I think we disposed of the amendment. The Minister, on the last occasion, said he was going to consider this section again. I know we have not reached the Report Stage yet but, perhaps, the Minister has had an opportunity of giving some thought to the matter. If that is so, we could, perhaps, have the benefit of his thoughts now because it might shorten discussion on the section.
Amendment to Standing Order 30. - Finance Bill, 1965: Committee Stage (Resumed).
Question again proposed: "That section 22 stand part of the Bill".
I have given some thought to this but I am afraid I have not come to any final conclusion on it. The Deputy will remember that I suggested I was contemplating raising the exemption limit to £5,000 in the case of those benefits and on pressure from the Deputy I said I would consider looking into the section more widely than just that. Having given wider thought to it since, I found that I just could not go any further.
On that point, does the Minister not consider that while raising the exemption limit would certainly ease the problem to some extent it would not eliminate the retrospective effect of the section? As the section is at present drafted, there is a very serious depreciation in the value of pension schemes which, in fact, have already been approved by the Revenue Commissioners. Perhaps in that connection the Minister would consider some alteration in the retrospection so as to avoid the worst effects which, as at present drafted, the section would have. As the Minister knows, the provision which people make, in either contributing to a pension scheme or in making a contribution in order to secure a lump sum at death, is designed to alleviate some of the problems which arise for dependants on the death of a wage or salary earner, or a person in that position who is anxious to make some form of provision. For that reason, perhaps the Minister will further consider the possibility of making the position clear whereby it would be regarded as separate estate.
I should like to say in regard to the two points made by Deputy Cosgrave that there is no new retrospection element in this section different from that in operation under any of the other Finance Acts. As I said on a number of occasions, the duties imposed under the Finance Acts in respect of estates of deceased persons operate, and have always operated, as of the date of death.
As to the second point, as far as superannuation schemes are concerned, they have been examined and have been agreed between the proposers of the scheme and the Revenue Commissioners, and that examination does not affect the ultimate liability for death duties as such. The purpose of the examination, as I understand it, is to ensure to the satisfaction of the proposers of the scheme and the Revenue Commissioners that the contribution payable to the scheme will rank for income tax relief. Another important point is, during the course of the operation of the scheme, it would not have such elements as payment of large sums periodically so as to depress ultimately the value of the estate of the benefits for estate duty purposes. To say that the scheme has the approval of the Revenue Commissioners does not, in effect, have anything to do with the ultimate obligation of the benefits for the purposes of death duties arising on the death of the persons involved.
I should not like to give Deputy Cosgrave the impression that I have anything in contemplation in relation to the two points he has just made.
The position is that the Minister will look again at this section.
I want to make it clear to the House what I am excluding.
Are we going to have section 22 recommitted? If not, at what time would the Minister be able to disclose his amendments?
The Minister would obviously agree to recommit.
Would the Minister be able to give us any indication as to when he can put down his amendments and when Report Stage will be taken?
It depends on Deputy Booth to some extent.
There is a lot of work to be done before that day comes.
I think so, but I do not want to get caught with amendments before——
Deputy Booth need not worry; there is a vigilant Opposition.
There is a vigilance all round.
Question put and agreed to.
SECTION 23.
Amendment No. 34 not moved.
Question proposed: "That section 23 stand part of the Bill".
I am not quite sure about the position so I put down amendment No. 34 just in case. I do not think this section does anything except bring a married woman's policy within the ambit of the code. If there is anything other than that, then there is a point in the amendment. If the effect of the section is merely to abolish the separate estate effect on policies under the Married Women's Status Act, then I think we can say what we have to say on the section itself. In any event, if it is within the rules of order, I should be happy for the amendment to be discussed with the section. If the Minister would rather have it that way, I do not mind.
Section 23 does not affect the liability for duty of the policies in question.
It affects the spread of duty.
It affects their liability to aggregation.
In the 1955 Act, these policies——
I beg the Minister's pardon. My amendment is quite honestly framed incorrectly. What I meant to provide is the prevention of the spreading of aggregation. I see I have provided that the policies would not be liable to duty. I accept the view of the 1955 Act as the right view and I can solve this problem by not moving the amendment. I drafted two amendments and quite obviously handed in the wrong one.
So far as I understand it, Deputy Sweetman has in a word explained our position. We are opposed to the aggregation which is involved by the change in the law proposed by section 23. The position has been, since the enactment of the proviso referred to in section 4 of the Finance Act of 1894, that this class of benefit is provided as in the case of a person who dedicates himself to providing some benefit, for a named beneficiary, usually his wife, and a person who can never share in any way in the property which is deemed to pass on his death. It has always been accepted as socially desirable, and therefore conceded by those in charge of the taxing provisions, that, while such property shall be liable to death duties because it is deemed to pass on death, it should be treated as an estate in its own right, a separate estate, and that has meant that there has been a benefit and I think a just benefit, to the estate of a person who makes such provision.
In Deputy Sweetman's proposals, which were subsequently enacted in the Finance Act of 1955, there was a provision that if a person decided to make provision by means of a number of such benefits— to take out a policy and nominate a benefit in respect of his wife and another policy in which he nominates a benefit in respect of some other member of the family—all aggregate together and the property so deemed to pass on his death will be subject to that partial aggregation. I think that is as far as one reasonably should go in a matter of this kind. It is proper and it certainly would represent our point of view.
But here the Minister for Finance now says we will cut out the exemption or the restriction completely on aggregation. We will make all death benefits aggregate, to stand as part of the estate passing on death. A simple example has already been given and there is no harm in repeating it. If a man by means of a life insurance policy makes a provision of benefit for his wife for, say, the sum of £5,000 and dies leaving other estate, amounting to £5,000, the position would be that the death benefits, since they stand on their own, are regarded merely as an estate of £5,000, which does not fall for any duty because it is not in excess of £5,000, and no duty is payable on that estate. Once this section is passed, this will be regarded as something that will be taxable. When a man dies, if he leaves an estate which has a total value of £10,000, duty will have to be paid at the rate of four per cent, so there is a four per per cent charge of duty on a minimum provision of that kind. Any Deputy who votes for this section, let there be no mistake about it, will be voting to tax the type of benefit which decent people have traditionally provided for their families.
I do not see what case can be made for a tax of this kind. I do not see what justification can be advanced for it. Indeed, I regard it in many respects as amounting to a breach of faith in relation to people who by dint of hard work and sacrifice in the past, by pinching and saving to keep up the premiums of a life assurance policy in times of stress, have contrived to keep up that policy, in the knowledge that under the law as it has been over the past 60 years, that policy would pay such duty only as would be attributable to its own value. We now propose, at the end of a lifetime of saving by such a person who wants to have the satisfaction that he has done something worthwhile to benefit his family, to legislate to tax that man for his past efforts.
There is a great deal of talk about savings by Ministers for Finance. The Minister's predecessor spoke about savings. The Minister has not been in office long enough to have made a number of speeches on the matter, but he has made one or two speeches about the importance of saving for the future of the country. Of course that is perfectly true. It is a truism. We should all save. We should all save more, and it is State policy that savings should be encouraged. We have savings drives from time to time. Saving was encouraged long before this State was established. Saving was traditional in Victorian times and recognised as such in Victorian times. Now in 1965 it is proposed to tax that type of provision.
If the Minister stands over this section, the Fianna Fáil Party can be assured—there are no newspapers now —that at every possible opportunity, we will drive home to the people the difference between word and action. We will drive home to the people that the Fianna Fáil Minister for Finance and the Fianna Fáil Party have by this section taxed the widow and other members of the family for whom the decent father has been trying to provide. That is the only sanction we can use, the sanction of advertising to the public that the Minister for Finance is seeking to put this provision through the House by reason of his majority. Any Deputy who votes for this section will do so in the full knowledge and realisation of what is involved. I regard this as a most retrograde step and one which is contrary to accepted social policy and the national interest.
If this provision is allowed to pass through the Oireachtas, many people who are saving in other ways and doing other things which they are encouraged to do will say: "It is all very well, but when it comes near the time to collect it, when it comes near the time when my store should be available for the purpose I have in mind, will another Minister for Finance come along and tax the provision I made by pinching and saving when I could ill afford it?" This is an indefensible section and the Minister has not so far put forward any justification for it. If the State's finances are such that we have to save the Central Fund by taxing death benefits for widows, we should pack up and leave.
