Dáil Éireann debate -
Tuesday, 27 Jun 1944

Vol. 94 No. 7

Finance Bill, 1944—Fourth and Fifth Stages.

Minister for Finance (Mr. O Ceallaigh)

I move amendment No. 1:—

(a) In page 3, Section 4 (1), lines 42 and 43, to delete the following: "the Children's Allowances Act, 1944 (No. 2 of 1944)" and substitute the following: "the Act of 1944".

(b) at the end of the section to insert the following two subsections:—

(3) Sub-section (2) of this section shall not apply in the case of a claimant who, because he is compelled to reside outside the State by reason of the circumstances of his trade, profession or employment, is not resident in any region on any date (being the qualifying date in relation to any payment period for that region) in the year of assessment to which his claim relates.

(4) In this section—

the expression "the Act of 1944" means the Children's Allowances Act, 1944 (No. 2 of 1944);

the expressions "qualifying date", "payment period" and "region" have the same meanings as in the Act of 1944.

This is to prevent a hardship that would arise if certain people were obliged by their trade, profession or employment, to live outside the State, owing to the fact that they would not come within the terms of the Bill as at present drafted. If they paid income-tax, they would suffer the reduction in the income-tax allowance and would not be entitled to get the children's allowance, so they would lose in both ways.

Amendment agreed to.

General Mulcahy

I move amendment No. 2:—

In page 3, Section 4 (2), line 53, to delete the words "forty-seven" and substitute therefor the word "fifty".

I put this amendment down in this exact form in order to bring out more clearly, not so much the principle that is involved as the method by which the difficulty could best be overcome. As was pointed out very clearly before, normally an income-tax payer who is in receipt of an allowance in respect of children under the income-tax code would, if he became entitled to a children's allowance, lose £1 per year for every child. A day or two ago, I was able to send the Minister a letter from one income-tax payer, who had eleven children, ten of whom were under 16, and who stood to lose £8 a year, because the State had adopted the principle that the family should be assisted by children's allowances.

The Minister has met the situation in a very reasonable and generous way. After all, the arguments have been piled on top of him. I am grateful for his attitude in the matter. My amendment, as printed, reads:—

In page 3, Section 4 (2), line 53, to delete the words "forty-seven" and substitute therefor the word "fifty".

I understand the Minister would be agreeable to accept it, if I substitute "forty-eight" for "fifty".

An Ceann Comhairle

Would the Deputy please read, for record purposes, amendment No. 2, as it now stands?

General Mulcahy

As amended, it reads:—

In page 3, Section 4 (2), line 53, to delete the words "forty-seven" and substitute therefor the words "forty-eight".

I wish to express my appreciation of the Minister's action in the matter and assure the House that, if this amendment and the one following it are accepted, no person will suffer any loss in respect of payment of children's allowances. There are a few cases in which there may be a slight gain.

Mr. O Ceallaigh

They may lose 3/- this year only and thereafter gain 2/6.

Mr. Dillon

The Minister is to be congratulated on that amendment.

Amendment, as amended, agreed to.

General Mulcahy

I move amendment No. 3:—

In page 3, line 60, Section 4 (2), to delete the word "forty" and substitute therefor the words "forty-two pounds, thirteen shillings and fourpence".

I understand the Minister will accept this amendment also if I substitute "forty-three" for "forty-two pounds, thirteen shillings and fourpence". As amended, this amendment would read:—

In page 3, line 60, Section 4 (2) to delete the word "forty" and substitute therefor the words "fortythree".

Amendment, as amended, agreed to.

An Ceann Comhairle

Amendment No. 4 raises a new and wide issue, namely, relief for wasting assets. Normally it could not be admitted on Report. In view, however, of the accommodation given on this Bill and the short interval between the Second and Committee Stages, I am prepared to allow the proposal to be discussed.

Mr. Roddy

In the absence of Deputy McGilligan, I move amendment No. 4:—

In page 6 to insert before Section 9 a new section as follows:—

The following shall be added to the "Rules applicable to Schedule A" (Schedule A, No. III) as set out in the First Schedule to the Income Tax Act, 1918, as amended by later enactments:—In computing the annual value or the profits of a mine from which minerals are extracted by underground adits, tunnels, wells, sinkings or borings the Commissioners shall make such deduction or allowance (not being less in any year than one-tenth of the entire capital outlay on such mine as is unexpired or has not been recouped out of profits at the beginning of each accounting period) as the Commissioners shall determine having regard to the expected life of the natural deposits of such minerals in such mine and the expected rate of extraction of such minerals therefrom.

This amendment asks the Minister to do here what has been done in other countries. The Minister is familiar with the case made by representatives of the mine owners as, I think, he met them on a number of occasions during recent years. Lest his memory may not be very clear as to the facts I shall briefly state the case for the amendment. Mining enterprise in this country has been mainly a history of failure due perhaps to lack of capital, lack of technical knowledge, the activities of foreign shareholders, want of proper equipment, etc. During the first Great War there was a revival of mining here, but as soon as the conflict ended these industries were either abandoned or failed because of foreign competition. Since the outbreak of the present war, due to the difficulties of procuring supplies from outside, and prevailing high prices, a number of mining industries have been revived such as barytes, ware clay, colloidal, and talc. However, they have achieved a degree of success which many people thought was not possible.

In America and in other countries mining enterprises are treated in a special way. In this State the Minister insists on exacting the full lb. of flesh from mining industries as well as from other industries. In other countries it is recognised that mining industries are on a somewhat different plane to other industries and for that reason they get special concessions.

