Written answers

Thursday, 23 June 2016

Department of Finance

Universal Social Charge Abolition

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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60. To ask the Minister for Finance his position on abolishing the universal social charge by 2021; and his plans to replace the potential €5.6 billion income per annum by 2021 that this charge could bring in by 2021. [17539/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Summer Economic Statement published by Government this week reflects the tax and spending priorities set out in the Programme for a Partnership Government (PPG) and sets out the expected available fiscal space from 2017 to 2021. Over the period to 2021, the split in the use of fiscal space between spending and tax reductions is broadly in line with the Government Programme commitment of 2 to 1.

As the Deputy is aware, there is a commitment in the PPG to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners, and limits the benefit for high earners. Reductions will be introduced on a fair basis with an emphasis on low and middle income earners.

The PPG states that reductions in personal tax rates - such as the phasing out of the USCneeded to reward work and support enterprise and employment will be funded largely through:

- Extra revenues from not indexing personal tax credits and bands

- The removal of PAYE tax credit for high earners and other measures to ensure the tax system remains fair and progressive

- Higher excise duties on cigarettes and increased enforcement and sanctions on the illegal importation and sale of cigarettes

- Increased enforcement and sanctions on fuel laundering

- A new tax on sugar sweetened drinks

- Improving tax compliance

Work on development of the medium-term income tax reform plan is ongoing and as such the expected cost is not yet finalised.  The plan is due to be published for consultation with the Oireachtas Committee on Finance in July, and for approval by the Oireachtas in October.

The revenue to be raised by planned offsetting tax changes, such as a sugar-sweetened drinks tax for example, will depend on, among other things, the rate at which the tax is set and the scope of its application.  These issues are budgetary matters which will be determined through the budgetary process.

The income tax reform plan will aim to support job creation and reward work which is a key driver of growth and prosperity in the economy. In developing the plan, available resources will be a key consideration along with safeguarding the economic stability of the public finances and the wider economy.

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