comes from a tax strategy group within Ireland’s finance ministry, but it also had input from several other ministries and the prime minister’s office. It maps out how Ireland’s fuel tax gap could be closed by the end of 2021.

The paper is strong on environmental motivation for equalising tax on diesel and petrol, citing both climate change and air quality.

It says: ‘The OECD have recommended at least an equalisation of excise rates on petrol and diesel to address negative externalities caused by the combustion of these fossil fuels. The basis of this suggestion is the lower tax rate on diesel fails to account for the social and health environmental externalities caused by its combustion. A litre of diesel produces approximately 15.5% more greenhouse gases than a litre of petrol.’ It adds that any advantages a diesel car has over petrol in fuel consumption is a benefit to the driver and does not account for the externalities.

The paper also notes the ‘increase in the number of diesel vehicles, particularly in cities, is giving rise to health concerns due to health implications of higher NOx, sulphur oxide and particulate matter emissions associated with these vehicles. The World Health Organisation estimate that air pollution causes 7 million premature deaths annually as well as impacting negatively on the lives of many more.’

Enda Buckley is leading the campaign to see the proposals realised, working in collaboration between T&E’s Irish member, An Taisce, Green Budget Europe and the umbrella group for NGOs in Ireland, the Irish Environmental Network, as well as a growing number of other civil society organisations including the Irish Cycling Advocacy Network. ‘This paper shows the way,’ Buckley says. ‘The UK has already equalised diesel and petrol tax. Belgium will have done the same by the end of 2018 and France is making rapid progress. In Ireland, the next step is to grow a national political consensus for the five-year programme.’