Noonan: VAT rise now should provide certainty

Finance Minister Michael Noonan has today confirmed that he intends to raise VAT by two points to 23% in next month's Budget.

News of the increase first appeared in a document leaked in the German Parliament this week.

Minister Noonan said that the terms of the bailout deal commit Ireland to increasing VAT over two years in 2013 and 2014, but he wants to increase it now instead.

"I’m also saying that if the Government accept my proposal, that that will be the only increase on the top rate of VAT during the duration of the Government," he said.

"That should give certainty.

"Everybody knew there were going to be tax increased in this Budget, the choices are limited. I want to increase indirect taxation rather than direct taxation, because increases in income tax cost jobs."

There are fears the VAT rise will spark an exodus of shoppers to north of the border where the rate is 20%.

Mr Noonan said he had already confirmed the VAT rise, along with carbon tax, increasing by €5 per tonne, earning €108m, and the flat rate €100 household charge to bring in €160m when discussing the medium-term fiscal report at the start of the month.

“It is important that the Irish parliament and the public would be fully informed,” he said.

“I put the information out there. So unless I put it up in lights I couldn’t be any more blunt about it, because if I was any more blunt about it I’d be accused of announcing budgetary measures ahead of the Budget.”

The Government is planning €2.2bn in spending cuts and €1.6bn extra in taxes as well as €700m savings from social welfare.