Govt looks to reduce VAT rate on energy to 9%
The three coalition party leaders have discussed plans to use domestic legislation to reduce the VAT rate on energy from 13.5% to 9%.
The development would mean a €49 per annum reduction on the average gas bill and a cut of €61 annually on electricity prices.
In a statement to RTÉ News, the Department of Finance said that Minister Paschal Donohoe “outlined taxation measures for consideration by the party leaders. Further work will now take place in advance of a Cabinet meeting”.
The measure would be introduced on a temporary basis and would require an amendment to the Finance Bill.
It is expected the measure will be discussed at a Cabinet meeting on Wednesday before being approved.
Separately, the Government is planning to introduce three weeks’ additional payments of the fuel allowance in one lump sum of €99.
This will be paid to 370,000 recipients of the fuel allowance.
Earlier, the three party leaders discussed plans to cut the Public Service Obligation levy on energy bills.
Minister for Energy Eamon Ryan had already indicated that he wanted to reduce the levy which adds €58.57 to bills annually. The money goes to fund sustainable energy.
Ministers also discussed enhanced supports to advise people struggling with energy bills, including helping ensure they are on the cheapest tariff available.
The meeting examined time-of-day pricing for electricity users.
This is a system which allows the 750,000 households with smart meters to avail of a cheaper tariff during an off peak period, for example, from 11pm to 8am.
About 50,000 homes are being switched to smart meters every month.
Houses with the smart meters would automatically be put on to time-of-day pricing under the plans being examined by Government.
These consumers will have the option to opt out of the new mechanism.
Minister Ryan, Taoiseach Micheál Martin and Tánaiste Leo Varadkar were joined by Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath.
They also discussed energy security as there are heightened concerns due to the war in Ukraine.
The measures discussed today came after the Government gave €200 to energy users, cut excise on petrol and diesel, and extended the fuel allowance.