Dáil Éireann debate -
Thursday, 19 Jun 1958

Vol. 169 No. 3

Finance Bill, 1958—Committee Stage (Resumed).

Debate resumed on the following amendment:—

Before Section 21, but in Part IV, to insert a new section as follows:—

This Part of this Act shall not come into operation until the passing of the Finance Act which shall be passed next after the publication of the report of the commission now considering the income-tax code.— (Deputy Sweetman.)

Mr. Cosgrave

I was adverting to the fact that the revenue authorities already have adequate powers to investigate expenses and allowances in respect of firms assessed for taxes and that no case has been made for the extension proposed in this Bill. Part IV of the Bill widens these powers considerably. When the various interests at different times made representations to have some alleviation in the tax code granted, the answer given was that this matter was the subject of inquiry by a commission and that any alteration in the structure, any changes in the allowances permitted, and generally any question of granting some form of remission or alleviation in respect of businesses and firms, would have to await the publication of the commission's report. This proposal, therefore, is a departure from what has been the generally accepted view that, until that commission reports, the law should be allowed to remain as it is.

It is a matter of some surprise that, at a time when the general aim is to attract to this country foreign capital for the purpose of development, to encourage by granting allowances in respect of development projects, or by altering the law as is at present being done in the amendment of the Control of Manufactures Act and in the measure dealing with external investment, when all the emphasis and accent have been placed on liberalising the restrictions which operate, this proposal should go in the opposite direction. Undoubtedly foreign investors will seek the place where they can get the most attractive return. It is common knowledge that particularly American industrialists and businessmen will seek to place investments where they will make the largest profit.

Already the revenue authorities have adequate powers to secure full returns on whatever expenses are claimed and full particulars of whatever allowances firms or companies seek to secure in order to cover incidentals or extra outgoings that are common in cases of this sort. The Minister apparently is worrying because companies may be including in their accounts provision for perquisites or allowances to directors which the revenue authorities consider unjustifiable. Foreign investors and even foreign technicians who might consider coming here will be anxious to know in advance not merely what terms are offered to them but what tax deductions will be made from them.

In many companies, the procedure is that a certain sum is allowed for expenses for refreshment for clients or customers, and so on. Directors or senior officials of companies are allowed such expenses and all reputable companies vouch for a sum for these items on a basis that has been accepted over the years by the revenue authorities. Some people criticise that and feel it could be abused, but anyone who has experience of business understands that it is the normal practice to entertain people when discussing business and frequently business is discussed when people are given a luncheon, and so forth. In addition, provision is made for other small matters, such as meeting these people and discussing a question with them. The provision enshrined in Part IV proposes to tighten up on that, on the basis that, as was mentioned on the Second Stage by the Minister, a similar provision was introduced some years ago in Britain.

Conditions in Britain are entirely different. They have there a very highly industrialised country, a condition of almost, if not full, employment, in contrast with conditions here where we are seeking to develop industries, where we have large numbers of unemployed and where the emphasis is on the development of industry to the maximum extent. To equate the restrictive practices of the law here on the basis that it has been done in Britain is to refuse to recognise these facts.

This is also a bad time to do it. We should not take one item and decide to deal with it in advance of the report of the Commission on Income-Tax. If we have deferred dealing with a variety of changes, such as P.A.Y.E., which we have deferred on the understanding that a commission will report on it, I feel that in this case we ought not impose further restrictive conditions in the income-tax code or in general taxation in advance of the report of the Commission on Income-Tax.

Mr. Sweetman

Is the Minister able to give us any of the estimates I asked him for? What does he estimate he is going to get as a result of this?

Dr. Ryan

No. It would be impossible to give an estimate.

Mr. Sweetman

Does the Minister not feel able even to go into whether it is of the order of £10,000, £100,000 or £1,000,000?

Dr. Ryan

I am afraid not. There is no means of finding out what the amount would be. It is only by trying this out that the amount can be found out.

Mr. Sweetman

Is the Minister suggesting that this part is being put into the Act without the Revenue Commissioners having advised as to what the result will be assessed in terms of money? I cannot conceive the Revenue Commissioners advising the Minister to do this or the Minister accepting that advice, without its being made clear as to whether there is a prevalent practice which it is necessary to cover in this fashion. If there is no prevalent practice, then we may assume that the revenue to be obtained will be negligible. If there is a prevalent pracrice I am certain that the Revenue Commissioners can and must have given the Minister an estimate.

I know of no body of people in the State who are able to estimate better and more accurately what is going to arise from any piece of legislation than the people on whom the Minister is depending in this matter. I am sure that there must have been some estimate taken before a part of an Act such as this was brought in, knowing, as everybody knows, the amount of irritation, trouble, administrative expense and detail that will be involved. I do not think this Act is being brought in simply because somebody thought that we have left out something that is in the British Finance Acts of 1948 and 1952 and that it would be bad if we did not do everything here that they do. There must have been some attempt made to assess what is involved. If such an attempt was not made, the answer seems to be that it is not worth going to the tremendous amount of trouble that it will cause.

Mr. Haughey

I might assist Deputy Sweetman by saying that in the debates in the British House of Commons on the matter the sum of £250,000 was mentioned as being involved. If it was £250,000 in Great Britain, I am quite certain that only about one-tenth of that amount would be involved here.

Mr. Sweetman

You might say one-hundredth.

