On Section I, the Minister's colleague, the Minister for Health, addressed the National Health Council the other day and, in the course of his remarks said that in his view the most urgent requirement was a reduction in the level of taxation. I want to ask the Minister if that represents Government policy and, if so, when is it going to be translated into action?
Committee on Finance. - Finance Bill, 1958—Committee Stage.
Question proposed: "That Section I stand part of the Bill."
I think it hardly necessary to say that it is Government policy to reduce taxation. I could almost say that is true not only of the Fianna Fáil Government but of every Government we had during the last 30 years. None of them succeeded in achieving that but in this Bill, as we go through it now on amendments, Deputies will come across many cases where I am trying to collect income-tax where it is not, in my opinion, being properly paid at the moment. On this whole question of income-tax my view about it is that it is a very unpopular thing but we should try, as far as we possibly can, to make it equitable. Every person liable to pay income-tax should pay it. At any rate that would help. I do not say it would achieve our object but it would help towards making it possible to reduce income-tax.
I think I would be in general agreement with the Minister on that, but I understand that the view of the Minister for Health was that the level of taxation should be reduced. The reason I raise this on Section 1 is that Section 1 continues the rate of income-tax at the existing level.
I thought the Minister would make some observations on this. It is undeniable that the rate of taxation at present is such as to do away with a great deal of the inducement to production that must be fostered if we are to survive. So far as personal taxation is concerned, to suggest, with the present value of money, that surtax should start at an income of £1,500 a year is farcical. That £1,500 would only be about £700 in the value of money in pre-war days when surtax was initially introduced. This position will have to be faced up to but, while I agree with the Minister when he says if everybody paid it would be a lot easier, I should like to know has he any estimate of the amount that would be saved, so to speak, if everybody paid the amount they were legally liable to pay.
I am not talking of tax avoidance; I am talking purely of tax evasion. Tax avoidance is where people legally order their affairs in such a way that there is no liability to taxation because they are not making the profits out of which to pay tax; tax evasion is where people dishonestly avoid paying taxation which they should properly pay. I believe that is dishonest, though I find it difficult to get agreement from people, whose standards I would have thought should be higher than mine, that it is dishonest deliberatley to refrain from paying the taxation for which one is liable.
At one time, a figure of 2/- in the £ was suggested; in other words, if everybody paid what he was legally bound to pay, 5/6 in the £ would produce the same amount of money as the 7/6 rate. It is about ten years ago that I remember that figure being quoted. Has the Minister got any more modern figure? Of course, the figure is one that would have to be treated with the utmost reserve. It would not be even approximate; it would be only "of the order". We should like to know that figure.
On this section, we should also like to know from the Minister what progress the Income-Tax Commission is making. This seems to be the proper section on which to raise that matter. I agree with the Minister that it is desirable, so long as there is income-tax, that its incidence should be equitable. That is one of the reasons why I set up the Income-Tax Commission and I should like to know what progress they have made towards achieving that equity in payment.
The question as to what we might get in if tax evasion were cut out completely is one I am not able to answer. Neither can the Revenue Commissioners answer it. They do not know; they can only guess. If they knew what tax evasion there was, they could get after it.
A guess would suit me.
They can make only a very wide guess. Let us approach it in this way: to take 6d. off the rate for income-tax would cost about £1,500,000. At 7/6, we get in from income-tax alone £22,000,000. That means that every 6d. is worth roughly £1,500,000. The question is: could we take off 6d. if we could stop tax evasion? We do not know. The Revenue Commissioners are not even optimistic enough to say we could. We have to leave it at that—we do not know. All we can do, I suppose, is, in our yearly Finance Bill, to do the best we can to stop tax evasion, to stop all the holes that are there.
The Minister does not understand the difference between tax evasion and tax avoidance, if he takes that line. I am not worried about tax avoidance.
Perhaps the Deputy is right. I mean tax avoidance. Tax evasion, to some extent, also, can be reduced. We can help the Revenue Commissioners by legislation in the way of making it easier for them to get after tax evasion.
With regard to the Income-Tax Commission, the Deputy is aware that one cannot press commissions unduly. One can only ask from time to time how they are getting on, or something like that. I do not think there is any indication that they will report in the near future. That is all I can say.
Question put and agreed to.
SECTION 2.
I move amendment No. 1:—
In sub-section (1), page 4, line 28, before "occupied" to insert "outside the areas specified in the Schedule to Ordú na Limistéirí Gaeltachta, 1956 (I.R. Uimh. 245 de 1956)."
I do not think it is necessary for me to recall to the House that the preservation of the Gaeltacht is a fundamental national objective. The difficulty is to provide suitable remunerative employment for the people in that area. It has always been agreed that market gardening is a particularly suitable form of activity for that area. In that connection, there has been passed by this House the glasshouse scheme. A big effort in that connection is to be made in the near future. Plans are being prepared privately for putting into operation which should bring about a considerable expansion of market gardening activities by the residents of Gaeltacht areas.
I am sure it will be agreed that any encouragement this House could give to such a desirable objective should be given. It may be said that very few people in the Gaeltacht areas pay any income-tax. I have in mind the case of an industrious young single man in the Gaeltacht area. If he were to go into this line of activity, he would not need to earn a very substantial amount of income before becoming liable to pay a substantial amount of income-tax.
I might point out for a moment the development of this matter. As many Deputies are aware, the provisions in relation to market gardening activities up to now have been governed by Rule 8 of the rules applicable to Schedule B. These rules provide that market gardening is different from any other farming activity. A farmer is taxed on his activities on the basis of the valuation of his land. Rule 8 of the rules applicable to Schedule B singles out market gardening from all other similar types of activity and says that in relation to that activity, the person concerned shall be taxed under Schedule B, but shall be taxed on the basis of the profits he makes, not on the basis of the valuation of the land concerned. That Rule 8 is now being repealed by this Bill and in its place we will have Section 2.
