Noonan promises workers they won't face new income tax hike
FINANCE Minister Michael Noonan has given a guarantee to taxpayers that they will be paying no extra income tax in the forthcoming Budget.
Given the need to raise up to €500m in extra tax revenue, there had been fears that he would take more money out of workers' pockets by cutting income tax bands and credits.
But Mr Noonan firmly ruled out any hikes in income tax bills by pointing to the Programme for Government commitment not to increase income tax rates, bands or credits.
"I'll just refer you to the Programme for Government, and you know what that says," he said.
Government sources have confirmed that Mr Noonan has no intention of touching income tax in the Budget.
The news will be a relief to hard-pressed families, who have seen their tax bills rise rapidly during the recession to pay for the hole in the public finances.
The exchequer's overall income tax take has risen by €1.5bn since 2008 despite there being 300,000 fewer workers in the economy.
But it means that Mr Noonan will be forced to look elsewhere to find the extra tax revenue to meet his Budget targets.
Tax experts believed that the most likely scenario is for small increases across a range of taxes – such as carbon taxes and the 'old reliables' such as alcohol and cigarettes.
Mr Noonan has also raised the prospect of a reprieve for tourism and restaurant businesses, whose temporary 9pc VAT rate is due to go back to 13.5pc in December.
He had previously suggested that the rate would have to increase but yesterday he left himself room for manoeuvre.
"We're all aware of the very strong lobby. It was a very successful initiative. It actually created 15,000 jobs and we're examining what the options are," he said.
A government source said that any decision to keep the lower VAT rate in place would depend completely on finding money elsewhere to pay for it.
Mr Noonan's pledge to leave income tax completely untouched has been welcomed by tax experts, who say that it will help the creation and retention of jobs.
The Irish Tax Institute's chief executive Mark Redmond said there had been a tremendous amount of additional taxes in recent Budgets.
"We've gone as far as we can really and it's really important we don't go near income tax so it doesn't become more difficult to create new jobs," he said.
It comes as the Coalition is still crunching numbers to determine the final Budget target – with Labour said to be "cautiously optimistic" that it will be lower than the current €3.1bn.
The final decision is expected to be made by Cabinet next week – with the details of the tax take for September due to be available by Monday.