Further memorandum submitted by HM Treasury
Thank you for your letter of 10 March asking
for some estimates of tax in the context of harmonisation of UK
and Republic of Ireland oil duty rates.
The information is as follows:
| (i) an estimate of the tax that would be foregone
annually if light oil (petrol) supplied in Northern
Ireland was subject to duty at the rate currently
prevailing in the Republic of Ireland;
|(ii) a similar estimate in respect of supplies of road|
|(iii) an estimate of the net overall cost of harmonising|
duty rates on all hydrocarbon oils supplied in Northern
Ireland at the duty rate currently prevailing in the
Republic of Ireland.
The final estimate includes non-road fuels such as gas oil
and fuel oil but not kerosene. In the UK, kerosene bears no excise
duty but, when used for domestic heating, carries a VAT rate of
5 per cent. In the Republic of Ireland, kerosene for heating purposes
bears an excise duty of 0.0373 punts per litre and a VAT rate
of 12.5 per cent.
I am also asked to advise you that these estimates are the
direct costs and do no take into account possible behavioural
effects of harmonising rates. These might include:
more cross border shopping/smuggling of road fuels
into the mainland UK, including from Northern Ireland;
a compensatory increase in yield offsetting to
some extent the cost of harmonising rates, as cross-border shoppers
and smugglers source their purchases in Northern Ireland.
It is not possible to estimate these effects with any degree
24 March 1999