Dáil Éireann debate -
Wednesday, 22 Apr 1925

Vol. 11 No. 1

COMMITTEE ON FINANCE. - RESOLUTIONS 1, 2 AND 3 (INCOME TAX).

Mr. BLYTHE

I beg to move Resolution No. 1:—

(1) That income tax shall be charged for the year beginning on the 6th day of April, 1925, at the rate of four shillings in the pound.

(2) That super-tax shall be charged for the year beginning on the 6th day of April, 1925, at the same rates as those at which it was charged for the year beginning on the 6th day of April, 1924.

(3) That the several statutory and other provisions which were in force during the year beginning on the 6th day of April, 1924, in relation to income tax and super-tax shall, subject to the adaptations and modifications made in such provisions by or under the Adaptation of Enactments Act, 1922 (No. 2 of 1922) and subject to the provisions of the Double Taxation (Relief) Act, 1923 (No. 8 of 1923), have effect in relation to the income tax and super-tax to be charged as aforesaid for the year beginning on the 6th day of April, 1925.

(4) It is hereby 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.

Mr. JOHNSON

I think before we proceed with the discussion on this resolution—a resolution which has a very definite intention—even though it may be outstepping the strict bounds of order, we might possibly be allowed to congratulate the Minister upon what, on the whole, is a very valuable contribution to the proposals for legislation respecting taxation. The line that we on these Benches have taken in regard to income tax and reductions of income tax has been, from the beginning, that we would oppose any reduction unless there was, concurrently, a reduction in the taxation of commodities generally consumable by the poor. I am glad to know that the Minister has met that claim by a very valuable remission of taxation on particular articles which are in very large demand by the poorer people—sugar and tea. That, I am sure, will be welcomed by every household, and especially by the poorer households. More particularly will it be welcomed by the poor with large families. I have no doubt that there will be some dissatisfaction, some sorrow, and some tears wept in Cork because of the retention of income tax at the rate of four shillings. There will be sorrow there even though there is a reduction of twenty per cent. in the tax. But Cork will float and the tears will dry up.

The people of Cork, at any rate, who would be most intimately concerned with the problem of how to keep a house going will be very greatly relieved to find that income tax on the man with 30/- a week and on the man of 15/- and 20/- a week of a dole, the income tax on the poor which is collected by means of taxation on sugar, tea and such like commodities, has definitely been reduced by a considerable amount, and I think the Minister should be highly commended for that act. I confess that I would prefer to have learned from the Minister that his proposal was to make an exemption, or, shall I say, to make an additional exemption, in connection with income tax in respect of lower incomes, and in respect of allowances for the larger families. I think that it would have been the better way to meet the case, but probably we will deal with that a little more fully at a later stage in these discussions.

A question that will arise later on— and I would ask the Minister to pay special attention to it, and I hope that none of the resolutions will preclude it even when they are finally passed on Report—is the question of a change in respect of the law relating to the collection of income tax from wage-earners. I hope the Minister has taken into account all that has been said in criticism both from employers and workmen and workwomen in respect of the collection by the employer of the tax, unless by agreement. I think that that is a matter we should give some consideration to and that we ought to change the law in respect of. I do not want to go any further into the question respecting this particular matter at the moment, but I thought it necessary and desirable and only due to the Minister to say that we appreciate the move he has made respecting taxation of the poor, that is, taxation on the breakfast-table commodities, and to regret that he has not seen fit in modifying the income tax, to extend the exemption in respect of the allowance for families and the lower incomes.

Mr. HEWAT

The resolution before us in connection with income tax is one which, I think, will meet with general approval in so far as it is a reduction on a tax which was at a rate that was becoming, and was being felt as unbearable under the conditions with which we have been faced in recent times. In saying that, it must not be taken, while the shilling reduction is very acceptable—and we accept it with very great gratitude—that the shilling reduction in income tax is adequate to the situation. On the other hand. I think that the Minister in making out his Budget had clearly before him the comments that would be made by Deputy Johnson in connection with indirect taxation. In taking the line which he has taken in abolishing the other taxes, I think he will, in a large measure, satisfy the people with incomes, in view of the reduction that is made in the income tax. The relief given in the indirect taxation in general application will, I feel, be accepted by the payers of income tax as a reason and a justification for the very moderate reduction that is made in the income tax. Therefore, as far as I can speak for the people who are benefiting by this reduction of one shilling in the income tax, I think, while we possibly expected more, possibly expected abolition——

Mr. GOREY

Possibly expected less.

