Tuesday, 27 January 2004

Questions (196, 197, 198)

Richard Bruton

Question:

312 Mr. R. Bruton asked the Minister for Finance if separate income to spouses arising from maintenance payments or from pension splitting in a separation, attract more favourable tax treatment than if these incomes remained in the hands of a one-earner couple; and his views on whether this breaches the principle established in a case (details supplied). [1426/04]

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Written answers (Question to Minister for Finance)

The tax treatment of separated spouses relative to that which would apply in the case of a married one-earner couple who remain married depends on the circumstances which apply in each case and it is not possible to generalise in the abstract.

However, it may be useful to set out in broad terms the position with regard to the tax treatment of separated persons. While, in general, separated couples are treated for tax purposes as if unmarried, they may, where a legally binding maintenance arrangement is in place, elect to be treated for tax purposes as if the separation had not taken place. However, the election to be treated for tax purposes as if married is not a right of one spouse but rather is a joint election of both spouses.

The general position in the case of legally enforceable maintenance agreements is that where the couple are treated for tax purposes as if unmarried, a tax deduction for maintenance payments for the benefit of his or her spouse is granted to the paying spouse but the payments are taxed in the hands of the receiving spouse. However, if the couple jointly elect to be treated for tax purposes as if the separation had not taken place, then the payer does not receive a tax deduction for the maintenance payments and the receiving spouse is not taxable on them.

On the other hand, non-legally binding maintenance payments are not taxable in the hands of the receiving spouse but the paying spouse cannot claim a tax deduction for them. Maintenance payments in respect of children are not taxable in the hands of the children or the receiving spouse. The effect of this is that the payments are treated the same way as if the taxpayer was providing for the child out of his or her after-tax income. This is in line with the tax treatment of all other parents, where the cost of maintaining their children is not tax deductible.

As regards pension splitting, the facts and circumstances of any particular case would have to be examined to determine whether part of one spouse's pension payable to the other spouse is a legally binding or non-legally binding maintenance payment for the benefit of that other spouse.

In relation to the Murphy case to which the Deputy refers in the details supplied, the Supreme Court held that it was unconstitutional to treat a married two earner couple less favourably for tax purposes than two single persons living together and on identical incomes to the married couple. In my view, the tax arrangements relating to separated spouses do not breach the principle established in the Murphy case.

Olivia Mitchell

Question:

313 Ms O. Mitchell asked the Minister for Finance if tax relief is available to family members for the cost of providing both maintenance and treatment in a nursing home of elderly parents or relatives or family members; and at what rate this relief is available. [1444/04]

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Tax relief, under the heading of health expenses, is available to family members in respect of the cost of providing maintenance and treatment in a nursing home of elderly parents or relatives or family members provided that the nursing home is an approved home for the purposes of the relief. A full list of nursing homes approved for these purposes is available on the Revenue Commissioners website,www.revenue.ie, as is a full explanatory leaflet on the tax relief relating to health expenses.

The tax relief in respect of unreimbursed health expenses is granted at an individual's marginal, or highest, rate of tax. Tax relief cannot be claimed for the first €125 of the health expenses incurred in any tax year where the claim relates to an individual. If relief is claimed in respect of more than one person, relief cannot be claimed on the first €250 of the health expenses incurred.

I might point out to the Deputy that over the last several years I considerably widened the scope of medical expenses relief and I removed a number of the restrictions that applied. For example, in the Finance Act 2001, I simplified the relief by removing the requirement that the taxpayer must be in receipt of the dependent relative allowance, now a credit, to claim relief in respect of their dependent relative. In addition, in the Finance Act 2002, I extended the list of qualifying dependants beyond immediate family. The relief can now be claimed in respect of a range of other relatives, persons aged 65 or over whether relatives or not, and persons of any age who are permanently incapacitated.

Barry Andrews

Question:

314 Mr. Andrews asked the Minister for Finance if his attention has been drawn to the fact that many senior citizens on the lower tax band are receiving a lesser tax rebate in respect of their waste charges than taxpayers on the higher rate and consequently paying higher waste charges; and if he will consider a different approach to correct this anomaly on behalf of senior citizens. [1466/04]

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The current tax relief for waste service charges is provided by granting a relief to taxpayers based on the charges they have paid to local authorities and private operators in the previous year, provided of course that they have actually paid the relevant amount and on time. Where an annual charge applies, the full payment is subject to tax relief at the standard rate, regardless of the taxpayer's marginal tax rate. Where charges for refuse collection are based on a "tag" system, a flat rate charge of €195 per annum is assumed and tax relief is granted on that basis at the standard rate.

I understand that a local authority may, on the grounds of personal hardship, waive all or a portion of a charge made by it for the collection of household waste or, where the collection of such waste is undertaken by the private sector, may subsidise the fee payable. The collection of household waste, and the imposition of refuse charges and appropriate exercise of statutory waiver provision in this regard, are matters for each local authority.

I have no plans to amend the scheme at this stage.