Did we finish Part II altogether, Sir?
Finance Bill, 1961—Committee Stage (Resumed).
Question proposed: "That Section 18 stand part of the Bill."
Yes.
I thought the Minister was to give some notice after Section 17 about a matter he intended to raise on Report.
He gave notice of an amendment.
Did he mention it?
He mentioned that he was going to move an amendment on Report.
I did not hear him say that.
He did.
I was just trying to be helpful for once. Is the word "disposition" construed anywhere else in death duty legislation?
I believe so.
Why put in a new definition here? Would it not be much better to have the same definition everywhere?
I believe the same definition appears in Section 27 of the 1941 Act.
1941?
Yes.
Is it exactly the same?
The same definition, yes.
Does no definition appear in the 1894 Act?
As far as I know, it has not been defined since 1941.
But before that?
The question is "That Section 18 stand part of the Bill".
Am I not going to be told whether it is defined in the parent Act?
I think the position is that it is used in a very general sense here. I think it was defined in previous Acts.
That is what I understood. When "disposition" in this part of this Act means something different to what it means in the other Acts, would it not be better to use another word so that there cannot be confusion? Would it not be better drafting?
I should not like to express an opinion on that.
It is hardly simplifying the matter to have the same word meaning one thing in one place and another thing in other places.
It has the same meaning, except as it says here, that it may be used for more than one transaction.
I am not so sure that it does.
Question put and agreed to.
SECTION 19.
Question proposed: "That section 19 stand part of the Bill."
On Section 19, which deals generally with the application of death duties, I should like to ask the Minister if he has ever considered introducing legislation to abolish death duties altogether? While it might be argued that the State would lose £3,000,000 by doing so, and while it might be argued that it might cause considerable difficulties with regard to reciprocal arrangements with other States, it does seem to me, taking a broad view of the situation, that what the Minister might lose by abolishing the death duties he would make up to a great extent in other ways. One of the great difficulties which face bigger concerns, and indeed even private individuals, nowadays is that they are trying to deal with the future, trying to alleviate the lot of those who come after them.
Originally when death duties were introduced as the brainwave of somebody a great many years ago, it was considered that they would not impose hardship but it has since been seen that they can cause considerable hardship. I know of many instances in many parts of the country where people have been literally crippled because of death duties. I know of many instances where big estates, which at one time employed as many as 40 people, now employ only ten. The original idea was that the introduction of death duties would lead to a more equitable distribution of wealth, but they were introduced a long time ago when, perhaps, there was a great deal of inequality and now death duties are really tantamount to capital confiscation. I cannot help feeling that private concerns which would be able to run their businesses free from the shadow of a huge absorption of their overall capital on the death of an individual, would be far better circumstanced and better additions to the State, once they were rid of the obligation of paying these heavy impositions.
In regard to the influx of capital, one of the things most eminently desirable in a new State is an influx of foreign capital. If death duties were removed one of the results would be that more people would be encouraged to come and live here, bring their capital with them and blend it into our general economy. It might be argued that unless they were people who would be domiciled in this country that would not apply in their case. Surely the abolition of death duties would encourage people with wealth to live here, to be domiciled here, and to prove of advantage to everybody concerned. Apart from the question of employment and putting their funds at the disposal of the State, they would help to secure the State's revenue from the point of view of income tax, and that would be a considerable item. If 200 or 300 wealthy people were induced to settle here, that would more than compensate for any loss of revenue accruing to the Minister from death duties or secession duties.
In regard to the argument which might be advanced in relation to reciprocal taxation arrangements which we have with other States, if the people who came to live here were encouraged to invest their money here the question of reciprocal arrangements would not arise. I appreciate the fact that the Minister in his Budget made some attempt to deal with the troubles and difficulties which people experience because of death duties but I feel he could have taken a risk and gone the whole way. Had he been prepared to do so, I think he would have been adequately repaid.
I mentioned that I knew of cases of hardship. I know of a case in the City of Dublin where a business concern closed down entirely, purely because of death duties and nothing else. I know of several cases in rural Ireland of people who had built up thriving businesses and because of the unexpected death of the head of a family they were forced to close down and clear out.
I know of a big estate in my own constituency which has now been reduced to practically nothing. I know of another estate in an adjoining county where formerly there were 40 employees but where now, because of several deaths, there are only ten. I know of yet another estate quite close to my own county where the same position obtains. Taking it by and large, if mature consideration is given to the matter, it will be seen that death duties have ceased to provide the benefit they were intended to provide. They were intended to provide employment and the more equal distribution of wealth but the direct opposite has happened. People who could least afford it have suffered most from them and that has caused unemployment.
While I appreciate the difficulties facing any Minister for Finance trying to do away altogether with death duties, I feel this country should take the risk. For a good many years we have had our own Government and this country is now becoming well known. There is a tendency for more people to come here; everybody who comes likes Ireland and wants to return. For that reason the Minister and his advisers should take the step and be pioneers in abolishing death duties. Legislation of this kind would be of greater benefit than any other financial legislation passed in the last 50 years.
It would be a bit tedious to go into all the arguments for and against death duties. The views of the Government were very clearly set out in the White Paper on Taxation issued at the time. In Part VIII of that White Paper, on page 21, the question of death duties is discussed. The reasons advanced from various quarters for and against are given, and The reasons why the Government considered they were justified in continuing these death duties are also given. I would also ask Deputies to look at the 37th annual report of the Revenue Commissioners, Table 45, which shows the numbers of estates in each range, and is a very interesting Table indeed.
I have given this matter very full consideration and I was assured about a year ago that there was no evidence to support the case that firms had to close down because of death duties. I should be very glad if the Deputy could give me some instances in that regard. I should be very interested to find out what is the incidence of the burden, as it were, of death duties on businesses.
