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good news VAT could soon be cut to 9 per cent after Taoiseach Micheál Martin secures EU agreement

  • The current EU rules mean that if Vat on fuel was reduced to 9pc to ease the financial burden on families and businesses, it could not return to 13.5pc – but rather would have to be charged at the highest rate of 23pc.
  • Taoiseach Micheál Martin and his EU counterparts signed off on a measure to help untangle complications with Brussels that had been holding up the prospect of reducing Vat on fuel.
  • The welcome news comes as two more energy firms have announced price rises, taking to three the number of suppliers hiking their charges so far this year

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Micheal Martin

Micheal Martin

Taoiseach

Taoiseach

/

Micheal Martin

Hard-pressed consumers have received a welcome boost, after the Government secured an agreement with the EU which means Vat on fuel could soon be cut to 9pc.

Taoiseach Micheál Martin and his EU counterparts signed off on a measure to help untangle complications with Brussels which had been holding up the prospect of reducing Vat on fuel.

At the end of an EU leaders’ summit in Brussels, Mr Martin said the Government can now engage directly with the policy-guiding Commission to finalise Ireland’s power to act if it is decided further fuel tax cuts are required.

“It’s progress, but I think there’s more work to be done on the details,” Mr Martin told reporters.

He said a special derogation given to Ireland in the early 1990s allowed Ireland operate a lower rate of Vat on fuel of 13.5pc.

Under the rule, any large-scale temporary cut in that rate would mean Ireland would lose that derogation – obliging us to revert to the standard 23pc rate, once the temporary cut expired.

So the current EU rules mean that if Vat on fuel was reduced to 9pc to ease the financial burden on families and businesses, it could not return to 13.5pc – but rather would have to be charged at the highest rate of 23pc.

Taoiseach Micheál Martin has been lobbying his EU counterparts about easing the rules on Vat at the summit in Brussels this week.

Yesterday government sources said there is a reluctance to introduce new cost of living measures every few weeks but said there will be huge pressure to reduce the rate of Vat on fuel if the EU clears the path for an easing of the rules around the derogation.

The welcome news comes as two more energy firms have announced price rises, taking to three the number of suppliers hiking their charges so far this year.

Energia is increasing its electricity and gas prices from April 25 next, while prepayment meter supplier PrePayPower will raise its prices for both fuels from the start of next month.

Electricity prices are going up by 9.9pc, and gas by 19.9pc.

PrePayPower, which gives its customers pay-as-you-go meters, announced three rises last year. Many people on low incomes use pay-as-you-go meters.

The increase will see the average PrePayPower electricity customer pay an extra €132 on their annual bill, according to David Kerr of price comparison site Bonkers.ie.

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Gas customers meanwhile will see an increase of €182 in their annual bill.

The latest increase from 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 in one year.

The company said its increases last year were among the lowest in the market with increases less than a third those of some suppliers.

Energia’s electricity prices are going up by 15pc, in a move that will cost the average customer an additional €247 a year. Gas prices are rising by the same percentage, which will add €180 to the average annual bill.

Dual-fuel customers will also be hit by a 15pc rise in prices, adding €426 to the typical annual bill.

It is the fourth Energia price rise in 12 months.

The company said the increases are the result of a sustained period of elevated global energy market prices.

The latest announcement means Energia’s dual-fuel customers will pay an extra €1,200 a year since the increases started last March.

Bord Gáis’s recent price rise announcement means its dual-fuel customers are being hit with combined price hikes of €1,315 over the past 12 months.

The latest rise comes after Bord Gáis Energy last week said it was increasing electricity prices by 27pc and gas by 39pc. This will add €385 to the average Bord Gáis electricity bill and €390 to average annual gas bills.

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

Energia director of customer solutions Andy Meagher said: “The wholesale cost of gas and electricity has risen substantially over recent months.

“We are very conscious that these global issues impact our customers locally, and we remain committed to delivering the very best value and service.”

He said the company has done its best to absorb the increases in wholesale and commodity costs, but these price changes were unavoidable.

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

“Overall, we have limited where possible the full cost increase to customers, and we will continue to review the market and to work with our customers to help them manage bills where required,” Mr Meagher said.


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