I am grateful to you, Sir, for the opportunity to raise on the Adjournment the issue of transfer payments from husbands to wives. I understand that in certain circumstances where a husband makes payments to his wife under a maintenance agreement, such payments are levied with PRSI. If that is the case, it is outrageous. Presumably when the husband earned moneys he paid PRSI appropriate to his station in life, whether as a civil servant, a self-employed person or a PAYE worker. The taxing of such a payment from a husband to a wife seems indefensible. A constituent raised the matter with me and I was shocked when I read his letter. I raised the matter to ask that something be done immediately to stop levies of this kind being imposed on transfer payments between a husband and a wife when there is not a moral, legal or reasonable basis for such a levy.
Adjournment Debate. - Maintenance Payments Levies.
I am replying on behalf of the Minister for Finance. He asked that I apologise for his absence as he is detained on other Government business. The matter Deputy McDowell raised is important and with your permission, Sir, I will give the House some background information on it.
If Deputy McDowell wishes to give details of his constituent's case to the Minister for Finance I will ensure it will be given the appropriate attention.
Under existing legislation where an individual is making maintenance payments to an estranged spouse, PRSI contributions, health contribution and employment and training levy are chargeable on the paying spouse's income at the time it is earned and again on the maintenance payments on their receipt by the receiving spouse. I should point out that this contrasts with the income tax treatment of such payments. For income tax purposes the payer is allowed a deduction in respect of the maintenance payments in the computation of his or her income. The maintenance payments are then chargeable to income tax in the hands of the recipient.
The responsibility for the legislation in question rests with the Departments which administer the various schemes, namely, the Department of Social Welfare — PRSI Contributions, the Department of Health — health contributions and the Department of Enterprise and Employment — employment and training levy. My colleague the Minister for Social Welfare addressed this issue in a response to a parliamentary question on 24 November 1993. He indicated at that time that the payment of social insurance contributions by both spouses was important in the context of benefit entitlements.
The payment of separate PRSI contributions enables each spouse to build up a social insurance record in their own right, and they can both, in due course, qualify for a pension. Entitlement to a social insurance pension is a valuable right and I agree with the Minister for Social Welfare that coverage under the system should be extended as widely as possible and should afford protection to separated spouses. It is therefore appropriate that a social insurance contribution be levied on the maintenance payment.
The charging of the health and employment and training levies to both spouses is another matter. For the purposes of these levies the person receiving the maintenance payment is treated in the same way as a self-employed person with the maintenance payments made by one spouse to the other being regarded as reckonable income. The liability to the various charges is the same as for a self-employed person and no allowance or cognisance is taken of the fact that the maintenance has already suffered deduction of levies in the hands of the payer. This is clearly anomalous. Unlike social insurance contributions no specific benefits accure to the individual involved.
It is clearly undesirable that the one segment of income should be subject to a double charge where, but for the fact of separation, the couple would suffer only one set of impositions. The number of such cases is small but it is rising and it may be expected that the incidence will continue to rise. Once again while in the case of social insurance the provision of a separate benefit entitlement constitutes a justification, the double charging of such payments to the levies is difficult to defend. The issue is a complex one affecting a number of Government Departments as well as the Revenue Commissioners who collect the levies. I have arranged that discussions should take place between officials of my Department, the Revenue Commissioners and the Departments of Social Welfare, Health and Enterprise and Employment to examine the position in detail with a view to bringing forward proposals for more equitable arrangements. I am confident that following these discussions a satisfactory solution can be found to what is essentially a complex administrative problem. I am grateful to Deputy McDowell for raising the matter.