Finance Bill, 1929—Committee.

The Dáil went into Committee.

SECTION I.

(1) Income Tax shall be charged for the year beginning on the 6th day of April, 1929, at the rate of three shillings in the pound.

(2) Sur-tax shall be charged for the year beginning on the 6th day of April, 1929, at the same rates as those at which it was charged for the year beginning on the 6th day of April, 1928.

(3) The several statutory and other provisions which were in force during the year beginning on the 6th day of April, 1928, in relation to income tax and sur-tax shall, subject to the provisions of this Act, have effect in relation to the income tax and the sur-tax to be charged as aforesaid for the year beginning on the 6th day of April, 1929.

Mr. MacEntee

I move amendment 1:—

Before sub-section (2) to insert a new sub-section as follows:—

"Section 21 of the Finance Act, 1920, is hereby amended by the substitution of fifty pounds for thirty-six pounds and of forty pounds for twenty-seven pounds as the deductions in respect of children."

The amendment which appears on the Order Paper unfortunately is not the amendment which I intended should appear on the Order Paper. It relates to Section 21 of the Finance Act, 1920, and is to increase the allowance made in respect of children. The amendment which we had drafted, and which, unfortunately, owing to a Standing Order of the Dáil, is out of order, provided that the increased allowance in respect of children should only be granted to those whose incomes are less than £400 per annum. We had as a complement to that proposal, and in order to ensure that no additional burden would be cast upon the taxpayer, proposed originally to decrease the allowance in respect of children to those whose incomes are more than £400. As originally worded, the amendment read as it appears on the Order Paper, with the following addendum:

in respect of an income of more than £400, to proportionate deductions in respect of one child and each subsequent child, which proportionate deductions shall in each case be equal to the basic allowance or allowances, less a pro rata reduction or reductions in such allowance or allowances of twenty per cent. of income in excess of £400.

We thought by the machinery provided in the latter portion of the amendment to compensate the Exchequer for the loss in revenue which would undoubtedly result, if the amendment as it now stands on the Order Paper were to be adopted by the House. But, as the latter part—the addendum which I have read—in so far as it curtails the allowances made to those in receipt of larger incomes, would contravene the Standing Order of the Dáil which precludes a private Deputy, or other than a member of the Executive Council, from proposing a resolution to the House which makes a charge upon the taxpayer, it, of course, does not appear on the Order Paper. We on this side of the House feel that we would prefer that the Minister should pay his way, rather than that he should continue the practice, which he is now endeavouring to discontinue, of putting upon the long finger and refusing to make provision for those liabilities which immediately fall due—that he should pay his way, rather than that he should involve the State in greater debt than he has. We feel, of course, that any remission of taxation possible, particularly any remission of income tax at this particular moment, is hardly justified and for that reason I am almost prepared to withdraw the amendment as it appears on the Order Paper.

I have really only put it down in order that our proposal might be put, even in this somewhat irregular way, before the House, because we do feel that there should be some sort of redistribution of the burden of taxation among the people of the country. As I showed in my speech, I think on the general Financial Resolution, the burden of indirect taxation has increased altogether disproportionately to the burden of taxation which is imposed directly on the people, and as direct taxation hits most heavily the poorer classes, and I suppose particularly those who have just come within the ambit of income tax, we felt when we were considering the Finance Bill that we should endeavour to secure some redistribution in order to lighten the burden of the income tax upon the lower middle class taxpayer, and, if possible, compensate the Exchequer for the revenue which would thereby be lost to it by restricting the allowances which have been made to the richer income taxpayer. As I said, I feel a difficulty in proposing the amendment in its present form, but I should like if the Minister, instead of dealing with the amendment on the Order Paper, would deal with the amendment which has been ruled out, to give us some idea as to whether he himself in future legislation will consider some proposal of the sort to increase the allowance to the smaller income tax payer and, if possible, to compensate the Exchequer for the loss in revenue which would thereby be incurred, by increasing, if you like, the burden, or restricting the allowances at the other end of the scale.

Mr. Blythe

I indicated before— I think in my Budget statement— that we had during the year considered a scheme along the lines that Deputy MacEntee desires. We tried to get compensation largely by reducing the half-rate allowance—the amount in respect of which it is given—but we found that there would still be a fairly substantial loss. If our Budget position had been such that that scheme could have been put into operation without the actual imposition of new taxation outside the income tax scheme, I should certainly have adopted it, but I would not care to find further relief for income tax payers by an increase in indirect taxation, and we, therefore, felt obliged to put the proposal aside for the present.

I am desirous of giving some increase in the reliefs available for the smaller income tax-payer rather on the lines given in England, if that could be done within our income tax system. I would like to look at the proposals the Deputy has put up, but proposals that we had ourselves and that seemed to us to be practicable left a substantial amount to be found. The real position is that it is impossible to accept this amendment because the money would have to be found by some new charges. As to the alternative methods of meeting the loss, I am willing to have them further looked into. It is too early yet to prophesy what the position will be in the next Budget, and I do not feel, therefore, that I can give any promise.

Mr. MacEntee

As I said, we are not anxious to press this amendment to a division, and I ask leave to withdraw it.

Amendment, by leave, withdrawn.

Mr. MacEntee

I move amendment 2:

To insert before sub-section (2) a new sub-section as follows:—

"Section 16 of the Finance Act, 1920, is hereby amended by the deletion of the words ‘equal to one-tenth of the amount of that income' and the substitution therefor of the following:—

(a) in respect of an income of less than £400, equal to one-sixth of the amount of that income; and

(b) in respect of an income in excess of four hundred pounds, £66 13s. 4d., together with a sum equal to one-tenth of the amount of that income in excess of four hundred pounds."

This amendment is designed to remove the disproportion which exists between the charges on earned and unearned incomes here as compared with the corresponding charges in Great Britain. The rate of income tax here upon certain incomes is nominally 3/- in the £; in Great Britain, the rate is 4/-. Here, however, the actual amount paid by a married taxpayer who does not receive allowance in respect of children and who is in receipt of an earned income of £300 is £3 7s. 6d., whereas the amount paid in Great Britain upon a corresponding income is only £2 10s. 0d. In the case of a married taxpayer in receipt of an income of £400, the tax paid here is £10 2s. 6d., as against £10 17s. 0d. which, in the same circumstances, would have to be paid in Great Britain. If, however, the income happens to be unearned, then the income taxpayer here only pays £11 5s. on £300, as compared with £15 on the same income in Great Britain. And if his unearned income happens to be £400, he pays £26 5s. 0d. here, as against £35 on the same income in Great Britain. Thus, in the case of an unearned income of £400, the Irish taxpayer would enjoy, over and above the British taxpayer, the sum of £8 15s. 0d., while if he earned his income that advantage would be reduced to 14s. 6d. Now, if the income was only £300, the advantage would vanish altogether, and instead he would pay 17s. 6d. more than the British taxpayer. In the case of a single man with £300 income, the sum of £10 2s. 6d. is paid in the Free State and £23 in Great Britain. It would seem to us that the incidence of taxation here is inequitable as compared with the manner in which taxation is distributed in Great Britain.

We ought to realise that when a person has to earn his income the amount of the real income he enjoys is probably very much less than the amount of real income a person in receipt of dividends or interest or some other form of unearned income enjoys. We think, in view of the fact that a greater number of people here have to earn their incomes and that the present distribution of the tax, particularly as between the poorer man who earns his income and the poorer man who enjoys unearned income, seems to be unduly favourable to the person in receipt of unearned income, some attempt should be made to equalise the burden. Accordingly we suggest a remission here that would go to equalise the burden between them. For that reason we have put down the amendment as it stands on the Order Paper.

Mr. Blythe

The cost of the adoption of this amendment would be as nearly as can be calculated round about £110,000 per annum. Now, I have to use the argument against that that I used against the other; that is, that if the amendment were adopted some new proposals for taxation would have to be introduced to meet the deficit. I know that it will be felt undesirable if at any time the reliefs given to the tax-payer lower down the scale here are less than in Great Britain. But I do not know that if we were to bring our allowances to the British level this year we could adopt it as a principle that we would keep them at the British level. It may well be that in Great Britain there will be further allowances. Now, the income tax operates rather differently here from Great Britain. I have not the figures worked out to cover this point, but I think Deputies will understand readily enough that any allowance would lose us a very much greater proportion of our taxation than in England. In England a very much higher proportion of the tax is paid by extremely wealthy people. I once indicated that in the Dáil by showing that a tax at the same rate gives a very much lower yield per head of the population here than in England. That means that in England the wealthy taxpayers are more numerous, and that the relief given to the poorer taxpayers loses a much less proportion of the revenue. It is quite possible that something that would cause us to lose 10 per cent. of revenue might only cause them in Great Britain to lose two, or even one, per cent., so that it is impossible for us to adopt as a principle that we should have our allowances equivalent to the British scale.

The relief in respect of earned income is one of the matters which I feel desirous to attend to along with the increase of allowances for children, but again, I would like to deal with it when it can be done either by shifting the burden of the income tax or by way of relief from taxation, but not by finding the money through the imposition of new charges.

Mr. Flinn

The Minister's argument with regard to both amendments can be put in a sentence: You cannot get blood out of a stone. That is its meaning, and that particular argument for the moment is unanswerable. The difficulty is: the Minister went further, and in defending that particular argument he is indicting income tax as a tax applied to this country.

He says: "I want to increase all these allowances; I am full of the milk of human kindness in relation to these poor people, these people on whom income tax does lie as a burden." Otherwise the Minister would not be concerned to increase it. He said: "I recognise that in this country there are a large proportion of people who, under income tax, suffer as distinct from merely paying." Everything that he has said as to the amount which he will lose over and above the amount which would be lost by the same provision in another country is a statement that the income tax as applied to this country is a greater hardship than the income tax as applied to another country. So long as he realises that and will allow that little seed to germinate in his mind between now and the next time he introduces a Budget, I am satisfied.

Mr. Little

Could the Minister supply the House with figures showing what the loss would be supposing a system such as the English system were adopted—that is to say, with regard to unearned income?

Mr. Blythe

I could not supply the Deputy with the information just now, but I could give him an answer if he put me a question later, or perhaps drew attention to the matter the next day on which this Bill comes up. Calculations have been made, and it is only a matter of bringing them up-to-date.

Amendment 2, by leave, withdrawn.

Mr. MacEntee

It has been suggested that we could take amendments 3 and 4 together and, in the circumstances, I shall now move them:—

3. To insert before sub-section (2) a new sub-section as follows:—

If any claimant proves that any portion of his income arose directly from stocks, shares or other investments in a manufacturing undertaking (or undertakings, as the case may be) established in Saorstát Eireann he shall, for the purpose of arriving at his assessable income, be entitled to a deduction of one-fifth of the income which thus arose.

4. To insert before sub-section (3) a new sub-section as follows:—

If any claimant proves that any portion of his earned income arose directly from profits in a manufacturing undertaking (or undertakings, as the case may be) carried on in Saorstát Eireann, then for the purpose of arriving at his assessable income, he shall be entitled, in addition to the earned income allowance already provided for under Section 16 of the Finance Act, 1920, to a further deduction of one-tenth of such portion of his income as arose as aforesaid, but such deduction shall not exceed £200 in the case of any individual.

There is a slight misprint in amendment 3. It should be one-fourth instead of one-fifth. The principle of these two amendments is the principle which we have often urged upon the Minister of endeavouring by way of remission or allowance in the Income Tax Acts to give some encouragement to Irish manufacturers. The purpose is to render Irish productive and manufacturing enterprises more attractive to the Irish investor. So far as the first amendment is concerned, we feel that in addition to rendering the enterprises more directly attractive by giving to the person who has invested in an Irish undertaking certain more favourable treatment under the Income Tax Acts, it will counteract the tendency which the present low rates of tax upon unearned income have to make foreign investments more attractive to the citizens of the Saorstát. It may seem a surprising statement to make, but it is nevertheless true that the lower income tax here makes foreign investments more attractive.

I gave an instance last year for which I worked out the figures. I had in mind then a shipping company which in that year paid a dividend of 7 per cent. and whose £1 shares were then standing in the market at 30/-. It is a very well-managed concern, old and prosperous, and the holders of shares at present, in view of the market price of the stock, have hopes that in time the capital value of the shares will appreciate. Obviously the marginal price at which the British investor would purchase shares in the particular undertaking that I had in mind at that time, in the conditions which then prevailed, went round about 30/-. If a British resident had £750 to invest in a concern of that sort and felt anxious to purchase shares in that undertaking, he would buy 500 of them and in due course would receive a nominal dividend of £35. Out of this dividend 4/- in the pound, or £7, would be retained for income tax, making his actual net gain on that investment only £28. Take the case of the Irish investor in present circumstances. If he bought those shares at the same price he would receive the same nominal dividend of £35, and because he would be liable to an income tax of only 3/- in the pound, he would recover £1 15/- out of the £7 originally deducted from his dividend in respect of British income tax. If we allow 5/- to cover his time and trouble and the cost of recovering the £1 15/-, we find that the amount of income tax which would be deducted from his dividend in that particular investment, instead of being £7 as in the case of the British investor, would be only £5 10/-, so that his return would be 30/- more, or 5.375 per cent. greater, than that of the British investor.

What is the position then? The net return which will find the stock a ready market in Great Britain is only 3.75 per cent. The Irish resident would receive 3.94 per cent. of the stock, and as the market for the stock is made in Great Britain, Irish buying which, as compared with British buying, will be, of course, comparatively small, will not tend to send up the price of the stock in Great Britain. The Irish investor, therefore, will be always in a position to pick it up at what will appear to him to be a reasonably cheap price as compared with the British investor. You have, then, the stock which can be bought by the Irish investor just at a price which will leave him more than the marginal return. He knows he can go in there and have a slight margin to play with, not a very large one, and as he finds the British people are buying it and looking at the investment with the history of the company in mind, noticing how the shares have appreciated during previous years, he will say to himself: "I have a chance here, and if I do come in on this stock it will appreciate in value, and I will do very well out of it."

Therefore, indirectly, when he looks at the Irish concern, the position is slightly different. The Irish concern, in the same circumstances, does not appear to him to offer the same favourable advantages. He does not receive anything when he invests in that. The net return he receives from an Irish concern is not anything over and above what his neighbour in Ireland will receive. When he has a choice between the two, it always appears to him that the British investment is the more desirable one. We ought to endeavour to counteract that. We can do so by the amendment which we have down here and which will definitely make an Irish investment always more attractive to the Irish investor than the English one. That is, all other things being equal.

I know it will be said the trouble about Irish investments is that the people have saved money and that naturally when they have saved money, often with great costs and great pains to themselves, they must be very careful as to how they are going to invest it. They will not have the same confidence in Irish investments because of the conditions which prevailed here up to recently, and because the past conditions or the present conditions of Irish investments do not appear to be as sound or as safe to the Irish investor as conditions of investments across the water. I am only arguing on the appearance of the case. I am not going to say that an investment in a sound Irish industrial undertaking is not much better in the long run than investments in some flotations which have recently been placed upon the British markets. But if the case is that an investment in Irish securities, even under present circumstances, appears to an Irish investor to be more speculative, though in fact it may not be so, than an English investment, we ought, in the present state of income tax, to offer to the Irish investor some inducement to overcome that, something which would make the Irish investment, notwithstanding all the disadvantages it may suffer on account of the condition of affairs, definitely more attractive to him than a foreign investment.

