Dáil Éireann Debate, Thursday - 19 February 2015
74. Deputy Michael Healy-Rae asked the Minister for Finance his plans to deal with the anomaly, whereby, a self-employed person starts paying tax at €8,250 and a Pay As You Earn worker starts paying tax at €16,500; and if he will make a statement on the matter. [7646/15]
Amharc ar fhreagraAs the Deputy is aware, 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.
All tax reliefs, incentives and credits are reviewed as part of the annual Budget and Finance Bill process. However, it is important to note that the changes to the Income Tax system introduced in Budget 2015 benefits all those who pay income tax and or USC equally, regardless of whether they are PAYE or self-assessed taxpayers.
