Fianna Fáil Finance spokesperson Michael McGrath has described the budget announcement of an earned income tax credit as falling well short of full equality for the self-employed and non PAYE income earners.
Deputy McGrath was speaking following the release to him of information which indicated that 111,600 people will benefit from the change in 2016. A previous parliamentary reply indicating that extending the PAYE tax credit to all non PAYE income earners would cover 284,600 cases. As a result of the restricted nature of the measure being introduced in 2016, 173,000 people living on income derived from savings and other non PAYE sources will continue to be discriminated against in the tax code.
Deputy McGrath commented “Not for the first time, we find that the government is over selling a measure it announced on multiple occasions. The tax change introduced in the budget to help the self-employed is a lot less generous than the government would like to have us think.
“Those who are living solely on income deriving from savings are effectively excluded. In 2011, the latest year for which figures are available, 42,000 people had mainly non PAYE income. More than half of these earned less than €25,000. They will still be discriminated against, particularly so on low incomes.
“For example, in 2016 a person with €15,000 of income, who does not qualify for the new tax credit, will pay over 10 times more in tax, PRSI and Universal Social Charge than a PAYE employee. The actual cost of the measure to the Exchequer is just €18m in 2016 which underlines its limited nature.
“It is my view that, insofar as possible, people on the same income should pay the same level of tax. Restricting the credit to what is referred to in the tax code as Case I and Case II is very hard to defend on equity grounds.
“This is not the only aspect of the tax and social welfare code where the self-employed are discriminated against. They are subject to a means test for Jobseeker’s Benefit and have no entitlement to an invalidity pension and occupational injuries benefits, which employees can avail of from contributions made at the PRSI Class A rate. As a country, we have a long way to go before we can say that we truly value the self-employed and their contribution to the economy,” concluded Deputy McGrath.