European Union rules prevent the Republic from from cutting the VAT rate on fuel to zero, according to Taoiseach Micheál Martin.
Sinn Féin leader Mary Lou McDonald called for a three-month temporary halt to VAT on fuel.
She said truckers and hauliers were protesting outside Leinster House because they are being "absolutely crucified".
Other Opposition politicians sympathised with the hauliers’ complaint while also suggesting they could have protested in a way that did not bring Dublin to a halt.
Speaking in the Dáil, Ms McDonald said that the carbon-tax increase announced in the budget “needs to be scrapped. It’s the wrong move at the wrong time.”
Mr Martin said that VAT is charged at 13.5 per cent, one of the lowest rates in the EU and under the rules it cannot go below 12 per cent. He said it was "not credible to put forward proposals that could not be implemented. Ms McDonald should not introduce "false ideas that cannot carry", he said.
The Government had doubled the diesel rebate scheme to 7.5 cent per litre once the price reached €1.43 per litre.
Mr Martin said carbon taxes would not be reduced because it is not the right thing for the planet.
Any temporary non-application of VAT would result in it having to return to the standard rate of 23 per cent even if the European Commission approved it, he added.
Ms McDonald said that hauliers were “small and family businesses already put to the pin of their collar with rip-off insurance costs, extortionate utility bills, the domestic cost of living and now skyrocketing increases in fuel”.
Hauliers were essential workers who had a major role in “keeping the show on the road” during the coronavirus pandemic.
She said that the State“needs to show up for them now with an alleviation package that includes an overhaul of the diesel rebate scheme . . . People are under real and ever-increasing pressure: since last year the price of electricity is up 16per cent, gas is up 23per cent and home heating oil an incredible 71 per cent.”
Ms McDonald asked “how on earth is anyone, any family expected to afford to heat their home with jumps like that? People are overwhelmed and the Government sits on its hands. Indeed you’ve come in with a hike in carbon taxes. This will undoubtedly make things even worse.”
The Dublin Central TD added that households face a real emergency in heating and lighting, running their vehicles and, she also noted, the weather is getting colder.
“Bear in mind that workers have been told now to work from home. So people will have their heating and lighting on earlier and for longer; and their bills, consequently, will go up even further.”
Separately Social Democrats co-leader Catherine Murphy said of the hauliers' protest: "I completely understand their frustration because they've seen their costs escalate".
City ‘eerily quiet’
But she encouraged them to protest in a different way.
She said the city is "eerily quiet" aside form the protest. And the M50 was "like a car park", it has caused disruption.
Ms Murphy added: “There may well be other ways that they could demonstrate that wouldn’t necessarily impact on people going to work, or other businesses from functioning, or people getting to hospital appointments.”
She said their complaint is valid due to the impact of rising fuel costs on hauliers’ livelihoods and she does not want to see a loss of people from a “vital industry”. She also said she is not sure blocking roads would achieve anything more than direct engagement on the issues.
Labour transport spokesman Duncan Smith said he did not know this group, but understood they are separate from the Irish Road Hauliers Association.
“Their actions today have ground Dublin to a halt. And those who have to commute or get to test centres have been impacted. Everyone is feeling the pinch as fuel costs are impacting households and businesses all over the country,” he added.
“On the substantive matter of haulage, I look forward to engaging with the Irish Road Hauliers Association on any issues they may have in the coming weeks,” he said.
