Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank the Senator for tabling the recommendation and recognising the measures taken in the budget to alleviate the burden of the universal social charge on a number of workers. The enactment of the Bill will result in the addition of a further 80,000 people to the 330,000 people from whom the requirement to pay the universal social charge has been removed since 2011.

I do not propose to accept the recommendation. It appears from the wording that it is the Senator's intention that all those earning the standard annual minimum wage be exempted entirely from liability to pay the universal social charge. The Senator should be aware that the changes proposed in the Bill include a provision to extend the exemption threshold for the charge from the current €10,036 to €12,012 per annum. This measure alone removes an estimated 80,000 low income earners from the USC net. These are in addition to the 330,000 individuals removed from the USC net as a result of the extension of the exemption introduced by the Minister in 2012. It is now estimated that approximately 650,000 people, or 28% of all income earners, will not be liable to pay the charge from next year onwards.

In addition, as a result of the reduction in the two lower rates of universal social charge and the extension of the threshold at which the 7% rate becomes payable from €16,016 to €17,576, all those earning the minimum wage will see a reduction in the amount they pay under the universal social charge next year. For instance, as a result of the changes introduced in budget 2015, someone earning €17,542 will see his or her weekly universal social charge of €10.51 per week fall to €7.19 per week.

This means the person's tax bill will be reduced by a little over 20%. In fact the new higher threshold was specifically chosen to ensure that those on the standard minimum wage would be exempted from the higher rate of universal social charge. It should also be noted that an individual on the minimum wage is exempted from paying PRSI.

While I cannot accept the Senator's recommendation I emphasise that budget 2015 and the Finance Bill are merely stepping stones to further reforms, as has already been outlined by the Minister for Finance.