Charlie McConalogue (Donegal, Fianna Fail)
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107. To ask the Minister for Finance why a cohabiting couple is not allowed to be assessed as a married couple for tax purposes whereby a person who is in full-time employment is not able to claim the partner's tax credits but such a couple is entitled to be assessed as a couple for social protection proposes; and if he will make a statement on the matter. [6570/16]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy may be aware, in general, there are no special income tax reliefs for unmarried couples living together.  In this context, tax law follows the general law relating to marriage. The basis for the current taxation of married couples derives from the Supreme Court decision in Murphy v. the Attorney General (1980) which held that it was contrary to the Constitution for a married couple to pay more tax than two single people living together.

In the case of cohabiting couples each partner is taxed as a single person and each is entitled to the tax credits and standard rate band appropriate to single persons. The same tax credits and standard rate bands are available to a married couple, with the difference being that one spouse's personal tax credit and a portion of his or her standard rate band may be transferred to the other spouse if they so choose. This can be of benefit where one spouse has low income or does not work outside the home, and therefore does not use their own credit and rate bands in full.

From a practical perspective, it would be very difficult to administer a tax 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 were actually cohabiting.  It would also be difficult to establish when cohabitation started or ceased. 

It should also be noted that while there may be an advantage in tax legislation for a married couple or civil partners, their legal status has wider consequences from a tax perspective, both for themselves and for persons connected with them.

To counter tax avoidance, transactions between 'connected persons' are frequently subject to anti-avoidance provisions throughout the various Tax Acts.  The definitions of 'connected persons' extend to relatives and children of spouses and civil partners.   Were the tax treatment of married couples and civil partners to be extended to cohabiting couples, it would be very difficult to prove and enforce such anti-avoidance measures in respect of persons connected with a cohabiting couple where the cohabiting couple has no legal recognition.  

The treatment of cohabiting couples for the purposes of social welfare is primarily a matter for my colleague, the Minister for Social Protection, Ms Joan Burton T.D. However, it is also based on the principle that married couples should not be treated less favourably than cohabiting couples. This was given a constitutional underpinning following the Supreme Court decision in Hyland v Minister for Social Welfare (1989) which ruled that it was unconstitutional for the total income a married couple received in social welfare benefits to be less than the couple would have received if they were unmarried and cohabiting.

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. 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.