Varadkar has 'no objection' to USC cut in October's budget

Taoiseach Leo Varadkar said he had 'no objection in principle' to a reduction in the USC, but  negotiations on the overall budget tax package still needed to be hammered out. Picture: Gareth Chaney/Collins

Taoiseach Leo Varadkar has indicated there may be a cut to the Universal Social Charge (USC) in the upcoming budget.

It follows calls made by Fianna Fáil TDs and senators at the party’s pre-budget meeting yesterday, where they urged Finance Minister Michael McGrath to cut the tax.

Speaking to reporters on Wednesday afternoon, Mr Varadkar said he had “no objection in principle” to a reduction in the USC, but  negotiations on the overall budget tax package still needed to be hammered out.

“The tax package is to be decided on and negotiated and obviously Minister for Finance Michael McGrath is making the initial proposals in that regard,” Mr Varadkar said.

“I certainly don’t have any objection in principle to a reduction in the USC to help particularly those lowest-paid workers that maybe don’t pay much income tax.”

Mr Varadkar said the overall tax package needed to add up to €1.1bn, as set out by Mr McGrath and Public Expenditure Minister Paschal Donohoe in the Summer Economic Statement on Tuesday.

The Taoiseach added the programme for government had committed to further indexation of tax bands throughout the lifetime of the coalition.

Investment in infrastructure

However, Environment Minister Eamon Ryan said while everyone is looking for a tax break, he believed that people instead wanted to see further investment in infrastructure.

“I think more than anything, what people in this country want is housing for young people, is infrastructure so that the quality of daily life improves,” Mr Ryan said.

“It’s that shortfall in capital spending I think is one of our biggest challenges and how we address that at a time when you do have to be economically careful is the real balancing act.”

The USC has been earmarked by Fianna Fáil as a means of cutting taxes for lower-income workers in particular, in contrast to Fine Gael’s desire to cut tax for middle-income workers.

Sources have said Mr McGrath is likely to move to reduce the tax in stages rather than abolishing it outright in the upcoming budget.

Previously, Fine Gael TDs and senators had called for the party to be associated with any cut in the USC, with concerns Fianna Fáil may claim credit for the reduction in the unpopular tax.