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Dáil Éireann debate -
Tuesday, 10 Jun 1947

Vol. 106 No. 12

Finance Bill, 1947—Committee Stage (Resumed).

Debate resumed on amendment No. 1.

When the House adjourned on the last day, I was speaking on this amendment. The case that had been made on the amendment by the Minister was that, first of all, it is not so significant so far as the amount it brings in is concerned. The Minister told us the amendment would mean a loss to the State of about £120,000 in the year. It is quite clear how to make up one-third of that on other measures introduced to-day if they were sent back, so that the loss would be reduced to £50,000 or £60,000.

Particular attention was directed to excess corporation profits tax, which amounted to very many millions, as confessed in the accounts presented. Those who were liable for that tax were allowed to pocket a certain amount of the money which they made by charging extra prices. In addition, there was the question of evasion. There was a considerable amount, but whatever it was, it was last year handed back to those who previously had paid it. I have even introduced for comparison here the tale of the five drapers in the City of Dublin, some of whom had losses and some gains, but balancing all out, the five had between £5,000 and £6,000 profit for a particular year. Four years later, after payment of tax, it was discovered that they had accumulated £82,000 profits. That was after paying tax—after paying some of the heavier taxes imposed. They have been enabled to make all that out of the pockets of the public and the Minister last year gave them a present of whatever these firms were paying in excess corporation profits tax.

In opposition to that we have put a deserving class of people who had been induced to get a stake in the country. The most valuable stake is to have a place in which they can live and bring up families—a house that will be the centre of their family life. We ask for the remission of this tax which was introduced simply because it was one more method of bringing in a little more money. I pointed out the last day—and I fancied the figures would be questioned—that previously, before a tax of this type was paid on house property, there had been a statutory allowance for repairs amounting to one-sixth. Since Fianna Fáil came to control matters, that allowance was removed and people were made pay income-tax, not alone on the poor law valuation of the premises but on that valuation increased by one fourth.

The difference between the amount which a person pays now as opposed to what he used to pay when he got the benefit of the one-sixth for repairs, and paid only on the valuation, less that, is 50 per cent. up and my calculation on that—and I do not think it can be gainsaid—is that instead of at the 6/6 rate, people are actually being asked to pay at the rate of 9/9 on house property. That is very near the British rate and that is something scandalous. Whatever might be said for this in the days when other people were being made pay income-tax, surtax, corporation profits tax and excess corporation profits tax, nothing can be said for it now, when the Government can treat so well people who are better able to bear the burden of taxation.

Mr. Morrissey

I proposed this amendment last week and I listened to the Minister's attempt to justify the retention of this tax. May I recount, for the information of the Minister and those on the benches behind him, that what I am proposing in this amendment is to relieve the owner occupiers of houses of this artificial figure, this 25 per cent., which was added by the Minister's predecessor to the full poor law valuation of houses for income-tax purposes? The Minister sees nothing wrong in it. Not only does he not see anything wrong in the principle or in the imposition itself, but it commends itself to him entirely. If, to-morrow, the Dublin Corporation or any other local authority proceeded to make the occupiers of houses or tenements pay their rates, not on the total poor law valuation but on that valuation plus an imaginary figure of 25 per cent., there would be an outcry in this country and every ratepayer would be up in arms against it. But in principle it would be no different from the proposal brought in by the Minister's predecessor, and which we are now trying to get wiped out.

I have in this amendment deliberately restricted this matter to the person who owns and occupies his house. The amendment, even if it were accepted by the Minister and carried by the House, would not undo entirely what the Minister's predecessor has done. There can be no justification for creating an imaginary valuation.

Remember the people you are penalising in the main—people who have made immense sacrifices to become owners of their own houses and who continue to make great sacrifices to pay off amounts which they borrowed in order to purchase these houses. Remember the circumstances in which we are continuing to do this, circumstances in which it is utterly impossible for any person to rent a house, in which any person who wants to have a roof over his head, must purchase a house. He is not only paying a very much increased rate on its full valuation but we are continuing to ask him to pay taxes not only on the full valuation but on the full valuation plus one-fourth. I think as I said in introducing the amendment that this is an outrageous provision. I do not think it could be justified in any way whatever. The Minister attempted to justify it but it was a very poor attempt. That is no reflection on the Minister; I think it would be impossible for any person to make a good or convincing case for it. I only regret that I cannot convince the Minister of its injustice.