There has been a great deal of money going out of the country. It has been calculated that our investments abroad amount to over £200,000,000. We have found recently that some of the flotations made here, though backed by Government security, are such that the Irish investor appears to be chary about putting his money into them. Possibly the disposition of the market recently does not seem to be properly gauged, and the return offered on the investment may be too low. We could make that return more attractive by increasing it in this way. Before that is done, we may possibly consider whether by means of the income tax we could not make the investment more attractive.

In regard to the amendment, as it appears on the Order Paper, there is a misprint—"shall be entitled to a deduction of one-fifth." That should be "one-fourth." The Minister for Finance said last year that he did not think, as it then stood, that the inducement which was offered to the investor was sufficiently large. I propose to meet the Minister by increasing the remission by 20 per cent., that is, raising it to one-fourth instead of one-fifth, as it was last year.

Mr. Anthony

We of the Labour Party have indicated our position in relation to the incidence of income tax for the last few years. I am supporting the amendment of Deputy MacEntee, and I rather regret that we have not taken amendments 3, 4 and 5 together, because much of what I would like to say on amendments 3 and 4, I would also like to say on amendment 5.

Last week, I advocated that certain reliefs should be given to Irish capitalists, Irish industrialists or other persons having money to invest in Irish industry. This is one of the ways in which this relief might be given. I rather regret that Deputy MacEntee has withdrawn his first two amendments, because I feel that we should have an indication from every Deputy in the House as to his position in relation to this very important question. The Minister for Finance himself has stated that there is a great difference between the effects of income tax in this country and the effects of income tax in Great Britain. We see in every phase of our social life the disparity that exists between the present tax in this country and the present and corresponding tax in another country. If there are any two amendments on the Order Paper that have a stronger appeal than any others, they are those two in the name of Deputy MacEntee. I do not want to refer to amendment No. 1, but really I find myself in complete sympathy with every amendment on the paper.

An Leas-Cheann Comhairle took the Chair.

Mr. Anthony

Deputy MacEntee, in the first case, asked for relief in the case of children, but, unfortunately, he withdrew that amendment. I would like to have some indication from the Deputies in the House, irrespective of Party, as to what they think of matters of this kind. I would also like an expression of opinion from the Minister with regard to the future policy of his Government on the questions opened up by these amendments. I have not the figures to date as far as they relate to Irish money invested abroad, but some years ago I was rather alarmed at, to me, the extraordinary figures then published as to the moneys of Irish capitalists, financiers and others invested in foreign securities. One of the ways by which we could attract that money to this country is indicated in these amendments. The relief asked for is "one-fourth of the income which thus arose." I think that is the least contribution which this House should make towards Irish industrialists who have had, under the circumstances that have obtained in this country, to invest their money in foreign securities.

In discussing this matter, a prominent financier some years ago told me that even if a slight encouragement were given to him, by way of relief in income tax for money invested in Irish enterprises, he and many associated with him would gladly invest their money in Irish industries. I suggested to him that he was getting better value for his money in this country than in other countries, and he, in turn, told me that even as a financier he was not altogether bankrupt in patriotism. He believed that he would undoubtedly get as good a return for his money here as he was getting abroad if the difference were made up by way of income tax or otherwise.

I suggest that Deputy MacEntee should not withdraw this amendment, but should have the courage that the Labour Party have had all along and should press this matter. I am not over-anxious for a division in the House, but we want a clear indication from the Government, from the Cumann na nGaedheal, and the Fianna Fáil Party, too, as to their attitude in relation to this matter. These two amendments, to me at any rate, are the most attractive on the Order Paper to-day. They certainly propose something constructive. I rather welcome that on the part of the Fianna Fáil Party as, at least, their second or third effort to do something constructive in Irish politics. I hope this thing will be persisted in, and that Fianna Fáil will not withdraw these two amendments, but will let us have an indication from the House of what it thinks on what is a purely business proposition.

Mr. MacEntee

I will deal for a moment with what Deputy Anthony has said. I feel if Deputy Anthony were here when the Minister was dealing with my amendments possibly he would not have uttered the strictures which he has on my attitude in withdrawing them. The Minister quite frankly admitted what we know to be the case, and in this matter we had to take a sympathetic view of his difficulty that he does not know where he is to find the money. We would be very anxious if we could possibly manage to press to a division and carry in this House amendments 1 and 2 in my name, but when the Minister tells us he cannot find the money, and that if he is going to make these remissions with regard to income tax he has got to compensate himself for it by increasing the burden on the poorer classes who pay indirect taxation, we on those benches could not stand over that. We realise that the lot of the income tax payer is hard, but we realise that there is a considerable section of the population in this country who are not sufficiently fortunate to pay income tax. There may be degrees of misfortune. Below the income tax payer there is a degree lower still. Consequently we could not feel ourselves justified in pressing to a division an amendment which would result in the income tax payer receiving an advantage at the expense of his less fortunate brethren. For that reason we withdraw 1 and 2.

Mr. Anthony

On a point of correction——

An Leas-Cheann Comhairle

I do not want a discussion on amendments 1 and 2, which have been withdrawn. Amendments 3 and 4 are before the House.

Mr. Blythe

With reference to amendments 3 and 4, this matter has been discussed before. There was one aspect which I do not know was the subject of much discussion but which I think deserves a little attention and that is the question of complexity. Everybody is in favour of simplifying the income tax code, but simplification can only be brought about if we are determined that we keep the purposes of the income tax code to the collection of revenue and the allowance of such personal exemptions as can be afforded and as seem equitable. If we try to attain a great number of objects or if we try to attain objects outside the collection of revenue by the provisions of our income tax code, then we increase its complexity. Of course, that is not by any means a final argument against amendments of this character. It may well be desirable even to increase the complexity of the income tax code in order to serve the purpose of improvements, but we should not lose sight of this fact, that if the matter were to be done it could not be done really by a simple section such as this. A number of supplementary provisions would be required and a very considerable new element of complexity would be introduced.

I oppose this amendment, however, on the ground that it is not the best or the most economic way to encourage industry. I believe that in so far as the State can encourage industry the other methods that are in use are better, and if we are to do more it should be by extending our efforts along these other lines, including protection in suitable cases, and even subsidies in suitable cases, and assistance such as is given and is of appreciable value in some instances through the medium of technical instruction.

If we look at number 3 we will see that this particular relief would have to be given in respect of all manufacturing undertakings. I do not see how we can very well say that in the case of undertakings where there is plenty of capital this should not apply. It has been estimated if this section were passed that in the case of Guinness shareholders alone there would be a loss of £30,000, which probably would be more with the correction that Deputy MacEntee has inserted. No useful purpose at all would be served there. There is a concern where the want of capital is not a consideration at all. We would simply lose £30,000 for nothing. I could mention other industries where a considerable loss would be involved and no direct benefit given. As a matter of fact, the greatest part of the loss of revenue would really be in relation to the industries which are fully capitalised and which if they require any further capital for development can get it.

The proposal also has this disadvantage, that it gives no relief naturally to the exempt taxpayer. It gives comparatively little advantage to the smaller taxpayer, and the weight of the loss to the Exchequer would go to taxpayers who are comparatively well off. In addition to Guinness, I might mention a concern like the Imperial Tobacco Company. I do not know that it would be suggested that this should not apply if the company which owned an industrial undertaking were registered outside. In any case I suppose if a substantial thing like this were given in suitable cases and not in the cases like the Imperial Tobacco Company all the technical steps necessary would be taken to have the industry regarded as being established here.

Amendment 3 deals with the case of the private individual. On a matter of detail, it must be unreasonable that the amount of the deduction should be limited to £200 in the case of the individual, where it might really be in the nature of earned income, and should be unlimited in the case of a shareholder of a company. In any case the difficulty of administering it in the case of a private individual carrying on business would be very great. It would arise, for instance, out of a mixed business. It is difficult enough for, say, the grocer who owns a bakery to present returns dealing with the business taken as a whole. If we were to have the sort of segregation that would be necessary in one of these mixed businesses, lots of difficulties would arise. If you apply it to the whole business, so long as it is actually one business on the one spot singly managed, then you might have lots of people starting some very small manufacturing end. The same sort of difficulty would apply even in the other case. I am taking the extremes of the scale, but the real difficulty would arise in the middle of it. Take the extremes. You have a furniture manufacturer. In one case a person gets the timber in an unworked state and he produces the furniture. The timber is sawn and made into furniture ready for sale. There is a case in this country of, I think, a private firm where furniture is imported and simply french-polished. The french polisher, I presume, would describe his firm as a manufacturing undertaking. There would be all sorts of borderline cases and great difficulties would occur in the working of the scheme. But I oppose it really on the grounds that this is not the best way to promote industry. I do not think, as a matter of fact, that the question of the return that it is possible to receive on money invested in industries in Ireland has been the great difficulty. The difficulty, I think, has been the belief that no return whatever would be received. The lack of confidence that there is in the country is not so much the lack of confidence that only five per cent. would be obtained, where seven per cent. or eight per cent. would be received outside, but the fear of the failure of the business. I believe that this particular type of provision, if passed, would involve very substantial losses to the revenue, and the revenue would have losses in cases where no benefit at all would come to the community by way of stimulating industry as a result of the losses.

Mr. Flinn

The Minister has two arguments against this. One is that the amendment itself is too broad, and the second is that there are difficulties in so far as the onus of proof is to be placed on a beneficiary. I do not see that that need worry the Minister. The man who wants an exemption is the man to take the trouble to provide the facts to prove the case, and I think he will go to that amount of trouble. It is too broad; it includes Guinness's brewery, the banks and various other activities of that kind. I agree that that is the difficulty, unless one can reach the stage of getting rid of these misbelieving black hordes of harpies that gather around the income tax collection. There has always got to be a gradual method of approach. It is merely a question of how we are going to approach it. If the Minister's objection is that this thing is covering too much ground the Minister himself could suggest lines and categories in which that could be reduced in the initial stages. For instance, when we were dealing with the no income tax campaign previously, certain of the banks definitely stated that while they were in favour of and would advocate that principle they themselves were prepared to stand out of the benefit of it. It would be quite possible to leave out breweries and certain activities of that kind, in other words, to proceed by exemption. You simply leave the Act as it is, and you amend Deputy MacEntee's motion to read "certain kinds of manufacturing undertakings, and certain kinds of investments," until we gradually find by experience what we can include and what we can exclude.

The Minister, apparently, objects to using taxation for the purpose of policy. He ought not to. He only does it momentarily when he is reminded of it. He did not object to it when he declared, in relation to the £100,000 tax on buses, that it was part of a policy which he has never since disclosed, and does not intend, apparently, to disclose. There is nothing which is more commonly used for the purpose of policy than taxation. Nearly every critical change in legislation—I mean things that are fundamental—has been done in the form of taxation proposals. The Minister knows that perfectly well, and why the income tax code, of all codes, should be regarded as sacrosanct, I am hanged if I know.

There is supposed to be £200,000,000 of Irish capital lying idle in England. What I would like people to understand quite clearly is what that means. We never sent over £200,000,000. We never invested £200,000,000. We sent over some hundreds of thousands of cows, some hundreds of thousands of eggs and firkins of butter for which we never took payment. That is what we have invested. We have invested £200,000,000 worth of agricultural produce in the industries of another country, and the price of that might very well and very wisely be actively encouraged to come back. If the Minister knew the sort of feeling that the average person would have if he could say: "From this day on I will never see or hear the name of income tax," if he could produce that condition in this country—the mere thought of being clear of all the trouble and annoyance of that system—he would be surprised at the amount of inducement it would give.

I do believe, without any doubt whatever, that if there could be an active and open discrimination in income tax, say in relation to Irish industries, there would be a very definite advance. This is not one of the arguments that comes under the Minister's "You cannot get blood out of a stone." Frankly, I have no answer to that argument at the present moment. There is no blood in a stone, but we have the assurance in relation to the things which we do want that when it comes to another object and there is a surplus, whether the Minister is introducing it from that direction or opposing from this, these are proposals which we do not proceed with, because there is no blood in a stone will have the support of the two large Parties of this House —of the Government, its successors and its predecessors.

If the Minister will recognise that quite apart from the amount of money involved, income tax is, of itself, regarded without any particular love or affection; that it is one of the things that people do not like, and that, if it were removed, it would make the country one to which people would be anxious to come, I think possibly that he will regard the instrument of income taxation as a policy machine of infinitely more power than he now does. I am perfectly sure that he has no conception, because he has no basis of experience on which to base that conception, as to the degree to which the present administration of income tax law and its amount are hampering the development of Irish industry. If he had that knowledge he would appreciate the extent to which alleviation could be brought about for the good of the country.

Mr. Little

Knowing the conservative attitude of the mind of the Minister for Finance, I would like to ask him whether he would not consider even diminishing the actual application of that principle, first of all in establishing it. It would be of immense benefit to the country if we could get agreement on the application of that principle first of all in regard to the need for capital for Irish industry, and, secondly, to the need for using Irish money for developing industry. Perhaps the Minister would confine the principle to giving certain privileges, say, to banks which invest money outside the country on their undertaking to invest money in industries in this country. We have not a complete set of figures, but I do not see why there should not be some way in which we could get the amount of the investments belonging to Irish investors in stocks and shares outside the country through the Stock Exchange on the one hand and, on the other hand, the amount of money invested in foreign securities, such as bills of exchange by the banks. At least, it would be some advance towards the assertion of the principle if we could get the full facts. I submit that in dealing with incometax the Revenue Department ought to be able to supply us with a considerable amount of data. I would ask the Minister if he would be prepared, even in a detailed way, to admit the principle as being valuable.

Mr. Blythe

I could not give the undertaking that Deputy Little asked for, and that Deputy Flinn pressed for. We do not think that this principle of giving special concessions in relation to income tax on income derived from manufacturing industry here is necessary, or that it is a good principle. We believe, in so far as revenue must be sacrificed or assistance given by the State, that the other ways by which assistance is already given are better and that anything more that needs to be done ought to be done along those lines. In reply to what Deputy Flinn has said, I do not take the line that income tax should not be used for policy, but I was trying to point out its complexity from the point of view of the taxpayer, and that, in so far as we try to use it for policy, we are likely to complicate it. We cannot achieve a purpose such as Deputy MacEntee aims at through income tax and at the same time simplify it. It may be necessary to abandon simplification. I think that we must abandon it if we try to do a number of things by means of income tax.

I do not base my opposition on the ground of complexity, although I draw attention to it. I do it in the belief that this is not the best way in which the State can put forward whatever efforts it is able to make towards increasing manufacturing industry in this country. I believe that this thing would cause grave dissatisfaction, that people not specifically engaged in manufacturing industry but engaged in useful business and giving perhaps as much employment, would have a considerable grievance, and that whatever harm this system may do, such harm would be increased. I believe also that the dissatisfaction amongst people who can live either in or out of the country as they like, and who bring considerable sums into the country, would be greatly increased, and, possibly, there might be some loss of revenue owing to the fact that they might leave. That, again, is rather a minor point. The main argument I have against it is that the methods of tariff or subsidy or assistance, education, or even assistance by finance along any lines that may be found practicable to substitute for the Trade Loans Guarantee Act, are ways on which we proceed, and that this method of differentiation in income tax is not the right one.

