The home heating oil industry has initiated legal proceedings against the Minister for Finance, Mr McCreevy, over what it calls discriminatory taxation on its products.
In a Budget submission to the Minister, the Oil Promotion Federation of Ireland (OPFI), which represents more than 400 home heating oil contractors, says it has with regret initiated a case against the Government under the Treaty of Rome.
It says while there is significant excise duty placed on its products, no duty is imposed on competing fuels such as natural gas, coal or peat. It says it has lobbied the Minister and the Department for the past two years but no action has been taken.
It says while it hopes a confrontation can still be avoided, the Government must create a level playing field in the heating market. It says the present regime may contravene Article 90 of the Treaty of Rome which prohibits discriminatory taxation.
"Our legal opinion advises that the Government may be liable to pay substantial compensation backdated several years should the European Court hold in favour of OPFI and it is also the view of our lawyers that we will indeed be successful in this action," says the group's submission.
The group says there may have been a reason in the past for not imposing excise tax on natural gas.
This was because gas from Kinsale was a "100 per cent indigenous source of energy". It claims this is no longer the case with 80 per cent of all gas being imported. "Kerosene, gas oil, and to a lesser extent LPG continue to be the only products in the residential heating market that are subject to this excise tax," they say. "The fact that excise duty is imposed on kerosene but not on natural gas or other products affects competition in the Irish market for domestic heating."
The group says the debate over fuel tax is not academic with consumers switching from kerosene to natural gas on price grounds.
"As the levy represents approximately one-tenth of the price per thousand litres of oil it is likely that the courts would favourably view an economic argument that the market share of oil suppliers and their ability to compete on a level playing field has suffered as a result of this levy."
The group's submission also refers to "a polarised energy policy with an emphasis on imported gas".
It says that with a second gas inter-connector with Britain the dependence on gas is in danger of rising to worrying levels. It quotes an ESRI report which said dependence on a few of gas suppliers would leave the Republic even more vulnerable than dealing with OPEC.
The Department of Finance declined to comment on the OPFI claims. A spokesman said the Minister never commented on taxation matters before a Budget.