Mr. Haughey

It must be very small indeed, if the amount given for Great Britain is reliable.

Dr. Ryan

It is not possible to give such an estimate and it would be unfair to ask the Revenue Commissioners to give it. There is one thing that the Revenue Commissioners do know and that is that the practice is growing of directors and highly-paid employees of firms obtaining perquisites of various kinds which should properly be subject to income-tax. Personally, I am more interested in the justice of the case than in the amount to be derived from this. We should try to have justice for every taxpayer.

Amendment put and declared lost.

An Ceann Comhairle

Amendments Nos. 22 and 25 are cognate and may be discussed together.

Mr. Sweetman

I do not think they are quite the same, Sir.

An Ceann Comhairle

All right. We shall take amendment No. 22 then.

Mr. Sweetman

I move amendment No. 22:

In sub-section (1), page 13, line 40, to delete "wholly, exclusively and necessarily".

I want to get some indication from the Minister as to what is "wholly, exclusively and necessarily" in the performance of certain duties. These words have been included since the Finance Act of 1918 but I find it impossible, in relation to Part IV of this Act, to know what is included and to know what the Minister seeks to cover. If we knew what the Minister seeks to cover we would have a better chance of ascertaining whether it is reasonable or not.

If a wholesaler here has a visit from a prospective purchaser from England, France or elsewhere, it is clear to all of us that if he is not going to pay him the courtesy of looking after him and entertaining him he will not get the atmosphere in which he is likely to do business. Everybody agrees that it is necessary in modern days to entertain such a visitor. When it comes to entertaining him, one might go to a fish and chip shop or one might go to one of the more expensive restaurants in Dublin.

Mr. Haughey

Even the Dáil restaurant.

Mr. Sweetman

No. There would be no export business done if customers were brought into the Dáil restaurant. That is quite certain. There must be a very great difference in ways of looking after a customer. It might be entirely necessary and would be accepted as being entirely necessary if somebody came over here to give him lunch but I cannot see how one could say that it was necessary to give him a good lunch, to bring the discussion down to plain terms. On that basis, it could be quite well argued by an inspector of taxes that because one had given a customer lunch in a restaurant off Grafton Street whereas one of the restaurants in O'Connell Street would have done quite well enough, the difference was not allowable.

Similarly, an inspector could make the argument that the person concerned might have got the business anyway and ask how could he say that it was necessary for him to take the potential customer out to lunch in order to get it. Once we delve down into the type of detail into which Part IV delves, we have to look at the detail from the other point of view. I want to stress that it is the Minister by the various provisions in Part IV, who has deliberately decided to go down to that range. Having regard thereto, it is up to him to give some general indication in this House, for the information of the people in the House and as a line to the business community outside, as to what type of expenses he has in mind should be allowed and what type of expenses should not be allowed. There must have been consideration given to this when Section 21 was being framed and I should like the Minister to tell us what were the examples put to him in connection with which he felt this section was desirable.

Dr. Ryan

These words, of course, refer to Rule 9 of Schedule E, which was enacted by the Act of 1853. They merely have the effect of excluding, as it were, employees who are already covered by that section. The words "wholly, exclusively and necessarily" are used in that section and have been used, it is obvious, for over 100 years and it is not proposed to amend that rule. It has stood there for over 100 years and I do not think it is the Deputy's intention that it should be amended. As to taking it out of this particular place, if this section had not been drafted and Rule 9 had stood, it would have the same effect—I am not a lawyer but I am sure it would have the same effect—and we need not have put in all this stuff at all. If, in fact, the Deputy is attempting to amend Rule 9, I do not think his intention would be effected by the amendments put in here.

Mr. Sweetman

Is the only defence that the Minister can offer that this is a definition made in 1853?

Dr. Ryan

Yes.

Mr. Sweetman

That will go down in history. That is 105 years ago and the Minister thinks the same methods are applicable to business in Ireland to-day.

Dr. Ryan

I am saying that we are excluding the people that came under that. They are not being dealt with in this section.

Mr. Sweetman

I thought I understood the section before the Minister spoke. I am quite certain that I do not now. I shall have to read it again before Report Stage.

Amendment, by leave, withdrawn.

Mr. Haughey

I move amendment No. 23:—

To add to the section a new sub-section as follows:—

(3) The reference in sub-section (1) of this section to any sum paid in respect of expenses does not include a reference to any sum paid in respect of expenses by a body corporate to any of its directors or employees where the amount so paid is equivalent to the amount which has been agreed by the Revenue Commissioners as being properly allowable with any trade union, or other recognised body or association acting on behalf of employees or directors.

This amendment is designed to try in some way to reduce the very great volume of correspondence, claims and appeals that will arise out of the operation of Section 21 as it stands. It seems to me quite clear that the section would throw a very great burden on the administrative machine and also on the general body of trading companies. Many payments that formerly passed unnoticed will now become the subject of investigation by the inspectors of taxes. Correspondence will take place about them and in a great number of cases, I am quite certain, the assessments will go to appeal.

