A kinda sorta maybe clarification on how maternity benefit taxation works

So, way back in November of 2013 I promised you guys that I’d try to get some clarification on what exactly is going on with maternity benefit taxation because, in all honesty, it’s a clear as mud.

I sent the following letter to all of my local TDs:

“Dear Deputy

I run a website for mothers in Ireland and since the introduction of a taxation on maternity benefit in July of this year I have been inundated with queries from women in relation to the implications for them of this tax once they return to work.
It now appears that when women are returning to work after their maternity leave, the tax on their maternity benefit is being treated as “other income” and is being deducted from their weekly or monthly tax credits. It is then necessary for them to seek to reclaim overpaid tax at the end of the tax year. The result is that they are seriously out of pocket on their return to work in anticipation of this refund at the end of the year. Additionally, women who have transferred their tax credits to their husband while on maternity leave and are being taxed on their full income with no tax relief.
This situation is impossible for the young families of your constituency and of Ireland.
Could I ask you to:
1. clarify how exactly the taxation on maternity benefit is being implemented in Plain English please because it is not clear anywhere even on the exceptionally helpful www.citizensinformation.ie
2. Please do something to make the situation more equitable for young families. Surely the system can be changed to ensure that the tax is deducted either when the benefit is being paid or on a regular basis overtime, rather than penalising young families when they need the money most.
Looking forward to your considered response.
Warmest Regards
Mind the Baby”
You will notice I opened the letter with “I run a website for mothers in Ireland…”. I thought this little fuzziness of the truth was easier than getting into the detail of the fact that I write a blog that is read by lots of different kinds of people but that women in Ireland in particular have been asking me for help in understanding why ALL THEIR MONEY WAS GONE when they went back to work. I’m sure said TDs will forgive of me this slight bending of the truth because the sentiment is still honest and fair. (Hi TDs, if you’re reading this and recognise yourself.) Anyway…

Just one TD came back to me. They forwarded me on the letter they in turn had been sent by the Chairman of the Revenue Commissioners, which was pretty nice of her, in fairness. So here’s what she said:

(you’ll need to click on the image to read the text properly)

Is this a helpful explanation do you think? I must admit, I definitely found it clearer to understand than anything else I’ve read but I had to read it twice. I think it plays down the fact that an awful lot of women don’t receive top-up payments from their employer and this is really where the biggest issue lies.
It also appears to me that maybe they’ve tidied things up since I sent in my original letter. For example, a few of you have mentioned that you transferred your credits over to your husband while on maternity leave whereas this letter is suggesting that its not possible to do that if you haven’t left enough for your maternity benefit to be taxed. Has this been your experience?
I like that she mentions that they are constantly reviewing because I really don’t think this is the best way this can be done. What do you reckon? Anybody any suggestions about how the tax can be applied in a fairer, easier way? Is there information missing in the letter that relates to you?
I’d love to hear your thoughts.


PS. If anyone would like the name and number of the person redacted at the bottom of the letter to contact them for more information, email me at hello at mindthebaby.ie and I’ll send it on to you. x

2 thoughts on “A kinda sorta maybe clarification on how maternity benefit taxation works”

  1. Hmm. Ok, it explains one scenario alright. The scenario in which people get paid a full top up. For those that get no or a small top up, it is no clearer and feels like they just rehash what you point out in your letter. I’d actually love to know what percentage of mothers that qualify for maternity benefit in this country get a full top up, because the policy seems to have been designed with just that mother in mind.

    I get that they can’t do it at source that easily because they’ve no way of knowing what you’ll earn that tax year due to the flexible nature of additional unpaid leave, and because they don’t take USC etc. I don’t know what the solution is, isn’t it their job to come up with an equitable solution?

    1. Yes it is their job! They don’t seem to recognise that it’s an issue in the first place which is a problem in itself.

      I think the percentage of women getting full pay is very small. We’re really talking about civil and some public servants and then women working in certain large companies, but that’s it. It’s a stupid system designed to collect a tax full stop. No thought went into the equity of it at all.

What do you think?