Decision not to reduce VAT on home heating oil defended by Minister

The Minister for Finance has defended the decision not to reduce VAT on home heating oil as part of the Government’s package of measures to tackle the cost-of-living crisis.

Paschal Donohoe said while the Government can help offset rising costs, he cannot bring in every measure demanded of him.

The Government on Wednesday unveiled its latest package of measures in a bid to ease the financial pressures on families and households.

The VAT rate for gas and electric will drop to 9% from May 1 until the end of October, at an estimated cost of 46 million euro.

The Government said the latest steps will offset the increase in carbon taxes, set to take place at the beginning of next month.

Ministers also agreed to reduce the excise tax on marked gas oil by 2.7% from May 1.

Mr Donohoe claimed the Government cannot cut VAT on home heating oil because of EU laws.

“The reason for that is we have laws across the European Union that govern what are the ways in which you can change VAT and how many different rates of VAT each country can have,” Mr Donohoe told RTE.

“While I accept this feels a little bit removed from challenges in relation to cost of living, overall really in the interests of the small exporting country like Ireland, within the European Union, that we have clear laws in relation to VAT because in turn it helps us sell our goods and services in other countries.

“While we do face great challenges with the war now, after a pandemic, we do so with an economy that’s still capable of growing and still capable of keeping a record number of people at work, because we got the choices of the last two years I think overall right.

“That’s why we are going to step by step help, but at the same time acknowledge that we can’t do all that many want me to do.

“The rise in price is at the till, the shop, the impact it’s having on your purse, your wallet is really considerable.

“It is the case as we move through this year, and maybe beyond, that we won’t be able to insulate our people, our economy entirely from the effect of the war in Ukraine and what that means in effect for the price of energy.”

Mr Donohoe also said a decision on whether to ban the sale and distribution of turf will take place after Easter.

It comes as Tanaiste Leo Varadkar told the Fine Gael parliamentary party on Wednesday that the proposed ban on the commercial sale of turf is being paused.

But hours earlier, Minister for Tourism Eamon Ryan said there are no plans to pause the ban, saying it will protect the public from air pollution.

Mr Donohoe said with a three-party Government, there can be “different views and different interpretations”.

He added: “What is the case is that no proposal in relation to this has come yet to Government.

“I understand that won’t happen until after Easter and after Easter then the Government will consider this matter.

“We absolutely, within Fine Gael, fully appreciate the imperative to make our air cleaner, it is also the case that this is a matter of concern to many within my party for economic and also recognising the importance of turf from a cultural point of view, and what that can mean for many families and businesses.

“We will engage within Government on this matter and work our way through this.”