# Calls for cuts in USC



## Brendan Burgess (26 Aug 2014)

There have been calls recently for the USC to be reduced.  For example, the Irish Tax Institute called for it today.

One of the big problems in Ireland is that the rates of tax on the lower paid are so much lower than in other countries. The burden of taxes in Ireland falls mainly on the higher paid. The USC helps to distribute the burden more fairly by making sure almost everyone pays something. 

And wouldn't cutting/abolishing employees prsi be fairer than cutting the USC?  This is a confusing tax which seems to apply to some income and some tax payers, and not to others e.g. some public servants.


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## Protocol (26 Aug 2014)

USC is a broad tax, yes, and was designed to be.

USC has few exemptions, allowances, etc., so as to collect revenue from more people.


Cutting PRSI will not happen, for two reasons:


PRSI is already very low by intl standards, e.g. 11-12% in UK, 20% in Germany
The SI fund is and will be under pressure in the future, so it needs more funds, not less

Note that public servants hired since April 1995 pay full PRSI like any other worker.


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## Gerry Canning (26 Aug 2014)

Calls to cut USC; 

Methinks we have learned little from recession and are forgetting a lot.!

We still as a nation are told we spend  more than we earn , so what are these geniuses thinking in even suggesting cuts in one place without proposing where taxes are to be added in another to even things up?

With public servants on full PRSI , if that means they are also paying into contributory pension then they will be entitled to get Contributory Old age pension + entitlement to work pension. 
So the SI fund will be under more future pressure! (am I wrong?)

The biggest Political issue is that an election has to be won in a couple of years, so to Hell with proper provisioning ! and woe betide any Politician who has an attention span beyond 2 years.

(It was always thus!)


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## jpd (26 Aug 2014)

Surely income tax, PRSI and USC are all just taxes on income - OK PRSI has an element of Social Security built-in - they have now come to the point where our tax system is becoming increasingly complicated and difficult to understand. 

No doubt, this gives employment to a range of tax advisers, etc and whilst not approaching the US tax system in complexity, it would be a lot easier and simpler to have a unified system with 2 or 3 rates and no exemptions


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## monagt (26 Aug 2014)

> it would be a lot easier and simpler to have a unified system with 2 or 3 rates and no exemptions


+1

Is there a simple comparison of the taxes imposed and the tax structures in place across the EU?


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## T McGibney (26 Aug 2014)

jpd said:


> Surely income tax, PRSI and USC are all just taxes on income - OK PRSI has an element of Social Security built-in - they have now come to the point where our tax system is becoming increasingly complicated and difficult to understand.


+1



jpd said:


> No doubt, this gives employment to a range of tax advisers



I don't think it does. All tax calculations are automated nowadays. The main driver of employment for tax advisors (apart from economic prosperity in general) is our flat tax 12.5% Corporation Tax rate, the success of which we seem stubbornly reluctant to repeat in the area of Income Tax, for some unknown reason.


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## Steven Barrett (26 Aug 2014)

jpd said:


> Surely income tax, PRSI and USC are all just taxes on income - OK PRSI has an element of Social Security built-in - they have now come to the point where our tax system is becoming increasingly complicated and difficult to understand.
> 
> No doubt, this gives employment to a range of tax advisers, etc and whilst not approaching the US tax system in complexity, it would be a lot easier and simpler to have a unified system with 2 or 3 rates and no exemptions



Good post. 

But we know that introducing a simplified tax system would take at least a decade to devise and implement, with a hullabaloo about how some woman in Carlow gets caught out on one rate and a fella in Sligo gets caught out on another.


Steven
www.bluewaterfp.ie


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## T McGibney (26 Aug 2014)

SBarrett said:


> Good post.
> 
> But we know that introducing a simplified tax system would take at least a decade to devise and implement, with a hullabaloo about how some woman in Carlow gets caught out on one rate and a fella in Sligo gets caught out on another.
> 
> ...



No it wouldn't.  

13 years ago, Charlie McCreevy turned the income tax system upside down. Within 12 months, we dumped our currency for the Euro. And nobody died.

Just do it.


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## Steven Barrett (26 Aug 2014)

Thanks for correcting me 

Do you think this government would do something like that?


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## Protocol (26 Aug 2014)

monagt said:


> +1
> 
> Is there a simple comparison of the taxes imposed and the tax structures in place across the EU?




