Gabhaim buíochas leis an Teachta as an dea-ghuí maidir le mo shláinte.
This is a very interesting question because, one way or another, all parties are either maintaining the status quo in respect of USC or advocating change. In that context, it is important to put the debate on a firm statistical footing at least, whatever the opinions might be subsequently. In reply to Deputy Tóibín's specific question, the indicative gross fiscal space over the 2017 to 2021 period is some €10.9 billion in cumulative terms, as outlined in budget table A.9. A decision not to index the tax system would add a further €2 billion to the level of space available over the period, of which some €500 million relates to the USC, bringing the total potential fiscal space to €12.9 billion. It should be noted that the indicative fiscal space highlighted in these budgetary annexes requires a number of assumptions, including in relation to reference rates for potential growth, deflators and certain other variables used in the calculation. These inputs are based on current projections and are likely to change over time.
In 2016, the universal social charge 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. 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. 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.
Since coming into Government, I have 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. 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, I 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.
The Deputy requested that I provide details of the gain which would accrue on the abolition of the USC to an individual earning €185,000 per annum. An employee with that income level has an annual USC liability of approximately €12,342 but I do not propose to provide a benefit of this scale to such a high earner. As in the previous two budgets in which the benefits of USC and income tax cuts have been capped at €70,000 in earnings 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.