Dáil Éireann debate -
Thursday, 7 Jul 1938

Vol. 72 No. 5

Committee on Finance. - Finance Bill, 1938—Second Stage.

Minister for Finance (Mr. MacEntee)

I move that the Bill be now read a Second Time. Most of the matter contained in this Finance Bill has already been before the House in the form of Financial Resolutions. As the provisions of these Resolutions have been explained to Deputies and as a further opportunity will be afforded on the Committee Stage of the Bill of obtaining additional information, should it be required, it is scarcely necessary that I should occupy the time of the House to-day with a recapitulation of what they purport to do. Accordingly, I propose to confine myself to a short explanation of the provisions contained in the Bill other than those covered by the Resolutions.

In Part I of the Bill, which relates to income-tax and surtax, the only sections which have not already been considered by the House are those numbered 3 and 4. These merely bring up-to-date the exemptions from income-tax granted in respect of certain allowances payable to relatives of persons killed in the Rising of 1916, and in respect of wounds and disability pensions and gratuities granted under the Army Pensions Acts. Section 2 provides relief in certain circumstances from Section 2 of the Finance Act of 1937 which relates to settlements on children. I shall deal with Part 2 in a moment. In Part 3 of the Bill, which relates to customs and excise, the only new provisions are those contained in Sections 22 to 25. Section 22 provides for exemptions from entertainment tax any competitions promoted by the Irish Amateur Billiards Association, the Irish Chess Union, the Irish Squash Racquets Association and such-like bodies. It also provides for exemptions in respect of air displays, gymkhanas, motor racing and motor boat racing. Section 23 provides for the payment of compensation bounty on portions of the 1934 and subsequent crops of home grown tobacco allocated to manufacturers, and subsequently destroyed as unworkable. I referred to this proposed concession in the course of my Budget statement. Section 24 merely extends from one year to three years the period during which an officer of customs and excise may demand the production of documents relating to the importation of goods. Experience has shown that the existing time limit is too short in certain cases. Section 25 is a drafting amendment designed to remove any doubt which may otherwise exist as to the power to determine the value, for the purpose of the Customs Acts, of goods on importation.

Part 4 of the Bill deals with death duties, and there the only section which has not already been before the House is Section 27. This section provides for exemption from estate duty of an inter vivos gift of movable property abroad made within three years before the death of the donor if the gift is made in consideration of marriage or is proved to have been part of the normal expenditure of the deceased or does not exceed £100 in value or amount and is an extension of the exemption which already exists in the case of a gift of movable property situate in Eire.

Part 5 of the Bill is new. It merely continues for a further period of three years, that is to say up to the 31st December, 1940, the existing exemption from Corporation Profits Tax of the Agricultural Credit Corporation and the railway companies. Part 6 of the Bill is the usual part which deals with miscellaneous and general provisions which may be found necessary from time to time. It contains the usual clause that all taxes and duties imposed under this Act are placed under the care and management of the Revenue Commissioners. It provides that the words "Ireland" and "Irish" shall be construed to apply in present circumstances in the manner provided for under Article 3 of the Constitution.

Part II of the Bill consists of Sections 8 to 14. This Part of the Bill is designed to give effect to resolution No. 3, adopted by a Committee of the House and reported to the House, which, as I have already explained, provides broadly that, in so far as income which accrues to the executors of the estate of a deceased person is in fact paid to a live tenant, residuary legatee, etc., it shall be treated for the purposes of income-tax and surtax as part of the income of the person to whom it is so paid. These are the principal provisions of the Bill.

Mr. Cosgrave

When the resolution to amend the law was before the last Dáil on the 19th May, the Minister for Finance went to some pains to deal with the question of derating. It may be urged that that is not a matter that properly comes within the scope of a Finance Bill. The fact is that the Finance Bill must find the money to give effect to it. In the course of his observations, the Minister said, as reported in Volume 71, No. 10, of the Official Report:—

"Deputy Cosgrave, trying to make the case for the volte face which has taken place, for the political somersault in which the Opposition is now engaged, said that the commission could not report in favour of derating in 1931 because the farmers at that time were prosperous.”

As a matter of fact, I did not say that, but one need not wonder at the Minister saying it. It would have been more the Minister's case than mine. The Minister went on:—

"The Deputy referred to certain figures. For instance, he said that, in 1926, the farmers owned 27 per cent. of the moneys on deposit in our banks and that in 1929 they owned 29 per cent. of those moneys. That is to say, in 1926 the bank deposits belonging to the farmers amounted to 27 per cent. and the remaining 73 per cent. of these deposits belonged to the rest of the community."

That is what the Minister represents me as saying. As a matter of fact, I did not say that at all, nor anything approaching it. I have here a report of what I did say. What has been referred to was not a statement by me; it was an extract from the report of the Derating Commission available to the Minister and recommended by one of his colleagues on the Front Bench — the Minister for Industry and Commerce — to the rest of the House. The Minister, apparently, never read it or, if he did, conveniently forgot it. These two figures, 27 per cent. and 29 per cent., had reference to the Post Office Savings Bank and were never mentioned by me as having reference to bank deposits.

