Tag Archives: duty

I wrote here about the method that the Revenue Commissioners employed to implement new rules on the rate of duty to be paid on diesel used for private pleasure navigation.

For reasons best known to themselves, Irish governments allow farmers to use cheap (“rebated”) diesel in their tractors, on the grounds that the tractors are for off-road use. And for many years boat-owners with diesel engines were allowed to use the same cheap diesel. The same arrangement applied in the UK and in Belgium. The diesel (“marked gas oil”) was coloured, latterly red in the UK and green in Ireland.

The EU decided some time ago that the rules should be standardised throughout Europe and that boats used for private pleasure navigation should not be allowed to use the subsidised fuel. The UK and Ireland sought and received successive derogations allowing them to delay the introduction, allegedly so that they could make appropriate arrangements. The governments did nothing about it. Accordingly, when the European Commission got fed up and told them there would be no more derogations, they had no plans ready and were faced by well-organised gangs of well-to-do boat-owners anxious to continue enjoying their subsidy.

The Irish authorities decided that boat-owners could continue to buy the marked gas oil, at the rebated rate, but that they would have to make a return to the Revenue Commissioners at the end of each year, showing how much diesel they had bought and how much Mineral Oil Tax they were paying to make up the difference. The December 2011 version of the document and forms is here (PDF). Mineral Oil Tax is intended to cover “the difference between the auto diesel and marked gas oil rates at the time of purchase of the oil”.

I asked the Revenue Commissioners how much they had taken in from boat-owners in 2009 and 2010. They said that they got  €169,895.51  in 2009 and  €140,929.12  in 2010.

For most of 2010, the rate of Mineral Oil Tax was  €449.18 per 1,000 litres  (it was slightly higher from 8 to 31 December 2010, a period when there would have been little pleasure-boating). That means that duty was paid on 313,748 litres of diesel.

So how effective is this system? On what proportion of sales for private pleasure navigation is the tax being collected? Revenue has no idea  and has no way of getting any idea because

Mineral Oil Tax on marked gas oil (MGO) is collected at the point of release for consumption from tax warehouse or upon importation to the State and, for the vast bulk of MGO, no information is available at that stage as to the ultimate destination or use of the oil, as most of it goes through a distribution network before it reaches the final consumer.

So let’s see if we can help to provide a rough estimate. According to the RNLI

A diesel engine burns about 1 gallon per hour for every 20hp. So a 90hp diesel would use about 90/20 = 4.5 gallons of fuel per hour. For those who prefer to work in litres then simply multiply the horsepower by 2 and then divide by 9. So a 90hp has an estimated consumption of 2 x 90/9 = 20l/hour.

Let us suppose, for the sake of argument, that the average pleasure craft has a 40hp diesel engine (which is what my 1960s cruiser had). That would use two gallons or nine litres per hour. So the  313,748 litres of diesel on which Mineral Oil tax was paid would have kept one cruiser going for 34,861 hours.

On the other hand, if there are 10,000 pleasure craft in Ireland, with diesel engines averaging 40hp, then they are claiming to have cruised for an average of three and a half hours each in the whole of the year 2010.

I suspect therefore that there is significant underpayment of the Mineral Oil tax and I suggest that the system should be abolished: boat-owners should pay the full (auto diesel) price.