I was endeavouring to find out two things and I wonder whether the Minister would be able to help me.
Finance Bill, 1955—Committee Stage (Resumed).
Question again proposed: "That Section 12 stand part of the Bill."
The Minister is always most obliging.
He may be able to help me because he has not got notice of this. I will forgive him if he cannot.
The Minister was so long a poacher on the other side of the fence in regard to these matters that he has a fair background of them. The worst type of gamekeeper is the one who has been a poacher.
Could the Minister say, roughly, the amount of death duties payable on estates as they rise from the lower figures to fairly high figures? That is the first question. The second is whether the Minister would contradict me when I say it is possible to take out on a young man in perfect health a straight life policy at a very low annual premium? When we talk of the sum for which a person is insured as being a very high figure, it does not necessarily follow that the annual premium need be a very high figure.
The stress is on the word necessarily.
Take the case of a young man. If an insurance company's doctors and actuaries advise that he can be expected to have a long life, the annual premium on such a straight life policy can be low. I am thinking of a young man with no possible chance, unless he wins a sweepstake prize, of accumulating what might be called a very large estate which would leave his family provided for in the event of his death. I say that where that man takes out a policy for each of his children when they are born——
On his own life?
On his own life, and making provision for each child in the event of his death. If he has say five children and has taken out a policy for £2,000 for the benefit of each of those children—the policy is a straight life one on his own life and the premium payments are made from his income— I say, that if the Minister accepts this, he is doing a most unfair thing to these young people. Instead of each of them paying as individuals, he is grouping them together for the purpose of extracting an added contribution for the Exchequer. The Minister should realise that in that case each of the children becomes a beneficiary of a sum that is now to be taxable.
The Minister and the Attorney-General said that I had made a faux pas. The Attorney-General made the biggest faux pas of all. The Minister said that an estate of £2,000 pays nothing, but if you have five estates of £2,000 each you get a total of £10,000, so that those people who never paid anything will now have to pay. I do not think the Minister intended that to be the case, nor do I think he realises, if this section becomes operative in its present form, the degree of hardship that is going to fall on innocent people whom he himself never intended should be caught by it. An estate exceeding £2,000 and not exceeding £3,000 pays 1 per cent; an estate exceeding £10,000 pays 6 per cent.; an estate of £20,000 pays 14 per cent., and an estate of £50,000 pays 30 per cent.
As a matter of accuracy an estate of £10,000 pays 4 per cent. and not 6 per cent.
I said that if it exceeds £10,000. If it is £10,000 my figure is correct.
No, because there are marginal reliefs.
I am talking of the net figure.
I am talking of the correct figure.
I am speaking of the net figure which will be taken to be correct by the Revenue Commissioners.
A lot more comes in as well as marginal reliefs.
If, by some extraordinary chance, I were to inherit from somebody £10,100, I would have to pay the figure I have mentioned.
You would not.
Take the case of the beneficiary that I am contemplating here. If the parent dies and a life policy becomes mature for payment, the child who is getting £2,000 does not, under the existing law, pay any estate duty. If, however, the Minister's proposal in Section 12 becomes part of our law and is enforceable by the Revenue Commissioners, and if there are six children in a family each getting £2,000, the Minister is now bulking the £2,000 for each child together as if each had inherited the whole lot. I say that is unfair. I do not think that is the Minister's intention, because he says that he wants to give relief in estate duty payments to lower income people.
Take the case of a man who has a reasonably good income. He is in, if you like, a hazardous occupation. He may be a pilot in a big airway company and has a big salary because of the hazardous nature of his occupation. He is insured separately himself. He can take out a straight life policy at a very low rate because of his income. He may be able to provide his wife and children with a policy for more than £2,000 for each. It may be £10,000 each, the aggregate sum being £50,000.
That would be an enormous estate.
It would not. This is the case of the father of a family who is engaged in a hazardous occupation. He is separately insured against death by accident by reason of his occupation.
