Dáil Éireann díospóireacht -
Tuesday, 30 Sep 2003

Vol. 571 No. 1

Written Answers. - Tax Code.

Róisín Shortall

Ceist:

361 Ms Shortall asked the Minister for Finance the reason the home carer's tax credit is not available to an unmarried couple with one working partner; the plans he has to extend this tax credit to such families; and if he will make a statement on the matter. [20186/03]

Minister for Finance (Mr. McCreevy)

As the Deputy will be aware, the home carers allowance, now a tax credit, was introduced in Finance Act 2000 to recognise the contribution made by a spouse who remains working in the home in order to care for certain dependent persons who may not be the spouse of the claimant. It may be claimed by a married couple who are jointly assessed for tax. The dependent person is defined as a child in respect of whom child benefit is being paid, a person aged 65 years or over, or a person who is permanently incapacitated by reason of mental or physical infirmity. This definition includes a person related by marriage to the claimant and a person in respect of whom the claimant is or was the legal guardian. The tax credit currently amounts to €770 per annum.

The provision is intended to cover situations where a spouse has forfeited a second income to care for dependents in the home. However, there is an income disregard, whereby the home carer may have some income in their own right without affecting their spouse's eligibility for the tax credit. In addition there is a taper system, which means the tax credit is not lost all at once when income exceeds the amount of the disregard. The tax credit is due in full where the home carer's annual income does not exceed €5,080 and where it exceeds that amount, the tax credit is reduced by half the excess. Effectively €1 of tax credit is subtracted for every €2 by which the income exceeds €5,080, so that where the annual income exceeds €6,620 no tax credit is due.

There are no special income tax allowances for unmarried couples living together. In this context, I point out that tax law follows the general law relating to marriage. Generally speaking, the basis for the current taxation of married couples derives from the Supreme Court decision in Mur phy v. the Attorney General (1980) which held that it was contrary to the Constitution for a married couple to pay more tax than two single people living together. The tax treatment of unmarried couples who cohabit was unaffected by the Murphy judgment. Each partner is taxed as a single person and each is entitled to the tax credits and standard rate band appropriate to single persons.

The position of married couples in relation to income tax is accorded recognition through the married person's tax credit and the home carer's tax credit. I have no plans to change the arrangements in that regard.

In budget 2000 I initiated the process of band widening with a view to establishing progressively a single standard rate income tax band for all individual taxpayers. When this process is complete the position of all couples will be the same with respect to the standard rate tax band. As Deputies will be aware, the issue of the tax treatment of cohabiting couples was last examined comprehensively in the report of the working group examining the treatment of married, cohabiting and one-parent families under the tax and social welfare codes. The group, which was established by the Minister for Social Welfare in May 1997, reported in August 1999 and the report is available from the Government Publications Sale Office. The group was sympathetic in principle to changes in the tax legislation to address the issues raised relating to cohabiting couples and reported that the options that it set out should be considered further.

The working group acknowledged that a key issue in relation to the tax treatment of cohabiting couples is whether tax law should proceed ahead of changes in the general law on the matter. For that reason, and while I am cognisant of the issues faced by cohabiting couples, I have no plans to extend the home carer's tax credit to such couples at the present time.