I think the Minister and I have both had an opportunity since of looking at Section 3. I said it was a question of looking to the future; the Minister said it was a question of looking to the past. I think a more accurate description would be that when we get into the future, then it is a question of looking to the past. What it means is that any allowance which, under the law heretofore enforced, was operative on the 5th April this year can be carried forward hereafter and that when we arrive in the future we can look back. An allowance that was operative on the 5th April this year can, when we get a long way ahead in the future, be still carried forward if necessary. As far as I understand, that is what it means.
Committee on Finance. - Finance Bill, 1960—Committee Stage (Resumed).
Question again proposed: "That Section 3 stand part of the Bill."
That is correct. A loss sustained in 1954/55 could be allowed in 1960/61. As the law stands, if it were not changed, that could not be done. Now the loss can be carried forward for all time.
The loss is always allowed against the first year in which there are profits—is that not so?
Yes. You take the farthest-back one, so to speak.
Question put and agreed to.
SECTION 4.
Question proposed: "That Section 4 stand part of the Bill."
I have great difficulty in understanding the section. Part of my difficulty arises from the construction of subsection 9 which defines capital allowances. As I understand it, capital allowances mean allowances that are not income allowances, allowances that are not normally allowed against profits for the assessment of tax. For example, a depreciation allowance is not a capital allowance but an allowance such as was included in 1950 Act for building, and the one that is amended to cover a hotel in this Bill—the subsection that says that the building allowance will be 10 per cent. for a hotel— would be.
As I understand the situation, that building allowance is a capital allowance but a depreciation allowance is not a capital allowance. If I am in wrong in that, I have misunderstood the section and if I am right in that I do not understand subsection 3. It means that the terminal loss includes the loss in the trade—and that is what I might call the income loss, perhaps.
Then it goes on in paragraph (b) to mention "the relevant capital allowances for that year of assessment." What I am not clear on there is whether that loss is the annual figure or the proportionate figure for the portion of the year in which the trade ends. Then I am completely foxed by the relevance of paragraph 3 of subsection (3). Why do we take in the preceding year when we have already taken in the year of assessment itself in paragraph (a)? I should have thought that the question that would arise would be in relation to (a) and (b) on the one hand or, alternately, (c) and (d) because I thought one could be charged only in relation to the terminal year for the proportion of it that had passed until the end of the year in which the business was carried on until termination.
It seems to me that by bringing in the 12 months before the date of discontinuance, something new is being brought in and if it is brought in from the point of view of carrying back loss, is it not also being brought in from the point of view of additional assessment?
There is also a provision that I do not quite follow. This arises if the business was permanently discontinued in the current year of assessment, that is in 1960/61, as provided in subsection (12). I do not understand that because I thought the situation was that if the business was discontinued in 1960/61, in any event without this section at all, the loss, if it were incurred in 1960/61, could be carried back into 1959/60. I thought that this part of the Bill was to ensure that you could carry back for more than a year. I understood the situation was that if you had a loss in the last year you could carry it back for one year only. Perhaps I have misread it; it is a complicated section.
Admittedly, it is a terribly complicated section and I must be very careful in what I say about it.
The brief will be very ample.
I believe one is not entitled to carry back even for one year at the moment.
Are you not entitled to carry back where you discontinued in part of a year?
No.
Then I am wrong.
Capital allowances are allowances in respect of capital expenditure which are made not as deductions on computable profits but as deductions on chargeable profits.
Does that make sense to the Minister? I do not want to interrupt, but does that mean that a capital allowance is one that is given to a trading firm assessable under Schedule D on the same basis as a life insurance allowance is given to an individual? Life insurance in an individual case is assessable. The profit is assessed; tax having being charged on that, a deduction is then taken off the tax so paid. Is that a correct analogy?
I do not think so.
Then I am in a worse position.
Subsection (1) looks back to the date of discontinuance and gives a full 12 months. Paragraphs (a) and (b) deal with a loss in the year of the discontinuance and paragraphs (c) and (d) go back the full 12 months from the discontinuance. I should have said perhaps that under subsection (9), the term capital allowance means an allowance other than those falling to be made in computing profits or gain. Capital allowances mentioned here are for machinery and plant, for industrial buildings, patents, mining development, dredging and so on.
What is an allowance that is not a capital allowance?
Ordinary current expenses.
But they are not allowances at all. They are outgoings. Do I understand the Minister to say that there are no allowances other than those on capital?
There would be the ordinary trade allowances for losses.
Could the Minister give us an example of what trade allowances are?
All expenses except those covered here as capital—a person's business expenses, wages, raw materials and so on.
The ordinary outgoings of a profit and loss account. Could the Minister explain to me—I feel sure it is in his brief—exactly what subsection (6) means?
It means reductions by payments made which are not made for trade purposes.
I see.
Question put and agreed to.
SECTION 5.
Question proposed: "That Section 5 stand part of the Bill."
I suppose there is some reason for drafting this section as it is drafted, because subsection (1), which is amended, says that it has effect as from the commencement of Section 7 of the Finance Act of 1932. By and large, that means from 1932 up to the present date in respect of certain securities. Then it goes on to say in subsection (2): "Where a certificate is given by virtue of this section..." Yet, notwithstanding that, we have gone back, through subsection (1). There must be some reason why it is drafted in this way. The normal method would be that the whole section would become operative as from the date of a certificate given after the passing of this Act, but in fact it says that the 1932 Act is to have been deemed always to have included that provision.
Subsection (1) brings in all securities before or after, but subsection (2) includes certificates already issued in certain cases and is just to provide that there will not be a duplication of some shares.
Surely if a certificate has already been issued it must have been in respect of a security that was issued since the passing of the 1932 Act and what we are putting in now is what has happened after the passing of the Finance Act of 1932? If it is only a matter of drafting, I am satisfied, but it seems to be an odd method.
The last two lines say: "Shares or securities which were payable before the date of the certificate."
I understand that. I do not understand the passage which says that the subsection is amended with effect as from the commencement of Section 7 of the Finance Act of 1932. Why should it be amended with effect as from the commencement of Section 7 of the 1932 Act when, in the next subsection, you say the amendment cannot have any effect until after the issue of a certificate? The two seem to be contradictory.
Subsection (2) says that though relief can be given in respect of securities issued before or after 1932, they cannot begin before the certificate is issued. In other words, I think, relief is given only after the passing of this Act.
That is what I thought it meant. Why then, in subsection (1), does it say: "With effect as from the commencement of Section 7 of the Finance Act, 1932"?
The relief cannot be given until this Act is passed.
I understand that the relief cannot be given until the new certificate is issued under this Act. If that is so, why do we say that the 1957 Act is amended with effect as from the commencement of the 1932 Act?
I presume it is a short way of bringing in all securities instead of going to the trouble of redrafting all the sections that applied to them.
I hope the Minister will look into it between now and Report Stage.
Question put and agreed to.
SECTION 6.
Question proposed: "That Section 6 stand part of the Bill."
I take it this refers to deposit interest?
Yes. The present law is that deposit interest is exempt up to £25 but a married man and his wife can each have a deposit of up to £25.
As the Minister is being generous about this I want to say that I have often been intrigued as to what is sacrosanct about bank deposits. Why do we make this concession available to the person who puts his money on deposit account in the bank while not at the same time giving a similar concession to the person who invests his money in State securities or industrial shares?
Of course, there are certain benefits given to people who invest their money in company securities within the State but this was recently brought in as an incentive to small savings, particularly aimed at the Savings Banks and Post Office bank. There was what appeared to be an anomaly and the Savings Committee asked me to amend this because they thought it would help them to get more savings invested.