In America mining enterprises are allowed to continue for ten years without paying any tax and in Germany from six to eight years. In Canada and in other countries special concessions are given mining enterprises. Canada and the United States are two of the largest mining producing countries and there depreciation and depletion allowances have been instituted. In Canada, for instance, mining enterprises are free of tax for the first three years and in South Africa £20,000 is allowed tax free as a concession to assist small mines. In this State the Minister has so far made no concession. The Irish companies that want the concession now are exporting substantial quantities of their products. Barytes produced here supply the home market to the extent of 18 per cent. and the other 82 per cent. is exported. That applies to other companies such as Benbulbin Barytes Ltd., Irish Minerals Ltd., Cloyne Mineral Co., Ltd., the greater portion of whose products are exported. If exports are to be continued after the war it is essential that these companies should have adequate capital with which to renew equipment and, generally, to meet the severe competition of other countries. They cannot hope to be in a position to do that unless the Minister is prepared to make them some concession in the way of taxation. They claim that they are entitled to the same concession as the American Government grants to mines there and that they should be free from taxation for ten years.

This request is a most reasonable one. I am sure that it is the desire of the Minister and of the Government to provide as much employment as possible. The mining industry provides a large measure of employment and, with the assistance and co-operation of the State, by way of granting the facilities now asked for, the mining industry will be able to extend its operations and provide much more employment in future. I understand that from a report made to the State Department at Washington it appears that British demands will be for 150,000 tons of barytes annually after the war. If the barytes company in Sligo is encouraged by the Government it will be in a position to meet a substantial portion of that demand and, as time goes on, and when they are in a position to secure more modern equipment, it should be possible to increase the output considerably. The same applies to companies engaged in coal mining and other enterprises with exportable surpluses. I earnestly appeal to the Minister to give special consideration to this amendment and to try to facilitate those companies. They are carrying out an essential national service of great importance and I submit that it is the duty of the Minister to facilitate them in every possible way. The greatest facility the Minister could extend to them at present would be to allow them to carry on free from the burden of taxation for a period of years. Ten years is the period which is sought. That is the period which is regarded as the average life of a mine in other countries. It is the period always used for accountancy purposes. I ask the Minister seriously to consider this matter and to grant the mine owners the very reasonable concession they seek.

Mr. O Ceallaigh

I am surprised at the Deputy suggesting that a mining company should be left entirely free of tax——

Mr. Roddy

They are so left in other countries, as the Minister knows, and why discriminate against them here?

Mr. O Ceallaigh

I thought that the Deputy was a reasonable man. That has been my experience of him, generally, but the publicity agents of the company he has mentioned seem to have made a great impression upon him. I thought that he was a little more reasonable and had more common sense. I thought he was a person who would examine the arguments——

Mr. Roddy

I mentioned what was happening in other countries.

Mr. O Ceallaigh

I thought that the Deputy would examine a case before he would swallow it wholesale, as he has done in this instance. Then he puts forward that case as a reasonable one. Ten years is supposed to be the life of a particular class of mine. The assets are supposed, at the ordinary rate of extraction, to last not more than ten years and the Deputy suggests that a mine which might yield very valuable profits to its owners should be free of tax completely for the whole period of its working. I suggest to the Deputy that that is not a reasonable proposition. No man in this House is more anxious to develop our mineral resources, as we know them, than I am, and I am prepared to meet in a reasonable way and to help people who are putting money into enterprises of that kind, but I am not prepared to do that in the way the Deputy suggests.

Mr. Roddy

The way the amendment suggests.

Mr. O Ceallaigh

This amendment is anything but reasonable in present circumstances. As the Ceann Comhairle reminded the House, it has been put in on Report Stage although it is of a fundamental character. It would change the whole income-tax code as it has existed since the State came into existence and as it existed for many decades before that. It is urged that such an amendment should be regarded as a reasonable amendment and should be considered on Report Stage. I am really surprised at the Deputy having allowed an amendment of this kind to be fathered on him, particularly at this stage. I cannot accept the amendment. For more than 12 months I have been seriously considering this question and I know that it is bound to have much wider reactions than the Deputy dreams of. "Wasting assets" have given very great concern to many Governments and many Ministers for Finance for a long time. "Wasting assets" cannot be confined to mineral resources. In some cases "wasting assets" include leasehold property. If a person has a lease for a term of 50 years, his asset will disappear at the end of that time and he could argue that he should get consideration for that as a wasting asset. If a man is engaged in the transport business and owns a few trucks, those trucks will last only about five years and could be reasonably regarded as "wasting assets".

Mr. Dillon

So they are.

Mr. O Ceallaigh

Where will you stop if you introduce this principle in respect of wasting assets? The principle cannot be confined to mineral resources and it might have very serious reactions on the revenue of the State. It is not a matter to be introduced as a sort of sideline; it is a matter which requires very serious consideration. It is getting that consideration and it may take some time to arrive at a conclusion. I am anxious to discover a way out but I do not see it at present. It is not true to say that what the Deputy seeks has been allowed in other countries because one must compare like with like. We are told by interested parties that, in the U.S., Canada, Germany and France, wasting assets in respect of mineral resources get special consideration. It must be remembered that these countries have not the same system of taxation as we have. Their system cannot be compared exactly with ours. We are doing in other ways a considerable amount to help industries of this kind. It is also worth noting that, so far as I am aware, out of the many mineral industrial concerns which have been working profitably over a long number of years here, only one has asked for any special consideration. Coal-mining companies which have been working satisfactorily for a great number of years have never asked for this concession and, surely, as much claim could be made for coal as a wasting mineral asset as for any other mineral. The State is spending a considerable amount of money in developing our mineral resources. During the past three or four years, we formed at least two companies to develop our mineral resources, so that we are not unmindful of what should be done in that direction. Section 8, which we are introducing, proposes to give additional benefits to owners of plant and machinery. That may be of considerable assistance to the industry which the Deputy has in mind. I cannot accept the amendment. I am examining the matter. I realise that it is an important subject which will have to get a great deal of attention and I see no hope of an immediate conclusion to the examination that is being made. It will take time.

