Opinion Who will be most disappointed with Budget 2018? The self-employed and residential landlords

Discussion in 'Budget 2018' started by Sarenco, Oct 10, 2017.

  1. torblednam

    torblednam Frequent Poster

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    I dunno, I only read the last few posts before mine, and I just like arguing (especially with Tommy!), so.... :D

    Here's a real kicker about the USC surcharge: it also applies to income from employments outside the state, because these are taxed as Schedule D Case III rather than Schedule E.

    A relative of mine was working through a Norwegian payroll in their oil industry in a well paid job (150k - 180k), whilst also being tax resident here. He'd already paid hefty deductions in Norway, and you would think that he had no further liabilities here under the DTA... however, he was hit for USC on the whole lot, including the 3% on the amount over 100k. I think that would most likely fall foul of EU treaty principle freedom of movement of workers, as I don't see how he could be taxed at a higher rate for being employed abroad than here. Not sure if it would apply to Norway (EEA but not EU), but would surely apply to EU.
     
  2. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    I agree that this can't be the official justification for the surcharge though it possibly explains why there is not a general outcry against what appears a purely discriminatory imposition.

    So what might that official justification be? Technically the only tax difference between PAYE and Non PAYE income is precisely as it states, the former is paid more or less as you earn it whilst with the latter you have use of the taxman's money for say another year. This was certainly the justification for the original PAYE allowance when interest rates were very high. I presume for the constituency we are talking about (high flying businessmen) the use of the money for over a year is of considerably more value than current negligible bank deposit rates. The saved interest on any loans suggests itself as a benchmark. Is 3% surcharge proportionate to this benefit?

    Let's face it the true political origins are as follows. The 3% surcharge was justified for all high earners at the time of our crisis. But senior civil servants had already borne the brunt of the correction, so it was felt they had had enough. The only constitutional way to exempt them from the surcharge was to exempt all Non PAYE income. That's my take. I Googled for justifications of the surcharge and found none.
     
  3. Páid

    Páid Frequent Poster

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    Taxes don't need to be justified.
     
  4. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    They need to follow the constitution. IMHO the surcharge does need to be justified as not being an affront to the constitution.
     
  5. Sarenco

    Sarenco Frequent Poster

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    The Minister recently explained the origins of the 3% USC surcharge in response to a PQ:-

    "The 3% USC surcharge is payable on self-assessed income in excess of €100,000. When the USC was introduced in 2011 it was accompanied by a series of other reform measures designed to simplify the tax system and widen the tax base in order to raise the revenues required at that time.

    One of these measures was the removal of the €75,000 income ceiling for employees, above which PRSI was not payable. This ceiling was removed for all employees in 2011, with the result that employees on incomes in excess of €75,000 became liable to an additional 4% charge on that portion of their income. At the same time the PRSI rate for self-assessed income earners was increased from 3% to 4%.

    The 3% USC surcharge on non-PAYE income in excess of €100,000 was introduced in tandem with the removal of the PRSI ceiling of €75,000 as, in the absence of this measure, self-assessed high income earners would have benefitted when compared to their PAYE counterparts from the tax package introduced in Budget 2011. On the basis of fairness, this could not have been countenanced at the time."

    Or to put it another way:–

    Employees were put in the same position as the self-employed in 2011 (there was never a PRSI ceiling on self-assessed income) but optically that didn't look good, so we slapped a 3% surcharge on self-assessed income above a random point!

    http://oireachtasdebates.oireachtas.ie/debates authoring/debateswebpack.nsf/takes/dail2017071200083
     
  6. Páid

    Páid Frequent Poster

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    Specifically which section of the Constitution?
     
  7. Sarenco

    Sarenco Frequent Poster

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    The Minister then went on justify the ongoing discrimination on the following grounds:-

    "With regard to equality of treatment, the Deputy will be aware that, while Employer PRSI contributions of 8.5% and 10.75% are payable in respect of employees, no similar contribution is payable by the self-employed. In addition, the self-employed also continue to benefit from a broader expense deduction regime than that available to employees."

    The first argument is a complete red herring. If the Minister wants to re-calibrate the rate of PRSI contributions by employers, on the one hand, and employees/the self-employed, on the other, then he should go ahead and do just that. Imposing a USC surcharge on self-assessed income above a random cut-off point does not achieve anything like the same result.

    The second argument is completely disingenuous. The self-employed can only claim deductible expenses on the basis of receipted expenditure that is incurred "wholly, exclusively and necessarily" in the business. How could claiming legitimate business expenses possibly justify a surcharge?

