Dáil Éireann debate -
Tuesday, 5 Jun 1956

Vol. 157 No. 10

Finance Bill, 1956—Second Stage.

Minister for Finance (Mr. Sweetman)

I move: That the Bill be now read a Second Time. The purpose of the Bill, as the House is aware, is to put into legislative form the proposals I submitted to this House in my Budget speech on 8th May and which were passed that day in the various Financial Resolutions. Before I give a summary of the provisions of the Bill, I should like, briefly, to refer to one matter which I mentioned on the concluding stage of the Budget debate. I indicated then that I hoped to have available for the members of the House and for the public the printed report of the Committee of Inquiry into Taxation on Industry before this debate would commence. I am glad that that report has now become available. It is a valuable document and one that goes at some length into many points that were raised.

I have in mind in particular a point that was made by more than one speaker from the Opposition Front Bench that there should be a special remission of taxation for export industries. As Deputies can now see in paragraphs 171 and 172, on pages 64 and 65, the report deals specifically with this matter. The House can see from those paragraphs that the committee, for the excellent reasons they have quoted there, refrain from making any recommendation for direct taxation benefits for exporters, as such. The House will also see that the committee indeed went further and suggested that aids to the development of industrial exports should be the function of some Department, other than that of the Revenue Department.

The committee has made certain suggestions which, as I have already said, are being examined. One of these suggestions is incorporated in this Bill, namely that in relation to initial allowances. In their report, the committee also suggested in paragraph 212 on page 80 that basic wear and tear rates should be published by the Revenue Commissioners. The basic wear and tear rates in existence are, in fact, published in the committee's report at pages 130 to 133. These rates are, therefore, now public property. However, I can say that if in the future any variation in or any extension of these basic rates is made or becomes necessary, we shall most certainly follow the committee's recommendation and make public any such new rates which may be fixed.

It is obvious that any worth while increase in exports can only flow from an expansion of production and that the problem which we are facing is to broaden our production base and to secure an all-round improvement in efficiency and productivity. Any means within our capacity that will help to achieve these ends must be adopted. It was for that reason, as I have mentioned, that I accept the committee's recommendation for a 20 per cent. initial allowance for wear and tear on new machinery or plant for use in a trade, but exclusive of vehicles.

I think everyone will agree now that, having had an opportunity of seeing this report, it is a document which will require very considerable study. We propose to give it that study in the period ahead. The results of our examination will hardly be made available until next year's Budget. Meanwhile, however, I would repeat what I have said already. When we have concluded our examination of the recommendations and implications of this report, we shall consider in greater detail whether a more general review of our code of direct taxation is desirable.

The Finance Bill itself is perhaps to some degree more a Committee Bill than one for general Second Reading debate, in so far as the actual text is concerned. For the convenience of the House, I propose just shortly to outline the purport and the effect of each section.

Section 1 is the customary section which fixes and imposes income-tax and surtax for the current financial year, 1956-57. It continues the previous enactments and corresponds roughly to Financial Resolution No. 1 passed on Budget day.

Section 2 gives effect to the proposal which I made in the Budget speech to modify in the case of persons whose health is impaired the existing restriction of income-tax relief in respect of life insurance premiums. At present this restriction is measured by reference to 7 per cent. of the actual capital sum payable on death. In future it will be calculated by reference to 7 per cent. of the capital sum which would be payable on death if the person's insurance were not, by reason of his health, subject to special provisions in relation to the capital sum payable.

This section will operate as from the year of assessment 1956-57 onwards, irrespective of when the policy of insurance was entered into.

Section 3 exempts from tax the first £25 of the total interest otherwise assessable on an individual taxpayer arising from deposits with the Post Office Savings Bank, with a trustee savings bank or with any of the commercial banks. In the case of a married couple where each spouse has deposit interest, and the total of such interest arising to the couple is in excess of £25, there will be but one £25 exemption and this will be apportioned by reference to the respective amounts of their interest. This provision, as the House is aware, has been introduced for the purpose of assisting saving.

Section 4 increases from £300 to £310 the income-tax deduction allowed in respect of a married couple.

Section 5 enables the income-tax deduction for a child to be granted for the year of birth, in the case of a child adopted during that year. I might, perhaps, mention that the income-tax allowance has always been available in the case of an adopted child, whether legally or informally adopted. The existing law, however, provides that, in order that an allowance may be given for a particular assessment year, the adopted child must be alive at the commencement of that year. In relation to natural born children, since 1949, the law has been that the allowance may be granted for a year, if the child is alive at any time during that year. It is now proposed, under this section, to put adopted children on the same footing as natural born children for the year of birth.

Section 6 increases from £50 to £60 the income-tax deduction allowed in respect of a dependent relative.

Section 7 extends the 20 per cent. income-tax relief available under Section 7 of the Finance Act, 1932, as amended by Section 7 of the Finance Act, 1935, in respect of certain public issues by providing that "rights" or bonus shares, to the extent that they relate to shares already carrying relief under that section, may be deemed to be issued for public subscription and may, accordingly, themselves qualify for relief, if, in regard to them, the terms of the original section are otherwise complied with. The purpose of this section is to enable consolidation of certain of these issues in so far as the past is concerned and to prevent subdivision in the future. If shares are consolidated in that way, there will be a better market in them. I might mention that Deputy Lemass, when he was speaking on the Budget, suggested that the only way in which this relief could be obtained was by way of refund. That is not so. It is dealt with by way of offset and not necessarily in the way the Deputy suggested, that the tax should be paid and claimed back.

Mr. Lemass

The tax is deducted from the dividend warrant. You must get a refund.

Mr. Sweetman

Yes. It is not dealt with by way of refund but by way of offset in respect of other assessments. I have often met such a case.

Section 8 and the First Schedule increase the rates of customs and excise duties on tobacco. The main rate of customs duty on unmanufactured leaf is raised by 7/11 per lb. from £1 14s. 10d. to £2 2s. 9d. per lb. and the various other rates of duty are increased correspondingly. The section also provides for an increase in the rate of rebate allowed on hard-pressed tobacco, namely, plug, roll, twist coil and bar, from 9/8 per lb. to 12/4 per lb.

Section 9 imposes a special excise duty of 7/11 per lb. on duty-paid stocks of tobacco held by tobacco manufacturers at 5 p.m. on 8th May, 1956, and provides for the deferment of payment of the duty to a date not later than 1st January, 1957.

Section 10 increases the rate of customs duty on mineral hydrocarbon light oil (petrol) from 1/9½d. to 2/3¼d. per gallon and correspondingly increases the rate of excise duty from 1/7½d. to 2/1¼d. per gallon.

Section 11 provides that the rate of customs rebate allowed on diesel and other heavy oils, when the oil is used for any purpose other than combustion in the engine of a motor vehicle, shall be reduced from 1/8 to 1/7 per gallon. The rate of excise rebate on oils is similarly reduced. These reductions, in effect, make the oils in question dutiable at the rate of 1d. per gallon. Tractor vaporising oil is excluded from the proposals and will, therefore, continue to be free of duty.

Section 12 and the Second Schedule deal with the rates of customs and excise duties on matches. The main rate, which is the excise rate applicable to the gross of standard sized boxes is increased from 5/9 to 10/3, that is, by three-eighths pence per box. Section 13 increases the rate of excise duty on bets made off the course from 7½ per cent. to 10 per cent. of the amount of the bet. Section 14 deals with the rates of customs and excise duties on table waters. The main rate which is the rate applicable to homemade sweetened table waters is raised from 4d. to 1/- per gallon, which is now the over-all rate for sweetened and unsweetened waters.

