Dáil Éireann debate -
Tuesday, 21 Jun 1960

Vol. 183 No. 1

Committee on Finance. - Finance Bill, 1960—Committee Stage.

Question proposed: That Section 1 stand part of the Bill.

Mr. P. Byrne

I wish to comment very briefly on this section. This year it is, as usual, re-enacting the legislation at present in force for yet a further year. Our tax code, which we are now re-enacting, goes back almost 150 years and, as far as I can recall, we are reintroducing these provisions for the 108th or 109th year. One could speak on it at length but I do not propose to do so. I wish primarily to avail of this opportunity to ask the Minister what consideration has been given to the Second Report of the Commission on Income Taxation which was furnished to him a year ago and published last October.

One of the peculiar provisions which we are re-enacting here is the archaic and obsolete Schedule A taxation. The Second Report of the Commission recommended the virtual abolition of Schedule A taxation and recommended the abolition of Schedule A taxation as applied to owner-occupiers of their own dwellings where the valuation did not exceed £30. That was a unanimous recommendation of the Commission. We are entitled to ask the Minister whether the Government have considered that report and whether or not they have accepted it. Many people are very disappointed that this Bill makes no concession to the independent occupiers of their own homes. Our whole tax code is unsuited to this country. It is based on obsolete economics and there is no part of it more absurd than Schedule A taxation.

All pre-Victorian economists had a theory that we derive a notional income from anything we own even though there is no cash income. That is crackpot economics. Schedule A taxation weighs very heavily on a section of the community who are very sorely pressed and for whom it is desirable for social reasons to provide every possible concession and incentive. The more independent home owners there are the more stable will be our economy. It is desirable from every point of view to encourage people to own their own homes. The position now is that a young couple may marry and suffer considerable disadvantages in order to acquire and own their own home by making heavy mortgage payments and paying a heavy rate of interest. The State then tells them they have a cash income from their ownership of that home and assesses them to taxation accordingly. That is extremely unfortunate.

The yield of Schedule A tax is something like £1,500,000 on paper. That is a purely fictitious figure because many Schedule A taxpayers are given relief under Schedule D in respect of their annual valuation and what is gained on the swings is lost on the roundabouts. In reply to a Parliamentary Question by Deputy Sweetman some time ago the Minister said that owner-occupiers were paying £150,000 taxation under Schedule A. The time has come for the Government seriously to consider abolishing this penal tax.

Again we are re-enacting all the legislation in force relating to the taxation of salary earners and wage earners. In a few months' time the scheme of P.A.Y.E. will come into operation. We on this side have considerable misgiving about that scheme. Personally, I am convinced that when the new scheme comes into force there will be a great outcry from many people not previously assessed to tax.

Our tax code is extremely inequitable. It is an old maxim of British law that equity is a stranger to income tax. I do not think we should accept that position. There is a very strong obligation on us to make our tax code equitable. I am not satisfied that the Minister is fulfilling that obligation. Three or four years ago, when the Minister made certain concessions to industry, he announced that in spite of the fact that a Commission was sitting he was prepared to consider proposals for tax reform. To give credit where it is due, he has brought in some, but I wish to emphasise that there is no section of the community more sorely pressed than salary earners and wage earners. There is no section more inequitably treated in regard to income tax. They are assessed to 20/- in the £. They have no way of avoiding income tax and their employers are forced to act as collectors.

Amendment 2 which Deputy Sweetman has tabled is an effort to insert more equitable provisions into the legislation relating to the taxation of wage and salary earners, but I shall have more to say on the matter when that amendment comes before us.

According to the latest report of the Revenue Commissioners, Schedule E taxpayers are contributing far more than they should to our tax revenue and the amount of money being raised from salary and wage earners is yearly increasing. In the latest report of the Revenue Commissioners, that for the year ended 31st March, 1959, it was disclosed that the actual income assessed to tax under Schedule E amounted to £105,000,000. That is the actual income, not the yield of the tax. The income assessed to tax for that year, 1959, increased by five per cent over the previous year. That is a position which did not apply to any of the other tax schedules. The income assessed under Schedule D declined and so did that of Schedule C; of course Schedule B income declined and Schedule A income increased slightly.

The Minister in introducing P.A.Y.E. told us that by reason of the fact that Schedule E tax would be in the future related to the current year rather than the previous year as under the old system, he expected in a normal year an increased yield of £1,000,000. I am convinced that when P.A.Y.E. comes into force the Minister will gain much more than he has told us he will gain. More people would be drawn into the tax net than is generally expected. Many people welcome P.A.Y.E. on that account. They say that heretofore certain types of workers have been getting away with too much. I do not accept that view. It is extremely unfair to turn the screw tighter on the wage earner when others are being left out of the tax framework.

