Pearse Doherty Source: Sam Boal

SCRAPPING THE UNIVERSAL Social Charge (USC) could lead to an increase in the Local Property Tax (LPT) of 600%, new documents released under Freedom of Information legislation show.

The Department of Finance document, which can be viewed here, released to Sinn Féin’s Pearse Doherty, outline proposed tax measures to make up for the shortfall in takings that would result from abolishing the much-maligned charge.

The main document released is a briefing note prepared for an incoming government prior to the general election last February.

That document warns that the abolishment of the USC in its entirety would be a “regressive” move, given that the USC itself is a “progressive” tax, and that other alternatives would have to be considered.

Four such alternatives are posited in the document:

Increased take on property and capital taxes, including increasing Local Property Tax by a factor of 6, and increasing stamp duty on shares

An increase in indirect taxes including VAT and excise on petrol and diesel (by €0.18 per litre), and beer (by €1.50 per pint)

Increasing income tax from 20% to 25% and 40% to 45%

Increasing corporation tax from 12.5% to 19.75%

None of the four options could be considered palatable, with each likely to spark voter outrage.

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While corporation tax may ostensibly have the least impact, at least at face value, on the average taxpayer, Ireland’s low rate of such tax has been instrumental in attracting multinational companies to base their operations here.

Shocking

Speaking on RTÉ’s Morning Ireland, Doherty described the alternatives available as “shocking”.

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Prior to February’s election Sinn Féin had possibly the most moderate policy regarding the doing-away-with of the USC, with a suggestion that anyone earning less than €19,000 per annum should be exempt. By contrast Fine Gael suggested that the charge be gradually phased out entirely but with a clawback for high income measures.

Currently the threshold for exemption from the USC is €13,000.

“It’s clear from these documents that the Department of Finance has been doing its job in warning the Government against completely abolishing USC,” said Doherty.

Removing the charge entirely will leave the country at risk in terms of its tax strategy.

The four options available are shocking – no-one will want to pay an increase of 600% in LPT, and that is just one of five avenues that would have to be taken.

Doherty suggested that his own party’s election promise to make workers on salaries of under €19,500 exempt from USC has been “vindicated” by the released documents.

“There’s no doubt about it but that this vindicates our position,” he said.

Our strategy for USC would cost less than €100 million. Doing away with USC entirely would see a huge amount of revenue lost to the state.

Stephen Kinsella (Department of Finance economist) says that the shortfall can be made up but to do so would be to rely on corporation tax strategy which is hugely risky.

Doherty said that the Irish corporation tax take “is already at the same levels of stamp duty, and such tax is far more volatile in my opinion”.