The carbon tax liability of rural households is higher than it is for urban households, according to an analysis of indirect taxes carried out by the Parliamentary Budget Office (PBO).

The PBO is a unit within the Oireachtas that provides information and analysis on budgetary measures.

In a paper published yesterday (Tuesday, February 20), the PBO looked at the impact of indirect tax on households.

The paper found that the carbon tax has a disproportionate burden on rural households, and is “particularly onerous” on rural households of lower incomes.

Rural households spend an average of €8.40/week on the tax, compared to an average spend of €5.50/week for urban households.

By 2030 – by which time the tax will have increased to €100 per tonne of carbon dioxide emitted (currently €56/t) – the liability for rural households will have increased by €10.90/week, while the increase for urban households will be €6.90/week.

Rural households also spend an average of €113.20/week on VAT (9.5% of household income), compared to €100.30/week for urban households (8.3% of household income).

Overall, when all indirect taxes are considered (including carbon tax and VAT), the lower-income rural households spend 25.7% of their income on taxes, compared to 22.9% for the lower-income urban households.

In general across the country, lower-income households of all types spend more of their income on indirect taxes than higher-income households.

The paper from the PBO said that ‘recycling’ of carbon tax revenues back to low-income households can offset increases in the tax, but that the ‘recycling’ that was carried out in Budget 2024 was “narrow”.

“Broader revenue recycling through the tax-benefit system would be useful to ensure low-income households, of varying composition, are also protected from carbon tax rises,” the paper said.

The findings by the PBO have been slammed by the Rural Independents Group of TDs, which said that the “insidious” rise in the carbon tax is “hitting rural and low-income households the hardest by making life more expensive”.

“Rural families are shouldering the weight of escalating VAT, excise duties, and carbon charges compared to their urban counterparts.”

Tipperary TD Mattie McGrath said: “Rural households are not only paying more but are slated to bear an even heavier burden in the years ahead, thanks to the government’s green agenda and carbon tax policies.”

According to McGrath, the paper from the PBO “affirms (the Rural Independents Group’s) long-standing assertion that rural residents, workers, and farmers are bearing the brunt of the government’s carbon tax agenda, further exacerbating the urban-rural divide”.

“The burden of the carbon tax falls disproportionally on low-income and rural families.

“This regressive taxation, layered atop existing mineral oil levies, including petrol, diesel, and home heating oil, serves as a stark reminder of the government’s indifference to the painful impact on rural residents, farmers, and vulnerable communities,” McGrath claimed.