I have to rule out of order amendment No. 6 in the name of Deputy Rabbitte because there is a potential charge involved.
Amendment No. 7. Amendment No 8 is related to No. 7 and we will take Nos. 7 and 8 together by agreement.
SECTION 2.
Chairman
I move amendment No. 7:
In page 17, subsection (1) (a), in Part I of the Table, before the entry relating to "The first £7,475" to insert the following row:
"The first £500 | 15 per cent. | the lower rate.".
I referred to this when I was moving amendment No. 1 and I said what I wanted to say on it. This is the idea of an introductory tax rate, £500 for a single person over a tranche of taxable income of £500, double that for a married person is the next amendment, and the rate to apply 15 per cent. I stated all the arguments already and I do not intend taking up further time by repeating it.
We discussed this earlier. Reducing the standard tax rate to 25 per cent, which is the commitment we are working to, would cost an extra £140 million. The introduction of a third tax rate would represent a move away from the rationalisation and the simplification that we are working to in the income tax code.
What is the cost of it. Is it £60 million or £70 million.
A 15 per cent rate on the tax band of income tax proposed would cost £67 million in 1992 and £112 million in a full year. In the circumstances I cannot accept the amendments.
Amendment, by leave, withdrawn.
Amendment No. 8 not moved.
I move amendment No. 9:
In page 18, between lines 4 and 5, to insert the following subsection:
"(2) Notwithstanding anything contained in the Tax Acts, Part II of the Table to section 2 of the Finance Act, 1984, (inserted by this section), shall apply to persons with dependents who are widows, widowers or single parents.".
This amendment seeks to extend the benefit of the double rate bands to the category of person listed in the amendment. Again the basic thrust behind it is one of equity. I find it difficult to appreciate how a widow or a widower, probably thrust into that status unexpectedly with a number of child dependants, does not have the benefit of the double rate bands. There is arguably a better reason for affording the value of the double rate bands to a widow or a widower in these circumstances than to the normal couple. Very often the widowhood may be the result of tragic circumstances imposing additional costs on the family, that such a person would be regarded as a single person for the purposes here mentioned seems grossly unfair. In equity there is arguably a stronger case to be made to extend the benefit of the double rate bands to such persons. I have put down this amendment before and I am sure the Minister would have the cost involved at his fingertips, but I would like to hear him tell us how much it is. This reform would be greatly appreciated by, albeit a small number of, people, who could very much do with the additional relief.
The cost of extending the double rate bands to one-parent families would be about £3 million in 1992 and £5 million in a full year. If the married entitlement to relief such as mortgage interest relief were also extended to single-parent families it would seem that the follow-on costs would be naturally greater. The income tax code already provides some help for widowed and single parents. Widowed persons have a personal allowance which stands at £2,600 compared with a single person's allowance of £2,100. Both widowed and single parents benefit from the lone parent's allowance which, combined with their basic personal tax allowance, gives such parents effectively the same personal allowance as a married couple, which is £4,200. Widowed parents receive an additional allowance ranging from £1,500 to £500 in the first three years after the year in which they become bereaved.
While the Government appreciate that lone parents may have particular difficulties, there are serious practical objections to giving the double rate bands to them. The double rate bands are given to married couples because there are two adults to support. This is not the position with the lone parent whose present tax treatment essentially falls between that of a single person and a married couple. Such treatment is not unreasonable given that there is only one adult to support.
Double rate bands would be of value only to lone parents taxed at the higher rate. At present about 35 per cent of such parents are on the higher rate, and any concession would therefore be one for the better off lone parents. If a concession were made for lone parents because they have children, there would be immediately calls for a concession for such parents with lower incomes who could not benefit from a doubling of the bands, and for married couples with children compared to married couples without children. As a concession would have already been made for higher rate lone parents such calls would in equity be difficult to resist. However, the root of the problem reflects the burdensome nature of parts of our tax structure. It is a matter which has to be addressed and our objective is to make further improvements over the coming years.
I reject the amendments.