I direct the Minister's attention to the paragraph which I quoted from the report of the Derating Commission. It will be found in Volume 71, No. 9, of the Official Report of 18th May and it is No. 154 of the report of the Derating Commission, page 68. That paragraph is as follows: —

"As the result of an investigation recently made for us by the Department of Posts and Telegraphs, it is estimated that the percentage of deposits in the Post Office Savings Bank which may be attributed to agriculturists rose from 27.1 per cent. at the 31st December, 1926, to 28.3 per cent. in 1927, 28.9 per cent. in 1928, and 29.1 per cent at the end of 1929."

There is a further paragraph in that report which may have escaped the Minister's attention. It is as follows:

"It was also found, as a result of an investigation made for us by the Bank of Ireland, that the proportion of its deposit accounts attributable to agriculturists rose from 51.03 per cent. at the 31st December, 1925, to 52.32 at the end of 1929, and there is no reason to think that this experience is not typical of the experience of all Saorstát banks."

I do not know what the Minister's intention was when he made this ridiculous and foolish statement, nor do I care. Not satisfied with harnessing me with such an irresponsible statement as I have just referred to, he went on to say:

"I read just a few weeks ago a statement from a very authoritative source——"

I am leaving out the interjections by Deputies at this stage——

"It was a statement which was published in a newspaper. I do not know what source, but I know that the person who wrote the article would have been in a position to know. I do not know where he got his figures. At any rate, this person, whose credibility I do not doubt and whose ability to speak with authority I accept, said that the amount of the Irish farmers' share of the bank deposits which had been 27 per cent. in 1929 had risen in 1936 to 39 per cent. That is to say that in 1929, when the wave of prosperity must have been at its height, the Irish farmers owned 27 per cent. of the deposits in Irish banks and the rest of the community 73 per cent. According to this authority, which I am prepared to accept, the farmers' share of the deposits in 1936 had risen to 39 per cent."

I do not know from what newspaper the Minister got all that foolish information, because foolish it is if we are to associate the 27 per cent. in 1926 with 29 per cent. in 1929 and 39 per cent. in 1936. However, let us take the Minister's foolish figures, or the figures of this foolish authority which he quotes. The only reference within my recollection — the Minister can tell me whether or not my source of information is correct — to this subject was in an article in "Lloyd's Bank, Limited, Monthly Review" for January, 1938. The article is signed "John P. Colbert," and the date is December 7, 1937. Extracts from this article were published in the Irish newspapers. If other articles from authoritative writers on the subject of the deposits attributable to farmers were published during that period, I have no recollection of having seen them, nor has anybody drawn my attention to them.

I take it that the Minister was quoting from Mr. Colbert's article, and the Minister himself can tell us whether or not I am wrong in associating his observations with the article written by Mr. Colbert. What do we find in his article in this publication? He says:—

"At any rate, the farmers have emerged from the crisis in a singularly strong financial position. Reliable figures are available which show that the total indebtedness of the Free State farming community to the banks and to the Agricultural Credit Corporation in January last..."

and as the article is dated December, 1937, we presume he refers to January, 1937,

"...amounted to only £13.5 millions, whereas on the same date the farmers held time deposits in the banks amounting to as much as £35.6 millions. Both on the borrowing and on the depositing side, the farmers are the largest group of banking customers in the community."

If the source from which I am reading now is not the Minister's source, I take up his 39 per cent. as representing the banking deposits attributable to agriculturists. We may take it that there is something like £116,000,000 on deposit in the banks at present. Thirty-nine per cent. of that is approximately £45,000,000. There is somebody out in his calculations — either the Minister or Mr. Colbert — because they do not tally.

Mr. MacEntee

What has the Deputy just said about the date of that article?

Mr. Cosgrave

The article is dated December, 1937.

Mr. MacEntee

And refers to figures in January, 1937.

Mr. Cosgrave

I presume so.

Mr. MacEntee

The Deputy has taken the figures for the present day.

Mr. Cosgrave

I will take any figure the Minister likes. I will take £120,000,000. It will not put the final figure out by £1,000,000. The Minister had better behave himself. He is not on a platform in Rathmines or elsewhere now. He has to deal with actual facts, and we want no such thing as boys' byplay in this business.

Mr. MacEntee

I am loath to interrupt the Deputy, but this is a matter that should have been raised on my Estimate. I doubt whether it is in order on this Bill. I do not wish to give lessons in manners to the Deputy——

Mr. Cosgrave

It arises out of a speech of the Minister on the occasion of a motion before the House that the law should be amended. This Bill proposes to amend the law and there is an exact and absolute continuity in the whole business. It is just on a par with the Minister's information about finance matters that he does not know what is in order on the Bill. I am not blaming the Minister for his lack of information, his lack of knowledge or competency. He is in the unfortunate position of having got a job to do that he is incapable of doing, but the people who are suffering are the unfortunate farmers of the country about whom the Minister cares nothing whatever.

