Seán Fleming (Laois-Offaly, Fianna Fail)
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291. To ask the Minister for Finance the position regarding public service pensioners who have to pay USC on some of their pensions whereas people who are in receipt of the State pension do not have this charge imposed; his plans to address this issue; and if he will make a statement on the matter. [31114/15]

Michael Noonan (Limerick City, Fine Gael)
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The USC was introduced in Budget 2011 to replace the Income Levy and Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and maintain revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced, and is applied at a low rate on a wide base. 

The USC, like the Income Levy before it, does not apply to social welfare payments or payments of a similar nature.  However, occupational pensions are liable to the USC, if the payment is greater than the exemption threshold, which from 1 January 2015 is €12,012 per annum.

As you are aware, delivering on a commitment in the Programme for Government, the USC was reviewed by my Department in the lead up to Budget 2012. The report is available at www.finance.gov.ie. The issue of USC applying to occupational pensions of retired public servants who entered the public service before April 1995 was examined as part of that review.  However, the Government decided not to exempt the occupational pensions of these individuals from the USC charge as it would be very costly and difficult to achieve, and it would involve all income earners with the equivalent income benefiting from the exemption.  In addition, it would also undermine the principle of the USC being applied to income with few exceptions.

However, as a result of the review of the USC, the Government decided in Budget 2012 to increase the entry point to the Universal Social Charge from €4,004 to €10,036 per annum. It is estimated that this removed almost 330,000 individuals from the charge. An estimated further 87,000 individuals have been exempted from the charge as a result of the further extension of the threshold to €12,012 in Budget 2015. This latter extension equalises the position for single individuals whose sole source of income is the State Contributory Pension with Public Service pensioners whose pension is at an equivalent level. Furthermore, I intend to continue to reform the tax system in this manner in future budgets, subject to having the required fiscal space.  I would point out however, that the changes to the income tax system included in Budget 2015 mean that all those who paid Income Tax and /or USC in 2014, including pensioners, will see a reduction in their tax bill this year where income is equal.