EUROSTAT
Directorate E: Social and regional statistics and geographical information system
Unit E-2: Living conditions /
Doc. HBS/2000/123/00
Expert Group Meeting
Household Budget Surveys
13 December 2000
Bech Building - Room B2/464
Agenda item III
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1.Redistributive Effects of State Taxes and Benefits on Household Income
1.1. Introduction
This study estimates the degree to which income was redistributed for different types of household by Tax payments and State benefits. This study is undertaken after the results of each Household Budget Survey (HBS) are published and uses these results as its main source of information.
People pay taxes in the form of income tax, social insurance contributions, motor taxation, licences and VAT/duty on the goods and services they purchase. They benefit, on the other hand, directly through cash receipts (e.g. children’s allowances, old age pensions, unemployment benefits etc.) and indirectly through the provision of services (e.g. social welfare, health, education, housing etc.)
The information on direct taxes and social security cash benefits are collected in the HBS. Most indirect taxes are imputed from the expenditure incurred by households on the assumption that they were borne fully by the consumer. Non-cash benefits accruing to individual households were determined on the basis of usage of social security services and the average cost to the State of providing such services (excluding central administrative expenses and capital outlay).
In many cases the usage of these services is determined in terms of frequency of use (e.g. number of General Practitioner visits, number of free prescriptions obtained etc.) as declared on the HBS questionnaire. In other cases the usage is based on age, economic status etc. of individual household members. The household is used as the basic unit for analysis since it is not possible to divide such items as housing benefits, indirect taxes and subsidies on joint household expenses to individual members.
1.2. Income Redistribution Stages
Four redistribution stages are distinguished in this analysis:
- Receipt of Cash benefits
These cash benefits are direct transfers of income from the State. Some are of a permanent nature to particular categories of people (e.g. social welfare pensions). Others take the form of temporary payments during periods of unemployment or disability, or during particular phases of a person’s life (e.g. children’s allowances).
The amount of cash benefits received by households, therefore, depends largely on the number, age and economic circumstances of individual members. These cash benefits are surveyed directly in the HBS. Their value represents the payments actually being made to sample households when they were interviewed. This means that, for example, in the case of unemployment benefit or assistance receipts no account is taken of any earnings and related direct tax payments in respect of employment during other periods of the year. Correspondingly, of course, no account is taken of payments to persons in employment when interviewed even if they may be unemployed at another point during the year.
- Payments of Direct Taxes
Direct taxes take the form of income tax and social insurance contributions (employee’s share only). The amount of direct tax paid by households is related to their income and the number of workers they contain. These taxes are reported directly in the HBS and are used with out adjustment in the analysis.
- Receipts of Non-Cash Benefits
Account is taken of the State benefits (e.g. educational, medical, housing, social welfare, subsidies) specifically provided to meet the particular needs of different types of households. The value of these benefits is estimated on the basis of the average cost (excluding administrative expenses and capital outlay) to the State of providing the corresponding services to the individual households in the HBS. No account is taken of those State services which benefit the community at large (e.g. roads, law and order, general administration, etc.)
- Payments of Indirect Taxes
The amount of indirect taxes paid by households depends on how they spend their money. Motor taxation and licences are surveyed in the HBS. VAT and fiscal duty are estimated for the expenditure incurred (after adjustment for the customary understatement of expenditure on alcoholic drink) by applying appropriate tax rates. Only indirect taxes levied directly on the households are taken into account.
2. Description of the Health Sector in Ireland
2.1. Government Health Schemes
The Irish Government provides general practitioner medical and surgical services under the Schemes described below.
2.1.1. General Medical Services Scheme (GMS)
Eligibility for this scheme is income related.
By definition, persons who are unable without undue hardship to arrange general practitioner medical and surgical services for themselves and their dependants receive free medical services. A special medical card is issued to identify persons who may receive this free general medical service.
A person eligible to receive free general practitioner services for him/herself and dependants registers with the doctor of his/her choice from a list of named doctors. These doctors have entered into agreements with Health Boards. It must be noted that these doctors have the final decision on whether they accept a patient on to his/her panel. Except in certain circumstances, the doctor chosen must live less than seven miles from the person should not already have a panel of the maximum number allowed. Where an eligible person does not succeed in obtaining registration, the Health Board arranges to have him/her entered on a doctor’s panel.
Drugs, medicines and appliances supplied under the Scheme are provided through retail pharmacies. In most cases the doctor gives a completed prescription form to the person, who takes it to any pharmacy that has an agreement with a Health Board to dispense GMS prescription forms. In rural areas, where a doctor has a centre of practice three miles or more from the nearest retail pharmacy participating in the Scheme, the doctor may dispense the drugs and medicines. The doctor is paid a dispensing fee for prescription dispensed. The medicines he/she dispenses are obtained through a stock order given to a retail pharmacy participating in the Scheme, located in the doctor’s normal area of practice.
2.1.2. Drug Payments Scheme (DPS)
Under this scheme persons who are ordinarily resident in the State and who do not have a current medical card can benefit. No individual or family has to pay more than £42 in a calendar month for approved drugs, medicines and appliances for themselves or their families.
In order to benefit under this Scheme a person must register themselves and their dependants with their local Health Board. Each registered person is provided with a DPS Card, which bears a family identification number. It also shows the Revenue and Social Insurance (RSI) number, date of birth and gender code of each eligible person. There are up to 700,000 DPS cards currently in use.
2.1.3. Long Term Illness Scheme (LTI)
On approval by Health Boards persons who suffer from one or more of a schedule of illness are entitled to obtain, without charge, irrespective of income, necessary drugs/medicines and/or appliances under the LTI scheme. The GMS Board makes payments on behalf of health boards for LTI claims submitted by pharmacies.
