Vol. 455 No. 2
11 Mr. M. McDowell asked the Minister for Finance his views concerning the taxation of couples in the event of a referendum to permit divorce; the plans, if any, he has to increase married persons allowances in cases where a taxpayer has a dependent spouse and a dependent former spouse; and if he will make a statement on the matter. [12026/95]
52 Ms O'Donnell asked the Minister for Finance the conclusions, if any, he has regarding taxation of couples in the event of a referendum to permit divorce; if married persons allowances will be increased in cases where a taxpayer has a dependent spouse and a dependent former spouse; and if he will make a statement on the matter. [11930/95]
I propose to take Questions Nos. 11 and 52 together.
The Government's Programme of Renewal has promised that, in advance of the divorce referendum, a comprehensive paper will be published indicating the text of the amendment proposed by Government and addressing a number of related issues, including taxation. The full details of the proposed tax treatment of divorced and remarried people will be given in this comprehensive paper. In the circumstances it would not be appropriate for me to outline my views on the taxation of divorced couples before the Government has had an opportunity to consider the matter fully.
If the Minister is unwilling to indicate his own policy position on the issue, perhaps he could be of assistance to the House. Is it possible to give a double allowance to the current spouse and the previous spouse in the aftermath of a divorce? If so, what would be the implications for the Exchequer and the taxation system if such a double allowance was given?
This is a complex area and I hesitate to speculate on Deputy McDowell's very profound question. The double allowance implies a certain relationship between the people involved, that is, a relationship of marriage. What the Deputy is suggesting is that if the divorce referendum is carried and legislation is subsequently introduced to give effect to the decision of the people, the marriage relationship which justified granting a double tax allowance, would no longer exist where a divorce is granted by the courts and, if I understand the question correctly, citizens who had previously been married to one another would have a second set of double tax allowances in a second union. That would present many difficulties. Full details of the proposed tax treatment of divorced and remarried people will be given in the comprehensive paper to which I have referred. I hesitate to give a definitive answer to the Deputy's question which is complex as the matter is still under review. We are preparing proposals for Government.
The answer whenever it is given will be central to the thinking of many people on this matter. For many dependent spouses who anticipate being divorced the idea that they would no longer be recognised under the taxation system, apart from the question of remarriage, would scare them. Does the Minister agree that there must be significant concern on the question of sharing the present tax deal for married couples in the event of a reconstituted second marriage and a divorced dependent spouse? Does he also agree that since the Minister for Social Welfare is publicly putting the building blocks in place on the social welfare side in the run-up to the divorce referendum the public are entitled sooner rather than later to a clear view of the taxation implications for families who may find themselves in this unfortunate situation?
Let us not charge the Minister here with social welfare matters.
The Deputy's question is well placed. The guiding principle for the Government in addressing the question of the divorce referendum and subsequent legislation to be enacted if the referendum is endorsed by the people is that no one should be financially worse off. It has been the practice in this House that taxation legislation reflects rather than leads social legislation. It would be premature for me to anticipate the decision of the people in the divorce referendum and to enact provisions in finance legislation. For this reason amendments tabled by Opposition Deputies were not accepted. I fully accept — I am aware of the position of the Deputy and that of his party on this matter — that there is a need for clarity in terms of what regime governing social welfare and taxation matters is likely to be put in place if the referendum is carried. I intend to ensure once the Government has considered how the issue should be addressed that this will be published to inform the debate in the run-up to the referendum.
May I take it the Department of Finance is working on this issue and preparing a position paper for inclusion in the comprehensive documentation to which the Minister has referred? I am not asking him to outline a precise deadline but when is the Government likely to be in a position to outline its thinking on this issue?
At the Government's request the Department is working on a paper on the fiscal treatment of married couples. Among other matters, it will outline how the Department and the Revenue Commissioners envisage divorced couples being treated for tax purposes following the introduction of divorce. I am not in a position to say when it will be published but in order to perform its function it will be published prior to holding the divorce referendum.
