Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I understand that it is the Deputy's intention to propose a tax system under which all of those earning up to €1,731 per week would be exempt from USC entirely. The current exemption threshold for USC stands at €13,000 per annum and it is now estimated that from next year, 29% of all income earners will no longer be liable for USC. To further increase this entry threshold to €90,000 would exempt 95% of income earners from USC and increase the number of taxpayers exempt from personal tax entirely to 37%. This would therefore considerably narrow the income tax base and expose our economy to significant risk in the event of a future economic downturn.

Deputies will recall that during the economic crisis, we reached a point where 45% of all income earners were exempt from income tax. That was unsustainable as it placed an unfair burden on those earners who were contributing to the income tax base, and exposed the vulnerability of our 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 fairest and most sustainable income tax system in the long term. The Deputies will be aware that in this budget I have retained the current USC threshold of €13,000 to maintain the existing USC base, and that I have also expressed my commitment to retaining that figure as the entry point to taxation in future.

I also note that the abolition of the USC for those earning less than €90,000, assuming that those earning above €90,000 would pay USC on all their income at the new 2018 rates, would have an Exchequer cost in the region of €2 billion on a full-year basis. Significant expenditure cuts or alternative tax raising measures would therefore be required in conjunction with such a measure. Taking these considerations into account, I am not minded to support the precise terms of the amendment put forward by the Deputy and cannot accept the amendment.

I can, however, agree to the proposition that a report should be prepared which presents the analysis relating to the amalgamation of the USC and PRSI, and it is my intention that this report will be made available to the Dáil in advance of budget 2019.