Here's how the Government adds to the cost of living
Daragh Cassidy
Head Writer

As inflation reaches record levels and concerns around the cost of living come to the fore, our research shows the numerous ways our Government is adding to the price of goods and services in Ireland.

Inflation is currently at an over 20-year high of 5.5% and the cost of living has rapidly overtaken Covid as the main worry for households and families in Ireland. 

Whether it's electricity, food, the price of a stamp, or petrol, everything seems to be increasing in price lately. 

The Government will claim its hands are tied when it comes to the rising cost of living, happy to blame world energy markets or perhaps Brexit. And while it’s true that many of the reasons for the recent spike in inflation are outside of its control, there are numerous ways that the Government adds to the cost of living here.

From energy, to banking and insurance, Government charges such as stamp duty, carbon tax, excise duty and VAT are adding hundreds to the cost of living in Ireland each year.

And despite protestations, these are all within the power of Government to reduce or abolish if it wanted to.

So here's a look at some of the ways the Government is adding to your financial pressures. 

Everyday goods and services

They say that only two things are certain in life. Taxes and death. And in Ireland the Government certainly knows how to tax us.

At 23%, our standard rate of VAT is one of the highest in the world and this feeds through into higher consumer prices.

When you buy adult clothes and shoes, perfume, smartphones, computers, shampoo, TVs, you name it, almost one quarter of the price you pay goes directly to the Government in the form of VAT.

Energy - around €421 a year in taxes

Carbon tax is currently €41 per tonne of CO2.

Considering that the average Irish household uses 11,000 kWh of gas every year, the carbon tax adds around €76 to the average annual natural gas bill.

This will increase to around €93 (inc. VAT) a year in May when the €41 rate kicks in on heating fuel.

Meanwhile the PSO levy adds just over €58 a year (inc. VAT) to electricity bills. 

VAT at 13.5% is also added to energy bills. 

Someone who uses an average amount of gas and electricity and who is paying standard rates for their electricity with Electric Ireland and standard rates for their gas with Bord Gåis Energy is paying around €270 a year in VAT to the Government.  

Banking - around €36 a year in stamp duty

Stamp duty of 12 cent applies to every cash withdrawal, up to a maximum of €5 a year. So someone who makes just under four ATM withdrawals a month will be charged €5 a year. 

Stamp duty of €30 a year also applies to all credit cards, regardless of your usage.

Stamp duty of 50 cent also applies to every cheque and bank draft. So someone who needs two bank drafts or writes two cheques a year will pay €1. 

General insurance - around €31 a year in stamp duty  

Stamp duty of 5% applies to non-life insurance policies e.g. home insurance, car insurance and contents insurance.   

2% of this goes to the insurance compensation fund, which is an important feature of the insurance market as it covers policyholders in cases where an insurer goes under.   

However the other 3% just helps to line the Government's coffers.

Taking an average car insurance premium of €650, this means Government taxation adds around €20 a year to each motorist’s policy.  

The average home insurance policy is around €350 a year so this means Government taxation adds around €11 in stamp duty to each homeowner’s policy.  

Life insurance - around €9 a year in stamp duty

Stamp duty of 1% also applies to life insurance policies such as term insurance and mortgage protection.

A couple in their 30s (non-smokers) who take out a joint life insurance policy for €250,000 cover with indexation over 30 years could expect to pay around €45 a month or €540 a year. This means Government taxation adds around €5.40 a year to their household bills.

A couple with a €3000,000 mortgage over 30 years with a joint mortgage protection policy for the same amount could expect to pay around €30 a month or €360 a year. This means Government taxation adds around €3.60 to their household bills.

Petrol and diesel - around €900 a year in taxes

According to the AA, around 96 cent for every litre of petrol and 85 cent for every litre of diesel goes towards tax. This includes the carbon tax, VAT, excise duty and the Nora charge. 

Based on the fact that the average Irish motorist drives around 17,000km a year in a petrol vehicle and 24,000km in a diesel vehicle, tax adds around €898 a year to your driving costs if you have a petrol car and €938 a year if you're driving a diesel car (based on 5.5 litres per 100km for petrol vehicles and 4.6 litres per 100km for diesel).   

Motor tax - a €57 surcharge 

We all know and accept that we have to pay motor tax. But what's not acceptable is being penalised by Government for how we pay it... 

The Government targets motorists who can’t afford to pay their motor tax in one go, unnecessarily adding to the cost of living. 

Someone paying a band D rate pays €447 a year. Someone who asks to pay in quarterly instalments will pay €126 a quarter or a surcharge of €57 a year.

Housing - thousands

The housing crisis has dominated headlines for several years now as rising prices put the dream of home ownership outside the reach of many.

However, the Government adds hugely to housing costs here. 

Someone purchasing a new home for €300,000 could pay over €40,000 to the Government or Government agencies in fees and charges.  

At the moment, up to €30,000 of this can be recouped through the Help-to-Buy scheme. But this only applies to new homes. People buying second hand homes still have to fork out thousands on stamp duty and Government legal fees. 

Sample make-up for a €300,000 new home:

  • Net cost €264
  • VAT €36k
  • Stamp duty €2,640 (1% of pre-VAT price)
  • Land registry fee €700
  • Fee to register mortgage €175
  • New folio charge €75
  • Copy of folio charge €40

Bubbles - €20 in excise duty

You'd think with all that's going on the Government might give us a break and allow us to celebrate a bit and let our hair down. 

Well, celebrating in style doesn't come cheap! 

A staggering €6.38 on every bottle of Prosecco, Cava or Champagne goes to the Government in excise duty alone (double the €3.19 rate on wine). One of the highest in the world.

So let's say you buy a bottle of bubbles to celebrate Valentine's day, one for your birthday, and one on New Year's Eve, that's almost €20 in excise duty to the Government each year. And that's before you even include VAT

Let's hear from you! 

Do you think the cost of living in Ireland is too high? And what do you make of the fees and charges outlined above?

Let us know in the comments below!

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