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VAT cut ‘made more sense’ says AA as fuel prices rise

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AA director of consumer affairs Conor Faughnan. Photo: Gerry Mooney

AA director of consumer affairs Conor Faughnan. Photo: Gerry Mooney

AA director of consumer affairs Conor Faughnan. Photo: Gerry Mooney

Petrol and diesel prices are at their highest since the pandemic began after climbing for four successive months, AA Ireland said.

The end of the temporary VAT reduction at the end of last month which saw VAT go back up to 23pc from 21pc and recent increases in crude oil have driven up prices.

According to the AA’sstudy, the average cost of a litre of petrol has increased more than 5c to 138.9c per litre, up from 133.8c last month.

Diesel rose to an average of 129.8c per litre, up from 124.9c last month.

Higher VAT costs added around 2c to the cost of both petrol and diesel.

Both are now at their highest level since the lockdown was introduced last March.

In January last year, a litre of petrol cost 144.5c and a litre of diesel cost 135.9c on average.

The AA said that continuing the lower VAT rate until the end of the current lockdown “may have made more sense”.

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“The decision to end the reduction in VAT at the beginning of March had been known in advance, but given that many families across the country are still dealing with the financial impact of Covid-19 a continuation of the lower rate, for at least as long as Level 5 restrictions remain in place, may have made more sense,” said Conor Faughnan, AA director of consumer affairs.

Finance Minister Paschal Donohoe introduced a temporary reduction in the standard rate of VAT last September. It expired on February 28.

The standard rate applies to approximately 53pc of activity, including the supply of adult clothes and footwear, electrical equipment, cars, petrol, diesel, alcohol and tobacco, the department said.

“Often when we discuss fuel prices, most of the attention is on crude oil costs or international factors such as OPEC reductions in production," said Mr Faughnan.

“However, the reality is that these factors only affect about one-third of prices at the pump, with our own tax system playing a much larger role in what we pay for fuel.”


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