Finance Bill, 1960—Second Stage.

Minister for Finance (Dr. Ryan)

I move that the Bill be now read a Second Time.

Last year the provisions of the Finance Bill were so long and complex that I took what was then the unusual step in the case of a Finance Bill of circulating an explanatory memorandum with the text of the Bill. This year's Bill has neither the length nor the complexity of last year's but I repeated the procedure of issuing an explanatory memorandum as it might be of assistance to Deputies in considering the Bill.

In view of the issue of the explanatory memorandum it is hardly necessary for me now to give a section by section account of the Bill. It may help, however, if I mention briefly the principal matters with which the several parts of the Bill are concerned.

Part I imposes Income Tax and Sur-tax for the current year at last year's rates. The Finance (No. 2) Act, 1959, which is referred to in Section 1 of the Bill, made, as Deputies will remember, alterations in the personal allowances and reliefs for this year in order to pave the way for the introduction of Pay As You Earn. The present Bill increases the income tax and sur-tax deduction for children and broadens the tax exemption in respect of deposit interest in the case of a husband and wife.

Provisions benefiting industry are also included. There are additional reliefs for business losses and the tax advantages flowing from Section 7 of the Finance Act, 1932, are being extended to securities of Irish manufacturing companies issued before 1932. Profits of harbour authorities are being exempted from tax.

Only Sections 8 and 9 were not foreshadowed in the Budget speech. The purport of these sections has, of course, been given in the explanatory memorandum.

Part II of the Bill is mainly concerned with the proposals in the Budget speech in relation to customs and excise duties. The sections in it provide for the various reliefs relating to entertainments duty, table waters duty, and hydrocarbon oils; abolish tobacco dealers' licences; amend the law relating to liquor licences and hydrocarbon oils for the purpose of providing more efficient, equitable and economic administrative procedures; and increase the duties on tobacco.

This Part of the Bill also contains a section concerned with rather detailed points of motor taxation law as already set out in the explanatory memorandum. I should, perhaps, mention that these points came to a head too late to have them included in the recent Finance (Excise Duties) (Vehicles) (Amendment) Act, 1960.

Four orders relating to special import levies and miscellaneous customs and excise duties are confirmed in the final section in this Part of the Bill.

The effect of Part III is to raise the exemption limit for death duties from £2,000 to £5,000.

Part IV brings within the scope of "exports" relief Irish-made goods exported by a company other than their manufacturer. The terminal date for "exports" relief will now be the year 1974-75 and a five year period of tapering relief will follow the exemption period. Safeguards are included to prevent unfair advantage being taken of these reliefs.

There are provisions, in Parts IV and VI, designed to encourage the expansion of the tourist industry. Holiday camps will be treated in the same way as hotels as regards tax allowances in respect of capital expenditure. In the case of expenditure incurred on or after the 1st January, 1960, the annual allowance will be 10 per cent. instead of 2 per cent. Such expenditure will of course also qualify for the 10 per cent. initial allowance so that, in the normal case, it will be written off for tax purposes over nine years.

Part IV also provides that profits from the mining of gypsum will qualify for the tax relief applicable to profits from coal-mining.

Part V of the Bill abolishes the stamp duty on passports and on special forms of bank draft to be used by employers in remitting income tax under Pay As You Earn. It also authorises the use of adhesive stamps instead of impressed stamps on copies of documents issued by district probate registries.

Part VI of the Bill deals with miscellaneous matters. It contains the usual section relating to the Capital Services Redemption Account; subject to conditions set out in Section 38, it makes certain tax reliefs available where a person was adopted informally and it extends the scope of the tax relief provided in 1956 for mines of non-bedded minerals. There is also a section in it relating to tax relief in respect of expenditure on the construction or extension of hotels and holiday camps. I mentioned this already in commenting on Part IV.

That, very briefly, is the scope of this year's Bill. Debate on the Finance Bill is mainly a matter for Committee Stage and I shall be glad to deal with any points of detail on that Stage.

