Since coming into government, I have made several significant changes to the Universal Social Charge which have increased 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 Universal Social Charge from €4,004 to €10,036 per annum. It is estimated that this removed almost 330,000 individuals from the charge.
In Budget 2015 I further extended this exemption threshold to €12,012, to apply from 1 January 2015 onwards. This exempted a further 87,000 individuals from the charge. This means that 28% of all income earners are not paying any Universal Social Charge at all. Furthermore, I also reduced the two lower rates at which USC is charged and extended the threshold before the 7% rate becomes chargeable. These measures, together with the introduction of a new 8% rate on income over €70,044, as well as a rate increase from 10% to 11% on self-assessed income over €100,000, further enhanced the existing progressive nature of the USC.
As I have stated on a number of occasions in response to parliamentary questions, it was never intended that the USC would be a temporary measure. It was designed and incorporated in to the Irish taxation system as part of its permanent structure and the revenues collected play a vital part in meeting the many expenditure demands placed on the Exchequer. It must not be forgotten that the USC replaced two other charges, namely the Health levy and the Income levy. I am cognisant of how unpopular the USC is but given that it raises over €4 billion per annum for the Exchequer, it is difficult to see how it could be abolished without the imposition of additional taxation elsewhere or through equivalent cuts in expenditure.
Notwithstanding this, as a result of the changes to income tax and USC in Budget 2015, all those who currently pay income tax and/or USC have seen a reduction in their tax bill this year compared to 2014 where incomes are equal. Furthermore, the Government has committed to continue to reduce the tax burden on low and middle income earners in the coming years, contingent on having the fiscal space to do so.
The rates of USC and the rate bands are set out in the chart:
|
Standard rate of USC
|
2015
|
2014 - 2012
|
2011
|
|
Exemption Limit
|
€12,012
|
€10,036
|
€4,004
|
|
1.5%
|
First €12,012
|
N/A
|
N/A
|
|
2%
|
N/A
|
First €10,036
|
First €10,036
|
|
3.5%
|
Next €5,564
|
N/A
|
N/A
|
|
4%
|
N/A
|
Next €5,980
|
Next €5,980
|
|
7%
|
Next €52,468
|
Balance
|
Balance
|
|
8%
|
Balance
|
N/A
|
N/A
|
* There is a surcharge of 3% USC on individuals who have non-PAYE income that exceeds €100,000 in a year, regardless of age.
** Medical card holders whose aggregate income does not exceed €60,000 now pay a maximum rate of 3.5% USC.
*** Individuals aged 70 years and over whose aggregate income is €60,000 or less now pay a maximum rate of 3.5% USC.
