As well as I remember, the last words last night on this amendment were that the Minister was to look at it between last night and to-day to see if it meant what we thought it meant.
Finance Bill, 1958—Committee Stage (Resumed).
Debate resumed on the following amendment:—
In sub-section (3), page 14, line 18, to delete "business".—(Deputy Sweetman.)
I would ask the Deputy to take note of the definition of "business premises" in sub-section (1) of Section 27, where it says: "...‘business premises', in relation to a body corporate, includes all premises occupied by that body for the purpose of any trade carried on by it." There is a proviso lower down which says: "...except where the reference is expressly to premises which include living accommodation, ‘business premises' does not include so much of any such premises as aforesaid as is used wholly or mainly as living accommodation for any of the directors of the body corporate or for any persons employed by the body corporate..."
Premises, therefore, have a wider definition in one instance and a narrower definition in another. Let us take sub-section (2). This sub-section does not include living accommodation and, therefore, the wider definition will apply. Sub-section (3) does include living accommodation and, therefore, the restricted definition will apply. Whether it is in the wider sense or in the restricted sense we must have the reference to business premises and to take it out would achieve nothing except to remove the sense of it.
Regardless of what it would achieve I want to try and understand what the two sub-sections mean. In sub-section (2) it is the wider definition because there is no mention of living accommodation. But in that sub-section does "accommodation" mean a room with an easy chair to put your legs up to the fireplace or what sort of accommodation is it if you do not have living accommodation?
It really means accommodation for the employee to do his work. "Supplies or services" would mean that he would be supplied with the necessary equipment to sit down, and so on. If that sub-section was not put in it might be held—although I am very doubtful—that these were services that the managing director was getting which were not provided for and for which therefore he would have to pay.
Then "accommodation" there means what one might term office accommodation?
Yes.
Passing on to sub-section (3), this includes living accommodation. Therefore the definition of "business premises" is that included in Section 27 (1) without the proviso. Is that the case the Minister is making?
Yes.
In regard to the words: "all premises occupied by that body for the purpose of any trade carried on by it", let us go back to the shop with the living accommodation over it. The premises are owned undoubtedly by the body corporate but if there is a separate valuation for the shop and the upstairs part of the premises, then it is quite clear that sub-section (1) covers the upstairs floors. I admit that it is intended to be clear but it is far from clear on the drafting. The "body" only occupies the premises for the purpose of the trade, the actual shop premises in which the trade is carried on. Even if we went back on some of the examples we were discussing last night there would, on that definition, be a case for saying that the bank occupied the offices downstairs for the purposes of the trade and that the upstairs was not occupied by the bank for the purpose of the trade carried on in it, but it was occupied by the bank to put the bank manager into occupation of it.
I shall travel this far with the Minister, that it might perhaps be a more suitable matter for discussion on sub-section (1) of Section 27 than it is here, because the Minister has persuaded me this far, that it is more on the definition of "business premises" than on the wording of sub-section (3) that there might be the difficulty which I envisaged. Therefore, I can raise it again on Section 27.
It would be more appropriate to discuss it on Section 27, but may I say that I am assured that when we say: "includes all premises occupied by that body for the purpose of any trade carried on by it" this undoubtedly includes living accommodation for its employees? There were some examples given last night. For instance, if there was a house in the grounds of a maltster where he lived, it would be included in the business premises and, of course, the bank manager's house would, too.
Might I ask the Minister to take the case of a business in another district where there is living accommodation on top? Do I understand that while the manager of the business may be allowed to live in the upper half without coming under the terms of the proposal in this section, the owner cannot without coming under it?
No, that is not the position. The owner would be in a different position, but it is not to be taken for granted that the manager would always have a right.
Who is going to decide whether he has the right or not?
He would have to come under (a) or (b), not (a) and (b) of Section 22 (1). It must have been the custom for more than 20 years for such a manager to live there or it must occur that it is necessary for the business for him to live there.
Supposing the owner is there now, and the owner wants to clear out and requires his manager to live in there, under certain regulations, will the new manager going into these premises have the same disabilities under this section as if he were the owner?
The new manager would probably be under the same disabilities as the owner, that is to say the value of the premises would be taken into account as remuneration of the manager——
Except that the manager would have to have more than £1,500 a year and a director would not.
That is so. On the other hand, if it was customary that a manager always lived in this type of business he would be exempt.
Amendment, by leave, withdrawn.
I move amendment No. 27:—
In sub-section (3) (a), page 14, line 23, to delete "twenty" and substitute "three".
Had the Minister anything in mind when he said 20 years or was it merely——
Perhaps it will shorten matters if I say "ten years".
That has nothing to do with the recent Abbey Play.
The Minister has saved me from making a dirty crack.
I shall put "ten years" in on the Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 28:—
In sub-section (3), page 14, to delete lines 30 to 34, inclusive.
The effect of the amendment would be to alter sub-section (3) as it now stands. We have discussed sub-section (3) fairly exhaustively and it emerges clearly that an employee will be excluded from the provisions of Section 22 provided he complies with (a) or (b) of the sub-section. I am concerned with the fact that, as the sub-section stands, a director of a company cannot come under that exemption. The purpose of the amendment is to have the same exemption available to a director under sub-section (3) as is available to an employee.
I cannot see why there should be any distinction particularly as we have discussed over and over again in this debate the case of the director or manager of the business premises which is typical in this country. There is no doubt that it is a custom, and a very desirable one, that after years of service a manager or higher executive of the type we have mentioned is made a director of the company with some small, nominal shareholding. It gives him a status and security which he would not otherwise have. It gives him an interest in the business and it is an ideal arrangement from the point of view of the parties themselves.
I am anxious, in so far as that custom prevails, that it should not be interfered with or hampered in any way. It is a desirable custom and one that should continue. It applies not alone in the type of country business we have discussed but in other businesses also. It is a trend in modern business management that where you have an executive, in some cases a young executive who shows exceptional promise, that, as an added incentive, he is taken on to the board of directors with a very small nominal shareholding. It is such people I am interested in and I cannot see that the general purposes of Section 22 are seriously interfered with or that the Revenue would be in any way hampered in their work if the amendment were accepted. I would urge the Minister to accept it. I do not want any discrimination against this very desirable practice of making good and faithful servants directors as a reward for their labours.
I am supporting Deputy Haughey in this. He and I were thinking on the same lines when putting in amendments. I cannot see what the purpose of the proviso is. I can understand the view, although I may not agree with it in other aspects, that there is an effort all through the Bill to make the position in relation to directors far more restrictive than in relation to employees, the theory being that the director is likely to be the owner of a substantial block of shares in the company and therefore has some control. But this is not dealing with something that flows in any way from that control; this relates to where there is either a long-standing custom that for the type of business concerned a person of that sort resides on the trade premises or adjacent to it, or that it is necessary because of the type of business concerned. I cannot see why, when it refers solely to the two types of exemptions given in clauses (a) and (b) of sub-section (3), there is any necessity to differentiate between directors and employees.
The tendency in modern times is to abandon the old idea of having no executive directors. The tendency now is to have executive directors even though in addition to them you may have other part-time directors who come in from the point of view of giving their wider background and general knowledge in the determination of the general policy of the company. This matter does not affect them so much; it is the employee director, the executive director against whom these five lines are directed. It is contrary to the whole trend of modern commercial life.
Deputy Haughey has given examples of the type of executive director there may be, the young man learning the job as he should from the bottom next the works and, on the other hand, the old employee of long and faithful service who is promoted towards the end of his time to be a director from the points of view of the acknowledgment of merit that such promotion entails and possibly the additional financial reward also involved. This proviso in these five lines strikes at the root of both practices and I think the Minister will agree that without question they are good practices and should be facilitated rather than legislated against as is done in the Bill as drafted.
All I can say is that this follows the pattern of Part IV generally in that we are treating directors in a different way from employees. The big difference, to begin with, is that the employee comes in for consideration only under Part IV if his emoluments are more than £1,500 a year. In the case of a director it does not matter what amount he gets; he is dealt with under this part of the Bill. We are not as kind, as it were, to directors as to employees because it is felt that a director can wield a good deal of influence with the company to get any amenity that may be going. He would be in a position to get living accommodation if it were available where a company might not go out of its way to make living accommodation available to an employee. For that reason I feel we should be more particular about giving the same concessions to a director as we would give to an employee.
