Ireland Plans Social Security Overhaul

by Jason Gorringe, Tax-News.com, London

20 August 2010

The Irish government is considering a major reform of Ireland’s social security contribution system, Pay Related Social Insurance (PRSI).

The overhaul is proposed as part of plans for the introduction of a new ‘universal social contribution’ which would consolidate PRSI, the health levy and the income levy.

Under the universal system, contributions would be necessary on various new sources of income, including rental income, investments and share options (unearned income).

In addition, the proposals look likely to introduce a single rate in respect of employed and self-employed workers' contributions. Currently self-employed workers pay contributions at 3% of earnings, while employees pay 4%.

One of the aims of the reform is the widening of the current PRSI net so that those earning less than the current EUR352 per week exemption threshold will pay into the social security system. It is also expected that the reforms will reduce the amount paid by employers in respect of employees earning less than EUR500 per week.

The changes could also remove the EUR75,000 threshold at which employees pay no further PRSI contributions.

The reforms would take forward some of the recommendations of the Tax Commission's report on tax reform, published last year. This report advocated increased revenues from the widening of the PRSI tax base so that tax reductions can be made in other areas. The report also called for the amalgamation of the health levy within the income tax system.

Details of the PRSI reforms are expected to be announced in the forthcoming budget later this year.

Recommended