The taxing of child benefit has been recommended by the Commission on Taxation. It said this would improve the equity and efficiency of the child benefit payment.
Commission chairman Frank Daly accepted that taxing child benefit would not be a straight-forward issue. There were legal and policy issues which needed to be addressed, such as the legal ownership of the child benefit payment, he said. Taxing child benefit would also would have a greater impact on larger families.
The Commission on Taxation recommended the introduction of a child tax credit to offset the additional tax payable on child benefit for those on lower incomes.
It also said that taxing of child benefit should be benchmarked against alternatives such as means testing, to establish the most effective method of achieving the aims of the child benefit programme.
The commission pointed out that the non-taxing of child benefit meant that the payment could be of greater benefit to people paying the higher rate of tax.
“This raises questions about the equity of the tax treatment of the payment,” it said. “An efficiency question also arises about the payment of child benefit to families in the higher income ranges regardless of need.”
Last year, child benefit was paid to 580,000 families in respect of 1.1 million children at an estimated cost of €2.5 billion.
Of those families, 20 per cent had incomes below €40,000, 65 per cent had incomes between €40,000 and €100,000 and 15 per cent had incomes of more than €100,000.
The National Women’s Council has expressed disappointment at the recommendation and said it would have a huge impact on families. Its head of policy Orla O’Connor said child benefit went towards the cost of childcare and those costs had spiralled in recent years.
PACUB (Protest Against Child Unfriendly Budget) said it would hold a protest march in Dublin on Saturday, September 19th to protest against the recommendation.
In other child-related recommendations, the Commission said foster care payments should continue to be exempt from income tax.
It also recommended that:
*The capital allowances for childcare facilities should be discontinued.
*The income tax exemption for childcare service providers should be discontinued.
*The exemption of employer-provided childcare from the benefit-in-kind charge should be discontinued.
*The one-parent family tax credit should continue.
*The home carer tax credit should continue.
*The widowed parent tax credit should continue.