Mr. MacEntee

In reply to one or two points which the Minister made, like Deputy Little and Deputy Flinn, I wish to say that this amendment is not in any way meant to be final. We did not propose to put down all the amendments and consequential amendments which would be necessary if the Minister for Finance were to adopt the principle. We felt that those could properly be introduced on the Report Stage. We put down this amendment so as to have the principle involved discussed. Nor do we argue that this is necessarily the best way of encouraging industry, but we hold that it is one way. It is the way the Minister himself has already applied. I think, in the present Finance Bill in relation to debentures, stocks and certificates chargeable by the Agricultural Credit Corporation. He has discriminated in favour of stock of that company. He has found it necessary to do so in the case of that company, which proposes to finance one industry to render it more attractive than the stock of other concerns not operating inside the Saorstát.

While we do not argue that the principle which we have embodied in this amendment is the best way to help industry, we believe that one of the ways industry could best be helped would be to take as little as possible out of production to lighten the general taxation on the producer. We say that comparing it with the other ways which the Minister has suggested, as compared with the tariff or a subsidy, this way is possibly a better way. I am not prepared to argue the question at length. We all know that one of the indirect effects of a tariff or a subsidy is that it secures the home market upon more favourable terms for the home manufacturer than for his competitors. Because he has a sense of security in regard to the home markets he is content perhaps to rest on his oars and to take the benefits swept to him by the tide. In this way if there is going to be any benefit to the taxpayer or the manufacturer, he has to secure it by his own exertions.

There is just a possibility that one could argue that the way to help Irish industry proposed in the amendment, as compared with the ways which the Minister has mentioned, is the better way. I do not want to argue that point, but we feel, whether this is the best way or not, that it is one of the ways which should be seriously considered by the House, because the fact remains that while there is a very considerable amount of Irish capital invested abroad, Irish concerns do find considerable difficulty in securing the capital necessary for their purposes. Even when issues of stock are made under the auspices of the Government, backed by a Government guarantee on very attractive terms, they do not appear to be sufficiently attractive in themselves to induce the Irish investor to invest in them.

In regard to the point which the Minister made as to the difference between amendments 3 and 4, he argued that there seemed to be an unfair discrimination between a man who earns his income, whose income arises directly from profits of any manufacturing undertaking in the Saorstát, and the man who derives his income from investments in the Saorstát. I think that is quite justifiable, because a man who derives his income from investments has a much wider freedom of choice. He can invest his money in Ireland or abroad, but the man who gets his income from a manufacturing undertaking here is practically tied to the spot. For that reason we feel that such a large inducement is not necessary to get him to continue the development of his business in the Saorstát as might be required in the case of a person who is free to invest his income here in the Saorstát, in Great Britain, or elsewhere in the world.

There is one other point to which I would like to refer. The Minister said, in the course of his reply, that possibly in order to secure the benefits of the principle we have embodied in amendment 4, a person carrying on a multiple business might start small manufacturing undertakings. We say, well and good. That is the purpose of the amendment—to get him to start small undertakings, to get him to take the plunge and to make things in Ireland rather than to distribute them. That is precisely the point. If a man does start a small manufacturing undertaking he will only do so because he is satisfied that on the balance it is going to be advantageous for him to start it. It is going to spur that man on to an enterprise which otherwise he would not undertake. In the Saorstát there are a number of large concerns which have been acting merely as distributors and not as manufacturers. If our amendment succeeds in getting these people to turn their attention to the manufacturing branch of industry, the amendment will be justified. There would be a large amount of competition between them which would have the effect of reducing prices and costs, and I believe that ultimately there would be a fairly substantial manufacturing interest in the country.

In regard to administrative difficulties, the whole income tax law bristles with them. I know there are border line cases. The whole thing turns on the point: Is the principle a sound one? If it is a sound one, the administrative difficulties and the cost involved are not any greater than the cost of principles already enshrined in the income tax laws. Every discrimination, whether relief in respect of children or earned income, was carried in face of some difficulty, and they have all been met. I agree that it makes for complexity, but if at the same time complexity can be justified by the results, we are not justified in rejecting an amendment on the ground that it would involve complexities. We think that the principle is sufficiently sound to carry the amendments, and for that reason we could not in justice withdraw them.

Mr. Flinn

I would like to make one other point, in relation to another effect of income tax discrimination, over and above the effect of any other tax that I know of. At the present moment the Minister is banking on tariffs as practically his one method of dealing with these matters. He has other methods, but that is broadly his line of country. The difficulty we have with tariffs in such circumstances as we find ourselves, is that the tendency of tariffed industries to change their ownership has actually been increased by the tariffs. If the Minister will go through things statistically he will find that there is a very real difficulty. Those who want to look at tariffs fairly are bound frankly to admit that fact—that it intensifies the trend towards expropriation of industries. I know two cases—the Minister probably knows them as well as I do—of an industry which was applying for a tariff in this country when an Irish manufacturer in that industry got into contact with those who were applying for the tariff and pointed out to them the actual circumstances of that industry in relation to competitors who were not then operating in the Free State. Simply on the grounds of prudence, until they could find some other means of protecting themselves against the dangers that that application for a tariff would have brought on them, they did not go forward with their application. It is only fair that those things should be said, and said openly, by those who are advocating tariffs.

In this income tax discrimination, we have the only weapon that I know of which can be used for the protection of Irish capital as distinct from the protection of Irish income. If, for instance, the whole of the income tax upon an Irish manufacturing industry were remitted, the shares in any Irish manufacturing industry would be more valuable to an Irish resident than a foreign resident by the capitalised value of that income, and the whole tendency would be that Irish-owned industries in this country would, to the extent of the discriminating relief, remain in Irish hands, and non-Irish-owned manufacturing undertaking in this country, to the extent to which that discrimination was allowed, would tend to pass into Irish hands. That, to me, is the biggest argument in favour of income tax discrimination, and if the Executive Council are not prepared to use this particular means of protecting Irish industry from the expropriation of ownership, a danger which I see growing, a danger which the Minister has experienced and which has been effective in the last few years, they must either be prepared to risk the continuation of that movement or to find some alternative means of dealing with it.

I, personally, have investigated, over a period of years, various possible ways of dealing with that difficulty. While you can, for France, England, Poland or Germany, whose training has been different, whose surroundings are different, whose internal control is different, formulate a lot of ingenious schemes, which have been very largely effective in these countries in preventing that expropriation of the ownership of means of production in this country up to the present, frankly I have not been able to find a method which is workable. This method, in my opinion, to the extent to which it would be used, would be effective. But I am very anxious to encourage the Ministery to investigate, formulate and put before the House for sympathetic consideration and examination any alternative means they have of dealing with that tendency. They have got to recognise that the tendency exists, and they ought to recognise that in these amendments the principle of the method of dealing with that difficulty is laid down.

Mr. Blythe

On the question which Deputy Flinn has last dealt with, the point of view of the Government is not entirely, I think, that put forward by Deputy Flinn. We do not see great objection to the coming in of British companies here, though we recognise that there are many cases in which it would be much more desirable to have home companies owning the industry. We do recognise also that if the process by which concerns founded here by Irish companies are being taken over by English companies were to continue to anything like the extent that it has been going on for the past year or two, steps will be necessary to deal with it. I agree, and perhaps the Government agrees, with Deputy Flinn, at any rate to this extent, that while the existence of even a considerable number of concerns owned by English companies here would be no particular harm, there are limits beyond which it would be extremely bad for the country that that process should go, and while not having reached a decision that it is yet necessary to take steps to check the acquisition of industry here by outside companies, we have been exploring two or three tax proposals to meet that matter. One of them was a certain rearrangement and modification of the Corporation Profits Tax, and there were others. I do not want to discuss it beyond saying that when we have come to the conclusion that we should take action to prevent concerns here falling into the hands of outside firms, we will take it along somewhat different lines from those indicated by Deputy Flinn.

Amendment put.

The Committee divided: Tá, 50; Níl, 62.

Tá

Aiken, Frank.
Allen, Denis.
Anthony, Richard.
Blaney, Neal.
Boland, Gerald.
Boland, Patrick.
Bourke, Daniel.
Brady, Seán.
Briscoe, Robert.
Broderick, Henry.
Buckley, Daniel.
Carty, Frank.
Cassidy, Archie J.
Clancy, Patrick.
Clery, Michael.
Colbert, James.
Cooney, Eamon.
Corkery, Dan.
Corry, Martin John.
Crowley, Fred. Hugh.
Davin, William.
Derrig, Thomas.
De Valera, Eamon.
Everett, James.
Fahy, Frank.
Flinn, Hugo.
Fogarty, Andrew.
Gorry, Patrick J.
Goulding, John.
Houlihan, Patrick.
Jordan, Stephen.
Kennedy, Michael Joseph.
Kent, William R.
Killilea, Mark.
Kilroy, Michael.
Lemass, Seán F.
Little, Patrick John.
Maguire, Ben.
MacEntee, Seán.
Moore, Seamus.
O'Dowd, Patrick Joseph.
O'Kelly, Seán T.
O'Reilly, Matthew.
Powell, Thomas P.
Ryan, James.
Sheehy, Timothy (Tipp.).
Smith, Patrick.
Tubridy, John.
Walsh, Richard.
Ward, Francis C.

Níl

Aird, William P.
Alton, Ernest Henry.
Beckett, James Walter.
Bennett, George Cecil.
Blythe, Ernest.
Bourke, Séamus A.
Brennan, Michael.
Byrne, John Joseph.
Carey, Edmund.
Duggan, Edmund John.
Dwyer, James.
Egan, Barry M.
Esmonde, Osmond Thos. Grattan.
Fitzgerald, Desmond.
Gorey, Denis J.
Haslett, Alexander.
Hassett, John J.
Heffernan, Michael R.
Hennigan, John.
Henry, Mark.
Hogan, Patrick (Galway).
Holohan, Richard.
Jordan, Michael.
Keogh, Myles.
Law, Hugh Alexander.
Leonard, Patrick.
Lynch, Finian.
Mathews, Arthur Patrick.
McDonogh, Martin.
MacEóin, Seán.
McFadden, Michael Og.
Cole, John James.
Collins-O'Driscoll, Mrs. Margt.
Conlon, Martin.
Connolly, Michael P.
Cosgrave, William T.
Daly, John.
De Loughrey, Peter.
Dolan, James N.
Doyle, Peadar Seán.
McGilligan, Patrick.
Mulcahy, Richard.
Murphy, James E.
Murphy, Joseph Xavier.
Myles, James Sproule.
Nally, Martin Michael.
Nolan, John Thomas.
O'Connell, Richard.
O'Connor, Bartholomew.
O'Higgins, Thomas.
O'Leary, Daniel.
O'Mahony, Dermot Gun.
O'Reilly, John J.
O'Sullivan, John Marcus.
Reynolds, Patrick.
Roddy, Martin.
Shaw, Patrick W.
Sheehy, Timothy (West Cork).
Thrift, William Edward.
Tierney, Michael.
White, John.
Wolfe, George.

Tellers:—Tá: Deputies Briscoe and Flinn; Níl: Deputies Duggan and P.S. Doyle.

Amendment declared lost.

Amendment 4 not moved.

Mr. Flinn

I move amendment 5:—

In sub-section (3) to add in line 27 the words: "provided that in the case of a manufacturing undertaking any undistributed gains or profits arising out of such undertaking and employed to the satisfaction of the revenue authorities in extending premises or in installing new plant shall be exempt from tax, while so undistributed."

I suppose the Minister for Finance is not the only man who has been shocked at being suddenly presented with his own child. As far as I know this amendment is in the words of the Minister for Finance himself, undistributed profits are to be taken as "profits arising out of such undertaking and employed to the satisfaction of the revenue authorities in extending premises or installing new plant" and such revenue shall be exempt from tax. On the occasion of the last Budget, when we put forward proposals for discrimination in relation to income tax, the Minister for Finance said that he himself had investigated one line in which that could be done, and that line was one which, in his opinion, was without apparent defects. He said it would not cost much, that it probably would be effective, and that it seemed to be the most reasonable way in which the matter could be approached. Our answer to that was that we were not concerned as to the manner in which the principle was enshrined in legislation so long as it was so enshrined in legislation and accepted. The Minister promised to consider very carefully between that Budget and this Budget the form apparently in which this proposal which is now offered to him with another formula would be accepted. This is one of the amendments that does not come under the description, "You cannot get blood out of a stone," because this amendment does intend to produce income.

If this money does go back and if means are used to encourage people to put their money into the development, the building up, and the improvement of the efficiency of their industrial and manufacturing plants, the income tax which will be got from such investments in any particular year ought to be equal to what the Minister would lose as a capital sum, even assuming that he loses it altogether.

One of the difficulties in connection with this method is that it might be said that a man would keep putting the whole income which he did not want to use otherwise back in undistributed profits, and that then he would be able to sell those reserved included in his business and, therefore, to sell that income clear of income tax. For the purpose of getting over that difficulty we have defined it, in the words of the Minister himself, as profits employed to the satisfaction of the revenue authorities, in extending premises or installing new plant. I do not want to speak at any further length on this matter. I feel it would be painting the lily or gilding refined gold to attempt to recommend to the Minister for Finance an amendment which he himself has drafted and a proposal which he himself has picked out of all the possible proposals of income tax discrimination as the one which he would advocate and with which he could find no fault or blemish.

Mr. Blythe

As I said last year, the proposal embodied in this amendment is one which has been a good deal advocated by writers on income tax, and, as I said also, it is one which seems to me to be suitable in the circumstances that exist here. It would be easier to administer than many other proposals that have been made, and the money which would be lost to the revenue without corresponding profit to the community would be less. But it is a proposal which needs some more examination than it has yet got. It is a proposal which involves some difficulties in administration—indeed all these proposals do—and it is one which could not be legalised by a single section such as this. There would have to be clauses containing quite a number of provisions. It is a proposal to which I will give further examination during the coming year with the view, if a satisfactory scheme can be produced, of recommending it to the House. I know there are objections to it; I know that difficulties would be created, but I am not convinced that those difficulties would be by any means insuperable. However, I could not accept the amendment even if the matter had already been fully examined, because, in dealing with any income tax proposal, a very careful examination of the code and of the drafting is necessary in order to make it workable and in order to ensure that results do not ensue different from those which are intended. I intend to have the idea that is involved here further examined as being one which I believe, on the whole, to be suitable for our circumstances.

Mr. MacEntee

I rise to correct a misapprehension which something the Minister said may possibly have laid the House under. In dealing with the amendment he used the phrase "lost to the revenue"— money which would be lost to the revenue. One of the advantages of this amendment is that any revenue which the Exchequer might temporarily have to forego is not permanently lost in any way. It is only, as it were, lent to the original income tax payer to enable him to utilise it reproductively. Of course, one of the advantages of the amendment is that it would be reproductive not only from the point of view of the income tax payer, but also from the point of view of the revenue itself. It would be a source of wealth. It is more or less in the nature of a revenue investment and, therefore, in considering it we should not come down to the basis that if we do carry this amendment the revenue is going to lose so much. It is going temporarily to forego certain income for the year, but that income is going to be invested, and if, as we believe, the investment will be a profitable one, the revenue is going to derive advantage from it year by year just the same as the income taxpayer who has secured the remission.

