Dáil Éireann debate -
Wednesday, 23 Jun 1965

Vol. 216 No. 9

Public Business. - Finance Bill, 1965 : Second Stage.

Minister for Finance (Mr. J. Lynch)

I move that the Bill be now read a Second Time. The Finance Bill implements the Budget proposals and Financial Resolutions. There are a few additional items dealt with in the Bill, such as the Capital Services Redemption Account annuities and a motor taxation proposal, but these are of a non-contentious nature and I shall mention them specially as I come to them. As has been the custom in recent years, an Explanatory Memorandum dealing with the various sections has been circulated with the text of the Bill; and it is scarcely necessary for me to repeat in detail the information contained in it.

All the provisions in Part I were indicated in the Financial Statement. The first section contains the usual charging provisions in relation to income tax and sur-tax. Apart from sections 7 to 9, which make certain technical amendments of the law preparatory to consolidation, the other sections in Part I either grant reliefs or provide for improved assessment and appeal procedures. The reliefs are provided for in sections 2 and 6. These are concerned, respectively, with shortening from five years to one year the period for writing off capital expenditure on scientific research relating to a trade and with giving certain extensions of exports relief as recommended by the National Industrial Economic Council. Section 3 is associated with the system of "one taxpayer, one charge" and provides for separate assessments under Schedules A and B where a property changes hands. Sections 4 and 5 give extended rights of appeal to the taxpayer and the Revenue and provide that an inspector of taxes may admit late appeals in certain circumstances.

Part II deals with customs and excise duties. Sections 10 to 14 relate to the budget increases in the rates of duty on beer, spirits, hydrocarbon oils, tobacco and wine. Section 16 covers changes in the rates of excise duty payable on pawnbrokers' licences arising out of the enactment of the Pawnbrokers Act, 1964. Sections 15 and 17 deal with matters which were not mentioned in the Budget Speech. Section 15 provides that the grant by the Revenue Commissioners of special duty-free import facilities for goods for re-export will be subject to the consent of the Minister for Industry and Commerce. Section 17 is part of the comprehensive scheme to rationalise and simplify the road tax system, to which the Minister for Local Government referred when introducing his Estimate on 27th April. The termination, as proposed in the section, of the quarterly issue of road tax licences involving tax at £3 a year or less will facilitate introduction of the scheme.

The Bill effects a further change in the excise laws which I might mention here. By virtue of the repeals set out in Part IX of the Third Schedule, Appraisers' and Plate Dealers' excise licences will be abolished with effect from 6th July, 1966. The revenue from these licences, as I said in the Budget Speech, is trifling and does not justify their retention.

Part III of the Bill deals with death duties. It does not contain the general anti-avoidance provision foreshadowed in Financial Resolution No. 18, of which there was much criticism in certain quarters. The Financial Resolution, which of course had no statutory effect, was introduced to comply with the financial procedure of the House and, as it was drafted in outline form, detailed advance comment on the proposed legislation was premature. Much of the opposition was in fact wrongly founded.

I want to make it quite clear that no proposal was ever put to me, nor did I contemplate any proposal, for a general section which would give to the Revenue Commissioners a final judgment in matters of liability to estate duty. Any decision taken by them would have been expressly subject to review by the Courts. Moreover, because of its special character, the section would have been restricted to transactions taking place after the passing of the Bill.

General anti-avoidance measures are a feature of a number of foreign tax systems; and indeed section 15 of our Finance Act, 1944, enables the Revenue Commissioners to counter transactions for the avoidance or reduction of liability to Corporation Profits Tax. There is, of course, a full right of appeal to the Courts against a direction of the Revenue Commissioners under that section. Deputies will also recall that the Commission on Income Taxation, in their Seventh Report, recommended the introduction, subject to a right of appeal, of a provision enabling all fictitious and unreal transactions to be disregarded in computing income tax and sur-tax. They said that they had no representations that the 1944 provisions in relation to Corporation Profits Tax were harshly or inequitably applied or that they should be ended or modified.

However, I have decided not to bring in general estate duty anti-avoidance legislation this year. I shall instead rely on the specific provisions against avoidance included in existing law as strengthened by the enactment of the specific proposals in the Bill. My basic purpose is to stop all loopholes and to prevent wealthy individuals, who can afford highly-skilled advice, from entering into arrangements which are not bona fide but are designed to minimise liability. In other words I want to prevent such people from shifting a part of their tax burden on to other shoulders, and particularly on to shoulders less able to bear it, and to ensure that the revenue from estate duty is maintained. I do not believe that anybody will quarrel with this objective.

The specific anti-avoidance provisions are contained in sections 18 to 25 of the Bill and are explained in some detail in the explanatory memorandum. The avoidance devices dealt with in sections 18 to 21 are the transfer of assets to companies, the establishment of discretionary trusts, the purchase of foreign immovable property so as to remove the assets represented by such property outside the ambit of Irish estate duty, and the determination of settlements by the purchase by the life tenant of the interest in remainder. Under section 22, death benefits payable under superannuation schemes are made liable in all cases to estate duty, except where the aggregate benefits do not exceed £5,000 and are payable to the widow or dependent children of the deceased. Provision is made in section 23 for aggregation, with the deceased's other assets, of property such as the proceeds of certain insurance policies effected by the deceased under the Married Women's Status Act, 1957, which, under existing law, is regarded as property in which "the deceased never had an interest" and is therefore non-aggregable.

Section 24 extends, from three years to five years prior to death, the period within which gifts inter vivos and property released from trust will be liable to estate duty; but gifts made or property released three years or more before the passing of the Bill, which would be exempt if the present law continued to apply, are not brought within the new charge. The exemption limit for gifts inter vivos is raised from £100 to £500. Section 25 confirms that the estate duty exemption in favour of gifts in consideration of marriage is to be confined to gifts made to the parties to the marriage and to the issue of the marriage.

The anti-avoidance measures will apply in respect of the estates of persons dying after the passing of the Bill, subject to special provisions for gifts inter vivos and for analogous benefits and also for the purchase of interests in remainder. It is customary to apply estate duty legislation by reference to deaths occurring after Budget Day or after the passing of the Finance Bill. If exemption were to be given by reference to the date the arrangements were made, the legislation could not become effective until a remote future time. Moreover, anomalies would arise because of the different treatment which would have to be accorded to the property of different persons dying after the passing of the legislation.

Sections 26 and 27 provide for the reliefs mentioned in the Financial Statement. These are the abatement of estate duty affecting benefits taken by a widow or dependent children where the estate does not exceed £15,000, and the abolition of the one per cent rates of legacy duty and succession duty on benefits taken by a spouse, lineal ancestor or lineal descendant.

Part IV, which contains only one section, is concerned with stamp duties. It accords exemption from capital duty and transfer duty where there is an amalgamation or reconstruction of companies.

Part V contains four sections relating to corporation profits tax, all of which were mentioned in the Financial Statement. They relate, respectively, to the continuation, for a further period of three years, of the temporary exemption from corporation profits tax of certain public utility companies, building societies and the Agricultural Credit Corporation Ltd.; to the extension of exports relief corresponding to that provided in relation to income tax by section 6 of the Bill; to the cesser of section 14 of the Finance Act, 1944, under which the profits of a subsidiary company may, in certain circumstances, be treated as the profits of its parent for the purposes of corporation profits tax; and to the application to corporation profits tax of the enactments governing the taxation of profits from lettings of buildings and land.

Part VI contains some minor amendments of the law relating to turnover tax. Provision is made confirming the liability to tax of clubs and of persons who are entitled to receive money from taxable activities, even though they may not themselves have carried on the activities in question. A common exemption limit of £150 a month for registration is substituted for the limits of £250 and £100 a month which up to the present have applied to certain persons in a small way of business. Another section brings retail sales of their own produce by farmers and fishermen within the scope of the tax if the receipts exceed £150 in each of two successive months. The last two sections in this Part of the Bill, sections 36 and 37, contain provisions which extend and define the taxpayer's right of appeal from decisions of the Revenue Commissioners in relation to turnover tax.

Part VII, comprising sections 38 to 45, is designed to secure proper taxation of profits from dealing in or developing land. Profits of this kind have to some extent escaped the tax net mainly because, under section 6 of the Finance Act, 1935, tax liability on the sale or demise of land arises only where the land has been acquired with the intention of reselling or developing it. As a practical matter it is virtually impossible for the Revenue to dispute a taxpayer's statement as to what his intentions were. Under the new provisions intention will no longer be a decisive factor. If lands are sold or leased after they have been developed, or after arrangements have been made to secure their development, the profits arising to the vendor or lessor will be taxable.

As pointed out in the Explanatory Memorandum, normal sales of agricultural land by one farmer to another will not be affected. There is specific exemption for any profit arising on the sale of property which a person has bona fide acquired, and used, as his own residence — notwithstanding that the profit is wholly or partly attributable to development work carried out by way of the construction, reconstruction or extension of a dwelling house or out-offices.

The seven sections in Part VIII give effect to the proposal that, in order to meet the requirements of the "one taxpayer, one charge" system, tax should be assessed, not on a partnership as a whole, but on each member of the partnership according to his share of the profits.

Part IX of the Bill contains the provisions, to which I referred in the Financial Statement, to remedy certain weaknesses in Part IX of the Finance Act, 1963, which charges profits from the letting of buildings and land. As the Explanatory Memorandum pointed out, the 1963 legislation provides that, where a short-term lease is granted wholly or partly in consideration of a premium, a proportion of the premium depending on the duration of the lease is to be treated as rent. The amendments for which this Part of the Bill provides will apply similar treatment to other receipts by property owners which are in reality of the nature of rent but which under the general law would fall to be treated as capital receipts.

Part X of the Bill deals with miscelaneous items, two of which were not mentioned in the Financial Statement or in the Financial Resolutions. These are, in section 58, the customary provision with regard to the Capital Services Redemption Account annuities and, in section 62 and the Third Schedule, the abolition of the 25 per cent rate of stamp duty on acquisitions of land by non-nationals occurring after the passing of the Land Act, 1965.

As regards the other sections, only three call for comment. Two of these deal with the extension of existing incentive tax reliefs. Section 59 extends to 31 March, 1968, the period of operation of the double initial allowances on plant and machinery and industrial buildings, excluding hotels, and section 60 lengthens from 10 to 20 years the period within which a company must commence to trade in order to qualify for "non-bedded" minerals relief. Section 61 provides for payments on account of income tax or corporation profits tax where the Special Commissioners postpone or adjourn the hearing of an appeal.

Those, broadly, are the effects of the provisions in the Bill. The Finance Bill is essentially a Committee Stage Bill and I shall be glad to deal with points of detail on that Stage.

Mr. T.F. O'Higgins

This Finance Bill comes before the Dáil at a time when the state of the economy gives some ground for apprehension. It is, therefore, necessary to consider in relation to the present situation in the country not only the terms of the Bill but also the provisions the Bill might well contain. The Finance Bill represents the carrying into legal effect of the financial policy of the Government as outlined in the Minister's Budget Statement.

Before referring to the terms of the Bill, I want briefly to refer to two features in the present state of the country which give people a feeling of some anxiety. First of all, it appears in relation to our balance of payments that not only has the deficit, which became apparent some months ago, not been reduced, but, on the latest figures, it appears that over a 12 month period, we are now running with a balance of payments deficit of £51 million. That in itself is a highly disturbing matter and it surely calls for some indication from the Minister for Finance as to what steps can or should be taken to deal with the situation. I should have thought that the balance of payments position at the moment would indicate the need for a new export drive. I should have expected, as a result of the situation which exists, that there would have been in this Bill an indication by the Minister of substantial new incentives to spur forward a new export drive to deal with the situation that now confronts the country.

I should, I think, recall to the House that in the past nine years undoubtedly the most significant economic measure taken by a Government in this country was the Finance (Miscellaneous Provisions) Act of 1956, containing the export tax relief concessions. It was at that stage, with the birth of this new idea in relation to exports, that this country really started entering the export markets and really began to make an impression on markets abroad. I do not suppose anything more can be done in that direction but it does occur to me that the situation now is such that an extension of that type of tax concession might well be considered. The concessions contained in the 1956 Act were, understandably I think, concessions to capital. They were concessions to the entrepreneur who entered into the export trade. He was encouraged to do so by tax concessions which benefited his business and, indirectly, himself.

I suggest to the Minister that that type of tax concession might well be broadened now to include the employees connected with export business. Some effort should be made to extend the concession to those who work in the export business, whether as ordinary operatives or in a managerial capacity. Some new vision in regard to matters of this kind might well result in another step forward in exports and might result also in what would surely be a desirable evolution from the country's point of view, namely, a lowering in costs of production which would enable us to sell on better terms on the export markets.

I hope nothing I have said will be taken as exaggerating the position. The difficulty is known to all of us. It is a problem in regard to which people expect action by the Government. It is a problem in respect of which no one will be satisfied by Government Ministers sitting like so many bumps on a log, twiddling their thumbs and waiting for things to get better, because, while we cannot entirely control any balance of payments difficulty which may arise, we can certainly retain a great deal of control by way of positive and constructive action. I would regard any difficulty that exists as a challenge to us and to the Government to show evidence of new thought and new leadership in dealing with the situation. If the problem were approached in that way, as I believe it should be, this Bill, instead of containing a small extension of the export tax relief provisions already in existence, would contain something new and something worthwhile, something which would redound to the credit of the country and increase the potency of our drive for export markets. That is one of the disturbing features of the economy at the moment.

There is also the fact that the country has in recent months experienced a new, sudden and unheralded restriction on credit. A credit squeeze is in operation. It is having a profound and dampening effect on the economy. No one, least of all anyone on these benches, can doubt the fact that, when the value of bank deposits compared with their lending capacity dictates the course, there must be some closing down on or contraction of credit. On the information available to us, we must accept that such is the present situation. We assume everyone acts responsibly and no one desires to act in any other way, and we must assume, therefore, that whatever restriction of credit is now taking place cannot be avoided. It is taking place because circumstances dictate that course.

Our concern in Opposition must be to know how the present situation came about and what steps are being taken or will be taken by the Government to deal with the problem. After all, we are just over the end of the first year of the Second Programme for Economic Expansion. That programme has been much talked about by Ministers and by the Fianna Fáil Party. In the recent general election, the people were led to believe that this programme represents a big step forward in constructive thinking and in blueprinting future prosperity for the country. They were led to believe great things.

All the phrases and the gimmicks devised by the backroom boys were aimed at getting the people to believe that the country was going forward on smoothly running, well oiled wheels, that the driver was in the cab, with his cap pulled down, smoking his pipe, with the engine well stoked and working satisfactorily. The slogan was: "Let Lemass lead on." Either that was true and accurate and fair or it was not. Perhaps it is too early yet to assess the full situation, but at least it now begins to appear that there may have been some failure to think with the long head. There may have been some mishandling of the necessary preparation for this economic programme.

No programme or plan for development can operate, or hope to achieve success, unless it is founded firmly on the provision of adequate credit. If there is any difficulty about that, if a shortage of credit becomes apparent, there is a return to the stop-go policies which mean that an economy is pushed and jerked alternately and the confidence of the people is damped and disturbed. We would like to know from the Minister and the Government, whom we must hold responsible for this, what happened in that regard in relation to this programme. What steps were taken to ensure that the credit available to the commercial banks here and to the community would be available to enable this Programme to go ahead?

I am going to suggest that the fact is, as everyone in the country now appreciates, that there has been a very grave mishandling on this score in recent years. Credit became available for a diversity of purposes without any adequate control or supervision. That could only come from the Government. The fact has been that up to last month the Central Bank and those who run it lived in an ivory tower. They lived aloof and away from the actual scene in which the pool of credit was used for all these purposes. There is no doubt about it. In the last 12 or 18 months for Stock Exchange transactions and for a whole variety of purposes of that kind, almost unlimited credit was available. There was no control, no supervision, no effort made to do what is now being done: the Central Bank going into the offices of the commercial banks, sitting down with the directors and advising them how their business should be conducted and run. We want to know how this situation grew up, why it grew up and what efforts will be made now to ensure that such a situation can never recur.

We learned at the time of the Budget, at the end of the first year of the Second Programme, that the progress which had been made on the Programme was in fact slow, sluggish and limited. Even in this 12-month period, agricultural employment dropped by 10,000, industrial employment increased by 13,000, making a net increase of 3,000 or four per cent. That represented half the aim for the first year set forward in the Second Programme. We learned that emigration ran at 25,000 in that 12-month period. That represented 40 per cent more than the target figure set out in the Programme. Unemployment reached a figure of 58,000 and the gross national product showed a modest increase of 4.2 per cent, about half the growth rate in other western European countries. The progress was slow and limited and certainly not something about which anyone could display any complacency. We are concerned as a small country in a highly competitive world, with a population explosion taking place all over the world, with countries straining hard to develop their own resources and turning hungry eyes on countries that cannot keep pace. That is the situation we are facing.

The aims of this Second Programme were low. The targets set were modest. It was hoped and expected that 6,000 more jobs a year would be provided, that emigration would drop to 18,000 a year and that our growth rate would be of the order of 4½ per cent. These were humble, modest aims. At the end of the first year, even these were not being achieved. Added to that, we have now these disturbing features in the economy which I am sure cause concern to the Government and certainly do cause apprehension generally throughout the country.

