Written answers

Tuesday, 28 February 2017

Department of Finance

Universal Social Charge Abolition

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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47. To ask the Minister for Finance his views on whether the abolition of the USC is neither possible nor desirable in the current economic climate and in the context of the fiscal space allowable; and if he will make a statement on the matter. [10018/17]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Programme for Government commitment to phase out the USC is not something that is being proposed in isolation but rather as part of a wider medium-term income tax reform plan focused on supporting economic growth. Tax revenues have grown by over 40% from €34 billion in 2011 to €48 billion in 2016. It is true that new taxes have been introduced but much of the increased revenue is driven by stronger growth and tax buoyancy. I have said on many occasions that I am cognisant of the high marginal income tax rates that apply to many people. We should be proud to have a highly progressive income tax system, but we must also appreciate the value of retaining the incentive to work, to enable those who work hard to provide for their families and generate further economic growth through increased employment and expenditure in the domestic economy.

Ireland is a small economy open to trade, open to the exchange of ideas and open to the movement of people. In order to provide the best opportunities for our citizens we must strive to make Ireland a fair and attractive place for people to live, to work and to build their futures.  It is my view that this requires fairness at both ends of the income spectrum reducing the tax burden on lower incomes while also having a top rate of tax that is internationally competitive.

The steady progress I have made in reducing the USC in the last three Budgets, allied to the many other factors at work in rebuilding our economy, is bearing fruit. When I took office in 2011 the unemployment rate was over 14% and went on to peak at 15.2%. It is now 6.6%. This is the 17th successive quarter of employment growth and more than 200,000 net jobs have been created since 2011.  Employment levels have increased in all regions of Ireland and we've had net inward migration for the past year or so people are coming home.

With regard to the feasibility of USC abolition, the forecasts contained in Budget 2017 set out the indicative net fiscal space over the 2018 to 2021 period of some €9.3 billion in cumulative terms.  Abolition of the USC over this period would absorb approximately 40% of the currently available net fiscal space. Furthermore it is my view that the resulting reductions in marginal tax rates would support job creation and economic growth, and better enable us to address the challenges and opportunities arising in the global economy.

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