Before we discuss Section 1, I should like to ask the Minister, with regard to the amendments that have been put down in my name——
Committee on Finance. - Finance Bill, 1947—Committee Stage.
They do not refer to Section 1.
We would have to discuss certain things on Section 1.
The amendments were handed in rather late.
I informed the Ceann Comhairle, that if he had no objection, I was willing to take the amendments that came in to-day from Deputy Mulcahy.
The Chair has no objection in a matter of this kind if there is full agreement of the House, even though the normal procedure is being to some extent departed from.
I have explained to the Minister and to the Ceann Comhairle the circumstances in which these amendments did not appear until to-day.
The amendments will be taken in their order.
Question agreed to.
I move amendment No. A 1:—
Before Section 2 to insert a new section as follows:—
"Section 4 of the Finance Act, 1939, shall be construed and have effect as if the words ‘four hundred pounds' had been substituted therein for the words ‘three hundred pounds'."
When we were discussing income-tax at the rate of 6/6 on the Financial Resolution, Deputy Davin was shocked at the unprecedented action of our Party in opposing income-tax at such a high level, but the fact is that the income-tax is pressing in an extraordinarily harsh way on people with lower incomes to-day. Certain relief is given to people with smaller incomes. In the first place they are allowed to make a deduction of one-fifth of the income that is earned before any consideration of tax arises. After that they are allowed to make a deduction in the form of a personal allowance, varying in amount between a person who is married and a person who is single. There is additional relief in that the first £100 is taxed at the half-rate and there is also relief in respect of children.
In the earlier stages of the incidence of income-tax there is a certain relief given to people with lower incomes. The Minister indicated in his Budget speech that he was giving a certain relief because of the position in which we are to-day. He said he was increasing the personal allowance of £120, in the case of a single person, to £140, and, in the case of a married person, he was increasing the £220 allowance to £260. He indicated that the effect of those alterations would mean that approximately 27,000 taxpayers would be relieved from that type of taxation. That statement is, I think, meaningless, because, if we refer to the average earnings of workers in industry, as published in the Irish Trade Journal of June of last year, we see that the average earnings for males in industry in 1938 was 54/11 a week and in 1944, the last year for which we have figures, it was 67/10 a week, bringing the yearly income to £178.
The Minister indicated that under his proposals a single man earning £175 or less would be free of income-tax, but the figures disclosed in the Irish Trade Journal show that up to 1944 a considerable number of wage earners must have been brought within the income-tax code and since then, with the lifting of the standstill Order, thousands more must have been brought within the code.
The effect of the present proposals on these various classes will be seen as we discuss the amendments that are set down here. The amendment here indicated is simply one dealing with the amount of income that shall be regarded as earned income. Under the 1920 Act, one-tenth of a person's income was reckoned as earned income for the purpose of income-tax relief, but that relief was not to extend beyond £200. By the 1932 Act there was a recognition that the cost of living was increasing and that some more relief in that direction was required. Under the 1932 Act an allowance of one-sixth was made on incomes up to £450, and one-tenth on incomes over £450, but the maximum relief was to be £200. Then, under the 1939 Act, the relief for earned income was set at one-fifth, with a maximum relief of £300.
There has been a very considerable increase in the cost of living since 1939, or there has been a very considerable decrease in the value of money. For some months past comparatively small increases have been given to make up for the cost of living and, as the basic salaries go up, the increase that has been given is smaller and smaller. For an increase in the cost of living of 70 per cent., people with higher salaries have received an increase of 23 per cent. or 25 per cent. If the maximum relief of £300 is left there, then persons with higher salaries, who are being given very inadequate increases in respect of the cost of living, will not get the relief in respect of earned income that they ought to be entitled to. I submit to the Minister that instead of leaving the maximum relief for earned income at £300, as it is at present, the maximum should be increased as suggested in my amendment to £400.
When the Budget proposals were being considered, I might have approached the question of relief in income-tax by going some way towards granting the reliefs suggested in the amendment, but we decided that we would use the money available for this purpose to raise the personal allowances both of the married and the unmarried person. This amendment would cost a fair lot of money; it would cost £100,000 in a full year. If we were to decrease income-tax in the way the Deputy suggests in this and other amendments, we should have to look elsewhere for the money. A person who has £178 earned income will pay only 3/3 in the £ on the £3 which is over £175 and the few shillings will not break him. The only thing I can say about the amendment is that to give effect to it would cost £100,000 which we should have to get elsewhere. It is realised that there has been a certain amount of compression but the people who enjoy these incomes must make a just contribution to the support of the State. Before we could reduce those burdens to any greater extent than we have gone in the Budget, I should like to see more clearly than I can at the moment how things are going to turn out in the coming financial year.
The Minister has introduced a Bill increasing in a tardy way the salaries of district justices, Circuit Court judges, High Court judges and others, but leaving the maximum relief for earned income at £300 means that he is going substantially to prevent the increases that are planned from going to them. He is giving with one hand and taking away with the other.
I am not taking any more in proportion than we took last year.
Amendment put and negatived.
I move amendment No. A 2:—
In Section 2, page 3, lines 30 and 31, to delete the words "two hundred and sixty pounds" and substitute therefor the words "four hundred and forty pounds".
This amendment deals with the personal allowance in the case of married persons. In 1939 the personal allowance in the case of married persons was £220 and the Minister proposes to raise that to £260 now. He said in his Budget speech that a single man earning £175 or less, and a married man earning £335 or less, would be exempt entirely from income-tax. If we take the case of a married man whose income is £325 and compare it with that of a married man whose income was £325 in 1939, we get an impression as to the way in which income-tax is eating into the social position here and the standard of living here. A married man who in 1939 enjoyed an earned income of £325, under the income-tax scheme at that time would be allowed a deduction for earned income of one-fifth, that was £65. There would also be deducted a personal allowance of £220. After these deductions were made, he would be liable to pay tax on £40. That £40 would be taxed at half the standard rate, the standard rate being then 5/6, so that he would have to pay a tax of £5 10s.
In other words, he would be left £319 10s. 0d. at a time when the cost of living was 178. Now the Minister says that a married man with an income of £325 will not have to bear any income-tax, but the cost of living at the present time is 295 so that in fact the £325 which the man gets to-day is worth only £187 when the cost of living to-day is compared with the 1939 cost of living. We find that the tentacles of the income-tax have gone from £325 down to £187 on the 1939 level. It is as if a man with £325 in 1939 were asked to carry on with a deduction of £132 from his income.
