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53
Table 2.13.
Continued.
D
NL
GB
CAN
Type of scheme
Tax credit/
Cash benefit
Cash benefit
Cash benefit
allowance
4)
Eligible groups
All families with
All families with
All families with
All families with
children
children
children
children
Graduation
Flat rate
Flat rate
Flat rate
Flat rate per
according to
per child .
per child.
per child.
child highest
number and age
Increasing from
Increasing with
Highest for
from 3rd child,
2)
3rd child
age
first child
highest for 0-7
years
Means-testing
No
No
No
Yes
Max. duration
Until:
Until:
Until:
Until:
(age of child)
16/27
16/18
16/19
18
3)
1)
Up until 1994 there were tax deductions in the Finnish scheme.
2)
The deductible tax allowance has the same nominal value for all children.
3)
In some special cases up to 25 years.
4)
Canada also has a supplementary scheme for low income families.
It is only in Canada the family allowance is means-tested, and the means testing may result
in zero family allowances. Prior to 1996 family allowances where also means-tested in
Germany but only for the second and subsequent children and only down to a minimum.
The maximum age of children is not a good indicator for when the allowance stops. In
some countries it can be extended when the children are participating in education (marked
as the age behind the / in table 2.13, max. duration), in other countries special allowances
for education replace the family allowance. Ideally, the family allowance and allowances
for education should be considered together, this has not been done here.
It should be mentioned that Canada also has a refundable tax credit scheme for families
with children (couples and single parents) and low income. From July 1997 to July 1998
there was a
phase-in, a maximum and a phase-out' profile, according to earned income, in
this scheme. It was an earned income supplement for low income families with children,
designed as supplementary child benefits, earlier it was of the same type as the US earned
income tax credit scheme. From July 1998 the basis was changed to all income and the
phase-in component was eliminated, for more details, cf. the section
announced changes
1997/1998'. The British ’Family Credit’ scheme serves the same purpose, it is not a family
allowance scheme, but includes having children among the eligibility criteria.
54
The level of the family allowance
The APW-couple has 1.5 times the income of the single APW. The effect on disposable
income of having children (receiving family allowance) is calculated relatively to the
disposable income of the couple without any children. The children are assumed to be in
the age bracket 1-6 years. Child no. 1 is assumed to be 6 years old, child no. 2 is 3 years
old and child no. 3 is 1 year old (and, even if that is not quite possible, born in 1997). In
the Canadian case, the means-testing has an effect on the allowance for all 3 family types
in table 2.14.
The most generous scheme is the Austrian followed by the German. The new German
scheme (from 1996) based upon tax credits is substantially more generous than the old one
and was further improved in 1997. Finland now follows after Germany (last year it was
opposite), the Finnish benefits were nominally unchanged from 1996 to 1997. Denmark is
fourth followed by Sweden, where the allowance was nominally unchanged from 1996 to
1997, and graduation according to the number of children was still closed for new entrants
(this is included in the calculation for Sweden). In the 1995 calculations Sweden was
’ranked’ just after Finland, since 1996 it is after Denmark. In 1998 the child benefits were
increased and the
old' graduation according to the number of children reintroduced in
Sweden. The relative impact of family allowances in the Netherlands and Great Britain are
less than ½ of what they are in Austria and Germany. Last is Canada, where the means
testing has a substantial impact, especially for the families with 1 and 2 children.
Table 2.14.
Effects on disposable income of receiving family allowance in 8 countries, 1997.
DK
S
FIN
A
D
NL
GB
CAN
Percentage change in disposable income with:
1 child
+4.2
+3.7
+4.5
+5.9
+5.2
+2.6
+2.9
+1.5
(no. 1)
2 children
+8.5
+7.3
+10.0
+12.4
+10.4
+5.6
+5.3
+3.0
(no. 1+2)
3 children
+13.2
+11.0
+16.5
+19.6
+17.4
+8.0
+7.7
+6.4
(no. 1+2+3)
Note: Child no. 1 is 6 years old, no. 2 is 3 years old and no. 3 is 1 year old.
The results depend on the selected ages at least for Denmark, Austria, the Netherlands and
Canada.
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