Budget must look to rising childcare costs


The Irish economy has overcome a raft of challenges it faced in the past three years. May 2023 saw a reduction in the unemployment rate to 3.8%, surpassing the pre-pandemic level of 4.8% recorded in February 2020. Recent data for May 2023 indicates an impressive surge in tax receipts, reaching an impressive €33.1 billion by the end of May—an increase of 10% on an annual basis.

This surge can be attributed to increases in income tax, VAT, and corporation tax. Income tax alone amounted to €13 billion by the end of May, reflecting a 9.5% increase compared to the previous year. VAT receipts also surged, registering nearly a 12% rise for the same period compared to the previous year.

Corporation tax receipts for the period ending in May saw a substantial increase of €1.1b. in comparison to the previous year.

Ireland stands out as the sole EU country to sidestep a recession during the pandemic, strengthened by the strong performance of multinational companies, which significantly boosted the nation’s economic activity.

With the Budget upon us is it any wonder that many lobbying groups are pushing for more from the government for their sector, from a rise in the state pension to childcare costs. And who can blame anyone looking for more.

A recent Taxpayer Pre-Budget 2024 Survey indicates that over a  third of Irish people (34%) believe that making childcare fees fully tax-deductible should be part of the Government’s Budget 2024 strategy to alleviate the financial strain on parents throughout the country. With a further quarter (25%) of the respondents believe the extension of the free childcare scheme is the way to go, while more than one in ten (13%) advocated for the introduction of a ‘ceiling’ cap on childcare costs, akin to rent pressure zone legislation.

The survey, which gathered insights from 2,000 taxpayers nationwide on their views regarding measures to reduce the cost of childcare for parents in Ireland, found that 11% believe that employers should be legislated to provide more childcare services at or through work.

Similarly, another 11% supported the idea of increasing Government funding to the childcare sector, with just 6% of those asked saying they do not believe it’s the Government’s responsibility to get involved in addressing the soaring costs of such.

The results of the study clearly show most of the people surveyed think it’s a good idea for the Government to step in and help reduce the financial burden of childcare. The most popular suggestion being – give full tax relief to parents.

However, the study also brings up an important point: we haven’t been great at taking advantage of tax breaks we’re entitled to already. This would make you wonder if parents would really use these tax benefits if they were made available?

In an Oireachtas debate earlier this year on childcare fees, the Government recognised that the average cost of childcare fees ranges from €800 to €1,350 a month for each child. The experts contend that inflationary pressures will have pushed up these prices even further making childcare a financial burden that proves challenging for working parents already managing tight budgets.

Marian Ryan, Consumer Tax Manager at Taxback,  commenting on the results said:  “These results illustrate a clear consensus on the need for Government intervention to mitigate childcare costs and provide valuable guidance to policymakers as we approach Budget 2024.

“Ultimately, the challenge lies in creating effective policies that genuinely help parents while ensuring the sustainability of the childcare sector.”


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