Gifting an entitlement

[ipxl]

If someone were to "gift" a state entitlement, eg: a state pension to the state would they accrue some tax benefits which would allow them offset their future taxes based on some portion of the entitlement they "gave up" ?

A topical question, I know but I genuinely am interested in knowing what the accounting / taxation issues are around such a maneouver.

--ipxl

 

[Joe_90]

If you mean refusing a pension, I do not think it has any benefit because the person is forgoing the income.
If you mean accepting the pension and donating it to charity then the person would have say €10,000 of PAYE Income subject to PAYE, PRSI, Health Levy, Income Levy, (I'm open to correction on the rates applicable to state employees pensions)
Then they would get a deduction against their PAYE Income so they would end up the same if not a little worse off due to PRSI ect.

 

[ipxl]

I think I follow.
I am thinking of the example of someone in receipt of an existing pension deciding to gift that pension to the state rather than someone refusing the pension at the outset of receiving that entitlement initially.

In that scenario are you saying that they would be no better off as a result of gifting the pension than they would have been if they never received the entitlement or are you saying they would actually have some offsetting of tax on their existing income less the pension entitlement that they gifted off to the state ?

 

[PC 80]

Then they would get a deduction against their PAYE Income so they would end up the same if not a little worse off due to PRSI ect.

As far as I know, PAYE workers don't get a tax deduction for donations; the tax relief is actually given to the charity.

 

[ipxl]

As far as I know, PAYE workers don't get a tax deduction for donations; the tax relief is actually given to the charity.

That was my recollection too. I seem to remember a local church suggesting something about donations and them being able to get the tax relief if the donor did some basic tax paperwork.

I assume TDs are considered as ordinary PAYE workers in this context (?)
Is there any semantic difference when the item being gifted is a state entitlement.
I saw this discussion and heard something else on Liveline (of all places) which made me think about how the sitting TDs have decided to "gift" their pensions to the state and I wondered about the tax implications.

 

[Padraigb]

The tax implication for a TD gifting a ministerial pension to the state is that the pension is not taxed. It would be absurd to gift, say, €20k to the state and then pay income tax on it as if one had received it.

 

[ipxl]

The tax implication for a TD gifting a ministerial pension to the state is that the pension is not taxed. It would be absurd to gift, say, €20k to the state and then pay income tax on it as if one had received it.

Padraig - Sure it would make absolutely no sense for the donor to be taxed on a benefit that they voluntarily gave up. However, this is not what I am asking. I am wondering (as per what others have suggested on other forums) that the TDs could somehow gift the pension amount net of tax to the state and somehow get a tax credit in their favour for having done so.

Perhaps it is ludicrous. I'm just wondering if it is a conspiracy theory or whether there is a sound accounting basis for such a transaction.

 

[Padraigb]

I think that what is happening is that some people are exercised by the use of "gift" as a verb, and are looking for jiggery-pokery. It's probably connected with the extreme distrust of politicians that has emerged recently.