What is the amount of the annual premium he has to pay?
If he is a young man in normal health the annual premium would be reasonably low.
Surely he could not get such a policy if he is regularly flying through the air?
I have said that he is separately insured against death by accident because of the nature of his occupation. The policies that I am referring to are straight death policies. That type of policy, against death from natural causes, is comparatively cheap. It is possible for him to make this provision because he has no other means of making provision to leave his family anything if he dies a natural death. He cannot bequeath the aeroplane he flies in to his family because it is not his.
I am pressing the Minister to tell the House that he will reconsider this and that he will be prepared to consider it from the point of view of coming to the House again on the next stage and saying: "There is this situation. It does need some special treatment. I think the House ought to agree that where persons have for a great number of years made this provision, are already committed to it have reckoned what will happen to their families if they die, and this now catches them up——
When they do it evasively surely.
No, there is no evasion. That is the point.
I have personal knowledge—that is why I am so concerned in this regard—of a man who had a delicate daughter, a daughter who was not fully developed mentally.
He was always anxious about this child and he made provision, as he thought, to bring in sufficient money to keep her for the rest of her life by investing £10,000 in what were then known as 5 per cent. Victory loan issued by the British Government. He died feeling he had made adequate provision for that child in the circumstances he had arranged for her. What happened? The British Government called in the 5 per cent. Victory loan and the only alternative that could be got for the money was a 3½ per cent. stock, with the result that the long-term provision made for that poor unfortunate child had to be altered. She had to be removed from the institution she was in to a less costly one.
Was that evasive action on the part of that parent? Surely there are many other parents, whether their children are normally healthy or not, who want to make provision for them. Deputy Barry does not seem to understand. I do not know whether Deputy Barry is a married man and has a young family or not, but I am sure if he has, he has often thought of the future welfare of his next-of-kin when his time comes, as I have often thought when my time comes. Therefore, I am thinking of that type of person, the person who has made these arrangements in the past. Not all of them have done it for evasive purposes. Some may have. You will always have that, but, as Deputy MacEntee asks, why hit the person who has done it out of pure motives because there are others who have done it out of impure motives.
You sort them out for me. I cannot do it. I think the protective quality of any insurance is valuable. The protective quality is its effectiveness.
And the most protection one can get at the least cost is the best. Therefore, the earlier you take out your insurance policy in your lifetime the more money you will get and the greater can be the provision made for your next-of-kin.
And the more premiums you will pay.
The Minister knows, first of all, that the younger you are for a straight life policy the cheaper the policy you can get.
Per annum.
Yes.
And you pay for more years.
That is all right so long as I am alive earning the money to pay it.
But you do not take out five when you begin.
You take out one for each child as it comes along.
There is nothing here about five.
No. I have only given that as an example because that is what the Minister has in mind. The Minister is not concerned about a single child or the widow of a deceased person. He is concerned about the whole group. He has grouped them together from the point of view of being able to extract estate duty from them together which he cannot do separately. I take it that soon the Minister will, if he goes along this line, take a firm with, say, five brothers— let us keep to the figure five—who are directors in a concern which they own jointly, each with £1,400 a year, which is below the surtax line, and the Minister will say: "I am going to join these all together. The total income of the five of them is £7,000 so that they will have to pay surtax between them". It is the same principle.
It certainly is not.
It is, and that is what we will lead to.
The Deputy should remember——
I suggest Deputy Barry should make his own contribution and allow Deputy Briscoe to make his.
