Can the government hold the line on restoring excise on fuel?

The Irish government is under significant political pressure as the September 1 deadline for restoring fuel excise duties approaches. Initially hoping that price shocks at the pumps would have subsided, the government's expectations were dashed by ongoing Middle East instability and a prolonged hot summer that is expected to drive up food prices due to lower crop yields.

This situation intensifies the political difficulty of implementing the first of four planned fuel tax hikes. The government had previously introduced temporary excise cuts in March to ease the burden on motorists, hauliers, and farmers. However, nationwide fuel protests in April forced further, deeper cuts with a revised end date of July.

Further lobbying and opposition pressure led to a revised schedule for the gradual restoration of excise reductions, spread across September, October, November, and December. Now, as the September date looms, representative groups and opposition parties are renewing their calls for a postponement. The government is struggling with the common political challenge of removing a 'temporary' measure, as the electorate remains focused on immediate price increases rather than past relief.

Adding to the complexity, recent tax figures reveal a substantial increase in government revenue from elevated fuel prices. The Department of Finance reported €328 million collected in VAT on diesel and petrol in the first five months of the year, largely in April and May, coinciding with price jumps linked to the Iran conflict. The government disputes claims of excessive revenue, highlighting that its support package since the conflict began exceeds €1 billion, significantly more than the increased VAT receipts.

Aontú's Peadar Tóibín criticized the government, stating it is "taking record VAT despite the fact that we are in a cost of living crisis." He argued, "They’re benefitting while the customer takes the hit, this is wrong and it’s unfair." Road hauliers and farmers have also joined the calls for a delay. The government maintains that no final decision has been made, with ministers continuing to review the situation.

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taking record VAT despite the fact that we are in a cost of living crisis. They’re benefitting while the customer takes the hit, this is wrong and it’s unfair.