At the end of the first year's working of the Programme, the National Industrial Economic Council, in relation to the trends then apparent, advised the Government that steps should be taken to stimulate the economy, to give it a shot in the arm and get it going again so that the Programme might continue and that some progress could be made. That advice from the National Industrial Economic Council was given before the present shortage of credit and the present credit squeeze became so widespread. Certainly, it is fair to say that now more even than the time this advice was given is there need for some new drive and stimulus for the economy.

In my reading of this Finance Bill, I do not see it. I see nothing along that line in the Bill itself. On the contrary, I observe, and I shall refer to, a number of provisions which, in my view, will make a bad situation considerably worse, a number of provisions which in fact will have the result of driving cash from this country and of making more profound the capital and cash shortage which now exists. I want, therefore, to come in that sense to a consideration of the provisions in the Bill and to do so against a background which, I hope, I have indicated not inaccurately as to the present economic situation in the country.

First of all, in relation to the Bill, may I refer to one matter which was mentioned by the Minister in his speech and that is the absence of the resolution along the lines of Resolution No. 18. Resolution No. 18 is a resolution that I have heard much of since Budget Day as I am sure many of us in the House have also. It was my responsibility, on behalf of the Fine Gael Party, to deal with that particular Resolution, nobody else's. In fact, I did not observe the nature of that Resolution. Had I done so, in the circumstances, needless to say, the opposition would have been expressed. In relation to the manner in which this Resolution was circulated, with 19 others, on Budget Day, I should like to say that it leaves very little scope and very little opportunity for Deputies in Opposition fully to consider the importance of what may, in effect, be proposed, particularly as the Budget Statement — I am sure the Minister will agree that I am not being unfair in saying this—gave no indication of the extent of the proposal that was to be moved in this Resolution.

The Minister in his Budget Statement, in the Official Report, Vol. 215, No. 8, columns 984/5, said, in relation to death duties:

Gifts made within three years of a donor's death are normally liable to death duties. I propose to extend this period to five years but, at the same time, to increase the exemption limit for gifts from £100 to £500. Also, gifts made in consideration of marriage are exempt from duty. To remove any doubts as to the scope of this exemption, legislation will be introduced expressly confining it to the parties to the marriage and the issue.

I have been impressed by complaints of death duty avoidance and I propose to bring in provisions to deal with the situation. The additional duty flowing from the anti-avoidance measures will, it is estimated, pay for the death duty reliefs. I might mention that the Revenue Commissioners will soon publish in one volume the Acts relating to death duties.

Those two paragraphs in the Minister's statement were the only intimation that I or other Deputies had of the nature and the form of the Resolutions which the Minister subsequently moved. Certainly, I was not put on notice that a Resolution proposing a change as extensive as Resolution No. 18 would in fact be moved by the Minister. The extraordinary thing is that the Minister comes in here today and says, in effect, that he did not know it, either. That seems to be the effect of what the Minister has said. Somebody, in my view, was trying to pull a quick one and pulled a quick one on the Minister and on the Government and might easily have pulled a quick one on the Dáil. Of course, the matter would have to be dealt with, in any event, in the Finance Bill.

It is a pleasure for me to be able to congratulate our daily press and in this respect the congratulation, while it can start with one paper, can be extended to all others. I do congratulate the Irish Times for pointing out, a fortnight later, the effects of this Resolution, and the Irish Independent for supporting the view expressed by the Irish Times and the Sunday Press for also joining in condemning the proposal contained in that Resolution. In any event, the result of it has been that the obviously noxious provisions of that Resolution are not incorporated in this Bill. Nevertheless, generally speaking, this Finance Bill represents a formidable display of the power of this country's bureaucracy.

The Bill itself is largely concerned with the tightening of the Revenue Commissioners' control over property disposition and with increasing their powers to interfere in family dispositions and family settlements. I do not think that any word in the sentences I have used is extravagant. I propose to demonstrate that this Bill, if ever there was one, is a bureaucrat's measure, introduced here at the behest of the Revenue Commissioners to ensure that their power will further be strengthened, and doing so despite social needs quite to the contrary.

Let us take the first example. At a time when there is a great social need to encourage older people to transfer their property to their children in order to get it into more active and enterprising hands, we have a Bill which is to make, and aims at making, such transfers more difficult and more infrequent. There is one clash between the social needs of our community and the intentions, the desires, the ambitions and the aims of the Revenue Commissioners. Bureaucracy has succeeded. They have got the Government, through the Minister for Finance, to give them powers in this Bill to prevent young people from getting the start they should get, to the national advantage. They aim at retaining property which could otherwise productively be used, in hands which, because of age, can no longer usefully do the task. What I say applies in particular to the provisions of section 24.

Section 24 also has its effect on sections 18 and 19. May I just say that, up to the Finance Act, 1910, gifts made by any person more than 12 months before his death were not liable to estate duty. That was the provision over 55 years ago. Under the Finance Act of 1910, that period of 12 months was extended to three years and it has remained three years ever since 1910. This has meant that the period of three years during which a person must survive to avoid death duty attaching to his estate is as well known as some of the articles of faith. Everybody knows it. It is part and parcel of the ordinary habit and the rules and regulations of every farmer and businessman in this country. It is now proposed in this Bill to extend that period from three to five years. I want to know why this is being brought about. All the Minister says is: "We propose to do it." Here is a change which will affect in a very radical way a whole lot of families, a whole lot of parents, a whole lot of owners of property throughout the country. It is proposed here by the Minister at the behest of the Revenue Commissioners and no case is made for it.

It is true to say that a change in this respect was made in the United Kingdom under the Finance Act of 1946 but that is no reason why we should do the same thing some 20 years later. The British, having extended the period to five years in 1946, found very quickly that it was not just and they brought in certain tapering provisions which offset the effect of the duty on death. In England, if the death occurs in the third year, the value of the estate for the purposes of estate duty is reduced by 15 per cent; if the death takes place in the fourth year, the duty is reduced by 30 per cent and if the death takes place in the fifth year, the value of the estate for duty purposes is reduced by 60 per cent.

These tapering provisions are contained in the British estate duty code. Here, the Minister just says: "We shall extend the period to five years", and no effort is made in the proposals before the House to taper off the effect of the impact of duty in cases of that kind. In addition, in the United Kingdom provisions there is scope for marginal reliefs. Whereas the Minister proposes here that a gift not exceeding £500 is not taxable, under the United Kingdom provisions, an allowance is made proportionately marginally in the case of a sum in excess of £500.

Again, there is no proposal here for that. We in Fine Gael shall ask the House to divide on section 24 of this Bill on the proposal it contains to extend this period in the way it is proposed. If the House is not in agreement with us, we shall at least ask the House to accept tapering provisions along the lines they have in the British system. In any event, I suggest to the House that we have in these provisions in section 24 and sections 18 and 19 an example of added and increased impact of duty without any case being made for it, merely because the Revenue Commissioners feel it should be done, though the effect may be to bring about and to perpetuate a situation in which as productive a use is not being made of property as there should be. It is a grave mistake. In the present economic condition of the country it can be very bad indeed.

Secondly, having read the Bill, it appears to me that the provisions I have mentioned and others will have the effect of damaging this country's image as a reasonable tax haven for foreign capital at a time when credit restriction is being caused by the lack of bank cash. This Bill will in addition operate to drive out cash from the country. I think this is particularly true of the provisions contained in section 20. That section is a repetition or imitation of a precisely similar section contained in the British Finance Act of 1964.

In Britain they brought in such a provision in that year and it is true to say that the result was the deliberate abandonment by a considerable number of wealthy people of their United Kingdom domicile. One of them was Lord Astor, the owner and proprietor of The Times. These wealthy people abandoned their domicile in the United Kingdom. I do not hold a preference for wealthy people. I like to see the sign of their money. It may be the British could afford to do that, could afford to lose capital in that way. We certainly cannot.

Section 20, which is the same measure as that introduced in the British Act of 1964, must be expected to have precisely the same effect here as it in fact had in England. I should like the Minister to tell me what evidence had the Revenue Commissioners or the Government to justify this proposal in section 20. What serious loss of revenue has resulted from the exemption from estate duty of immovable property or property situate outside the State? What loss has it meant to the State?

I know well the reason that will be advanced is that it was necessary in order to deal with what is known as the Jersey mortgage—procedure under which people with capital, domiciling themselves by choice in this country, proceeded to take mortgages on property in Jersey which, according to the law of Jersey, lex situs was regarded as realty, as immovable property. Apparently the purpose of this section is to deal with these people guilty of estate duty avoidance.

I would agree with the Minister, and everyone would agree, that a device of that kind should be dealt with, but surely it can be dealt with without bringing in a general provision of this kind which is going to tax all the immovable property held by people who have come over here, invested their money and frequently have bought Irish securities and invested in Irish property. These people who have no particular desire to engage in any tax avoidance will now be hit by this section, a general blanket tax provision which was designed to deal with one small problem, the Jersey mortgage, but which in fact is now so wide that it will have a dismaying effect on people of capital and wealth.

I do not know whether we on this side would be able to do so—the Minister has more resources available to him—but certainly we will endeavour on Committee Stage to suggest a section in place of this one which will aim at attacking merely the Jersey mortgage without going further. I would suggest to the Minister that if my assumption is right, that the object of this section is to deal with the Jersey mortgage, he should have it reconsidered. He should take it back and reconsider it to see whether some more apt or more appropriate provision could not be devised. I do feel that we stultify ourselves here when we merely take a chunk from a British Statute Book and circulate it on green paper and suggest that it is a product of Irish dynamism in some Civil Service Department. In fact, what we are doing is taking something from the British and applying it holus bolus to this country, without ever considering whether it is the most appropriate or most suitable legislation in our own circumstances. Certainly section 20 is not and I am going to suggest that he should look again at it.

As I already suggested, this Bill is a formidable display of the power of bureaucracy. That is also borne out by the fact that there are in this Bill a number of drastically retrospective provisions. Retrospective legislation is always something about which everybody in Government agrees with those in Opposition in saying: "Well, of course, we would not do it". All legislators are expected to avoid it like the devil avoids Holy Water. To change the law retrospectively and to say in respect of something a person did in the past, or something he contrived to obtain in the past, or arranged in the past, that he offended the law is something that should properly shock any person sincerely concerned with social justice in this legislature. We have in this Bill a number of provisions which, not by implication, but openly and brazenly, are retrospective.

First of all, there is this provision in section 18 which deals with disposition in favour of certain companies. Under section 18 (3), it is specifically provided that where the deceased has, either before or after the passing of this Act, made a disposition of property in favour of a company controlled by the deceased, then the effects of the section shall operate. I do not know whether the Minister will defend that proposal but there it is, retrospectively covering a disposition, which, when it was made, was perfectly in accordance with the law, merely because it was intended to avoid the impact of duty. That is a perfectly legitimate enterprise in which any one of us can engage, provided we do not break the law.

Why should we not be entitled as individual taxpayers to engage in a battle of wits with the Revenue Commissioners? It is their duty and the duty of the Government and the Minister for Finance to bring in a proper legislative measure. They can do this every year and if despite all the efforts of the Minister for Finance in his annual Finance Bill, there is a way of doing something lawfully, genuinely and properly, which will avoid taxation falling on the members of one family, why should it be wrong to do so? But why then should the Minister subsequently come in and say: "Although you did not offend the law and although the tax did not apply lawfully at the time and you are dead and gone now, nevertheless I am going to make your wife and your children pay for something they did not need to do at the time the disposition was made"? That is what is provided in section 18 (3).

Again, in the section to which I referred earlier, the Jersey mortgage section, section 20, in subsection (2) (b), it is provided that such an investment in a Jersey mortgage, whether done before or after the passing of this Act, will attract the machinery of this section. What is the justification for that? What are people who were encouraged to come here by statements of Government Ministers going to think? Perhaps some of these people were encouraged by the Minister himself when he was Minister for Industry and Commerce and went to America and invited people of capital to come to Ireland. What are they going to think when they find that not only are they taxed on immovable property which they own outside, but the taxation provision is to apply not merely from the passing of this Act but regardless of when the transaction was entered into?

Again there is section 22 which is one of a number of allied sections designed to deal with the purchase of and investment in land and its development. This provision is deliberately stated to be retrospective. I wonder has this been thought out. I concede that a case could be made for a person who buys land and puts forward the dummy excuse, with his tongue in his cheek, that he is going to build a house on it but then, after a time, discovers that it is not suitable. Perhaps his wife would not like to live there, or something like that and then he finds that unknown to him, he owns a goose which was hatching and now proceeds to lay golden eggs and in fact he makes a wonderful development out of the property and gets away with a large accretion of his investment.

If one has grounds for believing that that was the story at all times, then one must ensure that something like that will not be repeated. I could see grounds and cogency for any arguments the Revenue Commissioners put forward to say: "We are going to close that loophole and ensure that accretions in land values as a result of circumstances which the developer himself had nothing to do with will be liable"—just because land happened to be in an area opening up to development or something of that kind. I can understand that something might be done along these lines. Here, in this section, it is not only the future but the past that it dealt with because this is a retrospective provision. I am going to put forward an example which I do not suggest has happened or will happen but we should test what we do in this House by examples which may often be bizarre in their effect, although I do not think this one is.

I want the House to assume that a transaction of the kind proposed to be taxed under section 42 was put through 12 months ago, as a result of which a profit was made, which, on the basis of the then existing law, was not taxable. A company had been formed and the company made a profit. It has its books audited and certified under the Companies Acts. It then goes to the bank or somebody else who advances it money or gives it credit on the strength of the audited returns, the audited balance sheet. The company gets the credit and continues its operations and then it runs into difficulties and goes into liquidation. When it is in liquidation, if this section is passed, the Revenue Commissioners can raise an assessment and the debt for tax becomes a preferred debt in liquidation. The effect would be that the Revenue Commissioners would get a preference which would enable them to take what would otherwise have been available to the postponed creditors, including the person or bank or whoever advanced or lent money to the company on the strength of its certified audited returns and balance sheet.

Is that to be justified? It appears to me that if that test is applied, the constitutionality of a provision of this kind might easily be open to doubt. If you can provide in that way that something which was not so at the time people changed their position for the worse, obviously the most valuable rights of property would be endangered. I believe some of the retrospective provisions I have mentioned in sections 18, 20 and 42—there are others that I have not available—may and could lead to chaos in the country if insisted upon. I suggest to the Minister that he, with his advisers, should reconsider these provisions.

There is another provision to which the Minister referred in his opening statement. It relates to what is a very common and I think, certainly, a worthwhile practice among people throughout the country, that is, the provision by husbands generally of nominated insurance benefits for their wives or a nominated child. Ever since the estate duty code became incorporated and codified in the Finance Act of 1894, there has been a provision in section 4 of that Act which ensures that there would not be any what is called aggregation of property in which the deceased never had an interest. Such property, while it is deemed to pass on death, was valued separately from the deceased's other property which passed on death.

I think an example will indicate what I mean. Up to the present and ever since 1894, if a husband takes out a life insurance policy in respect of which he makes a revocable nomination in favour of, say, his wife for £5,000 and he dies, under our law at the moment no estate duty is payable on that particular benefit. It is considered for estate duty purposes as one unit of property, £5,000, and as it does not come within the scales of duty, no duty is payable. At the same time, that husband may have died leaving other property valued at, say, £6,000 and the duty which would be payable then on his estate would be the one per cent in relation to the excess of his other property over £5,000.

Now the Minister proposes in this Bill—and again I want to know why —that this proviso which has been there for over 70 years should now go and that henceforth that man, when he dies intending to benefit his wife, will have the £5,000 benefit through the insurance policy and the £6,000 which he leaves added together and he will now have an estate of £11,000 which will have to pay duty at six per cent.

That is a new kind of taxation proposal being put forward by the Minister. No case is made for it. It is surely not socially undesirable that a hardworking man while he is able to work should dedicate some portion of his earnings to the provision of benefit in which he can never share—that is the whole basis of the exemption—to buy a policy for his wife and keep it up. The fact that this is socially desirable has been recognised in Britain since 1894 by the most rapacious of Chancellors of the Exchequer and recognised in this country by every Minister for Finance. They have been good and bad over the years but the present Minister is the first to propose a provision of this kind, which in effect, says: "I am going to tax that kind of property." What is the case to be made for it? Perhaps the Minister will deal with that later on.

There are other things I could say in regard to the Bill but I do not want to delay the House unduly. I have mentioned some of the taxing provisions of the Bill where the bureaucrat really sets about stopping the taxpayer, "dealing" with him. Then you have all sorts of powers being sought to deal with little John Citizen but there is a difference of approach when some concession is to be given. The National Industrial Economic Council suggested to the Government that they should bring in a provision such as is proposed in section 28 of this Bill which would facilitate the amalgamation of companies and so on and would reduce the impact of stamp duty. Accordingly, section 28 is proposed now for the consideration of this House. Really, I wonder what has taken place. It seems to me that there is profound evidence of staleness somewhere. Instead of drawing up and devising a new Irish section which would deal with this problem in terms we could understand, there is introduced to us now a section which starts at page 22 of the Bill, goes into page 23, occupies all page 24 and reaches the latter part of page 25 slightly exhausted. There it is, a section which runs over 3½ pages of the Finance Bill. Was it the brain child of anyone in the Department of Finance. Not at all. Or of the Revenue Commissioners? Not at all. It comes, unbaptised, if you like, straight from the British Statute Book, from the British Finance Act of 1927. Section 55 of that Finance Act is taken out of the British Statute Book, given a coat of green and called section 28 of the Finance Bill, 1965.

