Perhaps it would be convenient if we took Resolutions Nos. 18, 19, 20, 21 and 22 together.
Financial Resolutions (1941-42)—Report (Resumed). - Financial Resolution No. 18—Estate Duty.
They might be discussed together, if the House so desires, but must be put separately.
I move:—
That the Dáil agree with the Committee in Financial Resolution No. 18.
Resolutions numbered 18, 19, 20, 21 and 22 are designed to prevent avoidance of estate duty by the adoption of certain devices. Similar legislation has recently been passed in Great Britain and Northern Ireland and the passing of such legislation in those countries is likely to call attention here to the devices in question, with the result that if we do not legislate similarly there may be a somewhat widespread adoption of such devices by persons possessed of considerable estates in this country and, in consequence, a serious loss to our Exchequer. Resolution No. 18 is directed against the avoidance of estate duty in certain cases in which a person who has a life interest in property joins with other persons in disposing of that interest within three years of his death, or within one year of his death in the case of dispositions for public or charitable purposes. The Resolution has effect only in the case of persons dying after the 7th May, 1941.
The purpose of Resolution No. 19 is to prevent evasion of estate duty where such evasion is carried out by means of schemes involving the transfer of property to a relative in consideration of an annuity. The principle of prevention of evasion contained in the Resolution extends also to cases in which property is, for the like consideration, transferred to a private company, or similar concern wherever incorporated, in which a relative of the transferor is a shareholder.
Resolution No. 20 is supplementary to Resolution No. 19 and is designed to prevent the evasion of estate duty in cases where, instead of transferring property to a relative, a person either (a) charges property of which he is the owner in favour of a relative in consideration of a life annuity, or (b) extinguishes a debt due to him by a relative in consideration of a life annuity. The Resolution, by providing that the charge or the extinction of the debt is to be deemed to be a "disposition of property", makes the charge or debt liable to estate duty in the same way as the provisions of Resolution No. 19 make the property transferred so liable.
Resolution No. 21 merely contains a definition of a life interest, or, more technically, "an interest limited to cease on a death". The definition is applicable to the existing enactments relating to estate duty as well as to the proposals relating to that duty which are now introduced. The enactments proposed to be repealed by Resolution No. 22 will, by reason of the terms of Resolution No. 18, no longer be applicable to persons dying after the 7th May, 1941. They will, however, continue to apply to persons dying on or before that date.
It is very hard to discuss these technical points from a mere reading like that. As regards Resolution No. 18, is there not some other method of coping with that particular device? Is there not a device known as accelerated succession, and would that not apply?
It applies to succession duty only, not to estate duty.
How is it intended to prevent the things mentioned in the next two Resolutions? Take the case of a person making a gift of property to a relative in consideration of the payment of an annuity, or the cancelling of a debt, which might mean the transfer of property from another angle.
It is not to prevent that, but to prevent the evasion of duty by that means.
Take the case of a person who parts definitely with his property to a relative. A father transfers the property to his son to play ducks and drakes with it, but always subject to the condition that the son will provide the father with an annuity. Apparently, it is intended to prevent that?
It is the intention to prevent that.
Is there any evidence that that practice is widespread here, where a man takes the step of definitely handing over property?
We have had cases that we definitely would regard, and that anybody would regard, as an abuse.
It may be that the Minister considers that he wants money and that he must get it in some manner.
No, that is not the point. There are definite cases where efforts were deliberately made to escape estate duty. We believe that was the intention. I have a couple of cases in mind where, through not carrying out the law to the full extent, they did not succeed. They even went to the extent of bringing lawyers over from England to advise them, but they did not carry out to the extent of 100 per cent. the instructions of the English lawyers and they failed. The effort was made to deprive the State of the estate duty to which normally, under the law as it stands, the State was entitled. The effort was made, but fortunately it did not succeed. There were other cases.
In one case that I have in mind, if it did not succeed entirely it succeeded partially.
The case I have in mind did not succeed at all.
Then they are different cases. I can understand a case where a person is unbiassed—and I do not always include the Revenue Commissioners in that class——
They are acting in the interests of the State.