Mr. Sweetman

I am glad the Minister has circulated the explanatory memorandum in relation to this Bill. Having said that, I am afraid it is the only thing I can say that is good about the Bill. This Bill is the implementation of the collection of the largest blister that has ever been imposed on the taxpayers. It provides the basis upon which £105 million tax revenue is being collected, not to mention the £6 million of motor vehicle duties or the £24 million of non-tax revenue. It is significant that this Bill provides the basis upon which £105 million of tax revenue is being collected, a figure which is to be compared with £94,500,000 in the year 1956-57 before the Minister took office. That is giving him credit for special import levies as being a current tax.

The size of the bill must appal all of us. We have, however, discussed generally the appalling amount that is being extracted from the pockets of taxpayers to a large extent on the Budget debate and I do not propose to deal with it any further today. On the general matter, it is disgraceful that the Minister made no effort, either in winding up the Budget debate or today, to advert to one matter of taxation which, as Minister for Finance, he certainly should have brought to the notice of the Dáil. When he was winding up the Budget debate, he was much more interested in making a Party political speech than in dealing with the sober matters with which he should have dealt as Minister for Finance.

The country is entitled to an answer to the question I put to the Minister in the Budget debate. The people are entitled to expect that if he did not give it then, he would have given it today moving the Second Reading of this Bill. That question was: what has happened to the Commission on Income Tax that was set up by me before I left office? On a previous occasion, I indicated in the House that it was deplorable that we had heard nothing from that Commission in relation to the general imposition and incidence of income tax. Some time later, I heard a rumour that the members of that Commission thought I had been unfair in castigating them for not having addressed themselves to that problem. If they did address themselves to it and if there is castigation due, it is due to the Minister for Finance if he received a report from them and did not give it to the Dáil or to the country.

A month ago, I asked the Minister for Finance a specific question: had he received any further report from the Commission on Income Tax. I got no answer then. We were entitled to an answer today. It should not have to be extracted like teeth from the Minister for Finance and we should not be in the position that in relation to a most important commission on taxation queries have to be addressed to him on it without his volunteering information.

What has happened in relation to the Income Tax Commission? They gave us two interim reports. In neither of these interim reports did they give any indication that they had considered the broad general aspect of income tax. Have they given any other report to the Minister? Have they given any indication to the Minister that they have been considering this problem and if they have, why has the Minister not told the Dáil about it when introducing his Budget, in the first place, when concluding the Budget debate, in the second place, or on the occasion of this Bill, in the third place? The country is entitled to an answer to these questions.

This Bill will also be part of the basis, together with the Bill of last autumn, on which P.A.Y.E. will be enforced. I do not think anybody yet realises the amount of trouble and cost to which employers will be put by being made unpaid tax gatherers. I am sure nobody realised that when the Bill was going through the House last autumn but since then, employers have had to get to grips with the situation. They have had to prepare the system to be put into operation and see exactly what will be needed under it.

It is becoming more and more apparent every day to those concerned that the cost of collection of tax under the P.A.Y.E. system will be quite a substantial burden on employers. I agree it is better to have a P.A.Y.E. system but the Minister should have taken steps in this Finance Bill to offset the additional cost with which employers will be faced. If he had done that, I would not complain about the cost that is being imposed; but he has not done that and employers are entitled, in my opinion, to some concession. They are entitled to receive some consideration for what will be a very troublesome undertaking.

In describing it as a troublesome undertaking, I am not in any way minimising the manner in which the Revenue Commissioners have simplified P.A.Y.E. here as compared with the system operative on the other side of the Channel. The Revenue Commissioners have done a good job in that regard, but, no matter how good a job they have done, a very substantial cost will nevertheless be imposed on every employer in this State and that cost should have been offset by a concession in this Bill.

Some of us when we saw the Estimates for Receipts and Expenditure published on the Saturday before the Budget were very surprised at the buoyancy of income tax revenue. In the six weeks, or so, that have elapsed since those Estimates were published, some of us have been given an opportunity of understanding and appreciating why there is this buoyancy. In all my experience as a solicitor, I have never seen as many notices going out to employers in respect of employees' arrears of tax. It is perfectly clear that one of the reasons for the buoyancy in income tax revenue this year is the stringent steps being taken to catch up with and to collect in this year arrears in existence so that there will come into collection in this year more income tax revenue. If that is so, and it must be so judging by the number of notices I have seen, it means the Minister is anticipating something that might otherwise be there next year for, I hope, his successor. By that time, with any luck, we shall have had a general election.

