Dáil Éireann Debate, Thursday - 25 April 2013
55. Deputy Clare Daly asked the Minister for Finance if a person in receipt of maternity benefit, but no other top-up payment from their employer, will have their maternity benefit taxed as a result of recent changes implemented by the Government. [19639/13]
View answer63. Deputy Ciarán Lynch asked the Minister for Finance if it his intention to tax maternity benefit payments; if mothers who are not in receipt of full employer top-up payments will be disproportionately affected (details supplied); and if he will make a statement on the matter. [19623/13]
View answerI propose to take Questions Nos. 55 and 63 together.
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 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.
As a result of maternity benefit payments becoming liable to income tax for all claimants, from 1 July 2013, a number of possible tax outcomes could arise:
1. An individual may pay no income tax on their maternity benefit payment as their tax credits will be sufficient to reduce their tax liability to zero.
2. An individual may pay income tax on some or all of their maternity benefit payment solely at the standard rate.
3. An individual may pay income tax at the standard rate on a portion of the maternity benefit and the higher rate on the balance of the maternity benefit payment.
4. An individual may pay income tax on all of their maternity benefit payment at the higher rate.
I am fully aware that some employers do not pay a top up payment to their employees whilst on maternity leave. However, in such circumstances many mothers will not be subject to income tax on their maternity benefit payments as their personal credits will ensure that no tax arises on the social welfare income itself. 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. Accordingly, the tax liability on maternity benefit payments will ultimately depend on the total income of the individual or couple concerned in the tax year or years concerned.
There are situations currently where an employee continues to be paid by her employer, while on maternity leave and, based on her PRSI contributions, is entitled to Maternity Benefit from the Department of Social Protection. The non-taxation of such benefit currently results in an employee having a greater net take-home pay for the period of maternity benefit, than 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 individuals would gain financially by being on maternity leave. The introduction of the charge to income tax on maternity benefit payments will ensure that those with identical incomes will be treated the same for income tax purposes.
I would point out though, that maternity benefit payments will remain exempt from Universal Social Charge and PRSI.
