The Deputy was abroad very early, so early that the 9.30 a.m. announcement for next week did not come as much of a shock to me. In the ordinary course of events, the Finance Bill does not appear right on the heels of the Budget debate. There is normally a considerable time between the issue of the Finance Bill and the conclusion of the general debate on the Budget. The general debate on this aspect of Government was opened on 14th June and only ended last night and, consequently, it is not appropriate to have the full debate on this Finance Bill on this Second Stage that might otherwise be desirable. Matters to be raised on this Finance Bill may be more appropriately debated on the Committee Stage and Fifth Stage.
However, it is appropriate to remind the House that this Finance Bill is brought in by the Government in pursuance of the promise and the threat made by the Taoiseach on 12th March and reported in the newspapers of 13th March that so far as Fianna Fáil are concerned, increases in taxation will never end. It is also appropriate to realise that this Finance Bill is their method of raising the taxation for the current year proposed by the Fianna Fáil Government—part of that taxation anyway. In his telecast on the Budget last March, the Minister for Finance referred to the fact that we as a nation were spending too much of our increased earnings without putting aside enough for investment.
That may be true. I think it is true but who is responsible? The person responsible for the fact that there is not sufficient margin of saving to put away for investment is the Minister for Finance himself. The overspending by the Fianna Fáil Government has had the result that we are now faced with bills for expenditure and taxation and that is one of the prime causes of our economic difficulties at the present time. We were in the unenviable position last year that we were one of the four countries alone in the world in which the purchasing power of the workers fell. It is largely because of the chain of events started by the excessive over-expenditure in relation to our economic position by Fianna Fáil that this has occurred.
In the discussion on the General Resolution, I referred to the increase that has taken place in taxation for expenditure over the past four years, which rose from £131 million in 1963-64 to £186 million this year. That would be serious enough if it were only the increase in indirect taxation. What is much more serious is that the Minister proposes to take this year approximately 56 to 57 per cent of the increase in the wealth of the community by way of taxation. On the Government's estimate of the increase in the gross national product, something like 56 per cent, or roughly three-fifths, is to be taken by the Government for governmental expenditure. How can there be any incentive to increase production when three-fifths of that increase is to be taken out of the pockets of the people? That is one of the things that will be achieved by this Bill.
I was amazed that the Minister did not see fit in his speech introducing this Finance Bill to give us some indication as to why a wholesale tax of this sort was chosen as the vehicle to collect the taxation which is to be superimposed on the existing turnover tax. Before the Minister introduced this Budget and this tax on 14th June, he must have examined the other taxes available to him and must have come to his conclusion that this was a suitable type of tax. In the time since then available to me, I have endeavoured to find any single country in the world which has this type of wholesale tax superimposed on an existing retail turnover tax. I do not pretend for a second that I have the facilities to make my inquiries exhaustive but the Minister has those facilities. He is able through our embassies abroad to ascertain the position in respect of taxes in any country in the world and it is at least significant that he has not thought it worth his while to suggest this morning that this particular type of tax is in operation elsewhere, side by side with, and superimposed upon, a retail tax.
In the discussion on the turnover tax in 1963, that tax which was the forerunner and the torchlight of all the inflation that has followed since, that tax which triggered off, as the Fianna Fáil Government of that time were told it would trigger off, a round of inflation from which the country has never recovered, Senator Dr. Ryan, the then Fianna Fáil Minister for Finance, made cogent and pungent arguments against the imposition of a wholesale tax. One would have thought that at least his Fianna Fáil successor in Government would have had the courtesy to his predecessor to explain why circumstances had changed and why arguments then advocated by the Minister were no longer operative.
One of the reasons the then Fianna Fáil Minister for Finance gave, at column 84 of the Official Report of Volume 202, for having a retail tax was: "The impact would inevitably be increased by the trade ‘mark-up', to the disadvantage of the consumer and without any direct gain to the Revenue". In fact, if one reads the Budget statement of 23rd April, 1963 and the discussion that took place in this House on the Committee Stage of the Finance Bill on 10th July, 1963, and subsequent days, one can find through the whole of that debate and discussion substantial arguments advanced by the Minister's predecessor in office against this type of wholesale tax. It was on those arguments the then Fianna Fáil Minister relied for his choice of a retail tax of 2½ per cent.
It is not for me to make any detailed comment on the manner in which Fianna Fáil have turned their backs on those arguments, but it is pertinent to note that while the turnover retail tax, and it was part of the reason why that tax was, and is, so bitterly unpopular, was flat in its operation and made no differentiation as between the luxury of a fur coat at one end of the scale and the bread purchased to keep the family alive on the other, this tax exempts certain articles of use which might perhaps be described as necessary. But in so exempting them, it does not travel the rest of the way, as it should, and differentiate between luxury goods, on the one hand, and on the other, goods that are necessary, though not perhaps as necessary as food. The meaning of section 3 is not crystal clear but, so far as I can see, the position is that materials for housebuilding, which are at present subject to turnover retail tax, as I would call it by way of contradistinction, of 2½ per cent, will now be subject, in addition, to wholesale tax at five per cent.