I was always opposed to this provision from the first day it was introduced. My opposition to it has grown as my knowledge of the way in which it bears on people has become greater. Many men in this city who, in order to get a home of some sort, had to undertake the responsibility of purchasing a home, have complained to me bitterly of the many charges which have to be met by the owner of a house, so much so that the average wage-earner or salary-earner finds himself in the position to-day that, having purchased a house, even where he is in a position to purchase it outright out of his own savings without borrowing, the various costs which have to be met by way of rates, income-tax and so forth are greater than the amount at which a similar house could be rented a few years ago. I think if we have any belief in the sort of talk we indulge in from time to time about our being anxious to give our citizens an interest or a stake in the country, one thing we ought to do is to make it easy rather than difficult for a man to become the owner and remain the owner of his own house.

I would press the Minister to reconsider his position in this matter. The Minister has told us that the amendment would cost something in the neighbourhood of £100,000. That gives us some idea of the imposition which this additional 25 per cent. puts on house owners. It gives us an idea of it particularly when we bear in mind that it is going to cost, according to the Minister, over £100,000 to give partial relief from this additional 25 per cent. because my amendment would not cover all those who have had to suffer under that additional 25 per cent. One hundred thousand pounds is, I suppose, even in these days a very substantial sum of money but it is inconceivable to me that if the Minister wanted to make a saving of £100,000 out of £70,000,000, that he would not be able to do so. I believe he would.

Amendment put.
The Committee divided: Tá, 24; Níl, 42.

  • Bennett, George C.
  • Browne, Patrick.
  • Coburn, James.
  • Cogan, Patrick.
  • Coogan, Eamonn.
  • Corish, Brendan.
  • Costello, John A.
  • Dockrell, Henry M.
  • Dockrell, Maurice E.
  • Doyle, Peadar S.
  • Fagan, Charles.
  • Flanagan, Oliver J.
  • Giles, Patrick.
  • Halliden, Patrick J.
  • Hughes, James.
  • Keating, John.
  • McGilligan, Patrick.
  • McMenamin, Daniel.
  • Morrissey, Daniel.
  • O'Higgins, Thomas F.
  • O'Leary, John.
  • Reidy, James.
  • Reynolds, Mary.
  • Sheldon, William A.W.


  • Aiken, Frank.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Blaney, Neal.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Colbert, Michael.
  • Colley, Harry.
  • Corry, Martin J.
  • Crowley, Honor Mary.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • De Valera, Vivion.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hilliard, Michael.
  • Kilroy, James.
  • Kissane, Eamon.
  • Lemass, Seán F.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Brennan, Thomas.
  • Breslin, Cormac.
  • Burke, Patrick (County Dublin).
  • Butler, Bernard.
  • Childers, Erskine H.
  • Little, Patrick J.
  • Lynch, James B.
  • McCann, John.
  • McEllistrim, Thomas.
  • Moylan, Seán.
  • O'Grady, Seán.
  • O'Reilly, Matthew.
  • O'Rourke, Daniel.
  • Rice, Bridget M.
  • Ruttledge, Patrick J.
  • Ryan, Mary B.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Richard.
Tellers:—Tá: Deputies Doyle and Bennett; Níl: Deputies Kissane and B. Brady.
Amendment declared lost.
Sections 4 to 14, inclusive, agreed to.

I move amendment No. 2:—

To add at the end of the section, in line 41, the following words:—

"and sub-section (4) of Section 36 of the Finance Act, 1941, shall be construed and have effect as if the words ‘twenty-five per cent.' were substituted therein for the words ‘five per cent.'."