He talks to us about a political somersault. Does he understand anything about the different circumstances in 1931 and to-day? Does he know that the Derating Commission opposed derating in this country because of the extra taxation it would mean? Does he know that in the last six years he has imposed five or six times that cost and has not given the farmers derating, and that, not alone has he not given them derating, but he has given them actually £78,000 a year less than they were given before he changed his position from this side to his present side? The Minister stated that I said that the conditions in agriculture were prosperous in 1931. I said that compared with to-day agriculture was booming, and this measure, with all its predecessors since the Minister entered into office, has piled taxation on every section of the community regardless of their capacity to bear it.

We are faced now in this year 1938 with a complete political somersault on the part of the Government and, one might almost say, with their full acceptance of the main plank in the Opposition's programme of the last six years — the bringing about of a settlement with Great Britain. They have done it and I am glad they have done it. My complaint is that they did not do it six years ago. They had not the courage to do it six years ago, but the desperation of their followers has probably driven them to it, together perhaps with the knowledge that the financial and economic policy pursued here during those six years could not continue indefinitely. Never was a country so sabotaged by a Government as this country has been by this Government during these six years, and never has there been such an attack made on its national economy, its working classes, its traders, its farmers and everybody who goes to make up the working people of the country, as that made by the policy of the Government during that period. Some have done remarkably well out of it. We have increased our indebtedness, national and local. We have made it practically impossible for farmers to meet their obligations.

We shall probably be told by some of the spokesmen of the Government that they are trying to evade their obligations, but looking up the records of the farmers of this country for a period of something like 30 years in relation to their payment of annuities, I find that no banker in any part of the world had a better class of customer amongst his first-class customers than those who comprised the Land Commission annuitants of this country during those 30 years. We find now that during the last three or four years, those years of marvellous prosperity to which Government spokesmen occasionally refer, the arrears of annuities are double what they were over 30 years, until the Minister took up office. There is no political somersault whatever on the part of this Party in connection with derating. The circumstances of 1931 and of to-day are as different as chalk and cheese. The agricultural exports of this country have diminished to a greater extent than the sum of money about which the Government was in dispute with Great Britain. The British have got all their money — every penny of it that they could have got out of this country — but the farmers have lost, and lost heavily, and they are no longer in a position to pay their rates and annuities which they were able to pay when this Government took office.

We are invited now to put down a motion in connection with derating. We do not propose to do anything of the sort. If the Government, from top to bottom, require to know anything about derating, they can look at what has been said during the last six years, and they will learn in the course of the next five or six years, if it does not take them longer, that they will have to adopt, if not derating, some other policy to rehabilitate the agriculturists of this country. They talk about it being inequitable. Inequitable, if you please! They are great judges of what is equity. What has been their policy in connection with agriculture for the last five or six years? It is an entirely different one from what we are dealing with now. During that period, it had reference to remedying, as far as possible, the baneful effects of their conflict with Great Britain. There were two main sources of improvement for agriculture — wheat and beet. We have 225,000 acres of wheat this year, and approximately 50,000 acres of beet. One farmer in five benefits by the beet business, and probably one in six, or one in eight, by the wheat policy. When they speak to us about equity, I should like to know whether, if derating was adopted as a policy, everybody would not get something out of it, whereas, according to their own scheme for assisting agriculture, one in eight in one case, and one in five, in the other, get the benefit. What matter if it were of any benefit to them, but a more expensive and extravagant proposal for assisting the main industry of the country could not possibly have been conceived by anybody.

As far as the Government is concerned, they have no policy for agriculture or industry at present. Why, only this evening, when the Estimate for Industry and Commerce was before the House, one had only to look at that Estimate to see that it alone was a condemnation of the Government's policy. What did we find? A sum of something like £200,000 was being put into the production of industrial alcohol, and at the other end of the series of figures with which we were supplied, it was estimated that a sum of £168,000 would be received from the sale of industrial alcohol. That looks all very well on paper, but what are the facts? The alcohol is worth, from the point of view of commerce, or as a commercial proposition, 4d. per gallon, and we are to pay 3/- per gallon for it. We are, therefore, going to receive that sum of £168,000 by reason of charging nine times the actual value of the alcohol. Similarly, with regard to a whole series of items in connection with that Estimate, taxes of one sort or another are being imposed on production in this country. Fees in connection with cement alone will probably amount to £20,000 or £30,000. I know that the Minister collected £100,000 in connection with cement alone in the last year for which we have published accounts. I mention these things because these items are the engines and the vehicles of production. Tax those things which are essential for the setting up of factories, or for production of any kind, and you might as well put an extra shilling or two on income-tax on the people concerned. The Estimates are littered with particulars of various revenues that are collected from this, that or the other form of production.

Notwithstanding the fact that the Ministry has persuaded a large number of very foolish people to vote for them and return them, and that they have now got a splendid majority, they will have eventually to adopt the policy that we have put before the country, whether they like it or not. It is no wonder that their Leader announces their intention of doing that now. My only complaint is that they did not do it when it was first suggested to them. One of the first things they will have to do is to reduce the cost of government, which has grown beyond the capacity of the taxpayer to bear. This Bill shows no improvement on its predecessors in that respect. A period of something like six or eight months has passed by since negotiations were concluded with the British Government to bring about a different state of affairs, but notwithstanding the change that has taken place, the same policy apparently is to be continued. Nobody outside of Bedlam ever heard of such a suggestion as that. The whole machinery of the State practically was mobilised to deal with the conflict with Great Britain. That is now over, and what are the new plans? We have not heard about them, and we have to face the same costs as if the conflict were on still.