I am glad Deputy Barry is throwing these points across because he is helping me to make clearer than apparently I was making, the case I am putting forward. Is the Minister satisfied that this is what he understood from this particular section? Does he not agree with me that it can cause unfair hardship? I do not wish to take-up the time of the House arguing this until 5 o'clock, but will the Minister say to me now: "I am accepting what the Deputy says as referring to people other than those who are out for purely evasive purposes. I will look into it and if there is anything in what he says I will see what can be done." I am not asking the Minister to promise now to do anything, but if he says that I will be quite satisfied. If he will not do that I must pursue the argument because I believe the situation is unfair. I am sure Deputy O'Higgins will agree with me that it is unfair. Deputy Costello had a point of view which was almost in line with what I am trying to express. They had this in England and it was abandoned, but the Minister says it was abandoned there because they could afford to do it in the light of their large resources in this direction, but it will not be abandoned here because our resources are so slender.
That was not quite what I said.
That is what I understood the Minister to mean. Perhaps the Minister will tell us what he did say and how far I am wrong. I understood him to say that it was easier for them to abandon it over there because of their resources in relation to huge estates compared with the small ones here. I think the Minister said that a £70,000 estate here is a large estate. However, I am not concerned with the question of the comparison of a large or a small estate here, in England or in America. I am concerned with what is right and what is wrong. I believe the committee that dealt with this in Britain abandoned it because they recognised it was wrong in principle, that it was unfair and that you are making out of individual citizens groups of citizens whom you are going to tax as a group as distinct from individuals. It is a completely new principle and should not be allowed to be introduced here. Will the Minister tell me that he will examine the provision and see does it require some saving words and, in addition, will he say if he thinks it is fair to make this retrospective by having it applied now to transactions which have been completed maybe ten, 15 and 20 years ago and up to this were free from this particular method of getting extra money from an estate of a deceased person?
I will deal first with the last point that Deputy Briscoe raised about retrospection. The position has always been that in respect of death duties the operative date has been the death of the person. That has always been the practice right down through the years. If it was desired to change the rate of estate duty at any time the change would have to be framed so that it would affect deaths of people who were born on and after the date of the passing of the Act. Obviously it might not come into effect for 60 or 70 years and it would be quite nonsensical from the point of view of legislation, and from the point of view of administration it would be utterly hopeless to have different rates running at the same time for people who were born at different times.
Is the Minister now talking as a poacher or a gamekeeper?
I am talking as both poacher and gamekeeper on this occasion. To have that type of duty imposed would be quite ludicrous and that is, in fact, what the Deputy, in his last few sentences, was asking me to do.
I am asking about a contract as distinct from a death.
That has been recognised all down the years and every Act that was passed has provided that the date of death was the operative date and as long as it did not create a different situation after the date of death, it was not retrospective. The Deputy has in front of him, I think, the statutes of 1951. There was some amelioration of the rates of estate duty in cases that became operative there in respect of deaths after that date, and has exactly the same principle as this section as regards its date of operation.
Deputy MacEntee dealt with the matter in another way. He will not misunderstand me, I hope, when I say this is an extremely technical matter and that what I think Deputy MacEntee did was to rush in and try to assist his colleague Deputy Briscoe without fully understanding the implications of what he was suggesting. The effect of the suggestion that was made by Deputy MacEntee would be simply this. As far as I am concerned, if I were back in the position of poacher, so to speak, I would be able to ensure that nobody would ever pay any death duties at all in respect of any personal estate, much less policies. You would be able to do it that way because it would, in effect, mean you could take out not a genuine policy at all but a succession of lump sum policies that you could distribute amongst your family. Let us take a person with an estate of £100,000. Instead of annual premiums he could pay lump sum premiums of £2,000 each on 50 policies, operative from the date of death. Instead of paying an annual premium he could pay a lump sum and that whole £100,000 would be free of death duty. The effect of Deputy MacEntee's suggestion would be that the whole estate would escape from liability to death duty.
We would all be rich people then.
It is one possible way of dealing with it if that is the policy you want to operate.
Is that not an oversimplification of the case?
I do not think that is the fair way to operate the provisions we want to legislate. I do not see any difference, except the purpose of avoiding death duties, between the man who takes out a policy on his own life for £10,000 and by his will be-queathes the proceeds of that policy between his five children, on the one hand, and the man who, on the other hand, decides that he will take out five separate policies and allot them to each of his children ab initio. I do not see that the one person should be treated differently from the other.
