Ceisteanna—Questions. Oral Answers (Resumed). - Consultations on PRSI.

Peadar Clohessy


17 Mr. Clohessy asked the Minister for Finance the consultations, if any, his Department has had with the Department of Social Welfare regarding the levying of PRSI and levies on maintenance payments from husbands to wives; and if he will make a statement on the matter. [8585/96]

Until 6 April 1995, where an individual made an enforceable maintenance payment to an estranged spouse, PRSI contributions, health contribution and employment and training levy were chargeable on the paying spouse's income at the time it is earned and again on the maintenance payments on their receipt by the receiving spouse. In 1994, a review of the treatment of maintenance payments for the purposes of levies and PRSI was undertaken by officials of my Department, the Office of the Revenue Commissioners and the Departments of Social Welfare, Health and Enterprise and Employment.

Following that review it was agreed that the health contribution and the employment training levy should not be imposed on that part of the payer's income which is paid to his or her separated spouse under an enforceable maintenance agreement. The appropriate changes in the law were included in Social Welfare Act, 1995, and had effect from 6 April 1995. This brings the treatment of maintenance payments for the purposes of the levies into line with their treatment in the income tax system.

The review also concluded that there should be no change in the PRSI treatment of maintenance payments. The payment of separate PRSI contributions enables each spouse to build up a social insurance record in their own right, and they can both, in due course, qualify for a pension. Entitlement to a social insurance pension is a valuable right and affords protection to separated spouses. It is, therefore, important for the protection of their individual pension rights that social insurance contributions be made by the recipients of maintenance payments.

Does the Minister accept that it is scandalous that a separated couple, the husband of whom must pay on the double probably for accommodation, etc., must pay a 5 per cent levy on the husband's payment to the wife? Does he accept that this is an outrageous discrimination as between ordinary couples living together who have far less calls on their income? Will he agree it is utterly wrong to penalise a family whose parents have separated by taking a 5 per cent cut out of the wife's money simply because she is living apart from her husband — that is 5 per cent out of the mouths of the children? Does he agree it is wrong to take 5 per cent of her money in circumstances where if the money was handed across the kitchen table by a cohabiting couple, one to another, there would be no deduction by the State?

What the Deputy has just said is quite true in the sense of one of a cohabiting couple handing the other money over the table, but the partner would not have a social insurance contribution record and therefore would not have an entitlement in her own right.

We believe, and it is the view of the group to which I have just referred, that it is in the interests of the person to whom the maintenance payment is being made to build up an insurance contribution record in her own right.

I cannot believe what I am hearing — the Minister says that if a separated husband gives his wife £100, the State has to get £5 a week from it because it will help his wife set up a social welfare contributions record. Will the Minister not accept that people in those circumstances are entitled to be treated in exactly the same way as a cohabiting couple and that a husband's payments to his wife and children for their upkeep should not be taxed differently from the case of a cohabiting couple?

A working party looked at this matter in some detail and came to a different conclusion.

May I suggest that the Minister go back to the working party and ask them to consider the issue from the point of view of plain, simple social justice? Two people living together do not have 5 per cent taken off when one hands the other money across the kitchen table at the end of the week, whereas a couple who live apart and consequently have far more expenses and difficulty in maintaining a spouse and family should not have a £5 tax on maintenance payments imposed by the State under the ludicrous guise of social welfare.

Will the Deputy not agree that if the person is getting a maintenance contribution of a certain order it should be subject to tax?

I would not agree with that and I do not think it should be the case.

Does he not think that the person in question should, if she is getting an income, make a contribution to the social insurance fund so that she would have protection in her own right?

Will the Minister reconvene this so-called interdepartmental group and ask them to explain to this House how it is fair that a couple who live apart should have a 5 per cent levy imposed on transfer payments between them when a couple who live together would not face that situation? What is so special about people who are living apart that they can be victimised in this manner?

I take cognisance of what the Deputy has said and I will raise the question with the relevant group.