Paddy Burke (Fine Gael)
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I welcome the Minister of State, Deputy Perry, to the House.

Marie Moloney (Labour)
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He is a great man for taking my Adjournment debates. I can always rely on him being present.

John Perry (Sligo-North Leitrim, Fine Gael)
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I thank the Senator.

Marie Moloney (Labour)
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The recent changes in the budget to the single parent tax credit have had an adverse effect on single parents, predominantly men in this case. The devil is in the detail. Not only do single parents lose the tax credit, but they also move up to the higher tax band more quickly as a result. It is a double whammy. The knock-on effect is a large reduction in income, leading to a substantial reduction in their maintenance payments to their partners, one party taking the other to court for maintenance and higher one-parent family payments.

I called for this debate to address a situation that has arisen whereby there is a requirement for one partner, the primary carer, to give written permission for the other parent to avail of the tax credit. We are going backwards. It is like how a husband used to have to give written permission for his wife to use a tax-free allowance. We must address this issue. In real life, many marriage and relationship break-ups can be nasty and result in collecting children at the door without partners speaking to each other. There are many good men who are willing to be part of their children's lives despite those break-ups and it is demeaning to make them get written permission in order that they might avail of this tax credit. Revenue must be in a position to know whether a primary carer is working and to make the tax credit available to the other parent if the primary carer is not using it. I await the Minister of State's response.

John Perry (Sligo-North Leitrim, Fine Gael)
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The one-parent family tax credit was reformed and replaced with a new single person child carer credit from 1 January. While the single person child carer credit is of the same value, that is, €1,650, as the earlier tax credit and also carries the same entitlement to the extended standard rate tax band of €36,800 per annum, the new credit is targeted such that it is available only to the claimant who is the principal carer of the child, that is, the individual with whom the child resides and who looks after the child for the year or the greater part of the year. A maximum of one credit is available per single carer-claimant, regardless of whether he or she cares for more than one child.

Given the difficult fiscal environment, it is essential that all tax reliefs, credits and incentives are kept under review to ensure they are properly targeted and, if necessary, refocused in order that they might achieve the socioeconomic objectives set for them. The one-parent family tax credit was, in certain cases, being claimed by multiple individuals in respect of a single child. A system that allows multiple claims in respect of the same child is unsustainable in the current budgetary circumstances.

It is important to point out that this new credit has been designed to work as an activation measure and to be an in-work benefit to support the primary carer to take up or remain in employment. It will assist single parents or carers with the cost of child care.

In addition, it should be noted that this new policy has been agreed by Government based on a recommendation put forward by the Commission on Taxation that the tax credit should be retained but that it should be confined to the principal carer only. The Government is satisfied that the restructuring of the credit will achieve such an outcome.

In the first instance, it is the responsibility of the parents to look after a child, including financially. Tax credits should not be considered a supplementary source of income, or an alternative to the financial support of a parent.

It is worth pointing out that where a principal carer is married, in a civil partnership or cohabiting they would not be entitled to the new credit, or the former one. In such circumstances the principal carer cannot relinquish the credit to a secondary carer. In addition, a secondary claimant who is married, in a civil partnership or cohabiting would not be entitled to the new credit, or the former one, regardless of the marital status of the primary carer.

The allocation of child care responsibilities is primarily for parents to agree. However, having listened carefully to the views expressed by colleagues in both Houses, the Minister brought forward an amendment on Committee Stage, such that a principal carer who is entitled to the credit and who does not wish to avail of it can choose to surrender it. A secondary claimant may then make a claim for the credit, provided that the qualifying child resides with him or her for not less than 100 days in the tax year. It is entirely appropriate that such surrendering of the credit should be evidenced in writing. This allows for certainty for the full duration of the tax year - this may be the point on which the Senator was seeking clarification - and caters for situations where a principal carer expects to have no tax liability, is actively seeking work, or simply wishes to relinquish the credit despite having the requisite income to utilise it.

The single person child carer credit is initially granted to the principal carer and it is only in circumstances where that individual chooses to relinquish his or her claim that a secondary claimant can then make a claim for the credit. The procedure for relinquishment is that the principal carer proves entitlement to the credit in the first instance and then notifies the Revenue Commissioners, using the same approved form, that he or she wishes to relinquish or surrender this entitlement. It is only in the event of such a relinquishment or surrender that a secondary claimant can then make a written claim to the Revenue Commissioners for the credit. Rather than requiring the second parent to get permission from the first to claim the credit, the legislation requires the first parent to notify Revenue of his or her intention to surrender the credit. That detail clarifies the point. Once the credit has been awarded to a secondary claimant, it will remain with that secondary claimant until such time as the primary claimant wishes to re-enter a claim for the credit. In such circumstances the credit will only be restored to the primary claimant from the start of the next tax year where a formal claim for reinstatement of the credit is made before the end of the current tax year.

In the situation where a principal carer is unwilling to relinquish the credit, it would not be possible to easily identify a secondary claimant, who could be a grandparent, parent or sibling, any one of whom might present a claim to the credit. In addition, a primary claimant could be awaiting a change in his or her employment status before claiming the credit, and as a result, may not want to give it up.

To allow the credit to a secondary claimant without it being surrendered voluntarily by a principal carer could reveal information about the financial or civil status of the principal carer and therefore be in breach of confidentiality. I trust the reply, while is quite technical, has clarified some of the points the Senator raised.

Marie Moloney (Labour)
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The reply has clarified some points but not others. I would refer to a paragraph in the reply, which states:

In the first instance, it is the responsibility of the parents to look after a child, including financially. Tax credits should not be considered a supplementary source of income, or an alternative to the financial support of a parent.

I am not happy with the answer but unfortunately it is one I have got. We have gone backwards on this. We are going back to the old days where a husband had to sign off on his wife's tax free allowance. I thought that day was gone but obviously not. I thank the Minister of State for coming into the House to take this matter.

John Perry (Sligo-North Leitrim, Fine Gael)
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I would make a further point that might be helpful. Agreement as to who would be the principal carer of a child is a matter for the parents or guardians. However, in the first instance, only the principal carer will be entitled to the credit, a policy change recommended by the Commission on Taxation in 2009. As regards the parent who is taking care of the child, while he or she may not agree to give a concession in respect of the credit, there is provision for agreement having been made with Revenue supported by documentary evidence. Even without the secondary carer getting a letter from the primary carer, agreement can have been given in this respect.

There is no specific tax credit for children in the tax code and the Senator should be aware that married or cohabiting couples are unable to avail of any additional credit in respect of their children. This is despite the fact that in certain cases such couples also have to maintain two households due to the location of employment. Notwithstanding the above, as a result of the amendment to this section, which the Minister brought forward, the primary carer may relinquish the credit such that it can be claimed by a non-primary carer in situations, for example, where the primary carer has no tax liability. That is the key point. I can forward the Senator the full briefing note on this and it may address some of the queries she raised.

Marie Moloney (Labour)
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I would pleased if the Minister of State would do that.

John Perry (Sligo-North Leitrim, Fine Gael)
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In one sense, this is about ensuring that taxpayers' money goes to the people who are most entitled to it. That objective has been agreed. I will forward the Senator the back-up file on this and she can study the detail of it that covers some of the points she raised.