RETIRED PEOPLE with large private pensions are likely to be pursued for arrears where it is found they underpaid tax due on their State benefits, the Revenue Commissioners have said.
The files of at least 2,500 pensioners whose annual income is over €50,000 will be examined in the first instance, according to Revenue, but thousands of pensioners on smaller occupational pensions will not be affected.
“We cannot simply walk away from that group earning over €50,000, though the outcome will depend on individual circumstances,” said a Revenue spokeswoman. “However, our focus will be on those with the largest liability and in many cases where people have small extra tax liabilities it may be uneconomic for us to pursue this.”
Pensioners in the higher tax bracket could have to pay an additional €4,400 a year for a single person, or €8,800 for a couple.
Some 150,000 pensioners received letters, after Revenue received detailed information from the Department of Social Protection about pension payments for the first time. About 115,000 people have been told they will have to pay extra tax, in most cases because the tax authorities were unaware they were receiving State benefits in addition to their private pension, while 20,000 have overpaid.
The action is expected to account for the vast majority of the €45 million that the Government expects to save this year through closer data sharing between Revenue and the department.
The news caused shock and dismay among many of those who received the letters, and Revenue helplines were overloaded yesterday. Age Action said some older people had misunderstood their obligations and called for a public information campaign.
Arrangements were being made last night for an emergency meeting of the Oireachtas finance committee next week, at which the two State agencies will be called to attend and explain their actions. Fine Gael TD Billy Timmins, a member of the committee, said Revenue’s approach had caused unnecessary concern for people.
Revenue defended its decision to communicate with taxpayers directly. It said public information campaigns didn’t work as well as individually tailored information. It also defended sending out the letter in January, because this would allow the tax liability to be spread out over the entire year.
Asked about Revenue’s approach to tax liabilities for previous years, the spokeswoman said an analysis was ongoing. Some people would face no arrears, for example if they became of pensionable age last year, while others would have only a small liability.
Revenue also acknowledged they set aside existing rules by sending out letters informing pensioners they will have to pay extra tax.
Under previous rules, Revenue staff did not review pensioners’ tax liabilities unless the person sought such a review. “It was considered more trouble than it was worth,” a retired tax official told The Irish Times yesterday. He described the Revenue’s decision to seek extra taxes from people who are receiving both a State pension and a private pension as “a cheap shot”, akin to “shooting fish in a barrel”.
The Revenue spokeswoman confirmed that the practice was not to reopen the tax files of pensioners, but said this was before Revenue received detailed data on State payments to over 500,000 pensioners.
The Office of the Data Protection Commissioner said it had no issue with the sharing of social welfare records between the two Government agencies, provided standard guidelines were followed.
The Association of Chartered and Certified Accountants pointed out that emergency legislation would be required for the Government to forgive underpaid tax.
