herald

Tuesday 6 December 2016

Petrol and diesel rises of up to five cent a litre among Budget options

Minister for Public Expenditure Brendan Howlin (left) and Finance Michael Noonan have decisions to make in Budget
Minister for Public Expenditure Brendan Howlin (left) and Finance Michael Noonan have decisions to make in Budget

Finance Minister Michael Noonan is holding the option of hiking taxes on petrol and diesel in reserve as Budget talks enter their final stages.

There is a growing view within Government that an increase of between three and five cent on a litre of fuel would allow for extra spending in other areas.

“The price at the pump has dropped substantially in the last year, so there is scope to put a small tax rise on fuel and still have people paying less than 12 months ago,” said a government source.

“Even a three or four cent rise on petrol and diesel could bring in as much as €150m in a single year.” 

A series of hikes in excise and carbon taxes since the economic crisis hit in 2008 saw 23 cents added to a litre of fuel.

However, global economic factors have seen petrol prices fall by around 19 cents a litre in the 12 months to September, while diesel is now 23 cents cheaper than it was at the same time last year.

Mr Noonan has already indicated that he is considering pushing up taxes on the ‘old reliables’ of cigarettes and alcohol.

This extra income would allow Mr Noonan to go beyond the €1.5bn package of tax cuts and new spending that he has committed to for 2016.

A decision on potential rises in excise duties will be among the final budget measures to be signed off before the details are announced next Tuesday afternoon.

Sources said that when all other areas are dealt with, the taxes on petrol and diesel will be on the table.

Angry

A hike in fuel prices would be met with an angry reaction from hauliers and motorists.

President of the Irish Road Haulage Association (IRHA) Verona Murphy told the Herald her members would be furious.

“We are expecting them to reduce motor tax for hauliers so if they just pull that back in another tax it’s no good,” she said.

The IRHA wants the Government to reduce tax on large trucks from €4,200 to closer to the Northern Ireland rate of €900.

“We are looking to be brought in line with the North because we need to be competitive,” she said.

Ms Murphy said that diesel is 10 cent cheaper in Belgium, even though both countries have similar excise rates.

“Fuel prices have come down but that as nothing to do with excise rates,” she said.

AA Roadwatch’s Conor Faughnan said that “an enormous 60pc of the retail price of fuel is tax”.

“Only for those emergency tax rises during the economic crisis we would be looking at petrol costing less than €1 a litre now.

“Motorists have a reasonable and justifiable expectation that fuel takes should start coming down. The emergency situation is over so emergency taxes should be gone,” Mr Faughnan said.

He argued it would be “foolish” to raise petrol prices as there are “very good economic reasons” not to.

“It would be a strategic own goal for Ireland to artificially jack up fuel prices. It would be self-defeating and effectively taking disposal income out of people’s pockets.”

Among the ‘old reliables’, Children’s Minister James Reilly is pushing for a 50c increase in the price of a pack of cigarettes in the Budget.

An additional 50 cent on cigarettes could raise an extra €63m and five cent on the pint would bring in €33m.

Dr Reilly has also asked for the gap in cost between cigarettes and roll-up tobacco to be addressed.

Roll-up tobacco, known more commonly as “rollies”, is considerably cheaper than the average pack of cigarettes, the price of which was increased to €10 in last year’s Budget.

It is widely expected that Mr Noonan will agree to these proposals on “health grounds”.

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