One has control, the other has not.
I do not see any reason why they should be treated in a different fashion from the death duty point of view. I think socially the principle of insurance is very wise and the principle of insurance is adequately covered and assisted by the State reliefs that there are in respect of life insurance premiums. But I can see no difference whatever between the principle of the person taking out one policy on his own life and the other person taking out separate policies in the way I have suggested, except that such people want to avoid having to pay any duty. If people can legally avoid paying duty naturally they will try to do so, and equally when the State feels the avoidance is disturbing the equity between one taxpayer and another, the State will close that method. That is what we are doing in this.
You have not proved your contention that it is disturbing the equity in such a broad and general way that it is necessary to do this.
If Deputy MacEntee thinks it is right that a person should so distribute his entire estate that he pays no duty, then it seems to me quite clear, as in the case of some other resolutions we were discussing, that the Deputy was not quite as active as he might have been in recent years. I would be delighted to join issue with Deputy MacEntee on the case he made. I think his case is completely untenable and the only suggestion I can make is that he made it because it was a somewhat technical matter the implications of which he did not fully understand— that he did not understand what he was rushing into. But if, having understood them, he still wants to rush in on that line, I am delighted to join issue with him on it because I think the suggestion that a plurality of separate policies should be treated in the same way as a single policy is so irresponsible that it will not under any circumstances bear examination.
I do not think the Deputy realised the import of his suggestion. He stated the case of a person who has his substance in his own house—may be a house valued at £3,000. We will say the house is valued at £2,000. If that man has another £2,000 which he has put into industry—let us take it that he has it in shares in an Irish company— he has £4,000. Why should he have to pay duty on £4,000 when the person who wants to evade liability for duty by taking out separate policies gets away with it? It does seem to be inequitable for one to have to pay and another not to have to pay. It is quite clear to me that when Deputies Briscoe and MacEntee made these statements they had not looked into the matter. I understand the full implications of it. It was a matter on which I was invited to express an opinion long before I sat on this seat for the first time.
The difficulty with the Minister was that he did not express it when he was on this side. He kept it very well concealed.
The Deputy had a very short journey from one side of the House to another but in travelling he changes his own ideas so much he feels he is entitled to think that other people suffer the same metamorphosis. I think when the Deputy looks into this again he will realise his approach is entirely illogical and that he is merely proposing the case here in order to excuse the man trying to avoid payment of duty which the Oireachtas has decided he should pay. That is the issue. It is a legal evasion which is being prevented for the future so that everybody may be treated in the same way on a fair basis.
We have had a most extraordinary confession from the Minister. All I can say is that it recalls to my mind a statement of the late Dean Swift when he was talking about certain appointees to Irish Sees.
They started off as honourable gentlemen from London but on the journey they were waylaid by highwaymen and when they came over here they were robbers. Apparently the journey from this side to the other resulted in a metamorphosis and the reverend gentlemen who left London became robbers before their arrival in their Irish Sees. Having said that, I should like to say now that I do not think the Minister is fair to himself. He said that he knew this evasion was taking place. Here we have a Minister on this side of the House at that time and a most active member of the Opposition who did not disclose that this evasion was taking place.
I never said that. I said I knew this basis of law. I did not say I knew these evasions were taking place.
Oh, very well. There is no point in chopping an argument on that basis, but the Minister spoke here about evasions of the law and talked about people taking out insurance policies. Are we permitting people to take out insurance policies in order that they might evade tax? But is there not something those people can do in order to evade death duties, but which has been regarded as being the sort of thing you do not have to take public measures to prevent?
