asked the Minister for Finance whether his attention has been directed to the statements made in the newspapers as to banks in the Saorstát being required to make a return to the Government of dividend warrants cashed for their customers, and whether he will state under what Act such particulars are required and the purposes for which they are needed.
CEISTEANNA—QUESTIONS. [ ORAL ANSWERS. ] - DIVIDEND WARRANTS—RETURN BY BANKS.
A good deal of misunderstanding appears to have arisen in connection with this matter, and I am obliged to the Deputy for the opportunity he has afforded me of explaining the position.
Under the provisions of the Income Tax Act, 1918, bankers and other persons in Saorstát Eireann entrusted with the payment of any dividends payable out of any public revenue other than that of Saorstát Eireann or with the payment of any interest, dividends, etc., payable in respect of the stocks, funds, shares or securities of any foreign or colonial company (including a British company), become liable to deduct Saorstát Eireann income tax at 5s. in the £ for 1923-24 and account for such tax to the Revenue. In the great bulk of these cases British income tax at 4s. 6d. in the £ is already deducted, and the operation of the ordinary law would, therefore, have resulted in a total income tax deduction of 9s. 6d. in the £. According to a statement made by the writer of "Notes from Ulster" in the issue of the Freeman's Journal of the 26th July, this is actually happening in the case of persons resident in the Six Counties who have investments in Saorstát Eireann companies, that is to say 5s. Saorstát Eireann tax is deducted by the Secretary of the Company in the normal course, and 4s. 6d. British tax is deducted in addition by the Northern bank which cashes the dividend warrant.
Whilst the Finance Act for this year was under consideration it was represented to me that this system would involve grave hardship on taxpayers in the Saorstát in very many cases unless some modification could be adopted, and Section 10 of the Finance Act was passed to deal with the point.
This section on the one hand authorises the Revenue Commissioners to make arrangements with the banks relieving them of the liability to deduct Saorstát Eireann tax in such cases, and on the other hand imposes on the banks the obligation to furnish to the Revenue authorities particulars of the cases in which, but for the operation of this section, they would have been obliged to deduct Saorstát tax. The object of the latter provision is, of course, to secure that the tax due to the Saorstát may be collected by means of direct assessment on the recipient of the dividend.
The advantages of this arrangement from the point of view of the taxpayer are obvious. It saves him the inconvenience arising from a deduction of tax which may be far in excess of his liability, and, since the Inspector of Taxes who assesses the dividend will normally have the taxpayer's return before him when the assessment is made, and can, therefore, make the appropriate deductions and allowances, it also relieves the taxpayer in most cases of the necessity for making a repayment claim to the Saorstát Revenue authorities.
There is no deep-laid scheme underlying the concession. It is not the fact, as stated in some quarters, that the banks must divulge particulars of their customers' private affairs in general, or that they must furnish details of all dividend warrants cashed. The section, for example, has no reference whatever to the dividend of a Saorstát Eireann company, since Saorstát tax in such cases is deducted by the Secretary of the Company. The banks are merely obliged to render particulars of dividends from which they would otherwise have had to deduct tax, and whilst, technically, the section as passed would necessitate the rendering of particulars by the banker in such cases whether he deducts tax or not, the Revenue Commissioners will not, in practice, require the details called for by the section in the case of any taxpayer who prefers that the ordinary provisions of the Income Tax Act, 1918, should be given effect to in his case, and Saorstát tax at 5s. in the £ deducted from his dividends.
There is one other point I should like to refer to. It is stated that, in consequence of the income tax arrangements, many persons are transferring their bank accounts to Great Britain or Northern Ireland. It must be borne in mind that residents in the Saorstát are liable to make returns for assessment by the Saorstát Revenue authorities of all income which has not borne Saorstát tax by deduction at the source. Where a taxpayer opens a bank account outside the Saorstát, pays into that bank account the proceeds of dividends which have not borne Saorstát tax, and then omits such dividends from his income tax return, the conclusion is almost irresistible that he is deliberately endeavouring to defraud the Revenue of the Saorstát, and thereby shift his own burden on to the shoulders of his fellow-taxpayers. It will be the duty of the Revenue Commissioners to use every effort to bring such persons to book, and to secure the imposition of the maximum penalties which the law prescribes for the punishment of such offences.