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

Decisions regarding tax matters are primarily a matter for my Department and the Office of the Revenue Commissioners.  However, the budget was agreed by the Government before being announcement on budget day.  From 16 October 2013, tax relief for medical insurance premiums has been restricted to the first €1,000 per adult and the first €500 per child insured. Any portion of premium paid in excess of these ceilings no longer qualifies for tax relief.  Previously, income tax relief for medical insurance premiums was provided at source on the entire premium amount at the standard rate of income tax, regardless of cost. This meant the State was paying 20% of the cost of all private medical insurance premiums. The cost of income tax relief in respect of medical insurance, which has increased significantly in recent years, was estimated at €404 million in 2011, €448 million in 2012 and €500 million in 2013. Despite the increasing cost of the relief, the number of those insured is estimated to have decreased by approximately 170,000 over the same period. At the same time, the level of medical cover has decreased on some policies. Against this background, the increase in costs was unsustainable. If the relief had remained unchanged while the trends continued, the cost would have increased to approximately €1 billion per annum by 2020.

Notwithstanding the recent reform, the tax system is still supporting those who can afford private medical insurance to the tune of approximately €400 million per annum. In effect, some taxpayers who could never afford private health insurance or who have had to give up their policies due to personal circumstances are continuing to provide financial support via the tax system to those individuals who can afford such insurance. In its 2009 report, the Commission on Taxation recommended the retention of medical insurance relief but suggested it should be limited. The introduction of an upper ceiling on the amount of medical insurance premiums that will qualify for tax relief achieves this recommendation. The new ceilings ensure continuing support via the tax system for those who purchase medical insurance policies, while reducing Exchequer exposure to more expensive policies.

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