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BCL Law Notes Revenue Law Notes

Taxation Of The Family Home Notes

Updated Taxation Of The Family Home Notes

Revenue Law Notes

Revenue Law

Approximately 23 pages


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In Ireland the “[i]ncome taxation system is based on the philosophy of individualisation”, (Fuller p.1) meaning simply that each person is taxed on an individual basis an no persons are taxed on a collective basis. This can be seen to be quite harsh on the family as a collective unit as the circumstance of families are largely not taken into account when taxation is concerned. This is room however, for assistance for families who’s circumstances deem them to be in need however, this is not done through revenue or taxation benefits but through social welfare benefits, such as a Family Income Supplement. Thus, it is submitted that the matter of taxation of the family is one which the revenue tends to steer clear of and this can be done due to the fact that individualisation while ultimately, quite harsh on the family is “not seen to be unconstitutional, as it does not “penalise the marriage state”” (Fuller p.1) it is submitted that the married couple in Murphy v. AG being the only exception to this statement here. The main question then is whether or not this system should be amended in favour of the family however, before discussing this it is relevant to examine how families are taxed in Ireland.

A reoccurring theme here is that any choice to assist the family is to be made by the legislature and could not be done by the courts due to the Separation of Powers. Historically, It had been the case that taxation was quite low so the issues concerning the taxation of the family were not as prevalent as they are today, yet once spouses got married and they both worked they were in a worse off position tax wise as opposed to when they were singly taxed. Pre 1980’s, once the woman became a wife she vanished from the world of tax, her income would be joined with her husbands and he would bare the tax bill. There was a tax free allowance scheme in place which was an isolated regime from the system just mentioned, it posed an allowance on income up to a certain amount which would not be taxable, today we have in place a system of credit and it allows the single individual can offset their tax bill with the credit they have been granted to reduce their overall tax bill.

The former tax free allowance for married person scheme was challenged in the case of Murphy v. Attorney General [1982], where they challenged the fact they had been paying more tax as a married couple as being unconstitutional under Article 40.1, 40.3 & Article 41. The High court found in favour under under Art. 41.3.1 was successful under their claims as their marriage was not safeguarded. In the Supreme court upheld the High Court decision under Art. 41.3.1 due to the fact the higher tax had been an unjust attack on the institution of marriage which the constitution pledges to protect as far as they practicable can. This case did however, put the State in a particularly difficult position because this case ultimately voided the tax regime applicable to married couples, in effect meaning those couples whom had been overpaying tax needed to be paid back. The Sct however, was the States saving grace here in stating that those married couples whom had over paid in tax did not have to be repaid, which was a significant win. However, they still were left in a problematic position post- Murphy as there was an issue where couples had owed tax to the State under the old regime s.21 FA 1980 which was retroactive to gain the tax back overall. This could be justified because they were married any way and the retrospective provision could not discourage marriage. The Sct however, struck down the retroactive provision so if you owed the State tax, they could not collect it. The real importance of this case however, was that the threshold for discrimination was to be nothing less than direct discrimination, this is affirmed in Muckley v. Ireland as well the court struck down s.21, there was no direct discrimination on the married state and Article 41 was narrowly interpreted to keep it constitutionality.

As a precedent for taxation of the family it is submitted the Murphy case is not worth its weight and can be seen to be a rare exception made by the court and this statement is justifiable by the treatment of the courts in later family tax cases whereby they set the bar at an unreachable level for taxation to be deemed in prejudice of the family. This submission can also be affirmed by the case of Mhic Mathuna v. Ireland, where again the standard was direct discrimination. This case was a challenge to whats now s.465 TCA granting a tax allowance to dependant children, now only applicable to incapacitated children and s.462 regarding single parents, stating the unmarried family was treated particularly unfair. Sct rejected these claims as they held the state was having regards to the different types of families, differences in allowances reflect this. It seems as this narrow interpretation has been consistent as long is there is no attack on the institution of marriage, and it can be said that this narrow interpretation by the...

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