Taxing maternity benefit -  A short sighted measure

Published: Wednesday, March 13, 2013

The Minister for Finance, Michael Noonan, announced his intention to bring maternity benefit into the tax net as part of his proposals in Budget 2013.

Up to now Maternity Benefit has not been regarded as income for the purposes of the Income Tax Acts and is disregarded for all tax purposes. In their report, the Commission on Taxation noted that the payment is intended to allow mothers to remain outside the workforce for a period to nurture their new-born children and there is a positive social dimension to the payment. They recommended that there be no changes to this.

The recent government decision to tax maternity benefit will mean that, depending on tax rates, mothers can except to lose up to €2,700 in income. In a recent speech Minister Michael Noonan stated that part of the general policy is that persons shouldn't enjoy a bigger take-home pay when they are out of work than in work. Some party political spokespeople and other commentators branded the move 'anti-family'. 

In our media work on the issue, the NWCI stated that having a baby is an exciting but extremely expensive time for parents. The exemption from tax was an acknowledgement of this and the fact that the social good from having babies benefits all of society. We also said that we believe this is a short-sighted measure on the part of the Minister for Finance and his colleagues in Government and called on him, in the interests of all pregnant women and new mothers, to withdraw the measure.

Maternity Benefit is a payment made to women who are on maternity leave from work and covered by social insurance (PRSI). The amount of money paid each week depends on the person's earnings. It is paid directly on a weekly basis for a maximum of 26 weeks. There is no obligation on employers to pay a top-up, though some employers will continue to pay an employee, in full or in part, while she is on maternity leave and require her to have any Maternity Benefit paid to them. The maximum rate of maternity benefit is €262 (€6,812 over the 26 week period) and the minimum payment is €217.80 (€5,662.80 over the 26 week period).