Cuts to USC under consideration as part of Budget 2024 tax package, says McGrath

Mr McGrath said that people on low and middle incomes needed to feel the benefits of income tax cuts, as well as those on higher incomes

Michael McGrath confirmed that he is examining cuts to the Universal Social Charge (USC) as part of the budgetary package.

The Finance Minister says that changes to income tax as part of Budget 2024 will be the “largest and most important” part of the overall tax package, with cuts to USC under consideration.

Speaking at the Fianna Fáil think-in in Horse and Jockey, Co Tipperary, Michael McGrath confirmed that he is examining cuts to the Universal Social Charge (USC) as part of the budgetary package, which is due to be unveiled on October 10.

“The income tax package will be the largest and most important part of the overall tax package in the budget and from our point of view, the important thing is that we achieve the fairest and most equitable distribution of the benefit of the tax reductions,” Mr McGrath said.

He said that people on low and middle incomes needed to feel the benefits of income tax cuts, as well as those on higher incomes.

“I’m examining a range of options at the moment across the income tax and USC codes to see what best achieves that,” Mr McGrath added.

Tánaiste Micheál Martin (right) with Minister for Finance Michael McGrath speaking to the media outside the Horse and Jockey Hotel in Thurles, Co. Tipperary, during an Fianna Fail party event. Picture: Niall Carson/PA Wire

The Government has €1.1bn to play with as part of the overall tax package in the budget, as set out in the Summer Economic Statement.

Tánaiste Micheál Martin added that the overall plan for the budget is to help address the cost-of-living crisis, with tax relief only being a part of that.

“Cost of living is the big issue facing people now and we’re going to look at a range of measures to alleviate pressures on people,” Mr Martin said.

“Some of that is through tax relief, we’re looking at all options, including USC, and then also reducing costs in terms of services.” 

 Mr McGrath added that he is also examining changes to tax treatment for small and medium-sized businesses, as part of a plan to make Ireland “a more attractive place for entrepreneurs to start a business”.

“I’m doing a trawl right through the entire taxation code, across all the different heads, to see what opportunities there may be to be more innovative, more creative,” Mr McGrath said.

Mr McGrath said that he is yet to come to a final decision, but that he would be discussing the budget with coalition party leaders “in due course”.

Speaking in Belfast, Taoiseach Leo Varadkar said there is no agreement on changes to the USC.

“We will talk about USC and all the other measures, but nothing is agreed because we haven’t met," he said.

“Ultimately we will have to see how it all fits together.”

Mr Varadkar emphasised the Government’s progress on reducing personal taxes to date adding “somebody earning €40,000 today pays less income tax and USC than they did in 2014,” he said.

“The basic principle that we've agreed in the Programme for Government between all three parties is that we will index tax bands and tax credits to bring about reforms that make sure that people are getting a (net) increase this year,” Mr Varadkar said.

Most people will be getting a pay increase this year from their employers, he claimed, and the Government wanted to make sure they didn't lose half “or even more than half of it” in income tax, USC and PRSI, he said.

“The question is exactly how we do that,” the Taoiseach said.

“There are many ways to skin the cat.”