Dáil Éireann debate -
Tuesday, 19 Oct 1999

Vol. 509 No. 4

Written Answers. - Tax Allowance.

Jackie Healy-Rae

Question:

198 Mr. Healy-Rae asked the Minister for Finance if he will discontinue the practice of deducting tax from people in receipt of disablement benefit, as had been the case prior to 1993 and 1994; and if he will make a statement on the matter. [20258/99]

Minister for Finance (Mr. McCreevy)

As disablement benefit has always been treated as income for tax purposes the Deputy is probably referring to disability benefit, which has been reckonable as income for tax purposes since 1993.

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 are therefore reckonable as income for tax purposes. Treating such benefits as income for tax purposes is essentially a matter of equity. Long-term social welfare payments have been taxable for many years. Taxation was extended to disability benefit in 1993.

In order to improve the position of those adversely affected by extending taxation to disability benefit, certain changes were introduced: to assist families, the child dependant additions payable with disability benefit were made exempt from income tax from 6 April 1995; the 1997 budget announced certain concessions in relation to the taxation of disability benefit arising from commitments in P2000. For the 1997-98 tax year the first three weeks of disability benefit were made exempt from tax while the exemption was increased to the first six weeks for the 1998-99 tax year and for subsequent years.

The effect of these changes is that disability benefit is not chargeable to tax in the case of the majority of disability benefit recipients.

Even where disability benefit is chargeable to tax, that is, after the first six weeks, the extent, if any, to which taxation will actually arise in a given case will depend on the level of other income that a recipient and their spouse, where applicable have in the same tax year. If there is no other income in addition to the social welfare payment, the existing exemption limits and allowances can generally be expected to ensure that there is no tax to be paid on the social welfare income itself.