I move amendment No. 19:
In page 8, between lines 18 and 19, to insert the following:
"(5) Noting that the tax year 2001 is of 38 weeks duration and noting that tax allowances are allowable at a 74 per cent of the normal annual rate, that the Minister shall as soon as may be after the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the impact of section 8 on tax payers who will no longer be entitled to receive the PRSI ‘tax holiday' in this tax year.".
This amendment relates to the PRSI holiday, as it is known. People pay PRSI contributions to the social insurance fund. There is a ceiling for employees above which they do not any more PRSI. The ceiling for the tax year 2000-01 is £26,500 and the Minister announced in the budget that for the tax year April to December 2001 the ceiling will be £28,250.
On the face of it one might say the ceiling is increasing slowly, as it has done every year. It will probably increase again this year. However, that is not the case. Last year, people paid the normal taxes they were required to pay and their PRSI. The tax year April to December 2001 is a short tax year of 38 weeks duration so a total of 74% of the various allowances are allowable against one's tax liability. The personal allowances – the Minister, Deputy McCreevy, reminds us they are now credits – are allowable at a 74% rating so everything is reduced by 74%.
The Ministers, including Deputy Dermot Ahern and Deputy McCreevy, emphasised in their contributions on the budget that they were returning tax to the people. People would pay less tax than they paid last year and everything in the garden was rosy. However, look at the small print. What has happened to the PRSI ceiling? Nothing. One would have expected the PRSI ceiling to be reduced to 74% like the other allowances but that has not happened. That is a major failure on the part of the Government.
I do not accept the figure given by the Department of Social, Community and Family Affairs in correspondence about this issue. The figure of 304,000 people was given by the Minister for Finance not long ago and I accept that. A total of 304,000 people are expected to reach the PRSI ceiling in this tax year. That means they had income in excess of £26,500. They paid PRSI on income up to that amount but when they reached it they stopped paying PRSI. Some of them are not paying PRSI at present. One would have expected that, in the coming tax year, April to December 2001, anybody who got a PRSI tax holiday during the previous tax year would also qualify for a PRSI tax holiday in this tax year. That seems reasonable. The Government spoke about reducing taxes and giving people back their money, so one would have expected that if one qualified for the PRSI holiday last year one would also qualify this year. However, that is not what the Government has done.
The Government will take PRSI contributions from a large number of people who would have expected this PRSI holiday. According to the Government's figures, the number involved is about 200,000 people. Probably in excess of 200,000 people will pay PRSI over and above what they would have expected to pay.
Why did the Government do this? The Government did so by sleight of hand as it wanted to gather additional revenue. The Minister will say I am talking about people on good salaries. These people are relatively well off. However, if the Government is talking about fairness and equity it should not impose additional taxes on people this year.
The Minister will also tell me that these people will not lose out – that they have had a PRSI holiday in the tax year 2001 and they will have a similar holiday in 2002. I am not sure if the Minister is fully aware that in the tax year 2000-01 – April to April – these people will hit the PRSI ceiling and have a PRSI holiday in this part of the year. However, there is a shorter tax year from April to December of this year and most people will not get the PRSI holiday in that period. In the tax year 2001 we will be back to the same situation and they will qualify for a PRSI holiday.
The Minister will say these people will get a PRSI holiday in 2001 and 2002. This is so but he is talking about three tax years rather than two. He is mixing up calendar years with tax years and that is not allowable and is unfair.
The case has been made and has attracted media attention. This issue is affecting a large number of people and, in the interests of fairness, and if the Government is earnest in saying it is not taking more tax off people and people will have reduced tax liabilities in the coming tax year, then people should not have to pay additional PRSI which they would not have had to pay if the tax holiday was brought back to 74%.