Dáil Éireann debate -
Tuesday, 20 Jul 1965

Vol. 217 No. 10

Finance Bill, 1965: Report Stage.

Mr. Sweetman

I move amendment No. 1:

In page 6, line 47, after "occupier" to insert "landlord or immediate lessor".

This amendment was put down purely for the purpose of ensuring that we would get on the record the explanation that the Minister was good enough to send to me privately. I understand from the Minister that the word "occupier" covers everything that section 6 of the Finance Act, 1928, covered having regard to the proviso contained in section 162(1) of the Income Tax Act, 1918, which is now being inserted in subsection (4) of section 3 of this Bill. The section in question empowered the collector of taxes to recover tax charged on property by distress either on the goods of the person chargeable or on the property assessed. The proviso ensures that where there has been a sale of the property for valuable consideration, the pre-sale liability of the vendor under Schedules A and B cannot be recovered after the sale by a distress on the property if the vendor is no longer in occupation. In effect, the Minister says the property will, by virtue of the proviso, enjoy the same immunity from distress under section 162 as if the purchaser had been provided with a certificate under section 6 of the 1928 Act. It is not necessary therefore, the Minister tells me, to include in the proviso reference to the landlord or immediate lessor. I am perfectly happy to accept the Minister's explanation, and to withdraw the amendment.

Minister for Finance (Mr. J. Lynch)

I can confirm Deputy Sweetman's interpretation.

Mr. Sweetman

I wanted to make sure that I had not to keep this for the future.

Amendment, by leave, withdrawn.

Mr. Sweetman

I move amendment No. 2:

In page 10, between lines 36 and 37, to insert the following section:—

Section 21 of the Finance Act, 1922, shall be amended by the addition of the following subsection:

(10) No direction shall be given under this section in respect of any accounting period after 6 years have expired from the date of the submission of the accounts of the company to the Inspector of Taxes.

I should like to refer to the discussion with the Minister on Committee Stage, and to come back to the suggestions then made. On Committee Stage, I moved an amendment suggesting that a direction should not be given once, say, a period of one year had expired. The Minister made the case that the effect of that would be to negative entirely the effect of the section itself in the Finance Act of 1922 and suggested that a period of three years was normal. I have doubled the period of three years and made it six, and I want to urge on the Minister very strongly either to accept this amendment in its present form, or to give a categoric assurance administratively that the period will not be exceeded.

On the last occasion the Minister indicated that his information was that the period of 20 years which I mentioned was utterly fanciful. I have since taken the opportunity of verifying with certain accountants and I have received categoric assurance from an accountant of repute, well known to the Minister as he is to me, that there is on his desk at the moment a case in which the Revenue Commissioners are seeking by means of telephone communication to go back, under section 21, for a period of 20 years. I want to suggest that is an entirely wrong approach. I want to suggest also, as I suggested on the last occasion, that the method of telephonic communication under which, for the purpose of bluff—not to use any stronger word as I used on the last occasion—a certain company should be asked to pay £X in additional tax, and then an immediate drop, so to speak, in the Revenue demand to half of £X when it is challenged, is wrong.

I want to suggest to the Minister that there used to be in the back duty investigation section of the Revenue Commissioners, and indeed in every section of the Revenue Commissioners, a clear and explicit view and understanding that the Revenue Commissioners demanded the tax which they believed was due by the taxpayer and that there was no question whatever of demanding more than they thought was due and in opening their mouth too wide, so to speak, at the beginning, laying the foundation for a settlement at a lower figure. That is not the way tax legislation should be implemented. The position should undoubtedly be that the taxpayer should be asked, and should be directed, to pay the sum that is legally and properly due, and there should be no question of a demand being made for more than is due, so that the taxpayer, out of a feeling of fear, will cough up something perhaps more than he might have coughed up if an excessive demand had not been made in the initial instance.

I want to say that having discussed this matter with accountants, it is not a matter of which solicitors have direct cognisance—since the last Stage of the Bill, I am assured that everything I said on that occasion can be proved, and proved to the hilt, and that recently a new practice has grown up of endeavouring to frighten taxpayers into making some payment by demanding, at the initial stages, an outrageously excessive one; by suggesting, for example, in the cases I have mentioned, that the Revenue Commissioners proposed to go back for 20 years over a company's profits for the purpose of making a direction under section 21 of the Finance Act, 1922. It is wrong; it is amoral; and it is extremely bad administration. It is not likely to provide that certainty in the commercial community which is an essential pre-requisite of proper commercial development. If companies cannot possibly tell where they stand for a period as long as 20 years, then how can they possibly make any plans in relation to their capital programme, to their capital expansion, to their capital development?

The Minister is, I think, precluded by the terms of the statute from applying to the Revenue Commissioners for cases under name. I am told, however, that I will be given the reference numbers of the cases concerned without being told the names of the people in question and that, on those reference numbers, the Minister can, without breaking the secrecy that is properly imposed on the Revenue Commissioners, verify whether or not what I have said is true, that, as I say, this practice has now become widespread —only recently become widespread. In fact, one accountant whom I met last week quite casually mentioned the matter to me. He said: "I heard that you raised in the Dáil the question of a direction going back for 20 years and that the Minister said that that did not happen. I can assure you that I have a case on my table where it has happened and I will give you the reference number of that case if you want it at any time without disclosing the name of the client." It is because I met that accountant last week and because I got that categoric assurance from a second source, with the assertions I made here on Committee Stage, that I decided to put down this amendment today for Report Stage.

It seems to me that there must be some method of arriving at administrative certainty, that a taxpayer can know, within a period of at least six years from getting his accounts, whether or not those accounts are completely acceptable. They should be done in a period of two years—really, within a period of one year, but I will accept a period of two years. Certainly, a period of six years is more than ample for anybody to deal with accounts and to see the pattern, and I would strongly urge the Minister to accept the amendment.

Mr. J. Lynch

I must accept what Deputy Sweetman has said when he tells the House that an accountant has consulted him to the effect that a demand has been made on a company going back over a period of 20 years. Demands are not made for more than the amount of tax properly due——

Mr. Sweetman

Would the Minister accept my assurance, too, that they are?

Mr. P. Belton

They are, of course.

Mr. J. Lynch

I accept it as an assertion.

Mr. P. Belton

It is true.

Mr. Sweetman

An assertion that is true.

Mr. J. Lynch

The purpose of the section is to ensure that companies making profits will be taxed on the profits or will use their profits for the development of their businesses and expanding employment and trade. It would be wrong to accept a specific minimum number of years beyond which the Revenue Commissioners may not go back. It happens that companies, having made profits, do not distribute them. If they distribute profits then, of course, they come into assessment for tax purposes. However, if a company does not distribute profits on the ground that they propose to use them for the benefit of the business, for the purpose of expansion, and if, for one reason or another, they neglect to carry out that expansion or neglect to develop the business for the purposes for which they held back the profits, then it is not unreasonable for the Revenue Commissioners to ask them what they propose to do with those undistributed profits.

If there were a time limit of three years or six years beyond which a direction may not be made, then it would be possible for a company to (1) refrain from distributing its profits so that they would become taxable on distribution or (2) to hold on to those undistributed profits up to a point beyond which a direction cannot be given and then those profits would be free of tax. I suggest——

Mr. Sweetman

They have already borne income tax and corporation profits tax.

Mr. J. Lynch

I should have prefaced my remarks: it is only for surtax. With regard to the point as to uncertainty as to what liability they will owe to the Revenue Commissioners ultimately, I am assured that in the case of any company who, for one reason or another, are precluded from carrying out the development for which they have held back those profits, the Revenue Commissioners are quite prepared to discuss the plans and proposals of that company and to do so in a reasonable way and to give the company every chance in case there is some factor which causes a delay to carry out the development they envisaged. They can, of course, inquire into the method which is used, according to Deputy Sweetman, and which I accept, if he says it is so, of phone calls in terrorem. I think that should not be the case. If it is, I shall investigate it and ask the Revenue Commissioners to go about making those directions in a proper and a better way.

I am afraid that by fixing a specific time, it would enable the company that would be, let us say, not frank—without using any stronger term—to withhold distribution of profits, not intended for use in the proper development of the company in such a way as would ultimately, after that period had elapsed, they would avoid payment of surtax. I again want to assure Deputy Sweetman and any company who feels it is under a disadvantage by reason of there not being a maximum period, that if they consult with the Revenue Commissioners in this respect they will find them absolutely reasonable as to how those unused profits may be disposed of and how they become liable to tax.

Mr. Sweetman

I must confess that I am disappointed with the Minister's reluctance to accept the amendment. On the other hand, I am glad to hear of his proposal to examine the administrative method. Frankly, I do not believe the Commissioners, as such, know exactly what is being carried on at a lower level, so to speak. I shall give the Minister in private some further information which I do not think it is desirable to disclose across the House. I hope the examination by the Minister will mean that the tax due will be dealt with in a fairer way in the future.

Mr. J. Lynch

If the Deputy will also give me in private the reference number to which he referred, I shall have that looked into also.

Mr. Sweetman

I shall do that. I hope that the result of that examination and the result of the matter being ventilated in the House will ensure that the method of telephone calls, as the Minister correctly said, in terrorem will cease and it will be merely that the proper tax will be demanded. I appreciate the Minister's intention to investigate. If his investigation does not provide the correct result, I shall have another opportunity of raising the matter with him. Perhaps on that occasion I might not pull punches in relation to individuals which I would like to avoid having to do, if possible.

Amendment, by leave, withdrawn.

Mr. J. Lynch

I move amendment No. 3:

In page 14, to insert the following definition before the definition in lines 22 and 23 of "deceased".

" `control' means, in relation to a body corporate, the power of a person to secure, by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate, or by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate, that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person;"

This is mainly to meet a point made by Deputy Sweetman on Committee Stage that the word "control" for the purposes of section 20 was not sufficiently defined. The amendment now introduced gives a very full definition of "control" in relation to companies and bodies corporate.

Mr. Sweetman

I appreciate the Minister's amendment.

Amendment agreed to.

Mr. J. Lynch

I move amendment No. 4:

In page 14, to delete lines 39 to 51 and substitute as follows:

"(2) For the purpose of this section—

(a) a company shall be deemed to be under the control of not more than five persons if any five or fewer persons together exercise, or are able to exercise, or are entitled to acquire, control, whether direct or indirect, of the company and for this purpose persons who are relatives of one another, persons who are nominees of any other person together with that other person, persons in partnership and persons interested in any shares or obligations of the company which are subject to any trust or are part of the estate of a deceased person shall respectively be treated as a single person, and

(b) a company which is controlled by any one or more of the deceased and relatives of the deceased shall be regarded as being itself a relative of the deceased."

This follows from the previous amendment. It deletes the subsection and subparagraphs that appeared originally and substitutes this form which is consistent with what we have been just discussing.

Amendment agreed to.

Mr. J. Lynch

I move amendment No. 5:

In page 15, lines 44 to 46, to delete "or, if shorter, the period from the commencement of the receipt by the deceased of any such income or benefits to the date of his death".

On Committee Stage Deputy Sweetman made a suggestion that the period to be taken into account here might be, in the case of a company which was not incorporated within the five year period, from the date of the incorporation of the company. I think Deputy Sweetman had in mind subsection (3) rather than subsection (4). The purpose of this amendment is to ensure that income from a fund of this nature for the purposes of death duties will be averaged over a period of five years. In fact, that income might have been received in a period of only three years. I think that the longer spread will give more relief to the taxpayer than was the case in the Bill as it stood.

Mr. Sweetman

I did not quite understand the Minister. I understood him to say this was in regard to subsection (3). I thought it was subsection (4)?

Mr. J. Lynch

Yes, but I suggested Deputy Sweetman might have had in mind that it related to subsection (3).

Mr. Sweetman

No, subsection (4). I may have expressed myself badly but subsection (4) was the section I always had in my mind. The amendment meets my point completely.

Amendment agreed to.

Mr. Sweetman

I move amendment No. 6:

In page 16, line 25, after "determined" to add:—

"Provided however that the value of preference shares which carry no voting rights or which only carry voting rights when the dividend is in arrear shall be the market value thereof."

On the last occasion on Committee Stage, I moved an amendment in respect of this matter—amendment No. 17—and I suggested that capitalisation value was the proper value for the preference shares. On this occasion I have switched that to market value because some of the Minister's comments appeared to me to be more relevant to market value rather than to capitalisation value. The Minister made his main objection to the section on the fact that a disponer might create a company and give to that company certain preference shares carrying a very low rate of interest and that on that account the value of those shares might be artificially low, even though he was getting a very substantial amount out of the company.

I pointed out then, and I want to point out now, that what the person concerned would be getting out of that company would be the interest on the preference shares and nothing else as far as this sector is concerned. Of course, the person concerned might be getting, as governing or other director, other income out of the company, but the Minister has already caught that in another subsection. I should be glad if the Minister would confirm that the value of the income the person concerned would be getting as a governing director would be, so to speak, treated and assessed as a slice of the capital value of the slice of the income of the company. If I am correct in that, it seems to me there is absolutely no reason why the amendment, or at least the intention of the amendment, should not be accepted. It is accepted by the Minister that this section does not apply to non-trading companies only, that it applies in addition to trading companies.

Mr. J. Lynch

No, it does not.

Mr. Sweetman

I think the Minister said it did on the last occasion.

Mr. J. Lynch

If I did, I was wrong.

Mr. Sweetman

So was I. Do I understand that this only applies to a holding company?

Mr. J. Lynch

Yes.

Mr. Sweetman

I admit the case is not so serious if it applies only to a holding company. To make quite sure we are talking about the same thing, might I refer the Minister to page H.2 of the stencilled report, which states:

Mr. J. Lynch

Subsection (4) (b) (2) would apply more to a trading company. This specifically refers to a non-trading company.

Mr. Sweetman

I do not think subsection (4) (b) (2) refers exclusively.

Mr. J. Lynch

No, not exclusively

Do I understand that the Minister and I were both wrong on that occasion?

Mr. J. Lynch

That was in reference to subsection (5).

Mr. Sweetman

This was the similar amendment, No. 17, which was providing that preference shares would be valued on a capitalised value whereas now I am moving exactly the same thing but on a market value.

As I understand it, in the course of Committee Stage we have changed the numbering of some sections by extra sections being put in and as a consequence, it is not always terribly easy to follow where we are but I think the Minister will see that amendment No. 17 on Committee Stage was in subsection (5), page 16, line 23, to add the proviso, and it is in the same one now.

While I agree that the spread of the section varies according to whether it is a non-trading company alone or all companies in general which are caught by this section, the Minister must agree that there is this pretty regular pattern in our ordinary everyday life, that is, that a company is formed by a man to carry on his business or perhaps to be a holding company for the various subsidiary manufacturing companies that there may be, in that company perhaps two sons are given the ordinary shares which have all the voting rights and the daughters are given the preference shares that have no voting rights whatever. If that is so, it seems utterly wrong to value the daughters' shares on the basis that they have the voting rights that control would give them. So long as they have preference shares with no voting rights, they have no right to turn the company into liquidation and if they have no right to turn the company into liquidation, the only asset they have is the preference share with the right to receive a preference dividend. To suggest that, when they cannot turn the company into liquidation, their shares should for the purpose of death duty be valued as if they had an immediate right to receive a distribution on a liquidation is to me to ensure that those daughters' shares will undoubtedly be taxed on a value they could never in any circumstances approach. That is unfair.

When one looks at it, on the face of it, in that way, it is another example of the pattern that runs through this part of the Bill, that in an effort to catch the person who is trying to avoid paying his fair share, the Minister is hitting the innocent as well as the guilty.