Am I right in thinking that the wife has not got to ask for a separate assessment to get the benefit?
No.
I am not right or I am right?
She has not to get a separate assessment.
The point I should like to make is that there are other very desirable forms of savings in addition to deposit accounts saving or savings through the savings banks. Indeed I would think there is no more socially desirable form of saving than the purchase of one's own house and in a sense I would relate a provision like this in general terms to the argument I was making earlier today in relation to Schedule A.
There are grants given for housing, and so on. This was at the request of the Savings Committee. I consider that the Savings Committee has done very good work in the last few years. They came to me with certain suggestions. It was the only suggestion I could meet at the moment and I would like to be able to do something to meet them because they have done such very good work.
Question put and agreed to.
SECTION 7.
Question proposed: "That Section 7 stand part of the Bill."
The basis of this section is, of course, that the harbour authority is a non-profit-making authority and, as the Minister has included the harbour authority, there are certain other non-profit-making authorities that I think should also have been included. The one that comes to my mind particularly is the Voluntary Health Insurance Board. That is a non-profit-making body, a body that was set up specifically by the State to carry out a certain type of insurance to arrange for a certain type of very necessary saving for the purpose of providing that people should make their own provision against illness and misfortune. As the Minister has in this section included one non-profit-making authority—and I think it is fair to describe a harbour authority as a non-profit-making body—he should have gone a bit wider and included also the Voluntary Health Insurance Board because that is a body of the same sort. On its power to expand and on its power, by its expansion, to attract new business will depend its success and, of course, let us be quite frank about it, its success will save the Exchequer considerable money on the Health Vote and will save the local authorities as well, quite apart from its being an excellent principle of our social code that people should look after themselves in so far as they are able to do so.
This matter was on the stocks prior to the time that I left office and as the Minister has now included one non-profit-making authority I would urge him to include others and certainly the Voluntary Health Insurance Board.
Of course, the harbours were regarded as profit-making. Otherwise we would not have to deal with them. The Deputy is perhaps using that expression in another sense, that they are non-profit-making in the sense that they are not paying dividends or anything like that. They were regarded as profit-making and therefore had to be exempt from income tax if we wanted to allow them to build up, and so on. Voluntary health insurance is a thing that has been considered. It must be remembered that very big concessions were given to the people concerned there. Every person paying a premium—I think the Deputy himself brought that in——
And I got plenty of abuse for doing so by the Minister when he was on these benches.
Maybe so. I do not think that is right but maybe it is.
Satire rather than abuse.
Every person paying a premium is exempt from income tax on that part of his income. Having been given a very substantial help, they are not the most urgently in need of relief of this kind. Again, of course, as the Deputy is very well aware, when considering a case of that kind one always has to consider those who are practically in the same category and may claim relief in the same way. However, it has not been overlooked. I may say that.
It is precisely because I felt it was in the same category as the harbour board that I mentioned it now. I think the Minister is right in correcting me when I said a non-profit-making body. It was because they were technically profit-making that they are assessable. A more correct description would be bodies which plough back their profits and do not pay dividends. It would seem to me that the door has been opened here and I would press the Minister to open it more in relation to the Voluntary Health Insurance Board. It would be a highly desirable thing from the State's point of view because it would ultimately mean the extension of a very sound social principle that those who can afford to look after themselves in misfortune should themselves make provision against that misfortune rather than rely on the State. Perhaps the Minister would prefer that I would put down an amendment on Report Stage so that we could discuss it then?
Question put and agreed to.
SECTION 8.
Question proposed: "That Section 8 stand part of the Bill."
Would the Minister mind explaining this, please?
As the law stands here an Irish resident who has investments in a private company here—I do not know whether it would apply to a public company or not; it is not likely to apply to a public company—if he gets a dividend out of capital profits he is not liable to income tax on it. If an English resident has money invested in a private company in England, he is in exactly the same position; he does not pay income tax on the dividend from the company. As the law stands, however, if an English person comes to live here and is interested in a private company outside and if there is a capital profit dividend, he has to pay income tax. It is a very peculiar situation.
I was asked about this by letter from a certain person whom I do not know personally. I passed it to the Revenue Commissioners. They thought they would deal with it for one year. They regard it as fraught with danger of exploitation. So the Deputy will notice it is done only for one year. It can be continued from year to year as long as we see no danger in it. The Revenue Commissioners think there is danger of exploitation if it were continued. Therefore, we are doing it, as it were, experimentally.
Do I understand from the Minister that this section can arise only in respect of a person who for tax purposes changes his residence from Britain to here?
Not for tax purposes, but comes to live here.
Does that not mean changing his residence for tax purposes?
I mean he does not deliberately do it for tax purposes.
If a person changes his residence from Britain to here then, and only then, can he claim the benefit of the section? Is that right?
Yes. He would not have to claim it otherwise because if he remained in England it would not apply or if he was an Irishman living here it would not apply.
Is the Minister, in his reason for making it from year to year, hinting that otherwise this section might be made the instrument for some of those ablutionary purposes, bond washing, stripping or other similar exercise?
Yes.
I suppose a person might change his residence this year and go back again next year.
In one year he might. It would be worthwhile.
He would not be able to do it on this basis; he would be caught.
Question put and agreed to.
SECTION 9.
I move amendment No. 3:
In subsection (1) to delete the words "the trade" wherever they occur and to substitute "that trade".
This section is one of the kernels to which we on this side of the House take violent exception in this Bill. When I read the section first I found great difficulty in understanding what the Revenue Commissioners were getting at and I still find the greatest difficulty in trying to ascertain what loophole it is intended to close here. If the Minister would like and if the Chair would permit, it might be simpler if we discussed amendments Nos. 3 and 4 together.
Yes.
Amendments Nos. 3 and 4 may be taken together.
As I read subsection (1), once a person carries on a trade or business then the Revenue Commissioners are taking power to demand from that person particulars of all the payments he makes outside his trade or business. Once you carry on a trade or business in any one thing, regardless of the fact that your trade or business may be concerned, shall we say, with harness-making, if the Revenue Commissioners want to get information about any other aspect of your private life that has no relation whatever to harness-making they still can ask for it.
The purpose of my first amendment, No. 3, is to restrict the information for which they can ask to something that is connected with the particular trade or business which they are examining. A person can, of course, have other businesses and it seems to me that this restriction in relation to the particular trade that is under inquiry is one that does not need any further commendation. It seems to me the proper way of dealing with it. So much for subsection (1) which deals with a person carrying on a trade or business.
Subsection (2), however, goes far and away beyond that. It is not a question of a person carrying on a trade or business but carrying on any activity. When we get to that we are going miles away. "Activity" is not defined; the Minister will correct me if I am wrong but I cannot say where "activity" is defined and therefore, as far as I can see, it means everything. I do not really understand the purpose of this subsection at all. It infringes, and infringes violently, the ordinary rights and privacy of the individual.
The Minister is aware that the interpretation of this section and the objections taken to this section are not objections which are being taken by me alone, or objections taken by anybody for a political purpose. The Incorporated Law Society are extremely perturbed about this section, and rightly so. I have not the slightest objection to giving any particulars about anybody who is paid in my business, whether I pay him salary or commission or anything else, but I object violently to being made break the seal of privacy, the seal of privilege I have in relation to the affairs of my clients.
As I read the section now I am bound, if the Revenue Commissioners ask me, to disclose under penalty where I have paid anything in excess of £15 to anybody in relation to any activity. If a payment is made by me as a solicitor it is undoubtedly made in the course of my business. It may be made on behalf of a client, and it should be clear beyond question that the privilege that must exist between the professional person and his client is protected.
