Is our carbon tax revenue-neutral or just a revenue-grab?

The Irish Times reported last October on a claim made by Minister John Gormley that the carbon levy to be announced in the budget of December 2009 would not be used as a tax to raise revenue for the exchequer. The Irish Times claimed that Mr Gormley said the carbon levy would go ahead on a revenue-neutral basis, along the lines recommended by the Commission on Taxation.

Minister Gormley's comments were in response to a claim by Ibec director general Danny McCoy that the carbon levy would in fact be an energy tax, primarily designed to raise revenue for the exchequer. In a statement issued last night Ibec said: “It seems to us that the carbon tax now being proposed as part of budget 2010 will simply be a means to collect revenue and will not be ring-fenced to reduce other costs to business or improve energy-efficiency". Mr McCoy said: “It’s beginning to sound like a revenue-grab. You then need to call it what it is, an energy tax. It should not be called a carbon tax.”

So, is our carbon tax revenue-neutral or a revenue-grab?

The FF/Green carbon tax is on target to raise €250m this year. Tax figures relating to the carbon tax show that it has raised €53.1m in the year to April and, with home heating oil about to be levied, the tax is set to yield €250m in total this year. Very good, and what was expected, but Fine Gael has claimed that just €130m of this €250m is set to be spent on energy-efficiency measures, which it says means that the Government’s assertion the tax would be revenue-neutral is false.

“Funds from the tax are supposed to address energy-efficiency, fuel poverty and competitiveness issues. However, the Government is taking in at least €120m more than it is spending in 2010 alone and €200m in a full year,” said FG TD Simon Coveney. “Minister Gormley claimed that €36m from the carbon tax was to be set aside for use as a PRSI exemption for employers who take unemployed people off the dole. This measure has not been implemented. Even if it is implemented before the end of the year, there is still €90m going straight into Government coffers,” he added.

Looks more like a revenue-grab than revenue-neutral to me. Why did Minister Gormley promise this tax would be revenue neutral when it clearly isn't?