The Minister and other members of the Government, for the purposes of certain arguments, have accepted the theory that money has only half the value to-day that it had before the war. We have not been forced in this country, as Governments have been forced in other countries, to make gigantic demands by way of a capital levy. The financial condition of other countries has been such that they have had to do that. Here happily we have not reached a position in which we have had to make enormous demands on the capital of the country, either to bolster up our finances here or to deal with an inflationary position here.
When we consider the amount of money in the country, when we consider the profits that were made in various ways by large sections of the people, we ought not to spread the tax burden so that it will eat so deeply in that stratum of earners who are represented by an income of £325 in 1939. We are acting to-day as if the Government, in 1939, to meet financial conditions, had brought the whole of the income-tax machine so much over the wage of salary earners of that type as to ask them to adopt a standard of living measured by £187 as against £325.
The Minister, when he says he is giving a considerable amount of relief by increasing the personal allowance from £220 to £260, is not facing the realities of the situation. That position affects practically all average earners in industry at the present time, at any rate as far as the single man is concerned, and we will come to deal with that later. It goes very deeply into the whole of our social life and it puts an extraordinary strain on the main body of workers. The Minister may say that it is because there are so many of them that they all have to contribute their share but the people who are asked so to contribute are people whose circumstances are being forced down in that extraordinary way by the cost of living and by the incidence of this taxation.
If Deputy Mulcahy followed up the man who had £325 in 1939, that is, the average man, he would find that his income is now, not £325, but 40 per cent. higher, and if he was a farmer, of course, it would be about 100 per cent. higher. It is hardly right merely to take the 1939 values and figures and make out that we are now putting 1947 taxation on a 1939 level of income. That is not being done as far as the average wage and salary earner is concerned. It does not give me any pleasure to have the personal allowance for married people at £260 instead of £440 but to step it up as Deputy Mulcahy suggests would cost, for married people alone, about £1,750,000 for a full year. That is a tidy sum of money and certainly I would want to introduce a new Budget if we accepted that amendment, particularly if we accepted it in conjunction with the next amendment for unmarried persons for whom Deputy Mulcahy proposes a proportionate increase. The two together would cost £3,500,000 in a full year. It just simply could not be done in present circumstances.
The Minister thinks that is an astonishing amount of money for the State to have to find in some other way but he is asking people whose standard of living has been very substantially reduced, many of whom are rearing their families in conditions of very serious hardship, to pay it. I feel that it would be reasonable to face the question of getting this money in some other way than by asking wage and salary earners to pay it. Because, while the Minister may indicate that there has been a substantial increase in the income of a number of these people, at any rate, during the last two years, I still do not entirely follow him and I suggest that the position is as I say and that the values of money generally would bear out the logic of the case I am putting to the Minister.
I move amendment No. A 3:—
In Section 2, page 3, lines 32 and 33, to delete the words "one hundred and forty pounds" and substitute therefor the words "two hundred and forty pounds".
The same type of argument applies and, for what they are worth, I would like to put the figures before the House. In the case of a single man with an income of £175 that the Minister says is now not touched, in 1939, with the earned income deduction of one-fifth and the personal allowance of £120, he would have had to pay tax on £20, which would be £2 15s. Therefore, he would have £173 5s. left out of the £175 income. With the cost of living as it is to-day £175 is worth £103 and it amounts to the 1939 man having £70 taken off his income. The Minister, however he may water the argument by saying that these classes have got increases in the meantime, cannot get away from the evidence that exists that the very heavy income-tax burden is eating lower down into the people who are on a much lower standard of life now than obtained in 1939.
I move amendment No. A 4:—
Before Section 3 to insert a new section as follows:—
Sub-section (4) of Section 3 of the Finance Act, 1932, shall be construed and have effect as if the words "two hundred pounds" were substituted therein for the words "one hundred pounds".
Amendment No. A 4 deals with the question of the half rate. After making allowance for earned income and for personal allowance in the case of a single or married man, the first £100 subject to tax has been taxed in the past at half the standard rate. Again, in view of the value of money and in the interest of those on low incomes who are seriously taxed at the present time, I beg to move that half the standard rate will be charged upon the first £200 of taxable income rather than on the first £100. That would be some contribution.
Again, I am afraid the answer I have to make to that is that it would cost £900,000 in a full year although at first blush one would not suspect that that amount of money was involved in it. That is what it would cost—£900,000.
Amendment put and declared negatived.
I move amendment No. A 5:—
Before Section 3 to insert a new section as follows:—
Section 4 of the Finance Act, 1936, shall be construed and have effect as if the words "one hundred and twenty pounds" were substituted therein for the words "sixty pounds".
Amendment No. A 5 asks that the allowance for children be doubled.
The position was that a deduction of £36 in income free of tax was allowed in 1920 for the first child and £27 a child for other children. Taking into consideration the cost of living and the cost of rearing a family in 1932, £50 allowance was made in respect of every child. Again in 1936, in further recognition of the increase in the cost of maintaining a family, the allowance for each child was raised to £60. Since 1938 only the cost of living has risen by 70 per cent. and there has been a recognition, in the introduction of family allowances, that the State requires to give assistance in present circumstances to people who have to rear families. The cost of education, the cost of feeding and clothing a family to-day is greater than the 70 per cent. If you look at the index figures with regard to textiles and clothing, you will find that it is not 70 per cent— in many instances it is more like an increase of 200 per cent. In every aspect of the child's upbringing—clothing, feeding, education—the position of the parents to-day is a most unenviable one.
A very considerable amount of the present social unrest is, I think, due to the difficulties parents experience in making ends meet at all. Not only workers, but many of the higher income classes, find it impossible to keep out of debt. Many of their insurances are mortgaged, many of them have had to sell houses that they owned under an insurance or under some kind of purchase system in order to keep themselves as far as possible out of debt. The cost of sending a child, particularly a child from the country to Dublin, Cork or Galway to get a university education has increased enormously over what it was in the past. A student in Dublin to-day can hardly get lodgings at 40/- or 45/- a week and it is utterly impossible for people, under present-day circumstances, who want to give to their children the education they would like to give them to carry on as they are. Therefore, while the Minister may feel that he has a case for turning down the proposals already made, I have here a proposal which I would press very strongly on him to accept, namely, that the allowance in respect of children be doubled from £60 to £120.
