Michael Healy-Rae (Kerry, Independent)
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147. To ask the Minister for Finance if the 3% USC surcharge for the self employed can be removed (details supplied). [33542/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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The 3% USC surcharge is payable on self-assessed income in excess of €100,000.  When the USC was introduced in 2011 it was accompanied by a series of other reform measures designed to simplify the tax system and widen the tax base in order to raise the revenues required at that time.  

One of these measures was the removal of the €75,000 income ceiling for employees, above which PRSI was not payable.  This ceiling was removed for all employees in 2011, with the result that employees on incomes in excess of €75,000 became liable to an additional 4% charge on that portion of their income. At the same time the PRSI rate for self-assessed income earners was increased from 3% to 4%.

The 3% USC surcharge on non-PAYE income in excess of €100,000 was introduced in tandem with the removal of the PRSI ceiling of €75,000 as, in the absence of this measure, self-assessed high income earners would have benefitted when compared to their PAYE counterparts from the tax package introduced in Budget 2011.  On the basis of fairness, this could not have been countenanced at the time.

With regard to equality of treatment, the Deputy will be aware that, while Employer PRSI contributions of 8.5% and 10.75% are payable in respect of employees, no similar contribution is payable by the self-employed. In addition, the self-employed also continue to benefit from a broader expense deduction regime than that available to employees. 

The Government’s plans to reduce the income tax burden for all taxpayers, with a particular focus on low to middle income earners, were clearly stated in the Programme for Government published in May 2016.

The Programme for Government recognises that high personal tax rates in Ireland discourage work and jobs and have a negative impact on our international competitiveness. Therefore, it contains a commitment for a medium-term income tax reform plan that keeps the tax base broad, while reducing excessive tax rates for middle income earners, and limiting the benefit for high earners. We must 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 employment and expenditure in the domestic economy.

Preparations for Budget 2018 are now under way. As the Deputy will be aware, changes to one particular tax, such as USC, are not considered in isolation. They must be considered as part of the overall Budget process encompassing both revenue and expenditure measures and in the context of available resources. Any announcement in relation to changes to the income tax system, including USC, would normally be made as part of the Budget and I am not inclined to diverge from this practice.