During the course of the Second Reading of this measure I indicated certain proposals which I thought should in justice be carried out in regard to the provisions in reference to corporation profits tax, particularly in those cases where the employee of a company reached the position of trust and responsibility of being a managing director of that concern. Under the law as it stands at the moment, if that managing director gives the whole of his time to working in the interests of the company where he very probably or possibly has worked from the ground floor up and where he invests his savings in that company, if he owns more than 5 per cent. of the shares of that company, the amount of his salary is not permissible by way of deduction from the amount of the company's assessment for corporation profits tax. The proposal in this amendment is that a director of that kind who gives the whole of his time to the affairs of the company should be allowed to own at least 25 per cent. of the shares and, if he does not own more than 25 per cent-of the shares, the salary he gets will be allowed as deduction.

I think I explained on Second Reading the attitude that I adopt towards excess profits of businesses, whether corporations or otherwise. I endeavoured to suggest that it is not possible to found in reason any justification for a particular tax like corporation profits tax which in practice has been found to work injustice and has been for the last 27 years abolished in England. If the Minister thought that the existing provisions of the income-tax code in reference to profits of business concerns, including concerns carried on by a corporation or by a company, were not adequate, then a new tax might be devised which would be more equitable in its incidence than corporation profits tax has proved to be. Pending an examination of a proposal of that kind, I suggest to the Minister that he ought to allow the managing director who gives the whole of his time to the business in which he is interested the concessions that I ask for in this amendment. It would appear that the existing provisions are designed to discourage the position of an employee becoming through his own efforts or on his merits the occupant of one of the chief executive or administrative positions in the company because, if he is not a managing director who owns a certain number of shares, then the remuneration he gets is permissible of reduction for income-tax purposes. On the other hand, if he happens to be such an employee who works his way up to the position of manager or managing director, who gives the whole of his time in the interests of the concern in which he has such an obvious interest and who has invested his savings to more than 5 per cent. of the business, then the business is hit as against other concerns who adopt a different procedure. There is no reason that can be ascertained in principle as to why there should be a distinction between a person of that kind and a person who does not give the whole of his time and who owns more shares than 5 per cent. I suggest to the Minister that these proposals ought to be seriously considered.

I would have been glad if Deputy McGilligan had answered Deputy Costello on my behalf on this matter. The basis of this amendment seeks to take something from the tax which the State is drawing on corporation profits. I know that Deputy Costello and most of the members of the Fine Gael Party were against excess corporation profits. The excess corporation profits tax was dropped last year. I was aware that there was a difference of opinion between Deputy McGilligan and the rest of the Party but I did not think Deputy Costello would go so far as to say that we should provide or so amend the application of corporation profits tax that it would be open to the directors by increasing their salaries, taking shares between themselves, to ensure that we would get none. Deputy Costello is wrong in saying that there is no corporation profits tax in England. There was, during the war, a defence contribution which was applied in a somewhat similar way to our own corporation profits tax. The name of the tax is now changed to "profits" tax. A year ago last autumn, in his special Budget, the Chancellor of the Exchequer said he was going to come forward with a new tax in substitution for excess corporation profits tax. In his last Budget he brought forward a profits tax which is practically on all fours with our corporation profits tax. Deputy McGilligan to-day, and on other days, objected to the abolition here of excess corporation profits tax but if we are going to have a tax on profits that is somewhat fair and equitable, certainly this corporation profits tax is much fairer in its incidence than the excess corporation profits tax. The corporation concerned could have been earning 50 per cent. on the capital invested yet have to pay no tax on its profits on foot of excess corporation profits tax. If a concern that had made no profits prior to the war made a few per cent. it had to start to pay excess corporation profits tax on the excess. The excess corporation profits tax would be unfair in its incidence if it were kept in being for a long time. I regard the keeping on of this corporation profits tax in its present form as a substitute for excess corporation profits tax to a certain extent and it is a very much more equitable tax. If I were to accept Deputy Costello's amendment, it would have the effect that a concern could avoid altogether the payment of corporation profits tax if it was a four-director concern and if each one of them held 25 per cent. of the shares. It would defeat altogether the purpose of the tax which I think is a reasonable and a fair one at the present time If anyone has a better one to suggest —one that would have a better effect —I am quite prepared to consider it. I do not think Deputy Costello's amendment would fill the bill.

