Why do the self-employed pay higher taxes?

I am self-employed, in that I set up a business in 2006, giving up a highly paid full-time job to do so. I also invested my SSIA and remortgaged a property to fund the business and took on a huge amount of risk
If the business had gone to the wall (looked likely for the first 4 years) then I would have had no social welfare safety net.
Fast forward and my company employs over 100 staff and exports are growing extremely strongly.
Like all other members of my company, my salary gets paid through PAYE and I do not claim expenses.
However I am now being charged 11%USC because I am an easy target, despite the impact I and the thousands of other self-employed have on our economy.
Were I to sell the business, any gains would be subject to 33% CGT.

It takes a brave person to start a business and all the tax system does is discriminate rather than encourage such bravery.
 
You keep missing the point that employees don't pay employer's PRSI - their employers do.
I'm not missing anything. You seem to think employers are a disconnected entity oblivious and unconnected with pay levels. The more employers PRSI an employer has to pay, the less they have available to pay employees.

From the government's point of view, for a particular person at a particular income level, they get less revenue in total from that person working if they are self-employed than if they are employed. Why do you think that is fair?
 
amgd I don't understand your post. If you are paid a salary under PAYE then you are not self employed. Also this 3% surcharge is not new.
 
From the government's point of view, for a particular person at a particular income level, they get less revenue in total from that person working if they are self-employed than if they are employed.

Are you really sure that is the case? It might be true of income tax (if you accept the fallacious argument that employer's PRSI is paid by the employee) but its certainly very debatable once VAT & other business taxes are taken into account.
 
amgd I don't understand your post. If you are paid a salary under PAYE then you are not self employed. Also this 3% surcharge is not new.


Good spot. He/she is an employee of the company and new 11% will not be applicable!
 
Are you really sure that is the case? It might be true of income tax ... but its certainly very debatable once VAT & other business taxes are taken into account.
On a like for like basis, yes I would be pretty sure - the person will still be doing the same job, charging VAT, contributing to profit etc.

Joe the plumber goes from self-employment to working for BigPlumbingCo - does the exact same work and charges the exact same amount so collects the exact amount of VAT, has the same contribution to profit (business taxes) as before - except now instead of paying himself a 40K gross self-employed salary, BPC only pays him 36,117 because they have to pay 3,883 employers PRSI. Self-employed he would have taken home 28,865 but employed he only takes home 28,613.

if you accept the fallacious argument that employer's PRSI is paid by the employee
Who said employers PRSI is paid by the employee? It is paid in respect of an employee not by an employee. But it is still money that the government gets as a result of the employed person's employment.
 
Who said employers PRSI is paid by the employee? It is paid in respect of an employee not by an employee. But it is still money that the government gets as a result of the employed person's employment.
Comment is fair as in the absence of this liability on the employer he/she/it would have capacity to pay the employee a higher gross salary.
 
Whatever about the different rates of prsi for employees and self employed, once self employed can get sick pay, jobseekers benefit, etc, only then can we have a fair comparison numbers wise.
 
Whatever about the different rates of prsi for employees and self employed, once self employed can get sick pay, jobseekers benefit, etc, only then can we have a fair comparison numbers wise.

Good point. The self-employed have much lower entitlements than employees.

Brendan
 
Good point. The self-employed have much lower entitlements than employees.
No they don't. The contributory pension is by far the most costly benefit provided - probably 65% of the cost of providing all PRSI-covered benefits (5.3B of 8.3B) - and that's current cost - accruing costs will be much higher for the contributory pension.

If you look at Welfare's cost to provide each benefit and compare the 13 benefits provided for Class A and the 5 benefits provided for Class S, Class S contributors are entitled to benefits costing about 70% of the total. And Class S pays 4% whereas Class A pays (or has paid on their behalf) 14.75%.

So which is better value:
14.75% of income to provide all covered benefits?
Or
4% of income to provide 70% of covered benefits?

Hmmm...
 
I assume that this thread should read "Why do the self-employed pay higher USC?"

Do they pay higher income tax than employees?
 
The Revenue Income Distribution Statistics for 2011 - the latest available year - would suggest that the self-employed have a higher effective rate of income tax than employees in the income bands from €0 to €35,000.

However, in the income bands from €35,000 onwards, employees have a higher effective rate.
 
Whatever about the different rates of prsi for employees and self employed, once self employed can get sick pay, jobseekers benefit, etc, only then can we have a fair comparison numbers wise.

I thought the self employed didn't get sick, or was that couldn't afford to get sick.
 
I like it Bronte and well done amgd28.

If self employed people find their own work why do the unemployed find none?
 
Hey. Just wondering why there hasn't been more of a backlash about the self-employed being hit with an 11% USC over 100,000, while employees are at 8%. I don't see the logic.

Unless I'm not seeing the wood from the tress here, isn't that ultra blatant discrimination - and even anti-small business?
 
Noonan's insinuation (RTE Radio 1 interview) that the self employed could to a certain extent manipulate the timing of payment of tax seemed to be used as a justification for them being singled out for such an imposition. I too am quite amazed at the silence of this particular segment of earners. Not a whimper out of them at the tax or at Noonan's inference.
 
I have said it before - this surcharge is not new. But the way it was announced it sounded new. It seems it was intended to give the impression that Labour had partly got their pet wish.
 
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