Dáil Éireann díospóireacht -
Wednesday, 29 Sep 1999

Vol. 508 No. 1

Written Answers. - Social Welfare Benefits.

John Gormley

Ceist:

364 Mr. Gormley asked the Minister for Finance if his attention has been drawn to the case of a person (details supplied) in Dublin 6 in receipt of a contributory old age pension who worked and paid the appropriate income tax and PRSI contributions and who received a 1.5 per cent increase on her widow's pension from the Department of Defence in July; if his attention has further been drawn to the fact that this increase has resulted in her now being over the PRSI exemption ceiling with the result that her gross income is now subject to 2 per cent PRSI levy and her disposable income has significantly dropped as a result; if he will rectify this anomaly as a matter of urgency; and if he will make a statement on the matter. [18301/99]

John Gormley

Ceist:

408 Mr. Gormley asked the Minister for Finance if his attention has been drawn to the case of a person (details supplied) in Dublin 6 who received a 1.5 per cent increase on her widow's pension from the Department of Defence in July 1999 resulting in her being over the PRSI exemption ceiling of £940 per month and her total gross income being subject to 2 per cent PRSI levy; if this situation is fair in view of the fact that this person's disposable income has now dropped significantly as a result; if he will rectify this anomaly as a matter of urgency; and if he will make a statement on the matter. [18269/99]

Minister for Finance (Mr. McCreevy):

I propose to take Questions Nos. 364 and 408 together.

I would point out that as regards PRSI charges on pensions, the Deputy's question appears to refer to the health levy, as occupational pensions are not liable to PRSI. The health levy is charged at a rate of 2 per cent on a person's total income from all sources with only a few exceptions, e.g, social welfare payments. However, the 1994 budget introduced a low income exemption threshold for the levies of £173 per week or £9,000 per annum which means that where a person's reckonable income is lower than the threshold they are not liable to the levies. However, when a person's income rises above the threshold the levies are payable on the person's total income. Following this year's budget the threshold is now £940 per month or £11,250 per annum. The current threshold ensures that most pensioners on low incomes are exempt from the levies.

In the 1999 budget I introduced significant restructuring of the levy system. The employment and training levy was abolished and the health levy was increased to 2 per cent which resulted in a reduction of 0.25 per cent in the combined levy charge from the previous tax year. These changes took effect on 6 April this year. The current arrangements in respect of the health levy are more favourable to many pensioners than most taxpayers because the levy is not applicable to their social welfare pension. The total income of medical card holders and recipients of social welfare survivor's and widow's pensions, lone parent's allowance and deserted wife's benefit/ allowance are exempt from the levies.

After a pension increase, the monthly income of the pensioner referred to by the Deputy increased to a level above the threshold whereby she became liable to pay the health levy. However, if her annual income remains below the threshold of £11,250 for the current tax year, she may be liable for a refund of any levies paid throughout the tax year. If this is the case she should then forward a copy of her P60 to the Collector-General's Office, PRG Section, Floor 5, Sarsfield House, Francis Street, Limerick.

The levies threshold was introduced in order to focus assistance towards those on low incomes. The Government was aware of the "step" that exists at the levies threshold when the threshold was introduced, however, it is considered that having a marginal relief system would introduce an unacceptable level of additional complexity into the levies/PRSI system. It is sometimes also proposed that the levies should apply only to that portion of a person's income over the £948 per month – £11,250 per annum – threshold. Such a measure would be costly to implement as it would benefit everyone.

While there are no proposals to abolish the levy, I can confirm that the position generally, including the level of the threshold, will continue to be reviewed, as are all other taxes or levies in the context of the annual budget.