Dáil Éireann debate -
Thursday, 18 Apr 1996

Vol. 464 No. 2

Written Answers. - Tax on Pensions.

Mary Harney

Question:

76 Miss Harney asked the Minister for Finance if his attention has been drawn to the fact that persons in receipt of contributory old age pensions and occupational pensions are taxed on the aggregate and frequently pay tax at 27 per cent on a significant portion of their income; the plans, if any, he has to increase the age exemption limit for income tax; and if he will make a statement on the matter. [7924/96]

Minister for Finance (Mr. Quinn)

It is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. In line with this principle, income from pensions is, therefore, reckonable as income for tax purposes.

Pensioners are, however, treated more favourably under the Irish income tax code than the generality of taxpayers. The exemption limits for pensioners are significantly higher than those which apply generally. These currently stand at £4,500 single/£9,000 married couple for those aged between 65 years and 74 years and £5,100 single/£10,200 married at 75 years and over as compared with £3,900 single/£7,800 married for other people.

Alternatively, if taxed under the normal system, a person aged 65 years and over receives a special age allowance of £200 single/£400 married couple in addition to the normal personal allowances.

I draw to the Deputy's attention that when personal allowances and exemption limits are increased, as in this year's budget, the increases apply to the elderly as well as to other taxpayers. In the 1995 budget, to provide greater assistance to the elderly, the increase in the exemption limits for those aged 65 years and over was double that made in the general exemption limits. Consequently, arising from my two budgets, the exemption limits for the elderly have increased by £400 in the case of a single person and £800 for a married couple. Increasing the exemption limits, rather than the age allowance, is considered the more appropriate method of giving extra assistance to the elderly through the tax system, as it focuses assistance towards those on lower incomes.