I want to ask the Minister—I shall come back to it more fully on Committee Stage—something about Section 9. Section 9 seems to me a provision which gives quite extensive powers to the Revenue Commissioners. It gives to the Revenue Commissioners power to roam into the personal and private affairs of every individual in the State. It would be bad enough if Section 9 were restricted to payments made in the course of trade or business, as is done in subsection (1), but in subsection (2), it specifies clearly "everyone carrying on any activity". What exactly that means, I do not know, but it seems to me that anybody doing anything at any time in any place comes within the scope of the subsection.

For instance, a person who gives 2d. to a newspaper boy or something to a person in a bookmaker's office for the purpose of a wager, shall we say, can be asked to go back over the year and make a return of all the payments made in that activity. I do not go into a bookmaker's office very often. I do not even deal with him much on the telephone. But there are some Deputies, and some people outside this House, who will find the position very difficult. There are many activities I carry on which I shall find it very difficult to remember at the end of the year. I shall find it very difficult, therefore, to make up all the payments I made during the year in order to make out a schedule and deliver that schedule to the Revenue Commissioners.

Under subsection (6) then, if I do not remember all the payments I made in any activity, I shall be liable to a penalty of £20, and that is a continuing penalty; it will be £20 for every day in relation to which I am not able to jog my memory. Mark you, the court cannot reduce this penalty of £20. It is the Revenue Commissioners who will determine whether or not it should be mitigated. I could understand a penalty like that where a district justice or a circuit court judge would have the right to determine whether or not I was bona fide in failing to remember. If a judge so decided, quite obviously, on the evidence, it would be shown that I was trying to hide something and, in those circumstances, I would have no objection to a penalty being imposed on me, but, under this section, the judge has no option whatsoever. If I am asked to whom did I make any payment last October and I say I cannot remember, automatically, under this section, I am liable to a penalty of £20 for forgetting, and £20 for every day I go on forgetting.

In relation to employers being made tax gatherers under P.A.Y.E., I might add one further word. There are some members of this House who are employers who will be collecting P.A.Y.E., and if they look up the memorandum circulated to them yesterday, they will see that, under an old Act passed in the twelfth year of the reign of Richard II, any member of this House who is a tax collector is automatically disqualified from membership of the House. Therefore, if we are tax collectors under P.A.Y.E., under that Act, we are automatically disqualified unless the Minister or his colleague, the Minister for Local Government, can amend that old, outdated section before P.A.Y.E. comes into operation.

Mr. Casey

That is one way of getting rid of you.

Mr. O'Malley

That would mean a solicitor could not sit in this House, if he collects estate duty.

Mr. Sweetman

That is how the memorandum circulated yesterday reads, if Deputy Booth has done his homework since yesterday.

It is also well that we should realise that Section 22 of this Bill is the section which confirms the levies announced by the Minister on Budget Day and the protective duties he has substituted for levies in certain circumstances. As I said before, the rose by any other name .... What does that mean? It means that in this calendar year, 1960-61, more than three years after the Minister acceded to office—and he acceded to office because he and his cohorts had led the people, particularly the shopkeepers, to believe that if Fianna Fáil became the Government, they would abolish the levies that had been imposed in 1956 solely for balance of payments purposes—the Minister this year will collect £1,120,000 from levies directly and £1,855,000 from customs duties he had imposed as an alias for levies prior to the end of the last financial year, that is to say, a total of just £3,000,000, and an additional sum for the further protective customs duties now being imposed in Section 22 changing the levies. I have not got an estimate of what that amount is. It may be £500,000. If I am wrong in that, the Minister will probably be very quick to correct me. But on that basis it looks that it might be £500,000.

