Senator calls for VAT rate cut on HVO for agriculture sector
A senator is calling on the government to cut the VAT rate on hydrogenated vegetable oil (HVO) for the agriculture sector.
Aontú Senator Sarah O’Reilly has said that such a move would be a practical way of encouraging the use of renewables in the sector.
HVO is a low-carbon biofuel made from waste, byproducts and derived products not intended for human consumption from the food industry.
The fuel can be used to power diesel vehicles and provides up to 90% reduction in greenhouse emissions per litre of fuel used.
Senator O’Reilly described the current rate of VAT on HVO as "punitive", adding that it “does nothing to incentivise people to use the product” .
“The current situation whereby those in the agricultural sector, and those hauliers who are supplying them and who are choosing to use HVO are being penalised by high VAT rates flies in the face of the government’s oft proclaimed commitment to cleaner fuels.
“We know that Ireland is facing massive fines for missing its 2030 [climate] targets and cutting the VAT rate on HVO to encourage its use amongst the agricultural and haulage sectors is one way of ensuring that people who actually want to switch to renewable can actually afford to do so," she said.
The senator said that when HVO is used for off-road purposes, such as in agricultural vehicles or for heating, the Road Transport Fuel Obligation Scheme (RTFO) applies an 80/20 rule.
"This results in a price difference of just over 20c/L between low-sulphur gas oil and off-road HVO.
"Furthermore, the VAT rates applied to these fuels exacerbate the issue: HVO is subject to 23% VAT, while gas oil is charged at only 13.5%," she added.
According to Senator O'Reilly, registered hauliers supplying the agricultural sector are currently unable to reclaim the Diesel Rebate Scheme (DRS) credit, which amounts to 7c/L
"This issue is compounded by an additional price differential of 8c/L, as HVO is already more expensive than conventional fossil fuels.
“This makes no sense at all, especially at a time when farmers and those across the agricultural sector are working to a standstill to make ends meet”
“I believe that these policies are creating significant barriers to the adoption of HVO as a sustainable alternative to fossil fuels and I am urging the government to be proactive and cut the VAT rate to make the product more attractive to more potential users in the agricultural sector," she said.
