Wednesday 11 December 2019

Time to replace the USC with a fairer tax

We need a fairer tax system
We need a fairer tax system


THE elephant in the room during the water charge protests was the Universal Social Charge.

This poorly understood tax takes far more out of our pockets than water charges ever will, but appears to have slipped under the radar because it was introduced at a time when voters were fearful of complete economic collapse.

It was indeed a dangerous moment in our history - as we were reminded yesterday with the news that the Central Bank was wondering aloud how best to deploy the Army to protect empty banks.

That moment of maximum danger has now passed and it looks like a good time to revisit the USC and invent a tax that is not quite as blunt an instrument.

The USC has some advantages. It forces the very rich and the poor to contribute something to the upkeep of the State. That is welcome, because in the past both groups contributed almost nothing to the Exchequer's coffers.

While this is no bad thing, the reality is that the USC has hit the poor more than the rich. It goes a long way to explaining why the Budgets introduced by the Coalition have widened the gap between rich and poor while previous Budgets during our financial emergency narrowed the gap.

Taxes which benefit the wealthy at the expense of the hard-working poor will inevitably chip away at social cohesion. Recent months have seen that cohesion fracture, with riots in some areas and rising support for political parties which offer facile answers to the complex problems that still face this country.

How could it be otherwise? When a party such as Labour favours the well-off with taxes such as the USC, voters will inevitably look to the margins of constitutional politics or even beyond.

The alternative to this chaos is an overhaul of the taxation system to increase fairness and reduce inequality.

While this is desirable we should not lose sight of the fact that international studies consistently show that our tax system is amongst the most effective in the world. Companies and individuals spend little time with red tape while evasion among PAYE workers is rare. We need a fairer system, but we should not throw out the baby with the bath water.

Irish Independent

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