Budget 2017: Self-employed still being stiffed despite some concessions

As Leo Varadkar talks about self-employed being Budget "winners", TaxAssist says measures will be “of little consolation”...

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Image: RollingNews.ie

The help extended to Ireland's self-employed yesterday was, in a way, Budget 2017 in microcosm, with good intentions and marginal improvements probably not amounting to enough to leave anyone overly satisfied. 

In Newstalk Business Editor Vincent Wall's so-called "confetti Budget" colourful and scattered with not a whole lot of substance upon closer inspection – the provisions for the self-employed have been held up by the Government as particularly beneficial.

Leo Varadkar, for instance, was bullish about the subject in conversation with Pat Kenny, declaring:

"This is a very good Budget for the self-employed, they're among the winners in this. And looking after the self-employed and getting a better deal for them is one of my personal priorities."

So, with one in six Irish workers being self-employed, what is this sizeable group getting?

As expected, the Earned Income Tax Credit introduced last year was increased. Roughly 147,000 self-employed people will receive a €400 hike in their credit, but it was anticipated to be a €550 increase. While it does build upon the initial €550 tax credit, it is still way short of the €1,650 tax credit PAYE workers enjoy.

Indeed, TaxAssist, the accountancy network which advises over 6,000 self-employed clients, believes people will be "disappointed" at the size of the increase and argues that they are due a bigger break to compensate for the years in which PAYE workers have fared far better.

Alison McGinley, Managing Director of TaxAssist, said:

"If a person is earning €60,000 as a self-employed individual they could have been, up until last year, worse off to the tune of €1,650 every year. Over the course of the last 10 years this amounts to over €16,000 – a large amount. Add to this the 3% surcharge that self-employed people pay in relation to USC on income over a certain level and you can understand why they feel put upon."

TaxAssist notes that this "discriminatory tax system" would never have been introduced if the self-employed had the same political influence as bus drivers, teachers or Gardaí. While it welcomes the improved credit, they have called on Finance Minister Michael Noonan to "consider how these overpayments can be refunded".

Varadkar also pointed to the two-year extension of Start Your Own Business scheme as a key measure, while cutting the 20% rate of Capital Gains Tax (CGT) in half should help some (even if the continuing €1 million limit is miles of the UK's €10m cut-off). 

Perhaps the most welcome measures the Minister for Social Protection drew attention to, however, relate to his own department. From next year, people who pay class S PRSI will be entitled to treatment benefits for the first time.

"So that's dental tests, the optical tests  all those things that employees get," Varadkar said. "And most importantly, from the end of next year, they'll be entitled to invalidity pension. So if they become sick, they will have a social protection pension which would be non-means tested. I think that will be a great reassurance to self-employed people."

While some sat up and took note of that...

... Others expressed dissatisfaction.


AJ Noonan, chairman of the Small Firms Association (SFA), summed it up thusly:

"Budget 2017 represents a relatively modest step in the right direction in the SFA’s long-fought battle for risk takers and job-creators in the economy to be treated equally by the tax system. We welcome the €400 increase of the Earned Income Tax Credit for the self-employed but will continue our campaign for full equalisation with the PAYE tax credit, as well as pushing for the Government to abolish the additional 3% USC that applies only to the self-employed."