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

Senators are correct in saying there are many different types of families now. The traditional family, which was practically the only model in the Ireland of 50 years ago, has been changed. We now have many types of families and should not be judgmental about these.

We are not being judgmental. This is purely about tax. The weakness in the case being made in the public debate is the assumption that there is tax credit for children in the tax code. There is no tax credit for children in the tax code. The children of cohabiting couples, partners living together or married couples living together do not get any tax credit and are not eligible for any. One of the exceptions to this relates to the children of separated couples. These children get a tax credit to acknowledge to fact that separated couples living apart can have additional expenses. This is the general background to this issue.

When the Commission on Taxation recommended in 2009 that we should change the situation, it pointed out there was no specific tax credit for children in the tax code. Whether married or cohabiting as a couple, these couples are unable to avail of any additional credit in respect of their children. This is the case despite the fact that some such couples also have to maintain two households due to the location of employment. For example, a father from Donegal may need to have a residence in Dublin if he is working in Dublin and lives there during the working week and his wife remains in Donegal with the children. There is no tax credit for the children in those circumstances. The distinction is not between couples living apart. Married couples frequently have to live apart because of economic or other circumstances. Therefore, there is a wider context to this debate.

In 2009, the taxation commission advocated this position should be changed and advised that one tax credit per family would be the way to go, because what was happening was there were two claimants in most cases for the care of the same child and in a number of cases there were three or more claimants. The Revenue decided and advised me that the credit should be confined to one credit paid to the principal carer and suggested that an indication of who that would be would be which parent was getting child benefit. However, that would not be the absolute proof. This is the background to the change.

In the course of the public debate and the debate in the other House, it was pointed out to me that if the principal carer who would be eligible for this child tax credit did not have a taxable income, no tax credit would be paid. Therefore, I agreed to amend the proposal so that in those circumstances the other parent could claim the tax credit. However, the overriding consideration is that there will be one child tax credit paid per child, not two or three.

In regard to qualifying for the credit, there is no problem if the principal carer has a taxable income and claims the credit. It is only where the principal carer yields up the credit to the other partner that the issues arise. Then it is a question of the Revenue Commissioners adjudicating on a claim. The 100 days is only relevant if the primary claimant with whom the child lives for most of the year relinquishes the credit. In regard to the 100 days, it is a self-assessment process. The individual makes a claim, and depending on the facts and circumstances, the Revenue Commissioners grant the credit or query the claim. The practice has not been for the Revenue Commissioners to chase after individuals in these circumstances. Its code of customer practice is operated on the basis of an acceptance of the honesty of the applicant and that is stated in the code. The Revenue does not treat people who make claims with suspicion. Its opening position is that a claim has been submitted and it accepts that taxpayers are honest people and will honour the claim, unless other evidence comes to them that the claim is fraudulent.

There have been a lot of fraudulent claims in the tax area and the Revenue has reviewed these matters on several occasions.

In the west Revenue undertook a review of the one-parent tax credit some years ago and collected €4 million on the basis of fraudulent claims. This is not as simple as it looks and the compromises we have made are reasonable.

In respect of a child of separated parents, one tax credit is payable. In the first instance, it is paid to the primary carer, but if the primary carer cannot avail of it through not having a taxable income, it may be relinquished and transferred to the other partner who must claim it from the Revenue Commissioners. The qualification period of 100 days was included because the legal position up to now was that if a child stayed with his or her grandmother for one night in the year, she could make a legitimate claim to Revenue for the full credit. While in practice that only happened infrequently, the legal position was that a person could qualify for the credit. There was the potential to abuse the system and that potential had to be removed.

It is not our business or that of the Revenue Commissioners to be judgmental about anybody or to interfere in family arrangements in any way. The position we have taken is reasonable in principle. Where there is no general tax credit for children in the tax code, it is reasonable to apply one tax credit to the child of a separated couple. That credit will, in the first instance, be payable to the primary carer and in the event that the primary carer is not in a position to avail of it, a mechanism will be provided in law whereby it can be transferred to another person, usually the other partner, who can then legitimately claim it. That is my position, but it is not as simple as it has been presented in public debate so far. There is no tax credit for the vast majority of children in the country.