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Cost of petrol and diesel to rise after Budget

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The cost of petrol and diesel will rise are set to rise after tomorrow’s Budget due to a €7.50 increase in the carbon tax to €33.50 per tonne.

his will add €1.28 to an average 60l tank of petrol and €1.47 to a tank of diesel.

The Carbon Tax hike will also see the price of a 12.5kg bale of peat will increase by 20c and €1.80 will be added to a 40kg bag of coal. Gas heating will also rise by more than €15 per 15,000 kilowatts per hour.

It comes after the Farming Independent recently reported that the removal of a tax relief that exempts farm diesel from increases in the carbon tax is among the policies being considered by the Department of Finance for Budget 2021.

The relief was introduced in 2015 after a commitment by the Fine Gael led Government to “exempt farm diesel from further increases in the carbon tax”.

However, according to the papers prepared by the Department of Finance Tax Strategy Group ahead of the Budget there is a case to be made for a review of the relief having regard to the increased policy priority attached to climate action measures.

It said that the continuation of the relief gives rise to issues of equity whereby, in the context of increases in carbon tax envisaged in the Programme for Government, certain sectors of the economy may be asked to bear the full costs of carbon tax increases, while other sectors may be in a position to avail of tax reliefs that mitigate the impact of these increases.

The measure 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) 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).

In the context of the 2014 Agritax Review, Indecon estimated the cost of the measure at around €3.4 million per annum.

IFA estimate that the tax on agri-diesel alone, based on the plans in the Programme for Government will put a cost on farmers of €27.3m in 2021. It said the current rebate system will mitigate, but this is cumbersome and it is not open to all farmers.

“The carbon tax undermines the competitiveness of the agricultural sector and the planned future increase will have a huge impact at farm level over the next ten years.

“As there is no viable alternative to using agri-diesel and other agri-fuels, the application of the carbon tax cannot incentivise behavioural change, therefore they should be exempted from the Carbon Tax,” the IFA said in its pre-budget submission.

Online Editors

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