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Dublin: 17 °C Sunday 19 May, 2013

Column: The Dept of Finance is either unable – or unwilling – to fix childcare

The Department of Finance is refusing to run the numbers on making childcare tax deductible. It’s not good enough, writes Stephen Donnelly.

Stephen Donnelly

I WROTE PREVIOUSLY on TheJournal.ie on my failed attempts to have the Department of Finance run the numbers on making childcare a tax deductible.

Michael Noonan told me that this wasn’t possible. He said Revenue doesn’t capture data on the net cost of childcare and therefore they couldn’t estimate the cost of making it tax deductible. The Minister also said that it was possible that the beneficiaries of any such tax relief would be the childcare providers, implying crèches would just hike up their rates.

So when two weeks ago Brendan Howlin said in the Dáil that he’d have any tax proposals from any quarter costed, I thought ‘here’s another opportunity to see if the Government might actually do its job’.

Here’s what Minister Howlin said:

I am giving the Deputies an open invitation. I will have any suggestion they present for taxation measures costed to see if it would have an impact in order that we can have as fair and balanced a journey as possible. We will have a difficult time balancing the income of the State to maintain decent levels of social provision.

Pretty unambiguous language. So I asked if the Department of Public Expenditure and Reform would have a crack at some analysis of childcare costs. I got a fairly curt response – and not from Minister Howlin’s department.

A strongly worded reply from Michael Noonan’s department said:  ”The Minister for Public Expenditure and Reform’s offer related to the provision of simple costings and not comprehensive analysis projects such as that requested by the Deputy”.

I kid you not – Brendan apparently didn’t mean hard sums, just easy ones.

The sums are too hard? Really?

The Department of Finance went on to give some top-line figures on childcare costs from the National Consumer Agency Childcare Price Survey of February 2011. The average annual cost of childcare for a baby aged six months would be of the order of €9,932 and the associated cost in tax relief to the exchequer per child would be €1,986.40 (easy sums).

But to fully estimate the cost to the Exchequer of tax relief for childcare, they would need data on the numbers of children in paid childcare for each of the different stages of a child’s upbringing. They’d also need to factor in any behavioural changes that might occur should childcare costs be tax relieved (hard sums). The correspondence concludes: “For all of those children currently in paid childcare, the introduction of such a tax relief would be almost entirely comprised of deadweight”.

So, having to make assumptions about the behavioural effects of taxation policy means the sums are too hard. How then are changes to taxation policy calculated in Ireland? Changing taxation policy changes behaviour – it’s one of the REASONS we tax things. Imagine the following argument: ‘We’re not willing to analyse the Exchequer implications of taxing cigarettes, as such a tax would change people’s smoking habits’.

So let’s run through the sequence of events. Noonan says he won’t cost the proposal, Howlin says he will cost any proposals put to him by any deputies, whereupon Noonan says Howlin actually won’t as they lack the data and the will to do it. However, the departments are pretty sure that tax-deductible childcare would be of no benefit to the taxpayer.

My question: Without doing the analysis, how can they be certain?

This interdepartmental flip-flopping and refusal to undertake analysis because it is too complex is unacceptable. Perhaps the Departments of Finance and Public Expenditure and Reform are correct –  perhaps making childcare tax deductible is not a viable solution.

According to the recent League of Credit Union’s ‘What’s Left’ Tracker, childcare costs are the greatest work-related expense of those with children. So their reluctance to look into helping these people out is baffling. The possibility that they’re actually not capable of doing the analysis is terrifying.

Stephen Donnelly is an Independent TD for Wicklow and East Carlow. See: http://www.stephendonnelly.ie/

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Comments (44 Comments)

  • Tweedledum and Tweedledee. Howlin said he’d work out the costings and now the Minister of Finance won’t go through with it because the sums are too hard? How about working out the cost of two calculators and take it from there.

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  • shows the weakness of Noonan and the irrelevance of Howlin

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    • Its that ol Labour pre-election slogan “labour’s way or Frankfurt’s way ” coming back to bite them again……they do realise Frankfurt = FIne Gael, don’t they??

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    • The cost of childcare is too high. It is too high because the market will bear the price. If the market (i.e. the consumers) were not willing to bear the price, the cost will come down. Plain and simple economics!

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    • It is too high because of the cost of meeting the standards and regulations required. Making the cost tax deductable would allow the creches to maintain their operational standards while providing much needed relief to working families i.e. the best of both worlds for all involved.