Mr. HEWAT

I think we can say that it will be gratefully acknowledged for the present by the people who are going to benefit.

Mr. WILSON

We on these benches also are very pleased to see that there is a reduction and that the reduction has been brought about by a reduction in expenditure, but we cannot understand why, of all the people that should be singled out for exceptional treatment, the farmer should come in for exceptionally bad treatment.

Mr. BLYTHE

Does the Deputy object to the doubling of the agricultural grant?

Mr. WILSON

I am speaking about income tax at present.

Mr. T.J. O'CONNELL

You know nothing about it.

Mr. WILSON

In the year 1915 the British Legislature brought in a Finance Bill by which the farmer was assessed on one-third of his valuation. That was subsequently made up to the full valuation, and it was doubled during the war. After the war it was brought back to the full valuation, and that is the position we are now in. We contend that we should be placed in the position we were in up to 1915 and that we should be assessed on one-third of our valuation as regards our incomes. I cannot understand what the Minister meant by asking farmers to keep accounts, considering that all the farmer's time is engaged in trying to make a living, to make ends meet, that there is no such thing as profit, and that rather than furnish these accounts he is willing to pay whenever he is made to pay.

Speaking seriously, it is a very objectionable feature to introduce the idea that farmers, when they are up to a certain valuation, should be compelled to keep accounts. We know, and the Minister knows perfectly well, that the larger the amount concerned in the farm at the moment, the more difficult is it for the farmer to make a profit. The reduction now taking place in the tax on tea and sugar will mean a considerable rise in wages to the wage earner, and in any household will amount to at least two or three shillings a week. I hope that while we have a reduction in the household expenditure, farmers will also have the advantage of the reductions which the Minister has given to every householder and every workman in the country. Of course we do not object to the reduction to 4/-. We would like to hear the Minister's reason for singling out that particular class of individual for special treatment.

Mr. LEONARD

I do not agree with the Deputy who has just spoken as to his interpretation of what the Minister meant by large farmers keeping accounts. As I understand the Minister, farmers of a certain large valuation would be assessed for income tax on that valuation, but if they kept correct accounts all the income tax they would have to pay would be on the profits shown by the correctly kept accounts. I think that is what the Deputy did not understand in the Minister's statement. The Minister told us that he estimated a loss of £200,000 on income tax in the coming year in consequence of the reduction from 5/- to 4/-. Personally, I would be very much surprised if he finds any loss at all. It is infinitely better for any Chancellor of the Exchequer to receive 4/- in the pound income tax from two people than to receive 5/- from one person. It is quite within the knowledge of a great many people here, and certainly within my knowledge, that there are people who would pay Irish income tax when it was as low, or lower, than that of Great Britain, and, consequently, I think that these people of means who will come and live and spend their money in our country will provide an undeveloped source of income upon which the Minister has not calculated. I think that, instead of having a loss on a reduced income tax he will probably, and I sincerely hope, have a gain.

