New report recommends increasing PRSI for self-employed
Advisory group wants rate of 5.5% to fund social benefits
Print6 September 2013
A new report, published by the Advisory Group on Tax and Social Welfare, has recommended the rate of pay related social insurance (PRSI) paid by those who are self-employed be raised from 4% to 5.5%. The group has recommended the hike, by more than a third, in order to fund extra social benefits for those who work for themselves.
Minister for Social Protection Joan Burton said the group’s recommendation would be taken on board by government. "My colleagues in government and I will now carefully reflect on the findings of the advisory group on this issue and will further consider the recommendations contained in the report taking into account future developments in terms of the budgetary and fiscal situation as well as other work under way." The higher PRSI rate would be to fund the paying of long-term illness and disability benefits for the self-employed, which are not available to those who work for themselves at the moment.
But the advisory group, headed up by barrister Ita Mangan, is understood to have concluded that there is no need to extend jobseeker’s benefit to the self-employed. This is because the self-employed have access to the means-tested jobseeker’s allowance, if their circumstances allow it. The report examined applications from the self-employed for jobseeker’s allowance between 2009 and 2011 and found that 85% of the 20,000 people who applied for this dole payment were granted it.
Lobby groups have reacted angrily to the recommendations. ISME, which represents small and medium-sized enterprises, called it an example of discrimination against entrepreneurs. CEO Mark Fielding said: "Any mandatory increase in taxation on the self-employed at this stage will delay and in many cases kill business proposals, which would create jobs in the economy."
The criticism was echoed by other business groups, with the Small Firms Association saying that any additional taxes would "push already struggling owner managers out of business and fuel the unemployment crisis". Ian Talbot of Chambers Ireland said there was "no justification" for the move, adding: "Any increase should be entirely voluntary and ‘opt in’ in nature, especially given that income protection plans can be bought privately".
Under the current system, all self-employed people with an annual income of over €5,000 pay a Class S PRSI rate of 4%, subject to a minimum annual contribution of €500.
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