Section 2 takes this whole thing one stage further. It puts beyond any doubt the question of taxing market gardening activities on the basis of profits. It removes them from Schedule B because, I understand, there has been some ambiguity in that connection, and it states categorically that the moment this Bill is passed market gardening activities will definitely be taxed under Schedule D, the same as any other trade or profession, and taxed on the basis of profits.
My amendment is directed towards exempting market gardening activities, in so far as they are carried on in Gaeltacht areas, from these provisions. I want to revert to the position where any person carrying on market gardening activities would be taxed on the basis of the valuation of the land involved only, and not on the basis of the profits he makes from market gardening. I do not think that is a very big thing to ask, particularly when it was never intended that this provision about market gardening activities being taxed on profits would apply to the type of people I have in mind in a Gaeltacht area. Obviously, it was thought that market gardening was an intensive form of farming which took place on the borders of large cities and, therefore, was more of a business than a farming activity and, therefore, was more appropriately taxable on a profits basis than on a valuation basis, so that I think I am only conforming to the original idea behind this whole matter of taxing market gardening activities by asking that the type of people I have in mind in Gaeltacht areas should be exempt.
I say that also because there was a case taken here in 1945 which had to go to the Supreme Court before it could be decided that Rule 8 of the rules applicable to Schedule B applies to Ireland at all. That was the case of McGarry v. Spencer.
What I am asking the Minister to do in my amendment is not very much. No loss of revenue will be involved. The Minister may say that he cannot accede to my request, because, if he did so, there would be a rush of people to this area to carry on market gardening there, on the basis that they would be exempt from tax on profits. In answer to that, I would say that that would be a very good thing.
The issue involved here is far more than the narrow issue of raising a certain amount of revenue. It is a question of national policy that the Gaeltacht areas should be preserved and developed and, in so far as my amendment makes some little contribution in that respect, I would urge the Minister to accept it.
First of all, I want to say that Section 2 does not alter the basis of taxation and for that reason the amendment would not have the effect desired by the Deputy. In other words, the amendment is really ineffective. However, that is only a drafting point and we do not want to take advantage of it. I want to deal with the Deputy's intention, because if I merely said it is ineffective he could put down an amendment for the Report Stage and it would be as well to deal with the idea now. His object is to get some benefit for market gardening, which includes tomato growing, in the Gaeltacht, which is not available elsewhere.
I have to oppose the amendment because, if we gave a concession of that kind, that would not be the end of it. There is no doubt whatever that it would be followed by a request for relief from income-tax by other industries in the Gaeltacht. There might be a lot to be said for that but that question would arise. Then we have the congested districts, which to a great extent surround the Gaeltacht. They might make as good a case, from the economic point of view, as the Gaeltacht areas and the demand for relief would spread to the undeveloped areas. We do not know where it would end.
Personally, I am against this principle of giving income-tax reliefs. My predecessor, Deputy Sweetman, gave these reliefs on exports and I was forced by my colleagues in the Government not only to continue but to extend these reliefs. Even so, I do not think it is a good thing that we should extend this system of giving reliefs, by way of exemption from income-tax, in cases of this kind. As Minister for Finance, I must say I would far prefer to give whatever might be the equivalent by way of grants and leave the income-tax code as it is. For that reason, I have to oppose the amendment, As it happens it is ineffective, but I would have to oppose it even if it were effective.
Amendment, by leave, withdrawn.
Question proposed: "That Section 2 stand part of the Bill."
Frequently we hear exhortations by Ministers, and by one in particular, that we have got a wonderful potentiality here in relation to our market gardening export market. It is true we are very near the areas with high density populations in Northern England. If the market gardening tax legislation is to be amended at all, is it not desirable that something should be done towards encouraging people into market gardening for the purpose of tapping and supplying that valuable market, or else the Minister's colleague in the Government might keep quiet about this line? There is no use one Minister taking one line and another taking a different line. I do not mind, for the purpose of discussion on the Finance Bill, which Minister is to speak on Government policy, but at any rate if the Government policy is to be, as the Minister has just indicated, that there should not be tax concessions of that sort, would he try and ensure that his colleague, the Minister for Lands, will talk the same language? It would help everybody to understand the real effort necessary, if one got unified leadership at the top.
On the Section, there are two points I should like to raise. One is that the exclusion of hops is continued as it was in the original Rule 8. I should like to know what is the position in regard to hop growing, or why this specific exclusion is there. Secondly, I am not quite clear as to the meaning of sub-section (3) (a). The sub-section says:—
"...the annual value of the market garden land, for the purposes of Rule 5 of the Rules applicable to Cases I and II of Schedule D, shall be arrived at by apportionment of the rateable valuation of the property."
Does that mean that the deduction allowable will be five-fourths of the rateable valuation, or a proportionate amount of the rateable valuation only?
The five-fourths does not apply. It is the valuation itself. I believe hops were in the original Acts and were not taken out. It means nothing.
Surely if we are tidying up it should be taken out?
We shall take it out some time.
Are any hops grown here?
Not in market gardening.
Even apart from that?
Not commercially. They were only tried here.
Question put and agreed to.
SECTION 3.
I move amendment No. 2:—
Before Section 3 to insert a new section as follows:—
Notwithstanding anything contained in this Act or in any of the provisions of the Income Tax Acts any society registered under the Industrial and Provident Societies Acts, 1893 to 1936, whose objects include that of working for the economic, cultural and social development of the Gaeltacht and whose funds are, in the main, applied for that purpose, shall be entitled to exemption from income-tax under Schedules C and D, and from corporation profits tax, on the profits or gains of any trade, business or occupation carried on by it in the areas specified in the Schedule to Ordú na Limistéirí Gaeltachta, 1956 (I.R. Uimh. 245 de 1956).
