VAT rate reduction should be kept on the table to reduce energy costs for consumers – Chartered Accountants Ireland

Temporary VAT cut on heating oil, gas, and electricity to 9% would deliver immediate benefit without legislative change 

VAT measures in hospitality were key part of policy response to pandemic, and should not be discounted 

11 February 2022: Chartered Accountants Ireland expressed disappointment at the Government’s failure to reduce the VAT rate on energy costs from 13.5% to 9% as a way of helping consumers cope with the crippling impact of rising inflation. 

“While the increased electricity credit will be welcome in many homes, it’s disappointing that the Government didn’t go further and temporarily reduce the VAT rate on the likes of heating oil, gas and electricity to 9%. Across the country, people are feeling the impact of rising inflation not just in energy bills but also in housing costs, weekly grocery shopping and fuel costs.  

“Reducing the VAT rate on home heating costs would have had the immediate effect of putting money back in consumer’s pockets in a simple and targeted manner and prevented a further portion of society from falling into fuel property. It would seem prudent to keep this policy measure on the table.” 

In terms of the associated cost to the Exchequer, the Institute notes that VAT is calculated as a percentage of the price of goods. Therefore, as prices inflate so too do VAT receipts. 

VAT reductions for the hospitality and tourism sector were an important part of the Government’s economic response to the pandemic in protecting those areas of the economy deeply impacted by the public health restrictions. 

Dr Keegan continued:

“The reduction in the tourism rate of VAT from 13.5% to 9% set a precedent and has been vital to the survival of many businesses in that sector. The benefit of such a reduction in rates is that the impact is felt immediately by consumers. Implementing this change would also have been an efficient use of the Government’s administrative powers given legislative change is not required.”

ENDS

PR & Communications Manager
Chartered Accountants Ireland