I move the Second Reading of this Bill, It embodies; in general form, the resolutions which have already been before the House and which have been discussed at great length. There are a few minor matters which were not mentioned in the Budget speech and which were nolt covered by the Financial Resolutions incorporated in the Bill. There is also one major matter which was mentioned in the Budget statement but which was not deal with by resolution embodied in the Bill.
A resolution was not necessary because the major matter was in the nature of a concession, and that is governed by Section 7 of the Bill. Section 7 relates to relief to investors in Saorstát Eireann securities which the Government proposes to make operative., This section provides for a repayment or an allowance of 20 per cent. of the income tax applicable to dividends received by individuals resident in Saorstát Eireann, and not resident elsewhere in respect of sums subscribed by them to capital issues made after the passing of the Act by Public companies, which satisfy certain conditions. Paragraph (a) of sub-section (1) of that section is the operative section which gives the concession. Paragraph (b) is introduced in order to ensure that in estimating the total income of the individual for the purposes of income tax and sur-tax such dividends or interests as he would receive from securities entitled to the benefit of the section shall be deemed to be reduced by 20 per cent. Otherwise a person, some part of whose income was derived, from investments enjoying the concession, might find himself liable to surtax when it was not the intention of the Government that he should be so liable. Sub-section (2) specifies the provisions that the company must comply with in order to secure the concession. The first of these is that it must be incorporated by or under the laws of Saorstát Eireann. It must be a company limited by shares within the meaning of the Companies (Consolidation) Act, 1908. The third is that it must bve managed and controlled in Saorstát Eireann, and thr fourth is that it must be a company which carries on business or, if it has not alreaycommenced business, intends to carry on business wholly or mainly within Saorstát Eireann. Paragraph (b) of sub-section (2) providees that the capital which is proposed to be raised by the issue enjoying this concession, "is, or is intended to bem, or has been devoted to the establishment or extension in Saorstát Eireann of one or more industires as defined by this section.
The defining clause is sub-section (5) of Section 7. The third condition to be fulfilled by a company is that no part of the cpaital to which the concession applies is to be or has been used directly or indirectly for the purpose of acquiring an existing business or any share or interest in an existing business, or of purchasig investment, or of paying off existing loans or debentures. The purpose of this paragraph is to ensure that the concession will only appluy to those cases in which fresh capital for the purpose of expanding a business or starting a business is being invested.
For instance, if an existing business were merely to be turned into a limited company, and there was no expansion of the business, or where new capital was to be used merely to pay off debentures issued, then the concession would not apply. In this connection a point may arise where capital was being raised not merely to purchase an existing business, but also to develop and expand it. In that case there would have to be two capital issues of distinct classes of shares,. Supposing the business which it was proposed to extebd were are the same time to be secured for say £50,000, and tghe company wished to raise £200,000, fo which £150,000 would be devoted to the expansion of the business, then there would have to be two distinct issue of two classes of shares, one of which of shall call "A shares, the total issues of which would amount to £50,000, devoted to the purchase of the business, and which would not enjoy the concession. The second class, which we will call the "B" shares, would enjoy the concession and would continue to enjoy it so long as the £150,000 of the capital was devoted to the real purpose of the issue, that, is to the extension of the existing business or the continuance of such extension. Paragraph (d) of sub-section (2) is merely to provide for the convenience of administration. That is to say it provides that the issue of stock, shares or security to which the concession applies must be readily distinguishable from the other issues of the company. Sub-section (3) provides that the dividend warrant in respect of which the concession will be claimed by the investor must also be easily distingushable. The manner in which sub-section (3) will operate is as follow: If the Minister certifies that he is satisfied that the issue of capital made by X.Y.Z. company in respect of the "B" shares of that company fulfils all the required conditions, the dividend warrants of the company will show separately thye dividends on the "B" shares and inspectors of taxes throughout the country will know at once that the allowance can be granted in respect of these dividends. Sub-Section (4) provides for the withdrawal of the certificate of the Minister which confers this concession if he considers that any of the presecribed conditions have not been met. Sub-section (5) makes the concession admissible in respect of any type of trade or business subject to cetain specified exceptions which are set forth in the sub-section.
Section 8 of the Bill relates to a minor matter and is designed to legalise the practice which has been in existence for many years. Irt enables the Special Commissioners to communicate by post their determination on an appeal. This practice has been followed for many years. There are two types of cases in which it is followed. It frequently happens that after hearing arguments on a legal question arising on appeal the Special Commissioners reserve their determination in order to consider the arguments. According to a strict reading of the law, they ought to arrange a further sitting to give judgment. That would entail the Sepcial Commissioners going say, to Tralee or some other centre in which they have sat, resummoning the appellants or their representative, and formally delivering their determination on the appeal. Quite obviously that would put both the State and the appellants to a considerable amount of inconvenience and would involve them in considerable cost. It has not been the practice to do that. Hitherto, the Commissioners having determined the appeal, notified the appellants by post of their determination.
The second case, which is similar to the first, is one in which possibly greater hardship nmight be impsed if the strict letter of the law were to be complied with; that is the case of an appelled whose assessment is small. As a general rule, when such an appellant comes before the Special Commissioners it is found that he has nothing but vague general statements to substantiate his appeal and the Commissioners, in order to give him time to produce some sort of account or written evidence to support his case, adjourn the determination of the case for the purpose of allowing him to submit such evidence to the local inspector of taxes. If the documentary evidence support the appellant's case, the inspector of taxes notifies the Special Commissioners accordingly.
