John McGuinness (Carlow-Kilkenny, Fianna Fail)
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82. To ask the Minister for Finance if he will consider the future costs of the exchange rates on UK pensions being paid to Irish citizens living here and the taxation of Irish State pensions with a view to providing pension protection relative to the exchange rate; his plans to exempt those on lower pensions from paying tax; and if he will make a statement on the matter. [37348/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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Following clarification with the Deputy’s office, I understand that his question relates to a proposal to reduce the Irish tax payable by individuals with an Irish state pension who also have UK pension income, due to the negative impact of movements in the UK exchange rate on the Euro value of the UK pension income received.

I am advised by Revenue that the taxation of an Irish resident individual in receipt of a foreign pension depends on the type of pension being received.

In general, foreign pensions, including United Kingdom pensions, are taxable sources of income in Ireland. They are liable to Income Tax and Universal Social Charge but not Pay Related Social Insurance.  Income Tax and Universal Social Charge on foreign pensions are charged at the same rates as other income and taxpayers are entitled to the same reliefs and credits.

Some foreign pensions are not taxable in Ireland. These are foreign occupational and social security pensions that would not be taxable if the recipient was resident in the country that granted the pension. Under the provisions of  Section 200 of the Taxes Consolidation Act, 1997 this type of pension should be excluded for all the purposes of the Irish Income Tax Acts whether the recipient is resident in Ireland or otherwise.

Where a taxpayer is in receipt of income in a foreign currency, it is the Euro value of the income which is subject to tax.  Accordingly, when a currency strengthens against the Euro, the amount subject to tax in Ireland may increase, and when a currency weakens against the Euro, the value decreases. 

Were a tax relief to be introduced for individuals suffering a decrease in the Euro value of their income due to currency fluctuations, this would imply that a corresponding withdrawal of tax relief should occur where an individual benefits from an increase in the Euro value of their income due to currency fluctuations.

I do not consider that it would be appropriate to introduce a tax relief for one cohort of pensioners purely on the basis that some part of their income is derived from UK sources, where that relief would not be available to pensioners with the same level of income derived from Irish-only sources.