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Irish Mirror
Irish Mirror
National
Ciara Phelan

Budget 2023: Cut in VAT on gas and electricity 'to be extended past October'

A cut in VAT on gas and electricity bills which was due to end in October is expected to be extended to help keep prices down, Finance Minister Paschal Donohoe has indicated.

It comes as Cabinet Ministers have agreed to bring the Budget forward to September 27 - two weeks earlier than expected - as the Government faces intense pressure to help Irish households.

Speaking to reporters on Monday, Minister Donohoe said as soon as “we’re in a position to see a lower price of energy, I'm very confident the Government will act at that point to change the measures that are there.”

Read More: Government could bring Budget 2023 forward with another electricity credit and fuel allowance bump on the cards

He was referring to a cut in VAT on energy which was introduced in early May to tackle soaring costs.

The VAT was cut from 13.5% to 9% but this measure was only due to be in place between May 1 and October 31.

However, a Cabinet source has confirmed that the VAT cut on energy is likely to be extended.

They said: “The €1.05bn tax package gives us the flexibility we need to extend it.

“It’s not all for income tax reductions.”

The cost of this measure is estimated already at €46 million for the six months.

It is understood that the Budget package will be €6.7 billion, which is €2.2 billion greater than planned.

Around €1 billion of this will be in tax changes, which is twice the amount originally set out.

Overall expenditure is expected to increase by between 5% and 10%.

Government Ministers have already signalled tax cuts, increases in social welfare and pension, another €200 energy credit for households and a number of targeted measures are also expected to help low and middle income families.

Tanáiste Leo Varadkar said on Monday people will see further relief in the summer due to measures announced in last year’s Budget.

However, he warned that no Budget will get on top of inflation.

He said: “Over the course of summer people will see other things come into effect.

“For example, there’ll be an increase in the back to school clothing and footwear allowance for low income families who are struggling with the costs of getting kids back to school.

“There’ll be an increase in the SUSI grant for students which kicks in in September and there’s a possibility of a public sector pay deal as well and then in Autumn we’ll see the Budget measures and will try get them kicked in as much as possible and then a whole other set of things coming into effect in January.

“It is very important to say that there is no Budget, early or late or emergency or mini that’s going to get on top of inflation.

“Thankfully because the economy is performing strongly with record levels of employment and rising income in the round and record tax take coming in from corporate profits, we will have a decent amount of space in the Budget to help people, particularly with the cost of living.

“And that will include a tax package, a pension increase, welfare increases and targeted measures to reduce some of the cost of living that the Government has control over.”

Minister Donohoe also warned Irish households that rising prices could remain until next year.

He added: “We do really appreciate that with the rising cost of fuel, the rising cost of food, so many in their purses and their wallets are really feeling the effect of rising prices at the moment.

“But this is a challenge that is going to be with us for many months.

“It's going to be with us next year and because of that, the most effective and most appropriate way of dealing with this is through the Budgets.

“We're very conscious that whatever decisions we make now, we have to be able to stand over even if circumstances change in the future.

“And I think that will be a guiding principle of the government too.”

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