The Minister will agree with me that there is an entirely different principle at issue here. Part IV of the Bill is framed on the premises that one should be more particular in the case of a director because of his powers of selection than one would be in the case of an employee. One may agree or disagree with that but that is not the issue at all in this section. The sole question at issue is whether the arrangement has been prevailing over a period of ten years or whether such a practice is necessary. That is the sole matter at issue here. Once the practice is there I cannot see what difference it makes whether the person is an employee or a director, once the practice is necessary I cannot see, either, what difference it makes whether the person concerned is an employee or a director.
Acceptance by the Minister of the point of view put forward by Deputy Haughey and me does not involve the Minister in any weakening in his general line that the director must be treated more restrictively than the employee. I am not suggesting that we agree with that general line but the acceptance or deletion of this proviso does not breach that general line. This relates only to the two matters contained in clauses (a) and (b) and there is nothing in (a) or (b) that breaches the difference in the general line which the Minister has taken as between director and employee.
I should like to know whether Deputy Haughey has in mind a man who was a manager and became a director.
And who continues to be a manager.
That is different from a man who was a director and became a manager.
A case in point would be that of a country, or, indeed, a city public house, where a man was a manager for 20 years and at the end of his days became a director. He still continues in his capacity as a manager. The very fact that he has become a director would exclude him under this section. That is one of the cases I have in mind.
That is a case with which I have some sympathy because it is taking from a man a benefit which he has enjoyed for some years. However, against that, in all probability if he were a director he would be better off and could afford to pay this small rent. It will be very small because it will be on the poor law valuation of the part of the premises occupied by him. I have some sympathy with the idea behind Deputy Haughey's amendment if it applies only to a case where a man has been accustomed to this amenity for some years and then becomes a director. I shall look into the matter.
If it is to be only a very small amount, it is not worth while complicating, the section from the point of view of inserting another proviso. I do not think that it is worth complicating the whole section to provide for one type of person. The difference is very trifling. I accept that the Minister could argue that his acceptance of the amendment would breach his general line that there is a difference between director and employee. I can see the Minister's point of view if acceptance of the amendment would involve such a breach but as far as I can see it does not involve such a breach at all.
The position is set out quite clearly in the two clauses mentioned and I urge the Minister to look at it from the general point of view between now and the Report Stage. I think that, if he does, the Minister will find that the acceptance of the amendment in full is not a breach of a general line of differentiation between directors and employees. It is hardly worth while, having regard to the other things involved, to make half a bite of our cherry.
I thank the Minister for promising to look into the matter. I support what Deputy Sweetman says because sub-section (3) will still apply to employees only.
It can only apply to the executive director.
It still deals with employees only. It is only the case of a director who is also an employee that we are interested in.
It could still be a substantial matter. I remember myself being one of a group of persons who went into premises which we were thinking of taking over for the purpose of commencing a certain manufacturing business. We did not take it over because the price was too high. I remember saying: "That is the house the manager lived in and if we take it over I am going to have it for myself." It was a lovely place and if some money had been spent on it it would be a great residence.
The Minister could only have taken that house over if he was a director in the regular employment of the company.
I admit that I would hardly qualify under this.
Amendment, by leave, withdrawn.
Amendments Nos. 29 and 30 may be discussed together here.
I move amendment No. 29:—
Before sub-section (4) to insert a new sub-section as follows:—
( ) Sub-section (1) of this section shall not apply to expense incurred by a body corporate in or in connection with the provision for any director or employee of the use of a motor vehicle or other transport facilities provided that it is proved to the satisfaction of the Revenue Commissioners that such facilities are availed of by such director or employee for the purposes of his employment only.
I think the purpose of the amendment is quite clear. Apart from the particular thing that the amendment tries to do, I should like the Minister to consider again the general implications of Section 22. We have all spoken of the all embracing nature of that section and of the trouble and difficulty it will put upon business people generally and also upon the Revenue Commissioners. The idea behind these two amendments would, to some extent, reduce that trouble and hardship. Apart from that, I think it can stand on its own legs and be justified per se.
There is no doubt that a clear case can be made for the provision either of a motor car or transport facilities for either the director or employees of certain firms. I have in mind a business which has a very great number of branches. There is a type of person in a controlling capacity and it is absolutely vital to that person that the services of a car and driver be placed at his disposal in order that he can efficiently control and supervise the activities of the different branches. That is only one instance and I am quite certain Deputies would be able to give 100 more examples of that sort. However, in so far as it is one instance, I think it proves my point. There is complete justification for exempting from the scope of this section the types of benefit envisaged in amendments Nos. 29 and 30.
In so far as the amount which is to be allowed, which would be exempted in my particular amendment, I was relying on sub-section (6)—which deals with apportionment—to mean if the vehicle, car or service were used outside the employment then, of course, the amount which was not strictly applicable to the employment could be apportioned, and would automatically come within the ambit of the section. I would press upon the Minister the desirability of accepting, if not my amendment, then at least amendment No. 30, or failing that, accepting the principle that in so far as the director or employee used exclusively for business purposes a car, motor vehicle or transport facility of any kind, they should not be treated as the sort of benefits which are taxed under Section 22.
Frankly, I am in some difficulty in relation to the problem from the point of view of interpretation. I am not particularly clear under Deputy Haughey's amendment whether the fact—to quote the example I gave yesterday—that an employee or director drives on company business down to Nenagh and then, having finished his business in Nenagh, drives out to the golf club to play golf after his business is over in the evening, per se involves him in a charge for his pleasure trip which invalidates the whole user of the car for business purposes otherwise. I think there is some doubt on the drafting on that line.
I am all against a person who is the director of an investment company, to quote an extreme example, who can not for the purposes of his business require a motor car, getting the use of a car free on the company's account. It seems to me that is a method of avoiding his personal director's responsibility that he should not avoid. In such circumstances if the job of this particular person with the company does not require a car for the business of the company he should not be given a car free under any circumstances. In so far as that limited scope is covered, I am at one with the Minister.
However, it seems to me it is absurd to try and bring in a basis of apportionment where a person genuinely needs a car all during working hours. Take the example of a high-grade commercial traveller, the case of an employee earning more than £1,500 a year. It seems to me absurd to suggest that when that employee goes down the country, when he has finished his work and is marooned in a country town away from his home, the ordinary small relaxation that he will require by the usage of his car that evening, should be treated as something for which he should be assessed. That is the purpose of the phraseology of mine in Section 30.
It seems to me it is part of that man's business to keep moving around the country, and that when he is away from his home base down the country you cannot classify him in the same way as a person is classified under the Income-Tax Acts prohibiting any allowance for travelling to or from his place of business. That person is down the country on business and requires his motor vehicle during the period he is working—during his working hours —and he should be able to utilise that vehicle after working hours without invalidating the whole procedure provided. If I have not expressed that perfectly it is merely a mistake in drafting. It is clear that person is a person who needs his motor vehicle genuinely for the due performance of his business.
I assume the Minister will say there have been cases where people have charged motor vehicles on company accounts even though they had no real business to use those cars for company business. By all means let the Minister stop that loophole but, where a person does, for the purposes of his business, genuinely require a motor car during his ordinary working hours I think it is silly, pernickety and finicky to tax him on the usage of the car in the evening after working hours are finished.
It is a matter of degree to a great extent. First of all, the businessman, say Deputy Haughey, has a car of his own. If he has to go down the country on business he is entitled to charge expenses and to that extent he is allowed expenses when making up his income-tax returns. I do not see how I can put the employee in a different position. The employee is supplied with a car by the company and there are degrees of usage. Quite true, some of them may use the car on business 90 per cent. of the time or maybe even more, and some of them may use the car only 50 per cent. of the time on business purposes. I think for that reason you will have to have an investigation in each case. The practice is, of course, that if men are working with a company doing the same type of work the inspector says: "We will take it five-sixths for the company and one-sixth for yourself." That is not charged as a rule unless something occurs where the inspector thinks a charge should be made. To depart from the principle of having the power to investigate each case would not be right and would not be just between one person and another.
I do not see how the two Deputies concerned could really insist upon this amendment without some powers left to the Revenue Commissioners in the matter. It might very well be, indeed, that if the Revenue Commissioners were to examine the case of a certain company who had travellers on the road, for one reason or another they might find that on the average they were using their cars over 90 per cent. for business purposes, and they will say: "We shall not bother going after them for income-tax." Things might very easily change after a year or two and, if we were to accept this amendment, as far as I can see, they would have no power to investigate the thing further. In case conditions changed, they would have no power to go back and examine again. If we do not accept this amendment, the only difference is that they would have power to go back again. In practice, if conditions remain much the same with that company, there will be no change made in the original agreement.
I am afraid I must disagree with the Minister when he talks about power. The amendment has nothing to do with the power of the commissioners to investigate. As a matter of fact, Section 22 has nothing to do with the power to investigate any such benefit.