Section 15 restores the dance hall tax. Two scales of duty are provided— a general scale applicable to dances held in or within three miles of the cities and larger towns and a lower scale applicable to dances held in places not in or within three miles of towns having populations exceeding 2,000. Under the general entertainments duty law, dances held in places not in or within three miles of towns having populations exceeding 1,000 will be free of duty. The various statutory reliefs from entertainments duty provided for entertainments promoted for charitable objects, and so on, will apply automatically to the dance tax.

Section 16 provides an exemption from entertainments duty for any entertainment consisting wholly of an Irish language film show. Section 17 imposes an excise duty on gaming licences for funfairs and amusement halls issued under the Gaming and Lotteries Act, 1956. The rate of duty is to be £10 when the period for which the licence is to be issued does not exceed three months, £20 when the period exceeds three months but not six months, £30 when the period exceeds six months but not nine months and £40 when the period exceeds nine months.

Section 18 amends Section 19 of the Finance Act, 1933, as amended by Section 25 of the Finance Act, 1935, which provides partial relief from entertainments duty for greyhound racing held in places not within 20 miles of a town with population more than 20,000, subject to the condition that greyhound racing was held in such place before 31st October, 1933. By deleting the latter condition and thus bringing within the scope of the relief a number of greyhound tracks established since October, 1933, this section gives effect to a recommendation included in the 1952 Report of the Advisory Committee on the Greyhound Industry. The relief takes the form of a repayment, subject to a maximum of £100 in any year commencing 1st November.

Section 19 terminates the customs duty on fillers and flats for egg-boxes imposed by Section 1 of the Finance (Customs Duties) (No. 4) Act, 1932, and reference No. 9 in the First Schedule to that Act, the reason being that these are no longer made here.

Section 20 confirms in force the Emergency (Imposition of Duties) Orders relating to the Special Import Levy and in relation to which I made a full statement on the Vote on Account.

Section 21 gives effect to the Budget speech proposal to grant a relief from estate duty, similar to that granted by Section 7 of the Finance Act, 1932, in the domain of income-tax, for new public issues made for the promotion of Irish industry. This section of the Bill provides that one-third of the value of any stocks, shares or securities issued after the passing of the Bill, and coming within the ambit of the section, will, in the case of an individual dying domiciled in the State, be excluded from account in the assessment of estate duty, provided the deceased person was the beneficial owner of the stocks, shares or securities continuously from the date of their original issue, or for a period of not less than three years immediately preceding the date of his death.

Section 22 extends for a further period of three years the temporary exemption from corporation profits tax hitherto afforded to certain public utility concerns, such as railways, to building societies and to the Agricultural Credit Corporation. Section 23 provides for the granting of initial allowances of 20 per cent. on capital expenditure incurred on or after 6th April, 1950, on the provision of new machinery or new plant, other than road vehicles, for the purpose of a trade, and to which I have already referred.

Section 24 ensures that the initial allowance will be taken into account in computing the annual deductions allowable in respect of wear and tear, while Section 25 defines the "basis period" by reference to which the initial allowance is to be granted.

Section 26 makes similar initial allowances to capital expenditure by professional men, assessable in respect of their professional incomes under Case II of Schedule D, and also by nurserymen and market gardeners, assessable under Rule 8 of Schedule B, who, unlike ordinary farmers, are chargeable on their full profits every year. Section 27 enables a company to obtain an initial allowance for the purpose of corporation profits tax where it would be eligible for such in computing income-tax liability. Section 28 is a mere construction section.

Section 29 levies the stamp duty of £140,000 on the Racing Board in respect of the year ending 31st March, 1957. This section requires a fresh Financial Resolution to be moved before the Committee Stage of the Bill, and takes the place of the provisions contained in Financial Resolution No. 9 passed on Budget day. I would emphasise that the section is brought in in this form because the Racing Board feel it can be done better in this way. However, there is no question of any diminution or any change in the amount that I was proposing to raise in this manner in the Budget proposals.

Section 30 provides that the 25 per cent. rate of stamp duty shall no longer apply in the case of conveyances or transfers of property acquired for private residential purposes, so long as any land attached to the house does not exceed five acres in extent, and also property acquired exclusively for the purposes of an industry other than agriculture.

Section 31 makes exactly the same provision in regard to leases. Section 32 provides for the transfer, as announced in the Budget, of the sum of £500,000 in the Road Fund to the Capital Fund set up under a Schedule of the Central Fund Act of 1956. I would stress in this respect that it is a transfer to the Capital Fund and not to ordinary current revenues. Section 33 makes the usual arrangements in respect of borrowing for voted capital services.

Section 34 enables the payment of interest on certain stocks of the E.S.B., of C.I.E., of local authorities to be paid without taxation. The section provides that such stocks may be issued with either, or both, of the following conditions:—

(a) that neither the capital nor the interest shall be liable to any taxation so long as it is shown that the stocks are in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the State;

(b) that the interest shall not be liable to income-tax so long as it is shown that the stocks are in the beneficial ownership of persons who, wherever their domicile, are not ordinarily resident here.

Section 36 is the ordinary section which places the care and management of these taxes in the hands of the Revenue Commissioners, while Section 37 is the normal construction section.

Mr. Lemass

Since the Dáil debated the Budget proposals, Deputies on both sides of the House have had an opportunity of ascertaining the public reaction to them. I think there are few who disagree with me when I say that the public were conditioned to expect tax increases. The various statements which had been made by Ministers during the course of the year prior to the Budget had created a great deal of apprehension concerning the financial position and there were very few taxpayers who did not anticipate some increases in their burden following on the Budget.

The public reaction to the proposals was directed far less, I think, to the actual tax increases themselves than to the circumstances surrounding the whole of the Budget position. Indeed, the impression which I formed following discussions with representatives of various economic interests was that the public in the circumstances would have accepted the need for increasing taxes, if they could have discovered that there was any clear line of policy in the Government's actions, any idea in the mind of the Government concerning the steps required to repair the defects in the position, any expectation that effective action would be taken, or that in the course of time, because of the pursuit of definite plans, the national income could be expanded to meet the rising demands on it.

The adverse public reaction to the whole of the Budget proposals was due, in my view, far more to the absence of an indication of policy on the Government's part than to the prospects of having to pay higher taxes. The slump which is developing in trade at the present time and the slump in public morale which, from a long term point of view, is even more serious, is less attributable to the actual Budget proposals themselves than to statements which were made by Ministers in connection with them. I have in mind particularly the speech of the Taoiseach in the Budget debate and to the concluding speech of the Minister for Finance. In neither speech was there any indication of policy, any clear indication that the Government are accepting their responsibilities and preparing to face up to them.

Both the Taoiseach and the Minister for Finance, and indeed most of the Deputies from the opposite benches who have spoken, appear to be entirely preoccupied with Party politics. Their concern was to score petty debating points, to misrepresent the views of their opponents, to talk themselves out of the political penalties which their mismanagement of the country's business may involve for them, certainly not to give any leadership to the country or to those who control economic factors as to how they could cooperate in getting the country out of the jam into which the Government's incompetence has put it.

The failure of our production to expand as the production of every European country is expanding, the recent recorded increase in unemployment notwithstanding the appalling situation revealed by the latest census report, the widening gap, which shows no sign yet of being rectified, in the country's balance of payments, all indicate that this country faces a crisis. It is a situation which calls for exceptional measures. It is a situation which requires not merely an imaginative approach but dynamic action. There is no sign that the country is likely to get them from the Government and the whole of the public reaction to the Budget derives from that fact. The Minister for Finance was boasting in his Budget speech that the Government could be tough. They are being tough in the wrong direction. In so far as the problems of the country are concerned, the Government have shown an appalling weakness, a weakness which is itself contributing to the dimensions of these problems.

