I propose to take Questions Nos. 131 to 133, inclusive, together.
The tax treatment of unmarried couples who cohabit is that each partner is taxed as a single person and each is entitled to the tax credits and standard rate band appropriate to single persons. Consequently, as each partner is a separate entity for tax purposes, credits and reliefs cannot be transferred from one partner to the other. The position of married couples in relation to income tax is accorded recognition through the married person's tax credit and the home carer's tax credit.
I initiated in Budget 2000 the process of widening the standard rate income tax band. When the process is complete the position of all couples will be the same with respect to the standard rate tax band. Every income earner will have his-her own non-transferable standard rate tax band regardless of marital status.
The home carer's credit was introduced in the Finance Act, 2000, in respect of those spouses of married one-income families who work in the home caring for children, the aged or incapacitated persons. It may be claimed by a married couple who are jointly assessed for tax and where one spouse, the home carer, cares for one or more dependant persons. The home carers credit cannot be claimed by co-habiting couples, as individuals who are not married cannot opt for joint assessment.
From 1 January 2002 tax relief for home loan interest will no longer be given through the tax system but will instead be granted at source. This means that the tax relief element on the mortgage interest will be built into the monthly mortgage repayment, that is, the monthly repayment will be reduced by the amount of the tax credit. The tax relief at source, TRS, system will result in an extension of the current relief to persons who have qualifying loans but do not get any relief at present because they do not pay tax. Under the TRS arrangements, a person who pays no income tax will benefit from the same reduced interest payment arrangements as someone who is a taxpayer. In effect, this means that from 1 January 2002, a cohabiting couple who jointly own their home and where only one member of the couple has a taxable income, will each benefit.
The issue of the tax treatment of cohabiting couples was examined in the report of the working group examining the treatment of married, cohabiting and one-parent families under the tax and social welfare codes. The group, which was established by the Minister for Social Welfare in May 1997, reported in August 1999 – the report is available from the Government Publications Office. The group was sympathetic, in principle, to changes in the tax legislation to address the issues raised relating to cohabiting couples and reported that the options that it set out should be considered further.