I want to put another case to the Minister in relation to subsection (1) as it is, if not amended, and also subsection (2). Can the Revenue Commissioners ask me to make a return to them of all the fees I have paid counsel during the year on behalf of my clients? I am not paying those. I am paying them as agent for a client but under this provision I can be asked to go back ad infinitum. When I say “go back ad infinitum” I am speaking of something that will happen in the future going back to the past. The position must be that in so far as payments are concerned it is only a payment I made on or after 6th April, 1960, but in 1970, for example, under this section the Revenue Commissioners can say to me: “Give us a list of the payments you made to ‘X’ or that you made in connection with any client in the year 1960”—10 years afterwards. That is fantastic.
There is no use in the Minister saying to me that the Revenue Commissioners will exercise this power reasonably and well. That is not the point. The point is that the law should provide that only reasonable information may be extracted, such information as will not cut across privilege and, secondly, such information as is absolutely necessary and can be shown to be necessary for the purpose of preventing evasion.
There is no use in taking a sledge hammer to crack a nut. On the Second Reading, the Minister indicated that what he wanted to do—as far as I understand him, at any rate—was to catch the case in which a person was genuinely employed but was paid something other than salary. I thought that person was caught by the Finance Act of 1958, which was discussed ad infinitum here. I am amazed to discover that that case is not covered. If that is all the Minister is at, presumably the Revenue Commissioners can ask for a return in regard to such a person in the same way as they ask now for returns in relation to those who are paid salaries. I do not know whether the Minister is suggesting that there is no power vested in the Revenue Commissioners to ask for a return of salaries. Certainly the Revenue Commissioners issue enough forms in that regard and I think there is a statutory obligation on every employer to make a return of all the moneys paid to employees. That is not the same as this. This goes far, far wider.
Deputy Byrne, when speaking earlier, referred to the manner in which the Revenue Commissioners do not always copy sections in British Bills which are in easement, though they invariably copy the sections that catch one. I shall leave him to deal with the reason why paragraph (c) of Section 20 of the British Bill has been omitted from subsection (5) here. The result is that this Bill is far more onerous, far more stringent, far more difficult than is the British Bill from the point of view of people carrying on business. Who will pay for all the returns that will be required here? The employer? There will be more and more requests for employers to do the work of the Revenue Commissioners. This is a request to provide lists of people carrying on widespread activities irrespective of whether or not those activities are taxable. There is no suggestion in subsection (2) that the reference is to taxable activities. It is "any activity". I do not see why there is any necessity for this wide net of this type in our circumstances here. So far as solicitors discussing the business of clients are concerned, that is something that could not be supported and should not be permitted.
There is another point I think I should mention. If by any possibility the section covers it I hope that it will be amended. It is difficult to discuss these amendments apart from the section but I shall try to avoid repetition as far as I can. There is a provision in Section 40 of the Finance Act, 1924 —I think the provision appears in the 1928 Act also—by virtue of which the Revenue Commissioners are exempted from their seal of secrecy in relation to the taxation authorities of Northern Ireland and Great Britain. Does this mean now that, under this section, payments made to people outside the jurisdiction can be disclosed? In my view that would be an unthinkable situation. Under the earlier section to which I referred the obligation as to secrecy imposed by any enactment "shall not prevent and shall be deemed never to have prevented the disclosure to any authorised officer of the Government of Northern Ireland any such facts as may be necessary" etc. I think that is in the 1928 Act, but I have not been able to trace it successfully so far. That would be after the double taxation agreement was brought in.
As this section is drafted, it would be permissible to transmit payments that arise on a list here to the other Governments concerned. That is something that should not be lightly put through this House. I want to make it clear that, so far as I am concerned, (1) I do not understand the necessity for this section at all; (2) in relation to a trade or business, I think it must be clear that the list in question must be restricted to the trade or business that is under inquiry; (3) I see no reason whatever for the inclusion of the widespread, rambling net to cover any activity. It is not even restricted to any taxable activity and, in effect, it means therefore that it covers everything that one does over and above the minimum lump sum provision.
I am sure the Minister has had transmitted to him the representations made by the Council of the Incorporated Law Society and their anxiety in relation to this matter, an anxiety which, I might add, was expressed by the Council before I had any discussion with any member of the Council or any of the officials of the Law Society. If this is to cover any payment made by a solicitor on behalf of a client there is, first of all, the question of privilege and, secondly, the cost of providing these returns will be quite substantial. I do not know who will pay for it; I am quite certain the Minister will not. Probably the poor solicitor will have to carry the baby.
I am at quite a loss to understand what is the necessity for this section. I should have thought that the Revenue Commissioners already possessed adequate powers to obtain information from taxpayers and I think that this is really an unwarranted extension of their powers which is being given effect to in a very cumbersome manner. As Deputy Sweetman said, it is all very well for the Minister to say, as I think he said on Second Stage, that the Commissioners will be reasonable in their approach to this matter and in using these powers but that undertaking by the Minister is not necessarily binding on individual inspectors.
On the Second Stage Deputy Sweetman spoke of the officious official who can sometimes avail of his powers in a rigorous and harsh manner. While we are all aware that the vast majority—99 per cent.—of the staff of the Revenue Commissioners are most considerate persons, there is always the exception to the rule and we should bear that in mind when dealing with legislation of this nature. This section is, of course, almost a complete copy of Section 20 of the British Finance Act of 1956 with subsection (5), paragraph (c) of that Act omitted. This afternoon the Minister took me to task when I suggested that we too frequently emulate the British authorities when we turn the screw tighter on those in the tax net, and too rarely do we emulate them when they loosen their grip. The subsection of the equivalent British provision to which I have referred, subsection (5), paragraph (c) of the British Finance Act of 1956, placed a curb or restraint on these powers which we have not copied, and I would urge upon the Minister that he should think twice about that.
This provision enables the individual inspector to serve a notice on any person carrying on trade or business to provide details of payments made for services rendered for any valuable consideration and the position is that in ten years' time, as Deputy Sweetman said, not having availed of the powers under this section in the interval, the individual inspector can serve notice on a taxpayer requiring him to extract information from his records relating to certain types of payments made to certain individuals. I could envisage a situation in which the Revenue Commissioners might be carrying out a special investigation into a taxpayer and they might serve a notice on those with whom they would have expected him to do business, those who might have been paying funds to him, to provide them with information, and it would be terribly difficult for any taxpayer to delve back into his records for ten years.
These records may even have been destroyed and yet, if the person who is served with notice does not supply the information sought, he is subject to all sorts of dreadful penalties which may be imposed upon him in quite an arbitrary manner, certain minimum penalties, without appeal. I would urge, first of all, that the Minister should drop this whole section and, secondly, if he will not do that, I would urge upon him that he should restrain inspectors from going back beyond a certain period. I would suggest two or three years which is the case in Britain. The inspectors there are restrained from serving demands which would require the taxpayer to delve back into the past beyond three years.
On the question of the definition of "services rendered" in subsection (1) I wonder could the Minister elaborate for us as to what we are to understand by that term "services"? Are they confined to personal services rendered by, say, a professional person or some type of commission agent rather than to services rendered as commercial transactions, say, by a carrier? It is difficult to envisage the examples. I should think that it would be very desirable that the type of payments about which information can be exacted should be restricted to payments in the nature of remuneration for personally performed services.
I have other points to make on this section but I think they would be more appropriate to the section as a whole rather than to the individual amendments. It is difficult to consider subsection (1) apart from subsection (10) which does elaborate somewhat on the question of services but again it does not define them. It merely says what they "include," and it is noteworthy that they include payments made by way of expenses incurred and also include any payments which could be said to constitute valuable consideration. I have a certain set of circumstances in mind. At one time payments in kind were not subject to tax but they are now and under this section a taxpayer may be compelled to provide details of such payments in kind, or of payments which could be said to constitute valuable consideration in the nature of gifts.
