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Reform to self-employed PRSI contributions could be "too expensive"

Despite earlier promises that PRSI contributions for self-employed people would be reformed, the Department of Social Protection says it would have “significant financial implications”.

Image: Mark Stedman/Photocall Ireland

A PROPOSAL THAT would see business owners allowed to pay a voluntary additional PRSI payment may be too costly to implement.

Last February, Minister for Social Protection Joan Burton stated PRSI contributions for self-employed people “can and will be reformed by the end of the year”.

Speaking on RTE’s The Frontline she stated that the self-employed currently cannot voluntary pay extra contributions that would contribute to their social welfare entitlements. As it stands, self-employed business owners pay 4 per cent PRSI.

However, reform to PRSI contributions may be on the back burner, despite Minister Burton stating that change would take place by the end of the year.

A spokesperson for the Department of Social Protection told TheJournal.ie that the Advisory Group on Tax and Social Welfare is considering the issue of social welfare entitlements for the self-employed adding that:

Any measure to provide short-term benefits to those who are self-employed would have significant financial implications.

They added that any decision made in relation to voluntary PRSI contributions would “would have to be considered within a budgetary context”.

The Small Firms Association (SFA) made a pre-Budget 2012 submission meeting with Minister for Finance Michael Noonan, arguing that those business owners who are willing to pay a voluntary additional PRSI payment should be allowed do so, in order that they may qualify for all social welfare benefits as their employees do.

Patricia Callan of the SFA said the proposal was “positively received” stating that in order to encourage entrepreneurs, self-employed people should get as much protection as their employees if a business fails.

Speaking to TheJournal.ie she said she has had “ongoing discussions with the representative from Department of Jobs, Enterprise and Innovation on this Group, who says that whilst there is political support for the proposal, it will come down to the cost of provision”. She added:

Whilst that analysis is ongoing, it looks like being too expensive to get through.

However, she said that this was still a “top priority issue for implementation” to the SFA. She said:

Notwithstanding that, we have included it again in our own pre-budget submission for Budget 2013 to Minister Noonan, and SFA Chairman, Ian Martin, made a presentation on this at the last meeting of the Government’s Advisory Group on Small Business in July, which is chaired by Minister for Small Business, John Perry TD, with a view to it being included in the Government’s Action Plan for Jobs, which is due to be published in early October.

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The social insurance fund that provides for social welfare payments faces a significant shortfall.

Earlier this week, Labour’s Joan Burton and Fine Gael’s Brian Hayes were in disagreement on how to plug the fund’s shortfall with Ms Burton favouring an increase in PRSI contributions while Minister Hayes favoured a reduction in social welfare.

Asked whether he was of the opinion that this initiative is something that would create jobs and encourage more people to start new businesses the Minister for Small Business, John Perry said:

Along with other matters, this is a matter that will be discussed by the Cabinet in relation to Budget 2013 over the coming weeks, the Cabinet will then make its decision collectively and announce these decisions in due course.

The Department of Social Protection stated that Minister Burton was unavailable for interview on the issue adding:

In relation to Budget 2013, no decisions have been taken as no Cabinet discussions have taken place with regard to the Budget.

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