why are people who start/run a business being penalised extra?

ei.sdraob

Why do people get penalised by the tax system for starting/running a business?
I am specifically referring to loosing tax credits for being a director (each company has to have at least 2 directors) or self employed but still having to pay prsi of course

according to this calculator

i would 3.7% worse of next year (as compared to 2.8% for someone who is not a director) if i get paid same amount (if i am still in business that is! none of this job security craick either! ) from own enterprise as compared to last year

the average of the "41,832 other people have used this calculator" at the time of this posting is 2.3% loss
so thats how the government are encouraging business by taxing more the people who decide to take a risk in creating a company (and jobs)

DeVore

I've been an entrepreneur for over a decade. Its like swimming against the tide.

Its like they dont want jobs to be created.

DeV.

ei.sdraob

DeVore wrote: »

I've been an entrepreneur for over a decade. Its like swimming against the tide.

Its like they dont want jobs to be created.

DeV.

tell me about it


aside: sorry for messing up post i wasnt sure whether to use existing thread on incomes or start new one
but i think this warrants a separate discussion since there is a sizeable penalty on anyone who bothers to starts/runs a company

alejandro1977

ei.sdraob wrote: »

Why do people get penalised by the tax system for starting/running a business?
I am specifically referring to loosing tax credits for being a director (each company has to have at least 2 directors) or self employed but still having to pay prsi of course

according to this calculator

i would 3.7% worse of next year (as compared to 2.8% for someone who is not a director) if i get paid same amount (if i am still in business that is! none of this job security craick either! ) from own enterprise as compared to last year

the average of the "41,832 other people have used this calculator" at the time of this posting is 2.3% loss
so thats how the government are encouraging business by taxing more the people who decide to take a risk in creating a company (and jobs)

that's what happens with a Gov where most inherit their seat - and a lot were teachers before

Did Brian Cowen start up his own legal practice ?

(not very entrepreneurial in any case)

Stark

People want job creation but not job creators. More accurately everyone seems to think creating jobs is the Government's role, ie: they want a piece of the sweet public service job action.

smelltheglove

Being self employed is like a crime the way they go on sometimes. My husband unfortunately lost his job and we have to jump through loops to get sorted because I work for myself.

The amount of times I have been questioned on why dont I have an accountant and why should they believe me about what I earn is unreal. My husband was even told at one stage that it would be a lot easier for him if I wasnt self employed, the country is backwards, the government either have their own agendas or are complete and utter thicks, which is more likely?

To encourage job creation they should be giving incentives to people who work for themselves, the government cannot be responsible for all new employment, they are laying people off themselves, any extra money they take off entrepenuers is less money those people can afford to spend on new staff. What we need in government are entrepenuers, people with real thinking minds, who can think outside of the box and consider the roundabout effects each decision can make not school teachers and solicitors.

namloc1980

PAYE employees get a tax credit for being employed. But self-employed people get no special tax credit. This is clearly bananas, the only way this country is going to get back on it's feet is if people go out there and make things happen but the amount of red tape and additional taxes and rates etc. that self-employed people have to put up with is unreal. It really is not worth starting your own business in this country. If the government was serious about this all self-employed people should at least get some sort of tax credit for their efforts, similar to the PAYE credit. And anyone who opens a business today should get an additional credit for say the first 5 years of their business, or get extra credits if they employ people.

DWCommuter

namloc1980 wrote: »

PAYE employees get a tax credit for being employed. But self-employed people get no special tax credit. This is clearly bananas, the only way this country is going to get back on it's feet is if people go out there and make things happen but the amount of red tape and additional taxes and rates etc. that self-employed people have to put up with is unreal. It really is not worth starting your own business in this country. If the government was serious about this all self-employed people should at least get some sort of tax credit for their efforts, similar to the PAYE credit. And anyone who opens a business today should get an additional credit for say the first 5 years of their business, or get extra credits if they employ people.

Im quoting this but its in no way an insult to the very good posts above, just the most recent in a line of thought that I really agree with.

