Joan Burton (Dublin West, Labour)
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176. To ask the Minister for Finance the position regarding his Department’s study to amalgamate PRSI and USC; and if he will make a statement on the matter. [38052/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I have stated on a number of occasions that my long-term view of the USC is to see its amalgamation with the existing PRSI system.  In this context, a guiding principle will be a focus on reducing the income tax burden in a way that is both affordable and sustainable.

I have asked my officials to examine policy options with regard to the amalgamation of USC and PRSI.  This will take some time in conjunction with the Department of Employment Affairs and Social Protection. The process will require an examination of what is likely to be a considerable re-working of the underpinning systems. The Universal Social Charge is a tax on income, whereas PRSI is a social insurance which generally confers rights to certain social welfare benefits when the necessary number of contributions have been made.  The Deputy may be aware that the Income Tax and Universal Social Charge paper prepared for the Tax Strategy Group this July contained information on the potential advantages of a simplification of the personal tax system via an amalgamation of USC and PRSI, along with details of some of the policy considerations that would need to be addressed.  This paper has been published on my Department’s website and is available at:

Changes to USC and/or PRSI will form part of the ongoing wider medium-term process of income tax reform which is likely to take a number of Budgets to deliver.  High marginal tax rates discourage work and increase costs to employers and therefore have a negative impact on both productivity and international competitiveness.  This is a time when we need to concentrate on improving our competitiveness, to continue the increases in employment and opportunities for our citizens.  It should be possible, as part of the medium-term reform process, to preserve aspects of the USC which are most beneficial to the long-term sustainability of our tax revenues, such as the wider tax base, while still achieving a growth-friendly simplification of the overall personal tax system.