05.27.22

VAT reduction on gas and energy bills

The recurring trend for the reduction in VAT rates for energy and gas continues unabated across Europe, considering rising inflation and the post-Covid economic recovery.

Ireland is no exception- and the Irish Ministry of Finance has announced a VAT reduction from 13.5% to 9% to take effect from 1 May 2022. This is expected to run until 31 October 2022.

VAT reductions often prove to be costly – and in Ireland, the reduction in VAT rates for energy and gas will come at a cost of 46 million Euros to the government.

In addition to rising inflation, it is likely the measure was introduced to counteract the carbon tax, which is also commencing on 1^st May 2022. Such measures serve to demonstrate that VAT must be viewed as part of a greater intricate framework of taxes within the fiscal structure rather than a tax in isolation and underlines the challenging role of the government to balance and manage the effects of taxation.