Brendan Griffin (Kerry South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

380. To ask the Minister for Finance his views on the SIPTU proposal to replace the universal social charge with a social solidarity contribution, including the introduction of the SSC credit of €775 per person for all incomes up to €100,000, with minor increases in USC thereafter; if his Department has costed the proposal; if so, the overall costs to the Exchequer in the estimation of his Department; and if he will make a statement on the matter. [32026/15]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Universal Social Charge (USC) comprises an exemption provision and is calculated on the basis of five income bands and rates (including the surcharge for certain self-assessed non-PAYE income earners).  The SIPTU proposal, as I understand it, retains the USC but would introduce a Social Solidarity Contribution (SSC) credit of €775 per person for all on incomes of up to €100,000. On the basis of the current USC rates and bands, the proposed SSC credit of €775 would result in incomes up to €23,250 not having any liability to the charge.  In that context it would be administratively easier to increase the USC exemption limit to €23,250 rather than introduce an SSC credit, although this would create a significant step effect within the USC system.

I am advised by the Revenue Commissioners that introducing a system that entails a credit being available to a taxpayer based on current year income would significantly increase the complexity of the operation of the USC.  This is on the basis that, currently, the USC is a cumulative charge which can cater for taxpayers with multiple employments or other income.  

The introduction of a credit reducing to zero when a taxpayer's income exceeds €100,000 would be very challenging both for employers and for payroll software providers in terms of the operation of the credit on a real-time basis.  Revenue does not have current year, real-time information about a taxpayer's current year income and would not therefore know when a taxpayer will exceed €100,000 in earnings.  As PAYE taxpayer income details are provided to Revenue by employers on the annual P35 return post year-end, Revenue would not be in a position to issue an instruction to an employer about a credit that is predicated on a level of earnings in the current year.  

I am further advised by Revenue that the cost of introducing a €775 SSC credit for all USC payers with income under €100,000 is estimated at €817 million in the first year and €1,105 million in a full year.  

The yield from introducing a 10% USC rate for all income over €100,000 (including a reduction in the existing surcharge of 11% to 10% for self-assessed taxpayers with non-PAYE income over €100,000) is estimated to be €62 million in the first year and €56 million in a full year. The lower full year yield reflects that in a full year (compared to the first year) the cost of reducing the existing 11% surcharge for self-assessed cases to 10% weighs more heavily on the net yield.

These estimates assume that all existing USC rates and bands remain unchanged.  They are based on 2016 estimated incomes from the Revenue tax forecasting model using latest actual data for the year 2013, adjusted as necessary for income, self-employment and employment trends in the interim.  They are provisional and may be revised.

The proposal suggests that the yield from the revised system is ring-fenced for social investment purposes, such as improving healthcare. The yield from USC is estimated to be €4.2 billion in 2015, and it is used to fund the State generally. If it were to be ring-fenced, the expenditure currently financed by the yield from USC that is not social investment, as defined, would have to be financed by alternative means, which could require additional taxation.

Notwithstanding the above, I will bear the proposal in mind in the context of my preparations for the upcoming Budget.