Experts had urged no tax of maternity benefit

The expert group appointed by the State to examine the taxation system specifically recommended against taxing maternity benefit.

There was surprise this week when Finance Minister Michael Noonan announced a move to tax the benefit, which pays from €217.80 to €262 a week, as part of the €3.5bn budget adjustment.

“From 1 July 2013, maternity benefit will be treated as taxable income,” he told the Dáil. “This measure will correct an anomaly so that women on maternity benefit will pay the same level of income tax as when they are working.”

The measure will save €15m next year and €40m in a full year.

But the 2009 Commission on Taxation report advised against taxing the benefit. The commission had been appointed by the Fianna Fáil-Green government.

The commission spoke to Revenue and the Department of Social Protection.

Revenue said the benefit was payable for a maximum of 26 weeks and therefore did not come within the category of “annual payment”.

The report said the benefit was intended to allow mothers to remain outside the workforce for a period to nurture their newborn children and there was a “positive social dimension” to the payment.

“Having regard to these aspects, we do not recommend any change in the taxation status of maternity benefit,” the commission said.