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Dáil Éireann debate -
Friday, 13 Jun 1924

Vol. 7 No. 24

COMMITTEE ON FINANCE. - SUPPLEMENTARY FINANCIAL MOTIONS.

I move:

That for the purposes of any assessment to income tax for any year which is made on or after, or has not become final and conclusive before, the thirteenth day of June, nineteen hundred and twenty-four, or of any deduction on account of income tax for any year, any increase of or addition to any salary, remuneration, pension, annuity, or stipend by way of war bonus, and any other like temporary increase or addition granted in order to meet the rise in the cost of living, shall be, and shall be deemed always to have been, chargeable to tax as salary, remuneration, pension, annuity, or stipend, as the case may be, and not as perquisites.

And it is declared that it is expedient in the public interest that this resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

This resolution is necessary to legalise a practice which has been, or may be, upset by a legal decision given in England in a case called "McDonald v. Shan." In that case the decision of the British court would presumably be valid in the courts here, and if this resolution were not adopted and carried into law it would mean that there would be a repayment of Income Tax due to the extent of about £50,000, practically all to Civil Servants. It would be worse for us to have to repay that £50,000 in view of the fact that it actually was received by the British, but under the clean-cut arrangement we would have to make the repayment. It was the practice to regard the cost of living bonus as salary or remuneration, and prior to 1922 to charge it on the amount actually received in the individual year in which it was charged. Perquisites, however, were charged on the three years' average. The Act of 1922 changed the law, and made perquisites chargeable to tax on the actual year, so that so far as any tax due since 1922 is concerned there is no trouble. The law is as this resolution prescribes, that it shall be for the years prior to 1922. Practically no classes except Civil Servants are affected, for this reason, that the full formalities in regard to assessment for Income Tax have not been carried out in the case of Civil Servants. What actually happens is that the salary is known and Income Tax is deducted. If any Civil Servant wishes to question it he will be given information, but actually notice of assessment is not served, so that, consequently, it might be held that the assessments on Civil Servants had not become final and conclusive; and that they could now be reopened in view of the possibilities of this decision in the British Courts. Already one thousand claims for repayment have come in. Now there is actually no equity in these claims.

It means that if this Resolution is passed that all along Civil Servants will have been charged year by year on their bonus in the same way as on their salaries. If, on the other hand, we do not pass this Resolution, and the Courts follow the British decision, and extended it in the way we fear, the effect would be that up to 1922, when the bonus was rising, income tax would be chargeable on the three years' average. The result would be that, of course, a great deal less Income Tax would be found to have been payable than actually was paid. Then the Act of 1922 would come in, and for the years that the bonus was falling we would be obliged to charge actually on the amount of bonus for the year, so that the Civil Servants would have paid less when the bonus was rising, and they would get the benefit of the fall. As things stand, and if the Resolution is passed, the actual amount of Income Tax due on the salary and bonus will have been paid by the Civil Servants, but no more than was actually due. The proposal is quite an equitable one. As a matter of fact, it follows precisely on the lines of a clause which the British Government have in their Finance Act for this year. There is no hardship at all; the hardship would actually be on the State, that the particular class affected would escape payment of a certain amount of tax due in equity on the amount of bonus, or they might do so if the Resolution were not passed.

I confess I am not able to understand this Resolution. There was a certain phrase used by the Minister for Finance that excites question, whether it was deliberate or not I cannot say, but I would like him to make clear the position. He said, speaking on a recent decision in the British Courts, that presumably that decision would be followed here. Is it intended that we should understand that that is inevitable, that because the British Court decided in this way regarding Acts which are equally operative in both countries, that the judgment of the courts here must follow the judgment of the courts in England? The answer to that is important in a general way, but it is important, I think, in relation to this very motion. Unless the motion means that the law has been changed, and that the liability for Income Tax on the bonus will only operate as from the 13th June, and will not apply to arrears, then the judgment of the British courts will be the law with regard to past bonuses.

We cannot change the law retrospectively—not as a habit. If it is the law, as decided by the British Courts, that Income Tax on bonus was legally not chargeable in the past, does the Minister suggest that the judgment of the Irish courts in such a case would be the same? Does he suggest that by the passing of these Resolutions you can make the income taxpayer liable for arrears of bonus charges.

