Written answers

Tuesday, 23 September 2014

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Independent)
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162. To ask the Minister for Finance the position regarding tax bands for self employed persons (details supplied); and if he will make a statement on the matter. [35305/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Income tax is payable at 20% on earnings of up to €32,800 per annum for single individuals regardless of whether they are employees or self-employed. Earnings above this amount are subject to income tax at 41%.

As the Deputy will be aware however, employees in the PAYE system benefit from a PAYE income tax credit worth €1,650 per annum, to which the self-assessed are not entitled. The PAYE allowance, as it was then, was introduced in 1980 to improve the tax progression of PAYE taxpayers and to take account of the fact that the self-employed generally then had the advantage of paying tax on a preceding year basis. The argument was also made at the time that the general scheme of allowances for expenses discriminated against employees and in favour of other taxpayers.

There have been some changes since 1980. For example, the self-employed now pay tax on a current year basis. In addition, the PAYE allowance has become a tax credit. However, significant timing benefits remain, depending on the accounting period used by the taxpayer. In addition, the expenses regime for self-assessed taxpayers remains somewhat more liberal than that afforded to employees and therefore the self-employed can actually pay less tax when compared to a PAYE worker on the same income.

With Budget 2015 only three weeks away, I am not prepared to be drawn into speculation on budgetary matters at this time. However, I will say that as part of the normal budgetary preparations, my officials are currently examining potential options for changes to the tax system for my consideration as part of the overall Budget package.

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