I should like the Minister to devote his attention to the latter part of the extract from the report I read of the Derating Commission:—

"It was also found as a result of an investigation made for us by the Bank of Ireland that the proportion of its deposit accounts attributable to agriculturists rose from 51.03 per cent. at the 31st December, 1925, to 52.32 per cent. at the end of 1929."

They add this:

"There is no reason to think that this experience is not typical of the experience of all Saorstát banks."

Now, let the Minister, if he likes, look up what those returns are. I am quite sure the banks would accommodate him in that respect. I am quite sure; knowing, as they do, the importance of this matter to our national finances, that they would facilitate the Minister in every way possible. Let him inquire from them individually for his own information, and for the guidance of the Ministry, what has been the experience since and compare the figures for 1931 with the year ended December last. Let him see whether that picture will not tell its own tale. At the annual meetings of the banks which took place this year in respect of last year's business reference was made to the large number of withdrawals of deposits made in the rural areas and expression was given to the regret of the bank directors at the inability of depositors to restore these moneys.

The position to my mind is quite a simple one. If the Minister is going to continue taxation at the peak figure that it has reached at the present moment, attention will have to be directed towards increasing production in this country, increasing in the first place its agricultural production in value and quality, towards lessening the costs of those engaged in industrial output, towards lessening the costs of the article to the people, towards trying to reduce those unnecessary expenses that have been imposed in one way or another on industry and commerce in this country. If the Government proposes to do that, it will have to put its own house in order first and reduce the terrible pile of taxation which it is imposing on the people.

Mr. Costello

The observations that I have to make on this Bill might perhaps be more appropriately made in greater detail on the Committee Stage but at the same time the topics in which I am interested in the Bill raise matters of fundamental principle. The Bill continues principles of a pernicious character which have their roots in earlier measures of this kind introduced by the present Government. The first principle embodied in this Bill to which I should like to refer is the principle of retrospective legislation which is always in favour of the Revenue and never in favour of the taxpayer. That principle appears to be one of the outstanding characteristics of every Finance Bill introduced by the present Government. We have several examples of it in the Bill before the House — the principle that where it is necessary to the Revenue to get powers to go back an indeterminate and indefinite period, practically without restriction against the taxpayer, such powers are embodied in a Bill of this character. They are embodied in this present measure. Where, however, it is a question of relief to the taxpayer, where it is a question of giving any benefit to the taxpayer, you do not find in any of the financial provisions or in the provisions of this particular Bill any power of a retrospective character or any power which will enable relief to be given retrospectively. May I take one or two examples?

We find the first of these retrospective provisions in Section 5 (8) dealing with the collection of coupons, principally by banks. That sub-section states that "Schedule C and D of the Income Tax Act of 1918 shall have and shall be deemed always to have had effect, subject to the provisions of this section." That provision is obviously inserted in favour of the Revenue, and will, I think, impose a very serious burden upon banks. It will probably impose upon them duties which they will be unable effectively to carry out, and which will, in any event, involve them in very considerable expense. Sub-section (8) of Section 5 in effect provides that banks and bodies of that kind can be called upon to go back and account for coupons that have been received and collected by them in past years without reference to any particular time. They can go back almost to the beginning of the history of income-tax.

Again, in Section 6 (5) it is provided that this section shall apply and have effect in relation to every year of assessment which began before the 6th April, 1938, as well as every year of assessment beginning after that date. In other words, you can go back to the time when income-tax was first established. Again, in Section 7 (4) it is provided that that particular section dealing with the value of bonds issued for payment of interest by way of funding will have effect in relation to every year of assessment which began before the 6th April, 1938, right back without any restriction, without any definite date being put upon it, and without any limitation whatever. May I remark in passing that Section 7 itself appears to be vague, again in the interest of the Revenue and against the taxpayer. It provides that the bonds in question are to be taken at their face value. But it very often happens, when these transactions take place, that the funding bonds are issued by defaulting debtors. They may have a certain face value, but the actual value may be nil. However, that is a matter of detail which can be discussed in Committee.

Mr. MacEntee

Will the Deputy show where the word "face" occurs in that section?

Mr. Costello

That is my comment on the section. What I am saying is that the face value may be taken on the construction of the section.

Mr. MacEntee

The Deputy says that it provides that they are to be taken at their face value.

Mr. Costello

I say that that may be the construction of the section. I shall deal with that matter on the Committee Stage in greater detail. I merely made the remark in passing. The Minister will not get out of it by pointing two or three times nervously with his finger towards me. We can deal with that matter on the Committee Stage, and I will justify anything I say. I am dealing really with the question of retrospective legislation. I referred in the few examples I have mentioned to the principle of retrospective legislation in favour of the Revenue, and I want to say that there is nothing in this Bill in favour of the taxpayer. The principle of retrospective legislation is not applied in favour of the taxpayer.

