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Irish Tax Experts Warn Against PRSI Hike

by Jason Gorringe, Tax-News.com, London

01 October 2013


The Irish Government has been urged not to implement a proposed 1.5 percent rise in the pay-related-social-insurance (PRSI) rate for the self-employed.

The increase was recommended in a recent report by the Advisory Group on Tax and Social Welfare, as a means of funding changes to the benefits system. The Irish Tax Institute has now warned that, were the Government to adopt the plan as part of its 2014 Budget, the marginal tax rate for the self-employed could reach a "staggering" 56.5 percent.

Around 300,000 individuals are classified as self-employed in Ireland. The Institute's Chief Executive, Mark Redmond, said that there is already severe disparity in the levels of PRSI paid by employees and the self-employed. "A self-employed single person on an income of EUR15,000 (USD20,262) pays almost six times as much tax and PRSI as an employee on the same income," he explained.

Employer PRSI is also causing problems for those self-employed workers who have staff in their business. Redmond believes that it "remains a serious impediment to job creation and a real burden on the cost of employment." He is concerned about the impact of an intended hike in employer PRSI on lower paid jobs from 4.25 percent to 8.5 percent, due to enter into force from January, 2014. This will make recruiting additional workers difficult and "giving employers a pay increase [will] become an even greater burden, with no cap whatsoever on Employer PRSI."

TAGS: individuals | tax | business | Ireland | insurance | employees | tax rates | revenue statistics | tax reform | trade association | trade | individual income tax | Welfare | Tax

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