I thought they had got all the possible powers to investigate anything under the sun as a result of the earlier Bills.
The amendment as I see it would merely give the Revenue Commissioners authority, after they had investigated any particular case, to say: "Very well. That motor vehicle or that facility is provided exclusively for business purposes and therefore shall be exempt from Section 22."
There is one other little aspect of the matter that I should like to put to the Minister. If a commercial traveller is supplied with a car and the inspector of taxes in any year says that the value of that car is £200 and that he will disallow one-fifth of it as being private, up to now, if that one-fifth was disallowed as being for private use in so far as the company was paying all the cost of the car, the disadvantage of the disallowance of that one-fifth fell on the company. Now, the Minister, by Section 22, is going to ensure that any such amount disallowed as being for private use will be added on to the individual's income and taxed accordingly.
The Minister does not mean to do this but what he is doing indirectly, in so far as this disallowance for private use is concerned, is taking the disadvantage away from the company and putting it on the individual employee. That is just one little disadvantage of the section as it stands at the moment. Surely I am right when I say that the Revenue would still be entitled to investigate everything and see what the facts are and then come to a decision. All I want to do is to give them the authority, when they have investigated it, to say: "Very well. All of that motor vehicle or all of that facility or a certain proportion of it is exclusively for business purposes and, therefore, cannot be taxable in the case of the individual."
How can the Minister say that it takes away the power of investigation when Deputy Haughey's amendment says, "provided that it is proved to the satisfaction of the Revenue Commissioners"? Does not that imply investigation?
If sub-section (1) does not apply, we are back to where we are.
The amendment says, "provided that it is proved".
Yes.
You have to prove first.
That implies investigation. Otherwise, how can you prove to the satisfaction of the Revenue Commissioners?
If I am to accept that, I want to know what do you achieve by it. Is not that what will happen? If the Revenue Commissioners examine the case and find that the car has been used exclusively for the company they will say that, in fact, sub-section (1) does not apply because there is no element of remuneration in this.
Amendment, by leave, withdrawn.
Amendment No. 30 not moved?
Am I prohibited from moving amendment No. 30, Sir?
No. The Deputy may move it but we agreed that amendments Nos. 29 and 30 were related.
We were discussing them together but I should like to move the amendment. I move amendment No. 30:—
Before sub-section (4) to insert a new sub-section as follows:—
() Sub-section (1) of this section shall not apply to expenses incurred by a body corporate for the provision of a motor vehicle which is required by a director or employee during the period while he is engaged on the business of the body coporate exclusively for that business.
Is the amendment withdrawn?
No, Sir. The case has been made in the discussion but I am not withdrawing it because I think I am right.
Amendment put and declared lost.
Are amendments Nos. 31, 32 and 33 related?
Yes, they are all related. I move amendment No. 31:—
Before sub-section (6) to insert a new sub-section as follows:—
( ) Sub-section (1) of this section shall not apply to expense incurred by a body corporate in or in connection with the provision, for any person who has not previously been resident in the State and who is employed by the body corporate in a training or advisory capacity for a period not exceeding three years, of living or other accommodation or of transport facilities.
I think it will be clear what I have in mind in this amendment. It very often happens and is likely to happen much more frequently in the future that an Irish company or trading concern, particularly in the manufacturing business, brings to this country an expert or technician from abroad and keeps him here for a certain period while he is either installing machinery or training workers or doing some other work of a technical or scientific nature. Everybody will agree that practice is very desirable and that it certainly will be on the increase in the future. With the development of modern technology, the practice is bound to increase very considerably.
I also have in mind in regard to this amendment the efforts which we are making to develop industries in the undeveloped areas under An Foras Tionscal. It is very likely that, if you were to say to some foreign expert or technician that you wanted him to go to Westport, for instance, to carry out the type of service I have in mind, the first question he would put is: "Can you provide me with living accommodation?" It is very likely that in a great number of these cases the provision of living accommodation will be an essential part of the contract. My amendment seeks to exempt from taxation the provision of such living accommodation for such person from the provisions of Section 22. It is a perfectly reasonable suggestion.
It is a very desirable thing in the national interest to persuade the type of people I have in mind to come here. In persuading them we will have to offer inducements and benefits of one sort or another. It would be no use offering them inducements if they are going to be taxed on them. Therefore, for the limited type of person involved and in view of the importance to the national economy, I would ask the Minister to accept amendment No. 31. Do you want me to deal with the other amendments now?
I think they ought to be discussed separately.
Are we dealing only with amendment No. 31?
Yes. This is one of the strange amendments to this Finance Bill, one of the strange pieces of the discussion on the Finance Bill, because it is the only case throughout the whole Bill in which I think there is any prospect of our being, the Minister and I, of the same mind against Deputy Haughey. I am afraid I do not agree with Deputy Haughey in this amendment. I can quite see his point of view that, when foreign technicians or experts come in here, they want to know where they stand. Very often living accommodation may have to be provided for them. That has to be done by the company employing them. In future, it will have to be done, bearing in mind the law in relation to the fixation of terms.
In spite of being blackguarded to the contrary by Fianna Fáil when I was Minister for Finance, I always took the view that it was improper to give rights to foreigners that we were not prepared to give to our own people. Deputy Lemass, on more than one occasion, and the Fianna Fáil Party as a whole, frequently adopted propaganda tactics against me, alleging that I was giving to outsiders rights and privileges in relation to taxation that I was not prepared to give to our own people. That was untrue then and it is, I think, a principle that should not be preached now. If the people concerned want to make it easy for foreign technicians or experts of the type to which Deputy Haughey has referred, they must do so within the terms of the employment of those experts or technicians and not through the medium of a tax remission which is not available to our own people.
There may, of course, be differences in the methods of assessment in regard to the person who is resident for a time but not ordinarily resident. But that is not the same thing at all. I disagree with Deputy Haughey in this. For all I know, the Minister may agree with him. That is the Minister's own business but, so far as I am concerned, it would be unwise for us to accept an amendment of the type suggested, even though I fully appreciate the need for such foreign personnel in the capacities outlined by Deputy Haughey.
I do not agree with the principle of making a difference between one person and another. It would be wrong for us to give privileges to foreigners which are not enjoyed by Irish citizens and, therefore, I could not agree to accept this amendment. It is quite possible, as Deputy Haughey says, that a company here, needing a foreign technical adviser, would be obliged to provide a house for him. That can be done, but there is no reason why the Revenue Commissioners should help them to do so; they can do it in the ordinary course of business. They can make whatever arrangements are necessary and whatever returns are necessary afterwards in their submissions for income-tax.
Obviously I have no option but to withdraw.
Amendment, by leave, withdrawn.
I move amendment No. 32:—
Before sub-section (6) to insert a new sub-section as follows:—
( ) Sub-section (1) of this section shall not apply to expense incurred by a body corporate in or in connection with the provision of hostel accommodation where the accommodation is provided for the staff generally.
The Minister and framers of the Bill have to some extent accepted the principle of this amendment by providing in sub-section (4) that sub-section (1) shall not apply to the provision of meals in a canteen. My amendment seeks only to extend that a little further. I shall give an instance of the type of case I have in mind. I am concerned with the case of an engineering firm which is carrying out contractual work in a remote area and where it has been necessary for them to provide accommodation for the staff in the form of hostel accommodation. It is desirable that accommodation of that sort should be excluded from the provisions of Section 22. I can imagine an over-zealous inspector endeavouring to apportion the value of such accommodation and taxing the employee or the contractors accordingly. I do not see any danger in the amendment. I think it could be accepted. I urge the Minister to accept it also on the general grounds I mentioned in relation to the other amendments—that is that it would cut down to some extent the volume of returns and administrative work arising out of Section 22 as a whole.
Although Deputy Haughey gave an example, I cannot imagine employees earning over £1,500 a year living in hostel accommodation, or company directors for that matter. It may be said that there is no reason why the amendment should not be accepted, but I do not see any reason why we should put in an amendment like this, an amendment which will never be used for the benefit of anybody.
Do I understand the Minister to say that he thinks Section 22 will never be invoked to make such accommodation taxable?
Yes.
If that is the Minister's recorded opinion, I am satisfied.
Now, look here. This is a trap into which many a man has fallen. If you go before the Revenue Commissioners for an appeal on income-tax and tell them what the Minister said in Dáil Éireann the answer is: "A lemon"! What he said or what he did not say in Dáil Éireann does not affect anybody. His opinion carries no weight whatever.
None.
