ACCOUNTANTS have called on the government to level the playing field for the self-employed in the forthcoming budget, claiming that it is “perverse” that this group is taxed more harshly than employed workers.
The Consultative Committee of Accountancy Bodies (CCAB-I) said that no sector had achieved more in reducing unemployment than indigenous small and medium-sized enterprises (SME). In its pre-budget submission, the group estimates that there are 100,000 self-employed people in the SME sector.
“There is a distinct bias within the tax system against the self-employed taxpayer in comparison with how employees are taxed,” said the submission
“The self-employed are charged a premium on their tax bill. They don’t receive the employee tax credit, which adds an additional €1,650 per annum in tax over what their employed peer pays.”
Analysis by the group of last year’s budget shows that the effective rate of tax on a single employee earning €15,000 is 1.9%, while a self-employed person earning the same amount pays tax at 14.9%.
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The body has also called on the government to abolish the 3% universal social charge on self-employed incomes of more than €100,000. It is estimated that the measure would cost €125m.
The submission also recommends the introduction of a tax credit for equity investments made by entrepreneurs into their businesses.
The tax credit would be based on the commercial interest rate applicable if the money had been borrowed from a bank.
CCAB-I is also seeking a reduction in rate of the capital gains tax rate applied to entreprenuers when they sell their businesses. The current rate of 33% applies to both business assets and other investments.
The group has called for a reduction to the top rate of income tax to 39% to assist workers on the average wage. This would benefit 325,000 taxpayers earning between €30,000 and €40,000 a year at a cost of approximately €226m over 12 months.
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Brian Keegan, the director of taxation with Chartered Accountants Ireland (CAI), said: “While it would be wrong to attribute the growth in employment in the past year purely to tax policies alone, it is clear that the reduction in the income tax burden in last year’s budget reduced the employment costs and rewarded effort and work.”
CCAB-I comprises Chartered Accountants Ireland, the Association of Chartered Certified Accountants, the Institute of Certified Public Accountants in Ireland, and the Chartered Institute of Management Accountants.