A VALUABLE tax break for squeezed middle-income families with children is being examined by the Coalition ahead of the next Budget.

Tanaiste Eamon Gilmore has put a child tax credit on the table as a way to ease the burden for hard-pressed parents.

The Government is already looking at income tax cuts as a priority in Budget 2015.

Now, in an interview with the Irish Independent, Mr Gilmore, pictured, has raised the prospect of a targeted measure aimed specifically at working families with children. A tax credit is effectively a discount off your tax bill, increasing your net pay.

A child tax credit would give a worker with children a larger discount based on the number of children they have.

Mr Gilmore said: "I think we do have to look at the degree of pressure families are under. You can look at the personal tax credits, the question of should there be a child tax credit. These are among the options to be looked at."

The main focus of income tax cuts, to swing in before the next general election, will be providing a boost to squeezed middle-income workers who earn between €30,000 and €60,000.

At the moment, the tax system does allow a one-parent family tax credit, giving a parent with a qualifying child a credit of €1,650.

But there is no widely available tax credit for parents, even though this is commonplace in other European countries.

The Coalition was already looking at a range of options to target middle-income earners and get them out of the punitive higher-rate tax net, where 52 cent of each €1 earned goes on tax. Options being considered include:

* Reducing the higher income tax rate of 41pc.

* Raising the band where workers enter the higher rate.

* Moving around the bands for the universal social charge.

The option of increasing tax credits was previously being played down, as workers do not tend to associate this mechanism with extra money in their pocket.

In contrast, Labour sees tax credits as a means to directly hone in on a particular sector, such as struggling parents with children.

Mr Gilmore said the Government had to continue to focus on relieving the burden on families.

"We are very conscious of the household budget, the family budget, and the pressures that families are under, the costs associated with child rearing. We have addressed the medical issue this year."

Mr Gilmore said a child tax credit was "an option" and the tax relief being looked at could come over a number of budgets.

"I think we have to look at all options. . . Not necessarily all of these are for the next Budget, but I think now that we are seeing the economy recovering; now that we are looking at a situation where what scope will there be for some improvements, we have to get clearer about where our priorities are going to be.

"It won't be just the one budget. You'd look at what can be done, assuming that the economy continues to grow and improve," he said.

The Tanaiste said the scope for tax cuts won't be known until later in the year.

"I think it's important we don't over-egg expectations, because any movement on tax is going to be dependent on the ability of the country to be in a position to do it," he said.

But Mr Gilmore said there were areas where choices could be made on the taxation front. And he expressed a preference for a cut in income tax, rather than capital taxes.

BURDEN

"My view would be we will not be reducing capital taxes, that any reductions in taxes will be on the income tax side," he said.

"We would be looking at relieving the burden of tax on working people and on families, rather than tax reliefs for very well-off people. And within the income tax framework, there are a range of options that I think we are looking at.

"One of those obviously is the rate at which people come into the higher rate of tax, €32,800. It's low and that's one of the options," he added.

Lifting the income threshold where the higher rate kicks in is likely to be the focus of any cut in personal tax in the Budget.

Finance Minister Michael Noonan signalled last week the low threshold at which workers hit the higher rate of tax of 41pc will be targeted.

Earlier this week, Taoiseach Enda Kenny reiterated the top rate of tax is reached at "too low a level".

Fionnan Sheahan

Irish Independent