Written Answers. - Family Support Services.
Derek McDowell
Question:
63
Mr. McDowell
asked the
Minister for Social, Community and Family Affairs
his views on the replacement of family income supplement with a comprehensive family tax credit scheme which can enable long-term unemployment assistance recipients with dependent children to secure a permanent net profit from re-entering employment with particular preference to child dependant allowances.
[18884/99]
The family income supplement scheme provides an incentive to low-paid employees with families to take up or remain in full-time employment by ensuring that such people are better off than they would be if they were instead relying on welfare payments.
It has been suggested that the replacement of FIS with a system of tax credits would ease the take-up problems associated with FIS and could ensure that all eligible families would automati cally receive the payment. There are, however, a number of difficulties associated with this approach which would need to be addressed.
First, a substantial number of FIS claimants have income which comes below the tax exemption limits appropriate to their family size. In order for such families to benefit from a tax credits system the payment would have to take the form of a refundable tax credit. Refundable tax credits are not a feature of the current tax system here and the practicalities of introducing such payments would require further consideration.
Second, entitlement to FIS is not determined solely on the basis of the claimant's earnings. Account is also taken, for instance, of family size, hours worked, the likely duration of employment, as well as any earnings which the spouse or partner of the claimant, where relevant, may have. Not all of this information is collected at present through tax returns made to the Revenue Commissioners, and the tax system is therefore not currently capable of automatically identifying the households with an entitlement to FIS. Any payment through the tax system would therefore still have to operate on the basis of the individual in the first instance supplying the additional information needed to establish entitlement to the payment.
A third area to be addressed relates to the nature of the payment. FIS is a weekly payment which is paid on a current-year basis. In the USA, for example, where a system of earned income tax credits operates, payment is generally received in the form of a tax refund after the end of the year. While there is provision for an advance payment option enabling employers to pay the credit throughout the year, a negligible number of recipients avail of this option.
In summary, it is clear that any move to a system of tax credits would have significant implications which would have to be carefully examined. Pending such an examination, it remains unclear whether the outcome would significantly advance the interests of low paid workers with families.
