Government formally drops plans to abolish the much-hated USC
Plans for the abolition of the Universal Social Charge (USC) have been formally dropped by the Government, Finance Minister Paschal Donohoe has said.
He is now probing ways of integrating the much-hated tax into the existing PRSI system as signalled by Leo Varadkar during his leadership campaign.
The move marks a divergence from the Programme for Government, which committed Fine Gael and the Independent Alliance to continuing "to phase out the USC".
Going into last year's General Election, Fine Gael promised to abolish the charge over a five-year period. However, Mr Donohoe said he is "very clear on what the long-term endpoint will be for the USC".
"We have a new Minister for Finance and a new Taoiseach. We are entitled to make our assessments of the landing points for important policy areas such as this.
"We believe the landing point is where we integrate the PRSI code into the USC code," he said.
Mr Donohoe has asked his officials to prepare a paper examining a range of policy options ahead of Budget 2018.
Put to him by Sinn Féin's Pearse Doherty that he has moved away from the Programme for Government, the minister replied: "At this point in the process, I have an open mind as to the elements of the income-tax system that could be employed as policy levers, to achieve the ultimate aim of the Programme for Government with regard to reducing the tax burden faced by low and middle-income earners."
Mr Donohoe said the current system of personal taxation, consisting of income tax, USC and PRSI, is "overly complex".
He added he was committed to "reducing excessive tax rates for middle-income earners and limiting the benefits for high earners".
"My focus on reducing the income-tax burden for those on low and middle incomes should be the guiding principle. This must be achieved in a way that is both affordable and sustainable," he said.
It comes as Taoiseach Mr Varadkar confirmed a delay in bringing forward legislation to give effect to the recommendations of the Joint Committee on the Future Funding of Domestic Water Services.
The legislation will give Irish Water the power to refund almost one million households up to €325 paid during the ill-fated billing regime.