That would be all right if the British section were a good section. The trouble is that it was not. It has been the subject of much judicial comment in its 38 years of existence. The British courts have dealt with it. Judges have said that they cannot understand its language. The Commissioners for Inland Revenue in Britain are so troubled about it that they are very careful about operating it. Its defects are many. One of them is that it refers to 90 per cent of the issued share capital of the company and, of course, most, if not all, take-overs relate to shares of a particular class, usually the ordinary shares of the company, and when a take-over bid is proposed which relates merely to the ordinary shareholders and does not relate to the preferential or other shareholders, then, in fact, the proposal is outside section 28 and the stamp duty relief there does not apply.

This defect has been well known over the past 38 years in England but nobody told the Department of Finance or the Revenue Commissioners about it and in they come. This Department, which the Taoiseach told us, like all other Departments, were going to become an economic development corporation, when they want to deal with a suggestion from the National Industrial Economic Council, go to the British Statute Book, blow off the dust, look up the marginal notes and say: "Ha, ha; section 55 of that Act will do fine". So, they ask us here to legislate the British mistakes in our Statute Book.

Again, a well-known defect in the British provision is that it does not apply, and has been held not to apply, where the take-over has been made by a company which is an existing shareholder, as frequently the situation demands and as frequently take-overs arise. In England it has been held that such a proposal is outside the section, but, again, the Minister in his proposal legislates in the same way so that there will have to be what in England there has to be if the exemption is to be given, an ad hoc specially formed company to deal with the situation.

Again, in England it has been found as a defect that this section does not deal with or cover bids made in cash or acquisition for cash. It deals only with a share exchange. Again, here in this section we have the same thing repeated by the Minister.

The crowning insult in the Minister's proposal, if I may make so bold as to use so extravagant a term, is the fact that nobody, apparently, told the Department of Finance about the Companies Act of 1963 passed by this House. So intent were they on copying what the English did, taking an English section, dressing it in green and having it introduced here, that they referred to 90 per cent of the issued share capital. That is what the English Companies Act provides. But we passed an Act here, you know, called the Companies Act, 1963, which is only two years ago, which provides for take-overs at 80 per cent.

Somebody has blundered and I would suggest to the Minister that this section be taken back and torn up and a suitable section brought in which will provide for a take-over at 80 per cent of the shares of a particular class. I hope that we will not have a repetition of further borrowings from the English or, if we do, I hope we will borrow at a better rate of interest than that particular one.

May I refer to one other thing in relation to the taxation proposals? There is a section in relation to the portion of the Bill dealing with the turnover tax under which the Minister proposes to change the law with regard to the application of the turnover tax in relation to farmers and fishermen. In the way it is done, in sections 34 and 35, it is not easy for Deputies to see what exactly is being done. It might be helpful if I reminded Deputies that under the Finance Act, 1963, there is in the First Schedule a list of activities exempted from turnover tax. One of these activities is : sales by farmers and fishermen of their own produce otherwise than in connection with the carrying on of a business of a shop or similar retail business. In other words, as the law now stands, any farmer or fisherman who sells his own produce, not as a shopkeeper, is exempted from turnover tax. Now, under section 35 of this Bill, that exemption is being changed so that the provision will now read, if this Bill is passed, that the exempted activities in relation to farmers and fishermen will be : sales by farmers and fishermen of their own produce other than retail sales.

In other words, from this on, any time a farmer or a fisherman sells directly to a member of the public who wants to buy from him, that sale may attract turnover tax. There is the provision that he has an exemption limit up to £150 but it is well that Deputies should appreciate that in this proposal we see the first beginning of the extension of the turnover tax. The Minister's predecessor, in 1963, when his head was bloodied but unbowed in defending the turnover tax, said that they would never tax the farmer or the fisherman. Not at all. Now the little toe of the Revenue Commissioners is in the jamb of the door and this is the beginning of the extension of the turnover tax. As long as Deputies know and appreciate that, then it is all right.

I wish to say a word or two about a speech the Minister made yesterday as reported in the newspapers this morning. I am quoting from the Irish Times of today's date. The Minister spoke at a Fianna Fáil luncheon in Dublin yesterday and he had many things to say about death duties. He compared the duty levels here and in Britain, and proceeded to indicate, not impliedly but expressly, that our duty levels were lower and that it was more attractive to die in Ireland than elsewhere. He said:

Our duty levels off at £100,000, the rate being 40 per cent. In Britain the rate of 40 per cent applies to estates exceeding £60,000 in value and continues to rise to a maximum rate of 80 per cent, i.e. twice our maximum rate, in the case of estates exceeding £1 million in value. The gap between our rate and the British rate, however, becomes quite significant at a much lower level than £1 million. The British rate is 60 per cent on estates exceeding £200,000 value, 65 per cent on estates exceeding £300,000 in value and so on.

He goes on to say that Irish rates of death duty were not unduly high. I am going to suggest that the Minister spoke either without being properly advised or, I regret to say, without having taken fully into his confidence the people at the Cairde Fáil luncheon. An Irish farmer would have to have an estate of £750,000 before a lower rate of estate duty would be paid than is paid in the United Kingdom.

Mr. J. Lynch

Will the Deputy allow me to intervene in case the report has not fully covered what I said? I have not read the Irish Times report. I was dealing with the suggestion that death duties ought to be abolished altogether for the purpose of attracting people with big estates to this country.

Mr. T.F. O'Higgins

I appreciate that. I did not intend to convey otherwise. The Minister was dealing with that but one of the arguments he chose in favour of his view that death duties should be retained was that the rate of death duty and estate duty here was significantly lower than in England and that in relation to maximum rates, it was precisely half. That is not so, and as I have said, the Irish farmer would have to have an estate of £750,000 before the people he leaves behind him would pay a lower rate than is paid in England.

There is a reason for this in relation to England and Northern Ireland. First of all, in England there was a provision in the Finance Act of 1949 under which all estate duties were reduced by 45 per cent in relation to agricultural values. Then in the Finance Act of 1954, some few years later, a similar reduction was made in relation to industrial hereditaments and machinery and plant and there is now in operation in England a rated scale of duty called the agricultural and business scale which applies to every privately-owned business and shop and every farmer in the country. There is a special scale which is down by 45 per cent and—I hope I will not bore the House by quoting a few figures; I mention them in order to get them on the records of the House— in relation to the three areas with which we are concerned, the United Kingdom, Northern Ireland and the Republic, the position is : for estates exceeding £10,000 and not exceeding £12,500, in the United Kingdom, the rate is 3.3 per cent; in Northern Ireland, it is five per cent; in the Republic it is six per cent. Between £12,500 and £15,000, in the United Kingdom it is 4.4 per cent; in Northern Ireland, six per cent; and in the Republic, eight per cent. Between £15,000 and £17,500, in the United Kingdom, it is 5.5 per cent; in Northern Ireland, seven per cent; in the Republic, ten per cent. Between £17,500 and £20,000, in the United Kingdom, it is 6.6 per cent; in Northern Ireland eight per cent; in the Republic, 12 per cent. Between £20,000 and £25,000, in the United Kingdom, it is 8.25 per cent; in Northern Ireland, ten per cent; in the Republic, 14 per cent, and so on up the scale. The position is that there is in many cases twice the duty imposed in respect of the estate of a farmer or businessman here.

In those circumstances, is it telling the full story for the Minister to say that our duty levels here are attractive compared with English levels and that, compared with the English rate, our duty rate is lower? I could follow these scales right through but the estate of a farmer or businessman would have to be worth £750,000 before a lower rate of duty would be paid than is paid in England.

When talking about duty in that context, I am talking only about estate duty because in both England and Northern Ireland, legacy duty and succession duty were abolished some years ago. They no longer apply there. We retain legacy duty and succession duty and we have, as I have indicated, estate duty at a much higher rate for agricultural and business property. Therefore, we shall have to take a new look at this problem.

May I end as I started—I apologise to the House for speaking at such great length—by saying we are now in a situation in which we have a balance of payments difficulty and a credit shortage? We have retained outmoded death duties, legacy duties and succession duty. Estate duty is at a significantly higher rate than in Northern Ireland or in England. In those circumstances, how can we expect to retain movable foreign capital; more so, how can we expect to attract more? There need be no doubt about it that without any great cost to the Exchequer, we could attract more if there were a more imaginative approach in this Bill. If more regard had been had to the state of the economy, I believe a worthwhile Bill could have been introduced which could meet the present situation as a challenge and do something constructive and dynamic to turn our present difficulties into a situation of advantage to the country.

I regret that this Bill appears to be nothing more than an exercise in the power of bureaucracy to tighten its grip on the taxpayer, to close holes that do not exist, that do not really matter one way or the other. In order to achieve that little bit of gain over the taxpayer, harm may be done to the image of the country and to the economy of the country generally. That is what the proposals in this measure seem to involve. We, in Fine Gael, recognise that there has got to be a Finance Act. We would wish it were a better one. We would wish it to contain other provisions. We will not oppose the Second Reading but we shall endeavour to the best of our ability to deal on Committee Stage with the broad aspects of the Bill, to suggest changes and to put forward amendments in the hope that we will improve the Bill. It would come much better, however, if the Minister would withdraw the Bill now and bring in a new Bill.

Mr. Corish

In case anyone might think I am giving scanty treatment to the Bill, to the Minister's remarks and to those of Deputy T.F. O'Higgins, I want to say at the outset that I must, of necessity, be brief. This Bill will give effect to the Budget proposals. We have always regarded the Budget as the instrument to be used for the shaping and improving of our economy. If we are to judge the Budget and the proposals in this Finance Bill in that light, we cannot truthfully say that either are manifestly successful.

As a matter of fact, my main criticism of this Finance Bill, or any Finance Bill for that matter, is focussed on what appears to the ordinary layman to be the unintelligible jargon in which various sections are cast. I am sure this is not done deliberately, but please have been made here from time to time to draft bills, particularly the Finance Bill, in language that can be quickly and readily understood. Without criticising those responsible for drafting this measure, I venture to suggest that there is very little in it that can be absorbed and understood by Deputies in whose hands it has been, in my case at any rate, since only last Saturday afternoon. To assume that it can be studied and discussed by one's Party in a matter of two days is, I think, asking too much. What the urgency is in having it discussed within two days of its receipt by Deputies I just do not know.

Our particular concern in these proposals and in the Budget lies in the big taxation provisions. In the case of spirits, ales, beers, petrol and wine, taxation is imposed. The House is acquainted, I think, with our views. In other years, we objected to increases of this kind because, as we explained, the revenue derived was not devoted, in our opinion, to deserving sections of the community. It was acting on that principle that we behaved as we did in relation to this year's Budget, giving the Government our full support in the proposals to increase taxation on the commodities I have mentioned. It is, of course, a fact that these increases will cause a further increase in the cost of living. We are satisfied, however, that they are acceptable to the community because the taxation collected will go in a bigger proportion than ever before to recipients of social welfare.

This is, however, yet another increase in indirect taxation and our view is that the emphasis should be on direct taxation. Possibly the Minister and the Government are working on the principle now that the worker who could not afford these increases two years ago can afford them now because of the increase of 12 per cent generally in wages and salaries. But the increase in the cost of living will once more eat into this 12 per cent. Indeed, it has already done so over the past 12 months. That will certainly provide a problem not alone with regard to prices but also with regard to wages and salaries.

May I reiterate now what I said on the Budget? The argument of the Minister's predecessor when he introduced the turnover tax was that taxation on drink, petrol and tobacco had reached saturation point. That was two short years ago. It seems now that the new Minister has changed his mind. There is a change in Government policy. Once more there is a reversion to the old hardy annuals when it comes to collecting more money from the taxpayer. We wonder whether or not the former Minister for Finance was wrong when he made the declaration he made in the Budget of 1963. In any case we now have both. We have an increase in tax on the commodities I mentioned and we still have the turnover tax.

As far as the turnover tax is concerned, we still maintain our view. It is true the Government are getting anything up to £15 or £16 million per year from the turnover tax. We cannot see the moral justification for the continued imposition of that tax on essential foodstuffs and essential clothing. I have an idea—I think it is a view held by many Deputies—that, if it were not for the intervention of the general election on 7th April, the Government might have chanced their arm and thrown another few per cent on the turnover tax which, incidentally, would be bitterly opposed by the Labour Party.

The House will appreciate, I think, that the Minister and the Government must take responsibility for the contribution, if one can use such a generous term, made by the turnover tax to increasing the cost of living. It has done that to a very marked degree. It has done damage to the economy, damage which could rebound and which may rebound on the economy in the not too distant future.

There is another change in this Bill in regard to the turnover tax. It will not have a very widespread effect. In one case it seeks to embrace yet another section of the community and, in another case, it seeks to lessen the impact of the turnover tax. I refer to those who sell their own agricultural produce.

There has been a good deal of talk about death duties and about taxation generally. The Minister can be assured that, when it comes to the collection of taxation, which in this case is direct taxation, generally speaking, he will have the support of the Labour Party. We may have a difference of opinion in respect of some details and in the application of some of the proposals in this Bill, but, generally speaking, we will support the Minister, as we did two years ago approximately when he introduced measures to ensure that there would be less evasion of the payment of income tax and other direct taxation. There is a section of the community paying to the full their share of income tax. I refer to those who contribute under PAYE—the builders' labourer, the plasterer, the mason, the farm labourer, the salary earner and the wage earner. All these have contributed because their employers return their income and the tax is deducted at source. Therefore, as far as we are concerned, any proposals to ensure less evasion in future will have our support.

There must be a considerable amount taken in income tax by way of PAYE. I would like to ask the Minister if he would consider making some change in the allowances. They have obtained now for many years. In view of the change in the value of money, I believe the Minister should make a case to the Government for a change in these allowances. I know this would cost a sizeable figure. Up to this we have had no indication of what it would cost. Perhaps, when replying, the Minister would indicate what it would cost to increase these allowances.

I would like to make a particular plea for an increase in the exemption limit for income tax. At present it is £6 per week. It is rather unfair in a society such as ours that a person in the wage bracket between £6 and £8 a week should be required to pay income tax. I appreciate they are single people, but it seems unjust that an agricultural worker, in many cases earning between £7 and £8 a week, and female workers, should be required to pay direct taxation on their income. I am informed that a concession in that respect would not cost a great deal and that there would not be a great loss to the Revenue if the limit were raised to £8 per week. To put it broadly, if there was a loss to be made up, there are those in the country who could afford to pay more by way of direct taxation, particularly those in the sur-tax group.

The main discussion so far has been on Resolution No. 18, coincidentally enough section 18 in the Bill. As far as the Labour Party are concerned, we are not in favour of the abolition of death duties. The details to be worked out are matters to be considered on Committee Stage. We found objectionable the original proposals of the Minister for Finance when he introduced his Budget six weeks ago. The changes made are welcome. They will not suit everybody, but they appear to us in the Labour Party to be more fair than the original proposals.

I believe also that the steps the Minister is taking in the sections subsequent to section 18 can generally be applauded and supported. These are proposals to ensure there will be a minimum amount of evasion as far as the payment of this type of tax is concerned. We took strong exception to the powers the Minister proposed to give the Revenue Commissioners in the decision they had to make as to whether or not transfers were made legally or illegally.

There is only one other point I want to raise. Again, I cannot do it in great detail. It concerns the income tax position of co-operatives. In 1963, the then Minister for Finance, Dr. Ryan, brought to an end the traditional exemption from income tax of co-operatives, but he continued it in the case of agricultural and fishery co-operatives. Many of us agreed with him that there was a lot of abuse in the type of co-operatives established and the claims they made. I do not think it is right that genuine co-operatives should have been penalised because some people did not behave as they ought.

The present Minister, when Minister for Industry and Commerce, established in 1957 a Committee to report on co-operative societies. They made a strong recommendation to the Government that two classes of co-operatives be scheduled: the co-operative society as we know it and the friendly societies. In their report, they made recommendations which were not accepted by the former Minister and which the present Minister gives no indication of accepting. They state at page 41 of the report:

The present position is satisfactory in so far as genuine co-operatives are concerned. There is, however, a probability of abuse by societies which, though holding themselves out as co-operatives, do not observe true co-operative principles in their activities. This situation could lead to the withdrawal of the tax privilege from all societies, including genuine co-operatives. The arrangements which we recommend for restricting the use of the term "co-operative" to genuine co-operative societies would provide the means of eliminating these tax abuses. While having regard to the recommendations in the Fifth Report of the Commission on Income Taxation and to the intentions of the Government as indicated in the Second White Paper on Direct Taxation laid before the Oireachtas in April, 1963, and in the Financial Statement of the Minister for Finance when introducing the Budget, 1963, we feel generally that the current tax exemption should be preserved for genuine co-operative societies.

