Patricia Ryan
Ceist:343. Deputy Patricia Ryan asked the Minister for Finance if he will abolish the universal social charge for persons on modest private pensions; and if he will make a statement on the matter. [42512/22]
Amharc ar fhreagraThursday, 8 September 2022
Ceisteanna (343)
Freagraí scríofa
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 steady income 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.
It is important to point out that the USC does not apply to social welfare payments, such as the contributory and non-contributory State Pensions. In addition, currently individuals with incomes of less than €13,000 are exempt from USC, which can include modest occupational pensions. Therefore, an individual in receipt of a contributory State Pension and an occupational pension of €13,000 can have a total income of just under €26,200 per annum and incur no USC liability. For 2022, it is estimated that 28 per cent or 797,600 of all taxpayer units will be exempt from USC.
Furthermore, I would point out that in recent Budgets, including Budget 2022, this Government actively increased the USC ceiling for the 2 per cent rate to ensure low income earners would not be subject to the top rates of USC.
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 plans to narrow the USC base.