That is the whole basis of the argument that we have put from this side of the House again and again in relation to what was section 18 and which is now section 20 in the Bill in relation to death duties. The same idea also permeates through other parts of the Bill which we will be discussing later on.

It must be possible to provide a method whereby the person who is trying to avoid paying his fair share will be caught and at the same time the innocent person will not be hit. There is no doubt whatever of the effect of this section as it now stands in the case that I gave, which is pretty regular. I am sure the Minister when he was practising at the Bar met the case often enough, as I meet it often enough in my profession, where the sons are given control of the family company and the daughters are given shares in that company, preference shares usually, in respect of which they have no control and the only right that they have so long as the company continues to carry on is to get their preference dividend. But, if the sons tried to liquidate the company then the daughters must come in for a share of the assets. The reason that is put in is to ensure that the sons must, in protection of the daughters, carry the company on. If the provision that the preference shareholders could share in the assets on a liquidation were not included, there would be nothing to prevent the sons concerned winding up the company, paying out preference dividends and paying off the preference shareholders perhaps at an inconvenient time or in a lesser amount. It is precisely to protect them that that provision is put in. Yet, the Minister is deliberately designing by this section to go out and to collect from daughters in that position tax on a value of their preference shares that they could never possibly realise, simply and solely because he wants to hit another person in another way.

That is not the way to approach this problem. It could be met quite easily. I do not say for one moment that the wording of the amendment I have suggested is foolproof. I have made it quite clear on Committee Stage, and I think the Minister accepted, that in relation to these revenue taxation statutes it was virtually impossible to draft them in the exact way that the drafter of the original Act would require and that what was essential in amendments was to make the intention appear. The intention does clearly appear in this amendment and I would urge the Minister to accept that intention and to deal with whatever is necessary in regard to the wording.

Mr. J. Lynch

I would not like to criticise the wording of the amendment because, as Deputy Sweetman has said, the wording as it stands makes it quite clear what the amendment is intended to achieve. To accept the amendment would strike at the very root of what the section is to achieve. The essential point of subsection (5) is to look through the securities of a non-trading company to the real value of the assets in order to see what they are for the purpose of assessment of estate duty.

If I might take some examples to give an indication to the House of what is involved: subsection (5) relates to the value for death duty purposes of securities in a non-trading company such as a man might form solely for the purpose of taking over his house, his land, rents, stock exchange securities, cash and otherwise. Under the law as it stands, the shares of this company for death duty purposes would have to be valued on a hypothetical open market basis. Therefore, the value would be substantially less than the value of a proportionate part of the underlying assets. The very purpose of subsection (5) is to get away from this hypothetical open market basis and to make the value of the shares for duty purpose equal to the proportionate part of the underlying assets.

As a rule, these companies are merely fronts to conceal the real ownership of assets and I may say there is no question here of hitting the innocent as well as the guilty. As I said, it is only for the purpose of getting at the real assets of a non-trading company. Take an example of such a company: Suppose a man forms a company to take over securities of one kind or another which he owns to the value of £50,000 and that the capital of his company consists of 500 ordinary £1 shares carrying all the voting rights and 49,500 two per cent £1 preference shares. Suppose he keeps 490 of the 500 ordinary shares and all the preference shares. If the income from the underlying assets is, say, £4,000 per annum, of this the two per cent preference shares would absorb £990 per annum, thus leaving £3,010 for the ordinary shares. The company could declare dividends of 600 per cent which would give the owner an income of £3,950, that is, £990 on the preference shares and the balance of £2,940 on the ordinary shares. If the amendment were accepted, the 49,500 two per cent preference shares would have to be valued on the basis of what they would fetch hypothetically on the open market and the hypothetical open market value of these two per cent preference shares would not be more than, say, 4/- each. This would give a total value of £9,900 for the preference shares and on a wind-up basis the value of the ordinary shares, which would rank after the preference shares, would be their par value.

Mr. Dillon

Why their par value?

Mr. J. Lynch

On a wind-up basis, that would be the position.

Mr. Sweetman

The whole case the Minister has been giving there is in support of an amendment such as mine against ordinary shares. I am not attacking the Minister's method in regard to ordinary shares.

Mr. Dillon

Would they be valued at par if they were backed with the assets?

Mr. J. Lynch

On a wind-up basis, I understand they would. The effect would be that estate duty would be payable on a hypothetical value instead of on the real value. The intention of the formation of these companies is, as a rule to transfer the assets from the owner in such a way as ultimately to avoid payment of death duties. As I said at the beginning the acceptance of the amendment would strike at the very root of what the subsection is intended to achieve.

Mr. Dillon

I do not understand the calculations the Minister has just made. He said that for the purpose of death duty the preference shares would be valued in relation to the rate of interest stipulated for them at about 4/-. That might be so for death duty but surely not in winding up. Half way through his calculations the Minister nimbly sprang from the basis of interest payable, that is, two per cent, to the market valuation of 4/- per £1 share.

Mr. J. Lynch

My example was on the basis of the amendment.

Mr. Dillon

Yes, but the Minister nimbly skipped from the death duty basis to the wind-up basis and said that on a wind-up basis, the ordinary shares would have to be valued at their par value. We cannot deal with this on two separate bases. If the estate is being valued for death duty purposes and the Minister takes, as I believe the Revenue Commissioners would take, the dividend yield as the yardstick by which to value the preference shares, they would certainly be entitled to have reference to the income for which the remaining ordinary shares were eligible or actually in receipt of for the purpose of their valuation, and it would simply mean that the ordinary shareholders of this holding company would bear the bulk of the burden of the appropriate rate of tax leviable, which would be related not to the face value of the shares but to the underlying assets.

However, in the case mentioned by Deputy Sweetman where the daughters are given the preference shares and the sons are given the ordinary shares for the purpose of preserving continuity of operation and control, it would operate to say that the daughters' share of the total burden of death duties would be approximately one-third of the face value of their holding, whereas the Minister said 4/- would be the probable value, while the sons would bear not death duties at £500 but death duties on the value of the ordinary shares measured by the value of the underlying assets which they held and through which they exercised control over the company. That may be good or it may be bad but let us at least understand what we are doing. I respectfully submit to the Minister that in his exposé he has taken two different bases of procedure for the purpose of determining how preference shares and ordinary shares would be valued in the same holding company.

Mr. Sweetman

I can see the type of avoidance the Minister is trying to catch and I can equally see a perfectly simple method by which that avoidance can be blocked and yet how the case of the daughters will be preserved. To take the Minister's case, the underlying value of the assets was £50,000. There were 49,500 preference shares carrying two per cent which he was going to value at the market value of 4/-, and 500 ordinary shares which he was valuing at par because the underlying value of the assets was still £50,000 and on liquidation the par value of the preference shares can be deducted. The avoidance could be quite simply prevented without any hardship to the daughters in the case I mentioned if in the circumstances the ordinary shares were to be valued at the underlying value of the assets which the section provides less the market value of the preference shares. That would mean that Revenue would lose no duty and it would equally mean that the genuine case of the daughters to which I have referred would be completely protected.

This is a perfectly simple amendment. I do not agree entirely with the view that the Minister has placed on it but I am going to give him all that for the sake of protecting the innocent case. Let us look at the Minister's case. I understood the Minister to say the man was possessed of all the preference shares and of 490 of the 500 ordinary shares. What would happen in the case in question? The preference shares would be valued at 4/-. I do not think the Minister is right in that valuation but again I will give him that. A £1 preference share carrying two per cent would, on present figures, be worth more than 4/-, but I shall be glad to use the Minister's quotation when I am arguing with the Estate Duty Office in relation to the value of a preference share. The preference shares in those circumstances would be value for one-fifth of £49,500, which is £9,900, calculating on my feet; my calculations are never all that good and certainly, to have to calculate when I am talking, is not fair. That would leave, on that basis, the underlying value of the assets left as £40,100 and the Minister would get duty in respect of the ordinary shares of £490, five one-hundredths of £40,100. That would get him of the duty bearing a value of £400 a one-fiftieth of the total amount—one-fiftieth of £50,000, or £1,000. The estate would be valued £100 less than it would be in the Minister's way, which is not worth arguing about in an estate of £50,000, and it would undoubtedly save the genuine case.

It could be done quite simply by a proviso added to my proviso that, where there were preference shares and where they fell to be valued at the market value, it is that market value which should be deducted from the asset value when determining the value of the ordinary shares for estate duty purposes. Quite frankly, I accept and recognise—I know the methods by which avoidance can be carried out—the Minister's desire to stop these methods of avoidance. I am not trying to amend the Bill in order to create loopholes or perpetuate existing loopholes. I am trying to amend the Bill in order to make quite sure that the genuine case will not be hit. I regret to say that I do not see any evidence in the Bill that the appropriate care has been taken by the Minister to ensure that the innocent are not hurt with the guilty.

The inclusion of such an amendment as I have suggested would undoubtedly mean that the Minister's case would be covered and the Minister must be advised that it will completely cover the case he has made except to the extent not of £100 duty but of duty on £100 which, in a £50,000 estate, is 27 per cent; £270 is nothing and, for the sake of £270 in a £50,000 estate, the Minister is going to insist on the inclusion of a subsection which will mean genuine hardship in relation to a family concern in which there is a holding company and the business itself is carried on under several subsidiary companies. It is not right that the Minister should do that and the Minister, in his cool, sober, normal human judgment, would not do it. I suspect he is being pushed into it because he believes that there is more behind it than there really is. The method I have suggested would cover the Minister's case beyond question and he should accept it.

Amendment put and declared lost.

Mr. Sweetman

I move amendment No. 7:

In page 17, between lines 4 and 5, to insert a new subsection as follows:

"(9) The provisions applicable to quick succession relief shall apply to duty payable under this section."

On Committee Stage, the Minister suggested that a quick succession relief applied to property. It does, of course, and I suggested to him on that occasion that what he was doing, in this section was getting back behind the value of the shares to the value of the property. The example the Minister gave on the previous amendment shows clearly that that is what the Minister has in his mind. I accepted that, for the purposes of the section, to get at what he wants, he is right in getting to the underlying value of the property, but, if he is getting to the underlying value of the property in one respect, he should also take it in another. What is sauce for the goose is also sauce for the gander; the Minister is taking the value of the property for the purposes of estate duty but he is not giving the reliefs that would be applicable to the value of the property underlying the value of the shares. If he is going to take it one way, he should also accept the other. I cannot understand why he will not and I should be glad to hear his observations.

Mr. J. Lynch

The provisions the Deputy has in mind—I referred to this on Committee Stage—are those contained in section 15 of the Finance Act, 1914, which provides that where estate duty has become payable on any property consisting of land or business, not being a business carried on by a company, and subsequently, within five years, estate duty again becomes payable on the same property, or any part of it that passes on death, that is, on the death of the person to whom the property passed on the first death, the duty on the second death should be abated. Apart from the fact that the 1914 Act expressly excludes a business carried on by a company, the business as such cannot pass and, therefore, I suggest that section 20 of the Bill does not apply for the kind of relief the Deputy suggests in his amendment.

Mr. Sweetman

We agreed, I think, on the last occasion that section 20 would be recommitted.

Mr. Cosgrave

That was section 18 before.

Mr. Sweetman

It is now section 20. I think that was the understanding.

Mr. J. Lynch

I agreed to re-commit two sections.

Mr. Cosgrave

Section 18 was one of them.

Mr. J. Lynch

A vote was taken subsequently on one of the sections, There is now only one section, in my recollection, to be re-committed.

Mr. Cosgrave

Is that not section 18—

Mr. Norton

Section 23.

Mr. Sweetman

It was section 21 and it is now section 25.

Mr. J. Lynch

It was section 22 and it is now section 24. I was prepared to re-commit section 23 but a division was challenged on the whole section and I was, therefore, absolved from that agreement.

Mr. Cosgrave

I thought the Minister agreed to re-commit section 18 which has now become section 20.

Mr. J. Lynch

No.

Mr. Sweetman

I thought we did, too.

Mr. J. Lynch

Would the record not tell us?

Mr. Sweetman

It is very hard to follow the record in this form. While Deputy Cosgrave is trying to find the reference in the record, may I put this to the Minister? Section 15 of the Finance Act of 1914 expressly excluded shares in a company because it was the value of the shares in the company that was to be valued under section 15 rather than the value of the property the company held. Does the Minister not agree that is so?

Mr. J. Lynch

Yes, that is right.

Mr. Sweetman

Now, is the Minister not deliberately going back on the basic consideration that was there when section 15 of the Finance Act, 1914, was passed? He is now saying it is not to be the value of the shares in the company that is to be taken into consideration. In other words, he is completely upsetting—I am not arguing about that—the whole basis of the Act of 1914 and once he is upsetting it for one reason, it is upset for others. We had a discussion on Committee Stage where the Minister indicated that it could not happen but it can happen, as I stated. There can be a second death in relation to these shares and one must go back to the value of the property and one would not take the value of the shares. If the Minister can persuade me that we are not going to take the value of the property on the second death—but only on the second death—then I agree that there is no necessity for quick succession relief but as the section appears to me to be framed, there is the possibility I have suggested.

Amendment, by leave, withdrawn.

Mr. Sweetman

I move amendment No. 8.

In page 17, after line 63, to insert a new subsection as follows:—

"(7) The spouse exemption given by section 14 of the Finance Act 1914 shall be applicable in respect of duty payable under this section."

I wrote the Minister a letter as I promised giving a hypothetical case where there would be duty under this section and if the Minister has no objection to my reading a copy of the letter I wrote so that it can be put on the records of the House, I shall do so.

Mr. J. Lynch

I have no objection.

Mr. Sweetman

Here is the case.

A settles £100,000 on discretionary trusts for his children; he himself is not an object of the discretion and he lives three (now five) years after the settlement.

The trustees pay the income (I assume 6 per cent) as to half to son B, as to one sixth each to daughters C, D and E meaning therefore £3,000 and three sums of £1,000 per annum.

B dies and your "slice" principle duty is payable on £50,000, equivalent at 27 per cent, leaving aside any question of aggregation, to £13,500.

After B's death the trustees have a fund of £86,000 with income of £5,190 which they pay as to £2,190 to B's widow and as to £1,000 to each of the daughters as before.

B's widow dies and on her death her slice of the fund is £36,500 being 2190/5190. Half the whole fund has already borne estate duty on the death of B and so under the 1894 Act Section 5 (2) as I understand it, half of her slice will now be exempt, but the other half, that is to say £18,250 will be subject to duty and will not get the benefit of the spouse exemption. That seems to me wrong. When you are making discretionary trusts bearing estate duty in the same way as a fixed trust (and I do not quarrel with you for so doing nor do I quarrel with the slice method, as I think it is fair), you should provide for a spouse exemption in the same way as in a fixed trust.

I deliberately took the figure of £100,000, because it was by far the simplest one to work down the percentages all the way along but of course the amount of duty that would be payable until one got down to the exemption limit would be exactly the same lower down. It seems to me that on the reading of the section as it is there is no doubt whatever that the second spouse to die is caught under the discretionary trust section the Minister is introducing and I think he will say that is wrong unless he can show me that it does not operate in that way.

Mr. J. Lynch

The section refers, as indicated on the side notes, to discretionary trusts and the purpose is to apply to such trusts the slice system of assessing death duties, in the same way as it would apply in the case of a mandatory trust. To apply different methods of assessment in discretionary trusts and mandatory trusts would be inconsistent. I must confess that I am not very familiar with methods of assessment of the slice system as I have not had any practical examples of it.

