The temporary reduction in VAT on energy products will not include home heating oil or solid fuels, it is understood.
The three coalition party leaders last night discussed plans to use domestic legislation to reduce the VAT rate on energy from 13.5% to 9%.
But the flexibility sought by Ireland from the European Commission regarding reducing Ireland's VAT rate on some energy products to 9% only covers gas and electricity.
This will reduce the average gas bill by €49 per annum and €61 on the average electricity bill from 1 May.
Petrol and diesel are taxed at 23% and will not be covered by the VAT change. However, excise on both fuels were cut earlier this year.
Minister for Finance Paschal Donohoe is working on taxation measures to bring to Cabinet tomorrow.
They will include a lump sum payment of €99 to 370,000 recipients of the fuel allowance.
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Taoiseach Micheál Martin said that the VAT reductions will "more than make up for" the extra cost of planned increases in the carbon tax.
Speaking in Dublin Castle, Mr Martin said he had previously given a commitment to offset or neutralise the impact of the carbon tax increase due to come in to effect on 1 May.
Reductions in the VAT charged on gas and electricity, to be announced tomorrow, will "more than make up for" the extra cost of planned increases in the carbon tax, the Taoiseach has said | Read more: https://t.co/K7wxTCw9QO pic.twitter.com/J95KhFsePb
— RTÉ News (@rtenews) April 12, 2022
"The measures the Government will discuss tomorrow in relation to the VAT reduction on gas and electricity, and indeed the fuel allowance area - targeting people who are under pressure - are designed to do just that," he said.
"And in fact, they will more than make up for - or indeed be far in excess of - the amounts that will be a raised on the carbon tax, or the impact of the carbon tax."
Minister Eamon Ryan, whose portfolio includes energy and the environment, will outline plans to cut the PSO levy on energy bills to zero saving consumers €58 per annum.
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Sinn Féin's Finance spokesperson Pearse Doherty criticised the omission of home heating oil from the vat cut on energy bills.
Mr Doherty said two out of three homes in Co Donegal, along with many across the west of Ireland, use home heating oil as their primary source of fuel.
"What the government is planning is to hike up those prices by further increasing carbon tax."
He repeated his call for a mini-budget including social welfare, childcare and rent measures.
Measures will 'more than offset rise in Carbon Tax'
The Tánaiste has said that measures to reduce the cost of domestic energy bills will "more than offset the rise in Carbon tax" next month.
Leo Varadkar was speaking as he launched the Government's new trade and investment strategy.
He said that the increase in carbon tax will cost the average household between €1.50 and €3 a month, however measures due to be announced by the Government tomorrow will go much further.
Speaking at Government Buildings, Mr Varadkar said EU flexibility has been secured to temporarily reduce VAT on gas and electricity, but not other fuel types.
He criticised proposals from Sinn Féin to reduce VAT to 0% for home energy bills, arguing that it would not be possible under European law.
The length of time that the temporary VAT reduction will be in place will be decided by the Cabinet tomorrow.
Additional reporting Tommy Meskill, Mary Regan