Both the Taoiseach and the Minister for Finance spent a large part of their time trying to controvert some Press statements as to who was running the Government, whether it was the Fine Gael Party or the Labour Party. Nobody knows who is running the Government and the only indication anyone has is that the Government is just drifting along without any motive power whatever behind it. Indeed, it would be a good thing for the country if either Fine Gael or the Labour Party decided to run the Government, because the Government might then get somewhere.

Mr. S. Collins

That is a new tune altogether.

Mr. Lemass

Will the Deputy produce some tune instead of the one "the old cow died of"? I do not want to go over the whole of the Budget debate again, but I once more invite every Minister and every Deputy who participated in that debate to apply this test to himself: read the speech he made in the Budget debate in 1956 and contrast it with the speech he made in the Budget debate in 1955. That is a simple test which any Deputy can apply to himself. I challenged any member of the Government and any supporter of the Government in the House to repeat here this year the speech he made last year. I renew that challenge now and I say that, if any Deputy does that, he will appreciate at once the extraordinary deterioration in national conditions which has been brought about in a single year.

Parliamentary Secretary to the Government (Mr. O'Donovan)

Come off it.

Mr. Lemass

Is the Deputy trying to suggest national conditions have improved?

Mr. O'Donovan

I am just saying you should come off it.

Mr. Lemass

Why should I?

Mr. O'Donovan

Because it is cod.

An Ceann Comhairle

Deputy Lemass on the Second Reading of the Finance Bill.

Mr. Lemass

Do Deputies opposite think that conditions now are better than last year?

Mr. S. Collins

No.

Mr. O'Donovan

If you were here, you would be yelling "crisis".

An Ceann Comhairle

Deputy Lemass must be allowed to make his statement without interruption.

Mr. Lemass

Of course there is a crisis. The most appalling thing in this situation is not to be found in books of statistics; it is to be found in the attitude of the members of the Government and the attitude of those who sit behind them. Do they not realise there is a crisis?

Mr. O'Donovan

No, certainly not.

Mr. Donegan

It is a problem, not a crisis.

Mr. Lemass

This deterioration in the financial position which has necessitated £9,000,000 additional taxation this year is not a crisis. This widening of the adverse trade gap to produce a deficit of £35,000,000 last year and a contraction in bank reserves of the same amount is not a crisis. The fact that every country in the world was able to record increased production last year and our position was one of stagnation is not a crisis. The fact that 200,000 people left the country in the past few years——

Mr. O'Donovan

The past five years.

Mr. Lemass

——is not a crisis.

Mr. A. Barry

There was a lot gone in 1954.

Mr. Lemass

Do you care a rap about anything except the votes you may lose? Is that your only worry? You are the Government now. This situation was disclosed last week. Will you do nothing about it except try to put the blame on someone else, to keep your votes by misrepresenting the position? Will you face up to the responsibilities of Government? If you are not prepared to do that, will you get out and let somebody in there who will? Which will you do? Will you sit there wringing your hands?

Mr. O'Donovan

We are not wringing our hands.

Mr. Donegan

It is you who are doing the wringing.

Mr. Lemass

What are you doing? I again in this debate invite any Deputy opposite to read the speeches made in the Budget debate by the Taoiseach, the Minister for Finance and the only other Minister who spoke, the Minister for Social Welfare, and see if you can find in them the slightest hint of policy or programme. Is that not a fair invitation? Do you not think the people who sent you here are entitled to get some indication of your minds, some indication of what you are thinking?

An Ceann Comhairle

I suggest that the Deputy use the third person.

Mr. Sweetman

After 30 years he ought to have learned that much.

Mr. Lemass

I apologise for a slight deviation from the Rules of Order.

Mr. S. Collins

He is tearing a passion to tatters.

Mr. Lemass

I suppose we will get an equal respect for the Rules of Order from some of those Deputies opposite.

An Ceann Comhairle

I hope so.

Mr. Lemass

The situation in this country at the present time requires that the people should be encouraged by a statement of policy or programme which may ultimately lead the country out of its present difficulties. They need a programme which appears to them to have within it the possibilities of an improvement in national circumstances. A large part of the difficulties which are arising now, and are likely to become more acute this year, are due to psychological causes, to that feeling amongst the people that there is no leadership, that the Government of the day has no plan, that there is no conception of a programme which can result in an improvement of the situation.

I do not know if Deputies opposite have had any recent contacts with their constituents but, if they had, I am sure they will have found that the prevailing mood amongst the people is, not despondency because difficulties have arisen, not despair because additional taxation is necessary, but gloom because there is no likelihood in prospect of an improvement of the position in the foreseeable future through any action of the Governemnt.

Mr. S. Collins

The Deputy must be visiting the wrong places.

Mr. Lemass

I visited Laois-Offaly. Did the Deputy?

Mr. S. Collins

I did—plenty of it.

Mr. Lemass

In the circumstances prevailing now we can, with benefit to the country, modify our Party controversies. This is a situation in which, from a purely Party point of view, we might exult. The Government which replaced us have proved to be incompetent and have made a mess of public affairs. We might expect that to bring votes to our Party at some time. But that is not good enough. For some time to come the management of the nation's business will repose in the hands of the men who now constitute the Government. Even if they have, in their short time, done a great deal of damage, in the time immediately ahead of us they can do a great deal more— far more than any subsequent Government, no matter how competent, may be able to repair for many years.

It is, therefore, our duty as we see it, Deputies in Opposition, to urge upon the Government that they should do something now to prevent any further deterioration in the situation. We ask them even to tell us what they think can be done, to give some revelation of their minds, some indication of the possibilities which they are discussing between themselves. As I say, the speeches which we got on the Budget debate reveal one thing only— an excessive preoccupation with Party politics and no realisation of the responsibilities which attach legally and morally to those who form the Government.

Mr. A. Barry

What a pious man you are.

Mr. Lemass

Speak up. I cannot hear you.

Mr. A. Barry

What a pious man you are, talking about politics. That is piety, but a most revolting kind of piety.

Mr. Sweetman

Deputy Lemass does not expect us to take that seriously, does he?

Mr. Blaney

It will not be taken seriously by this Government.

Mr. Lemass

It is at least a suggestion. I go further and I say that, if the Government can bring before the Dáil any practical proposal for an improvement of the situation now prevailing or even a proposal which would be effective in preventing a further deterioration in that situation, we will examine it on its merits without regard to political considerations and support it fully if it appears to us to be sound. All we ask from the Government is that, irrespective of whether they do it in a partisan way or in a constructive way, they will bring to the Dáil some series of proposals to arrest the decline which is now going on in our national circumstances.

The Minister for Finance promised, when concluding the debate on the Budget, that the report of the Committee on the Taxation of Industry would be circulated before the Finance Bill. He fulfilled that undertaking by a short head. The report came to members of the Dáil some hours before the text of the Finance Bill, and no Deputy has yet had the opportunity of considering it in detail, much less of arriving at conclusions on many of their observations and recommendations. At first sight, the report reveals one of the extraordinary weaknesses affecting the administration of Government here—the inadequacy of the statistical data available to those who have the responsibility for the formulation of policy or for making recommendations regarding policy. Even where statistical data is procurable, it is published very belatedly. No doubt, there is in that report information which was not previously available, but it is information relating to the year 1954 and earlier years. The Central Statistics Office is probably doing as good a job as possible with the resources available to it, but it certainly would make the business of Government a great deal easier, and the results of Government more beneficial, if the statistical services could be expanded so that the information which is available to us in respect of periods three, four or five years ago could be furnished for more recent periods.

Most people who will read that report and the recommendations contained in it, will, I think, feel that they are totally inadequate in relation to our present position. In the minority report, signed by Lord Glenavy, that comment is made: that the recommendations in the report and the observations of the committee underestimate the present need for stimulating productive energies. I think the most interesting and stimulating part of the whole document is Lord Glenavy's minority report, and even if Deputies do not feel like ploughing through the mass of statistics contained in the main document, I would urge them to read that part of the document. One does not have to agree with all the views expressed by Lord Glenavy in order to benefit from the reading of it. It is a useful thing that that report of Lord Glenavy on the situation was published. He certainly showed an ability to approach the requirements of the present situation comprehensively which appears to be lacking in the main report.