The Revenue Commissioners, the Circuit Court, the High Court and the Supreme Court will interpret the wording of the statute. The Minister's intention and the Minister's statement here that the section will not be invoked is worth less than the breath used to utter the undertaking. Is not that so? The Minister has no power to state that such a section will not be invoked.
None whatever.
It will be invoked by the Revenue Commissioners in the course of their duty. I have some experience of the Revenue Commissioners. They will do their duty—no more, no less—no matter who is Minister for Finance.
Amendment, by leave, withdrawn.
I move amendment No. 33:—
Before sub-section (6) to insert a new sub-section as follows:—
( ) Sub-section (1) of this section shall not apply to expense incurred by a body corporate in or in connection with the provision of any medical or hospital benefits.
The same arguments apply in relation to this amendment. Good employers to-day have all sorts of welfare schemes for their employees. It is very desirable that they should have such schemes. It is a very excellent trend and one that should be encouraged. Progressive companies put into operation schemes of one kind or another to relieve their employees of the anxiety of having to look after themselves when they are injured or fall sick.
I am endeavouring in this amendment to see to it that in so far as a company provides such facilities and benefits for its employees, those benefits would not be measured as income in the hands of the employees. For instance, I could imagine an inspector of taxes taking the cost of a medical welfare scheme and apportioning it out amongst the employees in an endeavour to arrive at an amount of taxable income in their hands because of it. I do not want to elaborate on that. I think what I am seeking is perfectly clear and I would ask the Minister to accept the amendment.
We are dealing here with the case of an incorporated body who pays the hospital or medical expenses of an employee. The question is whether that should be regarded under this section as part of the income of that employee, the employee, of course, being above £1,500 per year; we must keep that in mind. We cannot exclude this payment from the section. Deputies are aware that my predecessor provided for tax relief in respect of payments by an individual for insurance against medical, surgical or other expenses arising out of illness. That provision should be a sufficient gesture for employees. As far as I know, that section would apply also to directors if they pay a premium to the medical insurance company set up at that time and that premium would be exempt from income-tax. Therefore the State has done sufficient in that direction and for that reason we should not accept this amendment.
I do not want to be argumentative, but there are two entirely different things involved. One is the case where an employee himself pays an insurance premium to provide against medical expenses which may or may not occur, but what I have in mind in my amendment is the case where a company pays the actual medical bills— for instance, the case where it employs a doctor continually on a retainer, or employs a nurse in a factory or has a standing arrangement with a hospital that any of employees injured in an accident will be looked after. That is a completely different thing altogether from what the Minister has mentioned. I am aware of the provision the Minister mentioned and it is a very desirable and good thing but it has no connection whatever with the facts and circumstances with which I am concerned in my amendment. As a matter of fact it would not apply at all, because in the case of an employee or a director who is receiving these benefits under some scheme from his employers he would not have the type of insurance to which the Minister referred because he would not need it.
I think Deputy Haughey has an absolutely incontrovertible case on this amendment where a company has a doctor to look after its employees, an employee goes to see the company's doctor, and the company pays. As I understand the Minister, the payment made by the company to the doctor must be added back to the employee's salary for tax purposes. If that is the case it seems quite cracked. How, for example, is the amount paid to the doctor to be apportioned?
I do not like mentioning individual companies but let me take a State company which it is perfectly proper to mention here. Bord na Móna have a regular doctor to attend Bord na Móna employees in County Kildare. Supposing one of the Bord na Móna employees who is in receipt of a salary in excess of the maximum provided here attends that doctor, what proportion of the annual retaining fee paid by Bord na Móna is to be added back to the employee's salary? There are probably only six Bord na Móna employees in County Kildare who are over the maximum salary mentioned here and there are 500 Bord na Móna employees below that salary. The doctor is paid a composite annual sum for looking after the 506 Bord na Móna employees. Is it to be 1/506th of the annual fee that is to be added back as expenses or is it 1/6th? Surely the Minister is not trying to add back expenses of that sort for tax purposes. First of all, it would be ludicrous to do it administratively and secondly it would be utterly bad social policy.
I can understand the Minister's view in saying he wants to push people into the voluntary health insurance scheme. I did, and that is why I introduced the provision in 1955 in advance of the introduction of the voluntary health insurance scheme. Wherever an employee is to be responsible himself for medical costs, as the Minister said, what was done in the 1955 Act is enough and the State need not do any more. However, it is a horse of a different colour when the company concerned is providing a medical service in looking after its personnel. Let me say quite frankly that the company does not provide that medical service entirely out of its kind heart. It does it because healthy employees are of more benefit to the company than unhealthy employees, because it is better from the company's point of view to have small ailments attended to professionally and quickly rather than that they should be let drift and become fairly serious, when there would be a greater degree of absenteeism.
In cases where the company does provide a doctor to attend on an employee or director concerned as part of the general service for all the employees of the company—and not singling out one or two, because I could see possibilities of abuse there— it seems to be quite outrageous to attempt to add back the cost of that service or any part of it for tax purposes. I sincerely hope therefore, even if the wording of Deputy Haughey's amendment does not get exactly what is in his mind or what is in my mind, that the Minister will introduce something into this section to ensure that that cannot be done if that was what was originally intended.
I think I know what the Revenue Commissioners will do in this case. They will estimate the value of the medical services or hospital services provided, estimate the probable premium that would have to be paid to obtain those services and divide that premium over all the employees and add it to the man's taxable income which comes within the appropriate category and say that so much is the premium that would be appropriate to him in a neutral health scheme. Suppose the Revenue Commissioners adopt that device of determining administratively what is to be debited to an employee for the purpose of taxation, the result, it seems to me, is the very reverse of the general purpose of legislation in this House.
The Minister himself says—and I gather with approbation—that the House sought to encourage people to join the voluntary health insurance scheme by exempting them from taxation on their premiums. It appears to me that, in the absence of something on the lines of Deputy Haughey's amendment, we will do exactly the reverse where a firm has been providing a voluntary health scheme for its own employees. We all know cases in the City of Dublin where people are not obliged to take out a policy under the voluntary health insurance scheme because under their conditions of employment they have, and have had for generations, all the facilities—and more—available to them under the company health scheme.
I cannot help thinking that the only result of failing to incorporate Deputy Haughey's proposal will be for the company to introduce a right for its employees to opt out of their health scheme whereupon the man paying the premium to the insurance company would get it allowed for income-tax. Does the Minister want to bring about that situation? I do not think such a situation ever occurred to his mind. I cannot imagine that he wants every existing health scheme operated by a company to be disrupted by the provisions he is making in this Bill. I do not believe he has thought of it; I do not believe it has been provided for and I think the reason it has not been thought of, or not provided for, is that nobody sat down to consider the implications of these provisions and they are unable to do so because nobody who is in danger of being caught by these provisions has been given the opportunity of putting his point of view.
I cannot imagine, if the Income Tax Commission had been considering these problems, that the points would not have arisen and that those who are administering schemes in the cases referred to by Deputy Haughey would not have been invited to come and give evidence and say what the consequences would be on their schemes if this legislation in its original form were enacted.
I agree with the principle of Deputy Haughey's amendment, but I think it is only one of dozens of such amendments that will, by experience, prove to be necessary. This is the only one that will be made. I think this amendment only highlights the fact that we are stumbling about in the dark. It just happens that some of us have come in contact with certain problems such as that outlined in Deputy Haughey's amendment and we are raising them. Many others of us can see problems arising out of this Bill, but we are reluctant to put in amendments because if we do we would have to declare a personal interest in that we knew such a case. That is an onus that I do not think should be thrust unnecessarily on individual Deputies.
There is no reason why a man should feel any delicacy in going before a commission or an inquiry and pleading a cause in which he has a personal interest because everybody knows that it is because of his personal interest he is appearing there. The circumstances are very different here. Quite clearly Deputy Haughey has been brought in contact with something that has come to his attention in the ordinary course of his duties as a professional man studying revenue matters, but there are many others of us who know of analogous cases but we are precluded from mentioning them because it would mean declaring a personal interest.
I renew my suggestion to the Minister that this part of the Bill should be submitted to adequate inquiry and examination. It can then be brought in here again in the light of that examination and an intelligent decision reached. As it is, I warn the Minister that this is but one of many, many instances in which a degree of disruption, inconvenience and very possibly injustice, will be wrought by this part of the Bill of which I do not think he had any anticipation and which I do not believe he had any intention of inflicting.
The object of this part of the Bill is to put benefits in kind on the same basis as benefits in cash. If I were to take the stand that I would allow no exceptions, I do not see that there would be anything unjust in it. Deputy Dillon, of course, may say that several other things could be raised. One thousand things probably could be raised, but that does not say that there would be a good case for raising them——
No, but the case should be heard.
