Finance Bill, 1960—Report and Final Stages.

Mr. Sweetman

I move amendment No. 1:

1. In page 3, between lines 31 and 32, to insert the following new section:—

"2. —A member of the staff of Radio Éireann who ceased to be a civil servant on the establishment of that authority under the Broadcasting Authority Act, 1960, shall for all income tax purposes be treated not less favourably than if he was an ordinary Schedule E tax-payer as from 5th April, 1960."

I put down this amendment following the discussion on the Committee Stage so as to give the Minister an opportunity of indicating his views on it in accordance with the hope that he expressed that he would be able to do so at this stage. I do not propose to say anything more now. I shall make any further remarks that I have to make after hearing the Minister's comments.

Minister for Finance (Dr. Ryan)

When the new system of P.A.Y.E. was introduced by a Bill here, it was debated and the point of view of civil servants was explained and I think agreed with. Civil servants pay income tax on a P.A.Y.E. system at the moment and those who were working with the Broadcasting Authority had paid income tax fully for 1959-60 by the 5th April. Now, if they are to be exempt from income tax from the 5th April until the 1st October, they will then go on to P.A.Y.E. but they would have had a six months' holiday, as it were, from income tax and in that way they would be in a much more favourable position than the ordinary Schedule E tax-payer who pays his income tax on 1st January and 1st July. I suppose most Deputies here have their documents on their tables or desks waiting to pay tomorrow or next day, if they are prompt payers of income tax and they know that is the case. If the Broadcasting Authority employees had gone over to the new Television Authority on the 1st April they would have had that six months after that but actually they were being transferred during the period. I am not sure whether it is the 1st June or 1st July but I think it was on the 1st June they were transferred.

Mr. Sweetman

The 1st June was the date of the inception of the new Authority but whether they went over then or not I do not know.

Dr. Ryan

Yes, the 1st June. We have, if you like, reached a compromise with that particular grade. They have not exactly got a six months' holiday; they are paying for two out of the six months. I think it is a fair compromise, certainly fair to the individuals concerned who come fairly well out of it.

Mr. Sweetman

I think that is reasonable. I shall withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Sweetman

I move amendment No. 2:

In page 7, line 14, after "harbours" to add "and in respect of any profits or gains of the Voluntary Health Insurance Board".

I mentioned this matter on the Committee Stage. The Minister provides in Section 7 of the Bill exemption for harbour authorities. In consequence of the provisions contained in Section 7, a harbour authority will not have to pay any income tax in the future in respect of what I might best term its surplus of operating receipts over operating expenditure. Theoretically, that is called profit under the Income Tax Acts but, of course, it is something that is ploughed back. That is a new conception in relation to that type of ploughing back organisation and I think, therefore, when it is being adopted in respect of a harbour authority it should equally be extended in relation to the Voluntary Health Insurance Board.

I want to make it quite clear that my amendment has been deliberately phrased so as to ensure that the exemption will mean that the Board itself will pay tax on any income arising from any investments it may have. One can never be certain of anything from a drafting point of view but if I have not succeeded in doing that, that certainly was my intention —to provide that in respect of income it might get from the investments it might hold, it would be in a different situation from that which applied to the other surpluses. The difference between the gross operating profit and the gross operating expenditure is something that it was always intended under the scheme to plough back and it is something that it would be desirable in the public interest to plough back.

I do not think there will be any difference of opinion between the Minister and myself when I say that our aim and object in all taxation and social legislation should be to provide the inducements and the means by which those who are able to make provision for their social needs should be induced to make that provision. The inducement in this instance arises in two ways. It arises first by reason of the tax concession for the individual provided in the 1955 Finance Act I think — either 1955 or 1956 — but more than that we want to ensure that the Board is able to offer satisfactory schemes, able to offer inducements so that its schemes will go to the furthest possible point. It is particularly desirable in the early years of the Board, therefore, that it would have no barrier in the way of producing the best and widest possible scheme. There are bound to be some comparisons with organisations outside Ireland that were heretofore carrying on sickness benefit schemes in this country and which had been established long before.