Has the Minister given any consideration to the Canadian system of death duties? They have a graduated scale, just the same as we have, but in the graduation of that scale, the rate is applied to each step only and not as it is here under the Minister's proposal that if an estate is under the £8,000 mark, it is taxed at three per cent., but if the value of certain property in the estate varies and it goes up to £9,000, not merely is the excess taxed at eight per cent. but the whole £9,000 is taxed at the higher rate. In Canada, the basis of their estate duty legislation is that there is a lesser rate on an amount of £8,000, to use the example I have quoted, and that the increased percentage operates only on excess. I take it the Minister has considered the Canadian Estate Tax Act and that when he was varying the basis, he had some reason for not carrying their scheme into operation. I should be very interested to hear what that reason is because it would seem at first blush that that is a better system.
It appears to me that we could get much the same result as we would get from the Canadian way of doing it. As the Deputy has said, it is much the same as our system in regard to surtax. Surtax on a certain amount is 2/6d. and then on another slice, it is another 2/6d. and so on. As I say, we could get the same results as are got by the Canadian system.
Would the Minister not consider the suggestion that the abolition of death duties would result in a considerable influx of capital into this country ? By that, I mean home investment in the country.
Is it the Minister's experience at present that there is sufficient or insufficient home investment for funds available for such investment ? Would the Minister like to hazard an opinion on that matter ?
Could I have an answer to my question ? It seems to be simple enough ?
Would the Deputy mind repeating the question ?
Does the Minister not consider that on the abolition of death duties, there would be an influx of capital, and not only an influx of capital but considerable investment of capital in the Irish State itself? In other words, people would be more inclined to invest their money at home than abroad, which seems to be eminently desirable in the present financial position of the State.
It is difficult for people with large fortunes not only to come here but to invest their money here. Looking at it in that way, I always thought that it was much better to give inducements in relation to surtax rather than in relation to death duties because they get the immediate advantage of the comparatively low rate of income tax and surtax. However, as I say, it is not so easy for them to avail of it in the case of death duties and in any case, the advantage of the death duties is not available until they are gone. Looking at it from that point of view, I came to the conclusion a few years ago that we should move in the direction of reducing income tax and surtax as much as possible if we wanted to induce people to come in here.
I agree with what the Minister has said as to its being eminently desirable to reduce the rate of income tax and surtax but does he not think that he should consider the two things together? I cannot help feeling that if it is feasible to act on those lines, there will probably be an enormous increase from income tax and surtax and, therefore, the State will benefit and the individual himself —the smaller individual and the middle grade individual—will be relieved of a considerable amount of financial anxiety.
Deputies will realise that when this Bill is passed the rate of death duties will be half what it is in Great Britain and Northern Ireland for big estates.
Oh, no.
Oh, yes.
Forty-four per cent.
On an estate of £1,000,000, it is 40 per cent here and 80 per cent in England and Northern Ireland.
That is the very odd one. What about the £150,000 or the £200,000 estate?
Even the £200,000 estate has an advantage. It is 40 per cent compared with 55 per cent.
I agree there is an advantage.
I think we should see how this inducement works before we go any further. There is, as Deputy Sweetman well realises, I am sure, a choice as between one thing and another. We are hardly ever in a position to do both and that was my choice. I had the choice of either moving in the direction of giving concessions in income tax and surtax or in death duties. We gave some concessions, not very much, to death duties, but the bigger concessions were given in regard to income tax and surtax. I still believe that was the best way to induce people to come here. Of course, that was not the main reason for it either. The main reason was to give more relief to our own people.
The Minister will agree there are not many millionaires in this country?
I do not know how many there are but there are a few.
The kernel of the question in relation to relief from death duties as an inducement to people to come in here is whether in fact there are adequate investments to which they can switch. We all want them to switch to Irish investments. If we abolish death duties here and the persons concerned have not switched to Irish investments, it has not the slightest effect because what happens is that the investment in England is not transferred here and suffers death duties across the water.
In order that a policy of abolition of death duties will act as an inducement to people to come and live here and will be effective as such, it is essential that concomitantly with it, there should be available adequate investment opportunities for them here and it is an undoubted fact that there have been very few public flotations in this country in recent years. That has been a great mistake and although it is not relevant, except in passing, to say it, it is a great pity that the Industrial Credit Company have concentrated so much on straight lending and so little on public flotation. The two flotations that there have been, I think, this year have shown that the market would be right for it.
Question put and agreed to.
I presume we shall discuss the rates themselves on the Schedule?
Yes.
SECTION 20.
Question proposed: "That Section 20 stand part of the Bill.
I am worried about one thing in this section. The explanatory memorandum says:
Section 20 exempts from Estate Duty property which passes or is deemed to pass on a death and which is the subject matter of a gift to the State.
I understand that clearly but it goes on:
It limits the exemption to the period during which the property is held for the public benefit and provides for the levying and collection of duty if the property should cease to be so held.
I do not understand the circumstances in which property, having once been held for the public benefit, could cease to be so held. Suppose somebody gives Johnstown Castle, shall we say, as a gift to the State; suppose it were given generously by will, or by deed, and the State decided, at a later stage, that Johnstown Castle was not wanted for State purposes and that then, say, they disposed of it. I cannot see why the State, having had the use of it over a period and having voluntarily decided that they did not want it any more and having decided to dispose of it, should act retrospectively to bring in liability to duty.
It is not the option of the State that we are talking about; it is the option of the person who made the will. Suppose he had said: "I am leaving Johnstown Castle to the State for ten years, and then it comes back to my son." That is the sort of case we have in mind because it would be a gift to the State and if we did not put in subsection (2), it would be exempted from estate duty, succession duty and so on. If it came back in eight years no estate duties would be payable. That could be used as a means of getting rid of death duties if this subsection were not put in.
The mere fact that the State decided to re-sell some property that had been vested in the nation cannot operate to bring the charge of estate duty back again?
No. It would be essential to have the provision there in such a case if the State decided to sell.
Question put and agreed to.
SECTION 21.
Question proposed : "That Section 21 stand part of the Bill."
Would the Minister like to give us a little more information ? This is the section which in the explanatory memorandum is described as being "designed to combat" certain tax avoidance schemes. We had some comments before on "designed." I should like to know exactly what it is designed to do.
This is a section which is brought in to prevent certain avoidance devices. Perhaps if we deal with it subsection by subsection, it might be the best way to do it.