I think I am right in saying that there is a principle established at the moment that, in the case of a particular class of persons or people in a certain trade or profession, some organisation acting on their behalf will make arrangements with the Revenue Commissioners that a specific sum in respect of the particular expenses of that trade will be generally allowed. I take, for instance, the case of a carpenter. The trade union would negotiate with the Revenue Commissioners who would agree in the case of a carpenter that a certain sum say £50 a year, would in the normal course of events be allowable to that man for the particular expenses of his trade— tools, clothing and so on. A carpenter is not the type of person who normally would come within the scope of the section because he is not a £1,500 a year man, but I am instancing a carpenter as a handy example to support my argument.

I want to have established in this country the principle, that, first of all, the revenue, will recognise the right of other organisations acting for classes of people to enter into such negotiations. Having established that principle of the right to negotiate on behalf of persons in their organisations, I want it laid down that in all normal assessments on persons in that class, the allowance will be exempted from the provisions of this section. It seems to me that very considerable advantage would flow from that, in omitting from all the returns a certain amount of expense payments which otherwise would clutter up the machinery. There would be no disadvantage, I think, to the general purposes which are envisaged in the section. I cannot see that it would make the section less effective in any way. Agreement by the Revenue Commissioners will be a condition precedent, and I think in fact it will be a considerable improvement. I ask the Minister to accept the principle enshrined in the amendment.

Dr. Ryan

As the Deputy mentioned, he is aware that this section will apply only to employees with £1,500 or more. These agreements referred to by the Deputy have been extended so far only to trade unionists for certain uniforms, tools, and so on and there never has been an agreement with any sort of professional or higher organisation like that where earnings might reach £1,500 a year, but if it did occur then the principle would be applied. There is no doubt about that. Let us take the example of say engineers. If we became highly industrialised——

Mr. Haughey

Take doctors.

Dr. Ryan

Doctors would never reach £1,500 a year anyway. Say we have become highly industrialised and we have a certain class of engineers and we make an agreement that they get an allowance of £300. That would apply but of course they would have to make returns as otherwise there would be no check on whether or not they were getting more. The £300 would be allowed automatically. I think to put in the amendment would operate as a restriction. I do not think it would achieve anything and it might be a burdensome restriction if it ever had to be applied.

Mr. Haughey

Does the Minister agree that the principle of negotiation by professional organisations is accepted?

Dr. Ryan

Certainly I think it is a very good thing if it could be done.

Mr. Haughey

And that such negotiations will be favourably looked on from now on?

Dr. Ryan

Yes.

Mr. Sweetman

Would the Minister explain what does it mean? He has told me I did not understand what it means. I should like him to explain what it does mean in the circumstances.

Dr. Ryan

I did not accuse the Deputy of not understanding it because I am quite prepared to admit the Deputy has more experience in these matters than I have. I said the Deputy's amendment referred to the words "wholly, exclusively and necessarily". Those who have claimed under Rule 9 where their claim is based on the words "wholly, exclusively and necessarily" still have a claim in spite of this section. That is what it amounts to. In that way it is to the benefit of the taxpayers that he still has the right under Rule 9.

Mr. Sweetman

But it restricts the claim under "solely exclusively and necessarily".

Dr. Ryan

Yes.

Mr. Sweetman

If they were out he would have the claim without that restriction.

Dr. Ryan

We are not proposing to amend Rule 9.

Mr. Sweetman

I think you should.

Dr. Ryan

That is another matter.

Amendment by leave withdrawn.

Question proposed: "That Section 21 stand part of the Bill."

Mr. Haughey

I want to take a very serious view of this Section 21 and in fact of all of Part IV of the Bill. For the moment I am dealing particularly with Section 21. It is quite clear that it is causing a very great amount of public discussion and in the business community generally there is grave concern about what the section will entail. That worry is not directed to, or arising from, the fact that people will be paying additional tax as a result of the provisions of Section 21. The concern is with the fact that a great deal of trouble, annoyance and fuss will be involved in complying with the section. There will be a great deal of recording, analysis and administration that were not necessary before.

Section 21 is taken holus-bolus from the British Income Tax Act of 1952. That Act is the latest development dealing with this subject and this section is taken from it. I think we should endeavour to solve our own problems in our own way. There are just a couple of points to indicate we are not thinking of our own situation and dealing with it as it arises, but rather that we are in this Bill, to some extent, just doing what the British do without comparing the situations here and in Britain. There are two small indications —not very significant—to bear out my point of view on that. We have been talking about Rule 9 of the rules applicable to Schedule E and that is to be continued in force. Nothing is to be done about it. Surely when this part of the Bill was being framed it would have been a suitable time, if Rule 90 needed cleaning up, to do it. When you see "the cost of keeping and maintaining a horse to enable him to perform the same" faithfully preserved it is an indication that there is a certain approach to these matters.

Dr. Ryan

He is not bound to keep a horse.

Mr. Haughey

No, but why not change the rule? The fact that the rule is just copied holus-bolus without any critical approach to it would seem to bear out my argument. Earlier we had the case where a provision about hops was just carried forward because it had been there. These things are not important, I admit, but they indicate that the type of critical thinking about our own situation which should take place before a whole series of provisions such as we have in Part IV were brought in, has not been done.

The provision in regard to expenses previously was very sensible. The Revenue Commissioners took the view that expenses were a normal business procedure and they said there was no point in adding expenses to a man's income just for the sake of making a similar deduction later on. The idea of round figures or global figures for expenses was fairly widely accepted. Section 21 will do away with that and the onus will now be on the taxpayer to prove the expenses were necessary. It would seem to me that the Revenue Commissioners will now be entitled to say that any expense paid at all is income unless you can prove that it is not. That is putting a very serious burden on a hardworking businessman.

