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Tax Credits

Dáil Éireann Debate, Wednesday - 16 December 2015

Wednesday, 16 December 2015

Questions (61, 64)

Dominic Hannigan

Question:

61. Deputy Dominic Hannigan asked the Minister for Finance if the difference in taxation of maintenance payments received is in contravention of Article 40.1 of Bunreacht na hÉireann, which states that all citizens are equal, with the rider that the State may have due regard to differences of capacity, physical and moral, and social function; and if he will make a statement on the matter. [45558/15]

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Dominic Hannigan

Question:

64. Deputy Dominic Hannigan asked the Minister for Finance the reason persons in receipt of maintenance payments are treated differently in regard to the taxation of those payments, in that they pay more income tax than those with the same income where that income is not from maintenance payments; and if he will make a statement on the matter. [45553/15]

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Written answers

I propose to take Questions Nos. 61 and 64 together.

I am assuming that the Deputy is referring to the tax liability that arises on an individual who receives maintenance payments and is taxable on that income compared to the tax liability that arises on an individual whose income, under the Tax Acts, includes earned income.

In determining the amount of income tax payable on an individual's income, the individual may be entitled to either the Employee (PAYE) Tax Credit or the Earned Income Tax Credit, where it is shown that the individual's income, or an element of it, consists of earned income.

Earned income is defined, in broad terms, either as income arising from an individual's trade or profession, where the individual is self-employed, or as PAYE income where the individual is an employee.

Income received by an individual in respect of maintenance payments does not fall within the definition of earned income and as such, there is no entitlement to either the Employee (PAYE) Tax Credit or the Earned Income Tax Credit.

The treatment of maintenance payments and the income tax liability on that income is directly comparable with the tax arising on other taxpayers whose total income does not include earned income.

I would also point out that the tax treatment of a separated couple with one income earner is equivalent to the tax treatment of a married couple with one income-earner, insofar as only the income-earning spouse would be entitled to claim a PAYE or Earned Income Credit, as appropriate.

The constitutionality of the various provisions of the tax code are ultimately a matter for the courts to decide, where issues are put before them. However, the Deputy should be aware that due regard is given to the provisions of the Constitution when constructing the tax code.

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