Noonan plans ‘clawback’ tax for high earners if USC abolished

Minister for Finance Michael Noonan has rejected claims that the Government is engaged in a "row-back" on its plan to abolish the universal social charge (USC) for all workers.

Mr Noonan insisted he would “abolish USC completely” but “it will be replaced by some form of clawback for high earners”, after Sinn Féin jobs spokesman Peadar Tóibín said the Taoiseach would get a tax cut of just over €12,000 a year if the charge was abolished.

Fine Gael had pledged to eliminate the charge for all workers on the grounds that it was intended as an emergency measure. Mr Noonan insisted during Dáil finance questions that the charge would be abolished over five years at a cost to the exchequer of €3.5 billion but said there would be a clawback for high earners.

Mr Tóibín said the Taoiseach would have a tax cut of €12,340 on his wage, and someone on €100,000 would have a tax reduction of €5,500 but someone on the median wage would receive €860, “and we must remember that half the population earn €28,000 or less”.

He said that given the major disparity in tax cuts, “is it not the case that the abolition of the USC is an unfair way to redistribute some of the benefits in the State”.

Mr Noonan said those arguments “are based on the assumption that it is the Government’s intention, if re-elected, to abolish USC completely for all income. That is not the position.” He said they had capped the benefits at €70,000 and there would be a clawback on high earners.

Mr Tóibín said it sounded like a row-back, especially when there was no detail about the clawback and because the Taoiseach was advocating a €4 billion USC return to the State over the next five years. The Minister said he had been absolutely consistent on the charge, with no extravagant benefits for high earners.