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More Pain With Tax Hike...

More pain for PAYE workers as tax hike looks likely...

THE GOVERNMENT is on the brink of breaking its election solemn promise not to raise income tax.

The tax rise threat emerged as the European Central Bank (ECB) hinted that it is preparing to introduce a 0.25pc hike in interest rates next month -- which will add almost €400 yearly to the average €250,000 mortgage.

The blow to struggling homeowners will be further compounded by a new property tax and water charge set to be introduced in the new year.

Finance Minister Michael Noonan told the Dail yesterday: "I am not going to rule out any tax initiative, or any tax increase or any tax reduction."

He added that the "fraught" condition of our public finances meant he was not in a position to predict take hikes, including income tax.

The minister was also forced to concede that EU states such as France and Germany are looking to take an interest in the national assets of bailed-out states such as Ireland.

furious

Fianna Fail accused the Government of doing "U-turns on an almost daily basis" since coming to power.

Hard-pressed families will be furious by the disclosures given that the programme for government reached by Fine Gael and Labour rules out an increase in income tax.

"The 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 programme states.

However, Minister for Public Service Reform Brian Hayes this morning hit back at criticism that the Government was reneging on its pre- election promises.

"What Michael Noonan said yesterday is no different to what any other finance minister has said previously," he said.

Mr Hayes accepted that the Government will come under fire from the public but insisted that the necessary measures are being put in place to bring Ireland out of its "inordinate and difficult financial hole".

Meanwhile, the head of the ECB, Jean-Claude Trichet, warned that rising costs threatened to fuel inflation, indicating that a 0.25pc hike in interest rates may be imposed next month. The increase will bring the interest rate to 1.5pc.

The ECB boss refuted claims that bailed-out countries would suffer most from the hike.

"We are anchoring stability and also anchoring confidence. It's good by definition for all countries," he said.

There were further reports yesterday of a rift emerging between Taoiseach Enda Kenny and French President Nicolas Sarkozy over the status of Ireland's corporation tax.

A senior French MEP and member of Sarkozy's ruling party warned this morning that Ireland will be told to accept "extra and tough changes" in the coming months.

Jacques Myard admitted that the "French political classes are annoyed" by our refusal to budge on the 12.5pc corporation tax rate.

Report by Niall O'Connor - Evening Herald

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