asked the Minister for Social Welfare the reason there is no personal allowance deducted from income, before calculation of social insurance contributions as in the case with income tax; his views on whether social insurance in Ireland is a genuine actuarially-sound insurance scheme relating risk to premium; and if he will make a statement on the matter.
Written Answers. - Social Insurance Contributions.
27.
Social insurance contributions for employers and employees are based on gross earnings less superannuation contributions. This has been the situation since earnings-related contributions were first introduced in 1974. The deduction of personal tax allowances from these earnings would significantly reduce the PRSI income base and it would be necessary to substantially increase the rates of contribution in order to maintain the same level of contribution income.
The social insurance system is not an actuarially based insurance scheme as is the case with most private insurance arrangements in that the premium is not based on the risk but instead involves a pooling of risks between those covered.
If social insurance were to be similar to private insurance arrangements the contributions payable by those less able to pay would in most cases be significantly higher than those payable by the better off. Alternatively the benefits which the former would qualify to receive would be much lower. Either alternative would be unacceptable. Social insurance contributions in Ireland are based on ability to pay while the level and range of benefits provided are related to need. As such, the system is designed to effect a redistribution of income from those employed who are fortunate enough to be able to earn an income to those who are unable to earn such an income because they are sick, unemployed, widowed or retired. I consider the present system to be a reasonable and equitable one in our circumstances.