Dáil Éireann - Volume 641 - 20 November, 2007

Adjournment Debate. - Tax Code.

  Deputy Paul Connaughton:The decision by the European Union to remove a refund of almost 3.5 cent per litre of fuel used in passenger transport services will have a detrimental effect on private bus operators in rural areas and the passengers who use their services. It will also add to the cost of bussing children to school. The EU derogation which was sought by the Government will be discontinued at the end of the year. Some of the people involved in the business report that the decision will put an additional burden of up to 10% on their costs. The users of the services will have to pay for this.

Problems also arise in respect of private bus owners. While this rebate will apply to Bus Éireann as well as to private carriers, many bus owners believe the level of subvention given by the Government allows CIE companies to mask the loss of the rebate whereas the full cost will be met by private operators. I do not need to tell the Dáil what will happen if competition is removed from the sector because we all know what private operators have done for bus transport. Had they not existed, the cost of travel would be much higher.

One of the criticisms made by private bus operators is that they only read about the decision in last week’s edition of The Sunday Business Post. For whatever reason, it was one of the most closely guarded secrets in the country. It is hard to understand why the Government did not ensure the operators received adequate notice because the people directly in the eye of the storm should have been informed. I call on the Minister for Transport to delay the decision for at least a year.

  Deputy Jimmy Deenihan:The Government’s intention to remove fuel rebates on school contract work from 31 December 2007 came to the attention of private bus operators through an article in The Sunday Business Post on 4 November 2007. The announcement, which came out of the blue, places private bus operators in a difficult financial situation, especially in light of enormous increases in fuel prices. Operators are in the middle of a contract agreement with Bus Éireann and the withdrawal of the fuel rebate puts them in a no man’s land because the rebate was used as a bargaining tool when negotiating the contract. The usual response from Bus Éireann was that operators would always have [1680] the fuel rebate. The fact that the company knew about the imminent removal of the rebate further infuriates the private operators, who were aware that the prices agreed were for a period to June 2008 and based on receiving 3.4533 cent per litre of a refund for fuel consumed on each contract.

I received a number of letters from operators, one of whom states:

We presently employ eight school bus drivers on our payroll and transport approximately 550 children daily to and from school. The impact that this withdrawal will have for us will be devastating as we now have to operate for six months of 2008 without the rebate which we based our figures on initially, and which Bus Éireann allowed us do, knowing full well that it was to be withdrawn. This is coupled with the fact that we had to absorb the costs of the seat belt changes over the last few years but these were for the overall good of the school transport system unlike this present problem which will inevitably push operators out of the business. The long term issue will be who will transport children to and from schools in the 2008-09 school year.

Another operator wrote:

All of my prices and contracts for 2008 are based on this fuel rebate and they cannot be withdrawn. My business will fail. I do not know what I can do now with such short notice and I plead with you to make the strongest representation on my behalf to have this decision at least postponed to allow me seek alternative arrangements. I have been put at a serious disadvantage also, as the State company, Bus Éireann, were made aware of the removal of this rebate last year. I employ two people and carry approximately 70 kids to school each day. The removal of this refund, 3.4533 cent per litre, will make my business unsustainable and I will be forced to cease trading.

Another operator wrote:

All of my prices and contracts for 2008 are based on this fuel rebate and they cannot be withdrawn. My business will be severely disadvantaged. I don’t know what I will do at such short notice and I plead with you to make the strongest representation on my behalf...I employ 20 drivers on a part time basis, and run numerous amount of tours from March to November each year. The removal of this refund, 3.4533 cent per litre, will make my business unsustainable and I will be forced to lay off workers earlier in the season, and I might even be forced to cease trading.

I urge the Minister to postpone the decision until June, when the contract ends. That is reasonable.

  Deputy James Bannon:I join my colleagues, Deputies Deenihan and Connaughton, in high[1681] lighting the need for the Minister for Transport to outline his plans to alleviate the hardship caused by the sudden removal of the refund of excise duty on fuel used in passenger transport services, which will seriously impact on the private transport industry and lead to increased fares and the closure of many businesses.

It is outrageous that a plan to remove a tax relief worth €29 million to public and private bus operators in order to comply with an EU directive should be kept from the private bus industry. Every effort was made to keep them in the dark. Shame on the Minister and his colleagues for creating a situation whereby private operators accidentally discovered that the rebate was to be removed. So much for transparency and openness. The Minister has placed the private transport industry in a grave situation, yet the Government is once again hiding its head in the sand.

I have been approached by a number of private bus operators in Longford-Westmeath who were devastated by the news which came to them by rumour rather than direct communication from the Government. Of course, the Government did not fail to make the situation clear to CIE, which has the ability to hold an entire city to ransom. The private sector is the only sector that will suffer from the removal of the refund of excise duty on fuel used in passenger transport service. The removal of the tax relief will be cost neutral to CIE and the Exchequer but the private transport sector will bear the brunt as its costs cannot be absorbed. Many companies will be forced out of business. They were not even given the courtesy of official notification by the Government. These companies have benefitted from the lower rate of excise duty of 2.3 cent per litre of fuel compared with the EU’s minimum rate of 30.2 cent. Removal of tax relief will result in an increase in the price of a litre of diesel and impact on operational costs, which will be reflected in increased fares and excessive operational costs. Can the Minister of State even begin to imagine the panic among private bus operators who have already signed contracts for 2008, having agreed rates for schools and set fare levels on scheduled services which reflect the refund of excise duty? Much of the fault lies with the usual passing of the buck between Departments. The Department of Finance has stated that the EU viewed the fuel excise derogation as a form of state aid and there is now no tax solution. It has transferred the matter to Transport where, if there is any justice, it will force the resignation of the Minister — it is more likely to fade from sight.

The removal of tax relief would be a death sentence for private coach operators and would deliver an appalling blow to rural communities, particularly those in remote areas who do not have regular public services and rely heavily on private coach companies. Shame on the Minister.

[1682]   Deputy Michael Ahern:I speak on behalf of the Minister for Transport. The Government is aware of the importance of the fuel duty rebate scheme for passenger bus transport services. The current scheme is a matter, in the first instance, for the Minister for Finance and the Revenue Commissioners.

The background to this issue is that the 2003 EU energy tax directive incorporated special derogations which allowed specific excise duty reliefs to be applied in a number of members states. In the Irish context, these derogations allowed for reduced rates to apply to fuel used for scheduled public and private bus services and bus tour services. While the derogations expired on 31 December 2006, Ireland and other member states sought retention of their derogations beyond that date. However, the European Commission, the deciding authority, has refused all such requests. The Commission maintains that, in keeping with the EU energy tax directive, member states must apply at least the EU minimum rates of excise on fuels in such circumstances and any further favourable excise treatment is not allowable. The Commission’s decision was published on its website in March 2007. I understand the Minister for Finance will avail of the forthcoming Finance Bill to provide for the necessary legislative changes to conform with the directive.

As I stated, the Government is aware of the importance of the fuel duty rebate scheme for the passenger bus transport sector. With this in mind officials from the Department of Transport are engaging with officials from the Department of Finance to explore the possibility of replacing the scheme, where appropriate, by alternative non-tax financial support mechanisms to achieve the same policy objectives, subject to EU state aid requirements. I understand that in the interim the reduced rates applicable to fuel used for public transport services will be maintained.