USC to raise €4bn in 2016 - Noonan

In 2016, the Universal Social Charge (USC) is projected to raise approximately €4 billion in Exchequer receipt terms, with this level expected to increase as employment and wage growth continue in the years thereafter, Finance Minister Michael Noonan told the Dáil. Were the USC abolished, the full year impact, incorporating recent changes to the USC, would cost approximately €3.7 billion. “It should be noted these USC projections assumed some indexation of the USC, which increases the cost of abolition,” he said. “In terms of broad order of magnitude, were the USC abolished over the medium term, this would absorb one third of the currently available gross fiscal space.”

Replying to Sinn Fein’s Peader Toibin during Question Time, Minister Noonan said since coming into Government, he had already made several significant changes to the USC to increase its fairness. “As a result of a review of USC by my Department, the Government decided in budget 2012 to increase the entry point to the USC from €4,004 to €10,036 per annum,” he said. “This removed an estimated 330,000 individuals from the charge in that year. Further increases in budgets 2015 and 2016 brought the exemption threshold to €13,000, resulting in a situation in which an estimated 29% of income earners will be outside the scope of USC in 2016.”

Furthermore, he said he also reduced the three lower rates at which USC is charged and increased the thresholds for these rates. These measures, together with the introduction of a new 8% rate on income over €70,044, further enhanced the existing progressive nature of the USC.

“I have committed, if given the opportunity, to continue to progressively abolish the USC as part of a wider reform of the income tax system to reward work and reduce the marginal rate to no more than 50% for all workers to make Ireland more attractive for mobile foreign investment and skills, including for our returning emigrants,” he added. “It is my intention, should I be given the opportunity, to present further budgets to claw back some of the benefits of USC abolition for the highest earners. I will be setting out the details of my party's position on this issue in due course.”