Umbrella charge for PRSI and levies 'must exceed 8pc'
THE proposed replacement for PRSI and levies would have to be charged at over 8pc to avoid the burden falling heaviest on the lowest earners, researchers at the Economic and Social Research Institute (ESRI) say.
In his last budget, Finance Minister Brian Lenihan said he planned to combine the existing PRSI, health and income levies into a single "social charge" to be applied to all income.
Yesterday the ESRI published research showing that a 7.5pc charge could raise enough money to replace all three existing levies. This is lower than present PRSI rates, but the analysis showed the better off would gain more.
The 10pc of workers on the lowest earnings would see their disposable income fall by 2.3pc, while the 10pc of top earners would gain 1.9pc. Those in between would lose from 0.5pc to 2pc, when compared with the present system.
This is because workers earning less than €127 a week are exempt from PRSI and health levies, with smaller concessions up to €500 a week.
"The best way to deal with the imbalance would be to give a reduction -- not an exemption -- to lower-income workers," said ESRI researcher Brian Nolan. "But that would be expensive. To make up the revenue, the rate would have to be more than 8pc."
Blair Horan, general secretary of the Civil and Public Service Union, said: "What we have heard seems to be simply getting the lower-paid back into the tax net, so as to continue with the low-tax model of the economy," he said.
Researcher Tim Callan said the country needs to create a tax system that will support a successful economy after the budget deficit is closed, "and not just lurch from one annual crisis to another".