Written answers

Tuesday, 8 July 2014

Department of Finance

Tax Reliefs Application

Photo of Brendan GriffinBrendan Griffin (Kerry South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

222. To ask the Minister for Finance his views on calls to make private health insurance payments fully income tax deductible in budget 2015; and if he will make a statement on the matter. [29900/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Since 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.  Prior to this, income tax relief for medical insurance premiums was provided at source, at the standard rate of income tax, on the entire premium amount regardless of cost. Therefore, 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 has increased significantly in recent years, estimated at €404 million in 2011, €448 million in 2012 and €500 million in 2013. Despite the increasing cost of the relief, the numbers insured are estimated to have reduced by approximately 170,000 over the same period, while 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 and the trend was to continue, the cost would increase 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 around €400 million per annum. Effectively that means that 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.

It should be noted that the Commission on Taxation in its 2009 report recommended the retention of medical insurance relief but that 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. 

It is unfair and unsustainable to allow unrestricted tax relief on private medical insurance premiums, particularly at a time when the general population has contributed so much to repairing the public finances. However, 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.

Comments

No comments

Log in or join to post a public comment.