John Brady
Question:153. Deputy John Brady asked the Minister for Finance the rationale for the abolition of the one parent family tax credit announced in budget 2014. [49001/19]
View answerTuesday, 26 November 2019
Questions (153, 154, 155)
John Brady
Question:154. Deputy John Brady asked the Minister for Finance if there is an alternative in place for separated parents who contribute to their children and share custody in view of the fact that they can no longer access the one parent family tax credit. [49002/19]
View answerJohn Brady
Question:155. Deputy John Brady asked the Minister for Finance the amount saved from the one parent family tax credit being abolished. [49003/19]
View answerWritten answers
I propose to take Questions Nos. 153 to 155, inclusive, together.
The One-Parent Family Tax Credit (OPFTC) was examined by the Commission on Taxation in 2009, and its role in supporting the labour market participation of single and widowed parents was acknowledged. The Commission therefore recommended that the credit should be retained, but that it should be allocated only to the primary carer of the child.
The OPFTC was replaced by the Single Person Child Carer Credit (SPCCC) in 2014. 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 their intended socio-economic objectives. A feature of the OPFTC was that it could be claimed by multiple individuals in respect of a single child, resulting in a considerable annual cost of over €141 million by 2013, attributable to over 104,000 claimants. This was unsustainable and the OPFTC was therefore replaced by the SPCCC from 1 January 2014. Since then, only one credit is available in respect of any qualifying child, and an individual who is a primary claimant in respect of more than one qualifying child can only receive one credit. Agreement as to who will be the primary carer of a child is a matter for the parents or guardians, and is defined for the purpose of the credit as being the person who the qualifying child is resident with for the greater part of the year. Where the custody of a child is shared equally between two individuals, the legislation provides that the primary claimant shall be the person in receipt of the child benefit payment from the Department of Employment Affairs and Social Protection. However this is a secondary provision, and the main criteria for allocation of the credit is the residence provision. If a child is resident with one parent for the greater part of the year (i.e. for a period greater than 6 months), that person should qualify as the primary carer of the child and therefore be entitled to claim the credit in their own right as primary claimant. If the primary claimant does not wish to claim the credit they may surrender their entitlement to a secondary claimant.
In 2017, the most recent year for which data are available, the cost of the SPCCC was almost €94 million, attributable to over 67,000 claimants. These figures, and costs for each year going back to 2004, are published in the Cost of Tax Expenditures document on Revenue’s website at the link: https://www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/costs-expenditures.aspx Issues concerning this credit are outlined in detail in the review of the SPCCC conducted by my Department in 2015 contained in the Report on Tax Expenditures, available online at the link: http://budget.gov.ie/Budgets/2016/Documents/Tax_Expenditures_Report_pub.pdf
I am satisfied that the SPCCC in its current form is targeting limited State resources to where they are most needed. However, I am conscious of the significant contribution made by taxpayers generally to the rebalancing of the public finances, and of the challenges that individuals continue to face notwithstanding the improving economic conditions.
It is the Government’s position that earners start to pay the marginal rate of tax at too low an income level and it is committed to reducing excessive tax rates for low and middle income earners while also keeping the tax base broad. As a result of changes in recent Budgets, USC rates have been reduced to 0.5%, 2% and 4.5%. The income level at which taxpayers begin to pay the higher rate of tax has also been increased by €2,500 and there have been increases in both the Home Carer Tax Credit and the Earned Income Tax Credit.