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Dáil Éireann debate -
Thursday, 7 Feb 2002

Vol. 548 No. 1

Written Answers. - Tax Code.

Noel Ahern

Question:

95 Mr. N. Ahern asked the Minister for Finance if he will clarify the confusion which arises for cohabiting couples in relation to the different interpretations of social welfare and tax departments; the advice which can be offered to a couple which is unmarried and feels discriminated against; if a study of movement on this issue is expected; if one partner can take out a tax covenant in favour of the other; and if he will make a statement on the matter. [4061/02]

While the treatment of married and co-habiting couples under the social welfare code is primarily a matter for the Minister for Social, Community and Family Affairs, I point out to the Deputy that in the Hyland case in 1989 the Supreme Court held that it was unconstitutional for the relevant social welfare provisions to treat a married couple living together less favourably than an unmarried cohabiting couple. I understand that this judgment has been put into effect by treating co-habiting couples in the same way as married couples for social welfare purposes.

In relation to taxation, there are no special income tax allowances for unmarried couples living together. In this context, I point out that tax law follows the general law relating to marriage. Generally, the basis for the current taxation of married couples derives from the Supreme Court decision in Murphy vs. the Attorney General, 1980, which held that it was contrary to the Constitution for a married couple to pay more tax than two single people living together. The tax treatment of unmarried couples who cohabit was unaffected by the Murphy judgment. Each partner is taxed as a single person and each is entitled to the tax credits and standard rate band appropriate to single persons.

As the Deputy will be aware, the issue of the tax treatment of cohabiting couples was examined most recently in the report of the working group examining the treatment of married, co-habiting 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 Sale 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.

In budget 2000 I initiated the process of band widening with a view to establishing progressively a single standard rate income tax band for all individual taxpayers. When this process is complete the position of all couples will be the same with respect to the standard rate tax band.

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 have no plans to change the arrangements in that regard. The working group acknow ledged that a key issue in relation to the tax treatment of cohabiting couples is whether tax law should proceed ahead of changes in the general law on the matter. For that reason, and while I am cognisant of the issues faced by cohabiting couples, I have no plans to extend the married person's tax credit to such couples at the present time.
In relation to the issue of a covenant, the position is that there is no longer any tax benefit in one partner in a cohabiting situation taking out a deed of covenant in favour of the other partner. Sections 12 and 13 of the Finance Act, 1995, now Section 792 Taxes Consolidation Act, 1997, restricted the tax relief available for deeds of covenant for individuals to the following categories as follows: unrestricted tax relief is available on covenants in favour of minors who are permanently incapacitated other than from parents to their own minor incapacitated children; unrestricted tax relief is available on covenants in favour of adults who are permanently incapacitated by reason of mental or physical infirmity; and, tax relief, not exceeding 5% of the covenantor's total income, is available on covenants in favour of adults aged over 65.
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