Here is a Fianna Fáil Minister, three years after he came into office, collecting £3,500,000 in levies and quasi-levies when he was complaining bitterly in 1956-57 about the collection of £4,275,000 and giving the impression all round the place that if only Fianna Fáil got into power, they would wipe them out and that the people would be free of them. The sincerity of the promises they made in that general election can be seen quite simply without any further comment.

I am glad of one thing in this Finance Bill: that the Minister has now abandoned the totally impossible position he took up in 1957. In 1957, he extended the provisions of the Finance Act, 1956, so as to give the benefits of the 1932 Act to certain further industrial undertakings. At that time he was pressed very strongly by us that if he was going back to 1932, he should go back to the inception of the State. He was told then, and justifiably told, that going back to 1932 alone was turning revenue collection into Party political collection.

Notwithstanding the pressure put on him at that time from this side of the House, he refused to yield. I am glad he has yielded now and has undone the injustice he did three years ago. It does not matter to me whether he has done it because of remorse of conscience or because of the suggestions put up to him by the Associated Chambers of Commerce. For whatever reason it was done, it is a good thing and it is desirable that this benefit should be for all industries started since the inception of the State and not only for those started since Fianna Fáil came in.

As the Minister has said himself, most of the other sections in this Bill are matters we can discuss more clearly, and, perhaps, with greater advantage, on Committee Stage. Inevitably, any Finance Bill is one that is an accumulation of different ideas rather than the implementation of a pattern as a whole, even though, of course, it does implement the Budget, but certainly in relation to this Bill in particular, a Committee Stage discussion would be more satisfactory for all concerned on this side and also, I believe, for the Minister. For that reason, on this Second Stage, I do not propose to say anything further.

Mr. Cosgrave

I want to refer to one specific matter raised here in the course of the Pensions (Increase) Bill and which I believe the Minister should consider sympathetically, that is, increasing the income limit in respect of income tax relief for persons over 65 years of age from £600 to £800 per year. During the last year or so, and more particularly in recent months, a number of measures have been brought before the House which granted increases in pay and emoluments to different categories of public servants and officials, including not only members of the judiciary, the Dáil, the Seanad and the Government but civil servants, the Garda and the Army. In all these cases, the basis on which increased emoluments were granted, either salaries or wages, was the fact that the cost of living had increased over a number of years, so that in order to compensate for the increase in the cost of living, an increase in salaries, and in certain cases salaries and emoluments, was justified.

The position in respect of persons over the age of 65 is that the present income limit is £600 a year. Last year, the qualifying income limit in respect of persons entitled to join the health service was raised from £600 to £800 a year. So that no matter from what angle the maximum income limit is examined, it has been recognised that in relation to salaries and emoluments, the income limit should be increased. In the case of the increase which was sanctioned in respect of those entitled to corns within the health service, by raising the limit from £600 to £800 a year, it has been recognised that that increase was warranted because of the increase in wages and salaries, but there is this one specific case in which no increase has been granted.

For some years, people in a similar position in Britain have had the limit for income tax relief increased from £600 to £800. It is hardly necessary to re-argue the case or to re-emphasise the justification for this increase but the fact that the cost of living has increased for those who draw wages and salaries means that it has also increased for those who are retired. Whether a person is retired on a pension, either from the State or any other source; whether a person is living on an income from investments, or whatever the source, the fact is that the present income limit is too low.

I believe that the Minister, if he examines this, will be sympathetic in regard to the position of these people. When I say over 65, many of them are even much older than that. They go from that upwards. It is natural that in many cases people who reach that age, if they are not living with their families, require domestic help or assistance of some sort. At present they are precluded from participating in any of the benefits of the Voluntary Health Insurance scheme. Others are not entitled to the health benefits which people in a lower income group are entitled to and consequently their position in many cases is peculiarly difficult. I would urge on the Minister the desirability of considering their special position and embodying a change which will enable them to have their income tax relief assessed on the basis of £800 rather than £600 a year.