Mr. Blythe

I think that is a somewhat rosy view of it. In certain cases, the matter might work out as the Deputy suggests, but there would certainly be other cases in which the effect of this would be to enable individuals to spend more on their personal enjoyment and still do the things that they wanted to do.

Mr. Flinn

Does not the amendment specifically segregate it—"to be used for extending premises and installing new plant"? The Minister accepted that last year. He has had a whole year to meditate on it, and he tells us he is to spend another year meditating on it. Perhaps he will not have that amount of time. If he has the time, he will spend another year meditating on it. When will he do it? This year? Next year? Sometime? Never? A Kathleen Mavourneen Minister for Finance! I do not think the interests of this country can afford a Kathleen Mavourneen Minister as Minister for Finance. It is time the Minister woke up to do something instead of saying what he was going to do next year. He cannot put forward in this particular case the argument put forward in relation to every other amendment the principle of which he was prepared to accept. Therefore, he has got to get another. He has not the time! He told us at the opening to-day that there are £100,000 that he has not got and that he has not provided for and that that must be provided for. Because he cannot find other money, then he has got to turn down this proposal. And he is turning down this proposal because he has been too lazy to investigate the case and to put up consequential amendments to this. That is a thing which if he wanted to do he could undoubtedly do between this and the Report Stage. Next year! If he is here next year he will tell us that he is thoroughly in favour of this amendment and that he thinks it will not lose any revenue, but that he will have to think about it again. Some year, some time, if the House is patient enough to wait on him, he will carry into law the things which he says are desirable. We had a clear declaration from the Minister last year, quite as clear as we have had to-day, that the year which has intervened would be used for translating into practical legislation the thing which he now says in another year he may be able to translate into practical legislation. There was some validity in the excuse which he had made for the previous amendment which he has turned down. But there is no excuse which is creditable to the Minister or to his staff or is respectful to the House for the reasons now given for not being in a position to put into legislation what he thinks himself ought to be put into legislation and what he led the House to believe last year would now be put into legislation.

Amendment put.

The Committee divided: Tá, 51; Níl, 59.

Tá

Aiken, Frank.
Allen, Denis.
Anthony, Richard.
Blaney, Neal.
Boland, Gerald.
Boland, Patrick.
Bourke, Daniel.
Brady, Seán.
Briscoe, Robert.
Broderick, Henry.
Buckley, Daniel.
Carty, Frank.
Cassidy, Archie J.
Clancy, Patrick.
Clery, Michael.
Colbert, James.
Cooney, Eamon.
Corkery, Dan.
Corry, Martin John.
Crowley, Fred. Hugh.
Davin, William.
Derrig, Thomas.
Powell, Thomas P.
Ryan, James.
Sheehy, Timothy (Tipperary).
Smith, Patrick.
De Valera, Eamonn.
Everett, James.
Fahy, Frank.
Flinn, Huge.
Fogarty, Andrew.
Gorry, Patrick J.
Goulding, John.
Houlihan, Patrick.
Jordan, Stephen.
Kennedy, William Joseph.
Kent, William R.
Killilea, Mark.
Kilroy, Michael.
Lemass, Seán F.
Little, Patrick John.
Maguire, Ben.
MacEntee, Seán.
Moore, Séamus.
Mullins, Thomas.
O'Dowd, Patrick Joseph.
O'Kelly, Seán T.
O'Reilly, Matthew.
Tubridy, John.
Walsh, Richard.
Ward, Francis C.

Níl

Aird, William P.
Alton, Ernest Henry.
Beckett, James Walter.
Bennett, George Cecil.
Blythe, Ernest.
Bourke, Séamus A.
Brennan, Michael.
Byrne, John Joseph.
Carey, Edmund.
Cole, John James.
Collins-O'Driscoll, Mrs. Margt.
Conlon, Martin.
Connolly, Michael P.
Cosgrave, William T.
Daly, John.
Dolan, James N.
Doyle, Peadar Seán.
Duggan, Edmund John.
Dwyer, James.
Egan, Barry M.
Esmonde, Osmond Thos. Grattan.
Fitzgerald, Desmond.
Gorey, Denis J.
Haslett, Alexander.
Hassett, John J.
Heffernan, Michael R.
Hennigan, John.
Henry, Mark.
Holohan, Richard.
Jordan, Michael.
Keogh, Myles.
Law, Hugh Alexander.
Leonard, Patrick.
Lynch, Finian.
Mathews, Arthur Patrick.
McDonogh, Martin.
MacEóin, Seán.
McFadden, Michael Og.
McGilligan, Patrick.
Mulcahy, Richard.
Murphy, James E.
Myles, James Sproule.
Nally, Martin Michael.
Nolan, John Thomas.
O'Connell, Richard.
O'Connor, Bartholomew.
O'Higgins, Thomas.
O'Leary, Daniel.
O'Mahony, Dermot Gun.
O'Reilly, John J.
O'Sullivan, John Marcus.
Reynolds, Patrick.
Roddy, Martin.
Sheehy, Timothy (West Cork).
Thrift, William Edward.
Tierney, Michael.
Vaughan, Daniel.
White, John.
Wolfe, George.

Tellers:—Tá: Deputies Briscoe and Flinn; Níl: Deputies Duggan and P.S. Doyle.

Amendment declared lost.

Sections 1 and 2 agreed to.

SECTION 3.

Mr. Blythe

Section 3 is really identical with the existing legislation, except that the assessments have no longer to be signed by the special commissioners. As I explained, we had this signing in the case of Schedules A and B. Signing and allowing in the case of other schedules have been the merest formality. There are something like 600,000 assessments, and it merely meant that a batch of books was signed by the special commissioner.

Section 3 agreed to.

SECTION 4.

Mr. Blythe

Section 4 is for the same purpose.

Section 4 agreed to.

SECTION 5.

Mr. Blythe

Section 5 carries out one or two amendments which, I think, will be convenient. It enables, for instance, the inspector to amend an assessment by agreement with the taxpayer and the appeal is then taken as being withdrawn. At present, if there is agreement with the taxpayer the appeal has nominally to go before the special commissioners. In sub-section (5), Section 5, there is one other change. It is provided that the hearing may be by one special commissioner. At present, as I explained already, hearings take place before two special commissioners. The effect of that is that inconvenience is caused at the beginning of a circuit because inspectors have not sufficient time to have correspondence with taxpayers which might lead to adjustment of differences, and at the end of the circuit because the commencing of collections was delayed and the circuit lasts too long. The system of having appeals heard by two special commissioners was taken over from Great Britain. In Great Britain, however, the circumstances are quite different. There is no inconvenience in the system of hearing by two commissioners there, because there are local commissioners, and moreover, there is no appeal from the special commissioners, whereas here there is an appeal to the Circuit Court Judge on all matters of fact, with, of course, the usual appeal to the High Court on a matter of law. In certain matters in regard to which the decision of the special commissioners is final, applications for certain reliefs, the hearings will still be by two special commissioners. The hearing by one is confined to appeals against assessments, in which case there is the further appeal to the Circuit Judge.

Deputy Law raised a point the last day about one of the special commissioners. As a matter of fact, that special commissioner has been for a considerable time permanent in the post which he occupies.

Section 5 agreed to.

SECTION 6.

Mr. Blythe

Section 6 is carrying out the same idea. It allows the granting of reliefs by the inspector. As a matter of fact, what happens at present is they are allowed in the assessment, and they are supposed to be allowed by the special commissioner who signs and allows the assessment. It is simply carrying out the idea of having no longer the troublesome formality of books of assessment being signed and allowed by the special commissioners.

Section 6 agreed to.

SECTION 7.

Mr. Blythe

Section 7 is necessary because there is a provision, for instance, for the adoption of the basis for the preceding year. At present persons have to make returns based on the amount of profits and gains on the fair or just average of three preceding years, and so on. That will go, and it is necessary to have this.

Section 7 agreed to.

SECTION 8.

Mr. Blythe

Section 8 provides for the transfer of certain profits from Schedule A to Schedule D. At present mines, quarries, railways, gas works, waterworks, canals, ferries, fishings and various markets are chargeable under Schedule A on the annual value computed by reference to profits. The present state of the law is obscure in several respects. They are chargeable under Schedule A, according to the rules of Schedule D, and it is simply proposed that these matters be transferred definitely to Schedule D, which will remove certain complexities that exist at present.

Section 8 agreed to.

SECTION 9.

Mr. Blythe

Section 9, with the two sections which follow, brings into operation the change from the basis of the average of three years to the preceding year. In addition, it makes provision that at the beginning, in the first year of the assessment, under the change, in the case of a new business, the assessment shall be on the profits of the period. Then if it were started as is indicated in the section, during that year, in the next year it will be charged on the basis of the first twelve months working along the actual profits of the second period.

Section 14 has reference to the case where there is a change in partnership. If a partnership is only partially changed, if one partner remains in business and another comes in, then it may be charged normally as a continuing business; but if all the people concerned agree to go out of the business it can be treated as a business which has been discontinued and recommenced. Where there is a complete change of proprietorship, it is regarded as a winding-up of the business and the starting of a new one. The provision in regard to losses is really parallel to the existing provisions.

Section 14 agreed to.

SECTIONS 15-20.

An Ceann Comhairle

How many of these sections deal with a particular matter?

Mr. Blythe

All the sections up to 20.

An Ceann Comhairle

If we take 15 to 20, inclusive, and let the Minister make a statement on them, perhaps it would meet the case.

Mr. MacEntee

That would be better. It might be no harm if the Minister, in his statement, would go back and point out how persons may secure a refund in respect of losses. It would be well to have that cleared up.

Mr. Blythe

On the question of losses, I think that the new arrangement is, on the whole, more satisfactory and should be more favourable to the taxpayer than the old one. If losses occurred under the old arrangement, they were taken into account in the computation of the three years' average. Now it is proposed to allow losses to be carried over a period of six years and to be set against the profits that may be made in the first or all of these six years, if necessary. This particular section is, of course, parallel to the section which was adopted in Great Britain when the change was made there. It is proposed, for instance, under Section 16 and, I think, under Section 15 also, that where accounts are presented for broken periods the average shall be based on twelve months. For instance, in the past, where accounts for eighteen months and accounts for six months had been presented in order to obtain the amount for the year, we might have had to add the six months' profits to the eighteen months and their total divided by two. Under the new arrangement, part of the eighteen months — say six months — that would fall within the period will be taken and one-third will be added to the profits shown in the six months' accounts, so that the average, following the general principle, will not be over any greater period than one year.

There is a change in the basis of Schedule E assessments in the same way as in regard to other assessments. It will be put on the basis of the preceding year, and there are certain minor modifications in regard to double residence. There is also provision postponing Part 2 of the Bill until the year 1930-31. The effect of all these changes is to make a very definite move in the direction of simplification. It is only a comparatively small step in that direction, but it will be of appreciable value to some people. So far as the taxpayer is concerned, the new arrangement, in view of the times in which the change is being made, will affect them very little. In so far as arrangements are made for setting off all losses, I think the new arrangement is rather more favourable than the old. There is no interference with the present position except an interference which is consequential on the change from the three years average, or whatever other basis existed up to the present. In the case of British dividends accruing to persons resident only in the Saorstát since 1926, they have been chargeable on the basis of income arising in the year of assessment, and a great deal of trouble arose from that because estimated assessments had to be made in virtually all such cases, and there was the question of an endeavour to get payment on account, and, at the end of the year, to make either additional or reduced assessments. Under the new arrangement that will be got rid of entirely.

Sections 15 to 20, inclusive, ordered to stand part of the Bill.

Mr. Blythe

Section 21 continues the duties that have, with certain others, been called the MacKenna duties.

Section 21 ordered to stand part of the Bill.

Mr. Blythe

The next section, 22, continues the dried fruit duties. The original duties have been in force since 1876.

Ordered that Section 22 stand part of the Bill.

SECTION 23.

Mr. M. O'Reilly

I move the following amendment:—

Before Section 23 to insert a new section as follows:—

"The duties of Excise chargeable on tobacco grown in Saorstát Eireann under Section 7 of the Finance Act, 1918, shall cease to be chargeable or leviable as on and from the First day of January, 1930, and no duty of Excise shall be chargeable or leviable on tobacco grown in Saorstát Eireann which is sold or kept for sale in Saorstát Eireann as on and from that date."

I would like before moving this amendment to say that it would be a good thing if the House agreed to a free vote. That is one privilege I ask for and the other is that the Ceann Comhairle would give as much licence as he may think it is possible for him to give during the discussion on this question. I know very well that the Minister for Finance and others will consider that this is a very big question. I am aware that something approaching three and a half million pounds in revenue is obtained from tobacco. It is at present almost entirely on customs or imported tobacco that that revenue is obtained. It is undoubtedly an extremely heavy tax, especially on the poorer class of people who are unfortunately the most numerous in the country. Several attempts have been made to revive this industry. We have had schemes and we have had subsidies and rebates of duty. They have all failed but that is no reason why the industry itself should be a failure in Ireland. There are times when industries are started, when cooperative organisations are started, times of big prices and perhaps times of abnormal prosperity when in reality it is not good for either cooperative organisations or industries to be started. People are inclined at such times to take abnormal viewpoints, which afterwards have serious reactions when we get into a normal position. A rehandling scheme was started in the tobacco industry which would undoubtedly have been successful — and which was, in fact, to a certain extent successful — but for the particular period of prosperity in which that occurred. We find that tobacco was grown then in competition with other crops which had a guaranteed price, a price which was higher than that paid for tobacco. It was then an infant industry.

People had not a great deal of experience, and it was not quite so well understood as other crops, with the result that farmers naturally went in for crops which, at the moment, gave them the greatest returns. In those particular times, those other crops gave that special return. Afterwards, when that scheme had fulfilled its time, a rebate of duty was given. That rebate had very extraordinary effects, because the Minister for Finance, and perhaps the Minister for Agriculture, will at once multiply that amount of rebate by 800 pounds, which is supposed to be the produce of one acre of tobacco, and will tell us candidly that the farmer pocketed that amount. That, of course, is not the case. The farmer, under those conditions, pocketed no money whatever except what the manufacturers cared to pay him. The manufacturer may have pocketed the rebate, so that that method was not a good one for reviving the industry. I have, in fact, heard a man who knows the industry pretty well say that if the intention really was to kill the industry, the proposal made to revive it would have effected that end. Tobacco, unfortunately, from the time it was first introduced into this country, became a means to political ends, and at other times it actually entered into international politics. Charles II. found that it was a good method for raising revenue, and he proceeded to prevent the growth of the crop in any of these islands, because he had the monopoly of colonially produced tobacco. The only colony that produced tobacco was the United States. Of course, it was not the United States then. We find, at a later period, that what is the United States now did not at all agree with the economic policy under which it had to live, so it decided to change things by force, and it did so. The British Government, in order to intimidate that country to a certain extent, allowed tobacco to be grown in Ireland, but there was a proviso that it should not interfere with the commercial prosperity of England. The crop was grown most successfully here, and up to 1830, after 100 years experience, the crop was well and properly grown.

