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Dáil Éireann debate -
Thursday, 17 Jul 1941

Vol. 84 No. 14

Committee on Finance. - Finance Bill, 1941—From the Seanad.

The Dáil went into Committee to consider recommendations from the Seanad.

I move: That the Committee do not agree with the Seanad in recommendation No. 1:—

In Section 1, at the end of the section, that a new sub-section (4) be added as follows:—

(4) Section 3 of the Finance Act, 1935 (No. 28 of 1935) shall not apply to or have effect in relation to tenements and hereditaments in the occupation of the owner and the rateable value of which does not exceed twenty pounds (£20).

Since 1935 the law has stood that valuation on all house property is at five-fourths. This recommendation seeks to amend that, by removing that five-fourths in so far as houses of a rateable value not exceeding £20 are concerned. The first argument that I have against accepting it is that it would cost money that cannot be afforded.

I cannot tell accurately the amount, as I have not got the exact figure. If I did not get the five-fourths with regard to all house property, it would cost well over £100,000. What it would cost if the value of the property were limited to £20, I could not state exactly. The case was made in the Seanad that the Government had encouraged people to buy their own houses, if they did not build them for themselves, and that it was not in accordance with the Government's own ideals to attempt to increase the burden on thrifty people who purchased their own house property and, particularly, on those who lived in the houses they purchased. The case was made that the type of person who would live in a house with a rateable valuation of £20 was entitled to special consideration in this matter.

My answer to that was that the person owning and living in his own house should pay his full share of income-tax, just as every other citizen, and that, even as things stand, he benefits considerably as house property generally is not valued to-day at its proper value. House property in this city is valued more highly than anywhere else in the country, with the exception of the City of Waterford, but even in Dublin the valuation goes back to 1913—the last general valuation—and in 1913 it was only assessed by the then Valuation Office at 90 per cent. of the estimated value of the property. For income-tax purposes, it has been the custom here to accept the rateable valuation of house property. According to the standard we work on the Irish poor law valuation bears no true relation to the value of the premises for income-tax purposes.

The people who have invested in house property and, particularly, the people who live in the houses they own, escape a considerable amount of the income-tax which is borne by the citizen who, instead of investing in house property and living in it, has put his money in other forms of investment. The person who invests his money—say any sum from £500 to some thousands of pounds—in house property is assessed on five-fourths of the poor law valuation of the property. It is more than likely that, in 90 case out of 100, the valuation of that house should be twice or three times the rateable valuation which has been placed upon it.

There are people who own houses valued at £20, the rent of which is £90 or £100, and those persons pay income-tax on the rateable valuation, plus one-fourth. If the house is valued at £20, an individual pays, under the law as it has stood since 1935, on five-fourths of the valuation of that property—that is to say £25. If the money that purchased that house, the rateable valuation of which is £20, were put in some other investment or security, and the person concerned was drawing dividends from it, he would be paying more in income-tax, so that those who are at present living in houses which they own have a great advantage over people who have other forms of investment. Investments in house property, whether the owners live in the property or not, escape a considerable part of the tax which is placed on those who invest in industry—Irish or English— or in any other form of investment. The valuations in this country, with the exception of Dublin and Waterford, are based on the Griffith's valuation made in 1860, and are entirely out of date. That was the reason this Government introduced a Valuation Bill about the time that the emergency arose. We have not been able to go on with it since.

Is it in Limbo or is it damned?

It is like Mohammed's coffin. It is on the Order Paper still. Is the Deputy anxious to revive it?

It would take a lot of resurrection at present.

That valuation is 80 years old.

The houses that were valued must, then, be 80 years old.

