McCreevy defends levying PRSI on benefits as Finance Bill debated

A number of companies have entered into "very flexible and creative arrangements" to avoid paying PRSI, according to the Minister for Finance, Mr McCreevy.

He told the the Select Committee on Finance and the Public Sector that the absence of a ceiling on employer PRSI had led a number of employers to enter into deals with their staff in order to avoid paying the tax.

As a result, in last December's Budget, he imposed employer and employee PRSI on benefits in kind enjoyed by workers.

He said companies had paid €48 million in "other" benefits in kind such as gym membership or bonus bonds in 2001. This compared to €9 million in car benefits in the same year.

The imposition of PRSI on benefits in kind will yield €40.5 million in a full year when it comes into force in 2004, Mr McCreevy said.

Fine Gael finance spokesman Mr Richard Bruton argued that employer PRSI should not be applied to health insurance, which, he said, was "a good thing" from the State's point of view.

The committee was scrutinising the Finance Bill, which emerged unscathed despite vigorous resistance from the opposition.

The most feisty criticism was directed at the decision of Mr McCreevy to leave the personal taxation system largely unchanged in his last Budget and the subsequent Bill.

Supporting an amendment that would see tax bands, exemption limits and credits indexed to inflation, Mr Bruton accused the Minister of "levying taxes by stealth" and using inflation as "an ally" in the Finance Bill.

He said the Minister was "using inflation as a hidden tool to stick his hands into people's pockets".

Rejecting such suggestions, Mr McCreevy said indexation would cost the Exchequer €527 million in a full year, or three times' the cost of the tax package contained within Budget 2003. He said the Government was committed to a "responsible fiscal policy", observing that indexation did not currently fall into this category.

He also rejected an amendment suggesting that workers on the minimum wage should be excluded from the tax code.

He said he recognised the scale of costs involved in such a measure and could not accept them. He simultaneously rebuffed accusations that he had consistently favoured the higher-paid with his taxation policy.

Labour finance spokeswoman Ms Joan Burton reminded the Minister that one-quarter of the Republic's highest earners had paid no tax in 2000.

Aside from drafting changes, all proposed amendments were rejected yesterday.

The Select Committee must consider more than 200 amendments to the Bill before it can pass to the next stage of the legislative process.