The solution of the problem is, of course, an appreciation of the fact that the old concept of income tax is not properly suited to this country. In addition to asking the Minister whether or not the Government are accepting the second report of the Income Tax Commission, I should like him to tell us at this stage, if he can, a little more about the more recent report which has not yet been published. I refer to the report dealing with the question of the suitability of income tax to this country. It is a matter upon which the public at large and this House in particular should be very well informed.

Dr. Ryan

With regard to the second report of the Commission, I mentioned here recently that they recommended, first of all, that there should be exemption from income tax in the case of all owner occupied dwellings under £30 valuation. I have made no recommendation on that to the Government so far. I am very doubtful as to what recommendation I will make. There are many arguments for and against. I am not by any means convinced that it is a recommendation which should be accepted. At the same time, I am not saying that I have objected to the proposal.

Mr. Sweetman

Is the figure of 155,000 not about right?

Dr. Ryan

It is not a very big figure. I think that would be about right. The second recommendation was that surtax should be dealt with by the same officer of the Revenue Commissioners who deals with income tax. I am very attracted to that proposition and I think we shall be able to implement the recommendation within a reasonable time. Deputies are aware that the Revenue Commissioners have been very busy working on P.A.Y.E. and have not had very much lime to devote to this proposal. I think that reform will come in some form or other, though perhaps not exactly in the form recommended by the Commission.

I do not think I can usefully give any information with regard to the third report. I have authorised its printing. As soon as it is printed it will be circulated to Deputies. It would be well that Deputies should study it —it is a fairly comprehensive report— before we have any discussion here on the merits or demerits of the recommendations made.

I am afraid I cannot make any promise to the Deputy that there will be a very big relief under Schedule E, as things stand at the moment. I am quite prepared to agree that income tax under Schedule E is too high. The question is when can we deal with the problem. Any Minister for Finance would be glad to deal with the problem if he were in a position to do so.

Mr. Sweetman

It would not be fair for me to express a view on the third report, but I want to know from the Minister does the third report provide an alternative method of raising revenue other than by income tax, or does it say that income tax must be continued?

Dr. Ryan

I can give the Deputy this much information: a majority suggested an alternative to replace portion, not the whole, of income tax; a very substantial minority, however, did not agree with them.

Mr. Sweetman

We can only wait until it is printed then, and see.

Mr. P. Byrne

I suppose the Minister is having regard to the yield from the tax. If he does not get it under Schedule A, he must find it somewhere else. I urge upon him that this small class of citizens is extremely deserving of consideration.

In relation to the third report, I hope it will be circulated to all Deputies when it is published. That was not done with either the first or the second report. They were available only on request. This broad question of the suitability of income tax to this country is one which should be very closely studied by all members of the House. This is a subject upon which public opinion should be very well informed.

Mr. Sweetman

Has the Minister given any consideration to the point I raised on the Second Stage that, by virtue of the provisions of P.A.Y.E., any member of this House who happens to be an employer, apart from a company director, will be a tax gatherer and, as such, will be disqualified from being a member of this House by virtue of an Act passed in 1693? I said on the Second Stage that it was an Act passed in the reign of Richard II. I was wrong. It was passed in the reign of William and Mary. I trust something will be done to ensure that any member of this House who happens to be an employer and who will have to collect under the P.A.Y.E. system for the Revenue Commissioners will not be disqualified on that account.

Dr. Ryan

I am sorry. I omitted to look into that matter. I shall take a note of it now.

Question put and agreed to.

Section 2 agreed to.

NEW SECTION.

Mr. McQuillan

I move amendment No. 1:—

Before section 3 to insert a new section as follows:—

"Notwithstanding anything contained in this or any other enactment, American social security payments to persons permanently resident in this country shall not be taken into account in assessing the liability to income tax of such persons."

I hope the Minister will give sympathetic consideration to this amendment. I happen to have come across a number of cases in my constituency of Irish people coming back from America to spend the autumn and winter of their days in Ireland. Some of these people are in receipt of social welfare benefits and old age pensions as a result of their work in America and many of them have been subjected to income tax on their American social security benefits and retirement pay. That is very unjust. I know that in a number of cases, where the matter was tested in the income tax court, it was decided that they would have to pay income tax but the general feeling all around was one of sympathy towards them. However, the statement was made that it would appear, according to the law at any rate, they must be assessed and must be subject to income tax. Whether that was originally intended or not is another day's work, but I would suggest to the Minister that he should consider the matter sympathetically because these people are a benefit to the country.

We are very anxious to get as many dollars as possible in Ireland and the fact that these people are anxious to live in the country and spend their pensions here is one that should be taken into consideration. We have the benefit of the dollars and the spending power of these people who come back to Ireland and that should be sufficient without taking a second cut from them by subjecting their pensions to income tax.

Dr. Ryan

At present the social welfare payments received from America by such persons living here would be classed as pensions and it would be a very serious step to abolish income tax on pensions coming into the country. There are a number of people living here who have pensions from foreign sources, foreign Governments, and so on, and there is no reason in the world why they should not pay income tax. Therefore, it would require a great deal of consideration and preparation before anything could be done to deal with a particular class amongst pensioners in this country.

