The Commission on Taxation has recommended the abolition of the health levy, which it says confers no right or entitlement to benefit on the contributor, and also the abolition of the ceiling on employee PRSI contributions.
The estimated additional yield to the Exchequer of abolishing the PRSI ceiling would be about €150 million in a ful year, the Commission says.
An annual contribution ceiling of €75,036 applies to PRSI contributions in the case of employees. There is no ceiling in respect of the self-employed, so once an individual's earnings exceed this cut-off point, no further PRSI is payable.
The Commission says abolishing the ceiling would "increase the tax wedge and could have implications for employment costs". It could also affect Ireland's competitive position.
But it notes abolishing the ceiling would also address the issue of equity, and could give an additional yield to the Social Insurance Fund and improve social solidarity.
It suggests the abolition of the ceiling on a phased basis, in order to minimise the impact on employees and on employment costs.
Noting that certain "inconsistencies" arise in the PRSI system because of the way exemption limits are applied, it makes recommendations to eliminate the so-called "step effect" on employees.
The Commission recommends the removal of the weekly PRSI exemption limit (€352) and the weekly PRSI-free allowance (€127) and their replacement with a "reducing, non-refundable equivalent PRSI credit" of €14.08 per week (€352 x 4 per cent).
The credit would be due in full where earnings did not exceed €352 per week, ensuring that all earners with a liability below that amount would continue to have no PRSI liability.
For earnings above €352 per week, the amount of the credit could be gradually reduced.
Recommending a separate review of the "complex" PRSI system, the Commission says PRSI has "certain characteristics of a tax" but that the system is is "not easily understood and contains a number of anomalies. It makes a number of recommendations regarding PRSI which include "broadening and rationalising the base".
On the the health levy, the Commission says it should be abolished and integrated into the income tax system "when fiscal conditions improve sufficiently to allow a transition to the new structure".
The Commission recommends further integration of the tax and social welfare systems in terms of closer "technical and policy integration, greater exchange of information and the further development of administrative cooperation between the Revenue Commissioners and the Department of Social and Family Affairs".
Noting that certain social welfare payments are exempt from tax, it says that, as a general rule, all social welfare payments should be subject to taxation. It also recommends that arrangements should be put in place "as early as practicable" to ensure that tax due on social welfare payments is collected at source by the Department of Social and Family Affairs.
When in place, those arrangements would facilitate the taxation at source of child benefit payments.
It also recommends that the national training fund levy should be abolished and "a different approach to funding the national training fund should be put in place".