Minister Donohoe Introduces Temporary Reduction in Standard rate of Value Added Tax  

1st September, 2020

The Minister for Finance, Paschal Donohoe TD, has today (Tuesday) introduced the temporary reduction in the standard rate of VAT from 23% to 21%, until the 28 February 2021.

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

This measure forms part of a wider package of measures included in the July Jobs Stimulus to aid economic recovery and help ensure sustainable growth for the future. The July Jobs Stimulus is a comprehensive plan which will boost the economy and bring confidence back to towns and villages across Ireland.

Taking the effects of social distancing requirements into account, as well as the dynamic requirements of public health objectives, the cost of this measure is estimated broadly. In this context, the total cost to the Exchequer is estimated at €440 million in total, €160 million in 2020 and €280m in 2021.

Commenting today, Minister Donohoe said:

“This temporary reduction in the standard rate of VAT cuts across a wide range of economic activity and as such there is a broad range of the types of businesses and traders who will benefit. Discretion in relation to the setting of prices charged will remain that of relevant businesses, however, it will help consumer confidence, benefit consumers and generate economic activity if it was passed on to the final consumer.”