If a person taking out an insurance policy on his life is in a position before he dies to assign by deed of gift, that gift might be made three years in advance of his death and he evades death duties on the gifts which he has made to his own children. It may be that he can make these gifts some time before his death and that he is able to exercise a fair amount of control in the manner in which the gifts are dealt with and yet at the same time these gifts are not liable for death duty if they are made earlier than three years before the date of his death. These insurance policies may have been taken out many years before the man died and the case the Minister made is that he knew of instances where the policies were taken out many years prior to death.
I should like to come back to what I was saying before the debate adjourned. I was saying that we were not discussing this in a partisan sort of way but that we were trying to bring out the pros and cons, the merits and demerits of the Bill. I will put this question to the Minister. Supposing a son takes out only a single insurance policy on the life of a parent or a wife on the life of a husband, will that be caught by the section?
A single policy is not affected by the section, which deals with a plurality of policies.
The section says: "includes any policies of insurance on his life." Now, surely if this section is going to affect only cases of plurality of policies, it is somewhat ambiguously worded. I am not a draftsman but as I see the phrase I would conclude that it means one policy. The Minister says it means a plurality of policies but I say that the wording of the section does not rule out the singular. In order to make the position clear I would suggest that it should read: "more than one policy of insurance." As worded here, it would suggest one policy.
The law at present governs the single policy.
I will take it the Attorney-General's contention is correct that it may apply to one policy. Supposing you have a thrifty girl as many Irish girls are and she marries a nice chap who is all right in his own way but a bit of a harum-scarum and who is a bit free and open-handed with his money and she decided in quite a legitimate way that she would take out a policy upon his life. I am talking about one policy at this stage. She decided to take out a policy on his life and he agreed, saying: "If you can get the money out of eggs or butter or the housekeeping money you are quite welcome to take out a policy on my life and make provision for yourself."
Time goes on and in a couple of years perhaps the housekeeping money goes up and she takes out another policy and so on until a stage comes where she has got a substantial number of policies upon her husband's life. He dies, and, though he was a harum-scarum, he did not squander all his substance. He lived up to his income, if you like, but there was a fair amount of capital passing on the date of his death. Here is the estate of the deceased which he held in his own right, representing £20,000 or £30,000— it may not represent anything so big, but let us take that case—and here, on the other hand, is his wife who has paid the premiums over a considerable number of years on policies amounting to £5,000 or £6,000. Under the section as it stands, this sum of £5,000 or £6,000, which does not belong to her husband and for one penny piece of which the husband has not accepted responsibility, is to be aggregated with the rest of the estate.
If a person pays premiums out of his own moneys in respect of a policy on the life of somebody else, that policy is not liable to duty at all.
Wait, now; let us see how the section reads. We can only try to construe the section as it is printed.
It depends on who the person paying the premium is.
The section says:—
"Notwithstanding anything contained in Section 4...where the property which passes on a death but in which the deceased never had an interest..."
"had an interest"—an interest in these insurance policies.
No.
But the property passes in a way, because it passes from the insurance company to the policy holder.
If the wife was paying the premiums out of her own money.
Do you think the Revenue Commissioners would believe her if she said that? They would say:
"The hen belongs to the husband and they are his eggs."
She has paid the premiums out of the housekeeping money, out of her own thrifty management. I did not say that she had paid it out of income she derived from her husband.
I thought that was the "hens".
I said that she paid it out of the housekeeping money. She was able to put herself in a position to pay it by the exercise of thrift, providence and good management, even though the income may have originated with the husband, in the first instance. Is the position not this as it stands, that unless she can prove that the premiums on these policies were paid out of income arising on her own account and independent of her husband, the proceeds of these policies will be aggregated with the estate of the deceased for the purpose of death duties?
No.
Is it or is it not the position?
I have tried to make it clear to the Deputy that it is not, but apparently I am not succeeding.
Will the Minister tell me then what is the sort of case this is intended to catch?
The Deputy said that these moneys would be aggregable with his own estate. They would not.
"...shall, for determining the rate of estate duty to be paid thereon, be aggregated so as to form one estate...."
Exactly.