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    • It sounds like you have a vested interest in this subject Too Trueleft. Market forces will ultimately prevail and the wisest of service providers will price for it. The unwise will hope that the taxpayer will subsidise their business!

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    • My only ‘vested interest’ is that the creche my child is in adheres to best practices and standards while looking after him. To do so costs a lot of money. Thats why more affordable childcare must come through tax relief.

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    • Charles Windsor, adherence to the ‘market will prevail’ policies of Ayn Rand is exactly the kind of thinking that drove the massive economic mess worldwide. Beware John Galt and the bullsh*t notion of rational self interest.

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    • I agree with you Sinead but this is how western economies work. I would love to believe in Disney fairytales too and increase my popularity by promoting and agreeing with the sentiment. However, that would be akin to a TD cheering on a property bubble and mass hysteria rather than shouting STOP for fear of damaging his popularity and chances of re-election.

      There is a real world and a fantasy world. The real world eternally seeks by design to destroy the fantasy world. Embittered, we sugar our perceptions, deceive ourselves and pay homage to false prophets! Alas,this is the way of the world.

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    • Too Trueleft that sounds like the “price equals quality fallacy” which is the cherished argument of the marketeer and the vendor. Consumers that believe the fallacy are easily parted from their money.

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    • Thanks Charles Windsor, but that is not how all western economies work- just how under-regulated economies work.
      ‘Society’ is not a Disney fairy tale- it is where we live, and the economic policies we pursue infuence how society functions. There is no value to laizzez-faire if we wish to have a worthwhile society because ‘the market’ cannot be trusted to provide for all. Some things are needed which don’t always seem to make economic sense- unless you take an integrated view.
      Equally, citizens have to be responsible if they expect to gain optimal value from society and if no-one is prepared to contribute (taxes of all kinds, time, social involvement) no-one benefits.
      It is in the interest of even ‘the insulated top 1%’ to pay a little more if it means better childcare, education and healthcare which eventually mean greater net contribution to the public purse (educated workforce in good health) and fewer negative drains (prisons, long term illness etc) and it is the responsibility of the more fortunate to pay their share and of everyone to behave reasonably- work if you are capable, don’t rip others (or the state) off, care for the weaker ones.
      And this is not fantasy land. It’s like vaccination. Not everyone has to sign up for it, but if the majority do, then everyone is protected.
      That’s it – I’m done. Apologies for the manifesto and the thread hi-jack!

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    • Sinead, all western economies are under regulated. Over regulated economies create poverty. Expecting the rich and powerful to vote for higher taxes and tougher regulation is not going to happen as long as the government thinks they can offer jobs to the people.

      I never said that society was Disney fairytale. My point is a simple one; some eejits are naive enough to believe what they want to believe rather than face reality. The reality is that tax breaks are not going to happen without tax increases and big ones at that. Keep on believing a politician playing to the gallery. If he was truly honest with people he would be looking at the country’s finances in totality and report the grim reality of debit side of our skewed balance sheet. There are no votes in reporting that I’m afraid!

      “The waste of money cures itself, for soon there is no more to waste.” – M.W. Harrison

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    • The problem with Charles Windsor’s argument is that it is illegal to abandon care and supervision of one’s own children to make a political point.

      I would imagine that it is – usually – unappealing also.

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    • “Too Trueleft that sounds like the “price equals quality fallacy” which is the cherished argument of the marketeer and the vendor.”

      Not at all charles. In the creche my child is in there is a full list of standards and regs, including policy on hygiene, ratios, safety etc. To meet these requirements costs money. Pity you’re either unwilling or unable to adsorb such a basic concept.

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    • Too Trueleft the best childcare is also the cheapest. It is the care provided by a parent. Thus you still sound more like a creche owner angling for business than a consumer.

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    • Cathy 08/08/12 #

      @ Charles Windsor
      Only if you ignore opportunity costs. To avoid childcare costs completely would require a two-parent family to time-shift their hours for three years and/or one or both to work part-time or purely at home. If you are a single parent, only the working at home option is possible. After three, it is easier, due to school, but there are still four or more hours in the day during which the child needs care.
      If a parent decides to stay home for three years it is not a simple matter to return to the workplace. Their skills may be out of date, they certainly have a gap in experience. Equally, going part-time also affects progress in a job. In both cases, when the child is grown, the person will probably be earning less.
      So, quite aside from people wanting to work, people enjoying their work, there are sound economic reasons for paying for childcare. Childcare by parents also costs, just in a different way.

