Last night we were discussing this amendment in the context of, I think, amendment No. 11.
Finance Bill, 1966: Committee Stage (Resumed).
Debate resumed on the following amendment:
Before section 18 to insert a new section as follows:—
"Notwithstanding anything contained in any other enactment insurance policies shall not be aggregated with the rest of an estate for death duty purposes."
—(Deputy Sweetman).
With amendment No. 11.
And we were also to discuss on this amendment matters which might consequently arise under section 17 which was put through the House. The Finance Act of 1965 provided certain new and onerous provisions which unduly penalised those endeavouring, either through contributory schemes, or otherwise, to make provision for their dependants after they had passed on.
Various representations have, I know, been sent to the Minister in relation to this over the past year, and it is a matter of great regret to those who made those representations that the Bill introduced by the Minister does not contain greater amelioration than is contained in section 18. Section 18 does increase, to some extent and with retrospective effect to the passage of last year's Finance Act, the remission of duty that will arise to a widow and children. I do not know whether the Minister will be able to find any other precedent, but this is the only precedent that I could find whereby the remission dated back to the Finance Act of the previous year. I suggest the reason the Minister went outside established practice—and I am glad he did—was that he realised when he sat back and thought about it that the action he had taken last year was, as we said from these benches and as we endeavoured to prove to him in the Division Lobby, harsh and onerous.
One group of people affected in relation to the passage of this Act is the officers' association of the ESB. The Minister is aware that they sent him a memorandum on 19th May last showing the additional duty that would be payable by members of their association as a result of the Act of last year. In the first example the association gave, the increase in duty that was payable was no less than 130 per cent, going up from £274 to £632. In the second example given, the increase was 138 per cent, and the Minister has had before him the figures concerned.
It seems to me there is no justification for the Minister, because he wants to stop tax avoidance, hitting innocent people in this way. The Minister said last year he was anxious to avoid a person's utilising the non-aggregable provisions of the Married Women's Property Act as a means of avoiding tax and as a means of making artificial companies for that purpose. That may be, but it does not justify his taking a step to ensure that his net covered the genuine, innocent case, as it does in respect of the association who made these representations to the Minister, as well as catching avoidance cases.
There is another class of case which will be hit by this and which is not going to get, as far as I can see, any of the relief provided by section 29 of the Finance Act, 1965. That is the case of a person who brought up children but who, because of the age of the children at the date of the Adoption Act, was not able legally to adopt them. There are not many such cases but there are a certain number. I have in front of me a case in which a person is faced with the payment of duty of the order of £500 instead of its being of the order of £50, because the Act does not take account of these cases where there has been de facto but not de jure adoption.
I find it difficult also to understand how this section of last year and section 17 will operate in respect of the many schemes there are for widows' pensions. In many companies pensions are payable to widows for life or until remarriage. I understand the Revenue Commissioners are able to arrive at an appropriate discount of the widow's likely chances of remarriage. I do not know whether the Minister or I would be able to do it, but I understand the Revenue Commissioners do arrive at such a discount. I would be interested if the Minister knows how the computations are made, unless, of course, personal attendance is also required.
Whether that is so or not, there is a substantial number of cases in which there are other discretions vested in relation to these pension funds. In one case in respect of which representations have been made to me, the widow's pension is made up of two parts. The first part is the funded part, that is, the part that is payable by the pension trustees out of funds and investments in their hands. It is easy to deal with that, but the second part is expressed in the terms of the pension deed to be payable so long as the prosperity of the company justifies it. I do not know how it is going to be possible to make any computation of value in respect of pension schemes that are in that form, and many of them are. Many of them provide a basic pension and a bonus on to that basic pension, varying according to the prosperity of the company.
How can the value of the widow's pension and, therefore, the gratuity which follows from the pensionable amount, be assessed where it is expressed to be payable only during the payer's capacity to pay it? The vagueness of the provisions in the Act will mean that in the case of many pension schemes, administrative difficulties will arise which would not arise at all if the Minister had not introduced section 29 of the Act of 1965. Apart from the principle involved in relation to the aggregation of pensions, the Minister will have to do something in regard to this analogous to what he agreed to do yesterday in relation to Part VII of the Finance Act of 1965 dealing with the all-embracing clause for developments.
What has happened is that, in his efforts to prevent avoidance, the Minister has thrown his net in such a way that it catches other cases—though it does not catch all of them, as I reminded the Minister by an interjection on the Second Stage—and it is unfortunate that for the sake of alleged uniformity, the position so arises.
We had a long discussion on this last year, and I do not think there is anything that one can fruitfully do today except to say that all the fears we indicated last year have proved in practice to have been justified. The last 12 months experience of the Act of 1965 has shown that it was undesirable and that the Minister would have been well advised and would be well advised even as late as this, to repeal the provisions.
I know it is not necessary to go into the history of aggregation of different parts of a deceased's estate for the purpose of death duties, but, in order to explain the background of the introduction of section 25 last year and to indicate why I cannot accept the amendments put down by Deputy Sweetman and Deputy Cosgrave this year, it is no harm to remind the House, in the first instance, that insurance policies as such were never free of aggregation with the rest of the estate.
This question went back as far as the original Act dealing with property left by a deceased, in 1894. Section 4 of that Act included a proviso that property in which the deceased never had an interest was not aggregable with the rest of the estate. That was to deal with the situation that was often created at the time where A left property in trust to B for the life of C. When C died, that property, in which C never had an interest, would be aggregable with the estate. The property that A left in that form to B, and possibly his successors, would be aggregable with the estate of C for estate duty purposes.
In time, the exclusion of property of that kind was extended to property in which the deceased never had an interest. Property, even though it derived from the deceased and was, in fact, provided for him and his successors, and formed part of the deceased's estate, nevertheless, was not aggregable with the rest of the estate for estate duty purposes. Therefore, if somebody left money in one form or another to a person indefeasibly vested in that person, that property was not aggregable with the rest of the deceased's estate even though the deceased himself provided it.
Policies of assurance as such were never in that category, unless the policy, on the death of the deceased who paid the premiums, was indefeasibly vested in, say, his widow. If it was not so indefeasibly vested, even though he had made it in such a form that his personal representative would be the immediate payee, even though he had left it in his will, the proceeds of that policy would have been aggregable with the rest of his estate and, therefore, subject to estate duty. Even the policy itself, if it was up to a certain amount, would have been, in any event, subject to estate duty, even though not aggregated with the rest of the estate.