I support the amendment put forward by Deputy Rabbitte. It is an excellent opportunity for the State to recognise the unforeseen difficulties that a widow or widower experiences. Because of unforeseen tragic circumstances, the State has an opportunity to recognise that additional financial assistance is required at that time and a sympathetic consideration by the State is essential to get them over their temporary and maybe short term difficulties. Under the tax and social welfare systems, the widow and widower are treated extremely harshly. All of us know examples where free social welfare benefits enjoyed by a married couple before one of them died are often removed when the surviving spouse is under the age of 66. There are people who, through unforeseen difficulties, certainly through the loss of their spouse, lose free telephone rental, free electricity allowance and free television allowance. These facts were never taken into account in the administration of the scheme. The tax system and the social welfare system should recognise, in a sympathetic and charitable way, the financial hardships being encountered by this category in society. We have an opportunity, albeit at a small financial loss to the State, to ensure that this is so by accepting Deputy Rabbitte's amendment. When one considers that one penny on alcoholic beverages yields £8 million in a full year, surely we should be able to consider putting £5 million of that to the financial assistance of a very vunerable section of our community, namely widows and widowers, at a very difficult time.
Have you a constitutional point?
I would like to add my voice to those who feel that maybe widows and widowers are not treated over generously by either the social welfare code or by the taxation code, but I am not so sure that the specific amendment before us is the most appropriate or effective way of improving the lot of widows and widowers generally. In my Second Stage contribution to this Bill, I voiced my own concern about the treatment of widows and widowers. Other measures in the context of social welfare or in the general context of taxation might be made in future years to try to improve their basic position but, as the Minister has pointed out, the measure before us might not be as effective as originally envisaged.
The problem is that the standard band is too narrow. I acknowledge that, and our objective is to try to go further in that regard. I say to Deputy Hogan that last year the Finance Bill introduced the post bereavement. This was aimed at helping widowed parents to cope with the post bereavement period. I could not argue with him about the merits of it, but that was inserted last year to try to assist in that matter and I think it has done so.
Amendment by leave withdrawn.
Section 2 agreed to.
I move amendment No. 10:
In page 18, before section 3, to insert the following new section:
"3.—For the purposes of income tax assessment married persons shall mean—
(a) a man and woman who are married to each other, or
(b) a man and woman who are not married to each other but are cohabiting as man and wife.".
I will be intrigued to hear what argument the Minister can advance to defend not enshrining this amendment in the 1992 Finance Act. He will be aware that I have taken the text from the 1991 Social Welfare Act and, considering what is regarded as reasonable and proper in the case of social welfare, it seems extraordinary that it is suggested that somehow people should be treated differently in respect of income tax. The amendment seeks to do no more than to reflect an aspect of Irish life that is a fact for a growing number of people. If two people who are not married can be regarded as common law husband and wife for the purposes of social welfare, why can they not be so regarded for the purposes of income tax? It is an extraordinary anomaly. It is a glaring example of where the legislators are way behind the normal practice. It is an accepted situation; divorce Irish style. Hopefully, recent development will create an accelerating rush towards progress in bringing the law up-to-date and catching up with what is social practice. In the interim, however, it is quite wrong for the law to regard two people who are living together in a common law relationship as being in-eligible for the normal couple's tax allowances, but if those two people were to become unemployed and were to go down to their local labour exchange their status would be regarded totally differently. I do not see how we can defend it in one code and treat it differently in a separate code. I would hope that while we are attempting to deal with this matter legislatively that we can get it into the heavy queue for autumn, before a general election, and perhaps the Minister might show the way by incorporating it into the tax code.
I feel this is an anomaly that we will have to address at some stage but I am not certain that the Finance Bill is the appropriate place to address it. The reality is that it is extraordinary that two separate codes, the social welfare code and the taxation code, would treat the same two people in an entirely different manner and it strikes me as inequitable. I am not sure what the costs of correcting this would be, but the current arrangements cause great hardship. I have in mind a case of a man and woman living together in a relationship. The man has no income, yet the social welfare code demands that account be taken of the income of his partner. His partner says she is not keeping him because she does not see why she should and this causes an anomaly. I feel this is something that needs to be comprehensively addressed. The Finance Bill is as good a place as any to highlight this problem but my suggestion that the principle needs attention should not necessarily lead Deputy Rabbitte to believe that it would be addressed in the Finance Bill.
Deputy Noonan will give you the canon law position on it.
Deputy Noonan would be far better off to know the canon law position than me.
There is a very simple rule applying here. While I do not like it I can see the logic of it. The State has decided arbitrarily that it will apply one set of rules when it is taking money from people and, without a need or a sense of obligation to give an explanation to anybody, it will apply a totally different set of rules when giving money to people. The nature of any State, and particularly this one over a period of time, has been not to be so flaithiúlach in giving out money and, therefore, it has taken upon itself what seems to be an anomalous situation to anybody who does not happen to be either in the Revenue Commissioners or in the Department of Finance with a constraint to maximise revenue. While I support Deputy Rabbitte's point on this and the principle behind it, I think the whole system of marital law in this society has to be dealt with.