Ive been self employed since I left college in 1993. I will admit that the supports available in the early to mid 90s were good and there certainly was a pro entrepreneur system in place. However I noticed two succinct changes in the late 90s and then the noughties.(my opinion. Not the law.;))

1. FDIs started to dominate Government policy and this was to the detriment of new business start up support and associated incentives.

2. The pro construction policies from 2002 onwards also had a direct impact on support mechanisms to new business start ups.

Essentially if your business idea didn't benefit from FDIs or construction, it was extremely difficult to get support. I speak from experience in both areas. As the economy took off, grants and other forms of support for small indigenous businesses fell behind the overall economic growth patterns. You were either in IT or property or an associated industry or you were left to paddle your own canoe. The country thought it was above offering support to a start up.

Interestingly the back to work scheme run via the social welfare system is a further indication of the states attitude to encouraging enterprise. Since 2009 its length and rates have been halved. Instead of a decreasing support over 4 years, its now over two years. (I havent seen the latest figures)

I conclude that we never really encouraged enterprise among our citizens, paid it lip service and generally left it to other nations to come in and do it for us. The employment created out of the Celtic Tiger mirage that was heavily dependent on construction was just fluke and never sustainable. Now that it has all gone tits up, our latest budget features nothing to encourage self employment that could lead to creating jobs. This aspect of our economy has been abandoned when its really needed.

Just my opinion after years of trying to better myself, contribute to the economy/society and create something that could stand the test of time, grow and create jobs. But tonight I just feel like saying, **** it all.

Flimbos

Even though the property boom is long gone, the current government is still trying to flog the dead horse with the new stamp duty measures, Brian Lenihan even uttered the words, "stimulate the property market". Those words should be consigned to history. It's over, move on.

This will be one of the first things I'll be bringing up when the politicians come canvassing. The building boom is gone, FDI is shaky, what are they going to do to support small business, and encourage employment at this level.

PCPhoto

Flimbos wrote: »

Even though the property boom is long gone, the current government is still trying to flog the dead horse with the new stamp duty measures, Brian Lenihan even uttered the words, "stimulate the property market". Those words should be consigned to history. It's over, move on.

This will be one of the first things I'll be bringing up when the politicians come canvassing. The building boom is gone, FDI is shaky, what are they going to do to support small business, and encourage employment at this level.

Seriously - I must have missed that .... I wonder has he ever heard of the phrase ..."Flogging a dead horse"

thebman

We shouldn't be really surprised that FF only tried to encourage Construction industry startups now should we?

How many of them are on boards of construction companies and own multiple properties. Nama Wine Lake has a spreadsheet showing quite a few revealing names of directors on companies with loans in NAMA.

No wonder it took the IMF/ECB to finally get Anglo Shutdown (read renamed).

Scofflaw

We're treated by Fianna Fáil as if we were tax-dodging semi-criminals rather than wealth creators, and I can only presume that's because their views of self-employment are somehow coloured by their own views on the use of 'business expenses'.

Speaking of the Nineties, and IT - at one point my training company sought Fás certification for some of our courses on Internet technologies. We were told we could only have Fás certification for our courses if our trainers had been Fás certified - our point that there were no Fás certified training courses for the Internet, and that there was therefore a catch-22 in their reasoning appeared to fall on deaf ears. To add insult to injury, we were actually training Fás staff on Internet technologies at the time.

Nor has there been much other support for small IT startups at any time. The apparent support in the late Nineties was concentrated on a handful of 'stars' like Baltimore, and more went into disastrously silly ventures like eircom's Rondomondo. After that, of course, you couldn't get financial support for anything that wasn't property related.

I somehow can't see Labour becoming the friend and champion of the self-employed - will Fine Gael step up to the plate?

cordially,
Scofflaw

srsly78

ei.sdraob wrote: »

Why do people get penalised by the tax system for starting/running a business?
I am specifically referring to loosing tax credits for being a director (each company has to have at least 2 directors) or self employed but still having to pay prsi of course

according to this calculator

i would 3.7% worse of next year (as compared to 2.8% for someone who is not a director) if i get paid same amount (if i am still in business that is! none of this job security craick either! ) from own enterprise as compared to last year

the average of the "41,832 other people have used this calculator" at the time of this posting is 2.3% loss
so thats how the government are encouraging business by taxing more the people who decide to take a risk in creating a company (and jobs)

I'm a director, and I'm gonna be 5.2% worse off according to calculator. Big deal, still get to dodge 90% of tax anyway. You are doing something wrong.

