Should benefits be taxed?

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faketales

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I’m luckily not overly familiar with our benefits system but recently took parents leave.

I look 5 weeks at €274 a week. My employer doesn’t top up. It’s an expensive time and while the €274 was a big drop it was welcome.

I didn’t think a lot about its taxation but now realise that 40% of it will be clawed back as I’m a higher rate payer. I actually received €164 a week from the government which is a lot less generous.

I must admit I feel a little hard done by. By being a higher earner and contributing more in taxes I receive less support from the government.

I think if the rate I received was more proportional and closer to my salary I would be more accepting of being taxed but the rate provided seem more like a minimum to get you through a week amount rather than a replacement for salary.

Why isn’t child benefit taxed?

What the justification regarding benefits that are taxed and those that aren’t?

Why not tax me as as I am paid the benefit?
 
Maybe this thread is of interest to you?

Is Ireland out of touch regarding taxation / benefits?

I don't have in-depth knowledge of how government program and benefits work in different countries but talking with friends living elsewhere there seems to be a common theme that things are done a bit different in Ireland. One Big Taxation Pot We seem to operate a centralised tax pot where...
www.askaboutmoney.com
 
I guess some are intended to be social transfers at the rate they are being paid at, e.g. CB is a universal benefit. Others are intended to replace income streams temporarily so fall under taxable income.

MB was an anomaly, if your employer was topping up then you were better off when on MB by virtue of not paying tax on the element of the MB that formed part of your income. Now, you are the same as if you were being paid as normal, with the government funding your salary by the MB amount.

Same with some BIK...pension contributions, work related professional fees, travel passes, parking and vouchers to certain limits can be paid to employees free of BIK, other things like health insurance incur BIK.
 
Many employers who top-up maternity benefit have the employee get the maternity benefit paid directly to the employer and then get paid their salary as normal - in these cases the employee ends up with the same net income.

Maternity benefit has only been taxed since 2013, for many women in (often lower paid) non-civil service/bank type jobs they end up with a reduced/no salary and are taxed on the small MB they receive while off.

Agree with the OP, almost feels like highly taxed individuals are being penalised. I was ill earlier this year and signed off work for 5 months; I am a contractor/ self-employed and I received no state sick pay - not a penny. I am a high earner and pay PRSI & USC - was surprised that I wasn't even entitled to the 'dole' sick pay
 
GAAmam said:
Maternity benefit has only been taxed since 2013, for many women in (often lower paid) non-civil service/bank type jobs they end up with a reduced/no salary and are taxed on the small MB they receive while off.
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The weekly maternity benefit is €274. PAYE on that is [274 * 20% =] €54.80.

The basic tax credit per week for any employee is €72.12

Hence, none of those "many women in (often lower paid) non-civil service/bank type jobs" pay any tax on their maternity benefit.
 
Marsupial said:
The weekly maternity benefit is €274. PAYE on that is [274 * 20% =] €54.80.

The basic tax credit per week for any employee is €72.12

Hence, none of those "many women in (often lower paid) non-civil service/bank type jobs" pay any tax on their maternity benefit.
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If they are jointly assessed their partner may have their tax credits; most people don't view their salary and credit as a weekly payment but in the context of a yearly salary
 
GAAmam said:
If they are jointly assessed their partner may have their tax credits; most people don't view their salary and credit as a weekly payment but in the context of a yearly salary
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All of which is quite true, but has no bearing whatsoever on the simple, unarguable fact that none of those "many women in (often lower paid) non-civil service/bank type jobs" will have to pay any tax whatsoever on their maternity benefit.
 
Marsupial said:
The weekly maternity benefit is €274. PAYE on that is [274 * 20% =] €54.80.

The basic tax credit per week for any employee is €72.12

Hence, none of those "many women in (often lower paid) non-civil service/bank type jobs" pay any tax on their maternity benefit.
Click to expand...

Does it not depend on what you earn the rest of the year? For example if you were working of Jan-September and on Mat Leave for Oct - March you would have 9 months of work in the year.

If you earned say 25k in that 9 months you would be taxed on the mat leave pay right?
 
faketales said:
Does it not depend on what you earn the rest of the year?
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Well, yes, what tax you ultimately pay depends on your assessable income for the full year and, normally, tax credits are apportioned on a pro-rata basis based on how you are paid (e.g. monthly, fortnightly, weekly). This can sometimes lead to anomalies that need to be balanced out at year end or earlier.
 
misemoi said:
I guess some are intended to be social transfers at the rate they are being paid at, e.g. CB is a universal benefit. Others are intended to replace income streams temporarily so fall under taxable income.

MB was an anomaly, if your employer was topping up then you were better off when on MB by virtue of not paying tax on the element of the MB that formed part of your income. Now, you are the same as if you were being paid as normal, with the government funding your salary by the MB amount.

Same with some BIK...pension contributions, work related professional fees, travel passes, parking and vouchers to certain limits can be paid to employees free of BIK, other things like health insurance incur BIK.
Click to expand...

They have got very strict on requiring BIK on professional fees. I guess parking is harder to put a value on.

I guess my issue is that those social transfers don’t really look that different to “pay” replacements which don’t really look like pay but a minimum amount.

It might be fairer if they just gave a lower amount but tax exempt.
 
GAAmam said:
Many employers who top-up maternity benefit have the employee get the maternity benefit paid directly to the employer and then get paid their salary as normal - in these cases the employee ends up with the same net income.
Click to expand...

Then their Payroll/HR is incompetent.
 
faketales said:
Does it not depend on what you earn the rest of the year? For example if you were working of Jan-September and on Mat Leave for Oct - March you would have 9 months of work in the year.

If you earned say 25k in that 9 months you would be taxed on the mat leave pay right?
Click to expand...

Not if your PAYE was up to date when you left your employment in September. (Your income for the remainder of the year would be €274 a week and your weekly tax credit would exceed the tax due on this amount. In fact in that situation, you would end up being eligible for a tax refund at year-end!) [edited for clarity at 22.06]
 
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Marsupial said:
Not if your PAYE was up to date when you left your employment in September. (Your income for the remainder of the year would be €274 a week and your weekly tax credit would exceed this figure. In fact in that situation, you would end up being eligible for a tax refund at year-end!)
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Perhaps I’m confused. My tax credits were up to date. Then 5 weeks of leave, no tax. Then back to work with revised cut off and tax credits to claw back 40% of benefits.
 
faketales said:
Perhaps I’m confused. My tax credits were up to date. Then 5 weeks of leave, no tax. Then back to work with revised cut off and tax credits to claw back 40% of benefits.
Click to expand...
Maybe it is paid gross and didn't go via payroll so your tax liability was only accounted for when you returned to work via adjustments to your tax details?

Parent's Leave & Benefit - BrightPay Documentation

Full information and guidance on Parent's Leave & Benefit in BrightPay Ireland Payroll Software
www.brightpay.ie www.brightpay.ie
 
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