They are, and therefore should be revalued, but the houses built since are valued on the same basis except in the City of Dublin, which had a general revaluation in 1913, and in Waterford. Therefore the property owners of these two cities are paying more than they should pay relative to the property owners of the rest of the country. That was one of the things which it was hoped the Valuation Bill would remedy. House property to-day is undervalued and is not bearing its full weight of taxation. In 1935, in order to bring it up nearer to what it should be, 25 per cent. was added to the valuation for tax purposes, as a general rule. It was not generally felt that that was sufficient, but the taxpayer probably thought it was too much. It probably does not bring the present valuation of that class of property anywhere near what it should be if there were a revaluation this year or next year. I think that we are entitled to ask the owner of house property to pay his full share of taxation, just as if he had put his money in some other form of investment. Even on this basis of five-fourths of the valuation, he is escaping a considerable amount of taxation which the Exchequer would be entitled to ask from him. Some people, evidently, think that those who are living in the more cheaply valued houses are entitled to special consideration. From the investigations I have made, I think that, already, they are only too well and too generously treated, and that it is not fair to let even the smaller type of people be free from the full weight of the tax that the rest of the citizens with capital invested are called upon to pay.

This matter has been before the House on many occasions, but this is the first time I have heard the type of explanation with which the Minister has honoured us this evening. The Minister's estimate of the value of a house whose poor law valuation is £20 and my estimate may be completely different. I should assess that house at a present value of about £600. If that money were invested in war loan it would bring in £21 a year. The house would be subject to natural deterioration and to the cost of upkeep, which would not affect the invested money bringing in an income of £21 per year. Unless we are considering different types of security or unless he puts a higher value on the house than I should put, the Minister and I do not seem to get to the same point. The sum on which a man in possession of a house with a valuation of £20 is assessed is £25. That has been the law here since 1935.

That man owns a house for which, say, £600 has been paid. He is one of a great multitude of people who would be entitled to look to the municipality, and of course to the State, to help him to house his family. If he had six children or more he could make a very good case for getting one of the corporation dwellings. That would cost the municipality anything from £10 to £15 a year and the State an equivalent amount for the next 35 years. Instead of that, with a commendable civic sense of responsibility he either invests his entire capital of £600 in buying a house or purchases it through the agency of one of the building societies or possibly under the Small Dwellings Acquisition Act. Whatever way he acquires it we are going to ensure that he will pay every penny of taxation we can get out of him. That does not appear on the face of it to be a fair dispensation of legislation.

Up to the time that the change was made in the law, a man who owned a house with a valuation of £20 was entitled to deduct one-sixth of the valuation in respect of repairs. That meant that he was assessed on a valuation of £16 13s. 4d. This year, if this recommendation put forward by the Seanad in its wisdom does not find acceptance in this House, he will be assessed on £25. In other words he is going to be assessed on one and a half times the amount he was assessed some years ago. That is the fine we are putting on this man for accepting the responsibilities of citizenship, putting his money into a house and relieving the corporation and the State of the responsibility for paying portion of the cost of his house for the next 35 years. That is one side of the story.

The other side has been referred to by the Minister. Sometimes in this country we hear references to a gentleman who is generally described as of "glorious, pious and immortal memory" but we might describe Griffith as a man of pious but mortal memory. He is going to be buried for all time in connection with his valuations. Many years ago, when we were all young, there used to be on the outside of boxes of Paterson's matches a picture of a landlord sitting behind his desk with a farmer coming in to pay him his rent. Underneath was printed "I am going to pay my rent on Griffith's valuation". The Minister evidently has forgotten all the lessons of his youth.

From the time he fell into the hands of the Revenue Commissioners, his body and soul seem to have been lost. This is a proposition with which the Revenue Commissioners have been toying for 20 years. They brought it up 20 years ago when I was young and innocent and I remember that I was the only member of the Executive Council to oppose it. I succeeded in having it scotched at that time. Unfortunately fate ordained that I was the Minister left to defend the proposal some years subsequently when a recommendation came back to this House from the Seanad that we should restore the one-sixth allowance in respect of repairs. The sense of the House and the sense of the Seanad at that time were both against the proposal to abolish that allowance and the proposition was dropped. However, you may knock out a Revenue Commissioner for a time but he will come up again.