It might be easier if we took it subsection by subsection. They cover different cases. Subsection (1), for instance, is for the purpose of killing the dead horse. Is that not so?
No, not exactly. It is designed—I am now using the word— to deal with the case of a person who leaves securities—for instance, the loan which is expiring this year. If he were to buy £10,000 worth of that stock and leave it to his son, the stock would mature during the year. Suppose he also dies during the year, I believe if he wills stocks or securities in that case, they are no longer there and the duty is not collectable.
That is the disappearing trick.
Yes.
Does it not kill the dead horse also?
That is subsection (1). Subsection (2) deals with life interest. Say a person has a life interest and that interest is determined or terminated in the will of the person leaving the property and it goes to his son, let us say, who is entitled to it until the end of his life but he determines this before he dies. Then he dies within three years. That was also a method of avoidance.
Subsection (3) deals with what is called the in-and-out trick. The example given of that is that a man has a house worth £3,000 and also cash to the value of £3,000. He leaves the house to his son and buys it back for £3,000. He gives the son £3,000 instead. If he dies within three years, as the law stands, there is no house and the son therefore is only asked to pay death duty on £3,000 but, taking the value of the house at the time it was disposed of, he can now be charged death duty on the house and £3,000, that is, on £6,000 altogether.
Subsection (4) deals with a different matter.
I am happy about the section except that I should like to know if the provision under subsection (2) of Section 60 of the 1910 Finance Act is a proviso that it can go for arbitration, or what is it?
No, as far as I remember the subsection. As the present time the Revenue Commissioners may value shares, for instance, that are left at less than what they were worth before the owner died because his death made a difference. That, to a certain extent, would vitiate this section if it were left in that position in this case.
I am still not happy about subsection (2). I appreciate that the Minister is at a disadvantage because it is horribly technical. I thought subsection (2) was intended to cover the case of the tenant for life who enlarged his interest by buying the reversion but, apparently, it is not?
No.
Would the Minister have any longer explanation of Section 2 in his brief?
It is much the same as in the case of the first subsection but it deals with life interest, where a man might dispose of, or terminate his life interest before his death and trust funds which had been invested in short-term securities before the determination would then, of course, be left.
I thought that short term securities were only involved in subsection (1).
You might have the same position arising.
I thought I knew most of the poaching tricks but I do not know this one. It is quite clear that subsections (1) and (3) are not retrospective. Is it equally clear that subsection (2) is not retrospective?
No; it is not retrospective.
It is the date of the gift and not the date of the death.
Question put and agreed to.
SECTION 22.
Question proposed : "That Section 22 stand part of the Bill."
Is it not possible under this section, as it is drafted, that where trustees had bona fide dealt with the matter otherwise before the passing of this Act, nevertheless, they would be liable if the death occurred after the passing of the Act? If not, will the Minister say why? I know it is the death after the Act but the trustees might have dealt with the matter already bona fide. As far as I read subsection (2), it is only the death that is governed by occurring after the passing of the Act but the matter could have been dealt with already.
As I understand the matter, this is for the purpose of preventing trustees, shall I put it, avoiding their responsibilities, as a general phrase. The trustees might have already dealt with the matter yesterday or before Budget day. The "interest limited" does not arise. The death does not occur until next September by which time we hope the Bill will be law. Does it not then mean the last trustees? It operates retrospectively because the death occurs in September. They have already dealt with the matter.
Would the Deputy look at the last line or so of subsection (2) where it refers to "any settlement for any duty except to the extent of the property comprised in the settlement after such passing." The settlement must be made after the passing of the Act. It does not mean that we lose death duties. We get them from some other source.
I do not mind your following the property but I object to the trustee being made liable for something ex post facto. Is the Minister now suggesting that lines 19 and 20 mean that the trustee can be liable only in so far as he holds property at the time of the death which must occur after the passing of the Act?
The settlement must be made after the passing of the Act. It refers only to trustees who are concerned with the settlement after the passing of the Act.
Surely not? Surely it is the life interest that must be in existence after the passing of the Act and not the settlement? The settlement will have been made years ago.
As far as trustees are concerned, that does not mean that we are giving up any claim to death duty on the property from some other source.
Question put and agreed to.
SECTION 23.
Question proposed: "That Section 23 stand part of the Bill."
The exemption was raised from £1,000 to £3,000. It is now raised to £5,000.
We are repealing Section 24 (1) of the Finance Act, 1960, that is, repealing it as to aggregation, but the same section also exempted under £5,000 from succession and death duty. We want to maintain the position that they are still exempt under £5,000 and get away from the aggregation.
If I were in bad humour, I would say that was as good a mistake as you made last year. I think we pointed it out.
Question put and agreed to.
SECTION 24.
Question proposed: "That Section 24 stand part of the Bill."
Is that not to cover the Scott case?
I do not know what the name of the case is but under the Wills Act, with one exception, a person can inherit money even though he dies before the testator. Where a man leaves money to his son and the son goes before him, it goes to the son's children. We are not interfering with that case under the Wills Act. As the law stands, in such a case estate duty will be paid twice. We are now saying it need be paid only once.
Has that always been the case?
I think so.
I came across it only the other day for the first time. I think it is the Scott case. The Minister ought to have qualms of conscience about this section.
About having collected it?
No. It was a grandson of Mrs. Scott whom the Minister grievously wronged in the past four years.
I did not know that case really.
Question put and agreed to.
SECTION 25.
Question proposed: "That Section 25 stand part of the Bill."
This is a case of which I was not aware. I came across a certain case recently where a man left his son a fairly substantial farm and put into the settlement that he should get milk twice a day for as long as he and his wife lived. They lived for ten or 12 years afterwards. This section deals with that case or any other case where some provision was put in of some benefit to the testator during his lifetime. Now, estate duty will be paid only on the value of the benefit he retained for himself.
This is a most desirable section socially. We are all anxious that parents, when they get to a certain age, should hand over their property to their sons. Very often the parents, the son and the whole family agree that the parents will go on residing in the family house. Without this section they could not do it and avoid death duty.