DeVore

You're not a director sir. You, are a thief.


And I dont believe you anyway.

DeV.

View

Scofflaw wrote: »

We're treated by Fianna Fáil as if we were tax-dodging semi-criminals rather than wealth creators,

Well, with the right drafting of relevant legislation, it is easy to qualify for that title.

Now, if you just decided to become a "Social Partner", you'd have no problem - you'd even get to have "Tea 'n' Biccies" at Government buildings.

srsly78

DeVore wrote: »

You're not a director sir. You, are a thief.


And I dont believe you anyway.

DeV.

Eh it's all perfectly legit. Just like the way we pay ourselves minimum wage.

johnnyskeleton

DeVore wrote: »

I've been an entrepreneur for over a decade. Its like swimming against the tide.

Its like they dont want jobs to be created.

DeV.

They are still in the mindset that we can get 100k people working for multinationals who will employ 300k to build shiny offices and apartments for these new rich and the taxes from these new builds will employ 300k public servants. For the rest of people, they can either fend for themselves or get generous dole payments and thus we create an economic miracle.

What is long lost is the idea that someone who starts off selling cheaply imported shoes out of a small market stall can go on to run a successful multinational chain store, or that someone who starts off making a computer programme in their bedroom can go on to make a company that is recognisable across the world, or that someone who starts up a small website can expand to employ thousands of people.

They have this idea that jobs come from: 1) established businesses coming here to avail of tax breaks, 2) public private partnerships and 3) a select group of developers and "investors". Thus, government policy is to ignore start ups and to concentrate on pandering to the big boys.

Of course, another reason why is possibly that the majority of the people in Ireland want it like that, and they don't like people setting up their own businesses and getting above their station. Therefore, there are no votes in encouraging small enterprise, only in tax breaks for big business. And so long as the number of self employed people is small and disparate, nothing will be done about it.

johnnyskeleton

namloc1980 wrote: »

PAYE employees get a tax credit for being employed. But self-employed people get no special tax credit. This is clearly bananas, the only way this country is going to get back on it's feet is if people go out there and make things happen but the amount of red tape and additional taxes and rates etc. that self-employed people have to put up with is unreal. It really is not worth starting your own business in this country. If the government was serious about this all self-employed people should at least get some sort of tax credit for their efforts, similar to the PAYE credit. And anyone who opens a business today should get an additional credit for say the first 5 years of their business, or get extra credits if they employ people.

To be honest, I wouldn't mind if they abolished the PAYE credit and put nothing in its place. I accept that higher taxes are inevitable. Equally, I don't think the self employed should get any handout or any special treatment. However, I object to the fact that we are treated less favourably than the employed.

Japer

View wrote: »

Now, if you just decided to become a "Social Partner", you'd have no problem - you'd even get to have "Tea 'n' Biccies" at Government buildings.

not to mention a seat on some board somewhere, a nice little perk which some of the union heads also got;)

jmayo

DeVore wrote: »

You're not a director sir. You, are a thief.


And I dont believe you anyway.

DeV.

Even though I may agree with you, I have to say if any one of the rest of us (well me anyway :rolleyes:) had said that we would be infracted and not be receiving thanks from a mod. :rolleyes:

And yes I know who you are D.

SC024

srsly78 wrote: »

I'm a director, and I'm gonna be 5.2% worse off according to calculator. Big deal, still get to dodge 90% of tax anyway. You are doing something wrong.

Mind Sharing your tips on how you do this?

hmmm

The self employed (and taxpayers) have no visible and powerful lobby group. I don't agree that people in Ireland begrudge the self employed to a large degree, they simply don't understand what people who are self employed have to go through. IBEC is for big business, ISME I rarely see and the Chambers of Commerce occasionally get a look-in.

SC024

goat2 wrote: »

did you not realise that in this country the more you work the more you are penalised, the only people treated like gods are the leeches who have spent the last 10 yrs drawing the dole,

That is very true

ongarite

Looks like the self-employeed are getting one last shafting from FF before they leave government.

