2026-04-21

236. Deputy Pearse Doherty asked the Tánaiste and Minister for Finance if he will push at an EU level for electricity, including a separate category for residential electricity, to be added to the list of items that a zero VAT rate can be applied to in order to give member states maximum flexibility in designing their response to the energy crisis; and if he will make a statement on the matter. [26930/26]

298. Deputy Pa Daly asked the Tánaiste and Minister for Finance if he will discuss reducing the VAT rate for 0% for domestic electricity with his EU counterparts; and if he will make a statement on the matter. [26730/26]

I raised the crisis in people's homes in terms of their electricity bills with the Minister on numerous occasions. If we were to visualise this, it is 300,000 families. How many times would we fill Croke Park and the Aviva Stadium over and over again with the families who cannot pay their electricity bills? It is absolutely scandalous that people have been left in this situation. Time and again we have put forward the arguments that it was wrong to withdraw energy credits at a time of a cost-of-living crisis. It was wrong to leave people without those supports. Will the Minister make the argument at a European level to allow for zero VAT rate to be applied to residential electricity to give us the options to provide additional support beyond just energy credits to these families?

I propose to take Questions Nos. 236 and 298 together. I thank the Deputy very much. The EU VAT directive, which Irish VAT law must comply with, generally holds that all goods and services are liable for VAT at the standard rate which must be set at a minimum of 15%. If a good or service is listed under Annex III of the VAT directive, a reduced or zero VAT rate may be applied. It is important to note that Ireland applies more reduced and zero rates than every other member state. Some member states prefer not to introduce greater variability in VAT across the EU. The last amendments to Annex III were agreed in 2022 after four years of negotiation. Unfortunately, electricity was not included in these amendments and, therefore, the lowest rate that may be applied to VAT in Ireland is the second reduced rate of 9%. The application of the 9% VAT rate on supply of gas and electricity was introduced from 1 May 2022. This measure was extended on a number of occasions. In the most recent budget, we decided to extend it out to 31 December 2030. The total estimated cost of the reduced VAT rate for gas and electricity from its introduction on 1 May 2022 to the end of this year will be over €1 billion. We are actively engaging at an EU level. There is to be an informal European Council meeting this Thursday or Friday in Cyprus where the EU will bring forward proposals around energy affordability. My understanding specifically in relation to VAT is that there would be unanimity required for any changes to the VAT level. I do not see that as a likely outcome. I am just saying that to be honest. At present, there are no proposals at a EU level to reopen the VAT directive regarding zero rates for electricity. However, officials in my Department and across Government continue to engage with our European counterparts and with the European Commission in relation to energy affordability measures. The European Commission is working with member states on the EU-wide response to the crisis. That is why we have chosen to extend the maximum lowest rate of VAT we can currently apply to electricity and gas bills until the end of 2030. We are very eager to see if Europe wishes to go further on that. I am not detecting that there is any such unanimity at a European level in relation to reopening the VAT directive. However, I will ask. I will keep the Deputy and the House updated should that position change. Of course, the fact that VAT change requires unanimity as opposed to other measures Europe may decide to bring forward is a challenge.

I thank the Minister for his response. When he rises again, will he clarify for the House whether he has written to the Commission and asked it for this to be part of its tool? Has he asked the Commission to consider and agree a zero percent rate of VAT on domestic electricity? As he knows, the Commission has published its draft. It said it wanted to engage with member states. I am sure it engaged with the Minister in relation to this. Did the Minister ask the Commission and formally put that proposal to it in relation to the zero percent? In the absence of the Commission's agreement - the mechanisms in terms of member states having to agree - there are other measures that can be introduced. Energy credits is a way of supporting families and, indeed, the Minister brought it forward for many years himself. Does he not recognise that given the scale of the crisis, where people are at, that so many households cannot pay their electricity bills and that one in four households cannot pay their gas bills, there needs to be an intervention now? People simply cannot wait.

