Wealthy self-employed people to benefit

VERY high-earning self-employed people will actually lose less of their income to deductions as a result of this week’s Budget. That was revealed to people attending Ennis Chamber’s Budget briefing at the Temple Gate Hotel on an icy Wednesday morning.

Fergal Cahill of Cahill Taxation Services provided an analysis of the Budget and he said the situation facing the country is very serious. “These are probably the worst times known to man, in an economic context, for Ireland,” he said.
Mr Cahill provided figures to show how the Budget would impact on earners at various levels, which showed that single self-employed people with very high incomes will actually be in a better position. According to his figures, a person on €250,000 will be €1,495 better off.
“The only winners are those self-employed, who are earning in excess of €200,000. I’m sure it’ll be picked up in the press in time,” he commented.
People in the bracket in question will be paying the Universal Social Charge at 7%, whereas in 2010, the rate they were paying the income levy at was 6%, while the health levy was also affecting them at a high level, 5%.
Mr Cahill noted the 2% increase in Deposit Interest Retention Tax, which he said aimed to get people to “take money out and invest in the economy”.
He also outlined a range of benefits that have gone or are going, such as the patent dividend, rent relief, relief on trade union subscriptions and section 248 interest relief, the phasing out of which he described as “a deterrent for investors”.
While he welcomed the lack of an increase in corporate tax, he warned the low Irish rate may come under attack. “It remains to be seen what pressures will be exerted at EU level but for now, it remains and that is to be welcomed.”
Mr Cahill also mentioned moves that are set to be introduced under the National Recovery Plan 2011-14. These include dropping the entry point for income tax from €18,300 to €15,300, introducing property tax and increasing VAT to 23% from January 1, 2014. He expressed doubt about how successfully the level of VAT could be raised, given that a previous smaller increase had to be reversed.
Dr Eoin Reeves, senior economics lecturer at the University of Limerick, also presented at the briefing, speaking about the budget and the dire state of the Irish economy.
With regard to the IMF/EU bailout, he said two questions have to be answered; firstly is it right and secondly is it sustainable?
He said many leading economists, including more than one Nobel Prize winner, are of the view that “the whole idea of lobbing bank debt on taxpayers is not right”.
Dr Reeves also questioned how sustainable it is and said there is a risk that taking so much money out of the economy would result in a debt/deflation cycle.
He said Ireland does have some things going for it, more favourable demographics than many other European countries, good productivity levels with lower labour costs and improved infrastructure. However, he said despite these plusses, the outlook isn’t bright.
Dr Reeves said the recovery policies pursued haven’t been successful. “The deflationary policies that have been pursued haven’t worked and the markets don’t believe they have worked.”
He said investment in the economy has been falling dramatically and dropped by 31% in 2009.
He said he has mixed feelings about people on low incomes being forced to make contributions to the State. “I believe everyone should contribute but this raises the spectre of incentives to work, especially with the minimum wage being cut.”
He said there had been some “low-hanging fruit” and that Brian Lenihan should have moved to tax child benefit.
The markets still may not be convinced by Ireland in 2014, he believes. While he said the country’s debt/GDP rate is similar to what it was in the late ’80s, he felt the outlook isn’t as bright now. “Recovery is unlikely to be reopened as current international conditions now are not comparable to the late ’80s.
There is still a real possibility of a default he feels, while he says a review of the bailout may be already needed. “We can’t go forward piling on debt and there is a strong case for renegotiating the deal,” he concluded.