I beg to move the Second Reading of the Double Taxation (Relief) Bill. As already explained it is an enabling Bill, which will permit the Free State Government to arrange with the British Government for relief from double taxation, and empower the Governor-General to make Orders giving statutory effect to such arrangements. The British Government has taken a similar power in the Irish Free State (Consequential Provisions) Act of 1922. The Bill now before the Dáil will put the Free State Government in the same position as the British Act places the British Government in. Under Article 74 of the Constitution the taxation code at present in force in the Free State is the same in practically all respects as before the change of Government, and this state of affairs continues until the end of the current financial year. On the 6th of next month for Income Tax, and on the first of next month for all other taxes, a clean cut will take place; and where we have, as at present, one taxation code as between ourselves and Great Britain we will have, after those dates, two taxation codes similar in regard to law but independent in jurisdiction. The effect of this will be liability to double taxation. A person drawing a dividend from an English Company would be taxed at the source there, and at present would not be liable to any further tax here in Ireland; but unless some such arrangement as this Bill will enable us to make be made, that person would, in the first instance, be liable to deduction at the source in England, and, secondly, on payment of the dividend here would also be liable to Income Tax taxation. Conversely the same thing happens with regard to investments and dividends paid from here and their reception in England and taxation there. Our aim in this matter of double taxation is to ensure that no person will pay more than the higher rate of tax prevailing in either one country or the other. Now, in the case of the Corporation Tax, which is chargeable on the profits of all companies registered in the area of jurisdiction and on the profits earned in the area of jurisdiction of companies registered outside, the same profits would be liable to taxation in both countries in respect of companies trading in both countries, and a provision must also be made here to avoid double taxation. In the case of Death Duties, personalty, such as stocks, shares, etc., passing on the death of a person, might be liable to pay Death Duties twice over, and provision must be made to correct that. Lastly, in the case of Stamp Duties, documents such as cheques, transfers, which are stamped in the Free State now, do not require to be stamped in Great Britain, but after the 1st April, if no provision were made such as this Act entitles us to make, a cheque issued from here upon which a stamp duty of 2d. has been paid, will also be liable to stamp duty either in Belfast, if it went to Belfast, or in London, if it went to London. It is only in the case of Inland Revenue that the question of double taxation arises. It does not arise in the case of Customs. The British Government has already, as I have explained, taken power to provide against double taxation, consequent on the establishment of the Free State. Under Section 5 of the British Act entitled the Irish Free State (Consequential Provisions) Act, 1922, it is provided that where any tax is payable in the Free State in respect of a subject of charge, in respect of which a corresponding tax is payable in Great Britain and arrangements have been made between the British Government and the Free State Government to give a relief from double taxation, in such cases, Orders in Council may be issued giving statutory effect to the arrangements agreed upon between the two countries. Provision is also made in that Section for the extension of relief to those taxes which are within the jurisdiction of the Government of Northern Ireland. As regards Northern Ireland it has to be borne in mind that death duties and stamp duties are taxes under the control of that Government and its consent will be necessary to the inclusion of its taxes within the general arrangements for relief. The provisions of the Bill introduced now are reciprocal provisions. The most urgent aspect of the problem is in respect of stamp duty because unless arrangements are made before the 1st April, there is a liability in respect of any such duties to a double tax. A transfer stamped in Dublin would require again to be stamped before registration in Great Britain, and vice versa. A marketable security stamped in London would require to be stamped again on coming into Dublin, and so on, with regard to the various documents and instruments coming within the scope of the Stamp Acts. It is fairly obvious I think that unless suitable provision is made to avoid incidence of double taxation in connection with stamp duties there would be serious interference with trading operations, and it is for the purpose of permitting the Government to make such necessary arrangements that this Bill was introduced. I formally move the Second Reading.
DISTRICT JUSTICES BILL—FROM THE SEANAD. - DOUBLE TAXATION (RELIEF) BILL, 1923.—SECOND STAGE.
I second the motion.
