Phasing out the USC could cost the Exchequer close to €2 billion by 2020
The Department of Finance costings also include an analysis on cutting capital gains tax for startups.
THE GOVERNMENT HAS published plans for the potential phasing out of the Universal Social Charge over the next five years.
The Income Tax Reform Plan, released yesterday by the Department of Finance, provides an overview of the personal tax system – addressing a commitment made in the programme for government – and looks at how taxation can be made both more competitive and fair.
Looking at USC, three possible options for phasing it out over the next three budgets are included.
These are:
- Reducing rates, which would keep the same bands in place and mean everyone earning over €13,000 a year would still pay the charge, but at a reduced rate;
- Increasing band ceilings, which would provide the quickest relief for low earners;
- Increasing the exemption threshold, which would see around two-thirds of people taken out of USC over five years.
Implementing these measures would cost between €1.78 billion and €1.86 billion between now and 2020. The USC is expected to raise €4 billion in Exchequer receipts this year.
The controversial charge was at the centre of the last government’s plans during Budget 2016, with a 1.5% reduction in the top rate bringing the highest band down to 5.5%.
It was announced back in May that the government would be producing today’s medium-term document, however it is unusual for such specific costings and tax projections to be given in advance of the Budget.
Capital gains
The departmental document also provides more details on a pledge, included in the programme for government, to cut the rate of capital gains tax for startups to 10% from 2017.
The reduced rate, which would bring the Irish tax regime for entrepreneurs closer into line with the UK’s system, is due to apply for shares held for at least five years and be subject to a €10 million cap on gains.
The government projections show the move would cost €65 million for a full year. It follows a trimming of the capital gains tax rate to 20% in last year’s budget, although the measure came with a cap of just €1 million.
Written by Michael Sheils McNamee and posted on TheJournal.ie. Additional reporting Peter Bodkin.
