Can the VAT rate on Electricity be Reduced?

Sinn Féin suggested recently that the VAT rate on electricity, currently at 13.5%, be temporarily removed to ease the burden on households over the winter. The government have claimed that they can't do that due to EU law. In this post, I will take a quick look at the VAT Directive and try to establish what is actually permitted. 

First of all, there is no doubt that the minimum vat rate allowed is 5%, so that rules out a complete removal of vat :

"The reduced rates shall be fixed as a percentage of the taxable amount, which may not be less than 5 %". 

Next, Article 118 states that certain services cannot go below 12% and this was referred to by the government as applicable to electricity. As electricity comes under Annex 1, it would seem that the government is correct (- -but wouldn't 12% be better than no reduction ? ) :

" Article 118

 Member States which, at 1 January 1991, were applying a reduced rate to the supply of goods or services other than those specified in Annex III may apply the reduced rate, or one of the two reduced rates, provided for in Article 98 to the supply of those goods or services, provided that the rate is not lower than 12 %". 

However, something that has been noticed before is that there is often a grey area with EU law. Article 102 deals specifically with the supply of energy, including electricity and allows for either of the two reduced rates to be applied. In the case of Ireland, the two reduced rates are 13.5% and 9% (for hotels) :

"Article 102

After consultation of the VAT Committee, each Member State may apply a reduced rate to the supply of natural gas, electricity or district heating"

It is remarkable that no reference is made here to the minimum rate of 12%, but as article 102 precedes 118, perhaps it is inferred that 102 can be relied upon alone in relation to electricity. In that case, surely, a reference to the exception under 102 should have been made in 118. 

I am no legal expert and perhaps someone can comment below on what they think. 

We can test the legal recipes in the EU VAT directive by the results. And here, it would seem to be the case that when we look at other European countries, the vat on electricity can be reduced to a minimum of 5%.

- - Portugal reduced the vat on electricity to 6% for low usage households in 2019. Initial figures show that the reduced rate applies to about 42% of customers with the rest paying vat at the higher rate of 23%.

- - Spain have introduced a temporary reduction to 10% for low usage customers until December 2021. After that, the vat will revert to the normal 21% rate. It is estimated that the vast majority of households and businesses will qualify for the reduced 10 % rate. 

- - Italy have a fixed vat rate of 10% on electricity. This proves that the minimum rate of 12% does not apply to electricity as per article 102 . Applying the Italian model to Ireland would mean we could reduce our vat rate to 9% on electricity. 

- - Greece have a super reduced vat rate of 6% on electricity since 2019. This also applies to medicine and vaccines as well as children's books. Their normal reduced rate is 13 % which applies to hotels. It is interesting to see that in Ireland we seem to have our priorities completely wrong with hotels regarded as more essential than electricity. 

- - The UK had along with Malta the lowest vat rate on electricity in the EU with a rate of 5%. One of the reasons for brexit is that they were not able to reduce it to zero. 

- - Luxembourg have a vat rate of 8% on electricity. 

It seems clear that the vat rate on electricity can be lowered to at least 9%. But the government have chosen the spending option as usual which means additional handouts to struggling families. Which in turn will lead to a cycle of inflation as bills rise even more. 

EU Ban Scottish Potato Seeds

 Ireland has been importing potato seeds from Scotland for over 150 years but amazingly the EU has banned them following Brexit because they do not comply with "phytosanitary rules". I thought it truly remarkable that the most virus resistant seed available to Ireland since the Great Famine does not comply with EU rules. And we pay the EU for the privilege. 

1866

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1949

Peak Winter Demand Arrives

Things get a little bit shaky !

 Last night at 5.30pm, the electricity grid hit peak demand for All Ireland at 6,638MW - not far off Record peak demand of 6,878MW reached on December 21st last year.

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But total system generation was only 6,106MW leaving a shortfall of 532MW.  

Wind energy was low most of the day, only 380MW or about 7% was available for the whole island at 5.30pm.

The two UK interconnectors saved the day with combined imports of 450MW. There was still a shortfall of about 80MW, made up presumably from demand side units. These would comprise mostly of diesel generators and combined heat and power units. These units are "non-centrally monitored" according to Eirgrid and are not included in these graphs.  

Of course, that damned Brexit lot across the sea with their dastardly nuclear power charged us handsomely for the imported power, at € 2,000 a MW. 

To give some credit to the Irish grid operators, they were correct to build the East West interconnector as it is making up for the once efficient gas plant that have been prematurely wrecked from backing up the wind. One just hopes that the UK will have sufficient power to give us on those cold winter nights over the next few months. 

Whitegate and Dublin Bay Power Stations Trip

 850MW of generation lost last night

Both Whitegate and Dublin Bay gas power stations tripped last night a few hours after I had published about the return of Whitegate power station. Dublin Bay appears to be back this morning but Whitegate is still offline. This shows the precarious nature we are in. It now means we are dependent on a not too dependent interconnector and wind system. 

There is no reason given for the outages. It's possible that the loss of one power station can trip another but whether this is what occurred last night I do not know. 

Whitegate Gas Power Station back in Action

 Whitegate power station has in the past hour returned to operation after nearly 12 months out of action due to a turbine fault. It is expected to return to full commercial operation tomorrow. A small loose bit of metal caused significant damage last December to what is a very sensitive piece of equipment. It was due back at the beginning of November. The return of the 444MW power station comes just at a good time as the weather has turned cold and demand is rising. Also imports from the UK  and wind energy appear to be very low in the past few days. 

Back in July, the Energy Regulator warned that power stations have become less reliable due to extreme operational requirements that they were not designed for during periods of intermittent wind. 

Is the Covid Vaccine Working ? (Part 2)

 The covid vaccines do not seem to be having the same impact as previous vaccine rollouts such as the MMR vaccine :

Source : https://www.bmj.com/content/330/7500/1119

Introduced in October 1988, there was a 90% vaccination rate for children in the UK, similar to the rate of the covid vaccine here in Ireland. The impact is apparent in the sharp fall in rates of infection in the following years. 

Saving the Amazon not on the COP26 Menu

 I had a quick look at the objectives of COP26. The main ones are - lower emissions, stop coal, more EVs, more renewables, protect only those ecosystems affected by climate change and printing more money.

The biggest environmental problem in the world today is the destruction of the Amazon rainforest. The leading cause is cattle ranching. Banning the importation of Brazilian beef until the destruction stops would help save the rainforests. 

But that is not on the menu at COP26. The modern environmental movement is not fit for purpose.