Vol. 454 No. 3
92 Mr. M. McDowell asked the Minister for Finance if his attention has been drawn to the fact that social welfare payments made in respect of children are taxed in the hands of their parents; the plans, if any, he has to review such tax liability; and if he will make a statement on the matter. [10531/95]
The child benefit paid by the Department of Social Welfare is specifically exempted from income tax liability by virtue of Section 354 of the Income Tax Act, 1967. It is presumed, therefore, that the Deputy is referring to the child dependant additions (CDAs) which are payable in addition to the basic Social Welfare payment which a claimant is entitled to.
The position is that under Social Welfare legislation the basic Social Welfare payment to which a beneficiary is entitled to is increased by an appropriate amount in respect of each qualified child dependant. The CDAs form part of the entitlement due to a claimant and are not the entitlement of the qualifying child or children concerned. The moneys paid are, consequently, income in the hands of the claimant and where the Social Welfare benefit is liable to income tax the entire amount received by the claimant is assessed for tax.
As the Deputy will be aware, the 1995 budget exempted the CDAs payable with unemployment benefit and disability benefit from income tax. This change, together with the other income tax improvements which I announced in the budget, meets the commitment in the Government's Programme of Renewal to restructure the method of taxing UB and DB in order to improve the position of those most adversely affected. This exemption, however, applies only to CDAs payable with these two specific Social Welfare benefits.
I have no plans to change the tax liability of CDAs payable with other social welfare payments which are liable to income tax.
