Brendan Griffin (Kerry South, Fine Gael)
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222. To ask the Minister for Finance if he will review the viability of a multi-annual plan to phase out the universal social charge; and if he will make a statement on the matter. [48176/14]

Michael Noonan (Limerick City, Fine Gael)
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The Universal Social Charge (USC) was introduced in Budget 2011 to replace the Income Levy and the Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and raise revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced. It is applied at a low rate on a wide base. I should point out that it was never intended that the USC would be a temporary measure. The USC was designed and incorporated in to the Irish taxation system as part of its permanent structure and the revenues collected play a vital part in meeting the many expenditure demands placed on the Exchequer.

It is estimated that the income tax and USC measures introduced in Budget 2015 will cost €478 million in 2015. Although this is a sizeable amount of money it is only about one tenth of the estimated yield from USC next year. Thus any plan to abolish USC would need to be implemented over a long period and would be subject to the fiscal space available in each year. In addition, Government priorities need to be considered on an annual basis, particularly regarding tax and expenditure measures, and the annual Budget process allows Government to consider all of these aspects in the round. Therefore, I would not be in favour of tying the Government to multi-annual specific changes to only one aspect of the tax system in isolation.

The Deputy should note that the amounts raised by the new USC in 2011 were of the same magnitude as that raised from the levies that it replaced. It is estimated that USC receipts for 2014 will amount to around €4 billion, or approximately one quarter of total income tax receipts. Any scheme to abolish the USC would have to contain a credible road map as to how this revenue would be replaced, in order that vital services can continue to be funded.

The Deputy will be aware that in fulfilment of a Programme for Government commitment my Department conducted a review of the USC in 2011. As a result, I decided to raise the USC exemption threshold from €4,004 to €10,036 in Budget 2012, removing 330,000 individuals from liability to the charge entirely.

Furthermore, in Budget 2015 I extended the USC exemption threshold to €12,012, taking another 87,000 out of the charge. Budget 2015 also included a reduction in the two lower rates of USC and an extension of the threshold before which an individual is liable to the 7% rate, thereby exempting all those on the standard minimum wage from liability to the higher rates of USC entirely. Collectively the budgetary income tax and USC measures ensure that all those who pay income tax and or USC will see a reduction in their tax bill from next year.

A fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high and that I would seek to reduce it when the public finances would allow me to do so. The income tax measures in the Bill are the first stage of a three-year plan to reduce the marginal tax rate on low and middle income earners in a manner that maintains the highly progressive nature of the Irish tax system. However, it is not possible to be specific about the individual components of the plan for subsequent years, as each component will need to be considered in terms of its overall contribution to the total tax package delivered in each year's Budget.