Dáil Éireann Debate, Wednesday - 30 April 2014
110. Deputy Clare Daly asked the Minister for Finance the reason that pre-1995 public service occupational pensions are not exempt from the USC, but those post-April 1995 are; his views on whether exempting an amount equivalent to the State pension for those pre-1995 would be a more equitable solution. [19558/14]
View answerThe USC was introduced in Budget 2011 to replace the Income Levy and Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and raise revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced. It is applied at a low rate on a wide base.
The USC, like the Income Levy before it, does not apply to social welfare payments or payments of a similar nature. However, all occupational pensions are liable to the USC, if the payment is greater than the exemption limit, which from 1 January 2012 is €10,036 per annum. This is true of both pre and post 1995 public service and all private sector occupational pensions. However, in practice, post 1995 public service occupational pensions comprise of the relevant social protection pension rate and a top up occupational pension amount where applicable.
The Deputy may be aware that delivering on a commitment in the Programme for Government, the USC was reviewed by my Department in the lead up to Budget 2012. The report is available at www.finance.gov.ie. The issue of USC applying to occupational pensions of retired public servants who entered the public service before April 1995 was examined. However, the Government decided not to exempt the occupational pensions of these individuals from the USC charge as it would be very costly and difficult to achieve, as it would involve all income earners with the equivalent income benefiting from the exemption. In addition, it would also undermine the principle of the USC being applied to income with few exemptions. However, as a result of the review of the USC, the Government decided in Budget 2012 to increase the entry point to the Universal Social Charge from €4,004 to €10,036 per annum. It is estimated that this removed almost 330,000 individuals from the charge, some of whom may be retired public servants who entered the public service before April 1995.
As you will appreciate, as Minister for Finance, I receive numerous requests for exemptions from taxation. You will also appreciate that I must be mindful of the public finances and the many demands on the Exchequer given the significant current budgetary constraints. Tax exemptions, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.