As I have already said, many Deputies are aware that a very desirable project is about to be initiated in connection with the Gaeltacht areas. Great hopes are being placed on this project. Many people hope it will mean the beginning of a new era of development and employment in the Gaeltacht areas. Part of that project involved the formation of an industrial and provident society whose function will be to engage in various forms of economic activity and whose funds will be devoted solely and exclusively to the development of the Gaeltacht. My amendment aims at having such an industrial and provident society exempted from income-tax under Schedules C and D, not A or B. In other words, in so far as this society would hold land, house property or buildings, it would pay under Schedule A or B in the normal way. My amendment seeks to have such a society exempted from Schedule C or D.
I have put down the amendment particularly for the reason that this proposed society would engage to a considerable extent in market gardening activities and here there is a very curious position in relation to the industrial and provident society carrying on market gardening activities. As I said earlier, market gardening activities, up to this, were taxed under Rule 8, Schedule B. The section of the 1918 Income Tax Act which exempts industrial and provident societies generally from paying tax on their profits refers only to tax under Schedules C and D. Therefore, the peculiar anomaly prevails at the moment that if an industrial and provident society carries on any function or activity and complies with certain specifications, it is exempt from tax on profits except in regard to market gardening. It pays tax on the profits of market gardening activities and not, as a general rule, on any other form of economic activity.
I am trying to remove that anomaly. I want to have an industrial and provident society, in so far as it complies with the terms of my amendment, exempted from tax under C and D no matter what form of activity it carries on. Therefore, it would be in the same position in relation to market gardening as any other activity. I want it put, into the position of paying tax under A and B on any of its lands or buildings only.
The arguments which I put forward in relation to my first amendment apply even more forcibly here. This society, or any similar society which may be formed, will be doing work of national importance. In the case of a society such as that, there is no case for taxing its profits. The code we have up to the present recognises that industrial and provident societies are in a certain position and are more or less exempt from taxation. I want to make that definite and conclusive in the case of the type of society I have in mind, which will do this work of national importance in the Gaeltacht areas. I would appeal to the Minister to accept this amendment and leave the profits of such societies, if they make any, untouched, and leave it free to devote itself exclusively to this good work.
I think the Deputy is not interpreting this section correctly. I understand he has in mind the formation of a provident society in the Gaeltacht areas to purchase market garden produce from the growers. If that is the case, it is all right. If I am right in assuming that this society would purchase the produce of market gardeners and sell it on the market here or elsewhere, that would then be regarded as carrying on a trade which, in the ordinary way, would be subject to tax under Schedule D. Sub-section (6) of Section 2 seeks to leave things as they are. In other words, a provident society is left as it was before. When we are changing over market gardening profits from B to D, sub-section (6) has the effect of exempting the provident society from income-tax on its profits. It would be, of course, subject to tax under Schedule B, but I believe that is of very small account. As far as I can understand, the position of provident societies between B and D is very involved. But that is what is to be achieved by the section. Therefore, the Deputy has nothing to fear. As I understand, the activity it is intended to pursue in the Gaeltacht areas—to set up a provident society to purchase the produce of market gardening and fruit growers—would be exempt from income-tax under Schedule D also.
I am quite clear on what sub-section (6) does. I have no doubt in my mind. It continues the position whereby an industrial and provident society carrying on market gardening activities is not exempt from tax on its profits. Under sub-section (6) the position will be that an industrial and provident society carrying on market gardening will be taxed on the basis of profits and not on the basis of valuation of land.
The Minister pointed out that such a society would not itself be carrying on market gardening activity but would be purchasing and selling the produce. That is not so. It will itself carry on such market gardening activities. I want to have it exempt from taxation on its profits. I do not mind its being taxed under Schedule B. When the Minister says that sub-section (39) of the Income Tax Act of 1918 will exempt it, he must bear in mind that that section lays down two conditions, one of which is that the provident society, in order to avail of the exemption, must not sell to members, "who are not members thereof." That being so, the society I have in mind could not avail of the exemption in so far as it would be purchasing market garden produce and selling it—the idea is that it would export. It would be ridiculous to think that it could make every customer in the export market a member.
My amendment is designed to clear up the whole position and remove the existing anomaly in which this one activity of industrial and provident societies is singled out and taxed on the basis of profits. As far as the Gaeltacht areas are concerned, I want to do two things: to make sure that market gardening activity, so far as it is carried on, will be exempt from Schedule D income-tax; and, secondly, in so far as any other trade or industry is carried on, it will be exempt from taxation on profits apart from Section 39 of the Act. Do I make myself clear?
The Deputy need not worry about the fact that they will not sell the produce to members. Section 39 (4) lays down that a society "shall be entitled to exemption from taxation under Schedules C and D unless it sells to persons not members thereof or unless the number of shares is limited by its rules or practice." You must offend in both cases.
The second one means nothing.
The number of shares is limited to what?
You must sell to people outside the society and must limit your shares. I know it would be impossible to sell to members, but if you do not limit your shares you are all right.
As regards trading as a grower of vegetables, I am not clear about that. As things stand, I think you would be liable to taxation. I took it for granted all the time that the intention was to buy the produce from the growers and sell it. I said to myself, "That is all right". It never struck me that the society were going to grow the vegetables themselves. I had not considered that point. When I do come to examine it, it may be a principle we could not deal with. Under the circumstances, all I can say is that we can look into it before the next stage.
Amendment, by leave, withdrawn.
Question proposed: "That Section 3 stand part of the Bill."
On sub-section (2) (b), paragraph (ii), I would like to know what happens in a case I have in mind.
Sub-section (b) (ii) states:—
"in a case in which it appears to the inspector or other officer that an appeal may be settled by agreement under sub-section (3) of this section, he may refrain from giving notice under this paragraph or may by notice in writing withdraw a notice already given."
My point is: is it not possible that the Special Commissioners could appoint a place and time for hearing an appeal and, under this provision, the inspector would not notify the taxpayer? If agreement is not subsequently come to, what will happen? Will the Special Commissioners sit and determine the appeal? If the taxpayer does not know about it, it will of course go by default? Is it envisaged that that can happen?
