Financial Resolutions. - Financial Resolution No. 3—Corporation Profits Tax. – Dáil Éireann (10th Dáil) – Wednesday, 6 May 1942

Financial Resolutions. - Financial Resolution No. 3—Corporation Profits Tax.

Mr. O Ceallaigh

I move Financial Resolution No. 3:—

(1) That in computing, under sub-section (2) of Section 39 of the Finance Act, 1941 (No. 14 of 1941), or any sub-section which may be substituted for that sub-section by an Act passed in the financial year now current, the standard payments for dividends and interest in respect of any accounting period or part of an accounting period of a company which has issued capital after the 6th day of May, 1942, and before the end of the said accounting period or part of an accounting period, the following provisions shall apply and have effect, that is to say:—

(a) the expression "fixed rate" wherever it occurs in the said sub-section (2) or the said sub-section substituted therefor (as the case may be) shall, in relation to the dividends or interest on the said capital so issued or any part of that capital, be construed and have effect—

(i) if the said company was incorporated before the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the said dividends or interest (as the case may be) are or is actually payable or the rate of seven and one-half per cent. per annum, or

(ii) if the said company was incorporated on or after the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the said dividends or interest (as the case may be) are or is actually payable or the rate of nine per cent. per annum;

(b) unless the Revenue Commissioners because of the existence of special circumstances in any particular case otherwise direct, whichever of the following clauses is applicable shall apply and have effect, that is to say:—

(i) if the said capital so issued is the first issue of capital made by the said company and it is not shown to the satisfaction of the Revenue Commissioners that the said capital is represented fully by tangible assets owned by the said company at the time of the issue of the said capital, such amount (whether a part or the whole) of the said capital as is, in the opinion of the Revenue Commissioners, not so represented shall be excluded and deducted from the capital of the said company for the purpose of computing the said standard payments for dividends and interest and, if the said capital includes more than one class of capital, the amount of the said capital to be excluded and deducted as aforesaid shall be apportioned rateably between the different classes of the said capital, or

(ii) if the capital so issued is not the first issue of capital made by the said company and it is not shown to the satisfaction of the Revenue Commissioners that on the issue of the said capital so issued there had been an increase in the tangible assets of the said company in full proportion to the amount of that capital, such amount (whether a part or the whole) of the said capital so issued as is not fully represented by such increase of the said tangible assets shall be excluded and deducted from the capital of the said company for the purpose of computing the said standard payments for dividends and interest and, if the said capital so issued includes more than one class of capital, the amount of the said capital to be excluded and deducted as aforesaid shall be apportioned rateably amongst the different classes of that capital;

(i) preference stock or shares, ordinary stock or shares, and debentures or debenture stock (other than debentures or debenture stock issued by way of security for a bank overdraft) and nothing else shall be regarded as capital, and the word "capital" shall be construed accordingly,

(ii) the amount of any capital shall be taken to be the nominal amount thereof,

(iii) preference stock or shares, ordinary stock or shares, and debentures or debenture stock (other than as aforesaid) shall each be taken to be a different class of capital.

(2) That in computing under sub-section (3) of Section 41 of the Finance Act, 1941 (No. 14 of 1941), or any sub-section which may be substituted for that sub-section by an Act passed in the financial year now current, the standard payments in respect of the stock or share capital or debentures or debenture stock referred to in that section as the new issue in any accounting period or part of an accounting period, the expression "fixed rate" wherever it occurs in the said sub-section (3) or the said sub-section substituted therefor (as the case may be) shall, in relation to dividends or interest on so much (whether a part or the whole) of the said new issue as was made after the 6th day of May, 1942, and before the end of the said accounting period or part of an accounting period, be construed and have effect—

(a) if the said company was incorporated before the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the dividends or interest (as the case may be) in relation to which the said expression is used are or is actually payable or the rate of 7½ per cent. per annum, or

(b) if the said company was incorporated on or after the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the dividends or interest (as the case may be) in relation to which the said expression is used are or is actually payable or the rate of 9 per cent. per annum.

General Mulcahy

I would like to ask the Minister whether there is any part of this Resolution which makes provision for refunding where excess corporation profits tax has been paid for certain profits over a particular period, and where the profits in the next year fall below the previous profits. Does any Resolution that will be proposed to-day deal with that matter or is it dealt with simply in the Finance Bill?

Mr. O Ceallaigh

It will be in the Bill.

General Mulcahy

When Deputy Cosgrave was speaking he had some remarks to make on that part of this Corporation Profits Tax Resolution— Section (1), sub-section (a) (ii)—where it is proposed to grant a special rate for profits of new companies that were incorporated on or after 1st day of January, 1934. I would like to ask the Minister whether he could at this stage give us any idea as to why he arrives at that particular date. As Deputy Cosgrave mentioned, companies that were set up as new companies at that particular time, not only enjoy a concession to the extent of 20 per cent. in regard to income-tax, but they were established under very high tariffs, some of them very, very high, and in some cases were assisted by quota arrangement. It is peculiar that it is these companies, that have been established in such splendid circumstances for building themselves up, should get these concessions. It was always argued, I think, by the present Government when they were in Opposition, in the years from 1922 to 1932, that the policy of the Government at that time created a shocking state of affairs for anybody who wanted to develop Irish industry.

Reviewing the comments and reflections of present Ministers and other members of the present Government Party on industrialism, one would imagine that if restitution had to be made to anybody, it would be to the heroic and courageous industrialists who, in the conditions, described as appalling by the members of the present Government, that existed pre-1932, set up these industries and carried them on. I wonder whether at this particular stage the Minister could indicate why it is that January, 1934, is selected, and why it is the very fortunate companies who had the tremendous amount of Government assistance and the concessions that these companies enjoy, should be looking for and getting concessions of this particular kind now.

Mr. O Ceallaigh

After the last Budget and all through the year I received numerous deputations, representing all classes of industries, the Federation of Irish Industries, the Industrial Credit Corporation, individual companies—great numbers of them—I heard their cases and had them examined. The results of my examination and cogitation were set out by me to-day in the course of my Budget statement. I was convinced that, with regard to the excess profits tax, there was a case to be made in the direction I indicated. With regard to the date the Deputy refers to, 1934, I took that as the date when the tariff policy introduced by this Government, which caused the foundation of a number of new industries, began to be really operative; it was from about that time.

I examined a number of companies that were started in the years beginning 1934 and up to before the war, and I found that there was a not inconsiderable number of companies that had been founded in the years 1934-35-36 that had expected to be in full working order and to be running, perhaps normally, for a few years— two or three years at any rate—before 1939; but through a variety of circumstances, such as failure to get trained staffs ready to operate in time, failure to get materials or machinery, failure to get contractors to complete their job in time—a variety of reasons—they were not able to operate sufficiently long before the war commenced to enable them to get a fair standard of profits, and it would have been unfair to these companies not to give them some consideration. It is for that reason, and that reason alone, that I have introduced the concessions I have made.

General Mulcahy

Would I be wrong if I suggested that it was in the autumn of 1933, and not 1934, that the Taoiseach, on the one hand, and the Minister for Industry and Commerce, on the other hand, were going from Kilkenny to Nenagh and some of the other places, tossing the coin, or whatever it was, as to whether it was 100 or 300 new factories that had been started as a result of Government policy since 1933?

Dáil Éireann debate -
Wednesday, 6 May 1942