I propose to take Questions Nos. 120 and 121 together.
The Irish Income Tax code has many favourable provisions relating to the tax treatment of widowed persons and, in particular, widowed parents.
In the year of bereavement, a widowed person is entitled to the same personal tax credits as a married couple. A widowed parent tax credit is then available to a widowed person with dependent children for the five years following the year of bereavement. This credit tapers out over the five years and amounts to €3,600 in year one, €3,150 in year two, €2,700 in year three, €2,250 in year four, €1,800 in year five. This credit was introduced in 1991 specifically to assist such parents in the transition from married to widowed status. The estimated cost of maintaining the relief at €3,600 for five years is of the order of €1.7m. This is based on 2016 data and assumes the number of claims for this credit will remain static at 2016 levels. It also does not take account of future economic growth, or the resulting change in income levels, which would have an effect on the taxable income and as a result the ability of taxpayers to fully absorb the credit.
In relation to the estimated cost of extending the relief to ten years, at the current tapering rate of €450 per year there would only be 3 additional years before the credit is reduced to zero (€1350 in year 6, €900 in year 7, €450 in year 8). The cost of extending the relief to include the 3 additional years is estimated to be of the order of €5m which would be fully materialised after a period of 3 years, again assuming the number of claims for this credit will remain static at 2016 levels and it also does not take account of future economic growth, or the resulting change in income levels, which would have an effect on the taxable income and as a result the ability of taxpayers to fully absorb the credit.
However, both during and after this five-year period a widowed person with dependent children is also entitled to claim the Single Person Child Carer Credit (SPCCC), in addition to the single personal credit. This ensures that their basic personal credits, before taking into account the additional widowed parent credit, will be equivalent to those granted to a married couple while he or she continues to have dependent children.
Widowed parents who qualify for the SPCCC are also entitled to an increased standard rate band of €39,300. This compares favourably with the single person’s tax band of €35,300 currently. This ensures that in 2019 a widowed parent will not be subject to the higher rate of income tax until their taxable income exceeds €39,300.
Furthermore, widowed persons without dependent children, who therefore do not qualify for the SPCCC or the widowed parent credit, are entitled to the widowed person tax credit of €540 per year in addition to the normal tax credits for a single person.
It should also be noted that widowed persons who are in receipt of the social welfare non-contributory widow’s pension are not liable to the Universal Social Charge on that payment.
I am satisfied that the significant provisions currently in place relating to the tax treatment of widows and widowed parents are targeting limited resources to where they are most needed.