This section provides for the re-enactment for a further year of the statutory provisions in relation to taxation which were enforced on 5th April last. It is the means whereby we are giving a new chapter of life for yet another year to an income tax code which is over 150 years old, which was designed by a grand old English gentleman in the year 1803. It is such a hardy annual in our Finance Bill that henceforth we should urge our Ministers for Finance to pay some little tribute every year at this time to the memory of Sir William Pitt who designed an income tax code for English conditions 150 years ago. Our reluctance to change that code in any fundamental respect and our extreme conservatism in our approach to tax reform gives one grounds for doubt as to why we really bothered to obtain self-Government.
When one takes a look at provisions such as these, one could validly argue that we do not deserve to have the right to govern ourselves if we just year after year renew British legislation which was never designed with this country in mind and which is clearly obsolete and archaic not only in Irish conditions but in British conditions also. Of all our Ministers for Finance, I regret to say that it seems to me our present Minister for Finance manifests that extreme conservatism which I consider deplorable.
Our tax code is based on the British Act of 1918 which, in turn, goes back to much earlier Acts, the framework of which was laid down by William Pitt over 150 years ago. It bristles with anomalies and injustices. Some of those have been the subject of a report by an Income Tax Commission set up some years ago by Deputy Sweetman when he was Minister for Finance. Most of the recommendations of that Commission have been rejected by the Government in a White Paper circulated by the Minister last year.
The principal recommendation of the Commission which has been implemented was that in favour of a system of pay as you earn for the collection of income tax from wage and salary earners. It was advocated very strongly by the trade union movement in this country and I said at the time we were introducing it that I thought the trade union movement, and the labour movement in general, in the interests of the workers were ill-advised to press for the introduction of pay as you earn in this country. Over the short term it has been in operation, pay as you earn has made it easier for the individual worker to pay his income tax but it has had the second effect of making the worker a much easier mark than ever before for the tax collector so that the Minister finds himself in the position of relying more and more on the workers, the wage and salary earners, for direct tax revenue.
I feel strongly—and it cannot be too often repeated in this House—that the extent to which wage and salary earners are being fleeced for income tax is grossly inequitable in relation to the other sections of the community. It is most desirable that our tax code should be an equitable one, based on justice and fair play, on good Government and on morality, and for as long as we continue to perpetuate an inequitable direct tax code we are leaving many people labouring under a deep sense of grievance, under a feeling that they are pulling their weight while others are not.
The direct tax revenue which is being collected from wage and salary earners under Schedule E of the tax code is continuing to increase year after year. That is in part because wages are going up, but in the year just ended approximately £11,000,000 was collected by way of income tax under Schedule E. Most of that would have been collected before the eighth round increase in wages and salaries was given effect to. Five or six years ago only about £5,000,000 was collected in income tax from wage and salary earners. It is therefore a fact that we are relying out of all proportion to their share of the national income on wage and salary earners for our income tax revenue. They are a section of the community whose employers not only have to act as income tax collectors but on whom the impact of the income tax code weighs very severely.
There is no section of the 1918 Income Tax Act which has been more severely criticised by judicial authorities in Britain and here, and I know it is an old British maxim that equity is a stranger to income tax. It is a maxim which we should be prepared to accept in this country. There is great need for the tax code to be respected by the community at large. One is told by those competent to express opinions on these matters— moral theologians—that there is no obligation on the individual to pay an inequitable or unfair tax and as long as this unfair situation prevails here there is a very grave obligation on the Minister for Finance and on the House as a whole to rectify it.
When faced with this criticism last year the Minister for Finance indicated that his method of approaching it was to reduce the standard rate of tax rather than to effect reforms in the code for one section of the community rather than another. On the face of it, the Minister's approach might appear to be a valid one, but in so far as the suggestion goes that a reduction in the standard rate of tax relieves all sections of the community who are paying income tax—not all sections do pay income tax—the differential position as between wage and salary earners and sections of the business community who are taxed under Schedule D in respect of trade profits favours the latter class. Any criticism of Schedule E tax in Britain must apply with much greater force in this country by reason of the fact that to a far greater relative extent than in Britain we are relying on wage and salary earners for so much of our direct tax revenue.
In particular, there have been many suggestions made as to what form of differential relief we should make in respect of the tax-paying wage earner. I do not propose to go into them now but the Minister must be aware it is possible to argue very much more strongly for a higher rate of relief for wage and salary earners than in respect of other sections. I feel entitled to ask the Minister whether he is aware of these problems and, if he is, what he is doing about them.
