When I reported progress, I was drawing the attention of the House to the fact that, despite Deputy Seán Flanagan's optimistic prognostications, the Minister for Finance anticipates there will be an increase in the cost of living. He says to protect the recipients of social welfare benefits from the impact of that rise in the cost of living, he is making special provision for increases in old age pensions, widows' pensions and other benefits.
If this increase in the cost of living ensues, the inevitable result will be a general rise in the costs of production, with special reference to industrial production, with a consequent diminution in our competitive capacity in the export markets, in which we are finding it progressively more and more difficult to operate profitably. We already have an adverse trade balance of £105 million plus for the past 12 months of our trade. If our competitive capacity for industrial exports is injured by this new taxation, the prospect of our reducing that adverse trade balance grows more and more remote.
I am aware it has been the philosophy of Fianna Fáil for some years to have no regard to the cost of living and to say simply that it must be allowed to rise. But, sooner or later, the people of this country must reconcile themselves to the fact that, if we are to compete in foreign markets for industrial goods, unless we keep costs of production down, we shall be completely blotted out of foreign markets, more especially if these foreign markets become more and more automated in their industrial processes, which reduces their dependence on paid labour. In effect, this creates a situation in which their machines are competing with our men.
The more we raise the cost of living to our own society, the more we increase the inevitable costs of labour and personal service of every kind, with a consequent increase in our costs of production and a reduction in our competitive capacity. These facts are so elementary and obvious that it should not be necessary to reiterate them in this House, but the Budget proposed by the Government, the Finance Bill, with special reference to the section we are now discussing, all contribute to an increase in costs which is going to injure the economic life of this country, in my submission, very gravely.
The true evil of this tax is that it operates to increase the cost of living. But the passing of this increased cost to the consumer is not altogether a simple operation. It is going to wreak a good deal of havoc in the process of being passed on. Is there any reasonable Deputy who accepts it as equitable that, if you are dealing with a shopkeeper doing a business of £250 a year in a grocery shop, this turnover tax is the equivalent of going to that shopkeeper and telling him that as and from 1st November, he will be charged corporation profits tax at the rate of 62½ per cent before income tax? We go on to say to him in so far as he is able to pass it on to the customer, but the net result of that notice to a great many medium-sized shopkeepers—all of whom are employing a certain number of assistants —will be a notice to quit. They simply will not be able to carry on.
This morning, a Fianna Fáil Deputy said it was illusory to suggest to shopkeepers that they would be subjected to repeated inquisitions by inspectors of the Revenue Commissioners. I do not think that is true. I think the Revenue Commissioners must, in the discharge of their duties, conduct a very strict inquisition. At present the whole basis of the collection of income tax is founded on the certified accounts of chartered accountants. In the vast majority of cases, the Revenue Commissioners accept such accounts as adequate evidence of the true profit earned by a business firm for the purpose of assessing income tax.
It is quite true that shopkeepers who get these certified accounts for the purposes of income tax will have them accepted by the Revenue Commissioners for the purposes of the turnover tax. But those who know rural Ireland know that the vast majority of shopkeepers there do not employ chartered accountants at all. They have now two alternatives. One is to settle with the Revenue Commissioners themselves their monthly liability to turnover tax, or else employ—at considerable expense— chartered accountants to prepare returns and certify them to the Revenue Commissioners. In either event, the cost in time and in convenience, and indeed in money, is a very substantial item for a small businessman.
This whole proposal strikes me as being so grotesquely unjust that I find it hard, understanding it intimately as I do, fully to express to the House how unfair it is. Many Fianna Fáil Deputies may profess to misunderstand the demonstration of 10,000 shopkeepers against the tax in Dublin. They did not come here for fun and they are not the type of people who ordinarily resort to public demonstration. Deputy Seán Flanagan was the first Fianna Fáil Deputy frankly to admit that, to his personal knowledge, a great part of the demonstrating shopkeepers had been ardent supporters of Fianna Fáil. They did not come to demonstrate for any political purpose but because they feel they are being unfairly treated. I believe that if Deputies will wake up to the fact that in a grocer's shop this tax represents the equivalent of a corporation profits tax of 62 ½ per cent on all profits, they will realise that a very savage injustice is being done.