"...and the duty shall be levied at the proper graduated rate on the principal value thereof." Do I understand now——
"To form one estate".
Do I understand the Minister to make this point, that the only thing the section does is that, for the purpose of determining the rate at which estate duty will be levied upon the property proper, if I may so describe it, of the deceased person, his own capital resources, apart altogether from anything that might accrue to a policy holder by reason of his death——
It is not quite as simple even as that. Might I intervene to explain?
Certainly.
There are various types of property. There is what is known as free estate, that is to say, real estate or personal estate or chattelry estate, of which a person dies possessed and with which he can deal exactly as he likes. That will include policies of insurance.
Taken out by him.
Policies which a person has taken out on his own life and on which he has paid the premiums. It might include in certain circumstances policies which he has taken out on somebody else's life and on which he is paying the premiums. That is one type of property. There is then settled property, property in a settlement.
We can leave that out.
In a marriage settlement, for example, settled property and free estate, will be aggregable. There is a separate form of property— property in which a deceased never had an interest. That is the one we are discussing here, but that does not become aggregable with the free estate or settled estate. It is treated as one estate, as an entity in itself, and what this section provides is that any policies in respect of which a deceased ever had an interest will be considered as one estate and the rate of duty applicable to this will be struck, and it will not be aggregated with anything else.
I am grateful to the Minister for the way in which he has clarified the matter but it still does not remove my difficulty. As I see it, the position is this: a person will have real estate and settled estate. These are completely outside the ambit of Section 12. Am I right?
Yes.
Then we come to the aggregated estate, the estate in which the deceased never had an interest.
We might call it the "no interest" estate.
Very well. What is the position of these policies to which I have been referring where the deceased's widow has taken the policies out independently of the deceased and has been paying the premiums on these policies all the time? Is she, when he dies, to be liable for estate duty on the aggregated value of these policies? Can the Minister answer that, because it might possibly ease our difficulties?
It depends entirely on who has been paying the premiums.
Take the case of a person who ostensibly has received from her husband a regular pay. She may have got it weekly, monthly or quarterly but, at any rate, it was given for the general expenses and upkeep of the household. Take the case of the wife who has received from her husband a regular allowance to provide for housekeeping and other things. Out of this allowance, she has managed to put away a little bit every time, and has decided that, instead of putting that money in a savings bank in her own right or investing it in national loan or in an industrial undertaking, from her point of view, the thing which gives her the greatest possible assurance is to take out policies on her husband's life. How does she stand then?
Has she any money coming in from any other source?
I am assuming she has not. How does she stand?
It comes back to what sounds very simple, but is far from it. It depends on what money it was. In other words, it depends on whether there is a gift by the husband to the wife of that money, she to do what she likes with it, or whether the husband gives it to her on the basis: "This is to pay what is due and you account to me."
Now you know you cannot maintain the ordinary placidity of a marriage on the basis of running an annual account.
I agree.
Does it not show you that the section is bristling with difficulties? Here we have an ordinary case of a man and his wife. The man says: "You know, I can allow you so much for the housekeeping, and so on. You do the best you can with it. I assume that you will pay the grocer, the maid, and do a number of other things with the money such as clothing the children. However, do the best you can. I am not going to ask you to come along once a month and submit the housekeeping accounts to me for audit." The wife may agree to that and think to herself: "I am thrifty. I can make the children's clothes and I can do a dozen other things. In that way, I can save a little now and then." There are women who bless their husbands for that arrangement. The wife is, therefore, able to put by £20, £30 or £40 a year.
The Deputy has missed the point again. That is not the point that arises under this section. The point that arises on the Deputy's case is whether or not any duty is payable. This section deals only with cases where the duty is payable. The quiz the Deputy suggests that arises in that case is a quiz not under this section but as to whether or not duty is payable at all. That is the position. If it was her own money, there is no duty at all of any sort payable. That is where the difference is. This section only deals with cases where it is first established that duty is payable.