Supposing one professional man does a favour for another without charge and supposing as an ordinary act of courtesy the second man sends him some little gift as an act of gratitude-supposing he even sends flowers to his wife—does that constitute valuable consideration? Under this section will he be compelled to provide details of such transactions? It appears to me that on the face of it it may. I am quite sure the Minister himself has not got such transactions in mind when he is bringing in these proposals, but if the power is there we can only presume at some stage somebody or other is going to avail of it, and I think that is very desirable.
The object of a clause of this kind, which comes into the Finance Acts very frequently, is to make sure as far as we possibly can that everybody pays his fair share of income tax. Nobody likes paying income tax in this country, or in any other country either. But one thing that would make it a little more tolerable for the taxpayer would be the belief that everybody is made pay. What creates great discontent among taxpayers is that certain people are getting away with it and are not being made to pay.
Hear, hear.
I do not know why any Deputy would object to provision being made to make as sure as we can that everybody is paying his fair share of income tax. As the law stands, there is no power to require a person to give information about remuneration paid otherwise than to employees. This clause is brought in now to cover the cases of persons not regarded as employees. I do not think there would be a very big number brought in under this clause. The Deputy will learn from reading the section that no action is required of an employer unless a notice is served upon him by an inspector. No employer need have any of these terrors hanging over him at all if no notice is served on him because no penalty can be inflicted until the notice is first served and, secondly, until he disobeys it.
I do not see how Deputy Sweetman can read certain things into this clause. Take, for instance, the case of a solicitor. What he pays to a client is not for services rendered and, therefore, does not come under it. I presume what the Deputy has in mind is a case where he has funds to distribute to his clients as a result of a successful civil action or he might have funds to distribute as a result of a settlement of a will or something else. The client does not get that money from the solicitor for services rendered and therefore this does not apply. If a solicitor pays counsel, counsel has not rendered any service to the solicitor. He may have rendered it to the client, but not to the solicitor. Counsel is engaged on behalf of his client and therefore there is no reason why he should disclose, although indeed I do not see why there should be any great objection to disclosing in that particular case.
Except that it would take a member of the staff in any office a great deal of time.
There is no objection in principle? It is just the time? Anyway, it would not apply.
With respect, it clearly does under clause (a).
Deputy Sweetman raised this question of the Revenue Commissioners being absolved from secrecy. We should be careful about that point because we do not want the people to think generally that the Revenue Commissioners can publish or make known their financial circumstances from the returns made to them. That is not the case. When the Income Tax Agreement was made with Great Britain and Northern Ireland, it was obvious that the Revenue Commissioners and the Revenue Commissioners on the other side could not possibly carry out that Agreement if they were bound to secrecy. There was an exception made in that case, that if the Revenue Commissioners here passed on information to the Revenue Commissioners in England about a certain person who had, let us say, a residence in both countries, they were not in that case departing from their obligation of secrecy. But in no other case are the Revenue Commissioners absolved from secrecy.
I am not sufficiently versed in the interpretation of law to say, but I do not think that information gathered under this section will ever come under the notice of the Commissioners from the point of view of double taxation because it says that it is for services rendered by persons ordinarily resident in the State. If they are ordinarily resident in this State I do not think this question of double income tax applies.
Not in respect of clause (c). It is deliberately omitted from clause (c). That is where the trouble arises. If it were in clause (c) I would not object, but it is deliberately omitted from clause (c).
I have no objection to putting it in there, too.
If it were in there, the question could not possibly arise.
We certainly could put that in. Coming to the two amendments we are now discussing, the first amendment proposed by the Deputy here is that he wants to have "the trade" changed to "that trade". I do not know exactly what the Deputy has in mind there. If the Deputy is not anxious to push that amendment and withdraws it, I shall certainly ask the draftsman whether in his opinion it would strengthen the Bill in any way if we were to meet the wishes of the Deputy. However, I do not know exactly what the Deputy has in mind.
In the second amendment the Deputy wants to delete subsection 2. Subsection 2 deals with a body of persons carrying on activity which does not constitute a trade or business. When I first saw this draft I was rather curious myself to know what was particularly covered by it. I got a few notes at the time. Take a professional organisation, let us say a professional institute or organisation. It does not carry on a trade or business. A learned foundation—An Foras Talúntais, for instance—does not carry on a trade or business. An industrial federation, such as the Employers' Federation, would be another example, or any local authority. There would be just as much reason to require information from these bodies I have mentioned as there would be from an ordinary trade or business.
From that point of view, I do not see why the Deputy should be anxious to have it deleted. I think the Deputy was afraid that a person like a solicitor would have his confidential business intruded upon. I do not think there is any danger of that whatever. I do not see for what information the Revenue Commissioners could ask a solicitor apart from that in regard to his employees except in a particular case where he is paying a fee to somebody or other in connection with his own business. For instance, let us say he employed an architect to give him an opinion on his business house. The Revenue Commissioners in that case might be curious to know something about the architect and might ask for the information.
It is not the type of case that I can imagine would arise in the case of a solicitor. It does not definitely apply to his staff because they are his employees; it does not definitely apply to his clients because there is no service rendered and it does not definitely apply to counsel because a solicitor employs counsel on behalf of his client and in that connection counsel is not rendering services to the solicitor. I do not know, therefore, what anxiety the Deputy has with regard to this section.
Both Deputies said that we had left out clause (c) in Subsection 5, the clause that no information could be required further back than three years. That is their objection to it and I have no objection to that. I must say that the Revenue Commissioners mentioned that to me when they were doing this section and I said to them: "Surely you have no intention of going back three years" and they replied that they had not. I have no objection to that part of the Deputy's argument.
We shall be glad to take the Minister at his word in respect of the last portion of his remarks and include an amendment on the Report Stage. I do not like quarrelling with the Minister when I am sure that he has taken advice before making a statement such as the one he just made but I think that he is wrong. The section says that every person in trade or business is to make a return of payments made in the course of the trade or business for services rendered by persons ordinarily resident in the State and not employees in the trade or business. It is not for services rendered to the person who is asked to make the returns. It is for services rendered to anybody about which the person who is required to make the return has knowledge.
The Minister is right in saying that if I am acting on behalf of a client, the architect or counsel concerned is employed by the client and I am merely the agent. That is correct but under clause (a) I am bound to make all those returns because I am the person making the return and I am required to make returns of all payments made to persons ordinarily resident in the State.
The clause says payments made to a person in a trade or business for services rendered.
Once I am a solicitor I make payments to a person in a trade or business, to an architect or counsel or anybody like that because that is a necessary part of the business of a solicitor. He has to do those things for his clients. Once it is part of his business to do those things for his clients, these are payments made in the course of his business. When I get an architect to look at my own house it is not my business but as this is phrased at the moment every person that comes into my solicitor's office becomes part of my business and any payments made on that client's behalf becomes my business because my business is to take a client's money in for certain purposes and pay it out for other purposes. That is my business and the disbursements I make are in the course of my business.
Let me say this to the Minister, that this is not solely my own interpretation of the Section. It is an interpretation put on it by other people who are reasonably good at construction. Every payment a solicitor has to make is made in the course of his business. Every payment that passes through a solicitor's office can be included in these notices. I am not going to inquire as to what will be acted on or what will not be acted on. I know what the Revenue Commissioners will do. They will make out a form as they have made out a form for employees at the present moment, as they have a form for the return of interest on which tax is not deductible at the source. They will issue these forms broadcast and have everybody rushing around trying to put together the information required here.
