Dáil Éireann - Volume 395 - 08 February, 1990
Written Answers. - Child Income Tax Allowance.
Mr. Stagg Mr. Stagg
 33. Mr. Stagg asked the Minister for Finance the estimated cost in a full year to the Exchequer of taking family size into consideration in the PAYE tax system by the reintroduction of child benefit of £300 per annum per child, in light of the fact that family size is an important contributory factor in the overlapping of poverty and income tax.
Minister for Finance (Mr. A. Reynolds) Albert Reynolds
Minister for Finance (Mr. A. Reynolds): I presume the Deputy is referring to the general child income tax allowance which was abolished in 1986. Before its abolition, this allowance stood at £100 per qualifying child and was available to all qualifying taxpayers whether self-employed or taxed under PAYE. The full-year cost, estimated by reference to the 1990-91 income tax year, of reintroducing the child tax allowance on this basis, at the level mentioned by the Deputy, is estimated at £68 million.
I am aware of the difficulties faced by low-paid taxpayers with family responsibilities. In the 1989 budget, in a major initiative designed to help such taxpayers, I increased the general exemption limit for a married couple from £5,500 to £6,000 and introduced a child addition of £200 per child in conjunction with the exemption limits. In the 1990 budget, I further increased the general exemption limit, to £6,500 for a married couple, and I also increased the child addition to £300 per child. As a result, the exemption limit for a married couple with two children, which was £5,500 in 1988, will be £7,100 in the coming tax year, an increase of almost 30 per cent, while the limit for a married couple with four children will increase over the same period to £7,700, an increase of 40 per cent.
Overall, this year's increases in the general and age exemption limits and in the child addition will exempt an estimated 31,000 taxpayers with 58,000 children from income tax, while a further 65,000 taxpayers with 123,000 children should benefit from marginal relief. As I indicated in my budget speech, the Revenue Commissioners will be conducting  an extensive campaign to ensure that low-paid taxpayers are aware of their entitlements in this area. In my view, these measures, which cost in total £23.7 million in a full year and £14.2 million in 1990, are an effective means of targeting relief through the income tax system on low-income taxpayers with children. Parents on higher incomes will of course benefit from the other substantial changes I have made in income tax in the last two budgets, including, for example, the reduction in the standard rate from 35 per cent in 1988-89 to 30 per cent in the coming tax year.
Dáil Éireann 395 Written Answers. Child Income Tax Allowance.