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

In situations where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of income tax as a separate and unconnected individual. Because they are treated separately for tax purposes, credits, tax bands and reliefs cannot be transferred from one partner to the other.

As the Deputy will be aware, the tax treatment of couples was reviewed and considered as part of the 2020 tax strategy group process. The income tax paper of that year included an overview of the tax treatment of couples and outlined the rationale for the different treatment between married couples, civil partnerships and cohabiting couples.

The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General of 1980. The decision was based on Article 41.3.1° of the Constitution where 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. The decision led to the current income tax treatment of married couples that is in operation today and 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 recognise 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. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social policy in relation to such couples.

It should be noted that from a practical perspective it would be very difficult to administer a regime for cohabitants which would be the same as that for married couples or civil partners. Married couples and civil partners have a verifiable official confirmation of their status. It would be difficult, intrusive and time consuming to confirm declarations by individuals that they are actually cohabiting. It would also be difficult to establish when cohabitation started or ceased. There would also be legal issues with regard to connected persons. To counter tax avoidance, connected persons are frequently defined through the various Tax Acts. The definitions extend to relatives and children of spouses and civil partners, and this would be very difficult to prove and enforce in respect of persons connected with a cohabiting couple where the couple have no legal recognition.

There may be an advantage in tax legislation for married couples and civil partners in the context of the extended rate band and the ability to transfer tax credits. However, the legal status for married couples has wider consequences from a tax perspective, both for them and for persons connected with them. The difference in tax treatment for married couples is not confined to income tax. It is a feature of other tax heads, such as capital acquisition taxes. Therefore, any changes in tax treatment could only be considered in the broader context of the tax system and future social policy development, given that the legal status of married couples has wider consequences than from a tax perspective. Accordingly, I am not in a position to accept the amendment.