Dáil Éireann debate -
Tuesday, 31 Jan 1995

Vol. 448 No. 3

Written Answers. - Employers' PRSI.

Michael McDowell

Question:

156 Mr. M. McDowell asked the Minister for Social Welfare in view of the PRSI returns for 1994 to date, the estimated cost to the Exchequer in 1994 and 1995 of the reduction in employers' PRSI from 12.3 per cent to 9 per cent in respect of workers earning £173 and less per week which was introduced by him in the 1994 Budget; the estimated benefit to the Exchequer in 1994 and 1995 from the increase in the ceiling on employers' PRSI contributions from £21,300 to £25,800, introduced by him in the 1994 Budget; and if he will make a statement on the employment and taxation effects of the changes in PRSI announced in the 1994 Budget. [2895/94]

Minister for Social Welfare (Proinsias De Rossa)

The Class A Employers' PRSI contribution structure, introduced in last year's budget, operates on a two tier basis. A lower contribution rate of 9 per cent applies to employers in cases where their employees' total earnings are less than £173 in any week. The higher contribution rate of 12.2 per cent applies in all other cases up to an earnings ceiling of £25,800.

The cost of the lower tier concession, estimated at budget time, was £31 million in 1994 and £46 million in a full year. In order to partly offset this, the ceiling on the employers' contribution was raised to £25,800 instead of £22,200. It was estimated that this would contribute £3 million in 1994 and £26 million in a full year from Class A employers to the cost of the concessions announced.

PRSI revenue has shown an increase in 1994 over 1993. However, it is not possible to separate the effects of the budget changes from employment and earnings changes which also affect revenue.

The net effect of the package of reforms in the PRSI system and the abolition of the health contribution and the employment and training levies for employees whose weekly earnings are less than £173, introduced in last year's budget, was to cut the cost to employers of creating and retaining jobs while improving take home pay of employees. The incentive for employers to create jobs and the incentive for unemployed people to seek and take up jobs has been enhanced. Further improvements are being considered in the context of the forthcoming budget.