We must also remember that we could not, I fear, deal with those by mentioning a certain figure for exemption, to set a certain income under a certain amount. These payments are sometimes very high, much higher indeed than our social welfare payments here, and to exempt pensions of this kind under a certain limit would not meet the bill.

My third reason, however, is the most important. At the moment we are negotiating an amendment of our income tax agreement with the American Government. I am not sure whether this question will come up for discussion; it may or may not, but I think it would be advisable not to do anything in this direction at the moment. I should like to see that agreement concluded with the American Government before we would approach the case of these people but I may assure the Deputy that the signing of that agreement will not make it more difficult because I am quite sure that the American Government would be very pleased if we did what he asks. As I say, I think the signing of the agreement will not make it more difficult to deal with the case of these people and for that reason particularly I would ask of the Deputy not to press the amendment until we are in a position to deal with the matter more objectively.

Mr. McQuillan

Would the Minister be in a position to say when the amendment of the agreement between our Government and the American Government is likely to be made? Would it be possible that this matter could be discussed again in 12 months' time?

Dr. Ryan

Certainly, I expect we will be in a position to discuss this next year.

Mr. McQuillan

I appreciate the Minister's position but I would like him to know that there are a number of people who intended to come back here and live in retirement in the West of Ireland who have decided against doing so as a result of decisions made recently subjecting others in the same category as themselves to the payment of income tax. However, in view of the fact that the Minister's statement that this matter can be discussed again throws out some dim hope to those people I shall accept his assurance and withdraw the amendment.

Amendment, by leave, withdrawn.

NEW SECTION

Mr. Sweetman

I move amendment No. 2:

Before section 3 to insert a new section as follows:—

"Rule 9 of the Rules applicable to Schedule E contained in the Income Tax Act, 1918 is hereby amended by the substitution of ‘reasonably to incur expenditure for the appropriate performance' for ‘to expend money wholly, exclusively, and necessarily in the performance'."

This question of the expenses that can be deducted in relation to Schedule E income tax is one that has been tackled for the first time and I must confess that it was only recently, in another connection, that I was brought slap up against the full implications of Rule 9. Rule 9 of the income tax Act of 1918 states:

If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively, and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed.

The effect of the amendment that I suggest is to substitute the words "reasonably to incur expenditure" for the words at the end "wholly, exclusively and necessarily." The wording I have chosen is, of course, the wording that was adopted by the majority in the Cohen Report that was produced in 1955 in Britain.

The whole basis of the complaint in relation to Schedule E, and in relation to the prohibition on deducting expenses from salaries chargeable to Schedule E, has been that people do not see why it is desirable to have one law for Schedule D and another law for Schedule E. The provisions of the Income Tax Acts which permit people who own businesses to make certain deductions for income tax purposes are not affected at all by this amendment. Rather, on the contrary, I am trying to bring the position of salary holders on to a par with persons who own businesses themselves. As I say, it was only recently I came up against this in its stark reality, and I was frankly rather shocked to discover some of the expenses which a person could incur in relation to his job and which he would not be allowed to deduct from the salary he was getting.

For example, I quote the expenses of a person in a professional position who, if I may use the term, is trying to better himself. If he wants to better himself, he has to keep abreast of modem tendencies. Whether it is law, architecture or engineering, he has to buy the books appertaining to those things. If it is law and if he is not able to go down to read in the Law Library, he has to buy the Law Times. If he is an employed person he is not allowed against his taxation the cost of buying those journals because it is not absolutely necessary for him to do so, although all of us would agree that it is wise, desirable and reasonable that he should try and better himself in his position. On the other hand, if the owner of the firm considers that for his purposes it is desirable that he should keep abreast of modem developments, he is entitled to deduct the cost of the provisions of the sort I have mentioned.

It seems to me wholly illogical that there should be one law for, say, a solicitor who is self-employed and a different law for the solicitor that I employ, that there should be one law for the architect who is self-employed and a different law in relation to these expenses for the young architect in his office employed by him. One of the troubles with which we have been faced in the past has been that there has been too little endeavour by people in any type of employment to educate themselves so as to improve their chances, and not merely improve themselves but improve the general standard in the community. We have done far too little in the matter of research. One of the ways in which architects and engineers would be able to keep abreast and to take advantage of research in other countries would be to subscribe to journals of the sort I have mentioned.

The Cohen Report dealt with the matter fairly clearly and at some considerable length. It seems to me that the arguments adduced from paragraph 129 to paragraph 143, while summarising the arguments both for and against the rule, make the case that the existing Rule 9 in the 1918 Act is far too narrow in England. If it is too narrow in England I want to suggest to the Minister that our circumstances here, where the white-collar worker who wants to improve himself will have a far tougher time, make it even more certain that it is desirable that the rule should be widened here.

