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Friday 23 March 2018

Fionnan Sheehan: Reasons against taxing child benefit are killed off

Fionnan Sheehan

THE old excuses thrown up about not taxing child benefit have finally been put to bed. The last Commission on Taxation completely ducked the issue by failing to address it.

Successive social welfare ministers have argued there were myriad reasons for not doing it, from difficulties in setting up the system, inability to work out household incomes where the couple weren't married, to legal challenges arising.

The keenly anticipated Mangan Report finally kills off all these reasons for not taxing child benefit.

The report, obtained by the Irish Independent, does say there should be an element of universality, in other words that the State should provide some assistance towards the cost of raising children.

But it also recognises the need to target government funding towards those most in need.

The report says clearly the level of information that the Revenue has on the earnings of parents is "impressive" and that taxing their child benefit might be "less technically difficult than previously thought". Given Revenue's ability to handle the property tax, this is hardly surprising.

It goes as far as proposing the tax on child benefit payments should be deducted directly at source, with the Department of Social Protection effectively setting itself up as an employer and the benefit being treated like a payroll.

"The computer software required is relatively simple and would provide real-time accurate tax deduction," the report says.

Of course, the political excuse for not bringing in the taxing of the benefit still remains. It would be unpopular.

Up to 400,000 parents could have their benefit payments taxed following the expert report's description of the taxing of it as an "attractive option" for government. Once again, middle-income families would take a heavy hit.

Remarkably, the report has stayed unpublished for almost a year, despite its completion being demanded as part of the IMF-EU bailout agreement.

Of course, this meant its recommendations couldn't be implemented in Budget 2013. The debate will now begin on whether it will be included in Budget 2014. Joan Burton is arguing that the next Budget should not contain as many onerous cuts. But the Mangan Report's recommendations will be difficult to ignore.

Irish Independent

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