If the Section is intended to cover payments that I make on my own behalf alone then it is not properly drafted. If it is intended to cover payments which I make on my own behalf alone, which is the case the Minister has made, where I employ an architect for my own office premises, then that is not only what is covered in the Section.
The reason that I want to press Amendment 3 is that I want to be quite clear that when a person happens to carry on two businesses the notices must be segregated. I do not like this section at all. I doubt very much that clause (a) provides that the notices should be segregated and that a person carrying on two businesses cannot have them caught in the one notice. I am not prepared to say that my reading of the section in that respect is unchallengable. I am not quite happy about it myself but I want it to be quite clear that a notice can refer only to one business and that if a person carries on more than one business it must be dealt with in a second notice.
As far as amendment 4 is concerned the subsection is not restricted to the type of case which the Minister mentions. If it were it is a matter that could be considered in an entirely different light. The subsection as it is, in cases where two people go out to do anything at all, two people, for example, who engage in the business of broadcasting, two people who engage in the business of advertising carnivals or boxing matches, is not restricted to the local authorities, as the Minister mentions, or to the Institute of Chartered Secretaries or the Institute of Chartered Accountants.
I can see nothing anywhere which restricts the operation of this section to the type of body, to the type of activity that the Minister suggests. The type of body that the Minister suggests is akin, I agree, to the firm or company carrying on business. I take it there is no doubt that the word "person" in Section 9 means person in the legal sense, that is, an individual, a firm or company, but the way it is framed does not restrict this section to the persons or the bodies that the Minister has mentioned. It throws the net completely open. If three people go to the races and decide to pool their bets they are a body of persons carrying on an activity for that day and they could be asked to make the return under this section. That is an extreme case, of course, but the analogy that the Minister has suggested is one part of the subsection only. It covers cases a great deal wider than that. Surely the Minister will come this far with the House, that when one places a burden—and it is going to be a burden and a trouble— on an individual or body of individuals —the legislation must restrict that burden to the narrowest point where it is necessary to impose it for the common good.
I agree with the Minister that it would be far better if everybody paid the income tax to which they are legally liable. I have no sympathy at all with the person who trousers the fees that are paid to him and does not disclose them for tax purposes but I want to be quite sure that when you are catching that person you are not going to catch the innocent person as well and impose on him undue hardship, an undue amount of trouble and expense. It certainly seems to me that this subsection as drafted at present will do so.
I do not think it unreasonable to ask the Minister to indicate the extent to which these powers are likely to be used. It is all very well for us to reproduce here provisions such as this from the British Finance Acts but there is one most important circumstance that operates here which does not apply in Britain—the question of hardship which Deputy Sweetman has mentioned. If these powers are widely used, they will cause a lot of trouble and expense for those who have to dig out this information. As a professional accountant I fear that the brunt of this section will fall on the professional accountants and auditors who are acting as tax consultants to the various taxpayers concerned. I suggest to the Minister that, while in Britain wealthy concerns can well afford to provide all the information exacted from them, that position does not apply here and it cannot be too strongly emphasised that these powers which create hardship should be used very sparingly.
As I understand it, the Minister desires to achieve two things. The first is to ensure that every person carrying on a trade or business i.e., an employer—I think he described him—shall, if directed to do so give to the Revenue Commissioners information with regard to payments described in the marginal note here as "fees, commissions, etc." Secondly, that persons who cannot be described as traders or persons carrying on business would be required to give similar information. In the explanatory memorandum which accompanies the Finance Bill I think the Minister's intent is set out very clearly where it says that Section 9 empowers the Revenue Commissioners to obtain information about payments made by traders and others in respect of services rendered by persons not employed by them. I think that marginal note of the Bill itself does correspond generally with what the Minister deems to be the purpose of this section but I must agree with Deputies Sweetman and Byrne and the section as written here certainly appears to me to go far deeper and further than the Minister's explanation would infer. It seems to me that in order to bring it only within the ambit of the Minister's wishes some amendment of the section would be required and Deputy Sweetman has put down an amendment to delete the word "the" and insert the word "that". I do not know whether that would altogether cover his purpose.
I do not think it would, to be quite honest, but I could not find a better form of drafting.
"Such trade," or "his trade," might be better. I think Deputy Sweetman's idea is to ensure that particulars of fees, commissions or payments for services will be confined to payments made to persons who have rendered services to the person so concerned and not payments generally that he may know about, say, between a second and third party.
I do not know whether it would be possible to insert it there in Section 9, subsection (1) (a) "payments made in the course of his trade..." rather than "the trade or business". That to my mind would make it more specific than putting in "the trade or business" as the section reads at present. In subsection (2) I must agree that the wording, "Every body of persons carrying on any activity..." to my mind, appears limitless. It could cover any activity by any two persons in the State. I do not think the "Minister intended that should be so. As I understand it, I think his intention is to bring within the net of the general body of taxpayers those who, for one reason or another, can now evade tax, an aim with which those of us who have to pay tax, completely agree.
I think he is going rather too far in that and I suggest that, perhaps, on the Report Stage the Minister might redraft subsection (2) to bring it into line generally with the purposes which he expressed in the House. I understand the Minister wants to ensure that people not employed, traders, business people, professional people or other bodies of persons, who get fees or commissions or some other form of reward for services rendered, will pay tax on those services. If that is the Minister's intention I think the section could have been drafted more specifically to mean that and that only. It seems to me to go further afield and to include almost any business and any activity carried on by two persons. It is ridiculous if two persons were to employ an undertaker to bury a member of their family that they would have to return that under this section.
I regard this section with a very considerable amount of suspicion because it appears to be a taxation provision which is very curiously worded. I agree with Deputy Russell that the Minister did make his intention very clear and that his explanatory memorandum is very useful in giving an idea of the intention. I agree also that the marginal note gives an even clearer vision of what is meant, but the section does not say precisely what is intended at all. It does not even give "fees or commissions" which are referred to in the marginal note.
I can see the reason the Minister wants to make taxable a certain income which, at the moment, is very considerable, and I think anybody in business knows that it is considerable. I am talking of middlemen. There are considerable sums being paid in respect of introduction in business by business men to people not in their employment and I can see that the Revenue Commissioners feel that should be got after. However, I do not believe for a moment that this section will have the desired effect.
Deputy P. Byrne made the fanciful suggestion that the bouquet of flowers to the wife might be made returnable. It was a fanciful suggestion because there are many easier ways than that. You need not even go near the wife. You can make a gift in kind to somebody or other and leave the wife quite out of it.
Orchids might exceed £50. A box of chocolates costing that amount would be a good one.
There are those people who act as middlemen, introducing two parties together who do not already know each other. A tremendous amount of income is received by these middlemen, but if you cannot pay the man for making those introductions by way of commission you will be able to reward him in some other way which will defeat the Revenue Commissioners. The drafting of this appals me because it is far too wide. I can see exactly what is intended, but I do not think the drafting has carried that out at all.
There is this matter in respect of payments made for services rendered. The most obvious service that occurs to me is that rendered by the Post Office where a person in business pays the Minister for Posts and Telegraphs for services rendered by him. He is not an employee, but he is rendering a service to the business man in connection with his business. I can quite see that the Minister might say that is an even more stupid and more fanciful suggestion than that of Deputy Byrne. But it is quite possible and if the power is given to an inspector of taxes to ask for such a rendering, a business man or a professional man would have to consider all those points.
I feel that once you give the Revenue Commissioners power to do these things it is no use saying you can rely on them to be reasonable. That may be all right at the present time. But we do not know what the situation may be in a few years. I must say again that I fear the drafting of this section is too wide and too vague and appals me. I hope the Minister will agree to going back to this period of three years.
