Leaked budget plans went to all EU members - sources
IRELAND’S Budget 2012 document was not just mistakenly forwarded to the German Bundestag, it went to all member states on the EU’s Economic and Financial Committee, it was claimed today.
Sources close to the EU/IMF Troika told RTE News that the secret document was leaked by accident by the European Commission to the economic and financial committee which monitors the budgets of all EU countries.
Sinn Fein finance spokesman Pearse Doherty today called on the government to publish the document so that Irish people are aware of the financial issues that will affect them.
Opposition parties have called for a full explanation as to how the document, outlining a 2pc increase in the top VAT rate to 23pc in next month’s budget, was released.
Cigarettes, beer, wine, computers, cosmetics, diesel, petrol, tools, detergents and car parts are all set to be dearer after it emerged that the top rate of VAT is to rise to 23pc in Budget.
The increase is set to cost the average household €500 a year, calculations by accountancy firm Ernst & Young show.
The finger of blame was pointed squarely at the European Commission by government sources in what has turned into a deeply embarrassing situation for Taoiseach Enda Kenny.
The move is set to raise an additional €670m, which would make it the biggest tax-raising measure in the Budget.
The Government is denying that the document contained specific details of the Budget and insists no decisions have been made. But Finance Minister Michael Noonan did indicate last month that the VAT rate would rise.
Public Spending Minister Brendan Howlin said any correspondence with the EU-IMF should remain confidential.
“The Government would be deeply concerned and we would be anxious to find the source of the information,” he said.
The document is believed to be a paper circulated to the IMF/EU/ECB setting out the terms of the bailout.
Government sources said there was considerable annoyance over the paper making its way into another country's parliament.
The document presented to the budget committee of the German lower house of parliament states: "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 €1bn additional tax effort required in 2012.
"To this end, the VAT rate is being raised by two percentage points to 23pc, which will generate €0.67bn."
Currently the top rate of 21pc is also charged on bottled water, CDs, legal and accountancy services, furniture, hardware, jewellery, some medicines, pet food and toys.
Fianna Fail's finance spokesman Michael McGrath said the bailout plan agreed between the IMF and the EU did not see the top rate of VAT rising until 2013.
The rate was only due to rise by 1pc in that year and then by another 1pc the following year, he said.
Mr McGrath called on Mr Noonan to clarify the reports that details of December's budget plan had been revealed to the German parliament.
A spokesman for the Department of Finance insisted that no decisions had yet been made on tax changes.
"The budgetary measures are currently being considered. No decisions have been taken," he said.
Jarlath O'Keefe, a partner with Ernst & Young, said households would find it impossible to avoid the higher charge.
He added: "VAT increases alone would, on average, cost €500 per household annually. Together with the other indirect tax measures, such as excise duties, the figure could go to €700 plus per household."
Consumer lobby groups said increasing taxes on spending in the Budget would mean that households would keep their purses and wallets closed.
Dermott Jewell of the Consumers' Association said pushing up the top VAT rate would mean that the majority of bills would rise for people.
He added: "It beggars belief that the German parliament is told about this before the Dail."
Sean Murphy of Chambers Ireland warned the Government that the last time its hiked VAT in 2008 the yield from the tax collapsed. Higher sales tax would prompt an increase in the illicit trade in both cigarettes and alcohol, he said.
It was already known that the Government intended to increase the spending tax in the Budget as part of a plan to raise €1bn in taxes, but until now it was not known what the percentage rise would be.
At 21pc, this country's top rate of VAT is already the second-highest in the eurozone, the Irish Taxation Institute said.
- Charlie Weston and Fionnan Sheahan