Seanad debates

Thursday, 22 March 2012

Finance Bill 2012 (Certified Money Bill): Committee and Remaining Stages

 

11:00 am

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)

As Senator Reilly acknowledged, the Bill already provides for an increase in the exemption threshold from €4,004 to €10,036. This measure will cost in the region of €47 million for a full year and will remove nearly 330,000 people from the charge. While this is a significant cost, I do not expect it to result in a reduced yield for the Exchequer because of the switch to an accumulative basis of deduction and payment by the Revenue Commissioners from 1 January 2012, which will save a similar amount by avoiding underpayment of the universal social charge.

The additional cost of the recommendation would be in the region of €117 million for a full year and would remove an additional 273,000 people from the charge. This is a significant net cost, particularly in the context of the current budget balance. Moreover, a figure of €17,000 would bring the exemption threshold for the USC above the current entry point for income tax of €16,500 for a single person. Acceptance of this change would seriously undermine the rationale for the introduction of the USC, which was aimed at broadening the tax base from its unsustainable narrow level whereby a relatively small proportion of income earners were responsible for a disproportionate amount of the overall income tax yield, and to ensure most people made some contribution, however small, towards the provision of services and assisting the correction of the public finances. The removal of an additional 273,000 people from the charge would effectively reverse the base broadening already achieved. I must, therefore, oppose the recommendation.

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