Taxes, levies and charges all add up to make costs in Ireland some of the dearest in EU

March 8, 2022
|In Payroll, Taxation, VAT
|By Angela O'Leary
  • Housing and energy costs now 84pc higher than the EU average
  • Food 20pc more expensive as householders ‘face €2,000 rise in costs’
Ireland is one of the most expensive countries in Europe for consumer goods and services, with multiple taxes, levies and charges blamed for the high costs. Figures from the European statistics agency Eurostat show that prices in Ireland for consumer goods and services are among the highest in the European Union (EU). Housing and energy costs here are an extraordinary 84pc higher than the EU average. This has prompted calls for the Government to cut back on VAT and other charges to ease the cost-of-living pressures on households. The Indo Daily: Feeling the pinch – the ‘cost-of-living’ crisis and you Overall prices in this country are 40pc higher than the average across the union, the most recent figures from Eurostat show. Only Denmark and Luxembourg have higher prices. This country is the most expensive for alcohol and tobacco and one of the more expensive for food. Food is 20pc more expensive in Ireland than the average for 27 EU countries. Alcohol prices in this country are double the EU average. This was measured before minimum-unit pricing was brought in. Taoiseach Micheál Martin yesterday ruled out any further Government cost-of-­living interventions before the next budget. Mr Martin said the €500m package of measures, announced by Government this week to tackle the sky-rocketing rate of inflation, was a “once-off” and the “next intervention” would not be until the budget in October. Mr Martin said that while the cost-of-living package will “never fully” address the financial burden of the rising rate of inflation, it will “help to alleviate the pressures that are on many families, particularly hard-pressed families”. Business Newsletter Read the leading stories from the world of business. Sign Up On Thursday, the Government doubled the soon-to-be-introduced electricity credit to €200 and reduced public transport fees by 20pc. They also promised a one-off €125 payment for people who claim the fuel allowance. The drug payment scheme threshold was reduced and Budget changes to the Working Family Payment were brought forward. Mr Martin yesterday confirmed he will follow Public Expenditure Minister Michael McGrath’s lead and donate his electricity credit to charity The Consumers’ Association warned that householders are set to be hit with €2,000 in costs this year due to rising prices. Chartered Accountants Ireland has expressed disappointment at the Government’s failure to reduce the VAT rate on energy costs from 13.5pc to 9pc to help consumers cope with the crippling impact of inflation. Director of public policy at the accountancy body Dr Brian Keegan said the VAT rate on heating oil, gas and electricity should be cut to 9pc, saying this would have “the ­immediate effect of putting money back in consumers’ pockets”. Dr Keegan acknowledged that a derogation would be needed from the European Commission. But this did not stop the Government reducing the top rate of VAT from 23pc to 21pc for six months during the worst of the pandemic, or reducing the VAT rate for the hospitality sector to 9pc recently, he said. He said the more prices rise, the more money the Exchequer takes in from VAT. Dr Keegan said a VAT cut could be implemented from April for three months, saving consumers up to €400m on their energy bills. Economist Austin Hughes of KBC Bank said that Irish price levels are above the EU average due to indirect taxation in areas such as alcohol and tobacco and higher transport costs, due to our position on the periphery of Europe. But Mr Hughes said it was important to point out that Irish incomes are higher than in many other EU countries. Ireland has the eighth-­highest median annual ­earnings in the EU 27, at €40,074. This is well above the average, which is €26,314. An analysis by price comparison site Bonkers.ie shows how taxes and levies have a massive impact on prices here: ■Taxes and levies on household energy services add around €420 a year to the cost. Carbon tax is currently €41 per tonne of CO2. It adds around €76 to the average annual natural gas bill. This will increase to €93 a year in May. The Public Services Obligation (PSO) levy adds just over €58 a year (including VAT) to electricity bills. VAT at 13.5pc is also added to energy bills, adding €270 a year to the cost. ■The State takes around €900 a year in taxes from a typical driver from carbon tax, VAT, excise duty and the Nora (National Oil Reserves Agency) levy on diesel and petrol. According to the AA, around 96c of every litre of petrol and 85c for every litre of diesel goes on taxes. ■Stamp duties on banking and on insurance policies cost a combined €66 a year. ■Paying motor insurance quarterly incurs a €57 surcharge, compared with paying it for a year. Daragh Cassidy, of Bonkers.ie, said: “At 23pc, our standard rate of VAT is one of the highest in the world. And despite government protestations, these are all within the power of government to reduce or abolish if it wanted to.”