I think this really arises more from a decision of the Privy Council across the water. I think it was held in that case that it was not necessary that there should be an exact reservation of the benefit. It was sufficient to defeat the gift from the point of view of estate duty and to make estate duty payable that the donor would even exercise a benefit. I think in the case in question he used to walk out a couple of times, shoot an odd bird, and so on, and potter around in his old age.
I want it to be quite clear that that type of case is already covered, that it is not merely where there is a reservation of the benefit, not merely where there is a reservation of a benefit like the milk case the Minister mentioned, but that, in addition, even if there is a gift without reservation and the person concerned does in fact go on the property, there is no danger whatever of there being any construction that going on the property in that fashion would attract liability for death duty here now as it was held to do in the Privy Council case I referred to, I think, in December a year ago.
No. I think it was quite clear that estate duty will be charged only on the reservation to the extent that they exercise it, whatever it might be.
Very well.
Question put and agreed to.
Section 26 agreed to.
SECTION 27.
Question proposed: "That Section 27 stand part of the Bill."
This deals with mortgage duty on improvement by a parent of a subsidiary.
Yes, I know.
Question put and agreed to.
SECTION 28.
Question proposed: "That section 28 stand part of the Bill."
What exactly will happen in relation to cheque-books which are stamped? Have they all to be called in on 31st July?
You can affix a 1d. stamp in addition.
Is the Minister making any composition arrangement with the banks?
Yes.
So that they will collect it automatically, pay and debit the account?
If the person does not put on a stamp the bank can make that right.
That is what I mean. If the person does not affix a stamp, the cheque is not returned. Some arrangement is made that the bank will add it and presumably debit it to one's account. They will not give it to you out of the goodness of their hearts, I imagine, and then put it back by way of composition. Can the Minister also tell me what happens in relation to one coming in from outside the State?
A Bill of Exchange which includes a cheque coming in from outside will be legal at 2d. and 3d.
Will the Minister explain subsection (7)? On first reading it looks as if a Bill of Exchange which is not stamped for the right amount shall be deemed duly stamped for the right amount. That could not possibly be right.
It should have been stamped with an appropriate stamp before 1st August. If it is not, it is all right; it can be done with an ordinary stamp.
It should have been done and if it is not done it is all right. Why should I pay it, then?
Under the present law, it should be stamped with an appropriate stamp before 1st August. There will probably be a lot of misunderstanding and mistakes. If you can stamp it afterwards with the ordinary stamp it is all right.
I am still very dense. I cannot follow it.
Under the present law it can be stamped with an appropriate stamp—Promissory Note, and so on— before 1st August, 1961.
Before execution?
Yes.
Is this to say that after 1st August it can be stamped after execution?
There is a good deal of confusion, we find, about all these stamps. We try to publicise that the law stands until 1st August, but there is still a good deal of confusion. Although the law says at present that there should be an appropriate stamp on an instrument of this kind, if there is not an appropriate stamp it can be made good by an ordinary stamp afterwards.
Is this to cover confusion between 19th April and 31st August?
Yes.
Nothing more?
Nothing more. It will be an ordinary stamp after 1st August, in any case.
You will not have to impress a stamp necessarily now, before execution? Is that not right?
Yes. That is right. Really, we are rather anticipating the law under this.
Question put and agreed to.
NEW SECTION
I move:
9. Before Section 29 to insert the following section:
"(1) (a) In this section—
‘stock' means any stock or security issued or made by or on behalf of a company incorporated under the Companies Acts, 1908 to 1959, and quoted on a Stock Exchange in the State;
‘dealing company' means a body corporate which is for the time being recognised by the Minister for Finance as dealing in stocks for the purpose of facilitating activity in the market for stocks.
(b) A recognition granted to a body corporate for the purposes of this section by the Minister for Finance may be withdrawn at any time by that Minister.
(2) Where a dealing company purchases stock through a member of a Stock Exchange in the State and the purchase is effected in the course of dealing for the purpose of facilitating activity in the market for stocks, subsections (1) and (2) of section 42 of the Finance Act, 1920, shall apply to the relevant transfer subject to the substitution of ‘four months' for ‘two months' in paragraph (a) and paragraph (b) of subsection (2), and for that purpose—
(i) for each reference in the subsection to a dealer, there shall be substituted a reference to the dealing company, and
(ii) for the reference in the proviso to subsection (1) to a transaction carried out by the dealer in the ordinary course of his business as such dealer, there shall be substituted a reference to a transaction carried out by the dealing company for the purpose of facilitating activity in the market for stocks."
The purpose of this section is to give stamp duty concession to corporate bodies which deal with stocks of Irish bodies for the purpose of facilitating activities on the Irish stock market. We are all aware that there is not sufficient activity, let us say, in Irish stocks. Sometimes we hear they are not available at all. Sometimes we hear they are not for sale. It is possible I think to get certain corporations to take part in giving some life to the market by purchasing shares—industrial companies' shares, especially— coming on the market and selling again and in that way creating a market. This possibly will not be a very profitable business. The idea is that if they buy these shares and resell within four months there will be a flat rate of 10/-, not the ordinary rate of £1 per cent. Apart from that, these corporations must be licensed by the Minister and there will be consultations from time to time between the Minister and the stock exchange and the bodies concerned regarding the type of stock they should try to encourage. It is not necessary to encourage stocks that are going on the market every day, like those of our big companies. It is the companies that come next in importance we want to see encouraged if at all possible. This is an experiment. I do not know if it is going to succeed. We are not making a very big sacrifice in relation to the Exchequer by bringing in this proposal. I think we should give it a trial for a year or two to see what the outcome is.
As I originally read this amendment it was for the purpose of facilitating jobbing, if I may use the phrase. There are certain things I do not understand about it. First of all, as far as I can follow subsection (1) (a) it need not be Irish stock. It could be stock of an English company as long as it is quoted on the stock exchange here. There are very often English stocks quoted on the Dublin Stock Exchange and I do not think there is any advantage whatever in their being covered at all.
