Minister urged to hike PRSI for self-employed
Published 06/09/2013 | 04:00
A GROUP advising Social Protection Minister Joan Burton is set to recommend that pay related social insurance (PRSI) be increased by more than a third for the self-employed.
But lobby groups for the self-employed are set to oppose proposals for a huge hike.
A new report recommends the rate should go up from the current rate of 4pc to 5.5pc to fund extra social benefits for those who work for themselves.
Ms Burton is due to unveil the proposals today from the advisory group on tax and social welfare.
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 85pc of the 20,000 people who applied for this dole payment were granted it.
However, the higher PRSI payment that the advisory group recommends for all the self-employed to pay for disability benefits is set to be opposed by business group ISME.
A decision would have to be made by the Cabinet to hike PRSI, in line with the Mangan recommendations.
Mark Fielding, of ISME, said the proposal was "madness".
"This is a 37.5pc increase for the self-employed and proprietary directors in contributions. In the current climate that is just madness," he said.
He claimed that the self-employed have always been treated unfairly by the social welfare system.
Mr Fielding called for a system to be introduced here, similar to that in other EU states, where the self-employed could choose to pay higher PRSI for higher benefits, but bigger payments are not mandatory in these countries. Taxation expert Cathal Maxwell ,of PayLessTax.ie, said some 500,000 people file a tax return for self-employed income.
Between 200,000 and 300,000 of these people only have a self-employed income, but the rest file a return because although their main income is from the PAYE system, they have additional income from pensions, rental income or dividends. In the last budget it was announced that income from rental properties, dividends and savings would be hit by PRSI from next year.
However, if the Cabinet decides to implement the Mangan recommendation for a PRSI hike it is understood the new higher rate will not hit rental income, dividends and savings interest income for those whose main income comes under PAYE.
This would save thousands of "accidental landlords" having to pay PRSI at a rate of 5.5pc on their rental income, in addition to income tax and universal social contribution.
By Charlie Weston