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 the Health and Income Levies. Its primary purpose 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.

The USC has played a vital role in meeting the many expenditure demands placed on the Exchequer. Receipts from the USC in 2022 were in the region of €5 billion with a projected yield of €5.2 billion for 2023.

Currently, the exemption threshold for USC applies to individuals who earn €13,000 or less per annum. I am advised by Revenue that the cost of increasing the exemption limit of the USC to €100,000 is an estimated €2.4 billion and €2.8 billion on a first and full year basis respectively. As such, it would be necessary to raise this amount from other sources or there would be a shortfall in the Exchequer finances. Furthermore, such a proposal would also significantly narrow the income tax base and would expose our economy to significant risks in the event of a future economic downturn.

Ireland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. It is my view a broad-based, progressive income tax system, where the majority of income earners make some contribution but according to their means, is the most fair and sustainable income tax system in the long term.

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