There evolved, then, the system whereby, under the Married Women's Status Act, policies of assurance were effected by a man in favour of his wife and these were not aggregable, nor even aggregable inter se, but Deputy Sweetman, when Minister for Finance, made these policies aggregable inter se. In other words, if there was a lump of an estate, £x value and another lump, £y value, made up of Married Women's Status Act policies, as a result of legislation put forward by Deputy Sweetman, all these policies were aggregated in the lump of the estate value £y and, if the aggregation was high enough, would be subject to estate duty.
The only change effected, then, by this section 25 was that that kind of property of the deceased was aggregated with the rest of the deceased's estate. From the wording of Deputy Cosgrave's amendment, unwittingly, I would say, the impression is created that insurance policies were not aggregated with the rest of the estate for estate duty purposes. Indeed they were. There is only one kind, what we know now as Married Women's Status Act policies, which were not aggregated formerly.
Deputy Sweetman mentioned last night that the case where a man dies young leaving a widow and young family is more hard-hit by this provision than others but I think it is no harm to take a couple of examples. If he were a young man, I take it he would not have had much time to accumulate a big estate. Under section 29 of the Bill now, which extends certain reliefs, if a man leaves £10,000 after him and leaves a widow and one child the estate does not pay any duty. If he leaves a widow and two children, there is no duty payable on his estate up to £12,600 and if he leaves a widow and three children, up to £13,750. That is a sizeable estate to be free of duty.
As well as that, if there were superannuation death benefit which did not exceed £5,000 that, too, would be exempt. So that the type of hardship cases that are referred to are in the main exempt, certainly up to the limits I have mentioned here.
With regard to the comment about retrospection, I readily admit that I deliberately made the new reliefs given in section 29 retrospective with the introduction of the section last year because I recognised that some hardship cases arose during the year and since the legislation was introduced for the first time last year, I thought it was only right, no matter with what precedent I was breaking, that I should give the benefit of the extra reliefs being provided this year to estates which came under duty since the Finance Act of last year. I do not think there is anything wrong in that. Deputy Sweetman welcomes it and, if there was a breaking with precedent, I think it was worthwhile in this case.
There are, of course, under the provisions of last year's Act, other means whereby the value of an estate is reduced. If the estate consists of insurance policies, the value may be reduced for the purpose of estate duty. That is, we have made use of the device of a reduction of the value of gifts inter vivos from three to five, three to four and three years down, whereby the policy, five years before death, will be reduced by 60 per cent and the value of the accumulative part of the policy will be reduced proportionately in the succeeding two years.
So that all these easements are considerable and, I think, take most of the hardship cases out of the estate duty net. As in all legislation designed to defeat avoidance of payment of tax and of duty, it is difficult not to hit some cases where hardship might accrue but I suggest that the manner in which I have met these hardship cases is reasonably adequate and, indeed, takes hardship out of the payment of death duties in most cases, if not in all.
Amendment put.
The Committee divided: Tá, 55; Níl, 66.
Tá
- Belton, Luke.
- Belton, Paddy.
- Burke, Joan T.
- Casey, Seán.
- Clinton, Mark A.
- Cluskey, Frank.
- Connor, Patrick.
- Coogan, Fintan.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan.
- Costello, John A.
- Creed, Donal.
- Crotty, Patrick J.
- Desmond, Eileen.
- Dillon, James M.
- Dockrell, Henry P.
- Dockrell, Maurice E.
- Donegan, Patrick S.
- Donnellan, John.
- Dunne, Seán.
- Dunne, Thomas.
- Esmonde, Sir Anthony C.
- Everett, James.
- 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.
- Murphy, Michael P.
- Murphy, William.
- Norton, Patrick.
- O'Connell, John F.
- O'Donnell, Patrick.
- O'Donnell, Tom.
- O'Hara, Thomas.
- O'Higgins, Michael J.
- O'Higgins, Thomas F. K.
- Reynolds, Patrick J.
- Ryan, Richie.
- Spring, Dan.
- Sweetman, Gerard.
- Treacy, Seán.
- Tully, James.
Níl
- Aiken, Frank.
- Andrews, David.
- Blaney, Neil T.
- Boland, Kevin.
- Booth, Lionel.
- Boylan, Terence.
- Brady, Philip.
- Brennan, Joseph.
- Brennan, Paudge.
- Breslin, Cormac.
- Briscoe, Ben.
- Calleary, Phelim A.
- Carty, Michael.
- Childers, Erskine.
- Clohessy, Patrick.
- Colley, George.
- Collins, James J.
- Corry, Martin J.
- Crinion, Brendan.
- Cronin, Jerry.
- Crowley, Flor.
- Crowley, Honor M.
- Cunningham, Liam.
- Davern, Don.
- Lemass, Seán.
- Lenihan, Brian.
- Lenihan, Patrick.
- Lynch, Celia.
- Lynch, Jack.
- MacEntee, Seán.
- Meaney, Tom.
- Millar, Anthony.
- Molloy, Robert.
- Mooney, Patrick.
- de Valera, Vivion.
- Dowling, Joe.
- Egan, Nicholas.
- Fahey, John.
- Fanning, John.
- Faulkner, Pádraig.
- Fitzpatrick, Thomas J.
- (Dublin).
- Flanagan, Seán.
- Foley, Desmond.
- Gallagher, James.
- Geoghegan, John.
- Gibbons, Hugh.
- Gibbons, James M.
- Gilbride, Eugene.
- Gogan, Richard P.
- Haughey, Charles.
- Healy, Augustine A.
- Hilliard, Michael.
- Kenneally William.
- Kennedy, James J.
- Kitt, Michael F.
- Lalor, Patrick J.
- Lemass, Noel T.
- 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 Carty and Geoghegan.
Amendment declared lost.
Amendment No. 11 not moved.
Section 17 agreed to.
Sections 18 and 19 agreed to.
