Dáil Éireann debate -
Thursday, 15 Feb 1996

Vol. 461 No. 6

Written Answers. - Tax Relief on Childcare.

Frances Fitzgerald

Question:

63 Ms F. Fitzgerald asked the Minister for Finance the consideration, if any, he has given to providing tax relief on childcare; the studies, if any, that have been carried out on this issue; the findings of this study; and if he will make a statement on the matter. [3419/96]

Minister for Finance (Mr. Quinn)

The question of providing tax relief on childcare costs has been examined from time to time in the context of how the State can provide assistance to families with children.

The Tax Strategy Group considered the issue during its deliberations prior to the budget but did not come to a final view on the matter. The issues of cost, targeting, equity, the effect on the labour market, and the black economy are relevant in this context.

There have been studies both here and in the UK on this subject. The Second Commission for the Status of Women in its report to Government in January 1993 considered the matter but did not recommend that tax relief for childcare expenses be given to working parents. The commission considered that it was preferable that any additional state assistance for childcare facilities should be provided through increased investment in childcare support and services rather than by providing tax relief to parents for work-related childcare costs. (The NESC Report No. 91 on Women's Participation in the Irish Labour Market reached the same broad conclusion.) The commission noted that tax relief would do nothing to increase the supply or quality of childcare and would not improve the training or the supply of qualified childcare workers. Furthermore, it concluded that tax relief would be of little or no use to those with low or no income and that it would be of more benefit to the higher paid than low earners.

In the UK the Institute of Fiscal Studies, in a report for the Equal Opportunities Commission entitledThe Impact of Subsidising Childcare, examined a number of alternative methods for subsidising childcare. In regard to tax relief, the report concluded that it “has little beneficial effect on work incentives and channels money towards those who are already well placed in the childcare market” (page xv, Executive Summary).

Accordingly, I have no plans to introduce tax relief for childcare expenses at this time. As the Deputy is aware, tax relief is but one of the methods by which assistance can be provided for children and may not, in fact, be the most appropriate method. The State already provides considerable assistance to parents, in particular through expenditure on child benefit, education and health services. I will, of course, keep the matter under review,