Amendment No. 1 in the name of Deputy Noel Lemass not moved?
Committee on Finance. - Finance Bill, 1967: Committee Stage.
Section 1 agreed to.
SECTION 2.
Is it open to me to move it, Sir, in the absence of Deputy Lemass?
Unless the Deputy has the permission of Deputy Lemass to move it, he may not.
I have not got it.
Deputy Lemass was only codacting. Everybody knows that. I am sorry he did not move it. I would have liked to have made him swallow his words by not voting.
Amendment No. 1 not moved.
Amendment No. 2 not moved.
I move amendment No. 3, in the name of Deputy T.F. O'Higgins:
In page 3, lines 36 and 37, to delete "full-time".
Have you his permission?
I have, but what I have not got is my note. The Minister was not the only person to arrive without his papers today.
Perhaps in the interval I might explain what my view of the section is? As most Deputies know, the housekeeper allowance is at present granted to a widower or a widow or a husband whose wife has deserted him. The purpose of the section is to extend that housekeeper allowance to a married woman not living with her husband who has presumably, deserted her. We want to put the deserted wife in the same position as the deserted husband at the moment.
The reason we specified "full-time" is that, if we did not, it would leave it wide open to all sorts of people to avail of this who would not really be entitled to it, strictly speaking. Unless we use some words like "full-time" the most nominal type of employment would entitle a woman to secure this concession. The idea is that it is given to a woman who, because of the full-time nature of the occupation she undertakes, has to be absent from her home and therefore has to employ somebody to look after her children.
The Minister's argument may be all very well to avoid what I shall call the fake claim, but he must accept also that many young widows with young families cannot take a completely full-time job. They have to give some time and attention to their families and take a job that may be a half-time job or even a three-quarter-time job. Therefore, they have to have somebody to look after the young family while they are out. Surely that case deserves much more consideration than is being given to it by the Minister?
I can see the Minister's point of view that a person could get around the section by working for five minutes in the day. I am quite prepared to meet the Minister on that, but full-time employment takes the matter too far the other way. Some phraseology to the effect that she is engaged in some trade or profession which occupies at least half working time would, I think, be a fair compromise. I am with the Minister in so drafting the Act that there will not be the avoidance of the type he suggests. Equally, I think the present wording of it is far too rigid and it ought to be possible to arrive at a halfway house that would be feasible and fair both ways.
I would be inclined to support Deputy O'Higgins's amendment but it does appear that, perhaps, the wording is a little too loose. The Minister must take into account a person who is working for a period and whose major income is what he gets for that period. If the phraseology used could be related to that, it would meet the bill. I would ask the Minister to consider dealing with this matter at a later stage or in the Seanad.
There is one other thing. The fact that there might be fraud is hardly worth considering. The amount of money involved is very small. There is the substitution of £135 for £120. The amount involved would be £15 at 5/3. I do not think anybody would be inclined to bother trying to obtain that fraudulently, or even the whole £35 at 5/3. For that reason, the Minister, if he wants to help, should phrase it in such a way that it would refer to persons who are getting their major income from this sum.
It would not necessarily apply only to persons who would be practising fraud. Unless we put in words to that effect, everybody would be legitimately entitled to it who worked five minutes a day. They would not necessarily have to be practising fraud. I want to repeat this assurance to the House, that this provision will be administered in a very liberal and sensible way and I also want to say that I will interpret and the Revenue Commissioners also will interpret "full-time" as covering the case of a woman who could show that she is working what might be regarded as the normal hours for the occupation in which she is engaged. We would certainly consider her as working full-time.
Supposing she is working as a typist, half-day?
I cannot attempt to deal with everything here. The sort of thing I am thinking of is this: supposing you had a receptionist whose normal work hours were three or four hours in the morning. Provided that she is working the full amount of hours which would normally be understood to be the appropriate amount for the occupation, then we would regard her as working full-time. I would also envisage "full-time" being interpreted to cover a case where the employment involved lengthy absences from home and where the earnings involved substantially represented the means of subsistence of the taxpayer and the children. In other words, if, by virtue of the employment, she were away from home for considerable periods of time and the amount she earned was reasonably equivalent to full maintenance for herself and her family, this also would qualify as full-time.