In Section 27 of this Bill there is a provision rather belatedly remedying an injustice which, by faulty draftmanship or some other reason, crept into the Finance Act of 1924 in reference to the payment of death duties. My recollection of the Act of 1924 is that it made proper provision where gifts were made of property situate outside this country, as the Finance Act of 1894 had made no provision for the charging of estate duty on gifts of that kind. When we became a separate State, it was obviously improper that gifts, say, of Guinness' shares, being technically gifts of property situate abroad, should not be brought into the aggregate in the estate of a deceased person for the purpose of estate duty. Accordingly, a section in the Finance Act of 1924 was passed for the purpose of remedying that position. In doing that, it was overlooked that it had never been the law that gifts made, in consideration of marriage, of property situate abroad, should be subject to death duties. But it would seem, on the construction of the Finance Act of 1924, that gifts of that kind, made in consideration of marriage, were caught within the ambit of the net in the particular section of the 1924 Act.

It was recognised that that was improper and unjust and, I think, it would probably be recognised that that was never intended. The injustice was not remedied until the present Bill was brought in. The point I make is that where in a Finance Bill provision is made for stopping a hole which has appeared against the Revenue, then we find that the Revenue is fully covered and that retrospective legislation is introduced in its full operation in favour of the Revenue. But when we find that an admitted injustice against a taxpayer has crept into a Finance Act, and when that injustice comes to be remedied in favour of the taxpayer, the retrospective principle is not so applied, because Section 27 only applies to the death of a person occurring after the passing of the Act. I do not know to how many cases of this kind the matter will apply. But, if there were a marriage settlement of that kind dealing with Guinness' shares in respect of a person whose death occurred to-day or yesterday, because this section has not been passed this relief cannot be claimed.

This provision in this Bill points to the position that appears to permeate every Finance Bill introduced in this House in recent years. We find that in the Finance Act of last year and of the year before retrospective provisions were made in favour of the Revenue, power was given to the Revenue to reopen transactions completed by them in past years. In the case of living persons there is no limit to the operation of the income-tax Department and the Revenue officials in the investigation of taxpayers' accounts, notwithstanding agreements completed and accounts stated and settled. But we do not find in any Finance Act in recent years, and we do not find in this Bill, provision enabling the taxpayer to get retrospective benefits where he is entitled to reliefs.

In the income-tax code there are provisions that certain things must be done in writing, and although on a particular occasion a taxpayer's accounts are being reopened and investigated with all the virulence at the command of the investigation branch and, simultaneously with that virulent investigation of the taxpayer's accounts, it emerges that the taxpayer is probably entitled to certain reliefs, we find, as I found in a case I was engaged in recently, that where the taxpayer was obviously or probably entitled to certain reliefs, the case made by the Revenue was that, notwithstanding certain actions they had taken misleading the taxpayer into the belief that this case was before the special commissioners, notice in writing had not been given and therefore he was not entitled to relief.

I do think that where we have the principle embodied in every Finance Bill of retrospective legislation in favour of the Revenue, side by side with that principle, if it is to be carried on, there ought to be given concurrent relief to the taxpayer; that where the Revenue are entitled to reopen his accounts practically without limitation of time, the taxpayer should also be entitled to get relief without such limitation of time or of procedure as is contained in the various Finance Acts and the income-tax code in force at present.

Speaking generally, those are the only matters I intend to refer to on the Second Reading of this Bill. A number of amendments must be put down dealing broadly and in detail with the matters to which I have referred in principle. At the conclusion of the debate I should like the Minister to explain to me what precisely is the purport and effect of Section 25. Speaking subject to correction by the Minister and his officials, the effect of the construction of that section may well be, that when a question as to the value of goods imported comes to be ascertained, nothing will be heard in reference to that value, other than the opinion of the Revenue Commissioners, and that from that opinion there is to be no appeal. If that is the intention of the construction of Section 25, then I say that section itself embodies a pernicious principle that, I hope, the Minister does not intend to stand over. On the question of the value of the goods imported subject to duty there ought to be an appeal, which did, in fact, exist, from the opinion of the Revenue Commissioners or from assessments made by them in assessing duty. If the effect of the section is to introduce the principle, that no one should have any say as to the value of goods imported, for the purpose of assessing duty, except the Revenue Commissioners, and if their opinion is to be final and conclusive, I say that that is a section which ought not to be embodied in a Bill of this kind. Further, it introduces or continues a principle which ought not to be introduced or continued against the taxpayer or the payer of customs duty in a Bill of this kind.

General Mulcahy

In his opening remarks the Minister made reference to certain matters that were not before the House already. He did not refer to Section 16, in which there is a matter which, practically, has not been before the House, where a tariff of 37½ per cent., with 25 per cent. preference, is put on raw steel and iron that is imported. When he introduced the resolution on Tuesday, I asked the Minister if any kind of fears had been expressed by, or on behalf of structural steel or iron works in the City of Dublin and elsewhere, as to the effect of the new duty on their workers, and whether any of these fears have been allayed. The Minister was not able to say anything about it at the time. I want to raise the matter now, in order to show how necessary it is, in order that it should be dealt with thoroughly and clearly when we reach this section on the Committee Stage. I understand that there has been no allaying of the fears of industrialists or of the workers on this score.

