1. The
matter comes before the Court by way of Case Stated dated 22nd January, 1996
from Appeal Commissioner C.V.B. Diggin. The point at issue is whether the
increase in the Widow's Social Welfare Contributory Pension granted in respect
of qualified children was, for income tax purposes, the income of the widow.
2. The
Respondent has been a widow since 1989 and has had five qualified children who
reside with her whose births range over the years 1976 to 1987. The Respondent
is a Secondary School Teacher employed by the Department of Education and is
paid a salary from which income tax is deducted under P.A.Y.E. In the year
ended 5th April, 1990 the Respondent received a widow's (contributory) social
welfare pension totalling £6,482.10 from the Department of Social Welfare.
The pension of £6,482.10 consisted of an amount of £2,704.50 in
respect of the Respondent and £3,777.60 by way of increase thereto, in
respect of the Respondent's five dependant children. The Inspector of Taxes by
Notice of Assessment dated 26th February, 1991 assessed the Respondent on the
full amount of the pension, viz. £6,482.10.
3. The
assessment was appealed on 27th February, 1991, the ground of the appeal being
that the widow's (contributory) social welfare pension was overstated by
£3,778.00
4. The
provisions aforesaid were amended by Section 18(1) of the Social Welfare Act,
1976 which increased the weekly rate of a widow's (contributory) pension and
extended the rate of benefit where there were more than two qualified children.
5. Matters
were put on a more broad based footing by the provisions of Section 95 of the
Social Welfare (Consolidation) Act, 1981 which reads:-
6. Finally
the Social Welfare (normal residence) Regulations, 1986 (No S.I. 376 of 1986)
provides that increases in respect of child dependants are paid to the person
with whom the child is regarded as residing in accordance with the rules set
out in the Regulations. Rule 10 of the Regulations provides that:-
7. Counsel
for the Inspector of Taxes submitted that by reason of the distinction between
the definition of the word
"beneficiary"
meaning a person entitled to benefit as defined by section 2 of the Act of
1981, and
"qualified
child"
as in Section 92 of the same Act, the widow not the qualified child is to be
considered properly as the person to benefit. Furthermore, that section 92
expressly records the title to the pension in unambiguous terms thus -
8. Allied
to this concept of entitlement, reference was made to section 93 dealing with
the condition for receipt of benefit and emphasis was laid on the expression
rate
of widow's (contributory) pension in Sections 94 and 95 of the Act of 1981 as
clearly indicating that the element(s) of any additional sum(s) to the basic
widow's (contributory) pension were for the benefit of the widow and liable to
charge for income tax under Schedule E. In my opinion this submission is not
well founded. True, the mechanism for payment is that monies made available by
the Oireachtas through the Social Welfare system are paid to the widow - but it
is to enable her the better to provide, with State assistance, for the
children, defined by the Acts as
"qualified".
It is a benefit related to the child or number of children, of an age and not
only related to the widow, but also having a residence relationship.
9. Counsel
sought to distinguish the case from that of
O
Coindealbhan (Inspector of Taxes) v O'Carroll
[1989] I.R. 229 which was relied upon by the Respondent before the Appeal
Commissioner. The distinctions sought to be drawn were that the structure and
words used in the Garda Siochana Pensions Order, 1981 were materially different
in that, in that case, there was an express provision for a children's
contributory pension. While this is correct - and such clarity in the Social
Welfare Acts would have been welcome - it is noteworthy that even in the Garda
Siochana Pensions Order, the children's contributory pension was payable to the
widow. Counsel argued that in the instant case the increase in the widow's
(contributory) pension was referable to the circumstances of the recipient and
it is the rate of the pension not the entitlement that attracts the
chargeability to tax. Furthermore, that there was no statutory intention to
create a trust in the additional monies received by the widow by reason of
having a qualified child or children, because one of the uncertainties of a
trust (certainty of object) was absent. It was contended that a trust by
implication was not to be read into the Acts of the Oireachtas. Reference was
made en passant to the decision of the Supreme Court in
Chambers
v Fahy
[1931] (17 per O'Byrne J. at page 21) and considerable emphasis was laid on the
views expressed in
Bennion
on Statutory Interpretation
(Second Edition) at p. 361 et seq. on the nature of legislative implication and
the legitimacy thereof.