I can see what the Minister is trying to do and we must all sympathise with him in his objective. He wants to iron out the discrepancies and make the law equally applicable to everybody and see to it that nobody will use expenses to get an advantage over a fellow taxpayer. The Minister has said he is not terribly interested in the amount the revenue will collect by virtue of these provisions and it is obvious, I think in our circumstances that the revenue will be very small. The only justification for Section 21, therefore, must be that aspect of ironing out discrepancies and making one taxpayer equal to another. Surely the burden which will be put on the business community should not lightly be put there? The abuse would have to be fairly serious before it would be right to think of introducing these provisions, with the consequential annoyance and burden they inflict on the business community.

I am fairly satisfied, and it is the opinion of my colleagues, that there is no great volume of abuse in this matter. There is some, I suppose. I think I can honestly say from my knowledge and the knowledge of those I know and with whom I am associated, that if there is any abuse it is of very small dimensions and is not sufficient to justify the provisions of Section 21. There is no doubt that this will lead to a very great deal of additional administrative work on the part of trading concerns. For that reason, I feel the Minister might have second thoughts about the whole section.

I am particularly concerned about the export business aspect of the matter. In this House, we have already adopted the idea and the principle that the tax code should be adjusted in order to encourage export business. It is a vital national necessity that we should export. In particular, we must get increasing exports in the industrial field. There is only one way to secure increased exports and that is by aggressive selling policies abroad.

A very great deal of expense must be incurred in the modern business world—exactly the sort of expense that will come under the provisions of Section 21, namely, travelling, entertainment and other such expenses. There is nothing wrong, immoral or incorrect about that sort of expenditure. It is necessary. It is vital to your selling policy. In fact, it is the only way, in a great deal of cases, to get business.

Whatever about applying the section to our internal situation here, the Minister should seriously consider exempting from the provisions of Section 21 the case of a person incurring this type of expense when he is pursuing export business. A person going abroad and out in the world markets must be allowed a great deal of latitude in this regard. That is how the situation is and we have no control over it. To ask the type of person I am interested in to think continually of the terms of Section 21 when he is going about his business is surely not reasonable.

When, in 1952, these provisions were brought into the British House of Commons there was a section—I think Section 64—which provided power to the inspector of taxes to give dispensations from the provisions. In other words, in certain circumstances, in order to avoid unnecessary administrative inconvenience, the inspector of taxes was empowered to give dispensation in respect of certain types of payments and that left them out of the provisions altogether. As we adopted the bad provisions of the British Income-Tax Act, 1952, it seems extraordinary that we did not also accept the one sensible provision, to my mind, in the whole measure, namely, the dispensation section. It is the one section which would make the Bill workable. I would ask the Minister to consider very seriously the introduction of provisions whereby inspectors of taxes, in the proper circumstances, can give dispensations such as are envisaged in the British Act.

The Royal Commission which sat in Britain in relation to the matter had this to say about these dispensations: "The power to give dispensations is a valuable instrument for lightening the burden of administering the Act." That seems to be true. As that expert commission had that to say about these dispensations I find it very difficult to see why we did not adopt a similar idea here.

Another matter in relation to this section which also occupied the time of the Royal Commission in Great Britain was home-saving. That commission recommended that the idea of home-saving be abolished, be no longer practised. Here, the Revenue Commissioners seek to establish that, if you are allowed certain expenses for travelling or for meals, and if you have a wife and home, there is a corresponding saving at home and that that amount should be disallowed and only the excess amount granted as an allowance. I fully agree with the report of the British Commission on that point.

The question of home-saving is completely artificial. It has no reality. It leads to a great deal of trouble, annoyance and inconvenience for everybody concerned. I think we might very wisely adopt that recommendation of the British Commission and abolish once and for all this concept of home-saving.

With regard to the section itself, I should like to mention line 35, sub-section (1). Sub-section (1) reads as follows:—

"Subject to the provisions of this Part of this Act, any sum paid in respect of expenses, by a body corporate to any of its directors or to any person employed by it in an employment to which this Part of this Act applies, shall, if not otherwise chargeable to income-tax as income of that director or employee, be treated for the purposes of Rule I of the Rules applicable to Schedule E as a perquisite of the office or employment of that director or employee and included in the emoluments thereof assessable to income-tax (including sur-tax) accordingly, but nothing in this sub-section shall prevent a claim for a deduction being made under Rule 9 of those Rules in respect of any money expended wholly, exclusively and necessarily in performing the duties of the office or employment."

The word "perquisite" occurs in line 35. My only worry is the use of that word. In Rule 4 (3) of the Rules applicable to Schedule E, a "perquisite" is defined. I am wondering if there is some confusion there. In the 1918 Rules applicable to Schedule E, a perquisite has a very definite meaning and is very clearly defined. If the meaning attached to "perquisite" by sub-section (3) of Rule 4 is still to prevail, I think this section would need amendment. That is only a drafting matter but I would ask the Minister to look into it.

Generally, those are my views on this section. As I said originally, I can see what the Minister is seeking to achieve but I think he is turning his efforts in the wrong direction. I do not think the abuse is prevalent to any great degree. The Minister has said already he thinks it is on the increase, but I doubt that very much. It would need to be much more serious than it is, and it would need to increase a very great deal more, before it would justify the trouble and annoyance that Section 21 will cause. I ask the Minister, in addition to the particular points I have put to him, to have second thoughts about the section as a whole.