Last year I had occasion to ask the then Minister if he would include an industrial co-operative venture, in printing, I think. He promised to consider it for the Budget of 1965. Of course, he did not deal with that Budget. I would like the present Minister to indicate to the House whether he and his officials have given consideration to the proposal I made last year in respect of that particular co-operative society and, if so, what decision was come to.

We regard the Budget as a financial instrument to shape the economy of the country. The economy means a number of things to us. It means the provision of employment and the reduction of unemployment and emigration. As we pointed out on the Budget, so far as the objectives of the First and Second Programmes are concerned, they have not been achieved if we have regard to the record from year to year. Because we have not provided the number of jobs envisaged in the Second Programme, it means that between now and 1970, if we are to attain our target, we must provide 15,000 jobs per year. I do not think we are capable of that.

According to the Second Programme also, we are to reduce our emigration figures to 10,000 by 1970. In the past few years, the emigration rate has increased slightly. This is a bad trend which must be arrested by measures which the Government can take. Any Deputies who receive the weekly report on unemployment know there has been no reduction in comparison with similar periods in 1964 and 1963. Therefore, if we are to make any advance in respect of these three matters, much more is needed than what is contained either in the Budget or in this Finance Bill.

Mr. Cosgrave

Deputy T.F. O'Higgins has reviewed this measure in great detail and adverted to a number of clauses in it to which we object and which will require amendment on Committee Stage. As was stated by him and by Deputy Corish, the Finance Bill is necessary to give legislative effect to the Budget proposals and to give statutory effect to the various taxes which are required in order to meet the revenue which is announced in the Budget as well as in the Estimates as directed for particular items of expenditure. So far as these legislative proposals are concerned, we do not propose on this Stage to oppose the Bill but, with the exception of these necessary proposals, this Bill is negative and offers no stimuli to the needs of the economy. No incentives are provided for agriculture or industry. No encouragement is given to making the necessary expansion which is essential.

One of the matters which have been the subject of very considerable comment and a cause of concern among the community generally in recent months, certainly in recent weeks, has been the very rapid restriction in credit facilities. I know it can be argued, and that the actual bank advances will indicate, rather than any drop in credit facilities, comparing one period with another, that there is a continued expansion but that is to ignore the realities of the situation or merely to take the statistics without examining what is necessary.

In recent months and, as I say, in particular over the past few weeks, persons who have had overdraft facilities—business persons, farmers and, of course, the other category on which very considerable discussion has centred in this House in the past few weeks, those interested in building houses, either builders or persons wishing to purchase them themselves—have all felt the effects of this credit squeeze. When I say that they have felt it in this way, one has to analyse and examine what has happened.

Very many people—business people, farmers—had undertaken certain commitments on the basis of agreed overdraft terms. They had made individual arrangements with their bank managers and, on these understandings, had entered into certain commitments. They have now found, as a result apparently of a general direction—I gathered yesterday from the Minister for Finance that it is not a direction from the Central Bank but is apparently agreed policy operated by the associated banks—that, at short notice, these credit facilities which were previously indicated as available to individual businessmen and farmers and other persons requiring credit would have to be reduced. That has meant very considerable dislocation and problems for business people and individual farmers. Some of them are able to make alternative arrangements or have been in a position to get some alternative accommodation, but in a number of cases those who were granted these facilities and who had planned on that basis and assumption now find that no alternative credit facilities are available to them.

I disagree with the view expressed here today by the Minister for Agriculture that, so far as he is aware, credit facilities are available for productive purposes because I know, in relation to credit facilities which individual farmers negotiated with their bank managers, that having found them restrictive, or having been directed or requested by the bank manager to reduce them, they then sought accommodation from the Agricultural Credit Corporation and, there again, in a number of cases, credit facilities have not been forthcoming. That inevitably means dislocation, delay, confusion and in many cases considerable financial problems for the farmers or the business persons concerned.

I have consistently urged, so far as the building programme is concerned, that if there is to be a rational approach to the problem here, there must be, either under the aegis of the Building Advisory Council or after consultation with the Department of Local Government who have available the plans of the local authorities and the Building Advisory Council, some agreed programme on a defined period ahead so that builders and individual applicants for housing loans may know what the circumstances will be. It is bad enough for individual applicants to find that they cannot get credit facilities. It is difficult enough for builders to plan ahead when they find they are not able to get the necessary credit with which to conduct their particular operation. However, having got these arrangements ironed out and sanctioned, they still find that, because of the intervention of this credit squeeze, their operations are slowed down.

We recognise that the credit squeeze is to some extent affected by conditions in England but it has come here with a familiar rapidity over a great number of years. It has now established not merely in Britain but in this country a melancholy pattern so far as a great many businesses and builders in particular are concerned, to the detriment, I believe, of the long-term needs of the country as well as to the needs of the individuals concerned, with consequent dislocation of individual seeking of credit, for both agriculture and industry as well as for housing. If a predetermined programme were arranged and if it were understood that, within that programme, each year, over a three- or five-year period, adequate credit facilities would be made available, that there would be no abrupt termination to these arrangements and that the position would proceed without the intervention of what have come to be described and known as the Stop-Go policies, then people could plan ahead and the building programme in general could proceed on an orderly basis, to the advantage not only of builders and of those wishing to purchase houses but of the economy as well.

Nothing is more conducive to stable conditions, or to the ordered progress of a building programme, or the interests of those employed in it than a stable rate, rather than a position in which we are working at a considerably accelerated pressure at a particular time and then finding for a period that a recession occurs with consequent dislocation, consequent possible unemployment. We therefore believe the taxation policy should as far as possible encourage enterprise and stimulate and encourage investment, and not discourage it. The proposals in this measure do not offer any incentives to encourage the expansion of either industry or agriculture, or the ordered expansion of the reconstruction programme.

The general significant increase in the cost of living has been the subject of considerable comment not merely here but elsewhere in recent months and the Economic Statistics published with the Budget adverted to this matter on page 16. It stated that the consumer price index in November, 1964, was 25.8 per cent above the 1957 average, the wholesale price index increased by 17.2 per cent over the period, while the import price index increased by only 0.4 per cent. Thus, the price changes in this country over that period were not caused by rises in the price of imports but by internal factors.

At the time of the introduction of the turnover tax we expressed the view that that tax was badly conceived, that its consequences would react unfavourably on the economy. We also made it quite clear that, because of its complex nature, once that tax was introduced into the economy, it would be impossible to repeal it because any attempt at repeal would be an operation comparable with trying to unscramble an egg.

When the turnover tax was introduced, the then Minister for Finance and the Government based their support for it on assertions that the traditional sources of revenue would not yield in the future sufficient income to pay for the necessary public services, and some people were probably impressed by that argument. We have now had two Budgets subsequent to the 1963 introduction of the turnover tax. In both years, the traditional sources of revenue have been increased. They were increased on a substantial scale in the recent Budget. They have been found to be capable of yielding, not in one year but in each of two years, substantial additional revenue. The aftermath of the turnover tax is still with us as well and the effects of that tax have now snowballed to such an extent that even those who believed the tax would have certain compensatory advantages have begun to think otherwise.

It is a fact that a great many sections of the community received no compensation comparable with the rises in the costs of commodities affected by the turnover tax. Within a short time of the introduction of that tax, there was the ninth round increase in wages and salaries, the benefit of a 12 per cent increase to those categories who came under the ninth round. It was announced at that time that there was an agreed arrangement for a two to two and a half year term during which those income increases would be operative without any changes in the wage or salary structure. Those who benefited under the ninth round found that the increases were appropriated by rises in the cost of living. This is referred to in Economic Statistics which state:

In considering the full effects of the ninth round on consumer prices, however, one must take into account as well the effects on prices of the taxation of commodities occasioned by the necessity to increase the revenue of public authorities... It is not, of course, possible to earmark certain taxes to particular expenditure so that the overall effect of the ninth round cannot be determined.

In a reply given by the Parliamentary Secretary to the Taoiseach last week it was stated that the consumer price index for mid-May has increased in 1965 compared with mid-May, 1964. The figure now stands at 180.

If one examines the individual items —it is a very exhaustive list which I do not propose at this stage to read—one finds there has been a fantastic rise in the price of a whole range of commodities during the past 12 months. Beef has increased by 14.54 per cent, potatoes by 89 per cent—it is true that there are seasonal variations in that respect —mutton increased by ten per cent, eggs by 11 per cent, men's suits by five per cent, an overcoat by three per cent and increases in the price of children's clothing varied from 7.8 to 5.3 per cent. All these essential articles either of food or clothing have risen steeply in price and when one considers the effect of these on the family income, on the budget of households, one must conclude they are obviously the effect of the turnover tax having full play on the economy.

In common with others, we have expressed the great concern which individuals, particularly those on pensions or fixed incomes and retired personnel, feel at this steep rise in prices. I have never held the view that price control in an economy such as ours can be effective. It may be, to a limited extent, during a period of emergency or war when a whole range of controls can be made operative, when goods of various kinds can be brought under State control or direction. There is now a general belief that the Government have been far too complacent about the operations of the Prices Act, that while a great many prices have been properly and legitimately increased—these increases are due to a wide range of factors, the effects in some cases of the turnover tax or in others of wage rises resultant on the turnover tax—by and large the increases that have been put into effect have exceeded those justified under particular price arrangements, taking into account increases in wages and consequent increases in transport and other services, the effects on the budgets of local authorities due to the increased cost of certain goods and services.

It is therefore important for the Government to examine this situation afresh to see whether some general study of price levels should not be undertaken by the Prices Section of the Department of Industry and Commerce with a view to effecting certain reductions in the sense that it would be improper to hold out the hope that reductions could be effected, but to ensure that people do not increase prices beyond what is justifiable, that prices are not increased beyond a fair and reasonable figure, taking into account the cost of raw materials, transport charges, wages, salaries and so forth, all the recognised ingredients which go to make up the prices of commodities. I believe the time may well have arrived for the adoption of a procedure similar to that operated in some continental countries. Under this procedure, traders and trade organisations are required to justify, or indicate in advance, the proposed price levels and if these are exceeded, to justify before the appropriate section of a department, or a tribunal, the reasons for the increases.

In addition to the particular matters to which I have referred, the effect of Government increases has also been notable in the case of the telephone service and postal services. Last year postal charges increased by 17 per cent and charges for the telephone service by 14.29 per cent. The cost of education also increased and again this, in some cases, was consequential on the turnover tax. On a previous occasion, I referred to a school adjacent to this city in which the monthly budget, for about 250 students, had increased by £1,500 as a result of the tax. Education costs last year increased by 15.99 per cent, or nearly 16 per cent. In addition, rents increased by 5.48 per cent and rates on owner-occupied dwellings by 9.7 per cent and repairs and other incidentals by 2.75 per cent.

I believe that that situation has resulted to a considerable extent from the snowball effects of the turnover tax which were far greater than those initially contemplated. We have made it clear that the possibility of effecting any reductions in that regard at the moment does not appear very hopeful. This Bill offers no incentives for the purpose of stimulating the economy. While, as Deputy O'Higgins remarked, it may not be feasible to make further tax concessions comparable with those introduced by Deputy Sweetman in 1956, they have been recognised not merely in industry and by exporters but by impartial commentators as the greatest single technical factor in expanding exports.

The position has now been reached where we will have to review our whole trading position in the light of present trade returns. Recently we saw the figures for the five months ending May 31st and while it would be unrealistic to take a half-year period in a matter of this kind—it is better to take the 12 months period—the figures for the first five months of this year, compared with the same period last year, show an increase in the import excess of over £25 million. This situation has to be considered in the light of the present export figure. There is a view that the high exports of cattle last year which have tapered off this year may have had an effect. Because of higher exports last year, the number available for export this year is lower and while there are indications that the number of younger cattle in the country is up, a great many of these will not be saleable either in this calendar year or possibly in the current financial year. In addition to that, we have to face keen competition from continental countries as well as from Britain and in that situation the present trade outlook appears to be unsatisfactory.

I had hoped to hear from the Minister—possibly before he concludes he will give us some indication— how the present trade negotiations with Britain are proceeding. From replies given earlier, the indications were that discussions at official level had more or less concluded and it was expected that there would be a continuation of the discussions at ministerial level at a later stage. We recognise that these discussions are of a complex and technical character and a great many of them are such that they cannot be rushed or speeded up unduly. However, there is far too much suggestion in the Government's attitude that conditions are reasonably satisfactory. They have a complacent attitude to the problems of the economy generally but the sense of urgency which is essential if progress is to be made must also apply to matters such as trade negotiations. In regard to the present negotiations with Britain, we are anxious to hear what developments have taken place and what prospects there are for either a new or a revised agreement.

In that connection we have to recognise that most of our agreements with continental countries have been in operation since the end of the war and some of them have been in operation without alteration for ten years or so. The time has arrived when there must be a fresh look at, and a reconsideration of, the terms of these agreements, if we are to get the consequential trading advantages which we need if we are to compete in other European countries as well as on the British market. In view of the present confusion about the future of the European Economic Community and of EFTA, and the discussions proceeding between these two organisations, it is imperative that we should endeavour to be fully informed on them and, if possible, associate with them, so that no decisions will be taken which will affect or in any way interfere with our existing trading rights. If it is possible, we should benefit from any improved multilateral arrangements that may be made.

The sections of this Bill which have given rise to the greatest criticisms are those sections dealing with death duties. One of the difficulties in the death duty code is that in many respects it is unfair in its operation and inequitable in its effects. No one can justify a system whereby people can avoid tax and thus cause others, who are not in a position to make these arrangements, to pay more, but what we want to do here is ensure that our system of taxation is fair and equitable and that it so operates as to be an incentive and to encourage thrift.

One of the advantages which this country held out in the past, and which was used as a method to attract people of wealth, was that our tax system and taxation rates were generally more favourable than those in other countries in close proximity to us. That situation has now changed and I do not wish to weary the House by repeating the very exhaustive examples which Deputy O'Higgins has given but undoubtedly it is to the nation's advantage to attract persons of wealth. None of us is interested in enabling wealthy people to avoid paying their just share of the tax burden but it has long been accepted as agreed national policy that not merely do we want to attract persons of wealth but we also want to attract in many cases the know-how and skill which wealth can command abroad or can bring here.

It is frequently difficult to discuss matters of this kind without referring to individuals and one does not like in this House to refer to individuals by name but I think there is universal recognition and approbation of the fact that there was attracted, not merely to Dublin city but to this country generally, a man such as Chester Beatty, who has been made an honorary citizen and, I believe, the only one. That was done because there was general recognition that not merely had he brought here his great library and other artistic treasures but had also initiated here through business connections certain explanatory work and that he had invested here because he was convinced this country offered opportunities to him and those like him that were not available elsewhere. People like him come and give employment, perhaps start industries, bring treasures they have, possibly because they feel they are more secure here than elsewhere, and for some of them the pace of life is more leisurely and, certainly, up to now the incidence of taxation was lighter than elsewhere.

The fact that those people come in no way means that Irish people will have to pay higher taxes. If we can attract more of them, the effect on the national Budget must inevitably be since they pay their share, that there is a possibility that by attracting such people here, the share of taxation for the average citizen might be lessened. The policy certainly would not operate the other way.

The position has now been reached because of the proposals in this Bill that we may deter people from coming here. I believe the parts that are objectionable, commencing with section 18, and the retrospective effect in them, as well as the proposal to impose death duties, which will in future operate here at a higher rate than those operating in Northern Ireland or in Britain may act as deterrents. Reference was made earlier to the fact that because of the somewhat similar procedure put into operation in Britain last year, a number of very wealthy citizens there decided to leave the country. That is a matter for them and we can only look after ourselves, but it is obvious that what has happened there may well deter people from coming here. There is not here a great number of wealthy people, certainly not a great number of very wealthy Irish people, and it is unlikely that this will ever operate to drive those who have accumulated some wealth to leaving the country. But we should make it attractive for others to come here.

The position is that under the scale of estate duty which will now operate as a result of this Bill, there are only two cases, I think, in the table of rates I have here, in which the rate in Northern Ireland is equal to the rate which will operate here and as the estates go up—Deputy O'Higgins gave the lower ones—we find that on estates between £50,000 and £55,000 in Britain, agricultural and business scale, the rate of duty is 19.25. In Northern Ireland, it is 27; in the Republic, it is 30. For estates of £55,000-£60,000, on the United Kingdom agricultural and industrial scale, the rate is 19.25; Northern Ireland, 30; and here, 30. For estates from £60,000 to £65,000, the UK rate is 22; Northern Ireland, 30; and here, 33. For estates from £65,000 to £75,000, the UK rate is 22; Northern Ireland, 33; and here, 33. For estates between £75,000 and £85,000, the respective rates are 24.75, 36 and 37. Therefore, I think with two exceptions, the rate of duty will be less favourable here than in either Britain or the North, where there is no succession rate.

