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Tax Credits

Dáil Éireann Debate, Thursday - 17 December 2015

Thursday, 17 December 2015

Ceisteanna (176)

Dara Calleary

Ceist:

176. Deputy Dara Calleary asked the Minister for Finance the cost of extending the new self-employed tax credit introduced in budget 2016 to the 173,000 self-employed persons who will miss out and to persons omitted to an amount equal to the pay as you earn credit over a three-year period; if this will encourage entrepreneurism; and if he will make a statement on the matter. [46421/15]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

As the Deputy will be aware, the Earned Income Credit (EIC) of €550 for self-employed persons introduced in Budget 2016 will be available to an estimated 111,600 persons.  The EIC is available to taxpayers with active self-employed trading or professional income, and to business owner-managers who do not have access to the PAYE credit on salary income from their business. 

The figure of 173,000 quoted by the Deputy appears to be the difference between figures provided in answers to different Parliamentary Questions in relation to the number of persons that might benefit from the possible introduction of a tax credit similar to the PAYE credit for self-assessed persons.

One such estimate referred to a figure of 284,600 persons who might benefit from an extension of the PAYE Credit to all self-employed cases, including cases subject to tax under Schedule D, proprietary directors and assisting spouses and individuals whose primary income consists of investment income.  This estimate included cases classed as self-employed where most of their gross income is non-PAYE. It is estimated based on 2013 records that some 65% of individuals with income from a self-employed trade or profession are also in receipt of PAYE income, and would therefore already be availing of the PAYE credit.

111,600 persons are expected to benefit from the EIC as introduced in Budget 2016.  This credit was specifically designed to benefit self-employed individuals who have an active trade or profession, and who do not have any other income that would generate an entitlement to the PAYE credit.

It should be noted that where a person has both employment and self-employment income, a claim can be made for both credits, but the maximum total credit value available to each taxpayer is €1,650.  This is in line with the functioning of the existing PAYE credit; employees who work in two different employments are not entitled to claim two PAYE credits, for example.

Therefore all self-employed persons with an active trade or profession, who do not have access to the PAYE credit, should be in a position to claim the EIC in 2016.

I am informed by the Revenue Commissioners that the cost to the Exchequer of extending the EIC to other self-assessed persons who do not currently qualify for the credit, including those who already have access to a PAYE credit, is in the order of €95 million, and the additional cost to further extend this credit to €1,650 (level of the current PAYE credit) is estimated to be €313 million.

It is not clear the basis on which the Deputy is querying the extension of the credit over three years, therefore the cost presented is the estimate for making the change in one year.

It should also be noted that this estimate does not take into account the ability of the credit to be fully absorbed.

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