Tax-based child benefits ‘less generous’ than universal systems

Child benefit systems based on the tax system tend to be less generous than those structured around a universal benefit, according to a new study.

The study looked at the changing social and fiscal policy mix of child benefit systems in developed (OECD) countries from 1960 to 2005.

Key points

  • Child benefit levels have become more similar and generous since the 1960s. However, the composition of child benefit packages varies extensively across countries.
  • The Nordic countries and Ireland have come to rely predominantly on universal child benefits; in a second group (including Germany and the USA) redistribution to families with dependent children is instead channelled through the tax system; in a third group (including the UK) the system combines child benefits of both the social and fiscal policy types.
  • Benefit levels tend to be higher in countries that include universal elements in the child benefit package. The average universal child benefit also tends to be more generous than other benefit types.
  • The ‘fiscalisation’ of child benefits may not be of greatest benefit for low-income families with children. In addition, the income gradient inherent in child tax credit programmes seems to be a retreat back to the old forms of targeted approaches to family policy.

Source: Tommy Ferrarini, Kenneth Nelson and Helena Höög, The Fiscalization of Child Benefits in OECD Countries, Discussion Paper 38, GINI Project (European Commission)
Link: Paper

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