We had then begun to compete with the biggest tobacco producing country of the world, the United States. We were then, according to statements made in the House of Commons, the only country capable of competing in quality with the United States. As it interfered with commercial interests in England and as London manufacturers found that Irish manufacturers were able to produce tobacco of superior quality and at greatly reduced prices, they at once took steps to crush the industry here. We find that in that year, 1830, amongst many who lamented the industry from the point of view of the employment it gave and from the point of view of the cultural effect it had on the people of Ireland, especially the farming community, was the Royal Dublin Society. They lamented the fact that unemployment would increase and they wondered at that time what would become of the people engaged in the industry. There were then thirty-two factories in Ireland and in County Wexford as much as a thousand acres of tobacco were grown. Before the Union an Irish acre produced 15 cwt. of tobacco. The producers got one and sixpence per pound and the Government of this country which then was the Parliament in College Green, in order to protect the industry, levied a duty of three shillings per pound on imported tobacco. It is an undoubted fact that Ireland from the agricultural point of view was then in a most prosperous condition. That prosperous condition excited the jealousy of the British Government and they at once took steps to bring about the Act of Union. I believe if we adopted to a certain extent the method then adopted to protect agricultural industries we would be successful. In moving this amendment, I am not asking for any subsidy or any rebate. Neither am I asking the taxpayer to contribute any sum of money. Therefore, I am in agreement with the Minister for Finance. As long as we do not interfere with the revenue or ask the taxpayer for anything else, I am quite sure we agree.

Another point in connection with the industry is this: This amendment, if passed, will not come into force until January next. In order to grow a crop of tobacco next year, it will be necessary to sow the seed in February and March. The plants will not be planted out until May and June, and the crop will not be harvested until September and October. The tobacco itself will not be ready for manufacturing for almost nine months or a year after that. Therefore, before anything at all could possibly happen to affect the revenue, two full years would have to elapse. After the two full years have elapsed, and if on the second year the industry is revived and home-grown tobacco replaces any of the imported tobacco, there will be a small loss, perhaps, in revenue, but it will be very small, and, like most other industries, especially agricultural industries, we may take it that there will be no displacements of revenue of any kind for at least three full years. If the then Minister for Finance finds that the displacement is very serious, he has his remedy. He has succeeded in establishing an industry, which is a native industry, and which will undoubtedly be capable of producing some revenue. The Minister for Finance will have made an investment, I hope not for himself, but for some Minister for Finance who may succeed him. At any rate, I take it, it is the duty of the Minister for Finance to make such an investment. As the amendment is not going to cost anything within the next two years that the country cannot stand, I do not see what objection the House should have to accepting it. There are a few difficulties, as I said before, but the Revenue authorities, with their ability, will easily get over any difficulties that may arise.

There was one point that struck me. I do not know much about revenue laws, but it struck me that certain trouble may arise in regard to stalks and wastes. As I understand the matter, on the imported article a certain rebate is given to manufacturers on what are called wastes and stalks. If an industry were started under those conditions, I am quite sure that subsidiary industries, such as the manufacture of nicotine and other things, would also be started. These would encourage the farmer to sell his stalks to the manufacturer in order that he might get a larger rebate. I am quite sure that the rebate could be easily settled on the question of averages. The revenue authorities must have data sufficient to calculate what would be the average rebate on a ton of tobacco for the last three or four years. That would not present any great difficulty.

There are no other difficulties that I see. We have only adopted this system of taxation of tobacco because of habit. I am quite sure the Minister will admit that he found it there, and found it very convenient and handy as there is not very much trouble in the collection of the tax. But I believe that the time has arrived when we no longer can use handy methods and no longer can get money by any of these handy methods. That is the reason that tobacco has been singled out as being a commodity that can be taxed indirectly with the greatest amount of convenience to the revenue authorities. The present tax was a war tax. It was a tax started when they multiplied £1 by two and got £3. These conditions do not prevail to-day, but the tax is the same, so that it is bearing rather heavily on the people whose income is greatly impaired. In those days people looked on tobacco as a luxury, but we have ceased to look on this industry as being anything in the nature of a luxury one. Tobacco is to-day to most of us a necessity and, therefore, that taxation habit should cease as far as possible.

It would be well in considering this to see what the world outside is doing. We find that the British Government some years ago decided to encourage the growth of tobacco in their colonies, and they gave 2/- preference on the British market. If we had the plant grown here and had a free market we could avail of that 2/- in selling any surplus. At present we cannot do that. Several commissions were set up in Great Britain to inquire into this matter. The Imperial Economic Committee's reports are rather interesting reading, and they give very definite figures regarding the position of tobacco-growing in the colonies. They tell us that in Nyasaland and in some of the South African colonies the industry is looked upon by the people as being their only hope from the agricultural point of view. But Nyasaland and some of the South African colonies do not seem to have the advantage of a free home market. They have not the advantages that Canada and other countries have. In order to give an example of what a home market really means to the industry, and what bearing it has on the prosperity or success of the industry, I may say that the following is the position, the figures given representing thousands of pounds. You have India, probably one of the greatest tobacco-producing countries in the world, and also one of the greatest consumers. Of every thousand lbs. grown in India, 970 lbs. are consumed in India and 30 lbs. exported. Canada, which is more or less similar to this country in conditions, and to a certain extent in history, has a local production of 47. She consumes 38 of that in her home market and exports 9. The production of the Union of South Africa is 20½. They consume 11 and export 9½, whereas Nyasaland and Southern and Northern Rhodesia export all that they produce. Their exports are: Nyasaland, 8 millions; Southern Rhodesia, 16; and Northern Rhodesia, 2½. There you have had the least development. The industry there gives the least employment because they have not any home market.

It may be said that we cannot smoke the tobacco grown in Ireland. In fact, people stated that it could never become a habit with the people. We find, however, in South Africa something of the same conditions prevailed. As the taste in smoking, like a good many other tastes, is simply an acquired one, we find that in all these countries price governs the taste, and that if a new commodity is introduced, like tobacco, and the manufacturer can get it at a reasonable price, and has a reasonable chance of continuity of supply, he will take that tobacco and put it on the market and sell it, and it will be acceptable at once to the purchaser. What happened in this country previously was that we never had either of these things. We did not have the tobacco cheap, nor did we have any chance of continuity of supply. As to South Africa, this is what the Committee stated on page 26:

"In South Africa cigarettes made from imported American leaf have been practically ousted by those made from local growth. There is a parallel change in progress in the United States to-day, where cigarettes of blended tobaccos of Virginian and Turkish types are gaining ground at the expense of the purely American."

That is a matter of taste. One of the arguments put up here has been that Irish tobacco would not be smokeable. We have it, however, on the authority of at least one of the managers of a very large firm here in Ireland that he is prepared to blend a very high percentage of Irish-grown leaf, and that it can actually be sold to the public without the public knowing that. Of course, it is known in all countries that new seed introduced into a country is neutral. The flavour of the plant is to a certain extent neutral for a number of years. Until the seed gets a sort of naturalised and acclimatised it will not adopt any definite flavour. Several experiments have been made here, but most of them were confined to one class of tobacco —the strong dark leaf, which grew without any trouble. That is practically the usual class of weed— because tobacco is really a weed— which grows without any difficulty. There was no encouragement, and perhaps permission was not given, to grow the other, which is the most important leaf to-day—that is the cigarette leaf. We find that in different counties plants of different qualities will grow. Kilkenny produced a really good class of cigarette leaf, while we have to-day a really good cigar being produced in County Wexford.

That brings me back to the point as to why I asked that the duties and restrictions should be removed. There are certain conditions which at present the revenue authorities will exact from the tobacco grower and one of these conditions is actually in existence in the County Wexford. There we find that an individual who is growing tobacco even against these odds, in order to comply with the excise regulations was compelled to build his factory at least three miles away from where the tobacco was grown. And he had to enter into very heavy bonds and at present such bonds are not easily obtainable. The result of the Agricultural Credit Corporation operations is a proof of that. People are timid in going security for individuals throughout the country for any purpose whatever.

These are some of the restrictions which I would like to see removed in order that the industry may have a fair chance and which will be gone into more deeply later on. The present position of the tobacco industry is that the colonies which in the world production have an advantage of 2/- preference, have made great progress. Of all the countries that have made progress in this direction Canada is the foremost and as I said a few moments ago Canada is a country that in climate and otherwise is most akin in conditions to those here. I am aware that statements were made that tobacco is a tropical plant and that we might as well try to grow tea or sugar cane. Of course I know these statements were made in a humorous way and that there was nothing serious about them. The person who made these statements did not mean them to be taken seriously because tobacco is grown all over the world. We find the Canadian Government are taking very definite steps to still further encourage the production of the plant. At the present time they are actually making a survey of land suitable for tobacco production, in order that that land may be earmarked for that purpose. To say, therefore, that the industry would be of no importance would be completely wrong. The industry is one that employs a great number of people. It is an industry which the small farmer can profitably engage in provided he gets these particular opportunities. It is an industry into which the human element very largely enters. The grading and handling of tobacco cannot be done by machinery. It is an industry in which the chief work is done when other work cannot be done and one of the best parts of it is that in order to grow half an acre or an acre of tobacco you must have tilled at least four times as much as you grow in tobacco. The crop is only a short time in the ground after which catch crops can be very successfully grown and one of the most successful catch crops that can be grown is wheat. The land is perfectly clean. I do not mean that wheat can be grown in big quantities but I mean that wheat can be grown for the purposes of the small farmer and for his own use. That has been done previously and with great results and it can be done again. It is with confidence that I ask the Dáil to accept this amendment.

Mr. J.J. Byrne

It has often been said that this little island of ours is a green isle. I think if the House accepts this amendment it will be also said that we are a green people. I do not propose to go back to the days of Charles II. which the mover of the amendment did, but to deal with the question in more modern times about which we have more information than we have of the days in which King Charles lived. I would like to deal with the question purely from the commercial point of view and purely from the point of whether the starting of the tobacco industry in Ireland is likely to be an asset to the State. Now the nearer times to which I have referred have clearly demonstrated three things: the first is that the growing of tobacco in this country can only be accomplished at serious financial loss; the second is that even when we have a crop grown we are unable to dispose of it, and the third is that it will never be a revenue-producing industry so far as this State is concerned.

I listened to Deputy O'Reilly dealing with Nyasaland and Rhodesia and various other remote countries, but I wondered why he did not deal with the actual facts, which he could easily have got, as they exist about tobacco-growing in this country. He said that Irish-grown tobacco at reasonable prices would be bought by the tobacco manufacturers, completely ignoring the fact that the tobacco manufacturers here absolutely refuse to buy the tobacco and that portion of the crop is still unsold. We are asked to embark on tobacco-growing to-day entirely regardless of the fact that tobacco-growing has already cost the State something not less in amount than £100,000. After we have already wasted £100,000 we are asked to-day to go further and waste more money.

The Committee set up to deal with this particular question of the growing of tobacco stated that to embark on the successful production of tobacco it would be necessary that the country should be involved approximately in a loss of about £116 for every acre of tobacco grown. Paragraph 3 of the Report on home-grown tobacco states that this project has been tried for a period of 22 years up to 1923, that a bonus of 1/- per lb. was paid to growers, that this was changed later to a subsidy of £50 an acre, which was afterwards reduced to £25, and that this was provided for out of a special grant from the Development Fund amounting to about £70,000. And what was the net result of these subsidies? There was a steady decline in the total acreage under tobacco, and we still hold that £140,000 worth of home-grown tobacco in bond which we are unable to sell. The total acreage under tobacco was, in 1914, 217¾ acres; in 1919, 76½ acres; 1922, 51¼ acres; 1923, 33¼ acres; 1924, 20½ acres and 1925, 15¾ acres; so that from 1914 to 1925 the total acreage declined from 217 acres to 15¾ acres. It states in that Report that that decline in Irish tobacco-growing is due first to the refusal of the Irish manufacturers to buy home-grown leaf at the lowest price which the growers can afford to accept, and that the operation of the Imperial preference of two shillings in the pound in Great Britain had resulted in flooding the market with the cheap Indian and Colonial leafs. These are very important points which the mover of the amendment failed to deal with. They are difficulties which have got to be surmounted if the growing of tobacco as a profitable industry in this country has got to be embarked upon. The Report states that at that moment the produce of several years' crop, amounting to 140,000 lbs., was retained in bond, for which there was no Irish market available and which could only be sold in Great Britain at a substantial loss to the grower.

I wonder why Deputy O'Reilly, who is by no means a fool in industrial matters, did not deal with these particular points so vital to the tobacco-growing industry as it is affected in this country. I note here, in another portion of the report, they say: "Assuming that home-grown tobacco would displace a corresponding amount of imported leaf, the additional loss to the revenue over and above the present rate of preference would be, approximately, £116 for every acre of tobacco grown and marketed." Deputy O'Reilly, a practical farmer, asks the farmers of this country to embark on a proposition which involves the loss of £116 per acre. Now, I know that this is a green isle, but we are not quite so green as to embark upon a wild-cat project like that. The result of tobacco growing in this State has shown another very important thing; that is, if we continue to produce tobacco, it will have to surmount three barriers. These three absolutely negative the possibility of growing tobacco in this country at a profit. The first of these is that the cost of production tends to increase. The second is that the yield of tobacco tends to decrease, and the third is that the average selling price obtained tends to diminish. I would say, in the face of these actual results obtained in this country, that I cannot see how this House can be reasonably asked to entertain a proposition of this kind. Deputy O'Reilly referred to various parts of the country in which tobacco was grown.

If the Deputy only consulted this Report he would find there a lesson that we must take to heart in considering this question. In Louth the average yield per statute acre for tobacco in 1911 was 949 lbs.; in 1912 the average yield was 588 lbs. The average price in 1911 was 5d. per lb., and in 1912 it was 2.7d. per lb. The loss per statute acre in 1910 was £8 5s. 6d.; the loss per statute acre in 1911 was £19 7s. 6d., and the loss in 1912 was £20 10s. 3d. So that the loss, as we went on and gained experience in the growing of tobacco in the Co. Louth, rose from £8 5s. 6d. in 1910 to £20 10s. 3d. in 1912.

The same thing may be found in Wexford. In 1911 the yield in Wexford was 1,111 lbs. to the acre. In 1912 that yield fell to 770 to the acre. The average price was 5d. and 2.7d. respectively for these two years. I want you to get on to the net loss, and the net loss was, in 1909, £10 6s. 9d.; in 1910, £15 13s.; in 1911, £16 6s. 2d. and in 1919, £19 8s. 7d. Deputy O'Reilly is not satisfied that this State should cut its losses. He wants us to go back again and pile on to this country in its present economic position further losses. He told us that this was an admirable country in which to grow tobacco, a sort of ideal State, and he made suggestions that we would be justified not only in growing tobacco but in growing rice and other similar crops. I think there are more serious issues behind this matter than Deputy O'Reilly suggests. In 1912, 39 of the 50 small growers had heavy deficits. Yet it was one of Deputy O'Reilly's points that this was an admirable crop for the small farmers, and the crop to be dealt with in the same way that small holders deal with such crops. That was the result. There are only 11 cases where there were any sales to meet the charges. As to climatic suitability, I have only to say that in that particular year the frost did considerable damage. Forty thousand lbs. of tobacco was produced; 8,554 lbs. was so damaged that it had to be sold at 2d. per lb., and 7,975 lbs. were completely destroyed. Fancy having similar results in 1929 or 1931, to which Deputy O'Reilly refers. Surely the Irish farmers have got sufficient sense to see that this proposition is wholly impracticable. We have here 40,000 lbs. of a tobacco crop, of which one-fifth was useless, and one-fourth so damaged that it had to be sold at 2d. per lb.; there only remains about 23,000 lbs. of tobacco which one could call saleable tobacco, and the larger percentage of that tobacco was of a very inferior kind.