Since Deputy Sweetman read his letter to me, perhaps I might be permitted to read some of the notes I sent to him in reply.

Mr. Sweetman

I had hoped the Minister would read all of them.

Mr. J. Lynch

I said in Committee that the effect of section 21 is to place on the same level for all purposes of estate duty, including exemption, the interest measured by averaging the benefits over five years of beneficiaries under discretionary trusts and similar interests arising under mandatory trusts. Thus if, under a discretionary trust, A is paid an annuity of £x for his lifetime and after his death his wife B is paid an annuity of similar amount for her lifetime the consequence will be the same, so far as Estate Duty is concerned, as if there were a mandatory trust to pay A £x per annum for his life and after his death to pay £x per annum to his wife for her life. In neither case would there be a complete exemption on the widow's death. There is no identity between the "slices" of the trust fund representing the separate annuities; they do not constitute a property of which A and B are successive life tenants.

The extent of the exemption in the case of a mandatory trust depends on whether the trust property as a whole passes on both deaths or whether it is deemed to pass to a limited extent only and this in turn depends on the terms of the trust.

I do not know whether I should go on with this, but perhaps I shall read the next part of it: If, under a mandatory trust, a trust fund if held upon trust for A for his lifetime and after his death for his wife B for her life, whether or not the property is subject to annuities for C, D and E, the property as a whole passes on both deaths; there is complete identity in the property of which each spouse was life tenant; and the "spouse exemption" will operate in full. The annuities to C, D and E, if payable, are in the nature of charges.

If, however, the mandatory trust is to pay the spouses successively annuities, whether these are expressed as sums of money or as shares of income, there is not an actual passing of the trust property on either death. Instead, the trust property is, by reason of the cesser of the respective interests, deemed to pass to the extent of the annuity "slices". In such a case there is no full exemption on the death of the surviving spouse. There is only a partial exemption to the extent to which the "slices" overlap.

In regard to the hypothetical case mentioned by Deputy Sweetman in the note he sent me, the comments made are based on the assumption that in all cases where spouses have successive interests for life under a mandatory trust, there would be complete exemption on the death of the survivor, but that assumption is not correct.

Mr. Sweetman

It is, in a mandatory trust of a fixed income.

Mr. J. Lynch

I understand that would not be the case. However, if I may return to what I was saying: In the case of a discretionary trust, there would be complete exemption on the death of a surviving spouse if the trustees in fact paid the entire income to the spouses successively for their respective lives. Again, in a case in which the settlor dies within five years of creating the trust, so that the entire trust property pays estate duty on his death, as a gift inter vivos, and his wife is an object of the trust, there would be complete exemption on the latter's death, that is, the wife's, whatever the extent of the limited interest ceasing on her death. There is a lot in that which I must admit I do not fully grasp, not having had experience of it.

Mr. Sweetman

As the Minister admits, there is an overlapping on which on the death of the second spouse duty is exempted a second time. There is, as the Minister admits at the end of the note, the provision where the whole income is paid to one person and why should not the same operate where the income is split? I suggest that the Minister is splitting hairs and that what operates in respect of where the whole income is paid first to one spouse and then to another, should equally apply; if half the fund is paid to a son and the other half to three daughters and then the half that was paid to the son is paid to his wife after his death, it should apply. It would not have been very difficult to draft a subsection that would have covered it.

As I said in my letter, and repeat here, I do not quarrel with the "slices" method of attacking discretionary trusts. It was obvious that there had to be a section at some time to ensure that discretionary trusts could not completely escape duty. I accept that at once but I am against this extra burden. What it is going to mean in effect now is, with consequent embarrassment for the Minister for Finance in other respects, a considerable urge to dis-saving.

Mr. Cosgrave

I should like to urge the Minister to consider further the points made by Deputy Sweetman. I do not know whether the Minister has received representations other than those made in this House but certainly one representative organisation has expressed concern about the effect of this proposal. Although I have not got full details, one case was brought to our attention in which discretionary trusts were so concerned at the possible operation of this section that in one case in which quite a considerable estate was involved, property amounting to almost £250,000, the trustees have had a preliminary meeting and— in this case, a minor is involved—have expressed the view that until they see the legislation in its final form, they will not decide whether to retain the interest here or dispose of it altogether. This estate provides considerable employment and very great concern has been expressed by the trustees at the possibilities involved in this section and the effect of it on the estate.

Between now and bringing the Bill to the Seanad, the Minister might well consider introducing an amendment comparable with the one suggested to ensure that there will be no actual loss from the point of view of the State because in the event of the disposal of a property, a company or an estate of that sort, in which discretionary trustees have been appointed, the advantage to the country of the desirability of retaining such an interest here does not require any emphasis. For these reasons the Minister should consider further this aspect of the matter.

Mr. Sweetman

Might I be permitted to ask the Minister a question? Am I correct in thinking that section 21 as it now is, formerly section 19, applies not only to what we commonly call discretionary trusts but also to all cases whereby under a will or otherwise, power of appointment is given to a class? In such cases it is usual for the income to be applied for the benefit of minor children where, for example, they are entitled to the capital only contingently on their attaining the age of 21 years, but it is a regular practice that where children are carrying a contingent interest if they attain 21 years, the income can be expended for them, for their maintenance, education and benefit—that is the usual phrase, as the Chair no doubt is aware—before they are 21. If I am right in thinking that this section now covers not merely discretionary trusts as we ordinarly understand them but also every trust where there is that contingent provision for a child on his attaining at 21, then the section would make very much wider changes in the law than many of us anticipate.

Mr. J. Lynch

It is not intended to apply the section to cases of power of appointment.

Mr. Sweetman

Is the Minister aware that one representative body said that they have advised that it will so apply? I presume the Minister got the memorandum also.

Mr. J. Lynch

I got many memoranda but I do not know to which one the Deputy is referring.

Mr. Sweetman

Can I get at least this assurance, that if it is found section 21 does not affect the case of a trust where there is just the power of appointment as in the case I have indicated, the Minister will come to the House and make the necessary amendment?

Mr. J. Lynch

I shall do that.

Amendment, by leave, withdrawn.

Amendment No. 9 not moved.

Mr. J. Lynch

I move amendment No.10:

In page 18, line 5, to insert "other than land" after "property."

A comment was made both on Second Stage and on Committee that the intention was to apply the Bill to what are known as Jersey mortgages and that there was no reason to widen the scope of the section. The purpose of the amendment is to narrow the scope of the section.

Mr. Sweetman

It will now cover a Jersey mortgage and nothing else?

Mr. J. Lynch

That is roughly the position. I should not like to say it is precisely the position.

Mr. Sweetman

It might involve laws of other countries. Is the Minister aware of any cases other than Jersey mortgages that would be caught?

Mr. J. Lynch

No.

Mr. Sweetman

I shall not take the Minister to task if we come across a law in another country. We shall ask the Minister to amend the section, if such a case arises.

Amendment agreed to.

Mr. Sweetman

I move amendment No.11:

In page 19, to delete lines 37 to 40.

I had a somewhat similar amendment on Committee Stage. I do not think I made myself clear in regard to the case I was putting forward because the Minister's note to me on it appears to be addressed to something entirely different. I am quite happy to say the fault was mine in not explaining myself clearly. As I understand it—again, for the sake of example, I shall take a figure of £100,000 as being simpler than a percentage—if we have a case where the underlying value of the property is £100,000, the actuarial value of the tenant for life is £60,000 and the remainder man's actuarial value is £40,000, if the tenant for life buys out the remainder man, enlarges his interest, as it is technically known, then the amendment is designed to ensure that the whole £100,000 will carry duty on the death of the tenant for life and that the £40,000 that was paid will not be treated as being within the operation of section 7 (10) of the Finance Act, 1894.

I can understand that case, but it is not the type of case I have been trying to preclude. In the case I have mentioned, if the deceased had, again for the sake of example, free estate of £40,000, then, in order to pay the reversioner his £40,000, he would have to sell the free estate. He had no free estate left and he would have to pay duty on £100,000, which is quite proper.

If on the other hand, he had no free estate of his own, if he had to borrow the £40,000, having borrowed it, he would have paid it out and on his death he would have only £60,000. Why, if he had only £60,000, should he pay duty on £100,000? It is as simple as that. It seems to me quite clear that it is proper for the section to operate so as to provide that the sum of money paid by the tenant for life to the remainder man was not the proceeds of the sale of the trust. I do not want to provide that. I want to provide that if a person has bona fide raised the money to pay the amount of the actuarial claim, in so doing it can be taken as a proper deduction just as it could be taken as a proper deduction if the person concerned had sold his free estate to make it go.

Mr. J. Lynch

The purpose of Deputy Sweetman's amendment is to make section 7 (10) of the 1894 Finance Act operate in a case like this where the tenant for life buys out the remainder man. If that never happened, if we take the case of £100,000 value on the property concerned, the estate duty would be based on the £100,000, whereas if he bought out the remainder man's interest he would reduce the estate for estate duty purposes by the amount he paid. The exclusion of the words proposed by Deputy Sweetman would operate to defeat the purpose of the section and I am afraid there is not a good case for doing that.

Mr. Sweetman

Does it not appear all right in one way and not in the other? If the man has the money, it is all right; if he has not got it, he must borrow it.

Mr. J. Lynch

He gets the deduction for the debt if he borrows it.

Mr. Sweetman

Then I am happy. I do not see where he gets the deduction under the section, but if the Minister assures me he does get it, I am satisfied.

Mr. J. Lynch

I can assure the Deputy he does.

Amendment, by leave, withdrawn.

Bill recommitted in respect of amendment No. 12.

Mr. J. Lynch

I move amendment No. 12:

In page 19, lines 46 to 59, and in page 20, lines 1 to 16, to delete section 24 and substitute the following section:

"(1) (a) The provisions of this subsection shall have effect in relation to a death benefit payable under a non-contributory superannuation scheme.

(b) A death benefit shall be deemed—

(i) for all purposes of estate duty to be an interest purchased or provided by the deceased and to pass by reason of a disposition made by him,

(ii) for all purposes of succession duty to be a succession derived from the deceased as predecessor and from no other person.

(c) Where a death benefit is payable to all or any one or more of a class of persons, each such person shall be deemed to have become entitled on the death to all payments made to him notwithstanding that a power of appointment, selection or nomination in respect of the payments was vested in any person.

(d) (i) Where the aggregate value of all death benefits payable on a death does not exceed £5,000, the benefits shall, to the extent to which they become payable to or for the benefit of the widow or the dependent children of the deceased, be exempt from estate duty.

(ii) Where the aggregate value of death benefits payable on a death to or for the benefit of the widow or dependent children of the deceased exceeds £5,000, the estate duty chargeable in respect of such benefits shall not exceed the sum by which such value exceeds £5,000, but no reduction under this paragraph of the duty chargeable on a death benefit shall effect 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) or subsection (3) of section 13 of the Finance Act, 1955.

(e) In a case in which a death benefit consists of property other than money, any references in this section to a benefit being payable or to payments shall be construed accordingly.

(f) In this subsection—

`death benefit' means any benefit which accrues pursuant to a superannuation scheme on or in connection with a death, occurring after the passing of this Act, during service or after retirement;

`the deceased' means the person on or in connection with whose death a death benefit accrues;

`dependent child' means a child (including a child adopted under the provisions of the Adoption Act, 1952 and 1964) who had not attained the age of sixteen years at the date of the death of the deceased or who was then receiving full time instruction at any university college, school or other educational establishment;

`non-contributory', in relation to a superannuation scheme, means that no monetary contribution has been made to the scheme by the deceased;

`superannuation scheme' includes any arrangement connected with employment;

`employment' includes employment as a director of a body corporate.

(2) (a) The provisions of paragraph (d) of subsection (1) of this section shall apply to death benefits payable under a superannuation scheme other than a non-contributory superannuation scheme, to or for the benefit of the widow or dependent children of the deceased.

(b) In this subsection `death benefits,' `superannuation scheme,' `non-contributory,' `dependent children' and `the deceased' have the same meanings as in subsection (1) of this section."

Mr. Sweetman

Are we recommitting the original section?

Acting Chairman (Mr. Booth)

This amendment involves the recommittal of section 24.

Major de Valera

Section 21 of the Bill as originally drafted.

Mr. Sweetman

Was it the superannuation of life policies we agreed to re-commit?

Mr. J. Lynch

Yes.

Mr. Sweetman

We are recommitting on this.

Mr. J. Lynch

I should like to make a few preliminary remarks. Under the 1894 Act, section 4, if property in which a person has no interest passes on his death, that property is not aggregated with that person's own estate. At one time I found myself the subject matter of what I am now about to mention. When I took up practice in the law——

Mr. Sweetman

I beg the Minister's pardon. For one moment I thought he was on the subject matter of section 25 and he is not dead yet.

Mr. J. Lynch

I came across a deal in the course of my practice in which I found myself specifically referred to in a legal arrangement in which I had no interest. It was to the effect that a certain estate was to continue and pass from one person to another as long as I live. Apparently the solicitor concerned thought I was reasonably healthy and had a fairly long expectation of life. That was before I came into politics.

Mr. Norton

He was not a bad judge.

Mr. J. Lynch

That was the first time this came to my notice.

Mr. Corish

That was as good a way to make a legal arrangement as any. Look at you and guess your age.

Mr. J. Lynch

Apparently they look around to see if they know a reasonably healthy person, a person who is likely to stay in the country, whose death they will become aware of and that will finish the trust fund. I had no interest in the moneys involved. When I died, if it were not for the exclusion in the 1894 Act, the property involved in that settlement would be aggregated with whatever property I had and death duties would be charged on it.

I had no knowledge of or interest in this legal arrangement. Therefore I have obviously no interest in the property and am getting no profits from it. Apparently a device was adopted many years ago, and probably is still there, that certain trusts will be created for the life of the descendants of some dynasty and the descendants of that dynasty will have no beneficial interest in the property. The 1894 Act, because of that, provides that such property shall not be aggregated with other property passing on the death.

In the course of time, because of that, people were able to provide non-aggregable benefits for their descendants. In other words out of my own property I could provide a benefit which was to accrue to my wife when I died and which was property in which I never had an interest so that the benefit would not be aggregated with the rest of my estate for assessment for death duty purposes when I died.

Nowadays, people do that frequently. In the case of superannuation schemes where there are contributions the benefits arising on the death of the person making the contributions are liable to duty but may not be aggregable with the deceased person's free property.

In the case of non-contributory schemes, these benefits are not deemed to be provided by the deceased person. Property in which the deceased has no interest and which therefore is not aggregable also includes insurance policies. We will probably be referring to these later.

As the section was originally drafted, it appeared that the only purpose was to catch, for the first time, death benefits arising as a result of superannuation schemes. That was not so. As I said, they already are liable under the contributory schemes but not under the non-contributory schemes. The section, as redrafted, will make that quite clear. There is nothing new as far as contributory schemes are concerned. They were always liable for estate duty purposes.

There are many other forms of payment by persons, wealthy and otherwise, but the most obvious one, and the one that is principally being caught here, is the case of a company controlled by a man where the company makes provision for the man's dependants. They are not giving that particular man whatever he might otherwise earn from the company but they are putting it by. In present circumstances, that would escape assessment for death duty.

As I said, one of the purposes of the section is to catch these latter benefits. I would like to say also that I am bringing in for those death benefits that were previously subject to estate duty the relief which is being applied to the non-contributory ones not exceeding £5,000. If these benefits are valued for £5,000 or less then they will not be taken into account at all. It is generally agreed that most sums arising on death as a result of superannuation schemes, hardly reach £5,000 at all. At least there are very few of them.