2.1.4. Services for provision of General Practitioner Services in emergency circumstances for visitors from other states of the European Economic Area.
Eligibility for this scheme is income related.
Visitors from one of the other states of the European Economic Area with established eligibility, who require emergency general practitioner services while on a temporary visit to the State are entitled to receive from a General Practitioner a GMS prescription form for necessary medication. This medication may be dispensed in a Pharmacy that has entered into an agreement with a Health Board within the State. Pharmacies submit such forms, completed as necessary, to the GMS board for payment.
2.1.5. Dental Treatment Services Scheme
Eligibility for this scheme is income related.
Eligible Adults have access to a range of treatments and clinical procedures which comprise three separate elements of the Scheme:
- Emergency Treatment for the relief of pain
- Routine Treatment
- Full Upper and Lower Dentures
Implementation of the Scheme is on a phased age cohort basis with initial eligibility confined to Emergency Treatment for all qualified persons and Routine Treatments and a full Denture Scheme for those eligible persons aged 65 years and over.
Persons Eligible for Government Health ServicesHealth Board / GMS / DPS / LTI
Eastern / 334,031 / 250,249 / 37,317
Midland / 72,859 / 38,531 / 3,016
Mid-Western / 96,734 / 66,002 / 4,974
North Eastern / 112,673 / 64,551 / 4,855
North Western / 98,254 / 30,554 / 3,557
South Eastern / 137,281 / 76,219 / 6,239
Southern / 170,093 / 110,756 / 12,197
Western / 142,262 / 63,005 / 4,693
National / 1,164,187 / 699,867 / 76,848
% of Population / 31.09 % / 18,69 % / 2.05 %
Source: 1999 GMS report
2.2. Private Health Insurance
The Voluntary Health Insurance Board (VHI), which is a semi-state agency, provides the vast majority of the private health insurance in Ireland. Approximately 30% of the population, (1.2 million persons), are covered by VHI policies.
The policies cover “In-Patient” and “Out-Patient” health care.
2.2.1. In-patient health care
This relates to a range of surgical and specialists services in both private and public hospitals. The services covered are dependent on the type of policy the subscriber has. The Majority of costs of the services covered by the insurance policies are paid directly by the VHI. The costs the subscribers pay are related to the hospital where the surgical procedures are undertaken.
2.2.2. Out-patient health care
Subscribers may calm for expenditures for a range of out-patient services (e.g. general practitioners, consultant specialist consultations, emergency dental treatment, radiology and pathology) in a subscription year. This means, in practice, receipts are collected for a 12 month period before being submitted for refund. The refund procedure may take up to six months, depending on the complexity of the calm.
There is also an excess of £400 for a family and £250 for an individual, (i.e. only amounts above this excess can refunded).
3. Income Tax Relief for Health Expenses
For persons paying income tax, refunds may be claimed for medical expenses incurred in a tax year for which they paid income tax. In practice, receipts are collected for 12 month period before being submitted for refund. The refund procedure may take up to six months, depending on the complexity of the claim.
The medical expenses may relate to general practitioners, drugs or medicines, orthopaedic treatment, physiotherapy, medical or nursing appliances, non-routine dental treatment, radiology and pathology.
There is also an excess of £200 for a family and £100 for an individual, (i.e. amounts above this excess can be refunded).
3. The Irish Education System
3.1. Introduction
The State has constitutional responsibility for the national education system. There are ten Education Boards which function as a partnership between the Department of Education, the providers of education, parents and local community interests, including the business sector and locally elected representatives. The Department of Education concentrates primarily on strategic planning, quality assurance and budgetary responsibilities.
The structure of the system of education in Ireland owes much to history. Irish schools are owned, not by the State, but by community groups, traditionally religious groups. It is in general an aided system. The State does not itself operate the schools. But assists other bodies, usually religious, to do so. Almost 92% of the population of Ireland are Roman Catholics and religious authorities play a pre-eminent role in the realm of education.
3.2.Education Structure and Enrolments
Compulsory education is from the age of 6 to 15 years and is divided into six-year primary and a three-year lower secondary cycle. Parents may have their children educated at home provided that certain standards can be assured. However, this is an unusual practice. Parents may send their children to any state funded schools of their choice no matter where it is located.
Groups of parents and others are free, in principle, to set up their own schools and can receive the statutory subventions of the State, subject to conforming to the general regulations applying to all school authorities.
3.3. Primary level education
Primary level education commences at around the age of 5 and continues for 8 years.
The primary sector comprises primary schools (3,200), special schools (116) and non-aided private primary schools (68). Aided primary schools account for the education of 98% of children in the primary sector.
3.4. Second level education
Second level education commences at around age 12 and continues for 5 or 6 years. It consists of a three-year junior cycle followed by a two or three year senior cycle.
The secondary sector comprises of 768 publicly aided schools, 19 other State aided educational institutions outside of the main second-level system and a further 15 non-aided schools.
3.5. Third level education
The higher education or third-level sector comprises the universities, the technological colleges (both of which are self-governing institutions which receive an annual State grant and grants for capital purposes), the teacher training colleges (which are privately managed but largely financed by the state), as well as some non State aided private higher education colleges.
There are 32 publicly aided higher education institutions and 23 other non-aided colleges and institutions in this sector.
3.6. Educational Finance and Costs
The major portion of public expenditure in Ireland is borne by central government funds. Public expenditure per primary student is about IR£1,600 per annum, IR£3,000 per secondary student and IR£5,000 per tertiary student.
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