I draw attention to amendments Nos. 113 and 135 in my name which deal with the same phenomenon in the context of capital acquisitions tax. Deputies who were involved in the Committee Stage debate of the Bill this time last year will recall in some detail the fairly substantial debate that took place at that time. The point that was made — and I made reference to this in the Second Stage debate — is whether the Finance Bill is the Bill which should lead social legislation in the tax code or whether it should reflect it. Given the Government's delay in publishing the White Paper on marital breakdown and if that is the only issue that is preventing the Government from accepting these changes at this point, I believe the Minister should go back to Cabinet and get some kind of view or direction in relation to this before Report Stage. I accept that Ministers are given back-up advice which is clearly not disposed to accepting these amendments, for reasons that have been stated. However, the fact is that the ordinary citizen cannot understand how the Department of Finance and the Government of the day, irrespective of who is the incumbent office-holder, can apply, simultaneously, two totally different sets of rules, a set when they are giving out money and a different set when taking it in. That will, in my view — and this is the political point I want to make — undermine respect and support for the legal democratic system in our society because while there is a perfectly logical argument for this — which I can understand but do not like — that will not come across to the ordinary individual citizen. If we create laws or administer taxation systems that are not understood or accepted then we run the risk of undermining support for them. Therefore, whether we deal with the anomalies, as Deputy Rabbitte has said, in this legislation — and there are consequential ones right through the system — in the capital acquisition tax or at Report Stage, I would not anticipate that the Minister could make a change at this stage. However it will have to be dealt with at some stage. If you take the admonitions of Justice McCarthy in a recent Supreme Court judgment about the Oireachtas lagging behind in regard to legislation, this is another area where we are also lagging behind. We have to deal with it either in this Bill or some other way. Since the White Paper is not providing a policy framework for the Revenue Commissioners and the Department of Finance to operate within then we have to make that political choice ourselves.
Most people would sympathises with what is being suggested here. All legislation should take into account the factual position which is that there are unmarried people living as husband and wife. The problem here is — and perhaps the Minister could amplify this — to define "cohabiting as man and wife". We had this argument when we were dealing with the social welfare code. It was suggested at that time that you would have social welfare inspectors lurking under beds to establish if people were cohabiting or not. That is the difficulty as I see it. One problem that arises when dealing with tax assessment is that a couple may on one occasion be able to prove that they are cohabiting but the next day they may be apart. However, in relation to the social welfare code, where the State is making a payment, there is an ongoing investigation. We all know only too well that week in and week out people such as unmarried mothers lose their benefits because they are cohabiting. This assessment is on a yearly basis and it could be very difficult from the Revenue Commissioners point of view. I agree with the speakers on the far side of the House that this is something that the White Paper on Marital Breakdown should address, not only in relation to property rights and the actual issue of marital breakdown, but also the proprietary rights and the taxation problems that would arise concerning this. The simplistic wording, "cohabiting as man and wife", causes great difficulty for some people and there has to be a better way of enshrining it in the amendment.
I want to support the spirit of this amendment. I know we have had similar amendments on previous occasions and Deputy Quinn submitted a number last year. The standard reply from the Department of Finance is that the law on marital breakdown should not be more advanced than the civil law, and that arrangements under civil law for cohabiting couples or for the provision of divorce should be made first and tax law should follow. That is the standard reply but I am not sure if that reply is good enough at this stage because people have been waiting a long time for this legislation and it is an increasing problem. I am a member of the Mid-Western Health Board and I put down a question at last Friday's meeting on the number of births to unmarried mothers in the local hospital — and remember, our maternity hospitals are some of the biggest in Europe. The figure was just under 13 per cent for 1990 and 1991, and then for the first three months of 1992 it was 15.5 per cent. Coincidentally, I was reading the Economist while travelling home last Thursday night and it gave international figures. In Denmark 51 per cent of all births are to unmarried women, Sweden is 49 per cent. France is 31 per cent, the UK is at 29 per cent and we are now at an average of 13 or 14 per cent.
Thirteen or 14 per cent?
Yes. Certainly last year's figure would have been almost 13 per cent and, for the first three months of this year, it looks as though it is rising. A very interesting point was made about the Scandinavian figures, that it was not a question of unmarried girls becoming pregnant, it was a question of marriage no longer being the manner in which people decided to live together. Included in the statistics were the children of many couples in permanent relationships but who were not actually married under the law. I think we will have to move on this. Is there any way we can refer this amendment formally to the people who are preparing the White Paper? Can we refer this amendment, and the two in Deputy Quinn's name, in some formal way to the Department of Justice for consideration before they publish the White Paper? Is there any procedure we can invoke?
