Dáil Éireann Debate, Tuesday - 31 May 2022
167. Deputy Jackie Cahill asked the Minister for Finance if he will review the income limit for a reduced universal social charge rate for medical card holders given the rising cost of living and of many staple items, such as food and fuel; and if he will make a statement on the matter. [27351/22]
View answerAs the Deputy will be aware, the Universal Social Charge (USC) was designed and incorporated into the Irish taxation system in 2011 to replace two other charges, namely the Health and Income Levies. Its primary purpose was to widen the tax base and to provide a stable revenue stream to the Exchequer to provide funding for public services.
The USC is an individualised tax, meaning that a person’s liability to the tax is determined on the basis of his/her own individual income and personal circumstances. The USC is applied at a low rate on a wide base, which ensures that it is a stable and sustainable source of revenue for the State.
Currently individuals with incomes of less than €13,000 are exempt from USC. For 2022, it is estimated that just over 797,000 taxpayer units which represents 28 per cent of all taxpayer units will be exempt from USC.
In addition, medical card holders with total income of €60,000 or less benefit from reduced rates of USC. The reduced rates of USC that apply for 2022 are 0.5% on the first €12,012 of income and 2% on the balance. Taxpayers that can avail of this concession are not subject to the 4.5 per cent USC rate of charge, as would be the case for other taxpayers.
It is important to point out that the concession for medical card holders was never intended to be a permanent feature of the USC. Instead, it was planned to phase in the full USC charge for medical card holders via a transitional approach. This concession for medical card holders has been extended on a number of occasions most recently in Budget 2022, with an extension of the concession until 31 December 2022.
The USC has played a vital part in meeting the many expenditure demands placed on the Exchequer. USC receipts have been central to the current stability of the public finances since March 2020, despite the challenges arising from the Covid-19 pandemic.
Ireland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. In my view, a broad-based, progressive income tax system, where the majority of income earners make some contribution but according to their means, is the most fair and sustainable income tax system in the long term. As such, I have no current plans to increase either the USC exemption limit of €13,000 or the income ceiling of €60,000 for medical card holders to avail of a reduced rate of USC.
Finally, it is worth pointing out that since October 2022, this Government has introduced a suite of measures to address increases in the cost of living, at a combined cost of approximately €2.1 billion.
