Jack Chambers (Dublin West, Fianna Fail) | Oireachtas source

I thank the Deputy for raising this issue. The universal social charge was designed and incorporated into the Irish taxation system in 2011 to replace two other charges - the health and income levies. The primary purpose of the USC was to widen the tax base and provide steady income to the Exchequer to provide funding for public services. The USC is an individualised tax, meaning that a person’s liability to the tax is determined on the basis of individual income and personal circumstances. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base, which ensures that it is a stable and sustainable source of revenue for the State. The USC yield was €5.4 billion in 2023, with a similar yield expected in 2024. The USC is an important source of revenue to the Exchequer to fund public services. There is currently an exemption from USC for any individual who earns less than €13,000 per annum. It is estimated that in 2024, 37% of all taxpayer units will be exempt from USC.

With regard to the Deputy’s proposal, I am advised by Revenue that the cost of increasing the USC exemption limit to €100,000 in 2024 is estimated at €2.2 billion and €2.5 billion on a first and full-year basis, respectively. As such, this proposal would give rise to a shortfall of more than €2 billion that would have to be generated from alternative sources. It would furthermore significantly narrow the tax base and place an increasing reliance on a smaller number of taxpayers. This, in turn, would expose our economy to significant risks in the event of a future economic downturn. Ireland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. 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. As such, I have no plans to abolish the USC for individuals earning below €100,000 per annum.

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