By reason of the fact that they were long-established, I think many of these non-profit-making foundations as well as the profit-making companies carrying on sickness benefit schemes were able, because of the funds they had built up, to offer terms wider, perhaps, than the new company would be able to offer. I think it is up to us to ensure that the new Irish company will be put in the position as soon as possible of being able to establish itself even more firmly than it has been able to do so far and to ensure that any surplus resulting in any particular year from its operations can be ploughed back in toto without the Minister for Finance for the time being extracting his pound of flesh from it.

Theoretically, it may seem to the Minister that by agreeing to this he would be losing something from the Exchequer. I do not think that is so. I think the Minister will go with me as far as saying that the more the voluntary health scheme succeeds the less he will have to pay under the Health Estimate. If he adopts this amendment while it may mean a small diminution in receipts into the Exchequer from Schedule D income tax, nevertheless, the success of the Board will mean that he will have to meet in future less expenditure under the Health Estimate.

It is not, perhaps, strictly relevant, but I think it would be wrong for me to make reference to the work of the Voluntary Health Insurance Board without adding the comment that not merely have I felt its beneficial results in the case of illness in my own family but I have heard widespread commendation of its field of activity, of the manner of its administration and of the way in which it is grappling with the problems. That commendation that is published so frequently by people is something that should be taken into account and added as another argument as to why they should be allowed to get on with the good work without any drain on them from taxation of this sort.

Dr. Ryan

I should like, first of all, to say that the comments I have heard of the workings of the Voluntary Health Insurance Board lead me to agree with the Deputy. They have all been favourable. There is no doubt that it has made very great progress in its activities since it started. Unfortunately, we cannot decide the issue on that alone and neither did the Deputy ask me to decide the issue on that alone.

First of all, the Board is carrying on a trade or business and in the ordinary way would be taxed on its profits and the Deputy is proposing that we should exempt this body from income tax on its profits. The Deputy is probably quite well aware that in the Department of Finance one of the biggest fears they have is the fear of creating precedent.

Mr. Sweetman

I think in any Department.

Dr. Ryan

I am afraid that in this instance the fear of creating precedent is a real fear. There are many other organisations which could claim that they were doing very good work from the national point of view, not operating for personal gain or profits for shareholders or anything of that kind and it would, I am afraid, open the door to a very big number of applications which could be supported if we were to agree in this case.

I shall confine myself, however, to the analogy of those who insure themselves against fire or accident or who take out a life endowment policy. It will be agreed that the person who insures himself with the Voluntary Health Insurance Board gets much better terms because he is exempt as far as his premium goes from both income tax and surtax. In the case of a life policy, the person, if he insures with an Irish company, gets two-thirds free of income tax on his premium; if it is not with an Irish company, it is only half. If he insures against fire and accident and other things, he gets no relief whatever. The insurance company, in the other case, has to pay full tax, of course, on its profits as well as on its investments. So, those who are dealing with the Voluntary Health Insurance Board are getting very favourable terms.

When the Bill was going through the Dáil, it was pointed out that a very essential feature of the whole scheme was that it should be self-supporting and should not impose any charge on the Exchequer. That has been lived up to indeed. It was laid down when the Bill was going through that they were to get some small loan to carry them through their initial stages and that is as much as it has ever applied for. It would be inconsistent, however, with the intention to make the Board entirely self-sufficient or self-supporting if it were to get this income tax exemption because, after all, we can look on that only as an annual subsidy to enable them to carry on.

I do not know if I can say very much more. I suppose we could draw this debate out for quite a long time, but this Board was set up as a self-supporting body and has lived up to that. The difficulty of making it an exceptional case is the biggest argument I can use against the Deputy's request in this case. Therefore, I have to oppose the Deputy and say that I cannot agree to the amendment.