AN LEAS-CHEANN COMHAIRLE took the Chair at this stage.

It does not follow that the Irish courts would take the same view as the British courts. But when you have the highest court on the other side of the water taking a certain view of the meaning of the words of the law, there is at least a grave risk that the courts here will take the same view. We have, I think, to assume that it is probable the courts here will take the same view. There is no question of arrears. The question is one of claims for repayment of income tax already paid. The British courts did not decide that bonus should be charged on the three-year average, but they did decide that bonus on the nett profits of a business should be treated as a perquisite and that it should be chargeable on the three years average. It is but one step from that to decide that the cost-of-living bonus should have been chargeable on the three years' average.

I do not think that you could regard this as retrospective legislation. This payment was made. There was no objection to it here. Everybody thought that the law was that the bonus should be made a charge on the actual receipts of the year. Then a certain case was brought in Scotland which was carried to the House of Lords. A certain decision was given. It was thought from that decision, by a thousand people who have put in claims here, that they could succeed in recovering portion of the income tax which had been deducted from them and they have sent in claims accordingly. Nobody really has the opportunity of sending in such claims except Civil Servants, because, as far as the ordinary public are concerned, the assessments which were made on the understanding that the law meant a certain thing, and which they accepted on that understanding, became complete and conclusive and could not be re-opened. Owing to the informality which exists in regard to Civil Service Assessments, there is a danger that they might not be held by the courts to be final and conclusive and that they might be re-opened. The State might find itself obliged to pay up to £40,000 or £50,000 income tax back to Civil Servants, which would mean that they would escape portion of their liability. It would mean that they would have the advantage of the three-year average during the time when the bonus was rising and that, owing to the legislation of 1922 which made perquisites chargeable on the actual year of receipt, they would escape the working of the average which would be against them during the years when the bonus was falling. If we take the period of years up to now, including both the rising and falling years of the bonus, the Civil Servants will have paid no more than was due on the basis of the rate of income tax and the amount they received.

This is more serious than I thought. I suggest to the Minister that even Civil Servants are entitled to the protection of the law. If they and he and all of us acted under a misapprehension with regard to the law, then it is not their fault any more than ours, and they have a right to take advantage of it. They are entitled to be put right when they were overcharged, if they were overcharged. On the assumption that the Minister for Finance was not entitled to charge so much as he did charge, the claims for repayment, according to his suggestion as to what is the law, are justified. If we took over this law on a misapprehension we have to take the risk. We ought not now to try and legislate by resolution of this kind in a way which is going to penalise a considerable number of people and deprive them of what was their legal position up to date. If it is alleged that Civil Servants, and any others who may be liable under this, were not paying enough, then legislate in the ordinary way and bring in a new law as regards their future. But do not try to pass an enactment which is going to tell them that we were all under a misapprehension and that although we assessed them unfairly and unjustly and illegally they have now no redress. If a mistake was made and if they were charged a certain sum that the Treasury believed they were justified in charging, and that it now turns out they were not justified in so charging, surely we are not going to deprive them of their right to a refund—not by this method at any rate. I submit that this procedure and this proposal, as a whole, is not satisfactory and is doing an injustice.

Mr. O'CONNELL

I wish to protest, in spite of the Minister's assertion, against what is clearly retrospective legislation. The position, as I take it, is that a decision given in the English court does not bind us here. I take it that is the position and that it is open to Civil Servants, in view of the interpretation of the law in England, to bring a claim for the relief which has been granted there in the Irish courts and secure a decision here. To pass this Resolution is to forestall that possible claim and to make it impossible to have any such claim brought forward. That seems to me to be trying to legislate in order to set right something which was wrong some years ago. As I suggested, it is practically an Indemnity Act to get the Government out of a difficulty that, through an honest misapprehension of the position, they fell into. It is clear that a certain thing was done which is now questionable in law, and that it is open to the Civil Service to have a decision of the Irish courts on it. Fearing that that would be done, the Minister is bringing forward this Resolution which, if passed, would prevent the courts deciding whether the position is the same here as it was in England. I think that is introducing a very bad principle. If mistakes have been made on the part of the Administration, they should pay for their mistakes. If they have been wrongly advised as to the legal position, they should bear the loss. I think it is an extremely bad principle, when we find that certain things have been done, and not done legally, to proceed to pass an Indemnity Act to cover up the action of the Administration or the Government.