It is perhaps unfair to criticise the committee because of the nature of their report. They were set up in 1953, to consider the extent to which taxation in 1953 was a deterrent to the modernisation and extension of industry. They based their examination of that question upon the statistical data available to them, which related in the main to 1953 and earlier years. It is very probable that they had completed their work on the preparation of the report and decided upon their recommendations before the present crisis in our national affairs had developed. The committee were not obliged by their terms of reference to consider or make recommendations on the exceptional measures which are now needed to break the production deadlock and to get our national output expanding at the rate we need to survive as an economic entity.

When speaking on the Budget, I expressed my view that the issue at stake in these debates in the Dáil now is the survival of this business organisation which we call the Irish State. Deputies opposite scoffed at that suggestion, but I think nobody who studies the facts, and who notices the various indications of the trend of events which are available to us, can fail to recognise that we are indeed approaching a stage at which exceptional measures will be needed in order to ensure our survival; and if that is so, then we have got to be thinking in terms of exceptional measures and not of merely patching up the tax code in the manner recommended or considered by the committee.

The duty of the Government at the present time is to examine the stimuli needed in order to get that very great expansion of our production which, from every aspect of our national position, is needed. I recognise that the main prospect of a rapid and substantial increase in production lies in agriculture and the House has recently been debating the administration of the Department of Agriculture, on the Estimates. As usual in the case of agriculture, there was a variety of views as to how the problem of expanding agricultural production should be approached. Wherever wisdom lies, we must recognise the fact that the measures now being tried have failed. We are the only country in the world, as far as I can discover, which has failed to record an increase in agricultural output in 1955. It is clear, therefore, that there is something wrong in the present approach to the problem of expanding agricultural production, and if the Government will start off from that basis and re-examine their policies in the light of the fact that they have proved ineffective, then they may approach nearer to a workable programme affecting that aspect of our problem.

I have, perhaps, more experience in relation to industry, and indeed latterly, I have had the opportunity of debating with the management of a number of industrial firms, which, in my view had within them export possibilities, as to the reasons why these possibilities were not being explored or acted upon. I found that the main deterrents operating in the minds of those who control these firms to embarking upon the exploration of export markets were threefold: one was the difficulty in securing the necessary capital for the expansion of their operations; secondly, there was fear of the very considerable risks involved in any substantial participation in export trade—risks to which Irish industrial managements are not very accustomed —and thirdly——

Mr. Sweetman

Is the Deputy talking about currency restrictions?

Mr. Lemass

No; I did not mention currency restrictions.

Mr. Sweetman

What type of restriction?

Mr. Lemass

The risk of loss.

Mr. A. Barry

Bad debts?

Mr. Lemass

The risk of investing a considerable amount of money in developing an export trade and then not getting the trade—the ordinary commercial risk that anybody going into business must face which is obviously far greater in competitive international markets than it is in the protected home market. Thirdly, there was the fact that the profit to be earned in the export market, in relation to the capital required for the development of export trade, was substantially smaller than was needed to attract them.

Some of these problems are, I admit, more the immediate concern of the Minister for Industry and Commerce than of the Minister for Finance, and I may perhaps elaborate my views on them when the Estimate for the Department of Industry and Commerce is under consideration here. But it seems to me that if there is to be an organised effort to expand our meagre exports of manufactured goods the reality of these problems has got to be faced: the difficulty of Irish manufacturers in securing capital for the expansion of their activities, their reluctance to face the considerable risks involved in export trade and, thirdly, their inability to earn, in export trade, profits which appear attractive to them.

This report of the Committee on Industrial Taxation shows in a very definite way the capital problems to which I have referred. Only a minority of our manufacturers have got access to the very limited capital market we have in this country, and there are very few Deputies here who would think that an industrial concern proposing to embark into export trade and requiring additional capital for that purpose would be successful in securing public subscription of the capital required. Indeed, even a new firm proposing to engage in production for the protected home market or an existing firm proposing to expand its activities in the protected home market would have difficulty in getting capital by public subscription at the present time. The difficulty is obviously much greater when the capital expansion is designed to finance more speculative export business. Whether it is done by an adjustment of taxation arrangements or whether it requires an extension of the resources and the powers of the Industrial Credit Company, or whether there is some other method, I do not think it is possible to get any substantial expansion in industrial production for export without making capital for that purpose more readily available than it is at present to industrial companies.

So far as the risks are concerned, the difficulties may not, in the event, prove to be as great as the management of these firms now think they are. Most of our newer industries have grown up in the protected home market and they have planned their expansions in the past only when they could see the certainty of the market for the additional goods they proposed to produce and the possibility of selling them at a profit. The Commission on Emigration made a recommendation that there should be set up a co-operative exporting organisation designed to give assistance to private firms entering or wishing to enter the export market and to combine the productive strength of these firms so that they could enter the export market with a sufficient impact to secure permanency there.

That recommendation of the Commission on Emigration has been accepted in principle by the Party on this side of the House. Indeed we ourselves at one time had contemplated the establishment of an organisation of that kind and the Government sanction for the necessary legislation had been secured. It was not proceeded with then because the need was not particularly acute, but few will deny the acuteness of our present need, the urgent need for action to secure this expansion of production and expansion of exports.

So far as the third factor affecting the attitude of our manufacturers to export is concerned, namely, the rather meagre profits that can be earned in export business, I can see no way of meeting that point except along the lines suggested by the Irish Exporters' Association to this commission, that is, by a preferential remission of taxation on profits earned in export business. The Minister for Finance referred to that part of the commission's report where they dealt with that point. The astonishing thing is that the commission did not really deal with it at all. They got this recommendation from the Irish Exporters' Association and in their report they did nothing except print an extract from a memorandum which they got from the Revenue Commissioners regarding it.

I do not know to what extent the members of the committee may have considered the proposal but they have not in their report done more than endorse a very superficial comment on the proposal submitted to the committee by the Revenue Commissioners. Apparently the Revenue Commissioners said the proposal would violate the basic principles of income taxation.

What are the basic principles of income taxation? Is it that there should be no discrimination, with economic objectives in view, between particular forms of income, that all income, no matter how derived, should be subject to the same taxation and that economic objectives are not sufficient to justify discrimination in taxation between different citizens or different forms of revenue? It would be strange if these basic principles of income taxation were relied upon by the Government to justify the rejection of that proposal in a year in which the Minister for Finance himself brought in here a proposal to provide for discriminatory taxation in favour of certain mining companies. When that Bill was presented to this House I made it quite clear that, so far as we were concerned, we did not object to the principle of the discriminatory use of taxation in special circumstances to achieve economic aims.

I criticised the particular proposals in the Bill but there was no opposition to those proposals on the issue of the basic principles of income taxation. I think the Government is fully justified in adjusting its taxation measures so as to induce economic objectives which will serve the national welfare, and in circumstances like those now existing, in which the survival of this State as a business organisation is at issue, then the use of taxation, if it will help to that end, cannot be questioned. But what are the arguments put forward by the Revenue Commissioners? They say that a company set up here to make goods previously imported is making the same contribution to a reduction of the gap in the balance of payments as a company set up to make goods for export. A company which is set up here to make goods previously imported in 99 cases out of 100 has the assistance of protection. It is getting from the community a far more effective form of help, a far more effective assurance that they will be permitted to make profits than is involved in any taxation changes.

