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Cost of Living

VAT on gas and electricity could be cut to 9% under Government proposals to tackle cost of living crisis

Households could receive an additional three weeks payment of the fuel allowance as part of the proposed measures.

HOUSEHOLDS COULD RECEIVE an additional three weeks payment of the fuel allowance while the VAT on gas and electricity could be temporarily cut from 13.5% to 9% as part of a package of measures to help address the rising cost of living. 

The three coalition leaders met with the Minister for Public Expenditure Michael McGrath and Minister for Finance Paschal Donohoe this evening to finalise measures, which sources said included additional payments of the fuel allowance.

Tánaiste Leo Varadkar last week played down hopes for another major Government intervention, stating there will be no “big bazooka measure”, however he added that “nothing is off the table”.

The Public Service Obligation (PSO) levy on energy bills is expected to be 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.

It is also expected that mandatory time-of-day-pricing for electricity will be rolled out to encourage people to change their energy use to periods where costs are usually cheaper.

There is particular focus to do something on home heating oil, as the price has soared in recent months.

Sources have also said that Government has lowered excise to the lowest they can, but added that it might be able to do a bit more when it comes to VAT on fuels. 

Government had been lobbying the EU to allow Ireland reduce its VAT rate without facing penalties down the road when the temporary reduction would no longer be needed. 

One measure that didn’t make it into February’s cost saving package of measures is increasing the tax-free bonus amount an employer can give an employee from €500 to €1,000 annually. 

It is understood that measure is back on the table and being discussed this evening, with sources indicating that Donohoe is minded to sign off on it this time around.

How the Government plans to offset the carbon tax increase through targeted measures will also be on the agenda of today’s meeting.

Any measures that are agreed this evening will be brought to Cabinet on Wednesday.

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