Amendment to Finance Bill reducing USC on medical card holders & to fill the shortfall from this vote winning move, the USC on the self-employed is to be raised a further 3%.

Scofflaw

ongarite wrote: »

Looks like the self-employeed are getting one last shafting from FF before they leave government.

Amendment to Finance Bill reducing USC on medical card holders & to fill the shortfall from this vote winning move, the USC on the self-employed is to be raised a further 3%.

Since that caused me a brief moment of "aargh, what now?", it needs clarification - the extra 3% is not on all self-employed income, but on self-employed income over €100k:

Mr Lenihan said the rate for medical card holders would be reduced from 7 per cent to 4 per cent. He said the move would cost the Exchequer about €80 million and the self-employed would will pay a higher levy to offset the cost.

He said self-employed people will pay an additional 3 per cent surcharge on incomes over €100,000.

cordially,
Scofflaw

later12

srsly78 wrote: »

Eh it's all perfectly legit. Just like the way we pay ourselves minimum wage.

I don't think this is commendable but i live in the real world and I have to say that given how much anyone wishing to set up a privately held company in Ireland has it against them from the start, I secretly don't really hold that against you.

I realise that this is tax revenue and is ethically and morally wrong, but what this poster is talking about is not an uncommon practice among the self employed and is just part of the different worlds, or perhaps parallel universes, within which business and government often seem to operate.

Ireland has to start getting a whole lot more business friendly if it wants to get itself out of this mess. The Universal social charge change is another symptom of a government uneasy with or unfamiliar with the entrepreneurial mindset, it is hair pulling stuff and I hope it will not characterise the next administration.

SkepticOne

The problem for independent businesses is that from the government's perspective they are constantly being approached by businesses for various concessions and measures and in many cases are granted those concessions. The government could produce a long list of the thing they did for this or that business group. They would probably be surprised to be told they are not business friendly given what they are doing for the various vested interests.

What the government wants is to be at the centre of things dishing out favours. It is therefore in their interest to make things generally hard so that help can be given to specific groups. This process works in favour of business that can be organised into large lobby groups like bankers, publicans, the construction industry but works against small businesses selling unique products. Unfortunately it is this latter category of businesses that the country needs.

later12

SkepticOne wrote: »

This process works in favour of business that can be organised into large lobby groups like bankers, publicans, the construction industry but works against small businesses selling unique products. Unfortunately it is this latter category of businesses that the country needs.

Enterprise Ireland, Shannon Development, IBEC, NCPP, Forfas? Similar groups exist for indigenous industry and they are well capable of political lobbying.

The problem, I am afraid, is the Government, who follow the pattern of many previous administrations in being unhelpful towards the promotion of business. Ireland is not a business friendly country, profit is practically a dirty word. The Irish people's negative attitude toward wealth and wealth creation is the most significant hurdle that they will have to overcome in the coming decade, in my opinion.

ucd.1985

namloc1980 wrote: »

PAYE employees get a tax credit for being employed. But self-employed people get no special tax credit. This is clearly bananas..

The reason for the credit is due to the advantage of the goverment receiving tax from these people at continuous intervals which helps with the public finances.

There is a huge financial advantage to an individual who can earn income and only have to hand over tax payable on this income up to 9 months later.

Sure you could put the tax due in a bank account for a few months which would then help offset against the tax payable.

Moaning about the PAYE tax credit is nonsense in my opinion.

paul71

ucd.1985 wrote: »

The reason for the credit is due to the advantage of the goverment receiving tax from these people at continuous intervals which helps with the public finances.

There is a huge financial advantage to an individual who can earn income and only have to hand over tax payable on this income up to 9 months later.

Sure you could put the tax due in a bank account for a few months which would then help offset against the tax payable.

Moaning about the PAYE tax credit is nonsense in my opinion.