I should like to support Deputy Mulcahy on this amendment. Nobody except those who have had experience can understand the plight of those who are trying to rear a family at the moment. In fact, there is hardly any limit to their need. The Minister may argue again what this means as far as income is concerned. He may say that he is making a little restitution in the form of half-a-crown children's allowances. Really, the £60 does not at all meet the expenditure incurred by the heads of families in so far as proper rearing and good education of the children are concerned. Many of the women of this country deserve the V.C. in that they have been able to carry on under the conditions which have prevailed here during the last six or seven years. I do not know how they have done so. They certainly deserve every commendation for the self-sacrifices they have so willingly imposed on themselves in trying to give their families a proper education and in providing for them reasonable facilities for their proper upkeep. Like Deputy Mulcahy, I want to make a special appeal to the Minister to increase the allowance of £60, if not to £120, at least to £100. This would be a great relief to many of these people who are at the moment in dire need.
I wish to state that I support this amendment. The present allowance for children under the income-tax code is altogether inadequate having regard to the enormous increase in the cost of living, especially in regard to children, over the past seven years. The present allowance is £60 per annum. Those who have the responsibility of maintaining children know how inadequate an allowance of that kind is. Where a person strives to keep children at school beyond 14 years of age and up to 16 or 18 years of age, which many working-class families with an enlightened view endeavour to do, the allowance of £60 per annum for income-tax purposes is altogether inadequate.
School fees have increased enormously in recent years. As Deputy Mulcahy has rightly pointed out, it is really impossible for any ordinary working-class family to face up to the responsibilities and the expenses involved in having to send a child away from the home to obtain an education in a university or secondary school outside the home town. When you add to the responsibility so involved the enormous increase in the cost of living for adolescents between the ages of 14 and 16 years of age, particularly in the case of families struggling to give a good education to their children and to keep them at school as long as possible, many of them are in a really pitiable plight. I would suggest that if the circumstances of these families were investigated, if they could be induced to tear away the veil of pride and tell the real truth so far as their domestic circumstances are concerned, it would be found that a very real struggle is going on in order to give as much as possible to the children. I think the Minister ought to recognise that, in respect of children especially, there is a strong case for increasing the present allowance. The Minister may say that this would upset his Budget calculations. I think, however, that the Minister can find well-to-do income-tax payers in this country who might well be expected to pay more so that income-tax payers who get an allowance of only £60 in respect of children might be given a greater exemption even if broader backs have to bear the burden. This is a matter which ought to be very sympathetically examined and every effort should be made by the State in the form of a higher income-tax allowance for children to alleviate the very pitiable conditions which are being experienced by families who are endeavouring to carry on their domestic lives in the best way they can with an income-tax allowance which is now outmoded, having regard to the substantial increase in the cost of living in the past seven years.
The fact that the Minister decided to increase the personal allowance to single persons and to married persons without children would establish a case for giving a similar relief in regard to parents. I do not know how the Minister would attempt to justify his failure to give an abatement in respect of children, having regard to the fact that he has given some relief to childless couples and single persons. Is it the view of the Minister that families ought to be discouraged, or is he influenced by the fact that we have had to export the entire natural increase in our population over the last seven or eight years? Is that the philosophy behind his proposal to give an abatement only in respect of single persons and in respect of wives? He ought to consider the appeals which have been made from all sides of the House.
There is no conceivable case that could be put up against some relief for parents. We all know that the cost of education is very much higher than it was at any time in history. The cost of maintaining children in clothing is extremely high and parents who send children to a residential school have not only to pay an increased fee—I do not say the increases have been excessive, having regard to the added burdens upon the various teaching establishments—but they also have almost to feed them from home, having regard to the inadequate rations available in teaching institutions. When we take into consideration also the hight cost of boots and clothing, the Minister would be a hard-hearted man and almost opposed to children, to turn down the proposal put to him.
I desire to support Deputy Mulcahy in his appeal for an increased allowance for those people with families, who are doing their utmost to give them a higher education. Everybody knows that the cost of dressing a boy or girl at 16 or 17 years of age and sending them to Dublin to college, or keeping them in Dublin at college, is a very real burden at the moment. Clothing, footwear, college books and fees have considerably increased and the appeal made by various sections of the House is worthy of consideration. I am sure the Minister is sympathetic and, if he can do nothing this year, I hope he will consider Deputy Mulcahy's proposals on a future occasion.
I must say the Minister for Finance who could meet Deputy Mulcahy's suggestion would be very happy indeed. We calculate it would cost about £270,000 in a full year. The children's allowances here at present would be considered very generous in other countries. As Deputy Mulcahy pointed out, they have been increased gradually over the years. They stood at £36 in 1920, at £50 in 1932 and at £60 in 1936, at which figure they have remained since. When talking about a married man with children and the burden of supporting a family, the average person has in mind a man with a wife and three children. Deputy Norton spoke about the children's allowances being small and making it difficult for the working class family, but that average family—a man, his wife and three children—does not have to pay income-tax until its combined income is £529 per year. That is a fairly sizable income and is very much more than the average income of the country, even at the present time.
No one can think of a very good argument as to why children's allowances should not be increased, only that it costs money to do it. If we do not take the money from the married man with a family, we will have to take it from somebody else. Having regard to our general conditions, I think that the State has been fair to a married man with a family and that £529 income free of tax is very much more than they would get in any other country at the moment.
I do not think that is the whole picture. The Minister speaks of a man and his wife and three children earning a certain sum and says they will not have to pay any income-tax, but what about a family with five children, in which two happen to be over 16 years of age? They may also be attending school, but there will be no allowance for them at all.
If they are attending school or college, there will be, up to 21 years of age or more.
Up to 21?
Yes, up to any age, if attending school or college.
Well, I was under a misapprehension. I did not know it was up to 21. Does that include a person going to a day school?
Yes, to any school or college.
They can be very costly at that age.
