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Taxing times
The hard-pressed haulage industry will be hit with yet another layer of
taxation next January, when the Government's controversial Carbon Energy
Tax finally comes on stream. Words: John Loughran
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The carbon energy tax - or a tax on fossil fuels - was first mooted by
Finance Minister Charlie McCreevy in his Budget speech in December 2002,
as part of Ireland's commitment to the Kyoto Agreement on C02 emissions.
At the time business groups, including the Irish Road Haulage Association
(IRHA) expressed alarm at Minister McCreevy's proposals, which had (and
still has) the backing of Environment Minister Martin Cullen.
However, Tanaiste Mary Harney, who established her political reputation
by moving decisively in 1990 to get rid of coal smog in Dublin came down
firmly on the side of Irish industry in opposing the tax.
Throughout 2003 Ms Harney held meetings with major companies opposed to
the introduction of the tax. Companies such as CRH, Aughinish Alumina,
GE Power Systems, Treasury Holdings and the Irish Pharama and Chemical
Manufacturers' Federation all briefed Ms Harney on the respective positions.
Separately it emerged that IDA Ireland also expressed opposition to the
tax. Records released under the Freedom of Information Act show that IDA
Ireland argued as far back as mid 2002 that the tax was "fundamentally
flawed".
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Truckers
will be hit with a three cent per litre increase
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IDA Ireland claimed: "The negative impact of a carbon tax would
be particularly damaging in the current weak economic climate, poor conditions
on the foreign direct investment front, and the loss of competitiveness
Ireland has already suffered in recent years due to a rising cost base."
Initially, Ms Harney's department opposed the tax, contending it would
undermine competitiveness. But as 2003 drew to a close the department
acknowledged the tax was Government policy and focused its attention on
the rate at which the tax would be levied.
Environment Minister Cullen suggested a E20 per tonne of carbon dioxide.
However, the Department of Trade, Enterprise and Employment said the rate
was "excessive". However having accepted that the tax was now
Government policy it proposed an alternative rate of E10 to be phased
in over three years starting with E2.50, E5.00 and E10.
Minister Cullen's original proposal of E20 per tonne of carbon dioxide
would have increased the cost of diesel by more than five cent per litre.
On the other hand, Minister Harney's alternative would have added about
0.63 cent per litre in year one, rising to 2.5 cent by year three.
In February of this year the Environmental Protection Agency (EPA) finally
put a price tag on the cost of burning fossil fuels when it published
its National Allocation Plan for carbon dioxide emissions.
The current estimate is in the region of E10 to E12 per tonne, which would
add an additional three cent per litre to the cost of diesel at the upper
level. It is no surprise that the traded sector got what it wanted from
the Government - free allowances covering virtually the total amount of
its current level of CO2 emissions.
None of the big guns covered by the EPA's draft plan will have to pay
a cent in carbon tax when the regime is introduced next year. Only the
transport sector, small business and households will be hit by the measure.
Provided they can stay within their allocations, big business won't have
to contribute to the cost of meeting Ireland's commitments under the Kyoto
Protocol. the cost will be borne by the transport sector, including hauliers,
small business enterprise and the PAYE sector.
THE EPA's National Allocation Plan for carbon dioxide emissions had been
attacked by the European Commision, claiming the Government "could
have gone further" with its emission proposals.
Deputy head of the Commission's climate control unit Peter Vis, said the
EC was ready to use "a big stick" to force more far reaching
reforms. "We don't want to use the big stick, but the stick has to
be there," he commented.
The Commission believes big companies with heavy energy bills, have been
unfairly favoured by the Government, with smaller businesses and consumers
left to pick up the bill for the lower emissions regime.
Similarly, the Economic and Social Research Institute (ESRI) has criticised
the EPA's draft plan. The Government's mooted carbon tax would affect
the poor disproportionately. ESRI economist Prof John fitzgerald said
low-income households would be badly affected.
Prof Fitzgerald advised the European Commission to announce a ban on high-pollutant
vehicles within 12 years, claiming it would force the motor industry to
produce more efficient vehicles. Raising fuel duty, in contrast, would
only harm consumers and create resentment.
So come January 1, 2005 hauliers the length and breadth of the country
can expect to pay an additional three cent per litre (ex Vat) for their
diesel. The impact, the new tax will have on haulage companies will depend
on the relative strength of individual companies.
The IRHA is concerned that the introduction of this tax, will force many
operators out of business. Such is the association's concern, it has hired
a firm of consultants to gauge the impact the tax will have on the haulage
sector.
The consultants' report should make extremely interesting reading when
it is published in the coming weeks. It will come too late to change the
Government's mind on the introduction the carbon tax, but it might offer
hauliers some useful pointers on how best to overcome its negative impact.
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