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Burton drops plan for child tax credits

Tanaiste Joan Burton has dropped a Labour Party plan for a valuable tax break for squeezed middle-income families with children.

Her predecessor, Eamon Gilmore, put a child tax credit on the table as a key Budget proposal from the junior coalition partners to ease the burden for hard-pressed taxpayers.

Mr Gilmore hoped it would win favour with families across the country as Labour struggled to regain support.

However, Ms Burton is no longer demanding the tax measure in the negotiations for October's Budget.


Instead, she wants to cater for low to middle income families in other ways, such as tax relief and by allowing parents who go back to work to retain a child benefit top up.

Before the local elections, Mr Gilmore mooted a targeted measure aimed specifically at working families with children.

A tax credit is effectively a discount on your tax bill, increasing your net pay. A child tax credit would give a worker with children a larger discount based on their number of children. Mr Gilmore saw the expansion of personal tax credits to a specific child tax credit as an option to alleviate the degree of pressure families were under.

But Ms Burton is understood to regard the measure as too complicated and difficult to administer.

"We are not talking about the family tax credit. We always thought of it as a difficult and complex thing to do. We feel there are better ways to assist families. It wouldn't be one single initiative," a senior Labour source said.

Government sources said Fine Gael and the Department of Finance were not keen on the child tax credit proposal as they are difficult to target at the people intended to benefit.

"The problem with credits is everyone gets them and they are very expensive," a Government source said.

The Coalition wants to see low and middle income earners benefit from tax relief in the Budget. But it is not yet clear how much money will be available in the tax package or how it will be achieved.


The focus thus far has consistently been on the point at which workers begin paying the higher rate of tax.

The Coalition is looking at a range of options to target middle income earners and get them out of the punitive higher rate tax net, which kicks in at €32,800, where 52 cent of each €1 earned goes on tax.

Although Department of Finance officials have identified 25 options for tweaking the system in papers prepared for Budgetary consideration, the main spotlight will fall on raising the threshold where workers enter the higher rate above the current level.