EU standard VAT is 23%, but we usually charge a lower rate on energy: 13.5%. It’ll is likely to go back to that at the end of October, having been temporarily 9% since May 2022. If they extend the 9% thing, it’ll cost the government €319 million. A further complication of State policy is that the planned increase in carbon tax – which operates like an excise duty on fuel – will add to prices of most fuels in 2025 and raise a hefty €160 million for the exchequer (much of it ring-fenced for environmental and social spending).

Advice to cut VAT on bikes and e-bikes from the standard 23% to 13.5%

An interesting proposal understood to be in the mix for budget day is a cut in VAT on internet connections from 23 per cent to 13.5 per cent. This would cost around €60 million and would benefit households (by about €40 a year on average) and businesses.

Is 9% VAT returning for hospitality? The lower rate on hospitality applied from November 2020 – in the wake of the Covid-19 downturnbusiness – until August 2023, when it reverted to 13.5%. The sector is calling for a return of the low rate, but that’d cost €764 million a year

New homes could also be taxed at the lower 9%. The civil servants don’t like this either, arguing that there is no guarantee it would be passed on to buyers. If applied to all new houses it would cost €721 million a year, which makes it look unlikely.

Heat pumps might also see their VAT cut.

Experts believe that Irish tax revenues will have to increase in the medium term to meet the cost of ageing and climate change. Revenues based on fossil fuel cars will drop off sharply assuming the switch to electric cars is successful and the exchequer will have to look at a way to replace these. The Fiscal Advisory Council estimatedhttps://www.irishtimes.com/business/economy/2024/02/28/switch-to-electric-motoring-will-cost-exchequer-25bn-in-lost-tax-revenue-by-2030/#:~:text=The switch to electric motoring) the annual losses would climb to €2.5 billion by 2030. The council – and previous Tax Strategy papers – have looked at ways to do this, via measures such as taxing cars on their weight, or congestion charges. None of this will feature in Budget 2025. Also, the EU Commission, the OECD and the Commission on Tax and Welfare have all argued for measures to get more revenue from VAT and broaden the base over time.