Unmarried couples face tax unfairness - Deasy

Heterosexual couples were also discriminated against, John Deasy (FG, Waterford) claimed.

He said the Taoiseach and others had spoken about introducing legislation within months to deal with civil partnerships and the issues that go with it.

"However, people might not be aware that the Finance Act 2007, enacted last February, strips some basic rights under the tax laws from unmarried couples, be they same-sex or not. While the Government talks about extending rights, some basic tax rights have been removed in the last nine months.

"Section 130 of the Finance Act 2000 provided relief from capital acquisitions tax for many home sharers upon the death of a partner. In his speech on this section in 1999, then minister Charles McCreevy spoke about those in family and personal relationships who, under tax law, are treated as strangers.

"The section was passed to ensure that when somebody in a long-term but unmarried relationship, who suffered the death of their partner and subsequently inherited the family home, would not be subject to massive inheritance tax where a will was not made. One can understand the reason for it. It did not provide for equality, perhaps, but provided some element of fairness for unmarried couples under the tax law."

Mr Deasy said that the current Minister Brian Cowen, speaking during the debate on the Finance Bill 2007, had said he was introducing a provision to deal with such manufactured situations that came within the scope of a section which was contemplated for a completely different, more bona fide, set of circumstances.

He had tabled the amendment to close off any use of the provision in a manner that was not contemplated originally. He went on to say that he did not discern endemic fraud in this regard. What happened however was a blanket change that affected cohabiting couples.

Section 116 of the Finance Act 2007 was passed and, effectively, abolished the relief, except for reasons of old age or infirmity, said Mr Deasy. Mr Cowen had said the amendment was supposed to address some anomalies but the result was a blanket change in the law, he added.

"I have been contacted by a number of solicitors in Waterford about this. They have given me some examples of its effect. Take the example of two people in a long-term relationship where the dwelling house is owned by one of them.

"If the property-owning partner dies leaving the dwelling house to his surviving partner, and if the dwelling house was worth €400,000, the tax liability will be €400,000, less €25,000 tax exemption, which leaves €375,000 taxed at 20 per cent and amounts to approximately €75,000. That is the difference between being married and unmarried in this country. In this case, it is €75,000."