I think it may be taken as an irrefutable conclusion that when the Minister says I say something that is contrary to what Deputy McGilligan says he has no real answer in principle to the amendment I proposed. There is no real difference in policy or detail between anything I say on this. tax and anything Deputy McGilligan has said in reference to profiteers. I am in complete agreement with everything Deputy McGilligan has said and anything the Minister can say or suggest can in no way bring home any inconsistency between what I am saying and what Deputy McGilligan has said. I gave the Minister his alternative to this—if we want to get more money out of business, get a more equitable tax. I asked on the Second Reading of this measure for some justification in principle of this corporation profits tax. Why is there a tax on a business that is carried out by a corporation or by a limited company when an individual carrying on the same business is not subject to the same tax? Why is there a distinction? Why must a business be taxed which has carried on as a corporation and the same business carried on in partnership not be taxed? Why is there no relationship between this tax and the amount of capital employed in the company? I asked the Minister and I ask him again: can he give any principle underlying the imposition of this tax? The income-tax can at least have some apparent justification by its being urged that those who have incomes can best afford to pay tax that is required for State affairs. But what is the principle behind this? What is the principle behind taxing a business that is carried on by a particular machinery when the same business, carried on in another way, is not? Why is it that there should be, apparently (the Minister has not answered that point), some sort of discrimination in reference to this tax where the business of a company is carried on by a managing director who is an employee of the company and who puts his savings into that company—it is probably a limited company—when the same state of affairs would not arise if the person was merely a director drawing fees for doing nothing.

I support this amendment. I have listened to the Minister's remarks and it seems to me that the only justification he can find is that the corporation tax is paid by people who are able to pay it. Deputy Costello wants to know how it is that a corporation is mulcted for this tax when an individual or individuals trading are not subject to the same tax. The Minister seems to suggest that if he granted this some change could be made in the structure of the company. I would like to point out to the Minister that, in addition to the two classes mentioned, there is the third class, namely, the cooperative society, which does not pay income-tax at all. You have got, therefore, on this scale the corporation that, presumably, has the thickest fleece. It is mulcted more heavily than the individual trading on his own. He is let off lightly, and the co-operative society does not pay any income-tax. Is there any sense or justification in having three such variations in the case of people trading under this Bill?

As regards this matter of excess corporation profits and of excess profits, I have always held it to be a scandal that when legislation was brought into this House by the Government in 1939 a promise was exacted from them that nobody would be allowed to make good out of the exigencies of the war and that the Government after that closed their eyes to the people who were not merely making good but who were advertising themselves as making good. According to the Minister's predecessor in the Department of Finance and through the Revenue Commissioners' accounts it was made quite clear that those people were making millions.

Last year we reached the point when we threw overboard the tax which was taking some part of what was called excess corporation profits from them. All that I know is that at the time we were supposed to be taxing these people rather heavily a little company which had made a loss of £1,400 in the year 1939 was discovered to be making a profit of £23,600 in 1943, and that after paying the tax. Crowe Wilson made a profit of £7,485 in 1939, while in 1943 the profit had reached the figure of £15,777. Pim Brothers suffered a loss of over £3,500 in the year 1939, but they had reaped a profit of £12,648 in 1943 after paying the tax. Switzer and Company had a profit of almost £5,000 in the year 1939, and increased that to £12,000 in 1943. Perhaps the best example of all that can be taken is that of Todd Burns. They had a loss of almost £1,000 in 1939, but they were able to get themselves into the position in which they were able, even after the payment of this phenomenal tax, to have a profit of over £18,000.

Would the Deputy relate that to the amendment?

I am relating it to the Minister's speech in connection with my attitude to all these matters. If the Minister was relevant on that, I take it that I will be allowed to speak on it.

The Minister used two sentences on that.

And I have used the case of five drapers.

And several sentences.