General Mulcahy

The Minister concentrated on wasting assets in dealing with this amendment. I agree that the examination of the question of wasting assets is very important. Deputy Roddy made a big claim for the mining business but I do not think that the claim which he made was as sweeping as the Minister suggests. In Great Britain, where mining conditions are not as widely different from ours as are conditions in the U.S., we have the case of the Cornish mines. There is very definite demand there, practically amounting to pre-discussion of policy, that pre-production expenditure should be taken into consideration when dealing with mines as well as the cost of working during the earlier years.

Mr. O Ceallaigh

Has that request been acceded to?

General Mulcahy

It has not been acceded to, but in that country the whole discussion of taxation in relation to industry has progressed enormously and, recently, very rapidly. They realise that things are moving rapidly in the industrial world and they realise that whoever is left behind in the next year or two will be left behind for all time. We have there the example of people with initiative, power and capital to guide us. The question of initiative is, owing to our lack of capital and lack of experience, more important to us than it is to them. Men who are prepared to plunge into industrial and mining enterprise ought to be encouraged as much as possible to let their initiative go in the new circumstances and to realise that there will be a modern approach to the question of taxation on industry. The Minister indicated that there are many implications in amendments of this kind. We all agree as to that. He also indicated that the difficulties were so many that it was not likely that any urgent decision would be taken. In these matters we should prepare ourselves for development in the future, and the people on whom we will have to depend to take the initiative and to bear the expense in carrying out the work of development ought to be assisted at the earliest possible moment; they should be informed what the nature of the taxation on industry is likely to be. It is most desirable that the Minister should get these discussions brought to a head and there should be the closest consultation with industrial organisations or individuals who are prepared to undertake ventures of various kinds.

I think everyone will agree that where mining operations are concerned there is usually a very considerable amount of expense in connection with pre-development work. Those who may be anxious to develop the mines do not know exactly how things are likely to go. In that connection, it is very desirable that they would be informed as to the nature of the taxation they may have to bear, and consideration will also have to be given to the important factor of wasting assets. The same applies to the industrial side. I am sure the Minister is considering these things, but I would like to urge upon him that time is an important factor.

The Minister complains about this matter being raised now. I should like to point out that the last three or four months have not been quite normal. I think he will admit that the Finance Bill is being put rather quickly through the Parliament. Perhaps the Minister has this to say for himself, that industrial bodies and manufacturers generally ought to be more alive in putting up their case, and putting it up in time but I think the Minister has a certain amount of responsibility for encouraging commercial and industrial bodies to take time by the forelock by inviting their representations rather than damping their enthusiasm by making them feel that they are raising problems that are too big for consideration.

I simply support the general line that has been taken. I feel we should be grateful to Deputy Roddy for raising the matter. The Minister has told us he has been considering this question. Perhaps we could get him to agree that it is a matter of urgency and, as part of that urgency, if people outside, organised bodies or individuals, would begin to worry him a little more, then that would be all to the good, and in that way we might speed up decisions. Early decisions are very vital.

Mr. Dillon

I am anxious to get some information. I observe that the Minister for Finance detects a difference between modern mine owners and the old-fashioned ones. He is apparently beginning to wake up to the fact that there is a slight distinction between the old-fashioned industrialist, who believed it was his duty to earn a profit competitively and if he did not earn a profit the proper thing was to get out of the business and so make way for somebody who could, and the modern type. He has not realised that the Fianna Fáil Government have begotten a new type of industrialist who, if he cannot make a profit, wants to raise the tariff to 25 per cent., and who, if that does not secure a profit, wants a quota. If the quota is not sufficient to bring in the profit, the next thing that industrialist wants is exemption from income-tax and, should that not suffice, he desires a subsidy. We all remember the Roscrea factory. That type of industrialist wanted all his supplies free, wanted to be exempt from all taxes and to be paid substantial compensation if the Government did not continue to give all the supplies for nothing. I am glad the Minister has awakened to the fact that there are two types of industrialist in this country, but I hope he will be conscious of his own responsibility for begetting the particular type to which I have referred.

When we come to consider the question of exempting mines from taxation, I begin to wonder where that principle is to end. I suppose a mine is a wasting asset, but I see other companies which have to undertake considerable preliminary expense and I observe that their entire profits are being swept away by excess profits tax and special war burdens, and though they are paying to the Government in taxes as much as three times what they are distributing in dividends, they are constrained to carry in their balance sheets substantial sums on the assets side for preliminary expenses. There is a case of hardship if ever there was one. One would imagine that, before being mulcted in excess profits tax or corporation profits tax, they would be allowed to wipe off these preliminary expenses which they carry as fictitious assets. Unless we are prepared to review the whole ground, these are some of the burdens which everyone may be called upon to share.

