Wednesday 14 November 2018

FF TD calls for €1,654 tax credit to help beat welfare trap

Marc MacSharry TD
Marc MacSharry TD
Philip Ryan

Philip Ryan

A radical new taxation system aimed at eliminating welfare traps faced by working families is to be debated by the Oireachtas Finance Committee.

The new taxation model is aimed at encouraging families to leave the welfare system and get back to work through the introduction of a tax credit based on the number of children in a household.

The tax credit could be worth €1,654 per child and would benefit low- and middle-income families struggling to pay their bills.

The credit could be worth up to €5,000 to a family with three children.

A discussion paper on the introduction of the new tax credit was drafted by Fianna Fáil TD Marc MacSharry, who will present his proposal to the Finance Committee today.

In his opening statement, Mr MacSharry will say his policy aims to "eliminate discriminatory quirks" in both our welfare and taxation systems while incentivising work.

"The removal of existing anomalies and the provision of adequate support through the reform and reorganisation of parts of our taxation and welfare systems are now essential. The status quo cannot be allowed to continue," the statement adds.

Mr MacSharry argues that the €1,654 per child annual payment available to people under the welfare system should be a matched by a tax credit or allowance of the same amount for working families.

He said the credit would be paid irrespective of the level of income if the worker is working full-time.

A minimum wage worker with three children, now earning €18,958 from working 39 hours per week, would receive a tax credit of €4,962, which would in turn increase their net income by 26pc to €23,920.

An identical family with a gross income of €70,000 would see their income increase by 10pc. The tax credit would be capped at four children per family.

"This is in contrast to the welfare system where there is an increase paid for every qualified child in addition to a personal payment and an increase for a qualified adult dependent if applicable," he adds.

The Sligo-Leitrim TD estimates the tax credit would benefit the families of an estimated 638,000 children and cost more than €1bn a year to introduce.

However, he suggests the policy should be introduced on a phased basis to ensure it does not have a "reckless" impact on the economy.

Irish Independent

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