Joan Burton has stated that the Government will go further in the Budget for next year in relation to taxation.

The coalition has talked up the possibility of income tax cuts in Budget 2016 for several months - because the recovery is increasing pace with growth and is now the fastest in the EU.

Speaking to Jonathan Healy on Lunchtime today, the Minister said: "This year in the budget... we reduced the impact of taxes.

"We have begun that process of reform and we will go even further in the budget for next year."

Jonathan asked would this mean another cut in taxes to which she responded: "There will be changes in relation to taxation... improvements. We won't be making those decisions until later in the year."

Earlier, the State fiscal watchdog said the EU current caps on spending were too restrictive.

The Irish Fiscal Advisory Council said discretionary cuts would put more pressure on spending targets.

However, IFAC has backed the government to make some "departures" from the EU's expenditure guidelines - saying the current benchmark is too restrictive.

IFAC says it supports the government making a 'limited departure' from EC spending rules next year.

It says Brussels' targets for Ireland are "more constraining than required" however, it has warned that there will not be much scope for discretionary tax cuts.

IFAC warns 'giveaway' tax budgets would "tighten the expenditure benchmark" at a time when the State still faces medium-term pressures.

Michael Noonan

The finance minister says it should not be difficult to convince the European Commission that Ireland should be allowed to spend more money.

Michael Noonan says the current limits were based on 'nonsense' calculations which should be corrected soon.

In the Dáil, Mr Noonan revealed that the EU was basing its caps on some unusual calculations.