I move amendment No. 12;
Before section 20 and in Part V, to insert the following new section:
"20. —(1) In lieu of the provisions of paragraphs (i), (ii) and (iii) of section 37 (1) of the Finance Act, 1963, the following provisions shall, subject to the next subsection, apply and have effect in respect of every accounting period ending on or after the 1st day of April, 1966:
(i) subsection (1) of section 52 of the Finance Act, 1920, shall be construed and have effect as if ‘twenty-three per cent' were substituted for ‘five per cent.'
(ii) paragraph (a) of the proviso to that subsection shall be construed and have effect as if ‘tax shall be charged at a rate of seven and one-half per cent on so much of the profits as does not exceed two thousand five hundred pounds, and where the profits are profits arising in some shorter accounting period, tax shall be charged at a rate of seven and one-half per cent on such amount of the profits as bears to two thousand five hundred pounds' were substituted for ‘no tax shall be charged on the first five hundred pounds thereof, and where the profits are profits arising in some shorter accounting period, no tax shall be charged on such amount of the profits as bears to five hundred pounds';
(iii) paragraph (b) of that proviso shall be construed and have effect as if ‘thirty per cent' were substituted for ‘ten per cent'.
(2) In the case of any such accounting period which began before the 1st day of April, 1966, the profits shall be apportioned between the part of the period before that day and the part thereof after the 31st day of March, 1966, in proportion to the respective lengths of those parts and—
(a) as respects so much of the profits as is apportioned to the first-mentioned part, corporation profits tax shall be charged thereon at the rate of fifteen per cent, provided that tax shall be charged at the rate of five per cent on so much thereof as bears to two thousand five hundred pounds the same proportion as that part bears to twelve months,
(b) as respects so much of the profits as is apportioned to the second-mentioned part, corporation profits tax shall be charged thereon at the rate of twenty-three per cent, provided that tax shall be charged at the rate of seven and one-half per cent on so much thereof as bears to two thousand five hundred pounds the same proportion as that part bears to twelve months,
(c) the amount of tax payable by a company incorporated by or under the laws of the State shall in no case exceed the sum of the following amounts:
(i) the amount represented by 20 per cent of the balance of the profits apportioned to the first-mentioned part remaining after allowing such proportion of the deductions specified in paragraph (b) of the proviso to section 52 (1) of the Finance Act, 1920, as would be appropriate to that part if those deductions were apportioned in the same manner as the profits are required by this subsection to be apportioned, and
(ii) the amount represented by 30 per cent of the balance of the profits apportioned to the second-mentioned part remaining after allowing such proportion of those deductions as would be appropriate to that part if those deductions were apportioned as aforesaid."
This is an amendment in effect putting in a new section to measure the rate of corporation profits tax. It was not possible to do so before because the rate of British corporation tax was at the time of drafting not known. It is now known and our corporation profits tax, because of the double taxation agreement with the British Government, is related to the British corporation profits tax.
This is the correlative section to the earlier one?
Yes.
Amendment agreed to.
Section 20 agreed to.
I move amendment No. 13:
Before section 21, but in Part V, to insert a new section as follows:
"Section 8 of the Finance Act, 1924, as amended subsequently (which provides for relief in respect of error or mistake) shall apply to tax charged under an assessment to Corporation Profits Tax as it applies to tax charged under an assessment to Income Tax."
The purpose of this amendment is to provide for corporation profits tax the same provision as already exists for income tax, namely, that if there is an error or mistake in the accounts submitted and consequent assessments to tax, they can be corrected later. As I understand the matter, there is no such provision in relation to corporation profits tax and I do not quite know why. It may well be that perhaps the reason was that in earlier years corporation profits tax did not become applicable until after the first £2,500 of income. The Finance Act of 1963 provided that the first £2,500 of profits would be assessable to corporation profits tax at five per cent. The remaining profits are taxed at 15 per cent. The effect of this is that corporation profits tax is no longer something with which the big company alone is concerned: every company of every size is now concerned with it.
The suggestion I make does not add any new principle to the taxation law. It merely provides that the income tax provision in relation to error and mistake can now be applied to corporation profits tax. The provision, of course, is only operative if the mistake or error is found within six years, I think, after the end of the year of assessment. As I am merely transferring a provision of section 8 of the Finance Act of 1924 which already applies to income tax, that limitation of six years would also apply to the amendment.
I have no objection to the principle of this amendment. As Deputy Sweetman has said, the principle already applies in the case of income tax. One can readily understand why it is statutorily provided for in the case of income tax. Individuals may be more prone to make mistakes in the matter of returns for income tax purposes than companies would be in the case of returns for corporation profits tax. In practice, however, it seldom arises and when it does, the Revenue Commissioners make very adequate provision for the admission of late appeals. I have no objection to making provision for something that has become common in practice.
If the Deputy would leave the amendment to Report Stage, and if it is possible to bring it in on that Stage I shall certainly do so. I understand, however, there may be a lot of loose ends to tie up and it might not be possible to do it even there. No hardship is ever caused by the fact that it is not written into legislation and I can assure the Deputy that if it cannot be done on Report Stage, it will be done in the next Bill in any case. I think he could withdraw the amendment.
Certainly, I could. As I understand it, the Minister will do it on Report Stage if he can and, if he cannot do it on Report Stage, it will be reintroduced next year by the Minister for Finance and, meanwhile, the relief will be given, concessionwise, by the Revenue.
As it always has been.
That is quite satisfactory.
Amendment, by leave, withdrawn.
I move amendment No. 14, in the name of Deputy Byrne:
Before section 21, but in Part V, to insert a new section as follows:—
"Subsection (2) (b) of section 53 of the Finance Act, 1920, is hereby amended by the addition of the words ‘other than loans granted by the Industrial Credit Company which are repayable over a period not exceeding twenty years.'"
This amendment is to prevent a limitation on permanent loans. I never knew quite as much about corporation profits tax as I should and therefore, because this is entirely a technical matter, I am treading a little on dangerous ground. I may accept from the Minister a little tuition as he has had to accept it in other matters before.
Section 53 of the Finance Act, 1920, provides that no deduction is allowed from corporation profits tax in respect of interest on permanent loans. It is difficult to see why that provision was introduced. It seems that it was introduced to prevent the allowance of interest on semi-permanent capital such as debentures. In the then conditions, it did not seem unreasonable: nowadays, the position is entirely different.
