Billy Timmins (Wicklow, Fine Gael)
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Question 131: To ask the Minister for Finance when the issue of non-payment of tax on some private pensions came to light; and if he will make a statement on the matter. [1611/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that there is no issue of non-payment of tax on private pensions. The issue which is currently topical relates to the payment of tax on Department of Social Protection Pensions. In September 2011, under the auspices of a High Level Group of officials charged with ensuring ever closer working between the Department of Social Protection and Revenue, work commenced on looking afresh at data holdings in both organisations which had not previously been exchanged and which, with improvements in technology, could now be exchanged.

Subsequently, under its existing data exchange arrangements with the Department of Social Protection (DSP), information relating to long-term social welfare recipients was received by the Commissioners in late November 2011. This consisted of some 560,000 records relating to the State Pension, the Transition Pension, Widows/Widowers/Surviving Civil Partner's Pension and Invalidity Pension.

At the end of November, Revenue advised my Department that the aggregate amount of additional tax likely to be collected from this and other compliance activities with DSP was material so that we could factor it into the Budget arithmetic. This is a normal part of the interaction between my Department and the Commissioners and what I expect from them.

Revenue analysed the records received from DSP and matched them with Revenue's own records. Following this exercise, it transpired that in approximately one quarter of the cases - 150,000 - the amounts on record did not match for a variety of reasons - some were paying too much tax, others were paying too little. A large proportion had not reported their DSP pension to Revenue as they are required to do, and advised to do, by the DSP when they are awarded the pension in question. In some 15,000 cases, and these are the cases which have caused the most confusion, the taxpayers involved had not reported their DSP pension to Revenue but it appeared to Revenue that they are most likely exempt from tax.

The Revenue Commissioners have accepted that the communications strategy could have been handled better in this instance, in particular if they had more time before the start of the tax year. Their overarching objective was to ensure that the taxpayers involved pay the right amount of tax at the right time for 2012 and beyond, and I support that objective.

Revenue has a job to administer the tax system fairly and efficiently. Government policy encourages exchange of information to support smarter working and it also supports fairness in the tax system. In fairness to those who pay their taxes, including pensioners, this information had to be acted on by Revenue as soon as they could.

In accordance with their normal practice, I expect that Revenue will deal with the question of arrears on a risk basis. Some cases will be uneconomic to pursue having regard to the resources available to Revenue and the other jobs they have to do. Some cases are very recent pensioners so the question of arrears will not arise at all. I expect that the issue of arrears will not arise for a large proportion of the cases.

Revenue has a good track record in managing large projects in a sensible way while at the same time collecting the tax that the State needs and I am confident that they will in this case also.