Do not forget that this section has been drafted not originally at the instance of the Minister but at the instance of the tax gatherers who are out to catch evasion. The onus will be put upon the widow to show that it was her own money.
This section does not affect that issue at all. This section only affects aggregations. It does not affect the liability to duty.
I am not so certain that it does not. Sub-section (1) of Section 12 is worded like this:—
"Notwithstanding anything contained in Section 4 of the Finance Act, 1894, where the property which passes on a death, but in which the deceased never had an interest, includes any policies of assurance on his life, or moneys received under such a policy, or interests in such a policy or moneys, all the policies, moneys and interests so included (except any in respect of which estate duty neither is payable on the death nor would be if the duty were payable on estates of however small a principal value) shall, for determining the rate of estate duty to be paid thereon, be aggregated so as to form one estate, and the duty shall be levied at the proper graduated rate on the principal value thereof."
"The rate of", not "the liability to".
What is the effect of Section 13? What is the effect of the definition of "other property"? Is it not a complementary section to Section 12?
No.
I must have misread it. I look at sub-section (1) and I see here, after line 30:—
"‘the other property' means the property in respect of which estate duty is payable in connection with the death of the deceased, but which is not the property of the deceased."
Is that not precisely the sort of property we are dealing with under Section 12?
No. In which the deceased never had an interest.
I thought it was.
Section 13 deals with free estate and separate property.
So we take the two together. Is that the point?
The two are separate. Does the Deputy mean the two sections?
We have two nets now instead of one. The "no interest" property is caught under Section 12 and the other property is caught under Section 13. Is that the position?
Is that the Deputy's contention?
The Minister is here to inform the House on these matters.
Certainly. I will. Section 13 is giving a concession, not casting a net.
Perhaps it does.
It does nothing except give a concession.
Is the concession not consequential upon Section 12?
No.
"Aggregation of certain policies" and "aggregation" again.
This is an appeal to the Minister's sense of justice. I do not think he is treating the House fairly. Quite obviously, these are very obscure sections. I was not here—and, to that extent, I am culpable—when the Minister was putting the section before the House. As a layman, I am prepared to admit that I may not be fully cognisant of its real purpose. It may be that I am misunderstanding the section. However, I still cannot get away from the point I made at the beginning. If a person, by deed of gift, cedes property three years before his death that property is not liable to death duty on his decease. Supposing a person takes out these policies three or five years before his death, or even longer, will he be caught by this section whereas if he had chosen to make provision in a different way he would not be caught? Is there not surely a case there to ask the Minister to justify the difference between the two?
This Section 12 does not in any way affect liability to estate duty. It deals purely with the method of ascertaining the rate of estate duty when there is already liability.
I am perfectly certain the Minister will not ask us to believe that this section has been brought in merely with a view, purely and solely, to trying to fix a procedure determining the rate of duty.
That is so.
He has informed the House that he brought this in to stop evasion. That means, therefore, that people are at the moment not liable to estate duty because they have taken out these policies.
Or are paying at too low a rate.
This is a new principle now.
This is getting worse.
The longer this goes on the more bemused and befogged I get. Apparently, the Minister for Finance feels there is a moral duty on him, imposed by obligations of equity as between one citizen and another, to see that no person is allowed to insure his life at too low a rate. Does the Minister tell us that that is the purpose of this section—to try and discourage this type of insurance?
The Deputy knows I never said anything of the sort. It was too low a rate of estate duty.
I must be particularly dense to-day.
The Minister said he did not want to get any extra money, but that too little was being paid.
Would Deputy MacEntee be offended if I said that he is not at his best to-day in discussing this section?
It is my own fault that I was not here when the Minister introduced this section. I may not fully understand the purport and clear intention of it. However, I am here, at any rate, as a member of this Assembly and, in the interests of all of us, I should like to get this matter cleared up. We do not want to enact any legislation which would be unjust or any legislation which will prevent people from making proper provision for their relatives and dependents after their death. I am perfectly certain that the Minister's position in that regard is akin to my own. All we want to do is to make certain that, in his desire to stop what has been described as evasion, the Minister is not going too far.
