Duke of Marmalade
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Please Sarenco, don't be so pedantic. Listen to what I mean not what I say...In any case, a sole trader can always ensure that she gets paid all of the earnings of the company and thus avoid any possibility of double taxation. QUOTE]
With respect Duke, this sentence makes absolutely no sense. A sole trader refers to a self-employed individual who does not trade as a member of a partnership. If a sole trader receives earnings through carrying out a trade then obviously these earning are not being received by the company. You can't have it both ways!Sole trader may be technically the wrong word, I was merely stating the obvious that a 100% proprietary director can withdraw all available earnings from her company, thus avoiding double taxation.
I'm getting above my pay grade here but there may be some confusion in terminology. I can accept that doctors and solicitors may not be able to hide under a limited liability shelter but cannot unlimited companies be set up?
I didn't understand your ER PRSI point. Possibly the system in the US is symmetrical, it does not seem so in Ireland. ER PRSI seems a straight discrimination against employment versus self employment. QUOTE]
My point is simply that even in a jurisdiction where a self-employed person pays a higher level of social security (to reflect the fact that there is no employer's social security paid in respect of that individual), this is subsequently netted out under the income tax system to ensure that the employee and self-employed are ultimately put in the same net position. There is simply no discrimination against either the self-employed or the employee.What has the US got to do with this? 12.5% Employer's PRSI for over 100K salaries (which is the object of discussion) secures no substantive value whatsoever and is a clear distortion against the PAYE person versus the self-employed.
Fair enough, we learn a little more every dayNo, it is an offence for any body corporate or director, officer or employee of a body corporate to act in such manner as to imply that the body corporate is qualified, or recognised by law as qualified, to act as a solicitor. A body corporate include a company incorporated with unlimited liability.
I am not aware of any similar legal prohibition that is applicable to medical doctors but, as pointed out above, there are other good reasons why a professional would not chose to practice through a company.
Could you point to any previous contribution in favour of the discriminating treatment of the self-employed under the tax code that has not been comprehensively refuted? I'm trying not to be argumentative but you are adopting a very strong position for somebody with no axe to grind.
Please Sarenco, don't be so pedantic. Listen to what I mean not what I saySole trader may be technically the wrong word, I was merely stating the obvious that a 100% proprietary director can withdraw all available earnings from her company, thus avoiding double taxation.
Not sure how to respond to that! Do you mean that a proprietary director can draw a salary that reflects the entire amount of any net income/gains of a company such that the company has no profits and therefore no liability to corporation tax? I don't think anybody would dispute that but I thought you were arguing that a self-employed individual could make use of a company in order to defer personal taxes without any downside. My apologies if I misunderstood you but could you explain what tax advantage are you arguing accrues to a self-employed person by operating through a closely held company?
What has the US got to do with this? 12.5% Employer's PRSI for over 100K salaries (which is the object of discussion) secures no substantive value whatsoever and is a clear distortion against the PAYE person versus the self-employed.
Ok, I'll try once more and leave it at that:
The argument was made that it was appropriate to levy a higher rate of income tax/USC on the self-employed because no employer's PRSI was paid in respect of that self-employed individual and that this represented an indirect benefit to the self-employed person. My point was that even in a jurisdiction (the US) where a self-employed individual pays the equivalent of PRSI at a rate that equates to the combined employee/employer rate, this is then provided for by way of deductions in the income tax code so that the self-employed individual and an employee ultimately end up in the same net position.
Sorry if you can't follow my line of reasoning but that's the best I can manage.
Edit to add:
It is certainly true that the State receives less overall revenue due to the fact that no employer's PRSI is paid by or in respect of a self-employed individual. Is that your point? This seems entirely reasonable because the State incurs a greater potential liability in respect of an employee (e.g. if he/she ceases to be employed). To put it another way, a self-employed person receives less benefit from the State for his/her PRSI contributions. Bear in mind that PRSI was designed as a form of social insurance - as with all insurance, increased cover requires higher premiums.
I find your style very confusing, maybe you can rephrase.
PAYE credit and no USC surcharge, what this thread is all about.Not sure how to respond to that! Do you mean that a proprietary director can draw a salary that reflects the entire amount of any net income/gains of a company such that the company has no profits and therefore no liability to corporation tax? I don't think anybody would dispute that but I thought you were arguing that a self-employed individual could make use of a company in order to defer personal taxes without any downside. My apologies if I misunderstood you but could you explain what tax advantage are you arguing accrues to a self-employed person by operating through a closely held company?