We have not formally made a request in relation to zero percent VAT. The reason we have not is that my genuine feedback from engagement with the European Commission is that it is unlikely to have unanimous support. I am not against formally seeking further discretion on VAT but we have tried to target our asks to areas that we hoped we could make progress on, including seeking a temporary derogation from the minimum rate of taxation applied to auto diesel because the Deputy has been asking me to go further on diesel. I do not mean just because of the Deputy but many people, including him, have been asking me to do that. We have gone beyond what the energy tax directive allows us to do. We sought a derogation in relation to that. The reason we have not formally asked is that it is not possible to seek as a member state just a derogation from the functioning of the VAT directive. We would have to have unanimity in relation to that. The feedback we have been getting from the Commission is that is unlikely to be the case. However, I am happy to further pursue that with the Commission in terms of seeing if there will be such unanimity but I do not want to create a false expectation. It is my genuine view that it is unlikely to be something forthcoming from Europe. In relation to energy credits, I said yesterday and today that I do not think anything can be off the table. It would be foolish for us to rule in or out anything. The Deputy has heard me say this before but it is my genuine view that an energy crisis in the winter is very different from an energy crisis coming into the summer months. Therefore, we need to keep these things under review as we approach the autumn and winter in terms of budgetary plans and what is the best thing to do to assist people should the energy crisis persist. We also have to have other options and, indeed, I have heard interesting suggestions here about how we can help people with their own measures in terms of their own homes, whether that is retrofitting or solar panels and whether there is more we can do in that space to make that easier and more generous. I would be interested in engaging on that. I will keep an open mind on further energy interventions in the time ahead.

Sometimes I am lost for words in here.

I try to be constructive.

I know. I hear what the Minister is saying but, seriously, I do not know what more we need to do here. These are families. There are 300,000 plus of them who cannot pay their electricity bills. The Minister saying that if the Commission allows us to have a zero rate, we would be happy with that but the Government has not even asked.

That is not fair.

It has not even bloody asked the Commission to put this on the table. Last week the Commission asked the Minister and his Department what else they think it should do in this toolbox. The Minister has not even asked. There are families today who cannot pay their electricity bill, and these are people who are working and two income households. The level of arrears they have has increased. We have record numbers in the history of the State who cannot pay electricity bills. The Minister has not even asked.

That is not true.

There is a serious problem here. I do not want to repeat it over and over again but the Government needs to get down from the ivory tower. It needs to understand where people are at. People expect more from a government. People expect the Government to have their back and fight their corner. The Government is not even asking.

People expect more from an opposition. At a time of a national crisis when a Minister stands up and is trying to constructively engage, the Deputy just wants to give me the lines to take back. I explained to the Deputy very clearly. I said we are happy to go back and further engage with Commission. Hang on for a second.

The decision was made in 48 hours.

Just for a second, Deputy. Our Taoiseach - yours and mine and the Taoiseach of this country - will engage with his European counterparts when he attends an informal meeting of the European Council. Up for discussion at that meeting will be what more measures can we take. Ireland will make its position clear. The priority of my Department has to be to ask for things that individual member states can seek. Individual member states can seek a derogation under the energy tax directive. Individual member states cannot seek a derogation under the VAT directive. Therefore, the only way the VAT directive can be change is by unanimity.

I agree.

It is not about asking the Commission. It is not a member state. When we have engagements at the likes of the European Council, which the Taoiseach will have, it is about establishing whether there is unanimity. I am giving the Deputy an honest view in this House that I do not believe that unanimity is there. Do not give me the palaver about ivory towers here. This is about truthful debate. The Deputy asked about energy credits. I did not rule them out. I gave other views in relation to solar panels, retrofitting and things we can do.

The Government withdrew them.

I talked about €750 million package. Just because I do not agree with every position the Deputy adopts or because I point out legal and technical difficulties around them does not mean the Deputy cares and I do not. It just means I am being honest.

I did not withdraw them.