I am sure the Minister has read the Cohen Report. If he has, he must have been struck by the quotations that were given of the descriptions that had been applied to this rule in the past. I notice particularly that at one stage it was described as "jealously restricted"; "strictly limited"; "a very narrow and strict rule"; "the words are notoriously narrow in their application and notoriously rigid, narrow and restrictive in their operation... stringent and exacting." Those were all very strong words. They were used at one time or other in relation to this. That report suggests that the use of the word "obliged" in Rule 9 is defended on the grounds that the subject of tax is income from an office or employment. That may have been a good answer in 1918, but I do not honestly think in 1960 that it is at all apposite or at all relevant. I think that "musty terminology" is a much more apt description of that definition.

I do not see why—and I fail completely to see any valid reason in any of the reports—Schedule E should have a narrower rule for expenses than Schedule D. I would be very glad if the Minister would particularly apply himself when replying to that aspect. Why does he consider that the person who is employed should not be allowed as much credit for expenses as the person who is employing? It seems to me that in both cases the person is paying for these books. He must pay himself for whatever is necessary, desirable or reasonable. In the case of the employer, it is treated as a charge on the profits of the firm; in the case of the employee who wants to better himself, it is not allowed.

I would agree at once that it would not be right or proper to give the taxpayers carte blanche, that all expenses should be allowed. That, of course, would leave a hole open for evasion of the law, even, as a result, for avoidance. But it does seem to me that the words that are included in the amendment and that were included in the Cohen Report “reasonable to incur expenditure for the appropriate performance of the work in question” are words with which no one can quarrel.

I know the British Revenue authorities, and, I imagine, our Revenue authorities also, will say: "This is going to set up a new line of country. We have had a great many decisions already under Rule 9. We know what is allowable under Rule 9 and what must be disallowed. This is going to set up a new set of regulations and means there will be new principles adumbrated." That is exactly what I want. If we were not to accept the fact that there were to be new principles adumbrated, we would never amend any statute at any time.

While it may cause a little more trouble at the beginning while the first year of a new practice is being worked out, by and large when that is done and when the situation has been standardised there will be very considerable relief for the go-ahead employee. Whatever the Minister and I may differ on, we both will agree without question that we would rather see legislation so framed that the go-ahead person gets the benefit rather than the person who is not prepared to use his initiative and to push on. Unless we are prepared to legislate in such a way that those who are endeavouring to move ahead will have the urge to do so and will be urged to do so, we shall not get the increase in productivity that we must get if we are to improve our standard of living.

I do not propose to weary the House by reading out all the arguments set out at great length in the report to which I have referred. I plead guilty to not having read it myself until quite recently when this matter was brought to my attention, but it seems to me that the arguments contained in it are coercive. Having read them, it does not seem to me that there is any answer to them. It appears to me that the operation of this rule does bear unjustly and unfairly on employees and that it should be amended for that reason.

Mr. P. Byrne

As Deputy Sweetman has stated, this amendment was recommended by the Royal Commission. I want to emphasise that if there is a case for the amendment of this rule in Britain, there is a much stronger case for its amendment in this country where we are relying on the salary earner and the wage earner to a far greater extent proportionately than is the British Chancellor of the Exchequer. It cannot be too strongly reiterated that salary and wage earners in this country are being fleeced. They are fair game for the Revenue Commissioners and have no way out of the income tax net. As long as that position applies there is a strong obligation in equity to see that they are fairly dealt with.

There is no part of the income tax code which has been more frequently the subject of unfavourable comment by judicial authorities and those who know what they are talking about than this rule. The extreme rigour of the rule has been frequently condemned by the Courts who have no option but to implement it because it is the law. It is completely undesirable because of the anomalous position of the professional person in employment vis-á-vis his professional colleague who is not in employment and who may be self-employed. The same items of expense are allowable in the case of the one but are not allowed in the case of the other.

Deputy Sweetman has mentioned the case of the professional man who wishes to keep up to date in his profession and is obliged to expend money on the purchase of books and such like. There is a much more obvious example. Take the case of a professional man, an engineer or an architect, who is in the employment of the Board of Works. He will no longer be an architect if he does not pay his professional subscriptions to the Institute of Architects but he is not entitled to set off his professional subscriptions against his taxable income under Schedule E. Some inspectors, by concession, do allow such subscriptions but not all of them. They should not be in the position of having to give a concession in this matter. It should be quite clear that professional subscriptions to professional bodies should be allowed. However, in that connection I do not suppose the Minister will accept the amendments.

Mr. Sweetman

I have great hope. A ray of enlightenment is going to descend on us to-day.

Mr. P. Byrne

I would suggest that the amendments to that law brought into the British Finance Act in 1958 whereby the British allowed professional subscriptions should be adopted here. We are constantly adopting British tax legislation. That is undesirable in one sense but in another sense it is unavoidable because the whole basis of our tax code is the British system and the principle around which it is built is still the British Act of 1918. It is significant that whenever the British tighten the screws on the taxpayers we follow suit but when the British give some technical concessions, as in this case, we do not follow suit. We have an example of that in this Bill in Section 9 which is a complete copy, with the exception of one sub-section, of the British provisions of 1956. The sub-section which we have left out is the British one which gives a certain concession which we do not give. It is remarkably significant and undesirable that we should so consistently copy the British when they turn the screw tighter but not when they make concessions.

