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Wednesday, 5th August 2020
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PRSI move welcome, but still not enough for international financial services sector Back  
The Government made a concession to the top rate of employers PRSI from 12 percent to 10.75 percent in the Budget 2002. This will come into effect from 1 March 2002. Reaction to the concessionary move is mixed. Torlach Denihan, director of the Financial Services Industry Association (FSIA) welcomes the Ministers move in this year’s Budget stating ‘that on aggregate business has made a gain and that the Irish Business Employers Confederation (IBEC) and FSIA are pleased with the decrease.’ The removal of the ceiling last year incurred a cost of E215.86 million for a full tax year whereas the decrease announced in this year’s budget will imply that the government gives approximately E349.18 back to business. It is therefore on aggregate a significant decrease he said.

The two industries most affected by the removal of the PRSI ceiling in last year’s budget were financial services and IT. Abolition of the employers PRSI ceiling meant an increase for many companies in salary costs and it was seen as a disincentive to employ people on higher wages. Reaction from the financial services sector to the PRSI change in this year’s budget is still dissatisfaction as the PRSI hike is seen as a tax on employment of more highly skilled or experienced personnel and an increase in salary budgets. Peter O’Dwyer, managing director of Gensec says that, while any decrease in the rate is welcome, for front office high skill companies, 2002 will still see alarge increase in PRSI cost over 2001 as the full 12 month tax year kicks in. In a time of continuing uncertainty in the financial services market such unavoidable cost increases obviously have to made good elsewhere and can impact on job creation. Paul McGowan, tax partner, KPMG agreed with this saying ‘The Budget 2000 decision should have been reversed. We had a competitive advantage in social costs why throw it away?’

The removal of the ceiling on employers PRSI in last year’s budget evoked an outcry from industry especially the financial services sector. The FSIA and IBEC campaigned on the issue throughout 2001 urging the Government to rethink the levy. This campaign continued up until Budget 2002 with many pre-budget submissions pleading with the government to abolish the PRSI hike. Speaking at the second annual Finance Dublin conference in March 2001, the Tánaiste Mary Harney indicated that the Government would make some concession to the industry on the issue of employer PRSI within the next budget.

As the market has slowed however salary expectations are lower than in the boom times of last March and employees are less demanding. Denihan says that it is too early as yet to lay down demands for next year but he believes the general concensus from business is positive considering that the minister had a tough year on tax revenues and the fact that he made this concession is welcome.

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