Wednesday 21 February 2018

Mums to lose €2,700 a child as maternity benefit taxed

Finance Minister Michael Noonan
Finance Minister Michael Noonan

Michael Brennan Deputy Political Editor

WORKING mothers will lose out on up to €2,700 per child under measures to tax maternity benefit for the first time.

Under the current system, women do not have to pay any tax on the €6,812 of maternity benefit payments they get for six months after the birth of their child. But from July 1 they will have to hand back up to €2,700 to the Revenue because the payments will be taxed at up to 41pc from that date.

Finance Minister Michael Noonan (right) stood over the implementation of the cut, saying that some women were earning more while they were on leave than when they were in work.

"Part of the general policy is that persons shouldn't enjoy a bigger take-home pay when they are out of work than in work," he said.

It has been branded as a "tax on childbirth" and a "grab by the taxman" by the opposition.

Many women actually get more in their take-home pay while they are on maternity leave due to the way the system is currently set up. The State pays a maximum of €262 per week to a woman on maternity leave for six months -- or a total of €6,812. Around 90pc of women on maternity leave get this amount.

But many public and private-sector employers opt to give a "top up" to ensure that a woman gets her full wages. And tax is only paid on this "top-up" payment, meaning that women on maternity leave often end up with more in their pay packet.

Mr Noonan said it was never intended to provide a "financial gain" for those going on maternity leave. He said that even though maternity leave would now be taxed at either the lower 20pc rate or the higher 41pc rate, it would not be subject to the universal social charge or PRSI.

"I think most people would be happy if they would have the same (wages) on maternity leave as they have at work," he said.

Around 48,000 women a year receive maternity benefit while they are off work with a new baby.

But Sinn Fein finance spokesman Pearse Doherty criticised the decision to tax maternity benefit, saying it was getting rid of an additional benefit which had helped mothers.

"This is now a tax on childbirth. I think this is a grab by the taxman," he said.

The taxation of maternity benefit was announced in the Budget, but the individual cost to working mothers is only becoming apparent now. The measure will bring in €15m in extra tax revenue this year, and €40m in a full year.

Fianna Fail finance spokesman Michael McGrath said the taxing of maternity benefit would lead to a severe hit on working women.

"€107 out of €262 per week in maternity leave is a fair whack for a woman who is pregnant to take," he said.

And Independent TD Richard Boyd Barrett said the move was "anti-women" and "anti-family".

"You should be upholding that acknowledgement of the work women do for our society. It's entirely right and proper that they should be slightly better off," he told Mr Noonan.

Mr Noonan was speaking at the Oireachtas finance committee on the 2013 Finance Bill, which will implement the taxation of maternity benefit and other remaining measures of Budget 2013.

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