Tom Neville (Limerick County, Fine Gael)
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189. To ask the Minister for Finance if he will address the issues raised in correspondence (details supplied) in relation to stay-at-home parents who are facing financial discrimination. [35152/16]

Michael Noonan (Limerick City, Fine Gael)
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The system of individualisation has been in the tax code since 1999, and is now integral to the overall system. When first announced, the stated purposes of individualisation were, essentially, to ease the burden on single persons (65% of the work force), to take workers on the average industrial wage out of the higher rate of tax and more generally to facilitate a reduction in the numbers paying tax at the higher rate. Prior to this, a second spouse faced the marginal rate of tax on the first euro (or Punt as it was then) earned in his or her own name.

Individualisation was progressed to some extent in later years but never completed. The result is that we now have a hybrid system. Up to €9,000 of the standard-rate band can be transferred between spouses and the full married personal tax credits, can be allocated in full to one spouse. Because the income tax system allows married couples to choose whether to be jointly or individually assessed, there can be a difference between the tax liabilities incurred by married couples on the same household income, depending on the method of assessment chosen.

However, it is important to stress that married one-earner couples on average earnings are not affected by the different standard rate bands under the current structure as the married one-income band standard rate band of €42,800 is in excess of the current average wage. Furthermore, the €9,000 transferable standard rate band, which married one earner couples can avail of, reduces their income tax liability to around half that incurred by a single individual earning a similar income.

The difference in treatment for couples depending on whether one or both work may be attributed, at least in part, to the fact that there are costs associated with earning an income, such as travel and childcare costs. Such costs are likely to be greater if two persons, rather than one person, work outside the home to earn the same gross income.

It is my view that individualisation has now bedded into the tax system to a degree where it cannot be changed easily, and there are no plans to do so. It was estimated last year that to complete or to reverse individualisation would cost in the region of €800 million. Such a cost, if it related to the reversal of individualisation, would result in an increased burden of taxation on other cohorts of taxpayers including single parent families and single individuals.

However, you may be aware that a Home Carer Tax Credit may be claimed where one spouse works primarily in the home to care for a dependent person, such as a child or an elderly relative. This credit was introduced in the context of the move towards individualisation of the tax system, in recognition of the choices made by families where one spouse stays at home to care for children or the elderly. In the recent Budget, I announced an increase in this credit from €1,000 to €1,100 per year, effectively allowing the credit to shelter family income of €5,500 from taxation. This follows on from last year's Budget where the credit was increased from €810 to €1,000.

The constitutionality of the various provisions of the tax code are ultimately a matter for the courts to decide, where issues are put before them. However, I would point out that due regard is given to the provisions of the Constitution when constructing the tax code.

The issue of tax individualisation was considered by the Commission on Taxation in 2009 and that body recommended no change should be made to the current system. It concluded that the current system represents a balance between, on the one hand, acknowledging the choices families make in caring for children and, on the other, taking account of the need to encourage labour market participation.

As regards future measures, in the Programme for a Partnership Government there is a commitment to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners, and limits the benefit for high earners. The changes introduced in the last three Budgets have commenced reducing the income tax burden with an emphasis on low and middle income earners, and it is my intention to continue this process in future Budgets, as fiscal resources allow.

In relation to childcare, this is primarily a matter for my colleague, the Minister for Children and Youth Affairs in the first instance. Minister Zappone has announced the introduction of a new Affordable Childcare Scheme which will be available to all families both single income and double income. It is important to recognise that the Affordable Childcare Scheme is only one element of a broader set of commitments and supports aimed at parents and children.  The provision of improved services for centre-based care is very important, as also are the needs of children who do not attend such services.

In this regard, Better Outcomes Brighter Futures: The National Policy Framework for Children and Young People contains a commitment to produce Ireland's first-ever National Early Years Strategy.  The intention is to deliver a cross-cutting strategy which will take a joined-up, whole of Government approach to the issue of supporting children and their families during the early years (0-6 years). The drafting of the National Early Years Strategy is at an advanced stage and the Department of Children will hold an Open Policy Debate on the strategy before the end of the year with a view to publication shortly thereafter. Minister Zappone and her Department are open to hearing views about supports for parents raising children at home.