Paul McGrath (Westmeath, Fine Gael)
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Question 148: To ask the Minister for Finance the reason child dependant allowances are considered as income for taxation purposes; and if child allowances awarded to civil servants are similarly treated under the tax code (details supplied). [16422/04]

Charlie McCreevy (Kildare North, Fianna Fail)
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A child dependant allowance can arise from a number of sources such as social welfare legislation, employments and occupational pension schemes. As regards the child dependant allowance payable by the Department of Social and Family Affairs, the 1998 Supreme Court case of Ó Síocháin v. Neenan held, on interpretation of the relevant social welfare legislation, that the widow's pension, including the child dependant element, is the beneficial entitlement of the widow. The reason, therefore, that the child dependant allowances are taxable is that they form part of payments to parents which are treated as income for tax purposes. However, by virtue of specific statutory tax exemption, the child dependant allowance paid to individuals in receipt of either unemployment benefit or disability benefit is not taxable. A further statutory tax exemption relieves child benefit from tax.

As regards child allowances payable to certain civil servants, these allowances, payable in respect of dependent children, were introduced as part of an agreement with staff interests to eliminate marriage differentiation from Civil Service pay scales. In general, to be eligible for the allowance an officer must have been serving on 31 December 1978 in former marriage differentiated grades. The allowances are taxable.