asked the Minister for Finance the reason a person (details supplied) in County Offaly is being taxed at the top rate of 56 per cent in 1989-90 in respect of an ESB pension previously taxed at the rate of 35 per cent.
Ceisteanna—Questions. Written Answers. - ESB Pension.
3.
The Revenue Commissioners have advised me that, on the basis of the information available to the inspector of taxes, the taxpayer's total estimated income for the current year, 1989-90, is likely to exceed the relevant exemption threshold of £6,000. Consequently, he is not entitled to exemption from tax. However, as his estimated income does not greatly exceed the threshold, he is entitled to a measure of marginal relief. Marginal relief ensures that the tax payable in respect of the taxpayer's total income is no more than 60 per cent of the excess of his total income over the appropriate exemption limit. In every case in which it applies, it is more favourable to a taxpayer than taxation under the normal system of applying the 32 per cent rate to his taxable income, i.e. income less personal allowances and reliefs; this is because, although the rate of tax is higher, the amount of income to which it is applied is considerably less.
In order to facilitate the operation of the marginal relief system, the taxpayer has been granted higher tax-free allowances based on the £6,000 exemption limit. The correct tax rate to be charged on the excess of his total income over these allowances is 60 per cent, but for administrative reasons — employers would otherwise have to operate an additional tax table — he has been assigned a table rate of 56 per cent. A small undercharge may emerge on review of his liability after 5 April 1990; this can be recovered in a later year.
The inspector of taxes will write to the taxpayer shortly as he may be entitled to the higher exemption limit of £6,800 — the limit appropriate to a married couple over 65 years of age.