I would like to refer to general statements made during Committee Stage to the effect that there was one class that would seem to be relieved of the obligation of having these benefits liable to duty. Civil Servants, in fact, are in that class. I should say that in order to be subject to duty, the person entitled to the death benefit must have an absolute or enforceable entitlement. At present, a civil servant has not got that absolute and enforceable right to pension, nor has the widow or dependants an absolute and enforceable right to the lump sum accruing on his death before he reaches retirement age.

Mr. Sweetman

Therefore a Civil Service gratuity would be exempt.

Mr. J. Lynch

Yes.

Mr. P. Belton

The framers of this are exempt——

Mr. J. Lynch

On the last occasion I knew that there was this underlying tone in the debate. I should say that at the moment if there is one civil servant whom this £5,000 relief would not let out completely, that is about as many as there are, so, in effect, the entire Civil Service would be outside this provision so far as the £5,000 relief is concerned.

Mr. Sweetman

The £5,000 is being so framed as to let them out.

Mr. P. Belton

The ordinary employee contributes and pays in and the civil servant does not contribute because he does not earn this money. It is not in his salary or his earnings.

Mr. J. Lynch

I hope we will not have a Committee Stage debate on this occasion again.

Mr. Sweetman

We are recommitting the section.

Acting Chairman

It might be easier if the Minister were allowed to finish proposing his amendment.

Mr. Norton

I should like to ask the Minister what he thinks about civil servants who are not——

Mr. J. Lynch

Let me finish the other point. In effect, the death benefit to the dependants of a civil servant who dies before attaining retirement age is in the nature of an ex gratia payment and to bring civil servants within the scope of the Bill would catch these ex gratia payments, because it would be almost impossible to exclude them. That would be taking ex gratia payments paid after death. Civil service gratuities fall into the category of ex gratia payments because civil servants have never had enforceable rights under the Superannuation Acts. Payments under those Acts are permissive, and civil servants have not been granted a legal enforceable right to them. If the section did apply to civil servants, the £5,000 provided in the section would be high enough to exclude the vast majority of such gratuities from estate duty charges. I propose to examine the question of bringing civil servants' death gratuities within the scope of the section by an appropriate alteration of the superannuation code, or otherwise as I may be advised. I assure the House that this matter will have my early attention, but it is not appropriate to bring it into the current Bill.

Mr. P. Hogan

(South Tipperary): Will bank clerks and bank officials be in the same position as civil servants?

Mr. J. Lynch

I think a number of them have ex gratia payments and the £5,000 will let them out.

Mr. Corish

What difference does it make whether they are ex gratia payments or otherwise?

Acting Chairman

Before we proceed with a Committee Stage discussion on the Minister's amendment, I think we should have before us Deputy Cosgrave's amendment to the amendment and with it we might take amendment No. 19.

Mr. Norton

Before we take that——

Mr. Sweetman

I do not know where we are.

Mr. Norton

I want to say at this stage that I am not particularly interested in catching small civil servants any more than I was during the earlier stages.

Acting Chairman

We will go back on all this but to put the matter in order, we must have the amendment to the amendment.

Mr. Norton

I want to raise this matter while it is still fresh in my mind after the Minister's statement. The Minister said that the £5,000 exemption would exclude all but a few civil servants from this provision in any event. The people I should particularly like to catch—and I hope the Minister will have them particularly in mind when he is looking into this matter—are the senior civil servants, and particularly the senior civil servants in the Department of Finance who are framing these amendments for everyone else, and excluding themselves.

Mr. J. Lynch

I recognised that there was this underlying tone on the last occasion. It is not true to say that some people are deliberately excluding themselves.

Mr. Sweetman

Perhaps the Chair could enlighten me on this question: we have gone back to Committee and the Minister has moved his amendment. How can we move an amendment to the amendment until the amendment has been inserted?

Mr. Cosgrave

I thought we could discuss it without actually moving it.

Mr. Sweetman

I do not understand.

Acting Chairman

I am advised the first thing we must do is discuss the amendment to the amendment.

Mr. Sweetman

How can we discuss the amendment to the amendment before we have discussed the amendment?

Acting Chairman

As an amendment to a motion. The motion has not been passed. The motion is before the House.

Mr. Sweetman

I do not think it matters very much but I should like to be clear on it. So long as I am not prevented from speaking as often as I like, I do not mind.

Acting Chairman

We will go right back to Committee once we have Deputy Cosgrave's amendment to the amendment and amendment No. 19 taken with it.

Mr. Cosgrave

I move my amendment to amendment No. 12:

To add to the definition of "dependent child" the following:

"or who was then permanently disabled from earning his own living."

The purpose of this amendment is to extend still further the definition of "dependent child." As the House is aware, the Minister's amendment contains a definition of a "dependent child" which is a child, including a child adopted under the provisions of the Adoption Acts who had not attained the age of 16 years at the date of the death of the deceased or who was then receiving full time instruction at any university college, school or other educational establishment. The purpose of the amendment is further to extend the terms of that definition to include a child who might be over the age of 16 years but who was then permanently disabled from earning his own living.

The Minister and Deputies are familiar with many cases of children who had passed the age of 16 years and who might have reached the adult stage who were permanently disabled by one form of personal disability or another. In some cases it may be due to an accident, and in other cases it might possibly be the result of polio in their childhood, or they may have some disability which will affect them, in many cases, unfortunately for life. I feel this definition should be extended to cover those cases. In fact, this aspect of the matter was brought to our attention by a number of representative organisations who expressed the view that the number of cases concerned, while not very large, in many cases involved hardship not only for the individual, but also for his or her family. They felt they had an obligation and a responsibility to ensure that adequate provision was made for them because of the disability. Consequently, they had, in many cases, to take exceptional steps to see that a person so affected would be adequately and properly provided for.

This amendment, to some extent, improves the original section which the Minister in Committee undertook to re-examine; but I think it is still open to the objection that for the first time it aggregates this type of superannuation benefits with the free estate. Considerable discussion took place here on Committee Stage. During the course of that discussion, reference was made to the social advantages of superannuation schemes and to the fact that not merely were these schemes financially beneficial to the persons concerned but that there was a distinct social advantage involved in encouraging schemes of that sort.

Up to comparatively recent years the number of firms which operated these schemes were regarded as being in the forefront of progressive social thought—firms which had undertaken responsibilities in encouraging and facilitating the operation of schemes for their employees. Nowadays, with the considerable extension and growth in the social welfare code, while this need may not arise nevertheless for certain categories of workers or employees, it takes the responsibility from the State. There are large sections who might otherwise fall to be dealt with by the State. This has, in fact, distinct advantages in so far as it encourages thrift and encourages an outlook towards the provisions under the superannuation schemes which nowadays we take for granted to a considerable extent.

In that connection insurance companies have played a progressive part. One might say the insurance companies derive benefit from the schemes, but, on the other hand, people who contribute derive benefits from them. No matter what way it is looked at, the idea behind it and the concepts which these particular schemes have inherent in their various arrangements make it an idea which I believe we should endeavour to encourage and promote to the greatest possible extent.

The proposals which are enshrined in this Bill will for the first time aggregate the benefits of these schemes, or the sums involved, with what is known as the free estate. While it is to some extent true, as the Minister says, that possibly few of these schemes would reach or exceed the sum of £5,000, nevertheless the principle is bad. We regarded this as one of the features of this Bill which are not merely financially but socially undesirable. While the revised amendment as moved is to some extent an improvement, I still feel it is not anything like adequate.

The suggestion the Minister has made may to some extent allay certain fears expressed here during Committee Stage. I think it is unrealistic to suggest that people such as civil servants or possibly bank officials, merely because they have no legal entitlement under certain pension or superannuation schemes applicable in their case do not benefit. I think it is a fact that it has never been known that any of the benefits to which people are entitled are withdrawn except the individual concerned infringes in some way or other the terms of the scheme. Then the benefit is withdrawn for reasons other than that the authorities concerned, for some reason or another, decided not to operate the scheme, or allow the benefits of the scheme to operate in respect of the person concerned. However, it is possible the Minister may at a later stage propose an amendment in respect of the superannuation code.

Personally, I have no great fear about this except to the extent that it is liable to create a bad impression, in that those who are responsible for drafting or advising the Minister on the form of the legislation should advise one form in respect of the public generally and a different form in respect of those persons who are themselves responsible for advising in regard to it. However, we shall await the Minister's further proposals on this.

My purpose in tabling the amendment is to extend the definition to include a child who has passed the age of 16 and who, while not in certain circumstances still undergoing education or training, in a school or college, is permanently disabled from earning his own living because of a disability of a physical or mental character.

Mr. J. Lynch

I should like to intervene now. I do not propose to go into the merits at this stage of Deputy Cosgrave's amendment. I probably will have an opportunity later. I may have created a wrong impression when I introduced the section. I spoke of aggregation. Section 24 has nothing to do with aggregation. Section 25 provides for aggregation. I did say that, at the moment, contributory pension schemes or death benefits arising from contributory pension schemes are already liable to estate duty. That is a fact. I said that death benefits arising as a result of non-contributory schemes are not liable to estate duty at present. That is also a fact. I should have added that benefits arising from non-contributory schemes are deemed at the present time to be liable to succession duty at 11½ per cent which in most cases and in fact in nearly every case, is a much more onerous imposition than estate duty and I am now proposing to make these benefits arising from non-contributory schemes liable to estate duty as well as benefits arising from contributory schemes, but, at the same time, relieving benefits arising from non-contributory schemes of liabilities to succession duty. Later on, I shall be proposing certain and further other reliefs.

Mr. Sweetman

I presume somebody understands the Minister. I have failed completely.

Mr. J. Lynch

I am sorry; I thought I was as specific as I could be.

Mr. Sweetman

This is a horribly technical subject. As I understand the Minister, the purpose of section 24 originally, and the new section, is primarily to prevent avoidance measures. I want, however, to refer the Minister to section 34 of the Finance Act, 1958. Paragraph (m) of subsection (1) of that section provides:

that no service of a person in whatever capacity while he is (i) a proprietary director, (ii) a part-time director, (iii) a proprietary employee, or (iv) a part-time employee, may be taken into account for any of the purposes of the scheme—

—the scheme being a retirements benefits scheme. It goes on, then, going back to define what a proprietary director is:

"Proprietary director" means a director of a company who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control, more than fifteen per cent of the ordinary share capital of the company.

"Proprietary employee" is the same. A "part-time director" and "part-time employee" are defined as being persons who are not required to devote substantially the whole of their time to the service of the body corporate.

Mr. Dillon

Where is this?

Mr. Sweetman

This is a new section 24, an amendment being introduced in substitution of section 24——

Mr. Cosgrave

Amendment No. 12.

Mr. Sweetman

As I understand the section, it says that anybody who has more than 15 per cent of the capital of the company cannot get any benefit for any purpose of the scheme. On the last occasion, the Minister indicated that approval of the scheme was for the purposes of income tax concessions in relation to the calculation of deduction of contributions and he made that case. In fact, I had not checked the section then. Now, I have checked it and the position does not seem to me to be what the Minister said on the last occasion. It says:

(m) that no service of a person in whatever capacity while he is:

(i) a proprietary director,

(ii) a part-time director,

(iii) a proprietary employee, or

(iv) a part-time employee,

may be taken into account for any of the purposes of the scheme.

That means to say that anybody who has more than 15 per cent of the capital of the company cannot get the death benefit under any superannuation scheme because the superannuation scheme is ultra vires that section if the company bring it into operation. The section does not say, as I understood the Minister to say on the last occasion, that approval could not be given to such a scheme.

On the last occasion, the Minister said that approval could be sought for the scheme for income tax purposes but that it did not operate for death benefits. The section, I think, is clear. If it includes a person owning more than 15 per cent of the capital in death benefit, then it is ultra vires the section and the scheme is inoperative, does not come into effect. Therefore section 34 of the Finance Act, 1958, contains its own built-in, shall I say, provision against avoidance. When one considers the matter in that light, it blows skyhigh the whole case the Minister has made for the necessity for this section.

I want, however, to go on, in relation to the section, a bit further. I may say at once now that not merely do I not very clearly understand, with the best bona fide goodwill in the world, the explanation the Minister has given but that I find it extremely difficult to understand the original section and the amendment as introduced. As I understand these provisions now, and as it has been put to me by a person somewhat more skilled in superannuation schemes than I am, the effect of the new amendment the Minister is putting in is more penal than the old one. I want to pursue that because on the last occasion we succeeded in persuading the Minister that section 24 as originally proposed by him would inflict on the dependants of a man of even moderate means some hardship and he agreed to consider raising the exemption limit of £5,000 and to look at the wider implications of the section. He indicated then, and I think correctly, that he wanted to see how the hardship on the dependants of salary or wage-earning employees might be ameliorated, bearing in mind that what he wanted to do was to avoid an anti-avoidance section.

Section 54 of the 1958 Act, page 24 of the long white copy of that Act, makes it clear that, as a means of avoidance, it is really not operative at all. As I understand this now, the section will be even more penal, because what will happen now is that there will be a worse situation for non-contributory schemes than there will be for contributory schemes. I must, with respect, discuss to some extent what arises under section 24 and the amendment to section 25 in order adequately to understand section 24. As I see it, the contributory scheme that will now operate will be that the proportion the last five years' premiums paid bear to the total number of premiums paid will govern the proportion of the total policy moneys that will be taxed.

I think I am right in saying that that will have an effect which I shall deal with in another way and which I tried to cover by amendment No. 13 which has been ruled out of order, partly through my own fault because I placed amendment No. 13 in the wrong place: it is correct but it is in the wrong place on the list of amendments. However, that will have the effect of hitting the young man with the family much more than the older man. Perhaps I might make it clear why I say that. Take a person who, when he is 25, takes out an ordinary policy of life insurance, and therefore a contributory pension scheme, for a period of 30 years. If he lives the whole of the 30 years and dies one day before the policy becomes a payable endowment, then, as I understand it, the last five years' premiums are taken into account and the proportion on which death duties will have to be paid is one-sixth of the policy moneys—in other words, the last five years, in proportion to the total 30 years. Accordingly, he pays duty on only one-sixth of the moneys and, when he is 55, with a bit of luck, his family will be grown up, reared, and able to manage themselves.

However, if an unfortunate man dies at 35, when he has a young family, and when the widow and the young family really need the money, what will happen under the Minister's amendment is that having paid only ten premiums, the last five years will be taken and therefore at least half of the policy moneys will be taken into account for death duty purposes. The effect, therefore, of the Minister's amendment which includes amendment No. 15 which must be taken into account is to penalise the person who dies young. The person who dies young is the very person we want to allow off with a lesser rate of duty because the presumption is that, if he dies young, he will leave a younger family to be looked after. It seems to me therefore that the whole effect of amendment No. 15 is utterly anti-social in that respect. It was because of that that I framed amendment No. 13, but stupidly put it down as an amendment to the section instead of, as I had intended, an amendment to the Minister's amendment.

Acting Chairman (Mr. James Tully)

What about amendment No. 12?

Mr. Sweetman

Having understood that position in respect of contributory schemes, I want to come back to non-contributory schemes. You must take one with the other. The position is that in the case of contributory schemes the liability to duty is based on a value of one-sixth of the death benefit. In the non-contributory scheme, under this section and under amendment No. 12, there is no such provision. The position here is that the whole benefit is to be taken into account, except in so far as the aggregate value does not exceed £5,000.

