During pre-budget discussions, Finance Minister Jack Chambers was briefed on a proposal from the Department of Transport to lower the VAT rate on bicycles from 23% to 13.5%. However, officials expressed concerns that retailers might increase prices, preventing cyclists from seeing any real benefit.
A pre-budget submission highlighted that bike owners already receive substantial support through the Cycle to Work Scheme, which costs €5.5 million annually. Officials also warned that a VAT reduction could disproportionately benefit those purchasing higher-cost bicycles or e-bikes, making the measure potentially regressive.
The submission noted that while e-bikes and cargo bikes are more expensive, bicycles are available at a range of price points, ensuring entry-level options for consumers without the need for a VAT cut.
Implementing the reduction would cost an estimated €7 million annually and could lead to pressure for similar VAT cuts in other sectors.
An alternative proposal from the Department of Transport suggested introducing a direct grant scheme, which officials said could better address differences in income, geography, and existing supports.
Minister Chambers noted this approach might better achieve the desired policy goals and suggested further discussions with the Department of Public Expenditure.
Officials also cautioned against timing the VAT cut around the Christmas shopping season, as delays could attract criticism and potentially harm bicycle sales if speculation about a tax cut caused consumers to delay purchases.
The Department of Transport argued that a VAT cut would primarily help students, retirees, and those outside of employment—groups underrepresented in cycling and likely to need financial support to purchase bicycles.
The submission suggested that a reduction from 23% to 13.5% could lead to noticeable price decreases if passed on by retailers. It also noted that the competitive bicycle market would likely ensure compliance, with traders adjusting prices to remain competitive. Cycling advocacy groups could play a role in monitoring retailers to ensure savings reached consumers.