I believe this is contrary to the policy expressed some time ago by the Minister's predecessor, Dr. Ryan, when he said—I think it was in 1961—that there should be a relaxation of death duties and that he was reducing the rates applicable to estates in excess of £1,000. It was understood that it was to be an experiment. Now, although the rates are not being increased, the procedure will be tightened up and it seems to be contradictory of that policy laid down by the Minister's predecessor.

The other effect of this is adverse and reacts on what has been dealt with earlier. The great need in our economy at present is for more capital and more know-how. There is at present operating a very strict credit squeeze. This particular proposal and those which are being operated under the revised death duty procedure will make cash and credit less likely to come here and the prospects of expansion are less likely when penal or heavy death duties are operating on those who might give us the benefit of their know-how as well as provide finance.

The great objection to section 18 and the subsequent sections is the proposal to make them retrospective as well as the proposal to alter the period from three to five years in the death duty provision covering a settlement made prior to death. In a recent reply, the Minister indicated that, so far as statistics were available, they had no information on what increased revenue was likely to accrue from this proposal. If there is no increase, or if it is not significant, there does not seem to be any justification for it. As far as I can gather from the Minister's reply, the only reason for this proposal was that a similar change was being made in Britain.

One of the very strong criticisms I read in recent accounts of the discussions in the House of Commons on the Finance Bill—and if it applies there, it certainly applies to a far greater extent here—was of the effect this will have on small businesses. The criticism that was made on the Committee Stage in the House of Commons was that in certain parts of Britain a great number of small businesses and family businesses, in order to ensure the satisfactory continuation of the business after the present proprietor or owner, whether the father or one of the directors, dies, have to make some arrangement whereby taxation will not penalise the business or cause serious dislocation.

There was very strong criticism of this proposal because of the number of small businesses in Britain. If that is true in Britain, it is not difficult to imagine how much more true it is of this country and how much greater the effect of this will be in interfering with the reasonable and legitimate arrangements which people have been obliged to make.

Therefore, we should ensure that the provision of three years is allowed to continue. If the changes are made, this measure should operate only from the date of the Budget and should not have any retrospection in it. When a similar change was made in 1909 or 1910 in the British Finance Act of the particular year, there was, as far as I know, no retrospection. I do not believe there is any justification for retrospection in this case. As the section if drafted, there is no justification for the change from three years to five years.

Reference has also been made to the effect of the proposed change in section 20 and section 23. Deputy O'Higgins referred to this. So will others who will speak. Deputy Sweetman is probably much more familiar with the technicalities of it than I am. There is no doubt that this proposal is a very radical change from the position which has obtained up to the present.

The other section to which reference was made is section 42. Here, again, the retrospective element is objectionable. If certain steps were taken to avoid taxation or if there were what one might describe as a racket in the particular abuses which section 42 sets out to correct, one could sympathise with some remedial action being taken but, certainly, people are entitled to know in advance if the law as set out will continue to be the law. Whatever arrangements are made should not subsequently be altered by retrospective legislation. There has always been strong objection to retrospective legislation in any form in a matter of this sort. Retrospective legislation has been criticised from all sides of the House in the past. I do not believe there is any strong justification for retrospection in the present case.

The other defect in this Bill is that there are no increased income tax allowances for children or dependent relatives. Undoubtedly, the present allowances, which have remained unchanged for a great number of years, are no longer adequate to compensate for the drop in the value of money. The changes which were made eight or ten years ago, with only slight variation since, are no longer adequate to meet the needs of families. So far as children and dependent relatives are concerned, the allowances ought to be increased.

It is obvious that with the present high cost of hospital treatment, medical treatment and medicines and the incidental expenses involved in hospital and medical treatment, some relief should be allowed for such expenses. That matter has been discussed here in relation to previous Finance Bills over a number of years and amendments were moved to provide for allowance for these expenses. The substantial increases in costs which have arisen recently would justify the inclusion of a provision allowing for them in the present measure.

We intend on Committee Stage to move amendments to provide for the various changes which have been mentioned here and which we consider are desirable for the proper application of the death duty code as well as for the other changes necessary to grant allowances in respect of income tax.

Reference has been made in this debate and during the debate on the Budget to the investigation which the NIEC have been making. Certain recommendations were made in their report published at the time of the Budget. I notice from a recent announcement that the position was being further reviewed by the NIEC and that it was proposed to make further recommendations in the light of the credit squeeze. We are now half way through the present year and here again we want to inject some sense of urgency as to the need to deal with the problems which affect the economy. We must get from the Government rapid decisions in regard to adequate finance for housing, measures to cut out the technicalities or delays that are impeding people from proceeding with their work, to ensure that farmers and businessmen have sufficient credit, to ensure that, at least, they are allowed to proceed on the basis that whatever arrangements were made earlier will be honoured.

If a change has to be made and if credit is not as readily available as it was up to recent months, there is an obligation and an onus on the Government to explain what has caused the sudden retraction and at least to give to those concerned, business organisations and housing and other organisations, adequate notice. A clear indication must be given that whatever work has been contracted for or agreed to, either by individuals or by organisations, will be allowed to proceed and that the changes which may be necessary in the future will be announced sufficiently long in advance for people to plan on a reasonable basis, in the knowledge that the work they have undertaken and the programmes they have laid down may be proceeded with without interruption and without the stop-go effects which have been detrimental not merely in this country but elsewhere in recent years.

In a recent article by Mr. Patrick Lynch in Studies, he adverted to the changes which may be necessary in this country in the immediate future and to the fact that certain substantial changes will be required in the approach of the Government and of Government Departments to the problems which affect the country. He expressed the view that the rigidity in behaviour and the attitudes which have operated in the approach to problems in the past can have no place in the future and particularly in the Ireland of the 1970s. That article was a careful and penetrating analysis of many of the problems which affect the country. It should be studied with care, not merely by the Minister but by the Government. There should be a general directive to all concerned that the rate of progress and development must be stimulated and encouraged and that no out-of-date approaches can be allowed to interfere with the expansion which is essential if we are not merely to provide increased employment but to maintain the existing employment, not to mention the existing services and facilities which are essential for a reasonable standard of living in the years that lie ahead.

Mr. Booth

I agree with the Minister that the Finance Bill is in many respects basically a Committee Stage Bill and, therefore, I do not want to go into too much detail on this Stage. However, there are some matters of principle to which I should properly refer now. Initially, I should like to deal with this question of death duties and with some remarks which the Minister made in introducing the Bill here this afternoon.

The Minister referred to Financial Resolution No. 18 which has caused such a furore not only in the newspapers but elsewhere. That resolution, 18 (c) in particular, is something which must not pass without comment. Resolution 18 (c) did not cover any item of Fianna Fáil policy but it did introduce an element which I regard as positively sinister, that is, an attempt to give absolute power to the Revenue Commissioners to assess tax and to impose tax with complete discretion and also with a considerable element of retrospection. That is intolerable.

Deputy Cosgrave, speaking a few moments ago, stated that in his view retrospection was something which was hard to justify. I would go much further than that. I would say retrospection is something which cannot be justified, ever, ever, ever, and the sooner we get this into the heads of the Revenue Commissioners, the better. I am fed up with these nibbling tactics which are exercised in various shapes and forms year after year. There is something very sinister in any suggestion that a final assessment should be at the discretion of the Revenue Commissioners, and it is worse that that discretion should be suggested as being based on their idea of what a man's intention was at a certain date unspecified. What makes it worse still is that it was suggested that the decision as to a man's intention should be made only after he was safely dead and buried.

It was not only the newspapers who raised a storm over that proposal. There are many Deputies, apart from myself, who were deluged with correspondence from professional organisations and from private individuals. To that extent, I am glad the powers which the Revenue Commissioners asked for have not been given. The price of freedom is eternal vigilance and we must keep our eyes open for these tactics which are being used against us by those who are supposed to be our servants but who wish to be our masters. That is something I will not stand for and there are many other people on all sides of the House who would support me on that. Once and for all, let it be clearly understood that taxation can be imposed only by the Oireachtas by clear and well defined legislation and that there must never be any element of retrospection.

Section 18 is a vast improvement on Resolution 18 (c) but there is still this element of retrospection. I do hope that the Minister, between now and Committee Stage, will give serious consideration to this element of retrospection which, in my view, must be eliminated from the Bill.

Mr. Sweetman

We shall give the Deputy a chance of voting.

Mr. Booth

The general provisions in section 18 to which the Minister referred are for the prevention of an avoidance of tax. I am sorry that the Minister still seems to confuse avoidance with evasion, and I do know that the Revenue Commissioners are continually confused on that point and still regard anyone who does not come into their net as being a potential criminal who is doing something illegal. Here again we must point out that as long as a person keeps within the law, he is acting properly and may not be criticised.

There is a famous decision in the courts of the United Kingdom by a very distinguished and learned judge who upheld that principle and stated that he wanted it to be clearly understood that a man had a perfect right so to order his affairs as to reduce or eliminate his liabilty to tax. He went on to say he would uphold that right in spite of the lack of appreciation by the Revenue Commissioners. That is something which must be appreciated here. If a man acts in a certain way which does not render him liable to tax, the Revenue Commissioners must not criticise him. This cat and mouse game of inventing ever more and more complicated taxation codes is a waste of time. It is because many of our taxation provisions are so penal that people have to go to the expense of taking legal advice to try to protect themselves.

I was disappointed in the Minister's speech when he appeared to think that avoidance of tax is wrong. It is not. One can avoid tax in many ways. If a person earns a fair amount of money, he can either spend it—in which case he will come under the turnover tax code and he will also contribute to customs and excise receipts—or, alternatively, he may put his money to work by investing it or saving it. It could be said that by failing to spend his money, a person is avoiding turnover tax, customs duties and excise duties, which in fact he is doing, but there is nothing illegal or improper in that. On the contrary, I think it is a very laudable thing to do. Revenue will come back on that. Anyone who avoids the tax net is, from their point of view, somebody to be pursued to the limit.

What concerns me even more is that, when the Minister was speaking, he referred to these general provisions in Resolution 18 and said that it had been decided that these would not be enacted this year. I know the Minister cannot commit himself too far in advance but I do not want him to get away with the idea that, if he does not do it this year, we will be nicer to him next year. He must never do that, and I hope he will not try. The only way in which taxation of any sort can be imposed is by clear, well-defined legislation. Let us have no more of this other business now or in the future.

I was sorry, too, that he attemped to bring in a sort of class distinction by criticising wealthy people seeking expert advice to enable them to avoid tax. That introduced a kind of class conflict, something quite foreign to the Minister's normal way of speaking and acting. I do not know who put that idea into his head.

Mr. J. Lynch

Give me some credit for something here, my boyo.

Mr. Booth

If that is the Minister's own thinking, I would not give him any credit for it.

Mr. J. Lynch

I do not mind whether the Deputy does or not.

Mr. T. Lynch

The Deputy was trying to be nice to the Minister.

Mr. Booth

If the Minister wishes to take the blame, well and good.

Mr. Sweetman

He should have been taking the blame all along.

Mr. Booth

Let us get back to the point with which I was dealing, with regard to wealthy people seeking advice to enable them to avoid tax. The only reason people do that is that the possession of any form of wealth is regarded by Revenue as being something rather wicked and something, therefore, which must be heavily taxed. If the death duty taxation code were not so penal, people would not have to go to the extent of seeking expert legal and accountancy advice in order to reduce their liability.

Mr. T. Lynch

Hear, hear.

Mr. Booth

It is precisely because the death duties are so high that people are left with no alternative. It is not just to say that the poor, honest working man does not go to the length of seeking expert advice because he is so much a better person than the rich man. The fact is that he does not need to do it because he will not get caught by death duties to any extent. The people who will be caught are those liable to 20, 30 or 40 per cent who virtually have no alternative except to allow their estates to be utterly devoured by death, succession, legacy duties and so on.

I agree with some of the Minister's comments in a speech he made yesterday in another place that death duties have a certain social significance. I am not in favour of the building up of large fortunes in the hands of a few private individuals. I am very much in favour of family fortunes, if you like, being distributed amongst the members of the family in good time. That is, I think, a far better social asset generally. We do not want to have just a small number of very old, very rich people. It is only right and proper that people in their declining years should distribute some of their assets well in advance. I think there is a good deal to be said, therefore, for providing some incentive by having death duties scaled. Looking back over previous years, I am not sure whether death duties have really been considered in that light. I have a feeling that they have always been regarded by Ministers for Finance mainly as a way of raising money rather than as a means of promoting a more equitable distribution of wealth amongst a greater number of people.

The total yield from death duties, succession and legacy duties in the last financial year, according to the Appropriation Accounts, was about £3½ million. The amount is probably increasing. I gather it will probably be round £4 million this year. It is not a negligible amount but it is far from being a high proportion of the total revenue. I believe we would be far better off if we reduced the rates of death duty, succession and legacy duty, and for two reasons: first, because we would undoubtedly attract more capital into the country, and I agree with Deputy Cosgrave here, and, secondly, because we would make the avoidance of death duty a much less economic proposition than it is at the moment.

It is not, I think, unfair to compare the income tax position over the past few years. The only change made in the income tax code since Fianna Fáil came back to office in 1957 has been a reduction in the rate. In spite of the reduction in the rate, the yield has gone up every year, and gone up fast. That is because of a very good business practice; the way to get greater returns in business is not by raising prices but by reducing prices and increasing turnover. It is as easy as that. If we reduced death duties, we would, I believe, increase our turnover. We might, indeed, very well maintain the actual revenue receipt of £3 or £4 million, but it is more than likely we would increase it.

I have a case in mind in my own constituency of a prominent, titled gentleman who retired from Northern Ireland. He had a beautiful house with a big garden. He gave considerable employment. He had a big farm down the country on which he gave even more employment. The reason he came here was that the rate of death duty at the time was lower here than in Northern Ireland. Then the rate changed. He sold up the house and farm and all his assets, which were very considerable, and now he rests much more securely in the Bahamas. Why on earth could we not have held that man here so that he could contribute in income tax, turnover tax, customs, excise and all the rest, and also contribute eventually by way of death duties? But we drove him out. That is one case.

In another case a man wrote to me in connection with Resolution 18 (c). He said: "I have very considerable assets but, if this Resolution is confirmed in the Finance Bill, I am advised by my accountant that I must leave the country immediately". He was not telling me a funny story. I am quite convinced of that. These two cases come readily to mind. There must be very many more. We will lose capital if we go on like this and we will gain nothing.

I would plead with the Minister, if not this year, certainly in the not too distant future, to consider whether he would not do a far better day's work for the country by reducing the incidence of death duties rather than the reverse. We should encourage thrift. We are doing the exact opposite. A man who is thrifty and piles up a bit of money for himself will be penalised sooner or later and consequently he will be encouraged to make hay while the sun shines. That is his way of building up in unsound circumstances.

Section 22 introduces an element to which the Minister did not pay very much attention in his speech, but which I regard as very important indeed. This refers to death benefits arising under superannuation schemes. Superannuation schemes are not schemes which are just devised for the very rich to make them much richer and more idle in their declining years. These schemes are operated widely all over the country by State organisations and also by ordinary public companies and private companies. This is the ordinary way in which an employer looks after his staff.

All these superannuation schemes are subject to close scrutiny by the Revenue. The terms of each scheme, in order to get the proper tax relief, have to be submitted to and passed by the Revenue before they go into operation. All the schemes in operation at present have been set up with the full approval of the Revenue and on the basis that the death benefits which will arise from the schemes to the dependants of the deceased members will rank as a separate estate for death duties if they are liable to estate duties at all.

This provision seems to bring in a new proviso that the death duties will be added to the rest of the estate of the deceased, which would thereby not only increase the amount of duty but the rate of duty on the entire. If that is what this section means—and I believe it means that—it means a pension scheme in operation at present, set up by experts with the full approval of the Revenue, is now going to be drastically amended by a change of mind on the part of the Revenue.

Mr. Sweetman

And which had to be expressly given to the Revenue for approval.

Mr. Booth

Yes, they all had to be given to the Revenue in the first place. We cannot let the Revenue get away with that kind of damn nonsense. They cannot have it both ways. If the Revenue approve of a scheme, that is final. If we are not going to have finality, we can pack up and go off to the Bahamas, if we can afford the fare. Life will become intolerable here if we have this shilly-shallying and changing of mind. I hope the Minister will look at this very carefully. I do not think he has considered it as fully as he might. I appreciate this is his first term of office and he has a tremendous amount on hands; but we have to be very careful indeed in this measure that something is not put over on us.

In section 24 we come to this provision of five years instead of three years. Admittedly, as far as I can see, there is not a question of retrospection here in connection with that provision. However, I am not quite sure. We can probably argue that better on Committee Stage. It looks as if an attempt has been made to avoid retrospection on that issue. I cannot see why we want to raise that period from three to five years. Admittedly, in the United Kingdom, they now have a period of five years. However, I do not think the rate of duty is the same. I think it is slightly different in the first and second year prior to death. There is some slight concession there.

Mr. Sweetman

Fifteen per cent, 30 per cent and 60 per cent.