When I hear gentlemen who are paying themselves 6 per cent. per annum, and sometimes more, coming here and claiming very substantial concessions by way of taxation because they have done this pious duty of launching out in a mining or industrial enterprise, I am entitled to ask, what induced them to embark on this enterprise? Was it love of Cáitlín Ní Houlihán, or through a desire to increase their own incomes? Is there any Deputy so completely idiotic as to imagine that any gentlemen would embark on that type of enterprise without anticipating substantial profits for themselves? And, more power to them, I say—the more profits they can earn, the better pleased I would be. But that they should come to the House and ask that, in order to enable them to make substantial profits, the Exchequer should give a substantial grant by way of exemption from tax—there I would draw the line.

However, if they can get away with that type of plunder, there is no reason why I should not come in some day and say that my pub is not paying quite a sufficient dividend and propose that I should get a new porter pump and new glasses. Deputies will realise that public houses make a very substantial contribution to the social amenities of rural Ireland. Just as in the case of the industrial concerns that have been referred to, I could claim that the pub also has its wasting assets and there is no reason why the pub should not also be favourably considered. There is no reason why the Government should not facilitate the owners of such premises in order to enable them to carry on their special trades throughout the country. But if we come forward with this demand we shall be told: "If your business is not paying, why do you not get out of it?" I am rather inclined to ask persons who make similar requests, if their business is uneconomic, if it cannot bear the same burden of taxation that everybody else is bearing, why did they embark upon it? I venture to prophesy that if no such concession is ever made as is outlined in Deputy Roddy's amendment, that business will not close down. So long as it is paying 6 per cent. or 10 per cent. per annum on the invested capital it will be carried on.

I do suggest to the Minister for Finance, now that he has discovered that there are two types of industrialist in this country, the old-fashioned type who believes that the justification for his existence was that he was able to earn a profit and bear his fair and equal share of the burden of taxation, and the new type who believes that, in order to get a profit, he is entitled to be exempted from tax, he is entitled to be granted a general licence to plunder his neighbour, behind a tariff or quota —now that he has recognised these two types, he will learn to appreciate a little more the kind of industrialist that grew up in this country by their unaided efforts under free trade and be a little more wary of the exotic variety we have brought up in the glasshouse of protection during the last ten years. I am afraid that my friend Deputy Roddy will feel that I have spoken inimically to his amendment and I do not suppose there is much use in trying to disguise the fact that I have, but I can assure him that it is not because he sponsored it; it is because of the general reluctance which I feel for subscribing to the very popular fraud that the modern tariff-protected industrialist is in the business for love of Cáitlín Ní Houlihán, when I know he is in it for the profit he can and does get out of it.

An Ceann Comhairle

Is the amendment being withdrawn?

Mr. Roddy

I have moved the amendment on behalf of Deputy McGilligan who is acting on behalf of the mine owners and I should like to know something more definite from the Minister. Apparently, he is taking a more generous view of the matter than my friend Deputy Dillon. He realises after all that the mine owners have a grievance.

Mr. O Ceallaigh

I did not admit that at all.

Mr. Roddy

The Minister admitted in any event that they are entitled to special consideration. He admitted also that he was considering the matter very seriously.

Mr. O Ceallaigh

Yes.

Mr. Roddy

I should like to get from the Minister some indication as to when he is going to give effect to whatever plans he has for bringing relief to these people.

Mr. O Ceallaigh

I did not say I had any plans.

Mr. Roddy

Is there any hope that the Minister will give them any measure of relief in this Finance Bill?

Mr. O Ceallaigh

None in the world.

Mr. Roddy

I would ask the Minister to consider that, notwithstanding what Deputy Dillon has said, it requires a certain amount of courage to invest money in mining enterprises considering the history of disastrous failure in this business. Other countries make special concessions to mining enterprise and must recognise that here is a certain amount of hazard attached to the mining industry. The Minister spoke about wasting assets. I would remind the Minister that in Canada and the United States, two of the largest mineral-producing countries in the world, they have instituted depreciation and depletion allowances to mining companies. Canada has further exempted from tax for the first three years all metalliferous mines which came into production since the 1st May, 1936. This application, I think, has special reference to three companies—Benbulbin Barytes, Limited, Sligo; Irish Minerals, Limited, and Cloyne Mineral Company, Limited, all of whom engage in exporting products to other countries. If these people have made a case for relief it is because of the fact that there are special considerations and special difficulties connected with the mining industry which are not common to other industries. For instance, in Benbulbin Barytes mine in Sligo, at the end of last year they discovered that owing to a bog on top of the mountain over the mine, the water was leaking through with the result that the mine fissures became dangerous and they had to spend a considerable amount of capital in building an adit and making the mine safe. These difficulties arise in other mining enterprises, difficulties which cannot be foreseen and which are not common to other types of industries. For these reasons, I ask the Minister to give the matter special consideration. Apparently, the Minister is not in a hurry with the matter, but I would remind him that the war might not last as long as he anticipates, and when the war is over these companies will be subject to the same type of foreign competition as the companies which were started during the last Great War were subjected to and it may be that if he delays too long over the matter they may be wiped out of existence altogether and then there will be an end for another period to mining efforts. I do think that a very strong case can be made for special consideration for mining enterprises in this country and I hope the Minister will not delay too long over the matter.

Mr. O Ceallaigh

I will not delay any longer than is absolutely necessary to make the thorough investigation that has to be made because, as I said earlier, and I do not want to go over it again, it is a big, wide subject. I do admit that certain mining enterprises probably are risky things for capitalists to put their money into but capitalists in these cases are usually people who are not fools. If they have money to invest it means that they have probably made that money pretty hard.

