Dáil Éireann debate -
Tuesday, 6 Oct 1998

Vol. 494 No. 4

Written Answers. - Tax Allowances.

Róisín Shortall

Question:

277 Ms Shortall asked the Minister for Finance the reason the special position of widowed persons in comparison with single people is recognised in tax free allowances but not in income tax exemption limits; the plans, if any, he has to increase the tax exemption limits for widows; and if he will make a statement on the matter. [18730/98]

Minister for Finance: (Mr. McCreevy)

In the exemption limits system, the principal distinction made is that on the grounds of age. The system was originally introduced to assist the elderly, including the widowed elderly. It was subsequently extended to the generality of the low paid. The general exemption limits of £4,100 single, £8,200 married rise to £5,000 — £10,000 for those aged 65 to 74, and to £5,500 — £11,000 for those aged 75 and over. In the 1998 budget, I introduced a significant increase in the exemption limits for the elderly and also indicated that it is proposed to eventually achieve a single exemption limit for all those aged 65 and over. These measures will benefit elderly widowed taxpayers, and in this context it is estimated that almost half of all widowed taxpayers are aged 65 and over.

The report of the expert group on the integration of the tax and welfare systems recommended the gradual abolition of the marginal relief system because of the high marginal tax rates and also the poverty traps associated with it for those returning to work. This recommendation has been implemented in successive budgets, for the general exemption limits, by increasing personal allowances by more than the exemption limits.

As pointed out in the question, the main focus of assistance for widowed persons in the income tax code is provided under the personal allowances rather than the exemption limits. In regard to personal allowances widows are treated more favourably than single persons. They are entitled to a personal allowance which is £500 greater than the personal allowance granted to single persons. Where a widowed person has a mortage outstanding there is a provision in the income tax code allowing the widowed person to claim allowable interest of up to £3,600. The comparable figure for a single person is £2,500. In addition, widowed parents receive the basic single person's personal allowance of £3,150 and a one-parent-family allowance of £3,150. This means that the widowed parent's basic tax free personal allowances currently stand at £6,300, the equivalent of the basic allowances for a married couple and double those of a single person without dependent children. Most widowed parents would also be eligible for the PAYE allowance of £800.

In addition, the taxation of widows in the year of bereavement is at least as favourable as that of a married couple with the married allowance and double rate bands continuing to apply. In the year following bereavement, and thereafter, widowed persons are treated more favourably under the Irish income tax code than single people. A widowed parent in the year of bereavement is entitled to a personal allowance of £6,300, widowed allowance of £3,650 plus widowed parent allowance of £2,650, which is the equivalent of the married couples basic allowance. In addition, in the years following the year of bereavement, a widowed person with dependent children is entitled to a bereavement allowance. In the 1998 budget the period of this allowance was extended from three to five years and the allowance was increased to £5,000 in year one, £4,000 in year two, £3,000 in year three, £2,000 in year four, £1,000 in year five and nil thereafter, with effect from 6 April 1998.

Alan Shatter

Question:

278 Mr. Shatter asked the Minister for Finance the plans, if any, he has to introduce a special tax allowance to meet the needs of parents whose children suffer serious disabilities, including dyslexia, and where the parents incur substantial additional costs and expenses to facilitate a child suffering from these disabilities participating in primary and second level education. [18731/98]

Minister for Finance: (Mr. McCreevy)

Each year I receive a large number of proposals and suggestions for special tax allowances and reliefs. I will bear in mind the Deputy's proposal in the context of the preparations for the forthcoming budget. However, I would point out to the Deputy that tax reliefs, by their very nature, reduce the tax base and make general reform of the tax system that much more difficult.

I should also point out that the current tax system has a number of personal income tax allowances which are related to the care of incapacitated or disabled individuals. These reliefs include the incapacitated child allowance, the dependent relative allowance, medical expenses relief and convenant relief.