As far as (b) (ii) is concerned, the provision there is that notice of appeal shall be given, except for one or two reasons—either the inspector has reached agreement or the applicant desires to withdraw the appeal. Furthermore, if the inspector believes that agreement may be reached, notice of appeal need not be given.
But if agreement is subsequently not reached?
He will have to go on then and give the notice.
For a later sitting?
Yes.
In other words, if he is not given notice, thinking there may be agreement and there is agreement, the matter is not heard at all at that sitting of the Special Commissioners.
That is the point.
That is not stated here.
No. The Special Commissioners fix the time and place and the inspector, in his wisdom, does not notify the taxpayer; then agreement is not come to and the appeal before the Special Commissioners goes on.
It is not what is intended, but what is provided.
The section does not provide what I think the Minister means to provide.
I cannot quote the original section in which this matter is dealt with, but obviously this is merely the amending of that original section to some extent. I believe the position was that, if the inspector had given the notice, then he had to go on. Even if there was a settlement, it had to go on. It is to avoid that that this amendment has been brought in.
I am perfectly clear as to what is behind it. It is very desirable, but, as the section stands, it is open to the interpretation I have given it.
If agreement is not reached, the Special Commissioners would reopen the matter.
Under Section 5, sub-section (7) of the Finance Act, 1929. I see.
Will the Minister look into the drafting of the sub-section between now and the Report Stage? It is a question of drafting. We all understand what is desired is that a hearing need not go through all the formalities, if there is agreement, but, if there is not agreement, the taxpayer must be absolutely protected.
I shall look into it.
Question put and agreed to.
SECTION 4.
I move amendment No. 3:—
Before Section 4 to insert a new section as follows:—
(1) Where the Revenue Commissioners propose to make an additional assessment under Section 125 of the Income Tax Act, 1918, they shall give notice of such intention to the person to be assessed indicating the details of the discovery.
(2) A person receiving a notice in accordance with sub-section (1) of this section may, within 21 days from the receipt of such notice, appeal to the Special Commissioners on the grounds that the details set out in the notice do not constitute a discovery for the purposes of Section 125 of the Income Tax Act, 1918.
(3) The Special Commissioners shall hear and determine an appeal to them under sub-section (2) of this section as if it were an appeal to them against an assessment to income-tax and the provisions of the Income Tax Acts relating to the rehearing of an appeal or the statement of a case for the opinion of the High Court on a point of law, shall, with the necessary modifications, apply accordingly.
My amendment follows more or less on the lines of what the Minister himself is trying to do in Section 4. He is trying to improve the position with regard to appeals. Everybody will agree with him in that, and we are in fact very grateful to him. My amendment is designed to bring about an improvement in the existing position. It deals with the question of discoveries under Section 125 of the Income Tax Act of 1918. That section is the section where the inspector, if he claims to discover something which was not put before him properly in the normal way, can raise additional assessments at a later date.
The present position is that an inspector can regard anything as a discovery and the taxpayer has no voice or say, until such time as he receives an assessment. He can then, of course, appeal the assessment. My argument is that that is too late and there should be provision whereby, when an inspector claims to have made a discovery, he should notify the taxpayer, in which instance the taxpayer can appeal against it on the grounds that it is not a discovery, and the entire issue can can be resolved at that stage. It puts the taxpayer in an unfair position to present him with a fait accompli assessment and make him go before the Special Commissioners to argue that that assessment is excessive.
The argument should properly be based on whether or not there has been a discovery. My amendment is designed to secure that. If it is accepted, the position would be that the inspector would claim to have made a discovery; he would notify the taxpayer; the taxpayer could appeal to the commissioners on the basis that the claim did not constitute discovery at all and the issue could be argued out on that basis. The inspector could then, if the appellant failed, go ahead and make the assessment. I think that would be a more logical way of dealing with the position. I ask the Minister to accept the amendment. I do not see that there can be any serious objection to it.
First of all, the section deals with a case where the inspector discovers additional evidence and where he believes that the taxpayer was wrongly assessed—usually, of course, too lowly assessed—and makes an additional assessment. The Deputy believes that the taxpayer should, first of all, have an appeal on the question of discovery. If there is no discovery, he has no legal right to make an assessment. The Deputy's amendment would, I think, make things a bit more complicated. If the taxpayer is appealing under the Bill as it stands, he can have the question of discovery tried first. He can put it to the Special Commissioners that there was no discovery and, if they agree, the case is thrown out. Is it not better that at the same sitting the further point is tried, namely, whether the discovery is in order? Then it is argued, if there is discovery, as to whether or not the amount assessed is correct. If the section is left as it is, both matters can be tried at the one sitting. If I accept the Deputy's amendment, however, there will have to be two sittings. If the taxpayer loses on the discovery point, then there will have to be another sitting to argue the assessment. If the taxpayer is beaten on the discovery point, I think it is just as well that the other case should follow immediately.
But the fact that an assessment has been made tends to prejudice the situation to some extent. The taxpayer is no longer arguing that there was or was not a discovery. He is arguing against the amount, or correctness, of the assessment. I do not think the Minister quite conveys to the House the procedure that would take place in a case like that. If what he says is true, he has a point; but, as far as I know, what actually occurs is that the taxpayer goes in on appeal against an assessment and he must lead the argument. He must advance the reasons why the assessment is excessive, or should not be made, before the inspector says anything at all about discovery. I do not care how the position is achieved so long as the first argument is based on whether or not there is discovery, the details of which are fully known to the taxpayer before ever he is asked to argue.
