Enda Kenny (Mayo, Fine Gael)

Part of the memorandum of understanding that we have had to change is in respect of a commitment to take out €250 million extra in income tax in this year's budget for next year, which was agreed by the previous Government. We take a different view here. The Minister for Finance made clear his intention to bring a proposal as one of a number of proposals to the Government for its consideration in respect of a VAT increase of 2% and with no further increase planned over the period of the programme. The difference now is that the exchange rate has moved in our favour as distinct from what it was when Deputy Martin referred to differences in VAT rates previously. If tax plays a role in driving cross-Border shopping, it is the overall level of taxation which combines income tax, corporation tax, VAT and other charges. The UK increased its standard rate of VAT by 2.5% in 2010 and by a further 2.5% earlier this year, and that was up from the temporary lower level of 15% in 2008. We take a different view than Deputy Martin. As far as the Government is concerned, we want to focus on not impeding the opportunity for people to have jobs and to be able to go work. The evidence clearly is that increases in income tax, which were followed by Deputy Martin and his party, directly hit people who want to have a choice in spending their money and in what they purchase.

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