Dáil Éireann debate -
Wednesday, 8 Jul 1959

Vol. 176 No. 6

Committee on Finance. - Finance Bill, 1959—Report and Final Stages.

Minister for Finance (Dr. Ryan)

I move amendment No. 1:—

In page 8, to delete lines 5 to 10 and substitute as follows:

"(b) that time exceeded one month and, in the opinion of the Revenue Commissioners, the purchase and sale were each effected at the current market price and the sale was not effected in pursuance of an agreement or arrangement made before or at the time of the purchase.

(3) An appeal shall lie to the Special Commissioners with respect to any opinion of the Revenue Commissioners under paragraph (b) of subsection (2) of this section in like manner as an appeal would lie against an assessment to income tax, and the provisions of the Income Tax Acts relating to appeals shall apply and have effect accordingly.”

During the debate on Committee Stage on Section 6, Deputy Sweetman suggested that there should be a right of appeal against a decision of the Special Commissioners under that section. This amendment makes provision to that effect and provides the same machinery as regards appeals as would be available in the case of an assessment.

Amendment agreed to.

Dr. Ryan

I move amendment No. 2:—

In page 27, to insert "or" after "1956," in line 58 and to delete "or" after "1956" in line 61 and in page 28 to delete lines 1 to 4.

Amendments Nos. 2 and 4 may be discussed together. They arise out of points made by Deputy Sweetman on Committee Stage, in connection with Section 64, which is now Section 65. Deputy Sweetman inquired about the interplay of Section 64, as it then was, and earlier provisions of the Bill. He wished to be assured that export companies would be dealt with in the same manner as Shannon companies. I promised to examine the case again and, on examination, I am informed that there is some slight inconsistency in the way the two companies are dealt with. Although it is not terribly important, still it is rather involved.

Where a Shannon company uses machinery for both exempted operations and liable operations, it would be improper to allow the full wear and tear of the machinery against the liable operations. The correct course is to split the wear and tear and to allow a proportion against the liable operations. This principle was laid down in Section 8 of the principal Act passed last year in regard to Shannon companies. The same principle should, of course, apply when we come to deal with balancing allowances or balancing charges.

Section 40 of the original Bill deals, among other things, with export companies and Shannon companies and it relates solely to machinery. That section provides that when we are making our computations for a balancing allowance or balancing charge, all wear and tear allowances which would have been given if the company had been liable in the ordinary way shall be deemed to have been given. The effect of this is to secure that wear and tear allowances, which would not have been due year by year in the past, shall not be available to increase a balancing allowance or to cut down a balancing charge.

This puts the position in order as regards export companies. They, unlike Shannon companies, are entitled to their full annual allowances and their exemptions are in terms of tax. Section 40, as it was in the original Bill, also puts matters right as regards Shannon companies. Since, however, a Shannon company may be conducting both exempted and liable operations, Section 64, as it then was, is necessary for a proper apportionment of the balancing allowance or balancing charge that may arise on the sale of the machinery.

It is as regards industrial dealings that the inconsistency has manifested itself. Section 26, as it was, provides as regards buildings, in connection with balancing allowances or balancing charges, that, for a year in which no annual allowance has been given, a notional allowance is to be written off. It is adequate as regards export companies but it is, as I have now discovered, defective in relation to Shannon companies. The reason is that it does not meet the case where a partial allowance has been given to a Shannon company in the case of mixed exempted and liable operations. It cannot be said in such circumstances that no annual allowance has been given. This defect can be corrected by an amendment of Section 64, now Section 65, of the Bill which covers, for Shannon companies, balancing allowances and balancing charges.

If you take first Amendment No. 4 on the Order Paper, as the section stands, the balancing allowance or balancing charge for a Shannon company may be reduced, but, in the case of a balancing charge, an increase might be called for in relation to a building where the company had been carrying on both exempted and liable operations and there had been no notional writing-off for years in which a partial annual allowance had been given. The amendment corrects this. It removes a discrepancy that would otherwise have arisen as between Shannon companies, on the one hand, and export and other companies, on the other.

The amendment to Section 41 is purely consequential. As regards both building and machinery, everything will now be adjusted in the case of Shannon companies on the making of a balancing allowance or a balancing charge. A notional write-off will, therefore, no longer be necessary. The reference to Shannon companies is accordingly being deleted from Section 41.

