BUDGET 2016: Tax credit ‘first step’ towards equal footing

The introduction of a tax credit for entrepreneurs was welcomed in the wake of the budget as a first step in putting the self-employed on an equal tax footing as PAYE workers. 

Finance Minister Michael Noonan announced that a €550 tax credit is to be introduced for non-PAYE workers to address the disparity between the two groups.

Mr Noonan added that following a public consultation on the measures that would most benefit small business owners, the unequal treatment of entrepreneurs was identified time and again as one of the most pressing issues.

“Income tax, as currently structured, means that an employee will take home a greater proportion of their salary than a small business owner or entrepreneur on the same gross income.

"This disparity was raised frequently during the public consultation process. To start addressing this disparity I am introducing an earned income tax credit to the value of €550,” said Mr Noonan.

Business representative bodies gave a broad welcome to the introduction of the tax credit but warned that it was just an initial step along a much longer road.

“Taxpayers rightly expect equity and fairness and this budget goes some way to end the discrimination that has existed against the self-employed, through the introduction of a tax credit of €550 for 2016 which will increase in future years as resources allow,” said Certified Public Accountants Ireland chief executive Brian Purcell.

Cork Chamber president Barrie O’Connell said: “We are encouraged to see the introduction of the €550 income tax credit for those with earned income that do not have access to the PAYE credit.

"This is an important first step towards correcting the inconsistencies between self-employed and PAYE workers and is a timely step in supporting existing entrepreneurs and encouraging new entrepreneurs to the market.”

Another welcome boost to businesses was delivered by virtue of changes to employers’ PRSI with the entry point to the top rate of 10.75% increasing by €20 to €376 per week.

Like the introduction of the tax credit, however, the movement on employers’ PRSI may not go far enough, with the likes of Dublin Chamber calling for it to be waived entirely for micro businesses for three years, prior to the budget, to stimulate employment.

The long-awaited knowledge development box grabbed much of the headlines in terms of innovation supports, with a 6.25% rate.

Its unveiling somewhat overshadows the lack of any movement on the timeframe for submitting R&D tax credit claims which had been sought.

Deloitte tax partner, Louise Kelly, said further improvements to the R&D tax credit scheme could be seen in future but there were no particular amendments expected in this year’s budget.