There might be no great case to make for them. If I were to come along with a proposition that a man would be taxed on benefits in kind no doubt Deputies could think of 1,000 exceptions that could be made in their opinion. But if another Deputy —leaving the Minister out of it—says: "make no exceptions", that is a point of view, and it is the point of view that I started with but we did make certain exceptions.
Coming to the present point, if a company, as sometimes happens as we all know, has an employee working for it who is very faithful and of whom there is a high opinion and if he has to go to hospital, the hospital bill is paid for him. Under the present law he would be taxed on that because it is cash.
What does the Minister say?
That is cash. Therefore, under present law he has to pay on that.
Nonsense. Does the Minister mean to say that if the employer pays the hospital bill he is taxed on it?
I am putting this case where a man has to go to hospital and gets the cash from his employer to pay the bill.
No, but if the bill is paid for him——
The employer puts it into his remuneration for the year. He would have to pay on that at present. The object of this part of the Bill is to put benefits in kind on the same basis as cash payments for expenses. The purpose of this amendment is to say: "Take medical expenses out." I am saying: is it not logical if the employer is giving it in cash and saying: "Here is £50 to pay medical expenses," the man has to pay income-tax on that?
If, on the other hand, the employer says: "We have a scheme here, we will pay them for you," is it not quite logical to say that they should pay on that? The logical thing would appear to me to be that, as we are dealing with benefits in kind and bringing them into line with benefits in cash, if the employer pays the hospital bill for directors and employees in receipt of over £1,500, that benefit should come under Section 1.
In spite of what Deputy Dillon has said to-day, people do think that the Minister for Finance can help them in their income-tax difficulties and we get letters every day telling us that. I get letters very often from people complaining that they are not able to pay their income-tax bills because of medical expenses. The complaint often is: "I cannot pay because of medical expenses" but that does not absolve them. They must pay regardless of medical expenses. Not only do they not get an allowance for medical expenses under the income-tax code but neither do they get time to pay for that reason. Medical expenses do not constitute a special reason for getting time to pay.
If the ordinary employee who has no kind employer to look after his medical expenses and pay them for him does not get an allowance for these expenses would it not be unfair that a director or an employee in receipt of over £1,500 a year should get this concession —that his medical expenses should be paid for him and that they would not come under sub-section (1)? The case was made of a doctor to a company. Deputy Sweetman mentioned the company but that does not matter. In that particular case the usual thing is that a doctor treats a person practically by way of first aid but, if there is anything serious the matter with the employee, that company doctor tells him to go to his own doctor with his complaint. I have not the slightest doubt about such a case as that. There would be no such thing as tracing that up.
But there can be under this section of the Bill. It could be brought to that and it could be charged up to the doctor's salary. That would be nonsensical.
It would, of course, be nonsensical.
But the Bill, as you have drafted it, allows that to be done.
We must have some regard to common sense. If the Revenue Commissioners know that a director of the Turf Board was down on the bog, caught his finger in a machine and got a slight bruise on it, and the doctor put a piece of elastoplast on it, there would be no question of charging that up against the director. To do that would be absurd and no one would do it.
There is a firm in Dublin which, to the best of my knowledge, provides medical attention for its employees. Whether it is a bruised finger or an organic disease, the employee consults the doctor who makes provision for him. He may give him an appropriate bottle or it may call for hospitalisation. It seems absurd to me that any employee receiving treatment from that doctor should receive an assessment for it from the Revenue Commissioners.
If he is under the £1,500 figure he would not get an assessment. I am dealing with the case where there is no medical scheme but where an old and faithful employee has big medical expenses and his employer gives him £50 to cover them. That is in the nature of a bonus, if you like, and the employee pays income-tax on that. We are dealing with the case of making benefits in kind the same as benefits in cash. Therefore, if the employer has a scheme, it is only right that we should say that the value of that benefit in kind must be taken into account.
The Minister envisages a situation in which a firm has a medical scheme and all its employees heretofore could avail of that scheme without liability for income-tax. However, hereafter any employee or director with more than £1,500 a year will have to pay income-tax on any treatment he receives under that scheme whereas any employee with less than £1,500 will continue to benefit without liability for income-tax.
Yes, where there is a scheme.
We are now going to divide all these schemes into two classes. Hereafter the director or employee with over £1,500 a year will have to render an account of any illness suffered by him during the year, when he availed of the scheme and the extent to which he availed of it. All that must be assessed by the Revenue Commissioners and on that he must pay income-tax.
That is right.
Are we going absolutely dotty? Surely we cannot put on the Revenue Commissioners a duty that they cannot possibly discharge? It will come down to this—that you will get some scrupulous individual who will make an elaborate calculation and make a return to the Revenue Commissioners that he had gastritis in January, diarrhoea in March and some other complaint in August. He will say that on each occasion he got a bottle and on one occasion he was hospitalised for two days while they X-rayed him to find out if he had got gallstones. He invites the assessment of the Revenue Commissioners on that. The man sitting at the next desk to him will say: "Let them blooming well find out for themselves if they are fit. I am not going to tell whether I had diarrhoea or gallstones."
Remember, it is the duty of the Revenue Commissioners to find out if he had diarrhoea or gallstones. They have to find out what his income was, and if there are doubts about the state of his bowels they are bound to assess him and it is then for him to prove that they are wrong. That is the reductio ad absurdum of this section, but it is obviously wrong to legislate in such a way as to create impossible conditions for an honest taxpayer and to impose impossible duties upon the Revenue Commissioners.
I agree with the Minister for Finance entirely when he says that in the course of a discussion on a measure of this kind every conceivable contingency is raised. We could raise 1,000 cases, each for separate consideration, to see in how far these proposals would impinge upon them and I agree with the Minister for Finance that that procedure for legislation is not practical. It will not do, and you cannot carry on Government if every Act of Parliament is to be examined in that way in this House.
I agree with the Minister for Finance that an inquiry, if it is to be carried out at all, should be carried on elsewhere and by a different kind of body than by a committee of the whole of this House. That is the reason I am putting it to the Minister that the impact of this part of the Bill should be examined by a body set up for that purpose, either by us in special committee, or by the Income-Tax Commission so that every case can be put before them and, having given every case due consideration, they may put a lump block of cases to one side and say those are the hard cases for which a Legislature cannot legislate. There will always be hard cases for which a Legislature cannot legislate and society must carry on as best it can, avoiding in so far as it can the creation of hard cases. Here there are well defined types of persons and services which I think ought to be excluded from this.
The Minister has conducted some kind of inquiry of that sort himself and, as a result, he has departed from what he himself said was the pure logic of this legislation. It is only a matter of degree, and all I am asking is that there should be an informed inquiry into the circumstances of our taxpayers to determine to what degree should our discretion be exercised to exclude benefits, other than food, which have already been excluded under the Minister's proposals. I think, perhaps, the very format that I have given for arguing the case originally made by Deputy Haughey illustrates the extreme difficulty of the reductio ad absurdum in a matter of this kind, and further highlights the necessity for an inquiry.
I do not believe the Minister for Finance himself believes that the Revenue Commissioners can conduct the inquisition that would appear to be necessary on the employees of a firm earning more than £1,500 a year where a medical scheme is in operation. I believe his view is that it is not worth while legislating to exclude this and that, in fact, the provision requiring the Revenue Commissioners to take cognisance of it will be a dead letter from the date of its enactment. I think that is wrong, and I think Deputy Haughey's amendment is deserving of support on its merits, for its actual content, and also as illustrating the indisputable need of adequate inquiry into the full implications of this part of the Bill.
We are inclined to talk a good deal here in reference to the fact that this will apply only to employees whose incomes will exceed £1,500 a year. I want to sound a note of warning there, and this also applies to the point Deputy Sweetman was making about employees of Bord na Móna. As I read the qualifying section, that is Section 24, sub-section (3), it is the gross income that cannot exceed £1,500 a year. That is the total amount paid before any deductions are allowed. In other words, take the case of a commercial traveller who is getting an income of £600 a year. If he is paid, as any commercial traveller would have to be paid to-day, £1,000 a year to cover car and hotel expenses he comes within the section even though his income is, in fact, only £600, because sub-section (3) deliberately rules out deductions. When, therefore, we talk about the type of people who come under Part IV let us remember that the scope will be much wider than covering people earning £1,500 a year, £1,500 a year is the gross before any deductions are made at all.
