A childcare package and details of tax relief for profit-sharing schemes can be expected to emerge from the negotiations on the successor to Partnership 2000.
According to papers on the tax strategy for the latest Budget, obtained by The Irish Times, it appears that both will be addressed in these negotiations, having been left out of the Budget.
Most of the chapter on childcare has been deleted by the Department of Finance under confidentiality clauses in the Freedom of Information Act. However, it does state that the Minister for Finance, Mr McCreevy, has given a commitment to review the possibility of a tax relief on childcare. It concludes that there have been growing expectations over the last two years about assisting families with childcare needs and costs. "These expectations are likely to grow in the run-up to the negotiation of a successor to P2000," it states.
The Tax Strategy Group - comprising senior civil servants and political advisers - also generally agreed the package of measures recommended by an interdepartmental committee on childcare. These include an equal opportunities childcare programme, community-based afterschools services, local network initiatives and grants for medium-sized childcare facilities, as well as grants to schools' management for the provision of afterschools services. The other recommendations of the committee were deleted.
The documentation relating to the deliberations of the Tax Strategy Group shows that it concluded that employee participation schemes would be a "major element" of any post-Partnership 2000 national agreements. However, it was also noted that the negotiations may produce a range of further proposals and a broader analysis would be required at that time.
The papers provide a glimpse of the likely focus of negotiations on the social welfare side. The group stated that the indexing of social welfare rates, whether to consumer prices or to either gross or net wages was "certain to be a central factor in the talks on a new partnership agreement".
The tax treatment of cohabiting couples is also likely to be looked at in future budgets. In this Budget, the issue was only dealt with in terms of capital acquisitions tax. In terms of the general tax code, the group found that it may be possible to extend married treatment to cohabiting couples with children in a longterm relationship. However, this would require legal advice on constitutional aspects and could give rise to practical operational difficulties for Revenue.
The papers also revealed that the moves in the Budget to fix capital acquisitions tax at a single 20 per cent rate may have been against the advice of officials. The papers point out that a two-tier system at rates of 20 and 40 per cent would be "more effective" than a single rate of 20 per cent, as those in receipt of large benefits, while gaining somewhat, would still pay some tax at the top rate of 40 per cent on any gift or inheritance, say £40,000 above the threshold.
"Those in receipt of smaller amounts would benefit substantially from the abolition of the 30 per cent rate, as their top rate of tax would be 20 per cent. Furthermore, maintaining the 40 per cent rate would keep the top rate of capital acquisitions tax broadly in line with the income tax code," the paper stated.
The Minister for Finance also appears to have ignored advice to impose a surcharge on the profits of so-called close companies, most of which will benefit from the reduction in corporation tax to 12.5 per cent for the first £50,000 of profits.
The group warned that allowing these small firms with up to five employees to retain their profits and just pay 12.5 per cent corporation tax would mean millions of pounds of leakage from the income tax system as individuals - such as consultants - sought to pay the far lower corporation levels. The solution was to treat such companies in the way professionals are already treated and impose a surcharge at say 20 per cent on a portion of profits.