There are materials, without question, which go into the building of houses which are at present subject to the 2½ per cent tax. Those things will now have five per cent added by virtue of the provisions of section 3, that is, 1/- in the £. The effect of this will be that in relation to many of the materials that go into housebuilding, the Government will now get a rakeoff of 7½ per cent at the same time as they are purporting by means of grants to ease the lot of those who want to build a home for themselves and their families.
There might be some sense in that if, at the same time, the housing grants generally were increased. We all know that housing grants are less on the basis of the real value of money now than they were 15 years ago. Therefore, far from the increased Government taxation on housebuilding that will arise being offset, the reverse is the position.
This is not a selective tax except in so far as certain categories are exempt. The provisions of section 3 do not even carry out what the Minister indicated in his second Budget speech. He indicated in his second Budget speech that the Bill would provide that any goods liable to the existing retail tax, with the exception of those set out in subparagraph (iii), would be liable to tax. That is not so because the Minister, while not imposing the tax on exempted activities under subparagraph (i), has provided that he can exempt articles from this tax without exempting them from the retail tax. That has been done by the manner in which subparagraph (ii) has been drafted.
As I said when speaking on the General Resolution, it was not in accordance with his speech. It is desirable that more care be taken by the Minister either to explain what he intended or to make what he is putting into operation follow the intention. We will have a better chance and a better opportunity of discussing that particular aspect of it on Committee Stage.
When we were discussing the retail turnover tax in 1963, Sweden was given as the great example which we were going to follow and there were during that debate many occasions on which the then Fianna Fáil Minister for Finance objected violently because the Opposition were not satisfied to follow the Swedish pattern. Again, there is a complete volte face by Fianna Fáil in that respect. The Swedish Government have abandoned their retail turnover tax and have substituted instead a value-added tax to phase out the retail tax because they say themselves the impact of that tax on the essential industries and exports of the community will not be anything like as serious.
Here, there is no attempt to phase out the retail tax. On the contrary, the position here is that we have a new tax superimposed on the other and superimposed in a way that will mean to a large extent that there will be tax on tax on tax. I mention the double superimposition quite deliberately. You will have here a tax collected at wholesale level and, of course, that tax will be passed on in the price of the goods to the retailer, plus, of course, the mark-up for the wholesaler being out of his money during the period from the time he has paid the tax until the time he is paid by the retailer. That is natural.
Let us assume, for example, that there is an article that will be sold wholesale at £100. A five per cent tax will be added. That £100 will be sold at £105, plus mark-up, and then, on top of that, the retailer will have to provide, when he is selling, a mark-up, not merely for his own profit, not merely for his wholesaler's profit, but for the wholesaler's wholesale tax in addition. Perhaps, in consequence of that, the article in question—depending of course on the line—would be sold, not for £100, but for £125 or £130, perhaps even more. The amount does not matter for the purpose of this argument.
Then the retailer will have to add on to this price another mark-up of 2½ per cent, 2½ per cent which has to be added, not merely on the wholesale price but on the wholesale tax that has already been imposed, and we will find, I believe, in relation to these two taxes and the manner in which they have been superimposed, that the revenue part of it and the mark-up on that revenue part of it will mean an addition of perhaps as much as 15 to 20 per cent on the items that are caught in this way and that have to bear 7½ per cent duty between the two and, in consequence, will have the mark-up on them.
The value-added tax avoids that position, avoids that duplication. I agree that it is, perhaps, more difficult in certain respects to administer. The excuse given by the then Fianna Fáil Minister for Finance, Dr. Ryan, as to why we would not have a value-added tax in 1963 was that we had not sufficient experience here in Ireland of any turnover tax to start out on that line. We have had three years of most unfortunate experience of it, most unfortunate in the inflation that was generated by it.
I do not quite understand, either, how section 11 will operate in relation to imports. There is no exemption from section 11 in the same way as there is an exemption in sub-paragraph (iii) of paragraph (b) of subsection (5) of section 3. If the Minister is serious in saying that food, drink, tobacco, medicines, clothing, fuel, hydrocarbon oils are not to be subject to this tax when they are brought in by way of imports, he should have put that reservation and exception in section 11 in the same way as he puts it in section 3. As it is, it has been left discretionary for the Minister to do it or not as he wishes, or to widen it or to narrow it, exactly at his discretion, by the provision of subsection (2) of section 11. It is extremely bad drafting and extremely bad taxation law to have in one case the exceptions and exemptions properly set out in a class and not to have them in the other. That is, of course, unless the Minister for Finance intends that imports of that sort will be caught. I do not think that under the provisions of the Free Trade Area Agreement with Britain, he would be entitled so to do but, again, that is one of the things about which we should like to hear something from the Minister.
Above all, I should like to hear from the Minister where in the world do we have a wholesale tax and a retail tax running side by side, one superimposed on the other? I ask that question not out of curiosity, but because I should like to see, as others would like to see, where it exists, whether it works there, because it does not seem to us that it is possible to work the two together in that way without getting into very serious difficulties in respect of what is generally accepted as the worst possible canon of taxation, raising a tax on a tax.