I should like to support from a slightly different angle the view Deputy Haughey has put forward. There might be a case in which the inspector was wrong, to the knowledge of the taxpayers' advisers, in thinking there was a discovery of something that had been hidden. If the matter was dealt with in the way Deputy Haughey suggests, it could be dealt with much more expeditiously and at much less cost than if the taxpayer had to go to the hearing of the Special Commissioners fully able to meet the actual figure assessment, so to speak, if the discovery point went against him. It would inevitably throw further expense on the taxpayer by not permitting some method by which the discovery issue could be tried in advance and, if desired by the party concerned, what I would call the assessment figure issue postponed to another sitting. I do not know whether it could be done. I gather from Deputy Haughey it could not. It is not an aspect of which I would have personal knowledge, but there should be some method by which the discovery issue could be tried first, so that the taxpayer would know that he had not to go to all the expense of making up a case in respect of the assessment issue until he knew how he stood on the first issue.
Is it not a fact that the burden of proof rests on the taxpayer, whereas it should be the reverse? Under the existing provision, the taxpayer is being asked to appeal against the sentence. If the Minister were to accept Deputy Haughey's amendment the tax collector would first have to prove the guilt, if you like, of the taxpayer in not disclosing what has now been discovered. It is a typical Revenue provision that the taxpayer is guilty until he proves himself innocent; the taxpayer is liable until he proves himself not liable. I regard that as sinister. It should be up to the Revenue Commissioners to prove liability and if they established a case, then the taxpayer should have his first opportunity to meet that case. The position is that the discovery is alleged to have been made, the assessment is raised and the taxpayer is put to the proof to try to beat that assessment. I strongly support Deputy Haughey in his amendment.
I cannot see the point being made by the Deputies who have spoken. Is it not much more convenient for the person concerned, if he is beaten on the discovery issue, to have his case heard and have done with it? If the person concerned is absolutely certain he will win on the discovery case, well and good. He has no trouble except to go and make his point and have the case decided in his favour.
Special Commissioners or judges do not always deal with things in that fashion.
It is often the case with the Revenue Commissioners. However, the point I want to make is that in arguing the case for discovery, the inspector is also going through the argument on the assessment. I do not see how he could deal convincingly with the point of having made the discovery, without arguing at least part of the way, and probably the whole way, on the assessment.
It is a question of fact as to whether there is or is not a discovery.
Some Deputies may have more experience in these matters than I have. It would appear to me that there would be a certain amount of overlapping, but maybe there is not. In any case, even if there is not, it would be more convenient to have the one sitting, in case the person is beaten on the discovery, and have the case heard at the same time.
Perhaps the Minister will look into it between now and the Report Stage. I understand that is the formula.
Particularly when you are behind the Minister.
Amendment, by leave, withdrawn.
I move amendment No. 4:—
In sub-section (1), page 6, lines 45 and 46, to delete "or on behalf of".
I want to ensure that the statements and documents used are those of which the taxpayer has personal knowledge. My amendment is not full enough on its own. If the inspector of taxes wishes to rely on any documents for the purpose of an assessment, it is quite easy to provide that it must have been seen by the taxpayer before being sent in. Documents that are sent in without its being clear on their face that the taxpayer knows about them should not be utilised, and so far as statements are concerned they should be utilised only if they are made in the presence of the taxpayer. If they are made in the absence of the taxpayer, it is unfair that he should be bound by them afterwards. The inspector is in the position to know what statements are likely to be material and it is easy to provide that an oral statement should be made in the presence of the taxpayer and that a document should be signed by him. I do not like what is tantamount to a criminal admission being produced unless, in the first instance, it is well known to the person concerned so that there can be no possible suggestion that it is something done behind his back or without authority.
All that is provided here is that these documents will be admissible by way of evidence. The court will have to decide what weight should be given to them and I should imagine that if there was any suspicion that the man himself had not instructed the solicitor or the agent, as the case might be, they would not admit those documents by way of evidence. It is not an easy case to deal with. As far as I am personally concerned, another person looks after my income-tax. I do not think the Revenue Commissioners were ever told he had any authority to do it. He does it, anyway. Of course, I have to pay; he does not pay. There is a practice there which has been accepted for a long time and it would be difficult to go back on it and make a new rule that documents signed by an agent or solicitor would not be admissible. It might be a very big step to take.
Anyway, my amendment is not properly drafted, so I shall withdraw it—whatever about putting it down again the next day.
Amendment, by leave, withdrawn.
Question proposed: "That Section 4 stand part of the Bill."
In regard to sub-section (2) (a) and (b), perhaps the Minister would clear up a lot of doubt about this matter. He may not be in a position to do it now but could do it at some stage of the Bill. Perhaps he would outline clearly under what sections of the Income Tax Acts any of the criminal proceedings or other proceedings envisaged in (a) and (b) could be taken. I do not mind if I do not get an answer to that now, but would like to get an idea of the position at some stage.
Question put and agreed to.
SECTION 5.
I move amendment No. 5:—
In sub-section (1), page 7, line 11, before "post" to insert "registered".
In various places throughout the Income Tax Acts and in this Bill, there is mention of notice to be given by the Revenue Commissioners. We all know that ordinary letters—particularly if they are sent to people down the country—do not get the attention they deserve. Statutory notices as provided in this Bill should, therefore, be sent by registered post, so that everyone may know they are important.
This question of serving notices by post is rather a difficult matter, I believe. There is not much substance in it. There is the difficulty that the existing provision in this regard is incomplete and it is thought well to make it general. Secondly, in the income-tax law as it stands, some officer or assistant secretary had to sign practically all documents and that, of course, in the growing business of the Revenue Commissioners, would be nearly impossible. It is proposed to allow authorised officers to sign notices and certain letters. These two matters are being made right. There is no change in the existing practice, and these things have been more or less going on in that way. I should say that there has been no complaint about the way things have been going on. I think those are the two points which really arise in this section.
Is that the best explanation the Minister can give? It is as clear as mud. However, I shall talk about it on the section.
Amendment, by leave, withdrawn.
I move amendment No. 6:—
In sub-section (5), page 7, to delete all words from and including "but" in line 31 down to the end of the sub-section.
