It is not possible to provide an accurate cost to the Deputy of the provision of tax relief in respect of childcare fees, as reliable figures are not available for the numbers of children in childcare, the costs incurred by their parents and the number of parents who are paying tax.
However, a tentative figure can be calculated by using the 2013 "Indecon Report on Support for Childcare for Working Families and Implications for Employment" and statistics provided by the Department of Social Protection in relation to children in receipt of child benefit.
The Indecon report concluded that the average cost of childcare per pre-school child per week was €133 or €6,916 per annum in 2013. According to DSP figures on the numbers and ages of children in receipt of child benefit in 2013, there were approximately 489,500 children under 6 and 385,600 between the ages of 6 and 12.
If tax relief at the standard rate of 20% was provided on the costs of childcare in respect of even half of these children, it would result in a cost to the Exchequer of in the region of €340 million per annum in respect of those aged under 6 and €290 million in respect of those aged between 6 and 12; a total of €630 million per annum. However, it must be borne in mind that these figures are extremely tentative and the real cost could be much higher.
It is worth noting that with a view to increasing childcare places available, an exemption from tax is already available on income of up to €15,000 per annum for individuals who mind up to three children in their own home. The cost of this relief in 2012, the most recent year for which figures are available, was €1 million and it was availed of by 560 individuals.
Any tax relief for childcare fees could be seen to unfairly discriminate against those individuals who decide to stay at home to care for their children. While wanting to encourage participation in the workforce, equally we cannot say to individuals who stay at home to care for their own children that they are making a less valuable contribution to society.
In addition, tax relief would only be of benefit to those in the tax net and it is estimated that in 2015, 38% of income earners will be exempt from income tax. I would also have concerns that, based on experience with similar tax reliefs designed to reduce the cost of demand led goods and services in the past, any tax relief for the costs of childcare could inevitably be capitalised into the price for childcare services, resulting in a net transfer to childcare providers and no cost reduction for working parents.