I do not deny that the purpose of the section is to aggregate policies already aggregated by the 1955 Act and to aggregate them with the rest of the free estate. Very few people will so arrange their business as to leave exactly £5,000 in value in the free estate and exactly £5,000 in the value of the proceeds of an insurance policy or whatever death benefit it is. At the moment if a person had that, £5,000 would be free under the ordinary exclusion of the first £5,000 of free estate, and £5,000 of the policies, even of the aggregation of policies, would also be free. There are very few people who so arrange their affairs as to fall into that category. If the sum were £5,010 under the present law, that would be liable to estate duty.
£10 would be marginal.
It would not be so marginal at all because the whole £5,010 would come in for assessment, not just the £10.
The margin for estates of about £5,000 is £5,051.
Whatever the margin is. I am suggesting that no one will so arrange his business as to leave exactly £5,000 in free estate. I propose to bring in an amendment on Report Stage that will relieve the position considerably so far as these policies are concerned. Let me give an example of what I have in mind. Let us assume that a policy worth £5,000 on the person's death matures in favour of the widow, and the person has been paying premiums on that policy for a long number of years in excess of the five year period for which gifts inter vivos will operate. Let us assume that the value of the premiums he has paid up to the five years before his death was £4,000 and the value of the premiums for the five years before his death was £1,000, in that case I propose to free the £4,000.
Under which section?
I am bringing in an amendment on Report Stage.
How can we possibly discuss something that is not in the Bill, something that is not before us in any shape or form? This is another instance of sloppy drafting.
I was listening to the arguments on the section——
We have not discussed the section yet.
——on section 22 which overflowed into section 23, and as a result of arguments and submissions from both sides of the House, I decided to bring in an amendment on Report Stage. It is only fair—indeed, it is essential—that I should tell the House at this stage——
I asked the Minister on section 22 and he said, "no".
I also want to say this. Even in the case quoted by Deputy O'Higgins, the abatement I am bringing in in a later section will more than compensate that four per cent on the £10,000 for the widow and three children—£150 and £300 for the three children, which will relieve the estate completely of death duties. The purpose of this is to get at the larger estates that are so arranged as to avoid payment of death duty and so make the smaller people, by direct taxation and otherwise, pay what should be forthcoming from these larger estates. I am not making any secret of what I am doing.
Does the Minister propose a graded relief?
No. There will be specific amounts for a widow and specific amounts for dependent children.
We cannot discuss the amendment until we see it in its concrete form. If we are to judge by the explanation we got of this section in the explanatory memorandum, it is questionable whether we shall be able to discuss it even then. The purpose of an explanatory memorandum is to make the technical provisions of a technical Bill such as the Finance Bill easily understood by lay people. What does the explanatory memorandum say about section 23:
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.
It might mean something to a person who knows something about death duty law but would any ordinary person reading that think it was intended to cover a policy effected under the Married Women's Status Act? Would any ordinary person think that such a life insurance policy was covered? Would any ordinary person think that what was meant was that the policy moneys were to be aggregated with the free estate? I want to emphasise that the submission by the Minister of this explanatory memorandum in relation to this section in particular is a disgrace. He ought to be thoroughly ashamed of putting it before the House.
Hear, hear.
Going back on the history of the variation in the law made in 1955, I was unable to find the data in my papers over the weekend. The submission made to me in 1955 as a result of which I brought to the House the amendment concerned in the 1955 Act I can remember well. I can remember what happened. A person arranged his affairs so that he took out 100 separate policies of £1,000 each for his wife. Under the law then, each policy was to be considered an estate in itself and it was obvious that arrangement was a clear avoidance of liability of duty a person should fairly pay for the benefit of the community.
Consideration was given at that time —I can remember it well and I asked the Minister to go back on the record —as to whether we should have all those policies aggregated with the free estate. A definite decision was taken by me that we should not make them aggregated, but, for the purpose of preventing that person from taking advantage of that type of avoidance, I provided that all the policies should be aggregated so that a person with very substantial means would be prevented from getting in that way a very substantial sum free of death duty.
I have not the slightest hesitation now, ten years afterwards, in saying I was right in deciding that the policies would not be aggregated with the free estate. I was right to say they should not be aggregated inter se. It prevented avoidance of death duty liabilities and it prevented hardship. The provision in this section may prevent avoidance but it brings hardship and that is where, in the framing of this Bill, the Minister has been living completely in the clouds. This is a Bill more fitted for a type of society in other countries—a society of dissolute dukes and something else.
Drunken dukes.
Drunken dukes and dissolute doxies. It is not the type of provision that will do any harm except by preventing the Minister getting the capital he so badly needs for national development. We have, I am glad to say, arrived at a situation where life insurance companies are playing a full part in national development.
Hear, hear.
This section will have the effect of preventing them playing as full a part in the future because they will not get funds to the same degree. There was every reason in 1955 for preventing people taking out a number of separate policies because each separate document was to be treated as an estate in itself. There is no reason at all to provide in this Bill that a person must aggregate in order to pay a substantially larger sum to the State.
On section 22, I said the other night that this is not a provision from which the really rich man will get benefit. The Minister defined a really rich man as not the pipe-smoking rich man but a person with assets in excess of £100,000. A person with such assets will not pay one penny more under this section because the rate of duty for a policy of £100,000 is 40 per cent. That is the maximum rate payable in any event. If there were a provision in respect of which a person who had a free estate of, shall we say, £100,000 —one of the very rich people to whom the Minister referred—and by taking out a policy worth an additional £100,000 he could make a saving, I could understand the Minister coming to the House. In fact that man has been paying exactly the same before as he will pay after the Bill.
It is only the people of moderate means who are being assaulted and attacked by this section, and it does no good if the Minister comes to the House and says he will increase the margin here or the margin there. That will get him into exactly the same difficulties as he got into in relation to another case and in respect of which he, the Government and the entire national economy, are having to pay at the present time. The reductions that were made there were wrong. They had to be limited and the fact they have been limited has meant a public outcry. He will get himself into exactly the same trouble here. He may get himself, perhaps, in slightly worse trouble when it is realised that certain sums that are paid as gratuities will not be taxable at all.
This is not a case to hit the very big man. It is a section that is being brought in by the Minister because it is easier to be uniform, easier to work in uniformity with the British law. It is not because it is necessary or desirable for us by ourselves per se here. It is a bad section. It has nothing to commend it and the Minister would be well advised to go back and see the memoranda and the decisions I took in 1955 because I think they were the right decisions, to aggregate policies as such and not with the free estate.
I just want to repeat something, since Deputy Sweetman has again brought up the explanatory memorandum. He says no ordinary person would understand the full significance of the memorandum in respect of section 23. I suggest that no ordinary person would understand any part of the memorandum. It takes a person reasonably versed in income tax law and financial matters generally to understand even the implications of the explanatory memorandum. The terms of the Bill make it such as would be understood only by an expert but even though the memorandum, with reference to section 23, does not refer specifically to insurance policies, nevertheless, it does not refer only to insurance policies. There are other forms of benefit that could be affected by it, for example, annuity bonds purchased by a person for another. I am given to understand that any insurance man, any person who is used to dealing with life assurance, would understand fully the significance of the explanatory memorandum and what section 23 meant.
I repeat that section 23 does effect what Deputy Sweetman says is so bad: it aggregates the policies which have already been aggregated with the rest of the deceased's estate. I repeat that the provision for aggregation will not affect the ordinary person, even the more than ordinary person Deputy Sweetman and Deputy O'Higgins have in mind.
Would the Minister give us an example of the type of person it will affect, at the minimum?
The minimum case would be the person with a £5,000 free estate and £5,000 provided by way of death benefit. There would be an aggregation of them.
Over and above that, estate duty is payable?
No; it would be even lower than that because the free estate now is £5,000, or rather, there is complete relief of death duties on £5,000 or more. If a person has £5,000 free estate and £5,000 death benefit estate—call it that—they are not aggregated now. Therefore, there is no duty payable, but if the aggregation of the two estates reaches more than £5,000, then they would be liable.
The first £5,000 is the house?
If the free estate is £5,100, he does pay death duty on the whole £5,100?
That is right.
Then, in point of fact, it is almost, as the Minister said, possible to arrange for your house to come to exactly £5,000, and it does not take an exceptional house to come to that figure now and in the years to come it will take an even less exceptional houses. Are we not going to reach the stage where a £5,000 free estate will be taxed in practically every instance and a £5,000 free estate, in point of fact, will be of little or no value to anybody? Could we not get a definite ruling that the first £5,000 would be free of tax, no matter how much the free estate would amount to, that there is to be £5,000 free, whether the estate is more or less? We are going to reach the stage where that £5,000 will have little or no significance for anybody.
