Wednesday 7 December 2016

USC to be axed by 2020 as Coalition pledges to reward every worker

Niall O'Connor and Fionnán Sheahan

Published 12/10/2015 | 02:30

Dr James Reilly
Dr James Reilly

The deeply unpopular Universal Social Charge (USC) will be axed in 2020 as the Coalition pledges to boost the pay packets of every single worker in the State over the next five years.

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'The Big Bang' USC cut in Tuesday's Budget will be accompanied by a €200m childcare package and a series of sweeteners for the elderly, farmers and the self-employed.

Tánaiste Joan Burton is expected to secure a beefed-up Christmas bonus of at least €138 for a single person and €264 per couple, while Justice Minister Frances Fitzgerald has secured funding for special surveillance operations aimed at tackling the rural crime epidemic.

But significant cuts to USC, which will be followed by the abolition of the tax in 2020, will form the centrepiece of the Coalition's final Budget before the General Election next spring.

Government sources last night said changes to the individual USC bands and thresholds would see every worker in the State pay less income tax in 2016.

The point at which workers begin paying USC will be increased by €1,000 in a move that will benefit thousands of low-income workers.

Income-tax rates and the point at which workers enter the tax bracket will remain the same.

But sources say the overall tax plan will see the marginal rate of tax reduced to 49.5pc for the first time.

As well as assisting those at home, the Coalition will claim that its decision to axe USC will entice 70,000 emigrants home over the next five years.

It will be coupled with a pledge to reduce unemployment to 6pc by 2020. "By cutting taxes on work and encouraging entrepreneurship, phased abolition of the USC will support achievement of our target of replacing every job lost by Fianna Fáil by 2018, getting the unemployment rate down to 6pc by 2020, and bringing home 70,000 emigrants during the life of the next Dáil," said a senior Government source.

"It will keep Ireland competitive for mobile investment and skills, particularly as other countries seek to emulate our low rate of corporation tax.

"It will be accompanied by other tax measures to cap the benefits for the highest paid and to keep the tax base broad."

Meanwhile, another key plank of tomorrow's Budget will be the Coalition's €200m childcare strategy.

Government sources last night said Mr Noonan will pitch his Budget as one aimed at the country's "next generation".

The delivery of free pre-school for children when they reach the age of three has been secured by Children's Minister James Reilly. Parents will be given three separate windows during the school calendar to enter into the scheme.

Two weeks' paid leave for fathers will be rolled out from September, while a €5 child benefit increase will also be announced as part of the Coalition's childcare strategy.

The major investment in childcare will be coupled with a cut to the pupil-teacher ratio from 28 teachers per pupil to 27.

The Coalition's final Budget will see tax credits of around €350 being extended to the self-employed and also to farmers. Tánaiste Joan Burton is expected to push for a larger Christmas bonus than previously signalled. Sources say the Labour Party leader wants a 60pc restoration of the grant which would see €138 paid to a single person and €264 paid per elderly couple ahead of Christmas.

Meanwhile, Environment Minister Alan Kelly has secured agreement for his controversial scheme to deliver grants to developers who sell homes at below the market rate.

Irish Independent

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