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Why hasn't the government merged the PRSI and the USC yet? Minister says it's 'complex'

Sinn Féin says the lack of follow-through in the amalgamation is just another broken promise by Fine Gael.

Image: Shutterstock/Honcha

THE LACK OF progress in merging the Universal Social Charge (USC) with the Pay Related Social Insurance (PRSI) is just another “broken promise” by Fine Gael, according to Sinn Féin’s Pearse Doherty. 

His comments come as Finance Minister Paschal Donohoe states that merging the two is “complex” and “will take time to consider”.

The plans to merge USC and PRSI was floated by Fine Gael after the party’s promise to abolish the USC completely.

At the moment, the USC is paid by people who earn over €13,000 per annum. 

The much-hated tax was brought in by the late Finance Minister Brian Lenihan in 2011. The public were assured at the height of the economic crisis that it would only be a temporary measure, yet we are still paying it. 

Donohoe’s comments hint that there will be no change to the status quo in the upcoming Budget in October. 

In a recent parliamentary answer to Doherty, the minister said an inter-departmental working group was established in February 2018 to examine and report on options for the amalgamation of USC and PRSI over the medium-term. 

He said the working group completed its work and submitted a report to him in late 2018.

‘Serious challenges’

“The report addresses a range of options for how amalgamation could be achieved, but also has identified a number of serious challenges that will need to be further considered.

“The amalgamation relates to State funds with an estimated combined value of over €7 billion per annum, collected from over 2.5 million income earners. The issue is therefore a complex one that will take time to consider.”

The minister said follow-on decisions will be taken in due course, adding that he will make his views known public “at the appropriate time”.

Doherty said his party never believed Fine Gael would abolish the USC.

While he said his party recognises that workers’ income needs to be protected, “the solution does not lie in election promises that cannot be delivered” he told TheJournal.ie.

We all remember Fine Gael minister holding placards that said ‘Abolish the USC’. At the time and still this year, the USC brings in €3.9bn. 
Imagine we had a €3.9bn hole in the Budget facing into Brexit and all the other uncertainties we are familiar with from the Fiscal Council and other reports.

He said merging PRSI and USC was “Leo Varadkar’s way of escaping from the promise to abolish the USC”.

“Now we learn that this plan is to be quietly dropped too. His latest plan to increase the threshold to €50,000 is equally undeliverable and costly and Fine Gael are already side-lining the issue,” he said.

Top rate of tax

The apparent stagnation of the plan to merge the two taxes come as Taoiseach Leo Varadkar said this week that plans to raise the top rate of tax to €50,000 may also have to wait.

At the Fine Gael Ard Fheis last year, Varadkar committed to increasing the point at which people pay the top rate of tax to €50,000 for a single person and €100,000 for a double-income couple. 

The Taoiseach proposed to raise the threshold by €2,500 each year over the next five years from its current level of €35,300, in the case of a single worker.

In last year’s budget, the government had increased the entry rate by €750. 

But this week, Varadkar told the Dáil that a promised tax cut to come in over five years may not begin in the upcoming budget. 

The finance minister said the government “is committed to measures that positively benefit workers while also keeping the tax base broad”. 

“I am determined to balance the priorities of ensuring that our personal taxation system remains progressive, competitive but also resilient in the future,” said Donohoe. 

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