Mr. Norton

Or vice versa.

Mr. O Ceallaigh

These people usually work hard to earn whatever money they have and if they do put it into a thing like a mining enterprise they consider the problem in all its aspects before they do so, as a rule. In the particular case that Deputy Roddy has in mind, I do know that there are, at any rate, some men—I do not think they are very wealthy men— who have put considerable sums of money into this particular industry and, despite what Deputy Dillon said, I do believe a lot of it is due to love for Cáitlín Ní Houlihán. Cynic as I have often been in regard to certain people and certain enterprises, cynic as Deputy Dillon usually is with regard to all industrial enterprises, I believe in this case there are men who have put their hands in their pockets to develop an industry because they wanted to show that industrial and particularly mining development in Ireland can be made a success.

Mr. Dillon

Cáitlín stumped up with 6 per cent. on the last year's trading— very profitable romance.

Mr. O Ceallaigh

So much the better.

Mr. Dillon

Hear, hear! More power to them.

Mr. O Ceallaigh

It means that the enterprise will go on. I go further and say that I do not at all agree with Deputy Dillon that it is not right and proper to encourage people to put money in industrial enterprises and to develop the resources of this country even by giving them tariffs and quotas and other things. There was here for very many years an opinion that no industrial enterprise could succeed in Ireland.

Mr. Dillon

I never heard of it.

Mr. O Ceallaigh

And that nobody ought to put money into industry in Ireland.

Mr. Dillon

What about Guinness, Jacobs, Harland and Wolff?

Mr. O Ceallaigh

Before the State was established here I saw many enterprises floated by moderately poor men who thought it was a good thing. They listened to the preachings of those who were, at any rate, associated with the old Sinn Féin movement and they put money in Irish enterprise and many of the enterprises failed and they lost their money. It was a considerable sum to these individuals.

I remember seeing a cartoon in the old Leprechaun of Irish insurance companies that were started in this country over a period of years. They are not industries but commercial enterprises. That cartoon represented a graveyard with the names of all these Irish insurance companies on the tombstones. There were, I think, at least 30 or 40 of them and the Irish people put sums of money into them, big or small sums of money, and they all went down. It was not until very recent years that Irish insurance business was made a success in this country.

Mr. Dillon

We had better not go too closely into that.

Mr. O Ceallaigh

That is one example. It is not an industry, but a commercial enterprise. The same thing applies to industry. It was only within the last 20 years that we got in this country a real opportunity to give to industrial enterprise the help that was necessary to enable it to overcome the competition of subsidised industry the world over which was competing with our people inside their own shores. That was necessary to enable industries to live during their formative years. I am prepared to stand over and defend that. I am prepared to defend giving special consideration to mineral development. We have done that, and I am prepared to continue to do that as Minister and to ask the Dáil to continue to provide the money for that, as we are doing day by day. We have done it this session. We have given additional money for mining enterprise in this country to the companies that the State set up.

What Deputy Roddy asks in this amendment raises a similar problem but in a very extended and large way. It would mean making a very big change in the whole code. This question of wasting assets cannot be considered in relation to barytes mining alone. To get any satisfactory solution of the question of wasting assets will take some time. I am not going to ask the staff to waste time on the matter, but I am asking them to give it as thorough an investigation as they can and report to me, and they are doing it and they will do it. But, considering the other heavy work they have to do day by day, it is not easy to get an expert and senior staff to give time to a problem of that kind. They have made inquiries and are making other inquiries as to what the position is in the countries which Deputy Roddy suggested and other countries to see what is being done and, if there is any help or advice or information that we can get, we will turn it to advantage. Speaking on behalf of the Government, I say that we are out to develop Irish resources, mineral and otherwise. If we can help them by quotas or tariffs or in any other way we think necessary to meet the competition they have to meet, we will get the Dáil to give them that help in order to encourage people to put more money into the development of the industries of the country.

Amendment, by leave, withdrawn.

Mr. O Ceallaigh

I move amendment No. 5:—

In page 8, Section 13 (1) to insert before paragraph (f) the following paragraph:—

(f) where, in the case of a company which had one or more trade years, a person, who is a director required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity, was not a director during the trade year, by reference to which the total deduction under paragraph (a) or paragraph (b) of this sub-section is computed, but was during that trade year employed by the company, then, notwithstanding anything contained in this sub-section, the Revenue Commissioners, if they so think fit, may increase the total deduction by such amount (not exceeding the remuneration paid to that person for the said trade year) as they think proper;

This is introduced as a result of a promise I gave to Deputy Costello. Deputy M.E. Dockrell was also interested in the same matter and had an amendment down on similar lines to that of Deputy Costello last week. This relates to director-controlled companies and to an employee who becomes a director, and is designed to enable certain difficulties that were raised in the amendments last week to be overcome. I suggest that the amendment meets the case that Deputies Costello and Dockrell had in mind.

Amendment agreed to.

An Ceann Comhairle

Amendments Nos. 6 and 7 are cognate and might be taken together.

General Mulcahy

I think we might take them separately. I move amendment No. 6:—

In page 8, after line 45, Section 13 (1), to add a new paragraph as follows:—

(g) where the assessable profits of a company are different as the result of the application of this sub-section from the profits assessable before this Act came into force, the profits arising in an accounting period which ended after December 31st, 1943, shall be apportioned between that part of the accounting period which was prior to December 31st, 1943, and the part which was subsequent to that date.

