The hugely unpopular Universal Social Charge (USC) tax is here to stay for the “foreseeable future”, Finance Minister Michael Noonan has warned.
“It raises a lot of money,” he said, speaking this morning about the tax that was originally meant to be temporary.
“I believe that everybody at work should pay something, but I think low-paid people should retain most of what they earn.
“The approach has been consistent by the Government. In the first Budget in 2011, I took 330,000 people out of USC completely at the bottom. This year I took another 80,000 people out of USC, so that’s over 400,000 people that were paying in the past and are no longer paying.
“I reduced the lower rate this year by half-a-percent, and I reduced the second lowest rate by half-a-percent also so that people now on the minimum wage are paying at the lowest rate and it has been considerably reduced.”
The tax raises €4.5bn every year for the Exchequer.
“It is going to be part of the personal taxation code,” said Mr Noonan.
“A lot of people at the bottom don’t like it because you don’t pay income tax until you get to an income of €16,500, but you pay USC at €12,000 now after the Budget. So people wouldn’t pay personal tax at all if it wasn’t for USC.”
Meanwhile, at the top end there are objections as well.
“First of all, the rate is in addition to income tax,” Mr Noonan told Pat Kenny on Newstalk.
“But as well as that the various tax breaks that people can use for tax planning are only available for income tax, they are not available for USC, so there is a net advantage to the Exchequer.”
Mr Noonan said that from an exchequer point of view it is very efficient.
His comments came as Taoiseach Enda Kenny said high taxes were an obstacle to job-creation, and he pledged to continue plans to cut tax.
Speaking at a lunch given by the American Chamber of Commerce in Dublin, Mr Kenny (inset) said the rate on earnings below €70,000 was already due to reduce to 51pc from January. He promised to continue this in the next Budget and said the rate would be reduced further if Fine Gael was re-elected.
Mr Kenny also revealed that he had written to Barack Obama to welcome his reforms to help undocumented migrants in the US.