Budget 2004

Paddyo

If you earn less than 42k then you pay 4%
More than 42k you pay only 2% (yet another justification for removing the PRSI ceiling - these people can afford it more than those on the lower rate can)

This is not quite true - you pay the 4%(except on the initial exemption amounts) and 2% on earnings upto 42k- once your taxable salary to date exceeds the 42k then you only pay the 2%.



There are two main changes to BIK for the 2004 tax year

1) Employers must now calculate the notional (BIK) amount of pay
2) PRSI wil now be charged on these notional amounts.


One of the more difficult things for people to understand maybe that if the tax amount calculated in a particular period is greater that the real basic pay, the employer must pay the revenue the difference and then collect the amount from the employee over the next payroll periods - sort of like a loan.
If the 'loan' has not been repaid to the employer by March of the next payroll year then the amount left to be paid is itself treated as a BIK.

Paddyo

Victor

Originally posted by Paddyo
1) Employers must now calculate the notional (BIK) amount of pay

So if my employer gives me a €1,000 computer as a BIK gift for home use. Do I need to pay the tax / PRSI / HL on ~=€1,000 or on the substantially larger amount (~=€1,500) I would need to be able to afford the PC myself?

Paddyo

If he gives it to you - it will be liable for BIK

If he lets you use it - but it remains his, I think 5% of the value is BIKable unless the private use is incidental - the same with mobile phones, internet connections.

Paddyo

gurramok

Originally posted by shoegirl
As far as we have been advised:

1. The standard rate tax relief for vhi/bupa remains, so if you only pay standard rate tax, you only pay the PRSI. If you pay 42%, then the standard rate is deducted, so it is taxed at a reduced rate of about 20%.

2. You also pay PRSI on the entire amount.

Again this depends on what you are earning.

If you earn less than 42k then you pay 4%
More than 42k you pay only 2% (yet another justification for removing the PRSI ceiling - these people can afford it more than those on the lower rate can)

So basically, if your subscription is worth €400 and you earn less than 28k you pay about €24 per year or €2 per month

Earning between 28k and 42k this rises to about 100 but drops slightly if you earn more than 42k due to the reduced PRSI rate.

Unless you are insured on Plan E VHI or BUPA gold the reality is that it will be offset by the small increase in the personal allowance.

Also, for lower rate tax payers its really quite marginal as only a few euro a month.

Well, I just had a look at my monthly wage slip.
The BIK tax has worked out at 12 euro cost every month, cost 144 E/yr and i'm on VHI group plan B and earn less than 28k/yr.

Where is this tax money going into ?...Hardly the health service ?

Stealth tax how are ya.

Victor

Originally posted by gurramok
Where is this tax money going into ?...Hardly the health service ?

It goes into central government funds, which ultimately pay for everything.

Originally posted by gurramok
Stealth tax how are ya.

Not quite, it is designed to stop stealthy "tax evasion" whereby people had cars, holidays, golf club membersips etc. paid for by the company and they were paying little or no tax on it.

gurramok

Not quite, it is designed to stop stealthy "tax evasion" whereby people had cars, holidays, golf club membersips etc. paid for by the company and they were paying little or no tax on it.

I never had cars, holidays, golf club membersips etc. paid for by the company.
All i had was VHI paid for as a BIK.

Hardly fair is it ?

shoegirl

I agree with the resentment that some people have about paying BIK on health insurance, but lots of people don't get their health isurance paid for them and have to fund it out of their own pocket.

I don't think its unfair to level the playing field there. If somebody is getting something for free that is not standard (and believe me, many employees get no health insurance, and barely their minimum entitlements), then I think its fair to tax it.

Johnmb

Originally posted by shoegirl
I agree with the resentment that some people have about paying BIK on health insurance, but lots of people don't get their health isurance paid for them and have to fund it out of their own pocket.

I don't think its unfair to level the playing field there. If somebody is getting something for free that is not standard (and believe me, many employees get no health insurance, and barely their minimum entitlements), then I think its fair to tax it.

The government should have been trying to encourage more people to get health insurance to ease the burden on public healthcare. This will have the opposite effect. It is now now longer beneficial to either the employees or the employers for a company to offer free health insurance in lieu of a payrise. As a result, most companies will not offer it (save the administration), and most employees will keep the money rather than spend it on health insurance themselves. Not only should VHI and BUPA not be included as BIK, but extra incentives should be given to encourage more people to get them. It would surely be much more beneficial if health inscurance was given instead of wage increases (withing reason) to help keep the cost of employment in Ireland down, and to help ease the overstretched health service.

Victor

That money would be better spent on the less well off than the better off. Tax breaks invariably benefit the better off more than the less well off. Thsi was the primary problem with the tax free status of BIK - only better off people benefitted from it.

You already get tax relief of health insurance (and PHI).

Johnmb

Originally posted by Victor
That money would be better spent on the less well off than the better off. Tax breaks invariably benefit the better off more than the less well off. Thsi was the primary problem with the tax free status of BIK - only better off people benefitted from it.

You already get tax relief of health insurance (and PHI).

By encouraging employers to offer, and employees to take, health insurance in lieu of cash pay rises, you would be pushing the benefit to more employees, including the lower earners. Those very poor people who still didn't take it up would also benefit by the freeing up of public health resources. Trying to claim that increasing the tax on health insurance benefits anyone shows a lack of understanding as to what the Government has done. That money is not ring fenced in any way, it just goes into central funding which means it is just as likely (if not more so) to be spent on a new Jet or a ministerial payrise as it is to be spent on public health.

Victor

I can see your point, but if the government is already giving tax relief @ 20%, this is the ideal way of encouraging people to provide for themselves, without costing the state too much. However, I don't see why someone on minimum wage should pay tax and PRSI on the little they get, while someone on €200,000 is getting a tax subsidised golf club membership.

The PRSI money is effectively (save Charlie dipping into it a few years ago) ringfenced in the social insurance fund.

Johnmb

Victor, I'm not arguing against PRSI on BIK, in fact I am all for it. What I am arguing against is the way health insurance is treated. Instead of treating it as a BIK, I feel they should be treating it in a way that would encourage people to take it up. That would be better served by keeping it out of the PRSI bracket, by allowing the tax credit to be operated on a real time basis, and maybe even by letting the lower earners who take it up avoid the health levy in their PRSI payments.