There is no doubt whatever that Deputy Haughey is quite right in this, and the effect of the definition bringing in Rule 9 means it is the gross amount that is concerned. I must confess I am completely flabbergasted by the attitude the Minister is adopting towards this amendment. I could understand his view if he said he cannot accept it on the drafting as it is, that it might offer loopholes or something like that, but to suggest where a company has a scheme, under which it gives medical and surgical benefits, that automatically makes the amount of those benefits taxable, and that the Minister wants to do that, is utterly incomprehensible to me.
I know one firm in the city which has a great many employees who will come within the definition of Section 24. That firm is one of the best employers in this country and it provides not merely general medical benefits but also surgical benefits, radiographer benefits and every type of medical benefit without any charge to the employees of that firm. If the Minister's interpretation is correct then there will have to be spread over those employees in that firm the cost of all these benefits without regard to the fact whether an individual employee makes any use of the benefits in the actual year assessed or not. The Minister may say the proportion may be small. The proportion may be small but in the firm I have in mind it is certainly a high percentage.
I object violently to legislating here along a particular line and then saying that because the percentage is small the Revenue Commissioners are not going to bother about it. That is not the way to legislate and, in fact, that is not the way the Revenue Commissioners do their duty. If they did operate on that basis they would not be doing their duty. They must have regard to the law as it is laid down here, not to any expression of opinion.
The whole tendency of social legislation, the social view, the social approach to industry, as well as the efficient industrial approach, is to have the widest possible scheme, often by insurance, of medical and hospital benefits for the advantage of employees in industry. Not merely will there be in future no encouragement towards that approach but there will be deliberate discouragement. I can see considerable objection by employees if they find themselves, without their consent, having something suddenly lumped on to their notional income in a particular year without their having had to incur any expenses. The principle contained in the amendment by Deputy Haughey is one, in my view, to which no sane person could object and it is one that should be supported on all sides of the House.
I want to draw attention to something that I think is important. When the discussion began on this section the Minister for Finance staggered me a bit by saying that his attention had been drawn to a case where firms were paying servants £600 a year salary and allowing them £800 a year expenses. That seemed to me on the face of it to be an almost dramatic revelation but Deputy Haughey has just pointed out that, if you have a good commercial traveller and are giving him £600 a year salary, he may easily draw £1,000 a year expenses if he is a good man and covers ground well and keeps moving. That had not occurred to me before and I very much doubt if it had occurred to anybody else. I venture to swear that when Deputy Corish heard of a man who was being paid £600 a year salary and £800 expenses, he thought of a bedizened villain smoking a Havana cigar, floating about the country in a Bentley car.
Why pick on me?
Because I so highly esteem the Deputy's judgment. Frankly, that was the picture that was presented to my mind.
The Deputy is trying to represent my judgment as being bad.
I paid the Deputy a compliment by saying it was analogous to my own. The first impact of that picture on my mind was of a fraudulent person who was drawing the bulk of his income under a fraudulent disguise but we are now faced with the interesting fact that the commercial traveller, whose real salary is £600 or £700 a year, could very well come within the definition of a person in receipt of £1,500 under this Bill. I wonder would the Minister cross his heart and hope to die and say, when he was thinking of this Bill, did he think of a commercial traveller with £600 a year? I bet my bottom dollar that he did not because he had not time to make the adequate inquiry necessary into the provisions of this part of this Finance Bill.
The more I listen to the debate the more it is borne in on me that those of us who have applied our mind, with as much industry as we dispose of, to this Bill know far too little about it intelligently to pass judgment upon it. If that is our condition, what are we to say of the 140 other Deputies who know sweet Fanny Adams about it, at a time when the lead in this matter is being given to an absolute majority of Dáil Éireann by a Minister who, to say the very least of it, has taken a very cavalier view of the details of this measure?
I am obliged, Sir, in the light of this amendment, to recall to the House something I said earlier on in our proceedings. The function of the Revenue Commissioners is to protect the revenue and from time to time they think up comprehensive schemes to protect the Exchequer. They put those schemes into pigeon holes until they can find a Minister with a clear majority who, they hope, will not question the Bill. Out comes the scheme. They clap it into a Finance Bill; push it into his hand; shoot him into Dáil Éireann and say: "Put that through now and anyone that crosses you, cut the socks off him in the Party room, if necessary, and tell the other fellows to go to hell." That is what has happened.
That matter may not be discussed on the amendment. The amendment in the name of Deputy Haughey deals with medical or hospital benefits.
That is what is happening in regard to this amendment and all this part of the Bill and there is only one protection against it and that is that the House should be afforded an opportunity adequately to inform itself of the implications of this Bill. We are not so equipped. So, one facet of a wide problem is thrown into relief by this particular amendment: shall a man who may be in receipt of an income of £600 a year be denied the benefits of a medical scheme which he has heretofore enjoyed unless he pays income-tax on whatever the Revenue Commissioners may assess as his fair share of the total cost of the scheme or, if he cannot afford to pay that tax, will he be forced to opt out of the scheme, bearing in mind that it may be, and in certain cases is, so framed as to cater not only for himself but for his family as well? Is there any Deputy, including the Minister, who seriously contemplates requiring a man whose income is £600 or £700 a year to surrender a benefit of that kind for himself and his family or, in the alternative, pay income-tax on the assessed value of the benefit? I do not believe there is.
Is amendment No. 33 withdrawn?
No, Sir. I am afraid I could not allow Deputy Haughey to withdraw this amendment.
Is it clear that the income is gross income as described by Deputy Haughey?
It is quite clear. Rule 9 makes that clear beyond doubt. If the Deputy would like to have Rule 9, Rule 9 includes the cost of keeping and maintaining a horse to enable the man to perform his duties, amongst other things.
The question before the Committee is: That leave be given to withdraw amendment No. 33 in the name of Deputy Haughey.
We shall let him withdraw it. I shall put down a similar amendment on Report Stage and put it to a division.
Amendment, by leave, withdrawn.
Question proposed: "That Section 22 stand part of the Bill."
When this section comes into operation it will involve a very radical change in the situation which has obtained up to the present. That change will not be merely a change in existing practice; it will be a change in the fundamental theory of taxation as we know it. It is well to make this point clear to the House. Hitherto, there has been a fairly general principle applied in relation to these benefits in kind. The principle has never been very clearly defined but, nevertheless, in the sort of complex situation which surrounds the whole matter of benefits in kind, it has served as an excellent rule of thumb for dealing with a very difficult situation.
The principle is founded on the basis that a benefit in kind could be of two sorts; it could be convertible or it could be inconvertible. An instance of an inconvertible benefit would be the case wherein an employee in a cigarette factory, for example, was given either a certain amount of the factory's product, cigarettes, free of charge or else was permitted to buy them at a reduced rate. There you had a clear case convertible benefit. The employee got a benefit which was readily convertible into cash. In such cases the benefit was regarded as income in the hands of the recipient and was taxable as such.
You have then inconvertible benefits. A very good example of such benefits is the case of the employees of C.I.E. who are permitted to travel free on buses and trains. The benefit has some value undoubtedly but it is not convertible into cash. Up to now the rule of thumb has been that that type of benefit, because of the fact that it is not readily convertible into cash, is not treated as taxable income in the hands of the recipient.
As I said, the situation is complex and difficult, but that was the line of demarcation and it has worked very well up to now. There are two distinct reasons why inconvertible benefits should not be taxable. The first reason goes to the very root of the idea of income in a modern society. Income connotes that the recipient can exercise a choice. He gets money or some negotiable thing and he is entitled to select the manner in which he will enjoy it. He can apply it to different types of enjoyment. The very fact that he has that choice as to the way in which he will use his income is a distinctive characteristic of income in a modern society as against the old feudal system where a man only got that which he needed to live. Inconvertible benefit offends against that essential characteristic of income in a modern society and cannot be regarded as income in the modern sense and should not, therefore, be taxable.
The second reason, and probably the one which may appeal most to the Minister in relation to inconvertible benefits and why they should not be taxed, is that there is no ready means of assigning a monetary value to them. No matter what administrative methods we may adopt we shall run into serious difficulty in trying to assign a set monetary value to the inconvertible benefit. I believe that is one of the reasons why up to now we have not attempted to assess inconvertible benefits for tax purposes. Because of that difficulty I am quite seriously and genuinely alarmed at the amount of administration that Section 22 will involve.
I should like to put this point to the Minister. Take a businessman, reputable and honest, who is returning scrupulously every item of income and is not availing of any dodges in the nature of expenses or benefits in kind and you say to him: "We know that under the prevailing system certain individuals are getting away with a benefit and are not paying tax proportionate to the tax you pay. In fact, the law is not equally applied and it is not fair to you. These men get an advantage over you under the existing system. We shall give you a choice. Would you prefer that state of affairs to continue, with these men enjoying a slight advantage over you, rather than have Section 22 foisted upon you?" I am quite certain the answer would be: "Do not inflict Section 22 on me no matter who is getting some slight advantage over me".