From the point of view of the country generally, the blundering policy of the Ministry in this matter placed us in a very serious dilemma. A tariff of 75 per cent., with a preference of 50 per cent., was put on fabricated steel some years ago, but was later reduced to 50 per cent. and 33? per cent. There were complications, and the preferential rate of 33? per cent. on fabricated steel from Great Britain was wiped out as a retaliatory measure in connection with the economic war. Then we had the Agreement with Great Britain. The position of these firms now is that there is an ordinary tariff of 50 per cent. and 33? per cent. preferential, on fabricated steel and iron coming in. There is no tariff on their own raw materials. Under the tariffs on fabricated steel and iron a number of industrialists in the city were induced to expand. They put a substantial amount of money and capital expenditure into machinery in order to expand their works. A considerable amount of new employment was given. It is not possible to ascertain exactly the extent of that employment, but it is stated to be substantial, and is implied by the amount of fabricated steel work done in the country by Dublin and other firms during the last three or four years. With the exception of a certain amount of fabricated steel and iron work that was imported — I do not know whether that was done with or without licences — a very substantial amount of steel work has been done by Dublin firms, particularly in connection with the new cement factories, the alcohol factories, the beet factories and mills.

Under the tariff of 50 per cent. and 33? per cent., which until the recent Agreement with Great Britain was 50 per cent. and 60 per cent. on imports from Great Britain, a certain fabric of industrial work has been built up, and a certain number of workers put into an important industry that ought to be a kind of staple industry for us. They are told from the 1st November, that, I might say, half of their imports of raw material will be tariffed at the rate of 37½ per cent., and half at 25 per cent.

The position is that 50 per cent. of the imports of raw material for iron and steel come from Belgium and the other 50 per cent. from Great Britain. The position they are in now is that if they were to pay, say, an increased 25 per cent. on the preference rate here, they could manufacture steel for the new industry in Haulbowline. The margin of preference, if they had again to import fabricated steel and iron, is so small that they say it will not be effective. They demand now that a tariff of at least 50 per cent. should protect their fabricated steel and iron against imports. From the point of view of the people as a whole, and from the point of view of the Minister for Finance, the policy pursued in this matter has put us into the dilemma that our constructional ironwork will cost us at least 50 per cent. more than before this policy was embarked upon. If the tariff is not raised, the fabricators of steel are, to a large extent, going to be put out of business by reason of the fact that the tariff will not be sufficient to enable them to deal with fabricated steel and iron.

The claim of the manufacturers in this matter has been made to the Department of Industry and Commerce, asking for a 50 per cent. tariff. They have been met in no way by the Department of Industry and Commerce, and it is of importance, both from the point of view of the new industry at Haulbowline, if it is going to develop and last, and from the point of view of the men who are fabricating steel in Ireland — in Dublin, Cork, Waterford, some in Kilkenny and some in Carlow — that we should know exactly and clearly where we stand in this policy before Section 16 here is passed.

From the point of view of the new steel works at Haulbowline, if the firms fabricating steel in the country are to be put out of business, then there is no market for the steel that is going to be manufactured at Haulbowline. The Minister for Industry and Commerce and the Minister for Finance have to face that. If, on the other hand, the position that we are going to be put in is that a 50 per cent. tariff has to be put on fabricating steel in Ireland, then the people of the country are put into a very unfortunate position. They are going to have to pay for work of that particular class much more money out of their pockets than is ever likely to reach either capitalists or workers in the industry in the country.

Taking these two sides of that dilemma, I submit that it is of the greatest importance that the Minister for Industry and Commerce or the Minister for Finance, when he comes to deal with Section 16, would tell us where exactly we are going to stand, whether the Haulbowline industry is going to be in a secure position, whether the workers who are fabricating steel in Ireland, in Dublin and elsewhere, to-day, are going to be put out of work, or whether they can hope that they will be able to continue working and earning a livelihood in that particular way. The Minister has to answer both of these questions, and I think, if both of these questions can be answered satisfactorily, he ought also to be able to tell us what is the wasteful cost to the country of what has been done.

Mr. MacEntee

Sir, I do not propose to follow Deputy Cosgrave into the matters which he opened on this Bill except to note that apparently he has abandoned the policy which he put before the people at the last election and which the people rejected. This Government went to the country and told the people that if it were returned to power it would carry on with the policy upon which it was returned in 1937 and the people have returned it to power. Deputy Cosgrave's comment upon that was that no one outside Bedlam ever heard of such a thing. Well, I presume that if the majority of the Irish people happen to differ from Deputy Cosgrave he thinks that they are in Bedlam. In that connection he reminds me of the story of the person who looked over a wall of a mental hospital and saw a man working very hard outside and asked him what he was doing. The man said he was working and the man inside the wall said: "You ought to come in here." I suppose the position is that Deputy Cosgrave feels that we ought to join him in his confusion.

Mr. Costello

Could you not think of a better chestnut than that one? That story came from Adam's time.

General Mulcahy

I thought it was Hugo Flinn's story.

Mr. MacEntee

I think, whether it is ancient or modern, it is very opposite. However, I would prefer to direct my remarks to what was stated by Deputy Costello on the Finance Bill. I think his statements are much more ad rem. The Deputy, I am afraid, has a very short memory.

