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Tax Credits

Dáil Éireann Debate, Tuesday - 29 June 2021

Tuesday, 29 June 2021

Ceisteanna (150)

Mairéad Farrell

Ceist:

150. Deputy Mairéad Farrell asked the Minister for Finance the estimated annual cost to the Exchequer in each of the years 2022 to 2026 of restoring the PAYE tax credit as it applied to the contributory pension for dependents that was changed as part of Finance Act 2013, in tabular form. [34547/21]

Amharc ar fhreagra

Freagraí scríofa

I am advised by Revenue that payments from the Department of Social Protection are taxable sources of income unless they are specifically exempt from income tax. Both the State Contributory Pension and the State Non-Contributory Pension are chargeable to income tax, but not to Universal Social Charge (USC) or Pay Related Social Insurance (PRSI).

The Social Welfare Consolidation Act 2005 provides for the payment of an increase in the amount of weekly State pensions where the beneficiary of the pension has a qualified adult dependant. Although the qualifying adult portion of the pension is paid directly to the qualified adult, this payment is premised on there being an entitlement by the beneficiary to the pension in the first instance. As stated in section 112 of the Social Welfare Consolidation 2005 Act, the qualified adult portion is an “increase” in the pension and is payable in respect of a spouse/civil partner/cohabitant who is being financially maintained and whose income is not greater than a specified amount.

The tax treatment of the qualified adult increase is provided for in section 126(2B) Taxes Consolidation Act (TCA) 1997, as inserted by Section 12 of the Finance (No. 2) Act of 2013. That section provides that, for all the purposes of the Income Tax Acts, any increase in the State pension in respect of a qualified adult dependant is treated as if it arises to, and is payable to, the beneficiary of the pension. Since the increase is treated as income of the beneficiary for tax purposes, only one employee (PAYE) tax credit – valued at €1,650 - is available in respect of the State Pension, including the qualified adult dependent increase.

With regard to the Deputy’s specific question as to the estimated annual cost to the Exchequer in each of the years 2022 to 2026 of providing for a PAYE tax credit for the qualified adult dependent, I am further advised by Revenue that there are significant variables to consider in order to determine an individual’s final tax liability position and as such it is not possible to provide an estimated cost. This will be dependent on his or her civil status, his or her available tax credits or the amount of income received from other sources or perhaps an individual may not have sufficient sources of income to partially or fully avail of the PAYE credit in his or her own right. Furthermore, by virtue of section 188 TCA 1997, a person aged 65 and over is exempt from income tax where his or her total income is less than the relevant exemption limit. For 2021, the exemption limits are €36,000 for a married couple or civil partners and €18,000 for a single individual.

Finally, I would like to make the Deputy aware that the Minister for Social Protection recently provided details of the number of recipients of State pension (contributory) and State pension (non-contributory) respectively, who were also claiming an increase for a qualified adult and these statistics are set out in Parliamentary Question 13850/21, which can be located at the following link - www.oireachtas.ie/en/debates/question/2021-03-11/140/?highlight%5B0%5D=13850.

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