I was under a misapprehension. I think I have paid, under the income-tax code, for my misapprehension. Aside from that, the Minister says this would cost £270,000. That may look a big figure, but he gleefully came in last year and said that people paying excess corporation profits tax would receive back £3,000,000 and he did not bat an eye-lid. If he can give away £3,000,000 to folk who previously contributed to taxation from excess corporation profits tax — that is, from profits which they got over and above what the State considered a normal ratio of profit—and give it away to them ostensibly for the purpose of reducing prices—when everyone knows it is more difficult to live to-day than when that £3,000,000 was coming into the State—then our whole income-tax code is lopsided in that respect. We are putting a burden on the lower and middle income groups which should properly be borne by people who are in a better position to bear it.
The State could have had that excess corporation profits tax for a substantial number of years and might have used it usefully to give relief in other directions. Instead of that, we shovel it out to these people, who have not made a case for it at all, but who have got richer since the emergency than any other class in the community.
We proceed on the basis that the more you have the more the State will give you. Suppose a person has an income of £500 per annum. On the principle which appears to be accepted by the Minister for Industry and Commerce that the £ to-day is worth only 10/- in 1939 values, you are getting back to a situation in which a person has a pre-war income of £5 per week. One does not need to have a very lively imagination to picture the kind of life that a person can have in this country or in this city on £5 per week. It is folk of that kind that this amendment is designed to help.
I am still convinced that there are people in the country who are better able to bear this burden of income-tax than the lower and middle income earners, and that the Minister should avail of an opportunity of recognising the special claims of those who have the responsibility of rearing and educating children to the maximum assistance the State can give. The Minister has already recognised that the altered price levels have necessitated the raising of the allowances for unmarried and married persons, and, having admitted the principle in respect of these two classes, I cannot understand why he will not recognise the necessity for some similar modification of the present burdens in respect of children.
The Minister himself made the case absolutely for the amendment. He reminded the House that the allowance for children used to be much lower than it is at present and he proceeded to tell us that it was £35 up to 1932, that it was then raised to £50 and that in 1936 it was increased to the present figure—that is what I understood from him—and that, since 1936, there has been no change in the allowance. Can anybody here deny that if this House and the then Minister for Finance considered that £60 was a fair allowance in the circumstances of 1936, £120 can be considered a fair and just allowance to-day? I doubt if there is any parent in this House who is prepared to say that the increase in respect of the upkeep and maintenance of children since 1936 up to to-day stops at 100 per cent. There is not a parent here who will agree that it stops at 100 per cent., taking everything into consideration.
I was rather surprised by the Minister's statement that the average family in this country is three children. The average used to be much higher, and I suppose one should not be surprised that we are down now to an average of three, and, if present conditions continue, the average family will be still smaller. There is no question whatever that any man on a wage or salary to-day, even on what is looked upon as a substantial salary, with a family of three, four or five children to provide for, is at his wits' end to make ends meet. Commodities of all kinds have increased in price very substantially. Clothing for adults has increased very substantially in price. It is notorious that clothing for children of all ages has increased far more substantially than adults' clothing, and it is notorious that, not only has it increased in price, but the necessary clothing articles have to be replaced more frequently because the quality is not as good.
Deputy Mulcahy talked about parents sending their children to a university finding it difficult to get board and lodging for them in the City of Dublin at 40/- and 45/- per week. Would he be surprised to know that he would find it practically impossible to get board and lodging for them at 55/- per week? I doubt if you could get in this city to-day, in any house in which you would care to put your child, board and lodging for 40/- and 45/- per week. The Minister's answer to this may be that he cannot find the money for it, that it will cost so much; but he cannot argue against this amendment on the merits. If an allowance of £60 was considered fair and just, as apparently it was by the Minister for Finance of the day and the Dáil of the day, there is no answer whatever on the merits to a claim to have it increased to £120 now.
The Minister surprised me when he said the cost of this amendment would be as little as £270,000. When we take that figure and put it against the financial background of the Budget, I really suggest to the Minister that his will should fail him completely in arguing against this amendment. When he looks at this figure of £270,000 against the financial background of the Budget, and then transfers his imagination to the problem in respect of which we are trying to help, the problem of parents, who, in present circumstances, are trying to rear and educate their children, and particularly parents with more than three children who are trying to do their best for all their children, in spite of the fact that there are more than three, he must, I suggest, realise that this sum of £270,000 is very small.
The Minister is expecting to receive from taxation this year a sum of £52,416,000. He is expecting to receive that in a country in which in 1939-40 he received £26,303,000. On the income-tax side alone, there was collected in 1939-40 a sum of £5,948,000. Last year, there was collected a sum of £11,451,000 —almost double the amount. This year, the Minister expects to collect £1,500,000 more, in that he estimates to collect £12,981,000 in income-tax alone and £4,755,000 in corporation profits tax. It is against the background of these expectations that I would very strongly urge on the Minister that £270,000 is an inconsequential amount, and that, when he thinks of the conditions in which we are at the moment and the problems which face parents, on the one hand, and the results which will accure to the country on the other, if parents are encouraged in these difficult times to stand by their families and to make the sacrifices which Deputy Cogan says they have heroically made and are making for them, he should encourage these people and enable them to look after the well-being and the education of their children in these very difficult times.
I do not know why we should harp on the three-child family. Some of the most useful citizens we have, perhaps, have come from very large families. Large families have problems that are overwhelming. The sum of £270,000 is small out of such a Budget as we are dealing with here and out of the enormous amount of income-tax for which we are budgeting. The Minister has not been pressed as strongly as he might have been in regard to some of the other amendments. With the other amendments gone, this is an amendment on which he should be pressed very strongly. I do not think that there would be the slightest budgetary upset if he would agree to spare this additional £270,000 to relieve the burden of parents.
Deputy Mulcahy stated that the families larger than the three-child family are getting it difficult to live. I should like to remind him that the allowance goes up as the family increases and that, in the case of a family of seven children, no income-tax is payable until the parents' income reaches £769 per year. There has to be some relation between the allowance which a single man gets and that which obtains in the case of a married man with no family and a married man with a family of varying numbers. It is fairly reasonable to provide that a married man with three children can have twice the income of a single man before he pays income-tax.
He would, certainly, need it.
He would, of course, but, after all, we must remember that certain privileges attach to the married state, apart from the question of the family. Most people are quite prepared to assume the responsibilities of marriage if they can get a partner to assume it with them.
If you never gave them any allowance, they would do that.