Deputy Briscoe has already told the House that they have refused to do this in Great Britain. Why should we do it? After all, there the evasion is perhaps much more widespread than here. Why should we try to do it? If there are people fortunate enough to be in a position to take out these policies or provide for them, why should we go to the extreme that they have not gone to yet in England? After all, we have not yet become a socialist State or a communist State: we still believe in private property and in the rights of private individuals.
Am I to understand now, after all this talk, that what Section 12 now means is this, that where an individual takes out a series of policies on his life for his wife and children, each independently in the name of the wife and children, the only purpose of this section is, first of all, to aggregate the policies and that for the purpose of estate duty they will not be added to the estate of the deceased man?
To the free estate or settled estate.
Does that not make the matter really worse? Is it not really worse for the beneficiaries of the gentleman—who, the Minister might think, has done this as a result of evasive tactics, but who I say is making the best provision he can for each of his children? In fact, he may have different amounts for different children, he may have bigger amounts for his daughters than for his sons, under these policies. Is it fair to these beneficiaries, on the death of the father, who now become possessed of their own little estate—which may have been arranged for them from their early infancy and which could never be the property of the parent or either them, or of any of the other children, except possibly where death inter vened? Does he think it fair to aggregate those policy figures and say: "Each and every one of you will pay an estate duty rate on the seven aggregated policies as if each of you had received the full amount." Is that fair? It means bringing individuals, in some cases, into paying estate duty who normally would not have to pay it at all.
When we talk of figures like £10,000, everybody says that is a large estate, that £70,000 is an unheard-of figure. I think that this type of insurance policy behaviour should be encouraged by the State. You make provision for insurance against sickness. This is a thing that the State should welcome and encourage, rather than put a premium on it and try to become another child of the parent, another beneficiary, which was never intended I ask the Minister now—I am pressing him again—to consider the matter from the point of view I am talking about. Is he prepared to insert a clause, that this particular section will have effect only in the case of policies taken out after the date of the passing of this Act?
There is no use in the Minister arguing the point that the death duties change from year to year and yet relate back to the year of birth. One thing has nothing to do with the other. These are, in fact, contracts made by a parent with an insurance company, with a certain idea in mind. I do not know to what extent some of these cases would be affected, but I think the principle is wrong and I ask the Minister again to reconsider it.
I regret I am not prepared to do that. I do not think it would be right.
Question put and declared carried.
SECTION 13.
Question proposed: "That Section 13 stand part of the Bill."
The existing position, which this section alleviates, concerns cases where there is a free estate and a settled estate passing on the death of a person. If we consider the case of A, who settles property on his son B for life and then on to another son C after the death of B, in that case the estate duty is payable on the death of B, on both the settled estate that he leaves under that settlement and on the free estate. The effect of this section is to extend the exemption, in respect of the property provided by the deceased, from £2,000 to £10,000.
There have been cases where people who were not getting any benefit under the settlement, nevertheless had to pay very substantial sums by reason of the aggregation of the settled estate with their free estate. It is to ease that situation—particularly as it often affects widows—that I ask the House to pass this section.
Question put and agreed to.
Sections 14 to 21, inclusive, agreed to.
First, Second and Third Schedules agreed to.
Title agreed to.
Bill reported without amendment.
When is it proposed to take the Report Stage?
Would the House like to take it now? I have already undertaken to bring in one amendment and in that case I could bring it in in the Seanad.
I think it is desirable that we should have a final review of this situation next week.
Very well, Tuesday. Perhaps it could be agreed to take the Fourth and Fifth Stages on Tuesday?
That will depend——
On the sort of humour we are all in?
No, no.
Report Stage ordered for Tuesday, 21st June, 1955.