Here, we have them now opposing this recommendation with all the enthusiasm with which they introduced this increase originally and with all the avarice of a Shylock. They are also going to ensure that many of these people will pay more than they are entitled to get out of them. The worst feature of this imposition is that there are many unfortunate citizens in this State who are not properly assessable for tax of this kind at all and they will pay 7/6 in the £ on five-fourths of their valuations because through the sheer terror that the very name of the Revenue Commissioners inspires, they are afraid to stand up to them. The unfortunate owner of the house is afraid that if he stands up to them he will have to pay more and he pays, although he is not properly assessable. I think that this is an excellent recommendation of the Seanad. The Seanad's wisdom has far exceeded my anticipations. I think the Minister should reconsider his attitude to this recommendation and if he does not get his reward here, he will probably get it in the next world.

The Minister advanced some arguments which I doubt have any relation to the facts. He mentioned the case of a house that was valued at £20 and let at £90 or the letting value of which was £90.

I could give the Deputy dozens of examples of that kind.

I am surprised.

I could give them to him in Dublin without going any further but I also could give him some examples from Cork.

Residences?

I am surprised, because I am not ignorant of conditions in the City of Dublin and of the valuations in Dublin. There may be some cases.

There are dozens. I have had them investigated.

The Minister also said that he had to get money. That is a most unfortunate remark because, apparently, it has no relation to the justice of the claim.

That is just what a burglar would say: "I have to get the money." I would have expected the Minister to put up a better case than that. With regard to what he says about the person who owns his own house that person, apparently, is supposed to have got away with something. I should like to suggest to the Minister that the valuation of all those house has a relation to their market value and that when that person purchased his house it was in competition with other houses that were probably let at about the same rent. In face of all that, he walked in and purchased the house. Of course it is the luck of the game that income-tax has been increased since then, but the landlord was, at least, the owner of the house. I am not complaining about that because, of course, he has to pay his taxes like his fellow-citizens, but the man who purchased the house is bearing the burden of local rates as well. Local rates have increased about 50 per cent. and he has to foot that bill.

The Minister, by some process of juggling with the valuation figures, arrives at the conclusion that people who own houses are really getting away with something. Did the Minister ever compare houses in Dublin with houses, say, in Belfast or across the water? If he did he would probably find that houses outside this State have lower valuations and lower ground rents, and that they cost considerably less to erect. The consequence of increasing overhead costs on houses here is that you are pushing up rent because, remember, the whole question ultimately comes down to one of getting a return on the money that is invested. Ultimately the Minister will find that he has pushed up the cost of living on the workers of this country. That is what it amounts to. A person who lives in a house valued at £20 is somewhere just outside the artisan class. He is probably what one might call a black-coated individual, getting not very much more money than an artisan and having a very hard struggle for existence. I suggest that the Minister wants to give house property and building all the impetus he can, but in doing this he is only putting an additional cost of living on all the community, because it will ultimately come back on the whole community in the shape of rent and a return on the money. I do not think the recommendation of the Seanad goes far enough, but I certainly feel that the Minister might at least accept it.

I do not think that the recommendation of the Seanad goes far enough, and I am not over-fond of it for that reason; but because, if it were accepted, it would give some relief and might be regarded as the thin edge of the wedge to do what could be described as belatedly righting a wrong, I would be disposed to accept this recommendation. I put down amendments to several Finance Bills year after year in order to get rid of what I called, when this five-fourths of the valuation was originally devised, as the Revenue Commissioners' nightmare. I always called it so. I understand that the Minister makes the case now that his justification is that the revenue would lose too much if this were accepted. That was not the excuse given here on another occasion; that was not the reason put forward in justification of the five-fourths when it was proposed or when my amendments were put down to the Finance Bills.

I did everything I could to persuade the then Minister for Finance to revert to the old system. There was a certain amount of irony in the situation for me because, when I went through my own constituency in the course of elections, it was put up against me that I had never criticised this imposition of five-fourths in the House. The actual position was that on several occasions I put down amendments dealing with the Revenue Commissioners' nightmare and divided the House on them. For that reason alone I have a personal interest in the Revenue Commissioners' nightmare.

