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

This is an interesting debate as it touches on many social issues. As Deputy Boyd Barrett noted, these issues include the definition of a family in the modern age and the entire debate surrounding families. In debating this topic, we should be careful to provide a context for everything. In making comparisons of families, one must bear in mind that married or cohabiting couples living together with children do not receive any tax credit for children under the tax code.

I did not pull this proposal out of thin air. I refer to the findings of the 2009 report of the Commission on Taxation on the one-parent tax credit. As with all the commission's findings, it first describes the issue before providing a conclusion. The description of the issue regarding the one-parent tax credit was as follows:

A single parent, whether widowed, single, separated or divorced, with a dependent child or children may be entitled to receive the one-parent family tax credit... The one-parent family tax credit, where due, is given in addition to the basic personal tax credit. The tax credit can be claimed in full by each parent provided the child resides with the claimant for a whole or part of the year of claim. This condition is deemed by the Revenue Commissioners to be fulfilled if a child resides with a parent for at least one night in the year. The relief was originally introduced to assist single and widowed parents who work outside the home and who have dependants. The underlying purpose of the relief, therefore, is to support labour market participation of single parents with sufficient income to avail of the value of the credit.

The purpose of this tax credit is not, as Deputy Donnelly stated, to alleviate the cost of rearing children. It was envisaged as a labour activation measure to encourage participation in the labour market. Part of the abuse or, if that word is too harsh, the way in which the credit operated in practice was that, arising from the Revenue's definition of one night residing, we had circumstances where three people were claiming the allowance. If the grandmother was looking after the child for at least one night in the year - I do not wish to exaggerate the position as in practice the grandmother will often look after the child for one night a week - a third payment was made. When one contrasts this with the position of the families to which I alluded who do not receive any tax credit for children, one can see where the problem arises.

I refer to the conclusion of the Commission on Taxation's 2009 report on the issue of one-parent tax credit. It states:

We acknowledge that this tax relief plays a role in supporting and incentivising the labour market participation of single and widowed parents. We therefore recommend that the tax credit should continue. However, we also note that the annual cost of this relief is considerable. We recommend that Government should seek to minimise or eliminate the inefficiency (or deadweight element) associated with this relief in relation to the allocation of the full credit (and the additional standard band which applies as a result) to both parents. Such a move would help restore greater balance between the cost of the tax credit and the benefit derived from it. Accordingly, we recommend that the credit be allocated to the principal carer only in accordance with the current arrangements for child benefit.

The recommendation of the report, in paragraph 8.9, is the following: "The one-parent family tax credit should continue and the credit should be allocated to the principal carer only and in a similar way to the current arrangements for child benefit." This recommendation is reflected in my announcement on budget day and the measure included in the Finance Bill.

Deputies argued on Second Stage that this measure would operate unfairly, particularly in circumstances where the primary carer did not have a taxable income and called for at least one tax credit to be paid. I considered this argument to be reasonable. Rather than having two or three tax credits payable, the purchase of the amendment is to ensure that, in normal circumstances between agreeable couples, one tax credit would apply to the value of what has been paid until now. If, as in many circumstances, the woman partner of a separated couple is the beneficiary of child benefit and is consequently regarded as the primary carer but does not have a taxable income, her estranged partner may claim the tax credit in circumstances where he would be involved in the care of the child.

While one could argue about the threshold of 100 days, as I noted, a day can be reckoned as a significant portion of a day. If the husband takes the child overnight one day a week and returns the child the following afternoon, the period can be accounted as two days, thus giving more than 100 days in one year. On the basis of that definition by the Revenue, the proposed approach appears reasonable.

The measure does not contravene the programme for Government as there has been no change. The commitment in the programme for Government was not to change tax rates, credits or bands.

There is no change to tax rates, credits or bands. The one-parent family tax credit is being reconstructed to become the single person, child care or tax credit. The credit will be to the same value, €1,650 per annum, as the one-parent tax credit and there will be the same entitlement to the additional €4,000 extended standard rate band. I am increasing it to €36,800 per annum before liability to a higher rate of income tax arises. However, it will be more targeted in that there will be only one credit available per family child. This will be available to the primary carer who can relinquish it in certain cases. The programme for Government states: "As part of the Government's fiscal strategy we will maintain the current rates of income tax, together with bands and credits. We will not increase the top marginal rates of taxation on income." In my view, the credit is being maintained. At a time of limited resources, I am merely targeting the credit to ensure that it can achieve the objectives set for it.