I agree with Deputy Russell that the whole drafting of this section needs careful review. If I were given half a chance by the Leas-Cheann Comhairle I should like to develop the point of how hopeless it is to try and track down these payments at all and how futile it is to chase income rather than expenditure.
Immediately this goes through, there will not only be solicitors, and accountants but business men who will be finding the quickest and easiest way around it and it will not take them more than five seconds to do so. It seems to me to be a waste of time bringing it in and a dangerous way of bringing it in as well. The inspector of taxes, with the punitive powers given to him, will be able to force a person to make a return which, in good faith, he may try to make but which may be incomplete and land him in severe penalities. I am not at all happy with this section as it stands.
However, I cannot see how it could be redrafted to say precisely what the Minister means. I think it is worth commenting that the marginal note refers to fees and commissions. The section refers to neither. As I have already said, there is unlimited scope as the section is drafted but I cannot even suggest an amendment. All I can do is ask the Minister, with his advisers, to look into the whole section again very closely to see whether there is a point at all whether bringing in this would not lead to evasion on an even larger scale or whether bringing it in in its present form would give a power to inspectors of taxes which may greatly embarrass individuals and bodies in a way they should not be embarrassed by asking them to answer absolutely impossible questions.
With regard to Deputy Sweetman's reference to his amendment, I should like to assure him that when I read paragraph (a) of subsection (1) I take it to mean that service is rendered to the particular trade or business. I am sure that what my Department asked for was that it be made quite clear the services were rendered to the trade or business and that this was given as covering that particular point and no other. However, I shall ask the Attorney General again about that point to make sure whether there is any doubt about it and I undertake to bring in an amendment if there is.
Deputy Sweetman spoke of a person carrying on two businesses. He wanted them to be kept separate as far as this is concerned. I believe "the trade" has that meaning. I do not think that Deputies mean it but they do give the impression that they are afraid the Revenue Commissioners will get too much information. I do not see what harm it would be if the Revenue Commissioners got more information. If they simply come across some information that will make a man pay income tax who is not paying already, that is all to the good.
What about the trouble of providing the information?
That is a different matter. There are two points. If the Revenue Commissioners get too much information, I do not see any harm in that. If the Revenue Commissioners have power to ask for information that is unreasonable and do ask for it, I admit Deputies have a right to be careful that those carrying on the trade or business are not put to unnecessary trouble in looking up information for them. I do not think it could be claimed that there is anything very onerous on a business or profession or trade in the section. The inspector has to ask for the particular information and if he does not get it there is a penalty. We know that in all these matters a penalty is necessary to ensure that certain people obey the law. The great majority will give the information when asked for it but to get certain people to give information the penalty is required.
With regard to subsection (2), Deputy Sweetman and other Deputies made the point that any two persons might come under this. Possibly any two persons might but if it is necessary to get after two persons who are paying some person for services rendered, it is all right. Why not get after them if they must be got after in that way? It is not likely, however, that it will apply to any two persons because it says "Every body of persons carrying on an activity which does not constitute a trade or business." That is more likely to point to the type of organisation that I already mentioned here. I do not think it is likely to apply to any two persons but, if it does, there is no harm in looking for information from them also.
Would the Minister change the word "any" activity to "an" activity. Actually when he was reading it the Minister read it that way: "Every body of persons carrying on an activity" instead of "any activity".
I do not know if it would make any difference. I am afraid "an activity" there would mean any activity if we were to bring that in. However we can look at that.
Before I sit down I would give this further undertaking to Deputy Sweetman, that although I am assured that the clause as drafted has the meaning that he is looking for in subsection (1), I shall make further inquiries directly from the Attorney-General and if there is any doubt about it I shall certainly bring in some wording which will be more specific on Report Stage.
Do I understand the Minister correctly when I say that he is prepared to agree to restrict the return provided by this section to payments made for services rendered to the person who makes the return in his own right and not to services rendered to someone else but for whom the person concerned has to pay? I want to be quite clear beyond question that even though I am making payments in the course of my business on behalf of client X I am not under any obligation to disclose any of the business of client X. If I pay an architect to provide plans for redesigning my office and if I pay the same architect on behalf of my client Patrick Murphy for designing a house for him, I want to be clear beyond question that this section restricts the Revenue Commissioners to asking me for the fee that I have paid in respect of my own office and that the section does not enable the Revenue Commissioners to ask me for the fee that I have paid on behalf of Patrick Murphy to the person concerned. From what the Minister says now, that is what the Minister wants to get also.
That is what I want to get.
Then we can wait. I thought so myself in the first instance but I am assured by others more competent than I who have examined the section that that is not what the section means and the section will have to be clarified by putting some words in paragraph (a) which could be followed on in the others— restricting the services rendered to services rendered to that person. If I had moved to insert the words "to that person" there it would have been a better method of getting what I wanted rather than trying to change "the" to "that". I want to put that on record so that when the Minister is consulting the legal people he will see the anxiety that is in my mind. I am not a bit happy about the "body of persons" but I will wait until I see what the Minister has to say.
Amendment, by leave, withdrawn.
Amendment No. 4 not moved.
Is amendment No. 5 not moved?
Oh, no. It is an entirely different point. Amendment No. 5 is a principle upon which I could not possibly give way. I move Amendment No. 5:
In subsection (6) to delete lines 34 and 35 and substitute "liable to such fine, if any, not exceeding £20 as the Court may determine together with, in the case of a continuing noncompliance, such fine, if any, as the Court may determine".
The Bill provides that the Revenue Commissioners will be the sole arbiters of whether it is reasonable to provide the return or not. I can quite see that circumstances would arise in which it would be quite impossible for a person to make such a return. The situation under subsection (6) is such that, no matter how impossible the circumstances, the fixed penalty of £20 must be incurred.
As I understand the Section, in order to get the penalty imposed the Revenue Commissioners must go to court. That is right and proper. Therefore, there is no case to be made here akin, shall we say, to the Customs case where the Revenue Commissioners are the sole determinants of the penalty. There is no case to be made in those circumstances that the Revenue Commissioners should be the sole deciding body. By all means, if a person, in the opinion of the court, wilfully refuses to furnish information which he is bound under statute to furnish let us have him fined but it should be within the power of the justice before whom the case comes to determine the penalty. As the situation is, all the Revenue Commissioners have to do is to put in a certificate saying: "We asked for a return and we did not get it." It does not matter whether the person's office was burned in the period in question. It does not matter whether the cashier in the person's office defaulted and, in defaulting, messed the records up, as happens in many cases. No matter what bona fides the person concerned has the district justice has no option but to impose a £20 penalty and £20 for every day it goes on. The person concerned has to go cap in hand to the Revenue and say: “Please, will you mitigate?”
That is not the right way to deal with that type of case. The better way to deal with it is to give the judge who hears the case power to provide adequate penalties. I shall not quarrel, if £20 is not considered an adequate penalty, that it should not be made more. However, the judge should be given power to provide an adequate penalty and it should be left to his discretion, having heard the evidence, to decide what that penalty would be. Any other view in relation to a matter such as this is one that involves a reflection on the court.
The Revenue Commissioners in every country do not like the courts. They prefer to have everything in their own hands. If they are able to get away with that I do not blame them, though there is a lot to be said for the responsibility being placed elsewhere, even from the Revenue Commissioners' own point of view. This is a new type of code altogether and it is not a question of precedent as it would be if we were driving a wedge in the Customs code. This is a new type of case and in this type of case I am all in favour of giving the court full and adequate powers to deal with the matter, leaving it to the court to decide, after hearing the evidence, what is the penalty appropriate to the case, and I would urge the Minister very strongly to do so.