Mr. T.F. O'Higgins

May I say a word in relation to what the Minister has said? The concluding words the Minister used are not entirely final. The Minister has said that there is a fear in the Department — Deputy Sweetman interpolated "any Department"— against creating a precedent and that is quite understandable. The Minister will find that it was always understood to be the law that a statutory board of this kind which was expressly excluded from profit making by the terms of the statute creating it was not, in fact, liable for income tax. It was only a decision, the name of which escapes me at the moment, some time in 1953 or 1954 that held that view of the law not to be precisely correct.

When the Voluntary Health Insurance Bill was before this House it originally contained a section expressly excluding the Board from income tax liability. It was felt that such a section was more suitable for inclusion in a Finance Bill rather than in a Bill dealing with health insurance, even though it was laying down the terms and the rights and the liabilities of the new Board. Accordingly, the proposed section was taken out of the Voluntary Health Insurance Bill as it then was and the matter of its inclusion in a Finance Bill was deferred for further consideration.

I merely mention to the Minister that the question of the Board's not being liable to income tax was certainly present to the mind of the then Minister in introducing the Bill in the House and I have little doubt that my colleague. Deputy Sweetman, in due course, in a Finance Bill, would have dealt with the matter, which might have been dealt with had the section been left in the Voluntary Health Insurance Bill as it was originally planned.

The Minister has said very fairly and properly that the idea of health insurance as it was introduced here was that the Board should be self-supporting and should pay its own way. In the Act setting it up, provision was made for two loans of £25,000, not exceeding the sum of £50,000, to the Board to enable them to go into business. In fact, the Board indented merely for a loan of £13,000 and that loan has been fully repaid with interest to the State. The position has been that the Board has lived up to the hopes held out for it on its establishment but anyone looking at the finances of the Board in its annual report will realise it has had to put aside, comparatively speaking, quite a considerable sum to meet this income tax liability and the State in continuing to charge the Board that income tax, in effect, is making money out of the prudent provision by people in insuring against the hazards of ill-health.

That was never contemplated when this Bill was introduced. It was far removed from the minds of the then Government. It was always the intention — I am speaking purely for myself —that this Board would be prevented from making money out of health insurance but because it could not make money, that it would not be liable, merely because it received from a premium payer a sum of money, to be charged income tax.

I had intended in any event to refer to this matter on another occasion this evening but I would press the Minister not to approach this in any facile manner, not merely to say this is just the same as any other such board and is not a precedent. Health insurance creates a precedent and I think a very good precedent in this or any other country. When the Bill was introduced here, I stated that it was the first measure of social welfare in any country in the world in respect of which the taxpayer would not be asked to pay a penny. That statement has been lived up to.

The purpose of Deputy Sweetman's amendment is to provide that this type of social relief should not be taxed but should be encouraged so that it can develop and perhaps have a parallel in other spheres of activity. I would urge the Minister not to reject the amendment out of hand because there is a matter of considerable principle involved. I shall not put it any further than this: if Deputy Sweetman had introduced the ensuing Finance Bill, I have little doubt that it would have contained the section envisaged by the amendment. In those circumstances, I would ask the Minister to reconsider this matter very carefully.

Dr. Ryan

May I say a few words?

Mr. Sweetman

I move amendment No. 3:—

In page 7, line 42, after "rendered" to insert "to the person carrying on such trade or business"

In relation to this matter which we discussed on Section 9 last week, the Minister has gone some distance to meet my point with the following amendment, No. 4. However, I am still not very happy. Taking a solicitor as an example, I can see a situation in which I pay money for a client. I would do this in connection with my business because my business is to pay money for clients. It seems to me that on that basis I would be caught by the Minister's amendment, No. 4, in having to disclose and to return payments I made merely as an agent for somebody else.

I do not think there could be any doubt whatever in regard to my amendment because it makes it clear that the services must be rendered to me. We mentioned the other day the question of fees paid to counsel and I should like to take the same example today. I am not trying to restrict it to that but I am using it purely as being explanatory of what I have in mind. If I pay a fee to counsel, I pay it for services rendered not to me but to my client. Under my amendment, that would not be included in the return because the services are not rendered to me. However, if I were to accept the Minister's amendment, it could most certainly be held that I pay a fee to counsel in connection with my business, because my business is doing business for my clients and paying counsel is part of my business for my clients. It is a net drafting issue.

