Ciaran Lynch
Question:36. Deputy Ciarán Lynch asked the Minister for Finance if he will consider the merits of the proposal (details supplied) regarding single parent tax credit; and if he will make a statement on the matter. [4397/14]
View answerWednesday, 29 January 2014
Questions (36)
Written answers
As the Deputy is aware, the One-Parent Family Tax Credit (OPFTC) is being replaced with a new Single Person Child Carer Tax Credit from 1 January 2014. The restructured credit will be of the same value i.e. €1,650 per annum as the one-parent family tax credit and it will also carry the same entitlement to the additional €4,000 extended standard rate band, which increases it to €36,800 per annum, before liability to the higher rate of income tax arises. However, the credit will be more targeted, in that it will in the first instance, only be available to the principal carer of the child. Given the difficult fiscal environment, it is essential to review all tax reliefs, credits and incentives in order to ensure that they are properly targeted and if necessary re-focused in order that they can achieve the socio-economic objectives that are set for them. A system that allows multiple claims in respect of the same child or children is unsustainable.
The new credit is designed to be an activation measure, which was the original intention behind the OPFTC. It is designed to be an in-work benefit to support the primary carer to take up, or remain in, employment. It should not be considered as a supplementary source of income, on which the financial support of a parent depends.
The Commission on Taxation acknowledged that the One-Parent Family Tax Credit played a role in supporting and incentivising the labour market participation of single and widowed parents. However, in its recommendations it concluded that the credit should be retained but that it should be allocated to the principal carer only. The restructuring of the credit will achieve such an outcome.
As regards the potential of this change to interfere with the level of maintenance payments, if such reasoning were to be applied, then any general tax increase, as a result of an adjustment in tax credits, rates or bands could lead to similar situations. Ultimately, maintenance payments are a matter for parents and if necessary, the courts to decide. It is not possible, and indeed would not be appropriate, for the tax code to take account of every possible variable. However, as a result of the amendment which I brought at Committee Stage in the Dáil, a primary carer can relinquish the credit such that a non-primary carer can claim it. This could be done on alternate years, should the relevant individuals agree. In such manner, both carers would have the benefit of the credit and additional standard rate band but only on alternate years. This goes some way towards achieving the result that your proposal advocates.