The Government is being warned a reduction in the Universal Service Charge (USC) would leave less room to go ahead with promised tax cuts.
The Department of Finance has been analysing how politicians can implement promises made in the Programme for Government.
According to the The Irish Times it found that planned cuts to the USC* costing €1.7bn over the course of three budgets will mean money will need to be raised elsewhere.
Increasing the USC bands or raising the exemption threshold of €13,000 would cost the exchequer around €296m next year. Over a full four years, the cumulative cost would rise to as much as €1.86bn.
The USC currently raises €4bn a year, motre than is raised through VAT.
It is expected that the main rate of 5.5% will be cut in the budget for 2017 with the Government promising to phase out USC totally over a number of years.
* The Universal Social Charge (USC) is a tax on income that replaced both the income levy and the health levy (also known as the health contribution) since 1 January 2011.
You pay the USC if your gross income is more than €13,000 per year.