Proposal to hike PRSI provokes outcry from employers’ groups

Advisory body recommends increase in social insurance for self-employed

Minister for Social Protection Joan Burton is to consider the report. Photograph: Cyril Byrne/The Irish Times

Minister for Social Protection Joan Burton is to consider the report. Photograph: Cyril Byrne/The Irish Times

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Minister for Social Protection Joan Burton said she will consider a controversial proposal to increase Pay Related Social Insurance (PRSI) for the self-employed.

In a report published today, the Advisory Group on Tax and Social Welfare recommended increasing the rate so as to extend social insurance cover to those who were permanently incapable of work as a result of long-term sickness or injury.

Currently, the 324,700 self-employed people working in the Republic are liable for PRSI at the Class S rate of 4 per cent, which entitles them to certain long-term benefits such as the contributory State pension.

However, they are not entitled to range of other benefits, including long-term illness and disability benefits.

To fund the change, the advisory group proposed increasing the current rate to 5.5 per cent, a suggestion which provoked an outcry from employers’ groups.

Ms Burton said she could not say whether such measures would be introduced as very detailed discussions on the Budget had not yet begun, and the recommendations in the report required “further consideration”.

Fianna Fáil’s social protection spokesman Willie O’Dea said: “The Minister promised reform on the anomalies in the social welfare system that precludes the self-employed from claiming jobseeker’s benefit or illness benefit.”

“The contents of the report will do nothing to encourage people to set up business in Ireland and it certainly won’t help the self-employed whose company may be in trouble,” he added.

However, chief executive of the Irish Small and Medium Enterprises Association (Isme), Mark Fielding, said:

“Any mandatory increase in taxation on the self-employed at this stage will delay and in many cases kill business proposals, which would create jobs in the economy.”

“The current system in Ireland is completely unfair, based on antiquated, bureaucratic and cumbersome legislation, which penalises the self-employed and denies them their social welfare entitlements.”

“The failure to provide supports to entrepreneurs not only sends out the wrong message in promoting an enterprise culture but also disregards and disrespects the significant contribution of these individuals to the economy.”

The Small Firms Association said the suggestion indicated “a Minister who does not understand the challenges being faced by small business owners in Ireland today.”

“The economy and Irish workers are taxed enough. Additional costs will push already struggling owner managers out of business and fuel the unemployment crisis,” SFA director Avine McNally said.

The advisory group’s report, entitled Extending Social Insurance Coverage for the Self-Employed, found the current system of means tested Jobseeker’s Allowance payments adequately provided cover to self-employed people for the risks associated with unemployment.

“In this regard, it should be noted that contrary to widespread misconceptions, self-employed people are eligible for means tested payments in the same way as employees are eligible, although there are differences in the way income is assessed,” Ms Burton said.

The Minister said that during the three-year period 2009 to 2011, there were about 20,000 Jobseeker’s Allowance claims from self-employed people, 85 per cent of which were awarded.

Ms Burton said she said the increase in the number of people back in employment was a key indicator of an economy in a strong recovery position.

“I’m happy to say Ireland is moving into that almost exactly at the time that we are entering into discussions for a structured exit from the bailout. But we still have very tight economic paramaters.

“The Live Register figures for August are 6,700 less than for July. They are 25,000 less than last year and they are 35,000 less than two years ago,” Ms Burton said.

Asked about the possibility of a second bailout, Ms Burton said that in the experience of the IMF, which was the most experienced in helping countries to exit structural adjustment programmes, there was always provision for structured exit.

The Government, as yet, technically had not asked for such, but it was a “very common feature” of structural adjustment programmes, she said. It would simply mean that the country had access to a line of credit.

“You hope never to actually have to use it. But for instance, if some extreme change of circumstances happened you would have a back-stop or a cushion available. That happens as a standard in terms of countries which have recovered.”

Ms Burton was speaking at an event to mark the publication of the annual review of Merchant Quay Ireland, which provides services for homeless people.

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