Ireland Cuts Energy Taxes in Budget Bid to Appease Voters

Ireland will cut levies on fuels as part of a series of energy measures aimed at helping voters and quelling anger that escalated into protests earlier this year.

The measures announced in the Budget on Tuesday include reducing carbon tax on home-heating oil and gas. The tax will not increase again in the lifetime of the government, Finance Minister Simon Harris said.

That’s a change from the previous plan that would have seen increases in the levies kick in in the coming months.

The government is attempting to stave off growing voter discontent and avoid a repeat of farmer and haulier protests that blocked roads and the country’s only oil terminal in April over rising fuel costs.

There had been two scheduled increases between now and May next year from €63.50 ($71.533) per tonne of carbon emitted to €78.50 per tonne by May 1 next year. Instead, the tax will now be scaled back to €48.50 per tonne.

The finance ministry is also extending the temporary reduction in fuel excise rates that are currently in place until November to the end of February 2027, Harris added.

Read more: Irish Protesters Block Oil Refinery Over Rising Energy Costs

“The extraordinary circumstances we find ourselves in do call now for extraordinary measures,” he said in the Irish parliament Tuesday.

Harris unveiled a personal income tax package of €1.3 billion, including a €2,500 increase to the standard rate cut off point for income tax to €46,500.

There will also be an increase to the main tax credit, the Personal, Employee and Earned Income Credits, by €125.

Even though Ireland boasts some of the lowest borrowing costs in the euro area, its fiscal surplus is largely built on the huge — but volatile — corporation tax revenues from US firms, leaving the country highly vulnerable to global geopolitical swings.

Institutions ranging from the central bank to the state’s fiscal watchdog have called on the government to spend less and save more to buffer against future economic shocks.

The government pledged to funnel more of the windfall taxes into its sovereign wealth fund, which it aims to expand to €100 billion ($116 billion) by 2035. It will invest an extra €1 billion into the fund next year, in addition to the already-planned transfer of around €4.8 billion.

“Some of the biggest, most advanced countries in the world are experiencing a rise in borrowing costs that will significantly increase the cost of financing their debt,” Harris added. “Ireland is not immune from these challenges, and we must be mindful of the economic headwinds.”

In the wide-ranging budget, the government also:

Extended the bank levy for a further year, with a target yield of €200 millionIncreased the minimum wage by 79 cent to €14.94Increased the help-to-buy claim allowance for first-time home buyers by €5,000Boosted the rent tax credit by €150Increased three inheritance tax thresholdsReduced maximum childcare fees from €735 to €550