Dr. Nat O'Connor:

I thank the Deputy. There are a number of issues in relation to the commission's recommendations. They are recommending that older persons would pay a solidarity rate of PRSI. They are not paying PRSI at the moment. If they were to pay a solidarity rate for which they get no benefit this is almost the worst possible outcome. We are looking at a situation where the State is seeking to facilitate people who wish to work longer into their late 60s and 70s and beyond. In that sense the PRSI system needs to support people. For example, some people might like to work so they can build up enough credits to get a full-rate State pension. That is not possible at the moment. That would be a benefit of paying PRSI. A person in their late 60s could fall ill and might want to get illness benefit so they can get back to work. Many employers would deduct that amount but currently the person would not be eligible for illness benefit.

One of the strengths of the Report of the Commission on Tax and Welfare is that it looks at the intersection of the two systems. When one considers the older worker, that intersection becomes all the more important. We cannot assume that just because people lose a job at the age of 67 they are happy to move on to the State pension. They might be ill for a few months but they might want to get back to work again for another three or four years. The system should facilitate that.

Many older persons will be concerned about the idea of increasing PRSI on them, for a lot of reasons but not least because Ireland's pension coverage with private and public combined is very low. As my colleague Ms Murphy said earlier, it covers 39% of average wages compared to the European average of 56%. The income replacement of our public and private pension system is low. People on lower incomes have less capacity to pay additional taxes such as PRSI. That is a problem.

Looking into the details of the proposals that the State pension or perhaps welfare would be exempt but that other pensions would be charged, one could create all sorts of inequities by doing this. For example, there could be people with no entitlement to the State pension because they were State enterprise workers, yet they are paying a different type of public pension, which according to these proposals would be fully taxed under PRSI, and they could have a lower income than somebody on the State pension who would be exempt. That makes no sense.