Mr. Booth

I am still at a loss to understand why there has to be a change in the present practice. The present practice is that inspectors of taxes allow lump sums in respect of expenses for almost anyone in the upper income group, and that does not necessarily mean people with over £1,500 a year. There are employees in our business who are drawing less than that and who are allowed, by inspectors of taxes, sums in respect of unvouched expenses, up to £120, £130 and £150 per annum. The inspector of taxes in each case is perfectly free, and will be able to question any such outlay for expenses. Therefore, I do not see why this very cumbersome provision is now being brought in when inspectors of taxes have powers such as Deputy Cosgrave has already pointed out they have.

To my mind, it is very desirable that these lump sums should be permissible. There are certain expenses which can be readily vouched, such as travelling expenses or entertainment expenses in an hotel, restaurant and so forth, but there are cases where a businessman may bring home a customer for a meal at home. It is not giving away any secret that when you bring a customer home for a meal, you usually have a good meal, probably a much better meal than you would have yourself on that night. You would not have the cold meat on Monday left over from the Sunday Joint. If you entertain your customer on Monday, you would certainly want to have another joint or something rather better. Is that businessman to incur the expense himself, or has that businessman or his wife now to submit an account vouching that she bought a joint, cooked it with her own fair hands and own ingenuity, and prepared the vegetables, sauces, sweets, the savouries, coffee, liqueurs and drinks, if necessary?

Mr. Dillon

With the qualification of domestic saving—she would have to set off the cold meat.

Mr. Booth

That shows the whole laughable side of it, but, at the same time, there is the serious side. That businessman is put to expenses which are not readily vouchable. For that reason, up to now, inspectors of taxes who are not singled out for their generosity to taxpayers, have always allowed these sums for expenses. If these sums were allowable up to the present, what the Minister is now doing is making sums subject to taxation which have been found not liable to taxation previously. That is raising additional revenue out of the business community. At the same time, the Minister has said the people he is really trying to seek out are those who are not behaving strictly honestly. That may be his intention but he will not catch them that way.

It is a complete illusion to think that, by a provision such as this, revenue will be able to get a grip on every conceivable bit of expenditure, and will be able to prove whether it is permissible or not, or whether it is wholly, exclusively and necessarily paid out. Similar legislation in England has given rise to large-scale falsification of records and accounts, and I think it is only right to mention it is now the standard practice in certain London restaurants that, instead of giving a tip to the waiter, you pay for your meal and give the receipted bill back to the waiter who is over-joyed to get it. Instead of a tip of 2/- or 5/- he now has a negotiable instrument worth up to £3 or £4. There are people only too willing to buy that receipted bill from him. The net result of that legislation is that those who are out to defraud the revenue will be put to slightly greater trouble, but the frauds will continue as they have done. I hope the Minister does not take it that, following upon legislation such as this, tax evasion will immediately stop. I canot see why the legislation cannot be left as it is.

Those honestly returning expenses will continue to do it, but I am afraid a number of people at present honestly returning their expenses will be so infuriated by this legislation that they will be pushed over the edge. They will decide honesty does not pay and in future will falsify their records, which it is quite easy to do. The net result will be that honest people will now have much more work to do, whereas the dishonest will be able to get away as easily as they have done before this.

No matter what the Minister may say doubts are being cast on the business community as people who intend to defraud the revenue by reason of expense accounts and expense allowances. It is, however, interesting to know that no provision is made which would affect the allowances of Deputies and Senators. We get a certain amount to cover us for expenses. There is an allowance in respect of expenses which we do not have to vouch, and I do not see why businessmen should have to vouch and justify their expenses, while Deputies and Senators have not to do it. I regret having to say so, but, at the same time, I do not see the difference, except it is that the Government says the general standard of probity of Deputies and Senators is so much higher than the standards of employers and directors with salaries of over £1,500 per annum.

That is an unnecessary and unjustifiable slur on the business community, and just because there are some people who fiddle their accounts, I think it is entirely unnecessary for the Minister to introduce this cumbersome and onerous legislation. It will impose a very heavy burden on the business community and it will not go anywhere near meeting the situation the Minister has in mind. If the Minister faces up to it, he will see that falsification of accounts can go on as before. An inspector of taxes, after accounts have been audited and a tax return has been sent in, will have to check back to expense accounts for 18 months or more. How is an inspector of taxes to get conclusive evidence that an expense of £8 19s. 6d, 18 months before, was wholly, exclusively and necessarily paid in performing the duties of the employer? Is it not all too obvious that for the purpose of defrauding the revenue that expense can be placed to the credit of an employee who draws less than £1,500 a year?

The inspector of taxes can never know whether the theatre tickets, the dinner at the Gresham, or wherever it was, were actually enjoyed by the director or office boy——

Mr. Sweetman

The office boy at the Gresham!

Mr. Booth

—or by the director's secretary or by the director's wife and children. There will be nothing in the bill to show whether the director has entertained his entire family and family connections on the expenses account, at the expense of the company. I wish the Minister would get it out of his head that it is possible by these means to stop tax evasion. It is not, and it will not do it. It will cast a slur on the business community and put an additional load on them. As the Minister admits himself that he does not know whether he will get any more revenue out of it, I cannot understand why he should do it at all.

