asked the Minister for Social Welfare if he will give details of the basis of his computation based on which he has estimated the increased intake from employers' payroll taxes for 1989; and whether he accepts that such an increased burden is a disincentive to job creation prospects.
Ceisteanna — Questions. Oral Answers. - Employers' Payroll Taxes Yields.
39.
It is customary to increase the earnings ceiling for PRSI contributions in line with increases in wage levels. From April 1989 the current PRSI ceiling of £16,200 will be increased. Employees, employers and the self-employed will pay PRSI contributions in respect of earnings up to £16,700. In addition, employers will continue to pay contributions up to a ceiling of £20,000 in respect of the 15 per cent of employees who have these higher earnings. The 1989 Estimate includes £5 million in respect of the higher ceiling for employers.
The estimated social insurance yields are based on the available pay distribution data, allowing for certain macro-economic projections for pay increases and employment changes. When the increases in the PRSI ceiling are compared with the projected gross earnings bill for a full year they represent estimated increases in payroll costs of 0.1 per cent and 0.4 per cent in 1989 and 1989/90 respectively. I do not consider that the size of this increase will be a significant burden on employers, which would act as a disincentive to job creation.
Increasing the ceiling for the employer's contribution also in effect shifts the burden of financing social insurance from labour intensive enterprises where the earnings of the vast majority of employees would be below the existing ceiling to the more protected and financially sound sectors of the economy where there is a much bigger proportion of employees on higher earnings. Raising the extra revenue needed for social insurance in this way is much more in line with maintaining incentives for job creation than the alternative of increasing the percentage rate of contribution which would mainly affect labour intensive enterprises.
It should also be noted in this regard that Irish employers pay one of the lowest rates of PRSI in the European Community and that in the United Kingdom there is no ceiling for employers on the amount of earnings in respect of which contributions are payable.
Has the Minister or his Department checked the figure of £5 million with the Department of Finance?
The figures issued by the Department of Social Welfare are the best figures the Deputy will get because they are the people who have dealt with this business for generations. They know what they are talking about and people from the outside have discovered what the reality is. The figures are normally, and this has been done in this case, cross-checked with the Department of Finance. Of course, the two Departments work together in that area.
Is the Minister aware that the employer organisations have calculated that these extra payroll taxes on employment will cost employers a sum far greater than the figure mentioned by him? A recent estimate given to me was £40 million. Further, would the Minister accept that there is a suggestion that the Department of Finance figures are also far greater than those mentioned by him?
First, I want to reject utterly and absolutely the suggestion, or little sly proposal, that somebody is trying to do something with the figures. This suggestion is not worthy of the Deputy in the first instance and it is not true in the second instance. The CII came out with a figure of £70 million, which is what they thought the figure might be. That was based on a very hasty calculation which was entirely incorrect. The next day I was on the radio with the director of the CII and he accepted that they had got their figures wrong, had made some assumptions which were incorrect, had included the self-employed, done a variety of other things and had then realised that it was only the 15 per cent of the top paid employees and the companies who employed them that would be affected and that, in effect, the figure of £5 million in the 1988-89 Estimates is the correct one. I have given the percentage figures in relation to increases in payroll costs as 0.1 per cent in 1989 and 0.4 per cent in the subsequent year.
Would the Minister——
Order, please. The Chair is striving to complete the four remaining Priority Questions with the ten minutes left. I am asking for the co-operation of the Deputies concerned.
I want to make a brief point.
A very brief question.
Would the Minister accept that the revised figure from the CII — now that they have had a chance to do their full calculations — will be a £40 million extra burden on employers, that, in fact, the figure from the Department of Finance is £28 million and that the payment by businesses of this additional tax will require funds equivalent to those required to employ about an extra 4,000 people in the economy?
No, I would not accept any of those statements. First, the figure which the CII now have is incorrect; second, the figure from the Department of Finance suggested by the Deputy is incorrect and, third, the figure I gave the Deputy for the 1989 Estimates is the actual figure in the Estimates and was provided by the Department of Finance and the Department of Social Welfare jointly. The figure the Deputy may have been trying to get on to may be the figure for the year after that and the cost——
In a full year.
Nineteen eighty nine is a full year.
The full rate will not be payable for the full year.
I want to deal with the other questions also.
The full rate is payable on all incomes which occur within the full year. In the subsequent year, the year after——
The Minister——
I am calling Question No. 40.
(Interruptions.)
Please let us make progress. Time is running out for Priority Questions.
There is an extra burden——
Please, Deputy O'Keeffe.