10. The
argument concerning trusteeship is interesting but in my judgment unnecessary
to the issue to be resolved. The provisions of the Social Welfare Acts from
which the Case Stated arises are not those of a Finance Act giving rise to
taxation: were they so, the famous dictum of Rowlatt, J. in relation to taxing
Acts; 'nothing is to be read in, nothing is to be implied'
(Cape
Brandy Syndicate v IRC
[1921] 1KB 64) would be apposite. In my judgment the appropriate approach to
Social Welfare legislation is to construe it purposefully.
11.
Counsel
first argued that any additions or increases to the basic widow's
(contributory) pension were provided by the Oireachtas in the interest of the
qualified child or qualified children and that the correct approach to the
interpretation of the statutes was within the constitutional context. The
argument was then developed by noting that while the widow was the beneficiary
of a widow's pension; and that notwithstanding the fact that the Acts do not
expressly state that the additional monies are those of the widow or child, the
guidance provided by the judgment of Finlay C.J. in
McGrath
v McDermott
[1988] I.R. 258 at 276 is of assistance:-
12. I
have no difficulty in accepting the proposition that the Acts must be construed
within the constitutional context and I follow the approach to the construction
of the Acts as indicated in McGrath's case.
13. The
second submission on behalf of the Respondent is that if there is any ambiguity
in the terms in which the Acts are individually expressed, the Court is
entitled to consider the purpose or purposes of the individual Act or the Acts
taken as whole. Counsel drew attention to the different manner in which the
basic benefit and the incremental element is treated. By illustration it was
urged that the incremental element of the dependant child allowance is
earmarked for the child as in Section 95 of the 1981 Act, it follows the child
to the carer. In short the payment 'travels' with the child and is not allowed
to lapse; the increment is clearly intended and destined for the child although
the actual sum is paid to the widow. Giving the Acts a purpositive
interpretation this seems to me to lead inexorably to the conclusion contended
for by the Respondent.
14. The
manner in which the Oireachtas has chosen to treat, for tax purposes, certain
benefits payable under the Social Welfare Acts is reflected in Section 15 of
the Finance Act, 1992 which provides as follows:-
15. Section
15 of the Finance Act, 1992 was amended by Section 10 of the Finance Act, 1995
by the substitution of the following subsection for subsection (2):-
16. From
the foregoing it seems clear to me that from a position in which Social Welfare
benefits were not chargeable to tax, the position was altered by the Finance
Act, 1992 and tightened further by the Finance Act, 1995. Furthermore, the one
benefit expressly provided for as not being chargeable to tax are amounts
payable in respect of a qualified child.
17. I
am satisfied that the submissions of Counsel for the Respondent that the
reasoning of the Appeal Commissioner as set out in the Case Stated is correct.
While the individual facts in the instant case are distinguishable from those in
O
Coindealbhain v O'Carroll
,
nevertheless the cogent and compelling logic of the ratio decidendi of the
judgment of Lynch, J. is clearly applicable to this case.
18. While
I do not feel constrained to embark on a detailed consideration of the concept
of trusteeship of a widow, receiving an addition to a basic widow's
(contributory) pension, a sum referable to each qualified child; I would
nevertheless be of opinion that on a consideration of
Yates
(Inspector of Taxes) v Starkey
[1951] C.H. 465; [1951] T.L.R. 661 that the widow to whom monies are paid in
respect of a qualified child receives them not for her own benefit but on the
basis that such monies would be laid out for the benefit of the qualified
child.
19. The
answer to the Appeal Commissioner's question whether he was correct in holding
that the Respondent was not liable to income tax in respect of the increases in
the weekly rates of Widow's (Contributory) Pension paid to her in respect of
each qualified child who resided with her is therefore "Yes".