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Home > Dail Eireann debate. Questions - Tobacco smuggling [17426/20].

[Oireachtas] Dail Eireann debate. Questions - Tobacco smuggling [17426/20]. (21 Jul 2020)

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Question: 217. Deputy Brendan Smith asked the Minister for Finance if the issues raised by a group (details supplied) regarding the need to implement additional measures to counteract cross-Border smuggling and illicit trade in products such as tobacco, alcohol and fuel products will be considered; and if he will make a statement on the matter. [17426/20]

Minister for Finance - The serious threat that illicit trade in tobacco, alcohol and fuel products poses to legitimate business, to consumers and the Exchequer is clear and I am assured that combatting such criminality continues to be a Revenue priority. Revenue and An Garda Síochána collaborate closely in acting against cross-Border fuel, alcohol and tobacco crime, and also cooperate with their counterparts in Northern Ireland under the framework of the North-South Joint Agency Task Force. This cooperation plays a key role in targeting the organised crime groups who operate across jurisdictions and are responsible for much of this criminality. 

I am satisfied that Revenue’s work in this area has achieved a considerable level of success. For my part, I will fully consider any additional proposals for legislative change that may be brought forward by Revenue which would enhance its capacity to deal effectively with fraud and criminality in these areas. However, I would not support proposals such as those contained in the Sale of Illicit Goods Bill previously sponsored by the former Deputy Declan Breathnach. That Bill proposed to make it an offence to purchase illicit alcohol, tobacco and solid fuel, to make it an offence to purchase such goods from an unregistered or unlicensed retailer and to impose penalties and on-the-spot fines in respect of such offences. These proposals were not just unworkable but would undermine the good work that is ongoing in this area by diverting resources from where they are most required. 

The Retailers Against Smuggling (RAS) group, which has written to the Deputy, has highlighted concerns about the impact of smuggled solid fuel on legitimate retailers in Ireland, particularly in the border regions. All solid fuel supplied in the State is liable to Solid Fuel Carbon Tax (SFCT). Currently, there is no carbon tax on solid fuel in Northern Ireland. This factor, combined with that jurisdiction's lower VAT rate on solid fuel, lower environmental standards and currency fluctuations, can give rise to significant price differentials which incentivises the sourcing of solid fuel from Northern Ireland. 

EU Single Market constraints preclude the use of any cross-border movement controls in the administration of SFCT. This means that solid fuel coming into the State from Northern Ireland is not subject to cross-border movement controls typical of harmonised excises on mineral oils, tobacco and alcohol. Revenue has no authority to stop vehicles and physically inspect loads of solid fuel. Similarly, Revenue has no authority to challenge transportation or possession of solid fuel that originated in Northern Ireland as such transportation or possession are not, in themselves, Revenue offences. Even if controls were possible, a person transporting solid fuel from Northern Ireland could legitimately claim that SFCT will be accounted for on relevant supplies made in the State. An SFCT return does not have to be made until one month after the end of the two-month accounting period in which the supply is made. Neither the movement of solid fuel into the State nor the physical presence of solid fuel in the State generate a liability to SFCT. Therefore, there is no smuggling offence, in terms of evasion of SFCT, attaching to solid fuel coming into the State from Northern Ireland. 

The collection of SFCT by Revenue is heavily reliant on the regulatory regime covering the marketing, sale, distribution and burning of solid fuels in the State. This regime is enforced by local authorities who have powers to inspect premises and vehicles being used for the sale and distribution of solid fuel, collect samples of coal to check for adherence to environmental standards and to prosecute traders involved in selling coal that does not meet these standards. It should be noted that SFCT legislation does not distinguish between “smokeless” and “smoky” coal and the same SFCT rate applies regardless of the fuel standard. Distinctions between smokeless and smoky coal are made in the regulatory regime for environmental standards of solid fuel. I understand that this regime includes a ban on the burning of smoky coal and other prohibited fuels in certain areas (Low Smoke Zones). This ban complements the ban on the marketing, sale and distribution of those fuels in those areas and means that even smoky fuels bought elsewhere cannot be burned in Low Smoke Zones. 

In 2017 the Minister for Communications, Climate Action and Environment contacted Revenue with a view to putting in place more formal and enhanced cooperation between local authorities and Revenue in carrying out their respective roles of enforcing solid fuel environmental regulations and administering SFCT. At the beginning of 2020 Revenue participated in a number of “joint operations” within Low Smoke Zones in conjunction with the Department of Communications Climate Action and Environment (DCCAE) and local authority solid fuel inspection teams, with a view to checking for compliance across several tax headings, including SFCT. Revenue participated in these operations, based on the clear understanding of the statutory responsibilities of the agencies involved. In addition, a SFCT compliance module has been included in Revenue’s ongoing Mineral Oil Tax national compliance project. This project, along with many other field-based compliance activities, has been impacted by Covid-19 restrictions since mid-March.

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