Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence


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;
£85 million
(ii)  a similar estimate in respect of supplies of road
diesel; and
£60 million
(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.
£150 million

  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 of accuracy.

24 March 1999

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