Many firms get accommodation and finance from people such as the Industrial Credit Company on the basis of repayment over as long as five, ten and 15 years. Such accommodation would more normally have been the type of temporary bank accommodation that would have ranked as a corporation profits tax deduction. Section 53, therefore, does not seem to apply adequately in the present circumstances. I think it desirable that it should be liberalised so as to provide for this new machinery of industrial finance and to define as permanent loan something that was perhaps repayable by instalments over perhaps 20 years. I think that the term "permanent loan" is not defined in section 53 of the Finance Act, 1920.
One of the provisions that has been accepted in practice in relation to these loans is that if a loan is repayable at not more than three months notice, then it would be termed a short-term loan and would rank for relief for corporation profits tax purposes. The Minister will agree with me that the type of loan given by the Industrial Credit Company for working accommodation, or perhaps the type of loan given by finance houses for extended hire purchase, which is a loan repayable at fixed intervals over perhaps five or seven years, is much more the basis at present and it would be entirely contrary to the need of those loans and to the spirit of those loans if it were to be provided that they would be repayable on less than three months interest.
The whole modern industrial trend is to obtain working capital from the Industrial Credit Company and the merchant bankers. There is a swing away from the commercial banks. The ordinary interest due to the commercial banks on overdrafts is allowable as a deduction from corporation profits tax assessments but the type of merchant bank and industrial credit company interest to which I have referred is not so allowed. I think, therefore, the Minister should allow this and, if I may so put it, modernise section 53 of the Finance Act, 1920. Whether the exact wording of the amendment is such as he would like is another matter. I am not interested in wording in Finance Bills: I am always interested in principles. If the Minister tells me that he will accept the principle but does not like my wording, I shall be quite happy.
I cannot go quite as far as that. On the other hand, what the Deputy has suggested is something that will have to be considered and is being considered at the moment. Obviously the framers of the 1920 Act, when they introduced corporation profits tax, wanted to ensure that there would be no deduction from the tax in respect of dividends, distribution of profits, interest on money borrowed from a person having an interest in the firm, and so on.
I cannot see how it would arise for a dividend. Is corporation profits tax not payable before the dividend is struck?
Yes, that is true. I cannot go into the minds of the framers of the 1920 Act.
I think I caught the Minister out there, all the same.
It was due to a strach-fhéachaint at the brief. The Deputy understands what a strachfhéachaint is? There is a definition of the expression "permanent loan" in the proviso.
The Minister has caught me out. I meant that there is no definition of "permanent" in the Act.
If this amendment is adopted, there would be a danger of shifting the capital of companies from shares to loans and that could ultimately lead to tax avoidance by the directors of the company, particularly if it is a fairly tightly-held company or a small company.
A close company.
That is the word: a closely-held company. Times have changed considerably since 1920. There are many reasons for getting in new capital by way of debenture and loans from organisations such as the Industrial Credit Company. There are other types of organisations that would advance loans to companies as loans are often advanced to the Stock Exchange and to insurance companies. If loans from the Industrial Credit Company were excluded, there would be little reason why loans from insurance companies should not be excluded as well.
I appreciate the motivation of the amendment. I also suggest that I could not go so far, in principle, as accepting all the Deputy says. There is a reason for the change in the law at the present time and the general question of amending section 53 of the 1920 Act, by allowing a deduction of interest on permanent loans, is under consideration. I could not undertake that that consideration would be no deduction from the tax of the passage of the Bill through the Dáil. Nevertheless, it is under consideration. However, there are so many factors to be taken into account and so many safeguards would have to be built into any change in the law that I would prefer if the Deputy would not press his amendment at this stage. I could not give any indication at all that I could provide for a suitable amendment on Report Stage —in fact, I think I could say I could not—but consideration of the amendment of section 53 is proceeding.
I would be quite happy with that in one respect. I agree with the Minister that the type of amendment that might have to be drawn on this might be too complex to be drawn between now and Report Stage next Tuesday. But I do not want to let the matter rest so that nothing will be known about this matter until this time next year. It would be desirable that public notice be given of the completion of the Minister's examination without waiting for the Finance Bill, 1967. I shall put down a question for the first day of the resumption. If the Minister is not able to deal with it then, he can give an indication when I am to repeat it.
Amendment, by leave, withdrawn.
Question proposed: "That section 21 stand part of the Bill."
Do I correctly read paragraph (a) that in the case of dances, tax is payable where the dance is the primary attraction? If one has a dinner dance, it is fair enough to say one goes to take one's dinner while one dances and therefore dancing is the primary purpose. But if one has a dinner and a few minor instrumentalists come along afterwards, one has a social and two or three people get up and strum a piano and there is an impromptu dance, not a dance as such, I think that is outside the terms of the section but I would like the Minister to confirm that I have correctly understood it.
I think what the Deputy says is correct. In fact, that is the position. When dancing is purely incidental to the function, the receipts of any such function are not taken into account. The Deputy will be aware of many such functions. There might be a reunion. Speeches are made after dinner and a dance follows as a matter incidental to the rest of the proceedings. These are not caught by the section at all.
Question put and agreed to.
SECTION 22.
Question proposed: "That section 22 stand part of the Bill."
This is the section that extends to turnover tax the rights the Revenue Commissioners have in respect of income tax.
Does it also extend to the errors and mistakes I got extended for corporation profits tax earlier today and, if it does not, will the Minister extend it?
I do not know if I could answer that offhand. I do not think it would present any difficulty anyway.
The Minister might consider it between now and Report.
Question put and agree to.
SECTION 23.
Question proposed: "That section 23 stand part of the Bill."
I do not understand this section.
The purpose of section 23 is to secure that action against a defaulter for the recovery of turnover tax will not be prejudiced by the submission of late returns while the proceedings are in train. It has happened that people default in making returns and when proceedings are ultimately brought against them, they wait until the proceedings have reached a late stage and then make a return. That nullifies the proceedings taken up to that stage. This is again putting the situation back in the same position as applies in income tax at present.
I do not quite get that. If he produces the turnover tax figures and pays the money on the last date, you have the money and what further do you want?
It has happened that returns are made at a very late stage in the proceedings, inadequate or untrue returns, merely for the purpose of killing the proceedings.
Question put and agreed to.
Section 24 agreed to.
