The cost of providing greater fairness between married and cohabiting couples in the area of tax could cost the State in excess of €2 billion, according to Government estimates.
The Tax Strategy Group, an interdepartmental committee chaired by the Department of Finance, noted in 2003 that married couples received favourable treatment in the income tax system compared to single or cohabiting couples.
While the tax system provides for assessment on an individual basis, married couples living together may opt for joint assessment and may transfer unused credits and bands between spouses, subject to certain restrictions.
The Tax Strategy Group estimated that the process of extending such tax treatment to cohabiting couples would be anywhere between €167 million and €2 billion in a full year.
This figure is likely to have risen substantially in the meantime, especially given that the estimate of the number of cohabiting couples at the time was based on 2002 data.
The report says if some form of registration system to recognise cohabitation in law was adopted, the treatment of married couples under taxation law could be extended to such couples.
To give married credits and bands as well as the home carer credit and mortgage interest relief to an estimated 78,000 cohabiting couples in the Republic would cost about €167 million in a full year on a pre-budget 2004 basis.
However, if such an approach proved not to be possible, the costs could be significantly higher.
An alternative method of extending the same tax treatment to married and cohabiting couples would involve widening the standard rate band, removing the ability to transfer credits between spouses and giving all single taxpayers a personal credit at the value of the married credit. This would cost an estimated €2 billion.
Another approach could be to remove the present tax advantages that are enjoyed by married couples so all income earners were treated the same, but the group said this would "not be realistic".
The report also noted that there was a requirement for registration or court recognition for cohabiting couples who wished to benefit from tax and inheritance rights in a number of EU countries.
It said The Netherlands, Portugal and France all conferred tax and inheritance rights on cohabiting couples. Belgium had a similar regime, except the benefits applied only to inheritance rights.