Mr. Booth

There is some easing of the burden there. In Northern Ireland, they are on the strict three years. In answer to a Parliamentary question last week, the Minister stated he could not give any estimate as to the additional revenue which would be forthcoming in the current financial year if the period were increased from three to five years. If there is no estimate made as to what the increase is going to be, I suggest he should just drop it. If he does not know how much more he is going to get, what persuaded him in the first place to make any change at all? The only information he gave me was that the total value of these gifts, which were gifts inter vivos, in the last financial year was in the region of £400,000.

Let it be perfectly clear; £400,000 was not the amount of the tax: it was the amount of the value of the gifts which had been made in that year within three years of the date of death of the testator. The total amount of duty on that amount of gifts will probably be £15,000 or £20,000 at the very most. If that is the amount of money we will get on gifts inter vivos in the three year period, how much extra are we going to get by increasing that period to five years? We might get another £5,000. Suppose we even be generous and say we get another £10,000. Is it worth our while in this day and age to introduce a completely different element in order to chase a problematical £5,000 or £10,000?

Quite apart from anything else, look at the amount of additional uncertainty and work involved in solicitors' offices, accountants' offices, in banks, in the offices of inspectors of taxes, the estate duty office and so on trying to trace down gifts made four or five years ago. That sort of revenue is not worth having. You are going to spend so much money trying to collect it that it will be gone before you get it. There is every reason for keeping the three year period the same as Northern Ireland, and so far no reason whatever has been given for changing it to five.

Section 39 worries me also. That is the section which deals with profits and gains from dealing in the development of land. Section 38 is a definition section, and in section 39 we come to the actual meat. The Minister referred to the fact that, in his view, certainly the intention was that this should not affect an ordinary sale from one farmer to another. Maybe it is not intended to do that, but it is going to, unless somebody produces an amendment to this section. Certainly, I find no reference to a sale of land from one farmer to another being different from any other disposition of property.

The definition of "dealing in or developing land" is that it is a business which shall be deemed to be carried on where a person, having an interest in any land, disposes of that interest after he has developed the land or secured its development. That is a précis. Any person who has an interest in land and who develops it in any way, by levelling it, by draining it or by building on it, and who subsequently sells it at an enhanced price, is going to suffer a capital gains tax, which is something entirely new. It is time we realised that. This is a capital gains tax. I do not think we are prepared for it yet. At least, I certainly was not. I got no indication from the Budget that anything like this was envisaged.

It is one thing to tax a person who is doing nothing else but buying, developing and selling land, but, under this section, everyone is going to be caught who has any interest in land, who does anything to it and who subsequently sells it. The only exception to that is where the building was bona fide intended for exclusive occupation by him as his only or main residence and was in fact so occupied for substantially the whole of the period from the time when the construction or reconstruction was completed to the time when the interest was disposed of. That is a gorgeous section because it would be just mincemeat for somebody to interpret. You could interpret that almost any way. But, knowing the way inspectors of taxes work, I have a horrible suspicion it would be interpreted their way. It is vague.

How do you know whether a building was bona fide intended for exclusive use? How can you go into a man's intentions and, to that extent, we are back on this business to which I referred on Resolution 18 (c). It is giving too much power to the Revenue Commissioners. I cannot see any way in which a farmer could absolutely be satisfied that by developing his land in any way or by adding to his buildings, he was not rendering himself liable to a substantial capital gains tax, if at any time he subsequently decided there was a better farm a little farther away that he could purchase and then sell his own.

People should be given every encouragement to develop and improve their land in every way. Here, we are going to penalise them because someone in the Revenue Commissioners says in effect: "I have a horrible suspicion that somebody is going to do this and will make more money than I think he should." That is not the way we should impose taxation. Either the developing and improving of land is good, in which case we should encourage it, or it is bad, in which case we should discourage it and tax it to the very limit. I think it is a good thing and that it should not be taxed. This whole section needs to be drastically revised if it is to do what I think the Minister wants it to do but which, in its present form, it will not do.

I am sorry that, in this Bill, there has been no increase in tax allowance. I am concerned particularly in this matter on behalf of a very high proportion of my constituents who are retired people living on fixed incomes. This particular group has been hardest hit by our present expanding economy. The wage and salary earners, and professional people, including civil servants, have all received a steady increase of income. There are a very substantial number of people in the country who are living on fixed pensions of one sort or another, or on their savings, and whose incomes have not risen at the same rate as the incomes of those who are still working. I do hope that, even though it may be too late at this stage, the Minister will give earnest and favourable consideration as soon as he possibly can to some additional tax allowances for those who are living on fixed incomes such as pensions.

There is one other matter on which I should have been glad to see some concession, that is, in respect of stamp duty payable on deeds of transfer of land and property. I have not been in the House for all of this debate and I do not know whether the figures have already been quoted. The position is that at present stamp duty payable here starts at one per cent up to £1,000. Where a property is bought for £1,000, the stamp duty is one per cent. Up to £1,500, it is two per cent. Up to £2,000 it is 2½ per cent, and thereafter three per cent. That means that if you buy a house or a small bit of land for £700, the stamp duty is £7. On a very small house costing £2,000, the stamp duty is £50. In neither of those cases, in the United Kingdom, would there be any stamp duty whatever. Up to £4,500 consideration on the sale of property still attracts no stamp duty in the United Kingdom whereas the sale of a house or land here for £4,500 would cost £135 in stamp duty alone.

This stamp duty, added to legal fees and other expenses in the purchase of a new house, can be just about the last straw, particularly with young married couples going into their first house. I do not know what the total revenue from this source may be but I think we should at least take a leaf out of the United Kingdom book here by trying to find some other way of raising revenue than by stamp duty on deeds of conveyance of land and property. The perfect thing, of course, would be to suggest some other method of raising revenue to make up that loss: I am afraid I cannot do that. I do not imagine that at this stage the Minister can make any concession whatever on stamp duty on the transfer of land and property or on the tax allowance for people on fixed incomes. I hope I am in order on this Finance Bill in commenting on the omission of these matters and in expressing hope for a better fate for these two matters in the Minister's next Finance Bill.

There is much in this Bill which is purely routine. While the Bill does not arouse any great enthusiasm, we have just got to accept that revenue has to be raised. I would ask the Minister, in the interim between the Second Reading and the Committee Stage of this Bill, to go through the Bill very carefully again with his trained legal mind and without anybody breathing down his neck, so that he can see the full implications of every section because, to my mind, some of the implications are sinister, very wrong and quite unjustifiable.

We must never have retrospection in regard to taxation or legislation of any sort and we must have absolute certainty as to what the law is at this moment. Anyone acting in accord with the law at this moment must never thereafter be put in a less favourable position. If we can once get that clearly established, I think there will be some considerable amendments to the Bill as it has been introduced to us which will be a very great improvement.

Mr. Sweetman

I was shocked indeed by Deputy Booth's opening remarks, in which he directed his criticisms at people who were not able to answer, instead of directing them at the Minister himself.

Mr. J. Lynch

As did the Deputy's colleague, Deputy T. F. O'Higgins.

Mr. Sweetman

I was not here during the speech of Deputy O'Higgins. However, I have read the typescript of his speech and I noticed that during his speech, as during Deputy Booth's, the Minister was not man enough to ensure that he was made the subject of the attack, and not his officials. It would have been more becoming for him as Minister for Finance to have made it clear that he was the person with ultimate responsibility.

Mr. J. Lynch

I have no intention of denying it. I do not like interrupting Deputies but I certainly accept any responsibility there is for this Bill.

Mr. Sweetman

I wish to make it clear, as a person who has some knowledge of the manner in which Budget proposals are made up and Financial Resolutions brought forward, that while they are drafted by advisers to the Minister for Finance of the day— they were in my day, and I have no doubt still are-they are explained to the Minister in the most complete detail so that the manner in which they come to us in the form of Financial Resolutions is a decision of the Minister and of nobody else. In procedure in relation to taxation, the advisers the Minister has are scrupulous in ensuring that the Minister for Finance of the day fully understands the implications of the proposals for which he has to accept ultimate responsibility in the House. If, therefore, there is criticism of a Financial Resolution, or of the explanatory memorandum, or of the provisions of the Bill itself, it is the Minister who must accept the blame.

Perhaps because of the elections and the change of Ministers, some of the decisions were taken before Deputy Lynch became Minister for Finance. Nobody could know, and I do not know, whether some decisions were taken by Dr. Ryan before Deputy Lynch became Minister for Finance. In any event, it is clear to me from my knowledge of the procedure that the decisions were taken by a Fianna Fail Minister and by nobody else. I think it is only proper and right that we should pursue our examination, or our criticisms, or our condemnation of anything that is good in the Bill on the clear understanding that ultimate responsibility rests on the Minister.

I do not know if, in the course of the curriculum for the Bar, one has to read classical history or classical philosophy, but I think it is worthwhile to refresh the Minister's mind if he did have to read those in his day, and if not, to direct his attention to a comment from Plato's Republic where Socrates is expressed as stating:

The tyrant hopes, does he not, that the taxes his subjects have to pay will impoverish them so that they will be compelled to give their minds to earning their daily bread and not to conspiring against him.

The Minister could well and aptly take that unto himself in relation to this Bill, if not only from the point of view of the taxes his subjects have to pay but from an understanding of the Bill that has been put before us without a proper and adequate explanatory memorandum. The memorandum, or White Paper as we have come to call it—they are not at all the same—was woefully deficient in certain aspects and I would go so far as to say it was slyly deficient in relation to comment on section 23. I was glad to see the Minister redeem his personal reputation by specifically referring in his speech to what section 23 would cover and which was passed over in a most unbecoming manner in the explanatory memorandum.

Before I pass to considering the general background of the Finance Bill this year, I should like to make a few short references to certain provisions in the Bill with a view to being of assistance in enabling the Minister to see what is in my mind and to get from him, I hope, in his concluding remarks, some indication of what is in his mind in relation to the intention of certain sections.

The provision in section 2 enabling a more quick write-off for scientific research is a good one and as the Minister is entitled to be blamed for bad sections, he is entitled to commendation for the good ones. It is desirable that there should be encouragement of scientific research in the manner provided for in this section. However, I think it would have been better had the provision for accelerating write-off in relation to scientific research been extended to accelerated write-off of depreciation for adaptation and modern machinery so urgently necessary if we are to be able adequately to compete with countries abroad in the new free trade atmosphere of today.

In Sweden, I think — one of the Scandinavian countries — they have provision whereby a company is entitled to take for tax purposes the write-off it operates for commercial purposes and they have found that these methods of aligning commercial accounts to taxation accounts has done a great deal towards making the people there adaptation-conscious, making them conscious not merely of the need for modernisation but of the desirability for modernising all the time.

The decision whether to put in more modern industrial machinery in many cases is bound to be a marginal one and it would very often assist the firm concerned to come down on the side of going ahead with that modernisation if they knew they would be able to deal with the matter on the same basis as they would have to deal with it in their own commercial accounts. This was suggested in the recommendations of, I think, the Industrial Taxation body and it is a suggestion the Minister would be wise to introduce, seeing he has come part of the journey in his provision in section 2 for scientific research.

I am glad to see the Minister has put into statutory form in section 4 provisions in relation to appeals. I am told, however, by some accountants that there has been growing up recently a habit of appeals being listed without adequate notice and that this not only has caused some confusion in relation to the affairs of the firms concerned, but in addition often operates against speedy determination. If a proper period of notice were given, say, 21 days, it would very often be possible during that period of notice to determine the matter at issue, if it was not a question being submitted for ruling on principle, and that would substantially assist the position. If the notice is too short, it may often mean that it will not be possible to get the people concerned together or to marshal the arguments within the period of the notice and that again means a further delay. I have been told by an accountant about cases where people were notified on Friday of one week that the cases were coming up for hearing in the early part of the following week. That seems to be wrong and quite indefensible.

I am afraid that the effect of section 7 will be to make even more people free, unpaid tax gatherers for the State but I suppose it is something we must accept in these days. In so far as I am concerned, while section 13 does not affect me any more, sections 10 and 11 undoubtedly do, but I am quite prepared to pay more for my bottle of stout or for my whiskey or gin when those two particular provisions are imposed for the purpose of easing the position of the worse off members of the community.

Although that is not a luxury category, nothing can put in the same category the impositions provided by section 12. The increase in the price of petrol and oil is something that is bound to permeate through the whole economy and that at a time when it is vitally urgent and necessary that we should keep costs down for the purpose of being able to complete for markets abroad. We will have an opportunity of discussing that section in very great detail on Committee Stage.

Part III of this Bill deals with the provisions relating to death duties and frankly I cannot quite understand in relation to many of these provisions the mentality behind the Minister's approach to the problem. If as a result of some loophole in what was the intention of a previous Minister, the law is not stated as exactly as he had hoped, and a taxpayer finds that loophole, he is perfectly entitled to avail of it and there is nothing morally or legally wrong with his so doing. I can understand the Minister coming in and introducing a new provision to block such a loophole, if there is any need for it, but I do not understand the Minister approaching that correct fulfilment of the law as it was up to today, with the attitude that it was wrong for the taxpayer so to do. It was not, and I entirely endorse what Deputy Booth said, that it is an attitude of mind that for the sake of the preservation of free democratic rights, we must never allow to become prevalent here or outside at any time.

Frankly, I do not understand what the Minister expects to gain under section 18. I think the only effect of that section will be that there will be a gain for the British revenue. I have heard it stated by experts in this field outside that the reason section 18 was introduced was that there was pressure on the Minister to introduce it as part of the new double taxation agreement. I do not believe that for a minute. I believe section 18 was introduced from an entirely mistaken view of the existing circumstances. I must confess that I was not as perturbed as some others by Resolution 18 which was passed here on Budget day because such resolutions are blanket resolutions designed to cover a blanket situation and inevitably they are watered down and restricted very much indeed by the Finance Bill. I am glad that the Minister did not attempt in the Bill to follow up the wording of Resolution 18 as it was. Quite honestly, I give him credit for never having intended to do that, but it was a very good thing, notwithstanding that, that there was the realisation abroad in the community that if he had so intended, it would have been utterly indefensible.

Section 18, as I say, will have the effect of ensuring that in respect of companies like this, the assets themselves will be taxed. That will mean that for the future there will be no effort at incorporating any such non-trading company. The effect of incorporating a non-trading company has been that where that company held British investments, they were not liable to British estate duty on the death of the individual concerned. If they were held in the individual's own name, they would be liable and the British revenue would collect. It is quite clear that as a result of this section, no further non-trading companies will be formed and what will happen is that the British investments concerned will be liable to duty not as part of the estate of the deceased person himself, and duty will have to be paid in consequence in England and the Minister will have to make the appropriate allowance under double taxation relief here.

It seems to me, therefore, that the introduction of this provision is rather going to help the British revenue than help our own in the future. It does not seem to me, therefore, something that is entirely satisfactory or entirely desirable for the purpose, as the Minister has suggested, of plugging a hole. If it is plugging a hole, it is plugging it for the benefit of the British revenue rather than our own.

Apart from that, this section contains many phrases which are far too vague in a taxation measure, "directly or indirectly", in line 31, on page 14, "consisted mainly of income" in line 34. What does "indirectly" mean in that context? What does "mainly" mean? Does it mean 51 per cent? Does it mean, for example, in relation to the powers in this, that the percentage must be the percentage required for a special resolution under the Companies Act, 75 per cent of those present and entitled to vote? Or does it mean merely 51 per cent?

When one goes through the section, one finds things like that which are not anything like clearly enough defined. In the next page, page 15, there is reference to "benefits from the company". That is left at large but in the corresponding portion of the British Act—and this is put in largely because there were similar provisions in the British Act—in section 47 of the 1940 Finance Act in Britain, which was amended by the 1946 Act, there is an enormous section and, I think, a schedule defining "benefits" but here the matter is left entirely at large and it will be virtually impossible to interpret what some of these phrases mean until such time as somebody has died and the case has been taken to the High Court or, perhaps, the Supreme Court. That is entirely unsatisfactory for taxation legislation.

There are other things in it that I do not understand. There is the phrase at the bottom of page 15, "such sum as appears to them to be reasonable remuneration". Is that something the Revenue Commissioners can decide and against which there is no appeal? In the explanatory memorandum, it is suggested that there is an appeal against everything. If there is an appeal against that provision, for example, the more normal way of drafting would be "as appears to be reasonable" not "as appears to them to be reasonable". I suspect that it may be held, even though it may not be intended, that there is no appeal against that.

Later on in the section there seems to be no proper deduction in relation to paragraph (c) (ii) of subsection (5) for moneys that have been justly paid for money's worth, bona fide incurred. It appears that the vagueness of the provisions in the section is such that it would be beyond anybody's power to know exactly how it would work until there has been a judicial decision. That is unsatisfactory for a taxation code. Although I am referring to this matter in some little detail so that the Minister may have a preview of my mind, I am submitting substantial amendments not for the purpose of enabling anybody to avoid his obligations but in order to endeavour to get certainty as to what the section means, so that everybody will know. It is not possible to get certainty as it is at present.