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  • Gosh, who would have thought running a country would be complicated?

    Remind me to be more careful about who I hire to do it next time.

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  • Noonan is a liar and a clown. Of course it can be done, similare measures were introduced in the UK. You can read about that as well the incredible Swedish model: http://m.guardian.co.uk/society/2008/mar/11/children?cat=society&type=article

    Not only are young families desperately stretched but the policy re-inforces the gender inequality in this country. Young women with promising careers are (in the main) the ones forced to halt their progress due to the penal cost of childcare. Combine that with no statutory paternity leave and we have a nice little 1950’s outlook.

    Noonan can do the sums alright, he’s just not willing to help. A jaded and fattened conservative is not the right man to introduce an innovative social policy which will ultimately advance the cause of women and offer relief to stretched young families.

    As a Dad-to-be (in hopefully 2 weeks!) I’d like to thanks Stephen Donnelly and wish him well

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  • well done Stephen. my wife and i are putting our first into childcare next month. i can’t get over the cost. almost two thirds if my wife’s take home pay. i can’t believe the govt haven’t acted on this. but i imagine the cost is not so visible when like noonan you earn over a hundred k plus expenses.

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  • Ah Stephen Donnelly, Clear logical language/analysis and genuine efforts to fix/help our country..

    Such a rarity, if only we could clone him.

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    • Do you not see parish pump! A TD advocating policies that are costly and have no chance of being implemented in the current climate in order to endear himself to a certain cohort.

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    • Parents who place their child in childcare and work provide a net gain for the exchequer overall. This is acknowledged in many European countries and as a result the childcare is subsidised either directly or through the taxation system.

      Donnelly is an absolute diamond among cutehoors and me feiners. He should not be tarred with the same brush.

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    • “An absolute diamond among cutehoors” is a politician that tells people what they want to hear in order to endear themselves to the electorate! Diamond standard supporters of “cutehoors” blinker themselves to the harshness of reality by seeking comfort in what are patent fairy tales. !

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  • Theres no equality of access to childcare in Ireland, as it just does not make sense people on minimum wage pay the same fee as some directors on 100K+ salaries for example. Because childcare is not a luxury that you don’t buy if cannot afford, but necessity for many parents. My wife dropped her job as sending our little one would take about 2/3 of her take home pay. Disconnection with a child at this early living stage and juggling between 2 chores (work – home) for another 300 euro that would be left on the table – no thanks… I’d rather look to get couple more hours myself if month gets tight or just look to make some spending savings here and there. Tough luck, but I bet were not the only ones on the same boat.

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  • Blondie 19/07/12 #

    P Wurple – am open to correction but as far as I know there are no public service workers crèches actually run by the public service. I am aware of at least 1 crèche provided for children of public service workers but it’s sub-contracted out to be run by a private company.

    In Ireland parents’ main options are private crèches run as commercial enterprises. In the case of community crèches (not near as many of them & none in alot of areas) there is subvention of fees but unfortunately this is based mainly on what social welfare payments a parent receives so rarely benefits two working parents struggling with a mortgage etc. It’s a very messed up system.

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  • The curse of the career politician, having inherited his seat from his Daddy, he has been raised in the system and it is all he knows. He dare not upset the apple cart lest he be cast out of office and into the real world of which he knows nothing.

    Politics should not be a career, it should be a short term vocation for people who have proven their ability in the real world first to show that they have abilities to relate to the needs and wants of ordinary people.

    Seats should not be passed from father to son, like a butcher’s shop.

    Shayno said we should clone Stephen, but we shouldn’t need to. There should be people like him all over the country, people who have experience in the real world, who simply want their country to be properly run using sane joined up thinking and are willing to dedicate half a decade to bringing that about.

    And we should want to vote for them.

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  • When a person has to ask themselves “Can I afford to work” the system need fixing. Stephen is absolutely spot on with this. The deck is stacked so badly against people who want to work and have kids in this country that it beggars belief. We just found out we have our second on the way and if it turns out to be twins, game over. My wife will have to give up work, with the exchequer losing her income tax and USC as a result plus a loss to the donestic economy. Why does it not make perfect sense to make childcare deductable and keep her in the workforce and contributing??

    Noonan once again has shown his true colours. He’s a nasty piece of work. Theres no good reason for not looking at this no-brainer, but lots of bad ones. I’m sure ol’ Mikeys on that side of the fence, like he is with so many other things.