Sorry UCD this is incorrect, Company directors pay PAYE at the same time as all other taxpayers and their PAYE/PRSI is included in the companies monthly P30. Also Preliminary Tax for the self employed who are not directors is payable in advance at 100% of the prior year or 90% of the current year. Only the balance due in excess of the preliminary tax paid upon completion of the actual return is due 9 months later, and if that balance exceeds 10% of the total due to actual earnings being higher than estimated at date of payment of prelim tax you become liable to penalty interest at a rate which far exceeds commercial borrowing rates.

ucd.1985

paul71 wrote: »

Sorry UCD this is incorrect, Company directors pay PAYE at the same time as all other taxpayers and their PAYE/PRSI is included in the companies monthly P30. Also Preliminary Tax for the self employed who are not directors is payable in advance at 100% of the prior year or 90% of the current year. Only the balance due in excess of the preliminary tax paid upon completion of the actual return is due 9 months later, and if that balance exceeds 10% of the total due to actual earnings being higher than estimated at date of payment of prelim tax you become liable to penalty interest at a rate which far exceeds commercial borrowing rates.

1. Never made reference to directors, I am strictly talking about self employed non directors.

2. In reference to the nine months - an self employed individual can earn money in January and not have to pay tax on it till the preliminary income tax installment on 31 Ocotober of that year.

3. The same applies in relation to the 10% not due until the return needs to be sunbmitted. This 10% is more than likely made up of income earned in late Nov / Dec and the tax associated with this could once again be put an account an earn interest for 9 months.

Hence they could put the tax associated with this income into a savings account and earn interest on this amount for 9 months.

HivemindXX

The assumption is that the self employed will dodge a lot of taxes which the PAYE workers have no opportunity to. In my experience this assumption is well founded.

I'm self employed, in a bogus "you're a company so we don't have to pay you any benefits" kind of way. My accountants constantly question my expenses, but not in the way you might think. They want to know why I am not claiming for things that are standard practice. The fact I never use my phone for work purposes apparently wouldn't stop me claiming it as an expense for example.

I had a conversation with someone in the same boat as me who was telling me that expenses aren't widely abused. She told me that she claimed travel to a training course in her home country as an expense. Since she hadn't actually done any training I told her this was not a valid expense, but to her mind the fact that she could have done training that weekend instead of just going home for a weekend away meant she was entitled to charge her travel as an expense.

I know someone who was planning to convert herself to a PAYE worker in her own company for the minimum amount of time required to qualify for the state pension. As soon as the requisite time had passed they would convert themselves back to being a director.

Self employed people have significant advantages in how they handle their taxes over PAYE workers. Dishonest self employed people (and you can judge for yourself how many of them there are) have massive advantages.

pwd

Because grassroots small businesses should be the backbone of the economy for a developed nation. Multinationals will just relocate.

So they want to stop them from being feasible to make sure the country stays ****ed up.

They clearly want the country to be ****ed up, otherwise their actions would generally make no sense.

It's like when they said we'd become a knowledge economy while *massively* cutting funding for research.

It makes sense when you realise they are playing a big practical joke.

SC024

ucd.1985 wrote: »

The reason for the credit is due to the advantage of the goverment receiving tax from these people at continuous intervals which helps with the public finances.

There is a huge financial advantage to an individual who can earn income and only have to hand over tax payable on this income up to 9 months later.

Sure you could put the tax due in a bank account for a few months which would then help offset against the tax payable.

Moaning about the PAYE tax credit is nonsense in my opinion.

This huge advantage your talking about is fine if your earning megabucks but for anyone just earning a wage its a non issue

I'm a director and my tax is deducted from my wages weekly abd paid monthly via our companys P30. So by your ligic should I not get my PAYE Credit back?

HivemindXX

HivemindXX wrote: »

I know someone who was planning to convert herself to a PAYE worker in her own company for the minimum amount of time required to qualify for the state pension.

I think you got the wrong end of that stick.

srsly78

HivemindXX wrote: »

I know someone who was planning to convert herself to a PAYE worker in her own company for the minimum amount of time required to qualify for the state pension. As soon as the requisite time had passed they would convert themselves back to being a director.

wut? No you don't.

Directors are PAYE, but they pay class S prsi. Which entitles them to state contrib pension. http://www.welfare.ie/EN/Publications/sw19/Pages/sw19_sect1.aspx