Mr. Sweetman

The Minister referred all the way through to export companies. I presume the same applies in relation to a company doing home business and export business in so far as the proportion of its export business is concerned.

Dr. Ryan

Yes, that is right.

Amendment agreed to.

Dr. Ryan

I move amendment No. 3:—

In page 32, to delete lines 45 to 49 and substitute as follows:

"Provided that—

(a) if that person, by notice in writing served on the inspector of taxes not later than twelve months after the end of the year of assessment in which that sum was received, elects that the whole of that sum shall be charged to tax for the said year of assessment, it shall be charged to tax accordingly;

(b) if that person, by notice as aforesaid, applies to have the period for which he is to be charged determined as being other than the six years of assessment hereinbefore referred to (that is to say, the year of assessment in which that sum was received and the five succeeding years of assessment), then, if it appears to the Revenue Commissioners that hardship is likely to arise having regard to all the circumstances of the case unless a direction is given under this paragraph, they may direct that the charge shall be spread equally over a number of years of assessment other than six, of which the first shall be the year of assessment in which that sum was received."

We had a fair amount of discussion on the question of taxation on patents and as to whether the seller or inventor, or the dealer, was liable. Deputy Sweetman made the point that it might be a great hardship on the seller if he had to pay the income tax due over six years because it might possibly bring him up to the surtax level. I said at that time that I would try to bring in some amendment. This amendment enables the Revenue Commissioners to make the period more or less than six years. It was put to me when considering this amendment that it might suit a person to make it four years rather than six years if, say, he was drawing children's allowances. If he knew that in four years' time he might be out of that category, he might say: "I should prefer to pay it over four years." The amendment provides, therefore, that the Revenue Commissioners may consider an application from the person concerned to vary the number of years up or down in a case of hardship.

Mr. Sweetman

What will happen in the case where a person dies? He cannot then give the notice which is visualised in this amendment. During our previous discussions, we visualised a situation in which the person died. When the person dies, all the outstanding assessments tumble, so to speak, into the year of death and that could cause considerable hardship because so far as I can see he is not covered. It might be important to look into this because there would be even more hardship in the case of a death than in any other case because the man earning the money, the wage earner, would be gone.

Dr. Ryan

I am afraid we cannot get over that difficulty because if a person has got an agreement to pay over eight years and dies after four years, the four years must be collected immediately. I do not see how that can be avoided.

Mr. Sweetman

I know we are on Report Stage, but may I say, with the indulgence of the Chair, that it is not the question of collection that I am worried about? As far as I can understand, the amounts to be assessed are to be assessed over eight years. He dies at the end of four and, as the Minister says, the last assessment will be four times. That could push him up into the sur-tax bracket.

Dr. Ryan

I believe it could be spread back over the four, if that would be any advantage. It possibly would be some advantage to spread it backwards.

Mr. Sweetman

Can it be spread backwards under this amendment?

Dr. Ryan

It can be done all right from the date of the receipt of the money up to the date of death.

Mr. Haughey

Is it intended that the hardship referred to should apply only in the case of sur-tax?

Dr. Ryan

I think that is the only hardship. As has been said, we are taking a shorter period and it might suit to pay over four to balance against children's allowances and so forth. If a man makes a case showing that he is at any disadvantage, that will be considered.

Mr. Haughey

The election must apparently always be made within the 12 months.

Dr. Ryan

The first payment is due in 12 months.

Mr. Haughey

Is that election final? If, in the first 12 months, he takes a decision to elect for eight years and, a year later, it appears to him to be to his advantage to elect for a shorter period, can he re-elect?

Dr. Ryan

No. He must stick to it.

Mr. Sweetman

I do not think even I could push that argument down the Minister's throat.

Amendment agreed to.

Dr. Ryan

I move amendment No. 4:—

In page 43, to delete from "the amount" in line 42 to "such amount" in line 45 and substitute "there shall be made to or on the company an allowance of such an amount, or, as the case may be, a charge on such an amount,".

Amendment agreed to.

Bill, as amended, received for final consideration and passed.

An Ceann Comhairle

This is a Money Bill within the meaning of Article 22 of the Constitution.