Less than two months after the Government said that child benefit payments could not be taxed or means-tested because Revenue Commissioners and the Department of Social Protection files were not shared, 560,000 records with pension details have been sent to Revenue's computer system.
The Revenue Commissioners were able to match these records and come up with 115,000 cases where, according to Revenue, the social welfare pension had not been declared either at all or in full by the pensioner or that the pensioner's circumstances had changed.
Revenue has already been able to make arrangements for tax on the pensions to be collected through the pensioners' other employment or occupational pension, in cases where they have one.
For outstanding tax it is currently targeting the state pension, the transition pension (paid to people aged between 65 and 66), the invalidity pension and pensions for widows, widowers, surviving civil partners. Many recipients of these pensions are already paying tax, but many, according to Revenue, are not.
Pensioners were shocked to receive the letters early last week. Many were mystified at the suddenness of the Revenue's decision as these pensions have been taxable for many decades.
In its 2009 report, the Commission on Taxation was able to say that the arrangements between the Department of Social Protection and Revenue "include provision for the electronic transfer of data relating to beneficiaries of social welfare payments".
The tax will now be deducted in the next salary or occupational pension payment.
So shocked were some of the callers to Revenue's PAYE helpline that more than one said they were contemplating suicide. Some pensioners were convinced that they were up to date with their tax payments, only to discover that a small increase in their social welfare payment had generated the letter from Revenue.
One caller, who is in receipt of the state pension in addition to a public service pension, said that he had to leave the house and walk around the block before he could contemplate the letter. "I tried to get through to the number they gave me," he said, "but gave up after 20 minutes."
Public servants are mostly unaffected by the change, as public sector pensions are taxed under the PAYE system.
Revenue is suggesting that in many cases the additional liability will be "modest".
But for some pensioners, whose income apart from the State pension is what Revenue describes as "reasonably significant", such an annual additional liability could reach €4,400 for a single person and €8,800 for a married couple.
The Commission on Taxation suggested quite a different approach in 2009: "While appreciating that there are significant practical issues, it seems to us that, for the longer term, the optimal approach is one which would see the Department of Social and Family Affairs operate taxation at source in relation to social welfare payments to the extent that such payments are taxable."
While this seems a practical approach, from both a customer service and tax compliance perspective, the Department of Social Protection has consistently resisted calls to act as an employer.