Eoghan Murphy
Question:241. Deputy Eoghan Murphy asked the Minister for Finance if he will address the following biases in the tax code vis-à-vis self-employed persons (details supplied). [33732/14]
View answerWednesday, 17 September 2014
Questions (241)
Written answers
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.
Although employees who earn less than €352 per week are exempt from making an employee PRSI contribution, employers are obliged to make an employer's contribution, which is currently 8.5%, on their behalf, provided the employee earns in excess of €38 per week. In the absence of a similar employer PRSI element to PRSI for the self-employed, the minimum self-employed PRSI contribution ensures that a contribution to the Social Insurance Fund is made in respect of all those who work. In return eligibility for certain generous Social Protection payments is accrued.
An employer is obliged, on making any payment of earnings or emoluments to an employee, to deduct from the earnings or emoluments the amount of PRSI which is due in relation to the employment with him or her. If an employee works for different employers in the same income tax week, each employer is obliged to make deductions at the correct class of PRSI in relation to the employment with him or her only.
Section 13 (2) (a) of the Social Welfare Consolidation Act 2005 states "where in any contribution week a payment of not more than €352 per week (or the equivalent thereof) is made to or for the benefit of an employed contributor in respect of reckonable earnings of that contributor relating to an employment, a contribution shall not be payable by that employed contributor in respect of those earning from that employment". Notwithstanding the above, the employer PRSI element remains payable.