Often in the past, I have had to defend that policy of protection here and admit that under it the public were being asked to subsidise in prices industrial projects in the earlier stages of their development, believing that in the long-term the community as a whole would benefit. If we had not the power to protect our industries, if we were in the same situation as they are in Belfast of having to try to promote industrial development without the power of protecting it then we might resort to taxation relief or outright subsidy, but here we have not had to use those devices except in the specific matter of encouraging industrial development in the West and therefore that question does not arise in this connection.

But we have need to expand production for export. Indeed, the Committee on Industrial Taxation itself recognised that we are nearing the end of industrial expansion based upon the home market and that if there is to be a further and significant increase of industrial output and of employment given in the manufacturing industries it has to be through the development of industries for export, and if there is any prospect that we can stimulate that development by a suitable adjustment of taxation on profits earned in the export trade, then it is worth considering. Other countries have tried it. I think it is true to say that the majority of countries in Western Europe have in operation at the present time, discriminatory tax arrangements designed to benefit exports, and they do not consider they are violating basic principles of income taxation in so doing. They approach the problem as a practical one to be solved by practical methods, and our much more acute problem must be approached in the same way.

There is a further argument that as we have an item on the credit side of our international balance of payments, in our receipts for tourism, that hoteliers might look for the same concession. I do not know whether tourists come here because of our hotels or, as has been said, in spite of them. That is a question we have argued in the past, but it is certainly not the hotels alone that bring them here and to that extent the argument is fallacious. But I think the hoteliers have a legitimate complaint against the operation of the present tax code. There is no doubt that tourism is a most important item on the credit side of our balance of payments. I think it is the second largest economic activity carried on in this country and we could expand it, I am sure, a great deal more and make it of greater importance than it is. But why does the hotelier not qualify for a depreciation allowance on his hotel just as the owner of industrial buildings is now being recommended for a depreciation allowance? Is not the wear and tear on furniture in a hotel just as important an item in the accounts of the hotel proprietor as the wear and tear of machinery in the manufacturing industry? Far be it from me to argue that the volume of the tourist trade cannot be stimulated by a suitable adjustment of taxation also.

It seems to me, therefore, that the Committee on Industrial Taxation failed in the task that they were given to do in so far as they did not tell us their own views upon this proposal advocated by the Irish Exporters' Association and advocated from this side of the House during the course of the Budget debate that there should be an inducement held out to firms in this country to enter into export business, through a reduction in the income-tax on the profits earned on that business. We can parade our principles of taxation as a justification for doing nothing: we can rely on various excuses to justify inactivity, but something has to be done whether through one method or another. This country has got to bring about in the near future a very substantial increase in production and an equally substantial increase in exports.

It is not enough for commissions, committees or Ministers to come and tell us what cannot be done if they will not tell us in their view what can be done. In my experience—and I have checked that experience, as I said, recently by contact with the people in charge of industrial projects that are capable of doing export business in the sense that they are producing goods of a quality and at a price which appear to me to be comparable with goods on sale in foreign countries—I found that there were three main factors holding them back: in some cases inability to get the capital required for the expansion of their activities; hesitation about embarking upon that new capital liability because of the greater risks involved in the export trade and thirdly, the lack of inducement such as this tax concession would give. I feel quite certain, knowing the mentality of many of these people, that if there was held out a prospect of relief of tax in accordance with some sliding scale on profits earned on exports that it would have a very considerable influence upon their decisions in that connection.

The committee say in their report:

"We are doubtful, however, if income taxation provides the most suitable channel for concessions of this nature and we agree that aids to the development of industrial exports should be the function of some Department other than the Revenue Department."

For myself I have little doubt that an adjustment of income taxation would be a very effective stimulus to industrial producers to go into exports and if the Government do not agree with that, then it is for some other Department to come forward and say what alternative measures they are proposing to take.

I do not think that any adjustment of taxation to secure economic results need necessarily be permanent. Economic conditions change from time to time and the taxation system must change with them, and the proposals which I am advocating now here, the point of view I am urging, relate solely to the circumstances existing now and particularly to the urgency of our need to get an increase in production and increase in exports.

However, let us take the recommendations made by the committee as they stand. They recommend that there should be an increase in basic wear and tear allowances of 25 per cent. on industrial plant and equipment and that there should be introduced an initial allowance of 20 per cent., and that so far as industrial buildings are concerned there should be a depreciation allowance in their case also, with a 10 per cent. initial allowance.

The Minister has adopted in advance of the publication of the committee's report and embodied in this Bill, a recommendation for the introduction of an initial allowance on plant and machinery. I think that he would help considerably to secure amongst those who are in charge of the industries of the country an attitude of mind which will encourage them to expand if he will say now that the other recommendations of the committee will also be adopted, even if they are not implemented until the 1957 Finance Act. If he is not prepared to say it now, he should think of the desirability of saying it soon because the mere announcement of the Government's intention to give effect to the whole of the recommendations of the committee would itself have a stimulating effect. Certainly, I urge that the decision on these recommendations should not be postponed until the Budget of next year. There is no question of any cost involved. Even the adoption of the one recommendation concerning the introduction of an initial allowance on machinery involves no cost to the Exchequer in this year.

I see that the Local Government Officials' Trade Union has urged that the recommendation be not adopted at all until the whole tax code has been submitted to examination. I hope the Minister will tell the Local Government Officials' Union or any other officials' union that the ability of this community to keep on paying the salaries of officials in their present number will depend entirely upon the effectiveness of the measures that may be adopted this year to secure the expansion of production required to rectify our balance of payments position.

There is, however, one aspect of the proposal as set out in Section 23 of the Bill to which I want to refer. The section provides that the initial allowance will be one-fifth of the expenditure incurred after the 6th April, 1956, by any person upon plant and machinery and for the purposes of the section the expenditure is deemed to be incurred on the day when the sum in question becomes payable.

I do not know why that particular form was adopted in the section. It is a departure from all the principles upon which the calculation of wear and tear allowance was based in the past. Under the existing regulations of the Revenue Commissioners, the wear and tear allowance begins to be calculated only from the day on which the plant or machine goes into productive use. It does not matter when it is paid for or if it is never paid for or how long the plant may have been lying idle although installed in the workshop, it is from the day it goes into productive use that the wear and tear allowance is calculated and this introduction of the day upon which the plant is paid for as the critical date seems to me to be an important innovation in our tax code and a very undesirable innovation. I do not know what the Minister has in mind in that regard. What does he mean by the term, "the day upon which the sum in question becomes payable"? Will there not be innumerable legal cases taken to the law courts to determine the meaning of that phrase? When does the sum due in respect of a new machine purchased by a manufacturer become payable? Is it payable on the date on which he orders the machine or is it payable on the date on which he completes the payment for it?

In the great majority of cases that I know of any substantial outlay on industrial plant involves payments spread over a period of time. It is not unusual that an instalment has to be paid on the placing of the order, a further instalment paid on the completion of the plant in the manufacturer's workshop and a further instalment after the plant has been erected or perhaps even after it has been in use for some months in the factory of the purchaser. When is the sum payable? From what date will the initial allowance be calculated?

A number of firms who are interested in this proposal have been bringing their difficulties to me. I am sure some have been brought to the Department of Finance also. I have personal knowledge of one case where a contract has been made for the purchase of a substantial amount of plant for a new factory on terms which will not involve payment for that plant for three years. The plant will be in use, however, and the ordinary wear and tear allowance will be made in respect of that plant from the day it comes into use. Will the initial allowance in this case not be made until the final payment for that plant is made, long after it has gone into use, or is it to be made on the day on which the plant is introduced?

Mr. Sweetman

Would the Deputy mind explaining what he has in mind? Is that a deferred payment?

Mr. Lemass

Deferred payment.

Mr. Sweetman

It is not a separate hire-purchase transaction?

Mr. Lemass

No.

Mr. Sweetman

It is a straight deferred payment agreed with the supplier of the machinery?