It is obvious that if this amendment is passed the situation regarding income tax benefit would not arise. I assume Deputy Rabbitte is aware of that fact. It is difficult then to understand why it is being introduced in the Finance Bill. If it is the principle of the amendment that the Deputy is speaking about, that is a different matter but I do not think it should be promoted in the Finance Bill. It should be introduced in other legislation in the Dáil such as on social policy or the Health Act or whatever. It is strange and somewhat confusing to me that when you read the amendment where it states in 3 (b), "a man and woman who are not married to each other but are cohabiting as man and wife" and yet, the opening sentence is "For the purposes of income tax assessment married persons shall mean—". You cannot say persons are married if they are cohabiting with one another. It is the technicality of the wording I am commenting on but, as Deputy Ahern said, it would be very difficult to monitor the people who are cohabiting, to determine how long they are cohabiting and to estimate the administrative costs which would be required to implement that part of the proposal. I think that the principle that Deputy Rabbitte seems to be promoting should be put in place through other legislation.
I compliment Deputy Rabbitte on putting forward this amendment. Whether this is the most suitable place to make the change, I am not sure but it is very difficult to understand how we can have two different codes of practice. At present the people have credibility in the Government that represent them, and to allow a situation like this to continue is ridiculous. It is time we faced reality and we should not force an issue of this kind on people. All you need do is look at it and it is obvious that it does not make sense.
A story was told about a politician in Kildare some time ago who was holding a clinic and a lady called in to see him. He was getting details from her and asked her about her domestic position. He asked her if she was living with a man and she said, no. As the conversation developed, it emerged that there was a gentleman living in the house and when he put this to her she said "no, he is living with me". I suppose if the Government are entitled to use two different codes of practice this lady is entitled to give two different versions also. It is a problem that must be addressed. Perhaps today is not the day to do this but the sooner the better.
I think anyone reading the Official Report of this House will see precisely what Deputies on all sides believe should happen in this case. Some of the things that I wanted to say have already been indicated. It is important that I put that on the record. The purpose of this amendment is to provide for unmarried couples living together as man and wife the same income tax treatment as applies to married couples. As the Committee will be aware, there are no special tax allowances available to an unmarried couple living together as man and wife: each is treated as a single person for tax purposes, and each is entitled to single allowances and tax bands. This tax treatment reflects the general law relating to marriage. The point has been made that this treatment can lead to hardship where one partner of the couple has an income and the other has not. Attention has also been drawn to the different treatment of the issue in the social welfare code. In Committee Stage debate on last year's Finance Bill which I have read, Deputy Quinn made substantial sense in his arguments as he equally did in Second Stage debate on the property aspect.
There are, however, no proposals in the Bill to deal with the matter. I need not emphasise to the Committee that this is an area — I know we can try to say it is simple — involving complex and difficult issues, and any potential solution should be subject to a thorough legal examination of the constitutional aspects. In addition, I would like to point out that, as the Committee is aware, the White Paper on Marital Breakdown is to be published shortly. That is the position. It would clearly be putting the cart before the horse to attempt to tackle the taxation problems arising from marital breakdown in advance of the publication of, and debate on, the White Paper. Deputy Noonan has made a valid point about making the Official Report of this debate and the amendments available to the Department of Justice. The only fear I would have about that is that it may be used as an opportunity to examine other aspects or other clauses of the White Paper — which I think we all wish to see — but perhaps not. There is no difficulty in making the Official Report of this debate available to the people involved in preparing the White Paper. The ideal solution in this area is for tax law to follow, and not lead, the general law relating to marriage. I realise it has been argued both ways in this debate and Deputy Quinn has been fair enough to say that he can see both sides of the argument. However, it may be more difficult for the members of the Oireachtas to see it that way. I assure the Committee that when the White Paper has been published, there will be no delays in devising a solution. My Department and the Revenue Commissioners are ready and anxious to deal with the matter. Any solution, of course, must be consistent with the provisions of the Constitution and, therefore, it is important to have the White Paper published so that we can address these issues. I would like to make the general point that I also would be sympathetic to this problem. I raised this issue with the Government in advance of this debate and the Taoiseach would like me to reiterate what he said to Deputy Quinn last year, that he has a particular interest in getting this dealt with at this time. He undertook a detailed examination of the issues last year — work which is now available to me — but the Government would rather deal with it in the way that I have outlined.