I should like to use a few more. In 1939 Pim's ordinary shares were quoted on the market at 9d. After the Minister had pulled his pound of flesh through taxation, the shares rose from 9d. in 1939 to 15/- in 1943. Todd Burns' shares, which were quoted at 1/6 went up to 17/-. I objected to the Minister handing back to those people even the bit that he was taking from them in excess corporation profits, and I still object.

The effect of Deputy Costello's amendment might be that no corporation profits tax would be taken off people similar to those that Deputy McGilligan has mentioned.

I have offered the Minister facilities, if necessary, for a tax in substitution, provided it is worked more equitably, and so that the Minister can get the revenue in another way.

An Leas-Cheann Comhairle took the Chair.

I am prepared to consider suggestions from the Deputy or indeed from anybody in the country on that matter. I have pointed out that the Chancellor of the Exchequer in another country, after abolishing the excess profits tax decided that he would adopt the same type of tax and almost the name of the tax that we have here in operation.

We threw it at him.

We have it.

We threw the excess corporation profits tax to them. You have the position of the profits of these people rising from £6,000 odd to £82,000. At the same time this country is held up to the world as being one of the few countries where the real wages of the masses of the people have dropped below the 1939 level. That has been applied to ourselves, to France, Czecho-Slovakia and Japan.

That is a statistical lie. It does not operate at the moment.

I will give the Minister my authority for it—the English Times—the information is taken from the International Labour Office Statistics.

For what year?

This was published in the year 1947.

What year did it relate to?

It does not say and the year does not matter. I see that the year 1946 is referred to, but what is stated here is that in Eire, France, Czecho-Slovakia and Japan real wages have dropped below the 1939 level. That is a fact, and everybody knows it to be a fact. We know that civil servants are not getting the purchasing power to-day that they had in 1937 and 1938. Are the old age pensioners getting it?

That is not in the amendment.

The Minister said that the statement was a statistical lie. I say it is true, and that it is true with regard to old age pensioners, civil servants and the different categories of workers. The Minister knows that is a correct statement. You have the contrast to make between the two situations: the workers whose real wages have fallen below the 1939 level, and this other group of people whose profits, after paying all tax, have gone up from £6,000 to £82,000. Then we give them back part of the tax.

I am proposing to take something from them that Deputy Costello wants to give them.

Is the amendment being withdrawn?

Amendment, by leave, withdrawn.
Section 15 agreed to.

In view of the Minister's attitude, I do not think there is much use in my moving amendment No. 3 to this section.

Amendment No. 3 not moved.

The following amendment appears on the Order Paper in my name:—

Before Section 16 to insert a new section as follows:—

"When the remuneration or any part of the remuneration of a director of a company has been disallowed as a deduction from the profits of such company for the purposes of corporation profits tax a sum equivalent to the amount of such remuneration so disallowed shall for the purposes of his liability to or assessment for surtax be deducted from the total income of such director."

I have already drawn the Minister's attention to the circumstances which gave rise to double taxation. If the Minister does not see his way to consider that double taxation relief, I do not see any use in pressing the amendment.

Amendment No. 4 not moved.
Section 16 agreed to.
Sections 17 to 19, inclusive, agreed to.
Amendment No. 5 not moved.
Sections 20 to 22, inclusive, agreed to.
First to Fifth Schedules, inclusive, and Title, agreed to.
Bill reported without amendment.

When is it proposed to take the Report Stage?

I wonder if we could get it now?

No. What is the hurry?

I want to take the Bill to the Seanad.

What is the programme of the Seanad?

I hope to get it to the Seanad next week.

We can let the Minister get the Fourth Stage to-morrow and the Fifth Stage next week. Is there any setback in that?

I have a number of other Bills in hands and would like to get rid of this one.

Against that, I would like to prepare certain matter for the Fifth Stage. I do not know if any arrangement has been made.

Let the Fourth Stage go now and take the Fifth next week.

I am not concerned with the Fourth Stage.

I move:—

That the Fourth Stage be taken now.

There is no motion for it. It is not on the Order Paper.

The Minister has made a motion now. That is all that is necessary.

I object to its being taken in this way.

Ordered: That the Report Stage be taken to-morrow and the Fifth Stage next week.