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

I will read the briefing note which gives the overall position from the Department's perspective. We can then have a dialogue if that is necessary.

It would appear from the wording of the proposed amendment that it is the Deputy's intention that all those earning up to €376 per week, which is just over the earnings of a full-time worker on the new minimum wage of approximately €357 per week, be exempted from the charge for USC entirely. It is unclear whether the Deputy also intends that the amendment covers all income earners with incomes of less than €19,572, rather than just workers. Such a group would include pensioners and people with income from their investments. The Deputy should be aware that the changes proposed in the Finance Bill include a provision to extend the exemption threshold for USC from the current €12,012 to €13,000 per annum. This measure alone will remove an estimated 40,000 low-income earners from liability to the charge entirely. This is in addition to the number of individuals removed from the charge as a result of the two previous extensions of the exemption limit in 2012 and 2015. It is now estimated that more than 700,000 individuals, or 29% of all income earners, will not be liable to USC from next year. In addition to this and as a result in the reduction of the two lower rates of USC and the extension of the ceiling for the second rate of USC from €17,576 to €18,668, all those earning the increased minimum wage with an average working week of 39 hours will remain liable to the two lower rates of USC only, notwithstanding the increase in their gross income. It should also be noted that a new PRSI credit has been introduced in budget 2016 in order to address the PRSI step effect which would otherwise have had a negative impact on full-time minimum-wage workers from January 2016.

To increase the USC exemption threshold to €19,572 would 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 do this would seriously undermine the rationale for the introduction of the USC, which was to broaden the tax base from its previous narrow, unsustainable level. In addition, the USC was intended 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 individuals earning up to €19,572 from the charge would effectively reverse the base-broadening which has already been achieved. When the Government considers options for a budgetary tax package, it must take account of all the parts of the package. Therefore, single measures cannot be contemplated in isolation. Taking these factors into account, I am not minded to expend resources on the production of the report requested by the Deputy and therefore I cannot accept the amendment.

As regards indirect taxes, it is more appropriate to look at these as a proportion of people's expenditure, as distinct from their income. In this respect, I am aware of research from other jurisdictions which finds that those with the lowest reported incomes are not those with the lowest spending or those living in the most severe forms of deprivation.