The contrast with the Schedule D rule is very unfortunate. To clarify the minds of Deputies in this matter I mention an example which I came across recently of a medical doctor employed in a hospital who also had his private practice. Part of his income comes from his private earnings and part of it comes from his earnings as an employee. He is taxed under Schedule D on both of his incomes and he can claim many expenses which he would not be entitled to claim if his income were derived solely from his activity as an employee. Any of his colleagues who would not have a sideline of professional practice to qualify them to come in under Schedule D are treated differently. The expenses which he can claim are not only professional expenses but also include travelling expenses and entertainment allowances under Schedule D.

The Schedule E Rule 9 is so restrictive because we add the words "necessary to the provision of" and the restrictive view of the Revenue Authorities and of the Courts is that the engineer, architect, accountant or doctor who has paid subscriptions to his professional body is not allowed for them because they are not necessary to the discharge of his duties. That is an extraordinarily rigid interpretation of this rule. I believe that the rule was defective from the start and that it has been all along interpreted far more rigidly than was in the minds of those who framed it in the first instance.

I said a moment ago that because of the disproportionate extent to which we are relying on salary and wage earners for our income tax revenue there is a greater obligation on us to rectify this rule. It is quite obvious from the records of the Revenue Commissioners that salary and wage earners are being imposed upon more and more. They are very patient people, of course, but even the worm will turn and I feel there is bound to be an outcry shortly after the onset of P.A.Y.E. Acceptance of this amendment, of course, would not alter this position but it would make it clear that we were about to set out on a process of reform and that these people would be less drastically dealt with in the future.

The Royal Commission did not set out any order of priorities. In their terms of reference I think they were asked to indicate the priority in which the various recommendations should be implemented but they failed to do that and I am aware that, because of that, some time afterwards the Chancellor of the Exchequer asked the Institute of the Chartered Accountants in England to indicate the order of priorities which they, as tax practitioners, would feel justified in recommending. To my mind, it is remarkably significant that that institute which, if anything, would be biassed on the side of big business and industrial taxpayers, recommended as top priority the reform of this rule. It recommended the amendment we are now asking the Minister to accept.

Dr. Ryan

Deputy Sweetman spoke of what he described as the kernel of this matter and he asked me, in replying, to bring my mind to bear on it. Why, he asked, make a distinction between Schedule E and Schedule D taxpayers? Essentially, Schedule D taxpayers are different from Schedule E taxpayers. The Schedule D taxpayers must go out and get their business. They must look for business, as it were, in order to make the profits on which income tax is payable. If they are professional people they must look for business to earn incomes on which income tax is payable. We must, therefore, be more liberal because if a person who is a Schedule D taxpayer decides to spend a certain amount of money in order to increase his business or bring in more business, we must look on that as a legitimate expenditure and one that is therefore allowable for income tax if it is agreed that it is legitimate.

The Schedule E taxpayer is in a different position. He is working for another person. His area of activity is fairly well defined and necessarily his expenditure is fairly well defined also. His remuneration will be paid as long as he performs his duties satisfactorily and, looking at the Schedule E taxpayer in that way, the law as it stands up to this appeared to be justified, that is, that a Schedule E taxpayer could not claim exemption unless obliged by his employer to spend money in a certain direction. Take the case mentioned, and suppose there is an architect working for a public body which prescribes that he must buy certain periodicals and study them. He would be allowed that expense because it is necessary to hold his job.

Deputy Sweetman in his amendment has covered more or less the recommendation of the Royal Commission which sat in Britain. The British Chancellor of the Exchequer has not adopted that recommendation except in a very small way. He allows certain fees and subscriptions, but they are so circumscribed that I do not think I should like to bring in clauses here in the same form. I think I would be very highly criticised if I did so and I would certainly be pressed to make the concessions more explicit.

Deputy Sweetman also said that a person he had come across who was spending money to better himself in his position was not allowed the expense as an exemption for income tax purposes. That case would not be covered, as a matter of fact, by Deputy Sweetman's amendment because the amendment speaks of what is necessary to the appropriate performance of his duties and, of course, it is not necessary for the appropriate performance of one's duties that one should better oneself. Therefore, the amendment proposed by the Deputy would not cover the case he cites.

Mr. Sweetman

The Minister has imported the word "necessary".

Dr. Ryan

Excuse me, "reasonably incurred". But I do not think one could possibly argue with the Revenue Commissioners or anybody else that if a man spends money to better himself, it comes in under that.

Mr. Sweetman

Probably the Minister misunderstood me. When I said "better himself" I did not mean get a better position, but to better carry out the job.