Mr. Dillon

I think I understand the difficulty in which Deputy Booth finds himself. The Minister was sent in to do this and he knows "sweet Fanny Adams" about the proposals he has put before the House. He has the broad general idea that he will collar the fellows who have expense accounts, but that is all he knows. That is why one cannot get "hum" or "haw" out of him. He does not know; he does not particularly care; and he is too lazy to learn. I do not blame him for that, as it is a very complex business.

My complaint relates to that complexity. Because it is a business of considerable complexity, we set up an Income-Tax Commission and we put certain individuals to great trouble as a result of their accepting our warrant to go on that commission. I met one of them recently who said to me: "If I had ever dreamed what the acceptance of membership of this commission meant, I would never have accepted it." They are equipped to investigate this whole matter of expense. If this matter had been referred to them, we would have had the minutes of evidence tendered and the conclusions of an informed commission on that evidence, before us when we came to debate these proposals.

The plain fact is that there are now six of us sitting here and no one of us understands what these proposals involve. There is nobody in Oireachtas Éireann who knows what they involve and there are very few—perhaps two or three individuals—in the Revenue Commissioners who know what they involve.

We all know perfectly well that, if this legislation is enacted, those of us who are concerned in trade or business will hire accountants and company lawyers to sit down and say what it means. That is a wholly wrong procedure for legislating. That fact, to which I now refer, of what we, the business community, will have to do on the passage of this legislation into law, leads me to the second point which Deputy Booth has made. We all know the community is divided broadly into the tax dodgers and the fellows who do not dodge taxes. The tax dodgers will call in their accountants and company lawyers and ask them for means of riding a coach and four through this legislation, and they will find it. Then the Revenue Commissioners, in three or four years' time, will discover some of the dodges these boys have thought up and will bring in more legislation to meet these dodges.

This has been going on for generations, with the result that I have no hesitation in saying that at this moment there is no living man who understands the income-tax law of this country. It is certain that there is no citizen of this State who can make his own income-tax return. He has two courses open to him—one is to hire a firm of accountants to do it for him and the other is to throw himself on the mercy of the inspector of taxes and ask him to fill it out. If the demand is not too extravagant, he can pay it, but if the demand appears to be out of the way, he must post it to a firm of accountants and try to get them to unravel the state of affairs and see what they can do.

Is it not a fantastic situation that we have built up in this community in the past 30 years an income-tax code which affects the income of more than half the population, which nobody understands or could hope to understand? This complexity has grown very largely out of the ad hoc attempt to frustrate the tax dodger, which has been uniformly unsuccessful. It has always forced them to drop one tax dodge, only to discover that they have evolved two or three more dodges. In the meantime, the unfortunate taxpayer who simply wants to pay his taxes—partly because he is an honest man, a law-abiding man and partly because he has a horror of allowing possible claims to grow against him which might come down on him like a hundredweight of bricks in five or ten years' time. Doubtless, the honest taxpayer is not actuated by unmixed motives, but whatever his motives are, he wants to pay his taxes as they fall due. He is reduced to the stage, as a result of this growing forest of complex law, that he is no longer able to comply with the law without expert technical advice to determine what the law is. That is not a good thing.

I understood we set up the Income-Tax Commission, first, for the purpose of determining whether this was the best method of collecting the revenue the State required and, secondly, if direct income-taxes were the best method, to find out if the existing system could be simplified and a great deal of the unnecessary red tape associated with it abolished. That was its purpose and, as far as I know, the Minister applauded the decision to have this matter carefully investigated.

We at the moment technically are discussing Section 21, but in fact Section 21 constitutes only one section of Part IV of the Bill. What we are discusing really is Part IV of the Bill, and that part consists of eight sections. Has anybody in the House taken the trouble to sit down and read in detail these eight sections? Perhaps six Deputies out of 147 have done it, and, of the six Deputies who may have done so, I very much doubt if three of them have understood it.

Mr. Sweetman

I have read it and I do not understand it all. I am quite sure some others are in the same category.

Mr. Dillon

I have no doubt that legislation must be brought before this House from time to time which, of its nature, is highly complex, but it ought not be brought before the House without a White Paper or some kind of vade mecum which makes it comprehensible to those Deputies who are concerned to understand it. I do not believe that the full implications of Part IV can be made fully comprehensible to this House and its members by any White Paper prepared by the Revenue Commissioners. When we get a White Paper from them, objective as they seek to make it, they are stating the revenue side of the case— which, of course, must be stated, must be perfectly considered and evalued.

On the other hand, the purpose of our setting up the commission was that the revenue—who are the public servants who would be required to come before that body—could most trenchantly state the revenue case, but at the same time, the other parties concerned would be free to reply thereto. That would leave for us, the legislators of the State, the evidence to peruse and the conclusions of the commission to consider. It has never been suggested that the conclusions of such a commission are binding on this House. They are nothing more than recommendations.

To-day, when we were discussing the Transport Bill and I was asking the Minister for Industry and Commerce to consider restoring the benefit of the Probation of Offenders Act to persons convicted under the Transport Acts, he considered it to be a complete answer to all my arguments to pick up the Report of the Transport Commission and read out one paragraph in which they said they believed the difficulties were so great that the minimum fines and the suspension of the Probation of Offenders Act were desirable, in order to give effect to new transport legislation.

