John V. Farrelly
Question:65 Mr. Farrelly asked the Minister for Finance if the tax deduction of a person (details supplied) in County Meath who is an old age pensioner is too high; and if he will make a statement on the matter.
Written Answers. - County Meath Pensioners' Tax Liability.
I am advised by the Revenue Commissioners that the taxpayer claimed exemption from income tax in the current tax year. His income is expected to exceed the relevant exemption limit of £7,500 and he is not therefore entitled to exemption from income tax. However, as his estimated income does not greatly exceed the limit, he has been granted a measure of marginal relief in the certificate of tax-free allowances which issued to him on 2 May 1990. His allowances were restricted to take account of his social welfare pension, which is paid gross, leaving a tax-free allowance of £39.93 available to him for use in connection with his retirement income.
Marginal relief operates to ensure that the tax payable in respect of the taxpayer's total income is no more than 53 per cent of the excess of his total income over the exemption limit. In every case in which it applies, it is more favourable to the taxpayer than taxation under the normal system of applying the standard 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 applies is considerably less.