I am sure that this House will know that I have as much interest in the establishment of Irish industry as any individual here. I would be as anxious that the tobacco industry would be established in this country, as genuinely and sincerely anxious as Deputy O'Reilly himself, provided he could show the House that this country could make money by the establishment of such an industry. The first great essential in production is that we are to produce something for which there is a demand — that we have to produce that article for which there is a market. There is an economic law that nobody in this House can ignore, the law of supply and demand. Deputy O'Reilly wants us to produce an article for which there is no demand in this country, and an article which, when we have it produced, is entirely unsaleable. We produced home-grown tobacco here, and when we had a subsidy of something like £50 an acre for home-grown tobacco in 7 different centres — and I would ask Deputy O'Reilly to take particular note of these figures — the cost of production was 10.2d. per lb. The sale price was 4.3d. The result was that 5.9d. per lb. was lost on every lb. of tobacco grown and marketed in this country.

Deputy O'Reilly further elaborated the point that there was no reasonable chance given to the production of what he termed the lighter tobacco. I find in the same invaluable report, which Deputy O'Reilly evidently did not consult, that the cost of production of cigarette tobacco in one centre was £40 5s. 8d. per acre, whilst £17 15s. 6d. was the amount received by the sales, so that on the production of light tobacco there was a loss of £22 10s. 2d. per acre.

If we turn to the heavier tobacco. Deputy O'Reilly led the House to believe that it could be grown very easily; in fact, it was something in the nature of a weed. He said pipe tobacco was a very suitable product and it could be easily cultivated in this country. Pipe tobacco was grown in five centres, the cost of production was £27 1s. 0d. per acre, and the amount received was £9 10s. 0d. There was there a loss of £17 11s. 0d. per acre. Let us look at this as a commercial proposition. We realise that pipe tobacco has proved a dead loss, despite a subsidy of £50 per acre. Deputy O'Reilly is optimist enough to think that the mere removal of this duty is going to start a flourishing tobacco trade. I do not know what wages the people engaged in the trade will get. I do not know if the wages would be something like what is paid in remote countries and which amount to something like 2d. a day. I would like to see Deputy Corry offering an Irish agricultural worker 2d. a day.

Mr. Corry

I would pay him better than you would pay for the shamrock shovel.

Mr. Byrne

The shamrock shovel stood the test of this House and it has not been protected yet. Evidently it did not appeal to that side of the House, and neither do the figures which I am giving now. The result of these experiments has shown very clearly that from a practical point of view, from a commercial and profitable point of view, the growing of tobacco here is an absolute impossibility. It cannot be grown here with profit. That is a lesson we apparently have yet to learn. We have already paid £100,000 towards learning that lesson, and the sooner we digest the lesson the better. I think it is nearly time we had the moral courage to face up to this matter and to admit that tobacco growing has been a complete failure. There can be no financial return from tobacco grown here. It cannot be recommended to Irish farmers as a crop that will give a single penny profit. I see the Minister for Agriculture on the front bench. I fancy he will agree with me when I say that the £30,000 referred to by Deputy O'Reilly could be much better expended on behalf of the Irish farmers if it were invested on the same lines as the £8,000 invested in the Live Stock Breeding Act. If it were invested in some measure of that kind that the country sadly stands in need of, it would have more beneficial results.

I do not wish to say any harsh word of criticism about Deputy O'Reilly. I do say, however, that he does not seem to have studied the question before he put down this amendment. His proposal will not stand careful examination or any comparison with such figures as I have mentioned. Already we have lost enough in an attempt to grow tobacco, and my advice to the House is to advise the farmer to leave tobacco-growing alone, and if he does so he will find himself in a much better position.

Mr. O'Reilly

Deputy Byrne seems to have constituted himself as a judge on this important matter. There is nothing in the amendment which would permit him to constitute himself a judge of such a matter as tobacco-growing. The object of the amendment is to allow the farmers of Ireland to be the judges.

Mr. Byrne

I am willing to submit to the judgment of the House.

Mr. O'Reilly

The amendment seeks to allow the farmers of the country to find out whether they can grow tobacco or not. Deputy Byrne talked about a loss of revenue. There will be no loss of revenue, and it is quite obvious from his speech that the Deputy knows very little about the matter.

There are all sorts of regulations in connection with tobacco and I have tried to get them. A certain gentleman has tried hard to produce tobacco and to a certain extent he has been successful. There are certain restrictions imposed upon him. In order to grow tobacco to manufacture cheroots or small cigars he has to comply with all sorts of regulations. He has to get two citizens to sign a bond for £2,000 which would be forfeited for a breach of any of the regulations. One of the regulations is that he must get the revenue officer to inspect the produce in the bonded warehouse, and in order to meet other regulations he must provide a room of a certain temperature. He must provide certain prescribed sanitary accommodation and he must have at all times warm water for the gentlemen. Down in County Wexford it is rather hard to require all those things to be provided for the officer who arrives.

Minister for Agriculture

It is more. What is really suggested is that for every acre of tobacco grown the revenue would lose £320. It would lose the equivalent of the duty at present collected on 800 lbs. of tobacco. That revenue would have to be made up in some other way. We would have to put it on tea or something else, and all that in order to get £35 an acre on wages paid to labour. That, as I have said, is too preposterous for consideration.

Mr. Briscoe

Does the Minister still argue that the tobacco would be useless, that it would not be smoked by anyone?

Mr. Blythe

If the Deputy was listening to me he would understand that it was on the basis that it would be smoked, and that it would replace imported tobacco, that I was arguing. When the experiment was started a lot of people believed that ultimately tobacco growing would become economic here without a subsidy. That has not turned out to be the case. There is no prospect at all that it will become economic. As I have said, the suggestion is this — prices may have altered slightly within the past few years, but when we were discussing it, it was suggested here that farmers could not grow it, that it would not pay to grow it, unless they could sell it at 1/6 per lb. The position then was that the better liked tobacco grown elsewhere could be got at 7d. per lb.

If you remove the duty altogether from tobacco, both Customs and Excise, then Irish tobacco could not be grown here at all, and in order to have it grown, if there were no duty on tobacco, the position would be that we would have to pay the equivalent of 11d. per pound, or something like £40 an acre, and we would have to pay that in perpetuity for the luxury of having that article produced here. As a result of the £40 an acre, which would have to be raised off the taxpayer in some other way and which would have to go on permanently, we would only have from £30 to £35 an acre expended on labour. As I say, I think the proposal is so preposterous that it deserves no discussion whatever. Deputy O'Reilly began by suggesting that he was not looking for anything from the taxpayer, that it was going to cost us nothing, but when any person gets an exemption from duty that is really, especially in a case like this, an equivalent to a subsidy. We are not proposing to abolish the tobacco duties. We obtain a very large sum from them, and if we abolished them we would have to put a duty on some other article. I do not think that there is any other set of articles from which we could get revenue with so little disadvantage to the public as from tobacco. It is proposed, I take it, to continue the Customs duty on tobacco. If that is so, then, proportionately as tobacco is grown here, for every acre we lose £320. For one, two, three or four acres nothing appreciable would result, but if the acreage increased, as the Deputy suggested it would, undoubtedly we would have to put taxation on some other article. It is quite a good thing if there were any crop that is likely to become economic and likely to pay, and quite a good argument could be made even for a substantial subsidy in the beginning; but it would be impossible. I think, to justify a subsidy to the amount suggested by the Deputy.

At present, even allowing for the difference in the price which the Irish farmer must get and that paid for the imported article, there is an advantage, I think, of sevenpence in favour of the Irish article. I am dealing with the figures given three years ago. That article, of course, proved unsaleable even with such inducements and, apparently, a much larger inducement is necessary. The position clearly is that the present remission of duty is not going to get any tobacco grown. I do not believe that any increase whatever, without going the length that Deputy O'Reilly would have us go, on the present advantage, could be justified. As I say, the matter was discussed at great length in 1926 and, in opposing a motion for an increase of 1/6 in the difference between the imported and home-grown tobacco, in addition to the Minister for Agriculture and myself, Deputy Johnson and others spoke against the proposal, and as we were dealing with something that was more like a reasonable proposition than that of Deputy O'Reilly, the matter was fairly well discussed. If Deputies would go back to that debate they would see, as the House clearly believed at that time, that the arguments were against going further in an attempt to subsidise this crop. When the House divided there were 14 for and 48 against the proposal. It was not a free vote. I do not believe that a matter like this, involving substantial sums, could be put before the House on the basis of having it decided on a free vote. There was, however, considerable division of Parties, and I think there was a very general feeling in the House that the sort of stirring propaganda carried on in connection with tobacco-growing for a considerable time was without basis and was generally put forward without regard to the figures involved.

Mr. de Valera

I can see, from the attitude of the Minister, that he is not going to give this question even a fair trial by getting it examined further, as suggested by Deputy Law. He will admit that there is something over half a million pounds' worth of tobacco coming into this country in a raw state every year. If that can be produced here, why not produce it? The arguments of the Minister would be much more convincing if he did not apply them to practically every proposal made here to produce things which we can produce. If we had not the advantage of having other countries around us which can supply us with every article we require, is he going to say that we should not produce them ourselves and that we should continue to import them? Is it not obvious that we would at last reach a stage when we would not be able to import anything? Ultimately we would have to produce something, or starve. It is obvious to me that there is a fundamental fallacy in the argument used by the Minister. I am not saying this in reference to this particular matter, but generally to the arguments of the Minister. There are very few articles to which that would not apply. If we had reached saturation point in regard to work, if all our people were employed, and if we had alternative lines of employment, then we would have to be careful, I admit, as regards the line we select, but we have not reached that stage. We have people unemployed, and every line that can absorb unemployed people should not be turned down, as the Minister for Finance has turned down this. Those engaged in the manufacture of tobacco hold that, so far, the experiment has not got a fair trial and that vexatious interference and regulations have, in many cases, prevented the development of the industry.

I would not intervene in this debate were it not for the fact that the Minister for Finance is so uncompromising in his hostility to the amendment. There are certain difficulties in reference to this crop which the Minister for Finance cannot afford to ignore. But the same difficulties will affect any crop grown in this country, if it comes into the same category, in the same way dependent upon the exigencies of the Exchequer. With reference to the crop grown in 1926, there is really some of the tobacco in bond yet. This time last year a market had been found for that tobacco. It had been found after a good deal of difficulty, and after certain restrictions had been removed by the Revenue Commissioners to allow it to be sold. The Revenue Commissioners were so long in coming to a decision, and the regulations were so rigid, that the price of the nicotine extract of the tobacco was reduced from 10/6 to 9/-. Even then the regulations did not permit the sale of the entire crop of tobacco on the hands of the Meath growers and Offaly growers. The bond for the consignment and the sale of the Meath crops did not include the Offaly crop, and consequently it was necessary to get a second one, with the result that the people could not undertake the expenditure or the trouble, and the purchaser would not, except he got the entire crop, incur the initial expenditure on the machinery. Therefore the market has been lost. I will just read an extract from a letter of Mr. Villiers Stuart, of Waterford, in reference to the purchase of the crop. The letter is dated the 7th June, and is as follows:—

I am glad to hear that you have persuaded the Commissioners to assent to the disposal of the tobacco on hands. One difficulty, unfortunately, has arisen, however — viz., price. Nicotine was selling in quantity at 10/6d. per lb. at the time of our last correspondence. I now have before me an offer from a large German firm offering, in larger quantities, at 9/- per lb., a reduction of 1/6 a lb. This means I have no option but to reduce my offer accordingly — and you will see from enclosed memo, that the margin of profit is rather narrow even at that. As stated previously, it would not pay me to spend £150 or more on grinding machinery unless I can get Sir Nugent's tobacco also.

That finished the deal for the 1926 crop last year.

The restrictions referred to by the purchaser are as follows. This is from the Revenue Commissioners, dated 7th August, 1928:—

I am, however, to point out that the existing bond furnished by Mr. Villiers Stuart to cover removals from Dublin to his store at Lismore will not cover the removal of the Offaly tobacco.

Finally the sale had to be abandoned and the tobacco is still on hands. Therefore, that one market has been lost. The final decision of the Revenue Commissioners was to smoke out tobacco. The letter, which is dated the 8th June, 1929, is as follows:

I am directed by the Revenue Commissioners to call upon you to dispose of your 1926 crop of tobacco according to the regulations, or, alternatively, to destroy the tobacco not later than the 8th July, 1929.

That is typical of the sympathetic consideration this matter is getting. The amendment only asks that the experiment should be given a trial. It will not interfere with the existing revenue for at least two years. The Revenue Commissioners will have the experiment under observation, and if it interferes adversely with the revenue returns they can impose any terms that they like. I do not suppose any useful purpose will be served by asking the Minister to give any undertaking to consider this on another occasion, and I, therefore, think the amendment should be pressed to a division.

Mr. Blythe

On the question raised by Deputy Boland, as I said already, I am ready to look into the regulations and see whether they affect future crops or affect any crops on hand. I am prepared to consider what opportunities can be given to enable people who have tobacco on hands to dispose of it. I do not want to treat them with lack of consideration and I am prepared to look into that point. It may be that owing to difficulties or misunderstandings a market has been lost, but if any other market can be found, or if there is the prospect of any other market. I am willing to consult with the Commissioners and see what can be done to help people who have this crop on hand in some way. As I said to Deputy Briscoe, I am prepared to have the existing regulations looked into, in case anybody should think of growing tobacco with the existing preference, to see if those regulations could be amended in any way that would help them. I would, however, ask Deputies to remember that it is not a case of no encouragement being available for tobacco-growing. There is encouragement available at the moment for tobacco-growing to the extent of £40 per acre. No matter what views Deputy de Valera, or other members of his Party, may hold as to the need for giving encouragement to certain crops, I think that that is certainly a very substantial encouragement, and we are not proposing to withdraw it from tobacco. If any change takes place in the circumstances that makes that sufficient, or that makes it possible for people to grow tobacco under it, it will still be available.

I should like to say that no complaint had come to me about the regulations before. I have met representatives of the tobacco growers, and we have always discussed the question of the subsidy. I had some complaint about the question of disposing of tobacco within a certain time after it was grown, but on the regulations, to which Deputy Briscoe referred, I never had any complaint. I am prepared to look into this. I think that Deputies should really consider whether a preference to the extent of £40 per acre is not a very good thing for any crop whatever, considering the labour that will be employed and the value it is to the country. I do not think Deputies can reasonably take the view that we ought to have this crop grown here irrespective of cost, either to the revenue or to the community, through maintaining a Customs tariff which will raise the internal price. To carry it to the extreme, if we were to say that the main factor is to produce five hundred thousand pounds at home, and if we carry that argument to its conclusion, I think Deputy de Valera will admit that that argument is not valid to any length that one may care to take it.

