(Limerick East) asked the Minister for Finance if his attention has been drawn to the anomalous situation which exists concerning the taxation of Irish citizens who work in Northern Ireland but who are domiciled in this jurisdiction; if he has any plans to remove this anomaly; and if he will make a statement on the matter.
Ceisteanna — Questions. Oral Answers. - Taxation of Irish Citizens working in Northern Ireland.
64.
I assume that the Deputy is referring to individuals who are resident here. An individual who is domiciled but not resident here would not be liable to Irish tax on his earnings from employment in the United Kingdom.
An individual who is a resident of Ireland and employed in Northern Ireland is liable to British tax on his earnings. He is also liable to Irish tax. However, under the terms of the Double Taxation Convention between this country and the United Kingdom, rules are provided to prevent double taxation of the same income. This is normally achieved by allowing the tax paid in Northern Ireland as a credit against the Irish liability. This is a standard feature of double taxation agreements. It is to be found in the OECD model Convention and also in the agreements which Ireland has with other countries.
Government and local authority employees are normally chargeable to tax only in the State by whom they are paid. Again this is normal practice under double taxation agreements.
What the Double Taxation Convention seeks to do is to avoid the double charge to tax which would otherwise arise, and thus to ensure that Irish residents are subject to similar taxation whether their income is derived from within the State or outside.
I do not consider that this position is anomalous.
(Limerick East): I take the point the Minister makes when he says that I should have referred to residents rather than to persons domiciled here.
Is it correct that Irish citizens, people resident in this jurisdiction, who work in Northern Ireland are not allowed PAYE or PRSI allowances?
Correct.
(Limerick East): Is it also true that social welfare deductions under the UK social welfare scheme are treated as part of a resident's gross income for tax purposes in this jurisdiction and that no tax credit is allowed for that element of the deduction made in Northern Ireland?
With regard to PAYE and PRSI, the EC regulations stipulate that social insurance contributions are payable in only one member state at any one time. However, the health contributions and levies are not social insurance contributions and, accordingly, are not covered by these EC regulations. The PAYE allowance is only available to taxpayers whose income is subject to tax under the Irish PAYE system. A resident of this country who is in receipt of earnings from employment in Northern Ireland is liable to Irish tax on a preceding year basis in respect of his Northern Ireland salary. Accordingly, the PAYE allowance is not granted.
(Limerick East): Let us consider the position of a man in Dundalk who works in Newry. He is ultimately taxed under Irish tax law and he will pay his full income tax under the Irish tax code and anything that he had paid to the UK Government arising from his job in Newry will be given to him as a tax credit. Is that not the position?
That is correct.
(Limerick East): Effectively he is being taxed under Irish law, but he is not being treated like other taxpayers under Irish law as he has not been given the PAYE and PRSI allowances or credit for the social welfare payments which he makes in Northern Ireland. That is an anomaly which should be looked at.
I am sure he is given credit for the social welfare payments. In the event of unemployment or pension, the contributions will be counted because the rules apply on an EC basis to social welfare qualifications. I have already replied to the query on PAYE and PRSI——
(Limerick East): I shall answer that.
——but I do not think it is an anomalous situation. It is what is involved in all of the double taxation agreements around the world.
(Limerick East): The point I am making about social welfare deductions in the UK jurisdiction is not that the person does not benefit but that he is being taxed on the amount of money he has paid when he comes back to Dundalk, as if he had received the money. He is being taxed in the South on his gross income even though the deductions have been made for the social welfare payment in the North. That is anomalous. I do not think the Minister is confined by the double taxation agreements which exist, but that the Minister has discretion. Citizens of this country, people who are resident here if they are not citizens and people who are domiciled here and are resident should be treated under the law of taxation in the same way and they should get the same allowances so that on equivalent wages and salaries they should end up with the same amount of money in their pockets. Otherwise, there is an anomaly. I would like the Minister to examine this.
I have already explained the situation with regard to EC regulations. For as long as I have been in this House the matter has been up for examination and that will continue. In so far as I am in a position to do anything to help in these cases, I will be available but I cannot promise anything at this stage.
(Limerick East): We fail to agree on that last point.
That disposes of Questions, ordinary and priority, for today.