Jack Wall (Kildare South, Labour)
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Question 38: To ask the Minister for Finance his views regarding a submission (details supplied); his plans to address the stated problems; if there is any aspect of the submission that the applicants can or should review in regard to their taxation issues; whether the matter as stated in regard to the European Convention on Human Rights is an issue in regard to the determination of the applicants' tax position or whether they have they a right to be considered under any other category because of it; and if he will make a statement on the matter. [30355/11]

Michael Noonan (Limerick City, Fine Gael)
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The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. the 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. Where a couple is cohabiting rather than married or in a civil partnership they are treated as separate and unconnected individuals for the purpose of income tax. Each partner is a separate entity for tax purposes and, accordingly, credits, tax bands and reliefs cannot be transferred from one partner to the other.

It should be noted that 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 work, get the same treatment.

The difference between the two groups is the ability of married couples or civil partners to transfer tax credits and tax bands between the individuals, and this is of benefit where one of the individuals earns less that the 20% tax threshold of €32,800.

Section 462 of the Taxes Consolidation Act 1997 allows for the granting of a one-parent family tax credit of €1,650 to an individual who has a qualifying child. However, the legislation specifically excludes married persons, civil partners and cohabitants from claiming this credit. In other words, any couple, married, in a civil partnership, or cohabiting has no entitlement to this credit.

In addition, an individual's gross income is subject to Universal Social Charge (USC) at progressive rates as income increases. The applicable rates are 2% on the first €10,036, 4% on the next €5,980 and 7% on any balance thereafter. The USC is a charge specific to the income of each individual separately. There is no joint assessment provision.

My understanding is that the current taxation treatment of married couples, civil partners and cohabiting couples is not in conflict with the Charter of Fundamental Rights of the European Union.