The annual Organisation for Economic Co-operation and Development’s flagship publication on taxes and wages shows the progressive nature of the Irish tax system, and may highlight the difficulties any government could face if it sanctioned radical cuts to the Universal Social Charge.
The Government still plans to merge the USC with PRSI and alter tax levels for low-and middle-income earners despite Fianna Fáil leader Micheál Martin warning there is not enough money to do both and that it breaches the minority government deal.
Making a start in phasing out the Universal Social Charge — a key commitment in the Programme of Government — would cost the exchequer hundreds of millions of euro in lost revenue next year and cost as much as €1.86bn over four years.
The Fine Gael-Labour coalition will "not have a cent available" to invest in services and will be forced to impose up to €2bn more front-line cuts if it pushes ahead with plans to remove the universal social charge during the next government.
Lowering the cost of the Universal Social Charge by a percentage point for 1.28m taxpayers earning over €17,575 would cost the exchequer €364m, or over half of all the amount that Finance Minister Michael Noonan has indicated would be available for tax cuts in his pre-election budget next month.