Is it not possible that if you had what you would describe as a free estate coming to £5,100, the widow would have to sell in order to pay the tax? Is that possible?
No.
Yes.
If she could not get a loan from the bank.
No, because I am going to give her relief, as contained in the Bill already—£150. It could be more if we decide to make it more.
The Minister will appreciate that he is now dealing with two people not versed in company law or taxation matters.
I am not far beyond you. I am trying to keep pace with the Bill.
Take it this way: I die tomorrow and leave a house worth £5,200 and no money at all. What happens to my widow? Does she have to get money to pay the estate duty?
Yes, she has to pay £52 duty.
The duty would be one per cent on that but with the abatement I propose to introduce, she would have to pay no duty, and that is in the Bill.
That is in section 26.
Would the abatement be such that she would not have to pay anything?
In a small case like that, certainly.
There is no doubt about that?
There is no doubt about that, and even in respect of a much bigger case, for that matter.
Up to what figure?
That is assuming that the only asset is the house, that in actual fact you have a house worth £5,000.
I will do the calculations for the Minister, if he likes.
The £150 provision would save the widow from paying any estate duty on an estate valued up to £7,000. Then there would be £100 for each of her children, which would bring the figure still higher.
Provided the testator has done it the right way.
We can talk about that when we come to discuss Deputy Sweetman's amendment. In the case of a widow and one child, the figure would be £8,000; a widow and two children, £8,750; a widow and four children, £10,050; a widow and five children, £10,833. As I said, I am not fixed on the £150. My arm could be squeezed later on.
Thanks.
It is a question of arriving at an equitable figure.
Arising on the section as it stands, leaving out altogether the marginal cases which have been referred to, as a number of people remarked, people do not always arrange their affairs accurately nor can they be certain that values will come to precise figures. The principal objection to this section, as we see it, is that it does two things. For the first time, it aggregates insurance policies with the free estate and, secondly, it penalises people whom we have all tried to encourage and assist, the type of individuals in the community who have, as Deputy O'Higgins and Deputy Sweetman said, used their best exertions to provide by insurance policies or by death benefits for their dependants, who have made arrangements with insurance companies and who, at considerable personal sacrifice, pay each year an annuity or premium and who make arrangements whereby the widow will have an annual sum or, alternatively, in a number of cases, a lump sum, who have made the greatest possible effort, even beyond what might be expected of them, and who have denied themselves, and quite possible their families, too, while working and earning their livelihood to ensure that if they die before their families have been reared and provided for, there will be some provision for these families as a result of the policies they have effected through the means provided by insurance companies.
These people are not merely doing a good social and humanitarian act but they are also doing, from the point of view of economy, something that has been encouraged by successive Ministers for Finance: they are saving. One of the things that economists have been telling us is that too much is being spent and too little saved. These savings are economically beneficial and socially desirable. After considerable study, the insurance companies have developed schemes to provide what are considered the most beneficial terms and to provide for circumstances such as we have been discussing here.
I believe the Minister should reconsider the whole section. For the first time, we are aggregating the insurance polices formerly separated from the free estate and in that way penalising those who are providing for themselves without any obligation to the State. If this section, as drafted, goes through and deters people from making this provision which they will otherwise make, it may well be that class of people will be unable to make such provision for the widow and children and provision for these may then become the responsibility of the State.
I believe this section is economically bad and socially undesirable, and as drafted we must oppose it. I hope the Minister will reconsider it in a generous and sympathetic manner and amend it so that it will not operate against the economic interest of the State or penalise a number of people in such a way as to prevent them from discharging the social duty of providing for those dependent upon them.
I should like some information as to what class of persons we are really trying to catch. I think there is a certain amount of confusion generally in the minds of Deputies, as there is some confusion in my mind. If we are to let loose the lower income groups and if the top income groups are to be unaffected, I am forced to the conclusion that we are going to catch the middle man. I do not believe the middle man is the sort of person we should be chasing, if we should be chasing anyone. Has the Minister any information that people with estates of £10,000 and upwards are indulging in large-scale avoidance measures to defraud the Revenue? I very much doubt that.
I am forced then to the conclusion that this is an effort to achieve uniformity and, if that is so, let us throw it out. I do not see any value in uniformity as such. I am prepared to go with the Minister in any case where he can show us that there is a large-scale avoidance of tax by people who can well pay, in cases such as Deputy Sweetman has instanced from his own experience. If we relieve the small estates of any liability and if the top grade people still have to pay only the top rate, I think we are discriminating against the medium sized estate and I cannot see any justification for that at the moment.
With regard to the explanatory memorandum, I happened to be present at a discussion at which there was a manager of a trustee company and two solicitors also present, all of whom might be supposed to know something about this type of legislation and to understand the explanatory memorandum. Two of the three did not think that a policy under the Marriage Act was caught. It is true that they had only had a short time to read it but the fact remains that anybody who had a bare mimimum knowledge of these matters should have been able to follow it. I do not propose to give the names of these people in public but I will tell the Minister some time when I meet him privately. The memorandum is designated an explanatory memorandum. Explanatory to whom? Is it to the technician? He does not want it because he will read the Bill. The explanatory memorandum is meant to be something for lay people or for the technician so that he may use it as a guide to certain sections. In this case it does neither.
To go back to the section, if a very rich person has free estate of £100,000 made up of stocks and shares, a house or houses and house furniture, and if he takes out an insurance policy for another £100,000, he is no worse off after this section has been enacted than before it came into existence. He will be paying exactly the same sum. If a person has free estate of £7,000 consisting of a house, furniture and a little money in the bank and has provided an insurance policy for his wife of £3,000, as the law now stands, he would be paying on £7,000 at two per cent which would be £140. As it will be, he will be paying on £10,000 at four per cent, which is £400, less £150, which is £250. Therefore, that is the exact margin over that which everybody is losing until you become very rich, and as soon as you become very rich, you are losing nothing by this section.
As regards the explanatory memorandum, I agree with Deputy Sweetman to this extent: I presume it was meant as a guide to those Deputies who are not financial or legal experts. We are fortunate to have a few such people in the House, but it is fair to say that the vast bulk of Deputies are not in such a happy position. If this is meant to be an explanatory memorandum for Deputies, it does not serve that purpose. If necessary, there should be an explanatory memorandum to the explanatory memorandum to make it simpler. What is the point of giving this to Deputies to whom in point of fact it means little or nothing? I hope that in the case of future Finance Bills or any other Bills, we will get an explanatory memorandum sufficiently simple and in such lay language that the ordinary Deputy will have no difficulty whatsoever in seeing the pitfalls or anything that he should look for and have a point of view on.
With regard to this section 23, I do not think that anybody in the House put forward a point of view that there should not be death duties. Certainly it has not been a subject of debate today. The question arises: what are we to pay death duties on, and whom are we trying to catch? I am not particularly interested in the man of £100,000, or over £75,000, or even over £50,000. The person I am interested in is the small to middle income group person with an estate of £15,000 or thereabouts. Having that, he would have sufficient money to be able to provide for himself or to pay some death duties. I do not think this kind of person, while he may not be poor, could be regarded as being very well off. I think that if the Minister hopes to aggregate the different estates which are to be taxed on death, he ought to aggregate the benefits that can escape, that the free estate and the insurance policy ought to be aggregated, too, that the person whose house might be worth more than £5,000, if he has a similar policy, ought to be able to aggregate his estate in order to rearrange his affairs a bit better.
The purpose of death duties is to assist the State to provide revenue to help the less fortunate of the middle-class people, and these are the people who are largely going to be caught under this Bill. We are taxing these people to get money to give them benefits at some future date, which seems a crazy type of finance. Could we not try to formulate some scheme of what we believe estate duty should be and at what stage it should stop? I understand that section 22 is going to be resubmitted to the House and I would suggest that the Minister might consider having section 23 resubmitted so that in due course we could discuss it when we would know exactly what we were discussing and what his point of view is. He perhaps could tell us what type of person he is hoping to catch, what type of person he does not wish to catch, and where we stand. At the moment the whole position is far from clear to me and, I am sure, to many members of the House. The explanations he has given have not in all cases made the position clearer. In the case of a person who has a house worth £5,000, I think the Minister mentioned that he might extend this to £7,000. Is this on the free estate or on the total aggregate estate?
On the total.