I think I can say that wherever the Revenue Commissioners look for information under any Finance Act and where the information is refused, on conviction there is a minimum fine prescribed. That is just keeping in line with general legislation. I may perhaps appear to be trying to escape a little too much this evening under the umbrella of the Commission but the question of penalties is one that the Commission is considering, and I would prefer to wait and see what they would recommend. I am therefore disposed to leave this section as it is with the minimum penalty of £20.
But it is not a minimum penalty. It is a fixed penalty.
A fixed penalty minimum.
That is a different thing.
It is even worse—minimum, not less than £20.
I would not mind the penalty being high as long as the court has the discretion. Did I understand the Minister to say that the Commission have reported on this?
No, they are considering it. They intend to report on penalties.
We will have a battle at that stage then.
Subsection (6) says that the return must be a true and correct return. Subsection (9) refers to a certificate by an officer of the Revenue Commissioners that during a stated period the stated return was not received. There is certainly a case to be made for prosecution of someone who simply fails to produce any return but sub-section (6) refers to a true and correct return. Anyone who in good faith produces a return which is subsequently found to be incomplete has, it appears, failed to comply with the notice served on him by the Inspector of Taxes. For that reason I believe Deputy Sweetman has a singularly strong point that some discretion must be given to somebody to say whether the person upon whom the notice was served has made a genuine effort to carry out the demand made on him.
Subsection (6) definitely states that, the first time, it must be a true and correct return. That is going much too far. It is a matter with which the court should be able to deal. I agree with Deputy Sweetman also that anyone who deliberately and criminally refuses to disclose information which he should properly give should be heavily fined but, like him, I believe the Revenue Commissioners should not be judge and jury in their own case. It is essential, as a guarantee of the liberty and freedom of the individual, that the question of penalty should be adjudged first of all by the court which has all information before it. I would ask the Minister to reconsider this matter very seriously to make sure that there is no possibility of injustice. At the moment there is at least a possibility and even if it is only a slight possibility it is something we must avoid at all costs.
I would urge the Minister to reconsider this subsection. There is no minimum time limit here stated for compliance. There is noththing to stop an inspector of taxes serving a demand under the section on a person requiring him to furnish this information within three days, even within two days. There should be a certain minimum period for compliance stated so that the burden of this subsection will press less severely on the person concerned. Again, there is no right of appeal for further time and I do not think there is set out here any provision whereby the Revenue Commissioners or the inspectors may extend the time stated in his initial demand.
The Deputy is discussing the Section rather than amendment No. 5 which is before us at the moment.
We have all done that I am afraid. It is rather difficult to discuss the amendments except against the background of the section.
I will defer that point until we come to the section.
Could the Minister state who decides whether the return is true and correct? Is it the Revenue Commissioners?
They must go before the court for a decision.
I know they must bring the case to court but if the Revenue Commissioners say: "This is not a true and correct return" is the district justice entitled to say: "I disagree. I think it is all right?"
He has the right to do that. He has the power to do that.
Then it is the district justice who decides whether the return is true and correct.
He is not bound to accept a certificate from the Revenue Commissioners. He can decide.
Again, I am looking at this in the background of the section. As far as I know, this is the only case in which a district justice is being brought in, in the determination of a matter of income tax. The normal procedure is that one goes to the Special Commissioners and, following the Special Commissioners, to the circuit court judge. If it was the circuit court judge who decided, I would be quite happy. It is a new principle to bring in the district justice into the administration of income tax. That is what is happening here.
The Bill does not say who is to decide.
It comes under the Summary Collection of Tax Act.
Amendment, by leave, withdrawn.
With regard to amendment No. 6, I gather the Minister has said that he agrees the section is not intended to cover the matter about which I am worried.
No.
And, if it does cover it, the Minister will amend it in order to ensure that it is not covered.
Amendment No. 6 not moved.
Question proposed: "That Section 9 stand part of the Bill."
In subsection (6) there is no reference to any minimum period of compliance with the inspector's demand. As the section stands, the inspector can serve a demand requiring compliance within a very brief period—three days, four days. I think there should be a minimum period set out of at least 21 days for compliance. There is no provision either for an extension of the period set out in the demand should the circumstances warrant it.
On the question of the reliability of the statement furnished, I should like the Minister to tell us if it is envisaged that the statement should be certified by a professional accountant or auditor. If that is so, is there any possibility that the Revenue Commissioners may require a form of certificate which could not properly be given in all circumstances? I have in mind a certain precedent some years ago in connection with quota orders. The Department of Industry and Commerce required certain details from persons applying for quota orders for the importation of goods. On the foot of the form on which the details were set out of the applicant's consumption of these goods on the basis of a certain period there was a form of certificate for signature by a professional auditor. In many cases accountants found they were unable to sign without qualification or reservation.
When one has to delve into such detail as will be required under this section it may be difficult to provide a form of certificate acceptable to the Revenue Commissioners. I hope that the professional accountants will not be expected to bear the brunt of this section to the extent of asking them to certify details, details which they would not be justified in certifying without delving very deeply into the affairs of the individual, or individuals, concerned. The Minister also told us he would introduce an amendment restricting the period on the lines of the corresponding section in the British enactment. That is very wise and I welcome that assurance from him.
I should like the Minister to clarify some points in relation to subsection (5) (b). This deals with particulars of payments made to any one person where the total of the payments which would otherwise fall to be included in the return does not exceed £5. The total within what period? Is it within a period of a year?
What is meant there is the ordinary accounting period, but it does not actually say so.
If it refers to the period specified in the notice nobody will know whether the period will be a month, or whatever it will be. If a person knew at the beginning of a year—I do not necessarily mean the income tax year, but whatever his accounting year is—that £15 was the limit, he could quite conceivably deal with his books in a different way, if he thought it might mean something else. I take it the £15 limit is meant to exclude trifles.
Yes.
But it will not exclude trifles unless the period is known. Suppose, for example, I was given notice in 1963 to furnish particulars of every service within the period of the previous three years, that would be the equivalent of £5 per year. Tips to the office boy, or something like that, might come into it whereas, if it were specifically limited to £15 per annum, everybody would know where he stood, and it would not hurt the revenue at all.
Would the Minister consider raising the limit of £15?
Of course the period specified might not be an annual year or an accounting year, and I should say that if it is a shorter period then it is in the person's favour. We shall have a look at that, anyway, and see what we could do about it.
Fair enough.
I wonder could the Minister also give his attention to some clearer definition of "services"? I know what is intended but I do not trust my belief in intention. The services rendered by a person to a business man or a business, to a professional man or a professional partnership, could cover a very wide variety of things. Is there any way of linking that up, as I think it is intended to be linked up, with fees, commissions and suchlike payments? Many services are performed for business and for professional organisations by people who are not employed by those businesses or organisations. In that connection I would mention the Post Office, the Electricity Supply Board, the Gas Company, Corporation water supplies and many other like services.
There might be some way of making a reference to services rendered specifically to one person rather than a public service which is supplied to everybody, including a business, but as matters stand I could not make out a return of everyone who had supplied and rendered a service to me in my own business over the past year with any certainty that I would cover everything, whereas if there were this reference to fees, commissions, and similar payments it would be quite easy. I am sure that is what the Minister wants but, if it is, he should say so. "Services rendered to a person in the course of his trade or business" is far too wide a term in view of the fact that this is a tax provision and one which provides fairly heavy penalties in the event of an incorrect return. I think the Minister should reconsider this matter with his advisers and see if there could be a more restricted and definite definition of what services are actually covered by this section.
