Friday 28 October 2016

USC is no temporary little arrangement for taxpayers

Published 25/08/2014 | 02:30

The impact took a while to be understood by everyone.

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Coming in at the start of the year meant some were initially uncertain if their lighter pay packet was related to the holiday period.

But once the realisation kicked in the dent in take-home pay caused by the USC was permanent, it sent a shiver down the spine of most workers in early 2011.

Of course, you didn't even have to be a PAYE worker or self-employed to be hit by the Universal Social Charge. USC is liable if gross income is more than €10,036 per year.

Occupational pensions and pension contributions are subject to the USC. So too, a range of other payments normally exempt from the income tax net.

Once your income is over this limit, you pay the USC on all of your income.

Once you're in the net, there's no escape.

The 'emergency' tax replaced both the income levy and the health levy. However, it's no temporary little arrangement, to borrow a phrase in a different context from the late Albert Reynolds.

The USC brings in €4bn a year for an Exchequer, which has been stripped of boom-time taxes.

The Government will talk about broadening the tax base through the property tax and water charges, but the USC has really expanded the girth of the State coffers by squeezing the taxpayer.

Although the actual income tax rates have barely changed from the days of the Celtic Tiger, the introduction of the USC ensures anyone earning more than €32,800 pays a marginal tax of 52pc.

From every €1 earned above €32,800, only 48c makes it to the back pocket.

The experience of the 1980s, when workers were crucified by the taxman, is being repeated all over.

The Coalition is planning to deliver some relief to struggling taxpayers in the forthcoming Budget. The focus is on the middle-income earner and the method is around the higher rate income tax thresholds.

Expectations have been raised of something being given back after six years of penury. The promise is it won't come in one blast but will be over a number of Budgets.

The exact long-term plan for the USC though is unclear. Apart from the add-on taxes aimed at householders, there has been no fundamental reform of the basic taxation structures.

Taxpayers deserve to be told if the USC is here to stay and what's the purpose. If it's a tax on all forms of income, then define it as such. Tax transparency is required.

Irish Independent

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