Lucinda Creighton (Dublin South East, Independent)
Link to this: Individually | In context | Oireachtas source

219. To ask the Minister for Finance the cost to the Exchequer of extending a 20% childcare tax relief to all working families in the State for each child from six months up to the point where they enter the primary school system. [43232/14]

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

It is not possible to provide an accurate cost to the Deputy of the provision of tax relief in respect of childcare costs for children of pre-primary school age as reliable figures are not available for the numbers of children in childcare, the costs incurred by their parents and the number of parents who are paying tax.

However, a tentative figure can be calculated by using the 2013 "Indecon Report on Support for Childcare for Working Families and Implications for Employment" and statistics provided by the Department of Social Protection in relation to children in receipt of child benefit.

The Indecon report concluded that the average cost of childcare per pre-school child per week was €133 or €6,916 per annum in 2013. According to DSP figures on the numbers and ages of children in receipt of child benefit in 2013, there were approximately 489,500 children under 6.

If tax relief at the standard rate of 20% were provided on the costs of childcare in respect of these children, it would result in a cost to the Exchequer of in the region of €680 million per annum. However, it must be borne in mind that these figures are extremely tentative and the real cost could be much higher. 

I have no plans to introduce such a tax relief as it could be seen to unfairly discriminate against those individuals who stay at home and look after their children. While wanting to encourage participation in the workforce, equally we cannot say to individuals who stay at home to mind children that they are making a less valuable contribution to society.

In addition, tax relief is only of benefit to those in the tax net and it is estimated that in 2014, 39% of income earners will be exempt from income tax. It could also be argued that any tax relief would most likely be absorbed by childcare providers in the form of higher prices.

Having said this, I would like to assure the Deputy that the Government acknowledges the continuing cost pressures on parents, particularly those with young children. In recognition of these cost pressures, a number of support measures are in place to ease the burden on working parents. These include the Community Childcare Subvention (CCS) programme, which funds community childcare services to enable them to charge reduced childcare fees to qualifying parents, the Childcare Education and Training Support (CETS) programme which provides free childcare places to qualifying Solas and VEC trainees and the Early Childhood Care and Education (ECCE) programme which provides for a free pre-school year for children in the year before commencing primary school. Generous entitlements to paid and unpaid maternity leave as well as child benefit payments are also provided.

The Department of Social Protection provides financial support to families on low pay by way of the Family Income Supplement (FIS) and additionally to one-parent families through the one-parent family payment.

Furthermore, a Single Person Child Carer tax credit of €1,650 is available as well as an additional standard rate band of €4,000. This credit and band is payable to any single person with a child under 18 years of age or over 18 years of age if in full time education or permanently incapacitated. The primary claimant may relinquish this credit andthe increase in the rate band to a secondary claimant with whom the child resides for not less than 100 days in the year.To claim the Single Person Child Carer Credit a claimant must not be married, in a civil partnership or cohabiting.

In relation to exempting childcare costs from tax when the service is provided by an employer, a relief did exist in the form of a benefit-in-kind exemption. However, this relief was abolished in Finance Act 2011. The Commission on Taxation recommended its abolition, citing equity issues in relation to those parents whose employers did not provide such facilities.

As the Deputy will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones.  In considering these, I must be mindful of the public finances and the many demands on the Exchequer given the current budgetary constraints.  Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.