Unwed parent spaying more tax

UNMARRIED parents who live together are being forced to pay more income tax than their married counterparts yet if they find themselves on benefits, they are treated like a married couple and have fewer individual entitlements.

Treoir, the Federation for Unmarried Parents and their Children, has called on the Government to change this inconsistency, pointing to the fact that 60% of unmarried parents live together at the same address.

The Department of Finance acknowledges the contradiction, but says the aim of the welfare and tax code is to uphold the constitutional right of married couples not to be treated less favourably than unmarried couples.

Treoir assistant chief executive Margot Doherty said unmarried parents are “seriously disadvantaged within the tax system” if one of them decides to stay at home with the children.

“They are treated very differently than married parents and we have called on the Government to recommend treating cohabiting couples in the same way as married couples in both the income tax and social welfare systems.

“In the short term, this would mean that cohabiting parents with one income would benefit by the tax credits and bands of both of them. In the long term, Treoir recommends that the income tax and social welfare systems be completely individualised,” Ms Doherty said.

According to Treoir, if a dual-income married couple are earning €80,000 per year, they will have a net annual pay of €68,800. However, if one of the married couple works in the home and the other earns €80,000 per year, they will take home €62,000 after tax. In contrast, a cohabiting couple where one is at home and the other earning €80,000 will have net pay of just €58,500.

A spokeswoman for the Department of Finance confirmed that co-habitating couples are expressly recognised for the purpose of social welfare law but are not recognised for the purposes of income tax law.

“The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs 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 and having the same income,” she said.

“The treatment of cohabiting couples for the purposes of social welfare is primarily a matter for the Minister for Social Community and Family Affairs. 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”.