TAOISEACH ENDA Kenny insisted no final decision had been made by the Cabinet on a 2 per cent VAT rise.

He was replying to Fianna Fáil leader Micheál Martin who said Minister for Finance Michael Noonan had said last Thursday “that he intended to increase the rate of VAT by 2 per cent in one fell swoop in 2012”.

Mr Kenny replied yesterday: “For the deputy’s information, no decision has been taken by the Government in respect of details of the budget.”

The Taoiseach said Mr Noonan had 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 per cent 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 previously,” the Taoiseach added.

“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,” Mr Kenny said.

He told the Dáil the UK had increased its standard rate of VAT by 2.5 per cent in 2010 and by a further 2.5 per cent earlier this year, which was up from the temporary lower level of 15 per cent that it had in 2008.

“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 to work,” he added.

“The evidence clearly is that increases in income tax, which were followed by Deputy Martin and his party, are a direct hit at people who want to have a choice as to what to spend their money on and what they purchase as a consequence.”

Mr Martin said the information on the VAT increase came to members of the House after it had been distributed to members of the German parliament.

“Clearly, the Taoiseach’s budgetary process was different to any previous budgetary process,” he added.

“He has doubled the press conferences, trebled the leaks and halved the information to this House.”

Mr Martin said the Taoiseach should confirm that the documentation sent to the German parliament had now been lodged in the Oireachtas library.

He added that when the VAT proposal was combined with other suggestions about sick leave and redundancy payments, it all added up to a Government heading towards a massive disincentive to job creation and an attack on jobs and small business.

Mr Martin said Mr Noonan had it made it absolutely clear a decision had been taken on the 2 per cent increase.

“The Taoiseach should stop maintaining a fiction about it,” he added.

Mr Kenny said the Minister would bring the 2 per cent increase to Government as a proposal, “upon which I might add the Government has not signed off on yet”.

It meant, added the Taoiseach, that the zero rate of VAT that currently applies to a range of goods and services – including most foods, children’s clothing and, importantly, footwear, oral medicines and so on – would not be touched.