Households are paying more to the government for energy consumption despite a reduction in VAT on electricity and gas bills

Despite a VAT cut that came into effect yesterday, households are expected to pay more to the government for their energy use this year.

Simultaneously with the temporary reduction in the VAT rate on electricity and gas bills, the CO2 tax on gas, heating oil and other solid fuels will be increased.

And yesterday customers from Electric Ireland, SSE Airtricity and Panda also faced double-digit price increases.

Due to the increase in the CO2 tax, heating oil will become more expensive by a further 19 euros per 900 liter filling.

This means that 103 € of the costs for a filling of heating oil are attributable to the CO2 tax.

Some 600,000 gas customers will add €17 to the annual cost of the fuel, according to Bonkers.ie calculations, bringing the total carbon tax on household gas to €93.

Tax increases were also applied to coal and briquette bales.

The tax already adds around 10.5 cents to every liter of petrol and diesel after rising on Budget Night last October.

More than a million ESB Electric Ireland customers have been impacted by higher electricity and gas price hikes as of earlier this month.

Electricity increases by 23 percent, the basic price by 35 percent. Over a year, this costs the typical household an additional €300.

SSE Airtricity customers end up paying an additional €330 per year due to a 24 per cent increase in electricity prices that went into effect yesterday.

To cushion the blow of skyrocketing energy price hikes, the government is temporarily reducing VAT on electricity and gas bills from 13.5 percent to 9 percent by the end of October.

This saves electricity customers €35 and gas customers €25. Recipients of fuel money should get a one-off payment of 100 euros from the beginning of May.

The carbon tax does not apply to electricity, where the PSO levy is levied and which currently adds almost €59 a year to the bills.

However, this is to be reduced to €0 from October 1st.

Despite the reduction in VAT on gas and electricity bills, households will still pay more in this tax this year than last year due to skyrocketing energy prices.

This is because the tax is collected as a percentage of the bill and the larger the bill, the more VAT is collected from the Treasury.

Daragh Cassidy, of price comparison site Bonkers.ie, said the temporary reduction in the VAT rate was “bizarre” as it comes at a time when energy use is at its lowest.

“The temporary reduction in VAT to 9 percent is of course to be welcomed. However, the timing is a little strange.

“The reduction comes into effect when household energy demand normally begins to fall, and ramps up again when it begins to rise again.”

He said households could still expect to pay more VAT this year despite the cut.

“Given gas and electricity prices have skyrocketed over the past 18 months, households will still pay more VAT to the government each year than they did in 2020.”

Last year, a typical household with gas and electricity would have paid 230 euros in VAT.

This year, the VAT bill for the dual-fuel household is 300 euros.

Electricity and gas prices have skyrocketed since autumn 2020.

On average, households now pay around 800 euros more per year for their electricity and 600 euros more for their gas.

And the price of heating oil has more than doubled.

Mr Cassidy said further price increases are likely later in the year.