Another instance along the same lines—I hope the Minister will not object to it—is in relation to an inspector of taxes. If one said to a hardworking inspector of taxes: "You get nothing more than your salary. You have no expenses or advantages of any kind. Despite your best efforts as a conscientious inspector, we know there are some businessmen who are gaining an advantage under the law as it stands. Would you, as a taxpayer, prefer that they should continue to get away with that than that we should put on you the burden of administering Section 22?" I know what his answer would be.
The Minister admits that the gain he will get in the form of revenue will be slight. He is concerned mainly with ironing out discrepancies as between one taxpayer and another. Because of the very nature of inconvertible benefits there will still be discrepancies. A monetary value cannot be placed upon them and, therefore, one cannot compare one with another. No matter how scrupulously this section is administered the Minister will not succeed in ironing out discrepancies in relation to inconvertible benefits.
I do not like this section. It is unnecessary. It has been taken, lock, stock and barrel, from the British Act without any advertence to our situation here. I would not feel so bad about battering against a stone wall if I were merely trying to change a concept of the Minister's which was the product of his own thinking in relation to our particular situation. What does frustrate me is that I am trying to improve on something which is taken wholesale from an English Act and which is not appropriate to our particular situation. I appeal to the Minister to get rid of this section altogether. Judging by the debate so far, I do not think we shall succeed in getting him to do that but I would ask him, if he must have the section, to confine it to convertible benefits and leave out inconvertible benefits because they will only make the situation more confused and complex than it has been up to the present.
I wish to mention two small points on the section from the point of view of keeping it open for me on Report Stage. Sub-section (3) (a) provides that the period where the practice commences is a period of years before the passing of this Act. We are enacting a section I do not like and on which I shall have a few words to say in a moment. However, regardless of that, we are enacting a section which will deal with a position not merely in 1958-59 but in future years until it is repealed. It is clear, therefore, that having regard to the changing nature of industry and the changing nature of industrial practice in whatever period of years we fix, it should be a period ending on the particular relevant date.
The Minister rather jumped me into a compromise too quickly when I accepted his offer of ten years instead of 20 years. But whatever period it is —ten years, seven years or three years—it should be before the time of the tax year in question. If a practice in relation to some new industry grows up and it has been in operation for ten years when an assessment for 1960-61 comes into operation it should not be denied the benefit of that sub-section because it was not there for ten years before 1958 when the Act went through. That is so obvious that I hope the Minister will provide the necessary amendment on Report Stage without my having to do it.
So far as sub-section (4) is concerned, has the Minister realised that that sub-section, which correctly provides for the exemption of meals in a canteen, means in effect a discrimination in favour of the employees of the big firm against the employees of the small firm? It is only the big firm with a great many employees that can run a canteen. The small firm with a small number of employees cannot. While the big firm gets this concession the small firm which has not got enough employees to run a canteen but makes an arrangement by which its employees can obtain a meal in an adjacent premises, such as a café, fish and chip shop, or whatever you like, will be caught. That does not seem to me to be a desirable position. If we are to exempt—and I agree we should exempt—staff arrangements for meals near a place where people have to work, it should operate regardless of the size of the concern by which the people are employed.
The whole question of the principle on which the Minister has pretended several times to stand about benefits in kind is, of course, breached by the canteen arrangements and in my view correctly so. I mention it only to make it clear that the Minister cannot pretend, in relation to benefits such as those we discussed in the last amendment, that there is any principle from which he cannot depart without going back on his whole case.
I have no doubt whatever that Section 22 has been taken holus-bolus from the British authorities without any attempt to consider if we might have different circumstances here from their industrial circumstances. I said earlier in discussing this Bill that I thought the Bill was the product of people who, though entirely honest, entirely conscientious and scrupulous, were in the position that they could not possibly see the wood for the trees. Section 22 in its existing drafting is a complete example of that. The wide method in which the attachment of liability to trifling benefits in kind has been incorporated in this section because it was done on the other side makes it clear to me that there has been no proper consideration of our general economic circumstances as apart from revenue circumstances.
Let me be quite frank and say that the person who decides between general economic, overall circumstances and the revenue circumstances of the country is not any official but always must be the Minister for Finance of the day. If this Bill is a Bill which is grossly out of accord with our general Irish circumstances in relation to trade and industry generally, the blame for that must attach solely to the Minister. It is not blame which the Minister must accept merely as the political head of the Department; it is a greater personal type of blame. The whole purpose of having a non-technical man as the head of any Department, of having a person who is not an expert in the departmental work itself, is to ensure that he will be able to take a broader view of the particular points of view that are put to him by the experts in their own line.
It is the job of the Minister under the system of democratic government as we know it to see the wood for the trees. It is the job of the experts in their own line to put forward something that accords with their line. It is not their task to fit them into the general picture. This Bill and this section does not fit into the general Irish picture and it is no use people outside this House or in this House— but particularly people outside this House—saying that this is a technical Bill and it is enacted by the Dáil, not understanding the technicalities.
The whole purpose of having a non-technical person as head of a Department is that he may be able to put the technical point of view in its proper general perspective, and if that was done in regard to this part of the Bill, and in particular in regard to this section, we would get a Bill to deal with the small amount of what the Minister has termed "gross tricking" and at the same time one that would deal with Irish economic circumstances without adding to administrative costs of industry as the pernickety provisions of this part of the Bill do.
I am rather perturbed, if not appalled, at the prospect of having, as it seems we are having, a Second Stage debate on every clause. That is what is happening now. We are getting through this Bill, not at the rate of a section a day, but at even a lesser rate. It will be a long-drawn-out affair. Deputies must realise the Bill must go through in some form; we must have a Finance Bill and I fear we must exercise some sort of restraint if we are to get out of here before Christmas.
I can suggest one method quite easily.
I do not mean that for the Deputy alone. There are just three points in the last speeches that I want to mention. The word "canteen" is not defined; it may be a kitchen at the back of a workshop where four people are working as well as a well-laid-out canteen run by a big firm.
I should like to see the Minister going into the High Court and saying that.
I do know of some workshops where they supply tea at lunchtime——
So do I.
That is all right. That is allowed under this and we must not fall into the error of saying that this will favour the employees of the big firm.
It has been said several times that this clause is lifted straight out of the English Bill. If the English way of dealing with it is the best way we should not be precluded from adopting it. But I am afraid that is not altogether true because the Revenue Commissioners took several weeks to give me this Bill and, if it were only a matter of copying it out from the English Bill, they could have given it to me in a few hours.
I do not mind what the old principles of income-tax may be or whether inconvertible benefits in kind were not subject to income-tax. We must deal with matters as they stand now. When I am told that under present law a director may get a sumptuous house to live in, a gardener or two to look after the garden, paid for by the firm and not subject to income-tax, or that he can get a very fine motor car with a chauffeur or two supplied to him if he is a man who stays out late at night, and all running expenses free of income-tax, I do not care what the old principles are. I do not think we can stick to them if we cannot get after these people.
There is no use in the Minister trying to introduce that type of tirade, or trying to make the case that Deputy Haughey or myself and those others who spoke on the Bill are endeavouring to condone the type of tax avoidance the Minister mentions. We have made it clear without question that we do not stand for tax avoidance of that sort and equally clear that what we on this bench—Deputy Haughey can speak for himself—object to is the attempt to blackguard decent industrialists, the attempt to place on decent industrialists administrative burdens that are unnecessary and will increase production costs. We object to having superimposed on us a scheme which may be entirely effective—perhaps the best scheme in the world—for British conditions but which may not necessarily suit us here.
The Minister began with a vague threat about the progress of the Bill. I presume he meant to suggest that he intended to use the guillotine.
No.
I cannot see what else he meant. The Minister's speech had no meaning otherwise.
I said that at the rate we were going we would not finish by Christmas. That would be no guillotine.
The Minister said he would have to do something about it.
Of course he did, but he let his tongue run away with his head and he is now changing back. I am always glad to see——
I do not know why the Deputy should put the opposite meaning into what I said.
——a person having second thoughts. May I make quite clear what is delaying this Bill? It is the fact that, from beginning to end, the House has got practically no proper explanation from the Minister of the terms of the Bill. If the House, having asked for interpretations of the 21 sections with which we have dealt, had got clear interpretations as we went along and clear statements as to the meaning of the various sections we attempted to amend, we would have got much further than Section 22 by now.