SECTION 25.
Question proposed: "That section 25 stand part of the Bill".
Is this in exactly the same form?
It is, yes.
Has the former Act been changed at all since 1950? I do not think it has. I happened to be reading for the discussion on the Finance Bill yesterday the speech of the Minister's predecessor in 1963 in which he alleged it had been. He was, as the Minister's predecessor was well able to be when he wanted to get out of answering questions, thoroughly impudent about it. That is exactly the same form as has run since 1950. If it is not, I shall bring in an amendment to make it conform.
I made inquiries last year and I was told it was in the same form as previous years and I am told this is the same as last year.
I think Senator Dr. Ryan, the then Minister for Finance, wanted to head me off with the questions I was asking.
Question put and agreed to.
SECTION 26.
Question proposed: "That section 26 stand part of the Bill."
This applies the initial allowances to glasshouses on a commercial scale.
Where is the restriction that this applies only where it is a Schedule D case?
There is a reference in subsection (1), paragraph (d) to the growing of fruit and other produce in the course of a trade of market gardening within the meaning of section 2 of the Finance Act, 1958. I understand that takes it out of the casual case.
What did section 2 of the 1958 Act say?
It secures that a glasshouse will not rank as an industrial building or structure unless the profits from the activities carried on in it are chargeable under Schedule D. Section 2 of the 1958 Act provides——
Section 2, subsection (2) ?
——that profits are to be assessed under Schedule B instead of Schedule D.
But where it is only part of the year, is it still under Schedule B? How does this arise then? How does section 26 arise?
The practical example would be where market gardening would be commenced during the course of the year on land hitherto used for ordinary agricultural purposes.
What repairs allowance is given under section 26 of this Bill?
The allowance relates to the capital expenditure in respect of the erection——
That is, for a full year?
Ten per cent initial and——
Do you get the whole thing, even though it is only for part of the year?
There is no question of a portion. It is either a trade or it is not.
If it is only for part of the year, then under the provisions of section 2 (2), 1958, it does not come into Schedule D for that part of the year. Therefore, paragraph D in section 26 of this Bill does not operate. The answer is that people should only build their houses on 5th April in any year.
I am satisfied that this is well covered.
They should make very certain not to put in the last pane until 5th or 6th of April. Is it the end of the year or the beginning?
It can be B or D in the same year.
Yes, under the 1958 Act.
Once it starts coming under Schedule D, it remains under D.
Supposing having started under D, it goes back to B?
It then ceases.
My solution is a better one. Finish the glasshouse only on 5th April and then no problem arises.
Question put and agreed to.
SECTION 27.
Question proposed: "That section 27 stand part of the Bill".
This is the section that extends the relief on tax on profits derived from exports to goods which are not the property of the firm in the country but are processed further and re-exported, even though they may be goods of a subsidiary company or a parent company or a company abroad.
Any process does?
Any process.
Putting in one screw?
Yes.
Then a certain gentleman put in 18 screws too many because he put in 19 screws.
Of course, it would have to be an economic proposition.
It was very economic for him. We understand he made a lot of money out of it. He need only have put in one screw instead of 19. The Minister should ask him about it some time. He knows him very well.
Give me a little more information some time and perhaps——
He sits over there. He is now interested, or should be interested, in glasshouses rather than sewing machines. In regard to the section, one thing about which I am not quite clear is this: if a person brings in goods and submits them to a process of manufacture, is he still entitled to get the relief in respect of that year's working, even though in the following year it is not in the process of manufacture? In other words, is the qualification of processing operative for the year to which the accounts refer rather than the year in which the accounts are made up and presented? I think the answer is "yes".
The year to which the accounts refer.
Question put and agreed to.
SECTION 28.
Question proposed: "That section 28 stand part of the Bill."
Could I say something on this section in extension of what I said at Question Time today? This provides for the payment of somebody to manage the Government stocks and there is genuine difficulty at present for many people who are not being paid their interest on Government stocks. During the currency of the bank dispute, anyone can obtain currency of some sort or another for what might be termed good cheques. Even for this Government, a pay order of the Government would be considered a good cheque, or a dividend warrant even of this Government, but the dividend warrants are not being issued. The position is, therefore, that many people who are retired and who are in tight circumstances depend to a very large degree for their very existence on what they are able to buy with the interest from fixed Government loans. We are now in the situation, unless I am wrong, in which one Government loan is more than a month outstanding and——
There is a second one involved also.
There is another one about to come at the end of this month.
The 1st June and 15th June.
The 5½ per cent one.
Yes, Deputy Norton is right. There are two. A large number of people literally depend for their existence on the amount they get from these loans to eke out small pensions and small incomes. I dare say it is true that the Minister cannot go in and inspect the records of Government holders in the banks but there should be some scheme provided by the Government—and it should not be necessary for us to refer to this in the House in order to get it done—whereby the person who is able to prove that he has a Government loan of so much, and would have received on 1st and 15th June, or whatever the dates are, an instalment of the amount payable by the Minister, could at least get an advance on account of that.
I wonder what is going to happen if I issue a writ against the Minister for Finance for the dividends and interest due to me on the loan that was payable earlier this month, if I had any. The Minister would have no defence in law against such an action. Because people in difficult circumstances are not taking actions like that against him, it is very wrong that he has done nothing whatever to relieve their plight. In one weekly paper recently there was an example given—I do not know how true it is—of a person who had money on deposit in a bank and would not be paid. He threatened to issue a writ and was paid forthwith, as he was entitled to be paid. Had he gone to court, he would have got judgment against the bank.
I venture to state that if anybody, who has not received interest on any of the loans which he or she holds, and which interest was payable by the Minister for Finance on a date past, and if he or she issues a writ against the Minister, he or she must get judgment. It is reprehensible in the extreme that before the Government should act in relation to this matter, there would have to be a flood of actions against them. This is not an abstract matter. It is not a theoretical suggestion. I have received more than one letter from people complaining. I have received one letter in which the man concerned says he will go to his solicitor and take an action against the Minister. If he does, he will get judgment and the costs should not be paid out of the Contingency Fund but out of the joint personal fortunes of the various Ministers who have done nothing to see that the bank dispute be brought to an end, on the one hand, and on the other hand, nothing to relieve the plight of those who are really badly affected by it.
