Varadkar rules out cut in fuel taxes

Minister for Transport Leo Varadkar has categorically ruled out recommending a decrease in excise duty or VAT on petrol and diesel.

As some forecasters predict the cost of a litre of petrol could hit €2 by the end of the year – delivering a windfall increase in fuel tax revenue - Mr Varadkar said the scope for manoeuvre was more limited “than people think”.

He said increasing prices at the pumps did “not especially” mean a surge in tax revenue because the excise duty per litre was fixed.

While acknowledging the VAT rate was calculated on a percentage basis and this would generate more tax, he denied there was a net gain to the Government from higher fuel prices.

“The Vat is 23 per cent but the evidence is that as people spend more on petrol or diesel so they spend less on other things. It is not the way people think it is. It is a crude comparison but people may spend less on clothes to spend more on fuel so there is actually no gain in terms of tax”.

Mr Varadkar said if there was a reduction in VAT on fuel, the money would have to be recovered elsewhere.

He also said the price of fuel was partly due to factors beyond the Government’s control, including the international cost of fuel and the strength of the euro versus the dollar.

According to the AA, a litre of petrol now costs €1.57, up 2.1 cent since last month. Diesel also rose, and is up 1.3 cent per litre to an average price of €1.54. This contrasts with an average cost of €1.44.5 for petrol and €1.38.5 for diesel this time last year.