Cathal Crowe (Clare, Fianna Fail)
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36. To ask the Minister for Finance if he will engage with his counterparts in the European Union in order that the VAT treatment of home heating oil in Ireland can be revised, similar to be recent VAT reduction in electricity and gas. [21337/22]

Peadar Tóibín (Meath West, Aontú)
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42. To ask the Minister for Finance if he will outline any engagement he or his Department has had with the European Commission in relation to the temporary reduction of VAT on fuel. [21257/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 36 and 42 together.

At the outset, the Deputy should note that I wrote to Commissioner Gentiloni in early March regarding the need for Member States to have greater flexibility when responding to the energy crisis, particularly in relation to the VAT and Excise Directives. In addition, officials in my Department and their colleagues in Brussels are in frequent contact with the European Commission across a wide range of issues, including how to respond to the energy crisis.

As the Deputy will be aware, following lengthy negotiations, amendments to the VAT Directive were provisionally agreed in December 2021 with final sign off on the amended text at ECOFIN in April 2022. This new agreement came into effect on 5 April 2022.

Under this new agreement, Annex III of the VAT Directive was expanded to include gas and electricity. This means that Ireland can apply a reduced rate of 9% to these products in line with other goods and services to which a reduced rate applies. The Government has made a decision to avail of this flexibility from 1 May, the start of the next VAT period.

In relation to VAT on home heating oil, this new agreement on VAT rates also preserved Ireland’s historical derogations in relation to fuel and oil despite them not being included in Annex III. It is on this basis that Ireland applies its 13.5% reduced rate of VAT to the supply of fuel and oil for domestic and commercial use. The current 13.5% VAT rate applied to energy products is a ‘parked rate’, and cannot be reduced below 12%. It should be noted that other Member States must apply their standard rate of VAT to this product.

I and my officials have sought and will continue to seek the maximum degree of flexibility for Member States with respect to VAT as it applies to domestic energy and fuel use. That engagement will continue as I work with my European counterparts and the EU Commission to respond to the current energy crisis.