Tax Shock For One In Four Irish OAPs

115,000 Irish pensioners received a nasty shock in the mail on the first week of the New Year, with a demand for tax money from the Revenue Commissioners.

It followed an analysis by the tax authorities of data provided by the Department of Social Protection on the recipients of the State pension.

It found that one in four pensioners were liable to pay more tax for last year, because they did not declare their State pension when filing tax returns.

Others under-reported their pension or found themselves liable due to changes in their circumstances during the year.

Under Irish tax codes, social welfare benefits are taxable, but anyone over 65 whose annual income is less than €18,000 is exempt from income tax.

That means that anyone who is livingly solely off the State old age pension, for example, does not have to pay tax.

However, those who receive a private pension or a salary, while also receiving a State pension are liable for tax.

Thousands, it turns out, had not been declaring their State pension when filing their tax assessments.

Unlike in the United States where everyone files tax returns, and there is a high awareness of personal tax responsibility, self-assessment in Ireland only applies to the self-employed and many of the old people were unaware that it was up to them to ensure they were tax compliant.

The letter from Revenue caused dismay, shock and confusion among many pensioners.

Age Action Ireland, a lobby group that campaigns on behalf of the elderly, said that some older people misunderstood their obligations and called for a public information campaign.

Some were angry at Revenue's approach, claiming the individual letters demanding payment had come out of the blue.

But Revenue said public information campaigns did not work as well as individually tailored letters, and it was sending them out in January to allow the tax liability to be spread out over the entire year.

The action is a signal from Revenue that it is determined to maximize its tax take from whatever source.

Closer data sharing between Departments is expected to save the struggling Irish Exchequer up to fifty million euros this year.

Revenue says it will be pursuing all those involved, with a particular focus on those pensioners whose annual income exceeds €50,000.

"We cannot simple walk away from that group," a spokesman told the Irish Times, "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."

Tax Commissioner Declan Rigney said in many cases the liability will be modest.

"The variety involved in this is immense," he said, "It may be the somebody has a very modest increase in their taxes - it may be something as small as one euro a week."