Possibly, but they are acting selfishly from that angle. What is bred in the Revenue Commissioners, by their activities, is mainly suspicion. I can understand a Revenue Commissioner saying: "We have one or two of these cases and they will never occur again." But, surely, there is a social aspect to be considered. We have a person getting on in years who has control of money. He has a family, a good, steady lot. He has big investments and business engagements. If he remains in control of the money, we are aware that there have been tragic cases where people remained too long in control of the money, the businesses were brought to the ground and the families suffered. Let us suppose that a man is persuaded that his powers are declining and he says: "I must provide for my own declining years and I must get an annuity." Surely, in a bona fide case like that, there is no reason why that transaction should be regarded in a suspicious way? It is a thing I suggest should be encouraged.
Would the Deputy regard it as reasonable if that annuity were of the same value as the entire interest?
Clearly, there is the type of case that you can hit at, and you can draw up regulations under which these cases, if not brought into court, could be brought before some special tribunal to deal with these matters. But there can be cases of people who kept for themselves, through this device, some very meagre means which could only be regarded as bare subsistence means, taking the person's station in life into account, and who did give up the free handling of the money for business purposes, so that the business could be kept on for the benefit of the family. Whatever may be the viewpoint of the Revenue Commissioners, I say that it is bad social justice to go back on that. I do not know what the last two points mean at all.
Is not this principle in direct conflict with the principle laid down by the Minister for Finance himself, when he was Minister for Local Government and Public Health, in connection with the administration of the old age pensions code? He came in here at that time and said that he proposed to change the then existing practice by ignoring transfers of property to members of an old age pensioner's family during the remaining life of the old age pensioner, and laying it down that where these transfers were carried out in pursuance of a reasonable and genuine family arrangement he had determined that these persons who had divested themselves of their property should be regarded, under the old age pensions code, as destitute people entitled to the maximum pension.
They were not entitled to the maximum pension. Their means and their upkeep were taken into account.
But the fundamental principle is that the Minister was anxious that old people should divest themselves of their property and put it under the complete dominion of the young people of the family, and in that case right of residence was not reckoned for the purposes of the Act. In fact, the Local Government Department was anxious to persuade the old people, in the common parlance of the country, to "take to the room" and leave the running of the farm or property to the young people. Here, in a different stratum of society, the old people, instead of being encouraged to dispossess themselves of dominion over the family funds, are warned that if they do so the State will look upon that with an unfavourable eye, and, judging the transaction to be fraudulent, will disregard it for purposes of estate duty. Perhaps the Minister would reconcile these two different attitudes which he has sponsored in this House? I remember very well, and I think it worth recalling now, that in the Land League atmosphere in which I was brought up there was always a struggle going on with those who wanted to treat a man with a large homestead differently from the man with a small homestead, and I remember those who were through all that business saying: "You have got to stand on a matter of principle. A man's homestead is his homestead, whether he is a rich man or a poor man, and if you once trespass on the rich man's homestead and depart from the principle it will only be a matter of time until you will be trespassing on the poor man's homestead also." Here, it seems to me exactly the same error is being fallen into. We are establishing one line of conduct which we defend, and assert that it is not only permissible but praiseworthy in the one case, but we are also asserting that the pursuit of the same line of social conduct amongst the rich is a fraud against the State and must be pursued and prevented. I think that it is a very unsound approach to the problem, unless the Minister has some other reason in the back of his mind which influences him to adopt a different attitude in regard to this proposal to that which he adopted in regard to the old age pensions code.
It is perhaps not quite the same principle. The principle in connection with the old age pensions device was, I think, with a view to raising the marriage rate in the country by getting the old people to resign control of the household at a certain period. As I say, it is not exactly the same here, but there are similar points. The people who did this thing, which the Minister wants to prevent, did it with a good social viewpoint, and I think it should be encouraged. I want to get some information about the amount derived from estates duties. We have here, 1940-42, £1,320,000—does that take account of the £60,000 that is spoken of here?
No.
The £1,320,000 would be on the basis of existing taxation?
Yes.
That means that £1,380,000 will now be got?
Yes.
I notice that there is a variety of duties in this connection. What is the average percentage of the rates?
I shall try to get the information for the Deputy.
We might get it later?
Yes.
Question put and agreed to.