Taxation Commission – Messy Child Benefit changes?

We are all very glad for Child Benefit – at €166 per month per child (that’s nearly €2,000 a year tax-free), it’s an important part of most of our household Budgets.

But there is also the aspect that many who receive the child payment earn so much anyway, the question is asked why are they getting this additional free money. Could it be better spent? Can that money be distributed more equitably?

The Commission on Taxation’s job was to make suggestions across the spectrum of tax and social payments and Child benefit is proving to be one of the most vexing issues. But they will be recommending to the Government next week that Child Benefit is made taxable.

How would Taxing Child Benefit work?

in simple terms, this means you have an extra €2,000 of income per child subject to tax.

• Not paying Tax:  If you are not earning, or are not paying any income tax, then you will have no change to your income
• Paying 20% Tax on your pay: Then your pay will be reduced by€33 per month (that’s €166 times 20%) per child.
• Paying higher rate tax (41%): Then your pay will be reduced by €68 per month (being €166 times 41%) per child

So you probably still receive the €166 as normal, but your pay packet will be affected.

Is that it?

well it couldn’t be that simple, could it!

• Who gets taxed on it?  The mother or the father?  especially for unmarried couples or single parents, this could be a bunfight.  But even for married couples where one earns high and the other low, depending on who’s income it is deemed you could effectively play the system.
• Can it be taxed?  child benefit is for the child, to be spent on the child.  There is a question that this is illegal.

Just leave it alone

I think this could end up as an emotive, politically messy issue, much like the medical card issue last year. As dad to a near 2 year old, we have already become emotionally attached to this payment (although me a little more!)

I do think while fairer and more equitable, taxing child benefit or making it means tested would both end up messy. It’s going to get emotive with property taxes, carbon taxes and water rates also on the table, so leave us our Child Benefit as our comfort blanket while we get used to those.

Find out more

find out more about Tax Refunds and Top Tax Tips, including our Tax Refund Calculator at www.RedOakTaxRefunds.ie