Financial Resolutions. - Resolution No. 23—Corporation Profits Tax.

I move:—

(1) That paragraphs (c), (d), and (e) of sub-section (1) of Section 47 of the Finance Act, 1932 (No. 20 of 1932), shall not apply or have effect in respect of any accounting period ending on or after the 1st day of September, 1939, and in lieu thereof the following provisions shall (subject to the subsequent paragraphs of this Resolution) apply and have effect in respect of every accounting period so ending, that is to say:—

(a) sub-section (1) of Section 52 of the Finance Act, 1920, shall be construed and have effect as if for the words "five per cent." contained therein there were substituted the words "ten per cent.";

(b) Section 31 of the Finance Act, 1928 (No. 11 of 1928), shall be construed and have effect as if for the words "seven and one-half per cent." contained therein there were substituted the words "twelve and one-half per cent.";

(c) sub-section (2) of Section 30 of the Finance Act, 1926 (No. 35 of 1926), shall not apply, and in lieu thereof sub-section (2) of Section 45 of the Financial Act, 1925 (No. 28 of 1925), shall apply and accordingly the proviso to Section 52 of the Finance Act, 1920, shall be construed and have effect as if for the words "five hundred pounds" wherever those words occur in that paragraph there were substituted the words "one thousand pounds".

(2) That the following provisions shall apply and have effect in respect of every accounting period ending on or after the 1st day of September, 1939, that is to say:—

(a) paragraph (b) of the proviso to sub-section (1) of Section 52 of the Finance Act, 1920, shall be construed and have effect as if for the words "ten per cent." now contained therein there were substituted the words fifteen per cent.";

(b) sub-section (4) of Section 56 of the Finance Act, 1920, (as adapted by or under subsequent enactments) shall be construed and have effect as if the words "six years after the end of the accounting period or part of an accounting period" were substituted for the words "three years after the end of the accounting period" now contained therein.

(3) That special provision may be made by statute in respect of accounting periods which began before and ended on or after the 1st day of September, 1939, for the purposes of the foregoing provisions of this Resolution.

(4) That in ascertaining, for the purposes of a charge to corporation profits tax (other than excess corporation profits tax) the profits arising in an accounting period ending after the 31st day of December, 1940, in the case of a company the directors whereof have a controlling interest therein, no deduction in excess of an amount calculated at the rate of one thousand pounds per annum shall be allowed in respect of the remuneration of any director, other than a director who is required to devote substantially the whole of his time to the service of the company in a technical or managerial capacity and is not the beneficial owner of or able (directly or through the medium of other companies or by any other indirect means) to control more than five per cent. of the ordinary stock or share capital of the company.

(5) That paragraph (g) of the proviso of sub-section (2) of Section 53 of the Finance Act, 1920, shall not apply or have effect in relation to the ascertainment of profits arising in an accounting period ending on or after the 1st day of April, 1939.

I think the Minister said that he was reducing the exemption which heretofore stood at £5,000 to £1,000?

That means that very small firms, firms making a profit of £1,000 a year, will come in.

Profits of over £1,000 a year.

The rate is stepped up from 7½ per cent. to 10 per cent. and from 10 per cent. to 15 per cent. Is that in certain circumstances?

From 7½ per cent. to 10 per cent. with regard to certain companies, and from 10 to 12½ per cent. The numbers included in the 10 per cent. to 12½ per cent. are very small.

The average will be 7½ per cent. to 10 per cent.?

Some other provisions are inserted further down the Resolution, and I take it that Resolution No. 24 refers to excess profits corporation profits tax; in other words, the excess profits tax which used to prevail has now gone by the board and is replaced by Resolution No. 24.

I should like the Minister to take some imaginary figures for a particular company and tell us what is going to happen under this Resolution. I think the House would require some explanation from the Minister as to why, in respect of a tax so onerous as this, he goes back to a year which has been completely closed. Take a trading year running from 1st September, 1939, to 1st September, 1940. The company closed its accounts on that date, made whatever disbursements from its profits were necessary in the very difficult circumstances of that time, and made use of whatever moneys were available to it from these profits to consolidate its business in order to enable it to weather the difficult times of the present period and the even more certain difficult times that were then, and are now, looming ahead. I think it frightfully unjust for a Minister for Finance at this hour of the day to put huge taxation on moneys which might have been available on 1st September, 1940, but which may have been absorbed in one way or another in order to secure the maintenance of the industry, the continued employment of its employees and future supplies for the industry. They find now, when perhaps the money is not available, that they have to pay a large sum of money.

In face of the general position of industry at present, when we consider the importance which everybody must attach to the maintenance of it and the comparatively little provision made, compared with the amount provided last year, for maintaining people on Government schemes or relief, industry must this year, in spite of its difficulties, do even more than it did last year to maintain its people in employment, if the country is to be maintained and the Minister is to get his taxation. There is no part of the Minister's proposals for taxation of which the House would require a more careful explanation than this proposal, so that we can examine it and so that the industrial community, and even the workers dependent on the maintenance of industry, can thoroughly understand it and see whether it is equitable that these proposals should be gone ahead with, or that they should be modified or minimised. Some sample industry ought to be taken and the position in this regard explained to the House. In addition, a very good case would require to be made to the House for going back over the year ended 1st September, 1940, and imposing taxation of this kind in respect of it before the House could reasonably agree to it.

I do not propose to go into it in any great detail. As I said already, it has not been the practice, but with regard to Deputy Mulcahy's point, I will give an example. The reason I have to go back to this year is that I have to get the money, and it was commonly stated here, and outside as well, that we were allowing all sorts of people to get away with huge profits, especially during the war emergency.

So you were, and we are not a bit disturbed about your doing what you are doing now.

I had the situation examined by the Revenue Commissioners before the Budget of last year and on the information supplied to me then, I was satisfied that I would not be justified in bringing in an excess profits tax then, but on the information supplied since, I have no doubt that I am not acting unjustly in bringing it in now.

Indeed, you are not.

Deputy Mulcahy asked for an example of how this will work out. I shall give two examples. In the case of an Irish company, or a foreign company which maintains in this country a branch register of its members resident here,—there are some notable exceptions but they are not many—the margin of exemption we propose to reduce from £5,000 to £1,000 and we propose to increase the rate from 7½ per cent. to 10 per cent. corporation profits tax. The corporation profits tax payable on profits of £1,000, under the law as it stands, would be nil, and, under the proposed amended law, nil. I shall give the Deputy a copy of these figures. On £2,000 profit, the amount payable under the existing law would be nil, and, under the proposed amended law, £100; on £5,000 profit, under the existing law, nil, and, under the proposed amended law, £400; on £6,000 profits, under the existing law, £75, and, under the proposed amended law, £500; and on £10,000 profits, under the existing law, £375, and, under the amended law, £900.

In the case of a foreign company, the margin of exemption is again being reduced from £5,000 to £1,000, and the rate increased from 10 to 12½ per cent. The tax payable on profits of £1,000, under the existing law, would be nil, and, under the amended law, nil; on £2,000 profits, under the existing law, nil, and, under the amended law, £125; on £5,000 profits, under the existing law, nil, and, under the amended law, £500; on £6,000 profits, under the existing law, £100, and, under the amended law, £625; and on £10,000, under the existing law, £500, and, under the amended law, £1,125.

Question put and declared carried.