The original excuse given for the five-fourths was not the one proffered by the Minister to-night. Now he cannot afford to lose money. On an earlier occasion it was stated that the system of valuation was out of date. One reason advanced here was that the Griffith's valuation had so outrun its time that there were inequalities in the various houses valued all over the country; that new houses were valued higher than old houses, and a lot of people, to use the current phrase, were getting away with something. The Revenue Commissioners' justification for all their taxes is that somebody is getting away with something; that they have in their pockets what should be in the pockets of the Revenue Commissioners. I understand the Minister's justification for his present attitude is that somebody is getting away with something and the revenue of the State cannot afford to lose it.

As regards the first proposition, that these people who purchased their houses are getting away with something, I will recall the Minister's mind to the position after the last war when most people, being entirely unwilling to purchase houses, were forced under the conditions then existing to buy the houses which they only wanted to rent. I would say that of the people who have purchased houses since the last war, 80 per cent. of them did not purchase the houses by way of investment of their money but as a necessity, because they had to get a roof over their heads and they had to pay any price demanded in view of the scarcity of houses at that time. That very significant fact is entirely overlooked in connection with the position of people who live in houses they have purchased. They purchased those houses, not because they wanted to invest their money but because they could not get the houses to rent.

As regards the question whether or not the revenue can afford to do without the money that will be raised by this particular method, I think the Minister can hardly have had the matter properly examined. Viewed as a mathematical proposition, taking every house with a valuation of £20 and under as being liable for full income-tax, I suppose a substantial amount of money would be lost, but the vast majority of people living in houses with a valuation of £20 and under are married men with families and they would only have to pay, if they would have to pay anything, a very small sum indeed in income tax and they are the class of people who are deserving of the most consideration. The few pounds they have to pay to the Revenue Commissioners would mean a very great deal to their exchequers, particularly in present circumstances, but I very much doubt if the loss to the Exchequer by granting this exemption, or whatever you may wish to call it, would be anything like the figure the Minister has stated.

We must face the fact that the Minister has no intention of accepting this recommendation, but I am glad of the opportunity to renew the protest I made when the Revenue Commissioners' nightmare was introduced as the statute law of this country, a protest which I repeated until I got tired of it and no one seemed to take any notice of that protest.

I should like to support this recommendation. There is a good deal in what Deputy Costello has said. Many of the people who purchased houses some 20 years ago purchased them simply because they could not get houses to rent. That was the position in places like Limerick, Cork, Waterford and other towns. Many people made great sacrifices in order to purchase their houses. The Minister should have a heart, to use a current phrase. He got out of another difficulty with reference to taxation by making certain exemptions.

As regards the Revenue Commissioners, the fraction of five-fourths that they introduced has always impressed me. It took a Revenue Commissioner to think of it. I only wish that by some method or other the Commissioners and the Minister would apply such a fraction to our daily lives, so that some of us who are struggling for bare existence on our farms would be able to get five quarters out of a lamb instead of four. The whole thing reminds me of the story of a judge who sentenced a man to penal servitude for life. The man ventured some retort and the judge declared "If you say another word I will give you five years longer."

I have always been opposed to this expedient of increasing the valuation to five-fourths. The Seanad has made a recommendation to modify it in some way. Although the modification will not meet the majority of cases, it is still something to the good and I appeal to the Minister to accept it. It will be a small concession to the people who have purchased houses, many of them under extreme difficulties and at great sacrifices.