Yes. Deputy Morrissey thinks that an increase in prosperity will get people to marry and have larger families. That runs contrary to what is happening in every country in the world. It seems to me that, the lower the income, the larger the family.
That is the pity of it.
It is a statistical fact.
I am not disputing that.
I think that the allowance of £60 per child, which is nearly half the allowance given to a single person, is reasonable.
I think that there is a fallacy in some of the Minister's statements as regards the large families. A parent who is in receipt of the children's allowance at 2/6 a week receives £6 10s. 0d. a year in respect of the third child but he ceases to get his income-tax allowance, which would be £19 10s. a year. He is dropping that amount for every child in respect of which he has the children's allowance, so that the position of the large family is not as rosy as the Minister suggests.
Would the Minister address himself to this question: If £60 was considered to be a reasonable allowance, when the cost-of-living index figure was 173, as it was in August, 1939, is there not a case for raising that allowance when the cost-of-living index figure is 295? If that amount was equitable in 1939, how can it be equitable now?
In my Budget speech, I dealt with the situation.
I am not proposing this amendment to encourage large families. I am proposing it to relieve parents of very considerable distress. Parents are suffering much distress as a result of the economic conditions and their anxiety to do their best for their children. I do not think that anything is more crushing to the morale, courage or hope of the country than distress in the minds of parents, who are the guardians of the atmosphere in which their children grow up. I suggest seriously to the Minister that there is a problem here which is being definitely overlooked and that this proposal would make some kind of contribution to it.
The figure of £270,000 has been mentioned. Surely, the cost would not be anything like that, because it would not apply to the first two children in any family.
Deputy Dockrell is wrong about the 2/6. Income-tax allowance does not cease completely on payment of the children's allowance. A certain deduction is made from the £60 in respect of the third child when the 2/6 is given by the family allowance authorities. Instead of allowing £60, an allowance is made of £43. The allowance of £43, plus the 2/6, would amount to almost as much as the £60 allowance. One could go on raising the children's allowance until one would come to the point at which the single man would be not only supporting himself but the families of married people. That would be absurd. Single people have certain rights. They have to gather a few pounds if they propose to marry at some time. They have also other commitments, such as the maintenance of their parents. I think that this £60 allowance per child, when contrasted with the £140 allowance for an unmarried person, is fair and reasonable.
- Beirne, John.
- Byrne, Alfred.
- Coburn, James.
- Cogan, Patrick.
- Coogan, Eamonn.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, John A.
- Dockrell, Henry M.
- Dockrell, Maurice E.
- Flanagan, Oliver J.
- Giles, Patrick.
- Halliden, Patrick J.
- Hughes, James.
- Keating, John.
- McMenamin, Daniel.
- Morrissey, Daniel.
- Mulcahy, Richard.
- Norton, William.
- O'Higgins, Thomas F.
- O'Leary, John.
- O'Reilly, Patrick.
- Rogers, Patrick J.
- Sheldon, William A.W.
- Aiken, Frank.
- Allen, Denis.
- Bartley, Gerald.
- Beegan, Patrick.
- Blaney, Neal.
- Boland, Gerald.
- Bourke, Dan.
- Brady, Brian.
- Breathnach, Cormac.
- Brennan, Thomas.
- Breslin, Cormac.
- Buckley, Seán.
- Carter, Thomas.
- Colley, Harry.
- Corry, Martin J.
- Crowley, Honor Mary.
- Daly, Francis J.
- Derrig, Thomas.
- De Valera, Eamon.
- De Valera, Vivion.
- Flynn, Stephen.
- Fogarty, Andrew.
- Gorry, Patrick J.
- Healy, John B.
- Killilea, Mark.
- Kilroy, James.
- Kissane, Eamon.
- Lemass, Seán F.
- Lydon, Michael F.
- Lynch, James B.
- McCarthy, Seán.
- McEllistrim, Thomas.
- MacEntee, Seán.
- Moran, Michael.
- Moylan, Seán.
- O Briain, Donnchadh.
- O'Connor, John S.
- O'Grady, Seán.
- O'Loghlen, Peter J.
- O'Rourke, Daniel.
- O'Sullivan, Ted.
- Rice, Bridget M.
- Ruttledge, Patrick J.
- Ryan, James.
- Ryan, Mary B.
- Ryan, Robert.
- Sheridan, Michael.
- Skinner, Leo B.
- Smith, Patrick.
- Walsh, Laurence.
- Walsh, Richard.
I move amendment No. A 6:—
Before Section 3 to insert a new section as follows:—
In assessing income for the purposes of income-tax a sum equal to the capital element included therein shall be deducted from the sum received as income by way of contractual annuity in respect of which a capital payment has been made.
It has been the practice of many people who have a small capital sum or a capital sum of any amount when they get advanced in life and who are not quite sure how they might secure their future to pay it into an insurance company and contract for an annual payment to be made to them up to the date of their death. Nowadays more people tend to want to do that because of the insecurity of investing and equities of one kind or another and the small interest rates at present payable, which we, perhaps, would like to see continuing. They are so small that there is a tendency on the part of persons who have savings like that to eat into their capital if they want to maintain their incomes.
It requires a very substantial amount of money to get in any kind of a reasonable income. If you have £10,000 and you are able to get only 2½ per cent. on it, it is not very much to carry on with. If that amount of money was invested in an annuity terminable at the end of a person's life, he would get £650 or £660 a year, whereas if people maintained their capital intact and took whatever interest they could get on it, it would be only £150. So there is a strong tendency on the part of people with savings to eat into their capital. It is desirable to help people to have a secure outlook in their lives and to make as useful a use of their capital as possible. The difficulty under which they labour now is that if they pay a substantial capital sum into an insurance company, to be paid back by way of annuity during their lives, they are charged income-tax on the whole of the annuity, even though a very substantial portion of it—it might be as high as 80 per cent. or even higher—is, in fact, a repayment of capital and a using up of their capital.
The matter has been the subject of discussion and argument for a long time in great Britain and various ways have been adopted of avoiding losses of that kind, because, if a person pays for an annuity payable for a certain number of years, then the capital part of the annuity that is paid to him over ten or 15 years is not chargeable with income-tax. The only element of that part that is chargeable with income-tax is the element of interest. But, if there is an annuity terminable with life, the practice in Great Britain and this country has been that income-tax is charged over the whole of the amount, it being charged on capital that may have, and no doubt has, already paid its own share of income-tax.