Mr. Lemass

The supplier agreed that he would accept payment for the plant three years after it has been installed—or some period. There is another case where an important firm that I know of has incurred very substantial expenditure upon new plant. It incurred that expenditure in the first quarter of this year but, in fact, the plant, although erected in the factory, did not commence to operate until a date after the 6th April and, so far as I read this provision, there is therefore no prospect that that firm can ever get the initial allowance at all even though the plant did not begin to operate before 6th April and even though the ordinary wear and tear allowance was not due until a date after the 6th April.

Mr. Sweetman

Would not the Deputy agree that the whole purpose of this is to provide an incentive?

Mr. Lemass

Yes.

Mr. Sweetman

Where is the incentive in that case?

Mr. Lemass

Wait now.

Mr. Sweetman

Is not that the purpose of what we are trying to do?

Mr. Lemass

Is it? As an incentive, I do not think this counts very much at all. There is no addition to the total allowance which the firm will get on any particular plant. It merely means that some part of the allowance is made in advance.

Mr. Sweetman

Accelerated.

Mr. Lemass

Accelerated. The assistance that that gives to industry is that it makes available during the first year liquid resources that can be used for capital purposes. That is the advantage of the initial allowance, that it improves the liquid position of an industry that is expanding and it is the industries that are expanding that we want to help. I do not know what the Minister had in mind. That was the argument used for the allowance in the British Royal Commission's Report and it seems to me the only solid ground for giving it. The advantage to the firm is solely that it gets in the first year, the year in which it is incurring the expenditure, an accession of funds it would not otherwise have.

Mr. Sweetman

What is the purpose of that? Is it not to provide in that way an incentive to get new machinery?

Mr. Lemass

It is when a firm is expanding its activity that it runs into the difficulty of having available funds to finance the expansion and in many cases, as indeed in the particular case I mentioned, the rate of expansion is determined by the rate at which funds become available. In the particular case which I have in mind, the acquisition of the plant in question was only one part of a development plan which involves considerable expenditure over years to come, expenditure which will be undertaken as resources become available for the purpose and one of the advantages of giving them the initial allowance is that it makes resources available earlier. It does not cost the Exchequer a penny in the long run.

I will admit that, if the Minister has brought in this proposal in a form which means there will be no charge on the Exchequer this year and if he makes the application retrospective in any way, it may involve a charge in this year but I think he should understand that it is these firms that are prepared to take the chance of expanding, of incurring heavy capital outlay in modernising their plant, that are striving to get on to that basis of cost which will enable them to export, that require encouragement and help.

There is another point of view which I would ask the Minister to consider. This problem has been emphasised more by those who are concerned in the presentation of accounts to the Revenue Commissioners than by those concerned in the actual operation of industry. The phrase in the Bill is: "Where on or after the 6th April expenditure is incurred on new plant". The Minister should at least make that: "Where expenditure is incurred in an accounting period ending after the 6th April". Otherwise there will be interminable arguments between firms of auditors and the Revenue Commissioners as to when expenditure on the purchase of machinery was undertaken. Surely, from the Minister's point of view, it is just the same to have the simple provision that where expenditure was incurred in an accounting period ended after the 6th April the initial allowance will be paid? It will cost nothing in this year so far as financial results are concerned. One arrangement is exactly the same as the other in that respect. It is better to give that wider significance to the terms of the Bill than to create this prospect of continuous and fruitless argument with the Revenue Commissioners on the issue as to whether expenditure on a machine was undertaken on the 4th or the 7th of April. In the long run, it is just the same to the Minister and it would be far better for those who have responsibility for managing the accounts of industrial firms.

In his Budget speech the Minister announced—and this Bill implements the announcement—that, as an inducement to saving, the first £25 income from certain forms of saving will be free of income-tax. The person who saves in a particular way by depositing his money in a trustee savings bank or in the Post Office Savings Bank or with a commercial bank gets that concession. Why is saving in that way picked out for that benefit when savings in other forms are denied it? Has the Minister any objection to people investing their money in Government loans? Is it not just as important to encourage people to save their money by investing in Government loans as it is to encourage them to save their money by way of deposit at a bank? I cannot understand why that tax concession, small as it is, is not extended to all forms of saving that the State may desire to encourage such as investing in Government loans or in a building society. I cannot understand why a person who puts his money on deposit with a building society should not be regarded as contributing as much to the total of national savings as a person who puts money on deposit in a trustee savings bank. I urge the Minister to extend that concession to cover at least investment in Government loans and deposits with a building society. If he is not prepared to do that he should make a statement to the House giving his reasons as it is very difficult to understand what they might be.

The Minister referred to the proposal relating to Section 7 of the 1932 Act. I suppose he is technically right that the relief is not given by way of a refund of tax. It is done by way of offsetting in respect of the total tax payable by an individual but the individual has to make an individual application to get that offset. I do not understand why it is that the Minister or the Revenue Commissioners do not adopt my suggestion and provide that the relief should be given in the form of a reduction in the amount of tax payable so that the investor in the shares of an Irish company will get his dividend less the reduced amount of tax, not the full amount. I suspect that the reason why there might be opposition from the Revenue Commissioners to that proposal might be that everybody would get that relief which the 1932 Act intended.

Mr. Sweetman

The Deputy is wrong. There need not be any application.

Mr. Lemass

The Act says so, as well as proof of bona fide ownership.

Mr. Sweetman

No. The Deputy will find it is dealt with by ordinary reference in the taxpayer's return. When I was on the other side of the fence, I knew how it was done.

Mr. Lemass

I will admit that, as proof of ownership, they will accept the counterfoil from the dividend warrant but the individual taxpayer must send that in. He must make his application and send in the evidence.

Mr. Sweetman

The Deputy and I have to make tax returns at any time. That is all that has to be done.

Mr. Lemass

Whatever the reason, the section has been ineffective. The statistics I gave on the Report Stage— the statistics which are, in fact, supplemented and reinforced by certain statistics which appear in this committee's report—show that only a proportion of the companies qualified for relief sought certification and of the shareholders of these companies not more than 10 per cent. can have made application.

Mr. Sweetman

The Deputy forgets that it is the individual taxpayer and not corporate entities.

Mr. Lemass

My calculation is that if everybody availed of the provision in the 1932 Act it would cost the Exchequer £20,000 a year. In fact this cost £7,500. Somebody must explain why it is not costing more. The only explanation is that the people are not getting the relief. The only difficulty I see in doing it my way is that the section of the 1932 Act confines the relief to companies so constituted that they can operate without a licence under the Control of Manufactures Act and the relief is not available to anybody not resident in this country. Why these limitations should be maintained, I do not know. We know that at present Government policy is very largely based upon inducing foreign companies to operate industries here. If that is to be the policy, it is logical that this tax concession should apply to all investment in Irish industry from this date onwards. The whole process could be simplified. It needs merely to provide that the standard rate of tax deductible from the dividends paid by these companies will be reduced by 20 per cent. in all cases.

Mr. Sweetman

Would the effect of that not be that the corporate holders would get the benefit whereas individual holders get it now? If the company owns the shares, and not individuals, it is not at present entitled to relief. That is where the discrepancy between the two figures arises.

Mr. Lemass

If it is the policy of the Government to induce people to invest in Irish industrial concerns in preference to foreign industrial concerns, then this inducement must be something they will know of and it must be sufficient to influence their decisions. Indeed, I was astonished to find the high proportion of people actually engaged in stock market operations in this country who never knew of that section of the 1932 Act. The Minister now proposes that, after this date, shares that may be issued by these companies will count only two-thirds of their value when being assessed for death duty purposes. Why bring in this complication? Why complicate that by confining the concession to shares issued after this date? It means that every company in the country which issues shares in the future has in some way to designate them so as to distinguish between them and shares issued before this date. I am quite certain that its application in that form will mean that that section of this Finance Act will become almost as ineffective as the corresponding section of the 1932 Act. If these are intended to be inducements to people to invest in Irish productive enterprises, then could not these inducements have been framed in a form which will be clearly recognised and involve little difficulty to those who have to take the supplementary steps to make them real?

