A number of widely anticipated changes to the social welfare system are recommended. These include the abolishment of the employee PRSI ceiling, the extension of PRSI and the health levy to share based remuneration and the application of PRSI to employees' investment income. The report did consider the submissions to reinstate the employer PRSI ceiling.
The Commission proposes abolishing the employee PRSI ceiling, currently €75,037, on a phased basis to mitigate the impact on the employees concerned and employment costs.
The report indentifies anomalies in the PRSI system whereby self-employed contributors pay PRSI on income, including investment and rental income, whereas employees' investment and rental income are not subject to PRSI. To rectify this, the Commission recommends that employees should be subject to PRSI on unearned investment income, which would broaden the PRSI base and improve equity.
Currently, share options or remuneration in the form of shares does not constitute 'reckonable income' or 'reckonable earnings' for the purpose of the Social Welfare Consolidation Acts and therefore are not subject to PRSI or the health levy. The Commission considers the current PRSI system to be biased in favour of share based remuneration rather than cash remuneration and therefore calls for the introduction of PRSI and the health levy on share based remuneration.
The Commission acknowledged that a reduction in employer PRSI through reinstating the ceiling would reduce employment costs and may stimulate employment. However, considering international comparisons, the Commission recommend that the employer PRSI ceiling should not be reinstated.
Other recommendations include:
- Allowing trading losses as a deduction when calculating PRSI liability
- As highlighted by CCAB-I, there is a significant anomaly in the treatment of self employed persons as against employed persons in the matter of pension contributions. To rectify this, the report proposes the introduction of relief from PRSI in respect of pension contributions made by self employed contributors
- Eliminating the step effect in PRSI and the health contribution