The matter arose for discussion some time ago in Canada and a royal commission was set up to investigate this particular matter among other matters. They were asked:
"to investigate and to report upon the present treatment under the Income War Tax Act of payments to individuals in the form of annuities or other annual or periodic payments received under the provisions of any contract, will or trust; payments to individuals in the form of pensions, superannuation or other periodic payments or single payments received following retirements from or cessation of employment with an employer; payments by individuals under an annuity, insurance, endowment or other savings contract; and other payments of such a character that it is not obvious whether they are solely income or solely capital or partly the one and partly the other; and to consider whether any modification of that treatment is desirable and, if so, what alterations of the law are required for the purpose."
It inquired into other matters as well but, in relation to that, the recommendation said:
"where there was an almost unanimous view that contractual annuities comprised a substantial element of capital that should not be exposed to income-tax for a second time."
I realise that the Minister, having seen this amendment only this morning, may find it difficult to accept it, but I think the matter is one that deserves serious consideration, particularly in to-day's circumstances, when there are so many people who have accumulations of capital that they are anxious to safeguard, who find the chances of investing in any kind of secure way are not very great, unless a person is very skilled and somewhat venturesome, and especially, if people are old and are just thinking of their declining years, they cannot be expected to know how best to make use of their money. There is a problem there for them in which I think they ought to be assisted. They are faced with whether they will eat into their capital and use up portion of it, together with taking whatever small interest they can get from Government securities, or whether they will hand over their money to an insurance company and get an annuity for life.
It would help the insurance companies, on the one hand, and the people concerned on the other, and I think it would be introducing a certain amount of fairness into our taxation, if this matter were reviewed and if it was realised that in these annuities there is a substantial part which is capital on which income-tax has been paid already and it ought not to be paid a second time and that the law should be changed so that income-tax will be paid only on that part of the annuity which is, in fact, interest. I would like to know from the Minister if there is any chance of accepting the amendment or having the matter inquired into.
I am glad Deputy Mulcahy put down this amendment. I touched on this matter very briefly in the debate on the Budget statement. In this amendment we are dealing with a section of the people who are very limited in numbers. I do not think the Minister can produce any substantial figure showing the amount of money which the revenue would lose by having this amendment inserted in the Bill. I think the numbers involved would not be very great. Nevertheless they constitute a section of the community for whom I think there should be universal sympathy. In the main I think the people affected would be aged persons who would have accumulated some capital either by savings over a lifetime or from the sale of some business or a farm on retiring. These people would be anxious to have a secure income for whatever years of life might be left to them and would hand over their capital to an insurance company to secure that income. I think it is fair and reasonable that such persons should be taxed only on the income portion of the payments made to them and there should not be a direct levy on their capital.
Persons of this type are not going to derive any substantial benefit in respect of the allowance for children. In the main they would be aged people without dependent children and they would only receive if married a marriage allowance.
There might also be another class affected—persons, perhaps, in poor health, persons not fully physically fit who would have a sum of money or some property bequeathed to them and who would be anxious, not being able to engage in any of the various avocations of life, to have a secure income. There would be a certain number of people who would be receiving incomes of this kind and it would be harsh and unfair if their capital were taxed. Deputy Mulcahy pointed out that this matter has been the subject of investigation, and I think of sympathetic consideration, in other countries. I think it is only right that in a progressive country such as this, we should give a lead in giving relief to this section of the community.
Although this amendment came in rather late, I cannot plead that I had not time to give it consideration because I have heard about it before and its merits have been rather pressed upon me. As Deputy Mulcahy pointed out, if a person buys an annuity which is not for a fixed period, the Revenue Commissioners cannot calculate what is interest and what is principal in the annual payment made under such an agreement. But the Deputy and others who are interested in this can realise that there must have been some very good grounds why proposals to this effect were resisted here and elsewhere over a long period of years. The suggestion has been accepted in Canada recently but I do not know how it will work out. Both here and in other countries it has been resisted and there is good reason for that. No revenue commissioner, who is not a doctor or a prophet or a combination of both, could calculate what is the element of principal and what is the element of interest when a person purchases an annuity for life. That is the reason the request has been turned down. It is income from every point of view. It is a sum of money coming in annually which the recipient has to spend on himself or herself. If we were to get away from the taxation of income, and to make differences between sources of income in taxation, I do not know where we should arrive.
Recipients of sums of this kind in England tried to force the Revenue Commissioners over there to treat these annual sums as if one portion were interest and the other repayment of capital. That plea was not sustained in the courts across the water and I do not know how it could be sustained in the courts here. We have a certain income-tax code here and we charge people upon their incomes.
The Revenue Commissioners regard these annuities for life as income, not as repayment of capital and I must say I agree with them. If there is any person who does not agree with them, they have a way of testing the matter. We should get ourselves into all sorts of difficulties if we were to go any further than the system that already exists. If a person purchases an annuity for a fixed period he is charged income-tax only on the sum that is annual interest. If he purchased a life annuity he is purchasing an annual income and there is no one, unless he is a prophet, who can detach the interest from the repayment of principal. I do not think we should try to do it here.
The Minister is probably aware that in Canada they estimate that anything from 20 to 15 per cent. represents repayment of interest. The Minister surely could take some kind of empirical figure. If a person who has £10,000 contracts at 60 years of age for an annuity of £660 for life and if he dies within the first two years, after a couple of payments, I well then the Revenue Commissioners, have taken a sum of money as income-tax that was really taken from his capital. At the present time, there are ways of figuring out plans for preventing the Revenue Commissioners from doing that. That is by contracting for an annuity for a terminable period for part of the money and for a life annuity for the rest of it. If serious hardships are imposed on people at the present time arising out of the present practice, surely that is a matter that should be inquired into. I understand the law has been changed in Canada and the Minister has confirmed that now. The matter has also been considered in Africa and I understand it is also the law in the United States. All this points to the fact that it is a matter that should be inquired into. I would urge on the Minister that it should be inquired into to see if a change could be brought about in the present law.
