Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

In this Finance Bill, the Government has provided for an increase of €200 in the earned income credit to bring up to the value of €1,150 per year. This €200 increase provides a significant benefit to small business owners across the country, including retailers, publicans, farmers and tradesmen. It is estimated that the credit will be of benefit in approximately 151,600 cases next year, 2018. In view of the limited resources available in budget 2018, and all of the competing demands for amendments to the tax system, it is not possible to increase the earned income credit by €450 to €1,400 as proposed in the recommendation. Such an increase would cost more than €37 million in 2018 as compared with the €17 million first year cost of the €200 increase, which was achievable within the resources available. It would also provide for a disproportionate benefit from the budget to the self-employed in comparison with other individuals, including PAYE workers, pensioners and welfare recipients.

I accept that differences remain between the taxation of employees and the self-employed. However, it must be acknowledged that some of these differences are to the benefit of the self-employed. For instance, the self-employed continue to benefit from a broader expense reduction regime than is available to employees. There are significant timing benefits with regard to the payment of tax liabilities that are available to the self-assessed but not available to PAYE workers, depending on the accounting period used by taxpayers.

Senators will also be aware that the overall contribution to the Social Insurance Fund by the self-employed is significantly less than that of employees as no equivalent to the employer PRSI contribution is payable. They will further be aware of the commitment in A Programme for a Partnership Government to increase the earned income credit to €1,650. The budget 2018 increase of €200 is a significant further step in the right direction. It is my intention to make further progress on increasing the credit in budget 2019 subject to resources being available.

For the reasons outlined, I do not accept this recommendation.