We had a discussion yesterday in regard to the exemption of the spouse on the second death about which Deputy Booth and I took different views. I hope, when we come to discuss the provisions in relation to discretionary trusts in section 19 which do not permit the spouse exemption in respect of the second death, even though it is still in trust, that I shall be able to persuade Deputy Booth that in this section the omission of that will be unnecessary, unfair and unreasonable discrimination against the spouse who comes on with the second life interest as a result of the discretionary trust.

I imagine section 20 has been introduced primarily for the purpose of dealing with what has come to be known as the Jersey mortgage but if we were going to do it, it should have been done properly, and it seems wrong to provide a section which, while it may catch the Jersey mortgage where there is no death duty, it equally applies, for example, in respect of land in Australia which may have come into the possession of somebody here through the death of a relative out there and on which there is very heavy taxation in Australia, but in respect of which there is no provision for double taxation relief under this section. The position could well be, in respect of a property in Australia that has been left to somebody here who dies domiciled here before he has been able to dispose of it—and the property does not need to be very big, I am told—that it would bear 40 per cent duty in Australia and that would be paid, and then the position would be that the 40 per cent would be allowed only as a debt, not for double taxation relief, and the duty here would be paid at the rate of duty of 60 per cent which is obviously unfair and wrong. The manner in which the provision has been brought in to cover the case where there is no death duty in the country concerned is wrong in that it should be included for a country where there is. Similarly, I cannot see in this anything to protect a bona fide purchase for value or a bona fide mortgage for value, as is normally done in respect of provisions of this sort.

Again, the amount that will be gained by this cannot be great, outside what is, in our view, personal estate, although in the view of the particular country concerned, Jersey, it is immovable property. I think it would have been better—it should not be too difficult to draft—to provide a section stating that moneys that are treated as being immovable property in other countries shall be treated as personal property here and therefore taxable here rather than that we should destroy the whole fundamental view that runs through our legislation of what is immovable property physically situated in a country.

It seems to me also that in certain circumstances the provisions of section 21 can mean that a person would be taxed not merely on property he has acquired but that he would not be allowed to take the deduction in the money that has actually been paid for that property. That is a matter which I can discuss perhaps in great detail on the Committee Stage.

Sections 22 and 23 are allied to some degree in that they both cover the provision of policy moneys. Section 22 covers the policy money that has been provided, as Deputy Booth has correctly said, by the company as part of a superannuation scheme. Section 23 covers the policy money where a person, as he is perfectly entitled to do at present, has taken out a policy of insurance on his life for the benefit of his wife or his children which is duty free under the Married Women's Property Act—for the benefit of his wife primarily.

The present position is that a man can take out a policy of insurance on his life in favour of his wife for a sum up to £5,000 to be paid on his death without having to pay any death duties when he goes to his reward. It is treated as being an estate in itself and an estate in itself up to £5,000 is not aggregable with the free estate and accordingly is not liable. That is the position and has been the position since the passage of the Married Women's Property Act. Of course, the Married Women's Property Act became modernised here under the Married Women's Status Act of 1957 but that was only purely a reintroduction and a modernisation. The position has been, as I say, that a person has been enabled up to this to make that duty-free provision for his wife. The position now under this section is that he is no longer able to do that under section 23, nor can his company do it under section 22. " Nor can his employers do it ", would be a better phrase, under section 22.

Mr. J. Lynch

The Deputy was right the first time. It is the company.

Mr. Sweetman

Yes; it is the company which is employing him, but it is by reason of his employment by the company, because the whole genesis of superannuation is that it is something that is paid as a result of employment. A more correct phrase would be "as a result of his employment by the company".

Let us look at what the explanatory memorandum says:

Section 23 is designed to ensure that property which was provided by the deceased and which, under existing law, is regarded as property in which he never had an interest and is therefore non-aggregable, will in future be aggregated with the rest of the property passing on his death for the purpose of determining the rate of Estate Duty payable.

Does the Minister seriously think that that was an adequate explanation of a section that proposes to sweep away the provision that there has been all these years in our law in relation to enabling a man to provide an insurance policy for his wife without the duty being payable in respect of it? I suggest the purpose of an explanatory memorandum is meant to be to ensure that non-legal, non-technical people, would understand easily by reading the memorandum what the technical words in the section mean. Anybody reading that could not possibly understand, could not possibly realise, that this section, in fact, abolishes the right of a person to make provision in that way for his wife by means of a policy of insurance.

Mr. J. Lynch

It does not abolish his right, surely.

Mr. Sweetman

It does. It abolishes his right to make provision for his wife by a policy of insurance free of death duty.

Mr. J. Lynch

That is a qualification.

Mr. Sweetman

It is an essential qualification but it is not a qualification that is included in this memorandum. The Minister should be ashamed of putting out that memorandum as something purporting to explain what it did not explain. I may say quite honestly that when I read the memorandum, and admittedly, I have a little experience in these matters, and when I read the section, I began to wonder whether it could possibly be some interest other than the MWPA interest that was in issue and it was only after some considerable discussion with other people who were used to dealing with these matters that I found and satisfied myself that the section did cover a policy issued under the Married Women's Status Act and that, of course, has been confirmed by the Minister in his introductory speech today.

The situation is even worse than that. This is not a thing which arose away back and was carried on and was left at that. In 1955, there was a change in the procedure because people were dotting policies all over the place and, very properly, at that time it was decided that people would not be allowed to dot policies all over, that they must be aggregated together but that the right of the person concerned to provide a policy if he wanted to do it, a policy for his wife alone, was still retained as a sum of money not to be aggregated with the free estate of the person.

As I say, it was laid down in the earlier legislation and the principle was deliberately kept in the 1955 Act by a wise Minister for Finance that these policies would not be aggregated with the free estate and would not be made liable in the way that they now are made liable under this section.

The effect, frankly, of this section, will be to ensure that there will be a substantial diminution in saving. The social effect, the economic effect, of section 23 will be extremely bad at a time when we badly want substantially higher saving to meet our capital requirements and at a time when the life insurance companies have shown that they are prepared to contribute their proper share to the resources that are needed for capital development.

One of the features of recent national loans has been the manner in which life insurance companies both domiciled here and foreign companies trading here, have met their responsibilities in relation to national loans. That has been gratifying. The effect of this section is certainly going to cut down on that type of life policy insurance. It is certainly, therefore, bound to diminish saving and is going to mean that there will be less money available for national capital development. It is a bad section. It is a section that has nothing to commend it. It is one that the House should most certainly remove on the Committee Stage of this Bill and, I hope, will remove with the active co-operation of the Minister himself when he sits back and reflects on the economic effects that this section is going to have for what I believe will be a very trifling taxation effect compared to the whole national taxation receipts.

Deputy Booth has already referred to the absence in section 24 of the tapering clause that operates across the water where, as I interjected, it runs at 15 per cent in the third year, 30 per in the fourth year and 60 per cent in the fifth year. I want to go further than that in relation to this section. I do not think it is a good section socially. One of the things we want to do is to endeavour to persuade people to hand over to their children as soon as possible money to set them up, land if they are going to train as farmers, shares in the family business if they intend to go into the family business. The effect of making it five years instead of three years will act as a deterrent, not as an acceleration. People will be inclined to say: "It is not worth bothering about; five years is too far for me to look ahead." It will have the psychological effect of making them feel it is not worth doing at all. That is bad socially. It is bad economically and, for the life of me, I cannot see what will be the benefit in taxation receipts. Surely the amount will be very small compared with the unsatisfactory effect it will have?

We have all, on both sides of the House and on both sides of the Border, welcomed a spirit of goodwill and approach, hoping that that spirit of goodwill and approach will mean we shall be able to get closer together. This section is driving us further apart. In certain circumstances, it might be necessary to provide such a penal section in a Finance Bill but there are no circumstances present to us today in our economic fabric or in our taxation fabric which would indicate there is any real national advantage in extending this period from three to five years.

I believe the provisions of Part III, taken as a whole, will mean that in the future more and more family businesses will have to fold up on the death of one of the main people concerned. Under these provisions, it will be virtually impossible for a man who has a family business so to plan that family business that it will not be called upon, on his death, to provide funds that are not there for the purpose of paying duty and, at the same time, to provide the development, modernisation and increasing working capital that day by day become necessary in every family business.

The provisions included in section 21 of the Finance Act, 1956, in relation to Irish investments which qualified already under the Income Tax Act by virtue of section 7 or 8 of the Finance Act, 1932, should also be made available, at the very least, to those in a family trading business or family manufacturing business. Without that and with Part III of this Bill, many of these businesses will find it impossible to carry on. These businesses will be set back and prevented from competing in the modern trading conditions which we are facing. They will be prevented from doing what Deputy Lynch, as Minister for Industry and Commerce, was urging them to do a short time ago. I would urge the Minister very strongly to have another look at the provisions of this Part of the Bill and to ensure that, in any work he has to do to provide the taxes to run the country, he does not shut up what is such an enormous part of the fabric of our business community, the small family business.

This is money which should be ploughed back into the businesses for modernisation, new plant, new methods, new design, even for research of one sort or another. I know that the small business is not able to do its own research but it can pay the bigger research firms to do it, if they are not restricted in this way. Restricted they will be, because there is not in Part III of the Bill even a provision by virtue of which the duty which is now to be paid can be spread over a period of years as it would be spread if the property itself in which the business was carried on were directly liable and not made liable through the facet of the company that is visualised here.

I shall make a concession to the Minister in relation to Part IV which deals with stamp duties. I did my utmost to understand it and I was, at the end of it, not very much wiser than I was at the beginning. I shall have the pleasure, therefore, on the Committee Stage of asking him to explain concisely and in layman's language exactly what the section means.

I can understand the Minister not being anxious to include in this Bill something to repeal, and to substitute another provision for, section 6 of the Finance Act, 1935. The basis of the substitution the Minister indicated in the Financial Resolution in response to a query from me was that he wanted to get away from the statement of intention included in section 6 of the Finance Act, 1935. I can understand that because it is impossible, as he said himself and as the explanatory memorandum says, to know what was the intention in the mind of the taxpayer concerned. If that is so, why do we, as Deputy Booth pointed out, import into subsection (3) of section 39 another intention in which the Special Commissioners "are satisfied that the building was, bona fide, intended for exclusive occupation... ”?

If it were wrong to have in section 6 of the Finance Act of 1935 a provision that the Revenue Commissioners and, therefore, the Special Commissioners, were bound to prove what was the intention of the person concerned in developing land, is it not equally wrong that the Special Commissioners should be asked in this section to determine what was the intention? After all, what is sauce for the goose is also sauce for the gander and, if the basis of the necessity for the whole of this Part VII is for the purpose of more adequately covering what was restricted to the intention of the taxpayer in 1935, surely to goodness, we should not now fall into the same mistake again the other way, as is done here in section 39. But there is something even worse than that in this Part.

Section 42 contains not merely the specific expression of the very thing Deputy Booth said must never, never be included in a taxation code, but the section opens with the words "Where before or after the passing of this Act an interest in land is disposed of... " There could not be a more specific retrospective provision than that. It could not be more clearly expressed that the provisions of this section are retrospective. The provisions of the section are for the purpose of enabling the Special Commissioners, and I presume the Court of Appeal afterwards, to set aside a disposition of land or of property which was perfectly legal before 5th April, 1965, and now, by virtue of section 42, becomes illegal.

I think that is an utterly indefensible provision. I know what type of case the Minister intends to hit under this section. Let me say quite honestly I have great sympathy with his ideas because I think they are right, provided he does not make it retrospective. In case anybody may have other ideas, there is no case to my knowledge in which this would affect any client of mine professionally. I have reason to believe, however, that another person listening to me would scarcely be able to say the same, and I am not referring to Deputy Booth. Another person might find it difficult to say he is not concerned individually in its application, shall we say.

The purpose of this section is to enable the Revenue Commissioners to go back and, having gone back, to declare that a sale or disposition from one associated company to another associated company was carried through at a price that was not the proper market price and that now only the proper market price should be taken into account. I should not mind if the phraseology of the section were switched around so as to ensure that no person was entitled after 6th April, 1965, to claim as a deduction from his profits a price which had been paid in an associated company, which was not a genuine price, because then there is no retrospection. Then the decision in relation to this matter is related to this year, and this year alone. As the section is phrased, however, it is phrased to upset a disposition, whether made before or after the passing of the Act.

Nobody could possibly cavil with that if it said: "Where on or after 12th May, 1965" because Budget day was on the 11th May and it would be on or after the following day this was done, because notice was duly given and it would not, therefore, be retrospective. The Bill might be retroactive to Budget day, but that is something in relation to which there could be no objection.

Each of these two sections starts in exactly the same way by dealing with the matter as being a transfer before or after the passing of the Act and, though we may all have little sympathy with the type of transaction involved, it is not the type of transaction that we must consider here but the principle of retrospection because, as surely as I am standing here and other Deputies are sitting here, if the principle of retrospection is allowed here, it will be quoted again against us in some other much more noxious section in another Bill in the future; we will be told that the principle is contained in section 42 of the Finance Act, 1965, and that is the guiding light; and, because the Oireachtas of 1965 let through section 42, so also must a future Oireachtas let through an even more noxious section based on that principle.

I hope that the Minister will, when we come to consider this Bill in Committee, realise that there are wider implications than the mere taxation implication. I hope he will realise, as he must realise, that one of the things of which we are desperately short here is capital and another is the know-how that often goes with capital. To introduce provisions in a Finance Bill which merely have the effect of garnering in small amounts of money into the Exchequer, to be treated as income, though it is an argument as to whether or not death duties should be treated as income in national accounting at all, is a matter of trifling importance compared with a much bigger problem of finding the capital we need for our full national development. I hope the Minister will realise between now and Committee Stage that many of his provisions here may yet have the effect of preventing that capital coming in here for our future development.

I must apologise to the House for having spoken at some length on provisions that might to some extent be more normally discussed in Committee. My reason for doing so is that I regard many of these provisions as part of the general pattern being set in this Finance Bill and, secondly, that I think it is lamentable that the Finance Bill was left so late from the point of view of its circulation. It has been introduced only now, late in the session, late in a session which may well have to be curtailed by reason of the building work in progress. It is a Finance Bill which is intricate to the n th degree and I think even the Minister will agree with me on that. It is one that would have been better circulated a considerable time back in order to permit a long period between circulation and Second Reading and an equally long period between Second Reading and Committee Stage. We must remember that although some of us got the preview of the Bill last Friday evening—and I gladly take this opportunity of thanking the Minister for his courtesy in making it available to Deputy Cosgrave, Deputy T.F. O'Higgins and myself——

Mr. J. Lynch

And Deputy Corish.

Mr. Sweetman

Let him speak for himself. I am quite sure the Minister was not lacking in courtesy there, either. Be that as it may, this Bill is so intricate that even a person like myself, with some little knowledge of the background, both from the gamekeeper's side and from the view of the legal profession, found it impossible to master all the provisions in the time since then, and I have done virtually nothing else.

I understand the Bill was only made available to the general public on Monday morning. They were only able to purchase it in the Stationery Office on Monday, if in fact they were able to do so. I do not know if everybody was. I heard of a couple who got it that morning. The people outside who will be intimately concerned with the working of this Bill have not yet had the opportunity of considering its provisions. Some of them were considering the implications of the Financial Resolutions as such and, as Deputy Booth said, deluged us with correspondence in relation thereto. They were natural in their anxiety over the provisions of those Financial Resolutions.

For that anxiety, nobody can take the blame but the Minister. He should have said what he has said to-day— that Financial Resolutions are introduced as blanket resolutions and that there is no intention of making the Bill itself as wide as the Resolutions are framed, that is to say, if the Minister did not so intend, and I am being charitable in giving him the benefit of that doubt. If he got on his head the imprecations of many bodies outside and the imprecations of many individuals who felt he was going to ride roughshod over the Constitution —and I think that if Resolution No. 18 had been included in the Bill in the terms in which it was included in the Resolution, it would have been unconstitutional because it would have devolved to the Revenue Commissioners and the Special Commissioners a function that by the Constitution is reserved to the courts—if he had at any time made available to himself the luncheon he made available yesterday for the purpose of expounding one part of the Bill and made it clear at such a luncheon that the purpose of a Financial Resolution was merely to provide a blanket under which the Finance Bill was ultimately conceived, much of the anxiety that has arisen throughout the country would have been alleviated and might not even have arisen at all. Put at its lowest measure, public relations by the Minister in dealing with the Financial Resolutions and the Bill left everything to be desired.

Incidentally, let me comment for a second on the statement the Minister made yesterday about his saving for widows and children in relation to estate duty. I am afraid the drafting of the section does not do exactly what the Minister indicated yesterday. The section provides that, up to a sum of £15,000, a person can, if he leaves his property to his wife and children, get an allowance of £150 for the benefit to the widow and £100 for each benefit to the children. Supposing, for the sake of example, a man has a wife and three children and exactly the £15,000 the Minister specified. He leaves in his will that each of the three children shall get £2,000 and that the widow shall get the residue. The way the restriction to benefit is phrased in the section will mean that the widow will get the benefit of £150, but there will be no benefit in respect of the £6,000 given to the children because the children's legacy is not in any way curtailed by estate duty. Therefore, the saving in that case will be a saving of £150 only.

