Pádraic McCormack
Question:21 Mr. McCormack asked the Minister for Finance the reason the carer's allowance is added to the spouse's income for tax purposes; and the steps, if any, he intends to take to correct this anomaly. [16423/97]
Written Answers. - Tax Assessment.
Where married couples are jointly assessed for tax, the income of each spouse is combined and then assessed for tax on the basis of the appropriate married allowances, bands and rates. Joint assessment is beneficial to married couples as the allowances and bands available to a married couple, which are twice those available to a single person, are transferable between the spouses. In the circumstance the Deputy refers to, it is appropriate to add the income which one spouse receives in respect of the carer's allowance to the income of the other spouse for tax purposes where the married couple are being taxed on the basis of joint assessment.
As regards the taxation of the carer's allowance, 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 the majority of social welfare payments, including the carer's allowance, are therefore reckonable as income for tax purposes. Treating such payments as income for tax purposes is essentially a matter of equity. Accordingly, income from the carer's allowance received by one spouse is added to income, if any, received by the other spouse, for tax purposes.
The extent to which taxation actually arises in a given case depends, of course, on the amount of other income that either the social welfare recipient or the recipient's spouse has in the particular tax year. If there is no other income in addition to the carer's allowance, the existing exemption limits and allowances can be expected to ensure that there is no tax to be paid on the carer's allowance itself.