The Taoiseach, Mr Ahern, has given the firmest indication yet that tax bands will be adjusted in the Budget.

In terms of the rates of income tax, he told Reuters in an interview in Kuala Lumpur that "we've got to where we want to get them". The income tax rates are now 20 per cent and 42 per cent.

However, he added: "The only issue now is the adjustment of the (income tax) bands and that's obviously an issue that the Minister [for Finance\] will be looking at."

Increasing the standard rate band would be aimed at moving towards the Government target that 80 per cent of all earners pay tax only at the standard 20 per cent rate.

Moving towards this target is expected to be a focus of the Budget package in December, along with increases in tax credits to exclude more lower earners from tax completely and provide a boost to all income taxpayers.

The Taoiseach, currently on a tour of south-east Asia, said the Government would not change corporation and capital gains tax rates. "We don't intend to change them now. They are low and very competitive so there will be no changes."

The Taoiseach said that he expected Ireland to show gross domestic product growth of around 5 per cent this year - higher than a Government forecast, made in August, of 4.7 per cent for 2004.

"The figures not only for next year but also for the foreseeable future are staying at quite a high level," he said.

The Government has given repeated indications that it will adjust the standard rate band and increase tax credits in the Budget. This has not been done in recent budgets, meaning more people have been pushed into the higher rate band.

With considerable resources available to the Minister for Finance, Mr Cowen, this year, analysts expect a reasonably generous tax package along with spending increases ahead of inflation. The Taoiseach again indicated in his interview that spending on infrastructure would remain a priority.