Vol. 535 No. 3
104 Mr. Flanagan asked the Minister for Finance if he has satisfied himself that the PRSI ceiling should remain at £28,250 in 2001 being a shorter tax year; and if, in view of an apparent inequality, he will make a statement on the matter. [12645/01]
I am satisfied that the PRSI employee ceiling should remain at £28,250 for the nine months tax year, from 6 April 2001 to 31 December 2001. As I have said in previous replies on this topic, the "PRSI Holiday" issue is of relevance only to the minority of employees, an estimated 13%, who have annual earnings above the contribution ceiling. When annual earnings are in excess of the relevant contribution ceiling, employees have a period in each contribution year in which no contribution is due; the duration of this period depends on the level of annual earnings and the point in the tax year at which the earnings ceiling is reached. Up to this, "PRSI Holidays" tended to be concentrated mainly in the first quarter of the calendar year in the lead up to the end of the tax year on 5 April.
Prior to the decision to align the tax and calendar years from January 2002, relevant employees could have expected a contribution holiday mainly in the first quarter of 2002. Arising from this alignment, their contribution holiday will be deferred until the final quarter of 2002. Leaving the contribution ceiling intact for the short calendar year does not impose any additional PRSI liability on the employees involved, as they will continue to have two PRSI holidays over the two year period from 1 January 2001 to 31 December 2002, as they would have had prior to the changeover, although the second holiday period will now mainly be in the final quarter of 2002. Of course, for those employees whose earnings exceed £28,250 in the period from 6 April to 31 December 2001, no PRSI contributions will be payable from the point in the period the earnings ceiling is reached until 31 December 2001.
Furthermore, I do not accept that leaving the PRSI employee ceiling at £28,250 for the short tax year represents an inequality. As stated above, reducing the employee ceiling for the short tax year would benefit only the small percentage of employees with earnings in excess of the ceiling, while those with incomes below the ceiling would not be any better off as a result as they would continue to have a PRSI liability throughout the full nine months period.
Finally, I would remind the Deputy that most employees are now benefiting from the reduction of 0.5% to 4% in the contribution rate of PRSI, effective from 6 April 2001, which was announced in budget 2001.