It seems that the Minister is deliberately drawing his legislation to penalise non-contributory schemes. That is utterly wrong. I accept what the Minister has said, that the exemption limit may clear it. I do not know enough about the situation to know that, but I know this, that about half of the superannuation schemes in this State are wholly non-contributory. That has been found as a result of examination. In relation to the contributory schemes in operation, almost all of them segregate the amount payable in contribution as between a pension amount and a death benefit amount. Where such schemes are written by insurance companies, they will be counted here as non-contributory schemes. As far as I can see, therefore, the restriction of the £5,000 exemption is in fact going to be operative in only about 20 per cent of the current superannuation schemes. That appears to be wholly wrong. I speak with the greatest reserve on this because I found the original section, as I did this amendment, extremely difficult to understand.

The Minister will agree that over the past 12 years there has been a marked growth of non-contributory schemes. He also would have felt, when he was sitting a little further down the gangway as Minister for Industry and Commerce, that such growth of non-contributory schemes was a symptom of enlightened industrial psychology. If that is so, and I think it is such a symptom, it seems to me that the differentiation he is making in these two amendments now is a very bad thing, particularly when it is wholly unnecessary because of the provision in the 1958 Act for anti-avoidance.

In practice, the pursuance of that enlightened industrial psychology to which I referred has been that the employees contribute to that part of the superannuation scheme that provides for pension benefits on retirement, and the dependants' benefits are supported by the employers' contributions only. I do not think the Minister will disagree with me when I say that the man with a young family is invariably the most heavily committed in regard to household expenses, school fees, rent and the repayments on his building society mortgage, if he was lucky enough to have a mortgage made before the Government made it virtually impossible to obtain accommodation from building societies. He is going to find all these things a greater burden. I am afraid the effect of this section, in keeping with the other provisions we have had here, may well mean a reluctance to join. If the scheme has to be made into a contributory scheme for the purpose of getting within the exemption to which I have referred, that will mean a corresponding claim for an increase in wages and salaries in contravention of the appeal made by the Taoiseach the other day. It seems, therefore, that the whole purpose of this amendment and of this section is going to entirely defeat its ends.

I wonder is the purpose of this section really to provide that the Revenue Commissioners can decide what type of pension scheme the State is to have, or rather what type of pension scheme individual employment is to provide? Whether that is intended or not, if it does in fact have that result, it is very bad legislation. I do not think anybody would suggest that the Minister for Finance or anybody able to advise him in his Department, no matter how expert he may be at his own job, is either qualified or competent to dictate the design of a pension scheme. That is the specialised work of experts. It is a type of specialisation which is obviously not available in the Department of Finance or in Revenue. It is entirely wrong that there should be any such suggestion and that the effect of these sections is going to be to enable the Revenue Commissioners to dictate the type and design of pension schemes for industry as a whole.

Again, I come back to where I started. In section 34 of the 1958 Act, there is a built-in prevention of the avoidance of duty. That built-in prevention is quite adequate to prevent people avoiding their liability to duty, and anything the Minister does after that is only interfering in the whole superannuation scheme for industry for the State as a whole, and is something that will bring no benefit but rather, on the contrary, will be quite an objectionable feature of our taxation laws.

Major de Valera

With regard to Deputy Cosgrave's amendment, possibly in a more comprehensive way the point would be met by the striking out of the word "dependant" in clause (d) (i) of the Minister's amendment. There is a case to be met and in so far as that part of the section is concerned, that would meet it.

I also must confess that I am somewhat confused as to the purposes of this section. As I understood it, the primary purpose of the original section 22 was to catch a scheme, say, for the big company director who was referred to here, if provision were made for what one might call exorbitant sums. Does Deputy Sweetman disagree with me?

Mr. Sweetman

No; I am agreeing with the Deputy.

Major de Valera

If that was the point, I do not know—I have not examined Deputy Sweetman's point so far—as to whether there is or is not sufficient answer in the 1958 Act as quoted but, if the answer is there, then we would want to know where the answer has failed in practice, or if it has failed and what are the purposes of the section. It seems to me that one of the things that we should be told is how much more revenue will come in as a result of this section, on estimation. Usually when legislation like this is provided in a section of the Finance Bill, the experts who prepare it have some idea of what the return of it will be. I would be particularly interested in knowing what will be the average return in the ordinary case from the section. It is a factor that perhaps we should have asked for earlier. Then we could make some kind of guess as to what the incidence or the force of the section would be on the community as a whole.

There is one other thing which I am afraid I must refer to. The Minister referred to undercurrents. I take it he was referring to me.

Mr. J. Lynch

Not only Deputy de Valera.

Major de Valera

What I said here was not meant to be an undercurrent. I was responsible for the discussion here the other day in which I mentioned the class of cases. I had a very good idea that there was one class, in fact, the class the Minister mentioned, that the original section 22 did not capture, namely, civil servants. I was anxious to know, however, whether there were other classes. For instance, Deputies on the other side of the House mentioned bank clerks but I think they would be captured. The arguments proceeding from Deputy O'Higgins and other Deputies on the other side of the House were all on the assumption that all these people would be captured by this section. I did not mean this as an undercurrent. I meant it as a point for examination and I was not specific at that time because I thought there might possibly be other classes as well. It does seem to me that civil servants are excluded from this new section. Frankly, I think, in principle, that should have been adverted to.

Mr. J. Lynch

They are not excluded.

Major de Valera

No, but they are not captured by the section. I will deal with that in a moment. There may be very good reason for it. As the Minister said, and I for one completely accept, the superannuation scheme is to be looked at. What I do not like is the explanatory memorandum. The explanatory memorandum circulated with this Bill simply says in relation to the original section 22: "Section 22 provides that death benefits payable under superannuation schemes will in all cases be liable to estate duty except where the aggregate value of these benefits does not exceed £5,000." There is nothing more said but I think in the case of an explanatory memorandum, it should be explicit and it should be explanatory. It was not as an undercurrent that there was the crosstalk there was in the House. I simply wanted to raise the question that there were classes, or there was the possibility that there were classes, whether accidentally or not, and that it would need to be looked into.

On the principle of the thing, I think I would agree with one of the remarks Deputy Norton made earlier where I think he implied that there should be uniformity where taxation is concerned. I do not think anybody questions that. I do not think there is any effort made to breach that principle. But, at the same time we should be careful that these things are adverted to.

Mr. P. Hogan

(South Tipperary): There seems to have been considerable confusion engendered into this entire matter. First and foremost, in the original Bill the section was labelled section 22 and after the Committee Stage it became section 24. That has caused some confusion here. Then, in the original set of amendments an amendment was introduced by the Minister to replace section 24 and in the first set of amendments that was amendment No. 6. Now in the second set of amendments it is amendment No. 12.

Mr. J. Lynch

I cannot be held responsible for that.

Mr. Sweetman

I am afraid Deputy Sweetman was responsible for that because he threw in a lot of amendments.

Mr. J. Lynch

Nor would I allow Deputy Sweetman to be blamed.

Mr. P. Hogan

(South Tipperary): I am not blaming the Minister.

Mr. J. Lynch

It is not fair to be importing this as part of confusion.

Mr. P. Hogan

(South Tipperary): I merely mentioned that there has been confusion and I tried to indicate how it has occurred in all our minds. Then there is something for which the Minister is responsible, that is, he has introduced a new section which in his first set of amendments was amendment No. 7, dealing with insurance policies, and is now in the second set of amendments, No. 15. He did not seem to be clear in his mind in the first instance, judged by his own statement and by the explanatory memorandum, as to what he was trying to cover in section 22 because it was labelled “Benefits Accruing by Reason of Superannuation Schemes”. He went on to say it was a measure to catch non-contributory benefits, for example, death annuities provided by a man for his wife in which he loaded a lot of his money on to an insurance policy which his wife would get in the form of a lump sum or annuity or a mixture of both.

Whether it was under pressure from memoranda from insurance companies all over the country, or what, the Minister has now introduced a new section dealing entirely with assurance policies. He has taken it from section 22 and has introduced it as a new section. That has caused some of the confusion. Even though the Minister has said he is not responsible for the confusion in the first case he is responsible for the confusion in the second case.

I should like to get some information from the Minister and I will put my questions to him as specifically as I can because it is not easy to follow some of this discussion. I understand that heretofore contributory benefits were aggregable and liable.

Mr. J. Lynch

They were liable but not aggregable.

Mr. Sweetman

Liable as an estate in themselves.

Mr. J. Lynch

Liable as an estate in themselves, yes.

Mr. P. Hogan

(South Tipperary): Non-aggregable? That is, in regard to contributory benefits, the only change is that there will be an exemption given up to £5,000.

Mr. J. Lynch

That is in the section, yes.

Mr. P. Hogan

(South Tipperary): That is the only change that has been made as regards these benefits?

Mr. Sweetman

They have been aggregated and will be liable to aggregation in future.

Mr. P. Hogan

(South Tipperary): And the non-contributory ones which were heretofore non-aggregable and non-liable are now to be aggregable and liable?

Mr. J. Lynch

They are liable to succession duty but not to estate duty.

Mr. P. Hogan

(South Tipperary): I shall come to that. He has given this sop, and said: “I have made you liable and aggregable but to soften the blow, I will remit the 11½ per cent succession duty and I will give you the £5,000 relief which the contributory ones are getting.” That is not as good a hand-out as it would appear to be. The Minister need not have mentioned the £5,000 relief because they were not paying it before.

Mr. J. Lynch

Most of them were paying more by way of tax.

Mr. P. Hogan

(South Tipperary): The Minister tells us they were paying more because they were paying succession duty. I cannot argue on that point because I do not know how these figures are worked out. I would want a table in front of me, but I shall take the Minister's word for it. Perhaps they were paying more but it remains to be seen, when their benefits are added to their real estate and those amounts are aggregated, whether they would be paying less than before. I am quite convinced the purpose of the alteration is to get more money out of them and that the Minister will.

I asked the Minister a question here the other day on this matter of aggregation. Although he is doing this, he does not know how much money it will bring in or how much money he may have lost over the past year. The question was: "To ask the Minister for Finance if he will give an estimate of the net loss to revenue which occurred over the past financial year by failure heretofore to provide the legal coverage envisaged by section 22 of the Finance Bill, 1965." He mentions the succession duty at 11½ per cent, which this wipes out. He mentions the £5,000 benefit in respect of the widow and dependent children. He concludes by saying: "No figures are available on which to base an estimate of the amount of duty which would have been payable if benefits not caught by existing law had been under a charge for duty in the last financial year." However, I do not know whether that concluding paragraph relates to section 22 as the Minister had originally envisaged it or whether it now relates to section 24 with the new section dealing with assurance policies siphoned off from it. It would lead to clearer thinking if in the original section the Minister had introduced his previous drafting and not have us tied up with superannuation schemes and assurance policies as we seem now to be.

Mr. J. Lynch

Let me say, first of all, that there was nothing sinister in the alleged exclusion of civil servants. It was accidental.

Major de Valera

I did not say there was anything sinister.

Mr. J. Lynch

I hope the impression has not been created.

Major de Valera

We want to be frank.

Mr. J. Lynch

There was an imputation of an alleged lack of frankness in the memorandum.

Mr. Sweetman

The Minister must admit that the statements in the explanatory memorandum in relation to section 22 are entirely misleading.

Mr. J. Lynch

They are not fully explanatory.

Mr. Sweetman

They are entirely misleading. The Minister knows very well that if he made those statements as a barrister to a judge, he would properly get the works.

Major de Valera

The Minister is not responsible for everything that appears in print. He is not a miracle worker.

Mr. Sweetman

The Minister is going to get it from me.

Acting Chairman (Mr. James Tully)

The Minister might be allowed to reply.

Mr. J. Lynch

In relation to section 34 of the 1958 Act which Deputy Sweetman quoted and to which he referred in a less precise way on Committee Stage, section 34 of the 1958 Act is designed to facilitate people who want to draw up superannuation schemes that are contributory in order to ensure that the contributions will be taken account of for purposes of income tax and other aspects of the superannuation schemes that are examined by the Revenue Commissioners. It has no reference whatever to estate duty. The fact that there is, as Deputy Sweetman suggested, a built-in exclusion of superannuation schemes as affecting directors of companies, the kind of persons whose financial activities are sought to be caught here, does not mean that those activities are not permissible anyway or have not been. The section as it stands refers to arrangements in its definition of a "superannuation scheme". It says: " `superannuation scheme' includes any arrangement connected with employment."

Mr. Sweetman

But it does not because ex gratia payments are given as part of an arrangement and it does not include ex gratia payments.

Mr. J. Lynch

Because ex gratia payments are gifts and we have not a gift tax as such.

Mr. Sweetman

They are arrangements, and if it was the other way around, I am very sure the Revenue would contend that the ex gratia payment was an arrangement. Does the Minister not know that everybody would contend that it was part of the arrangement under which they took up their employment?

Mr. J. Lynch

I understand that an "arrangement" means a legal arrangement, which is, I understand, an enforceable one as well.

Mr. Sweetman

I am coming on to discuss arrangements in section 42 where I am fortified by the advice of senior counsel.

Mr. J. Lynch

If I continue to get interruptions, we shall never get to section 42.

Mr. Sweetman

I beg the Minister's pardon.

Mr. J. Lynch

The type of provision for superannuation schemes under section 34 of the 1958 Act is not such as to exclude the necessity for section 24. These relate to having contributions reckoned for income tax purposes and there is also regard to the avoidance of undue payments of lump sums in the course of the operation of these schemes. That, as I said, does not obviate the possibility of the director of a private company making, through the company itself, an arrangement for the purposes of avoiding estate duty. Section 24 is still necessary for the purpose of catching that type of activity. Indeed, as I said, section 24 brings into liability for death duty non-contributory schemes.

Mr. Sweetman

If the Minister is right in relation to section 34 of the 1958 Act—I am not accepting that he is — would it not be a far better anti-avoidance measure to provide in this Bill that section 34 of the 1958 Act will apply and, even though it does not apply as a complete prevention of anti-avoidance, to make it apply?

Mr. J. Lynch

It is a different line of country altogether.

Mr. Sweetman

No, it is not.

Mr. J. Lynch

That section deals with income tax liability. Section 24 deals with liability to death duties on sums payable on the death of a person who, in one way or another, provides the benefit out of his resources. Once more, I have been put off what I intended saying.

Mr. Sweetman

I am sorry.

Mr. J. Lynch

I was dealing with non-contributory schemes. Death benefits arising out of non-contributory schemes are not at present liable to estate duty but they are liable to succession duty and succession duty is much more onerous. I am now relieving them of liability to succession duty and bringing them in with the contributory schemes benefits, making them liable to death duty as such and relieving the first £5,000. In a later section, I shall be introducing an amendment which will enhance the value of that relief to quite a considerable sum, in some cases a sum that will relieve completely the type of case the Deputy has in mind.

Mr. Norton

The Minister said he was relieving the first £5,000. Is this the first £5,000 when it does not exceed £5,000?

Mr. Sweetman

No. It is only if it is under £5,000.

Mr. J. Lynch

I am sorry; when they are under £5,000.

Mr. Norton

Would the Minister not consider doing what he said he was doing and relieve the first £5,000?

Mr. Sweetman

I should be quite happy with Deputy Norton's suggestion.

Mr. J. Lynch

I am sorry. I should not have said the first £5,000. I should have said up to £5,000.

Mr. Norton

Would it be very expensive to relieve the first £5,000?

Mr. J. Lynch

That is a question I could not answer offhand.

Mr. Sweetman

What will the amendment provide anyway in money?

Mr. J. Lynch

It would be very hard to assess that.

Mr. Sweetman

Nothing.

Mr. J. Lynch

Oh, yes.

Mr. Sweetman

How much?

Mr. J. Lynch

At a very rough estimate——

Mr. Sweetman

I am quite sure that there is a very accurate estimate in the brief in front of the Minister.