I cannot see the purpose of sub-section (5) unless the Minister is entirely wrong in the explanation he has just given. It seems to me that what has happened is that people have been illegally signing notices in the Revenue Commissioners' offices up to this and that the Minister now wants to validate it in this way. Furthermore, it seems that, as provided by sub-section (1), notice is being given by post of certain matters and that it was invalid and illegal to give these notices by post and we have here another retroactive sub-section in sub-section (5).
My amendment proposes to delete the provision that notices, before the passing of this Act, would now be validated even though they were invalid. I do not know what the Minister is getting at, but on the face of it it would appear that somebody has had tax collected from him without the appropriate formalities having been gone through and that it is proposed now to slide in a little sub-section, sub-section (5), to make sure that everybody is protected, even though the tax was collected illegally. There must be some purpose behind it.
I think sub-section (5) is more directly related to the operation of sub-section (3).
It is directed to (1) and to (2). Sub-section (1) is the method of serving by post and this seems to indicate that that was illegal or else sub-section (5) would not be needed. Apparently someone was signing documents he should not have signed or else sub-section (5) would not be needed in this form. So far as sub-section (3) is concerned, it may or may not have already been in operation; but there is not any meaning for sub-section (5), unless reliance is being placed on a method of service that was bad. There is no meaning in sub-section (5) unless someone signed documents he had no business to sign up to this.
Certain documents have been signed by the assistant secretary or some high officer, but I think there was a certain doubt about other documents. Whether or not documents went out illegally signed is doubtful. I cannot say more than that. As the Deputy is aware, when a section like this is brought in, it sometimes encourages people to look up to see the meaning of it and it may be that they discover a weakness in the law. It is to cover such a case that this is put in. No case has ever arisen so far, no one has ever questioned it, but this is to make assurance doubly sure. As a result of this section being introduced, a weakness may be discovered in the law up to this and this is designed to prevent any action being taken—retrospectively, if you like—for that reason.
How were the notices served before this?
They have been served by post, these particular ones.
If they were served by post already, will this sub-section (1) not be tautologous with the section which already gives the power to serve by post? Is it a fact that they were served by post and that there was no power to serve them by post?
I do not know if there is any doubt about post. I think it is more with regard to the signature. Perhaps there is some ground for doubt there.
Will the Minister at least agree to this? If it becomes clear that someone has got a notice which he did not understand because it did not appear to be in proper form and if he comes in with this in respect of something that has happened already, he will not be told that time has gone against him?
Oh, no.
Time starts running from now?
We would not take advantage of such a section.
Oh!
Oh! If the Minister is as simple as that, we have to parse every word in this Bill. We have him on that now, on the record, that time does not matter in this respect.
Amendment, by leave, withdrawn.
Question proposed: "That Section 5 stand part of the Bill."
I would ask the Minister to reconsider the provisions of sub-section (3). I am not a lawyer, but I formed the impression that this is a very radical departure from existing practice and that it is a very undesirable departure which, in fact, offends against the most elementary principles of justice as between plaintiff and defendant. Its effect apparently will be that, after it is passed, an officer of the Revenue Commissioners can stand up in court, wave any document and say it is such and such. There is no necessity for him to prove it: the onus of disproving the document is put on the defendant, the taxpayer. That is an extraordinary state of affairs and if it is to be allowed to prevail, it is blatantly unfair to the taxpayer. I think it is an infringement of the function of the courts because it does away with ordinary rules of evidence and, generally speaking, is most undesirable. I may be wrong in my interpretation of it, but it seems to me to be something completely new and fundamental and very undesirable, and if I am right, I would ask the Minister to reconsider the whole sub-section.
I am afraid the Deputy is over-apprehensive about sub-section (3). It authorises the officer to hand in a document. The document is genuine and that is the end of it. It is a genuine document handed in by an official and it must be taken into cognisance by the court. Of course, the court may find it is wrong and the only thing is that he does not have to take somebody along to identify him.
Does he have to prove the document?
No. This is a genuine document, and it has no more value than if all the legal proofs were gone through.
Question put and agreed to.
SECTION 6.
I move amendment No. 7:—
In sub-section (1) (a), page 7, line 38, to delete "1957" and substitute "1958".
As I understand it, this is another case of retrospective taxation. An employee who was paid certain sums in the year commencing 5th April, 1957, knowing that he received a certain amount for his salary and knowing that he was paid certain sums for his expenses, made his family budget on the basis of taxation on his salary. Now, as I understand the position arising out of Section 6, that is all gone, dead and done with, and we can now require the person for whom that employee is working to go back to 5th April, 1957, and give a return of that employee's expenses since that date.
There is no sense in going back for the expenses, unless tax is to be levied, if the Revenue Commissioners and the company concerned disagree in relation to the expenses. Therefore, as far as I can see, the whole point in this section is to raise tax in respect of the current year on a figure different from that on which the taxpayer was genuinely entitled to believe he would be assessed. As far as I can see, this will lead only to Schedule E assessments. There may be some other explanation of it, but I do not understand what is at the back of it, unless it means going back over the last year.
Section 6 seeks information for the returns from employers with regard to payments to employees. It asks that the returns specified under Section 105 of the Income Tax Act of 1918 will be made from 5th April, 1957. The amendment suggested by the Deputy is "5th April, 1958", but the inspectors of taxes would be dealing with tax due since 5th April, 1957. If the Deputy's amendment were agreed to, it would mean the inspectors could not start operating under this section until next year. It is the salary or emoluments or pay received from 5th April, 1957 to 1958, that will be coming under review now. It is not seeking information that is necessary for the money that is now payable. That is the point.
But is this information not for the purpose of taxing the employee on a sum received by him in 1957-58 different from what would be chargeable if this section were not there? If the Minister is trying to defend this purely on the basis that we assess this year on what was received last year, then I know where I am. We do assess this year on what was received last year without any question, but people make their budgets knowing that they will be assessed on what they received and many people put aside, out of income as received, sufficient to meet the tax. This is now increasing the amount— this is not the charging section which will increase the amount, but the section which seeks information to increase it.
