Dáil Éireann Debate, Tuesday - 4 October 2022
220. Deputy Seán Haughey asked the Minister for Finance the rationale for the position whereby all Department of Social Protection payments are exempt from the universal social charge, while occupational pensions are indeed subject to this charge; and if he will make a statement on the matter. [48201/22]
Amharc ar fhreagraThe 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.
The USC, like the Income Levy before it, does not apply to social welfare payments, such as the contributory and non-contributory State pensions. However occupational pensions, are liable to the USC if the payment is greater than the exemption threshold. Currently individuals with incomes of less than €13,000 are exempt from USC, which can include modest occupational pensions.
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 amend the current treatment of pensions for USC purposes.
