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. Occupational and contributory pensions are not subject to PRSI contributions. Occupational pensions are however liable for the health and employment and training levies, subject to the usual conditions.
Pensioners are treated somewhat 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 would draw to the Deputy's attention that when personal allowances and exemption limits generally are increased, as in recent budgets, such increases apply to the elderly as well as to other taxpayers. In the 1995 budget, in order 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 the last two budgets, the exemption limits for the elderly have increased by £400 in the case of single persons and £800 for a married couple. Personal allowances have been increased by £300 single and £600 married. Furthermore, some pensioners have also benefited from the widening of the tax bands.
Exempting all people aged 65 and over from tax would benefit primarily those with significant incomes. Increasing the exemption limits, rather than the age allowance, has been 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. The position of the elderly will, of course, be carefully considered in the context of preparations for the forthcoming budget.
