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How to take the sting out of taxing maternity benefit for Irish working mothers

When the Irish Parenting Bloggers Group organised a blog march last October to object to Government cuts to children’s allowance, I brought a controversial proposal to the table. Instead of cutting a universal payment to all children which would affect every family, I suggested that a tax on maternity benefit would generate some of the savings that needed to made and would create an equity amongst working mothers on maternity leave, where some women had previously been benefiting from a tax anomly. Everyone would keep their children’s allowance and no one would earn more on maternity leave than when they were at work.  You can read the original post here.

Children’s allowance got cut anyway.

I like to think that maybe one of the powers-that-be must have been reading this blog because at the same time they announced the children’s allowance cut, they also announced the tax on maternity benefit. From July of this year, maternity benefit will be treated as taxable income and will be deducted at whatever tax rate a recipient is currently on.

There has been a lot of criticism in the media in recent days about the introduction of this tax. I must admit, a small part of me is sorry that the tax has been introduced because if I had another baby it would affect me directly and I would have less money than I had on my last maternity leave and I would have to look at my options in terms of the amount of time I could take off.

But I have to say, I stick resolutely by my proposal to tax maternity benefit. No matter how you twist it, the old system benefited some women but not all. In reality, it was the most vulnerable women who needed it most who didn’t benefit from the tax loophole – the low wage earning mothers and the stay at home mothers, who don’t even have maternity benefit in the first place. It’s the same principle that applies to Ireland’s children: they are all equal and deserve the same children’s allowance.  All mothers should be equal.

photo credit: Dominik Meissner www.Orime.de via photopin cc How to take the sting out of taxing maternity benefit for Irish working mothers Mind the Baby Blog www.mindthebaby.ie
photo credit: Dominik Meissner www.Orime.de via photopin cc

Climbing down off my high horse, the consequences of taxing maternity benefit do have a dark side with very real, negative societal impacts. The truth is women who benefited from the tax break used to use it to finance their unpaid leave so that they could stay at home with their babies for as long as possible.

Of course they did.

Many of us do everything in our power to stay at home with our children at this precious time in their lives.

From July, a whole swathe of new mothers will be cutting short their time at home due to financial commitments and it’s very, very sad. Heartbreaking for mothers, for their babies and for society who thinks children are better off in paid childcare than being nurtured by their parents.

I’m sure you’ve observed that we’re still paying the same rate of PRSI though, even though we’ll be receiving less. Given that the average age of mothers giving birth in Ireland is now 32, these women have been in the workforce a long time prior to their pregnancy and have made significant PRSI contributions, which they will continue to make if they return to paid employment.

Given Ireland’s recent renegotiated debt deal, there’s certainly a question mark over how important the saving on maternity benefit is. So here’s my new proposal:

Take the €40 million annual saving that the Government will make by taxing maternity benefit, divide it by the amount of women on maternity leave each year and calculate how many additional weeks of maternity benefit this would pay for. Then spread it evenly between all recipients.

Doing a rough calculation on CSO figures from last year, I estimate that this would give each woman on maternity leave an extra 8 paid weeks. That would be approximately 34 weeks of maternity benefit per pregnancy.

Imagine the positive impact that this would have on families and on society as a whole.

We’ve taken away the inequity in the maternity benefit system, painful as it may be. Now let’s turn the negatives of this correction into something that would be of exponential benefit to all working mothers and by default their families.

Powers-that-be, if you’re still listening, it’s time to do something good.

Related Posts:

Leave child benefit alone. Tax maternity benefit instead.

Leave child benefit alone. Tax maternity benefit instead.

The second that silly season finished and the Dail was back in session, various members of the current Government returned to their obnoxious and irresponsible practice of kite flying to test public reaction to hypothetical cuts as we hurtle towards Budget 2013. Continue reading Leave child benefit alone. Tax maternity benefit instead.