Michael McGrath (Cork South Central, Fianna Fail)
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The Universal Social Charge (USC) was designed and incorporated into the Irish taxation system in 2011 to replace two other charges, namely the Health and Income Levies. The primary purpose of the USC was to widen the tax base and to provide a steady income to the Exchequer to provide funding for public services.

The USC is an individualised tax, meaning that a person’s liability to the tax is determined on the basis of a person’s own individual income and personal circumstances. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base, which ensures that it is a stable and sustainable source of revenue for the State.

It is important to point out that in 2016, joint Department of Finance/Economic and Social Research Institute (ESRI) research found that USC represented a more stable form of revenue than income tax. The findings highlighted that USC revenues would fluctuate by less than income tax revenues whenever income is volatile. Given the openness of the Irish economy and consequent susceptibility to economic shocks, the contribution that the USC makes to the stability of the State’s revenue sources is considerable.

It is also important to note that the USC yield is c. €5 billion (projected €5.2 billion for 2023). If the USC were to be abolished it would be necessary to generate this yield from alternative sources.

Currently, there is an exemption from USC for any individual who earns less than €13,000 per annum. It is estimated that in 2023, over 1.14 million taxpayer units (or 35% per cent of all taxpayers units) will be exempt from USC, which includes part-time workers earning less than €13,000 per annum, persons in receipt of small occupational pensions of less than €13,000 per annum, and taxpayers in receipt of state pension income only.

In regards to the Deputy’s proposal, I am advised by Revenue that the cost of increasing the USC exemption limit to €100,000 in 2023 would be approximately €2.6 billion and it would result in the removal of approximately 1.86 million additional taxpayer units from the USC.

As such, this proposal would give rise to a shortfall of approximately €2.6 billion that would have to be generated from alternative sources. Furthermore it would significantly narrow the tax base, leaving our public finances vulnerable to external shocks.

As such, I have no plans to abolish the USC for individuals earning less than €100,000 per annum.