Stephen Donnelly (Wicklow, Independent)
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Question 83: To ask the Minister for Finance further to Parliamentary Question No. 82 of 11 January 2012, if he will release the analysis and recommendations provided to him on this issue; if directors of limited companies paying Class S PRSI, whose income exceeds €100,000 in a year, and who may have additional income as landlords or from self-employment, pay the 3% USC surcharge on any or all of their total income; and if they do not, the reason for same. [8644/12]

Michael Noonan (Limerick City, Fine Gael)
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For the purpose of this reply it is assumed that the Deputy is referring to a Proprietary Director who is a director of a company who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control more than 15 per cent of the ordinary share capital of the company. The 3% surcharge of Universal Social Charge on self-employment (Schedule D) income in excess of €100,000 was introduced in Finance Act 2011 as a transitional measure. This measure was introduced when it became apparent that self-employed income earners earning over €100,000 would be sheltered from the harsher effects of Budget 2011.

Proprietary Directors generally pay Class S (self-employed) PRSI but, for tax purposes, their income in their role as Proprietary Director is assessed in the same manner as employment income and their tax is collected under the PAYE system. This means that the USC surcharge of 3% on self-employment income is not applied to their income as Proprietary Directors. However, where Proprietary Directors have self-employment income (such as rental, investment, trading or professional income) over €100,000, this income is subject to the 3% surcharge.

Many Proprietary Directors have significant other income from a self-employment source. Of the estimated 15,000 Proprietary Directors earning over €100,000 per annum, an estimated 5,500 have self-employment income of over €100,000. These Proprietary Directors are charged the 3% USC surcharge on non-directorship income. It is estimated that €34 million will be yielded in 2011 from Proprietary Directors alone as a result of the USC surcharge of 3%.

Furthermore, Proprietary Directors have a higher tax liability than other PAYE income earners, on the same level of income, as they do not benefit from the PAYE tax credit. They may also pay more PRSI than other PAYE income earners because, unlike Class A contributors, Class S contributors do not have the €127 per week PRSI allowance. Revenue classifies Proprietary Directors as PAYE taxpayers on their income from their role as Proprietary Directors and, based on the information I have outlined, I see no grounds for altering this state to, in effect, reclassify them as self-employed.

Stephen Donnelly (Wicklow, Independent)
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Question 84: To ask the Minister for Finance if he will set out the total tax and charges burden that will follow the Finance Bill for three case studies, as follows, assuming all are single, and any other variables are standardised between them, a PAYE employee earning €200,000 per year; a company director earning €200,000 per year from that directorship; and a company director earning €100,000 per year from the company directorship plus €100,000 per year from other sources, including should the burden vary according to what those other sources of income are, setting out the variation according to the different classes of income; and if he will explain the discrepancies. [8645/12]

Michael Noonan (Limerick City, Fine Gael)
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For the purpose of this reply it is assumed that the Deputy is referring to:

1. a proprietary director, which is a director of a company who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control more than 15 per cent of the ordinary share capital of the company .

2. "€100,000 per year from other sources" is taken to mean other self-employed income (Schedule D income).

On that basis, the total taxes and charges for 2012 are set out as follows for the three case studies put forward by the Deputy. Figures are rounded to the nearest €1. In addition, variations can arise due to rounding.

Summary

The variation is due to the Employee benefitting from the PAYE (Employee Tax Credit) of €1,650 per annum and Class A PRSI having an weekly allowance of €127 which is not available to Class S contributors.

Case 1: A single PAYE employee earning €200,000 per year.

Gross Income €200,000

Universal Social Charge:

€10,036 @ 2% = €200.72

€5,980 @ 4% = €239.20

€183,984 @ 7% = €12,878.88 (€13.319)

PRSI:

Class A

€200,000 - €6,604 @ 4% = (€7,736)

Income Tax:

€32,800 @ 20% = ` €6,560

€167,200 @ 41% = €68,552

€75,112

Less Credits

Personal Tax Credit (€1,650)

PAYE Tax Credit (€1,650) (€71,812)

PAYE Tax Credit (€1,650) (€71,812)

Total Deductions (€92,867)

Net Income €107,133

Case 2: A single Proprietary Director earning €200,000 per year.

Gross Income €200,000

Universal Social Charge:

€10,036 @ 2% = €200.72

€5,980 @ 4% = €239.20

€183,984 @ 7% = €12,878.88 (€13.319)

PRSI:

Class S

€200,000 @ 4% = (€8,000)

Income Tax:

€32,800 @ 20% = ` €6,560

€167,200 @ 41% = €68,552

€75,112

Less Credits

Personal Tax Credit (€1,650) (€73,462)

Personal Tax Credit (€1,650) (€73,462)

Personal Tax Credit (€1,650) (€73,462)

Total Deductions (€94,781)

Net Income €105,219

Case 3: A single Proprietary Director earning €100,000 per year plus €100,000 per year from other sources (self –employed/Schedule D income).

Gross Income €200,000

Source A (Income from Proprietary Directorship) €100,000

Universal Social Charge:

€5,018 @ 2% = €100.36

€2,990 @ 4% = €119.60

€91,992 @ 7% = €6439.44 (€6,659)

PRSI:

Class S

€100,000 @ 4% = (€4,000)

Income Tax:

€16,400 @ 20% = ` €3,280

€83,600 @ 41% = €34,276

€37,556

Less Credits

Personal Tax Credit (€825) (€36,731)

Personal Tax Credit (€825) (€36,731)

Total Deductions under Source A (€47,390)

(Income from Proprietary Directorship)

Net Source A Income €52,610

Source B Income from other sources €100,000

(self–employed/Schedule D income)

Universal Social Charge:

€5,018 @ 2% = €100.36

€2,990 @ 4% = €119.60

€91,992 @ 7% = €6439.44 (€6,659)

PRSI:

Class S

€100,000 @ 4% = (€4,000)

Income Tax:

€16,400 @ 20% = ` €3,280

€83,600 @ 41% = €34,276

€37,556

Less Credits

Personal Tax Credit (€825) (€36,731)

Personal Tax Credit (€825) (€36,731)

Personal Tax Credit (€825) (€36,731)

Total Deductions under Source B (€47,390)

(self–employed/Schedule D income)

(self–employed/Schedule D income)

Net Source B Income €52,610

Total Deductions under source A & B (€94,780)

Total Net Income from Source A & B €105,220