The VAT on energy bills is to be reduced to 9 percent as part of the new package of measures for the cost of living

VAT on electricity and gas bills will be temporarily reduced to 9 per cent as part of a new set of cost-of-living measures aimed at tackling the ongoing energy crisis.

As electricity and fuel bills soared, government leaders and their senior ministers held emergency talks to discuss the crisis.

They were shown an official analysis which suggested they can lower the current 13.5 per cent VAT rate on electricity and gas without being found to be in breach of EU tax rules.

The move could save billpayers €49 a year on electricity and €61 a year on gas.

Low-income earners who receive a fuel flat rate also receive a one-time payment of 100 euros, which corresponds to three weeks of service.

The move will benefit more than 370,000 people who will receive the payment.

Taoiseach Micheál Martin reached an agreement with the European Council to examine whether Ireland could reduce the tax on energy bills.

Last week it was thought the government could not lower VAT on energy bills.

However, Taoiseach Tánaiste Leo Varadkar and Green Party leader Eamon Ryan have been told laws can be changed to allow them to lower the VAT rate on electricity and gas.

An amendment to the Finance Act is expected to be made.

There was also consideration of lowering the median VAT rate from 13.5 percent to 12 percent, but that means all products and services would be taxed at that amount, not just energy.

A long-promised cut in the public utility levy on energy bills, which will save people nearly €60 a year, is expected to come into effect in October.

Green Party leader Eamon Ryan will also offer fresh advice on how people can save money by using smarter meters and time-of-day pricing to lower their energy bills.

Mr Ryan will also offer advice on helping people who are in debt as they cannot afford to pay their bills.

The Taoiseach and the Tánaiste vowed to offset the forthcoming hike in carbon taxes following backlash from their backbench TDs.

It is hoped that the VAT decision will offset May’s carbon tax hikes.

Also attending the meeting at government buildings were Treasury Secretary Paschal Donohoe, Public Expenditure Secretary Michael McGrath and Social Protection Secretary Heather Humphreys.

Mr Donohoe recently announced that he and Mr Ryan are considering introducing taxes on energy company profits after the European Commission gave the green light to member states to introduce new levies to address the cost of living crisis triggered by the Russian invasion of Ukraine .

In response to a parliamentary question from People Before Profit TD Paul Murphy, Mr Donohoe said: “Officials in my department and the Environment, Climate and Communications Department are studying the potential for such a proposal”.

The minister said an additional 10 percent tax on energy companies’ profits could bring in around €60 million.

ESB Group achieved an operating profit of 679 million euros last year, which means an increase of more than 10 percent compared to the previous year. This resulted in a dividend payment of 126 million euros to the state.

However, a decision was made not to implement these measures as it could also result in renewable energy companies being hit with new taxes on their profits. The VAT on energy bills is to be reduced to 9 percent as part of the new package of measures for the cost of living

Fry Electronics Team

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