Catherine Murphy (Kildare North, Social Democrats)
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299. To ask the Minister for Finance his plans to conduct a full review of the taxation policy of married persons and cohabitating partnerships in view of the time that elapsed since an examination of the current legal status of cohabiting couples; and if he will make a statement on the matter. [22127/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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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.

The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General (1980). This 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.

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. Cohabitants do not have the same legal rights and obligations as a married couple or 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. 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.

I have been advised by Revenue 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 were 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 throughout the various Tax Acts. The definitions extend to relatives and children of spouses and civil partners. This would be very difficult to prove and enforce in respect of persons connected with a cohabiting couple where the couple has no legal recognition. There may be an advantage in tax legislation for a married couple or civil partners as regards the extended rate band and the ability to transfer credits. However, their legal status has wider consequences from a tax perspective both for themselves and persons connected with them.

I understand that, as part of the Tax Strategy Group (TSG), which is overseen by my Department, a paper is likely to be published soon setting out the consideration of policy matters that arose during a preliminary review of the tax treatment of married and co-habiting couples. The expectation is that it will be published in the coming weeks as part of the regular Budget process. In 2019, my Department carried out a review of the Home Carer Credit which also examined some of the issues around the current tax treatment of married and co-habiting couples. This was published as part of Budget 2020 and can viewed at the following link:

Neasa Hourigan (Dublin Central, Green Party)
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300. To ask the Minister for Finance his views on the deemed disposal rule which was introduced in the Finance Act 2006; his plans to revise same; and if he will make a statement on the matter. [22141/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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Finance Act 2000 introduced the gross roll-up taxation regime for investments in certain investment undertakings and life assurance policies. The regime provides that there is no annual tax on income or gains arising within the investment. Any tax arising applies at the level of the investor.

Finance Act 2006 introduced an 8 year deemed disposal rule in relation to these investments. A deemed disposal occurs 8 years following inception of a policy of life assurance or acquisition of a fund and then every 8 years thereafter. The deemed disposal rules also apply to equivalent offshore funds. Any gain on the investment which arises from the date of inception or the date of acquisition to the date of the deemed disposal is subject to tax. This ensures that income isn’t rolled up indefinitely in life assurance policies or funds without being taxed. On the ultimate disposal of the investment, any tax paid which arose as a result of a deemed disposal is allowed as a credit against any final tax liability on disposal.

There are no plans to review the 8 year deemed disposal rule at this time.