Mr. CONNOR HOGAN

While I will pay a tribute personally to the Minister for Finance, I cannot say that I am satisfied with his Budget. On the question of income tax, and as regards the point Deputy Wilson made, under the Act of 1886, income tax was assessed on Schedule B, and in 1919 it was assessed on three times the valuation, but during the Great War it was assessed on twice the valuation of the holdings. In other words, the occupier of land was assessed during that period at six times the amount of assessment pre-war. That is an extraordinary thing. It has been reduced, however, to three times the amount, but, even so, is it not an extraordinary and anomalous position, and would there not be a great outcry among the community if any person were assessed at three times his pre-war assessment? The limit certainly has been lowered, but I submit that the occupiers of land have been particularly hard hit, and it is scarcely fair that the assessment should be made on that valuation. We want to revert to something like the old conditions, inasmuch as land does not show the same profit now as it did before the war. I am rather sorry that the Minister did not see his way to reduce income tax to something below four shillings. We cannot, of course, yet say what the British income tax will be, but if it is lower than 4/-, if it is 3/6, does the Minister realise how it will affect companies doing business in this State and having their offices registered in Great Britain? Messrs. Guinness, for instance, would pay no corporation tax in Ireland because their offices are registered in Great Britain. If our tax is higher than the British tax what will happen the companies who are in business here and having their offices in Great Britain? They will only pay at the British rate on their dividends here. That is scarcely fair. The position should be that our income tax should, at least as a minimum, be equal to that of Great Britain, whereas, even if we were below it, companies registered outside Ireland will continue to pay at the British rate. That is a point which I would like the Minister to take up.

Mr. JOHNSON

Will the Minister say for our immediate satisfaction whether it is correct to say that a firm having its headquarters in Great Britain and doing most of its productive work here has not to pay corporation tax?

Mr. BLYTHE

Certainly it has to pay corporation tax.

Captain REDMOND

I regret that the Minister has not seen his way to remove the corporation tax and I, for one, am not satisfied with the reasons which he has given for the course he has taken. Undoubtedly the reduction of income tax by 1/- will be a great relief to this country, and it may be an inducement to those who are outside the country for a time, to come back and stay here, but that does not get away from the fact that even if the British income tax is reduced to 4/- in the course of the next few days, and thereby be equal to the proposed new income tax in the Free State, the corporation tax payable by companies here will be 1/- more than that payable by companies in Great Britain. That is not an inducement for any enterprise from any source in this country. Another thing which I regret in connection with this matter is that the Minister has not seen his way to make some statement in regard to double taxation. On several occasions I myself and other Deputies during the last year have drawn his and the Dáil's attention to this iniquitous system of every taxpayer having to pay twice, first to the British and then to the Irish Exchequer. I have always claimed that the taxpayer should only pay the sum that is finally due from him and that he should only pay that sum once. It has been suggested that a clearing house should be set up whereto the taxpayer should pay the sum finally due by him, and in that clearing house the two Governments should fight it out between them as to the various sums to be allocated. I think, therefore, it is a pity that after all this time some arrangement could not have been come to between the two Exchequers on that point. Perhaps now that the income tax will likely be the same in both countries, there may not be quite the same delay, because it is quite true that owing to the fact that income tax was at the rate of 5/- in the Free State and 4/6 in Great Britain, there were considerable difficulties to be overcome by way of mathematical calculations. Now it will merely be a question of halving the amount, but that, to my mind, is a stronger argument still for setting up something in the nature of a clearing house.

I think it would do away with a great deal of delay, and also do away with an irksome burden that is unnecessary, and, I think, unjustifiably borne by the taxpayers of this country who have to pay more than is actually due from them, and who are out of their money for a considerable time. A taxpayer should be called upon only once to pay the actual sum required by the State from him in the way of income tax. These are the only remarks I desire to make at this stage in regard to this particular resolution. I certainly am in favour of the step the Minister has taken. I think the direction is a right one, and I am sorry the Minister has not gone further.

Mr. GOREY

I have not much to say, as Deputy Connor Hogan has given expression to our view point, and I may add that Deputy Captain Redmond has also given expression to our views with regard to the dual income tax. To my mind, there is nothing so unfair to this country as having to pay English income tax, and to pay here also, and go to considerable trouble in trying to get it back. A few years ago it was not got back at all. The Minister talks glibly about farmers keeping accounts. It is all very well for Deputy Leonard, who keeps an office, to keep his accounts in the ordinary way of business, but it is not so easy for an ordinary farmer to keep his accounts. To do so he would want to keep a typist, or somebody of that description. He would then be between the devil and the deep sea, and there might be other aspects. It might be quite as cheap, or cheaper, to pay the income tax assessment than to keep accounts. I do not think the Irish farmers have to any extent kept accounts for a great many years. It may be considered that is a misfortune. Perhaps it is, but I do not think they will keep accounts. Speaking from my own personal experience of this year, last year, and the year before, I know that farmers have been losing instead of making money, and losing by hundreds and thousands, even good farmers. The income tax, with regard to farmers, is really based on loss and not on income.

