Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I will read the speaking note on the section in order that we establish our base. I will then try to deal with the individual queries raised.

Employees paying full PRSI, including civil and public servants appointed after 1995, are entitled under the Social Welfare Acts to maternity benefit payments payable by the Department of Social Protection. These benefits consist of the following payments: maternity benefit and adoptive benefit in Annex 1 and health and safety benefit in Annexe 2.

Maternity benefit is a payment for employed and self-employed individuals who satisfy certain PRSI contribution conditions on their own social insurance record. The current rate payable depends only on the recipient's earnings in the relevant tax year and is subject to a minimum payment of €217.80 and a maximum payment of €262 a week. Maternity benefit is currently payable for 26 weeks and some 90% of claimants are paid a maximum €262 per week, which equates to a total payment of €6,812.

Many employers, including most Departments and State agencies, continue to pay normal salary to employees while they are on maternity, adoptive or health and safety leave. Currently, the relevant social welfare payments are not taxable. In circumstances where an employee continues to be paid by her employer in full while on maternity leave, the current non-taxation of these payments results in such an employee having a greater net take-home pay for the period she is out of work than she would have if in work. It was never the policy intention that a financial gain would accrue to those on such leave. The current system that allows a gain for some recipients of such benefits is anomalous and unsustainable in current economic circumstances. As members will recall, I took a similar approach to illness and occupational injury benefits in the Finance Act 2012 to avoid a similar situation. In line with all social protection payments, these benefit payments will continue to be exempt from the universal social charge and PRSI. The charging of income tax on these benefit payments will commence on 1 July 2013. The anticipated income tax yield in 2013 is €15 million, with a yield of €40 million in a full year. It is a significant yield, as members will see, because the payment is quite big. I have outlined part of the general policy that persons should not enjoy bigger take-home pay while out of work than in work.

On the overall principle of taxation in regard to social welfare payments, the general principle is that, as far as possible, income from all sources should be treated equally for taxation purposes. 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 the disability benefit, the State pension, widow's, invalidity and blind person's pension, carer's allowances, the one parent family payment, as well as short-term benefits such as jobseeker's benefits. Treating these payments for income tax purposes is essentially a matter of equity. I am not saying that if one's only income is from these sources it is taxable. Clearly, it is below the threshold for tax, but when there is other income in addition to these benefits, they are reckonable for tax. That is the point I am making in reply to Deputy Michael McGrath's question on the general policy issue, but we are prepared to look at exceptional cases also.

A number of questions were asked about the position on tax rates. Deputy Michael McGrath, supported by Deputy Pearse Doherty, spoke about employers who did not pay salaries or wages to staff on maternity leave.

Deputy Pearse Doherty spoke about employers who do not pay salary or wages to people who are out on maternity leave. I have a note which covers that in general terms. The precise number of recipients who will be liable for income tax on the benefit is not available. However, I understand the Department of Social Protection has estimated that the average weekly number of maternity benefit recipients in 2013 will be 22,800, including those who will not have an increased liability to income tax. 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 arise. An individual may pay no income tax on her maternity benefit payments as her tax credits would be sufficient to reduce her tax liability to zero. Due to the length of time a person is out of work, she may not consume her full tax credits in that year. In circumstances in which the employer does not pay, the tax credit may reduce the tax liability to zero. It is not true to say that those who do not get paid while on maternity leave will have to pay full income tax on this benefit. A second possibility is that an individual may pay income tax on her maternity benefit payments at the standard rate. A third is that an individual may pay income tax at the standard rate on a portion of the maternity benefit payment and the higher rate on the balance. Some public or private sector workers who get full salary on maternity leave may pay income tax on maternity benefit at the higher rate. Given the different categories, it is difficult to generalise.

There are other benefits. Deputy Richard Boyd Barrett referred to the importance of women in society and the role women on maternity leave play in supporting their children. Deputy Pearse Doherty spoke about this also. A number of supports are provided by the State with which Deputies will be quite familiar. Extended periods of leave from work are provided for. It applies across the public sector but also in the private sector where there are obligations on employers. To reply to Deputy Stephen Donnelly, income tax will apply to the benefits not USC or PRSI. Women on maternity leave are also entitled to family income supplement. It is difficult to measure who the beneficiaries are but it applies to one-parent families, for example. Child benefit is paid to assist families with the cost of having and rearing children. As soon as a new baby arrives, eligibility for child benefit is established. There are a number of measures to support women on maternity leave and through their pregnancies and in helping to rear children afterwards.

There is no attempt to treat people unfairly or unequally. There is a general principle which must, in equity, apply given the times we are in. The yield of €40 million is significant. Most people will be happy that they have the same pay when they are on maternity leave as they would have if they were working.