Dr. Ryan

To perform his duties more efficiently. That would probably be all right.

Mr. Sweetman

I did not mean to move on but to do better in his own job.

Dr. Ryan

I do not think it is right for Deputy Byrne to accuse the Minister for Finance or the Revenue Commissioners of always following the British when they tighten up regulations and never following them when they give concessions. We should take pride, if you like, in any case where we are better than the British in income tax law, and there are many cases where we are more liberal than the British in our income tax code. We have many benefits that they do not give at all and we should be proud of that rather than attack ourselves, as it were, for slavishly following the British penal code and never following them in giving concessions.

There is one thing we have to remember in this country and that is that when the law is tightened up in Great Britain we are in the unfortunate position that we have to a certain extent to follow the British in many cases because the same circumstances arise here and we have to tighten up our regulations accordingly. I am afraid it will become necessary for me to give notice that I want to bring in another amendment, at Report Stage, which I am afraid will be regarded by Deputy P. Byrne as slavishly following the British, to tighten up the income tax regulations. It cannot be helped.

I should like to say, however, that there is a very big difference between Schedule E and Schedule D. Under Schedule E a man is remunerated for carrying out a certain job. If he cannot carry it out he is, all right. But under Schedule D a man must look for his work and, if he wants to expand his business or develop it, he must spend a certain amount of money in so doing. He must go out and seek the work and, I think, must get more consideration than the individual who is taxed under Schedule E.

Sir Anthony Esmonde

The Minister, in replying to the arguments of Deputy Sweetman and Deputy P. Byrne, would seem to me to have brought out even more forcibly the injustice that exists between Schedules E and D. I took his argument to be that no allowances for expenses are possible to a professional man under Schedule E, unless they actually are indicated to him by his employers as being necessary to improve his professional capability. I think the Minister suggested that if it were indicated to a man working for, say, some Department or another that if he bought a certain type of journal it would improve his professional ability he would be entitled to an allowance. But I do not think he definitely committed himself.

I took it from what he said that if such man wished to subscribe to a particular association he would not be entitled to an allowance, whereas under Schedule D a man is entitled to it. Deputy P. Byrne made it clear that in some instances inspectors of taxes do allow such a deduction. That seems to draw out the parallel that there is an injustice as between the two Schedules. The truth is that the individual under Schedule E is easy game for the tax collectors. The Schedule E individual is on a fixed salary. Everybody knows what he is getting and it is accordingly quite possible to come along and take the last shilling out of it.

From that point of view I should like to reverse the Minister's argument. It is much easier to get the tax out of an individual under Schedule E and for that reason I think there should be a relaxation rather than a tightening up. That is not to say that I think everybody in the professional end of Schedule D is too well treated. But I do think that individuals under Schedule E above all should be entitled to the same professional privileges as his counterpart under Schedule D.

Supposing an engineer working under the Board of Works finds that it would be to his professional advantage to take a course elsewhere— perhaps to study conditions in other countries—if he is put to a particular expense for that purpose and makes a claim for a relief of taxation, according to the Minister he is not entitled to it unless it is considered necessary by those who employ him because, they say, he needs it for professional improvement—a refresher course of some kind.

I can speak only for one profession —the medical profession. It is a known fact that if a man in that profession does not do a refresher course from time to time he goes to seed. The Minister himself, a medical man, must know that well. The same applies to every other profession and I think it is carrying the thing too far when a man who is permanently employed in a job is not allowed tax relief for even joining a society. After all, if a man wants to keep himself up to date—an electrician, or even a professional man such as a doctor, an engineer or a lawyer—he must keep himself in touch by joining a society which relates to the employment in which he is engaged.

It may be only a small point; there may be only a small amount of money involved, but it is a principle and the principle appears to be, in relation to the income tax code, that there is one law for one and another for another. Frankly, I do not think the Minister justified his case in resisting Deputy Sweetman's amendment. Deputy P. Byrne was probably right in his forecast that the Minister will not accept the amendment.

I took it from his reply that he was going to utilise some of the devices in the British tax code to tighten things up and that he will not give any relaxation in relation to Schedule E. I think the Minister should think a lot on this point and give the matter his earnest consideration because a particular mass of people in this country provide the greater part of the tax and they are entitled to this consideration. I do not believe they should be considered for all time as fair game for the tax collectors.

Mr. Sweetman

I must say I was rather horrified by the line the Minister took because it seems to me he was excluding all consideration from his mind that there could be anything wrong with the 1918 rule. Even the most ardent advocate of that rule before the Cohen Committee did not close his mind to its unfortunate repercussions. I must repeat that it has had unfortunate repercussions in England. It is bound to have far more unfortunate repercussions here, because of our different class structure, because of our different industrial structure and different professional structure.