I take it that the point of view of the Minister is that estates of £7,000 or over would be subject to death duties?
That would be the effect of the Bill as now before the House.
I presume that reflects the Minister's mind.
I have given the House an intimation of two further amendments that I propose which would bring it up to maybe £10,000 in that case.
I would like the Minister to state some policy or some philosophy which he believes in regarding estates, that estates of such and such in size should pay death duties and estates under it should not. It should not be difficult to let us know what exactly we believe in and are trying to achieve, the people who are to be taxed and those whom we do not want to tax. Surely we could get a definite statement from the Minister on what the Government believe. As it stands, I would not be fully inclined to vote for section 23, but if we understood what the Minister has in mind exactly, what he is hoping to do and the type of person affected, then if we hear his explanation, perhaps we would not oppose this section. For that reason, is it possible that this section could be recommitted so that we possibly would know a bit more clearly what the Minister's point of view is and his philosophy is on death duties?
As I said earlier, when we have death duties in general, we have to see that we implement them. There are certain points which make it difficult to say that at this particular stage there will be no duty or no higher duty. We have to fix some point at some stage from which you start and some point on top at which we finish. Where that point ought to be is the difficulty. We have the 40 per cent rate on £100,000 above which we do not go. Then the difficulty about the minimum arises because there are changes in certain circumstances. If a widow and children are left, the estate given to them will be liable to different rates according to the number of children left with the widow.
As I said, I am going to make further easing provisions here by relieving a certain proportion of the insurance policy. I admit that I could not tell specifically now how that would work and I could not answer Deputy Norton's question in any great detail in order to put a figure in his mind, but what I have said is that the £150 abatement which I propose to allow for the widow and £100 for each of the dependent children will, I hope, raise those two sums.
Could the Minister give special consideration to a house? In certain circumstances, it seems unfair to tax the value of a house——
When you go into certain circumstances, you create a little chink which is going to widen out to a considerable extent to relieve a lot of people. It could break down the whole code. I can assure you that people who have to pay death duties are pretty slick about this. They can not only devise systems themselves but they pay very expensive fees to advisers——
Surely if a man with a modest-sized house worth £5,000 or £6,000 makes a provision for payment of estate duty for his wife and three or four children, it is wrong to have a tax provision in respect of the wife and children and to tax the very dwelling in which they live. I know the Minister's problem. I am for death duties but I do not want to see people harmed to the extent to which this section would appear to harm them. It is a question of getting a figure.
I cannot give specific figures just now. I have not got my amendment.
And the Minister wants his arm twisted so that he can jack them up.
The amendment I propose to introduce on this section would be very difficult to explain in terms of money.
In any case, recommittal of this section on the Report Stage is tantamount to withdrawing the section and a new section being brought in?
Not necessarily.
Would the Minister not consider leaving this section over until the amendment is ready, proceeding with the other section and then resubmitting it later? It is unfair to expect us to discuss something of which we do not know the full implications.
We would be here until October if we were to recommit every section.
It might be better to recommit this.
I am prepared to stand on the section as it is, subject to the amendment I propose to introduce, but in deference to the suggestion that I might have more specific information on Report Stage, then perhaps I can adopt the same attitude on this as I did on section 22.
I thank the Minister.
Question put: "That section 23 stand part of the Bill".
The motion is carried.
Deputies
Vótáil.
I thought there was an understanding about it.
About what?
I said I would think about it.
The Minister said he was prepared to stand on the section.
Yes, but that in deference to the suggestion that I could give more information on the kind of reliefs I propose to give——
The Minister said he would stand on the section.
But in deference to the suggestion that was made——
What did the Minister mean?
I said I would adopt the same attitude in relation to section 23 as I did in relation to section 22.
The Minister is asking the House to pass the section as it stands. I have the greatest sympathy with the Deputies in the Labour Party. We know precisely what we are against. We are against the section as it stands.
We passed section 22 on the same basis.
That was different.
Section 22 gets its teeth from section 23.
If the Minister asks this House not to pass section 23, that is all right, but if the Minister asks the House to pass the section, we will vote against it.
I suggested that, subject to the amendment I am bringing in——
What amendment?
It will come on Report Stage. Members will have more information on that Stage, and if the House is satised with it and with the other amendments I propose to introduce in regard to the abatement clauses——
There is only one amendment I would accept to section 23, that is, the amendment I brought in in 1955.
If the Deputy wants it that way, he can have it.
Withdrawal of the section.
Question put.
The Committee divided: Tá, 63; Níl, 48.
Tá
- Aiken, Frank.
- Andrews, David.
- Blaney, Neil T.
- Boland, Kevin.
- Booth, Lionel.
- Boylan, Terence.
- Brady, Philip.
- Brennan, Joseph.
- Brennan, Paudge.
- Breslin, Cormac.
- Briscoe, Ben.
- Burke, Patrick J.
- Calleary, Phelim A.
- Carter, Frank.
- Carty, Michael.
- Childers, Erskine.
- Clohessy, Patrick.
- Colley, George.
- Collins, James J.
- Cotter, Edward.
- Crinion, Brendan.
- Kitt, Michael F.
- Lalor, Patrick J.
- Lemass, Noel T.
- Lemass, Seán.
- Lenihan, Brian.
- Lenihan, Patrick.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim, Thomas.
- Meaney, Tom.
- Millar, Anthony G.
- Cronin, Jerry.
- Crowley, Flor.
- Crowley, Honor M.
- Cunningham, Liam.
- Dowling, Joe.
- Egan, Nicholas.
- Fanning, John.
- Faulkner, Pádraig.
- Fitzpatrick, Thomas J.
- (Dublin South-Central).
- Flanagan, Seán.
- Foley, Desmond.
- Gallagher, James.
- Geoghegan, John.
- Gibbons, James M.
- Gogan, Richard P.
- Haughey, Charles.
- Hillery, Patrick J.
- Hilliard, Michael.
- Kenneally, William.
- Kennedy, James J.
- Molloy, Robert.
- Mooney, Patrick.
- Moore, Seán.
- Moran, Michael.
- Nolan, Thomas.
- Ó Briain, Donnchadh.
- ÓCeallaigh, Seán.
- O'Connor, Timothy.
- O'Malley, Donogh.
- Smith, Patrick.
- Wyse, Pearse.
Níl
- Barrett, Stephen D.
- Barry, Richard.
- Belton, Luke.
- Belton, Paddy.
- Burke, Joan T.
- Burton, Philip.
- Clinton, Mark A.
- Collins, Seán.
- Coogan, Fintan.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan.
- Costello, John A.
- Creed, Donal.
- Crotty, Patrick J.
- Dillon, James M.
- Dockrell, Henry P.
- Dockrell, Maurice E.
- Donegan, Patrick S.
- Dunne, Seán.
- Dunne, Thomas.
- Esmonde, Sir Anthony C.
- Farrelly, Denis.
- Fitzpatrick, Thomas J. (Cavan).
- Gilhawley, Eugene.
- Governey, Desmond.
- Harte, Patrick D.
- Hogan, Patrick (South Tipperary).
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kenny, Henry.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lindsay, Patrick J.
- Lynch, Thaddeus.
- Lyons, Michael D.
- McLaughlin, Joseph.
- Murphy, William.
- Norton, Patrick.
- O'Donnell, Patrick.
- O'Donnell, Tom.
- O'Hara, Thomas.
- O'Higgins, Michael J.
- O'Higgins, Thomas F.K.
- Reynolds, Patrick J.
- Ryan, Richie.
- Sweetman, Gerard.
- Tully, James.
Tellers:—Tá: Deputies Carty and Geoghegan; Níl: Deputies L'Estrange and T. Dunne.
Question declared carried.
SECTION 24.
Amendment No. 35 was disposed of with amendment No. 10. The next amendment is No. 36. That could be discussed with amendment No. 38.
I am not moving amendment No. 38. Amendment No. 36 meets it.
I need not explain amendment No. 36 then.
No. I am obliged to the Minister in that he has met me completely.
I move amendment No. 36:
Before subsection (4), page 21, to insert the following new subsections:—
"(4) In determining, for estate duty purposes, the value of any property which is deemed to pass on a death—
(a) as property taken under a disposition purporting to operate as an immediate gift inter vivos within the meaning of paragraph (c) or paragraph (e) of subsection (1) of section (2) of the Finance Act, 1894, or
(b) under the provisions of subsection (1) of section 30 of the Finance Act, 1941,
being a death taking place in the third, fourth or last year of the five-year period, the principal value of the property shall be reduced—
(i) by fifteen per cent thereof, if the death takes place in the third year,
(ii) by thirty per cent, if the death takes place in the fourth year,
(iii) by sixty per cent, if the death takes place in the fifth year.
