Donohoe rejects Sinn Féin appeal to cut tax rate on home heating oil

Spain and the Czech Republic are interested in cutting the Vat rate on domestic energy supplies because their tax rate "is so much higher than ours", according to Minister for Finance Paschal Donohoe.

He rejected a Sinn Féin appeal to engage with the European Commission to cut the tax rate on home heating oil which had risen by a “staggering 46 per cent” while electricity increased by 21 per cent and gas by 14 per cent.

The party's finance spokesman Pearse Doherty said "we need to stretch every sinew to protect households from energy poverty this winter" and Budget 2022 failed to do that.

But Mr Donohoe said the majority of other EU countries “are handling this very severe issue for many families in exactly the same way as we are”. He said this was done through changes in social welfare payments that were announced on budget day including an increase in the living alone scheme, the fuel allowance and the income threshold for the working family payment scheme.

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He insisted that “we’re absolutely aware of the added pressure that many are facing at the moment and we recognise that by decisions that have already been made in the budget”.

EU rebate

During Dáil finance questions Mr Doherty said the Czech Republic had passed legislation to introduce a zero rate on energy bills for the winter months and it seemed the European Commission was going to allow that to happen.

He called on Mr Donohoe to look at rebates over the winter months and engaging with the Commission as the Czech Republic is doing to try to take the pressure off households.

The Czechs had “slashed the cost of energy bills by 11 per cent” and the Spanish government had also cut bills until the end of the year, said Mr Doherty. He added that the British Labour party had asked the Tories to zero rate their energy bills during the winter period.

And he said the EU itself came forward with a communiqué “that allowed member states to rebate the Vat that is collected on energy”.

But Mr Donohoe insisted “there’s no provision in the [EU] directive that would allow a Vat exemption or a Vat rebate in respect of domestic energy supplies” and the Government in recognising the impact of energy price increases had brought in a “targeted package of social protection interventions”.

He added that Spain and the Czech Republic have a standard Vat rate of 21 per cent while Ireland’s is 13.5 per cent. “And that’s why they have the interest that they have in looking to make a change in their Vat payment, because their Vat rate is so much higher than ours.”