Mr. Costello

Has what?

Mr. MacEntee

The Deputy, I am afraid, has a very short memory if he forgets the numberless cases in which our predecessors in office legislated retrospectively in Finance Acts.

Mr. Costello

I made no distinction between Finance Acts before or after 1931.

Mr. MacEntee

I thought that the Deputy had said that this question of retrospective legislation was characteristic of the Government, of this Government.

Mr. Costello

It is more characteristic of your Government than the last Government.

Mr. MacEntee

Not more. Not more, and certainly not more characteristic of this Government in the rather one-sided way that the Deputy wished to imply.

Mr. Costello

If the Minister would not mind my interrupting him, I make him a present of the argument as regards the two Governments. I made no distinction, and any remark I made with respect to retrospective legislation in Finance Acts may be taken of the first Government as well as the present Government. If that is of any assistance to the Minister, I am prepared to make him a present of that, because the Revenue Commissioners, like the brook, go on for ever. They were there before the Minister came in, they will be there after he has gone out.

Mr. MacEntee

And I suppose they will have to be here as long as the State continues to exist. They are a necessary part of the machinery of Government, and unless the Deputy would endeavour to persuade the people to adopt an anarchistic mode of existence, I do not know how we would be able to dispense with the Commissioners in ordered society. But I think that the Deputy is unfair to himself. He gives me too much when he says he is prepared to make a gift to me of any point I may care to make about retrospective legislation, and to say that he condemns it not merely since 1932 but that he condemned it prior to 1932, because the last occasion upon which our predecessors legislated retrospectively was in the Finance Act of 1931. But mind you, the effect of Section 2 of that Act was to increase the time limit for making assessments on executors. I think it is much worse from the point of view of strict equity, which the Deputy tries to uphold here in this House, than anything we have tried to do since, but it was done in 1931 when the Deputy was there to advise the Government of the day as to what were the true principles of justice.

Mr. Costello

I was not advising the Government on the Finance Bill.

Mr. MacEntee

I am prepared to say this, that the Opposition have met the Government very fairly in regard to the finance business of this Session and that possibly this Bill has not been sufficiently long in the possession of the Deputy and other members of the House to study it in very great detail, but, if the Deputy does look at provisions 3 and 4, he will see that there, notwithstanding what he has said to-night, we are legislating retrospectively in favour of the taxpayer.

Mr. Costello

Three and four of what?

Mr. MacEntee

Sections 3 and 4. And as to Section 5, which the Deputy thinks imposes a hardship on the banks and which he assumes compels the banks to go back very many years, I think that if the Deputy would ask the opinion of the bankers in regard to that particular section, he will find that it afforded them some essential relief, because this section is merely to confirm a practice which has been in existence for very many years, say 20 or 30, it may be more, and which the banks, feeling that they were carrying out the law in accordance with the statute as it exists here, and as it has always been interpreted here, have always followed. This section does not make any change in the law. It merely confirms the law and makes it plain and clear how the legislature desires that law to be read. It imposes no hardship upon the banks, and certainly no hardship upon the taxpayers, not so much hardship as might be imposed upon a very large class of the community of this country if by any chance our courts were to hold, as courts elsewhere have held, that there was a flaw in the drafting of the section, because, in that event, no less than over £300,000 of revenue might have to be sacrificed, and that £300,000 would naturally, have to be made up by those who are not fortunate enough to have possessions invested abroad and to be in receipt of foreign dividends.

I think the Deputy made the same point in regard to Section 5. It may be taken that Sections 5, 6 and 7 more or less hang together. They all arise out of the one case which has been heard in Great Britain. It is merely to confirm and make watertight the law here. That law has not been challenged here, and we are not doing anything which would impose any disability upon the general body of taxpayers to which they have not already been subjected. With regard to Section 7, I think the phraseology of sub-section (1) is clear and explicit. In line 11 it says "as if it were the payment of an amount of the said interest equal to the value of the said bonds at the time of the issue thereof." I cannot see anything there to compel any court to interpolate the word "face" if it were proposing to construe that section. It is the value at the time of issue. They may be issued at a discount or at a premium, and they may be issued at par, but it is their negotiable value at the time of issue of which we take account, and there is nothing there which would, I think, empower the Revenue Commissioners to collect on the basis of the face value of the bonds if they were only disposable at a discount.

I think the Deputy used a very ingenuous argument in regard to Section 27 when he said that in the Finance Act of 1924, by reason of an error which had crept into the drafting, an injustice had been done to the taxpayers. Are we to assume that our predecessors, with all the learned lawyers advising them at the time, including one who became the Chief Justice of our Supreme Court, prepared their legislation so carelessly that an injustice of this sort should be done to the taxpayer? I quite agree that in the circumstances of the time an error in draftsmanship might arise, but if it were merely an error, why was not that error corrected in 1925, 1926 or 1927, or some time prior to 1932? Why has it been left to us in 1938 to correct what the Deputy wants us to assume was merely an error? I should say that Section 24 was drafted with full advertence to what it would catch and what it could let go free, and in Section 27 we are making a concession to the taxpayer which could have been made by our predecessors, but which it has remained for us to make.

