Under Section 985 Taxes Consolidation Act 1997, the Education Training Boards (ETB) are required to deduct tax under the Income Tax PAYE system on the making of payments to craft apprentices. The Income Tax PAYE system places an obligation on employers to make deductions at source of Income Tax, USC and PRSI from payments made to employees and an obligation to remit such deductions to the Revenue Commissioners
The ETB's requirements in relation to the deduction and paying over of USC from such emoluments are set out in the Universal Social Charge Regulations 2018 (S.I. No. 510 of 2018).
The 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 and it is applied at a low rate on a wide base. Taxation revenue from all taxes, including the Universal Social Charge, goes towards funding essential public services and the provision of these services would be negatively impacted if there was a fall in the income received from such taxation.
As a result of changes in recent Budgets, USC rates have been reduced to 0.5%, 2% and 4.5%. The income level at which taxpayers begin to pay the higher rate of tax has also been increased by €2,500 and there have been increases in both the Home Carer Tax Credit and the Earned Income Credit. The impact of these changes is that the top marginal rate on incomes up to €70,000 has been reduced from 52% to 48.5%, with fewer people on incomes around the national average having any income subject to the 40% rate of income tax.
It is not my intention to exempt this charge for apprentices. It is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. Ireland has one of the most progressive personal income tax systems in the EU and OECD. This means that Ireland’s tax system is designed to ensure that those on lower incomes pay less tax than those who earn more.