Brian Hayes (Dublin South West, Fine Gael)

-----the Government could not simply abolish the USC, and the system would default back to the old regime.

Second, changing the tax system during the tax year presents significant problems. In this case, there would be a mixture of charges where the USC would apply on income for the first three months of the year and the income and health levies would apply for the following nine months. It is difficult for me to assess what the impact on individuals would be at this stage but I believe we would have a situation where there would be significant overpayments and underpayments of tax. These would require end of year reviews by Revenue and in some cases would result in very painful additional charges being imposed on some taxpayers. We argue that this is not practical in current circumstances.

Third, such an approach would impose a significant cost and administrative burden on employers and payroll companies. None of this would be in the interest of business or employment prospects for the economy. Finally, it has to be recognized that the USC is expected to raise €4 billion in a full year. We cannot afford to jeopardize that by abolishing the charge in a haphazard manner.

It has been claimed by the Deputies opposite that the USC is a regressive charge. This is not correct. It is a fact that the more one earns, the higher the percentage of one's income is paid under the USC. When the USC is considered in the broader context of how we tax income generally, the overall effect is highly progressive.

According to a recent European Commission publication, Monitoring Tax Revenues and Tax Reforms in EU Member States 2010, Ireland has the most progressive taxation of income of EU member states in the OECD. The data shows that almost all EU countries have progressive taxation systems. On a rating system where less than 100 is regressive and above 100 is progressive, most other EU countries have a progressivity rate of between 120 and 130. By comparison, Ireland has a progressive rate of 174. The independent commentators who compare the taxation systems of different countries do not accept the charge that our taxation system is not progressive.

Examples are given of the USC charge on someone earning €16,016 compared with someone earning €100,000 per annum. It is important that we are honest about this issue, look at the total tax liabilities and not just one part of them. An individual earning €16,016 in 2011 will be expected to pay €440 over the entire year in taxes. An individual earning €100,000 in 2011 will be expected to pay €40,867 in taxes and charges. It is absolutely clear that the greater a person's income, the greater the amount he or she pays. Given the stated position of the party opposite, I find it difficult how it would oppose this based on the argument of whether or not this is a progressive system. If we want a genuine debate in this country, as opposed to the Punch and Judy gombeen politics that have been served up for too long, then we must be honest about this and not play to the gallery, saying one thing to the public but another thing behind their back.

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