Child benefit means-tests 'can be done'
Published 04/12/2011 | 05:00
AN 'inter-departmental' committee established three years ago has told the Government how to means test child benefit -- even though the Department said it couldn't be done and has established a new committee to look into the issue.
It has now emerged that former Finance Minister Brian Lenihan set up just such a committee after delivering the Supplementary Budget on the April 7, 2009.
"We will continue to target the available resources on those most in need," Mr Lenihan said at the time.
"The government does not think that it is fair to pay the same level of benefit irrespective of the level of income of the recipient. For that reason, the government has decided that child benefit will be means tested or taxed in the Budget for next year."
Soon after that he established an inter-departmental committee from Revenue, Finance and Social Community and Family Affairs to look at how best to tax or means test child benefit.
Within six months, the committee had delivered options to the government's Tax Strategy Group, saying that while all of the options had advantages and disadvantages, "they can all be realised given adequate time and resources".
Two and a half years later and, other than the paper presented to the Tax Strategy Group, nothing has been heard of this child benefit committee and none of its proposals are being implemented.
The original 2009 committee said the first crucial step towards means testing child benefit was to identify "ownership" of the benefit, and took the view that this would involve changing the nature of the benefit in social welfare law. It made contact with the Office of the AG to start looking at what changes might be needed to ensure that "ownership of the benefit would reside with the individual(s) responsible for the care and custody of the child".
In late 2009, the committee had identified options for taxing or means testing child benefit. This could be done in a number of different ways.
•Deducting tax at source from the benefit through the PAYE system. This would involve the Department of Social Protection acting as an 'employer' and using a payroll system to pay child benefit, deducting the tax due where necessary.
•Collecting the tax on the benefit, also through the PAYE system, by reducing the claimant's tax credits through a system called "coding in".
•The Department of Social Protection deducting 20 per cent of the child benefit at source, while Revenue would collect additional tax due from higher rate taxpayers.
Alternatively, means testing could be carried out by the Revenue Commissioners supplying the latest income figures to the Department of Social Protection, which would reduce the child benefit payment based on the income levels. What they were proposing here was an income test based on Revenue's records, not the standard social welfare means-test.
Whichever option was selected would have to be structured so that people on low incomes would not be taxed on their child benefit payments.
The various options would all involve the Revenue Commissioners and the Department of Social Protection exchanging information -- which could be very easily accomplished as both departments routinely share information. Both departments also have all the legislation they need to allow them to share information.