Mr. Norton

Give us some figure.

Mr. J. Lynch

I have nothing in the brief, but I could say £50,000. That is a very rough estimate now.

Mr. Sweetman

The Minister would solve the whole thing by doing what I suggest in section 34, if it is not already caught, as I think it is.

Mr. Norton

Would the Minister explain——

Mr. J. Lynch

I will not explain any more because I am not getting a chance.

Mr. Norton

I will come back again.

Mr. J. Lynch

Deputy Cosgrave suggested, and Deputy de Valera supported him, that we might extend the relief which the section provides for dependents to children who are disabled. In subsequent sections, and for the purposes of this section, which will be applicable, I have an extension of dependency to include people over 16 years of age who continue a full-time course of instruction at school, college, or other educational establishment, or words to that effect. It is very difficult to assess the extent to which a person is incapacitated or the extent to which that incapacity or disability precludes him from earning a livelihood. While one must have sympathy with the general type of case Deputy Cosgrave has in mind, I think that, having extended the type of dependency to persons over 16 years who are following a full-time course of instruction, I have gone reasonably far. To extend it beyond that would create tremendous difficulty as far as assessing liability is concerned and would impose on the Revenue Commissioners the very onerous obligation of determining disability, and the extent of disability, and whether people with a disability are capable or incapable of earning, and how much. I think the tenor of the Bill, as now amended as far as dependency is concerned, goes a fairly long distance to meet the type of case the Deputy has in mind.

Mr. Sweetman

Would the Minister explain how he got the figure of 11½ per cent succession duty he mentioned?

Mr. J. Lynch

The figure was supplied to me. It is a combination of ten per cent ordinary duty and one and a half per cent extra as a succession derived from the employer.

Mr. Sweetman

Ten per cent ordinary. What succession duty is ten per cent?

Mr. J. Lynch

Non-contributory. The 11½ per cent refers to succession derived from the employer. I shall get more details on that. The debate is not over as far as this section is concerned and I shall have more information later.

Mr. P. Hogan

(South Tipperary): I take it this 11½ per cent the Minister is wiping out applies only to the part of the estate covered by the insurance?

Mr. J. Lynch

The benefit derived from a non-contributory scheme.

Mr. P. Hogan

(South Tipperary): Not the entire estate.

Mr. J. Lynch

Yes.

Mr. Norton

On the last occasion on which we were discussing this Bill, the figure involved on the last section, which is concerned with the 25 per cent duty on land purchased by non-nationals, was £183,000 and the Minister regarded that sum as of no consequence whatsoever. All he hopes to get under this particular section is £50,000.

Mr. J. Lynch

The Deputy should not be fixing me with these figures.

Mr. Norton

Even if the figure were double what the Minister says, I should be still prepared to accept it as accurate. Half the figure the other night was, according to the Minister, of no importance whatsoever. The Minister says he wants to catch the company director who had avoided his proper share of revenue. Apparently he will not catch very many because all he will get is £50,000 a year. This is not a question of collecting revenue to ensure justice is done and, on that, I go along with the Minister, but, instead of allowing duty on the first £5,000, provided it does not exceed £5,000, could he not go the whole way and make the first £5,000 exempt? He will not lose very much and this would meet everybody's difficulty. It will also catch the people he wants to catch, the company directors and those he feels are getting away with large sums in insurance. The £5,000 exemption is designed to relieve the small cases.

Mr. Sweetman

No, it is not.

Mr. J. Lynch

No; I am saying that, in order to relieve what Deputy Norton suggests, the £5,000 would go through the big cases also.

Mr. Norton

I do not see any reason why company directors should be able so to arrange their affairs as not to pay their proper share. What I am asking is they exclude the first £5,000, irrespective of the amount. Since the Minister started off by admitting that this was bringing in practically no revenue, what would be the difficulty in making the first £5,000 free—not up to £5,000—for any amount? This covers all the objections I have heard.

Mr. J. Lynch

I am also introducing those other reliefs, raising the £150 allowance for widows to £250 and £100 for a child to £150. That is going to mean considerable relief.

Mr. Norton

The Minister admits that we are not really discussing revenue. The amount involved is of little or no importance when it is coming from a section of the community from which we should be very loth to take money, widows and orphans, people in meagre circumstances. In addition to what he has suggested, could he not also make the first £5,000, free, since it is going to cost very little?

Mr. J. Lynch

I am afraid I cannot.

Mr. Norton

At least I am glad the Minister has given a specific answer that he is not sympathetic to the widows and orphans——

Mr. J. Lynch

No, I am sympathetic.

Mr. Sweetman

It is not much good being sympathetic if you do not translate it into practice.

Mr. J. Lynch

The reliefs I have already referred to are in the Bill for widows and orphans.

Mr. Norton

Would the Minister put in the first £5,000 free or these reliefs, whichever is the greater?

Mr. J. Lynch

I do not know if that is relevant.

Mr. Norton

The only people the Minister will sympathise with are the big business people.

Mr. J. Lynch

There is no revenue at all in this 25 per cent.

Mr. Sweetman

Of course that is nonsense.

Mr. Booth

Would the Minister deal with his reaction to the point which I raised with him before on the question of existing pension schemes? Arrangements which are made with the knowledge of the Revenue authorities in advance for avoidance of tax liability may very well be caught virtually retrospectively as soon as the Revenue people get wise to them. Here we are dealing with existing superannuation schemes of which the Revenue has always been fully aware in the greatest detail. The Minister may say that when the schemes were submitted to the Revenue Commissioners, they were not submitted on the question of death duties but purely on the question of income tax liability and relief in so far as the premiums were concerned, but the fact remains that those schemes were put into effect with the full knowledge of the Revenue Commissioners in order to build up a sum to help the widows and other dependants of the members of the schemes, either by way of providing a lump sum which will be a tremendous help in discharging the death duty on the remainder of the deceased's estate or by providing a pension for the dependants.

When you get a lump sum, I can see there is possibly some reduction in hardship because at least the dependants have some liquid resources in hand but the way in which people have arranged—very properly—their affairs has been based on the fact that these death benefits would not be liable to estate duty at all in certain cases or would not be aggregated with the remainder of the deceased's assets. I cannot feel that this is a fair way of legislating when we provide that where a perfectly legal action has been taken as a result of which a formal contract has been executed between an employer and trustees for a superannuation fund, the Revenue authorities should then come and radically vary the effect of the whole arrangement. That seems very unfair and it seems to be going back to the same old business of retrospection.

It is quite possible for the Minister to say that it is difficult to legislate for different classes of cases. There may be a question of administrative difficulty but I do not think that should ever be put forward as a reason for doing less than justice. If the Minister feels it is absolutely essential in future that superannuation scheme benefits should be aggregated and taxable, well and good; let people therefore provide for increased benefits so that the net receipts to beneficiaries would still be approximately the same, but at the moment, with these pension schemes, there will not be time to amend the schemes in order to provide the same benefits as originally intended. There is, therefore, quite definitely a case for making an exclusion in this Bill for all superannuation schemes currently in operation with the full approval of the Revenue Commissioners and with their full knowledge.

Mr. J. Lynch

Again, I want to point out that the schemes to which the Deputy refers are schemes which were submitted to the Revenue Commissioners for the purpose of agreeing on the extent to which relief would be provided for contributions, whether by employer or worker or both, form liability to income tax. I must again point out that contributory scheme benefits are already subject to liability for estate duty. Therefore, I do not know what point the Deputy is making in that respect.

The next section, which has not been recommitted is the one which deals with aggregation but aggregation seems to be worked into this section to the point that we seem to be taking advantage of the recommittal——

Mr. Sweetman

No.

Mr. J. Lynch

That is what is happening as the debate is going along. I did not have the figures a few minutes ago when dealing with Deputy Norton's point but it is relevant to mention them in the case which Deputy Booth has in mind. Is it those big cases which we want to ensure will pay that should benefit or is it the ordinary cases? If it is the ordinary cases, I submit on the figures I am now giving, that the £5,000 exemption will with the increase in the abatement of duty that would otherwise be payable by widows and children, give very substantial relief. In the case where there is only one dependent child, the point at which an estate of this nature would become liable is to be £7,010——

Mr. Sweetman

Is this free estate or superannuation benefits?

Mr. J. Lynch

All in : the aggregate.

Mr. Sweetman

How does the child's benefit come into the superannuation scheme here? It does not, not unless they have done it on the share basis I mentioned the other day, which no superannuation scheme does.

Mr. J. Lynch

In the case of a widow with one child, the point of liability at which estate duty begins is £10,000.

Mr. Sweetman

Could the Minister explain how the calculation works up to £10,000.

Mr. J. Lynch

I have got only the net figures.

Mr. Booth

£5,000 superannuation benefit and £5,000 free of estate duty.

Mr. Sweetman

No, that is not right.

Mr. J. Lynch

If the house will give me the opportunity to read the figures, it would be of some benefit to other Deputies who do not understand the position, even if other Deputies——

Mr. Sweetman

The Deputies who understand the position are trying to make it clear for the other Deputies.

Mr. J. Lynch

A widow and one child would not have to pay duty until the estate reaches £10,000.

Mr. Norton

It is £10,000 now but it was £7,000 a moment ago.

Mr. J. Lynch

No; I said one child. There was no child involved before. That is where the £5,000 relief operates. For a widow with one child, the figure is £10,000; for a widow with two children, it is £10,150; for a widow with three children, it is £11,667; for a widow with four children, it is £12,600, and so on up to the case of a widow with six children, when it is £14,375. Therefore I think I can indicate to the House that there is substantial relief for the cases about which most Deputies are concerned.

Mr. Norton

That is the aggregate of her estate, from all sources?

Mr. Corish

Would the Minister take a figure of £16,000 for the aggregate of a widow's estate?

Mr. P. Byrne

That is a stiff one.

Major de Valera

Do not forget the Succession Bill.

Mr. J. Lynch

I will have to get some figures worked out.

Mr. Corish

I should like to have them.

Mr. Sweetman

I will tell the Deputy. She will have to pay £1,600.

Mr. Corish

Is that still the position under the present amendment?

Mr. Sweetman

It is, yes.

Mr. Norton

We were discussing civil servants pensions and so on, but could the Minister tell me what is the position in regard to Ministers' pensions and the position of their widows? How are they covered in this situation?

Mr. J. Lynch

There are enforceable rights provided by statute and therefore they are liable to benefit.

Mr. Norton

I am very sorry to hear it.

Mr. J. Lynch

And so are trade union officials. I take it they are entitled to enforce——

Mr. Norton

It does not affect me.

Mr. Corish

I should like the Minister to deal with the case of the £16,000 because this is an example that has been circulated to Deputies. I reckon that if estate duty is to be paid to the tune of £1,600, it means that the widow will either have to borrow or will have to sell the house in order to pay the duty. Does the Minister's proposed amendment reduce the duty to any extent?

Mr. J. Lynch

It reduces it by £250.

Mr. Sweetman

Not for an estate exceeding £16,000.

Mr. J. Lynch

Up to £15,000.

Mr. Sweetman

Deputy Corish said £16,000. The Minister should take enough time to understand the provisions of the Finance Bill before he comes to the House.

Mr. J. Lynch

When Deputies ask questions from all sides of the House —I never put myself forward as an income tax expert——

Mr. Sweetman

No, but that is clearly in subsection (6) of section 28.

Major de Valera

These are matters——

Mr. Sweetman

It is rather vital whether a widow pays anything or nothing.

Mr. Corish

This is the classic or the current case——

Mr. J. Lynch

I never received that document.

Mr. Corish

——of the house and the contents being valued at £8,000 and a pension of £10 per week with a capitalised value of £8,000 and therefore an aggregate of £16,000. A man leaves such an estate to his widow. What has she to pay on that?

Mr. J. Lynch

She pays £1,600.

Mr. Corish

Let us start from there. I do not pretend to follow the intricacies of finance law, let us call it, but this could be regarded as a reasonable and an average sort of estate and a reasonable provision to be made for a widow. I was quoted recently as saying that £8,000 would not be an unusual value for a house in present circumstances but we have to remember that the £8,000 includes not alone the value of the house but the rest of the man's estate. It includes the furniture, his personal belongings and a car if he had one; therefore I do not think anybody could say that £8,000 was anything but average or, one might say, modest.

Major de Valera

Modest.

Mr. Corish

Neither would it be an unusual provision that a husband who had a reasonably young wife—you can select your own age there—say a woman of 30 or 35 years, who had no trade or occupation but who was solely dependent on the provision her husband would make for her, would try to ensure for her an income of £10 a week. When we think in terms of the value of houses, we must remember that the market value of houses is going up month after month. The labourer's cottage which at present might be valued at £1,000 or £1,200 could well be valued at £1,500 or £2,000 in a few years time.

I want to see people paying their due amount of tax and I am with the Minister when he wants to ensure that people will not, in the name of avoiding their tax responsibility, do any sort of "hooky" business which although it might be within the law, would be morally wrong. The House has been given this example by various people and by a certain association. Here is a situation in which a woman is left a house and personal estate to the value of £8,000 and her husband has made provision for a pension of £10 a week which, when capitalised, is assessed at £8,000 and the Minister himself has said that in those circumstances the widow, having no children, and even with the present amendment, will have to pay duty of £1,600.

How does she get it? Does she borrow it? If she does, she will have to pay interest on it. If she does not feel like borrowing it because she feels the terms are too onerous she will have to sell the house and then she will have to get another one, a more modest one. The Minister should accede to Deputy Norton's proposal that a figure like £5,000, or some figure on which the Minister may decide, should be accepted as the value of a house and should be exempt.

Mr. Cosgrave

We have stressed this aspect earlier but I want to re-emphasise the points that have been made during the discussion. The figures which are included in the Bill and which we have been discussing may have been reasonable enough before the drop in the value of money. Nowadays people are no longer amazed at the price which property fetches because you have to discount a good deal of it, due to the effects of inflation. While initially it may look well in print, in actual practice the drop in the value of money indicates that these figures no longer mean what they did. Consequently, although the figures we have been discussing this evening may sound reasonable and appropriate, in so far as superannuation is concerned, a figure of £5,000 is still as much as any of these persons would get and I think the Minister should advert to the very dramatic changes in respect of house property.

To some extent the present restriction on credit may have if not a downward influence on prices, certainly may prevent prices going higher. The old prices and values no longer hold true. Depending to a considerable extent on location and so on, price values very considerably. For these reasons I believe the Minister should consider further raising the total value because, as has been pointed out, the amount involved for a widow, particularly one with children, can result in very considerable hardship. Undoubtedly, the figures mentioned here indicate the problem that will present itself for widows with children if this Bill is passed in its present form. The Minister should consider price levels in relation to the present depreciated value of money and the consequent changes in values that have occurred.

Major de Valera

I shall not chase the money part further, but I shall take Deputy Cosgrave's point that there is a decrease in the value of money, meaning an increase in the value of property. That being so, one must have in mind that the nominal value of an estate is likely to appreciate and is doing so rather rapidly. If the nominal value of estates is appreciating at the rate at which it is appreciating and if aggregation is to take place, which it is——

Mr. J. Lynch

Not under this section.

Major de Valera

I am not arguing aggregation.

Mr. J. Lynch

Aggregation comes under section 25.

Mr. Sweetman

Persons liable are also open to aggregation under this section.