I am not making much of it; it is not a very great concession. I think it is a natural sort of thing to have done, and if my attention had been drawn to it earlier I could have dealt with it earlier. In any event, it is a concession and I do not see why I should apologise to the House because I am not going to make it retrospective. It would be a ridiculous thing if I were to put in a clause to say, as has been said in Section 5 and in some others of these sections, that the law is and always has been to such an effect. That would mean that I would have to go checking up all the records. How could we ever administer such a concession if we were to make it retrospective? Am I to go chasing through every household in Ireland trying to find out what gifts were given in consideration of marriage or something like that, or as part of the ordinary expenditure of the donor, or to find out was the gift less than £100 in value? I think the Deputy would agree that the Revenue Commissioners might be very much better employed than in doing that.

With regard to Section 25, the position is that the original Section 34 of the Finance Act of 1933, which is referred to in this section, was in the following terms: "Wherever a duty of customs is imposed ... at a rate calculated by reference to the value of the article or goods chargeable with such duty, the value of such articles or goods shall"— and then this phrase, with which I am most concerned, follows: "for the purpose of the calculation of the amount of such duty payable thereon, be taken to be the price which, in the opinion of the Revenue Commissioners, an importer would give for such article or goods if such article or goods were delivered, freight and insurance paid, in bond, at the place of importation."

Doubt has risen as to whether the words "for the purpose of the calculation of the amount of such duty payable thereon" have not a limiting effect, and whether they, according to the section, could be applied to cases where the Revenue Commissioners are required to have regard to the value of goods for purposes other than the calculation of the amount of such duty payable thereon. The proposed amendment is intended to remove this doubt, and the existing definition of value in Section 34 of the Finance Act of 1933 is re-enacted, but is made applicable generally for the purpose of the extra orders relating to customs.

Mr. McMenamin

How is that to be interpreted in practice?

Mr. MacEntee

As it has been interpreted up to the present. The only thing about it is that it has been interpreted up to the present merely for the purpose of the calculation of the amount of such duty payable thereon. It will be interpreted in the same way in the future.

Mr. McMenamin

What is the position of invoices?

Mr. MacEntee

If the Revenue Commissioners have reason to think that the invoices are not correct——

Mr. McMenamin

I am not now dealing with dishonest cases, but with honest cases.

Mr. MacEntee

I am telling you that the law is already laid down by Section 34 of the Finance Act of 1933, which indicates that the value shall, "for the purpose of the calculation of the amount of any duty payable thereon, be taken to be the price which, in the opinion of the Revenue Commissioners, an importer would give for such article or goods if such article or goods were delivered, freight and insurance paid, in bond, at the place of importation." That will continue to be the principle which will be applied, but what has been done is to remove, in fact, these words: "for the purpose of the calculation of the amount of such duty payable thereon," because it is felt that it may limit the power of the Commissioners to make valuations of articles for other purposes.

Mr. McMenamin

There is no appeal from that.

Mr. MacEntee

For instance, certain toys are liable to duty only if they exceed 9d. in value. If they do the rate of duty is 50 per cent. ad valorem, with a minimum of 1/-. In cases of that sort it is necessary that the commissioners value the articles in order to decide whether they are to be admitted free of duty. But it is felt that under the clause to which I called the attention of the House they might possibly be debarred from valuing the articles for the purpose of leaving them in free of duty. The Deputy will see that the omission of these words may, in fact, make it easier for the taxpayer and may afford him relief.

Mr. McMenamin

That does not impress me.

Mr. MacEntee

It impresses those who have to administer the revenue laws. This is done because of the doubt which has been cast that the commissioners cannot fix the value for the purpose of exempting goods from taxation.

Mr. McMenamin

Having fixed it, there is no appeal?

Mr. MacEntee

If the Deputy will give me notice of that point I will deal with it more fully. The statute is passed in order to allow the Revenue Commissioners to make valuations for the purpose of allowing goods to come in free of duty. With regard to Section 16, I hoped that the Minister for Industry and Commerce would be able to say something on that. He may do so at a later stage. I will call his particular attention to it.

General Mulcahy

It will be handier on the Committee Stage.

Mr. MacEntee

Yes.

Mr. McMenamin

Will the Minister say anything about Section 27?

Mr. MacEntee

I have been saying a good deal about it. The Deputy probably did not hear me. I have pointed out that it is a relief section.

Mr. McMenamin

But only qualified relief.

Mr. MacEntee

The Deputy might as well say that any relief granted on the income-tax code is only qualified relief. Does the Deputy want us to withdraw the relief altogether?

Mr. McMenamin

No; I want the Minister to be logical.

Mr. MacEntee

The only logic in this is that when the public services require it the money has to be got.

Mr. McMenamin

Will the Minister explain the purpose of Section 24, requiring examination after three years?

Mr. MacEntee

It has been found in cases of fraud or suspected fraud that the existing powers which the Revenue Commissioners have do require the production of certain proofs. But the period of one year is not sufficient. The proposal there is to extend the period to three years.

General Mulcahy

Is there any danger that this section will put people who are interested in waste paper out of business?

Mr. MacEntee

I do not think so.

Question put and agreed to.

Committee Stage ordered for Wednesday, 13th July.