Eoghan Murphy
Question:134. Deputy Eoghan Murphy asked the Minister for Finance the reason a self-employed person pays more income tax than a PAYE earner when the Government is trying to incentivise entrepreneurial activity. [46000/13]
View answerTuesday, 5 November 2013
Questions (134)
Written answers
For the purpose of this reply, it is assumed that the Deputy is referring to entitlement to the PAYE tax credit. On that basis, the position is that the PAYE allowance, as it was then, was introduced in 1980 to improve the tax progression of PAYE taxpayers and to take account of the fact that the self-employed generally then had the advantage of paying tax on a preceding year basis. The argument was also made at the time that the general scheme of allowances for expenses discriminated against employees and in favour of other taxpayers. There have been some changes since 1980. For example, the self-employed now pay tax on a current year basis. In addition, the PAYE allowance has become a tax credit. However, significant timing benefits remain, depending on the accounting period used by the taxpayer. In addition, the expenses regime remains somewhat more liberal than that afforded to employees and therefore the self-employed can actually pay less tax when compared to a PAYE worker on the same income.
Notwithstanding the above, to extend the PAYE tax credit to the self-employed would also be extremely costly to achieve. However, as the Deputy is aware, I did announce in my Budget Speech a package of 25 measures costing over €500m to promote jobs and growth. I believe that these measures will assist new business and small business and provide support for employers in almost every sector.