Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The first part of the amendment tabled by Deputy Doherty as worded, would suggest the Deputy is seeking an exemption of €17,542 per annum, from which all individuals within the universal social charge net would benefit. However, his intention may have been to increase the USC exemption threshold of €10,036 to €17,542 per annum.

As the Deputy may be aware, there was a specific commitment in the programme for Government to review the USC. Delivering on this commitment, the USC was reviewed by the Department of Finance in the lead-up to budget 2012 and the report is available on the Department’s website. As a result of the review of the USC, the Government decided in budget 2012 to increase the entry point to the charge from €4,004 to €10,036 per annum. It is estimated this removed almost 330,000 individuals from the charge.

I should point out the cost of the first part of the Deputy’s amendment as worded, would be in the region of €648 million for a full tax year. However, if his intention was to increase the exemption threshold from €10,036 to €17,542, then the cost would be in the region of €132 million for a full tax year and would remove an additional 365,000 individuals from the charge. This is a significant net cost, particularly in the context of the current budget balance.

Moreover, increasing the USC exemption threshold to €17,542 would effectively increase the entry point to the charge above the current entry point to income tax of €16,500 per annum for a single employee. To accept this would be to seriously undermine the rationale for the introduction of the USC, which was to broaden the tax base from its narrow unsustainable level with a relatively small portion of income earners responsible for a disproportionate amount of the overall income tax yield. In addition, it was to ensure that most individuals would make some contribution, however small, to the provision of services and towards assisting in restoring the public finances. The removal of an additional 365,000 individuals from the charge would effectively reverse the base-broadening which has already been achieved.

The second part of the amendment put forward by Deputy Doherty, seeks to provide that individuals aged 70 and over would benefit from a concessionary rate of USC of 4%, irrespective of their level of income. I should point out that given the budgetary constraints and the need to raise revenue, earlier this year in the Finance Act 2013 the Government decided to amend the structure of the USC for those aged 70 years and over and medical card holders with income in excess of €60,000 per annum, such that the reduced rates of USC would be discontinued from 1 January 2013. The Government believes this decision was justified and will ensure equity between all citizens with income in excess of €60,000 per annum. It is also important to point out that payments from the Department of Social Protection, such as the State pension, are exempt from the USC. Furthermore, such payments will not be taken in to account in determining if an individual has exceeded the €60,000 threshold. I cannot accept that pensioners earning in excess of €60,000 per annum should benefit from a concessionary rate of USC, while those individuals working and earning the average industrial wage are subject to a USC charge of 7% on their income in excess of €16,016 per annum. However, it should be noted those aged 70 and over whose income does not exceed €60,000 per annum, excluding social welfare income, will continue to benefit from the concessionary rate of USC. The Revenue Commissioners estimate the cost of the second part of the amendment would be €26 million. For the above reasons I cannot accept the amendment.