Vat at 23% is also chargeable on road diesel but at the reduced 13.5% rate on green diesel. The Irish system of charging less tax at the pumps for diesel used off-road (also pursued in Britain) creates the opening for criminal gangs to wash out the dye and pocket the tax difference. This has become a major racket, costing the Exchequer at least €100m per annum.

The alternative is to scrap the dyed diesel altogether and let qualified off-road users, including farmers, claim back the tax difference later. This would not work in the Republic unless a similar change was made in Northern Ireland, which faces the same incentives to make the change, namely revenue loss and the sustenance of criminality. Numerous countries in Europe as well as the USA operate a rebate system, with just one type of fully-taxed diesel available to distributors.

Irish farm organisations have been lukewarm about the change, reasoning presumably that there is nothing in it for farmers beyond some extra paperwork. Farm contractors have also drawn attention to the delayed cash-flow implications.

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But it appears that there could be more in it for off-road users than meets the eye. If I understand the Revenue Commissioners’ website correctly, the position is as follows. Ordinary road diesel, available at every filling station in the country, costs typically up to €1.50/litre. Of this figure, 47.90c is excise and 28.05c is VAT.

Total tax is thus 75.95c, with the remainder (74.05c) going to the retailer, distributor, refiner and ultimately the crude oil producers and shippers. Take this 74.05c as the base cost if green diesel were to be scrapped. The excise on green diesel is 10.23c/litre and VAT at the reduced rate brings this up to 95.66c. The rebate to off-road users should be about 54.30c/litre if calculated in this manner. But few distributors of green diesel discount the fully-taxed price as much as this. The typical price seems to be around €1/litre, not necessarily because the traders are ripping people off but because the current system imposes extra costs. The extra costs include adding the dye, keeping separate tanks for green diesel, as well as extra delivery and stock-holding costs.

If the fuel trade were relieved of these extra costs, there appears to be at least 5c/litre in potential extra rebate to off-road users, not a bonanza but worth thinking about. At various retail prices for road diesel, fully taxed, the tax difference and hence the potential rebate works out as follows: at €1.50/litre, the rebate should be 54.3c; at €1.48, it should be 54.2c; at €1.46, it should be 54c, and at €1.44, the rebate should be 53.9c.

The actual reduction on offer to farmers and other off-road users is below these figures. In effect, the costs of the green diesel system are borne by the off-road users.

If the farm organisations have been opposing a change because they see no advantage to farmers to offset the form-filling hassle, they might have another think.There could be a worthwhile potential gain for off-road users if the cost savings could be routed, at least in part, in their direction.

Most farmers now have to cough up €102 per annum per tractor, even when it is rarely used outside the farm. Given the potential savings, there should be plenty of scope to do a deal which would keep everyone (apart from the criminals) happy. Bear in mind that there would be savings also for Customs officials and the Gardaí.

From a broader societal perspective, it is clearly undesirable to persist with a system which has opened up such a large criminal racket. Motorists who succumb to the temptation to use washed diesel are also taking a risk with their vehicles, which can suffer significant damage. Washed diesel is simply not the same product as proper road diesel.

action

From the Exchequer’s standpoint, it is a little puzzling that there has been no action on this issue. The revenue loss is not chicken-feed and the Government parties clashed prior to the budget over issues involving smaller sums. If cleaning up the diesel mess can yield €100m (some estimates are much higher), you would expect the Department of Finance to be leading the charge.

Since we know that practical rebate systems have been devised, and are operated successfully, in other countries, nobody is being asked to split the atom here.