If it does not support his case, a corresponding notification is sent. In either event the Special Commissoners can notify the appellant of their determination by post.
In this case, as in the first case, in which the amount of money involved is greater, it would again be a hardship on the appellant if he had to appear before the Sepcial Commissioners in person, and quite obviously it would be an unjustifiable expenditure if the Special. Commissioners has to travel to Galway or Tralee or some remote part of the country merely for the purpose of issuing their determination and stating, in effect, that the appellant had not been able to produce satisfactory documentary evidence to sustain his case. It has not been the practice of the Commissioners to proceed in this way. They have utilised the post for the purpose of communicating the determination of the appeals to the appellants. The practice has been found, at any rate, convenient and cheap. I am not going to say that it has given general satisfaction. I suppose the amount of satisfaction which the preative give would be assessed by the reduction in income tax which the appellants secure. At any rate, it has been a convenient and chep practice.
It happens, however, that the validity of a determination given under these circumstances has been questioned recently in one of the Circuit Courts. The strict letter of the law possibly would involve the Commissioners proceeding in ths very cumbersome, tedious and expensive way to deliver their determinations in the case of every appeal which came before them. Accordingly, the purpose of this sub-section is to legalise the practice hitherto prevailing and to enable to Commissioners, without question, to communicate determination by pose.
In connection with this section I would like to point out that, zas the law stands, whenever, a determination is communicated or is given at a personal hearing, the appellant, if he desires to appeal to the high Court on a point of law, must express dissatisfaction immediately with the decision of the Special Commmissioners., If the desires to carry an appeal to the Circuit Court on a point of law or fact, he must express dissatisfaction within ten days. Sub-section (2) provides that where a determination is sent by post the tinme limit for both purposes shall be twelve days after the date of the written determination.
Section 9 deals with certain reciprocal relief in respect of the United States of America,. It relates to the exemption from income tax, including supertax or surtax, in respect of income derived from the operation of a ship or ships documented under the laws of the United States. As the House is no doubt aware, there is a very special case for relief from double taxation in respect 0of profits on shipping. A tramp steamer in the course of a round voyage may call at several different countries and be charged income tax in each of them. The principle of making arrangements for relief on shipping profits has been gererally recognised by many countries and by the League of Nations. In the Finance Act of 1927 provision was made for making such arrangements by order and arrangements were, in fact, made with Norway and Sweden under the section and an arrangement is in course of conclusion with Denmark.
It was originally intended to make an arrangement in the same way with the United States, but it was found that technical difficulties arose owing to the fact that the Saorstát legislation contemplated a formal arrangement being made, whereas the law of the United States does not admit of this., That law provides for the granting of relief on the lines followed in Section 9 of Bill and would make the relief possible only in the case of those countries which grant an equivalent exemption to United States citizens and companies. If this section is passed in its present form it will satisfy the equivalent exemption privision of the United States law and reciprocity by the United States will, therefore, follow automatically. In order to ensure this, the section, I think, has been based on the United States provision.
One other matter which was not referred to in the Budget statement and for which it was bnot necessary to introduce a Resolution is referred to in Section 35. It exempts from legacy duty the whole of the legacy give for charitable purpose by the will of a person dying, after the passing of this Act, where the Revenue Commissioners are satisfied that the whole of such legacy has been, or will be, applied to charitable purposes in Ireland. There is no new principle embodied in this section. As a matter of fact, under Section 38 of the Stamp Duties (Ireland) Act, 1842, a legacy that must be applied to charitable purpose in Ireland is exempt from legacy duty. It happneded, however, that owing to certing court decision, this exemption was held not to operate unless the terms of the will are such that the executors, or trustees, must apply the legacy for the benefit of a Irish charity. It has happened, owing to careless drafting, that in many cases, although it is reasonablu clear that the intention of the testator was that the legacy should be applied in Ireland, the will has been so drawn that the executors have had to option of applying the legacy for charitable purposes elsewhere. In such cases, even though the legacy wqs applied wholly for charitable purpose in Ireland, exemption cannot be given under the existing law. The clause is designed to remedy this defect and to ease the conscience of the Exchequer which, at the present moment, will, owing to an accident or an error on the part of tghe person drafting a will, get duty to which it has no equitable claim.
These are the only features of the Finance Bill which, as I have said, have not already been before the House either in the Budget speech or in the form of the Resolutions. I may say that in connection with the Bill as it stands, owing to the pressure on the draftsman's office and the expediency of Parliamentary procedure, it will be necessary to introduce a number of minor amendments on the Committee Stage. Most of them are drafting amendments, and intended merely to clarify the text. There is, however, one section which has been omitted from the Bill, and which it is intended, also, to introduce on the Committee Stage. This is a section which appears in last year's Finance Act dealing witht the duty on moneylenders' licences. It may be remembered that under Section 19 of last year's Act, power was taken to levy money upon moneylenders' licences which might be issued under any Act passed, or to be passed, during the financial year ended 31st April, 1931. The last Government were unable to introduce the necessary legislation in time. We hope to be in a position to introduce it in the current year, and, accordingly, on the Committee Stage a section will be introduced giving us power the impose a licence duty should the necessary legislation be passed.