Cuts to USC would cost State €1.6bn

The State would lose out on at least €1.6bn in revenue if it cut the deeply unpopular universal social charge for people earning €60,000 or less a year.

Finance Minister Michael Noonan revealed that the impact of any attempt to lessen the pressure on struggling families after the move was proposed by opposition TDs.

In a formal parliamentary question response to People Before Profit member Richard Boyd Barrett, Mr Noonan said since coming to power the Coalition has raised the universal social charge income exemption level from €4,004 a year to €12,012 a year. This move has taken more than 400,000 people out of the USC net.

However, if the exemption level was raised to €60,000, Mr Noonan said the State would stand to lose €1.6bn to €2.2bn a year — a reduction the exchequer would struggle to handle. “These figures are estimated on the basis of no change to the rest of the structure of the Universal Social Charge, and that all income would come into charge once the €60,000 threshold was breached,” he said.

Mr Boyd Barrett and other opposition TDs have repeatedly called for the removal of the charge as they believe it has served its purpose and is an unfair de facto tax on the public.

The only funds excluded from the charge are an individual’s total income if it does not exceed €12,012 a year, all social welfare payments and income which has already been subjected to DIRT tax.

Earlier this month, Mr Noonan told Newstalk radio that the charge is likely to remain “for the foreseeable future”.

“I believe everybody that works should pay something. They’re citizens and should be part of a contribution. It is [the USC] going to be part of the personal taxation code. A lot of people at the bottom don’t like it. Some people wouldn’t pay tax at all if it wasn’t for the universal social charge. From an exchequer point of view it’s very efficient,” he said.

The charge was introduced during the final months of the Fianna Fáil-led government in 2010. The now opposition party’s leader, Micheál Martin, said yesterday he believed the charge cost Fianna Fáil up to 30 seats in the subsequent 2011 general election.

“Politically it was very damaging,” he said. “It was sold originally as a merger of levies and PRSI but it turned out to be much higher than people anticipated. It was electorally very damaging. What’s done is done, but the bottom line is decisions had to be taken and two thirds of the fiscal correction was undertaken by Fianna Fáil in the last Government.

“The €6bn budget [for 2011] we introduced was a killer electorally, but it had to be done. The present Government were able to piggy-back on all of that but electorally, yes, the universal social charge did take 30 seats off us.”