I think the Minister has no desire to incorporate in this section moneys that are paid by someone as an agent merely for somebody else. He merely wants to catch moneys that I pay as a principal. I do not think there is any difference between us but it does seem to me, on my interpretation of the drafting of the two amendments, that there is a substantial difference. I had my amendments drafted beforehand and I held them in cold store until I saw the Minister's amendments. I had some other gems for him, but he has met the points and so I did not put them in. But I considered carefully before putting in No. 3 whether, in fact, the Minister in No. 4 did meet my difficulty, and I came to the conclusion that he did not. I might add that I consulted elsewhere also and I was advised that there was some doubt as to whether the Minister's amendment did catch the agent who habitually, as part of his business, paid certain moneys for another principal. There can be no doubt whatever on that ground if the Minister accepts my amendment.

Dr. Ryan

I admit that the Deputy's form of words might be a bit more restrictive than mine — a bit too restrictive, I am afraid. As far as my legal advice goes, I do not think there would be any danger that a solicitor could be compelled to say what he paid to counsel because he is paying on behalf of a client. Possibly, it could be held, as the Deputy has pointed out, that it is part of his business to defend his clients and, therefore, part of his business to engage counsel to help him to do so.

I think the Deputy will agree that there is definitely no danger of what he feared, namely, that an inspector of taxes might ask him how much he paid to a certain client by way of settlement. That is definitely ruled out. I am afraid the Deputy's words would be too restrictive altogether. There is an example I should like to put before the Deputy. A manufacturer sells a machine. The buyer complains that the machine is not working properly. The manufacturer engages an engineer who happens to be convenient and he asks him to look at the machine and advise on it. Under the Deputy's wording we would be precluded, I am afraid, from getting information as to what the manufacturer paid the engineer.

Under my amendment there would be no such difficulty. It is unlikely we would ever be getting after an engineer like that, but I give the example to show the difference between the wording in the two amendments. In my amendment no danger need be apprehended. It gives a little more latitude to the Revenue Commissioners to get information. I am told, however, that the principle underlying this is that it must be an effective payment and it is held that effective payment is made by the person who is the ultimate payer, not an agent.

Amendment agreed to.

Amendment No. 6 not moved.

Dr. Ryan

I move amendment No. 7:—

In page 8, line 5, to insert "in connection with the activity" before "by".

Amendment agreed to.

Dr. Ryan

I move amendment No. 8:—

In page 8, line 8, to insert "to persons ordinarily resident in the State" before "in".

Amendment agreed to.

Dr. Ryan

I move amendment No. 9:—

In page 8, to add the following word and paragraph to subsection (5):

"or

(c) particulars of any payment made in a year of assessment ending more than three years before the service of the notice requiring him to make the return."

This amendment is in response to a point raised by both Deputy Sweetman and Deputy Booth. There was an objection to the fact that there was no time limit on the Revenue Commissioners as to how far back they might go when looking for information. It was suggested we might put in a limit. I think three years was suggested because it was three years in the British Act. This amendment is to meet that point.

Mr. Sweetman

The Minister is being unfair in describing paternity of this amendment to either Deputy Booth or myself. It was Deputy Paddy Byrne who pointed out that there was this omission.

Dr. Ryan

That is quite right.

Amendment agreed to.

Mr. Sweetman

I move amendment No. 10:—

In page 9, between lines 22 and 23, to add a new subsection to section 9 as follows:—

"(12) Nothing in this section shall require a solicitor to include in any return to be made hereunder any payment made by him on behalf of a client."

I move this amendment for the purpose of getting an express assurance from the Minister that he has been advised that this section, as now amended, cannot be utilised to force a solicitor to disclose his client's business.

Dr. Ryan

Definitely not because, as I said, the principle underlying this is effective payment and that is a payment made by the ultimate payer. An agent cannot be requested, therefore, to give information under this section.

Amendment, by leave, withdrawn.

