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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.

I WROTE PREVIOUSLY on 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:

Read: More columns by Stephen Donnelly >

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