Measures to offset the forthcoming increase in the carbon tax will be introduced by the Government before May, Tánaiste Leo Varadkar has said.
However, Mr Varadkar also said a VAT cut on energy amid the current cost-of-living crisis was not currently possible, following engagement with the European Commission by Taoiseach Micheál Martin and Minister for Finance Paschal Donohoe on a potential cut to VAT rates.
The Tánaiste was speaking during Leaders' Questions in the Dáil on Thursday, where Sinn Féin's deputy leader in the Dáil Pearse Doherty said the planned increase in the carbon tax, due to come into effect from May 1st, "should not go ahead".
Mr Doherty said there was a need for an emergency mini-budget amid the cost-of-living crisis and that the Government “can and must do more”.
Mr Varadkar said there had already been “a substantial response” from the Government to help people with the burden of rising costs, a response worth up to €2 billion, which wasn’t “small” and was “much greater than has been done by other governments around Europe”.
“But, we acknowledge that more needs to be done given that prices continue to rise,” he said.
“We don’t want to chase every price increase with an action; that’s not sustainable, that’s not credible.
“We want to look at it in the round, both in the next budget and indeed before the next budget.”
Home heating oil
Mr Varadkar said the carbon tax increase would not apply to petrol, diesel or electricity but would apply to home heating oil.
He said it would add about €20 to the cost of filling a full tank with home heating oil and increase the cost of gas by about €1.50 per month for households.
Mr Varadkar said that the Government did plan to mitigate the rise in carbon tax for the most vulnerable, but gave no detail about what that would look like.
“We will bring in measures before May to offset that increase but it is important to be honest about the scale of that increase,” Mr Varadkar added.
“You would think from some of the commentary that the carbon tax is somehow responsible for all or most or even a lot of the [cost] increases that people are experiencing; that’s not the case.”
Mr Varadkar said Sinn Féin’s proposal to reduce VAT on energy would be considered but that currently it was not possible.
He said there had been engagement with the European Commission and that the State already had one of the lowest VAT rates on energy in Europe. The VAT rate on fuel in the State currently stands at 13.5 per cent.
“At the moment if we were to do what you have proposed it would not be possible, it’s not lawful, not legal,” he told Mr Doherty.
He said if VAT on fuel was reduced to 12 per cent, it would then have to go back up to the full standard rate of 23 per cent because of VAT directive structures.
The Tánaiste said that being in Opposition Sinn Féin had “the convenience of making proposals and making promises that cannot be implemented”. Additional reporting: PA
