Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

In situations where a couple is cohabiting, rather than married or in a civil partnership, each individual is treated for the purposes of income tax as a separate and unconnected individual. Since they are treated separately for tax purposes, credits, tax bands and reliefs cannot be transferred from one partner to another. As part of the tax strategy group, TSG, process last year, the tax treatment of couples was considered. The TSG paper on income tax included an overview of the tax treatment of couples and outlined the rationale for the different treatment of married couples and cohabiting couples.

The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy v. Attorney General. This decision was based on Article 41.3.1° of the Constitution, in which the State pledges 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. This decision led to the income tax treatment of married couples in operation today. The constitutional protection of Article 41.3.1° does not extend to non-married couples.

To the extent that there are differences in the tax treatment of the different categories of couples, such differences arise from the objective of dealing with different types of circumstances, while at the same time respecting the constitutional requirements to protect the institution of marriage. Cohabitants do not have the same legal rights and obligations as a married couple or a 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. As such, I note that any changes in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development regarding such couples.

There would be legal issues with regard to so-called 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 could be difficult to prove and enforce in respect of persons connected with a cohabiting couple where the couple does not have 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, the legal status for married couples has wider consequences, from a tax perspective, both for themselves and persons connected with them.

I also note that the difference in tax treatment for married couples is not confined to income tax and is also a feature of other tax heads, such as capital acquisitions tax. Any changes, therefore, in the tax treatment could only be considered in the broader context of the tax system and future social and legal policy development, given that the legal status of married couples has wider consequences than from a tax perspective. That is the reason I am not in a position to accept this amendment.