Dáil Éireann Debate, Tuesday - 1 July 2014
110. Deputy Catherine Murphy asked the Minister for Finance the way disputes over who a primary care giver and which parent is awarded the single parent child carer tax credit are determined; if policy is being refined in this area; and if he will make a statement on the matter. [28283/14]
View answer111. Deputy Catherine Murphy asked the Minister for Finance if she has undertaken any impact analysis of the change from one-parent family tax credit with a single parent child carer tax credit; if she will commit to examining the possibility of a joint parenting agreement to allow both parents to adequately support their children; and if he will make a statement on the matter. [28284/14]
View answerI propose to take Questions Nos. 110 and 111 together.
As you are aware the One-Parent Family Tax Credit (OPFTC) has been replaced with a new Single Person Child Carer Credit from 1 January 2014. The restructured credit is of the same value i.e. €1,650 per annum as the one-parent family tax credit and also includes 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 is more targeted in that it is, in the first instance, only available to the principal carer of the child. 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 OPFTC 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.
The person who receives the child benefit payment is being used as the initial indicator by the Revenue Commissioners to identify the individuals who are likely to qualify for the new credit. However, the credit will in the first place go to the person who cares for the child for most of the year. Agreement as to who will be the principal carer of a child is a matter for the parents or guardians.
You appear to be suggesting that the credit could be jointly shared between the parents. The Revenue Commissioners have informed me that this would prove to be administratively very difficult to implement even where there is agreement among the parents, which is not often the case. In addition, as income and tax arrangements are prone to change it would require that the issue be revisited on at least an annual basis to ensure the correct tax treatment is being apportioned to each party. While a 50/50 split may suit some taxpayers it would not suit others and determining the exact split for a large number of taxpayers would place an unacceptable administrative burden on the Revenue Commissioners. However, as a result of an amendment that I brought to the measure at Committee Stage, the current legislation allows the parents to agree among themselves to each claim the credit on alternate years provided they meet the qualifying criteria.
It is essential to regularly review all tax reliefs, credits and incentives in order to ensure that they are properly targeted and if necessary refocused in order that they can achieve the socio-economic objectives that are set for them. While I understand the difficulties being experienced by those that have lost the OPFTC and who have not qualified for the new SPCCC, I am satisfied that the new credit targets limited Exchequer resources to where they are needed most.