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  • the answer’s in the question: “childcare costs are the greatest work-related expense of those with children”. so making it deductible would be a huge loss of revenue for the government! not that mysterious surely…

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    • There are parents out there who leave work to look after the kids because of childcare costs. A tax break might put these people back on the workforce and paying tax.

      Without knowing how many people fit the above description and how much they would earn, we can only make an uninformed decision.

      The minister’s uninformed decision to not give tax breaks bothers me because childcare is a huge bill for me right now.

      Also I suspect the minister is making this decision in order to appear to be avoiding it. If he were to bring in this tax break and it hurts the exchequer, then he is to blame. If he does not bring it in and this hurts the exchequer, then he’s off the hook. “Sure, he didn’t do anything.”

      Noonan should be clear. He is not unable to make a decision on these tax breaks. He has decided not to provide them.

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    • Versus the loss in revenue in PAYE, USC of a mother who is forced to give up work? What about the positive effect the proposed relief on black market childcare? What about the extra spending power of the relieved families and the extra money going back into the economy? What about the fact the relief may now make it an option for a parent to return to the workforce?

      Scratch the surface a little. Your glib analysis falls flat.

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  • Damocles 19/07/12 #

    Incidentally, Journal, awesomely cute pic.

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  • I have a gut feeling the Gov don’t want to apply the tax fairly…i.e. means tested as it’s the rich who would lose out. Same goes for flat rate fee for household charge. This short-sighted and greedy attitude just causes distrust, disallusionment and a widening in social disparity. The costing model is fairly simple and already available. I wish our Politicians would show a little more courage and commitment to doing what is right. Its embarrassing that tge Troika have to instruct them on this. Come on Ireland – we can do better. Ross.

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  • Alt suimiúil

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  • Stephen I have sympathy for you trying to get any progress out of this government- the lunatics really have taken over the asylum

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  • Out of interest, how much do the public service creches charge? The ones that only public service workers are allowed send their children to… Is it the same as the private ones?

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  • I think the Republic of Ireland is the most women unfriendly country in the developed world. Other examples to back this abound. If this government behaves like bog conservatives on this issue, then they can expect to lose a lot of seats at the next election. Clearly, as Stephen Donnelly points out, child care costs should be tax reductible. This will encourage more women with children to stay in the workforce or enter the workforce. This means they have more earning power and therefore there is more revenue for the government. We should also look at the Swedish model where parents or single parents need not spend more than 1% to 3% of their/her/his income on childcare costs depending on how many children they/she/he have/has. Also, we should introduce statutory paternal leave.

    Is the Republic of Ireland a bog Republic where we continue to forlornly and wretchedly pursue Harry Blaney’s dream of an Ireland whose population is restored to pre-famine levels with women playing their part by churning out the babies or are we a truly modern Republic, comfortable with our present limitations and willing to set workable, realistic and realizable goals?

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    • :-) ‘Harry Blaney’s dream…”
      unfortunately we are a rather distractible people and it’s realtively easy to have us fight amongst ourselves rather than deal coherently with the issues that’ll really make us a happier people – good heathcare, childcare, education, work….and taking responsibility for our own part in society (giving and taking)

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    • I suggest Paul Carr that your opinion is founded on nothing than the Irish anti-Irish prejudice. If you want childcare to be tax deductible then pay more tax. Increase VAT to 26.3% and income tax to 57%. Then you can have the childcare facilities similar to Sweden. Would that encourage more women back into the workforce? Inexpert would be too kind to describe your comments and we know that prejudice not being founded on reason cannot be displaced by logic.

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    • Paul, I would point out that the automatic relating of “childcare” to “women” is not very women friendly either, since it devolves most of the hard and unrewarding and repetitive tasks of daily childcare onto women while exempting that part of the human race which fertilised the women.

      It takes two people to produce a child and both should have to shoulder the consequences in parenting duties and career setbacks.

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    • though I agree with the rest of your point. I just want to break the false equivalence that just because we’re the host organism we’re more specially wired for this stuff than men are. It makes me grind my teeth because it costs us so much.

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    • Susan: I did not relate childcare to women.

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    • I wrote, “child care costs should be tax reductible. This will encourage more women with children to stay in the workforce or enter the workforce”. I would have thought that was pretty obvious. How pointing that out means I associate childcare with women is beyond me.

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  • when does childcare stop??is paying for accomodation and food childcare for third level ?
    this is a childs education — and so is preschool — please give a tax break for all dependent children.
    This then allows a parent to make a choice

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