I do not think that anybody would quarrel with the statement that the people who have found it most difficult in recent years have been the white collar workers. This amendment is designed primarily to assist the white collar worker and I do think that in those circumstances it is one that should be considered and not thrown aside. A change of the rule even suited the British. I should like to quote one paragraph from the Cohen Report, No. 143:

In the course of our study of this very difficult problem we formed the impression that some part of the complaints about the unfairness of the Schedule E rule in relation to that of Schedule D was due to nothing more than a lack of liaison between those responsible for dealing with the respective sets of claims. Indeed the evidence more than once suggested that there was considerable variation in the treatment of comparable claims under the same Schedule, according to the parts of the country in which they originated.

I am led to believe that even though this is a very much smaller country there is something of the same sort here. I should like a categoric answer from the Minister to the question: is there any liaison kept by the Revenue Commissioners at the top to ensure that the inspector of taxes, shall we say, in Cork, Galway, Kilkenny, deals with the matter in the same way as, shall we say, the inspector of taxes for Public Departments, in Dublin?

I do not think that here it is at all necessary to go to the extent that the Cohen Committee went in recommending a liaison unit. That is not necessary for our purposes here. But, it would be desirable—in fact, I would go further and say it would be virtually essential—that there would be complete uniformity here as to the manner in which this rule was to be interpreted. It cannot be a question of judicial decision because, if it were a question of judicial decision alone, there would not be differences between different places in England. It is a question purely of administrative interpretation.

I have not got the same practical knowledge of administrative interpretation as Deputy Byrne would have from his professional experience as an accountant. He has already told the House, with that knowledge that he has as a professional accountant, that there are differences between one tax inspector here and another. That is highly undesirable. It would certainly be desirable that some method should be adopted to ensure that in future there would be the uniformity in relation to a tax matter such as this that is so obviously and so eminently desirable.

I am not quite clear whether I made this point before or not, but I want to make it now. One of the reasons why I have adduced this form of wording in the amendment is to try to get the Schedule E rule nearer to the Schedule D rule. I do not understand at all the Minister's argument that a person who is being employed by somebody is in a safer position than an employer. I accept, of course, that the employer has, if you like to use the word, to find the business but, at the same time, the employer is his own boss; he is taking his own decisions.

There is an element of responsibility of a different sort on the employee. It is up to him to try to ensure that he adequately fits himself to carry out his employer's work for which he is being remunerated and it would be quite farcical to expect anyone when he was employing somebody to say: "In order that you may keep up to date as an engineer in the Board of Works you shall buy, read, annotate and keep every week the Civil Engineering Journal," or whatever it is, or "In order that you may be a good engineer in the employment of the Commissioners of Public Works, you shall pay regularly and punctually on every 1st January your subscription to Cumann na nInnealtóirí" or whatever Engineers' Association it may be. It would reduce employment to a farce if, when one was employing somebody, one had to sit down and think and list out all the various things that had to be done.

May I put it another way? When I am employing an assistant solicitor in my office I expect that solicitor will keep abreast of the law in respect of whatever branch of the solicitors' work in my office I am calling him to do. If he is to be the person dealing with probate practice and land registry practice, then I expect him to keep abreast of probate practice and land registry practice and he knows that perfectly well. I have not listed it. I do not expect him to keep abreast of bankruptcy law because he has nothing to do with bankruptcy law.

The Minister's argument is that it cannot be allowed because I have not listed in my initial contract of employment that he shall buy the Irish Law Times, that he shall read the Irish Law Times, that he shall put it aside and keep it, that he shall be a member of the Incorporated Law Society, shall we say. In fact, the question of the Incorporated Law Society does not really arise because I think most offices pay the subscriptions to the Incorporated Law Society and to the Solicitors' Bar Association for their assistant solicitors. The assistant solicitors have not to pay it themselves.

However, if they had, these are things that you cannot list out and a much more satisfactory method is to determine that what is reasonable shall be allowed. It is not what is reasonable in the opinion of the employee; it is what is reasonable, first, in the opinion of the inspector of taxes; secondly, if the taxpayer is dissatisfied with his view, what is reasonable in the opinion of the Special Commissioner of Income Tax and again, if either the inspector of taxes or the taxpayer is dissatisfied with the view of the Special Commissioner, what is reasonable in the opinion of the circuit court judge. I do not honestly see what could be more reasonable than to suggest that reasonableness should be the test so long as the person concerned is not going to be the judge of that.

In the accepted cases of what I might call high law, a circuit court judge is the determining person in relation to tax affairs. It would be far simpler, would remove considerable dissatisfaction and would certainly remove an existing cause of complaint if the Minister were to allow the circuit court judge to decide what was or was not reasonable in respect of a taxpayer who is an employee in that individual case.

Mr. P. Byrne

I make no apology for having suggested that our approach to tax legislation is reactionary and unimaginative. In this context I am referring to the technical and mechanical changes of our tax structure rather than to those Budgetary amendments made from time to time in respect of statutory reliefs and allowances.