Try this:

http://www.oecd.org/tax/tax-policy/tax-database.htm


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## Protocol (26 Aug 2014)

jpd said:


> Surely income tax, PRSI and USC are all just taxes on income - OK PRSI has an element of Social Security built-in - they have now come to the point where our tax system is becoming increasingly complicated and difficult to understand.
> 
> No doubt, this gives employment to a range of tax advisers, etc and whilst not approaching the US tax system in complexity, it would be a lot easier and simpler to have a unified system with 2 or 3 rates and no exemptions



Yes, income tax and USC should be merged.

Three or four rates would make the system more smooth.

I suggest 20%, 30%, 40% and 50%.


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## Protocol (26 Aug 2014)

Gerry Canning said:


> With public servants on full PRSI , if that means they are also paying into contributory pension then they will be entitled to get Contributory Old age pension + entitlement to work pension.
> So the SI fund will be under more future pressure! (am I wrong?)




Note that PS paying full PRSI will not get a penny more pension than their colleagues who do not pay full PRSI.

Their combined State pension + work pension should equal the work pension that the pre-95 PS gets.


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## jdwex (26 Aug 2014)

Brendan Burgess said:


> There have been calls recently for the USC to be reduced.  For example, the Irish Tax Institute called for it today.
> 
> One of the big problems in Ireland is that the rates of tax on the lower paid are so much lower than in other countries. The burden of taxes in Ireland falls mainly on the higher paid. *The USC helps to distribute the burden more fairly by making sure almost everyone pays something. *


Agree with that. Just widen the standard tax band so people aren't paying the top rate so quickly.


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## gianni (26 Aug 2014)

...


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## ashambles (26 Aug 2014)

Gerry Canning said:


> With public servants on full PRSI , if that means they are also paying into contributory pension then they will be entitled to get Contributory Old age pension + entitlement to work pension.
> So the SI fund will be under more future pressure! (am I wrong?)


One issue will be that the average (not all) public servant will be retiring before the official COAP age. This is because certain sectors can draw down the pension before 68.  

An even bigger problem however in that the government as employer seemingly does not pay the employer's (10.75%) contribution. 

It might be argued why should this matter, the government as employer pay now or pay later but this would be a sleight of hand intended to make the government pensions look affordable by hiding the cost in the PRSI fund. The linkage is bad news for people relying directly on the COAP as opposed to someone relying on the COAP as a variable in a formula where the result is always 50% of final salary.


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## Gerry Canning (26 Aug 2014)

Protocol said:


> Note that PS paying full PRSI will not get a penny more pension than their colleagues who do not pay full PRSI.
> 
> Their combined State pension + work pension should equal the work pension that the pre-95 PS gets.


 ........

If Public Servant is paying into his work pension; surely he is entitled to full work pension.That is what he signed up for. 
The only caveat could be that Public Servant has same (risk) as the rest of us on the long term success of his pension eg link it to average growth or fall in pension funds ..
If Public Servant is paying full Prsi (like the rest of us) he is also entitled to Contributory old age pension.

Smells of unfairness on current Public Servants?


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## mandelbrot (26 Aug 2014)

Gerry Canning said:


> ........
> 
> If Public Servant is paying into his work pension; surely he is entitled to full work pension.That is what he signed up for.
> The only caveat could be that Public Servant has same (risk) as the rest of us on the long term success of his pension eg link it to average growth or fall in pension funds ..
> ...



The salary scales are adjusted so that the post-95 hires are paid slightly more than pre-95 to compensate for the PRSI they pay.


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## becky (26 Aug 2014)

mandelbrot said:


> The salary scales are adjusted so that the post-95 hires are paid slightly more than pre-95 to compensate for the PRSI they pay.



That only applies to the Civil Service.  In the case of the HSE, there is only one scale.


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## Steven Barrett (27 Aug 2014)

Gerry Canning said:


> ........
> 
> If Public Servant is paying into his work pension; surely he is entitled to full work pension.That is what he signed up for.
> The only caveat could be that Public Servant has same (risk) as the rest of us on the long term success of his pension eg link it to average growth or fall in pension funds ..
> ...



It depends on the scheme rules. Most defined benefit schemes take the OAP into consideration when defining the benefits paid e.g. 2/3 final salary less State OAP. Not having to fund for €12k a year cuts down on funding costs immensely. 


Steven
www.bluewaterfp.ie


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