Paul Lawless (Mayo, Aontú)
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21. To ask the Minister for Finance if he will commit to reviewing the tax individualisation system, which unfairly penalises single-income households; and if he will outline any steps his Department is taking to address this issue. [15153/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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Prior to 2000, the income tax system allowed for full joint assessment of married couples. This meant that a married one earner couple could use the combined tax credits and standard rate band available to both individuals – i.e. double the personal tax credit and standard rate band available to a single earner. As a result, where the primary earner of a married couple had sufficient income to use the available reliefs in full, the second earner faced the marginal rate of income tax from the first pound of income earned, which acted as a disincentive to workforce participation for second earners.

A process of moving towards an individualised system of income taxation began in the tax year 2000/2001 with initial steps being taken to individualise the tax bands. The stated economic objective behind the move was to increase labour force participation and reduce the numbers of workers paying the higher rate of income tax. It should be noted that many European countries have made similar moves towards a partial or fully individualised income taxation system on the grounds that it improves equality and economic independence for women.

The policy of individualisation never advanced beyond the initial step outlined above. The result is that we now have a hybrid system, which has been maintained for over 20 years. For example, up to €9,000 of the standard-rate band can be transferred between spouses and the married personal tax credit, can be allocated in full to one spouse. As the income tax system allows married couples and civil partners to choose whether to be jointly or individually assessed, there can be a difference between the tax liabilities incurred by married/civil partner one-earner couples compared to married/civil partner two-earner couples on the same household income, depending on the method of assessment chosen.

However, in lieu of fully transferable rate bands, a Home Carer Tax Credit may be claimed where one spouse works primarily in the home to care for a dependent person, such as a child. This credit supports one income households and was introduced in the context of the move towards individualisation, in recognition of the choices made by families where one spouse stays at home to care for children or the elderly. In recent years, the value of the credit has been increased significantly and it now stands at €1,950 for the current tax year.

The issue of tax individualisation was considered by the Commission on Taxation and Welfare (CoTW) in 2022 and, it recommended a phased move towards individualisation of the Standard Rate Cut Off Point as a step towards addressing disparities in the income tax system, facilitating increased employment, and decreasing the gap in the employment rate between men and women. 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/

Should this occur, all couples that are married or in a civil partnership would be treated as a single taxpayer without the option of being jointly assessed.

Furthermore, I would point out that the issue of tax individualisation was last reviewed by my Department in 2023 as part of the Personal Tax Review, which sets out further analysis of the recommendations of the Commission on Taxation and Welfare, including in respect of tax individualisation. The Report is available at the following link-

www.gov.ie/pdf/?file=https://assets.gov.ie/273335/96f70eb1-64e1-4f02-9096-e36f306a048b.pdf#page=null.

Finally, it should be noted that both the PRSI and USC are already applied on an individualised basis.