SFA criticises policies on employers' PRSI

The Small Firms Association (SFA) has criticised the Government's decision to increase the ceiling on employers' Pay-Related Social Insurance (PRSI), saying it is a tax on jobs and contrary to a pro-enterprise policy.

In its Annual Spring Economic Statement, the SFA states that the 21 per cent increase in the employers PRSI ceiling was inconsistent with "the strategic need to improve productivity and lower costs in indigenous industry".

The PRSI ceiling for employers has increased from £29,000 to £35,000, meaning that for each employee, they must pay the insurance charge at a rate of 12 per cent on salaries of up to £35,000. Mr Kieran Crowley, the SFA's chairman, said the tax increase, announced in the Budget, was "vastly in excess of the rate of inflation or the rate of salary increase" and was "a glaring inconsistency" in Government economic policy.

"It is a deliberate, real increase in taxation," he said.

The perception was that the increase was a substitute for the reduction in Corporation Tax but employers' PRSI contributions were going to be paid regardless of a company's success.

"The struggling business is going to pay it just as much as the super-successful business. It is not a fair substitute for a profits tax," Mr Crowley said.

The SFA also called on the Government to re-focus its training strategy for the long-term unemployed, saying that recent OECD findings confirmed the inadequacy of the approach.

Efficiencies could be secured by only resourcing measures which achieved significant labour market progression rates. "The SFA is of the view that further tax reform which increases the reward for work is necessary if we are to successfully manage our growth.

"This should go hand-in-hand with more market-led training schemes and a more tightly controlled social welfare payments system."

Mr Crowley added that interest rates paid by small businesses for overdrafts and term loans were steep compared to inter-bank and competitors' rates, and contrasted with the rates paid to small depositors.

The benefits of euro participation had to be passed on, he said, if cost pressures were to be minimised.