What should be done, it seems to me, is that the charging sections should be put in this year—and I shall argue about that from another point of view. But if one accepts that there should be charging sections, they should be put in this year and come in course of payment during the following year. It does not seem right to alter the basis on which a man is assessed for tax after the year has closed. We know that during a particular year, in common with other people, we may have to pay more or less tax according as the rate of taxation varies, but this is the first step in making one type of person amenable to an increase in tax in respect of something he has already received. I shall deal with this more fully on the charity section.
Amendment, by leave, withdrawn.
I move amendment No. 8:—
To add to the section a new sub-section as follows:—
(3) Sub-section (1) of this section shall have effect only if the employment is an employment to which Part IV of this Act applies.
The purpose of this amendment should be pretty clear. Section 6 is designed to facilitate the operation of Part IV of the Bill, and particularly Section 21 which brings in new provisions as to taxation of expenses and, I suppose, in order to give effect to Section 21, it is necessary that the Revenue Commissioners should have the type of information they seek under Section 6. We shall deal with Part IV later on and I do not want to say anything about its provisions at this stage, but, even for the purposes of Section 21 or Section 22, as they stand, I think Section 6 is too embracing. It seeks all information, every possible facet of information; it excludes nothing. I think it is just unworkable and my amendment is designed to ensure that the information looked for in Section 6 shall be given only in relation to employments which are governed by Part IV. In brief, of course, it refers to persons earning over £1,500 a year because Sections 21 and 22, and the rest of them, apply only to persons in receipt of incomes over £1,500 a year. Therefore, the information which it is sought to get by this section should I think also be restricted to that type of employment and that is what my amendment seeks to do.
The existing provisions of the Income Tax Acts make it obligatory on an employer to complete the returns of employees and submit them to the revenue authorities. In any size of trading corporation employing any fair amount of persons that task is onerous enough as it stands. It involves a considerable amount of clerical work and office administration to prepare the existing returns. By this section, the returns will be expanded out of all proportion, as far as I can see. Consider an office boy in a factory who is sent on an errand and is given his bus fare. Section 6 covers that type of payment; nothing whatever is excluded. There is no indication that the size of the expense payment or the size of the salary of the person to whom the expenses are paid will enable an employer to exclude any particular information from the return.
I think this provision will lead to chaos, if it stands. It will involve the trading corporation in keeping all sorts of detailed records which they do not have to keep at the moment and which it will tax them very severely to keep in the future. Further, the information which will come as a result of this section will be an embarrassment to the Revenue Commissioners. The flood of irrelevant and unnecessary information which will come in as a result of this Section 6, as it stands, will overwhelm the Revenue Commissioners and be a complete embarrassment.
My amendment seeks to cut out all the irrelevant and unnecessary returns and just to put an obligation on an employer to give the expenses information about an employee to whom Part IV applies, that is, an employee in receipt of £1,500 a year or more. I am confirmed in my opinion because, in relation to benefits in kind which are covered by Section 22, the farmers of the Bill themselves only look for returns about benefits in kind in the case of persons over £1,500 a year.
Sub-section (1) (b) of Section 22 reads as follows:—
"Subject to the following provisions of this part of this Act, where—
(b) apart from this section, the expense would not be chargeable to income-tax as income of the director or employee,
Rules 1 and 9 of the Rules applicable to Schedule E and Section 105 of the Income Tax Act, 1918, shall have effect in relation to so much of the expense as is not made good to the body corporate by the director or employee as if the expense had been incurred by the director or employee and the amount thereof had been refunded to him by the body corporate by means of a payment in respect of expenses, and income-tax (including surtax) shall be chargeable accordingly."
Therefore, in so far as benefits in kind are concerned, the framers clearly see it is necessary only to get information on benefits in kind in relation to people earning more than £1,500 a year. But, in this case, where expenses are concerned, they seem to look for the information about everybody. As it stands, it will place a tremendous burden of administration, recording, and analysing on employers. The duty of keeping the records to enable them to complete the existing return is onerous enough. If it has to be extended, at least limit the information in relation to persons to whom it will be applicable, namely, to persons in receipt of £1,500 a year or more.
I do not think it would be possible to limit the returns here to cases that might crop up under Part IV. I am told this information would be necessary if there were no Part IV at all. I do not know why Deputy Haughey should think there will be such a great deal of extra work in the ordinary firm. Comparatively few employees get expenses of any kind. So far as I know, the ordinary worker does not get expenses. In that case, no return is to be made. Commercial travellers, for example, get their expenses.
What about travel money, for example?
I cannot see that it will put employers to a great deal of additional trouble. Certainly, there is a leakage here. Take employees who are not in the £1,500 class who are getting expenses. That, at least, should be reviewed by the Revenue Commissioners to see whether or not they should be expenses or whether or not the whole amount is legitimate. For various reasons, I think the power is necessary and that it will not create any trouble.
I strongly support Deputy Haughey. As I understand the position, I have got to put a separate new column in my petty cash books. Whenever I send the clerk or an office boy from my office in Baggot Street to the Four Courts and he takes a bus then, in the ordinary course of events at present, when he comes back he gets a refund of his bus fare. I must now have a separate column for that. After every week, I must extend it in respect of the office boy, clerk, court clerk, and so on, and that has to be summarised as at the end of the year.
In a rather trifling office such as mine, that would mean quite a substantial amount of work. I do not mind doing it if there is any point in doing it but there is no point in doing it. The Minister and I may have difference of opinion in relation to certain other parts of Part IV. However, where expenses are paid by a person or by a big company—and there is no connection that could possibly lead to connivance between one and the other—what is the sense in the Revenue Commissioners' trying to set themselves up to determine whether it costs 3d. or 4d. for a bus fare from Baggot Street to the Four Courts? That, as far as I can see, is what I shall have to do under this section.
