THE GOVERNMENT will only be able to deliver on its pledge to avoid increases in income tax if it succeeds in renegotiating the terms of the IMF/EU bailout, Taoiseach Enda Kenny said yesterday.

Speaking at the National Ploughing Championships in Athy, Co Kildare, Mr Kenny said the terms of the memorandum of understanding commit the State to raising an extra €250 million in income tax in each of the next three years.

“My commitment was not to have any tax on employment and work and that means the renegotiation of that element of the memorandum of understanding.”

He said representatives of the troika had indicated at the last appraisal of our performance in meeting the bailout commitments that they were willing to listen to Ireland’s case for alternatives, “and the Minister for Finance will make our case for no increases in income tax or bands”. In order to achieve no increase in income tax, there would have to be a renegotiation of that element of the memorandum of understanding, he said.

“We are not in charge of our economic destiny because the paymaster general is in the office and that is the troika. The money was loaned to us on that basis.

“So we have to have a change of policy and renegotiate the last memorandum of understanding, which was signed off on by the previous government and committed the country to that extra €750 million.”

He welcomed yesterday’s quarterly national account figures from the Central Statistics Office which reported stronger than expected growth in the second quarter but said they showed the challenges to be faced. “In respect of the budget figures, what we have set out are very clear targets to have the deficit reduced to 8.6 per cent for 2012. The trigger for that is that you have to abstract somewhere in the region of €3.6 billion in 2012.