The Deputy will be aware that it is the Government's view that a fair, efficient and competitive income tax system is essential for economic growth and job creation.
While it is the case that some self-employed people can pay more tax than a PAYE worker on similar incomes, it is important to understand that PAYE workers and the self-employed are taxed in different ways to reflect their differing circumstances.
Employees in the PAYE system benefit from a PAYE income tax credit worth €1,650 per annum, to which the self-assessed are not entitled. 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, there are other aspects to how the self-assessed are taxed which can be beneficial to them. For instance, there are significant timing benefits, depending on the accounting period used by the taxpayer, which are available to the self-assessed but which are not available to PAYE workers. In addition, the expenses regime for self-assessed taxpayers 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.
It is important to note that the changes to the Income Tax system introduced in Budget 2015 will benefit all those who pay income tax and or USC equally, regardless of whether they are PAYE or self-assessed taxpayers.
As regards PRSI, I assume the Deputy is referring to the 10.75% rate of employers PRSI, which is payable once an employee's income exceeds €356 per week. I would point out that a lower rate of employer PRSI of 8.5% applies where weekly income is €356 or lower. These rates of employer social insurance contributions are very low when compared internationally.
As regards the encouragement of employment by the self-employed and start-up businesses, I would draw the Deputy's attention to the JobsPlus scheme operated by the Department of Social Protection. This scheme provides cash grants to employers where they employ an individual who is classified as being long-term unemployed. The Government has made additional funds available for this scheme for 2015.
