An increase in the Universal Social Charge (USC) for people under the age of 70 and with a medical card is scheduled to take effect from the end of the year.
Currently, people with a medical card receive a reduced USC rate of 2 percent on income above €12,012.
According to the law, however, the concession expires at the end of this year.
Finance Minister Paschal Donohoe told RTE radio today that it was a measure he had extended in the past – but had not committed to doing so again.
“It refers to those who are over a certain age, get a health card and pay the 2-part USC fee, as opposed to the higher one.
“It is custom and practice that I do not state what I will be doing before Budget Day, which is later in the year, but this is a matter I have expanded on in the past and I will bring a recommendation to Government in the right place.”
The Treasury Department said USC’s reduced rate for medical cardholders is never permanent.
It applies to people under the age of 70 with a health card and an income of less than €60,000.
If the government goes ahead with the planned elimination of USC’s reduced rate for medical cardholders, those individuals would pay USC at a rate of 4.5 percent.
That’s more than double the current rate, at a time when prices are ahead at a rate of 8 percent.
Almost a third of the population has a health card, or 1.6 million people.
A health card allows low-income individuals and families to receive a variety of medical services free of charge.
If the reduction were removed, someone earning €30,000 would pay an additional €217 a year due to the removal of that reduced tax rate, accountants said.
A Treasury spokesman said USC was added to Ireland’s tax system in 2011 to replace health and income levies.
The aim was to broaden the tax base and provide the treasury with stable revenues to finance public services.
USC is an individualized tax, meaning that an individual’s tax liability is determined based on their own individual income and circumstances.
USC is widely applied at a low rate, ensuring it provides a stable and sustainable revenue stream for the state.
Currently, individuals earning less than €13,000 are exempt from USC.
And health cardholders with combined incomes of €60,000 or less benefit from reduced USC rates.
Persons age 70 and older whose total income for the year is €60,000 or less also benefit from a reduced USC rate. But it is not planned to go until the end of the year.
USC’s reduced rates, effective for 2022, are 0.5 percent on the first €12,012 of earnings and 2 percent on the balance.
The Treasury Department said taxpayers who receive the concession are not subject to USC’s 4.5 percent rate.
But it added: “The concession of medical cardholders was never intended to be a permanent feature of USC. Instead, the plan was to phase out the full USC fee for health cardholders via a transitional approach.”
This perk for health cardholders has been extended several times, most recently by Treasury Secretary Paschal Donohoe in Budget 2022, with an extension of the perk until December 31 of this year.
“Any further extension of this concession will be considered in the context of the 2023 budget,” the department said.
The pressure that rising inflation is putting on household budgets means it would be politically very difficult for Mr. Donohoe to raise USC’s rate for those with medical cards, sources said.
Budget documents last October said, “USC’s reduced rate for medical cardholders is being extended for an additional year at an estimated cost of $70 million in 2022 and $72 million per year thereafter.”
https://www.independent.ie/business/personal-finance/tax/finance-minister-paschal-donohoe-refuses-to-say-if-he-will-extend-reduced-usc-rate-for-thousands-of-under-70s-as-concession-due-to-run-out-41800426.html Treasury Secretary Paschal Donohoe is refusing to say whether he will extend USC’s reduced rate for thousands of under-70s as a concession as it expires