Michael Healy-Rae (Kerry, Independent)
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109. To ask the Minister for Finance if he will address the tax credits for single carers and jointly assessed (details supplied); and if he will make a statement on the matter. [35283/17]

Michael Healy-Rae (Kerry, Independent)
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110. To ask the Minister for Finance if he will increase the home carer's tax and income thresholds (details supplied); and if he will make a statement on the matter. [35284/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 109 and 110 together.

The two tax credits to which the Deputy refers have different origins and policy objectives and therefore should not be considered in comparative terms.

The Home Carer’s Allowance was introduced in Finance Act 2000 in the context of the commencement of a multi-year plan to move to the full individualisation of the tax system. Prior to 2000, income tax allowed for full joint assessment of married couples, meaning that the earner in a single-income couple could use the combined tax credits and standard rate band available to the couple – i.e. double the personal tax credit and rate band available to a single earner.  As a result, where the primary earner of a couple had sufficient income to use the available reliefs in full, the second earner faced the marginal rate of tax from the first pound of income earned, and this could act as a disincentive to workforce participation for second earners.

A process of moving towards an individualised system of income taxation began in the 2000-01 tax year with the stated economic objectives of increasing labour force participation and reducing the numbers of workers paying the higher rates of income tax.  A fully individualised system would have resulted in a two-parent, single-earner family having the same net income as a single individual from a gross wage – i.e. it would no longer be possible for the tax bands and allowances of the non-earning spouse to be used by the earning spouse.  However, in recognition of the choices made by families in relation to caring responsibilities, the Home Carer Credit (HCC) (or Home Carer’s Allowance as it was then) was introduced in tandem with the move towards individualisation in order to benefit families where one spouse works primarily in the home to care for children or other dependants.  The HCC was increased in both Budgets 2016 and 2017 and now stands at €1,100 per annum.  It may be claimed in full where the home carer’s income is below €7,200 per year, and on a reduced tapered basis where the home carer earns up to €9,200 per year.

The Dependent Relative Tax Credit pre-dates the HCC and may be claimed by an individual who maintains a dependant relative at his or her own expense.  The dependant relative can be an individual unable to maintain themselves due to old age or infirmity; a widowed parent; or a child on whom the claimant depends due to old age or infirmity, and the credit cannot be claimed where the dependant relative’s income exceeds €14,504.

The credit has remained unchanged for many years and the current rate of this tax credit is €70 per annum.  The credit has remained unchanged in recent years as there are inherent limitations in the potential for the tax system to be an effective policy tool, particularly when looking at individuals who may be working on a part-time basis while caring for a dependant relative.  In general, a single employee will only enter the income tax net when income exceeds €16,500, so an increase in a tax credit would have no potential to benefit individuals earning less than that amount.  For this reason, direct expenditure measures can be a more effective policy tool than tax reliefs in providing support to individuals on lower income levels.

With regard to any future increases to the Home Carer Credit, any such announcements would normally be made as part of the Budget and I am not inclined to diverge from this practice.