Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I appreciate the fact that people in Ireland pay a lot of tax, whether it is income tax, USC or PRSI. In budgets over the last number of years we have reduced the burden of taxation on people. In some budgets we reduced the USC, in other budgets we reduced income tax. We intend to do that in the forthcoming budget in October. There will be a package. The exact composition of that package is yet to be determined but it will mean reductions in the amount of tax people have to pay. That is an important commitment that the Government made and that we will honour. The programme for Government says we will index tax credits and tax bands so that when people get a pay rise, they do not see half of that lost in income tax, USC and PRSI. That is the commitment we made in the programme for Government, one we will honour in the forthcoming budget. It is not the intention of the Government to abolish the USC. It brings in €5.3 billion a year. Notwithstanding the surplus we have, a tax package of that size and nature would not be appropriate. It would fuel inflation and endanger the public finances into the future. It is important to point out that when the USC was introduced by Brian Lenihan a long time ago, it replaced two existing income levies. The Deputy will recall the health levy, which had been around for about 20 years, and the income levy, which had been around for some time. People often take the view that it was a new tax. It was actually the health levy and the income levy, which had been around for a long time, combined, and then it was increased. We have reduced it somewhat since then. It is a progressive tax in that those who earn the most pay the most. Those on the lowest incomes are exempt. Unlike income tax, there are very few ways to avoid it. The various reliefs and tax breaks that apply to income tax do not apply to USC. On the commitments my party made in 2016, that was quite some time ago. We did not win that election. There has been another election since then. In the 2020 election we committed to getting to the point where people did not have to pay the highest rate of income tax until they earned €50,000 and would only pay the highest rate on income above €50,000. We have made a huge amount of progress getting to that point, up to €40,000 now, and we hope to make further progress in further budgets.

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