In this subsection `the five-year period' means the period of five years beginning with the relevant disposition of property or the relevant disposition or determination of the limited interest, as the case may be.
(5) Where, for estate duty purposes, the aggregate value or amount or gifts to a donee within five years prior to the death of the donor exceeds £500, the estate duty chargeable in respect of the gifts shall not exceed the sum by which such value or amount exceeds £500, but no reduction under this subsection of the duty chargeable on a gift shall affect any reduction of the estate duty on other property under subsection (1) of section 13 of the Finance Act, 1914, or paragraph (b) of subsection (2) of subsection (3) of section 13 of the Finance Act, 1955."
Amendment agreed to.
In amendment No. 36, which the House has just approved, there is a typing error in the text as submitted by me. In subsection (5), second line, of the amendment, the words "amount or gifts" should read "amount of gifts".
I shall not be unkind and say something.
The amendment is passed.
You mean it is not passed. It is passed by.
I thought the Minister just moved it.
I thought the Deputy was referring to his own amendment.
No.
The word "or" has become "of".
That is right.
I move amendment No. 37:
To delete subsection (4) and to substitute the following:—
"(4) Subsections (1) and (3) of this section shall have effect only in cases in which the deceased dies after 11th May, 1968."
The Minister gave some indication at an early stage that he differed from my interpretation of section 24 and he will remember that I indicated to him then the case I had in mind. The case is that a person made a gift on 1st January, 1963, and dies on 2nd January, 1966. That is more than three years, but the disposition was made within three years before such passing. Under subsection (4), in the case I have in mind, the gift will have been made within three years before the passing of the Act and there will, therefore, be liability to duty.
In the Finance Act of 1910, section 59, the position was dealt with entirely differently. It was provided in that Act that the purpose was to deal with people who had made a gift after 13th April, 1908. I understand 13th April, 1908, was the date of the Budget of that year and the Act provided that, in the case of a person dying on or after 30th April, 1909, there was then one year in which a gift was exempt. The Act of 1909 provided that the one year would be extended to three years and that any gift already made would be clear. This Bill provides that what was three years must now be five years but it does not provide the same clearance as given in section 59. I should like the Minister to explain why he has drafted it in this way and has not followed the precedent in the 1910 Act.
I believe that what I said the last day was correct, that the transitional relieving period which now operates, that is, the three years before the passing of the Act, was the same as the transitional relieving period in the 1910 Act except that three years are substituted for one year. I also believe that if the amendment proposed by Deputy Sweetman was accepted, it would introduce a new principle altogether in death duties— one that should not be accepted. Let me give an example. If a gift were made before the passing of the Bill by a person dying after the 11th May, 1968——
It would be caught.
It would be caught under the——
Under my amendment.
Yes. If the deceased died on the 10th May, that is the day before——
The Budget.
——the three years would apply. It would be difficult, just for the purpose of this Bill, to bring in an operative date on the 10th May in one case and the 12th May in another.
Which was Budget day?
The 11th May. The date of the passing of the Act is obviously the date that ought be applied and the same transitional period, even though it is three years now as against one year in 1910, ought to continue to apply. The amendment would contemplate a three year postponement in the operation of——
——of this section and it would be an odd principle in taxation legislation.
The Minister must go back to the 1910 Act, which made it quite clear that any dispositions then made would run out, so to speak, for a year. As I understand it, Budget day was the 30th April, 1908, and the Act starts off by saying that in the case of a person dying after the 30th April, 1909, the liability provided would obtain but that there would be no liability in the case of a gift made before the 30th April, 1908. Therefore, anything that had this one year exemption on the day Mr. Lloyd George stood up to make his Budget speech remained exempt. I do not mind which way the Minister does it but the period should run out. The period ran out the year before, and the Minister should let the period run out now. My amendment is framed exactly as the amendment in the 1910 Act was framed but I am quite prepared to put it another way. Would the Minister prefer it to provide as follows: "this section shall have effect only in cases in which the deceased dies after the passing of the Act and the relevant disposition, surrender, assurance, divesting, determination or other transaction was made or effected after the 11th May, 1962"?
1965.
No, 1962, three years back. Then everything that had gone, if it was made after that date, would have run out after the passing of the Act and three years before it. I want to ensure, as was done in 1909, that a valid gift runs its term and be free. That is what the 1909 Act does in section 59 but it is not what this section does. I do not mind how the section is amended as long as it arrives at the same conclusion.
Supplementing, in a different way, what Deputy Sweetman said, I think we are all agreed, are we not, on this business of principle, that a gift which was made by anyone before the Minister stood up to make his Budget statement should carry with it and surrounding it the benefit of the law as it was at the time of the disposition? Putting it very gently——
That is a better summary.
——the consensus of opinion here is that such a gift should be treated for this purpose, or any other purpose, in the light of the law as it was when the gift was made. If we are agreed on that, it seems to me—this is only a suggestion, it is not intended to be a drafting answer to the matter—that it would be quite simple to provide a subsection in this section to the effect that this section shall not apply to any gift made before the 11th May, 1965. If we so provide in relation to any gift made before the Minister made his Budget statement, then the three year period applies in relation to any gift made after that and the law falls into place in relation to time and death and so on, but we are not concerned with providing in relation to time and death. The section would operate in relation to any gift made after Budget day, or any date we take, but obviously Budget day would seem to be the proper date. Then, after Budget day, the provisions of section 24 would apply.
I think that would meet what Deputy Sweetman has in mind and the expressed view and sentiment of the Minister that retrospection should not apply. The only way it does, it seems to me, is if you pass from Budget day and take a day such as the day after the passing of the Act. Then you become involved in too many complications in dealing with the death of the man, the time of disposition and so on, and you get into the kind of difficulty in which we all are. Go back to the simple thing and say that the Act will not affect any gift made before Budget day and that only the law then applying should attach to these gifts, and in relation to any gift made after Budget day, if the Dáil passes this Bill, the new law should apply. Certainly that would be in accordance with ordinary democratic practice and would kill any idea of retrospection.
I would suggest to the Minister that if he makes some approach along that line on the Report Stage something could be done. Certainly I think it is clear that the examples given by Deputy Sweetman do indicate, within the section as it stands, a case of retrospection. They do indicate in regard to a disposition made prior to the passing of this Bill, or prior to Budget day, that there is a situation in which under the section there is retroactive effect of the law and the disposition made in the light of certain law is now finding the law different. We do not desire that and we should not allow it to happen. We can prevent it by the simple expedient of making the section apply only to gifts made after the Minister's statement.
As it appears from the section as drafted, the 1910 Act to which we have referred was in fact the Finance 1909-10 Acts of 1910. Apparently, for what reason I do not know, the Act covered the two years.
They had to increase the number of Lords. That was the time they had the row in the House of Lords.
The section as it stands simply substitutes "5 years" for "3 years" in both places where "3 years" occur in the 1910 Act. I understand that, for the purpose of that Act, Budget day was 30th April, 1909, and, by reason of the year's operation of the inter vivos provision, gifts made before 30th April, 1908 were excluded. Therefore, the retrospective period was one year. It coincides with the period in which gifts inter vivos were then excluded. We are doing exactly the same thing, except that we are putting the five years.
That was not full protection and you are not doing it.
It may not be full protection. My argument on this amendment is designed solely to ensure that you do exactly what was done in 1909. As I understand the situation, the Finance Act, 1910, was passed on 29th April, 1910. The Finance Act, 1910, was enacted as a result of the Budget on 30th April, 1909. When the Chancellor of the Exchequer, as he then was, stood up on that date, he indicated that any gift which had already run its full term before Budget day would be clear. That is not the position here because the words here are "within 3 years from the passing of the Act". It seems to me that that is not the same. The position, as I read it, is that if the Minister takes the Finance Act, 1910, and takes section 59 and alters all the figures, 5 for 3, all the way down in section 59 and then comes back to this House, I do not know about my colleagues but I shall not object.
Deputy Sweetman would be satisfied with that, but I would not.
I got a bad training when I was in that seat over there.
