Report by Advisory Group on Tax and Social Welfare on child and family income support

antoobrien

Minster for Social Protection Joan Burton has published the report from the Advisory Group on Tax and Social Welfare on child and family income support payments.

The summary is available on the DSP website, with the full report available also for download.

I haven't read the report yet, so I'm taking this from the text of the webpage. I'll make any corrections in due course.

With that in mind here are the highlights
What they were asked:

• The Advisory Group was asked to examine the issue of child and family income supports. In this regard the Group was asked to examine in particular Child Benefit, increases for qualified children and the Family Income Supplement payments.
• The Group was also asked to take into account the considerable level of analysis that has already taken place in relation to family and child income supports, which includes a range of reports that have considered structural reform of these payments. These include a Department of Social Protection value for money review of child income support payments published in November 2010.
• The terms of reference require that all of the Group’s work is carried out in the context of ensuring that the income support and tax systems provide good incentives to take up work and contribute to the reduction of poverty and child poverty in particular.
• The Group is also required to consider any proposals for change to existing arrangements in a cost-neutral or cost-reducing context.

Findings:

• State should provide some income support for all children and targeted support to low-income families.
• The Group also concluded that the taxation of Child Benefit and a two-tier child income support payment were the two most feasible options for reform.
• Taxation of CB is not the best approach
• "There was a strong preference in the Group towards the two-tier child and family income support payment approach underpinned by the potential it would afford to rationalise the overall child income support system while minimising work disincentives, allowing for better targeting of support and at same time allowing flexibility to future governments to amend (either separately or together) the components of the payment."

The two tier proposal:

• Under the two-tier payment approach, child and family income support payments would be rebalanced and integrated as follows:
• A universal tier in respect of all children, which would replace the current Child Benefit payment.
• A child income support supplement or second tier payment, which would replace the current Qualified Child Increases components on all Social Protection schemes and the Family Income Supplement.
• This second tier selective payment would be available automatically to those in receipt of a means-tested primary social welfare payment (replacing Qualified Children Increases components on these payments).
• Where individuals with children were not in receipt of a means-tested primary social welfare payment (including those not on any social welfare scheme) or on FIS, they could apply for the second tier selective payment by submitting their application and satisfying a means test. This payment would replace FIS and also cover some families not currently eligible for FIS.
• The second tier payment would therefore be payable in respect of children in low/middle income families where the parents were not in receipt of a social assistance payment. For these families, the payment rate would be proportionally reduced as income increases.
• While the Group looked in detail at issues around the design and financial implications of a number of specific “packages” for the two-tier payment proposal, in terms of payment rates and thresholds, the Group emphasised that it was not endorsing a particular configuration for the two-tier payment as this is a matter for Government. However, the Group used a specific package in its report in a way that would illustrate the practical effects and operation of the payment, and how it might compare with the taxation approach.
• The Advisory Group report stated that the changeover to a two-tier child and family income support payment need not occur in one year but could be implemented over a transitional period of a number of years. Sufficient time would be required for the Department of Social Protection to implement operational measures so as to facilitate the delivery of the new payment.

Comments on taxation:

• In its examination of taxing Child Benefit, the Advisory Group identifies three options:
• Reduction in available tax credits of recipient (coding in), whereby tax credits for PAYE taxpayers would be restricted by the value of standard rate tax due on the Child Benefit paid and, to ensure higher rate tax in appropriate cases, reducing the Standard Rate Cut-Off Point by the amount of Child Benefit. Collection at source by the Department of Social Protection, whereby the Department would register as an employer and collect the tax due in the same way as the PAYE system.
• Final Liability levy, whereby there would be a non-refundable 20% levy at source of the payment with an exemption for social welfare recipients.
• None of these options would be ‘simple’ to administer for either Revenue or the Department of Social Protection and the Advisory Group’s report identifies pros and cons for these options. In particular significant ICT development would be necessary for both Revenue and the Department of Social Protection and this would have consequences for the lead-in time for implementation.
• Overall the Advisory Group did not favour the taxation approach because of the fact that it only addressed one payment in the overall structure and did not provide for a comprehensive approach to the system of payments supporting families with children.
• Taxation of Child Benefit is also subject to a number of legal questions. According to the Group’s report, the main legal issue relates to the requirement that cohabiting couples with children would not be treated more favourably than married couples with children. This could arise, for example, if the child benefit income was deemed to be the income of the income-earning spouse but could not be deemed to be the income of an income-earning cohabitee. The Group also noted that questions had been raised in relation to ownership of the Child Benefit payment and therefore who would be assessed for tax purposes

.

Comments on means testing

• Means-testing Child Benefit could mean that some families would not receive any child income support from the State. Therefore, the Group did not favour this approach as the Group was of the view that a universal child income support payment at some appropriate level should be retained.
• On a more general level this approach (means test) would only address one of the main income support payments and would have no benefit in terms of a better design of the overall child and family income support system.

Gumbo

On the outside, it looks ok and shouldnt affect the less well off.
I would be in favour of scrapping CB if there was a system in place to allow parents to work and not be so crippled with money that its makes it worthwhile, not just financially, but mentally too.

I have one child, i would be lost if we lost CB, it comes and goes on the same day, it gets spent in Dunnes Stores Charlestown every month without fail on baby stuff.

Creche fees etc why hasnt something been done on this, even from a tax credit point of view. €210 per week is the cheapest creche in out area and along the route to work. Its just not financially viable to pay that at present, and thus one parent only works 3 days. It would actually make financial sense to give up work, one of us and claim SW but that would not be a viable long term option, and plus you would go mental not working!