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

There has never been automatic indexation of tax bands, allowances or credits, or any other part of the tax code in Ireland. Of course, Ministers take account of various indices when introducing budgetary measures on budget day. Ministers and their officials, in addition to doing whatever they are claiming to be doing, are conscious that if there is significant inflation in the system, measures compensating for the lack of indexation should be included in the budget. However, this has never been made automatic, presumably because Governments like to keep policy control of events such as this. There are times when the fiscal position is so poor that automatic indexation would be a burden on the Exchequer. The movement towards automatic indexation, as happens in other countries, has not happened in Ireland and I have no proposal to introduce it at this stage.

A tax credit for child care payments was considered as part of the work of the interdepartmental working group on future investment in child care. When the working group published its report in July 2015, it advised against the introduction of a tax credit measure owing to the considerable risk that it would not achieve the policy aim of supporting the affordability of child care. The working group suggested it was possible that such moneys would be capitalised into the costs facing parents and that it was likely that any scheme that would have a meaningful impact would be very costly. Policy has moved in a different direction. The reasons for this can be set out in very simple terms. Parents on very low incomes who pay no tax would not benefit from a tax break on child care payments. Couples or mothers paying tax at the standard rate would benefit at the standard rate only. Better-off individuals on higher incomes who pay tax at the higher marginal rate would benefit at the higher marginal rate. It is clear, therefore, that an initiative giving tax credits for child care payments as the principal method of delivering affordable child care would fail an equity test very quickly. In the world in which we live it might also result simply in increases in child care charges. In such circumstances, the transfer would be to the provider rather than to the person availing of the service. That has been the considered policy position since 2015. The Minister for Children and Youth Affairs, Deputy Katherine Zappone, is introducing child care proposals - she has published some of them - but they are not tax-based.

The Deputy also asked about our position on emissions. The Department of Finance is not the main policy maker in respect of the country's compliance or non-compliance with European rules. Other Departments are responsible for that aspect.

We can do things around the edges. I refer to climate-friendly activities, machines, etc. We can provide for small tax breaks around the edges in the interests of reducing emissions. This has been done previously. Perhaps Deputy Eamon Ryan or his colleague, John Gormley, did this in respect of motor tax when they were in government.