Could I say I appreciate what has been said and there is no point in going over the argument. My question is really a procedural one. If a White Paper is published, it is no more than that, it is simply a White Paper. Therefore, if the defence of the Administration is that the tax law should reflect the social law, the social law per se will not necessarily have changed until such time as the White Paper becomes legislation. Is the Minister saying that the Government would be disposed to change elements of the tax code in respect of the whole question of the marital status of citizens as soon as the White Paper has been published, but in advance of any constitutional referendum, and subsequent legislative change? Is that what the Minister is saying?
Yes is the simple answer to that. We would be in a better position to deal with the matter. I cannot give an outright commitment. My own viewpoint is that the White Paper, will clear the way for the people who are trying to devise legislation in the tax area. The referendum — whenever it will be — will result in a "yes" or a "no", but the arguments will be dealt with in the White Paper which will help people to make a better judgment. Whether it will be found that one can proceed on the legal aspect, I do not know until the White Paper is published.
I do not want to prolong the debate. I thank Deputies and the Minister who, it can be said, are broadly in agreement with the thrust of the amendment and what it seeks to achieve. I can understand the argument that the tax law cannot precede the civil law. It could be argued that if we were to do so it would be a peculiarly Irish solution to an Irish problem but I make the point that we have done this in the case of the social welfare law. It seems to me that there ought to be a question of equality before the law. Deputy Dermot Ahern and Deputy Hilliard said that they agree broadly with the trust of my amendment, but Deputy Ahern thought some of the wording was simplistic and Deputy Hilliard felt that it was not appropriate to this Bill. It may be simplistic but it is the wording of Deputy Michael Woods, the present Minister for the Marine, and it is the wording which Deputy Ahern's party put through the House very effectively in 1991. It seems to me that if the wording is good enough for the social welfare code, is should be good enough for the tax code.
I appreciate the point about lagging behind the civil law but there ought to be equality before the law and I do not understand how the State can on the one hand say, we regard you for all intents and purposes as a married couple for social welfare purposes, but when it comes to income tax you are two single persons. Apart from the other questions which it highlights about Irish society, it is something that needs to be addressed urgently.
I thank the Minister for his sympathetic remarks. It seems to me that Deputy Noonan's suggestion, notwithstanding the pitfalls, is the appropriate way to tease out the problem further.
Chairman
Is the Deputy pressing the amendment?
No.
Amendment, by leave, withdrawn.
NEW SECTION.
I move amendment No. 11.
In page 18, before section 3, to insert the following new section:
"3.—(1) Where a deduction falls to be made from the total income and an individual for the year 1992-93 or any subsequent year of assessment in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this subsection and the amount of the deduction would, but for this section, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2).
TABLE
|
Statutory provision |
Amount to be deducted from total income for 1990-91 |
Amount to be deducted from total income for 1991-92 and subsequent years |
|
(1) |
(2) |
(3) |
|
£ |
£ |
|
|
Income Tax Act, 1967: |
||
|
Section 138 |
||
|
(married man) |
4,100 |
4,500 |
|
(widowed person) |
2,550 |
2,800 |
|
(widow bereaved in the year of assessment) |
4,100 |
4,500 |
|
(widower bereaved in the year of assessment) |
4,100 |
4,500 |
|
(single person) |
2,050 |
2,250 |
|
Section 138A |
||
|
(additional allowance for widows and others in respect of children) |
||
|
(widowed person) |
1,550 |
1,700 |
|
(others) |
2,050 |
2,275 |
|
Section 138B |
||
|
(employee allowance) |
800 |
1,050 |
(2) Section 3 of the Finance Act, 1986, shall have effect subject to the provisions of the section.".
This amendment seeks to increase allowances in respect of the categories therein that have not been increased since 1990.
This amendment proposes increases in the main personal income tax allowances as well as an increase in the PAYE allowance. The effect of the amendment would be to increase the married personal allowance by £300 (from £4,200 to £4,500), the widowed person's allowance by £200 (from £2,600 to £2,800) and the single person's allowance by £150 (from £2,100 to £2,250. There would be consequential increases in the single parent allowance. The PAYE allowance would increase by £250. The cost of the changes in the allowances proposed in the amendment is estimated to be £82.1 million in 1992 and £133.1 million in a full year. The income tax changes already incorporated in the Bill are estimated to cost £168 million in the present income tax year. I must therefore, oppose the amendment in the present budgetary circumstances.
Chairman
Is the Deputy pressing the amendment?
No.
Amendment, by leave, withdrawn.