Irish Finance Minister Michael Noonan has said that the Government is no longer committed to its election pledge of a one percent cut to the main Universal Social Charge (USC) rate.
Noonan told reporters that the Government is “no longer committed to the detail” of the Fine Gael manifesto, pointing out that “obviously, the government wasn’t re-elected in its older form.”
He added that “the Programme for Government is now the new document from [which] we are working,” and that the Budget will be shaped in consultation with opposition party Fianna Fail.
The Fine Gael manifesto pledged a one percent cut to the main 5.5 percent USC rate in Budget 2017 and the complete abolition of the USC by 2021. The USC is levied in addition to personal income tax and was introduced in response to the fiscal challenges Ireland faced after the financial crisis.
A Fine Gael-Labour grouping failed to win a majority of seats in February’s general election. Following months of discussions with the opposition parties, Fine Gael was instead able to form a minority government in May. The “Programme for a Partnership Government” was the result of these negotiations. It committed the Government to phasing out the USC over the life of the parliament, “on a fair basis with an emphasis on low- and middle-income earners.”
The Government’s Summer Economic Statement estimated that there is just under EUR1bn (USD1.1bn) available for additional spending increases and tax cuts in 2017. When this document was published in June, Noonan said that there will be “at least a 2:1 split between public spending and tax reductions,” with a particular focus on phasing out the USC.
According to the Irish Examiner, Noonan has now said that “there isn’t an awful lot for tax relief, so while we will fulfil our commitments it will be by way of making a strong start which we will continue over three budgets.”
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