The type of case that Deputy Cosgrave selected of a man with six children living in a house with £20 valuation would not apply at all, because such a man would not be paying any income-tax. It is also probable that the man with three children, when his allowances for income-tax purposes were taken into consideration, would not have to pay any income-tax if living in a house with the same valuation. Deputy Costello was right in saying that a great number of people, living in houses with a £20 valuation, would not be paying income-tax at all. The occupation of houses with a £20 valuation is not altogether confined to people in the suburbs who have recently purchased their houses. All over the country you have grave and gross inequalities as regards the valuation of houses. In some parts you have houses that might be described as mansions with a rateable value of £20, and in some of the smaller towns quite big premises with the same valuation. My submission is that it would be unfair if houses of that kind, and there are quite a big number of them, should escape their due share of taxation. Let me give some examples from Dublin and Cork of houses with a £20 valuation, and of the rents that have been demanded and that are being paid for them. Terenure: valuation, £20; rent, £96. In that case the landlord is paying the rates. The rent, excluding the rates, would probably be about £75. Kilmainham: valuation, £19; rent, £84; Milltown: valuation, £20; rent, £96; Howth Road: valuation, £20; rent, £96; Clontarf: (three cases) valuation, £18; rent, £84; valuation, £16; rent, £72; valuation, £23, rent, £91; Drumcondra: valuation, £21; rent, £95; Rathfarnham: valuation, £22; rent, £108. These examples show that the valuation of the houses is only remotely connected, if connected at all, with the real value of the property. That is what I maintained when speaking earlier on the recommendation. Here are some examples from Cork. They are probably worse than the Dublin ones because there has been no revaluation in Cork since the Griffith's valuation. Douglas Road: valuation, £16; rent, £92; valuation, £18; rent, £90; Wilton Road: valuation, £20; rent, £100; valuation, £20; rent, £92 10s; Ballintemple: valuation, £17; rent, £75; valuation, £17; rent, £75; Glasheen Road: valuation, £12; rent, £60.

As I have already said, these valuations are not even remotely connected with the real value of these properties. We have taken the £20 valuation because the Seanad fixed on that figure. I cannot accept the recommendation.

Question put: "That the Committee do not agree with the Seanad in recommendation No. 1."
The Committee divided:— Tá, 48; Níl, 22.

  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Breen, Daniel.
  • Breslin, Cormac.
  • Carty, Frank.
  • Childers, Erskine H.
  • Cooney, Eamonn.
  • Corry, Martin J.
  • Crowley, Fred Hugh.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Humphreys, Francis.
  • Kelly, Thomas.
  • Kennedy, Michael J.
  • Killilea, Mark.
  • Kissane, Eamon.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Lynch, James B.
  • McCann, John.
  • McDevitt, Henry A.
  • Meaney, Cornelius.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mullen, Thomas.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Reilly, Matthew.
  • Rice, Brigid M.
  • Ruttledge, Patrick J.
  • Ryan, James.
  • Ryan, Martin.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Richard.
  • Ward, Conn.

Níl

  • Bennett, George C.
  • Benson, Ernest E.
  • Byrne, Alfred.
  • Byrne, Alfred (Junior).
  • Corish, Richard.
  • Cosgrave, William T.
  • Costello, John A.
  • Davin, William.
  • Dockrell, Henry M.
  • Doyle, Peadar S.
  • Everett, James.
  • Giles, Patrick.
  • Hannigan, Joseph.
  • Hickey, James.
  • Hughes, James.
  • Keating, John.
  • McFadden, Michael Og.
  • Mulcahy, Richard.
  • Murphy, Timothy J.
  • O'Higgins, Thomas F.
  • O'Sullivan, John M.
  • Pattison, James P.
Tellers:— Tá: Deputies Smith and Kennedy; Níl: Deputies Doyle and Bennett.
Question declared carried.

I move: That the Committee agree with the Seanad in recommendation No. 2:—

In Section 41, sub-section (1), page 24, lines 37 and 38, that the words "consequent on an invitation to the public to subscribe therefor" be deleted, and the word "and" be substituted; and after paragraph (c) that a new paragraph be inserted as follows:—