Mr. Sweetman

I move amendment No. 11:—

In page 16, lines 48, 49 and 50, to delete "the Imposition of Duties (No. 89) (Special Import Levies and Miscellaneous Customs Duties) Order, 1960."

The purpose of this amendment is to give the Minister an opportunity of answering the various queries that I threw at him rather quickly and, possibly, without notice in relation to Section 22 on the Committee Stage. First, I asked the Minister to give me the estimated yield from the various Orders that are being made. Unless I am forced to, I do not intend to have an acrimonious political argument about levies and quasi-levies. I have no intention of starting that hare, but I think we are entitled to know the other side of the picture in relation to the diminution by, I think, £575,000 that the releasing part of these Orders involves.

The Minister was, I think, a little bit puzzled, just as I was puzzled myself, in relation to the second question I asked. Why, in all the Tables that were issued over the last four years as being explanatory of the Budget, was account taken of the diminution in revenue because of the Order then made dealing with the matter at Budget time, but no account taken of the increase in revenue which would accrue by reason of exactly the same instrument? The printed Estimates of Receipts and Expenditure issued on the Saturday before the Budget are clearly set out as being operative at the rates in force. The rates then in force were varied by remission, on the one hand, and by increase, on the other hand, by the same part of an operation, and it seems to me that when one side of that operation is included in the explanatory Table, the other side should also be included.

Amendment, by leave, withdrawn.

Bill recommitted in respect of amendments Nos. 12, 13 and 14.

Dr. Ryan

I move amendment No. 12:

In page 22, to insert the following Part before Part V:

"PART V.

CONFIRMATION OF AGREEMENT.

(1) The Agreement, set forth in the Third Schedule to this Act, made on the 23rd day of June, 1960, between the Government and the United Kingdom Government relating to the Agreement set forth in Part I of the First Schedule to the Finance Act, 1926 (as amended by the agreements set forth in the First Schedule to the Finance Act, 1928, the First Schedule to the Finance Act, 1948, and the Second Schedule to the Finance Act, 1959), is hereby confirmed and, subject to confirmation by the United Kingdom Parliament, shall have effect accordingly.

(2) For the purpose of carrying out any obligation under Article 2 of the Agreement set forth in the Third Schedule to this Act, the Government may by order direct that any provisions of the Income Tax Acts specified in the order, being provisions affecting in any way exemptions from income tax of persons resident in the State, shall not affect, and be deemed not to have affected, exemptions from income tax which persons enjoy as not resident in the State but resident in the United Kingdom, and any such order shall have effect accordingly.”

Amendments Nos. 12 and 14 go together. Amendment No. 13 is purely a drafting amendment.

This is to insert a section to give statutory powers to implement the Agreement that was signed on 23rd June, and the Agreement is set out in the Schedule. This section, which will now be Part V and which, I think, will be Section 34 of the Bill, has two parts. The first part of the section says that: "The Agreement set forth in the third Schedule to this Act... is hereby confirmed and, subject to confirmation by the United Kingdom Parliament, shall have effect accordingly." The meaning of that subsection is that when the Agreement is confirmed, if we on our side withdraw an exemption from income tax, by passing the law through the Oireachtas in the Finance Bill, it will have the effect of preventing a person living in that country from having the benefit of that exemption in future. If that were not passed, however, a person living in England who did the same type of business here, could claim the exemption under the residence agreement. If you like, this is to say to that person: "You are not entitled to claim any benefit under the residence agreement. It does not apply."

Subsection (2) then lays down how we would operate under Article 2 of the Schedule. If we bring in legislation withdrawing an exemption and apply it not only to our own citizens but also to residents of Great Britain, the latter might claim that, under the residence agreement, they were exempt, and if we refuse to accept that, they might complain to the British Government that they were being treated unfairly. If the British Government approached us and said: "This is unfair under the residence agreement and we think you should not go ahead with it" and if we agree to that, subsection (2) gives us power to make an Order rescinding that clause and giving exemption to the person in England. We need not necessarily rescind it as far as our own citizens are concerned. This section gives the force of law to the working of the agreement.

