Call For Clarity Over Irish Pension Tax Debacle

by Jason Gorringe, Tax-News.com, London

10 January 2012

The fallout from the Irish Revenue's disclosure that thousands of pensioners will receive an unexpected tax hit continues, with the agency forced to re-open customer enquiry lines and facing calls for a public information campaign.

An exchange of information programme between the Revenue and the Department of Social Protection (DSP) revealed inaccuracies in information held on DSP-issued pensions. Around 115,000 pensioners are set to receive letters from the Revenue detailing the error, with many told to expect greater tax deductions from their DSP pensions in future.

If a recipient of a DSP pension has no other sources of income, they are not liable for income tax on the DSP pension. However, if, in addition to the DSP pension, an individual also has another source of income – for example an occupational pension from a former employer – they may be liable to tax on the DSP pension.

According to the Revenue, there are discrepancies between its own records and those of the DSP which detail entitlement to various forms of state-funded pension. It believes that, if, over time, pensioners have failed to inform the Revenue of any changes in circumstance or payment, its records might have fallen out of line with the amounts actually paid by the DSP.

Since the news broke on January 5, the Revenue has had to field 20,000 calls on the matter, and it is expected that department officials will be called on to answer questions in parliament over the coming week. The Revenue has confirmed that its helpline will be re-opened on January 9 to deal with queries.

The Revenue came under immediate criticism from the Age Action charity, with spokesman Eamon Timmins stressing the anger caused by the news, stating that it may cause further hardship for many older people. The charity has now called for the Revenue to launch a public information campaign in the coming months to highlight steps which pensioners need to take in order to remain tax compliant. Timmins said: “The letters have caused anger and anxiety among older people who previously believed they were tax compliant and who had been tax compliant all their working lives. However, this exercise by the Revenue Commissioners has highlighted misunderstandings among older people regarding their tax obligations.”

“On the basis that the Revenue Commissioners receive accurate updates from the Department of Social Protection about what payments an individual receives, what other information do the Revenue Commissioners require about a person’s circumstances, or any changes in their circumstances that occur during the year, in order to ensure a person pays the correct amount of tax. A public information campaign is needed to highlight these issues so that we do not have a recurrence of this week’s events,” Timmins added.

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