Speaking at a pre-Budget 2014 briefing on behalf of the Irish Tax Institute and in association with Dundalk, Cavan & Navan Chamber of Commerce, Mr Bernard Doherty, Chairman CTA North East Network said there were many tax issues impacting on the self-employed in Ireland now including the PRSI issue.
Left to Right: Paddy Malone, PRO Dundalk Chamber of Commerce; Lyn Sharkey, Vice-President Cavan Chamber of Commerce; Bernard Doherty, Chairman CTA North East Network – Irish Tax Institute & Pat O’Callaghan, CEO Navan Chamber of Commerce.
Mr Doherty said “The marginal tax rate could be set to reach a staggering 56.5% for Ireland’s self-employed if the Government presses ahead with the proposed 1.5 percentage point increase in the PRSI rate for the self-employed in Budget 2014. He said that increase was suggested earlier this month in the Mangan Report (Report of the Advisory Group on Tax and Social Welfare) in return for enhanced social welfare benefits.
“The self-employed, who number over 300,000 are already paying a marginal tax rate of 55% compared with 52% for employees”,
Employer PRSI a real burden
Mr Doherty said: “For those self-employed who also have staff in their business Employer PRSI costs remains a serious impediment to job creation and a real burden on the cost of employment”.
“Employer PRSI on lower paid jobs is set to increase in this budget. The Employer PRSI rate of 4.25% on lower paid workers (approx €19,000), introduced as part of the Jobs Initiative to encourage employment, is set to be returned to 8.5% from 1 January 2014, a doubling of the rate”.
“For employers with staff earning above that level (approx. €19,000), they continue to face a very high Employer PRSI rate of 10.75%. Recruiting extra workers becomes a huge cost and giving employees a pay increase becomes an even greater burden, with no cap whatsoever on Employer PRSI.”
Deteriorating Capital Tax environment hindering investment in Irish businesses
Mr Doherty said small businesses are also impacted by the punitive capital tax environment that has emerged over the last five years. “With loan funding difficult to access, fledgling businesses are more reliant on supportive investors. However such investment is not encouraged by capital tax rates that have increased by 65% in five years – moving from 20% to 33%”, he added.
“While we have been increasing our rates of CGT, CAT and income tax, other countries have been enhancing their offerings. A number of countries have focused on capital tax initiatives to attract business investment. This creates risks at a time when Irish investors are becoming increasingly mobile and can make comparisons with tax rates in other countries. Tax reform in the UK and our geographical proximity to Northern Ireland present particular challenges”.
Pay and File
Mr Doherty said: “The Minister has flagged that the income tax Pay and File date is likely to be changing, and probably from 2014, due to earlier budgets imposed by the EU”.
“Any change to the pay and file date is going to be very difficult both for taxpayers and tax advisers who are central to the tax administration system. If the pay and file system has to change this will be monumental. Thorough and careful consultation must take place before any changes are contemplated”.
“There are over 600,000 individuals in Ireland who file tax returns every year and we have over 5,000 AITI Chartered Tax Advisers working with them to ensure high tax compliance levels. We cannot underestimate the disruption that would be caused by any change to the current pay and file system”, he concluded.