Vol. 492 No. 5
32 Mr. J. O'Keeffe asked the Minister for Social, Community and Family Affairs whether he will amend the Social Welfare (Consolidation) Act, 1993, to make it clear that pension increases paid to widows for their dependent children are paid in trust for those children and should not be liable to tax clawback. [14578/98]
Social welfare legislation provides that an increase in pension shall be paid to a widow or widower in receipt of a contributory widow's or widower's pension in respect of a qualified child or qualified children. A qualified child for this purpose is defined as a person who is ordinarily resident in the State; who is not detained in a reformatory or industrial school; and is under the age of 18 years or over age 18 and under age 21 and in full-time education.
The existing provisions governing the taxation of widow's contributory pension are set down in section 126 of the Taxes (Consolidation) Act 1997. The full amount of the pension payable to the widow, including the child dependant component, is assessable for tax purposes. The amount of tax payable, if any, would depend on the overall income and circumstances of the individual concerned.
I assume the Deputy refers to the recent Supreme Court judgment in the case of Seán Ó Síocháin, Inspector of Taxes, and Bridget Neenan. The Supreme Court ruled that the relevant provisions of the Social Welfare Acts provided for an increase in the widow's contributory pension in respect of the child payable to the widow and not a pension for the child payable to the widow. The effect of the judgment is that the existing taxation provisions remain unchanged so that such income continues to be assessable for income tax under the Income Tax Acts.
Any change to the tax treatment of a contributory pension would involve a change in tax legislation and would be a matter for the Minister for Finance. I remind the Deputy that the Minister for Finance is aware of the problems facing widowed people, especially in the period following the bereavement. Accordingly, he made substantial improvements in the budget to the widowed parent bereavement allowance.
Where does the Minister stand on this issue? Does he accept that it is a cod to pay a relatively small child dependant allowance for the children of widows — about £15 per week — which is taxed? Does he agree it would be fairer not to subject the allowance to tax? Is that Minister aware that under the Garda widow's pension scheme, for example, the courts found that such payments for children are not liable for tax? Does he agree that an anomaly exists with the social welfare payment?
In this instance there are fundamental issues related to tax policy which are taken into account in a budgetary context. If one was to make a taxation policy change in this area all other schemes involving child dependant allowances would have to be examined. The judgment in the Neenan case does not change existing policy and the Supreme Court drew a distinction between it and the Garda pension scheme. In the Neenan case it decided that the social welfare provisions indicate that the beneficial entitlement to the entirety of the social welfare payment is vested in the widow, whereas in the Garda scheme that is not the case because there is a specific reference to the children's contributory pension.
Does the Minister accept that the system does not treat widows well? It is to compound that to tax payments made for their children. Does the Minister agree that there should not be such a tax clawback from the social welfare payment? What would be the cost of such a change?
I do not have an indication of the cost. Special provision was made for widows in the budget. Those over 66 years of age who were on the maximum rate got a £5 increase. The Minister for Finance increased the special allowance in the first year of bereavement from £1,500 to £5,000 to be tapered out over five years rather than three years.
God help the widows.
The Government is doing more than the Deputy's party did when in Government.
