Dáil Éireann debate -
Tuesday, 31 Mar 1998

Vol. 489 No. 3

Written Answers. - Income Tax Code.

Tony Gregory

Question:

151 Mr. Gregory asked the Minister for Finance if, further to Parliamentary Question No. 309 of 24 March 1998, the persons concerned who were in receipt of social welfare payments will be worse off financially as a result of one person taking up employment in view of the effects of the tax treatment of income earned. [8167/98]

Minister for Finance (Mr. McCreevy)

I presume that the Deputy is referring to the tax treatment of cohabiting couples and in this regard I would point out that there is no provision in tax law which would permit the granting of married person's tax allowances and tax rate bands to cohabiting couples. Each partner is taxed individually, as a single person, and in calculating the liability of each party no reference is made to the tax affairs of the other party.

I understand that the previous question referred to the tax treatment in the forthcoming 1998-9 tax year of community employment scheme wages which are subject to income tax. Arising from income tax changes announced in the budget, a single person will normally be entitled to a tax free allowance of £3,950 in the 1998-9 tax year, comprising £3,150 personal allowance and £800 PAYE allowance. This is equivalent to a weekly tax free allowance of £75.96. The weekly taxable income on the normal CE payment of £86.75 will therefore be £10.79, which at the new reduced standard rate of tax of 24 per cent corresponds to £2.59 tax payable per week compared to £4.06 in 1997-8. There will be no liability to employee PRSI in the 1998-9 tax year where weekly earnings do not exceed £100 per week. In summary, therefore, participants in community employment with the normal gross wage of £86.75 per week will see their tax and PRSI deductions fall by £1.77 from £4.36 to £2.59 following the beginning of the new tax year in April.

Exemption from tax or relief under the marginal relief system, may apply in a case such as this due to the level of income involved. However, without knowledge of the full circumstances of the case it is not possible to give a definitive answer on this point. Should the taxpayer contact his or her Inspector of Taxes giving full details of his or her circumstances, his or her case may then be reviewed and marginal relief or exemption applied where appropriate.