With regard to the general matter, I do not think the Minister really realises how unfair the provisions of the Bill at present are, and it is because I think he has always taken up the attitude that he wants to be fair as between individuals and firms that I am encouraged to come back again to this particular matter in the way I do in these amendments. The Minister says the 31st December, 1943, is the most convenient date for the application of this change in taxation and I agree that perhaps he is the best judge of that. But, even then, there is a certain amount of retrospective taxation in it. Even accepting this date, as I do, I want again to raise the question that the effect of the provision here ought to apply equally to various classes of people and various classes of firms. It creates a rather impossible position for persons who make a certain distribution of income at a particular time of the year and then find, as a result of action here on the part of the Legislature, that they are to incur in respect of that period expenditure that they did not expect to incur. However, there is a certain amount of retrospective taxation in this and let us agree that it is the best thing we can do about it. The Minister's provisions propose to deal with people who have been evading taxation. It will also affect people who have been acting quite genuinely and in a bona fide way. Let us take these people who have been evading taxation. My proposal here would have this effect that, at any rate, people who are evading taxation would be dealt with equally.

Mr. O Ceallaigh

I do not know.

General Mulcahy

I will give the Minister a case. In connection with my first amendment, take the case of three persons who joined in the formation of a company in which the three of them were directors and they gave full service to the company in the trade year which ended before 31st August, 1939. Therefore, they come under the provisions of Section 13 (c). Let us say that the capital is £14,000, equally divided in ownership between the directors, and that the company made up its last accounts on the 31st January, 1944. Its profits, before providing for remuneration for any of the directors, let us say, were £5,000. Each director was paid £1,000 for his general services. Under the existing law, that £3,000 would be allowed as a charge, leaving a balance of £2,000. As that is less than the exemption limit of £2,500, the company would not pay excess corporation profits tax. But, if the Finance Bill passes in its present form, only £420 of the £3,000 paid to the directors will be allowed for. That will leave a balance of £4,580, from which £2,500 will be deducted, and the company will then have to pay excess corporation profits tax on £2,080 for the whole of the accounting period ending 31st January, 1944. That means that that company will now, under this Finance Bill, if passed, have to pay £1,040 that it did not expect to have to pay. As I say, it made up its accounts to the 31st January, 1944.

Another company, also formed by three persons with the same capital divided in the same way amongst the directors and paying the same directors' fees, which had no trade year before August, 1939, but had the good luck to make up its accounts for the year on 31st December, 1943, will not have to pay any excess corporation profits tax this year. That is as far as this year is concerned. My amendment suggests that the date, 31st December, 1943, should be taken as the date which would become operative for the actual beginning of the tax. In these circumstances, the company which made up its accounts to the 31st December, 1943, would not be affected in respect of the period back to that, but during the current year it would be; and the company that had made up its accounts to the 31st January, 1944, instead of being stuck for £1,040, which its friend and rival company, which ended up its accounts a month earlier, had to pay, would pay simply one-twelfth of the amount. In other words, it would pay in respect of January, 1944; but both companies would begin to feel the incidence of this new piece of taxation from the 1st January, 1944.

Now, let us say that these are two firms that are trying to evade taxes. Why should one escape that taxation because it makes up its accounts on a particular date, and the other firm have to pay £1,040, because it was so unlucky as to make up its accounts a month later? Again, suppose that they are both honest and bona fide firms, trying to carry on their business as best they can: one of them will be stuck in the same way as I have described; it has already distributed the assets of the firm in a way that seemed good to it, or it might have put some money aside for further development. Here, however, you have, in the case of two firms that are perfectly bona fide, one being stuck for a tax amounting to £1,040, while the other escapes that tax, merely because of a difference in the accounting period. That is the point that I really want to press on the Minister in regard to the first amendment: that it is inequitable and unjust as between two pairs of thieves on the one hand and two pairs of honest men on the other hand. I do not know really whether people in business ought to have been given notification that this thing was being given effect to, earlier than its publication through the medium of the Finance Bill.

Mr. O Ceallaigh

I explained it in pretty full detail on the occasion of my Budget speech at the beginning of May.

General Mulcahy

And, accordingly, there was a Financial Resolution to cover it?

Mr. O Ceallaigh

Yes.

General Mulcahy

Well, then, I am sure that the Minister must have received a number of comments or recommendations in connection with the matter. Again, however, as Deputy Costello pointed out the other day, in connection with the Budget, people are so bewildered by taxation at the present time that they do not realise what is happening, but I think that, in Parliament, we here should realise that it is inequitable and unjust, as between two firms, that one has to pay £1,040, which payment it would have escaped if it had been lucky enough to make up its accounts earlier.

Mr. O Ceallaigh

I think I can say that both as a Minister and as an individual I do not wish to be unjust to individuals or companies, but here we are dealing with people who definitely did set out to evade the payment of taxes. Deputy Mulcahy described them as honest men. Perhaps they are, even though they got away, to use a vulgar phrase, with cutting the revenue.

