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

I am sure the Deputy will agree with me that our current system of personal taxation, including as it does three separate charges on income, through income tax, USC and PRSI, each with different income bases, reliefs and manners of assessment, is overly complex. It can be difficult for individuals to understand the personal tax system has the potential to lead to an increase in employment or, indeed, increases in the level of work undertaken by individuals.

The programme for Government commitment to the phasing out of the USC was specified as part of a wider medium-term process of income tax reform, which would maintain the breadth of the tax base, while reducing excessive tax rates for middle income earners and limiting the benefits for high earners.

We have made steady progress in reducing the personal tax burden in the three most recent budgets, with a particular focus on low to middle income-earners, and these reductions have been achieved primarily through cuts to the lowest three rates of USC. The top marginal rate of tax on income up to €70,044 has been reduced to 49%, and it must be remembered that, as recently as December 2014, the marginal rate of tax for a single individual on all income over €32,800 was 52%.

My long-term view of the USC is to see its integration into the existing PRSI code. My focus on reducing the income tax burden for those on low and middle incomes should be the guiding principle. This must be achieved in a way that is both affordable and sustainable. In this regard, the end result is more important than the means of achieving this outcome. At this point in the process, I have an open mind as to the elements of the income tax system that could be employed as policy levers, to achieve the ultimate aim of the programme for Government with regard to reducing the tax burden faced by low and middle income earners.

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