Taxation: USC to be cut ‘on fair basis’ for lower earners
Published 04/05/2016 | 02:30
Low and middle-income workers are set to see a reduction in the Universal Social Charge (USC) in the minority government deal reached between Fine Gael and Fianna Fáil.
The agreement sees Fine Gael forced to rein in its pre-election pledge to abolish the charge for all earners over the next five years.
The USC was brought in as an emergency measure by the Fianna Fáil-Green Party coalition at the start of 2011 and raises about €4bn a year.
The document states that the next government will: "Introduce reductions in the Universal Social Charge (USC) on a fair basis with an emphasis on low and middle income earners."
This is closer to Fianna Fáil's manifesto promise to eliminate USC for workers on the first €80,000 of earnings over five years, rather than Fine Gael's proposal to scrap it outright.
During the election, Fianna Fáil finance spokesman Michael McGrath had argued that his party's proposal was "fair, affordable and deliverable" and claimed it was in contrast to Fine Gael's plan. The minority government document also sees Fianna Fáil agree to facilitate Budgets "consistent with the agreed policy principles in this document".
It includes a version of Mr Noonan's pre-election plan to establish a 'Rainy Day' fund - although Fianna Fáil also had proposals for such a fund. The document pledges to set aside cash for the fund but does not specify how much. The Government will seek to introduce a PRSI scheme for the self-employed "and provide a supportive tax regime for entrepreneurs and the self-employed".
The parties agree to maintain the country's commitment to "meeting in full the domestic and EU fiscal rules as enshrined in law" and to keep Ireland's corporation tax rate.
The documents pledges to "maintain Ireland's 12.5pc corporation tax, and engage constructively with any measures to work towards international tax reform while critically analysing proposals that may not be in Ireland's long term interests."
It also recognises the full implementation of the Lansdowne Road Agreement.
A Public Service Pay Commission is to be established to examine pay levels across the public service, including entry levels of pay. The deal also states that the Workplace Relations Commission and the Labour Court are the proper forum for State intervention in industrial relation disputes.