Grey areas undermine tax reform of unwedded bliss

Original Source By Fionnan Sheahan COHABITING couples are the fastest growing family type in the country. According to the last Census, the total number of cohabiting couples was 121,800 in 2006 up from 77,600 in 2002. They represented 11.6pc of all family units in 2006 compared with 8.4pc in 2002. And almost two-thirds of them were couples without children. When the Civil Partnership Bill comes into effect, couples living together, but not married, will have the opportunity to legally register their relationship. This rule won’t simply apply to same-sex couples, but also to opposite sex couples. The Department of Justice reckons just 2,000 couples will want to register. The Department of Finance believes 10,000 couples will want to register. Not every co-habiting couple is going to want to register in a civil partnership. Nonetheless the numbers predicted by these Government departments to avail of the new law does appear a tad on the low side. At the moment, the Department of Justice’s side of the bargain would appear to be easier to resolve. The Government is essentially trying to introduce a relatively straightforward — though socially reforming — piece of legislation to recognise partnerships. The Civil Partnership Bill will provide a statutory way for the registration of partnerships, it will details the rights, duties and responsibilities of couples in such partnerships and set out what happens on the dissolution of partnerships. The legislation will stop short of gay marriage and attempt to ensure the special status of marriage in the Constitution is protected. But it’s not that simple and the Government knows it. As soon as the civil partnership bill comes into effect, it will have enormous implications for the taxation and social welfare system in this country. It’s only right to extend the taxation and financial rights enjoyed by married couples to registered co-habiting couples. It’s a reality, yet it’s being brushed under the carpet by the Government at present. Ministers claim these benefits will be afforded to co-habiting couples and will be provided for in the necessary Finance Bill and Social Welfare Bill once the Civil Partnership Bill is implemented. No detail whatsoever is being provided about this side of the deal. The claim that tax and welfare implications can be dealt with after the legislation is passed is akin to booking a holiday and saying you’ll only look at the price when you get home. At the moment, the Department of Finance says giving married couples’ tax benefits to other co-habiting couples will cost €25m per annum, based on 10,000 couples registering. This is before the capital tax and social welfare implications are taken into account. In past years, the same Department of Finance warned the entire taxation system would come crashing down if same-sex couples got the tax status of married couples and would therefore cost anything up to €2bn. FIVE years ago, a Department of Finance discussion paper on the tax treatment of couples said the initial cost of extending the tax benefits of married couples to cohabiting couples would be €167m a year. This scenario would be based upon introducing some form of registration system to recognise cohabiting couples. But the Tax Strategy Group (TSG) document, from September 2003, also pointed to problems caused by difficulties with legal definitions and said to widen the standard-rate band and remove married couple tax credit transfers, while also ensuring nobody was worse off than at present, would cost an estimated €2bn in a full year. Former justice minister Michael McDowell was honest enough to warn an extension of tax breaks to a significantly higher number of people would have colossal implications for the Exchequer, and therefore consequences for married couples. “The very, very generous tax regime for married people would have to be reduced to bring in equality,” he said in 2004 when debating the issue. The tax implication of recognising same-sex couples has already got a run through the courts. The pressure to bring forward recognition of civil partnerships was contributed to by a groundbreaking case taken by a lesbian couple’s challenge to the Revenue Commissioners’ refusal to recognise them as a married couple for tax purposes. The High Court case being taken by Katherine Zappone and Ann Louise Gilligan from Brittas, Co Dublin, seeking recognition for their marriage in this country, would have opened the door to co-habiting couples if it had succeeded. Their case may not be the last time such issues get an airing in the courts. Given the largely behind-the-scenes opposition to the Civil Partnership Bill, which reared its head to a degree among Fianna Fail backbenchers, it’s not unlikely the final legislation will face severe legal scrutiny — if not ultimately a Constitutional challenge. Setting aside the Constitutional issues for a moment, given the present economic circumstances, the Government is unlikely to voluntarily enter an agreement to substantially lower the tax base. This may well mean a further delay in the passing of the legislation. Supporters of the Bill deserve to know the cost implications and the Government’s envisaged timetable for passing the legislation. Leaving grey areas will only present opponents with an opportunity to undermine the merits of the legislation.