PRSI change would hit workers in the pocket
WORKERS face being hit by PRSI deductions on all their income.
The Commission on Taxation recommends that the employee cut-off point for PRSI should be scrapped.
This means that PRSI would apply across the board on all income, draining further cash from take-home pay packets.
This would hit those workers earning more than €50,700 a year -- the current ceiling for payment of the pay-related social insurance.
The balance of income being taken up by PRSI contributions would effectively triple beyond this mark. The only reprieve would be a possible reduction in the general PRSI rate as a consequence of its wider application to PAYE workers.
The employers' ceiling has meanwhile already been scrapped, and the Commission advises against its reintroduction. But the report does recommend that companies should be given the option of offsetting R&D tax credits against employer PRSI costs.
And it says that workers should be subject to PRSI on 'unearned' income, for example money from investments or renting property. This proposal is likely to present huge logistical difficulties, not to mention verification problems. The commission also wants PRSI to apply to share options.
Meanwhile, the commission has harsh things to say about the Government's reliance on PRSI as a revenue-raising measure.
PRSI is meant to operate as a system whereby both employers and workers make contributions towards an individual's entitlement to various benefits outside the workplace.
These include health and dental treatment, as well as eligibility for the contributory state pension and unemployment benefit.
But governments have not tended to ring-fence PRSI to pay for the services they are meant to fund, with the commission complaining yesterday that PRSI has "certain characteristics of a tax".
The report says the health contribution levy, generally lumped in with PRSI in pay slips, "does not confer any right or entitlement of benefit" and should be abolished "when fiscal conditions improve sufficiently" and absorbed into the general income tax system in the meantime.
The commission recommends that PRSI should apply to more workers "in view of the burden on the Exchequer" during the current financial crisis.
Having a wider range of people contributing to PRSI would help keep the rate of contributions low all round, according to the advice. PAYE workers and the self-employed should pay the same rate of charge.
The rate of PRSI for a PAYE worker is 6pc (4pc plus a 2pc health levy), up to a ceiling of €50,700 after which only the health levy becomes payable.
The employer's rate, in respective of each employee, is 10.75pc.
- Senan Molony Deputy Political Editor
