Robert Troy (Longford-Westmeath, Fianna Fail)
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318.To ask the Minister for Finance if he plans to scrap USC as part of Budget 2025, and in particular, if he will examine the case of retired teachers, who only receive a Department of Education pension but still have to pay USC. [31541/24]

Jack Chambers (Dublin West, 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, for example where the economy moves from a boom into a bust. 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.

The USC has played a vital role in meeting the many expenditure demands placed on the Exchequer. The USC yield was c. €5.4 billion in 2023, and a projected yield of €5.6 billion is expected in 2024. If USC were to be abolished, it would be necessary to raise this amount from other sources.

Currently individuals with incomes of less than €13,000 per annum are exempt from USC, which can include modest occupational pensions. For 2024, it is estimated that 37 per cent of all taxpayer units will be exempt from USC.

The USC like the income levy before it, does not apply to social welfare payments, such as the contributory and non-contributory State pensions. However, a retired public servant in receipt of an occupational pension, is liable to the USC if their payment is greater than the annual exemption threshold. It also worth pointing out that persons aged 70 or older can benefit from a reduced rate of USC where their total income is €60,000 per annum or less.

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.