Secondly, there is no provision to say that the dealing company must be a company incorporated in Ireland. That can perhaps be covered by the fact that the Minister has to recognise it but if he is only going to recognise an Irish dealing company it would be better to put that into the Act.
Thirdly, I am not clear what is the advantage in giving this type of inducement to a company and not giving it, for example, to members of the stock exchanges. Members of the stock exchanges, in our circumstances here, are most likely to be the normal jobbers and if they are buying in stock and taking it themselves, surely they would be just as good objects of this inducement concession as a dealing company. I should be interested to know from the Minister why he excludes members of the stock exchange. It seems to me that unless we are going to have the whole jobbing set-up here that they have on the London Stock Exchange, and that is most unlikely, it will be perhaps stockbrokers that will be making the market in these Irish securities which we all know is lamentably absent at the present time.
I am advised that "companies incorporated under the Act of 1959" means Irish companies, so I think we are all right as far as that goes.
The 1908 Act.
The 1959 Act, anyway. I am not sure about the 1908 Act. The word "incorporated" means incorporated here.
With all due respect to the Minister's advice, I do not think it does. "Incorporated under the Companies Act, 1908" can be an English company. Whether the phrase "Companies Acts, 1908 to 1959" is an inclusive phrase is another question, but in the Companies Acts we always defined it as that and it is not defined here.
I must have that examined again because we certainly do not want to incorporate anything but Irish dealing companies. As regards the stock exchange, they have this concession but it is for two months, not four. The stock exchange, purchasing stock of its own and selling within two months, has the same concession. The members of the stock exchange have been consulted on this and they are not asking for more than two months. Of course, they get rid of stocks fairly quickly and they do not need more than the two months.
Some of them do hold stocks longer than that, and I think it would be desirable to give the longer period to them. "The dealing company"—is that to be an Irish company or an English company?
That would be an Irish company.
Then why not say so? There is not even the word "incorporated" included.
It must be recognised by the Minister for Finance.
I said that but if the Minister for Finance is going to recognise only an Irish company would it not be better to say so in the section?
Yes.
If the clear intention is that it is only to be an Irish company that is to be recognised, it is bad not to put it in the section. If there are some reasons why the Minister might want to recognise an outside company at some time then we ought to be told.
I had in mind only an Irish company but it just crossed my mind that it is better to leave it open because it is possible there might be some company that is not exactly Irish and that might be able to do this job for us. It must be recognised by the Minister for Finance. I certainly have no intention of recognising anything but an Irish company, at the moment anyway.
Amendment agreed to.
SECTION 29.
I move amendment No. 10:
In subsection (2), page 18, between lines 9 and 10, to insert a new subparagraph as follows:—
"() that the property is being acquired by a public company incorporated in the State of which the shares of every class which have been issued are quoted on the Dublin Stock Exchange, or".
This is the section that deals with the imposition of the 25 per cent. stamp duty as provided by the No. 2 Finance Act of 1947. In introducing the amendment I had, of course, intended to discuss it as part of a scheme with amendments Nos. 11 and 16, I think it was, but Nos. 11 and 16 have been ruled out of order.
No. 15.
That is a slightly different point. I will argue that on the section. On the Second Reading I made it clear to the Minister and the House that I regard this section as being wholly deficient and I went so far as to send to the Minister a copy of the scheme in respect of which there had been advice by counsel on a means of avoiding the Act. I take it the Minister received that letter from me because I did not get any acknowledgement of it.
I did receive it. I am sorry.
So long as the Minister got it I am happy. I hope the Minister will acknowledge it in such a way as, between now and the Report Stage, to amend the section to cover this point. Nobody is interested in trying to get down to the basis of the public company that is quoted on the stock exchange. I had thought before that there might have been some earlier exemption on that but in the limited time available to me before putting down these amendments I did not trace one. So far as a public company is concerned, so long as it is a genuine public company I do not think any of us are interested in the slightest as to who the shareholders are or what class of persons they are. If it is not a genuine public company then it will not get a quotation on the Dublin or Cork Stock Exchanges. I am not quite sure what the exact situation is in Wexford, whether there is a stock exchange there or not. They have stock and share brokers in Wexford.
The stock in Wexford is four-legged.
We are not dealing with the four-legged sort. There could not be a public company quoted on the stock exchanges and utilised merely for the purpose of avoiding the stamp duty—for a fake avoidance, if I may use the word. It seems to me, therefore, it would be desirable to have a provision in the Act by virtue of which the mere certificate—capable of proof, of course —that it was a genuine public company quoted on the Stock Exchange would be sufficient to take it out of the class in question. Public companies would be almost inevitably exempted because it would be for an industrial purpose or for residential purposes and, therefore, under five acres. But I can visualise some cases where it would not be, and I think it could usefully be relaxed in relation to the public company.
It is really more because I wanted to bring up the percentage in a private company that I exempted the public company. If one had the percentage in a private company being exempted somewhat higher than 50 per cent., there would be far less chance of evasion in the private company; and, of course, so long as the public company was exempted altogether, there would not be the cluttering of the adjudication machinery that might otherwise arise. Before I go into other aspects of this, I should be interested to hear what the Minister's reaction is to the exemption of public companies.
I have had some difficulty in understanding what the Deputy's purpose was in putting down this amendment. I could only conclude that the Deputy has in mind a public company whose shares have been acquired by aliens——
Some of whose shares.
Not the majority?
No.
If some of them were and the majority were not, on examination the Commissioners would have to allow it.
It means every time a public company purchased anything, you must have a complete scrutiny of the whole thing. I do not think it is worth while doing that.
I find it very hard to see a company of the kind visualised by the Deputy being interested in agricultural land. But suppose they are, and suppose we have the position of finding on examination that a good deal of the shareholding of a company is in the hands of aliens. As I say, if the majority are not in the hands of aliens, it is passed.
But remember I was bringing in that it had to be only one-tenth in the hands of aliens to exempt. I would not have introduced amendment No. 10 unless I also introduced amendment No. 11.
If it should happen that the majority shareholding is in foreign hands, it will come under Section 26 of the Act of 1949 and there would not be any further difficulty about it.