There are now nearly 180,000 people paying tax under pay as you earn and while it is true that up to some years ago the number of taxpayers was much more restricted and that therefore it was possible then that the impact did not fall on so many people, the greater number of people labouring under this imposition now increases the Minister's responsibility. The Income Tax Commission have now issued their final report dealing with these problems. That report has not yet been circulated so I am at the great disadvantage of being unable to comment on it. I sincerely hope that if the Commission have recommended reliefs in income tax relating to wage and salary earners the Minister will pay greater attention to them than he has done in respect of the Commission's four earlier reports. As I said, the bulk of the important recommendations of the Commission have been rejected by the Government and we are in the position of having this archaic and obsolete income tax code inflicted on us not only for another year but indefinitely, to all outward appearances, unless our entry into the Common Market makes any significant difference to the position.
In that connection it behoves the Minister to advise the House of what are the likely effects on our taxation and fiscal system which may result from our entry into the Common Market. Article 99 of the Treaty of Rome provides that the Commission of the European Union shall consider in what way the law of the various member States concerning turn-over taxes, excise duties and other forms of taxation can best be harmonised in the interests of the Common Market. The Commission shall submit proposals to the Council, which shall accept them by means of unanimous vote.
When introducing the Budget, the Minister referred very briefly to the fact that he was having a study made in his Department of the effects on our tax laws which might result from our entry into the Common Market. It appears to me that Article 99 relates only to indirect taxation and refers only to the harmonisation of the indirect taxation codes of the various States in the European Union and not necessarily to the tax codes. Harmonisation in this case, perhaps, may be a very different matter. It is a fact that a great deal of intensive work is going on in the EEC not only in relation to indirect taxes but also in relation to direct taxation in studies of various European systems to see how they can be measured up to a single design.
One of the impacts of such an integration may very well be for us a complete change in the income tax base so far as industrial taxation goes, a change which could very well subject our corporate taxpayers, limited companies, to a form of capital gains tax. I say that because it appears to me that in most of the countries in the Common Market at present their tax base, that is the base sum on which income tax is computed for the equivalent of limited companies, is very different from ours. We are assessed on an income basis whereas they are assessed on a nett worth basis, which has regard to changes in the capital position of the company from one year to another rather than to the trading income which the company earns on a revenue basis. That is a form of automatic, built-in capital gains tax. It would cause a great deal of dismay and apprehension among corporate taxpayers here if they felt they were to be subjected to a capital gains tax as a result of our entry into the Common Market. I throw out that point merely as one of a number of urgent problems concerning our entry into the Common Market on which we are entitled to information from the Minister.
It may be unfortunate that the Income Tax Commission has suspended its work and gone out of existence without adverting to the impact of our entry into the Common Market, if we get in, on our tax code. I certainly hope that, if we do get into the Common Market, we will exercise some common sense in relation to taxation. No survey of the tax position here can be made without adequate statistics. Too frequently questions are put down by interested Deputies looking for information on one aspect or other of the tax code and the Minister has to say "I am sorry. The records of the Revenue Commissioners are not kept in such a way as would enable me to answer this question". One asks a question about the cost of collecting Schedule A income tax, for example, and the Minister has to give the preposterous answer that he does not know what the cost of collecting Schedule A income tax is. That position is not good enough. It is a position which could be readily rectified. In his Financial Statement the Minister adverted to the fact that he was installing electronic equipment for collecting tax. I hope that equipment will be used for the analysis and assimilation of revenue returns and that we will get something really informative in the way of an annual report from the Revenue Commissioners. Their present annual report is not sufficiently informative for anyone seriously interested in the matter.
I have other things to say on this Finance Bill, particularly in regard to Schedule A tax, the tax on the owners of residential houses, but as it is the subject of an amendment by Deputy Ryan, my remarks can be deferred until then. The Minister has given every indication that he is going to outdo the British Tories in conservatism so far as tax reform is concerned. No later than a few weeks ago the British Chancellor of the Exchequer was able to indicate that next year he is going to abolish Schedule A income tax on owner-occupiers. The British Chancellor is not in the position the Minister for Finance here is in. He has not had a report from an expert commission recommending the abolition of such a tax, whereas our Minister for Finance has had such a report and has indicated very strongly he is not accepting that report. I would respect the Minister if he were to say he thinks there might be something in the recommendations of the Commission on Schedule A but cannot for the moment, for revenue reasons, implement those recommendations. The fact that he would appear to have committed himself and his successors to a rejection on doctrinaire grounds of the Commission's report is to me a matter of great disappoinment.