Major de Valera

The nominal value of estates is appreciating and the effect of this section is in aggregation. Therefore, I would ask the Minister very seriously to consider whether in the status quo or should I say, the ante status quo situation on which the estimates the Minister gave us were based, £5,000 is sufficient or whether it should be reviewed. Having got the facts by varying the limits, as undoubtely would happen later to meet cases as they occur, that variation will take place with a certain amount of friction and time lag and the net result will be to operate more severely and more harshly in the type of case Deputy Corish was talking about rather than on the estimates on which the £5,000 was based. That is a point that should certainly be looked into.

When Deputy Sweetman opened, he said he was confused about the section. So was I. I have looked at it again and I have found that there is a change really only in the structure of the section and not very much in the section itself.

Mr. Sweetman

Is the Deputy talking about the amount?

Major de Valera

Amendment No. 12 as against section 24, previously section 22. We should look at the point I am making. Subsection (1) of the proposed new section states:

The provisions of this subsection shall have effect in relation to a death benefit payable under a non-contributory superannuation scheme.

Anyone reading that would think it applies only to non-contributory schemes. It applies to everything because subsection (2) (a) says:

The provisions of paragraph (d) of subsection (1) of this section shall apply to death benefits payable under a superannuation scheme other than a non-contributory superannuation scheme, to or for the benefit of the widow or dependent children of the deceased.

Mr. Sweetman

Therefore, it covers all schemes, contributory and non-contributory.

Major de Valera

The general overall legal effect will be that. In other words, the intention of the section remains substantially as it was. In this subsection——

Mr. Sweetman

He is going to write to tell the Deputy to shut up.

Major de Valera

Pardon?

Mr. Sweetman

It is all right. I prevented a message being sent back to the Deputy.

Major de Valera

The original section 22 said that a death benefit meant any benefit which accrues pursuant to a superannuation scheme on or in connection with a death. The question I want to ask the Minister is whether under this section the definitions are broad enough. I should like to know how is it that the Civil Service are exempt from this? As one reads that section, the Civil Service are exempt unless a death benefit is not involved.

Mr. Corish

An ex gratia payment.

Major de Valera

That immediately brings up the point of a big company. You can have a number of directors in what may be a private company or a public company. No arrangement is made; nothing is done. It may be that one of the directors dies and the board simply make an ex gratia payment. There is no arrangement whatever for superannuation. Will that payment get away? If it does, surely it is a coach and four through the Act.

Mr. Norton

The company will not face income tax.

Major de Valera

Do not mind income tax. I am talking about death duty. It leaves it open to a board of directors to say nothing, do nothing. Deputy Booth has just reminded me that the pension trustees have a discretion. We are back again to discretionary trusts. What is the difference between a notional Government discretion and the other?

Mr. Sweetman

This is a notional Government. We know that.

Major de Valera

I said "notional Government discretion".

Mr. Norton

He is appealing to the Opposition for advice, the Minister having gone away.

Major de Valera

I was not appealing. I was arguing with Deputy Sweetman.

Mr. Sweetman

I shall get to the Deputy in a minute.

Major de Valera

In all seriousness, the first objection is that there are a class of higher civil servants, who, for the moment, will be exempt from this. I make no further point about this in itself but the Minister is going to look into it. I make this point, however. In all dealings with these matters, whether things concern ourselves in this House or public servants, there should be a complete disclosure in this House and to the public at large. I consider that principle should be very clearly stated in this House.

Mr. Norton

Hear, hear.

Major de Valera

If that escape route is open in one case, why is it not open in another? I shall repeat this point for the Minister's benefit. If there is escape from the wording of the section on the ground that payments are ex gratia, that is, in regard to civil servants, if the reason the section does not capture civil servants is that the payment is ex gratia and at the discretion of the Government, why is it that a board of directors could not just sit tight, do nothing, and if one of their members died, the payment in his case would not be an ex gratia payment? Why could that not be open, and if it were, it would be easy to drive a coach and four through this section.

Mr. T.J. Fitzpatrick

(Cavan): I had not intended speaking on this amendment at all but since I came into the House, I have been rather shocked to have it brought home very clearly to me that we appear to be providing one level of death duty for the Civil Service and another level of death duty for the ordinary private citizen. If we are doing that, or even anything like it, it is something that is to be deplored and something which should not be allowed to pass without a protest from everybody who appreciates what we are doing.

Mr. J. Lynch

We are not doing anything of the kind.

Mr. T.J. Fitzpatrick

(Cavan): As I understand the position, a death benefit, to which the estate of a civil servant becomes entitled, is not liable to death duty and is not liable to be aggregated with the rest of his estate because it is regarded as an ex gratia payment from the State to the estate of the deceased person. Every boy and girl entering the Civil Service knows that on his death his estate will become entitled to a lump sum. I fail to see how that can be regarded as an ex gratia payment and I fail to see how it should be treated as such. The reaction of the next-of-kin or the executors of any deceased civil servant. who are told: “The State has decided in your particular case not to pay the ex gratia sum normally paid to people of this category” would be to create an uproar. It is quite right that there should be such an uproar because when that person entered the Civil Service, he did so on the basis of certain conditions of employment, one of which was that at death, payment of a lump sum would be made. In the case of a creamery manager who becomes entitled under a non-contributory scheme to a lump sum payment to death, that lump sum payment becomes liable to death duty.

There is a very big principle at stake here, all the more so, when we are dealing with a branch of legislation in relation to which the Minister, and indeed the Government, are peculiarly and particularly in the hands of the Civil Service. I do not say that in any offensive way.

Mr. J. Lynch

What other way is there of saying it?

Mr. T.J. Fitzpatrick

(Cavan): I say it because I regard it as my duty to say it in this House. Members of this House would be criticised, and rightly so, if they decided to pass legislation exempting themselves from death duty or income tax. We know the uproar there was in the country when a portion of Deputies' salaries was exempted from income tax and how hard it was to convince the man on the street that that particular portion was an expense and not a remuneration.

I cannot over-emphasise the risk of adverse comment to which we are leaving ourselves open if we allow this proposal to go through. I say that it will be utterly impossible to explain to any intelligent citizen why a lump sum payable to a higher civil servant, or indeed to an ordinary rank and file civil servant, should escape death duty while the lump sum payable to the commercial traveller, the bank manager, the creamery manager or anybody else who might be participating in an non-contributory scheme, will be liable to tax.

Mr. J. Lynch

It is obvious some Deputies are getting in on this because they think there is a bit of copy in it. I said, at the start, I wanted to make it quite clear that it is accidental that this provision did not catch the Civil Service. With regard to the extent to which it relieves civil servants, there were only about one or two cases in the whole Civil Service, and there is no point in getting attached to a whole spread of creamery managers and somebody else, because of death benefits that would arise in the superannuation scheme of creamery managers. These kind of people would not be taken into account at all because £5,000 is being relieved. That £5,000 would more than cover every death benefit that will arise in the case of civil servants.

I have told the House specifically that the intention is, for what it is worth, and it is not worth a lot, except the point of principle as Deputy Fitzpatrick said, that the benefits arising out of a superannuation scheme for civil servants will be taken in but this is not the appropriate Bill for it. They will be taken in under superannuation or other legislation which I have promised the House it is my intention to introduce. Nobody should be importing anything sinister into this section.

Mr. Norton

I would accept the Minister's assurance, but just as a matter of interest, when is that likely to happen?

Mr. J. Lynch

I cannot say exactly when.

Mr. Norton

Will it be within the next few months?

Mr. J. Lynch

It will be.

Mr. Norton

Will the Minister make a statement to the House with regard to this? I hope there will be no question of its being buried away in some clause of an Act.

Mr. J. Lynch

You cannot bury an Act and when you want to bring about a change, you have to come to the House and make a statement in regard to it.

Mr. Norton

I should like a clear indication of exactly what the Minister's intention is.

Mr. J. Lynch

In relation to the point made by Deputy Corish about an estate of £16,000, if that estate, as he said, were made up of a house, money in the bank and some securities, then that estate would be liable for the full £16,000, as mentioned. Some of the securities might have to be sold to pay it but I understand there is little, if any, evidence of anybody having to sell a house to pay for death duties as such.

(Interruptions.)

Mr. J. Lynch

Deputy Corish and Deputy Norton give nobody a chance. I do not interrupt when Deputies are speaking. I want to say also the Bill will give relief. Apart from the superannuation benefits case, there is extra relief given in this Bill to the type of estate in regard to value and size which Deputy Corish had in mind a while ago.

Mr. Sweetman

The Minister need not be peevish about criticism while he is speaking or otherwise, because the fact is that he has come in here with a damned bad Bill, and a particularly outrageous explanatory memorandum. The Minister had better realise that that type of approach will mean that he will have to stay even longer in the House trying to explain the Bill. I might suggest that before we get another Bill with as bad an explanatory memorandum, the Minister would be wise to go to at least one member of the House I can think of and get some lessons in the technique of tick-tack.

The Minister has not yet explained to the House how the 11½ per cent succession duty was made up. He has not yet explained to the House why he is putting superannuation death benefit under a non-contributory scheme in a worse position than benefit under a contributory scheme. The position, as I understand it at any rate —I do not in any way suggest that I am certain to be right—is that in the case of a contributory scheme, the amount of the policy moneys of the death benefit which are to be taken into account will be only that proportion which the last five years payments bear to the total payments made. Therefore, in the case of a person living to 50 or 55 years, the proportion will be very small, and it has the unfair social result that where a person dies young, the proportion is larger. In any event, it is not the whole death benefit in a contributory scheme that bears the brunt. It is only a proportion, or part, or share. I think it is bad that the Revenue Commissioners should dictate the type of pension scheme we should have.

Non-contributory pension schemes should be taken as part of an enlightened industrial psychology and should not be hit as they are being hit. This is bad and I think it arises because the Minister will not take the trouble—I do not mean that to be offensive but it is the fact—to write in a proper anti-avoidance section. I think it is in the section, but supposing I am wrong. It would be a very simple matter for the Minister to provide that section 34 of the 1958 Act would also apply to death benefits. That would mean that a case of avoidance would be caught, and a person having more than 15 per cent of the capital would not be able to write out exemption from estate duty under a superannuation scheme.

That would be very simple. It would require little more than a section of about four lines, saying that if the Minister is right—I assume he thinks he is right, but I am not prepared to agree that it would be so constructed by the courts—the provision in paragraph (n) of subsection (1), section 34 of the Finance Act, 1958, and the definition, would apply for the purpose of death duties as well as income tax. That would mean that all cases of anti-avoidance would be caught and genuine superannuation schemes would not be caught. It would be quite simple for the Minister to do that.

In addition, I cannot see the answer to the point made by Deputy de Valera. If ex gratia payments to civil servants are not caught in this Bill — I am not talking about the exemption limit — why could not a similar coach and four be driven through every part of the section by a company providing not a superannuation scheme as such, but ex gratia payments? The point made by Deputy de Valera is entirely valid. I regret that the Parliamentary Secretary came in and tried to curtail his contribution.

Mr. Carty

That is not so.

Mr. Sweetman

I accept that, but I thought that was his purpose.

Mr. Carty

It was another matter altogether.

Mr. Sweetman

I am glad Deputy de Valera's contribution was not cut short.

Mr. Carty

It is very hard to cut short a de Valera.

Mr. Sweetman

If I had made that remark, it would have been taken as offensive.

Mr. Carty

Mine was not meant to be offensive; it was meant to be complimentary.

Mr. Sweetman

That remark by the Parliamentary Secretary has so shaken me in my stride that it has completely put me off my line of thought.

Mr. Carty

That is very good.

Mr. Sweetman

I cannot understand why the Minister wants to penalise non-contributory pension schemes in a way in which contributory schemes are not being penalised. It is tantamount to saying that he will decide what pension schemes there shall be. That is wrong. When he was Minister for Industry and Commerce, I am sure he took it as enlightened psychology that there should be non-contributory pension schemes in industry. Section 34 of the 1958 Act is a built-in avoidance measure. Let us apply section 34 to death duties and we will get the anti-avoidance restriction we need, and we will allow the superannuation schemes which are desirable for the purpose of good industrial relations to go through as they should go through.

Mr. J. Lynch

I am sorry I omitted to reply to the point raised by Deputy Sweetman on succession duties assessed on death duties arising from a non-contributory scheme. I am not in any way penalising, or trying to affect in any way, the creation of contributory or non-contributory superannuation schemes in industry. In cases of benefit arising from non-contributory schemes, the ordinary rate for succession duty is ten per cent. That is, a succession derived from an employer. In the case of successions not liable to estate duty, as these are not as of now, there is an addition of one and a half per cent, making a total of 11½ per cent.

Mr. Sweetman

I thought the 1½ per cent had gone under section 29 of this Bill.

Mr. J. Lynch

It is not the same thing. Liability to succession duty for non-contributory schemes will be gone under the section we are dealing with now.

Mr. Sweetman

Section 29 abolishes the 1½ per cent and the additional succession duty of ten shillings per cent.

Mr. J. Lynch

This is a specific 1½ per cent. It is different from the £1 per cent and the ten shillings per cent.

Mr. Sweetman

If we went back to the record, we would find the Minister did not indicate there was that differentiation when he was asked on section 29. However, we know now there is.

Mr. J. Lynch

I can only say in respect of section 34 that it deals, as I said already, with provisions for avoiding liability for income tax in these cases, as agreed with the Revenue Commissioners. I do not accept the argument of Deputy Sweetman that a simple reference in this Bill to that section and that providing for death duties would solve the type of problem with which I am trying to deal in section 24. If it did, it would not be necessary for me to go through this long debate.

Mr. Sweetman

Does the Minister agree that in relation to my example as between contributory and non-contributory, one bears the value of one-sixth to the other.

Mr. J. Lynch

I do not agree with that, either. I should say in relation to the points about a loophole referred to by Deputy de Valera that if a firm is going to provide a big sum by way of ex gratia payment, it will not get income tax allowance.

Major de Valera

As far as the estate of the person is concerned, there would be benefit. In other words, the firm would be in a position to give death duties tax-free payment.

Mr. Sweetman

A death duty free payment.

Major de Valera

Yes. We now have widened the class. Not only could senior civil servants, with depreciation of money, come into the class that would be exempt but we now include the class of company director whose dependants could get, under this scheme, a duty-free gift under the name of an ex gratia payment. If that is so, does the Minister not feel it goes a long way towards defeating the whole purpose of the section? I do.

Mr. P. Byrne

The Minister may think he is having a pretty gruelling passage this afternoon.

Mr. J. Lynch

This is my job. I am prepared to sit here as long as any Deputy wishes to talk.

Mr. P. Byrne

To my mind, we have been obstructing these provisions for weeks on end. In the mass of technicalities which we have been discussing this afternoon, we can very well overlook the aim and the effect of these provisions. Superannuation schemes are provided for salary earners. Salary earners are, in this country, by and large, small. Very few salary earners have salaries in excess of £3,000 a year. The average salary paid is away below £2,000 a year. These are the people we are taxing under this section. These are the people on whom we are tightening the screw.

A few weeks ago a case was made that certain provisions in this Bill were serving as a disincentive to the wealthy class whom some persons want to see encouraged into this country. The Minister was able to get up and boast that at the sum of £85,000 our maximum rate of estate duty ceases, whereas in Britain the rate over £85,000 increases tremendously. The wealthy people in this country are taxed, relatively speaking, far less onerously than the small people whom we are getting at in these provisions. That to me is a nauseating thought.

Deputy Corish referred to the example of the widow with an estate of £16,000. She does not get the benefit the Minister has been speaking of under section 28. She gets no benefit whatever under section 28. The figure of £16,000 for the widow of a bank clerk living in a modest type house valued at £7,000—£8,000 today is a small estate for such a person. If her house is valued at £6,000, it will leave her with a capital of £10,000 which, if she invests in Government securities, will give her an income of £500 a year to bring up a large family. This is the type on whom we are tightening the screw in the section we are now discussing.