It is quite true that the object of that drafting is to ensure that a gift which has achieved the purpose under the law at the time of the disposition will not now be caught. In other words, a gift in respect of which, at that time, the 12 months had expired, would not be caught. But that is only a little bit of double-dealing, if you like, because the objection to retrospection surely is in relation to the gift about which, at the time it is made, the law says: "If you make that gift and 3 years pass, that gift shall not be liable to death duties", and so it should be. Now, 12 months later—that 12 months gone— the Minister for Finance comes in and changes the law and the person who had the gift and the person who made it now find that instead of merely having to live another two years, he now has to live another four years to escape the impact of death duties. That is retrospection and, no matter whether or not the section in the Finance Act, 1910, is correctly applied here, I would feel that that kind of retrospection is contrary to the form in which all of us here would desire to see our legislation.
We can achieve an absolute guarantee that there will be no retrospection if we say: "If we are changing the law, it shall not affect any gifts made before we announce the change." That is perfectly clear. It is simple and easily understood. It does not require any technical knowledge or anything of that kind to appreciate what we are doing. The law shall operate only in relation to gifts made after Budget day if we say that there is no retrospection and the built-in protection for a gift will operate or not operate according to the law immediately before it. That is the kind of object I thought the Minister was standing for and a sentiment which I thought he was expressing and which I was prepared to applaud.
I would agree very much with Deputy O'Higgins on that point. I feel it is a pity that we have not the Official Reports of last week's debate because, according to my recollection, we dealt with this matter generally in connection with section 18. A number of amendments were put down by Fine Gael Deputies dealing with retrospection generally which were withdrawn on the Minister's general undertaking to review the position further. I cannot see any real difference between the matter which the Minister has conceded to some extent under section 18 and the matter which is under discussion now. I am all with Deputy O'Higgins: the simpler the better. I think that is a very good rule to adopt. Far too much of our financial provisions and our taxation code is shrouded in complete mystery, due to the amount of verbiage which surrounds it. I should feel very much happier with this if the Minister would give us some indication that he will reconsider this subsection of section 24 in exactly the same way as he has done in relation to section 18.
I propose to leave the section as it stands.
Amendment, by leave, withdrawn.
Amendment No. 38 not moved.
Question proposed: "That section 24, as amended, stand part of the Bill".
Will the Minister agree to make any clarification of subsection (4)?
No clarification is necessary. I have told the House that gifts made three years or more before the passing of the Act will not be caught by this section. All other gifts will be.
That was not what was done in 1910.
Having met us on the other sections to achieve uniformity, with the only precedent which is available to us, it is a pity the Minister would not reconsider having complete uniformity at this stage.
I am saying there is uniformity between the provisions of this Bill and the previous Bill.
Would the Minister not agree to make an act legal at the time the deed was done, irrespective of how many people were involved or how much might be involved but purely on the principle of not having retrospection? Does the Minister not think it would be advisable to reconsider this and to reword it? He said last week that if there was a fault, it was in being too reasonable but that is not a fault: it is a very good thing to aim at. Would he not reconsider that Budget day should be the day and that anything which passed before that should be excluded?
No.
Question put.
The Committee divi ded: Tá, 66; Níl, 47.
Tá
- Aiken, Frank.
- Allen, Lorean.
- Andrews, David.
- Blaney, Neil T.
- Boland, Kevin.
- Booth, Lionel.
- Boylan, Terence.
- Brady, Philip.
- Brennan, Joseph.
- Brennan, Paudge.
- Breslin, Cormac.
- Briscoe, Ben.
- Burke, Patrick J.
- Calleary, Phelim A.
- Carter, Frank.
- Carty, Michael.
- Childers, Erskine.
- Clohessy, Patrick.
- Colley, George.
- Collins, James J.
- Corish, Brendan.
- Corry, Martin J.
- Cotter, Edward.
- Crinion, Brendan.
- Cronin, Jerry.
- Crowley, Flor.
- Crowley, Honor M.
- Cunningham, Liam.
- Dowling, Joe.
- Egan, Nicholas.
- Fanning, John.
- Faulkner, Pádraig.
- Fitzpatrick, Thomas J. (Dublin South-Central).
- Flanagan, Seán.
- Foley, Desmond.
- Gallagher, James.
- Geoghegan, John
- Gibbons, James M.
- Gogan, Richard P.
- Haughey, Charles.
- Hillery, Patrick J.
- Hillard, Michael.
- Kenneally, William.
- Kennedy, James J.
- Kitt, Michael F.
- Lalor, Patrick J.
- Lemass. Noel T.
- Lemass, Seán.
- Lenihan, Brian.
- Lenihan, Patrick.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim Thomas.
- Meanney, Tom.
- Millar, Anthony G.
- Molloy, Robert.
- Mooney, Patrick.
- Moore, Seán.
- Moran, Michael.
- Nolan, Thomas.
- Ó Briain, Donnchadh.
- Ó Ceallaigh, Seán.
- O'Connor, Timothy.
- O'Mally, Donogh.
- Smith, Patrick.
- Wyse, Pearse.
Níl
- Barrett, Stephen D.
- Barry, Richard.
- Belton, Luke.
- Belton, Paddy.
- Burke, Joan T.
- Burton, Philip.
- Clinton, Mark A.
- Collins, Seán.
- Coogan, Fintan.
- Cosgrave, Liam.
- Costello, Declan.
- Costello, John A.
- Harte, Patrick D.
- Hogan, Patrick (South Tipperary).
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kenny, Henry.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lindsay, Patrick.
- Lynch, Thaddeus.
- Lyons, Michael D.
- McLaughlin, Joseph.
- Murphy, William.
- Creed, Donal.
- Crotty, Patrick J.
- Dillon, James M.
- Dockrell, Henry P.
- Dockrell, Maurice E.
- Donegan, Patrick S.
- Dunne, Thomas.
- Esmonde, Sir Anthony C.
- Farrelly, Denis.
- Fitzpatrick, Thomas J. (Cavan).
- Gilhawley, Eugene.
- Governey, Desmond.
- Norton, Patrick.
- O'Connell, John F.
- O'Donnell, Patrick.
- O'Donnell, Tom.
- O'Hara, Thomas.
- O'Higgins, Michael J.
- O'Higgins, Thomas F.K.
- Reynolds, Patrick J.
- Ryan, Richie.
- Sweetman, Gerard.
- Tully, James.
Tellers:— Tá: Deputies Carty and Geoghegan; Níl: Deputies L'Estrange and T. Dunne.
Question declared carried.
SECTION 25.
Question proposed: "That section 25 stand part of the Bill".
Might I ask the Minister, in dealing with section 27 of the Finance Act, 1938, to which version of that Act he is referring?
Section 27 deals with gifts inter vivos of foreign property.
I know that. I want to know to which version of the Act the Minister is referring.
I do not know what versions the Deputy is talking about. Perhaps he will enlighten me.
I shall enlighten the Minister. The wording of the section in the bound volume of the Act is not the same as the wording of the section in the copy of the Act deposited in the Supreme Court.
I cannot answer that. I did not realise there was a difference.
Surely the Minister is briefed on that. It is well known. If the Minister wants enlightenment, I shall refer him to a little book by Mr. Bartholmew Collins, the former head of the Estate Duty Office. At page 72 thereof, he draws attention to the fact that the bound volume is not the same as the version in the Supreme Court. I should like to know which version the Minister is now amending.
There is some duplication of words in one of the copies. I do not know whether it is the copy in the Supreme Court or not. I am relying on the one passed in the House, whichever that is.
Which one is that? I can understand the Minister's section in one case; I cannot understand it in another. I should like the Minister to explain it.
I am afraid I cannot. I was not aware of the situation until now.
Perhaps Deputy Sweetman could help by explaining what the discrepancy is?
The words "of the interest" are inserted in the bound volume and they are not in the copy in the Supreme Court.
What section is it?
Section 27, the section we are amending. This is the very section. If the words "of the interest" are included, I cannot make head or tail of what the section means. If the Supreme Court version is right, the section is intelligible. I wonder would the Minister explain which he is working on?
I do not know how the difference would arise. I can only say that I rely on the Bill as passed by the Houses of the Oireachtas as the authentic Act.
Will the Minister be in a position to advise us which is authentic before the next Stage of the Bill? May I tell the Minister the Supreme Court one is the correct one and the words "of the interest" are not included in the Act and should not be considered?
May I make another inquiry, and this section will do as well as any other section? When will we get the bound volume of death duties which we were promised by the Minister's predecessor a long time ago, and which version will be included?
I understand it is with the printers. Other considerations have arisen in that case.
Which version does it include?
The correct one, I am sure.
