Brian Lenihan Jnr (Dublin West, Fianna Fail)

The proposal made by Senator Cannon appears to reflect a proposed change to the income levy that section 2 of the Bill proposes to abolish, rather than the universal social charge that is replacing it. However, the proposed recommendation appears to seek to grant relief from the charge in respect of payments to a personal retirement savings account made by an employer. An employer's contribution to an employee's PRSA is treated as a benefit in kind for income tax purposes. The employee is then entitled to claim personal tax relief, subject to the relevant ceilings, in respect of that contribution, as if he or she had made a personal contribution. In effect, this means that no additional income tax charge arises in respect of the employer's contribution, provided the relevant ceiling is not breached. For USC purposes, the individual's aggregate income from all sources is subject to the charge without relief for pension contributions. This includes such items as employer's contributions to PRSA, which are treated for income tax purposes as the income of the individual.

Were I to concede to Senator Cannon's suggestion, this would result in a position where an employee could benefit from an employer contribution to the PRSA by not paying USC on the amount of that contribution. This would occur even though the PRSA is treated as the employee's personal income, but an employee who is unable to get his or her employer to contribute to his or her PRSA, and instead personally makes contributions of the same amount from his or her own resources, would suffer the USC charge. I cannot accept that this is equitable.

The whole question of relief for pension contributions, including PRSA contributions, is being examined by my Department in the context of the national recovery plan and the Government's objective to raise €700 million from the pension sector over the period of the plan. In my view, a change in this area would be inappropriate. The plan indicates that the Government is willing to engage with the industry to examine alternatives to deliver the outcome. This invitation extends to this issue as well.

I must regret the insistence of the Fine Gael Party, the Labour Party and latterly, the Green Party on the fast-tracking of this Bill.