Michael Noonan tight-lipped on USC ‘tax time bomb’

Finance Minister Michael Noonan has refused to say if he will defuse what he called a "tax time bomb" primed to hit the elderly and sick with USC hikes.

Mr Noonan said he had not yet reached a decision on what to do about a pre-programmed change to the levy, which will see rates for older people and those on medical cards increase, and payments for self-employed people decrease from the New Year.

When the USC was brought in by the Fianna Fáil-Green government at the beginning of 2011, rates were set at 4% for people on medical cards earning less than €60,000 per year, and 10% for the self-employed earning more than €100,000 per year. But the legislation stated the rates would harmonise at 7% from January 1, 2015.

Mr Noonan blamed the hikes on Fianna Fáil and said they were “opportunistic” to now oppose them.

“They are like the people who planted the time bomb and then want other people to change the timing mechanism on the bomb. And the bomb will go off on January 1 if someone else doesn’t change it, so they are a bit opportunist as it was their lack of foresight that has put us in this position.

“Fianna Fáil in government brought a concession in, but they put a termination date on it, and that’s a matter of law they brought in in the Finance Bill,” Mr Noonan told RTÉ.

“We haven’t increased personal tax in any of our budgets,” he said.

“The effective date for what’s being predicted is January 1 next, but there’s a budget in between and this is something that will be considered very carefully.

“One of our priorities should be not to put additional impositions, particularly on the low-paid and middle-income people; and secondly, to be very aware of vulnerable people in society who can’t take any more in terms of tax and charges,” Mr Noonan said.

The minister, however, would not be drawn on whether the reduction for self-employed people would still go through if the lower rate was held for medical card holders.

“If there’s an automatic reduction we will look at that to see if it’s justified and if it is not justified we will leave it at 10%,” he said.

Fianna Fáil finance spokesperson Michael McGrath said Mr Noonan should allay the fears of sick and elderly people.

“A pensioner couple with a single earner on €40,000 a year, and who hold a medical card, stand to lose out by over €700 per annum if the Government does not deal with the issue,” he said.