Brian Cowen (Laois-Offaly, Fianna Fail)

I pointed out on Committee Stage that existing law already provides an exemption from an employee benefit-in-kind charge where employers provide free or subsidised child care for their employees. The exemption applies where child care facilities are made available solely in-house by the employer, jointly by the employer with other participants, by other persons in circumstances where the employer is wholly or partly responsible for financing or managing the child care service or by other persons in circumstances where the employer is wholly or partially responsible for capital expenditure on the construction or refurbishment of the premises. In order for the exemption to apply, the employer must be involved in the provision of the facilities or their management or funding.

Deputy Burton expressed concern on Committee Stage that the relief is not available to small and medium enterprises, SMEs, by virtue of their size. However, while an individual small or medium enterprise might not be able to facilitate the provision of child care facilities on its own, the legislation allows it to join with other small employers to provide co-located facilities, contributing proportionately to costs and jointly providing the child care service. In this way, SMEs can collectively address the differences of scale in the provision of facilities. In my view, the Deputy's concerns are already addressed in existing legislation. The amendment regarding the provision of child care services by employers is already provided for in tax legislation and is, therefore, unnecessary.

The Deputy raises a second issue in seeking that employers be permitted to purchase child care for their employees from third parties. As pointed out on Committee Stage, a core requirement of the current exemption is that employers must be involved in the provision, management or funding of facilities. Apart from this, the main difficulty with the Deputy's suggestion is the potential cost to the Exchequer in that it could give rise to what is known as salary sacrifice on the part of employees. The latter would involve employers paying the cost of child care in return for employees forgoing an equivalent amount of income. In effect, employees rather than employers would end up bearing the cost of the child care.

The provision would result in a win-win situation for employers and employees but this would be at the expense of the Exchequer and the social insurance fund. Employers would avoid employers' PRSI of 10.75% on the salary forgone, while employees would obtain relief from income tax at the marginal rate and also from health contributions. Such a provision is more likely to be of benefit to better paid employees who could afford to enter into salary sacrifice arrangements. It would, in fact, be inequitable to those employees who were not in a position to participate in such a scheme. The provision would have no impact on the supply of child care places and could lead to some displacement. There would also be a knock-on effect on the cost of child care because people being subsidised, possibly by the Exchequer, might be prepared to pay even more for the service. Ultimately, such a provision, if introduced, would be likely to lead to pressure for full tax relief for all those paying their own child care costs, with the associated costs being borne by the Exchequer.

As the Deputy is aware, current Government policy is designed to increase the supply of child care places and not to use resources to grant tax relief in respect of child care costs per se. In these circumstances, I am, therefore, unable to accept her amendment.

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