Tax relief on childcare

We use a registered legit Creche for our two toddlers, amounting to €250 a week. We are both in employment.

Does anybody know if we are eligible for tax relief?

There is no tax relief on childcare at present, but [broken link removed]. [I'm a Labour member, btw] Still, I wonder if any additional tax relief or subsidy would simply go into the hands of the creche owners, as increased demand without increased supply would result in higher prices?

Rainy,

I am not sure that any tax relief for perents is going to make much of a incentive for people to open creches

The main problem with childcare facilities in this country is for a large part they are an uneconomical business

They are not easy to make money in

As above, €125 pw for a toddler
A creche must have 1 worker for every 3 toddlers
Therefore the creche will only receive €375 for the minding of three toddlers
Since minimum wage is €7.65 (40 hours is €332 incl ER PRSI) that does not leave a lot to pay for rent and insurance by the owner, €43 for minding 3 kids

The government did try and make it more attractive for people to open child care facilities through tax incentives but these seem to be the "root of all evil" since primtime during the week

Subsidised childcare is probably the only answer

stuart@buyingtolet.ie

stuart said:

Subsidised childcare is probably the only answer

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But wouldn't basic economics dictate that such subsidies would result in increased prices (additional demand, but no additional supply) and the subsidies will flow straight to the creche owners?

stuart said:

Since minimum wage is €7.65 (40 hours is €332 incl ER PRSI) that does not leave a lot to pay for rent and insurance by the owner, €43 for minding 3 kids

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Not to mention the fact that many people paid only the bare minimum wage might not be economically incentivised to provide anything more than the bare minimum of care to the kids...

economics dictate that such subsidies would result in increased prices (additional demand, but no additional supply)

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Tax incentives for parents is not going to make a diference to the person running the creche
If they are not making money now then they will raise their prices if there is a tax incentive for parents
A tax incentive for parents will raise prices

Loot at S.23 properties, did they make money for the developers or make housing more affordable

subsidies will flow straight to the creche owners?

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Subsidies "flowing" to the owners will make it possible for them to make money by running a creche
Therefore people will want to open creches, as businesses

More creches means more competition, then and only then might prices fall
I know it is difficult for someone like yourself (rainy) to understand competition is a good thing but it can be

Generally, anyone would be mad to open a creche and expect to make a good living from the profits

Personally, I do not have a strong opinion on whether or not cerches should be subsidised to make them cheaper

But I am certain that tax breaks for parents will not lower prices, so there is no point in that
Except if people are chasing votes

stuart@buyingtolet.ie

Hi Stuart - Can I suggest that we avoid the personal jibes and focus on the topic in hand.

As a general point, while I'm not suggesting there is a gold mine to be made in the creche business, I'm a bit puzzled by your generalised suggestion that creches are losing money. If this was the case, why do the owners continue to operate them? I have noticed anecdotally that creches do seem to have to compete for business which wasn't the case a couple of years ago (advertising, leaflet drops etc). I've also noticed that the new creches starting up seem to be pretty massive almost production-line type operations.

stuart said:

Tax incentives for parents is not going to make a diference to the person running the creche
If they are not making money now then they will raise their prices if there is a tax incentive for parents
A tax incentive for parents will raise prices

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Did you omit something from this comment? It seems to be contradictory, where you say tax incentives won't make a difference to the owner and then you say that tax incentives will result in increased prices. Surely those increased prices will very definitely make a difference to the owner, i.e. increased profits?

stuart said:

Loot at S.23 properties, did they make money for the developers or make housing more affordable

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Well the generally accepted wisdom (on this site & elsewhere) is that they certainly made money for the developers, as the tax break is built into the price charged by the developer (for no additional cost on his part). So the benefit did flow to the supply-side of the equation. I don't know enough tosay whether it made house more affordable or not, though I do now that 'affordable' and 'housing' don't often go together in the same sentance in modern Ireland.

I am not saying that all creches lose money but it is not anywhere near as lucrative a business as people think due to the high fees they charge

As I showed earlier, the minding of toddlers is not worth the effort for most but that is where the next set of 2-5 year olds come from

The margins on minding older children is better but still not astronomical

The current crop of new creches for a large part may be utilising tax incentives introduced which are used to reduce the income tax bills of the "owners"

It seems to be contradictory, where you say tax incentives won't make a difference to the owner

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A bit backwards from me alright
What I meant was, the only effect of tax credits for parents will be that it will make it easier for the owners to raise the price

I mentioned the S.23 point as it illustrates that tax incentives at the consumer end generally distort the market place

stuart@buyingtolet.ie

Thanks for all the replies.

I wonder what the 3 to 1 legislation is based on and from where it came?

Based on the figures, this seems to be critical to the financial model.

Personally, our creche does not appear to have the 3 to 1 ratio on toddlers. Alongside that I would question whether it is overkill?

For what it's worth has some information about the regulation of childcare services.

Cheers; there ya go. Toddlers (1 to 3 years) ratio of 6 to 1. They must have changed the legislation since this morning!!

Ratio of staff to children increase for older age groups - most Creches take a hit on the baby rooms or else charge more €250 for two children is very good, you must be outside the Dublin Area, The creche is our Corporate Park in Dublin charge €245 for one child for a week!!!!