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Finance Minister Paschal Donohoe refuses to say if he will extend reduced USC rate for thousands of under-70s as concession due to run out

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Nearly 1.6 million people have medical cards which allow individuals and families on low income to receive a variety of free medical services. Stock image

Nearly 1.6 million people have medical cards which allow individuals and families on low income to receive a variety of free medical services. Stock image

This concession for medical card holders was extended by Finance Minister Paschal Donohoe in Budget 2022. Phoo: Damien Storan

This concession for medical card holders was extended by Finance Minister Paschal Donohoe in Budget 2022. Phoo: Damien Storan

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Nearly 1.6 million people have medical cards which allow individuals and families on low income to receive a variety of free medical services. Stock image

A rise in the Universal Social Charge (USC) for those aged under 70 and with a medical card is scheduled to take effect from the end of the year.

Currently people who hold a medical card get a reduced rate of USC of 2pc on income over €12,012.

But under legislation the concession is due to run out at the end of this year.

Speaking on RTE radio today Minister for Finance Paschal Donohoe said it is a measure he has extended in the past - but did not commit to doing so again.

“What it refers to is those who are over a certain age, in receipt of a medical card, paying the 2pc USC charge as a opposed to the higher one.

"It is custom and practice that I don't indicate what I'm going to do in advance of budget day, which is later in the year, but this is a matter I've extended in the past and I'll bring a recommendation to Government on it at the right point."

The Department of Finance said the reduced USC rate for medical card holders was never intended to be permanent.

It applies to those under the age of 70 on a medical card with income under €60,000.

If the Government goes ahead with the scheduled removal of the reduced rate of USC for medical card holders it would see these people paying the USC at a rate of 4.5pc.

This is more than double the current rate, at a time when prices are racing ahead at a rate of 8pc.

Nearly a third of the population has a medical card, or 1.6 million people.

A medical card allows individuals and families on low income to receive a variety of medical services free.

If the concession is removed someone earning €30,000 would pay an extra €217 per year as a result of this reduced rate being removed, accountants said.

A Department of Finance spokesperson said the USC was incorporated into the Irish tax system in 2011 to replace the health and income levies.

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Its aim was to widen the tax base and to provide a stable revenue stream to the Exchequer to provide funding for ­public services.

The USC is an individualised tax, meaning that a person’s liability to the tax is determined on the basis of his or her own individual income and personal circumstances.

The USC is applied at a low rate on a wide base, which ensures that it is a stable and sustainable source of revenue for the State.

Currently, individuals with incomes of less than €13,000 are exempt from USC.

And medical card holders with total income of €60,000 or less benefit from reduced rates of USC.

People aged 70 or over whose total income for the year is €60,000 or less also benefit from a reduced rate of USC. But it is not scheduled to go up at the end of the year.

The reduced rates of USC that apply for 2022 are 0.5pc on the first €12,012 of income and 2pc on the balance.

The Department of Finance said taxpayers that get the concession are not subject to the 4.5pc USC rate.

But it added: “The concession for medical card holders was never intended to be a permanent feature of the USC. Instead, it was planned to phase in the full USC charge for medical card holders via a transitional approach.”

This concession for medical card holders has been extended on a number of occasions most recently by Finance Minister Paschal Donohoe in Budget 2022, with an extension of the concession until December 31 this year.

“Any further extension of this concession will be considered in the context of Budget 2023,” the department said.

The pressure rising inflation is putting on household budgets means it would be very difficult politically for Mr Donohoe to push up the USC rate for those on medical cards, sources said.

In last October’s budget documents, it said: “The reduced rate of USC for medical card holders is being extended for a further year, at an estimated cost of €62m in 2022 and €72m per annum thereafter.”



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