The next Minister rambles in and presents Part IV of this Bill and says—"No. I will not postpone this operation until it has been examined by the Income-Tax Commission. If this matter is under consideration by the Income-Tax Commission"—which he does not know—"so far as I am concerned it is res judica already and they can stop their consideration as I am going to legislate now.” I think when you press him to indicate what his views are that he has not got any, because, any more than the rest of us, he does not understand what Part IV involves. There is nobody who understands Part IV.

Mr. Haughey

Let us be clear on that; I understand it perfectly.

Mr. Dillon

I do not believe it. I do not believe the Deputy appreciates what is going to happen under this section. I know what has happened. They have lifted this out of the British Act and dumped it in here. It was designed for places like Liverpool, Birmingham, Glasgow, Newcastle-on-Tyne and Manchester. It is going to operate——

Mr. Haughey

In Ballaghaderreen.

Mr. Dillon

Certainly in Ballaghaderreen and in every village and town in Ireland and that is one of the things which I think is so grotesquely unbecoming in this legislation. Deputy Sweetman has already referred to the fact that every shopkeeper in Ireland may have to consider whether the chop he gives to a customer who comes in and gets dinner in the kitchen, can legitimately be charged up, or whether he is to pay income-tax on it because he is not entitled to have his living allowance out of the profits of the shop. Of course in the old days it would be quite true for the Minister for Finance to say that that did not apply in rural Ireland because shopkeepers and traders were not incorporated companies. That has very largely changed in the last 30 to 40 years. A surprising number of small country businesses have become incorporated for their own protection, and very wisely, in order to avoid other tax consequences, of being devastated by inheritance tax and death duties, if they are not an incorporated company.

That is the evil; that there is already being built up a volume of case law in England to interpret the impact of this on British conditions. What is going to happen here is that it is going to impact on Irish conditions. The only way somebody in rural Ireland will be able to determine if this Act applies to his case is to go to court, and everybody knows if you go to court you end up in the Supreme Court. It is like the poor fellow who fixed the law of bailement. It was the case of the unfortunate man who had a cask of wine and it fell off his cart. The cask was worth about £7 10s. but the chancery lawyers held that this was the ideal issue on which to determine, once and for all, the true significance of the law of bailement and the case went to the House of Lords. When it was finally determined the costs for both parties were £235,000, but the law of bailement has been settled for all time.

Some unfortunate country publican here will proceed to get the true interpretation of this part of the Bill. Deputy Haughey understands the correct interpretation of this Bill and some unfortunate man will go to him and he will say that he understands precisely the meaning of this Bill. That unfortunate client will go into battle with the Revenue Commissioners. They may start litigation in the home quarters and then go to the Circuit Court, then to the Court of Appeal, and end up in the Supreme Court and have the satisfaction of demonstrating in the end that Deputy Haughey was half right and the commissioners half right, but Deputy Haughey fails and the man will be made bankrupt.

Then under Section 27 of this Act the Revenue Commissioners will get a decree against them and if they do not pay promptly what the Revenue Commissioners have recovered against them they will not be brought to court to get an instalment against them. The decree will be countersigned by the superintendent and the man will be dragged out of his own drawing-room as a leading Fianna Fáil supporter was last week, and put in jail.

An Leas-Cheann Comhairle

The Deputy is getting away from the section.

Mr. Sweetman

Unfortunately that is what may happen to a person in relation to expenses.

Mr. Dillon

If they do not understand it, as I believe none of us understand it, there is only one way of determining it, and that is to go to the courts for interpretation. Is that not so? All that could be avoided if these matters were given adequate consideration by the commission and we in Dáil Éireann knew what we intended to do. Is that not so? If, subsequently, some unfortunate taxpayer gets involved in litigation arising out of what we intended in Dáil Éireann he will become involved in heavy expenses, ending up with a decision of the courts that we had not adequately expressed our intention. There is a well-established remedy for that. You can amend the law to make the will of Dáil Éireann prevail over the interpretation or, as we call it, the misinterpretation, and adequate provision can be made to compensate the individual who has been mulcted by heavy costs, but proceed on the assumption that we had effectively expressed our will in the first Act. Nobody knows what we intend to do and nobody is taking steps to find out.

I should like to be able to say that I believed this was due to some Machiavellian design of the Minister for Finance and that he had some dreadful, dark purpose. I do not believe that is so. I do not believe he has the faintest notion of what he is doing. I believe this was thrust into his hand and that he was told it was something to prevent tax dodgers, something which would sound grand at the South Dublin by-election. We are going to have equality amongst all taxpayers and the rich fellows are going to be made pay. It will not take a feather out of the richer fellows. The Revenue Commissioners will catch up with the richer fellow but they will then go back into battle and begin again, and as sure as there is an eye in a goat, the Revenue Commissioners will catch up with him and nail him again. In the process, however, a growing number of relatively inoffensive shopkeepers, merchants and small manufacturers, who have not got the resources to go in for this kind of thing, will have their ears nailed to a variety of posts, designed to capture erring capitalists and tax dodgers and it becomes a kind of ghastly battle in which the innocent suffer a growing burden of complexity.