I agree with what Deputy Sweetman has said. I was approached the other day by someone who was due to be paid a dividend on 15th June on the 5½ per cent National Loan. I did intend to put a question down, but Deputy Sweetman forestalled me, to find out what steps the Government are taking and why something has not been done. Surely it should be a simple matter for the Government to do something about this? It is possible for some people to cash Government cheques through commercial concerns, but surely it is the Post Office, which is a Government Department, which should be responsible for cashing them? Since the amount of money involved in paying these two dividends must be fairly considerable, as a matter of curiosity, who is saving money? Will the investors get additional interest on their interest for that period during which they are out of their money or will the bank hold on to it? What is the position about the amount of money the Government have been lending to themselves interest-free?
They say that is why they are not worried.
It is not true to say we are not worried. I am sure both Deputy Sweetman and Deputy Norton know this is a very difficult problem. There are three loans involved—6 per cent Exchequer Bonds, 5½ per cent National Loan and 6 per cent National Loan. The Exchequer Bonds were due on 6th June and the others on 9th June.
And there will be another very large sum due on 15th July.
I understand there are 30,000 holders of Exchequer stock and 32,000 holders of the others. All the records are held in the Bank of Ireland.
That is 62,000 writs which will be issued against the Minister?
Surely, as the Bank of Ireland are the Minister's agents, and they are not capable of fulfilling the job, the Minister should demand back the records and get someone who can do the job to look after them.
I do not like to think what the Labour Party would call me if I went in and started looking through the books in the bank. With regard to the strike, Deputy Sweetman alleges we have done nothing about setting it. The Deputy knows we have our organisation for that purpose and that organisation is working constantly, and was working constantly up to last night when certain disagreement was expressed by the staff side with the proposals put up by the employers' side.
I do not like to comment further on the strike, since it is not yet settled, but it has created difficulties. It was hoped, having regard to the settlement in the Six Counties, that the strike would also be settled here. I am told the terms being negotiated were somewhat similar to the terms accepted in Northern Ireland. Unfortunately no solution has been reached. I promised the Deputy today that I will see what, if anything, can be done. When his question came into the office, I got the draft answer and made inquiries then to see if there was anything that could be done. I was assured that any steps we might be able to take would be impracticable. That unfortunately happens to be the position still. Nevertheless, I will see if anything can be done.
Surely the Minister could make an advance in cases of hardship out of the Contingency Fund?
Possibly that could be done, but one would have to ascertain the holdings of the people involved.
Some would not be inscribed holdings and holders would be able to produce certificates and the interest warrants for the last payments to show they had them then.
They could be sold since.
That eventually could also be covered if the Minister wished.
The interest which should have been paid out is now mounting up. It must be fairly considerable. Do the Government intend to do anything about this? Will they take it as an interest-free loan or will they pay it out as added interest? Had these people got their money and invested it elsewhere, they would have been getting interest on it. Does the Minister intend to do anything about that?
It is a rather difficult question to answer on the spur of the moment.
I take it the Minister is sympathetic?
I have not said I am.
There is a considerable amount of money outstanding and the Government are taking an interest-free loan from these people.
The Minister could always introduce legislation.
To come back to section 28, what exactly does it mean? Will the Minister take over the management of all Government stocks from the Bank of Ireland?
No. The register of some Government securities is held by the Central Bank and the old section 19 of the 1937 Act is the section that makes the Bank of Ireland the agent for certain Government stocks. The Central Bank is now an agent as well and the type of remuneration the Central Bank would require would not be the same as that for the Bank of Ireland. Even though it has not been settled yet, this section deals with the Central Bank being established as an agent for managing some Government stocks.
Would the Minister say what stocks are held by the Central Bank?
Tax reserves certificates, national bonds and 6 per cent Funding Loan, 1969.
That is the £20 million loan last year to get the Government out of their mess.
Yes—one of those problems that often arise.
No, Sir, it never arose before. Never before was there that type of funding loan.
Not that one, but such problems as often arise.
Oh, yes, but never before did the Minister for Finance of the day have to go to the Central Bank and get it to take over and fund a loan in that fashion?
The Minister said just now that they have done something to end the strike. The fact is either the Minister is at fault, or his colleague, the Minister for Industry and Commerce, is at fault, or the agency is at fault, because nothing has been done effectively to bring this dispute to an end and the dispute is causing serious disruption of the life of the business community. I can understand the Minister hoping until last night that the strike might be settled because the one in Northern Ireland was settled. But the fact is it has not been settled and the House and the country are entitled to know what the Minister for Finance now proposes to do about it because he is the Minister for whom this is a particularly appropriate matter. The Minister for Industry and Commerce still deals with labour relations, but this particular matter is within the purview of the Minister for Finance. It is a fact in regard to the non-payment of the interest to which Deputy Norton referred, that the person who is going to make money out of that non-payment is the Minister because he will not have to provide by Exchequer Bills, as early as he would otherwise have to provide, for the payment of the interest.
Be that as is may, the baby is squarely with the Minister and the country wants to know what he is going to do to bring this disruption of business to an end and to bring to an end the hardship that is being caused to many people who are not being paid Government loan interest and in respect of which the Minister has made it clear he has great difficulty in finding a means of taking them out of the hardship.
I would not like anyone to get away with the impression that the Government are sitting back and doing nothing.
"Sitting on its fanny" is the expression.
Whatever female name one likes to ascribe to it.
It is not we who so described it; it was the Leader of the Government.
When this strike started, at all times the Chief Conciliation Officer of the Labour Court was in touch with the situation and keeping the Government, through the Minister for Industry and Commerce, informed of the situation. When the current negotiations, that is, the negotiations that ended last night, started, it was at the instigation of the Minister for Industry and Commerce, following a meeting of the Government, that the Chief Conciliation Officer entered the fray, so to speak. These negotiations broke down only last night. Surely Deputy Sweetman does not suggest that somebody should go rushing in—even though I recognise the urgency of the situation—when we have not yet had a report back from the Chief Conciliation Officer and, even if we had, we would not have had time to consider it? It is hardly fair, so soon after these negotiations have broken down, for the Deputy to imply that the Government are doing nothing.
I was implying the Government have been doing nothing all along, but I kept quiet until last night.
