Taxing the self-employed: Government punishes riskers in Budget 2015


Government ministers like to encourage the spirit of enterprise and to invoke the merits of self-employment. And they do so to promote a dynamic and competitive economy, and to increase employment. But despite the ministerial rhetoric, the income tax measures announced in the Budget continue to discriminate heavily against the self-employed – whether those are on low or high incomes. A self -employed worker on annual earnings of €15,000 – less than half the average industrial wage – next year will pay 14.9 per cent of gross income in tax. His or her civil service counterpart will pay 1.9 per cent on that same sum. The self-employed person will pay €2,235 – almost eight times the €285 tax bill of the civil service employee.

Why should two people receiving the same gross income pay a different tax rate on their earnings? No Government Minister has yet offered a credible explanation for the unfair tax treatment of the self-employed, as against employees in the PAYE sector. The tax inequity, which discriminates against the self-employed, starts at low-income levels and continues at higher levels.

The divide between both sets of taxpayers is growing, and it has widened further with the Government’s decision to make the self-employed pay an 11 per cent rate of Universal Social Charge on earnings over €100,000. Employees will pay 8 per cent. But while the self-employed are taxed more heavily, they also secure fewer social benefits.

For example, when out of work they cannot claim job seekers benefit. As Independent Dáil deputy, Lucinda Creighton, noted during the budget debate, the USC rate of 11 per cent that applies to the self employed who earn over €100,000 annually, is now close to the 12.5 per cent rate of corporation tax that the Government, rightly, has sought to defend. Why then does a Government that claims it wants to reward and encourage risk taking, as a means of boosting employment, then tax the risk takers so much more heavily than the rest?