What we are out to do is to try to defeat devices taken by certain companies or firms in order to evade liability for excess corporation profits tax. Of course, if we take the whole range of companies that are liable to excess corporation profits tax, it would be only a small proportion of these companies that have evaded payment, or have attempted to evade payment of the tax, but there definitely is a number of companies—even a considerable number—that have set themselves out to evade the payment of this taxation and that have got away with it. We could not be just to all these companies, in the way Deputy Mulcahy desires, by fixing a certain date now, because some of these companies started to evade the tax, one might say, on the very first day it was imposed, while others took time to consider how they would get around it. They all started, on different dates, to evade the tax; but we are letting them get away with what might be described —I do not know if I am right in the description—as ill-gotten gains. They were legally entitled to evade the tax. There is nothing new in that; it is done every day in the year, but it is the duty of the Minister for Finance and his advisers to try to find methods of stopping these evasions. Every year, or practically every year, in connection with the Finance Bill, we have to bring in amendments of the law in order to meet the inventiveness and ingenuity of people who discover means of getting through or around the law, and to impose on them certain obligations with regard to taxation. Here, we are dealing definitely with evasions, and I say quite seriously to Deputy Mulcahy and every Deputy in the House that I see no way of being equitable or just, as between man and man, or company and company, and the State, except the one way of going back and making the tax retrospective, or this amendment retrospective until 1st January, 1941. If we do that, it means that they are all on the same basis and that we will get back from them all the moneys that some of these firms have pocketed as a result of being able to evade the payment of these taxes.

General Mulcahy

Of course, they may not have the money now.

Mr. O Ceallaigh

Oh, yes, they will find the money all right. They will find it if we amend the law, but I see no other way of being just or equitable. What the Deputy suggests would allow some of them to get away with considerable sums of money. Others, I admit, as the Deputy suggests, would be stuck and have to pay £1,000, or whatever the sum may be— in some cases it might be a considerably larger sum. The Deputy desires to be just and equitable, but his suggestion would not mean equity between the different companies. Some of these companies got away with considerable sums of money because they started in time, and some may even get away with further sums of money, but the Deputy's suggestion would not mean equity as between the various companies that have evaded the payment of taxation under this arrangement.

An Ceann Comhairle

Is the amendment being withdrawn?

General Mulcahy

Well, Sir, in view of what the Minister has said, I suppose there is no object in pressing it.

Amendment, by leave, withdrawn.

General Mulcahy

I move amendment No. 7:—

In page 11, after line 9, Section 14 (11), to add a new paragraph as follows:—

Where the assessable profits of a company are different as the result of the application of this section from the profits assessable before this Act came into force, the profits arising in an accounting period which ended after December 31st, 1943, shall be apportioned between that part of the accounting period which was prior to December 31st, 1943, and the part which was subsequent to that date.

Mr. O Ceallaigh

I think that this amendment is similar to the last one.

General Mulcahy

I take it that, if the Minister says that this amendment is similar to the last one, he will take a similar line in regard to it?

Mr. O Ceallaigh

Yes.

General Mulcahy

Well, take the case of a company that makes up its accounts on the 31st December, and which, let us say, on the 1st February, 1943, forms a subsidiary company in a legitimate and honest way of doing business. Then, in order to have an accounting period for the old company and the subsidiary company, they have to make up their minds whether to close their accounts for both companies on the 31st December, 1943; in which circumstances the old company would make up its accounts for 12 months, and the subsidiary company would make up its accounts for 11 months, or else make up their minds to close their accounts on 31st January, 1944, in which case the old company would make up its accounts for 13 months, and the subsidiary company would make up its accounts for 12 months. If they are lucky enough to make up their accounts for 31st December, 1943, then they may escape the Minister's new taxation, whereas, if they are unfortunate enough to say that they will make the 31st January the end of their accounting period, then they get caught for the whole of their accounting period. There may be various methods of dealing with criminals but this is a kind of method we find it difficult to understand. However, if the Minister says that it is similar to the last case and that he is going to adopt a similar line of action in regard to both cases, I shall withdraw the amendment.

Mr. O Ceallaigh

I think the same remarks would apply to this amendment as to the last. A surprising number of these subsidiary companies have been started. To my own personal knowledge in some cases, people I know personally—deliberately I would say, judging by the facts as I have seen them—started subsidiary companies and divided their own business into separate companies with a nominal capital for the purpose of getting the benefits of the £2,500 minimum standard and evading the payment of tax. They are not, it is true, a great number in proportion to all the companies that exist in the country but a considerable number have been started by people from whom one would expect better. Deputy Mulcahy knows some of them and I know some of them and really one would expect better from them. They have done that deliberately to evade the payment of tax and we cannot let them get away with it.

General Mulcahy

I think the Minister will appreciate that we said that we were entirely with him in seeing that all taxes that were legitimately due should be paid——

Mr. O Ceallaigh

I know that.

General Mulcahy

——and in seeing that business is carried on in a proper and equitable way. We are entirely with him, and desire to give him every assistance to find out and prevent the evasion of the law by companies of various kinds but we think that failure to apportion the tax over the various periods in this matter seems to introduce a principle that is contrary to the principles that have been operating in the past. Retrospective legislation of any kind is bad but when it is retrospective legislation that will hit one company over a period of six months and another up to 18 months it makes the situation even worse. That is the point we find it difficult to understand.

Mr. O Ceallaigh

I would say again to the Deputy that we are anxious to avoid any injustice to any company or individual. If cases are brought to the Deputy's notice or to my own notice in which injustice has been done and in which we have acted inequitably as between one company and another, we shall have them examined before next year's Bill is introduced and if we think it necessary to amend the law so as to avoid these injustices, we shall do so.

Amendment, by leave, withdrawn.

Mr. O Ceallaigh

I move amendment No. 8:—

In page 11, Section 15 (3), at the end of the sub-section, to add the words "and in relation to any such appeal all the provisions relating to appeals against assessments to corporation profits tax shall apply".

