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Budget 2011: Bumper payday for self-employed high earners

Self-employed single people earning over €200,150 a year will be better off in 2011, thanks to generous reform of the PRSI system.

Image: Julien Behal/PA Wire

THOUGH THEY MAY be in the minority, self-employed people earning over €200,000 have reason to celebrate the passage of Budget 2011 – it means that they will actually be better off under the new measures.

TheJournal.ie’s Budget calculator reveals that single self-employed people earning exactly €200,150 a year will be totally untouched by the Budget measures announced yesterday – and that those earning above that amount actually end up paying less to the state than they did previously.

The strange results come about because of the reform of the PRSI and social insurance systems, which see the income levy scrapped and replaced by a new Universal Social Charge.

Single people earning the ‘magic number’ of €200,150 (or single-income married couples earning €206,150) see a modest increase in their income tax, and are hit significantly by the new Universal Social Charge, but any hit they take is offset by the abandonment of the income levy and by the reduction of PRSI, which is being phased out.

For single people on the ‘magic number’, income tax increases by €936, and the Universal Social Charge by €13,329 – but the drop in the income levy (€7,009) and PRSI (€7,256) render the new increases redundant.

The reform means that a single self-employed person on €250,000 a year stands to gain €1,495 over the course of 2011 – while those earning €500,000 stand to benefit to the tune of €8,995.

The select few earning €1m a year through their own businesses benefit to the tune of €23,995 – or €1,999 every month – under the new reforms. Similar figures are returned by the Budget calculator of accountancy firm Deloitte.

The reforms were passed by the Dáil in the same vote as the one which reduced the minimum wage by €1 an hour – cutting the annual wage earned by a minimum wage employee by 11.5% a year.

Labour finance spokesperson Joan Burton described the “bonanza” for the self-employed as “a common theme with this Fianna Fáil government” and said her party had proposed a new increased tax rate for couples earning over €200,000 of 48%.

Jimmy Kelly, the Irish regional secretary of trade union UNITE, said the union was asking its members “to make their voice heard to persuade those politicians with a shred of conscience” to oppose the Budget.

“Politicians stand up and say it is fair because everybody feels the pain, but these figures show that this is a blatant lie.”

Announcing the Budget measures in the Dáil yesterday, finance minister Brian Lenihan said the current system of taxation was “no longer fit for purpose”, saying that the 8% of Irish people earning €75,000 or more currently paid 60% of all income tax.

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