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Revealed: Department of Finance warns that abolishing USC ‘would provide the greatest benefits to those on highest income’

25 August, 2016 - by Pearse Doherty TD

Sinn Féin Finance spokesperson Pearse Doherty TD has said information he has received from the Department of Finance under Freedom of Information shows that the plans by Fine Gael and Fianna Fáil to phase out the Universal Social Charge have been slated by Department officials as “regressive”, “base narrowing” and would have “limited benefits” because so many would gain nothing.

In the correspondence provided to Deputy Doherty, a range of alternative revenue sources are outlined including a 600% increase in property tax, a 5% increase in both income tax bands, increasing Corporation Tax to 19.5%, and a 5% VAT rate on children shoes and other previously 0% rated items.

Speaking today, Deputy Doherty said;

“This is the information that Fine Gael and Fianna Fáil were not telling us about during the recent general election which was fought on this issue. Department of Finance official briefings from February show very clearly that the move to abolish or phase out USC would be regressive, narrow the tax base and disproportionately favour the better off. An example is given of how  a minimum wage earner would gain €316, while a high earner with an income of €150,000 would gain over €9,500.

“Sinn Féin argued strongly that the USC could not be phased out completely as it would leave a massive €4 billion gap in public finances. Today, we learn that the Department presented to the Minister several options to replace this income. These include a 600% increase in Local Property Tax, increasing Corporation Tax to 19.5%, and a 5% VAT rate on children shoes and other previously 0% rated items and a 5% income tax increase to both rates. In each case these options were only part of the proposal. 

“Sinn Fein argue that those on the lowest incomes should be protected from USC while investment is needed to fix our health and housing crises. The scale of investment that will not be made because of a commitment to carry out what the Department of Finance has called ‘regressive’ and favouring the better off is now clear from the shocking options that were presented.

“The correspondence provided to me by the Department of Finance proves Sinn Féin’s case. It is simply not realistic that the USC could be phased out completely without major tax increases or a complete neglect of investment.

“Finance Minister Michael Noonan must face up to that fact now as we enter the most crucial phase of budget planning. This budget should be about investment in public services such as health, housing and education while protecting the lowest earners in society from the USC. Any party now proposing the phasing out or abolition of the USC must explain whether it will neglect public services or let the public know which one of the hugely hurtful tax options it will implement to replace the lost revenue.

“Minister Noonan should also outline why this information was not included in the brief he published after the government was appointed.” ENDS

Note: Please see attached the FOI document in question

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