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energy costs

VAT rate cut from 13.5% to 9% on energy bills until the end of October

Targeted supports for those on fuel allowance will mean an additional three weeks payment.

LAST UPDATE | 13 Apr 2022

THE VAT RATE has been cut from 13.5% to 9% on energy bills until the end of October, Finance Minister Paschal Donohoe has confirmed.

Cabinet signed off on the reduction today, with the minister confirming that excise tax on marked gas will also be reduced by 2.7%.

The reduction on excise on marked oil will continue until the Budget in October.

Government has also signed off on an additional one-off fuel allowance payment of €100.

The Government is hoping that the VAT cut will offset the planned increase in the carbon tax.

The Public Service Obligation (PSO) levy on energy bills has also been scrapped as part of Government measures aimed at addressing inflation.

The PSO is charged to all electricity customers in Ireland and all energy suppliers are required to collect this levy from customers through bills.

The PSO levy is currently €4.30 excluding VAT per month which equates to €58.57 per year inclusive of VAT.

Donohoe told reporters today at Dublin Castle that giving a VAT reduction on home heating oil remains a challenge. 

If the Government reduces VAT on home heating oil, “everything else that is charged at that 13.5% VAT would have to come down as well”, explained the minister. 

He said this would have a “really, really significant tax cost” to the Exchequer, and it wouldn’t be targeted.

“It would involve spending a large amount of taxpayers’ money on parts of our economy, which while they are facing challenges, are not facing the pressure that those who are facing the pressure those that are consuming home heating oil are facing”. 

“So if I was to make a change in relation to home heating oil, everything else that is charged the 13.5% would have to come down as well, including, for example, commercial services. I don’t believe that would be good use of the country’s money, it certainly would not be targeted,” he added. 

The Government plans to publish its economic forecast later today, but the minister said that they are predicting inflation will be above 6%.

A more pessimistic paper will also be published if the country faces into more “difficult changes” in relation to energy costs, the minister said, adding that this would add further pressure on inflation. 

The Taoiseach said yesterday described a “unique set of circumstances”, including a “once-in-a-century pandemic creating its own inflationary cycle”, and now a war in Ukraine, which he described as “adding very significantly to the already increasing energy crisis”.

He added: “I’ve been very consistent that we cannot entirely deal with or respond 100% to all of the increases that have happened as a result of the pandemic and as a result of the war.”

With reporting by Rónán Duffy



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