(South Tipperary): Is it not a fact that the Minister for Health in the North of Ireland intervened immediately in the dispute?
And failed immediately, too.
(South Tipperary): But he tried.
They have no machinery in the Six Counties like the Labour Court here.
The Minister means they have no means of settling disputes in the Six Counties?
They have no statutory machinery such as we have. However, I do not know what this has to do with the discussion.
It has quite a lot to do with it.
I do not want to get involved in a dispute about the bank strike.
I would like the Minister to end this dispute. He has obligations to the people from whom he has borrowed money to make restitution in respect of their dividends. Now the Minister will not even say whether he is prepared to pay interest to them on the money which he is withholding. If anybody tried to keep money from the Government, the Revenue Commissioners would be up in arms, looking for one per cent interest per month on it. If the Minister does not do something about it, he, or his Department— I do not mean the Minister personally —is engaging in theft from the shareholders, the people who subscribed to Government loans. The bank strike has been on now for a period of five or six weeks. Commercial firms in town, to whom it was obvious the strike was coming, had the foresight to make arrangements for the withdrawal of money to meet their obligations. Surely the Government could have made arrangements so that the warrants could be posted earlier and that they would not be overtaken by the situation which has developed?
Even if he got the records.
Why must we always be Irishmen who think afterwards instead of looking ahead and being a little bit smarter than we are?
That is because it is Fianna Fáil.
The Deputy wants me to act like Wilson in clearing the ships out of the harbours.
He is handling the situation with infinitely more patience and tact than you are doing.
The Minister for Finance wants his colleague to carry the baby.
I did my stint on strikes—not that I am afraid of facing this one.
And he is washing his hands of it.
Question put and agreed to.
Sections 29 and 30 agreed to.
FIRST SCHEDULE.
Question proposed: "That the First Schedule be the First Schedule to the Bill".
Perhaps the Minister would explain paragraph 4 (a) which says:
Subject to the provisions of this paragraph, where credit for corporation tax in respect of any profits falls to be allowed against corporation profits tax or income tax, no deduction for corporation tax... shall be made...
That seems to be tautological.
It simply means that if you give the relief by way of credit, you do not allow it again by way of deduction.
Surely the credit arises only after the profits have been determined, and this is putting the cart before the horse?
The profits are computed without taking account of allowances.
It seems to be a very involved way of arriving at what we want to arrive at. I am sure the Minister could write it in simpler language. Would the Minister also explain paragraph 5 (b)? Why do we not say the normal thing, "on a time basis", which is in the Income Tax Acts?
I understand this is the more normal provision. "Time basis" is not used.
I do not know what the 1920 Act provides, but I think "time basis" is the more understandable phrase. The Supreme Court will have to decide it some day.
I understand "time basis" is never used in this context.
I think I should be able to find an Act in which it is used, not today. I shall try before Report Stage, if I have time, on a time basis relative to my other commitments, to look it up.
Question put and agreed to.
SECOND SCHEDULE.
Question proposed: "That the Second Schedule be the Second Schedule to the Bill."
This deals with customs duty alone, is that right?
Yes.
Why do we have a Schedule for customs duty and no Schedule for excise duty? We have excise duty only in section 9 of the Bill. I do not understand why customs duty needs a Schedule and excise duty does not.
I think the answer is partly in the full and preferential rates of duty.
Preference according to the country from which imported?
Yes.
But in subsection (3) of section 9, we strike only one broad figure for excise duty and we have a variety of figures for customs duty—three and two variants—in each preferential and full. Why do we not have any perfume spirits under excise? Why do we not have liqueurs? We have Irish Mist and we have good Gold Label. I do not see why they are all bulked for excise and there are three separate categories for customs.
I will check up on that for Report Stage.
I do not like enacting something we do not know about. I do not think it right that the Minister should ask us to pass this Schedule this evening without being able to explain that. Is it not in the brief under subsection (3) of section 9?
The brief ended with the last Schedule.
Am I to understand, then, that for the home spirit one pays exactly the same excise duty, regardless of strength, even though one pays different rates for imports? That seems wrong. The import preferential rate goes up from £13 5s 6d to £21 4s 10d. That is very nearly threequarters as much again. There is a difference in the strength of an Irish liqueur and a good bottle of Power's Gold Label. I prefer the Power's Gold Label, even though it is not as strong as a liqueur, but I do not know whether there are any Irish perfumed spirits that would qualify for the first category.
I am afraid I cannot answer the Deputy's question as to the difference in strength of liqueur and ordinary whiskey and to what extent duty is charged on the difference.
How many forms of Irish liqueur are there? Does the Minister know? I can only think of two offhand—the Galway one and Irish Mist.
I think they are both the same strength as Irish whiskey. I think they are both 70 u.p.
Are they? It is not a liqueur at all. It is only a spirit.
I do not want to enter into that end of it but I think they are all the same strength.
I notice one paragraph here that might help the Deputy. The basic increase in the duty is £1 9s 7d per proof gallon. In the case of liqueurs and perfumed spirits, which are usually imported, at strengths well above proof, the increase amounts to £1 19s 11d which is 4d per glass higher.
That is, a glass? On a glass of Scotch whisky, it is 4d.
£1 9s 7d per proof gallon as against £1 19s 11d.
I do not know how many glasses go to a proof gallon.
The difference is infinitesimal, which probably indicates that the difference in strength between whiskey and liqueur is infinitesimal.
It may well be, but the difference in duty in the Second Schedule is as between £13 5s 6d and £17 18s 5d which is a colossal difference—a 25 per cent difference. I think we had better get some clarification on Report Stage. I will put down an amendment for Report Stage to delete the Second Schedule. We will get the clarification on that.
Question put and agreed to.
NEW SCHEDULE.
I move amendment No. 15:
Before the Third Schedule, to insert the following new Schedule:
"THIRD SCHEDULE.
DUTIES ON TOBACCO.
PART I.