Mr. Briscoe

I should like to ask the Minister if he would give some information to the House with regard to the change in the method of control over the export of currency. Since the abolition of the exchange control section, I understand that it is now a matter for applicants for foreign currency to go to the banks and the banks can, on their own satisfaction, issue the foreign currency and the means of getting it up to a certain maximum. I understand that the maximum is £5,000. I should like to ask the Minister if he can state what happens when it reaches that stage. Do the banks have to make a specific kind of case and what are the regulations or where can they be ascertained?

In any event, I shall finish now, but I should like the Minister categorically to state whether representations were made to him in connection with the transfer of currency for the purchase of stamps.

Mr. Russell

I just want to deal with a few points on this Finance Bill. I wonder would the Minister consider making some concessions to the owners of private and commercial vehicles who tax their cars or lorries, as the case may be, quarterly. Under recent legislation, taxation of certain types of commercial vehicles was very substantially increased. It would be a welcome concession to the owners concerned, who are mainly public hauliers in a very small way of business—a very hard-working section of the community—if they could pay their quarterly tax as nearly as possible, pro rata to the annual tax of these vehicles.

I should like to advance the same argument in regard to the owners of private motor cars, which as everybody is aware, show a very substantial increase in numbers, particularly since the war. A number of these owners, for financial reasons, cannot tax their cars annually and it would be a welcome concession if the Minister could meet them in some regard. As the Minister knows, taxing a car by four quarterly payments involves a sum considerably in excess of the figure for one annual taxation payment.

I should also like to deal with some points under the heading of mining. There are two matters, both of which I referred to on the Budget. Under present legislation, a different allowance is made in the case of mining operations which are termed underground operations. The same concession does not apply in the case of mines where the operations are known as open-cast.

As the Minister is aware, over the past ten or 12 years, there has been a considerable expansion in mining interests. A new lease of life has been given to many mining properties which had been closed down, in some cases, for 70 or 80 years. I would urge the Minister, having regard to the fact that both types of operations take place in different mines throughout the country, to bring in legislation to provide the same allowance in the case of open-cast mines as now applies to underground operations.

I should be very sorry indeed—Deputy Sweetman accused me of being silent on the matter—if through my silence, the Commission on Income Tax should be accused of not doing their work. I can assure the House that they have been working very hard. They have already produced three reports, two of which have been published. One of them is being implemented. The Report on P.A.Y.E. was a fairly comprehensive document. They put a good deal of thought into it and it took a good deal of time. That, as Deputies know, we have adopted. They then produced a second report which is being published concerning Schedule A tax and also the consolidation of income tax and sur-tax collection. I have not come to any conclusion on that and, consequently, I made no recommendation to the Government on these two points, although I think I mentioned here before this year that the Revenue Commissioners have been moving in the direction of taking sur-tax and income tax together. I know it will come some time. When it will come I cannot say at this moment.

The third report is, of course, the big matter, that is, whether income tax can be replaced by some other form of tax. They have presented that report, but only within the past few days. It is a very comprehensive report. I could not possibly give any opinion on it for a long time. I intend recommending its publication to the Government as soon as possible so that everybody can see it. That proves that the Commission have been working hard. I think we should be thankful to them for the time they have given to the matter. I know that everybody here will give very earnest consideration to the recommendations they make.

Mr. Sweetman

I should like to join in the Minister's appreciation of them of their work, now that they have done it.

Dr. Ryan

The second point raised by Deputy Sweetman was that this Bill would, to some extent at any rate, be invoked along with the Finance (No. 2) Bill of 1959 in bringing P.A.Y.E. into operation. I suppose the Deputy made that point for the purpose of bringing himself into order. Again, I appreciate what employers are doing under P.A.Y.E. They were very helpful in this matter as I mentioned here during the Budget debate. The trade unions and so on have also been very helpful in trying to get P.A.Y.E. to run as smoothly as possible.

It is principally designed, I may say, to cover the cases where people are drawing remuneration but are not regarded as employees. That is the whole point in the section. Some do not make returns of all payments of that kind. There seems to be some legal justification for the omission. It is in order to remove any doubts in that respect that this clause is put in. A person who is an agent for a company might be paid on a fee basis and not be an employee. Therefore, returns might not have to be made in his case. It is a clause that will have to be discussed more fully when we come to Committee Stage.