We have, I might say, very few exemptions in this country. We have exemptions from income tax for charities and for superannuation funds, but very few beyond that. If the exemption is being abused and we withdraw it, Article 1 lays down that that would apply also to a person resident in England who might, under the double income tax agreement, claim exemption. To that extent the double income tax agreement would be amended. If we pass legislation of that kind, Article 2 gives power to the British Government to object and say it is not in the spirit of the agreement. If we agree, we take action under subsection (2) of the section; if we do not agree, it is laid down here that, with that exception, everything else in the agreement still holds good. Article 3 lays down that it becomes effective when it has the force of law, that is, when it is sanctioned by the British Parliament and by the Oireachtas.

Mr. Booth

And subject to confirmation by the United Kingdom Government.

Dr. Ryan

From the date of the signing of the agreement, the 23rd June.

Mr. Sweetman

We announced before 23rd June we were going to do it. I think we announced it on 22nd June. The day is sufficient to retain the principle that it is not retrospective. It may be retroactive, but that is not a matter on which I have expressed the same views as retrospection.

"THIRD SCHEDULE.

AGREEMENT BETWEEN THE GOVERNMENT OF IRELAND AND THE GOVERNMENT OF THE UNITED KINGDOM WITH RESPECT TO CERTAIN EXEMPTIONS FROM TAX.

The Government of Ireland and the Government of the United Kingdom,

Considering the Agreement of the 14th April, 1926, between the Government of the Irish Free State and the British Government in pursuance of which exemptions from tax are conferred on persons resident in one only of the countries from tax under the law of the other,

Considering that legislation may be enacted in either country to maintain the proper incidence of libility to income tax and to prevent the obtaining of undue tax advantages,

Considering that such legislation may be insufficiently effective unless, as well as applying to persons resident in the country where it is enacted, it applies also to persons not so resident but resident in the other of the two countries and accordingly affects exemptions from tax conferred in pursuance of the said Agreement of 1926,

Recognising that the legislation which was the subject of the Agreement of the 4th April, 1959, made between the two Governments affected the said exemptions in particular ways, and desiring to supplement that Agreement by a more general Agreement.

Desiring to declare that save as provided by this Agreement the continuance in force of the said Agreement of 1926 shall not be affected by the enactment of such legislation,

Have agreed as follows:—

Article 1.

Legislation enacted in either country at any time after the date of this Agreement and affecting in any way exemptions from income tax of that country of persons resident in that country shall, except as otherwise provided by the legislation and subject to the next following Article of this Agreement, have the like effect on exemptions from that tax which persons enjoy as not resident in that country but resident in the other of the two countries, and the enactment of such legislation shall not affect the continuance in force of the said Agreement of 1926, as amended by Agreements of the 25th April, 1928, the 21st July, 1947, and the 4th April, 1959, and this Agreement.

Article 2.

If the Government of either country represents that any provisions of legislation enacted in the other country, being provisions falling within Article 1 of this Agreement, are nevertheless not within the intention of the Agreement, the two Governments shall consult and if they agree that Article 1 ought not to apply the Government of the country in which the legislation was enacted shall take the necessary steps to secure that the said provisions shall not affect, or be deemed to have affected, exemptions from the income tax of that country which persons enjoy as not resident therein but resident in the other country.

Article 3.

This Agreement shall become effective on the exchange of notes confirming that the necessary steps have been taken to give it the force of law in Ireland and the United Kingdom, and thereafter shall remain effective only so long as it has the force of law in both countries.

Dated this 23rd day of June, 1960.

For the Government of Ireland.

SÉAMAS Ó RIAIN.

For the Government of the United Kingdom.

D. HEATHCOAT AMORY."

Amendment agreed to.

Bill reported with amendments.

Bill, as amended, received for final consideration.

Question: "That the Bill do now pass" put and agreed to.

An Ceann Comhairle

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

Dáil Éireann debate - Wednesday, 29 Jun 1960

Finance Bill, 1960—Report and Final Stages.

Dáil Éireann debate -
Wednesday, 29 Jun 1960