I think I get your point now. I suppose what I meant is that I started off thinking it was highly discriminatory against the S/E but then contributions, esp. from orka, plus my own questioning as to why people volunteer for self employed tax status got me wondering.Well, you said that you had formed the view, based on other posts, that the system was not tilted against the self-employed. Could you identify what posts you are referencing that have not been refuted? In other words, what is the basis for your opinion?
This is key. I don't think ER PRSI on over 100K garners any real extra benefit for the punter. It is a tax pure and simple. Your point has some validity at the levels where unemployment benefit actually kick in.Edit to add:
It is certainly true that the State receives less overall revenue due to the fact that no employer's PRSI is paid by or in respect of a self-employed individual. Is that your point? This seems entirely reasonable because the State incurs a greater potential liability in respect of an employee (e.g. if he/she ceases to be employed). To put it another way, a self-employed person receives less benefit from the State for his/her PRSI contributions. Bear in mind that PRSI was designed as a form of social insurance - as with all insurance, increased cover requires higher premiums.
PAYE credit and no USC surcharge, what this thread is all about.
But proprietary directors are not entitled to the employee tax credit...
To be fair, I don't know whether proprietary directors are treated as self-employed for the purposes of the USC surcharge - perhaps another poster could clarify.
This is key. I don't think ER PRSI on over 100K garners any real extra benefit for the punter. It is a tax pure and simple. Your point has some validity at the levels where unemployment benefit actually kick in.
Ah, now I think I see your point. I think what you are really arguing (and I don't want to put words in your mouth so please correct me if I have misunderstood you) is that the level of the employer's PRSI contribution is too high in view the benefits accruing to their employees. I think we can find common ground here, bearing in mind that many self-employed people have employees and are required to discharge employer's PRSI for the benefit of their employees.
But surely this is an argument for reducing employer's PRSI or re-balancing the employer/employee contribution rates and not an argument for clobbering the self-employed with additional taxes above those paid by employees? Does that sound reasonable or do you think I am missing something?
We're getting close sarenco. I have to accept that the PAYE credit of 1650 seems unfair given that its initial rationale (high interest rates and prolonged tax deferral) no longer apply. ER PRSI on over 100K seems wrong and so does 3% surcharge for the S/E. Do two wrongs make a right?Ah, now I think I see your point. I think what you are really arguing (and I don't want to put words in your mouth so please correct me if I have misunderstood you) is that the level of the employer's PRSI contribution is too high in view the benefits accruing to their employees. I think we can find common ground here, bearing in mind that many self-employed people have employees and are required to discharge employer's PRSI for the benefit of their employees.
But surely this is an argument for reducing employer's PRSI or re-balancing the employer/employee contribution rates and not an argument for clobbering the self-employed with additional taxes above those paid by employees? Does that sound reasonable or do you think I am missing something?
We're getting close sarenco. I have to accept that the PAYE credit of 1650 seems unfair given that its initial rationale (high interest rates and prolonged tax deferral) no longer apply.
Agreed. Also, the minimal timing advantage has been further diminished by the substantial increase in DIRT and the fact that the self-employed have always been liable for PRSI on deposit interest.
ER PRSI on over 100K seems wrong
I can certainly agree that the level of an employer's PRSI contribution is too high, particularly at higher salary levels.
and so does 3% surcharge for the S/E.
Obviously I agree with this point.
Do two wrongs make a right?
USC is deductible at the same rates for both employed and self-employed.
Self-employed and others, including employees, who have non-PAYE income in excess of €100,000 pay an additional 3% on the excess over €100,000.
The main difference in the application of PRSI and USC between the self-employed and employees, is that the self-employed are entitled to deduct capital allowances from gross income before PRSI and USC are applied.
You must have missed my post in reply to BB’sEdit to add:
It is certainly true that the State receives less overall revenue due to the fact that no employer's PRSI is paid by or in respect of a self-employed individual. Is that your point? This seems entirely reasonable because the State incurs a greater potential liability in respect of an employee (e.g. if he/she ceases to be employed). To put it another way, a self-employed person receives less benefit from the State for his/her PRSI contributions. Bear in mind that PRSI was designed as a form of social insurance - as with all insurance, increased cover requires higher premiums.
Good point. The self-employed have much lower entitlements than employees.
The State does incur a greater liability for employees compared to the self-employed but it is 40% to 50% greater – not the multiples that would warrant total PRSI of 14.75% vs. 4%.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...
Are employees not entitled to deduct normal business expenses (including capital allowances) from non-PAYE income before PRSI and USC are applied? Genuine question.
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