Question put and agreed to.
SECTION 26.
I move amendment No. 40:
In subsection (1), page 21, line 31, after "years" to add:—
"or who if over the age of sixteen years was at the death of the deceased receiving full time instruction at any university college, school or other educational establishment."
The object of the amendment is, I think, quite clear. It is to provide the abatement provision which the Minister proposes, in the same way as is allowed in the income tax code, in respect of a member of the family who is receiving instruction at a university, school or other educational establishment. It does not require any words of mine to convince Deputies that such a boy or girl is in all respects a dependant in the household. It would appear to be reasonable that, if in a family containing such a boy or girl there is the tragedy of the death of the father, or whoever is the important member of the family, if we are providing for abatement for the widow and children under 16 years of age, we should certainly extend the abatement to a child over 16 years of age who is not earning because he or she is seeking further education and training. That is the object of the amendment, and I hope the Minister will sympathetically entertain the proposal in the amendment, even if the manner in which it is drafted or put forward is not particularly apt.
Is there the same allowance for income tax purposes?
Yes.
I wonder can I add something to what Deputy O'Higgins said, because I personally would like to see some extension of the definition of "child". I would be with him completely that the other classes to which he referred are very deserving. Very often, particularly in the country areas, we find a child who is over 16 years but is still very much a dependant. There may be a daughter, or two daughters, still working at home for no wages, and sometimes there may even be sons over 16 years working on the farm, and with no income of their own. I do not know what sort of definition we should bring in and I wonder would the Minister be able to help us in that regard.
I am not a country man myself and possibly it is out of order for me to introduce this, but it is something which I know other Deputies are concerned about, and if someone else could develop this theme better, I would be quite happy about it. I feel that limiting it to children of 16 years does not really meet the case. Probably a better case could be made than I can make for children who are over 16 years, but who are still literally dependants, either because they are not paid wages or because they are physically or mentally handicapped in some way, and will remain dependent for the rest of their lives.
Would "dependant" in this case seem to indicate a child who would be dependent on the estate? It is common in country districts for a boy or girl to be resident at home and not have any earning capacity other than their labour in the home. When they come to leave the home, they must of necessity be a burden on it. It seems to me that if the relief proposed by the Minister is to have effect in the rural areas, it should cover children who are dependent on the estate.
One other point strikes me. I listened as attentively as possible to the discussion on the benefit to the widow. If the wife is the legal owner and she dies first, is the widower entitled to the same benefit?
No.
Would the widower be entitled to the same benefit?
No.
Not under the section as it stands. The Deputy has a very good point.
If the wife is the owner of the property and she dies first, would the husband, the widower, be entitled to the same allowance?
Not under the section.
Does it not seem right that he should?
This is a relief, and it is difficult to create all the reliefs at the same time. The difficulty which would arise in the case suggested by Deputy Booth and perhaps amplified somewhat by Deputy Kennedy is in trying to define "rural areas". This is a problem which has cropped up in many Bills. I think it would be reasonable to accept the spirit of the amendment moved by Deputy O'Higgins. I think I can go that far anyway.
Good.
We can see how far we can go along the other road in future years. I think we should confine it at the moment to something well known and well ascertainable. I do not suggest that Deputy O'Higgins's amendment is not properly drafted—it probably is—but subject to the introduction of a suitable amendment, I accept the principle of his amendment.
I appreciate the Minister's approach.
Amendment, by leave, withdrawn.
I move amendment No. 41:
In subsection (5) to delete paragraph (a).
In this amendment I am trying to draw attention to something I think the Minister does not mean. In the first part of section 26, "benefit" is defined as being property accruing to a dependant. We then go on to define a "dependant" as a widow or child. In subsection (3) (a) and (b) we define the concession that is being given in relation to the widow's benefit or in relation to the child's benefit. We must therefore relate back the concession to property accruing to a child, for example, under the joint meaning of these two sections.
When you come on to subsection (5) (a), you find:
In a case in which the amount of a benefit is not affected by a liability to estate duty arising in connection with the death of the deceased, no abatement shall be made under those subsections;
A paraphrase of that would be: "In a case in which the amount of the property going to a child is not affected by a liability to death duty." It seems to me that on that basis if a person has an estate of £15,000—the size of the estate provided by the Minister— and leaves a widow and three children, if he leaves each of the children £2,000 and the residue to the widow, then none of the children is getting a benefit affected by a liability to death duty.
That is correct.
Therefore, the amount allowed in that case is £150. If, on the other hand, the same testator goes to a good solicitor——
I know a good one.
——and the solicitor draws the will with this section in mind and says the effect of the will is to leave nine-fifteenths to the widow and two-fifteenths to each child, then the abatement of estate duty will be not £150 but £450. It seems to me obviously wrong that the substantial difference in the concession of £300 should depend on a mere technicality in drawing a document like that. It seems grossly unfair that premium should be put on that technicality. An efficient way of covering both cases would be through this amendment. I am equally willing to accept any other method by which the normal manner in which a testator would draw a will like that would qualify for the benefit rather than the abnormal way of putting it at one-fifteenth shares.
Deputy Sweetman is quite correct. If a person leaves specific sums, the residue would be caught for estate duty and not the specific sums. One need not go to the point of setting out certain fractions of the estate in order to ensure that the maximum abatement benefit will be got, but in the case of the estate he mentioned, if instead of saying two-fifteenths, the testator said £2,000 to child A, £2,000 to child B and the residue to the wife, that would leave the wife the same fraction, nine-fifteenths. The solicitor could advise the client to include in the will provision that all the specific bequests will bear a share of the duty, in which event the full value of the abatement would accrue, and I am sure a prudent solicitor would be alive to that situation and so advise his client.
Is it not bad deliberately to draw something as technical as that? The difference would not mean much in duty.
To do it otherwise could possibly leave people who are not dependants—strangers, perhaps— open for unwarranted benefits. I do not understand how it might arise.
Could the Minister not draft it quite simply otherwise? Could he not provide that for the purposes of this section, but no further or otherwise, a testator shall be presumed, unless he has declared the contrary, to wish that each legatee would be liable for and pay duty? We could find a form of words to do it if the Minister agrees it is wrong to have this technicality.
There is the difficulty in other sections of other Finance Acts and in this Bill that unless a solicitor, in drawing a deed or document, is not conscious of the provisions of the Act the client may be caught for taxation for which he would not otherwise be liable.
I entirely agree.
It is not the job of the Legislature actually to draw wills but to provide the means whereby wills prudently drawn can get the benefit of whatever the Legislature provides.
This is an obvious one. There was the provision about spouse exemption which had not been provided in an earlier section. If the Minister, with all his advisers, does not provide it, how could he expect the testator to provide it? However, I shall try to get it done the other way on Report Stage. I do not wish to open the door to avoidance but I want to provide a fair do for the child.
If the Deputy has something in mind, we can consider it.
Amendment, by leave, withdrawn.
Section 26 agreed to.
SECTION 27.
I move amendment No. 42:
In subsection (1), page 22, line 22, to insert "or created" after "conferred".
This amendment was prompted by the experience of the House in relation to the introduction of the Committee Stage of the Succession Bill. Deputies will perhaps recall that we had the novel experience of the Minister for Justice moving a Financial Resolution on the inception of the Committee Stage of the Succession Bill. On inquiry from Fine Gael Deputies, it quickly became apparent that the change in the law proposed under the Succession Bill would, by reason of the creation of legal right in a widow, create an estate or a succession which might pass and which might become liable to death duty provisions. Here, under section 27, there is still the obscure approach which seems to be part and parcel of the drafting of the finance legislation, because this coy section—it is a coy section—is a provision aimed at giving relief.
It proposes in effect to abolish legacy duty in respect of widows and that, of course, is desirable. However, the manner in which it is put forward here is to abolish the one per cent on succession duty and the additional succession duty at the 10/- rate on a legacy from a testator or intestate dying after the passing of the Bill. Of course, this Bill, presumably, was in draft at the same time as the Succession Bill went into draft and possibly the drafting was not fully considered because it appears to me that "a succession conferred" are words suitable to cover successions which arise in the normal way but I do not know whether the word "conferred" is sufficiently wide to include a succession created by statute, a statutory right which, in fact, is the result of the Succession Bill if it is passed.
It is for that reason that I suggest, to make the thing perfectly clear, that we should include in the section the words which I have suggested, which would mean that the concluding words of subsection (1) of the section would then read:
... or on a succession conferred or created after such passing.