Mr. de Valera

Neither is the other.

Mr. Blythe

I have not suggested, so far, that no preference should be given to tobacco, simply because it cannot be grown as cheaply here. I pointed to the very substantial existing preference, and I have suggested that it should in all conscience be regarded as enough. If you took the other line of argument, you might say that we should, regardless of cost, attempt to grow the tea used here, or something like that — to grow it in glass-houses — that the cost would not matter, provided we kept the money here that it now costs the country. I think the Deputy will see that that is not a reasonable point of view. If they argue it, I am prepared to admit that it is not defensible to say that in no circumstances should you pay more than the cheapest price. Nevertheless, the whole thing must be looked at in a reasonable way, and I do not think that because there was a good deal of propaganda in connection with tobacco, we must take up the line that we must go to great lengths.

It is not fair to suggest that this matter has not been considered. It was considered a great deal, and, as a matter of fact, most of us — I certainly myself did — came to the consideration of this matter with the desire to extend the tobacco crop. I believed in it because of the propaganda which had been carried out by the late Arthur Griffith and others. Most of us were believers in the prospects of the tobacco crop and we all came to the consideration of it prejudiced tremendously in its favour, and a great deal of departmental and other consideration has been given to it. If there are substantial new facts they will be considered, but I do not know whether substantial new facts have arisen. I think that really the supporters of the industry themselves, if they still believe in it, ought to examine and see whether there is any other thing that can be done, whether there is something that can be suggested other than merely an enormous increase in the preference. That would be the better way for them to approach it. If they did approach it that way, they might have something to put up to the House that would merit a great deal more sympathetic consideration than this could merit.

Mr. M. O'Reilly

The Minister said that I made a very preposterous proposal. I disagree with him in that. I do not see anything nonsensical in it at all. There was a lot of nonsense talked about subsidies and committees, and all that sort of thing, in a great many cases by men who did not know anything about the business. I dealt with the point about setting up committees, and I said that what I would like to see was that a group of farmers should be consulted and let them determine whether they would grow a crop like tobacco or not. If they did succeed in growing it there would be a loss of revenue, which could be filled up, and if they did not succeed there would be no loss to the revenue at all. I think I see what was behind the Minister's mind. He fears that we might be making an attempt to break down the economic barrier, and to break down the principle adopted by the other country, and for the adoption of which that country had special reasons. The policy that was adopted does not suit us at all. If the farmers are to be expected to pay their land annuities, and the Government has power to make them pay or put them out, then these farmers should not be restricted because of revenue, from production, because it must be remembered that revenue lives on production. It we continue this we will eventually get into a strange position if we do not get somebody to lend us money, and if we are not more sensible in our methods we will not get people to lend us money. It is by production that we must live. If the Minister does not allow production to go on unhampered, then I say he is not going to get the revenue that he wants.

The point that I want to make particularly is that instead of asking a committee to decide whether a farmer could or could not grow tobacco you should let the farmers decide that matter for themselves. You need spend no money upon it. Subsidies and all that method of spending money through departments on agricultural industry always leads to corruption and demoralisation. When a farmer got £50 an acre as a subsidy for the growing of tobacco he put in about six plants to the acre, and then said they failed, and demanded his £50 and he got it. That was what killed the operations under a subsidy. Of course the growing failed. You have the other process of the 1/4 rebate. Of course the farmer does not get it at all; he does not handle it. The manufacturer gets it, and he tells the farmer that his crop is no use. He tells the farmer that he does not grow enough, and there is no use in buying it because people will find out, that they are able to discern the home-grown tobacco, and that they will be disgusted with it. This kind of talk goes on and the manufacturer pockets his 1/4 and pays as little to the farmer as he can. He trades upon the farmer's position.

As far as the tobacco industry is at present concerned, the Minister talks about getting any substantial new facts. There are substantial new facts, and these are some of them. The manager of one of the biggest tobacco factories in the city, not speaking on behalf of his company, but speaking on his own behalf, distinctly stated that 40 per cent. of Irish-grown tobacco could be blended, as I said already, on account of the neutral flavour of Irish-grown tobacco. That is a new fact showing that you would have a market. In any case the market would depend upon the price at which the article could be sold, and more than that upon the continuity of supply. As long as the farmer is suspicious and as long as he finds officials wandering about his place at any time of the day or night, no matter what the subsidy may be, the farmer will not grow that crop. He feels it is an artificial something which has been started by the Government out of which he might get a few handy pounds easily. We want to be much more practical in this matter and we want to allow the farmer to stand upon his own legs. There is no use taking the opportunity from them and giving a subsidy. The farmer is as smart as the Government, and if he gets the opportunity he will do the Government down. The objection to a subsidy is that it causes demoralisation and it creates lack of confidence.

The tobacco industry gives a revenue of three and a half millions. The whole taxation system in this country will have very serious results for us, because the system adopted is to collect always more than you want. The surplus is distributed to the advantage of the Government in control, and the result of the thing is that the Government in control—no matter which Government—would have a certain fixity of tenure because of that system; whichever Government gets in is likely to continue in for a generation. I had in mind—and I admit it, and if the Minister suspected me he was quite right— the breaking down of that system which does not suit this country and which is killing it.

Amendment put.

The Committee divided. Tá, 49; Níl, 69:—

Tá

Aiken, Frank.
Allen, Denis.
Blaney, Neal.
Boland, Patrick.
Boland, Gerald.
Bourke, Daniel.
Brady, Seán.
Briscoe, Robert.
Buckley, Daniel.
Carty, Frank.
Cassidy, Archie J.
Clery, Michael.
Colbert, James.
Colohan, Hugh.
Cooney, Eamon.
Corkery, Dan.
Corry, Martin John.
Crowley, Fred. Hugh.
Davin, William.
Derrig, Thomas.
De Valera, Eamon.
Everett, James.
Fahy, Frank.
Flinn, Hugo.
Fogarty, Andrew.
Gorry, Patrick J.
Goulding, John.
Houlihan, Patrick.
Jordan, Stephen.
Kennedy, Michael Joseph.
Kent, William R.
Kerlin, Frank.
Killilea, Mark.
Kilroy, Michael.
Lemass, Seán F.
Little, Patrick John.
MacEntee, Seán.
Moore, Séamus.
Mullins, Thomas.
Murphy, Timothy Joseph.
O'Kelly, Seán T.
O'Reilly, Matthew.
Powell, Thomas P.
Ryan, James.
Sheehy, Timothy (Tipp.).
Smith, Patrick.
Tubridy, John.
Walsh, Richard.
Ward, Francis C.

Níl

Aird, William P.
Alton, Ernest Henry.
Beckett, James Walter.
Bennett, George Cecil.
Blythe, Ernest.
Bourke, Séamus A.
Brennan, Michael.
Brodrick, Seán.
Byrne, John Joseph.
Carey, Edmund.
Coburn, James.
Collins-O'Driscoll, Mrs. Margt.
Conlon, Martin.
Connolly, Michael P.
Cosgrave, William T.
Daly, John.
De Loughrey, Peter.
Dolan, James N.
Doyle, Peadar Seán.
Duggan, Edmund John.
Dwyer, James.
Egan, Barry M.
Esmonde, Osmond Thos. Grattan.
Fitzgerald, Desmond.
Fitzgerald-Kenney, James.
Good, John.
Gorey, Denis J.
Heffernan, Michael R.
Hennessy, Thomas.
Hennigan, John.
Henry, Mark.
Hogan, Patrick (Galway).
Holohan, Richard.
Jordan, Michael.
Kelly, Patrick Michael.
Keogh, Myles.
Law, Hugh Alexander.
Leonard, Patrick.
Lynch, Finian.
Mathews, Arthur Patrick.
McDonogh, Martin.
MacEóin, Seán.
McFadden, Michael Og.
McGilligan, Patrick.
Mongan, Joseph W.
Mulcahy, Richard.
Murphy, James E.
Murphy, Joseph Xavier.
Myles, James Sproule.
Nally, Martin Michael.
Nolan, John Thomas.
O'Connell, Richard.
O'Connor, Bartholomew.
O'Hanlon, John F.
O'Higgins, Thomas.
O'Leary, Daniel.
O'Mahony, Dermot Gun.
O'Reilly, John J.
O'Sullivan, Gearóid.
O'Sullivan, John Marcus.
Reynolds, Patrick.
Roddy, Martin.
Shaw, Patrick W.
Sheehy, Timothy (West Cork).
Thrift, William Edward.
Tierney, Michael.
Vaughan, Daniel.
White, John.
Wolfe, George.

Tellers:—Tá: Deputies Corry and O'Reilly; Níl: Deputies Duggan and P.S. Doyle.

Amendment declared lost.

Question proposed: "That Section 23 stand part of the Bill."

If the duty upon ready-made clothing is not increased the effect will be that English manufacturers will be able to sell their suits in this country on the same footing as Irish manufacturers, and the protection given to the ready-made clothing industry here will have been very largely destroyed, if not quite destroyed. In February last, a duty of 25 per cent. was imposed upon imported woollen tissues, but as the Imperial preference was allowed the effective tariff was 20 per cent. At the same time the duty upon ready-made clothing was increased by 5 per cent. to 20 per cent., with certain exemptions allowed in the case of cloth costing 1/6 per square yard and under seven ounces in weight. The effect of that arrangement was to reduce the protection that had been given to the ready-made clothing manufacturers in respect of these suits for which they would still have to import the cloth.

The Tariff Commission undoubtedly considered the matter. They expressed themselves of the opinion that the five per cent. increased duty which they recommended would be sufficient to protect the firm engaged in the ready-made trade from suffering any loss because of the duty upon imported cloth, but after some time, when it became evident to the Minister for Industry and Commerce or the Minister for Finance that a mistake had been made, a proposal to increase further the duty upon imported clothing was again referred to the Tariff Commission. The Tariff Commission, however, rejected that proposal and brought in a recommendation to increase that exemption limit from 1/6 a square yard to 2/6 per square yard. The effect of increasing the exemption limit, although it met the case of the ready-made clothing manufacturers, reduced the possible demand for Irish woollen cloth and weakened the protection which had been given to the Irish woollen industry here. The arrangement which came into operation in February gave the ready-made clothing manufacturers of the Free State a very strong inducement to purchase the cloth produced here that was suitable for their business, but that inducement was destroyed, in part at any rate, when the exemption limit was raised from 1/6 to 2/6. I see it now suggested in the Press that an arrangement is likely to be made whereby the exemption limit will be reduced from 2/6 to 2/-, but it seems to me that all those proposals and counter proposals which are in the air are more or less attempts made to sidestep the obvious solution of the difficulty which was suggested from these benches on each occasion when the matter was before the House, that is, the increasing of the duty upon ready-made suits to at least 25 per cent. If that is done the inducement to Irish ready-made clothing manufacturers to purchase Irish cloth will remain unimpaired, while at the same time the protection which these manufacturers enjoy themselves will not be weakened. The only argument which has been advanced against that proposition is that it may mean a rise in the price of the ready-made suits to the consumer, but I think if that argument is examined properly it will be seen that it bears very little weight. It would undoubtedly, of course, raise the price of an English suit made out of English cloth and imported into this country, but surely that is the purpose of the protective duties, to discourage the sale of such suits here. It will not raise the price of the suit manufactured here whether manufactured from English or Irish cloth. The effect of the duty upon woollen cloth will undoubtedly result in a rise in the price of the suits made here from English cloth, but the suggestion to raise the duty upon wearing apparel will not have that effect by itself, and that is the proposition that is now before us.

Of course we know we will get the argument that the ready-made clothing manufacturers here will probably increase their prices if the duty is raised by the full amount, or almost the full amount of the increased duty. I do not think, however, that is likely, although it would be very hard to get that idea into the minds of Ministers in view of the attitude they always take in relation to such matters. I would like to point out, however, that in this business there is a very considerable competition. There are numbers of firms in this country all anxious to produce to the maximum of their capacity, in keen competition with each other. At the moment there is no indication that that competition will be lessened. We must also bear in mind that if such a rise in prices did take place the manufacturer could easily establish a very large trade for himself by putting on the market, as undoubtedly there will be on the market, a suit made from Irish cloth which will pay no tax whatever and which will offer an inducement in price to the consumer which will be increased as the prices of the other suits are increased. The fact that competition is in operation will mean that suits will be sold at the lowest economic price at which they can be sold.

We must also remember that this industry is in competition with another industry—the handicraft tailoring—and if the price of clothing is increased to a certain extent there is a very strong inducement for people to get suits made to measure in an ordinary tailor's shop. The industry is in a peculiar position in so far as the competition of another industry comes into operation. I believe, therefore, that we are satisfied that the rise in prices in consequence of the duty is almost negligible. On the other hand, if that course were adopted we will be keeping unimpaired the full effectiveness of the woollen tariff which the Tariff Commission and the Government considered advisable to impose, and the full effect of the duty in respect of the ready-made clothing industry which the Government considers is necessary to impose. I cannot understand why it is that the Minister for Finance or the Tariff Commission have refused to take the course that was obviously open to them on this matter on numerous occasions. As I pointed out before, they brought in a recommendation when the matter went to them a second time which they were not asked to consider. They were asked to consider a proposal to increase the duty on wearing apparel and they turned it down with practically no explanation as to why, and brought in an alternative proposal which no one asked for, neither the woollen nor the ready-made clothing manufacturers. I think if the Minister would ignore the Tariff Commission in this matter now when it is obvious that they have made a mistake, and act on his own judgment, he would take the line we are suggesting and increase the ready-made clothing tariff by at least another five per cent.

Mr. Aiken

I think Deputy Lemass has pointed out very effectively that it is very likely there will not be an increase in the cost of ready-made clothing if his suggestion is followed and another five per cent. is put on imported readymades. The whole attitude and action of the Government in regard to the tariff on woollen goods and on ready-made clothes is typical of this. They have been chopping and changing continually about these tariffs since they first began to consider them. Deputy Lemass has pointed out that the tariff which has been put on imported woollen goods will operate to reduce the tariff on ready-mades. Ready-made manufacturers in this country are not as well able to compete with the foreign ready-made manufacturers as they were previous to the imposition of the tariff on woollen goods. That is a very bad thing. What promise of security are the Government going to hold out to future manufacturers when they are going to put a tariff on their goods? We hope that they will go ahead with their tariffs and protect other manufacturing concerns in this country. But what inducements have the manufacturers of goods which we hope will be tariffed later on to increase their plant or increase their production? They may say to themselves that what happened in the ready-made clothing may happen in their case, that when they had increased their plant and trained their workers so that they were in a position to supply the home market and compete favourably with outsiders the Government might change their minds again. I hope that the Minister for Finance will accept Deputy Lemass's suggestion. There is no reason why he should not. Even if the cost of clothing did go up a little bit the people would have the money to pay for the clothing. At the present time you have a couple of hundred people employed in making ready-made clothes in Drogheda. It would be very little consolation to the workers who might be thrown out of employment if the price of clothes is lower when they have no money to buy them. At the present time they are getting employment, and even if clothes did go up a shilling or two per suit they would have the money to pay for them. If they are thrown out of employment it will not matter how low the cost of clothing is when they will not be able to buy them.

