Fine Gael will introduce a new income levy on workers earning more than €100,000 after it abolishes the Universal Social Charge, the Irish Independent can reveal.

The party plans to fulfil its commitment to get rid of the charge which Taoiseach Enda Kenny has described as "hated", but then intends to find a "clawback" mechanism that will increase the marginal tax rate for higher earners.

Finance Minister Michael Noonan confirmed the plan in the Dáil yesterday without giving any detail.

However, it is understood the Fine Gael manifesto will outline an explicit method for workers earning more than €100,000 to make a larger "contribution".

While details are still being finalised, it is likely that these workers will pay an increased rate of pay-related social insurance (PRSI) or a levy.

It will be considerably less than the 8pc USC rate currently paid by workers in the bracket.

To date, Mr Kenny has consistently boasted of his party's plan to abolish USC, but has not mentioned any wealth tax.

"Fine Gael is committed to being able to say that USC will be abolished, but if you get to very high earners they would make a massive benefit unless something new is done. There will be a tapering effect," said a source.

Clawback

Speaking in the Dáil, Mr Noonan said it was wrong to assume Fine Gael was "to abolish USC completely for all levels of income".

"That is not the position," he said. "It will be replaced by some form of clawback for high-earning people."

The minister said the details of the clawback would be provided in the early days or possibly even before the election campaign kicks off.

"Effectively, we are talking about an election commitment whereby, if we are re-elected, we will handle the USC over the next five years," he said.

The Government introduced USC reductions in the last two Budgets, but capped the benefit at €70,000. Sinn Féin's Peadar Tóibin claimed Fine Gael was performing "a row-back".

Meanwhile, the Coalition has rejected a report by the European Commission that claims Budget 2016 was too political.

The commission said the "recovery is threatened by recent decisions which affect the path to a sustainable budgetary posi- tion" and suggests the forthcoming General Election may have influenced the Budget.

However, Jobs Minister Richard Bruton dismissed the report, saying every Budget brought in by this Government "has comfortably beaten the targets set by Europe".

"Our every spending increase is very prudently within what is affordable by the economy," he said.

Irish Independent