I think the justification the Minister has attempted to make for this Bill is insufficient to warrant us in allowing it to pass. The Bill proposes to empower the Ministry to make arrangements with the British Government and with the Government of North-east Ireland in regard to double taxation, but to leave it to them to make any reciprocal exemptions that between them they may agree upon, and having made these arrangements to lay upon the Table an Order which then is to be revoked by a specific vote of the Dáil. Well, this particular method of legislation by Order is undesirable, particularly when the onus of examining the Provisional Orders is not imposed upon any particular person, or group of persons, and that the Dáil refused to appoint a committee a week ago to have the duty thrust upon it of examining Provisional Orders. Now, it remains for the individual member to go through these particular Orders, find out whether they are objectionable or not in any of their details, and only when he has found that out, and persuaded the majority of the Dáil of their objectionable character can they be annulled. I think we ought to object to the particular method by which this kind of relief from taxation is to be attained. It seems to me if it is essential that there should be exemptions made from taxation that these exemptions should be contained in a Finance Bill or the Finance Act.
They ought not to be the subject of agreement between two Governments, each of which is supposed to have fiscal independence of the other. I find that in respect of the Australian Parliament they have an arrangement whereby the double taxation in regard to income tax shall not be imposed except under certain conditions. It is by an Act of the Parliament of Australia, and the rate of exemption is specifically laid down beforehand. It is made quite clear to people, citizens of Australia, investing their money abroad, what liability they are to be under. The proposition here is to leave it entirely in the hands of the Ministry of Finance to arrange with the Parliament or Treasury in England, or in the North-east of Ireland, to make such exemptions as they wish. I think that method is a bad one, and ought not to be adopted by the Dáil. The general principle, too, ought to be examined more closely than the Minister has suggested it is worthy of. Take the matter of income tax as an instance, especially when the Minister says that there shall not be imposed upon any holder a greater amount of tax than the highest tax in force as between the respective countries. You are hereby inviting Irish investors to invest in British stocks. I think the pressure should be the other way, and I do not think it is desirable that we should invite Irish investors either to retain their money in British investments or to increase the amount so invested. I rather think there should be somewhat of a penalty imposed upon the export of capital in this way. I believe it would be very much more conducive to the prosperity of the Saorstát if, before we allowed any exemptions, they were thoroughly examined in the Dáil, and we should as a matter of fact impose an extra tax upon incomes through investments outside the Saorstát.
The Minister speaks of the necessity of doing certain things before the first of April. I suggest it would be easy to bring in a Bill making exemptions in respect of stamp duty if it is necessary, and I am very doubtful of the necessity It would have been just as easy to bring in a Bill setting forth the exemptions which he proposes to make, as to bring in a vague proposition of this kind, in which he asks us to hand over the powers of taxation, and, worse still, exemptions from taxation, and leave out control, because that is what it means in practice. He asks us to hand over control—renounce the real control the Dáil should have over taxation and exemptions from taxation. My feeling in respect of this Bill is that it is, perhaps, not so designed, but its effect will be to place the Saorstát in greater subjection than ever to British economical and financial interests. We are, I fear, going to encourage Irish investors who may be somewhat timid, and who may be encouraged by promises from across the water of higher rates of interest and profit, to invest their moneys over there. Then where their treasure is there will their hearts be also. Investors will look abroad and think always of their financial connections. The financial bond will be encouraged, will be strengthened, and I submit our efforts ought to be directed towards loosening that financial bond and using pressure upon Irish investors to compel them—or, shall I say, induce them—to put their money into Irish investments. We do not know what the intention of the Ministry is in regard to this reciprocal arrangement. I have no doubt they will assure us nothing of the kind is intended such as agreeing to an arrangement which would give any inducement to Irish investors to take their money abroad; but we do not know.
This is a reciprocal arrangement. The British side of it was passed some months ago, presumably with reference to the transition period. We are now invited to extend that period, and I have a shrewd suspicion from what has passed in the Press recently, confirmed by this Bill, that we are going to be told that there will be no change in the incidence of taxation for the next year at any rate; that the fiscal system that was obtained in the Treaty is not going to be of any effect for another year. I suppose we shall have to wait a little while before we are confirmed in that suspicion or disillusion, but the signs seem to point to the fact that we are going to give away the advantage that fiscal freedom has given to us.
