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File photo: Home heating oil truck outside house. Alamy Stock Photo
Leaders' Questions

Criticism over soaring home heating oil costs as Martin says hands are tied due to EU VAT rules

Micheál Martin says they are working with the EU to see if there can be greater flexibility.

THE GOVERNMENT HAS been criticised for doing little to help consumers with the rising costs of home heating oil. 

Cabinet today approved an excise duty cut amounting to 20c per litre on petrol, 15c per litre on diesel and 2c on marked gas oil. 

There has been no further cut in VAT or any other taxation measures. 

The cost of home heating oil has climbed to an “outrageous price” Sinn Féin leader Mary Lou McDonald told the Taoiseach.

Home heating oil prices have almost doubling from around €400 for 500 litres to close to €800 in just a matter of months.

The vast majority of modern home heating systems use Kerosene in their boiler, while a smaller number of older households use gas oil to heat their homes. 

“This is crazy. It’s hugely stressful for workers and for families trying to heat their homes. It’s a disaster,” McDonald said in the Dáil this afternoon. 

The Taoiseach said the price increases have been beyond the government’s control, adding that the impact of the war in Ukraine has been stark in terms of the dramatic increase in the prices of oil and gas. 

Micheál Martin said the Irish Government’s hands are somewhat tied when it comes to further reductions in fuel costs and home heating oil cost reductions. 

EU regulations

“There are regulations and frameworks under EU law that do not facilitate such measures right now. We are working with our European Union colleagues to see whether we can introduce greater flexibility in that area.  

“The same applies to VAT. Home heating oil is not subject to excise duty but is subject to VAT at 13.5%. If we reduced that rate, we would run the risk of having to move to a higher rate, 23%, once the crisis is over because we have a derogation with regard to VAT on energy.  We want to protect that derogation, which keeps the VAT rate lower than it otherwise would be, for the long term,” Martin explained. 

Sligo-Leitrim TD Marc MacSharry also raised the issue of home heating oil with the Taoiseach. 

Martin said he took MacSharry’s point, but said the Government could only use the “instruments that are available to us”.

“There’s an issue with the VAT. If we bring that down significantly on a temporary basis, we could end up at a very higher rate of  VAT once the temporary situation is over, so we’ve concentrated on measures we can do within all the various frameworks and legal situations on the petrol and diesel of 20 cents and 15 cents and then on marked gas at 2 cents,” he reiterated.

As far back as last year, members of the Opposition have been calling on the Government to enter into talks with the EU around our derogation on VAT. 

Former Labour leader Alan Kelly asked the Taoiseach in January if Ireland could ask for “once off derogation” but Taoiseach said it was not possible. 

“The prices are growing at such a rate that people expect you to stretch yourself, to stretch our European partners and to act in what is a crisis situation,” McDonald said today. 

She said her party have been asking the Taoiseach to speak to the EU about the VAT rate since last September. “So don’t don’t cry now,” she told Martin. 

Social Democrats Róisín Shortall also asked the Taoiseach to confirm if the Government is advocating for cuts on VAT as part of the EU response.

‘Greater flexibilities’ 

The Taoiseach said: “We are advocating for greater flexibilities in terms of what Member States can do to offset the pressures on consumers and on people.”

During the informal EU Council meeting in Versaille in France tomorrow, the Taoiseach said countries will be “pushing and advocating for maximum flexibilities in terms of how we respond to the price pressures”. 

The Taoiseach added that the Government does not envisage the rationing of oil and petrol. 

“We have oil and gas reserves,” he said. However, he said there is scenario planning underway in all departments, so there are plans for “scenario one, scenario two, scenario three – one can be worse than the other”, he said, though some might never come to pass, he added. 

Such contingency planning makes sense, said Martin. 

Foreign Affairs Minister Simon Coveney said last week that the Government would have to ensure that there are “extraordinary flexibilities” available to EU member states to protect their own citizens’ well-being.

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