Customs.
|
£ |
s. |
d. |
||
|
Unmanufactured:— |
||||
|
If stripped or stemmed:— |
||||
|
containing 10 per cent. of more by |
||||
|
weight of moisture |
the lb. |
3 |
9 |
5 |
|
containing less than 10 per cent. by weight of moisture |
,, |
3 |
17 |
1½ |
|
if unstripped or unstemmed:— |
||||
|
containing 10 per cent. or more by weight of moisture |
,, |
3 |
9 |
4½ |
|
containing less than 10 per cent. by weight of moisture |
,, |
3 |
17 |
1 |
|
Full |
Preferential |
||||||
|
Manufactured:— |
£ |
s. |
d. |
£ |
s. |
d. |
|
|
cigars |
the lb. |
4 |
6 |
10? |
3 |
12 |
4½ |
|
cigarettes |
,, |
4 |
4 |
6? |
3 |
10 |
5½ |
|
Cavendish or Negrohead |
,, |
4 |
6 |
3 |
3 |
11 |
10½ |
|
Cavendish or Negrohead manufactured in bond |
,, |
4 |
5 |
7? |
3 |
11 |
4½ |
|
other manufactured tobacco |
,, |
4 |
4 |
3 |
3 |
10 |
2½ |
|
snuff containing more than 13 per cent. by weight of moisture |
,, |
4 |
3 |
10? |
3 |
9 |
10½ |
|
snuff not containing more than 13 per cent. by weight of moisture |
,, |
4 |
6 |
3 |
3 |
11 |
10½ |
PART II.
Customs.
|
£ |
s. |
d. |
||
|
Unmanufactured:— |
||||
|
if stripped or stemmed:— |
||||
|
containing 10 per cent. or more by |
||||
|
weight of moisture |
the lb. |
3 |
12 |
10 |
|
containing less than 10 per cent. by weight of moisture |
,, |
4 |
0 |
11 |
|
if unstripped or unstemmed:— |
||||
|
containing 10 per cent. or more by weight of moisture |
,, |
3 |
12 |
9½ |
|
containing less than 10 per cent. by weight of moisture |
,, |
4 |
0 |
10½ |
|
Full |
Preferential |
||||||
|
£ |
s. |
d. |
£ |
s. |
d. |
||
|
Manufactured:— |
|||||||
|
cigars |
the lb. |
4 |
10 |
11? |
3 |
15 |
9½ |
|
cigarettes |
,, |
4 |
8 |
7? |
3 |
13 |
10½ |
|
Cavendish or Negrohead |
,, |
4 |
10 |
4? |
3 |
15 |
3½ |
|
Cavendish or Negrohead manufactured in bond |
,, |
4 |
9 |
9 |
3 |
14 |
9½ |
|
other manufactured tobacco |
,, |
4 |
8 |
4? |
3 |
13 |
7½ |
|
snuff containing more than 13 per cent. by weight of moisture |
,, |
4 |
7 |
11? |
3 |
13 |
3½ |
|
snuff containing more than 13 per cent. by weight of moisture |
,, |
4 |
10 |
4? |
3 |
15 |
3½ |
PART III.
Customs.
|
Full |
Preferential |
||||||
|
£ |
s. |
d. |
£ |
s. |
d. |
||
|
Manufactured:— |
|||||||
|
cigars |
the lb. |
4 |
8 |
2 9/10 |
3 |
15 |
9½ |
|
cigarettes |
,, |
4 |
5 |
11? |
3 |
13 |
10½ |
|
Cavendish or Negrohead |
,, |
4 |
7 |
8 |
3 |
15 |
3½ |
|
Cavendish or Negrohead manufactured in bond |
,, |
4 |
7 |
1 1/10 |
3 |
14 |
9½ |
|
other manufactured tobacco:— |
|||||||
|
hard pressed tobacco |
the lb. |
4 |
3 |
3 9/10 |
3 |
11 |
3 |
|
other pipe tobacco |
,, |
4 |
5 |
3 |
3 |
13 |
2 1/10 |
|
other manufactured tobacco |
,, |
4 |
5 |
8? |
3 |
13 |
7½ |
|
snuff containing more than 13 per cent. by weight of moisture |
,, |
4 |
5 |
3½ |
3 |
13 |
3½ |
|
snuff not containing more than 13 per cent. by weight of moisture |
,, |
4 |
7 |
8 |
3 |
15 |
3½ |
PART IV.
Excise.
|
£ |
s. |
d. |
||
|
Unmanufactured:— |
||||
|
containing 10 per cent. or more by weight of moisture |
the lb. |
3 |
8 |
3½ |
|
containing less than 10 per cent. by weight of moisture |
,, |
3 |
15 |
10½ |
|
Manufactured:— |
||||
|
Cavendish or Negrohead manufactured in bond |
,, |
3 |
10 |
3½ |
PART V.
Excise.
|
£ |
s. |
d. |
||
|
Unmanufactured:— |
||||
|
containing 10 per cent. or more by weight of moisture |
the lb. |
3 |
11 |
8½ |
|
containing less than 10 per cent. by weight of moisture |
3 |
19 |
8 |
|
|
Manufactured:— |
||||
|
Cavendish or Negrohead manufactured in bond |
,, |
3 |
13 |
8½ |
"
—An tAire Airgeadais.
Acceptance of this amendment involves the deletion of the Third Schedule to the Bill.
We are expressing our opposition to the last Budget of a week ago on the General Resolution. We will not bother about individual small Resolutions.
I am not accepting it.
It happens to be your own. Is it in order for a Minister to change his mind like that?
I am sorry; the context of Deputy Sweetman's observation led me to believe that he had an amendment in to delete the new section.
Amendment agreed to.
Third Schedule deleted.
FOURTH SCHEDULE.
Question proposed: "That the Fourth Schedule be the Fourth Schedule to the Bill."
It makes it very difficult when there are different sheets of amendments.
Numbered the same.
Yes. Could we know what Irish wine is made of?
Imported must.
Is there no Irish wine made of Irish ingredients?
I have seen some of it made privately by people who grew their own grapes and tried to make wine but on such a small scale that it was by no means a commercial proposition.
I know one man whose wife makes rhubarb wine. Would that be caught under this?
No: imported grape must, and grape must is, broadly speaking, grape juice the fermentation of which has been arrested.
Does this come out in sherry?
Yes. That is free of customs duty.
Which, the must?
Yes; must is free of customs duty.
Question put and agreed to.
Fifth Schedule agreed to.
Title agreed to.
Bill reported with amendments.
Report Stage ordered for Tuesday, 28th June, 1966.