VAT on energy bills to be cut to 9pc after Government hold emergency talks

With electricity and fuel bills skyrocketing, the Government leaders and their senior ministers held emergency talks to discuss the crisis.

They were shown official analysis which suggested they can the reduce the current 13.5pc VAT rate on electricity and gas without being found in breach of EU rules on taxes.

The move could save bill payers €49 a year on electricity and €61 a year on gas.

People on low incomes who are in receipt of the fuel allowance will also receive a one-off €100 payment which equates to three weeks of the benefit.

The move will benefit more than 370,000 people who are in receipt of the payment.

Taoiseach Micheál Martin secured agreement with the European Council to examine if Ireland could reduce tax on energy bills.

Last week, it was thought the Government could not reduce VAT on energy bills.

However, the Taoiseach, Tánaiste Leo Varadkar and Green Party leader Eamon Ryan were told legislation can be amended to allow them reduce the rate VAT on electricity and gas.

It is expected that an amendment will be made to the Finance Act.

Consideration was also given to reducing the 13.5pc middle rate of VAT to 12pc but this will mean all products and service would be taxed at this amount and not just energy.

A long promised reduction in public service obligation (PSO) levy on energy bills, which will save people just under €60 a year is expected to come into place in October.

New advice on how to people can save money by using smarter meters and time of day pricing to cut their energy bills will also be announced by Green Party leader Eamon Ryan.

Mr Ryan will also issue advice on supports for people who are in debt as they cannot afford to pay their bills.

The Taoiseach and Tánaiste promised to offset the upcoming increase in carbon taxes following backlash from their backbench TDs.

It is hoped the decision on VAT will offset the carbon tax hikes in May.

The meeting in Government Buildings was also attended by Finance Minister Paschal Donohoe, Public Expenditure Minister Michael McGrath and Social Protection Minister Heather Humphreys.

Mr Donohoe recently revealed he and Mr Ryan were considering introducing taxes on the profits of energy companies after the European Commission gave member states the green light to introduce new levies to address the cost of living crisis sparked by the Russian invasion of Ukraine.

In response to a parliamentary question from People Before Profit TD Paul Murphy, Mr Donohoe said: “Officials in my Department and the Department of the Environment, Climate and Communications are evaluating the potential for such a proposal”.

The minister said an additional 10pc tax on energy company profits could raise around €60m.

The ESB Group made ESB Group made a €679m operating profit last year which was a more than 10pc increase on the previous year. This resulted in a €126m dividend being paid to the State.

However, it was decided not to go ahead with these measures because it could also seen renewable energy companies hit with new taxes on their profits.