Willie O'Dea
Question:44. Deputy Willie O'Dea asked the Minister for Finance the reason behind the changes in taxation regarding maternity benefit; and if he will make a statement on the matter. [55761/12]
View answerWednesday, 12 December 2012
Questions (44)
Written answers
The position is that it is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. In line with this principle, the majority of social welfare payments are reckonable as income for tax purposes. These include long-term payments such as the Disablement Benefit, the State Pension, Widows, Invalidity and Blind Pensions, Carers Allowance and the One Parent Family Payment as well as short term benefits such as Job Seekers Benefit. Treating these payments as income for tax purposes is essentially a matter of equity. Of course, the extent, if any, to which taxation actually arises in a given case depends on the level of income that a recipient has in a tax year. If there is no other income besides the social welfare payment, the basic personal credits in force can be expected in most cases to ensure that no tax arises on the social welfare income itself.
In addition, prior to the Budget day measure to treat maternity benefit as a taxable source of income, there were situations where an employee continued to be paid by her employer, in full, while on maternity leave and, based on her PRSI contributions, was entitled to Maternity Benefit from the Department of Social Protection and the previous non-taxation of such benefit resulted in an employee having a greater net take-home pay for the period of maternity benefit, than applied if she was at work.
The rates of Maternity Benefit are earnings-related and are set to reflect post-tax income. It was never intended that a mother gain financially by being on maternity leave. The previous system that allows for a gain, for some recipients, was anomalous and not sustainable given the current budgetary constraints, hence the need to introduce taxation measures.