Pensions Tax Dilemma
It is incredible how the Revenue got this so wrong. They have sent 115,000 letters to people which resulted in 20,000 people contacting the helpline on Friday and Saturday last. The phone lines were jammed again on Monday and it looks like this will continue throughout the week. “Distraught pensioners in tears are ringing the Revenue and when they can’t get through they are ringing the Pension Ombudsman.”
It has been a classic case of using a sledge hammer to crack a nutshell. The approach has been excessive when you consider the vast majority of tax payers have no tax liability at all.
Questions have been asked as to why it has taken so long for the Revenue to address this issue. Since 2005 the Revenue Commissioners have had a legal right to share information with the Department of Social Protection. Up to now their “computers were unable to talk to each other”. This has now been resolved and they can cross check to see who is in receipt of a Social Welfare Pension and in the receipt of a Private Pension as well. The liability arises if the two incomes combine to create a tax liability.
The Revenue Commissioners’ figures suggest that one in four of those pensioners surveyed from Department of Social Protection records may have underpaid on their taxes. Some acts of non-compliance were wilful tax evasion, where individuals failed to declare the State pension payment for tax reasons. According to Revenue estimates, 2,500 taxpayers with pension and other income in excess of €50,000 have failed to pay tax owing on their State pension.
Certainly, the Revenue Commissioners should have done much more, by way of information campaigns, to inform taxpayers of their legal obligations. A tax system in recent years subject to substantial change can give rise to confusion – notably among the elderly. And undoubtedly the Revenue should have identified the problem sooner, and acted quicker to ensure so many could not flout the tax laws with impunity for so long.
The important thing to remember here is that:
- A single person over the age of 65 is except from tax up to €18,000,
- A married couple over the age of 65 are except from tax up to €36,000.
If your pension falls within these tax exemption limits then you definitely won’t be paying any tax. The farce situation has arisen whereby the Revenue have admitted that they will be taking tax from over 15,000 people who have small occupational pensions with a higher tax bill. The Revenue will only have this money on a temporary basis before he has to give it back to the taxpayer.
The Government would have to pass special legislation to forgive underpaid tax in this instance. Revenue has stated that its thrust will be on tax owed by pensioners from 2012 onwards.
In the meantime the Revenue Commissioners are scaring the lives out of our pensioners.
Tags: financial advice, pension, QIFA, tax