As I say, I have given the matter a good deal of thought over a period of years and it seems to me that there are many snags involved. If we were to admit that this income is partly repayment of capital and partly a sum which should be treated as income, we would get to the point where it would be almost impossible to decide the matter. Take a doctor or a lawyer. After he is qualified he begins to earn an income. But supposing he dies quickly, it could be held, if he died within a few years, that this income over those years is merely repayment of the capital that his parents had invested in his education. You could get into all sorts of snags if you admit this and one thing that I could see as a result is a very big decrease in death duties. There is an income for a period. You get something out of that, but if everybody buys these annuities for life, the death duty element of State income will suffer. In this world, I do not think we can all purchase that security. Somebody must hold the capital and invest it and take the risk involved. We cannot all play safe to that extent.
Surely insurance companies, if they take his capital, make constructive use of it. The Minister may very well be depending on insurance companies to finance all kinds of matters, including, say, housing and capital might as easily and as usefully be utilised, say, financing the development of housing or industry here as in paying death duties.
Is the amendment withdrawn?
If the Minister does not accept it there is no use in pressing it, but I think the matter ought to be considered.
I move amendment No. 1:—
Before Section 4 to insert a new section as follows:—
Section 3 of the Finance Act, 1935, shall not apply to or have effect in respect of any tenement or rateable hereditament which the owner thereof occupies as a dwelling, and accordingly tax under Schedule A of the Income Tax Act, 1918, shall be assessed and charged on any such tenement or rateable hereditament.
The object of this amendment, and I venture to say it is an important amendment, is to remove a grave injustice. I think it was in 1935 that the Minister's predecessor, Deputy MacEntee, came into the House with a proposal that as and from that time the owners of houses should pay income-tax, not on the full poor law valuation of the house, but on five-fourths of the valuation. In other words, he created an artificial value for the purpose of income-tax and the owner of a house found that from that forward he would pay not on the full valuation but on the full valuation plus an unreal 25 per cent. At that time that proposal was strongly opposed. It created a great deal of resentment and it was generally felt to be unjust and to create a very dangerous precedent.
The injustice and unfairness of that particular proposal have been aggravated by the course of circumstances in the last 12 years. We know the position in this country and particularly in this city, and county is that nobody can rent a house and that any person who wants to get a roof over his head can do so only by purchasing a house. I think I can safely say that so far as from 75 to 85 per cent. of house purchasers are concerned, they can purchase only with the assistance of banks or building societies. The man on a salary buying a house at to-day's prices is paying anything from 150 to 200 per cent. over and above what the house would have cost him ten or 12 years ago. He has to borrow from 75 to 85 per cent. of the purchase money and he has to contract to repay that sum by way of annuity over a period of 20 years, which commits him to about 8¼ or 8½ per cent. on the amount borrowed. In addition, he has to pay a very greatly increased rate of, in this city, 25/9 in the £ and further, in addition, he has to face the cost of living. The last straw is that he has to pay income tax not merely on the full poor law valuation of his house but on five-fourths of the valuation.
Remember, the position of that man was worsened to a great extent by the proposal that was brought in in or about the same time, which wiped out what up to that time had been a very valuable allowance, namely, the allowance in respect of repairs. It meant so far as the owner of a house was concerned an increase of practically 50 per cent. on what he had been paying prior to the introduction of these particular proposals.
I want to suggest to the Minister and to the House that we ought to be consistent. We are blathering in this House, and indeed outside it, year in, year out, about the housing situation and about the absolute necessity to house our people and to do all we can to encourage people to have a stake in the country. We laud the effort of the citizen to become the owner of his own house and we proceed to penalise him when he becomes the owner.
This amendment, like most amendments which are by way of reference, is unintelligible as it appears on the paper unless Deputies have referred to the Acts. I would therefore like to make it clear that I am confining this proposal to the owner-occupier. I am concerned in this amendment with the man who owns and occupies his house and I am confining it to that type of person. The Minister may say that the additional amount the average house owner has to pay is not very great, but to the type of person I have in mind, the person who is being hardest hit by the section which I am seeking to have amended, every 10/-and every £1 counts very much. I want the Minister and the House to think of the man who is already married and his family started and the man who is thinking of getting married and who wants to get a roof over his head. They have to buy in a highly inflated market, to borrow practically all the money and to repay it with substantial interest. In a great number of cases they have to buy new houses which have been valued within recent years and to pay a very heavy rate on them. On top of all that the State is not satisfied with making him pay income-tax on the full value of his house but this additional 25 per cent. must be put on. That is a proposal to which I was always opposed, and information of a more definite and a more intimate kind which I was able to get in regard to this problem in the last few years has only convinced me of the grave injustice.
I do not know—perhaps the Minister will tell us—what this relief would cost. The question of cost should not enter into it very much. There is no justification for the retention of this tax, which should never have been introduced. It is unfair and it is leaning, in the majority of cases, on those who are least able to bear any additional impost. I would appeal, therefore, to the Minister to remove this injustice by accepting the amendment which I have just moved.
There is one factor about which I would like to remind the House. I think before the five-fourths imposition was put on the house owner—the Minister can correct me if I am wrong—was entitled to deduct under Schedule A a portion of the valuation of the house from his income-tax assessment. That concession was given in order to encourage thrift and to meet the cost of repairs. If the repairs years ago were worth consideration surely they are worth very much greater consideration at the present time. The person who owns his house has got a very raw deal. Remember, one of the problems with which we are faced to-day is the housing of the population. If a much bigger percentage of the population owned their houses the situation would not have got to the pitch it has. I should like to suggest to the Minister that he is discouraging thrift and that he is treating rather unfairly a class of person whom it is to the interest of the Government to encourage. If many more people owned their houses we know how much happier the situation would be to-day. I would appeal to the Minister, therefore, to accept this amendment.
Deputy Morrissey made some calculations and I am afraid he did not take all the facts into consideration. If the person whom he spoke of bought the house at £1,600 and borrowed 80 per cent. of it at 8 per cent. interest he would be entitled to set-off that interest or get an allowance on that interest payment and it would be very much more than the £24 he might have to pay on the valuation of his house. As a matter of fact he would still have something left, £30 or more, to set off against other income. I do not think there is anything I can say except that if we are to have an income-tax code based on income I do not think that we could ignore the income which a houseowner could get if he employed his capital in some other way than in the purchase of his own home. While we retain the income-tax code, collecting income-tax on the valuation of the house, I do not think it can be held that the present valuations represent the true income which a house would return to the owner if it were let or occupied by himself. The 25 per cent. extra that was put on back in the ‘30's would have to go very much higher than that. I have not proposed to increase it in this Budget but I certainly do not propose to accept Deputy Morrissey's amendment. While we tax on 25 per cent. more than the valuation it is on a valuation arrived at according to estimates of the last century. It is estimated that this particular amendment would cost between £100,000 and £120,000. Even if there were any merits in it, which I do not see, I do not think we could do it at this stage.
