Calls mount over VAT cut as fuel prices hit new high
Government generating record revenues with VAT intake now almost offsetting recent excise cuts brought in to help struggling families
THE Government is generating record revenues from VAT receipts as fuel and electricity prices continue to rocket, new figures reveal.
And according to a new study obtained by the Irish Mail on Sunday, increased revenue from VAT has almost offset the recent excise cuts the Coalition brought in to ease pressure on consumers.
It comes as demand is growing for Finance Minister Paschal Donohoe to slash fuel VAT rates to a new emergency rate of 9%.
Earlier this month, the Government announced a €320m package of fuel excise cuts which shaved 20 cent off a litre of unleaded petrol, and 15 cent off diesel.
However, these reliefs were quickly overtaken by soaring prices at the pumps.
And now a new study carried out by the industry group, Fuels for Ireland, reveals the excise cuts have almost been offset by the spiralling VAT take that has boosted the Government’s coffers.
The survey, which compared the overall tax take of a litre of petrol and diesel a year ago with this week, shows the Government is just two cents shy of the income it was receiving on sales of a litre of diesel this time last year.
And it reveals up to half of the recent cut in petrol duties has been sucked up by the increase in VAT receipts. In March 2021, the Government took 81.09 cents a litre of diesel in various taxes. Last week the take was 79.93, a drop of just two cents.
The impact of the 20 cent excise cut in petrol duties has also been seriously diluted, from 92.90 a litre this time last year to 84.11.
In contrast, the amount of VAT collected per litre increased by just under 30%, from 27.11 cent in 2021 to 34.59 cent this year.
Commenting on the survey findings, Fuels for Ireland CEO Kevin
McPartland called on the Government to ‘initiate a comprehensive review of taxes, levies and duty on fuel products’.
Mr McPartland told the MoS: ‘High retail prices for fuel mean high VAT returns for Government. ‘While they argue that excise duty cuts have reduced diesel by 15 cent per litre, and petrol by 20 cent per litre, the truth is motorists are paying only 2 cent less in total taxes for every litre of diesel they buy and only 8c less to the State for every litre of petrol they pay today compared with this time last year.’ Demands for a decrease in fuel VAT have intensified in recent weeks after the excise cuts failed to have a significant impact on prices at the pumps.
Minister Donohoe has consistently opposed cuts to VAT rates on the grounds it is not permitted under EU tax laws.
However, at this week’s summit in Brussels, EU leaders agreed to introduce greater flexibility on the rights of states to set their own VAT rates.
Taoiseach Micheál Martin said this means the Government can now engage directly with the European Commission to finalise Ireland’s power to act if it decides further fuel tax cuts are required.
However, the Taoiseach warned it is not a done deal yet, saying: ‘While it’s progress, I think there’s more work to be done on the details.’
One senior government source told the MoS: ‘The [EU] council has agreed to look at all options, including VAT and pricing.’
Another minister said: ‘We haven’t got a deal, but it is the steppingstone to securing a deal – it gives us the freedom to secure a cut. It will be up to Paschal to secure the deal.’
In an indication of growing pressure internally on Mr Donohoe, another minister warned: ‘Any failure to secure a cut in VAT is now politically unsustainable.’
The finance minister is believed to be uneasy about the impact sweeping VAT cuts will have on the exchequer.
But his ministerial colleagues are even unhappier about the soaring VAT take.
One senior minister warned the Minister: ‘The current take is politically unsustainable. We are at best standing still.’
Another Cabinet member said: ‘The Government is seen as being too cute for its own good, giving with one hand and taking with the other.
‘The proof of the pudding is at the pumps, prices have crawled down.
‘The public are furious and generally, in that scenario, they blame the Government.’
Minister of State for Skills and
‘Motorists are paying only 2c less on diesel’
‘Government is seen as too cute for own good’
Further Education Niall Collins said the VAT is ‘hitting middle Ireland especially hard’ and that it is effectively an ‘extra tax on rural Ireland’.
Mr Collins told the MoS: ‘The public expects in a time of hyper-inflation for us to make every effort, now that the EU has sanctioned it, to cut VAT.
‘The Government needs to be in the business of cutting prices, not adding to them.’
Dermot Jewell of the Consumers’ Association of Ireland said: ‘Right
now a cut in VAT is the main artery through which we can fund some reduction during this emergency.
‘The impact of VAT is why, from the start of this crisis, we have been
calling for a reduction.
‘Only a cut in VAT can facilitate the Government’s objectives to significantly reduce the cost of fuel.’