This amendment is introduced to meet the case made by Deputy Costello on the last day. He suggested that, as Section 15 of the Bill stood, it was not clear, to his mind at any rate, that the right of appeal to the courts was to be continued. This amendment is to make it clear and definite, so as to satisfy the mind of anybody in doubt on that matter, that the appeal to the courts is continued.

Amendment put and agreed to.

Mr. O Ceallaigh

I move amendment No. 9:—

In page 11, before Section 16, to insert a new section as follows—

Where—

(a) a company (in this section referred to as the new company) applies in writing to the Revenue Commissioners to make an apportionment under this section, and

(b) the new company satisfies the Revenue Commissioners—

(i) that it was incorporated after the 31st day of August, 1939, to carry on a trade or business similar in character to, but smaller in scale than, the trade or business of a company (in this section referred to as the old company) which has been dissolved and which had one or more trade years, and

(ii) that it does so carry on such trade or business, and

(iii) that more than 50 per cent. of the ordinary issued capital of the new company is held by persons who held in the aggregate more than 50 per cent. of the ordinary issued capital of the old company, and

(iv) that a substantial part of the organisation of the old company has been taken over by the new company, and

(v) that the new company was incorporated not later than one month after the dissolution of the old company, and

(c) the new company furnishes to the Revenue Commissioners such accounts, particulars and information as the Revenue Commissioners require for the purposes of the application.

the following provisions shall have effect—

(1) the Revenue Commissioners shall apportion to the new company an amount equal to so much of the profits of the old company for the trade year by reference to the profits of which the standard profits of the old company would have been computed if it had not been dissolved as the Revenue Commissioners consider appropriate to the trade or business carried on by the new company, and

(2) the amount so apportioned to the new company shall, if the new company so desires, be the standard profits of the new company in respect of every accounting period ending after the 1st day of January, 1941.

I indicated my intention on the Committee Stage to introduce a new section of this kind. It has been brought to my notice that a company which was carrying on a prosperous business before the war might find it impossible to carry on on the old scale as a result of the war. A new business was then started which was in fact a continuance of the old business, but on a very different scale. For legal reasons the older business had to be formally discontinued and great difficulty was found in bringing the standard of the older company into consideration after the new company was established. It is to get over that difficulty that this amendment is introduced.

Mr. Dillon

This amendment is designed to deal with a situation arising out of excess profits duty?

Mr. O Ceallaigh

Yes.

Mr. Dillon

May I draw the Minister's attention to this point? We are all agreed that excess profits duty can be a very heavy burden on a business recently established. We are all agreed, too, that everybody has to accept very heavy burdens in these times and there is no serious objection to them provided they are equitably distributed. Has the Minister's attention been directed to the case of companies started in the years before the war which really got no opportunity to earn profits and did not expect to earn profits in these years? They were doing the preliminary work that every commercial enterprise must do and, for no patriotic or other motive other than for ordinary sound business principles, they were undertaking expenses in excess of their profits in anticipation of making substantial profits when they were under way. Now these firms have no standards practically at all though they have substantial capital. They have in many cases pursued the perfectly legitimate accountancy procedure of bringing preliminary expenses into their balance sheet as an asset. Anyone, however, who knows how to read a balance sheet realises that the retention of such an item in a balance sheet over a protracted period is very unsound business because it is a fictitious asset. Yet certain of these companies, owing to the fact that they are limited to £2,500 as a standard before excess profits duty is levied upon them, are constrained to pay over almost their entire profits to the Government and they have no funds wherewith to write off this purely fictitious asset in the balance sheet. Surely some consideration should be given to a business enterprise so circumstanced.

I fully recognise that when the general principle was being established of a standard over and above which excess profits tax would be levied, it was extremely difficult in anticipation to legislate for the exceptional case. Even to-day if there was only one firm concerned, I would agree that that was one of those distressing sets of circumstances in which the impossibility to legislate for the peculiar case was working a hardship, but that it was one of those hardships which it was very difficult to avoid. Now there does appear to emerge a category of firms who are so circumstanced. I suggest to the Minister that he should look into the question and see whether some concession could not be made on the lines that where a firm was in a position to satisfy the Revenue Commissioners that the item appearing in their balance sheet as preliminary expenses was not inflated and was a proper figure, the Exchequer would be prepared to make some concession towards the creation of a fund for the extinction of that item before the profits of the company were assessed for the collection of excess profits duty.

Mr. O Ceallaigh

I do not think the position of any of these companies is exactly as the Deputy suggests, because the circumstances in relation to a new company of the type the Deputy has in mind, a company which had not a standard before the war, were considered. Under pressure in this House, I agreed to allow such companies to have a substituted standard of 10½ per cent. on the subscribed capital. That is a very generous standard. I should be glad to examine any case of hardship which the Deputy may have come across or which was brought to his attention, but if he will look into the matter and examine it in the light of this 10½ per cent. on the subscribed capital as a substituted standard, I think he will agree with me when I say that I doubt if there is any of these companies which has a grievance.

Mr. Dillon

I shall look into it in the light of what the Minister says, and, if there is anything further to be done, I shall mention it to him directly.

Amendment put and agreed to.

Question—"That the Bill as amended be received for final consideration"—put and agreed to.

Question—"That the Bill do now pass"—put and agreed to.

An Ceann Comhairle

This is a Money Bill within the meaning of Article 22 of the Constitution.