Govt expected to move on cut to fuel excise in the next week or two

March 8, 2022
|In Accounting, Business, Cashflow, Resources, VAT
|By Angela O'Leary
GOVERNMENT IS EXPECTED to move to cut excise on petrol and diesel in the next week or two.
The Journal reported earlier this week that senior sources said that should the €2 per litre mark for petrol and diesel be breached, the Government would have no choice but to step in.
Leo Varadkar signalled on Friday that the Government will intervene on costs before the budget in October.
The Tánaiste indicated to the Dáil this week that excise will need to be reduced in order to tackle the spiralling costs at the pumps.
Senior Government sources have told The Journal that while nothing is signed off on yet, a cut is on the cards soon.
“I would think in the next week or so,” said one senior source.
 
About 60% of pump prices are due to tax, including VAT and carbon tax, according to figures from the AA.
Due to excise receipts for the two months to the end of February being up €37 million on same period last year (this figure also includes alcohol sales), it is understood the Government believes there is some wriggle room for action to be taken.
As excise is a domestic tax, Government sources say it is an easier step to reduce it, rather than tinkering with VAT, as it is governed by an EU Directive.
The EU is currently preparing a white paper on how to deal with the cost in the rise of energy which could deal with the issue of VAT. The Taoiseach has said this should be completed within the next ten days.
On how Government plans to go about reducing excise, the same source said: “It would need legislation, but it is doable.”
Another said it is “pretty simple, you can just reduce it” stating that it is just “X cent per litre”.
While the Government has no estimate as to just how high fuel costs will go in the coming weeks, it is understood that “it could get much worse”.
When asked if it could hit €2.50 per litre, those in government circles said “you couldn’t rule it out”.
 
While a cut in excise would be a revenue loss, the Government’s thinking is that it would help tame inflation as high energy costs feed into everything.
While it has been indicated that the Green Party would not be keen on a move to reduce excise, it was also suggested that the Finance Minister Paschal Donohoe would also not be too happy on any changes in taxation before the Budget.
Sources have reiterated what the Taoiseach said last week in terms of pressing ahead with the carbon tax increase.
Carbon tax is due to increase for home fuels in May, but is not due to increase on petrol or diesel until October.
“We don’t want to cut that,” said the same source, stating that it is ring fenced for “good stuff”.