I would urge on the Minister to take out of that section the limitation that that concession will only apply in respect of shares issued after this date. Take, for instance, a company which has an authorised capital of £200,000, £175,000 of which has been issued, the other £25,000 to be issued as additional capital is required on the extension of the business. That company in the ordinary course would offer the £25,000 to the existing shareholders to be taken up by them but now the company has to go through some process that will enable that additional £25,000 shares to be segregated and distinguished from the original shares. As a concession, it is very slight, and the Minister should have gone on to say that so far as people who in the past invested in Irish industries are concerned—and they are the people who have to be mainly relied on to get capital for industrial expansion in the future—that they will get the benefit of that section equally with those who may come in now in respect of future issues.

The Minister has, no doubt, received many representations concerning the dance tax. I have, at any rate. But I presume there is no possibility of getting the Minister to drop this stupid proposal altogether, because I regard it solely as a political decision and certainly of little significance in relation to the Budget. That tax is going to cost him more to collect and to prevent evasion than he will get from it.

Mr. Sweetman

Do not believe it.

Mr. Lemass

I raised in the Budget debate the question of exemption of dances held for charitable purposes. The Minister assured me that dances for charitable purposes would be excluded, but the exclusions are granted under regulations which often prevent them from becoming effective. One of the regulations is that the expenses of the dance must not exceed 50 per cent. of the takings. If they exceed 50 per cent., then the duty becomes payable. Perhaps if I read an extract from a letter, it will indicate part of the problem in this regard:—

"All the functions in our hall are in aid of the parish church and the school building fund and this regulation will apply to our dances, but our big difficulty is that we are limited to 12 o'clock dances. Indeed, most charitable dances are very likely to be in the same position, as they are invariably sponsored by bodies or priests who must observe the Bishop's wishes in regard to 12 o'clock dances."

He goes on to explain that dance bands will insist on getting the same fee for dances running from 8 to 12 as from 10 to 2, and that if they have to restrict the amount they will pay the band in order to keep within the 50 per cent. regulation, they will not get good bands. The good bands will go to competing halls, six miles outside the town, which are exempt from tax and also apparently from observing the Bishop's wishes in regard to the hours.

Mr. Sweetman

We will not go into that aspect of it.

Mr. Lemass

It is urged that that condition should be removed, that is, that so long as the Minister is satisfied that the whole of the proceeds are bona fide going to the prescribed charities, and the function is organised for the purpose of charity—that particular society whose letter I read is a very well known society and nobody can question the bona fides of the promoters of these dances—the exemption should operate. If the Minister is not prepared to remove this condition entirely, and merely prescribe that the whole net proceeds must go to charity, he should consider, in the circumstances now prevailing, the question of raising the limit from 50 to 60 or 75 per cent. It seems fairly clear from the information given to me that those societies and organisations running dances under these limitations for charitable purposes will not be able to compete with the commercial dance halls, and may have to cease their operations.

The Minister stated that he was modifying his proposal with regard to the levy on race course betting, but that the alteration in his proposal did not involve any reduction in the revenue which he anticipated from that source. I want to be clear about this. The Minister stated in the Budget speech that in respect of the tax upon bets by the stamp duty on race course bets and increases in the charges on bets in betting shops, he would get in £290,000, but he is now talking about £140,000 from the Racing Board.

Mr. Sweetman

£140,000 for on the course and £150,000 off the course— total, £290,000.

Mr. Lemass

Starting price bets will bring in £150,000? Again I want to urge that even though the Racing Board may have accepted the Minister's decision subject to the modification of the arrangement he has announced, this is a foolish step to take. I do not know if the Minister saw the comment on it in the Financial Times. It was a very striking comment. The writer described this tax as the equivalent of an industrialist selling his tools to provide working expenses. While there were times when that business could have supported a higher levy, because conditions were very good in the business, those times have passed now, and indeed, it is almost certain that there would have been a very considerable contraction in the Racing Board's income this year anyhow.

Mr. Sweetman

There was a meeting last week which was a record.

Mr. Lemass

There were also others which were far from being records.

Mr. Sweetman

Until there was a drop of rain. That was all the trouble.

Mr. Donnellan

They are not going on too badly at all.

Mr. Lemass

I am not going to try to persuade the Minister further except to say that this proposal is imposed contrary to the assurance, if not expressed, at least implied, in the statement by the Government of the day that the organised machinery of the Racing Board would never be used for the purpose of raising revenue for this State.

Under this Bill the Dáil is being asked to confirm the special import levies announced by the Minister in March last. I do not know if there is any prospect of getting the Minister to reconsider the incidence of many of these levies having regard to experience of them in their short operation, but I think the Minister and the Government as a whole made a very serious mistake at that time in implementing those decisions in regard to the special levies and restrictions on hire purchase facilities without consulting with the business interests concerned. If the aim of these special levies was to reduce imports, and not to bring in revenue, if the primary purpose was to bring about a contraction in the volume of imports so that the balance of payments gap would be narrowed, the Minister could have got that result in a way which would have involved far less difficulty for the traders concerned and far less unemployment in their workshops. I am certain, for example, that if the Minister had called together the assemblers of motor vehicles, and said to them that, in the interests of reducing the adverse trade gap, it was desirable to cut down motor-car imports this year by 20 per cent. or by 25 per cent., he would have got their wholehearted co-operation. The primary aim of the Government would have been secured in a way which would have involved far less difficulty for the traders concerned. I do not know if the Minister fully appreciates the effect of imposing a tax upon goods and making at the time it is imposed an announcement that the tax is temporary and will come off at the discretion of the Government at any time. The effect is to keep trade in these goods to the very minimum.

That is what is happening in the case of motor vehicles. It is not the additional levy which is the main cause of the difficulty nor is it the rise in prices which the levy involves, but it is the expectation in the public mind that that levy will come off some time and, consequently, there are many individual decisions to wait until next year to buy the new car instead of this year.

The Minister for Industry and Commerce recently published a statement to the effect that the levy will not come off in the immediate future. That was of some help but it was not definite enough to eradicate from the public mind the idea that there is some advantage in postponing the purchase until later. If the Minister had sought the voluntary co-operation of the importers in the reduction of imports or had imposed quantitative restrictions to the same effect the public attitude would have been completely different and the effect on trade and employment would have been a great deal less serious.

I see that the Minister for Industry and Commerce has modified the more stupid provisions of the Order relating to restrictions on hire purchase facilities. There was some sense in imposing restrictions upon hire purchase facilities when these facilities were used for the importation of manufactured goods from abroad. What sense was in applying these restrictions to goods such as clothing that are almost entirely home manufactured, I could never see. Not merely were the restrictions applied to home produced clothing but imposed far more severely on these articles than on the articles imported completely manufactured from abroad. That has been rectified to some extent. There were other mistakes made that time which are now becoming apparent. I hope the Minister will avail of the Committee Stage of this Bill on the appropriate section to state that the effect of these special levies will be considered and that the necessary alterations to minimise their more undesirable consequences will be made.

We are also asked in this Bill to confirm the decision to take £500,000 from the Road Fund. There are some Deputies here who remember the uproarious debates which took place in 1953 when the previous Government came to the House with a Bill to alter the road vehicle taxes in order to expand the Road Fund revenue and even though it was impossible to deny that the maintenance of the normal volume of work on the roads involved a considerable increase in expenditure, Deputies now in the Government or supporting the Government opposed that measure and explicitly undertook to revoke it when they got the power and reduce the road taxes upon motor vehicles to the pre-1953 levels.