I am afraid it would be extremely difficult to define the word, at least too narrowly. That could worsen it. Broadly it means anything that is done for a reward. After all, if there is a money reward I am quite sure a businessman would have a note of it over the past year. Therefore, it should not be too difficult to make out a return, especially if it is going to be more than £15. It is almost certain that a businessman would have a note of moneys paid out by way of reward. For instance, if a lorry driver took some trouble to deliver a parcel, the man getting it might give him a 5/-tip, and small tips like that would not come into this. I do not think there would be any great difficulty for any businessman to say, apart from his employees, to whom he did pay moneys during a given year.
Does it cover payments made through the Post Office for services in delivering letters, or cover the E.S.B. for services in supplying electricity?
I do not think so.
I know it is not intended to, but does it?
The Revenue Commissioners, the Deputy knows, will not be looking for income tax from those people.
But is the return complete without that?
There have to be specified amounts but the Deputy must know the services will have to be of a kind specified in the notice.
But the Section does not say that. It says for "services rendered" by persons. It does not say "for such services as may be specified in the notice." I am sure that is what is intended but it does not say "for such services as may be specified in the notice."
The fourth line in sub-section (1) says "all payments of any kind specified in the notice made during a period so specified," and so on.
Yes, but it does not say in respect of services.
That is for services.
Could the Minister elucidate one point for me in relation to subsection (6)? If an inspector of taxes serves a notice demanding a return on or before the 31st July, and the taxpayer does not make that return and the matter then comes before the court, shall we say on the 1st October, then there is default of 61 days in August and September. Is the continuing non-compliance referred to in that subsection related back to the date when the notice expired or does it mean continuing non-compliance after the date on which the matter was brought to court?
After the conviction.
Only after the conviction—£20 a day after conviction?
Yes.
With all due respect to the Minister the subsection does not say that. The subsection says quite clearly "together with, in a case of continuing non-compliance, a penalty of the like amount for every day on which the non-compliance is continued." I think in the case I have cited the court would be bound to impose a penalty, first of £20 for non-compliance, and secondly a penalty of £1,220 for non-compliance for 61 days after the notice had expired before the matter came to court. That is not what the Minister intended and he ought to change the subsection.
It specifically states "a penalty ...for every day on which the non-compliance is continued."
"Non-compliance" must be read with "failure to deliver" within the period limited in any notice.
We shall have a look at that.
Just before passing on, subsection (10) (b) states: "references to the making of payments include references to the giving of any valuable consideration." What would the Minister describe as a valuable consideration?
That is a 64 dollar question.
We are back to orchids again.
You might give a man anything from a bag of potatoes up to a motor car. Before leaving the question of income tax I should like to make a statement.
Deputies will recall that last year we entered into an Income Tax agreement with the British Government to deal with the tax avoidance device known as "dividend stripping." It was agreed that specified anti-avoidance legislation in the two countries, by virtue of which exemption from tax was barred in certain circumstances, would apply to an exemption founded on the Income Tax "Residence" Agreement of 1926 between Ireland and Britain. Subject to this, the Residence Agreement was reaffirmed. To prevent fresh measures of tax avoidance being used, a further Agreement is now being negotiated which will restate, in general terms, the Agreement of last year. I hope to circulate copies of this proposed new Agreement as early as possible and to move an appropriate confirming section on the Report Stage of the Bill.
It was only since the Bill was circulated that it became apparent this matter was urgent and the British Chancellor is getting his Bill through Parliament, as we are here, and it was agreed that we should ask our respective Parliaments to ratify this Agreement by having an amendment inserted in the Finance Bill. I hope to circulate the draft of the amendment to Deputies within a day or two and for the reason that I am circulating this I shall not ask for the Report Stage until this day week.
I suppose it is in order to make comment. The Minister is bringing in a pretty substantial amendment on the Report Stage. Shall I put it this way? Until we see it we cannot offer anything like comment on it, but I think we are entitled to ask the Minister for an undertaking that in respect of the new section the Bill will be recommitted.
I have no objection if the Chair is agreeable.
The House is entitled to do it, with or without the leave of the Chair if the House so wants.
Question put and agreed to.
Sections 10 to 13, inclusive, agreed to.
SECTION 14.
Question proposed: "That Section 14 stand part of the Bill."
May I again ask the Minister to oblige me by describing the difference between a ball and a dance? I have never succeeded in getting him to define it.
As a matter of fact, I did go to the trouble of looking it up in the Oxford Dictionary. There is not very much difference between them except that I think a ball is a more ambitious function than a dance. Any one of us might give a dance but it requires a fairly substantial organisation to give a ball. I can see no other difference between them.
It is a "hooley."
Question put and agreed to.
Section 15 agreed to.
SECTION 16.
Question proposed: "That Section 16 stand part of the Bill."
I should like to refer the Minister to the reply he gave me on the 14th of this month in relation to the trend in tobacco consumption. I found it very difficult to understand that trend in the light of the revenue figures. If I understood it correctly there was a drop of some three per cent. in 1959—I am speaking now of financial years— as compared with 1958. It came back five per cent. this past year. If that is so, why is there this change in tobacco dealers' licences? It does not seem to me to be consequential in any way on the consumption trend. Has the Minister any explanation to offer for the very substantial fluctuations we have had in tobacco consumption over the past six years? Consumption definitely jumped from 95 per cent. of 1953-54 to 98 per cent. and then there was a drop down and a rise again. Does the Minister think it was for health reasons? Does he think the new rise last year was due to any particular cause or was it entirely fortuitous?
It is a very speculative business and various explanations have been given for the increase in the consumption of tobacco last year. Strange to say, one of them was the fine year—that so many people enjoyed themselves during the week-end that they smoked more than usual. That seems to be a good explanation because the traders always appear to get big orders on Monday mornings as stocks of cigarettes are run out over the week-end, especially at seaside resorts.
It was not really any increase or decrease in consumption that influenced me in regard to the tobacco licence; it was the value of money. It is only 5/- and there were 36,000 of them there. Nine thousand pounds may have been worth while collecting 35 years ago, but it is not worth while now, and we considered we were losing on it.
I had a fair idea of that.
Question put and agreed to.
SECTION 17.
Question proposed: "That Section 17 stand part of the Bill."
I think we could deal with the changes in the consumption of beer in the same way. Why was the consumption of beer in 1960 down on 1957 and why was the consumption of whiskey in 1960 down on 1957? The Minister led us to believe that 1957 was a dreadful year. There must be some explanation, if that is so, as to why the consumption of whiskey and beer was down last year.
I must say I have not compared that figure with 1957. I have examined it only in comparison with the previous year. There was some slight increase last year over the year before. I do not know what the explanation would be in regard to 1957.
I suggest there is a very obvious explanation. Under Fianna Fáil the people have left the country.
They were galloping far faster when you were there.
Surely the Parliamentary Secretary does not really believe that?
I know it.
He will not get anybody in the country to agree with him.
Question put and agreed to.
SECTION 18.
Question proposed: "That Section 18 stand part of the Bill".
What is the purpose of Section 18? Is this for a special rebate on account of White-gate?
This is taking the penny off the fuel oil.
Hydrocarbon oil is fuel oil and light hydrocarbon oil is petrol, is that it? All right.
Question put and agreed to.
SECTION 19
Question proposed: "That Section 19 stand part of the Bill".
This is the penny?
This is the increase in tobacco duty.
This is the operative section on which I intended to make the remarks I made by mistake on the wrong section. This is the section by virtue of which the Minister is collecting £980,000 extra this year. I think I am right in saying that.
Progress reported; Committee to sit again.
The Dáil adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 22nd June, 1960.