Date Released: 01 July 2015
SIPTU has launched a proposal for “A Progressive Alternative to the Universal Social Charge” (USC).
It recommends that a new Social Solidarity Contribution, which would retain all the progressive elements of the existing USC charge as a highly effective and efficient mechanism for raising much-needed revenue from the wealthy and those on top incomes in Irish society, should be introduced.
The revenue generated from this Social Solidarity Contribution, which should at least equal the approximately current €4 billion USC yield, would no longer go into central exchequer funds. Instead, it would be dedicated exclusively to social investment purposes, such as improving healthcare, education and training, childcare and eldercare as well as providing for the housing needs of all the population etc.
The Government would also be required, on an annual basis, to produce a report clearly documenting how the revenues are being used and the progress made in respect of each intervention as a result of the revenue committed.
The Social Solidarity Contribution would be accompanied by a new credit along the lines of the existing PAYE tax credit. This credit should be introduced in Budget 2016 at €775 per person for all incomes up to €100,000 per annum.
It would have the effect of eliminating the charge entirely for income earners below the Living Wage (i.e. €23,250 a year), cutting it by half for all individuals on the standard band threshold (i.e. €33,800) and reducing it considerably for middle income earners.
Everyone on incomes up to €100,000 per annum would each receive exactly the same, i.e. €775, proportionately benefiting those on low to middle incomes most.
Setting out the proposals at a press conference in Buswells Hotel today, SIPTU President, Jack O’Connor reiterated his call that the resources that become available as the economy recovers should be directed over the short to the medium term in a minimum 2:1 ratio in favour of public services.
“At least two-thirds should go towards improving public provision and one-third towards tax reform, targeting low and middle income earners. This 2:1 ratio would mirror the approximate 2:1 ratio of cuts versus tax increases incurred in the €30 billion in ‘fiscal adjustments’ that took place between 2008 and 2014. Thereafter, the focus should be exclusively on improving public provision, with the ultimate objective of developing Northern/Central European levels of public services incrementally over time. Tax reform should be rendered close to cost neutral through the introduction of new taxes on capital and on the wealthy,” he said.
“Almost two thirds of the resources available for tax relief in Budget 2015 were deployed on a small proportion of earners in the middle to upper income brackets. We believe that all of it should be dedicated to the Social Solidarity Contribution credit of €775 per person – giving everyone on incomes of up to €100,000 the same in cash terms.”
In order to keep within the 2:1 ratio, the SIPTU document proposes that additional revenues would be raised by bringing in the 10% rate proposed by the Department of Finance in 2011 on incomes above €100,000. Thus, the introduction of the SSC credit would cost approximately €775 million. If it is not applied to those on incomes between €75,000 and €100,000, it would cost less than €700m. If the credit is not applied on incomes between €60,000 and €75,000, there would be a further ‘saving’ of €92.5m. In total, the saving from applying the credit at €60,000 instead of €100,000 would be €172.8m.
Most of the cost would be offset by new revenue raising measures. These would include reform of Capital Acquisitions Tax and the introduction of a net Wealth Tax (estimated yield of €400 million); reform of tax expenditures, such as those related to property and pensions (estimated yield of €100 million); on-line betting tax (estimated yield of €70 million); and increases in excise on tobacco (estimated yield of €35m). Such measures would be in line with EU rules that ‘excess’ spending growth (i.e. beyond Ireland’s permitted ‘fiscal space’) be resourced through discretionary taxation. This would render the net cost at approximately €150 million.