I refrained deliberately from saying anything that would be a departure from the objective viewpoint on this Bill, but the Minister, by his last statement about the progress of the Bill, has forced my hand. The true reason we have taken so long on this Bill is that the Minister does not understand it and could not understand it because he has not read it and has failed to explain it because he has failed to read his brief. If he had read his brief the explanations would have been forthcoming far more readily all along.
The Deputy may go through the Official Report of to-day's debate when he gets it and point out if he can any single instance where anybody here did not understand what we were talking about. We resumed to-day on a section on which we had spent a long time yesterday and we are still on it. There is no use in the Deputy trying to get away with what he has just said, that it is because I do not understand the Bill. I do not understand everything in the Bill; nobody could get up and explain what line 20 on page 44 means without sitting down and studying the Bill to find out what it was. I admit the Deputy could have put me in the wrong a few times if he wanted to do so and I am not accusing him of doing that, but it is not true to say that all the delay is due to the fact that we do not understand what we are doing. We are on this section for a long time. I put it to the Deputy that no Deputy to-day could pretend that there was anything he did not understand in what we were talking about or that any of the general things discussed could not be understood.
I have been in the Minister's seat. I know the briefs submitted to the Minister for Finance by the Revenue Commissioners. I know how complete they are and I know that anybody else could have produced the explanations of the sub-sections to us in a way which would have enabled us to have got a move on.
Question put and declared carried.
SECTION 23.
Question proposed: "That Section 23 stand part of the Bill."
Might I inquire, peacefully, what sub-section (2) means? I cannot understand it and if anyone can explain it to me he is a better man than I am. I do not know what it means.
Have we amendments on this?
There are no amendments on it.
Sub-section (2) means that if a company has an asset which is not bought at this time for the employee or director but which is on hands for some time, an asset such as a car or a house, and then at that stage gave it to the employee or director, it will be taken at the value then, and not at the value at first instance.
As the law stands the value of a convertible asset is assessable at present. Is it the law that the assessable value of a convertible asset is the first purchase price?
This does not change the existing practice.
Then I do not understand why we have to include it if it is the same law as we have at present.
It may include an inconvertible asset.
If you give a director the use of a new car the value of that car is its purchase price but if that car has already been used for six months the value of it is so much lower. Is that what is intended?
That is right.
Am I right in thinking that clause 3 (b) is the one the Minister referred to in dealing with five-fourths as against four-fourths?
Yes.
Question put and agreed to.
SECTION 24.
Amendments Nos. 34 and 35 are related and might be discussed together.
They are not quite the same.
Very well.
I move amendment No. 34:—
In sub-section (1) (b), page 15, to delete "or similar person" in line 42 and "or person" in line 43.
I am not quite clear as to what the words "or similar person" mean in sub-section (1) (b). As far as I know there is no similar person to a director in a body corporate.
Suppose a board of directors is called a council of governors? That is the point there.
It is operated under charter.
It is not always called a board of directors.
That is all right.
Amendment, by leave, withdrawn.
I move amendment No. 35:—
In sub-section (1) to delete lines 47 to 54 inclusive.
This is a different matter. I cannot understand how the directors of a body corporate could operate legally under the direction of somebody else. I admit that I am taking a body corporate in this context to be a company and I think I must so take it. For the directors of a company to take directions from anybody else is ultra vires the Companies Acts. I admit that shareholders have the right to take over certain responsibilities but the directors still carry out their duties, maybe in a mandatory form, from a general meeting of the shareholders of a company. I cannot understand the person who is interposed here. It might be where the directors are bound under contract to do something for somebody else but they are bound under contract for the benefit of the company. I put down this amendment because I felt that there must be some explanation for the use of the words which I could not get at because, on the face of it, they do not appear to be relevant.
The idea of this is to get at the person who, not legally, but in fact, is able to control the company. Take the case of a subsidiary company of a parent company. The subsidiary company would be controlled by the parent company or, as may happen in this case, you may have a large shareholder who holds 60 per cent. or 70 per cent. of the shares and who may not have the time to devote to the business of the company. He puts people in as directors and says to them: "You carry on and come to me for directions." He is able to direct the company in fact but not legally.
How is it proposed to get at him if there is no agreement in writing?
Suppose you have that position that I have just mentioned of a large shareholder in a small company and that small company has a nice house to give to a person. Naturally that large shareholder could use his influence to get that house and if we did not put in this provision including amongst directors what you might call controlling directors, this part would not apply.
Take another case. I act as a solicitor for a particular company. In a certain type of business they are always accustomed to act in accordance with what I say. They are always accustomed to act in accordance with what I say because they have not got the specialised advice or knowledge that I may have in relation to this particular aspect of their business. They are always accustomed to act in accordance with my direction. I have no shares whatever in the company but under this section I am caught.
No, the Deputy is not. If he reads the last two lines of sub-section (1) I think he will find he is not caught.
No, because it is not advice given in a solicitor's capacity. It is advice given in the knowledge of the particular business. I do not think that is professional.
I think "professional" is used generally in that sense there.
If the Minister is taking it on that basis I think there will have to be a different interpretation of "professionally" because "professionally" means something particular to me. It means business as an accountant or business as a solicitor. I may be wrong and I would like to think over that. I cannot see that "accustomed to act" is the right phraseology in the light of what the Minister has in mind. As I understand the Minister, what he wants to do is to catch the person who really does control a company but is himself not a director of the company, the person who controls it by remote control. Fair enough; I can see what he is at in that respect and whether I agree with him or not does not enter into it. However, I think this definition will mean that more people will be drawn into the net than the Minister intends. I have now got an explanation of what the section means, and it is up to me to think on it between now and the Report Stage.
I was assured "professionally" includes technical advice as well as professional advice, but I do not know much about it. I am in doubt, too.
One point occurs to me. I cannot see who exactly will give the information to the inspector of taxes or how the inspector will discover where, in the management of a company, there is such a person who is giving instructions from the background. I do not know whether a specific question will have to be placed on one of the company's returns and an answer given stating that, in fact, a company is not controlled by its directors but by some other person. I do not know of any company where that does occur and I do not know if the Minister has any evidence that it does, in fact, occur.
It seems to me to be a rather fanciful provision which unnecessarily confuses the income-tax code in this connection. Can the Minister produce any evidence that a practice is growing up of persons controlling companies, in which they are not directors, simply because they are shareholders and can the Minister say in what way that information will be brought to the attention of the Revenue Commissioners, whether it will be a matter the Revenue Commissioners will discover on their own or whether an additional return will now have to be submitted by each body corporate?
There is evidence of very small companies being formed for certain purposes. I do not know whether they might be formed for the purpose of giving a man outside the directors, a large shareholder, a free house, a free car or something like that, but there is a danger it might occur. The second question the Deputy asked was by what means the Revenue Commissioners will get the information. I am afraid we will have to leave that to the Revenue Commissioners. They may get it or they may not. There is no way under this Act by which they will get it.
I was trying to find the section later on which provides that control means holding a certain percentage of the share capital. There is one section in relation to that. I know I have an amendment to change the 10 per cent. specified to a different figure.
I think the section which the Deputy has in mind applies to part V rather than to Part IV.
I know it does not affect Part IV at all but I suggest to the Minister that instead of having the portion here "including a person according to the directions of whom the company is accustomed to act" it would be far better to have "the directors including a person who is a large shareholder." The wording "person under whose instructions he is accustomed to act" is far too vague. I do not know what "accustomed to act" means. I expect the Minister has in mind, in relation to these sections, companies that are really formed ad hoc for the purpose of avoidance.
Yes.
Supposing there is a small company, the directors will obviously meet very seldom. If, at their first meeting, a benefit in kind is given to a person who is not a director of that company then the person who receives the benefit is outside the scope of this Bill. You cannot say on an initial occurrence that it is a decision in accordance with the direction of a person on whose instructions they are accustomed to act. You must build up the custom for it. If the Minister is trying in that case to knock the ad hoc company there is a way of breaching it on the wording here straightway.
A much better method would be to adopt the method that is included for Part V—not the method included as Part V is drafted at present—but the method as included when Part V is drafted after the Minister has accepted my amendments to it. I do not think there is any doubt I have got the Minister on a single meeting like that.
In my opinion "accustomed" applies to the general and not to the particular.
I agree completely.
If such a company is accustomed to act in that way.
I shall make the Minister a present of it. I can form an ad hoc company for the purpose. At the very first meeting I can do this and I can drive a coach and four through the Minister's section.
Progress reported; Committee to sit again.