| 16.4°C Dublin

Varadkar wants unpopular USC to be reformed

Transport Minister Leo Varadkar is calling for the highly unpopular Universal Social Charge to be reformed.

The Fine Gael TD favours targeting income tax, rather than the USC directly, as the way to reduce the tax burden on workers for their contribution during the Troika years.

The minister wants to see the threshold at which workers hit the higher rate of tax raised, so people can increase their take-home pay.

At the moment middle-income earners hit the higher rate of income tax on wages of €32,800, meaning that the combination of income tax at 41pc, the USC at 7pc and PRSI of 4pc means only 48c from every euro earned above that level goes into the worker's pocket.

"As regards the USC it would make sense to combine it with PRSI into a single contribution," said Mr Varadker.


The USC is seen by many as a recession tax introduced by the then Fianna Fail-led government due to the economic downturn, making it even more attractive to the coalition to cut.

Mr Varadker's call comes after Junior Finance Minister Brian Hayes insisted the USC must be reduced.

Mr Hayes described the tax as "synonymous with the crash" and said he believed that cutting it would be a clear message of thanks to workers.

"If there is one tax that is synonymous with the crash, it is USC," said Mr Hayes.

"I think people hate it and I can understand why.

"If we could see some reform of that, I think that would be good," he added.

And it's not only Fine Gael that are mooting changes to the hated USC, Labour is also looking at reductions in the tax.

"It's one of the options we're looking at. But obviously it's too early for decisions at this stage," a senior party source said.

A cut in the rate would benefit everyone who pays the charge, but an adjustment to the bands would also effectively cut what many people pay.


The USC is currently calculated at 7pc on incomes above €16,016.

Possible tax cuts are being viewed by the Coalition as an economic stimulus by encouraging growth and additional spending in the economy.

The Government is looking at different possibilities to help middle-income families hit by the higher tax rates which see 52c of each euro they earn going on tax.

These choices include reducing the higher rate of tax, currently set at 42pc; raising the band where workers hit the higher tax rate, currently at €32,800 and moving around the bands for the USC.