Written answers

Tuesday, 18 September 2012

Department of Social Protection

Tax and Social Welfare Codes

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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To ask the Minister for Social Protection the steps she has taken to address the issues of tax parity and PRSI contributions for self employed workers; her views on whether the currently as constituted system discourages persons from becoming self employed due to the absence of a social safety net if business fails; and if she will make a statement on the matter. [37166/12]

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry South, Independent)
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To ask the Minister for Social Protection her views on a matter (details supplied); and if she will make a statement on the matter. [38137/12]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I propose to take Questions Nos. 639 and 741 together.

Self-employed persons are liable for PRSI at the Class S rate of 4% which entitles them to access long-term benefits such as State pension (contributory) and widow's, widower's or surviving civil partner's pension (contributory). Ordinary employees who have access to the full range of social insurance benefits pay Class A PRSI at the rate of 4%. In addition, their employers make a PRSI contribution of 10.75% in respect of their employees, resulting in the payment of a combined 14.75% rate per employee under full-rate PRSI Class A. (For employees earning less than €356 per week, the rate of employer’s PRSI is 4.25%).

Any changes to the PRSI system to extend the full range of social insurance benefits to self-employed persons would have significant financial implications and would have to be considered in the context of a much more significant rise in the rate of contribution payable.

I established an Advisory Group on Tax and Social Welfare last year and one of the issues that the Group is currently considering is the issue of providing social insurance cover for self-employed persons in order to establish whether or not such cover is technically feasible and financially sustainable. In addition, the Actuarial Review of the Social Insurance Fund, which has been laid before the Houses of the Oireachtas and will be generally available in the next few days, has examined this matter.

Self-employed individuals who fall on hard times or are without work for some time may establish entitlement to assistance-based payments. Those who have been previously self-employed can apply for the means-tested jobseeker’s allowance if their business ceases or if they are on low income as a result of a downturn in demand for their services. In general, their means will take account of the level of earnings in the last twelve months in determining their expected income for the following year and, in the current climate, account is taken of the downward trend in the economy. As in the case of a non-self-employed claimant for assistance-based payments, the means of husband/wife, civil partner or co-habitant will be taken into account in deciding on entitlement to a payment.

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