Mr. BLYTHE

I do not wish to say much at this stage. We are very fully aware of the objection to double income tax. We have continually had the matter in mind, and have given time and thought to exploring new possibilities for at any rate minimising the difficulties that have been found to exist. We certainly are not at the end of our tether in that particular matter. We have not sat down and become satisfied with the position. We are most anxious to get at a simpler method, and as a matter of fact at present I have under investigation in the Revenue Office a proposal for a considerable simplification, and if we find it will not unduly penalise us from the view of revenue it will be taken up with the British Government. Generally, we are prepared to explore, in conjunction with the British Government or separately, any possible steps that may be taken for the purpose of modifying these. I do not think that a clearing house into which all the income tax would go, leaving the two Governments to find out how much was owing to each, would work out at all. You can only use diplomatic methods between the Governments. If you have to settle thousands of claims year after year, I am afraid the clearing office would have some of the characteristics of a dog fight. I will deal at some future time at greater length with the questions raised by Deputy Gorey and Deputy Johnson. When the Finance Bill is before us, proposals for the modification of collection, and changes in the bases of assessment, could be brought in as amendments and fully discussed.

The question of a tax on the farmers under Schedule B is one that Deputies should understand. The farmer is entitled first to the one-tenth reduction for his unearned income allowance. Then there is deducted the interest borne on the land annuity, about eleven-thirteenth of that, so that anybody can see there is very little to pay under Schedule B. This is the position, that a farmer, to be taxed, should be a farmer of very considerable valuation if he has no other income than from land. If he has other income besides land, he gets his allowance for the other income, and he will be charged on the land. We get considerable sums into the Exchequer that way. If a man is a teacher he gets his personal, married and other allowances, and similarly if he keeps a shop. These are exhausted before we come to the land, and that is why he pays on the land. That is why going back to the old basis would result in loss of revenue, but as regards the ordinary farmer who lives on his husbandry and has no other income, the aggregate amount of tax paid by him is not worth talking about.

Resolution agreed to.

Mr. BLYTHE

I beg to move Resolution No. 2:—

That Rule 3 of the General Rules applicable to Schedules A, B, C, D, and E of the Income Tax Act, 1918, shall be construed and have effect as if there were inserted at the beginning thereof the words "Every citizen of Saorstát Eireann and."

It is hereby 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.

No. 3 of the General Rules referred to provides that every British subject, whose ordinary residence has been in Saorstát Eireann, shall be assessed and charged as a person actually residing in Saorstát Eireann, even when he has left Saorstát Eireann for the purpose of occasional residence abroad. There is one class of citizen who would escape the rule that applies to nearly everybody, and that is, shall we say, a Belgian living here and who has become a citizen of Saorstát Eireann; he would escape certain liability that other citizens would not escape. It is for the purpose of making citizenship of Saorstát Eireann the test, irrespective of any other considerations, that this resolution is proposed.

Mr. JOHNSON

Perhaps the Minister would explain what would be the position of an American citizen who has been living here for some time, who has been naturalised in America, and has not renounced his American citizenship? Is he a citizen of Saorstát Eireann within the meaning of this resolution?

Mr. BLYTHE

I do not think that he is, if he has not accepted citizenship of the Saorstát.

Mr. JOHNSON

Would he be liable for any income tax under this resolution?

Mr. BLYTHE

He is not liable to the full extent; he would have certain exemptions that the ordinary citizen or resident here has not. Here we follow the citizen, even if he goes abroad temporarily, and we get it back from him in the same way as if he continued to reside here.

Mr. GOOD

Does this mean that every person living outside the Saorstát who has money invested in the Saorstát will be in practically the same position as a citizen of the Saorstát?