If that were done it would be perfectly clear that the statutory legal right if it is subsequently passed and becomes part of the law would be a succession created by Act of Parliament and would enjoy the exemption which is proposed in this section.
I am told the technical word employed in the Death Duty Acts in relation to the creation of successions is "conferred". That word is in sections 3 and 5 of the Succession Duty Act, 1853 and, therefore, it is considered that the word used, "conferred", includes the word "created" proposed by Deputy O'Higgins.
With regard to the point he raised on the Succession Bill, the Succession Duty Act of 1853 in section 2, says that every devolution by law of any benefit or any beneficial interest in property confers a succession. So that, the Succession Bill is caught up, I take it, with the earlier Succession Duty Act, 1853, and I understand that the word "conferred" is all-embracing for the purpose.
I am satisfied with the Minister's explanation.
Amendment, by leave, withdrawn.
Question proposed: "That section 27 stand part of the Bill."
Does this include quasi-succession duty?
I cannot answer that offhand.
Will the Minister have a look at it, because it should? It should include everything where it is going in the issue bracket—the spouse and widow bracket. Is that not what the Minister intends?
Yes, that is right.
I am not quite sure that it does not include quasi-succession duty as it is drawn. I am not prepared to be dogmatic about it.
I will check that and we can talk about it again, if necessary.
If it does not include it, the Minister will include everything for issue?
I am told the words "quasi-succession" are not used, generally anyway. The term does not seem to be well known.
We will leave it until the Report Stage but I think we could find it in Webster Brown anyway. I will not say that categorically but I think so.
Question put and agreed to.
NEW SECTION.
I move amendment No. 43:
Before section 28, but in Part III, to insert a new section as follows:—
"The duty upon an account of property or an interest ceasing on death to which sections 18 and 19 of this Act apply or the duty due upon an account of chattels real, may, at the option of the person delivering the account, be paid by eight equal yearly instalments or sixteen half-yearly instalments with interest at the rate of 4% per annum from the date at which the first instalment is due and such instalment shall be due at the expiration of one year from the death, and the interest on the unpaid portion of the duty shall be added to each instalment and paid accordingly; but the duty for the time being unpaid with such interest to the date of payment may be paid at any time, and in case the property is sold, shall be paid on completion of the sale."
The whole point of sections 18 and 19 of the Bill is that you get behind the shares of the company and you go back to the property itself. If you are going back to the property itself for the purpose of assessing duty, equally you should go back to the property itself for the purpose of the reliefs. What is sauce for the goose should be also sauce for the gander.
In relation to land, hereditaments and real estate generally, there is a relief where deaths come quickly one after the other and there is equally in such cases a provision for extending the payment of the duty over a period of years. The amendment which Deputy O'Higgins moved and to which he asked me to address myself covers the extension rather than the quick succession. We had a discussion on the quick succession part of it already but, if there is going to be the going back behind the ownership of the shares to make sure that greater duty is obtained, equally there should be the arrangement to allow the people concerned to pay the duty over a period of years. If this is not done it will have, in my view, the effect of closing down many a family business after the death of one of the main owners of such business.
The instalment provisions available under the 1894 Act apply to real estate and the amendment, I gather, seeks to apply these provisions to duty chargeable under sections 18 and 19 of the Bill. When real estate becomes chargeable under the provisions of these two sections, the statutory instalment provisions of section 6, subsection (8) of the 1894 Act will apply in the ordinary way.
And there will be the instalment provisions?
There will be the instalment provisions.
That is fair enough. I withdraw the amendment on behalf of Deputy O'Higgins. He thought that there would not be.
Amendment, by leave, withdrawn.
NEW SECTION.
On behalf of Deputy T. F. O'Higgins, I move amendment No. 44:
Before section 28, but in Part III, to insert a new section as follows:—
"(1) Section 15 of the Finance Act, 1914, is hereby amended by inserting after `land' where it first occurs of the following:
‘or any property to which sections 19 or 20 of this Act applies or chattel real property'.
(2) The provisions of section 15 of the Finance Act, 1914, shall apply in cases covered by the provisions of section 18 of this Act."
There is a peculiar arrangement in relation to certain of these provisions that where it is freehold land the benefit arises but no such benefit arises where the land is only leasehold and it is to ensure that such benefit is included that Deputy O'Higgins has put in the amendment. This is the quick succession case. I thought the two were together.
I think they are related in some way, all right. The first paragraph of the amendment suggests that section 15 of the Finance Act, 1914 should apply also to sections 19 and 20, that is, the sections dealing with immoveables and to chattel real property. In actual fact, the 1914 provision does apply to chattel real property and will apply to land subject to duty under section 19 or section 20 of the Bill.
That is fair enough. Because of what section would it apply? I was looking at the wrong section.
Section 15 of the 1914 Act.
That is the non-succession section. There must be some general section somewhere. Would it be section 5 (2) of the 1894 Act?
I understand that if land or shares of land ...
When the Minister says "land or shares of land" does he mean portions of land?
Shares of land.
Where we have companies that have shares of land does it apply?
I understand it is automatically applicable.
Fair enough.
Amendment, by leave, withdrawn.
NEW SECTION.
I move amendment No. 45:
Before section 28, but in Part III, to insert a new section as follows:—
"(1) Subsection (1) of section 10 of the Finance Act, 1894, is hereby repealed and there shall be substituted in lieu thereof the following:
"Any person aggrieved by the decision of the Commissioners with respect to the repayment of any excess of duty, or by the amount of duty claimed by the Commissioners whether on the ground of the rate charged, the value of any property or otherwise may appeal to the High Court within the time and in the manner provided by Rules.
(2) Where a person brings an appeal under section 10 of the Finance Act, 1894, the Commissioners may, if they so think fit, charge the assets of the deceased with the amount of the duty claimed, and such charge shall have effect as on and from the date upon which such charges is duly registered against the property of the deceased and shall take priority over all charges and incumbrances whether statutory or otherwise.
(3) No fee or other payment shall be required for the registration of any charge authorised by subsection (2) of this section.
(4) Subsection (4) of section 10 of the Finance Act, 1894, is hereby repealed."
The object of this amendment is to simplify and make easier the means of appeal against a charge of estate duty as put forward by the Revenue Commissioners. Deputies who have taken part in this debate up to the present must appreciate that the death duty code in this country is extremely complex, difficult and technical. Complex and involved as the situation is at the moment, the position of people who, in fact, are subsequently visited with a charge for duty is made extremely difficult by the form in which an appeal may be taken. One would imagine that there should be a simple form of appeal, but, under the law as it is, if a person wishes to appeal against the decision of the Revenue Commissioner that person must lodge the amount of duty.
That is frequently quite an intolerable liability to discharge. People are often not in a position to do it, which means that the appeals section cannot be used and does not function. If we decide to confer the right of appeal on a person charged with duty, it is only fair that we should make the appeals section work. At the moment it does not work in many cases because the duty to be lodged cannot be found. The object of the amendment is to ensure that, where a person is aggrieved by a decision of the Revenue Commissioners, he can lodge notice of appeal and have the matter decided either for or against him by an independent court.
I suggest that subsection (1) of section 10 of the Finance Act contains ample facilities for appeal. It is true that it is a condition that the appellant should lodge the duty claimed by the Revenue Commissioners but the court has power, in cases of hardship, to dispense with the lodgment requirement subject to the appellent giving securities for the amount claimed. That should take care of the ordinary case in which hardship would arise. My experience of the courts is not as extensive as that of Deputy O'Higgins but I have found that the courts are generally reasonable in taking security for costs or for tax, as in this case, and they would not, in genuine cases of hardship, impose an undue burden on any person seeking recourse to the courts.
Deputy O'Higgins suggests as part of the amendment that where a person brings an appeal under section 10 of the Finance Act, 1894, the Commissioners may, if they so think fit, charge the assets of the deceased with the amount of the duty claimed, and such charge shall have effect as on and from the date on which such charge is duly registered. Two difficulties would be involved there. The first is that if the property is settled property a charge would not be effective in any event. I do not think it would be equitable that all the property of the person should be charged. The subject property of the appeal must be the same as the property charged for.
If the assets of the deceased were in the form of British securities, the assessment of duty on which was appealed, then the charge of the Revenue Commissioners would not be very effective. Having regard to this difficulty and to the fact that the courts have the power to dispense with the lodgment of the amount of the duty claimed, I suggest that the appellant has ample protection already.
Amendment put and declared lost.
Progress reported; Committee to sit again.