How is the excise border managed in Ireland?

Question

There is a tax border between Northern Ireland and Ireland for excise.

By "tax border" I mean a border across which tax is due.

Although there has been a harmonisation effort within the EU for excise, it is is incomplete and only minimum rates are set for member states (Directive 2008/118/EC).

From the EU's website:

EU countries agreed on common EU rules to make sure that excise duties are applied in the same way and to the same products everywhere in the Union. For example, by applying at least a minimum rate of excise duty.

How is this managed currently on the island of Ireland?

Answer 1

The UK and Ireland are both part of the EU Single Market and the Common Travel Area. Hence there is no excise duty on goods crossing the border between Northern Ireland and the Republic of Ireland, and citizens of UK and the Republic are free to cross the border without stopping.

Update:

There is a difference in fuel duty between NI and the Republic, and smugglers have exploited this by buying fuel in the Republic and selling it in NI. There is no restriction on fuel for personal use so it is legal for a resident of NI to drive over the border, fill their tank and drive back. However transporting the fuel and then selling it is a crime.

The UK and the Republic have cooperated on the introduction of a fuel marker so that such smuggled fuel can be identified. As a result the proportion of illicit diesel in Northern Ireland dropped from 26% in 2002/2003 to 8% in 2013/2014. See Section 5.3 of this document for details (thanks to @origimbo for locating it).

Answer 2

Fuel is cheaper in Ireland than in Northern Ireland. So Ireland doesn't have to do anything about it. Northern Ireland would have to do something about it, but currently seems to do nothing, even though the estimates are that it (and/or the UK) lose(s) 200 million pounds a year because of the cross-border refueling of private vehicles. And yes, there is a difference in excise; the EU stuff that amatita pointed to sets the minimum excise; member countries can impose more. And they do; data for 2017:

the excise rate in the Republic was 13% lower than in Northern Ireland for petrol and almost 30% lower for diesel.

Forecourt prices in the Republic for petrol averaged £1.13 per litre last year, 9.5p cheaper than in Northern Ireland, and diesel averaged 95p in the south, 27p lower.

Also this cross-border excise difference is not unique to Ireland vs Northern Ireland:

While the EU sets minimum excise duties under the Energy Taxation Directive, which avoids aggressive tax competition, there are no maximum rates. A comparison of excise rates across EU member states in July 2016 reveals that the highest excise rate rates for both petrol and diesel are just over twice as high as the lowest rates. The minimum diesel rate is 8.1% lower than that for petrol and the average rate across the EU is 19.5% lower than the average for petrol resulting in lower retail prices for diesel than petrol (European Commission, 2016).

Answer 3

There is currently a tax border between Ireland and Northern Ireland.

The tax border between Ireland and Northern Ireland has two components: VAT and excise.

@Peteris asks in a comment below this answer:

WTF [sic] is a tax border?

A tax border is a border across which tax become due.

The border between Ireland and Northern Ireland is a tax border because it is a border across which tax (VAT and excise) becomes due in specific circumstances.

Note that for excise, under some circumstances duty only becomes due at some later time after crossing the border. In the intervening period the excise goods are treated as being in a "duty suspension" state. In these circumstances the movement of the excise goods across the border is registered with the government (described later) pending eventual duty payments.

From the UK Government:

The duty falls due at the time when the goods leave any duty suspension arrangements, that is when:

• they are released for consumption or otherwise made available for consumption (generally via the warehouse system) registered trader (REDS) or occasional importer receives them in the UK
• a vendor makes a delivery under distance selling arrangements
• missing consignments and other dutiable shortages are discovered
• goods imported for personal use are then sold or put to commercial use

There is no customs tax border between Ireland and Northern Ireland while the UK remains a member of the European Union because membership of the European Union involves membership of a customs union: the European Union Customs Union with its Common External Tariff.

Excise is the application of a duty (a tax) usually levied at the point of production on goods that are widely available. Excise rates are published online.

Goods that commonly incur excise duty are tobacco, fuel and alcohol.

To avoid border movements whose purpose are to illegally circumvent duty, an excise border is necessary between Ireland and Northern Ireland.

On the island of Ireland this tax border is managed without physical infrastructure for reasons of political tension. "Hardening" the border to mitigate fraud on the Ireland/Northern Ireland tax border is not possible.

For legal movements of goods the online Excise Movement Control System (EMCS) is used and duty revenue is collected via online payment system. For the UK this is the Excise Payment Security System (EPSS).

Note that excise goods do not incur additional duty charges when crossing the Irish border if:

• you transport them yourself
• you will use them yourself or give them away as a gift
• have paid duty and tax in the country where you bought them

So if you buy a barrel of petrol and move it yourself over the border for personal consumption or for gifting then no additional duty is payable.

If you buy a barrel of petrol and have it moved for you over the border - for whatever reason - then duty is payable via EPSS.

If you buy a barrel of petrol for resale and move it over the border then duty is payable when the fuel exits a duty-suspension regime. eg. it is resold. The taxable import can be declared using EMCS.

Another answer here highlighted the loss of revenue to the UK exchequer of up to £200 million each year due to fuel meeting these criteria crossing the border. Despite the headline it is perfectly legal for residents on one side of the border to fill up their vehicles on the other. The respective exchequers have no legal right to demand additional duty.

The focus for the tax border between Ireland and Northern Ireland is therefore the movement of excise goods sold under distance selling arrangements (eg. someone buys some cigarettes over the internet from a vendor across the border), or movements for resale (eg. the owner of a petrol station purchases a tanker consignment of petrol from a vendor across the border).

For illegal movements of goods the tax border between Ireland and Northern Ireland is managed through North/South police service cooperation: the PSNI in the North and the Garda Síochána in the South.

Intelligence is shared and coordinated cross-border operations (document found by @origimbo) are conducted, including but not limited to:

• interdiction of illegal shipments/transhipments of excise goods
• targeting of persons involved in such operations
• use of marker systems to assist detection (eg. Accutrace S10 for fuel)

An important argument for having a customs partnership "backstop" if the UK leaves the European Union is that a tax border (in that case for customs) on the island of Ireland would necessitate a hard border and exacerbate political tensions.

There is currently a tax border on the island.