FF vow USC and capital gains cuts - but no return to auction politics

Fianna Fáil has promised to cut the universal social charge (USC) for all but the highest earners in Irish society if it returns to power after the next election, despite insisting it has “learned the lessons” of the dangers of auction politics.

The party’s finance spokesman, Michael McGrath, outlined the plan yesterday as part of a series of high-profile tax and “rainy-day” fund measures the opposition party will implement if elected to government.

Speaking at a media briefing in Dublin, the front-bench TD said Fianna Fáil’s election manifesto will include plans to end USC for anyone earning less than €80,000 a year and to drastically cut the fee for those earning more than that sum over the next five years.

The party intends to remove the lowest rate of USC rate of 1% on income up to €12,012 within a year of entering government, and to halve the 3% rate on the next €6,600 of a person’s income.

Mr McGrath said the party will cut the 5.5% rate on the next €51,376 of a person’s income, and remove the 3% and 5.5% rates entirely over the next five years; the 8% rate on income above €80,000 will be reduced to 5.5% but not removed.

In addition, Fianna Fáil will reduce the capital gains tax on entrepreneurs to a 10% flat rate on income up to €15m to compete with Britain, and create a “rainy day” fund from future excess corporation tax.

The plans will cost €459m and €7m a year for USC and capital gains, respectively.

However, despite claims that the plans bear the hallmarks of a return to auction politics, Mr McGrath insisted Fianna Fáil have “learned the lessons of the past” and are not trying to buy electoral success.

Asked why his party did not commit to completely removing USC, unlike the Government parties, he said people had become “very cynical about political promises and understandably so”. He said the Fianna Fáil plan is “something I can stand over and which is deliverable”.

He said while a complete removal is possible “if the economy recovers, we can’t commit to that”, and he chastised Fine Gael and Labour for its 2011 election “frenzy” of promises which were “abandoned almost immediately”.

Fine Gael and Labour last night hit out at the claim, with Jobs Minister Richard Bruton warning Fianna Fáil’s economic record shows it cannot be trusted, while Labour back-bencher Derek Nolan said USC is Fianna Fáil’s “baby” and that his own party “will not take lectures” on its reform.

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