Axing USC - Rash pledge was a blatant political ploy

AS the old saying goes, there is no such thing as a free lunch. That truism certainly applies to Fine Gael’s much-vaunted plan to abolish the iniquitous universal social charge (USC) by 2020. 

A swingeing tax that hurt everyone, it was introduced in 2011 as a means of raising badly needed revenue. USC literally does what it says on the tin by taxing the gross income of anyone earning more than €13,000 a year.

When first introduced, the income ceiling was pegged as low as €4,000 a year which meant the poor were hardest hit.

However, even by the harsh standards of the increasingly unpopular Fine Gael/Labour coalition of the day, the tax was acknowledged to be far too regressive and the income ceiling has since been raised gradually, albeit reluctantly.

Eventually, despite enabling the Government to put its hand into taxpayers’ pockets and take out a whopping €4 billion every year for the exchequer coffers, a somewhat rash promise was given by Finance Minister Michael Noonan to scrap it in a blatant political ploy.

Thanks to Sinn Féin’s finance spokesman, Pearse Doherty, who has obtained a briefing document from the department, we now know what getting rid of the USC will cost.

In what has all the appearance of a carefully managed pre-emptive strike, the department has given a cost list of alternative ways of raising revenue if the plan to abolish USC goes ahead, even on a phased basis.

Apparently, the repercussions on taxpayers would be so catastrophic that the Local Property Tax would go through the roof by a staggering 600%.

Other options would be to increase indirect taxes, effectively putting up the cost of petrol and diesel by 18c per litre, while a pint of beer would be up by €1.50.

Alternatively, income tax could be raised by 5%.

Inevitably, if any of these options happened, the angry protests seen over water charges which brought hundreds of thousands of people onto the streets, thus forcing the Government to suspend the charges, would be tame by comparison.

According to the department a “600% increase to the property tax is only given as an example to illustrate what could happen”.

The examples provided show the magnitude of the changes that could be made to recoup taxes foregone as the USC is reduced further but some of the examples while arithmetically sound and serve their purpose as illustrative examples, do not take account of other Programme for a Partnership Government commitments such as the intention to retain the “highly successful 9% Vat rate on tourism related services”.

This adds weight to the view that the department is embarking on a cynical PR exercise deigned to scare people out of their wits so that Minister Noonan can justify yet another U-turn, this time on scrapping USC.

It is not an exaggeration to say the ‘illustrative examples’ given by the department in its exploratory briefing document are inflammatory.

Despite Brexit, it appears no consideration has been given to the possibility of raising revenue through corporation tax by, for instance, making some giant conglomerates pay 12.5% instead of the current rate of 2%.

That would raise billions.


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