Another thing about the ready-made clothing is that if we have factories here making up ready-made clothes they will be close to the factories which are making the cloth and they will be able to tell the cloth manufacturers the designs they want. It is well known that a lot of clothing manufacturers are behind the times in the matter of designs, and it would be too bad if the ready-made clothing went out of existence and the manufacturers of clothing got further and further away from the people to whom they are going to sell their completed goods.

Mr. Blythe

It is not correct to state that the Tariff Commission was asked to report on an increase of the tariff on wearing apparel. What happened when the question arose after the tariff on cloth was put on as to the ability of the manufacturers to meet the needs of the clothing manufacturers, was this: that the case as it then appeared was put to the Tariff Commission. It was pointed out to them that the cloth manufacturers would not be able to supply the needs of the apparel manufacturers for a considerable time and that, in consequence of that, manufacturers of apparel would have to import their cloth, and pay duty on goods and that the protection which they enjoyed would be diminished. Having considered all the circumstances, the Tariff Commission made the report which led to this particular section in the Bill. The desire of the Tariff Commission, as shown in their report, was that the manufacturers of wool cloth should have this opportunity which will come to them from the clothing manufacturers. At the same time the Tariff Commission felt that only a moderate increase in the apparel tariff could be justified without special and separate consideration, because the application was for a tariff on woollen cloth. Incidentally, the position in regard to apparel had to be considered, but the Tariff Commission felt that they should be very slow to recommend what some people wanted, the doubling of the apparel tariff or an increase of 66 and two-thirds per cent., which Deputy Lemass suggests, without a separate application and the complete consideration of the matter. The position now is —I do not know whether Deputy Aiken adverted to it—and will continue to be if this section is passed, that the bulk of the cloth which apparel manufacturers require is imported free and, consequently, that they are not deprived of the protection which was given them by the apparel tariff.

It is true that as long as this section continues, the protection as regards that particular range of cloth must not be taken as equivalent to the abolition of the tariff on woollen cloths. As a matter of fact, at the present time the mills generally are doing very well. There is only one mill, I think, which could be said to specialise in a cheaper cloth. The other mills have been manufacturing the better class of cloth, and they are now finding a ready market. It is admitted that there is a great deal of work going on in the mills, and that this will make it possible for them to compete in those lower grades. It is undoubtedly a fact that the better trade and the resources that will come to them will make it possible for them to do something in these particular lines. It is open to them to make a further application in regard to this range of cloths if they so choose and to show the Tariff Commission that they will be prepared to meet the requirements of the clothing manufacturers. The Tariff Commission has shown that it is anxious to give them protection so far as these ranges of cloth are concerned.

It has been extremely difficult to get at all the facts in this case. Undoubtedly when the original application was before the Tariff Commission the entire facts of the case were not freely and immediately put before them. Facts that should have been disclosed immediately had, as it were, to be dragged to life. I think a great deal of the difficulty in dealing with this, as in dealing with many of these cases, is that everything is not always frankly disclosed, and difficulties and doubts about the possibilities of executing things are not put forward. The best side, naturally, is advanced. It is difficult for the Tariff Commission to know the facts.

As I have already indicated, representations are being made and information is being supplied by the Woollen Manufacturers' Association. That information will be examined with a desire to do the best that is possible both for the woollen manufacturers and the clothing manufacturers. I would not be prepared to adopt Deputy Lemass's suggestion and impose an extra five or, as some other people want, an extra ten per cent. on apparel without any recommendation to that effect from the Tariff Commission. I believe if that were done that there would be an increase in the cost to the public.

I would like to remind Deputy Aiken that it is not only the 200 employees who are working in Drogheda who would have to pay the increased cost, but people all over the country who have no connection with the clothing manufacturers or the woollen manufacturers. People who are miles from them, and who will not benefit in any personal way will have to pay any increased cost that may result. I would be inclined to go a certain distance with Deputy Lemass, and to say it is not as likely in this case as in many other cases that the full amount of the tariff would be added to the price. The manufacture of apparel is comparatively easy, and it would not be so easy therefore to make a ring which would include all or the bulk of those engaged in it and that would continue to include them.

If there was a tariff which made it easy for the manufacturer to buy Irish cloths, I think that probably these cloths would not be supplied at as cheap a rate as they would be if there was any great margin to spare. Consequently I am satisfied, apart from the cloth manufacturers altogether, that the price of cloths would be such that some extra cost would fall on the purchaser, and I believe that even the cloth manufacturers themselves, without any ring, would tend to make somewhat better profits if there was a good margin. Without saying that the entire five or ten per cent. would be taken from the public, I believe that some substantial portion would be taken from them. For that reason, and the reason I have indicated when I said that many people who would not benefit at all by the increased employment would have to pay the increased cost, I would definitely take up the position that I would not propose an increase that had not been recommended after examination by the Tariff Commission.

Mr. Lemass

There are just a few points to which I would like to refer. In the first place, the Minister mentioned that when the matter came before the Tariff Commission on the second occasion it was not on a proposal to increase the duty on wearing apparel. In the report it is mentioned that the cloth manufacturers stated that their view was that the situation would be met by increasing the clothing duty by ten per cent. and the woollen manufacturers agreed to that proposition, but the Tariff Commission turned it down and brought in alternative proposals.

Mr. Blythe

The Tariff Commission is supposed to consider more sides of the case than one; that is, to consider more than the case of the applicants. In this case, you might say that the clothing manufacturers and the apparel manufacturers were the applicants. The Commission had to consider all the matters and was really revising its original recommendations. It was not like a new recommendation. It was revising certain aspects of recommendations dealing with the woollen tariff. If two years had elapsed and the woollen manufacturers and the apparel manufacturers had come forward with a formal proposal that the apparel tariff should be increased, then there would have been nothing for the Commission to do but either to recommend the tariff or recommend against it. What they were doing was dealing with certain points that arose out of their original recommendation. There was no fresh evidence given.

Mr. Lemass

There are three parties concerned, namely, the ready-made clothing manufacturers, the woollen manufacturers, and the consumers. Both sets of manufacturers agreed to the proposition and, so far as the consumers are concerned, they are only articulate through this House and not through the Tariff Commission. It is my view that when you have both applicants and opponents, if I may term them such, in agreement it should be automatic for the Commission to bring that forward here and let the Deputies in this House, as representing the consumers, express their opinions instead of confusing the issue by bringing forward different proposals to that about which the applicants and opponents had been prepared to agree. The Minister stated that the recommendation to increase the exemption to 2/6 per square yard means that the bulk of the cloth for ready-made clothing is now imported free of duty. We have no information to test the accuracy of that statement except that available in the Census of Production. In the section relating to the ready-made clothing industry the figures are given as to the total quantity of cloth used by the ready-made clothing industry in 1926. It represented something like £1,500,000 in round numbers. That would show that the average price was 4/3 per trade yard, which is over the 2/6 stated here. It would appear that the bulk of the cloth would be within the tariff limit and it is only the cheaper cloths and less than half the quantity which will be included in the 2/6 mentioned in this section. In other words, the better class cloth will still be liable for duty whereas the poorer class cloth will not. I pointed out before when this matter was under discussion that the effect will be that there will be more suits of the poorer class sold and less of the better class because the difference in price between them will have been increased as a result of the tariff in this section.

The Minister said that the mills are doing well. I have no doubt that he is correct in that. The situation is probably all right at the moment in so far as the mills are taking advantage of the additional market made available by the imposition of the duty, and the ready-made clothing manufacturers are able to deal with the bulk of their business, but the Minister himself is fondest of emphasising the undesirability of chopping and changing in the matter of tariffs. When a proposition of this kind comes before us we like to see it settled at once instead of modifying it by successive steps in the hope that we will ultimately reach the right solution. The Minister said that if the ready-made clothing manufacturers are not satisfied they can come forward to the Tariff Commission with new proposals. Later on he said that certain information was submitted to him by a deputation which he received. I would like to know if it is intended that he will take action on his own behalf as a result of these representations or whether he will refer the matter again to the Tariff Commission after hearing all the representations that could be made to him. It seems to me that there is a degree of uncertainty in this matter. That is most undesirable. If the Commission is to deal with every suggestion in regard to the modification of a tariff we know where we stand, but if, on the other hand, as has happened, the tariff recommended by the Commission can be modified without further reference to them it is another matter. It happened in the case of the woollen duty—I am speaking from recollection.

Mr. Blythe

It did not happen. The only case in which I know that that was done in any substantial way, apart from verbal alterations, was in the case of glass bottles, and there there was agreement from all parties.

Mr. Lemass

I would like to be informed whether the Minister proposes to refer the representations made to him to the Tariff Commission or whether he proposes to deal with them before this Bill passes. That is a matter of some importance.

We have wool here, and we have weaving going on, and we should try to keep the ready-made factories going, so that there will be no possibility of their failure. They have proved their ability up to now, and with a little more encouragement they would be on their feet, and in a very short time might be doing an export trade. Undoubtedly ready-made clothing manufacturers could exercise a good influence over the people who weave the material. I certainly would like to see the ready-made clothing industry progressing, not alone for its own sake, but for its effect on the designs of the weavers. Our woollen manufacturers have proved, even in the last few years, handicapped as they were, that they were capable of developing their industry. In the United States, against a 60 per cent. or 65 per cent. tariff they are sending in goods and selling their materials. They did that with practically no help from the Government, and if they got a little help they should be able to develop that and other markets. If we go ahead and better our designs and our marketing system we can develop a very big business in woollen goods. It is the one industry for which we have a name abroad, and we should hang on to it and make the most out of it. We approved of the Government putting on the 20 per cent. tariff on woollens, but we did not approve of their allowing that tariff to operate to reduce the tariff which had previously been put on ready-mades. When the tariff went on the woollen goods the tariff on ready-made clothing should have been increased so as to keep the ready-made clothing manufacturers in the position in which they started a few years ago.

Minister for Industry and Commerce (Mr. McGilligan)

I think there is general agreement that the woollen industry is one suited to this country and that everything should be done to increase and extend it. But unfortunately when one gets to details as to how it is to be extended the lamentable fact comes to light that the only point upon which the apparel people and the clothing people can be got to agree is that an increased tariff should be put on ready-made goods coming into the country. One would imagine that when two sections of the community enjoy protection—enjoy it certainly at the beginning and in so far as they are not able to supply the entire requirements of the country at the expense of the consumer—that there would have been some accommodation likely as between these two sets; that the apparel people would have gone to the clothing people and given them orders, and that the woollen manufacturers would have made the best efforts they could to produce not exactly variety of design, because I think, as far as variety is concerned, the ready-made people are putting up impossible demands, but as far as quantity and certain variety of design is concerned they would have made a very good attempt to meet them. One cannot get agreement or accommodation even on these terms. As far as lack of accommodation is concerned, on the evidence put before me, I would be definitely against the ready-made clothing people as opposed to the others. In so far as they put forward an argument founded upon a big variety of designs that they claim they require to suit the needs of their customers, I would not give in to them a great deal. But when it comes to quantity of material at a certain price, then their contentions must be listened to.

What do we find with regard to this tariff? Deputy Lemass has spoken vaguely of the mistakes made by the Tariff Commission and of the lack of public confidence likely to be brought about by constant changing. There was no mistake made by the Tariff Commismission. Many a court case has been referred back after having been heard before impartial judges in whose capacity and discretion there is every confidence, simply because new evidence has come to light. That is the case here. There was new evidence with regard to the bulk of the cloth required by the ready-made clothing people. On that I am not taking averages from the Census of Production figures. I am taking an inquiry made into the books of three or four of the biggest firms in the country by officials of my own Department at a time when it was not realised what that inquiry was for and when no change in the presentation of the figures could have been made to suit their case. On that, there was definite agreement that the old exemption limit would have brought within the scope of the tariff the bulk of the cloth required by the ready-made people.

Mr. Lemass

The old exemption limit of 1/6?

Mr. McGilligan

Yes, and that the bulk of their requirements lay between the 1/6 and the 2/6 per yard.

Mr. Lemass

Let us have the precise truth about it in relation to this present tariff. Deputy Lemass read out figures showing that there was a very big amount of tariffed suitings brought into this country, and a very big quantity still coming in. We are asked to increase the tariff. When the ready-made manufacturers in this country are not able to supply the needs of the country in ready-made clothing, does it stand clear to commonsense that there is to be an extra increase of articles sent in?

Mr. Lemass

I am not sure that that is correct, that the ready-made clothing manufacturers cannot supply the needs of the country. The only information I have is this information in the Census of Production. According to the Census of Production for 1926, the trade represented 75 per cent. of the total imports of 1924, the year before the tariff was imposed.

Mr. Lemass

The Tariff Commission did recommend that this matter should be reviewed after five years or that their first recommendation should come into operation automatically at the end of five years. This section seeks to impose an exemption limit and will remain.

Mr. Blythe

No—"or within five years."

Mr. Lemass

Five years after 23rd May, 1929, the first recommendation of the Tariff Commission comes into operation. Is not that so?

Mr. Blythe

Yes.

Mr. Lemass

Mr. Flinn

I move:—

To insert before Section 30 a new section as follows:—

On and after the First day of August, 1929, entertainments duty within the meaning of Section 1 of the Finance (New Duties) Act, 1916, shall not be charged or levied on payments for admission to any entertainment which on application by the promoters has been certified by the Minister for Education, or other authority recognised as competent by the Minister for Finance to be in the actual effect on those taking part in or witnessing same as predominantly educative.

As the Minister has repudiated the child of his own that I offered him to-night, perhaps at this late hour he may be more willing to take one of which he, I think, is god-father. I think he will be reasonably familiar by now, and probably a few members of the House are reasonably familiar with the subject matter of this amendment. We have been faced by the fact that there are particular so-called entertainments in Ireland which have behind them, not merely a background, but an absolute structure of educational effect, and I think the Minister for Finance is quite as strongly as I am in favour of seeing that entertainments of that character which can be so described shall not be penalised and used as a method of inland revenue. Anything more absurd than to suggest that educational activity in the country should be actually taxed for revenue I can hardly conceive as a proposition. Now the position that the Minister took up on the last five or six occasions, I think, on which we discussed this matter was that he was entirely in favour of doing this thing. He did not know how to do it without increasing the area of exemption further than was desirable. He and his staff were to go into it in the last year. He was to consider a formula which I put before him. He was to consider some alternative formulas of his own and see if, by any possibility, a formula could be got which was watertight, which would exclude from the area of taxation educational activities under the form of entertainments, and which would not allow, under that exemption, entertainments which were not strictly educational. In this amendment we have taken every means of assuring that they shall be actively educational. We have taken the responsibility of saying that the onus of proving to the satisfaction of the Minister for Finance that they are educational shall be upon the promoters of those enterprises, and that the cost of proving that they are educational to the satisfaction of the Minister for Finance shall be on the promoters. I do not think we can possibly go further than that.

Progress reported.

The Committee to sit again tomorrow.

Dáil Éireann debate - Thursday, 20 Jun 1929