Minister rules out income tax increase

Minister for Finance Michael Noonan has confirmed he is proposing to increase VAT by two percentage points in this year’s Budget.

This afternoon, after the Government’s budget plans were leaked in the German parliament, Mr Noonan said no decisions have been made by Cabinet but “to put it bluntly, it’s my intention to propose a 2 per cent VAT increase”.

He told RTÉ's News at One: "I don't want to do an interview and pretend the 2 per cent tax increase is not in my head - it quite clearly is.

“And the document which reflected that view was leaked in Germany in circumstances that I don’t understand.

“But it is absolutely accurate to say that the Government has not made any tax decision on the forthcoming budget but, in the interests of preserving and creating jobs, I’ll be advising that we won’t increase income tax but we will make the adjustments on indirect taxation and the principle adjustment on my advice will be a 2 per cent increase on the standard rate of VAT.”

Mr Noonan said he made it clear he was looking at indirect taxation when he announced the Government’s budgetary plans up to 2015 three weeks ago. “The options were VAT and carbon tax and also €100 flat rate charge on homes…so I put the information out there, I couldn’t be more explicit than that.

“I want to stress these will be my proposals to Government, the Government are aware of what I intend to propose but there have been no decisions yet made on the tax side of the Budget,” he added.

Mr Noonan described yesterday’s release of the documents as “disappointing”.

He said: “We have quarterly reviews every time the troika is in Dublin and this is confirmed in a formal document which is signed by the Minister for Finance and the governor of the Central Bank.

“The document which was leaked was a preliminary draft of this document but it also contained, at the request of the Commission, indications of what we might do in the Budget.”