Deputy Cosgrave referred to the position of the person over 65 years. As Deputies are aware, better treatment was given to people over 65 years who were living on unearned income. I think it came in, first of all, in 1951. The sum of £600 is regarded as earned income. Until you consider this matter calmly and impersonally, we must take the person with £600 a year unearned income and see how he compares with a person with £600 earned income. Six hundred pounds unearned income must come from investment of some sort. Generally it comes from investment of some sort. It would mean a capital value of £10,000. You could hardly regard the old person with £10,000 as being very badly off and I think, generally speaking, he would not be regarded as worse off than the pensioner with, say, £10 or £12 per week.

Looking at it from that point of view, one would, I think, come to the conclusion that there was no great case for making an increase. Representations have been made to me before now on the same lines as those made by Deputy Cosgrave that this might be raised to £800. I suppose that might be considered again—that is all I can say at this stage—but not this year.

At present and for some time back there is no limit on the amount that may be granted under the Exchange Control Regulations. Banks are permitted to give money on request if it is required for the purchase of goods for this country. If the goods are for re-export the question of added value comes into operation. General directions are laid down for the banks and the banks act within these directions.

Regulations and notices are sent to the banks from time to time. Anybody going to a bank can have a look at them and find out for himself what these control regulations are. As far as the specific question is concerned, I can assure the Deputy that nobody made any representations to me with regard to the purchase of stamps for this country.

Deputy Russell spoke about mining. He gave the impression that the owners of mines are not as well treated as other sections of the trading community. I think he said he thought they should be put on the same basis—in regard, I suppose, to financial advantage—as exporters. The legislation dealing with coal-mining and mining generally is a different code from export legislation. On the whole, I think the mining people have been treated well. There is no question of export in their case. If they are exporting they get the export facilities. If they are not exporting they get advantages in regard to tax that no other trader gets. On the whole, I think the benefits given to miners have been fairly generous. We are bringing in two new activities that we were not benefiting before—one is gypsum and the other is anhydrite. That is the only change as far as this Finance Bill is concerned.

Mr. Russell

I had in mind making a differentiation between, say, raw ores treated as against those sent out untreated. In other words, I wanted to encourage the treatment of ores mined in this country rather than to send them out in the raw state. I wanted to take the process of manufacture a stage further here.

Dr. Ryan

I believe there are proposals for the treatment of some of our ores here. If they should materialise, probably a proposition of that kind will be put up and we can consider it when that time comes. Deputy Russell went on to say that we should abolish death duties. We would all agree with that if we could afford it. If a Minister for Finance has £1,000,000 or £2,000,000 or whatever it may be that he is prepared to offer by way of concession he must decide where to apply it. There are so many things that are attractive to deal with—income tax, surtax, death duties. We usually end up by trying to do a little for all of them. We find it very hard to abolish the one or the other completely. I agree it is not a desirable tax in these times when we talk about personal saving, and so on. It would be a great thing if we could abolish it but we cannot afford to do so.

The other point the Deputy made is one which has been made on many occasions. He urged that we should raise the exemption limit for corporation profits tax. In the past, it went up and down over fairly wide ranges. For many years now the limit has been about £2,000. As far as I remember the tax is lower now—it is only 10 per cent.—than it was when the exemption limit was higher.

If you compare how the corporation and the private individual are treated you will see that the corporation is in a favourable position. Take a private trader who pays income tax and surtax. If you compare his case with that of the corporation you will find that the corporation is not any worse treated. If the profits are very high the corporation is treated better than the individual trader. From that point of view, I do not think one can make a very good case for raising the exemption limit.

I must confess I am not very familiar with the matter of stamp duty on transferred properties. I can only promise to look at it again and see whether it would be possible to do something about it.

Question put and agreed to.

Committee Stage ordered for Tuesday, 21st June, 1960.

Dáil Éireann debate - Thursday, 9 Jun 1960

Finance Bill, 1960—Second Stage.

Dáil Éireann debate -
Thursday, 9 Jun 1960