When this amendment was originally proposed in 1936 we opposed it vigorously and in each successive Finance Bill I put down for some years an amendment not similar to the amendment proposed at the moment by Deputy Morrissey but an amendment designed to repeal this increased 25 per cent. on all houses.
Deputy Morrissey's amendment is confined to one particular section of house property owners, namely, those who occupy and own their own houses. There is no question that a person who owns and occupies his house should be exempted from income-tax in respect of his purported or supposed income from this house by reason of the fact that he lives in it. The basis of the objection is that this five-fourth figure, this increase of 25 per cent. is an entirely artificial and empirical figure arrived at without principle and that it is, in fact, an additional burden upon one particular section of income-tax payers. That is the real basic objection to it. There is no principle on which the figure of 25 per cent. was arrived at. An attempt was made to justify this proposal, when it was introduced by the then Minister for Finance, on the basis that it was merely a prelude to the general revaluation of all property in this State; and an ill-starred Valuation Bill was introduced to the House and died a violent and unmourned death some years ago. This prelude to that general revaluation still remains, although the only justification for its imposition was that there was to be this revaluation.
In its essence, it is a tax on a particular section of income-tax payers. The Minister tried to suggest that the proposal of Deputy Morrissey was to exempt this particular class from this tax. There is no such proposal. It is assumed that, if the owner of property who purchases his house for the purpose of living in it, employed the capital in another investment, he would have an income from it; but that overlooks the fact that, since the last war, people who have been obliged to purchase their houses have consistently had to pay far more than the house was worth, by reason of the scarcity of house property for letting. If that amount of capital were invested in other securities, they would have realised a greater income than they could expect from living in their own house.
The Minister says it would cost £100,000. That is a very small figure. I recommend to him, if he wishes to recoup himself, to increase, if necessary, the five-fourths to a greater figure on that class of property which is being utilised at present to extract exorbitant rents from people unable to get accommodation anywhere. In this city, at present, scandalous rents are being extracted from people who can get no place in which to live. Rents of £300 to £600 a year are being asked for so-called self-contained flats in houses that would have been sold not less than three years ago for £1,500 to £2,000. Those houses are being turned into so-called flats, sometimes into three or four flats, and those exorbitant rents are being exacted for each flat and are being taken from people who are looking for a roof over their heads.
That is an appalling situation in which people find themselves owing to the scarcity of housing accommodation. I recommend to the Minister to increase the tax on those houses, which are bringing in enormous incomes to their owners at present. They are not merely exacting high prices from people in urgent need of housing accommodation, but they are imposing conditions upon them, that they will not let the house or flat be used if there is a child brought into it. Only in the last few days, one instance of that came to my notice, where £300 a year was asked for a hall flat and that condition regarding children was to be imposed in the tenancy agreement. I recommend to the Minister to spread this £100,000 over those profiteers, who are paying only on the same basis as the ordinary owner or occupier of his property.
Those profiteers are increasing the cost to other people who are trying to get houses and thereby inflating the price of house property, for the purpose of enabling themselves to make an exorbitant profit. The Minister should do that and agree to Deputy Morrissey's amendment. This is an inequitable tax and the facts I have brought to its notice demonstrate its inequity to the House. The person who has to buy his house in order to live in it pays income-tax at five-fourths the supposed income. A gentleman who bought a house cheap three or four years ago and made a little structural alteration could convert it into three or four self-contained flats and make an enormous income out of that house. His investment yields a tremendous percentage of profit, but he pays income-tax, not on the actual profit he gets but on the five-fourths valuation. I commend to the Minister the suggestion that in order to relieve the genuine case to which Deputy Morrissey refers, he should act in that way and would not lose one penny piece to the revenue.
The Minister has said that this would cost £100,000 or £120,000 a year. I remember the time when this five-fourths principle was introduced here by the then Minister for Finance with the phrase that it was like the tiny grain of mustard seed going to sprout into a magnificent tree under which some future Minister for Finance in happier days would lie and grasp the glittering prizes as they fell. This proposal would cost only £100,000, but nevertheless that would represent the interest on the money we have spent without looking for any return, on the magnificent airports that are to turn this country into a sort of international Crewe of the air. I understood that, if there was any member of the community which a Government would desire to favour, it was the individual who bought his house, not for the purpose of trafficking in it and making money but for the purpose of living in it with his family. That is the person to whom this amendment applies. The Minister will not make the concession.
Deputy Morrissey has pointed out that the calculation was made—of course, it differed according to the varying valuation put upon houses— that the taking away of the old-time allowance which used to be made for repairs and adding the extra quarter to the valuation meant over the country an increase of about 50 per cent. on those who had house property. It means that, if the community generally bear a tax of 6/6, a person who has his own house is paying 9/9. We are getting very near to the British income-tax in that way. I would contrast the situation of the houseowner who lives in his house with other people.
There was a tax on excess profits and various calculations were made as to the particular sum derived from the excess profits that corporations made in the exigencies of the war situation, by taking advantage of the situation from which they were supposed to derive no advantage. Various calculations were made and the lowest I have heard was about £17,000,000. That is the amount paid and the earnings would amount to something like £35,000,000, though that has been questioned by some people. Last year, we decided to abolish that and throw that money in. In other words, we gave to excess profits garners all that they were able to get, and it was certainly in the region of millions. As against that amount in excess profits out of the war, we have these people who cannot make them but are simply living on their income. There is a kind of fictitious increase in house prices, because if the house owner decided to trade it would fetch something higher in the way of income, but because he is staying in it and occupying it as a dwelling-house he is notionally supposed to have got a higher income out of it; and then we raise the tax to a higher amount. It is certainly a very peculiar contrast that the people who waxed fat on excess profits during the year have been handed back those excess profits for the year. These are millions but, when it comes to £100,000 for a section of the community which is always regarded as deserving of commendation by the Government, the Minister is adamant and will not give it to us. I want to talk about the drapers, but they can wait until next week.