    So why is there no outcry about this obvious ongoing discrimination?

    Well, to be fair, the accountancy bodies have been pointing to this unfairness for a number of years (e.g. http://www.cpaireland.ie/media-publications/institute-news/2017/10/10/budget-2018-continued-tax-discrimination-against-the-self-employed-very-regrettable).

    However, I suspect the real reason is that there is little sympathy for any taxpayer that is fortunate enough to have self-assessed income over €100k and the numbers involved are too small to matter much politically.
     
  8. T McGibney

    T McGibney Frequent Poster

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    That's not a very valid counter-rebuttal. :p

    I would argue that the scope for a self-employed person to effectively and sustainably evade tax is heavily limited by Revenue enforcement. Put simply, its a mug's game, on a par with drunk driving.

    And you didn't address my point in relation to the householders VAT evasion "cash job" phenomenon. The naive plumber or painter who falls for this scam will be nailed to the wall whenever they are found out.

    This will include being made stump up all VAT arrears. (And all may take is one or two complaints to the Revenue to put them on their case.)

    But the householders who induced or conspired with them to give a "no VAT" price will never be touched - unless of course they themselves are self-employed.
     
  9. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    Somebody mentioned constitutional challenge. I'm not a constitutional lawyer but I presume it would be non constitutional to tax fair haired people differently from dark haired folk. Possibly the same can be argued of the 3% surcharge though the issue is intertwined with other different aspects of the taxation of PAYE vs Non PAYE such as PRSI, expense deductions, timing of payments etc.

    As Sarenco's helpful posts illustrate, the authorities certainly seem to think they need to "justify" the surcharge.
     
  10. Páid

    Páid Frequent Poster

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    I'm not a constitutional lawyer either.

    It seems to me that Revenue are allowed to discriminate e.g. age tax credit - isn't this one of the nine grounds for discrimination?
     
  11. torblednam

    torblednam Frequent Poster

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    What's that got to do with Revenue?
     
  12. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    Well, of course, the whole tax and social protection system is riddled with discrimination - disability allowance, child benefit, non contributory OAP etc. etc As already stated I presume using colour of your hair as a factor would breach some of Dev's wise creation.

    Personally I think there would be no chance of the surcharge being deemed a breach of the Bunracht. Besides the complication alraeady mentioned it is not even a surcharge targeted at individuals. It is targeted at Non PAYE income and even "PAYE people" can have that.
     
  13. Páid

    Páid Frequent Poster

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    Revenue are responsible for tax credits.
     
  14. torblednam

    torblednam Frequent Poster

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    Revenue administer the tax system, they don't make the laws. Did you see Revenue deliver the budget on Tuesday?

    That's like saying the Gardai make laws.
     
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  15. Páid

    Páid Frequent Poster

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    You could have said that Revenue were not responsible and that Finance (possibly ?) are.

    The important point is well made by Duke of Marmalade above.

     
  16. torblednam

    torblednam Frequent Poster

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    Finance, as in the MINISTER for finance? I.e. Politicians rather than civil servants.

    I'll try another analogy; if you were being sued tomorrow, it'd by the person suing you, not their solicitor or barrister, or the trial judge.
     
  17. Páid

    Páid Frequent Poster

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    I meant the Dept. of Finance. You're just obfuscating the point at this stage.
     
  18. Sophrosyne

    Sophrosyne Frequent Poster

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    Paid,
    Irish laws, including tax law, are made by the national parliament, the Oireachtas; not government departments.
     
  19. Páid

    Páid Frequent Poster

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    Not all laws - Statutory Instruments are introduced by Departments and bye laws are introduced by local councils (among others).

    The point is that taxes may be discriminatory irrespective of who introduces them.
     
  20. Sophrosyne

    Sophrosyne Frequent Poster

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    Last edited: Oct 13, 2017
    Statutory Instruments are secondary legislation which allows either a government minister or bodies to whom legislative power has been delegated by statute to legislate in relation to detailed day-to-day matters arising from the operation of the relevant primary legislation.

    However, they cannot change primary legislation.

    For instance, the Income Tax (Employments) (Consolidated) Regulations 2001 (S.I. No. 559 of 2001) deals with the detail of how the PAYE system is to operate but it cannot introduce, amend or abolish tax reliefs.

    Of course they may. They discriminate between residents and non-residents, between those of different personal status - married, single and widowed, those who have children and those who do not, the employed and the self-employed, companies partnerships and sole traders, et seq.

    That is the nature of taxation systems worldwide.
     
    Last edited: Oct 13, 2017