Gormley insists carbon levy in budget will be revenue-neutral

Fri, Oct 30, 2009, 00:00

THE CARBON levy in December’s budget will not be used as a tax to raise revenue for the exchequer as has been suggested by the employers’ organisation Ibec, Minister for the Environment John Gormley indicated yesterday.

Mr Gormley said the carbon levy would go ahead in December on a revenue-neutral basis, along the lines recommended by the Commission on Taxation.

His comments came as Ibec again voiced its concerns that the carbon tax now being proposed would in fact be an energy tax, primarily designed to raise revenue for the exchequer.

Mr Gormley, also the leader of the Green Party, said he was not in a position to specify at what level the tax would be set, and if Minister for Finance Brian Lenihan would opt for the €20 levy on each tonne of CO2 emitted, as recommended by the commission in its report in September.

If that level of tax were applied, petrol and diesel would rise by about five cent a litre and a bale of briquettes would cost an additional 50 cent.

“We have not worked out yet what it will be. Do we start off at €10 [per tonne of CO2] or €15 or go to €20?” Mr Gormley said on RTÉ.

He insisted the levy would work in favour of the economy, would stimulate business by encouraging efficiency, as well as creating jobs.

Mr Gormley was responding to concerns expressed by Ibec director general Danny McCoy that soundings from Government circles suggested it might be a revenue-raising tax.

“I am very disappointed with Danny McCoy, who is a very reasonable person who has in the past supported the carbon levy,” said Mr Gormley. He pointed out Mr McCoy was on the Commission on Taxation that supported the introduction of a carbon tax only two months ago.

However, Mr McCoy said last night Ibec did support a carbon tax and putting a price on carbon, but only under certain conditions.

Ibec has said it supports a carbon tax that is based on a scenario where the revenues collected are recycled, ultimately reducing costs for business.

It believes revenues should be ploughed back into energy-efficiency schemes; initiatives to encourage the take-up of cleaner technologies by firms over time; and also used to reduce labour taxes.

In a statement issued last night Ibec said: “It seems to us that the carbon tax now being proposed as part of budget 2010 will simply be a means to collect revenue and will not be ring-fenced to reduce other costs to business or improve energy-efficiency.

Mr McCoy said last night: “It’s beginning to sound like a revenue-grab. You then need to call it what it is, an energy tax. It should not be called a carbon tax.”

Ibec repeated that it could not support any moves to further increase the high costs of energy. “We contend the timing is not right for the introduction of this tax unless there is a specific commitment to utilise the revenue collected to reduce costs to business,” it said.

The Minister’s spokesman last night implied that Ibec had flip-flopped on its position.