I am sorry the Minister has not adverted to the point I made, namely, that in this context regard must be had to the fact that the Minister for Finance relies on salary earners and wage earners to a far greater extent relatively than does the British Chancellor of the Exchequer. Admittedly, the British Chancellor has not as yet entirely implemented the recommendations of the Cohen Report but he has done so in part at least in respect of professional subscriptions. I am glad the Minister has indicated that he considered that matter and thought that provisions such as were introduced in Britain in 1958 would be unwieldy and cumbersome for this country. They were, as the Minister said, hedged round with many peculiar restrictions. However, as far as the matter of professional subscriptions is concerned, I would urge on the Minister at least to make recommendations to the Revenue Commissioners impressing on them that uniform concessions should be granted throughout the country allowing subscriptions to professional bodies payable by any person, say, engaged in professional employment. That would seem to be a way round that aspect of the law.

Dr. Ryan

Deputy Sweetman asked me about co-ordination among inspectors. It appears that the Revenue Commissioners issue specific instructions to their staff throughout the country which are frequently amended; therefore every inspector is working on the same instruction. Also, representatives of the chief inspector pay frequent visits to the various inspectors.

Deputy Sweetman seemed to take it from what I said that my mind was closed on this question. By no means is that so; Deputy Sweetman knows that no Minister for Finance could close his mind on any income tax subject. I have had suggestions made in regard to this matter of allowing certain expenses to Schedule E taxpayers and particularly professional people. I have never had an attractive proposal. I certainly would not like to have provisions on the same lines as the British provisions because they are very complex.

Mr. Sweetman

Does the Minister mean Section 16 of the British Finance Act of 1958?

Dr. Ryan

Yes, that is the section. If something attractive and tangible could be suggested I should certainly be prepared to consider it. I do not like the idea of a flat allowance all round. We should like to give flat allowances at every opportunity if the money were available but this is a different question we are dealing with here. A flat allowance all round in order to lighten the burden on Schedule E taxpayers would be welcome at any time and will be made whenever the Minister for Finance can do it.

Mr. Sweetman

I must confess I have some sympathy with the Minister in disliking the flat allowance in this case. In another case I discussed with him the flat allowance was adopted but there were special circumstances, the realisation that it was undesirable to have individual taxpayers arguing with the Revenue Commissioners. However, in relation to the general body of taxpayers if a flat allowance all round is made it makes no concession to initiative. On that basis I would not like it. I am not quite clear whether the Minister intended to imply by the fact that he had received this very full, voluminous Report from the Income Tax Commission that they had finished their labours.

Dr. Ryan

No, they will be reporting on all these matters.

Mr. Sweetman

That is all I want to know. If they have not finished their work I would ask the Minister to send them a special request to examine the incidence of this rule in Ireland. If the Minister does not feel disposed at this stage to accept the amendment I have suggested and to accept the views that have been put on this side, I think it would be worth while to get the Report of the Commission—I am assuming their third report does not cut across this in any way——

Dr. Ryan

No.

Mr. Sweetman

I have not seen it and I am not asking the Minister to comment on it. If the third report does not include anything in the nature of a reference or a recommendation on the lines of this amendment I would ask the Minister to request them to consider the application of the expenses rule in relation to Schedule E taxpayers and to see if they thought it desirable either to recommend the adoption of a new wording such as there is in the Cohen Report or that the existing wording is satisfactory in our circumstances in Ireland. In that case I would have to reconsider my own opinions. I have no doubt they would not say the present situation was satisfactory without having good reason for it and they would no doubt adduce their reasons. In the absence of the Minister's being prepared to accept my amendment, I would ask him to suggest to the Commission that they should consider this problem and consider it in the light of our circumstances as apart from the circumstances in Britain which were considered by the Cohen Committee. Is the Minister prepared to do that?

Dr. Ryan

The Chairman, when presenting the last report, told me they had quite a number of other matters on which to report. I am not sure whether that is one of them.

Mr. Sweetman

Is it the idea that we will ask them to include that?

Dr. Ryan

Yes.

Mr. Sweetman

I shall withdraw my amendment on that assumption.

Amendment, by leave, withdrawn.

SECTION 3.

Question proposed: That Section 3 stand part of the Bill.

Mr. Sweetman

I am not quite clear as to what subsection (2) of this section means. It says:

This section applies to losses sustained after the beginning of the year 1960-61

I understand that quite clearly but the subsection continues:—

—and to so much of any loss sustained before the beginning of that year as could, apart from this section, be carried forward to that year.

Does that mean that if a firm had a loss that on the 5th April, 1960 they were entitled to carry forward then, that now they can carry forward that loss until the 6th April, 1966?

Dr. Ryan

On the 5th April they were entitled to go back six years but from now on they can go back six years from any period. When you come to 1970 you can go back 16 years.

Mr. Sweetman

Is it not going forward rather than going back?

Dr. Ryan

When you come to 1970 you can go back 16 years.

Mr. Sweetman

Perhaps we might leave it until 8 o'clock. We might both examine it between this and 8 o'clock.

Progress reported; Committee to sit again.