The £5,000 limit which the Minister has brought in in his amendment is of no use at all to the young widow who has a large family. If she is aged 30 or less, or is perhaps up to the age of 35, a pension of £10 a week in her case will have a capital value of about £8,000.

These are the facts that cannot be got over. The Minister must accept the responsibility for tightening the screw more rigidly on small estates. With the inflation which has taken place in recent years, the type of person who up to five, six or eight years ago would have had an estate of over £5,000, now if he has made any effort to provide insurance benefits for his dependants, will have an estate of up to £20,000-£25,000. I would suggest to the Minister if he would remove the £15,000 margin in section 28, most of us would feel a lot happier about the provisions in this section. If he would increase the maximum estate for this benefit for the widow and children—a very proper benefit—to, say, £25,000 or £30,000 I, for one, would feel much happier about these awful provisions in sections 24 and 25.

I do want to urge on the Minister that the £5,000 limit in section 24 and in the amendment is of little or no value to the young widow. I am sorry there has been so much to-do here today about the civil servants. I accept entirely what the Minister has said about the position there, that he will rectify it in the superannuation code. Far from trying to draw civil servants into the net, I would urge on the Minister to extend to other salary earners the exemption in respect of superannuation benefits now available to them. If he will not do that, of course, in the interests of equity and justice, he must make the amendment which he has spoken of in the superannuation code.

Mr. Sweetman

The taxation code is the right place to do it.

Mr. P. Hogan

(South Tipperary): It has transpired in the course of the discussion in which the Minister is moving to make non-contributory schemes liable to duty that, apparently, rather by an accident, the Civil Service appears to be exempt, on the basis, as I understand it, that their benefits are non-enforceable and/or that they may be regarded therefore as ex gratia payments. I do not know what the legal side of this may be or why their pension rights may be regarded as non-enforceable, unless it is that the King can do no wrong or the State cannot be questioned. Accepting that as being so, to come back to the points raised by Deputy de Valera and others, can the Minister give us any assurance that, at the moment, there are other superannuation pension schemes in operation all over the country which may claim, and may claim in court, perhaps successfully, that their claims were non-enforceable?

The second point I want to make is this. What is to prevent future schemes from being devised by firms so as to make their pensions or their annuities non-enforceable? On the point the Minister has raised here, I would ask him if he thinks such may not arise in the future.

Mr. J. Lynch

I do not think so. If they do, they will be caught.

Mr. P. Hogan

(South Tipperary): Any existing ones?

Mr. J. Lynch

I do not think there are any.

Mr. P. Hogan

(South Tipperary): What about the banks?

Major de Valera

How can one case be caught if the other is not caught?

Mr. Sweetman

The Minister is not going into it.

An Leas-Cheann Comhairle

Is Deputy Cosgrave's amendment being withdrawn?

Mr. Sweetman

If the Minister will not accept it, there is no point in pressing it. I just want to know why non-contributory and contributory pension schemes are being treated in a different way. I have not had the answer to that yet.

Mr. J. Lynch

They are not being treated so; that is the answer. They are being treated in the same way.

Mr. Sweetman

They are being treated in a different way, I suggest, in this. In a contributory pensions scheme, the contributions are taken, the same as premiums on a life insurance policy. It is the proportion of the policy moneys which are liable to duty, the same as the proportion of the last five years' premiums bears to the total premiums paid. For a non-contributory pensions scheme, it is the whole death benefit. That is the difference.

Mr. J. Lynch

The five years' provision applies to life assurance policies but not to contributory superannuation schemes. The insurance policy section applies to policies effected by the deceased on his own life. But that section does not apply to superannuation.

Mr. Sweetman

Then the Minister has delivered himself far more to me. He means to say that he is making the duty on a pensions scheme death benefit more penal than in respect of a life insurance policy taken out. That is utterly indefensible in a situation in which we are trying to get a man-power policy, good industrial relations: we all accept that good pensions schemes are part of that. Now, the Minister is calmly telling us that the contributory pensions scheme will not get the benefit I thought he had said earlier it would get. Maybe, again, this is my mistake; I do not know.

Mr. J. Lynch

I did not say that.

Mr. Sweetman

I refer to the benefit of the concession given to limit the proportion of policy moneys liable to duty to the proportion which the last five years of premiums bears to the total premiums paid. I can see no reason, no argument, no suggestion of fair play in that that should happen in a contributory pension scheme and not be the case in a life insurance policy. It defies reason that the differentiation should be there and it will completely negative any hope of better industrial relations.

Mr. Norton

May I just say this before we leave this section? I know that, to an extent, I am repeating myself. I should like to make one last appeal to the Minister to see some reason. We are not against people paying their full share of the death duties. We think that what we are dealing with now does not bear any relation to that. The Minister introduced this section and used as a reason for doing so that people are avoiding paying their fair share of duty, and that some company directors are using their position to avoid it. No evidence has been produced to bear out what he said. Deputy Sweetman mentioned that a director in a company who has more than 15 per cent interest in the company is not eligible, in any event. The Minister produced no evidence of any kind to support his statement. The suggestion we made was that the first £5,000 should be exempt from estate duty in the free estate and also the full £5,000 as regards superannuation. These are small people, the widows and orphans of small business people or small employees in a company. In a superannuation fund, £5,000 is equivalent to £6 5s. a week and that is not a big pension. Both the free estate and the first £5,000 superannuation should be exempt and then let the normal rates of taxation continue. This will catch the person the Minister set out to catch and will do justice to all sections of the community, particularly the small person whom we should try to help here today.

The Minister mentioned that he hopes to get £50,000 from this. It is a ridiculous figure to have such a lengthy discussion about in this House, bearing in mind the people from whom we are trying to take it, our widows and orphans. There is a tendency in this country to regard the Labour Party as being anti-business and anti-money. We see more reason and more light in this, apparently, than do Fianna Fáil. We are not as anti-middle class, anti-business and anti-money as Fianna Fáil have shown themselves to be by this section of the Finance Bill. I hope, when the next election contributions are being sought, that the people contributing to Fianna Fáil will bear this in mind.

Major de Valera

One last question. I cannot believe that such an obvious loophole as the one I have adverted to can have been overlooked. Is there any specific regulation, statute or anything that gives protection to the public service beyond that or, on the other hand, that captures the type of case I am talking about? Otherwise, it seems ridiculous for us to leave such a case open when we are all agreed that there is one type of case we want to capture and that is the one the Minister mentioned at the beginning.

Mr. J. Lynch

We have not got a gifts tax, as such, except gifts inter vivos. We must accept that that is the position. I do not believe that there will be this wide open evasion or means of evasion to which the Deputy referred. I want to say this, in reply to Deputy Sweetman. I want to satisfy him that we are not being inconsistent in what we are doing for insurance policies and death benefits. The section I am introducing to give certain reliefs to people who will be obliged to pay death duties on moneys they get from policies effected by the deceased will not apply, except in the case of policies indefeasibly vested. Therefore, if there is any contingency which might deprive that person of profiting from the proceeds of that policy, it does not qualify. In the case of death benefits arising out of superannuation schemes, they are not payable anyway until death. Therefore, I am suggesting the policy that is not indefeasibly vested is in the same position as superannuation benefits. They are not payable until death takes place. We are treating contributory and non-contributory on the same basis.

Mr. Sweetman

I am sorry I was not able to follow it. I am sure the Minister was doing his best. I was doing my best to follow it, but I am not clear.

Mr. P. Hogan

(South Tipperary): On amendment No. 6, which is replacing section 24, may I ask a final question? Does amendment No. 7 which will be a new section——

Acting Chairman (Mr. Jones)

We are at amendment No. 12 at the moment.

Mr. P. Hogan

(South Tipperary): Sorry; it is the different numbering on the amendment sheets. Is there anything in the next amendment, relating to policies of insurance, which covers or bears in any way upon the superannuation we are now discussing?

Mr. J. Lynch

No.

Mr. P. Hogan

(South Tipperary): They are completely distinct?

Mr. J. Lynch

Yes.

Amendment to amendment, by leave, withdrawn.

Amendment No. 12 agreed to.

Amendment reported and agreed to.

Acting Chairman

Amendment No. 13 has been ruled out of order.

Mr. Sweetman

I can say all I want to say on amendment No. 15.

Amendment No. 13 not moved.

Mr. Sweetman

I move amendment No. 14.

In page 20, between lines 26 and 27, to insert a new subsection as follows:—

(4) Nothing in this section shall make any moneys payable under a policy effected under the Married Women's Status Act, 1957, liable to aggregation with the free estate of the deceased.

Section 25 now provides that policies that are effected, and in respect of which the deceased has no interest, are now going to be liable for aggregation for estate duty. Since the last Stages of the Bill, I have been making some inquiries. I understand one of the things the Minister has in mind is to cover, for example, annuity bonds. I feel therefore it is desirable that a policy effected under the Married Women's Status Act, 1957, should be segregated in a separate way from the annuity bond for the purposes of this discussion.

The purpose of my amendment is crystal-clear. It is to provide, as I provided in the 1955 Act when I was over there, that all the policies taken out under the Married Women's Status Act will be liable to duty as an estate in se and that they will not be liable to aggregation in the free estate of the deceased. It seems to me perfectly fair that in respect of annuity bonds you must aggregate them altogether. A person could take out 20 bonds, each for £4,000, and they would not be liable to duty. That is wrong and should not be permitted, and under the amendment I have provided, it would not be permitted. My amendment provides that the system introduced in 1955 to prevent avoidance of that sort would be operative but that there would not be penalisation of the case mentioned by Deputy Corish in relation to the widow with an estate of £16,000.

I said on the last Stage all I wanted to say on this. It is crystal-clear that this is the just and social way of dealing with this, and in the present economic circumstances of the country, the desirable way of dealing with it—that we should increase and give every incentive to increase savings in this way. Of course, it is noticeable that this Finance Bill does absolutely nothing, as it was originally introduced, to cope with our present economic difficulties. The only possible addition there was to help saving was section 10 which was included, not in the Bill as published, but on the Committee Stage by the Minister. It is merely an extension of the relief I provided in 1956 when I was over there. This is a bad section as it is at present. If the amendment is included, it will be a fairer section. For that reason, the amendment is one the House should pass.

Mr. J. Lynch

Like Deputy Sweetman, I think I said most of what I would say now on Committee Stage. We had the same kind of discussion. But I am strengthened on this occasion by what Deputy Sweetman has just referred to, that is, the relief being provided in the next section, which I can elaborate on when we come to it. While Deputy Sweetman agrees that annuity bonds deliberately taken out for the purpose of avoiding estate duty ought to be caught, as this section proposes to catch them, it is quite conceivable that people could carry out the same kind of operation with insurance policies.

Mr. Sweetman

No, not since 1955.

Mr. J. Lynch

At least they can be aggregated. A person could so split up his big estate in order to avoid higher death duties because of the non-aggregation as between the policy side and the free estate side. Nevertheless, the considerable relief I am giving on the insurance policy side in the next amendment will take a lot of the teeth out of any argument that this is being anti-social to the extent Deputy Sweetman suggested.

Mr. Sweetman

Let us take the example given by Deputy Corish. A person leaves a house, furniture, other contents and other petty free assets valued at £8,000 and a policy for death benefit of another £8,000. Unless this amendment is passed, that widow will be liable to pay £1,600. With this amendment she would not. She would have to pay only about £500.

Mr. P. Hogan

(South Tipperary): Deputy Sweetman is correct. In the existing circumstances, there is three per cent on an estate of £8,000 and another three per cent on an insurance policy of the same amount, £240 of each, making a total of £480. Under this section, by which the beneficial estate and the personal estate would be aggregated, the payment would be £1,600. Admittedly, in amendment No. 15, which will be a new section, the Minister is giving some concession, about which I am not at the moment clear. In this particular case the concession, in so far as the estate is over £8,000, will not be applicable. As Deputy Corish quite rightly remarked, a house with a bit of furniture and perhaps a garage and a few odds and ends, which is not a very big estate, when everything is realised, might make £8,000 and if you take the position of a widow in these circumstances, her liability is being jumped from £480 to £1,600. The Minister may give reliefs in the lower brackets, which we will come to later on amendment No. 15, but there is no relief, as far as I can gather from the Bill, for a person with that type of estate.

Amendment put.

The Dáil divided: Tá, 55; Níl, 65.

Tá

• Barry, Richard.
• Belton, Luke.
• Belton, Paddy.
• Burke, Joan T.
• Burton, Philip.
• Byrne, Henry.
• Byrne, Patrick.
• Clinton, Mark A.
• Cluskey, Frank.
• Connor, Patrick.
• Coogan, Fintan.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan.
• Crotty, Patrick J.
• Desmond, Eileen.
• Dockrell, Henry P.
• Dockrell, Maurice E.
• Donegan, Patrick S.
• Donnellan, John.
• Dunne, Seán.
• Dunne, Thomas.
• Farrelly, Denis.
• Fitzpatrick, Thomas J. (Cavan).
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Harte, Patrick D.
• Hogan, Patrick (South Tipperary).
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kenny, Henry.
• Kyne, Thomas A.
• Larkin, Denis.
• L'Estrange, Gerald.
• Lindsay, Patrick J.
• Lyons, Michael D.
• McAuliffe, Patrick.
• McLaughlin, Joseph.
• Mullen, Michael.
• Murphy, William.
• Norton, Patrick.
• O'Connell, John F.
• O'Donnell, Patrick.
• O'Donnell, Tom.
• O'Hara, Thomas.
• O'Higgins, Michael J.
• O'Leary, Michael.
• Pattison, Séamus.
• Reynolds, Patrick J.
• Ryan, Richie.
• Sweetman, Gerard.
• Tierney, Patrick.
• Treacy, Seán.
• Tully, James.

Níl

• Aiken, Frank.
• Allen, Lorcan.
• Andrews, David.
• Blaney, Neil T.
• Boland, Kevin.
• Booth, Lionel.
• Boylan, Terence.
• Brady, Philip.
• Collins, James J.
• Corry, Martin J.
• Cotter, Edward.
• Cronin, Jerry.
• Crowley, Flor.
• Crowley, Honor M.
• Cunningham, Liam.
• de Valera, Vivion.
• Dowling, Joe.
• Egan, Nicholas.
• Fahey, John.
• Fanning, John.
• Faulkner, Pádraig.
• Fitzpatrick, Thomas J.
• (Dublin South-Central).
• Flanagan, Seán.
• Foley, Desmond.
• Gallagher, James.
• Geoghegan, John.
• Gibbons, James M.
• Gilbride, Eugene.
• Gogan, Richard P.
• Haughey, Charles.
• Healy, Augustine A.
• Hillery, Patrick J.
• Brennan, Joseph.
• Brennan, Paudge.
• Briscoe, Ben.
• Burke, Patrick J.
• Carter, Frank.
• Carty, Michael.
• Clohessy, Patrick.
• Colley, George.
• Hilliard, 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.
• Meaney, Tom.
• Millar, Anthony G.
• Molloy, Robert.
• Mooney, Patrick.
• Moore, Seán.
• Moran, Michael.
• Nolan, Thomas.
• Ó Briain, Donnchadh.
• Ó Ceallaigh, Seán.
• O'Connor, Timothy.
• O'Malley, Donogh.
• Smith, Patrick.
• Wyse, Pearse.

Tellers: Tá, Deputies L'Estrange and T. Dunne; Níl, Deputies Carter and Geoghegan.

Amendment declared lost.

Debate adjourned.