Increase in carbon tax planned for budget

 

CARBON TAX which applies to domestic heating and motor fuels will be increased by a minimum of €5 per tonne in the budget despite no reference being made to it in the secret budgetary document made public by a German parliamentary committee.

Government sources confirmed last night that the carbon charge will be increased by at least €5 from its current level of €15 per tonne.

The sources said the absence of a reference in the outline of the budget sent to the troika was because it was an early draft.

In the context of some sluggish Revenue returns in the latter months of the year, the tax could be increased to as much as €25 per tonne.

That would result in a similar exercise to the Government’s frontloading of the 2 per cent VAT increase in a single year, rather than spreading it over two budgets.

Carbon tax is applied to a range of domestic and transport fuels and is measured by calculating the weight of carbon dioxide emitted by each fuel.

A €5 to €10 per tonne increase will mean increases of up to 3 cent per litre on the price of petrol and diesel, 30cent on a bale of briquettes and €1.20 on a 40kg bag of coal. Other fuels affected by the tax include kerosene, marked gas and natural gas. Electricity is not included. The programme for government states that farm diesel should be exempt from any further increases in carbon taxes.

Department of Finance figures estimate that a €5 per tonne increase could yield €108 million in a full year to the State, with the take for a €10 increase rising to €216 million.

It comes as Central Statistics Office figures for the end of November show VAT figures have continued to fall below target.

The shortfall on VAT has now reached €380 million, or 4.5 per cent below expectations. Minister for Finance Michael Noonan may be forced to make last-minute adjustments if the exchequer returns for November – to be published on Friday afternoon – fail to meet targets.

November is one of the most important months for State revenue as it includes corporation tax returns and returns for the self-employed. If the gap between targets and returns increases, it could all but wipe out the €600 million tax revenues to be carried over into next year.

Mr Noonan, in a series of speeches recently, has said a small variation of the overall adjustment of €3.8 billion may be necessary for the Government to meet the 8.6 per cent of GDP target deficit set down by the EU and the IMF.

The Cabinet will meet today, and probably Thursday, to finalise the tax measures of a budget that will be disclosed for the first time over two days.