Amendment, by leave, withdrawn.
Amendment No. 11 not moved.
I move amendment No. 12:
In subsection (9), page 19, line 61, to delete "19th day of April, 1961" and substitute "20th day of April, 1961."
This is the case I made on Budget day or on the General Resolution, I do not remember which.
We can agree to that. I do not know if there is any such case. There might be.
I understand there is one. One of my professional colleagues told me he had a case. I had a case the day before, the 18th. I was all right.
Amendment agreed to.
I move amendment No. 13:
In subsection (9), page 20, lines 16 to 18, to delete "and irrespective of whether or not it has been stamped with a particular stamp denoting that it is duly stamped".
This is another matter I mentioned on the General Resolution. I was shocked to hear from the Minister that there was even a precedent for suggesting that the adjudication stamp was not a final operation. I should be very interested, indeed, if the Minister could explain that aspect to me now.
The difficulty about this amendment is that, if we were to accept it, it would in fact defeat the retrospective provisions of subsection (9)——
Did I hear the Minister say "retrospective provisions"?
Retrospective to the 20th of April. Any person coming in to have his deed stamped between the 20th of April and the passing of this Act will thereby be exempted and cannot be pursued further.
Is it not at the option of the Revenue Commissioners whether they impress the adjudication stamp or not? I do not think anyone can force the Revenue to impress the adjudication stamp before the 1st of August. If I lodge a deed for adjudication at some stage or other the Revenue must quote me the stamp duty; but they are not tied to quote it to me within a particular time of my lodging that deed. Shall I put it another way? If they are tied to quoting me the duty and impressing the adjudication stamp within a particular period, they very often break the tie. The period which the Stamps Branch require to consider the appropriate stamp duty on a document varies, of course, with the difficulties that arise in connection with that document. If I lodge the deed dated the 20th of April on the same day, nothing I know of can force the Revenue to deal with that and adjudicate it forthwith.
It seems to me it would have been a far better principle to deal with it on the basis of saying: "If you want this adjudication, you will not get the adjudication stamp put on until after the passage of the new Bill, because there has been a resolution passed by Dáil Éireann under the Collection of Taxes Act." The Resolution passed by the Dáil under the Collection of Taxes Act means that the terms of that Resolution were in force as from Budget date. The Minister will agree with me on that? It would have been far better to deal with the matter in that way.
I do not know whether there has been any particular case or not. I am not interested in that aspect of it at all. What I am interested in is this. When solicitors or counsel get before them a document in an investigation of title that they say, on the face of it, has been adjudged duly stamped, I am interested in ensuring that they will not have to look back behind that adjudication stamp. If they do that, it will throw up all these cases again. The provision here is that there must be adjudication virtually in these cases in future. Yet, though there is to be adjudication under subsection (4), the Minister is saying that the adjudication stamp is not to be accepted. That means that each case has to be gone back on again. That will create, as I understand the position, an endless chain of administrative difficulty.
I am told that the Revenue Commissioners must put on the adjudication stamp.
Within what period?
They cannot unduly hold it up. They might say they would adhere to the ordinary practice—a day or two, or whatever it is.
A day or two?
Whatever the ordinary practice is. As the law stands, they cannot unduly hold it up.
Surely, the Dáil Resolution under the Collection of Taxes Act operates from Budget day?
Not in relation to stamp duty.
Why do we pass the Financial Resolution at all then?
It does not refer to stamp duty.
Do we not pass a Financial Resolution on Budget day?
I believe that is only to comply with the rules of this House. It has no legal effect. The Deputy asked when this was done before. I refer him to Section 25 of the Finance Act, 1949. I believe the same words exactly were used. Again, Section 26 of the Finance Act, 1949, subsection (4) (a) (1) contains the same words. It was used in the 1950 Act, too. I take it that is sufficient for the Deputy.
The Minister has convicted me of being asleep on two occasions.
The point is that this can refer only to cases which come in for adjudication stamps after 20th April. I do not see that there could be any great complaint. The Revenue Commissioners will look at it again when they get the power under this Bill. I might mention also for the Deputy's information—he may be aware of it— that the Revenue Commissioners met the Incorporated Law Society in regard to this matter. They had some misgivings, but, as a result of the conversations, they were quite satisfied.
That is not all the information I have got.
Unfortunately, we have not got an agreed report.
The report we both have is somewhat different. Will the Minister look at this again between now and Report Stage to see if there is any way of getting over the difficulty? We can both go back now and inquire about the terms of our reports.
Amendment, by leave, withdrawn.
I move amendment No. 14:
To add to the section a new subsection as follows:—
"() If, before the 1st day of September, 1961, notice in writing is given to the Revenue Commissioners and a person proves to their satisfaction that a contract for the sale of any lands, tenements and hereditaments was completed before the 20th day of April, 1961, and the Revenue Commissioners are satisfied that a conveyance or transfer executed on or after the 20th day of April, 1961, gives effect to such sale, and does not give effect to a sale in respect of which a contract was completed on or after the 20th day of April, 1961, then, notwithstanding anything in the preceding subsections of this section, the stamp duties chargeable on such conveyance or transfer shall be the same as if this Act had not been passed."
There was a similar provision in previous Acts and I think it is only fair that there should be some such provision in this Bill. At the same time, I want to make it perfectly clear that I think the provision in the 1947 Act was grossly abused and I do not believe the wide-open terms of that Act are entirely appropriate. I have had some difficulty in drafting a suitable amendment and my amendment is intended more for the purpose of arguing the principle rather than the exact details.
Take the case of a person who entered into a binding contract before the Budget. It seems rather like unconstitutional legislation to say now that he will be penalised by retrospective taxation after the Budget. If a person enters into a binding contract on 2nd April and that contract is to be completed a month after, which is the ordinary practice, it means that the contract would be completed on 2nd May. The purchaser and vendor enter into an absolutely valid agreement. The Minister comes along on 19th April and says: "Though you have entered into a valid agreement, I will make you pay another 25 per cent. to me in respect of what you agreed to purchase."
