Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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178. To ask the Minister for Finance the reason persons in long-term relationships but who are not married or in a civil partnership, cannot transfer their tax credits to their partner and if consideration has been given to addressing this issue. [34643/13]

Michael Noonan (Limerick City, Fine Gael)
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The position is that where a couple is cohabiting, rather than married or in a civil partnership, they are treated as separate and unconnected individuals for the purposes of income tax. Each partner is a separate entity for tax purposes and, therefore, cohabiting couples cannot file joint assessment tax returns or share their tax credits and tax bands in the same manner as married couples. The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General (1980), which 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.

However, a cohabiting couple where both partners are working get, in total, the same tax credits as a married couple or couple in a civil partnership (i.e. €3,300). In addition, the same amount of income is subject to tax at the 20% rate (i.e. €32,800 each). This equates to the €65,600 threshold in the case of a married couple or couple in a civil partnership.

If both cohabitants earn in excess of the standard rate band (i.e. €32,800), then they both pay tax at 41% on any income in excess of €32,800. Married couples or couples in a civil partnership where both individuals work get the same treatment.

The difference between the two groups in relation to income tax is the ability of married couples or civil partners to transfer certain tax credits such as the personal/married credits and part of the tax bands, i.e. the tax band of €65,600 available to married couples or couples in a civil partnership with two incomes in 2013 is transferable between spouses up to a maximum of €41,800. This is of benefit where one of the individuals earns less than the 20% tax threshold of €32,800 or where one of the individuals has no income.

Cohabitants do not have the same legal rights and obligations as a married couple or couple in a civil partnership. Therefore, there is no reason why they ought to be accorded similar treatment to couples who have a civil status which is recognised in law. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development in relation to such couples.