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

It is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. 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 disablement benefit, the State pension, widows', invalidity and blind pensions, carer's allowance and the one parent family payment, as well as short-term benefits such as job seeker's benefit. Treating these payments as income for tax purposes is essentially a matter of equity.

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 could arise. An individual may pay no income tax on the maternity benefit payment as her tax credits will be sufficient to reduce her tax liability to zero or an individual may pay income tax on some or all of the maternity benefit payment solely at the standard rate. In some cases, an individual may pay income tax at the standard rate on a portion of the maternity benefit and the higher rate on the balance of the maternity benefit payment, while in others an individual may pay income tax on all of the maternity benefit payment at the higher rate.

I am aware that some employers do not pay a top-up payment to their employees while they are on maternity leave. However, in such circumstances many mothers will not be subject to income tax on the maternity benefit payments as their personal credits will ensure no tax arises on the social welfare income. Of course, the extent, if any, to which taxation actually arises in a given case depends on the total level of income of the individual or couple concerned in the relevant tax year or years. Maternity benefit payments will remain exempt from the universal social charge and PRSI. I do not believe taxation of maternity benefit is a retrospective tax for a number of reasons. In budget 2013 I announced that maternity benefit paid by the Department of Social would become taxable from 1 July 2013. The underpinning legislation for this measure was contained in the Finance Act 2013 which was passed by the Oireachtas and signed in to law on 27 March 2013. Maternity benefit payments only became liable to income tax for all claimants from 1 July 2013.

As the Deputy will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones, but I must be mindful of the public finances and the many demands on the Exchequer, given the significant budgetary constraints.

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