Deputy Johnson and Deputy O'Connell mistake the equities of the case. All law is based on equity—or ought to be. These calculations were made on an equitable basis. It was considered that the law gave power to have these deductions made. The interpretation of the law has disturbed the equities of the case. It was in equity the money was deducted. If the 1922 Act had not made a change, so that perquisites were deducted on the average of the three years, there would be no claim at all. The judgment of the English courts has upset the reasoning that brought about that change and, therefore, I think there is no claim in equity.

What Deputy Wilson has stated is perfectly right. There is not the slightest equitable reason for asking for the return of this money. It is simply an attempt, naturally and quite reasonably—nobody finds fault with the people who are trying to take advantage of this—to get back money which is not equitably due. I see all the disadvantages and the arguments against anything that can be called retrospective legislation. Retrospective legislation is to be avoided, but we must take proper steps not to allow people here to get money from the State to which they have no equitable claim. That claim is simply due to the particular view that judges took of the meaning of the section, and it was contrary to the intentions of the drafters of the section. It was one of these breaches in the Revenue laws which are always being made by the courts and which always have to be repaired. In the case of the Revenue Laws, people are most anxious to find a loophole or any way out.

Motion put.
The Committee divided: Tá, 41; Níl, 11.

  • Pádraig F. Baxter.
  • Earnán de Blaghd.
  • Seoirse de Bhulbh.
  • Próinsias Bulfin.
  • Séamus de Búrca.
  • John Conlan.
  • Sir James Craig.
  • Louis J. D'Alton.
  • Patrick J. Egan.
  • Seán de Faoite.
  • Desmond Fitzgerald.
  • John Good.
  • William Hewat.
  • Connor Hogan.
  • Liam T. Mac Cosgair.
  • Pádraig Mac Giollagáin.
  • Risteárd Mac Liam.
  • Seoirse Mac Niocaill.
  • Liam Mag Sioghaird.
  • Liam Mag Aonghusa.
  • Pádraig S. Mag Ualghairg.
  • Martin M. Nally.
  • John T. Nolan.
  • Criostóir O Broin.
  • Seán O Bruadair.
  • Risteárd O Conaill.
  • Partholán O Conchubhair.
  • Eoghan O Dochartaigh.
  • Séamus N. O Dóláin.
  • Peadar S. O Dubhghaill.
  • Eamon S. O Dúgáin.
  • Donchadh S. O Guaire.
  • Mícheál R. O hIfearnáin.
  • Aindriú O Láimhín.
  • Séamus O Leadáin.
  • Fionán O Loingsigh.
  • Domhnall O Mocháin.
  • Pádraig O hOgáin (Gaillimh).
  • Pádraig K. O hOgáin (Luimneach).
  • Tadhg P. O Murchadha.
  • Patrick W. Shaw.

Níl

  • Seán Buitléir.
  • Tomás Mac Eoin.
  • Pádraig Mac Fhlannchadha.
  • Tomás de Nógla.
  • Tomás O Conaill.
  • Aodh O Cúlacháin.
  • Liam O Daimhín.
  • Eamon O Dubhghaill.
  • Domhnall O Muirgheasa.
  • Tadhg P. O Murchadha.
  • Pádraig O hOgáin (An Clár).
Motion declared carried.

I beg to give notice that on the motion for the adjournment this afternoon I will draw attention to the parsimonious and unpatriotic methods of the Minister for Finance in not providing sufficient money to supply a sufficient number of patrol boats around the coast of Ireland for the protection of fisheries.

That question is being raised by another Deputy.

I suppose I will get an opportunity of discussing the matter.

There is already a question on the adjournment and we cannot discuss another one.

Perhaps the Deputy would withdraw that question. We are coming pretty near the end of the session and this is an important matter.

We cannot discuss the question now.

We want to capture some of that income tax.

Mr. O'CONNELL

Which you voted for.

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