Berlin get to see our Budget first ?

Government 'to raise VAT by 2%'

Minister for Public Reform Brendan Howlin today declined to confirm or deny a report the Government will increase the top rate of VAT by 2 per cent in next month's budget.

According to documents presented to a budget committee of the German lower house of parliament in Berlin yesterday, the Government will raise the top rate of Value Added Tax (VAT) to 23 per cent, generating an additional €670 million.

It will make up the rest of the €1 billion it is targeting in new revenue measures through indirect taxes.

Asked today to confirm the report, Mr Howlin said “it’s information that hasn’t happened”.

He insisted the Government had yet to make any budgetary decisions. “The Budget is a work in progress,” he told RTÉ’s News At One. “I’m certainly not going to comment on any potential elements of it, but I can tell you there are no decisions in relation to any element of the Budget, and there won’t be until the entire package is before Cabinet.

“The issue [VAT increase] that you mentioned is part of the Memorandum of Understanding. The timing might be somewhat different, but I’ve no idea the basis of discussions in the German Bundestag.”

However, Fianna Fáil’s Michael McGrath called on Minister for Finance Michael Noonan to immediately make a statement to clarify the matter.

Mr McGrath said: "According to the reports, members of the German parliament have been given details of the Irish Budget three weeks before the Irish parliament and the Irish people."

"If this proves to be true, it would be a staggering and unprecedented breach of faith with the Irish parliament and Irish people on budget plans."

"It would represent a fundamental breach of established protocols in relation to the disclosure of budgetary measures," he added.

Ireland is committed to making budgetary adjustments of €3.8 billion for next year under its EU-IMF bailout, and Minister for Finance Michael Noonan has said he will not reveal the exact measures until he presents Budget 2012 on December 6th.

"After successive budgets in which income tax burdens were raised significantly, we have decided to focus on indirect tax increases to deliver the bulk of the 1 billion euros additional tax effort required in 2012," the document, which was seen by Reuters, said. "To this end, the VAT rate is being raised by 2 percentage points to 23 per cent, which will generate €0.67 billion."

In a separate document, the EU-IMF troika of lenders said that while Ireland continues to perform well under its programme, risks remain for market sentiment, economic growth and potential higher-than-anticipated bank losses.