Dáil Éireann debate -
Wednesday, 13 Dec 2000

Vol. 528 No. 2

Written Answers. - Tax Code.

Dick Spring

Question:

34 Mr. Spring asked the Minister for Social, Community and Family Affairs if he has considered the implications which the shorter forthcoming tax year will have on the PRSI fund; and if he will make a statement on the matter. [29703/00]

Minister for Social, Community and Family Affairs (Mr. D. Ahern)

In 1998, an interdepartmental working group considered the issues which would arise in the event of the alignment of the tax and calendar years. My Department was represented on this group. The arrangements being introduced for 2001 in relation to matters affecting my Department are those recommended by the group. The Government, in July 2000, confirmed this position when the decision was made to effect the change from 2002.

There will be some cash flow losses in 2001 and 2002 to the social insurance fund as a result of the alignment of the tax and calendar years. These will be approximately £20 million in 2001 and around £5 million in 2002. These arise as a result of remittance patterns in the last two months of each tax year, reductions in payment levels by annual PAYE-PRSI remitters and in P35 balancing payments as well as the fact that profits on which class S contributors will assessed for 2001 will be 25% below normal levels.

I will put in place a number of special arrangements so as to ensure that no person is disadvantaged from a social welfare point of view as a result of the alignment of the tax and calendar years. As the Deputy will be aware, 2001 will be a once off short tax year. The social insurance entitlements of all contributors will be protected where 2001 is the relevant tax year for entitlement to benefit. This will be achieved by the addition of 14 contributions or credits, as appropriate, to the records of all persons who had a contribution in 2001. This measure is fair to all contributors and eliminates any possibility of contributors being deprived of benefits that they might otherwise have become entitled to in an unchanged scenario; avoids the necessity for extensive, and expensive, legislative and computer program changes; and will not introduce, once off, confusion in relation to entitlement conditions for customers.

I have now completed the process of aligning the implementation of increases in weekly rates of social welfare payments with the commencement of the income tax year. Accordingly, the unprecedented levels of increases in these payments announced in the budget will take effect from the first week of April 2001.

In addition, I have already secured the approval of Government for the continuation of this alignment in 2002. This will mean that increases in weekly payments in that year will be effective from the first week of 2002. This will be a very positive outcome for all social welfare claimants arising from the decision to align the tax and calendar years.