Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I propose to take Questions Nos. 45 and 46 together.

PRSI is just one element of a statutory payroll deduction system that includes three parts, income tax, USC, and PRSI, which between them have three different sets of thresholds and entry points, seven bands and eight rates. Given its complexity, this is a system that most people find difficult to understand. It is expensive to administer and can be inequitable. For example, certain reliefs and benefits are available to employed people but not self-employed people.

Welfare and taxation systems which use income and other thresholds to trigger eligibility and payment rates will inevitably give rise to some unintended effects at the margins of these thresholds and these can reduce incentives for people to work or for employers to offer employment. We should therefore constantly seek ways to improve how the system works and, in particular, how it can be simplified and its benefits to contributors and taxpayers made more transparent.

As one example of how the system could be simplified and made more transparent, it might make sense to replace the USC and PRSI with one new PRSI-style charge: social insurance. This could in turn be linked to wider and better benefits. This is an option I intend to explore further once the results of the actuarial review of the Social Insurance Fund, which is currently underway, become available later this year. These results will allow us to calculate long-term costings for any changes to social insurance.

We also need to make the system more equitable, particularly for self-employed people, and I have already started this process by implementing a number of important measures as part of budget 2017.

Since March 2017, self-employed people have access to the treatment benefit scheme which includes free eye and dental exams and contributions towards the cost of hearing aids. These measures benefit over 300,000 self-employed workers and their dependants and will cost €3.5 million in 2017 and €4.5 million in a full year. Treatment benefit entitlements will also be extended from October 2017 to provide further dental and optical benefits for both the self-employed and employees. The cost of this measure is €9 million in 2017 and €47 million in a full year. Over 2.5 million workers, including the self-employed, will benefit from these additional benefits.

Self-employed workers will be also be eligible for the invalidity pension from December 2017. This is a major reform as, for the first time, self-employed people will have access to the safety net of State income supports without having to go through a means test if they become permanently incapable of work as a result of an illness or disability. It is estimated that 1,400 self-employed people will immediately qualify for invalidity pension based on contributions made to date from December 2017, giving rise to a cost of €1.5 million this year. The estimated 2018 and 2019 costs are €23 million and €38 million respectively.

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