Mr. BLYTHE

Oh, no. It alters the law in relation to nobody except a person who was a citizen of Saorstát Eireann and whom we might not be able to make liable if it came to a matter of enforcing it in the courts under the law which relates to a British subject.

Major COOPER

It is really a very intricate matter of international law; the question of double citizenship is a very contentious one. But could the Minister tell us, assuming that a person was held to be a citizen of Saorstát Eireann because he was born in Ireland, but subsequently went to the United States, renounced his British citizenship, and became an American citizen, afterwards returning here, would he become liable for income tax as an American citizen or as a citizen of the Saorstát?

Mr. BLYTHE

There are certain provisions in the Constitution with regard to citizenship, and I think I must ask the Deputy to study them for himself.

Resolution put and agreed to.

Mr. GOOD

Of course it is understood that we will have an opportunity of discussing these resolutions in detail subsequently? It is very hard to see now what is really intended.

AN CEANN COMHAIRLE

These resolutions must be reported separately, and may be amended on Report; they must be put into the Finance Bill, which will have a First, Second, Third, Fourth, and Fifth Stage.

Major COOPER

The only thing is that it would be a good thing to have the Attorney-General in attendance then.

Mr. BLYTHE

I move Resolution No. 3:—

That any repayments of income tax for any year of assessment, whether ending before or after the passing of this Resolution, to which any person may be entitled in respect of any deduction allowed under Sections 18 to 22 of the Finance Act, 1920, or in respect of the reduction of the rate of tax on the first two hundred and twenty-five pounds of taxable income under Section 23 of that Act, shall be made at the standard rate of tax for that year, or at half that rate, as the case may be, but subject to such adjustments as may be proper in cases where relief is given under or by virtue of the Double Taxation (Relief) Act, 1923 (No. 8 of 1923):

Provided that, in the case of any person who proves as regards any year that, by reason of the deductions to which he is entitled, he has no taxable income for that year, any repayment to be made shall be a repayment of the whole amount of the tax paid by him, whether by deduction or otherwise, in respect of his income for that year.

It is hereby 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 one that is taken from the British Finance Act of last year. The declaration made under it follows the practice that has always existed, but in England a year or so ago litigation arose in connection with the point as to the rate at which a person was entitled to repayment once a change of duty arose. The courts decided in favour of the Inland Revenue authorities, but the judge expressed some doubts as to what the legal position really was. Following that the British introduced this provision into their legislation. As I explained last year, our courts are not bound by British precedents, but we must assume that if a doubt arises in a British court, or that a British court decides in a particular way, it is most likely that a court here would decide in a similar way, and when the British Government has found it necessary to make provision for a possibility of an established practice being overturned by a legal decision, it is only wise that we should make that provision also. The whole difficulty and confusion in the mind of the taxpayer is likely to arise through companies deducting a tax at composite rates. A company will pay a dividend next December, and tax will be shown as deducted at the rate of 4/3, because one-fourth of the dividend relates to the past financial year up to the 31st March, and tax is deducted in respect of that at the 5/- rate, while tax is deducted in respect of the remainder of the year at the 4/- rate.

There is then shown on the dividend warrant which the taxpayer receives tax deducted at 4/3, and it would generally produce in the mind of the taxpayer the type of confusion which we used to find in regard to Summer Time; when it was 9 o'clock by Summer Time people could not make out whether it was 8 o'clock or 10 o'clock ordinary time. No difficulty would arise if companies were to do something like this: to give two dividends, one in respect of the period up to the 31st March, and deduct tax at 5/-, and another for the six months running up to December, or whatever the next period was, and deduct tax at 4/-. The taxpayer would know then that in respect of this year he was only entitled to repayment in respect of 4/-. But as the dividend warrants, coming out as they will, with the change of tax and with these composite rates, a great deal of confusion will arise and taxpayers will be difficult to satisfy. Then there is the question that arose in England by that decision, and litigation on the head of it, and it is possible that under the existing procedure the only and the completely equitable procedure may be overthrown by the courts.

Resolution put and agreed to.