VAT could soon be reduced to 9 percent after Martin reaches EU deal

Harried consumers have received a welcome boost after the government reached an agreement with the EU meaning VAT on fuel could soon be reduced to 9 percent.

Aoiseach Micheál Martin and his EU colleagues signed a measure to untangle the complications with Brussels that had held up the prospect of a VAT cut on fuel.

Speaking at the end of a summit of EU leaders in Brussels, Mr Martin said the government could now work directly with the policy-making commission to finalize Ireland’s standing to act if it were decided that further fuel tax cuts were needed.

“It’s progress, but I think the details still need to be worked out,” Mr Martin told reporters.

He said a special exemption granted to Ireland in the early 1990s allowed Ireland to use a lower VAT rate on fuel of 13.5 pcs.

Under the rule, any large-scale temporary reduction in this rate would mean Ireland would lose that derogation – forcing us to revert to the standard rate of 23 per cent once the temporary reduction expires.

So current EU rules mean that if VAT on fuel were reduced to 9 per cent to ease the financial burden on families and businesses, it could not return to 13.5 per cent – but instead at the maximum rate of 23 per cent would have to be calculated.

Taoiseach Micheál Martin campaigned for a relaxation of VAT rules among his EU colleagues at this week’s summit in Brussels.

Yesterday, government sources said there is a reluctance to introduce new cost-of-living measures every few weeks, but there will be tremendous pressure to lower the VAT rate on fuel if the EU paves the way for a relaxation of rules around the exemption paves.

The welcome news comes as two more energy companies have announced price increases, bringing the number of suppliers who have increased their fees so far this year to three.

Energia is raising its electricity and gas prices from April 25, while prepaid meter provider PrePayPower is raising its prices for both fuels from early next month.

Electricity prices will increase by 9.9 percent and gas prices by 19.9 percent.

PrePayPower, which provides pay-as-you-go meters to its customers, announced three increases last year. Many low-income people use pay-as-you-go meters.

According to David Kerr from the price comparison site, the average PrePayPower electricity customer pays EUR 132 more on their annual bill as a result of the increase.

Gas customers, meanwhile, will see their annual bill increase by €182.

The latest increase in PrePayPower represents an annual increase of €374 for the average electricity customer since this time last year and €349 for the average PrePay gas customer one year from now.

The company said its increases over the past year have been among the lowest in the market, with increases of less than a third of those of some suppliers.

Energia’s electricity prices will increase by 15 percent, which will cost the average customer an additional €247 per year. Gas prices increase by the same percentage, adding €180 to the average annual bill.

Dual fuel customers will also be impacted by a 15 per cent price increase adding €426 to the typical annual bill.

It’s the fourth Energia price hike in 12 months.

The company said the increases were the result of an ongoing period of elevated global energy market prices.

The latest announcement means energy Dual-fuel customers have been paying €1,200 more per year since increases began last March.

The recent announcement of a price increase by Bord Gáis means that its dual-fuel customers are being charged a total of €1,315 in price increases over the last 12 months.

The latest surge comes after Bord Gáis Energy said last week it would increase electricity prices by 27 percent and gas prices by 39 percent. This adds €385 to the average Bord Gáis electricity bill and €390 to the average annual gas bill.

The company is also controversially increasing its base fees by the same percentage, which has prompted accusations of price gouging.

Andy Meagher, director of customer solutions at Energia, said: “Wholesale costs for gas and electricity have increased significantly in recent months.

“We are very aware that these global issues affect our customers locally and we remain committed to providing the best value and service.”

He said the company was doing its best to absorb increases in wholesale and raw material costs, but those price changes were inevitable.

He said the company’s customer care team is available to assist customers with difficulties and it also plans to partner with the Money Advice and Budgeting Service (MABS) to offer advice and support.

“Overall, we have limited the full increase in costs for customers as much as possible and we will continue to monitor the market and work with our customers to help them manage invoices where needed,” said Mr Said Meagher. VAT could soon be reduced to 9 percent after Martin reaches EU deal

Fry Electronics Team

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