(d) either the said new issue was made consequent on an invitation to the public to subscribe therefor or the Revenue Commissioners are satisfied that no part of such issue was paid for or satisfied by the utilisation, directly or indirectly, of assets which were in the hands of the company on the last day (in this paragraph referred to as the said day) of the trade year which ended in the year ended on the 31st day of August, 1939 (excluding from such assets a sum equal to the amount (if any) of dividends distributed and directors' remuneration paid within six months after the said day in respect of a period ending on or before the said day) or by the utilisation, directly or indirectly, of profits of the company made after the said day (excluding from such profits so much thereof as was applied in the payment of dividends or of directors' remuneration to an extent not exceeding in rate the average amount of the dividends distributed or directors' remuneration paid (as the case may be) not later than six months after the said day in respect of the three, two, or one years or year by reference to the profits in one of which the standard profits of the company are computed),

Section 41 of the Bill is designed to provide for making an allowance in a case in which there has been an introduction of genuinely new capital into the business of a company which has a profits standard, such new capital being introduced after the end of the standard period. The section, as it stands, however, does not provide for the case in which such capital is introduced otherwise than as a result of a public subscription. The recommendation is designed to remedy this defect, and I ask the House to accept it.

This is a rather peculiar amendment, because new capital in this case means getting in money from the existing shareholders, or floating an issue which will be subscribed by the public. That particular operation will cost the company money. If it were not for this amendment which is now being made it would be open to the firm to employ some of their reserves, to sell some of their securities, if they have securities, or to employ money which they have on deposit. What purpose the Minister has in mind in making this amendment to the original section has not yet been disclosed to the House. We should be glad to hear from him the reason for it. There is no great difference between an extra flotation—the issuing of extra shares to shareholders who are already in possession of some of the shares of the company—and using the money which the shareholders have had to their credit in reserves and so on during the past few years. It will be open to the company, unless I am much mistaken, to issue from their reserves a bonus, and advise the shareholders at the same time that it would be possible for them to return the bonus for extra shares. In that case they would probably defeat the purpose that the Minister has in mind. An issue such as I have mentioned would not be an extra dividend. It was done some twenty years or so ago, when one firm which had its headquarters in England issued to its shareholders what was called at that time a bonus, but which was really a distribution to the shareholders of funds which had been earned by the company over a series of years. It was furnished to them in the form of war loan. It was not cash; it was war loan. It is very doubtful whether Order 83 or its accompaniment, or the provisions of the Finance Act, interfere with a case of that sort. There are shareholders here of British companies; what they did at that time I expect it is possible for them to do on this occasion. It would seem strange if the reserves of a company, which are the property of the shareholders, could not be distributed to them. In that case, they would defeat whatever purpose the Minister has in mind, unless it is that he wants to find new money, that he thinks money is available for investment and that it ought to be got by those companies.

I felt satisfied that the section, as originally drawn, was drawn in such a way as to do everything possible to avoid evasion. There had been attempts at evasion, and there has been successful evasion of tax by companies using reserves as capital. We insisted originally that there should be a new issue to the public, but in the Seanad it was pointed out to me that we need not insist on a public issue so long as there was a genuine flotation of additional capital for cash, and the case made, I thought, was reasonable, so long as it was restricted to capital issued actually for cash, as against capital issued in the way of bonus or in some other way that might leave the door open to evasion, especially in regard to private companies. I accepted the case made by the Senator concerned, and agreed to wipe out the words "consequent on an invitation to the public to subscribe therefor", leaving it open, so long as there was actual cash paid for the additional capital, so that it would be counted in regulating the standard.

Could the Minister, by any possible chance, make the drafting of this amendment any more complicated? It is almost impossible to read it.

I agree that it is complicated.

It is complicated to the point of being almost incapable of interpretation.

Well, we know what the lawyers can do when they are put to it.

Mind you, the Revenue Commissioners can beat them any day.

Is the object of this extraordinarily obscure drafting to prevent anybody knowing what on earth is meant, so that this idea of the Revenue Commissioners, to prevent what is called evasion, may be properly handled?

It is drafted by lawyers, and I suppose lawyers can interpret it.

Well, we shall do our best.

Question put and agreed to.
Reported that the Committee had disagreed with recommendation No. 1, and agreed to recommendation No. 2.
Report of Committee agreed to.
Amendment made, accordingly, to the Bill.
Message to be sent to the Seanad accordingly.
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