Written Answers. - Maintenance Payments.
Michael McDowell
Question:
43
Mr. M. McDowell
asked the
Minister for Finance
if his attention has been drawn to the fact that families where the parents have separated are subjected to the imposition of PRSI and levies on maintenance payments while cohabiting parents are not subjected to levies on moneys transferred; and if he will make a statement on the matter.
[1564/95]
Under existing legislation where an individual makes an enforceable maintenance payment to an estranged spouse, PRSI contributions, health contribution and employment and training levy are chargeable on the paying spouse's income at the time it is earned and again on the maintenance payments on their receipt by the receiving spouse.
Where the couple are separated but the marriage has not been dissolved or annulled they have the option of having the maintenance payment disregarded for any purposes of the Taxes Acts and in those circumstances the payment would not be income in the hands of the recipient for tax, PRSI and levy purposes.
Transfers of moneys between spouses which are not legally enforceable, have no significance for tax, PRSI and levy purposes.
The payment of separate PRSI contributions enables each spouse to build up a social insurance record in their own right, and they can both, in due course, qualify for a pension. Entitlement to a social insurance pension is a valuable right and I believe that coverage under the system should be extended as widely as possible and should afford protection to separated spouses. It is, therefore, appropriate that a social insurance contribution be levied on the maintenance payment.
The charging of both spouses to the health contribution and employment and training levies is another matter. For the purposes of these levies the person receiving the maintenance payment is treated in the same way as a self-employed person with the maintenance payments made by one spouse to the other being regarded as "reckonable income". The liability to the various charges is the same as for a self-employed person and no allowance or cognisance is taken of the fact that the maintenance has already suffered deduction of levies in the hands of the payer. This is clearly anomalous. Unlike social insurance contributions no specific benefits accrue to the individual involved.
The number of such cases is small and the introduction in last year's budget of an exemption from the levies for persons with incomes below £9,000 will have reduced that number further. Once again while in the case of social insurance the provision of a separate benefit entitlement constitutes a justification, the double charging of such payments to the levies is difficult to defend. The issue is a complex one affecting a number of Government Departments as well as the Revenue Commissioners who collect the levies.
Following discussions which have taken place involving officials of my own Department, the other interested Departments (Social Welfare, Health, Enterprise and Employment) and the Office of the Revenue Commissioners, I am considering, in the context of the forthcoming budget, certain measures designed to effect more equitable arrangements for maintenance payments.
The Deputy also refers to moneys transferred between cohabiting parents. The position here is that where a payment is made by one of the couple to the other person under a deed of covenant, for the benefit of that other person, the payment would also be treated as income in the hands of the recipient for tax, PRSI and levy purposes.
Transfer of moneys between a cohabiting couple which are not legally enforceable under say a deed of covenant would have no significance for tax, PRSI and levy purposes.