There is one very simple way in which the Minister can satisfy himself beyond question as to whether or not there was a binding contract. A contract to be valid has to be stamped. I would exempt only those contracts which carried an impressed stamp prior to 20th April. Such a stamp bears the date on it and there is absolutely no possibility of fraud on the Revenue Commissioners. If it were merely a case of signing over an ordinary 6d. stamp, then of course some unscrupulous person might date that back. That cannot be done in the case of an impressed stamp.
There might be even harder cases than that. Take the case of a person who bought a property in March and some difficulty arose in connection with title and he was unable to get his conveyance before 19th April, due to no fault of his own. The vendor might have had to get in an outstanding estate. The vendor might have been away and the deed, or deeds, might have had to go to him for completion. It has been known occasionally for delays to occur in legal matters, though I am happy to say that such delays occur but seldom. There could be a whole number of reasons for general delay in a very small number of cases.
I accept without question the point made by the Minister's advisers to the Incorporated Law Society that this went on, and on and on under the 1947 Act. It did. In no circumstances, would I ask for as wide an exemption as that. Where there is a genuine contract and the genuineness of the contract is easily adduced, because the contract must be stamped within a certain period, the Minister should ensure that he does not penalise people who are complying with the law. I am prepared to meet the Minister to a degree in relation to what he wants to prove, namely, that the contract was genuine. Once he is satisfied there is a genuine contract, he should allow it.
I was in great difficulty in relation to the drafting of this amendment in regard to the date, the 1st September. I felt I had to include some date which was after the passage of the Act because it would not be right to say if a person gave notice on a date that was going to be before the Bill was passed, as then he could not give notice before the Bill became an Act. Therefore, I had to provide a period after the Act was passed. If the Minister can find a way around that, I am not the least bit interested in the 1st September as a date. I had to provide some date after the Act was passed.
In these Finance Bills, we usually mention the 1st August as being the operative date. In order to give people the month to make their claim, it had to be from the date of the passage of the Act. That is why I put in the 1st September. If the Minister feels he could get around that difficulty by issuing notices now, so far as I am concerned I am perfectly happy about it. All I want is that there will be some public notice and some short period in which people, after they have received public notice, could come in and prove that they had a genuine bona fide contract and, if they had a bona fide contract, that they would not be penalised half way through what was a perfectly legal transaction.
When I read the Deputy's amendment and comments on it, I came to the conclusion that the adoption of this amendment would be far too open to fraud by having stamps put on afterwards and the wrong date put on, because, as the Deputy has pointed out, an adhesive stamp would be in order just the same as an impressed stamp. The Deputy has destroyed that argument by saying that he would advocate that this amendment should apply only to a case where an impressed stamp was used. I am afraid that would be hardly fair because if we agreed to that, we would give a concession to a person who had the good fortune to have put on an impressed stamp and would not give it to a person who put on an adhesive stamp.
There was a great deal of speculation going on for at least six or eight weeks before the Budget was introduced and although many forecasts were made as to what the Budget would contain, nothing was so persistently referred to as some provision to deal with this matter of the purchase of estates by aliens. Any solicitor or anybody who intended to purchase must have been quite apprehensive of what would happen if he were buying an estate around that time. I do not think he could have hoped to get away with it unless the whole thing was complete before the Budget was brought in.
Would it not be fair to say that a genuine solicitor would have believed the same pattern would be carried out as was carried out before?
In 1947?
Yes.
Of course, the position in 1947 was very different. The proposal in 1947 was, if you like, a new proposal, of which people had not got notice. At that time it was, in my opinion, quite just to put that saver in. It is quite different now because, as the Deputy will admit, anybody who would be affected by this amendment, let us say, was deliberately, if you like, trying to get around the Act, legally if you like, and knew that, whatever changes might be made in the Budget, at least we would try to copperfasten the intentions behind the 1947 Act in whatever we might do. So, I think the circumstances are quite different now from 1947.
Although the Deputy has deprived me of the argument of fraud being used with regard to stamping a deed and putting on the wrong date, on the other hand, to say that it shall apply only to the impressed stamp brings me down to the other argument, that it would be unfair to give it to people who were fortunate enough to put on an impressed stamp and leave others out. The fairest thing is to reject the amendment, really.
What the Minister means is that rather than be fair to one section he is going to be unfair to everybody. Is that not the argument?
To be impartial to all of them, yes.
Impartially unfair. I would ask the Minister seriously to consider this again, for this reason— the only cases that I am interested in are cases where there was a genuine difficulty in completion and where there was a contract and where the closing of that contract was held up through no fault of the purchaser.
I have already made myself clear on some of the evasions of the section of the 1947 Act. I have no use for any one of them. The only one that appeared to me to be honest was the certificate that it was a pre-1947 company, because that was a declaration that was quite specifically excluded and deliberately excluded in the 1947 Act.
In a genuinely correct case, it does seem hard that the solicitor acting for a purchaser may get an action against him for the extra 22 per cent. duty. It would be three per cent. if it was within the provisions; 25 per cent. otherwise. Supposing, for example, two parties entered into a contract in March and the vendor did not comply with deducing title quite as speedily as he might and the solicitor for the purchaser wrote him a couple of letters and told him to get a move on with the job, but did not take out a summons against him because he wanted to give him a chance of dealing with it and, in consequence of that, the matter had not been closed before Budget day, the purchaser would be entitled to say to his solicitor: "My legal remedy was not to write a couple of letters to the solicitor for the vendor telling him to get a move on but to issue a summons against him for not having got a move on and, because you have been lenient to the vendor and his solicitor, I have to pay an extra 22 per cent. stamp duty, and I am going to make you liable for it". That is a situation that can easily arise. I do not think for a moment that the Minister would feel that he should legislate in a way that that could arise.
