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

I thank Deputy McGrath for the amendment. The system of individualisation has been in the tax code since it was introduced by the former Minister, Charlie McCreevy, in 1999. It is now integral to the overall system. When first announced, the stated purposes of individualisation were, essentially, to ease the burden on single persons, 65% of the workforce; to take workers on the average industrial wage out of the higher rate of tax; and, more generally, to facilitate a reduction in the numbers paying tax at the higher rate. Prior to this, a second spouse faced the marginal rate of tax on the first euro, or punt as it was then, earned. In tandem with individualisation, a home carer's allowance was introduced to compensate couples where one spouse stays at home to care for children or other qualifying individuals. As the Deputy may recall, there was a major row about individualisation and the allowance was introduced subsequently. The arguments I have outlined for the Deputy are those put forward by Mr. McCreevy when he introduced individualisation.

Individualisation was progressed to some extent in later years but never completed. The result is we now have a hybrid system, with the standard rate band partially transferable between spouses, €9,000 being the gap between the single and married one earner bands. To complete a reverse individualisation would cost approximately €800 million. The Commission on Taxation recommended no change be made to the current system. It concluded the current system represents a balance between acknowledging the choices families make in caring for children and taking account of the need to encourage labour market participation. On the home carer's tax credit, the commission stated it was integral to the current hybrid system of individualisation and that "it would not be realistic to contemplate its withdrawal while the current arrangements in relation to the tax bands continue to exist or in circumstances where band individualisation is completed".

The Deputy may be aware that on budget day the Department published a number of policy documents, including the report on tax expenditure which included new guidelines for best practice in ex anteand ex postevaluation of tax expenditure. The report describes the purpose and main features of tax expenditure in an Irish context. In particular, it outlines the limited circumstances where tax expenditure should be used as an alternative to direct Exchequer funding. The report also discussed tax expenditure evaluations carried out in Ireland in recent years. The guidelines are informed by international best practice in this area and work carried out in other countries. It is available on the budget website, and the guidelines have been circulated to the Secretaries General of all relevant Departments.

I am not minded at this time to embark on a full cost-benefit analysis of the home carer's tax credit, given the recent reviews carried out by the Commission on Taxation. However, the Deputy may be interested to know the Revenue Commissioners estimate that in 2012, the latest year for which figures are available, the home carer's tax credit cost €63.2 million and was availed of by 84,400 families. The credit is currently worth €810 per annum for qualifying families.

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