Quite apart from the outrage being perpetrated on this considerable body of respectable citizens, I suppose there are Deputies who have asked what is to become of them? If some go, will not others benefit? I think that is true. This will accelerate the pace at which the ordinary shop will disappear in favour of the multiple self-service shop which tends to grow in our cities and country towns. It is true that the collection of this tax is much simpler for a self-service shop operated by a large corporation such as those at present arriving from Britain and buying up sites all over this country.
As another Deputy pointed out, under the self-service system, a customer collects her parcels and on leaving at the door, has her bill made up. In the course of that transaction, it is relatively easy for the self-service store to pass on this cost by adding 2 ½ per cent to the total bill. On the contrary, the average shop involving personal service is obliged to quote prices for each article purchased by the customer and, in effect, finds it progressively more and more difficult to collect the tax. If it were physically possible for many of these people to absorb the tax, I am sure in defence of their own trade they would try to do so, but it is economically impossible for a grocer to absorb a corporation profits tax of 62 ½ per cent and survive.
A great many will not survive and we shall have the pleasant feeling of having eliminated a number of our neighbours from their traditional livelihood, the pleasant achievement to our credit of having broken up a considerable number of respectable families in rural Ireland who have earned their living in the distributive trade. We shall have the satisfaction of knowing that we have put out of jobs a number of assistants. Some will be young men and women but many will be people in middle age who will find adaptation of their lives to the new regime a matter of considerable difficulty. To those who are, in any degree, familiar with rural life particularly, and urban life also, these are prospects that cause considerable concern. They carry conviction to my mind that the whole proposal is iniquitous and unjust.
As Leader of this Party I want to deal with the silly propaganda propagated by Fianna Fáil who begin by saying that this tax raises £10.5 million. It is said that this money is needed—where do the Opposition propose to get it, if not through the turnover tax? The answer is perfectly simple. I do not believe that it costs or should cost £63 million per annum more to run the country in 1963 than in 1957. If this tax is implemented, it means that the Exchequer is receiving £63 million pounds per annum more than it received in 1957. I want an opportunity to examine that figure.
I assume that Fianna Fáil Deputies are aware that there is no greater crime in politics than that of the Minister for Finance or Government colleague who would disclose Budget secrets before Budget Day. I assume Fianna Fáil Deputies know that more than one British Chancellor of the Exchequer has been forced to resign from public life as a result of such revelations. And the reason is simple: if such revelations were permitted, the opportunities for individuals greatly to enrich themselves as a result of advance information would be multiplied. They can so enrich themselves because they, as individuals can anticipate the tax as nobody else can but it follows from that, that if everybody can anticipate every sort of revenue contemplated by a Government, then that form of revenue produces nothing at all.
If it is true that after an examination and assessment of the national resources, it is necessary to raise this money, there are many ways in which a Government can tax but none is productive if announced six months in advance, thus giving everybody an opportunity of evading or defeating it. As I said, and I want to repeat, having given most careful examination to this whole problem, I am satisfied that if additional revenue was necessary there are at least four possible methods open to the Government, and two of them were rejected by this Government in favour of this infamous tax. I say that without the advantage of any prior consultation with the experts of the Department of Finance or with the Revenue Commissioners whose business it is to submit proposals to the Minister for Finance when an increase in revenue is necessary for the essential purposes of the Government.
I am aware that no rational Deputy of the Fianna Fáil Party or indeed of any other Party in this House is ignorant of the facts which I am now stating. I am aware that that will not prevent the Deputies of the Fianna Fáil Party continuing to thump tubs and proclaim that unless the Opposition are prepared to offer a substitute for this tax proposal, they are not in good faith. I want to tell some of these Fianna Fáil Deputies who still retain some remnant of conscience even after their association with the Party to which they now belong, that that kind of conduct degrades themselves and does a genuine disservice to democratic politics in this country. Any arguments put forward by a responsible public man which he knows himself to be fraudulent in some measure degrades the public life to which we all belong.
I want to recall again a further evil element in this tax. It is a tax which, according to the Government's White Paper on Direct Taxation laid before the Houses of the Oireachtas on 19th April, 1961, operates to place an additional burden on persons in the lower income ranges. "It bears more heavily on married couples, especially those with family responsibilities. A sales tax," it says, "might tend to have an inflationary effect."
However, that is not the end of it. It was Deputy Colley who directed our attention to another interesting characteristic of this tax. He pointed out that it had one beautiful quality: it had no point of diminishing return.