Pádraig Mac Lochlainn (Donegal, Sinn Fein)
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332. To ask the Minister for Finance if he plans to increase income tax exemption limits for persons aged over 65 years in the time ahead. [13444/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The age exemption applies for any year of assessment where an individual is aged 65 years or over and his or her total income does not exceed €18,000. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.

Marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies the individual or couple is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system.

It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands.

I have no current plans to increase these thresholds further. However, it is important to take into account that the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. For example, persons aged 65 or over may also avail of the age tax credit, which currently amounts to €245 per year for single persons or €490 per year for married couples or civil partners. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are not chargeable to USC or Pay Related Social Insurance.

It should be noted that the recent Commission on Taxation and Welfare (CoTW) recommended that age should be removed as a factor for determining the charge to Income Tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, located at the following link - www.gov.ie/en/publication/7fbeb-report-of-the-commission/

My Department has begun initial work on a review of the personal tax system, taking account of the recent report of the Commission on Taxation and Welfare, and considering a range of personal taxation issues. I recently launched a public consultation on the personal tax system, inviting stakeholders to provide their views and feedback. Further details are available on the Department's website - www.gov.ie/en/consultation/3ee22-minister-mcgrath-launches-public-consultation-on-the-personal-tax-system/