If a person is sufficiently technical and clever not to do that but to give by his will nine-fifteenths of his estate to his widow and two-fifteenths to each of his three children, the saving in estate duty will be £450. Is it not an absurd situation that where it appears to any ordinary layman as being exactly the same, in one case there is a deduction of £150 and in the other, the estate concerned has to bear £300 more estate duty? That arises, of course, because of the restriction in the section that the rebate is restricted only to the benefit of the person concerned. In the first case I gave, the amount the child gets is fixed at £2,000. In the second case, it sounds for all practical purposes as if it is exactly the same, because it is two-fifteenths of £15,000; but that is not the same under this Bill as it is phrased, and the person who knows he has to be technically absurd in that way is going to save £300. That is bad taxation law.

Apart from the individual provisions of this Bill, we must consider the Bill in the general picture of the economic circumstances in which we find ourselves to-day. I am sorry to say that, considered in that general picture, the Bill is lacking in the purposes to which it should have adverted. At this moment we are in a situation in which we are, on the one hand, seeing in Britain the effects of a severe credit squeeze and difficulties in relation to their trading position and, on the other side of us, we see a restriction in America of the imports that may be made into that country. A credit squeeze in England has meant, naturally, that people are going to buy less of our goods. Buying less of our goods will mean less exports by us here.

The surcharge introduced by the Government in England, in defiance and in breach of their contractual agreements with us, undoubtedly has made it much more difficult for exports to be sold in Britain. There might, and perhaps would, have been some case for hoping that the reduction of the surcharge at the end of April by five per cent, from 15 per cent to ten per cent, would have meant a surge of exports by us in May. Unfortunately, however, when the May figures came to be published, we found that that was far from being the case. The reduction in our exports for May, 1965, as compared with May, 1964, as the Minister is well aware, was of the order of £2½ million. As I say, we were entitled to hope and to expect that, with the first reduction in the British surcharge, we would see some amelioration of our export position. It is a tragedy that we have not.

At the same time as that reduction in our exports was happening, we have seen a very substantial increase in our imports. One can obviously point in May to importation by Aerlínte of the jet that would have swelled the April figures and that might be considered in that month perhaps as a capital increase to that effect. There is nothing that we can see from the outside which would have the same effect in the following month. The increase in the following month, following a similar increase in April of some £5½ million in our exports, is something that must give all of us very great cause for concern.

We are, of course, unable, at this stage, adequately to assess the full import of these figures because our statistics of all sorts are very much behindhand. The Government may have certain indications behind the scenes which may enable them to form a judgment on figures that are not available to the ordinary person but it is utterly absurd that we are facing here in the Finance Bill, in mid-June, 1965, a position that appears to be as serious as it is and that in the Economic Series published on 14th June, 1965, the latest figures for which any index number for volume of imports, for volume of exports, for import unit values and for export unit values in terms of trade are those that are available to December, 1964.

We are five months behindhand in our statistics in relation to matters which were utterly vital to a consideration of our economic position. Bad as that is, the acme of a ludicrous position was realised when Deputies found tables on the Table of the House last week and got, if they asked for it, a volume of statistics made available for the first time and given to all of us for the first time as something worthwhile, agricultural statistics for 1960—five years after the statistics were operative. Does that indicate that, in relation to our economic analysis, in relation to our analysis of trends, in relation to our analysis of the ordinary things on which a business executive would run his business, we are miles behindhand, that we are not being fed with the information we require? I do not use "we" in the sense of the House. I mean "we" in the sense of the Government because I know that many of these figures are not available to the Government either. It is not a question of the Government's not publishing them: they are not available to the Government in anything like sufficient time to enable proper planned judgment to be taken upon them.

This is an age in which business of all sorts, more and more every day, is finding it necessary to get statistics with which to be able to judge where they are travelling in the future. We have got to ensure as a nation, as a people, as a Government, as a Parliament that the national statistics are made available in sufficient time to be able to help in the formulation of proper policy and proper decisions for the future, whether one may consider them on the basis that the Minister likes to term "programming" or we like to term "planning". We cannot make any real progress towards ensuring that the necessary action can be taken without having the material available on which to judge that action.

It is common knowledge that the May figures for trade were far beyond the estimate of anybody competent to make an estimate in that regard. One of the reasons why that is so is that, as I feel, the general statistical information is not anything like up-to-date enough. Let me add that I, too, I suppose, must take some share of the blame for that because perhaps I did not allow the Statistics Office enough room for expansion just as, quite obviously, the Minister's predecessor did not allow it. I hope the Minister will reverse the trend that has been there up to this.

Such information as is available, however, late and all as it is, does make it clear that towards the end of 1964 our impetus was running down. The volume of production index for transportable industries in the last quarter of 1964 showed a very much smaller increase than it did in the earlier quarters. I appreciate that the building strike came in that quarter, but it also came into the third quarter and yet the tapering-down of the trend was far more pronounced in the fourth quarter of 1964. I have not seen any figures for the first quarter of 1965. I do not know whether the Minister has them. However, anything that is available so far makes it clear that the volume of production was going back rather than accelerating. In the circumstances of our continually increasing imports, it was, of course, desirable that it should accelerate. The rise in the consumer price index from 165 points in February, 1964, to 180 in May, 1965, is something that will make it still harder for us to keep our costs down to compete on the the export market. In relation to the necessity that we should compete on the export market, I should like to raise one question which has considerably worried me, which worried me in this debate here at the time the British, in breach of their agreement, imposed the surcharge.

The Buy Irish Campaign should have been an excellent effort for the purpose of reducing imports but if, instead of effecting solely a reduction in imports, it also had the effect of making certain managements feel they need not go after exports, then instead of being a good thing, it was a bad thing. I am afraid that in certain cases the effect of that campaign has been that certain industrial executives felt they need not, because of the campaign, make any effort to retain their markets in Britain to absorb or balance the surcharge that had been imposed, with the assistance made available by the Industry and Commerce Vote. The effect may well have been that while from a short-term point of view it may have been of some help, in the long-term point of view it has prevented our exports being maintained, prevented us from keeping the market we had achieved in certain commodities.

Many industries took an entirely different line. Many of them—one in particular, of which I have knowledge, in my constituency—regarded the surcharge as an added challenge. They felt they should endeavour to work out the matter from the national viewpoint. The effect of the Buy Irish Campaign in respect of their goods meant they would get additional capital out of which they could fight the export challenge. That, I submit, was the right approach. It was hoped at the time that everyone would take that approach but unfortunately it seems to me the trade import figures to which I have referred, coupled with the increase in home wholesale prices, make one wonder whether that did occur as universally as we would all wish.

That view, too, is borne out by the increase of some 13 points in the retail weekly sales for April, 1965 at 137 as against 124 for April, 1964. At the same time, we see a decline in the net external assets of the banking system and of departmental funds. In answer to a question I asked here yesterday, I was given the percentage ratio of our external assets in relation to our imports and to the import excess and it is striking to see the ratio the percentage of our external assets bore to our total imports. In 1956 it was 94.5; in 1957, the year after Fianna Fáil came back to office, it was 106.9 and in the year ending 30th April, 1965, it had dropped to 58.2. The drop in the external assets in relation to our imports of the reasons why the National Savings Bond issue the other day was a flop. It was not pitched—as I told the Minister at the time, though I wished it well—in the right direction.

It was most depressing for all of us on this side as well as for the Minister that a larger sum than £1,920,000 was not taken into the national kitty through that issue for national productive capital to increase the national wealth. Even so, in that respect the example of some of the Minister's colleagues—not the Minister himself—in relation to national loans on another occasion was as depressing in the national interest and I hope we shall arrive at a point at which the deficiency in the amount anticipated in the National Savings Bond issue will be made up in some other way for the benefit of the Exchequer.

It was inevitable there would be an unfavourable result from the decrease in our net external assets. With the credit squeeze that has operated in England, that has had two effects over here. Many subsidiaries here of firms in Britain and America have been in the habit of looking to their parents for the finances necessary to carry on here. As things got tight in Britain, the parent in Britain threw the child here more on its own resources. A similar situation arises in relation to a subsidiary here of an American company. The effect of that was that the subsidiaries here were taking more of the share of the national resources than they had been accustomed to heretofore and that had an accelerating effect in drying up the pool of credit. It is useless for the Minister for Agriculture to say, as he did today, that there is no restriction of credit for agriculture.

Mr. T. Lynch

Hear, hear.

Mr. Sweetman

It is useless for the Minister for Local Government to say there is no restriction in relation to credit for the building of houses. The fact is there is and everybody knows it. The fact is that this restriction has arisen for the reasons I have given and because of lack of proper foresight by the Government.

All of us who are in business in Dublin know how hard it is at present to get finance for any purpose, no matter how productive it may be. All of us either who act as solicitors for builders, or who are engaged in the building industry, know how difficult it is to get prompt finance for the building of houses. May I give the Minister one specific example from my personal knowledge? A person entered into a contract to get a house built and he had a letter of authorisation from the building society that the loan he required would be made available to him. The builder completed the house in February last and notified the building society that the house was ready and requested that the building society's surveyor should examine it and see if he would pass it. The society surveyor did examine it and found it all right and I have been endeavouring, on that unfortunate person's behalf, approximately once a week since then to get the funds he was promised from the society to enable him to complete his purchase. I received a notice the week before last that the funds would be made available in the week commencing 19th July. That house was passed in February and he will only be able to get the money to complete the purchase in July.

It is just nonsense to say, with that one example and with many other similar examples known to many of my colleagues in Dublin, that there is not a restriction on finance for housing. The new arrangements even for Small Dwellings Acts loans that have been provided by the Minister for Local Government, with the concurrence of the Minister for Finance, are in effect in Dublin County Council area inoperative because Dublin County Council are, I understand, restricted to dealing with houses where the ground rent is more than £10, and while that was an appropriate figure for small dwelling loans some time ago, it is now quite out of line and it means that the funds are not going to be available until that legal position is changed.

All of us know and hear of cases every day of people who are endeavouring to get accommodation for one thing or another and are refused that accommodation. I know the answer the Minister will give me is that it is not factual because bank charges are rising. They are because so much is in what I might call the pipeline but the fact is that for the past month nobody has been able to get accommodation in the way he would wish. This arises from the factors to which I have referred and greater understanding of those factors is now developing. Banks make money by lending and if the banks were able to lend money to solvent people, they would be delighted to do so if they felt they could do so, having regard to the percentage cover they need to keep as liquidity in relation to their figures. We have got to accept that this position exists and a franker admission by the Government that it does exist would help people to realise the cause and the best way to get out of the national straitjacket in which we may be placed in that respect. It arises partly because the Government did not ensure with the Central Bank that there was any planned approach to the necessary expansion of bank credit. For that, the Government themselves must accept a very substantial share of the responsibility.

What does this Finance Bill do to ease the problem, to generate new exports, to provide a method of cutting down, to bring exports to a reasonable figure and reduce the balance of payments, which I see is estimated to be running at about the rate of £51 million in the year taken to April or May? That estimate must also allow for a substantial increase in invisible exports in the first five months of this year because trade depreciation in those five months was some £26½ million. There is no evidence whatever in this Finance Bill that the Minister has given any thought to the problem of how we can get out of that straitjacket or what we can do to ensure that we will not have difficulties of this sort in the future and will be able to increase our exports, notwithstanding the difficulties with which we may be faced on either side of the sea at present.

One of the things which we ought to do and which we should encourage people to do—and this is a suggestion I made as long as two years ago— is to have some statutory inducement on the taxation side towards getting a better spirit in industrial relations by means of some kind of copartnership in industry. If this Bill had included a section dealing with that, in an effort to ensure that there would be some approach of that sort, it would help substantially to meet the problem of ensuring that all of us —no matter whether we be manufacturers, employees in a manufacturing concern, professional people or otherwise—would realise the position which the Government have allowed to develop.

All the indications in this Bill in relation to our trade, our balance of payments, in relation to our credit and to the supply of money, in relation to the manner in which credit for private production has dried up, because the Government have been taking too much from the pool that was available, in relation to the manner in which this Bill attacks saving in the ways I have indicated, show that it is the wrong Bill to ease problems at the moment. Even at this stage the Minister should amend the Bill very substantially if we are to achieve the improvement for which all of us wish.

Mr. Norton

Let me start, by expressing my indignation in relation to section 18 as originally proposed. I want to condemn it at once. I am glad the Minister has had the good sense to change it in this Bill. Whether or not we are in favour of death duties is not the point. Nobody, least of all I hope, the Members of this House, could have felt satisfied with the original form and wording of the section. I find it very difficult to understand how the Minister introduced it at all. It is possible that because of the changeover in the Department, the Minister did not really have time to consider all the implications of the different sections presented to him in the Finance Bill but I do not think this is a legitimate excuse or that he can hide behind the smokescreen that it is a general plan that is thrown out for discussion. The Minister, before he comes into the House with any detailed legislation, should be aware of all the implications of the various sections. He should be fully conversant with their possible effects and he should understand them in such a way that he will not find himself producing legislation one week and coming back a few weeks later, withdrawing it and substituting something else.

Mr. J. Lynch

I have not come back.

Mr. Norton

The Minister has changed section 18 so much that its effect is now entirely different from its original effect. To bring in half-baked legislation without proper consultations means either that the Minister did not read it or understand it properly, that he simply accepted what was put before him by the Revenue Commissioners. That is wrong, and if this House had not been fully alert and viligant——

Mr. J. Lynch

Nothing happened in this House between Resolution No. 18 and section 18.

Mr. Norton

I can appreciate the Minister's desire to tighten up the laws regarding avoidance of death duties. If it is felt that the present laws are not sufficiently comprehensive and if the Minister wishes to tighten them up and brings in more comprehensive legislation with that objective, it is all to the good. Nevertheless, I think it should be brought to the Ministerial mind that the Irish people are perfectly entitled to dispose of their property in such a way as to benefit their next-of-kin and in order that they may do that the will should be clear and unambiguous so that they may comply with the law and at the same time make the most beneficial provision for their families.

The powers which the Revenue Commissioners sought originally apparently are not necessary now. It is most undesirable that the Minister should come into the House and quietly try to slip across a piece of legislation the effect of which would be to set up the Revenue Commissioners as judge and jury——

Mr. J. Lynch

I repeat that was not done.

Mr. Norton

No, this was proposed legislation and I think it is wrong that the Minister should have tried to slip this across. I hope he will be more careful in future and that whoever is advising him on behalf of the Revenue Commissioners will also be more careful. I have heard many other Deputies, including some of the Minister's supporters, express disapproval of this and because this disapproval has been expressed on all sides of the House, I hope it will make the Minister and his advisers more careful in future when drafting legislation of this kind.

As regards death duties, I agree with Deputies on all sides that death duties should be tapered off over the five-year period. If we hope to attract wealthy people here from abroad, as we have been able to do in recent years, and if they are to pass their remaining years in peace and quiet here, I think our tax laws, particularly as regards death duties, will have to be more favourable than those operating elsewhere. It is very beneficial to the country that these people can be induced here: they are something in the nature of permanent tourists. They avail of our goods and produce while resident here. They also avail of our service industries and pay income tax here and when the Lord eventually calls them to their reward, the Minister will collect his share of death duties on their estate. This seems to be a very good reason why the Minister should consider seriously tapering off death duties on estates and seeing to it that our rates are not less favourable than those in Britain or elsewhere. I hope when the Minister comes to reply, we shall find that he listens to the advice the House offers him in good faith and that he will avail of it.

I am not, and the Labour Party are not, opposed to the higher taxes that were introduced becauses the bulk of the revenue which comes from these taxes went towards the social welfare classes. I am still opposed to the turnover tax as at present collected. The sensible, economic way to collect this tax is at source. This would allow a variation between one industry and another. I still hope the Minister will reconsider this when he has had sufficient time in the years that lie ahead and that he will eventually come round to changing the turnover tax so as to collect it at source. That would have many advantages. It would be more economic, and would obviate evasion.

I should like to condemn as strongly as possible the recent increase in the price of drink in the licensed trade. This increase is equivalent to doubling the tax the Minister put on. The Minister estimates that the tax on drink will bring in £2 million and I presume the licensed trade will also benefit to the extent of £2 million. It seems utterly fantastic that any trade or section of the community should be allowed away with £2 million without some protest from this House. When the tax on oil and petrol was increased, neither the oil companies nor the petrol retailers and garages increased the price of these products by an amount greater than the actual revenue increases but the licensed trade, which a few months ago was rubbing its hands and welcoming the prosperity it was enjoying, suddenly found it could not exist if it did not get another £2 million. Overnight costs were said to have increased. I am not a publican, but I understand the problems of the trade very well and I am well aware that since prices were put up previously by retailers and brewers and distillers, costs have not increased to any appreciable extent and there was no justification whatever for this price increase.

I was glad that the Minister himself condemned it but he was powerless to avoid it. I think this was a pity because if he had taken the advice of the Labour Party over the past two years to reactivate the Prices Advisory Body, he would have machinery available to deal with this situation. I hope he now sees the folly of not reactivating the Prices Advisory Body. If he had done so, he would not have to sit there helplessly waiting for the Fair Trade Commission to hold an inquiry.

Debate adjourned.