Every week, I shall have to take out, not my global figures—I would not mind doing that in the slightest-but the different bus fares charged up by each employee of mine who has to go from Baggot Street to the Four Courts. It is farcical. There must be a method of framing the section in such a way that information that will be of some use in relation to revenue returns will be made available; that unnecessary time, annoyance and bad humour will not be spent by those in business collating information that is useless to everybody and—and this should appeal to the Minister—that he will not have to provide additional revenue officials to sort out the wheat from the chaff. As I understand the section, that is what I shall have to do. I cannot see any sense in my having to do that.
I think the Minister is under a misconception on this question of expenses because it is in the interest of an employer to make sure that any money he gives to an employee for expenses is so spent. Consequently, the Minister, the employer and the Revenue Commissioners are all on the same side. An employer is always very careful to check expense accounts of any sort, but for anyone who is engaged in a wholesale business where travellers are employed, It would be a very big job indeed to decide on the amount of money paid for petrol, for hotels for each individual, the amount spent on running repairs of a car, or other expenses that travellers might incur from time to time, quite apart from entertainment. What alarms me is the provision in sub-section (2) where it refers to payments made in respect of expenses and "includes a reference to sums put at the disposal of an employed person and paid away by him." That covers absolutely everything.
It covers not only the expenses of an office boy going down to the post office to buy stamps, but it covers the money given to him with which to buy the stamps.
The Deputy is right.
It covers 10/- given to the office boy with which to buy stamps, and his expenses are tangled up with ordinary office overheads. The whole thing is quite laughably wide. Anybody who touches any money under any circumstances, even for the purpose of taking it from the cash office to the sales office, might have to be returned. I know that is a foolish thing, but, at the same time, there is no reason why the Revenue Commissioners should not say it should be done.
There is a wonderful illusion that the Revenue Commissioners always get to the bottom of everything, given time. They cannot. When they say they must be told about everything by everybody at once, it just produces chaos and confusion. I hope the Minister will look into this matter realistically, because once it is ordered that a sum of money, paid to anybody for any purpose at all, must be returned against that person's account for the year, and then be justified, the Revenue Commissioners will not collect any taxes at all and everybody will go "crackers" in a very short time.
The reference that puzzles me is that made "to any payments... for services rendered in connection with the trade or business, whether the services were rendered in the course of their employment or not." What exactly does that mean?
With regard to Deputy Russell's question on the reference "were rendered in the course of their employment or not", it might be held by some clever lawyer, if we did not put in "or not", that these were not expenses, that they were not used at all in the business. I do not mind the employer giving the employee money to spend, but we do not want the employer to get away with it tax free in that case and, of course, the employee, too.
However, I think the point raised by Deputy Booth is wrong with regard to the man who goes to buy the stamps. The Deputy may not have studied the Bill carefully because the last sub-section of Section 6 refers to paragraph (a) in sub-section (1) of the section and includes "a reference to sums put at the disposal of an employed person" and so on. Paragraph (a) refers "to any payments made after the 31st day of April, 1957, to employed persons in respect of expenses", so that sub-section (2) only qualifies paragraph (a) in so far as the money is used by the person as expenses. The money the office boy—who has been referred to so often—gets to buy stamps is in respect of stamps and is not in respect of expenses and, therefore, sub-section (2) would not apply. Anyway, if the office boy were paid less than £3 a week, he would not be returned under Section 105 of the Income Tax Act of 1918.
Deputies are inclined to raise rather finicky points to give examples of the terrible things the Revenue Commissioners may do. We should come down to the more serious part of this section and deal with it as a genuine attempt by the Revenue Commissioners to get returns with regard to expenses of employees where there might be cases in which money was being paid out by them as expenses but was really paid out in order to save them from paying income-tax. It is quite true, as Deputy Booth says, that an employer will make very sure he gets a return of expenses from a person to whom he gives money for expenses. In genuine cases, he will, but we are not dealing here with genuine cases, as such. We are dealing with cases where the money purports to be for expenses but is not really for expenses at all, but paid out with the object of evading income-tax. That is one case, but there may be other.
I just want to say finally on this amendment that I instanced the case of the office boy only to show how all embracing the section is. Apart altogether from finicky little points like that, there is no doubt that the section, as it is framed, will lead to a tremendous amount of additional administrative office work for any people who employ a substantial amount of labour. It will mean that all sums of money not recorded in detail up to now will have to be compiled under various headings, segregated, analysed and submitted to the Revenue Commissioners. I do not see the necessity for it.
There is this procedure already in force in respect of returns under Section 105 of the 1918 Act. The return required to be made under that section is a fairly comprehensive one and provides the Revenue Commissioners with a great deal of the information they require. Furthermore, when an inspector comes along to deal with the accounts of a trading corporation, he goes through them with a fine comb. He analyses every suspicious figure that he finds, and can align himself directly on his target without going through the massive machinery involved in Section 6. One would imagine that there was no other way but that laid down in Section 6 by which the Revenue Commissioners would get this information.
Though the Minister might not be prepared to accept my argument that this information would be returned only in the case of persons earning £1,500 a year and more, I think he should accept the idea that the section, as it stands at the moment, is too wide and will result in chaos, if it is to be effectively enforced. If it is not to be effectively enforced, it would be far better to leave it out altogether. The Minister might consider between now and Report Stage putting some form of limit within the section, confining it in some way to more direct alignment on the type of information he wants, and the type of person he wants to get after.
Would the Minister consider restricting the section to cases where a composite figure for expenses was paid and exempting all expenses vouched by the employee to the employer? He may think of that between now and to-morrow and cut out a lot of trouble.
Amendment, by leave, withdrawn.
Question proposed: "That Section 6 stand part of the Bill."
We will adjourn that until to-morrow.
Progress reported; Committee to sit again.