Enda Kenny reiterates his promise to phase out USC

Taoiseach Enda Kenny has reiterated his promise to phase out the controversial Universal Social Charge, despite differing comments from Finance Minister Michael Noonan.

Mr Kenny said abolishing the USC on a phased basis is part of party’s programme for government but stopped short of providing information on any planned levies for high earners. Last week, Mr Noonan said a “clawback tax” for high earners would be introduced if USC is abolished.

Mr Noonan said it is not the Government’s policy to cut USC for all earners, adding a new charge for the highest earners would be established to replace it.

Michael Noonan

But yesterday Mr Kenny said scrapping USC is still a central part of Fine Gael policy. Speaking at the publication of the Action Plan for Jobs 2016 in Oberstown, Naas, Co Kildare he said: “The phasing out of USC is part of an overall taxation reform which will be spelled out in the Fine Gael programme for government. Clearly it is our position to phase out Universal Social Charge.”

Mr Kenny added the government has already reduced the level of USC being paid at the two lower levels.

“We have now taken 500,000 people out of a requirement to pay USC. The benefits have been capped at €70,000, which means they’re focused directly on lower, middle-income earners,” he said. “I said if re-elected we would reduce USC by a further 1% in 2017, which will cost €250 million and we will leave sufficient fiscal space to do that. So we’re clear on this in terms of phasing out of USC and capping its benefits and having it as part of an overall taxation reform.”

Jobs Minister Richard Bruton said the gradual phasing out of USC “is an important principle”. He said: “USC is not like income tax, it doesn’t make capital allowances so it doesn’t provide for the sort of reinvestment that ought to be in a tax structure. I thinkMichael Noonan has made it clear everyone will benefit from the changes he will make.”

Richard Bruton

Mr Bruton said the greatest benefit from the changes would be to those on lower to middle incomes. “I think that’s in accordance with all good principles of an income tax code.”

However, Renua Ireland candidate Paul Bradford claimed the promises around USC are simply an “election gimmick”. He warned “election fever may yet have serious consequences for the fiscal stability of the country”.

Mr Bradford said abolishing USC would create a €4.5 billion funding gap.

‘’Renua wants to abolish USC but only as part of a structured recalibration of the nation’s finances,” he said. “The Taoiseach, by contrast, appears to want to abolish it as part of an election gimmick.”

But Mr Kenny said Fine Gael‘s election manifesto will be independently costed, adding a clear path on employment has been set out by the government up to 2020 which would include bringing 70,000 young Irish people back home to work.