Dáil Éireann díospóireacht -
Thursday, 9 Nov 2000

Vol. 525 No. 4

Written Answers. - Social Insurance.

Jim Mitchell

Ceist:

90 Mr. J. Mitchell asked the Minister for Finance if he will give comparative figures between the rates of PRSI and levels as applied here and the equivalent charges in the United Kingdom; and if he will give indicative examples of the affect of these on take home pay when taken together with income tax and health levies in both jurisdictions. [25379/00]

Minister for Finance (Mr. McCreevy):

In both Ireland and the United Kingdom, social insurance is calculated on a weekly basis and is payable by both employers and employees. While Ireland's system is known as PRSI, that is, pay-related social insurance, the system in the UK is known as national insurance contributions, i.e. NIC.

In Ireland, in the current tax year, full-rate PRSI contributors pay 4.5% of their income in PRSI. However, the first £100 of weekly earnings is exempt from liability to PRSI and there is also a ceiling above which no PRSI is payable which is currently £26,500. The UK operates a similar system for employees. The current rate of NIC applicable is 10% with a weekly exemption for earnings up to £76. There is also a ceiling of £535 per week or £27,820 per annum, above which no NIC is payable. Thus far both systems are comparable in the fact that they both have weekly exemptions and ceilings. However, in the Social Welfare Act, 2000, an additional feature was introduced into the Irish PRSI system to benefit low earning full-rate employees. Under this system, an employee who earns less than £11,750 per annum is exempt from liability to PRSI but if his/her income exceeds this limit then he-she is liable to PRSI under the normal system, as described above.

Employers in Ireland pay PRSI in respect of their employees at a rate of 8.5% where the employee's income is below the threshold of £280 per week or £14,560 annually. Otherwise if the employee's income exceeds the threshold of £14,560 per annum, a rate of 12% is payable on all of the employee's income up to a ceiling of £36,600. Employers in the UK pay NIC in respect of their employees at a rate of 12.2%. However, there is no ceiling above which no NIC is applicable but there is a weekly exemption for the employer's contribution of £84 per week.

The UK does not have a health contribution levy on income as Ireland does.

The following examples show for various taxpayers on various incomes, calculations of net income and average tax rates for both Ireland and the UK respectively. The figures for Ireland take account of income tax, the health contribution and employee PRSI, while figures for the UK take account of income tax and employee NIC.

As can be seen, the Irish tax system is more favourable for taxpayers on low incomes and for one-income married couples. The income level under which it is more beneficial for a single person to be assessed under Ireland's regime is £20,000. The similar figure for a married couple with two incomes is £40,000. The level under which it is more beneficial to be assessed under the Irish system for married one-income couples with children, is £56,000.

Single Taxpayer

	Ireland	UK	Ireland	UK
Gross Income	Net Income	Net Income	Ave. Tax Rate	Ave. Tax Rate
£5,000	£5,000	£4,833	0.00%	3.34%
£10,000	£9,054	£8,342	9.46%	16.58%
£15,000	£12,213	£11,742	18.58%	21.72%
£20,000	£15,128	£15,142	24.36%	24.29%
£30,000	£20,208	£22,160	32.64%	26.13%
£40,000	£25,559	£28,661	36.10%	28.35%
£50,000	£30,927	£34,661	38.15%	30.68%

Married Taxpayer, One Income, Two Children

	Ireland	UK	Ireland	UK
Gross Income	Net Income	Net Income	Ave. Tax Rate	Ave. Tax Rate
£10,000	£10,000	£8,342	0.00%	16.58%
£20,000	£17,482	£15,142	12.59%	24.29%
£30,000	£24,322	£22,160	18.93%	26.13%
£40,000	£29,673	£28,661	25.82%	28.35%
£50,000	£35,041	£34,661	29.92%	30.68%
£60,000	£40,419	£40,661	32.64%	32.23%

Married Taxpayers, Two Incomes, Two Children

	Ireland	UK	Ireland	UK
Gross Income	Net Income	Net Income	Ave. Tax Rate	Ave. Tax Rate
£10,000	£10,000	£9,667	0.00%	3.33%
£20,000	£18,108	£16,684	9.46%	16.58%
£30,000	£24,426	£23,484	18.58%	21.72%
£40,000	£30,256	£30,284	24.36%	24.29%
£50,000	£35,206	£37,084	29.59%	25.83%
£60,000	£40,417	£44,320	32.64%	26.13%

It is appreciated that the tables are making a comparison between salaries in Irish currency and salaries in sterling, e.g. IR£10,000 with £10,000 stg., making no adjustment for exchange rates. When the data are converted to take account of the exchange rate difference, the gap in average tax rates narrows, in some cases substantially, but the pattern is essentially the same.