The Revenue Commissioners have refused to rule out backdating taxes following the announcement 115,000 pensioners will have to pay extra taxes due to an under-calculation of their liabilities.
The tax bills will affect people who are receiving both a State pension and a secondary private pension or salary.
Affected pensioners will be issued letters from the Revenue Commissioners within the next week informing them they are liable for extra taxes this year.
Speaking this morning, tax commissioner Declan Rigney would not rule out backtaxing those liable for the past missed payments. "This is not an amnesty, let me be clear on that," Mr Rigney told RTÉ's Morning Ireland.
He said Revenue was analysing data it received from the Department of Social Protection that allowed it to match those who have been receiving both a State and private pension, or an additional source of income.
“We need to do the analysis, we need time to do that,” Mr Rigney said. “My point is, right now, it’s about sorting it, going forward as best we can.”
The underpayment of taxes came to light after the Department of Social Protection sent records pertaining to 560,000 pensioners to the Revenue Commissioners.
The provision of information by the Department of Social Protection to the Revenue Commissioners is permitted under social welfare legislation.
Revenue found in this case that 115,000 taxpayers were liable to pay more tax in 2012 either because they had never previously declared their State pension to Revenue; had under-reported their pension; or because the taxpayer’s circumstances had changed.
Mr Rigney advised that, in many cases, liability will be modest. “The variety involved in this is immense. It may be that somebody has a very modest increase in their tax. It may be something as small as €1 a week,” he said.
However, in some cases where the pension was not previously on record and a pensioner’s second income brought them into the 41 per cent tax bracket, the annual additional liability could reach €4,400 for a single person and €8,800 for a couple. A Revenue statement, issued last night, noted this would only apply in cases where the individual already had a significant income outside their State pension.
There were at least 2,500 instances where pension recipients were in receipt of annual incomes in excess of €50,000.
Approximately 325,000 pensioners remain unaffected because they either have no other income apart from their old age pension or are exempt from paying tax. Another 20,000 taxpayers will pay less tax as their pension was overstated on Revenue’s records.
A further 100,000 records were in respect of people who pay tax on their State pension through the self-assessment system.
A range of benefits payable under the Social Welfare Acts are taxable but anyone over the age of 65 whose annual total income is less than €18,000 for a single person or under €36,000 for a married couple is exempt from income tax.
Age Action said the announcement meant law-abiding citizens would now be left with tax bills at the start of a year when there have never been as many demands on their pensions.
Spokesman Eamon Timmins said it had caused anger and confusion among older people and he called on Revenue to undertake a public information campaign to highlight the issues.
“The commissioners are blaming the under-calculation on the fact that a variety of pensions paid were not included by the recipients in the calculation of their personal liability," he said. “Older people who contacted us today were at a loss as to how one arm of the State did not know what the other arm of the State was paying out. They had presumed these payments had been included.”
Fianna Fáil spokesman on social protection Barry Cowen described the situation as “gross mismanagement”.
He called for clarity on the suggestion that the demands may be backdated for a number of years and asked Minister for Finance Michael Noonan to explain when he became aware of the issue.
Mr Cowen also called on Minister for Social Protection Joan Burton and the Revenue Commissioners to outline what efforts were being made to allow any extra payments to be made on a "phased and manageable" basis.
Fine Gael Meath East TD Regina Doherty said that tax compliance was an important issue but that there were lessons to be learned from how the episode had been handled.
"It can be very unsettling for an elderly person, who is possibly living alone, to receive an unexpected letter in the post about their financial affairs. I would urge Revenue to consider the methods they use in the future when they have such important information to impart to a large section of the public," she said.
Revenue's 1890 telephone service will be available tomorrow from 9.30am to 4.30pm to deal with queries on the issue. It said the number to ring was outlined on the Revenue letters received by individuals in receipt of Department of Social Protection pensions.
The Citizens Information Service said anyone with concerns should drop in to their local office, telephone 0761 07 4000 or visit the website citizensinformation.ie.