MINISTER FOR Finance Michael Noonan has promised the higher rate of VAT will not be increased again “in the lifetime of this Government” following a 2 per cent increase in next month’s budget.
Mr Noonan described the release of the Government’s budgetary plans to German politicians as “disappointing” but confirmed that the top rate of VAT will increase in budget 2012.
The documents – which contain details of the Government’s plans for a two percentage point hike in the top rate of Vat to 23 per cent and a flat rate €100 household levy – were inspected by a German parliamentary committee this week as Taoiseach Enda Kenny held talks with German chancellor Angela Merkel.
Speaking at a press conference following a meeting of the North-South Ministerial Council in Armagh, Mr Kenny said: “I am not in the blame game here.
“I regret that these things which were speculative and which were not signed off on should be a source of some discussion in some other quarters,” he added.
The European Commission apologised for the embarrassing release of the document, describing it as “regrettable”. This followed a Government complaint to the commission over the leak.
Mr Kenny said the VAT hike had been agreed in negotiations with the EU-ECB-IMF troika in return for a freeze on income tax rates. But he insisted it was only a proposal.
However, speaking later, Mr Noonan confirmed his intention to increase VAT next month. “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,” he said. “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.”
Mr Noonan told RTÉ Radio that while no decisions have been made by the Cabinet, he has to raise indirect taxes on “this occasion”.
“I’m doing that because indirect taxes have less impact on jobs.
“We have to raise taxes and on this occasion I don’t want to raise income tax because it destroys jobs,” he said. “I will not be touching income tax but I will recommend to the Government to accept a VAT increase. The Government have not seen my full proposals yet and certainly has not signed off on that decision.”
Mr Noonan pointed out that there was no VAT on food and predicted the increase would affect wealthier people most because they spend more on luxury goods.
The manner of the document’s release led to scathing criticism of the Government by the Opposition for allowing a situation arise where German parliamentarians learned of Irish budgetary proposals before the Oireachtas had any sight or knowledge of them.
Fianna Fáil leader Micheál Martin called on the Taoiseach to explain how the German parliament was given access to details about the upcoming budget.
“I am calling on the Taoiseach to make a statement on what has happened in this case. Did he, his department, or the Department of Finance know that these documents were to be circulated? If not, how did this happen? If Irish officials were aware that these documents were being circulated, it raises very serious questions about this Government’s approach to the Dáil. If they did not, the Taoiseach needs to order a swift and formal investigation.”
Sinn Féin president Gerry Adams also called for an explanation from the Taoiseach.
“This is another example of how the sovereignty of this State has been handed over. Enda Kenny must come into the Dáil and explain how these documents are being discussed by a German budget committee before their contents have been revealed to the Oireachtas.”
Labour backbencher Dominic Hannigan expressed fury at the leak and called on the troika to put in place security measure to prevent a repeat. But he said the fact that Irish economic affairs were being discussed in foreign parliaments was a direct result of the legacy of Fianna Fáil’s 14 years in power.
In the Dáil, Opposition calls for a debate yesterday on the leak were ruled out of order. However, the measures contained in the leaked document could not have been debated because of Oireachtas rules for Friday sittings.