CPA President Criticises Discrimination In Tax System Against Self-Employed

by Amanda Banks, for LawAndTax-News.com, London

27 May 2008

Discrimination in the Irish tax system against the self-employed is threatening entrepreneurship and action needs to be taken if the entrepreneurial culture that has been the corner stone of Ireland’s economic success is not to be threatened, the President of the Institute of Certified Public Accountants (CPA), Norman J. Adams has stated.

Addressing the CPA’s annual conference in Dublin, Mr Adams stated that the tax system discriminates heavily against the self-employed, the group that is the bedrock of Ireland’s entrepreneurial culture:

“We have a deeply discriminatory and unfair situation that young entrepreneurs who are paying themselves a very modest salary – as most young entrepreneurs do to ensure that they can invest in their business – will find that they are paying three times as much tax, PRSI and levies as an employee with the same income," he stated, going on to add:

“Somebody earning EUR20,000 as an employee will have just over EUR1,000 deducted from his or her earnings by the Government, while a self-employed person with the same taxable income will see more than EUR2,800 deducted. Young entrepreneurs are, in effect, being penalised for taking the risk of starting a business, at the very time when they need financial support the most."

"And while discrimination may not be as pronounced for higher taxable incomes, it is still the case that a self-employed (person) earning EUR40,000 will have 21% more deducted in the form of tax, PRSI and levies,” Adams continued.

Ireland has benefited hugely from new business start-ups over the past two decades and it has been argued that Ireland’s economic success is founded on the efforts of people who have been prepared to take a risk and set up their own business, Mr Adams noted.

“There is surely no justice in penalising the risk takers in the form of excessive state deductions from their income while people who are employed and who are taking no financial risk benefit at their expense," he observed, concluding:

“If we want to maintain the entrepreneurial culture that has served us so well, then it is arguable that those whom take the risks should be taxed at a lower rate than employees. At the very least they should not be discriminated against."

“Discrimination like this will only put people off setting up businesses and if that happens then the economic recovery we are hoping for will be in serious jeopardy."

Recommended