The third objection that I have to the Bill is that the authorisation to make arrangements for granting relief from double taxation is confined to the Governments of Great Britain and the Government of the North-East corner. If it is desirable to make such arrangements in the interests of citizens of the Saorstát, why not extend to the Government here power to make similar arrangements of a reciprocal kind with any other Government that is willing to do so? Conceivably there are men in Ireland who have moneys invested in Canada, Australia, or South Africa. Is this Bill depriving the Government here of the power to make arrangements with the Governments of those other countries? Conceivably also Irishmen may have investments in France, or Germany, or Mexican Rails. Are we willing to make any arrangements with the Governments of those countries? If not, why not? It may be a very good thing to facilitate intercourse between England and Ireland, and even to facilitate the investment of British money in Irish concerns, so as to give the British investor the real control that President Wilson and many others have talked about—the real control that overrides political control and determines the lines that political affairs will take. It may be a very good thing to facilitate that kind of investment, but I submit to the Dáil that it is not good for us to hand over the power to make arrangements of this kind to the Ministry, leaving us only the provisional order to annual or accept as a whole. I submit that this ought to go into the Finance Bill and that we should examine each particular item clause by clause. Then we shall know whether it is likely to be to the advantage of Saorstát or to the disadvantage, and the Dáil will be responsible. I would ask you to vote against the Second Reading of this Bill.
I do not wish to say anything against this Bill for I think it is a good one, but there is one matter that I would like to direct the attention of the Minister for Finance to. In the course of his introduction of the Bill, he referred to Income Tax, and then he went on to several other matters which he described as Duties, Death Duties, and so on. I confess that I have not looked into the matter very deeply. I took a glimpse through some of the Taxation Acts before I came down here, and I suggest the Minister should consider whether it would not be well to introduce a Clause defining tax or stating what it includes. We all know Income Tax is called a tax but the Minister himself refers to Death Duties and Stamp Duties. I am by no means certain that the word tax, which is the only word used in the Bill, would be regarded as sufficiently extensive to cover Death and Stamp Duties. I suggest that it might be well to be quite certain about that before we part with the Committee stage of this Bill, and that it might be desirable, possibly, to introduce a definition clause defining taxes as including all subject matters of duties, imposition or charge, or some extended term of that kind so as to make it quite clear that these duties to which the Minister referred in introducing the Bill would be covered by the word "taxes" which is used here.
I take it that it is the country where the industry is carried on that would have the right to income tax and not the country of residence. For instance, an Irishman with money invested in England would be liable for the English Income Tax and the Englishman with money in Irish Industries, which is scarcely a likely thing, would be liable for the Irish rate of Income Tax, and would not be liable to English Income Tax afterwards. The attitude of Deputy Johnson would be bad enough on investments made as from this date, but his attitude to previous investments to my mind is absolutely malignant, and the present time is not an opportune one for introducing legislation to make them invest in Irish Industries. We have people at the moment going around the country under the red flag, seizing any industries we have.
This does not arise under this Double Taxation Bill.
It does not arise, I quite agree, but it is unfortunate that the Deputy mentioned it at the present time.
A Labour Deputy
What is your flag— the black flag?
Well, it is not the white one anyway. And the red has no terror for me, and any time the red people want it they can have it in any form they like. That is all I have to say. I am anxious that the President would give us some idea as to whether it is the country of residence or the country where the tax is earned which would be liable for income tax.
The case made by Deputy Johnson does not appear to me to be very convincing. The question arises first of all as to whether this ought to be done. That is a vital question, I suppose, for us here. I do not know to what extent it may be a vital question for the British Government, but it is a vital question for persons who have considerable investments and who are citizens of either one country or the other, and as such it ought to be a vital question for citizens of Great Britain as well as for citizens of Saorstát Eireann. I think there is no doubt whatever that this is a matter which should be settled, and settled as quickly as possible, and that there should be an arrangement that no person by reason of the new position created by the setting up of the Saorstát should be committed to double taxation. In some cases people are at present liable to the extent of 12/- in the £; if liable to, say, 12/- in one country they are held liable for 12/- in the other country. It is obvious that someone will have to make up the difference. The next question arises as to whether or not this is the best machinery to adopt in order to deal with it. We believe it is. No real case has been made against it. The Bill which I think has been circulated provides that Orders made by the Governor-General shall be laid before Dáil Eireann so that it shall have an opportunity of considering any such Order. We can circulate, if necessary, a White Paper with the Order explaining in detail its operation and effect. I think it is fairly clear.
May I ask the President if he is aware that an Order of that kind can only be annulled en bloc—it cannot be amended.
