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

It would appear from the wording of the proposed amendment that it is the Deputy's intention that all those earning up to €380 per week - somewhat above the earnings of a full-time worker on the new minimum wage of approximately €361 per week - would be exempt from the charge of USC entirely. It is unclear whether the Deputy also intends that this amendment would consider all income earners with incomes of less than €19,752 rather than just workers. Such a group would also include pensioners and people with income from their investments. The current exemption threshold for USC is €13,000 per annum and it is now estimated that over 745,000 individuals - 30% of all income earners - will not be liable for USC from next year. To further increase this to €19,752 would exempt 42% of income earners, which is more than the 37% estimated to be exempt from income tax in 2017, and would, therefore, considerably narrow the income tax base. During the economic crisis, it reached a point where 45% of all income earners were exempt from income tax. That was unsustainable and it placed an unfair burden on earners who were contributing to the income tax base and exposed the vulnerability of the income tax system to economic shocks.

It is my view that a broad-based progressive income tax system where the majority of income earners make some contribution according to their means is the most fair and sustainable model in the long term. In 2017, following the passage of this Bill and the USC reductions it contains, a single PAYE employee on €19,752 will pay about 9% of their gross income in income tax, USC and PRSI. I consider this to be an appropriate contribution toward social and public services bearing in mind that a similar employee earning €35,000 will pay about 18% of gross income and an employee earning €70,000 will pay approximately 34% of gross income. The Deputy will be aware that in this budget I retain the current USC threshold of €13,000 to maintain the existing USC base. However, I have reduced the three lowest rates of USC by 0.5% each, thereby ensuring that all individuals currently paying USC will see a reduction in their liability next year. Options regarding the future of USC need to be considered in the context of the reform of the wider income tax system. In A Programme for a Partnership Government, there is a commitment to ask the Oireachtas to continue to phase out USC as part of a wider, medium-term income tax reform plan that will keep the tax base broad, reduces excessive tax rates for middle income earners and limits the benefits for high earners.

With regard to the Deputy's request for a report, he will be aware that when the Government considers options for a budgetary tax package, it must take account of the cumulative effect of all parts of the package and, therefore, single measures should not be contemplated in isolation. Furthermore, the Deputy will be aware that in July my Department published an income tax reform plan that provides detailed information on the distribution of the USC charge, as well as potential pathways towards its phasing out along with the analysis of many other aspects of the income tax system.

Taking these factors into account, I am not minded to expend resources on the production of the report requested by the Deputy. In such circumstances, I cannot accept the amendment.