Dáil Éireann Debate, Tuesday - 11 May 2004
150 Mr. O’Shea asked the Minister for Finance his proposals to exempt the old age contributory pension, the widow’s contributory pension and the invalidity pension (details supplied); and if he will make a statement on the matter. [13435/04]
View answerI noted the terms of the motion passed by the Tramore and District Active Retirement Association: "that the contributory senior citizen's pension, the widow's contributory pension and the invalidity pension be granted in full, and that the moneys received from such pensions be not included when assessing income tax".
However, it is a general principle of taxation that income from all sources should be subject to taxation and this includes pension income from the Department of Social and Family Affairs. Social welfare payments, the old age contributory pension and the old age non-contributory pension are reckonable for tax purposes in line with the majority of social welfare payments such as the retirement, widow's contributory, widow's non contributory and invalidity pensions, the one parent family payment and short-term benefits such as unemployment benefit and disability benefit. The treatment of pensions as income for tax purposes is essentially a matter of equity.
In my last three budgets, I have increased the age exemption limits for those aged 65 years and over by more than 40% which now stand at €15,500 per annum single and €31,000 per annum married. Elderly persons or couples with annual incomes at or below these limits are not liable to income tax. The extent, if any, to which taxation will arise for an income earner will depend on the level of income which that person has in a tax year. Pensioners aged 65 years and over continue to be treated more favourably under the income tax code than the generality of taxpayers. In addition to the basic personal credit of €1,520 per annum single and €3,040 per annum married and, where applicable, the employee credit, formally known as the PAYE allowance, of €1,040 per annum, income earners aged 65 years and over are entitled to a special age tax credit which is €205 per annum single and €410 per annum married.
Pensioners and those aged 65 years or over who are widowed persons without dependent children are entitled to a tax-free credit of €300 in addition to the normal personal credits of a single person. Pensioners and those aged 65 years or over who are widowed parents with dependent children have an even more favourable tax treatment. In the year of bereavement, a widowed parent may receive a personal tax credit which is the equivalent to the married tax credit. In the years following this, widowed persons with dependent children receive a one parent family credit in addition to the single personal credit. This ensures that their overall credits are equivalent to that of a married couple for as long as they continue to have dependent children. In the years directly following the year of bereavement, a widowed person with dependent children is also entitled to a bereavement credit. This credit is tapered over five years and amounts to €2,600 in year one, €2,100 in year two, €1,600 in year three, €1,100 in year four, €600 in year five with a reduction to nil thereafter.
Widowed parents are also entitled to an increased standard rate band at €32,000 per annum. This compares favourably with the single person's tax band of €28,000 per annum. The concessionary treatment is afforded to those aged 65 years or over in the administration of deposit interest retention tax, DIRT. Such persons are entitled to a refund of DIRT paid if their income is at, or below, the age exemption limits mentioned above. The claim for repayment of DIRT is made after the end of the year of assessment. Partial refunds may be due to persons whose income in any tax year did not greatly exceed the exemption limits.