I am aware of that. Stamps, I think, I have already explained, must be provided for before 1st April. Now if it be put forward by the Deputy that we could get through an arrangement of this sort in a Finance Act he is very much more optimistic than I am. I do not know how it can be done. A Finance Act, as he is well aware, without any elaborate explanation of it, ought to be an instrument of very considerable importance to this Dáil. It is obvious that one cannot rush that through in the time between now and the 1st April. If the case be that we ought to have done it before this I admit at once that he has scored a point there, but he might have reserved a small quantity of ammunition when he engaged in that offensive. There are many other things we ought to have done as well. There is a large list of necessary legislative Acts that ought to have been introduced and dealt with, but it has not been possible and it will not be possible to do these things as quickly as the necessities of the time perhaps demand. Now, for the first year we must have Orders, but it might be provided that in subsequent years legislation could be introduced which would deal with them in a manner which might give greater satisfaction, although it is possible that it would be only a satisfaction to members of the Dáil. As long as the instruments that we put up effect the purpose that we have in mind and satisfy the equities of the case, which are really what should be satisfied, I do not know that there are reasonable grounds for complaint. As regards the necessity for relief, we have interviewed the authorities of the Stock Exchange and they are all clear as to the necessity. We have reason to believe that the Banking world also demands relief. I do not know whether the Deputy is aware of the extent to which monies in vested in either one country or the other are involved. Very large sums of money are invested. I think the Deputy appreciates the necessity of not further complicating the money markets by neglecting to discharge our obligations as a Government in a matter of this kind. People who invested in English firms or in English securities, whether gilt-edged or otherwise, were entitled to understand that whoever would be the responsible persons in either this country or Great Britain would look after their interests should such political changes occur as would prejudice their investments. That is a reasonable assumption for any person to make in any country. I do not think that there is any objection to considering the point made by Deputy Fitzgibbon; it is a reasonable suggestion, and I will undertake to consider it and see if we can introduce some clause defining what is meant by a "duty." The matter mentioned by Deputy Gorey is a matter for arrangement. We start away with the fundamental idea I suppose, that there should be a division as regards the income tax. I do not think it would be fair to expect me to enter into a laboured explanation of the merits of either a person who owns property in the one case or the country which provides the money in the other. If you take into consideration the question of Consols, monies provided for carrying on the war, and so on, the sums of money invested by this country—that is by the whole of Ireland—amount to something like one hundred and six million pounds—that is, that we hold about that much of English securities. On the other hand, sums of money advanced for services in this country by the British Government, or, at least, by the citizens of Great Britain, amount to something like one hundred and thirty millions, in respect of Land Stock. One of these would practically balance the other. If income tax were deducted, or liable to deduction, in both cases it would be rather an expensive subject to go into. Deputies will appreciate the fact that in respect of War Loans income tax is not deducted in the case of some of these Stocks. I do not think that the Dáil would be justified on the case made by Deputy Johnson in refusing to pass this Bill. I think it is a duty that we owe to our own citizens; it is a duty that we owe to those of our own citizens who are investors, and it is a duty that, in equity, is due to people that they will not be mulcted, and that the ordinary business people in Ireland would not be subjected to double Stamp Duties or other such impositions which, under the circumstances, would be very unjust and very immoral, and that we would certainly fail in our duty if we did not seek to relieve them of such impositions.
When will the next Stage be taken?
I would like to take it as early as possible. I will have to ask the indulgence of the Dáil with regard to that. I do not think that it is very contentious. If the Dáil would agree to have it taken tomorrow——
Then there will not be time for amendment. Some amendments will have to be put forward.
Four days notice of amendments is supposed to be given. If the President waives that it means that he will be taking amendments when the Bill is in Committee.
As long as they give me ten minutes, or quarter of an hour, to consider them I will be satisfied.
The Committee Stage of this Bill will be taken on Thursday then, which means that amendments will not be printed unless they are received to-morrow morning.
That is not satisfactory and it is not fair. I think that, as far as the proposers of amendments are concerned, we should have at least until Thursday. As to what the Dáil does, of course it can do what it pleases; but I think that those who wish to propose amendments should have some little time to think about them.
No amendments will appear in print on the Paper unless received to-morrow. Since the Bill is to be taken in this way, we must receive amendments up to the last moment, but they will not be upon the Paper.
If the Dáil is agreeable to that, I am quite willing.