MINISTER FOR FINANCE Michael Noonan has refused to rule out the prospect of increasing income tax rates in the Budget next December.

Speaking in the Dáil this morning, Noonan said the deteriorating financial situation and precarious nature of Ireland’s financial affairs meant that he could not guarantee leaving tax rates unchanged in the next Budget.

The finance minister said he was “not going to rule out any tax initiative, or any tax increase, or any tax reduction.”

Noonan was speaking during debates on the Finance (No. 2) Bill 2011, a bill which gives legal effect to the measures in the government’s jobs initiative of last month.

Among those measures are proposals to restore the national minimum wage back to €8.65 per hour, cutting the VAT rate applied to tourism industries, and to raise the national retirement age.

The indication that income tax rates could be increased goes directly against statements in the Programme for Government reached by Fine Gael and Labour, which stated:

[T]he new Government will… Maintain the current rates of income tax together with bands and credits. We will not increase the top marginal rates of taxes on income.

The provisions of the Four Year Plan, to which the government has agreed to abide for the next Budget, required the government to raise €1.9bn through income tax changes over the period of the plan.

Though the last Budget did not change the income tax rates, it effectively lowered the thresholds at which the rates came into effect.