Certainly, if the Minister will not give way to me on the principle of this amendment, I shall have to push him very hard to incorporate another provision, namely, that anybody who was moving along genuinely and clearly was not going to be held negligent for not having instituted proceedings before Budget day to insist that the vendor closed before Budget day. Unless there was such a specific provision in the section, the purchaser's solicitor would be liable for action. I do not think the Minister wants that or visualised that but I am told that there is one such case. I am told there is one case of a genuine contract that was made which should have been closed by the solicitor for the vendor before Budget day but was not so closed and the solicitor for the purchaser did not want to issue a writ against the vendor the very day that he was entitled so to do. He merely wrote or possibly got on to the telephone, as we all do from time to time, and said: "Look, will you clear this matter up." Because he did not issue the writ on the day he should have he may well be held guilty of negligence and may be sued for the 22 per cent. additional stamp duty.
Nobody wants that and that is not the intention. I am sure the Minister will provide that that will not happen. The easiest way of doing that is to provide for the genuine case in the manner I suggested. Those of us who are in the solicitors' profession know that 99 out of 100 contracts have impressed stamps on them. We do not rely on the ordinary sixpenny postage stamp, signing over it. It is never done. Any genuine case is always sent down to the Stamp Office and the impressed stamp is put on the formal contract. The ordinary sixpenny postage stamp is used only in cases where there is an atmosphere of such informality that it would be difficult to prove dates and therefore, I think, could fairly be excluded.
I would strongly urge the Minister that he is doing a real injustice to certain innocent members of the solicitors' profession if he does not provide that contracts which can be proved to be genuine by the method I have suggested—or if the Minister can think of a better method I should be quite happy—should operate as from contract date rather than from the conveyance date, when the completion of the conveyance has been held up through no fault of the party suffering.
I must say the Deputy is offering me a much more objectionable alternative to save the solicitors from their slowness.
It was because it was so objectionable I thought the Minister would give in to me on the other one.
It is not an amendment I can accept.
Will the Minister examine some method of saving the genuine cases?
I might at this stage refer to three amendments tabled by the Deputy which have been ruled out of order. I was trying to draft an omnibus amendment to cover the whole lot. I shall see if this particular point can be covered. The amendment I have in mind gives the Revenue Commissioners a little more power than they had before.
So far as I am concerned I want to make sure that the type of faking that went on in the last two years will be stopped once and for all.
I shall bring in an amendment on the Report Stage.
I withdraw this amendment.
Amendment, by leave, withdrawn.
Amendments 15 and 16 not moved.
Question proposed: "That Section 29, as amended, stand part of the Bill."
As the Minister has indicated that he is to bring in some sort of omnibus amendment to Section 29, perhaps it might save a great deal of trouble all round if we left Section 29 until the Minister's omnibus amendment was available? Perhaps if the Minister is agreeable it would be an easier method to recommit Section 29 on the Report Stage and pass on from it straight away.
All right.
Otherwise we would have to travel over the same ground twice.
It depends on the Chair. I have no objection to recommittal providing we come back to it again, on the Report Stage.
The Chair will not have any objection if we can agree.
Section 29 has been entered upon and discussed and I feel it has to be dealt with at this Stage.
Yes, but the Minister has agreed to recommit on Report. We pass it now and recommit it on Report.
Question put and agreed to.
SECTION 30.
I move amendment No. 17:
In subsection (9), page 23, line 43, to delete "19th day of April, 1961" and substitute "20th day of April, 1961".
Section 30 is an exact parallel.
Exactly.
Amendment agreed to.
Amendment No. 18 not moved.
Question proposed "That Section 30, as amended, stand part of the Bill."
I take it the Minister's omnibus amendment will cover Section 30, as well as Section 29, running in parallel lines.
Yes, both.
Question put and agreed to.
SECTION 31.
Question proposed: "That Section 31 stand part of the Bill".
Is this in the normal form?
Yes, as in every other year.
Question put and agreed to.
SECTION 32.
Question proposed: "That Section 32 stand part of the Bill".
This is the Bank of Ireland section.
I do not understand this section at all. How has the Bank of Ireland been lending us money all the time?
We have to authorise the Bank of Ireland every year to lend money. It is not permitted under the statute.
We authorise it under the Central Fund Bill or the Appropriation Bill?
There is a clause in the Central Fund Bill every year. We are giving it for all time.
We will get much more money as a result.
I do not know about that.
Question put and agreed to.
SECTION 33.
Question proposed "That Section 33 stand part of the Bill".
What is the point of Section 33?
In the 1960 Act certain provisions were made in regard to export reliefs and an anti-avoidance clause was brought in, but it dealt only with the 1960 Act. This extends it to all the various Acts dealing with export reliefs.
I am not going to pretend I am much wiser, because I am not.
Question put and agreed to.
Sections 34 to 36, inclusive, agreed to.
First Schedule agreed to.
SECOND SCHEDULE.
Question proposed: "That the Second Schedule be the Second Schedule to the Bill."
In regard to the rates of estate duty, the jump that there is now is more weighted at the £5,000 end than at the other end. Would it not have been fairer to run the second margin, say, up to £7,500 and then the 3 per cent. rate up to £9,000? It has been rather weighted by the Minister being a little bit niggardly in taking advantage of the change at the lower end of the scale to give a margin of only £1,000 in the first step. I do not believe it would make all that difference to revenue. He might have graduated his scale slightly more generously than he did.
It would, as the Deputy knows, cost some money—I do not know how much.
We might put down an amendment on Report Stage and the Minister might do a little calculation. In respect of the other end of the scale, the previous highest rate was 45 per cent.?
53 per cent.
Has that rate been changed at all?
No.
Below the £100,000, I do not think it has. I think what has happened is that the Minister has just washed out the rate above £100,000.
From £8,000 up, it was the same, except when it ran up to £300,000.
What is the rate in excess of £100,000 to £150,000?
The rate is 53 per cent. on £300,000.
What is the rate for an estate between £100,000 and £150,000? Was it 41 per cent.?
40 per cent. It was 41 per cent.
It is now a flat 40 per cent. above £100,000. In other words, an estate between £100,000 and £150,000 has only gained by one per cent., because it was 41 per cent.
That is right. The rate on £200,000 was 45 per cent. and is now 40 per cent.
Question put and agreed to.
Third Schedule agreed to.
Title agreed to.
Bill reported with amendments.
Report Stage ordered for Tuesday, 4th July, 1961.