I am afraid I am obliged to say that the only genuine beneficiary is the company lawyer and the cute accountant. I remember the day when we could transact income-tax business without any accountant. It cost me only £8 to get an accountant to make out my income-tax returns. With this legislation accumulating, the bill will grow.

Mr. Haughey

Surely it is guineas?

Mr. Dillon

I have no doubt it is. It is growing. They used to do it for two at one time, but it is becoming so complicated now and it takes so long that it is eight, and will be ten by the time this is finished, so that they benefit, the lawyers benefit and the tax-dodgers benefit, while the Revenue Commissioners continue conscientiously to do their duty and the bewildered taxpayer becomes more and more bewildered with the passage of each of these Bills.

I want to renew the suggestion, already made and rejected by the Minister, I understand, that Part IV of this Bill should be postponed until it has been examined by the Income-Tax Commission. I want, and I suppose every Deputy wants, to prevent the exploitation of the tax code in order to, make money for tax-dodgers. Every Deputy wants everybody to bear his fair share of the taxes imposed. But our desire to achieve that end should not send us like bulls into a china shop whirling a scimitar, whether in the form of horns, hooves or knives, because that procedure hurts innocent people much more than the original evil which we seek to abate.

The common purpose can be achieved in the ordinary way, can be done effectively and can be done so that justice is not only done but that everybody sees that justice is being done. That is an important consideration. I think I would be right in saying that, in principle, we are all agreed with the Minister that if there is tax evasion, it ought to be stopped. We are prepared to help him stop it, but we want to know what we are doing. The way to enable us to know what we are doing is to let this matter be adequately examined by the commission we have established for that purpose. If and when that is done, we are perfectly prepared to deal with the Finance Bill in the Autumn or any time of the year when there is adequate information before us properly to consider the substance of Part IV of the Bill now submitted.

Dr. Ryan

We have been discussing this Finance Bill very objectively and without politics. I hope we will not have politics introduced now, but the Deputy cannot help introducing politics. It makes one think that every Bill he brought in here was brought in solely for political purposes. Why must the Deputy always talk about these things?

Mr. Dillon

Because I know the Minister's form for the past 25 years.

Dr. Ryan

It is because the Deputy cannot think of anything but politics. I should like to deal with one point raised by Deputy Booth in reference to Deputies' expenses. I am quite certain if a director of a company could claim he had, let us say, to spend £10 or £12 a month on stamps, that he had to stay at some hotel in Dublin at least two days a week at his own expense, that he had to run a car in his own county to look after the interests of his customers—constituents, in our case—that he had to subscribe to many charities in his county as well as national charities, it would be seen that, when all these were added up, that director would be claiming very much more than the £600 per year we are getting. It is wrong that anybody should think that Deputies are going to get off better in their expenses than any director or any employee under this Bill. We should not allow that notion to get out, that directors will be harshly treated in that way.

Mr. Booth

We do not have to vouch.

Dr. Ryan

No.

Mr. O'Donnell

They would be more than they are if they were vouched.

Dr. Ryan

If the Revenue Commissioners were asked to allow Deputies their expenses on the scale they allow directors, I think Deputies would be better off.

Mr. O'Donnell

Hear, hear!

Dr. Ryan

It is coming near closing time and I do not think I have anything else to add except this point. It was said we had power already. The inspector has power at the moment to get information from the employer only on his liability; he is not empowered to get information on the employee's liability. If the employer, let us say, has allowed £500 expenses to his employee, he need not, under the present law, tell the inspector he has allowed more than £200 and the inspector has to accept the fact that the employee is getting only £200. I want to make that clear because some Deputies said we had power already, without bringing in this section.

Mr. Dillon

What does the Minister mean?

Dr. Ryan

He can allow his employee £500 a year expenses. He need only say £200 and he is not committing any offence.

Mr. Dillon

I cannot understand that. Of course, he is committing an offence if he states something which is not true. If you fill up any return to the Revenue Commissioners in which you make a statement which you know to be false, you certainly commit an offence.

Mr. Booth

It is blasphemy.

Mr. Dillon

I sympathise with the Minister in the complexity of this matter. Anybody who has been concerned in business appreciates the great complexity of these matters. All I am asking is that we should be afforded an opportunity of considering proposals of this kind with some adequate information. I do not think the Minister has it. I do not think he is in a position to give it to us. I do not find particular fault with the Minister's being in that position because I do not believe it is possible for him to accumulate and disseminate in this House, off his cuff, the kind of information requisite adequately to consider proposals of this character.

What maddens me is that we have the machinery now functioning to give us all that information and we have the means at the Minister's disposal to bring into this House the fullest information in regard to all this matter, so that if any of us raised a question which was reasonable or necessary for the proper consideration of this matter, he could say: "Turn to page 38 and you will find the matter dealt with fully there", or "Turn to page 94 of the report and you will find two cases quoted of the conclusions of the commission on this issue. I am not against the conclusions of the commission; I am not accepting the conclusions of the commission. I have considered their conclusions on the evidence, but, having proved the evidence and added to it, in my own experience as Minister for Finance, I am rejecting the commission's recommendation and asking the House likewise to reject it." We know then where we are are. We know what we are doing and we know the merits of the arguments put before us. I submit that at this moment nobody in this House knows what we are doing, not even Deputy Haughey who says he understands the meaning of the sections but admits he has no idea how they will impact upon the lives of our people. And that is what matters.

Progress reported; Committee to sit again.