Dáil Éireann Debate, Tuesday - 13 July 2021
271. Deputy Matt Shanahan asked the Minister for Finance if he will provide clarity in relation to the way his Department recognises cohabiting couples (details supplied); his views on whether this is a serious inconsistency in the system; and if he will make a statement on the matter. [37549/21]
View answerI am advised by Revenue that where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of income tax as a single person. This means that each partner is chargeable to tax on her/his own income and is entitled to the basic annual personal tax credit of €1,650. Neither partner will be entitled to the increased standard rate cut-off point and, tax credits, tax bands, and reliefs cannot be transferred from one partner to the other.
Parts 44 and 44A of the Taxes Consolidation Act 1997 provide for joint assessment of a couple for tax purposes. However, joint assessment is available only to married persons or civil partners who live together. Joint assessment for other cohabiting couples is not provided for in the tax code.
Information on the taxation of cohabiting couples can be found on the Revenue website, available at https://www.revenue.ie/en/life-events-and-personal-circumstances/marital-status/cohabiting-couples/index.aspx.
The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy v. Attorney General (1980). This decision was based on Article 41.3.1 of the Constitution which compels the State to protect the institution of marriage. The decision held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income.
Differences in the tax treatment of the different categories of couples arise from the objective of dealing with different circumstances while also respecting the constitutional requirement to protect the institution of marriage. Cohabitants do not have the same legal rights and obligations as a married couple or couple in a civil partnership which is why they are not accorded similar tax treatment to couples who have a civil status that is recognised in law. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development in relation to such couples.
From a practical perspective, it would be very difficult to administer a regime for cohabitants which would be the same as that for married couples or civil partners. Married couples and civil partners have a verifiable official confirmation of their status. It would be difficult, intrusive and time-consuming to confirm declarations by individuals that they were actually cohabiting. It would also be difficult to establish when cohabitation started or ceased. There would also be legal issues with regard to ‘connected persons’. To counter tax avoidance, ‘connected persons’ are frequently defined throughout the various Tax Acts. The definitions extend to relatives and children of spouses and civil partners. This would be very difficult to prove and enforce, in respect of persons connected with a cohabiting couple where the couple has no legal recognition. There may be an advantage in tax legislation for a married couple or civil partners as regards the extended rate band and the ability to transfer credits. However, their legal status has wider consequences from a tax perspective both for themselves and persons connected with them.
Furthermore, the difference in tax treatment for married couples is not confined to Income Tax, and is also a feature of other taxes, such as Capital Acquisitions Tax. Therefore, any changes in the tax treatment could only be considered in the broader context of the tax system and future social and legal policy development more generally, given that the legal status of married couples has wider consequences than from a tax perspective.
The arrangements and associated legislation for the purposes of payments or allowances under the remit of the Department of Social Protection in relation to married couples, civil partners and cohabiting couples are a matter for the Minister for Social Protection and her Department.