They have not done so. Indeed, last year they took to themselves the credit, such credit as they could gather, because expenditure on road maintenance work was greater than it had been in previous years by reason of the higher revenue which these additional taxes brought in but it is rubbing salt into the public wounds when the Government decides to keep these taxes in force and devote the money intended for the improvement of the roads, to the purposes of the Exchequer. Is it intended that any part of the National Development Fund this year will be used on the roads? A substantial proportion—far the greater part of the total expenditure in the past—went on the roads. It would be the height of folly to take that £500,000 out of the Road Fund into the Exchequer and then take it out of the Exchequer to spend it on the roads through the National Development Fund. That is what I think the Government intends to do.

Mr. Sweetman

Why would the Deputy think that?

Mr. Lemass

Would the Minister answer whether any part of the National Development Fund will be spent on roads?

Mr. Sweetman

I have already indicated that it will not.

Mr. Lemass

So that the total expenditure on road maintenance, repair and construction will be substantially less than last year. So far as the Bill is concerned, we are not going to vote against it. We recognise there must be a Finance Bill, but we are opposed to almost every section of it and we will make that opposition abundantly clear when we get to the Committee Stage.

Mr. Sweetman

The speech we have just heard from Deputy Lemass dealing with the matters included in this Finance Bill has been somewhat astounding. I must confess that there are times when I find it difficult to understand how Deputy Lemass can take the line that everything everybody else does is political, the Deputy being the person who, perhaps more than anybody else, has utilised the time of this House for Party political purposes at one time or another. I do not propose to follow him down the Party line.

The purpose of the Finance Bill is to implement the proposals that were put to the House and the country in the Budget. The purpose of those proposals and the theme on which they were based are ones of which Deputy Lemass, as he has shown in his remarks, makes no criticism. It is essential that in our present circumstances we should make certain, in so far as we can, there will be no deficit on current account. This Budget and this Finance Bill ensure that that will be so. If Deputy Lemass wants to accept the proposal—to be fair to him, I think he does—that there should not be a deficit on current account, then, when he is opposing any section of this Bill on Committee Stage, it will be equally incumbent on him to ensure that his opposition will provide other means of balancing on current account the expenditure requirements of the State.

We cannot have it both ways. Either we ensure that we do balance our current account or we do not. The proposals the Government have brought in in this Bill for the purpose of ensuring that we do balance are based primarily on the theme that less essential forms of spending and imports should be first to take the charge. I do not think, no matter what Deputy Lemass may say, there has been any criticism of that theme throughout the country. The country as a whole has accepted that it was correct for the Government to look to those two sources for the necessary funds to balance our accounts.

Deputy Lemass to-day also made references to the report of the Committee of Inquiry into Taxation on Industry and to other aspects of production, particularly for export. I think the Deputy is wrong when he endeavours to stress the need of production solely for export. What we want to do here is to increase our total production. If we increased total production, that of itself would provide the additional productive capacity for export. I think it is far better to go for an increase in total production, with the inevitable resultant exports, rather than concentrate on production for export alone to the exclusion of incentives for production for home purposes as well.

The purpose of the introduction of an initial allowance this year is to provide an incentive to those engaged in industry to install new machinery. With the installation of new machinery, it will be possible for those engaged in industry to produce more and to pro duce it more efficiently. If they are able to produce it more efficiently, that will enable, them better to compete in the export market. It will enable them also to assist in the matter of home costs. Our aim and our object should be to improve total over-all production in the knowledge that, so far as home consumption is concerned, that is likely to be more or less static. Therefore, the more production we have, the more we will have to export. If we can produce more efficiently, as new machinery will enable us to do, then we will have commodities available for export at competitive prices.

I must confess that I found some difficulty in deciding the point at which the allowance for new machinery should be introduced. I went back to what I have just said—that the primary purpose of it was to provide the incentive. If that is so, then it does not seem that one is providing that incentive by going back and giving the allowance retrospectively. It is towards the future we should look in this respect.

Mr. Lemass

It is the date at which the machinery starts to work and not the date on which it was installed that is the important thing.

Mr. Sweetman

I think the important thing is that we should endeavour to induce as many of our manufacturers as possible in the future to order, to bring in, to install and to pay for as much new machinery as they can. I think the Deputy will agree with me that anyone who brought in new machinery heretofore did not bring it in with the idea in their minds that they were going to get an initial allowance.

Mr. Lemass

Will the Minister accept that no additions to the machinery in any factory will be made this year which had not been decided on before this Bill was introduced?

Mr. Sweetman

The Deputy interrupted me in one point I was about to make. I was about to pay a tribute to the industrialists who have already ordered new machinery. The fact that they did so, that they were go-ahead in placing that order in 1948, 1949, 1953 or in any other year is a good thing for the country. What I want to do by this initial allowance is to provide an incentive to ensure that more people will put in more new machinery in the future. The way in which that incentive can operate is in the manner in which the Bill has been drafted as now before the House. I can, as I have said, sympathise with a certain feeling of hard luck, if one likes to use the phrase in the case of those who have already put in machinery.

Mr. Lemass

Not only put it in, but who have already paid for it.

Mr. Sweetman

Those who have already ordered it, because when they ordered it, they did not consider they were to get such an allowance as is now provided.

Mr. Lemass

If they have not paid for it, they are all right.

Mr. Sweetman

One could take the date of ordering, the date of installation or the date of payment. I think that taking the date of payment would probably be the fairest of the three. I think the Deputy will agree with me, if he knows anything about wear and tear allowances—I feel quite certain he does—that this is such a complicated matter it cannot adequately be dealt with by means of question and answer across the floor of the House.

Mr. Lemass

An industrialist could have machinery in his factory for a year and it would not qualify for the allowance, until he put it into use.

Mr. Sweetman

I think the Deputy is not altogether accurate in his interpretation of the regulations in that respect. He has suggested that the British, following their Royal Commission, provided what he is recommending. That is not so. I have been telling the Deputy what the effective action in this respect should be. I admit it must be a matter of opinion, in the final analysis. I do not accept the Deputy's view that there will be great difficulty about the date on which the expenditure is payable. I certainly am prepared to consider the drafting of amendments, if there is any doubt on that score. We all want to ensure that, in all legislation, particularly under the revenue code, there is as much certainty as possible in the actual words used in the Bill. I do not think there is the doubt here that the Deputy suggests. However, I promise to have the matter looked into. As I said earlier, this is more a Committee than a Second Stage Bill and Deputy Lemass said the Opposition agreed with that analysis.

It does not seem to me that there is any point in my elucidating further any details on specific points to which the Deputy referred. We will have another opportunity of dealing with the Bill in that respect. I want, however, to stress this: Deputy Lemass has always been a person who believes in announcing grandiose plans which may never come to fruition and suggesting that they, in themselves, will do the job. They do not. The effect of many of the announcements of the grandiose nature, for which the Deputy has a penchant, has been to retard rather than intensify production. I believe that methods designed at really doing the task, such as the Mining Bill to which the Deputy referred—incidentally, I did not think the Deputy would be very anxious to refer to that debate considering the prophecies he made then, which have since been shown to be incorrect, in regard to the prices of certain metals——

Mr. Lemass

They will go up again. That is another prophecy.

Mr. Sweetman

My views were more correct than the Deputy's in that respect. It is in relation to the actual things that are done, like the Mining Bill to assist new mining operations here, and it is in relation to doing things, like introducing the initial allowance, that real aid can be given to production. It is in respect of doing things, like introducing the provision for freeing the first £25 of certain interest for savings purposes, that new savings can be assisted. That is much better than grandiose propaganda in relation to which I could not hope to compete with the Deputy.

Question put and agreed to.

Committee Stage ordered for Wednesday, 13th June, 1956.