Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 193 and 194 together.

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. However, payments made by the Department of Social Protection, including the State Pension, are exempt from USC.

The USC has been reviewed and considered by my Department on many occasions. The issue of USC applying to occupational pensions of retired public servants who entered the public service before April 1995 has also been examined by my Department. Such individuals are (or were) liable to modified rate PRSI, which does not generate an entitlement to the State Pension. In retirement therefore they receive an occupational pension only, and do not receive a separate State Pension unless as a result of PRSI contributions made in another employment during their working life.

It was decided not to exempt the occupational pensions of these individuals from the USC charge as an exemption could be very costly and difficult to achieve, potentially involving all income earners with the equivalent income benefiting from the exemption. In addition, it would also undermine the principle of the USC being applied to all income with few exceptions.

I would point out that the entry threshold to USC has increased significantly since it was introduced. When introduced, the entry threshold was €4,004 and now sits at €13,000 per annum. The rationale for the exemption threshold is to provide assistance to the cohort of taxpayer earning less than €13,000 per annum, such as part-time and seasonal workers and persons in receipt of small occupational pensions.

In addition, I would also point out that the structural changes implemented to the rates and thresholds of the USC since its inception in 2011 have resulted in a significant reduction in USC liability for all taxpayers. For example, in 2011 the rate structure was 2 per cent to €10,036, 4 per cent to €16,016 and 7 per cent on the balance. Whereas, in 2026, the rate structure is 0.5 per cent to €12,012, 2 per cent to €28,700, 3 per cent up to €70,044 and 8 per cent on the balance.

Finally, as the Deputy will appreciate, decisions regarding taxation measures are made in the context of the annual Budget and Finance Bill processes, at the appropriate time, and having regard to the sound management of the public finances.