The Minister's approach is extremely stingy. The Minister may say that this will be dealt with liberally but did anyone ever see the income tax people dealing liberally with anybody? Do we not all know they try to screw the very last penny when it comes to assessing tax and is it not true that unless it is written into the Bill and is in fact laid down so that it cannot be twisted in any way, there will be no remission at all except for those working full-time? The Minister might as well face up to it. Either change it and include "full-time" or delete "full-time".
I do not accept Deputy Tully's view of the administration of the Act.
You do not have to.
No, I do not. But I do think that Deputy Tully is right, for this reason: the Revenue Commissioners have got to interpret the Act and administer the Act that is before them and the Bill that is before us does not allow of liberal interpretation. It is as specific and as restrictive as it could possibly be and there is no use in the Minister saying that it will be interpreted in a liberal way when the wording of the section which the Revenue Commissioners under their warrant of appointment have to carry out does not allow of any liberal interpretation. It could be covered, if you like, by phraseology such as I suggested already or by such phraseology as "throughout the year is in reasonably full-time employment". If it is specifically, as it is there, "in full-time employment", there is no use in abusing the Revenue Commissioners and the inspectors of taxes for carrying that out. The person to be abused is the Minister for Finance who brings in the Bill and who has so phrased the Bill that it is restrictive and cannot be interpreted in any other way.
Deputy Tully says that the Minister is being extremely stingy. I do not think this is the case. The Minister is doing something that has not been done before—let us be fair to him there—broadening the scope of relief not previously available. It is true to say that in this section we are treating of deserted wives. Is that not so?
Yes.
Of whom there are quite a number in this country.
They must be very few and far between and I wish we could prevail on the Minister to go the whole hog and to have regard to the reality of the situation, that there is plenty of part-time work of a clerical nature available in this city today. I know nothing about the rest of the country. I mentioned typists This is the sort of work which a deserted wife with three or four or five young children is likely to take to, working for half a day.
She would hardly be paying tax on part-time employment if she has a young family.
I grant you that. The Minister will concede that the housekeeping allowance dealt with in this section is only £100—a very modest allowance—and to be fair to himself, to do justice to himself, the Minister should go the whole hog and accept the amendment.
I am in difficulty here. The idea behind this, of course, and the idea behind the use of the phrase "full-time", is that a woman's employment or business must entail a substantial absence from her home, must, bona fide, necessitate the employment by her of a housekeeper. I think we are all agreed on that. If a woman is necessarily absent from home sufficiently long to have to employ a housekeeper, then we would all like her to qualify.
I want to put the opposite point of view. I want to say that by using "full-time" here we are, in fact, making it flexible. What is "full-time"? For a Senator, for instance, "full-time" employment as a Senator does not by any means equate with full-time employment for a Deputy. "Full-time" in this regard may be used flexibly as related to the type of employment a woman would take. If the employment necessitates being absent for only half a day, that is full-time employment, whereas, if we go the other way at it and try to spell out the circumstances in which she will be entitled to this allowance, then we will probably bring unnecessary rigidity into it, which I know Deputies would be anxious to avoid.
I am giving the House a solemn assurance that the term "full-time" will be sensibly interpreted. I do not quite agree with Deputy Sweetman that that assurance by me in this House is of no value because, admittedly, the revenue officers have to interpret the law and apply it without fear or favour or distinction. But, here what we are dealing with is the actual interpretation of this phrase and this single phrase, not the section as a whole, just this phrase. I think they will be quite within their jurisdiction in interpreting "full-time" in the way in which I am describing it.
I am sure that if the Minister checks through the various Government Departments he will find there is an interpretation of "full-time" which does not equate with what he has just been saying; in fact, if the person is full-time, it will be taken that he or she is employed for a set number of hours per day.
Not necessarily.
If the Minister checks, he will find that the interpretation, even in his own Department, of "full-time" cannot be taken as two or three hours. I should like to see included in the Bill something which would protect the interest of a woman who is living in Ballyfermot—if Deputy Dunne were here, he would tell me there are no deserted wives in Ballyfermot—or in some other part of the city, and has to travel across town to a job which she may be doing for only two hours in the morning and two in the evening. Because she has this job, she has to get somebody to look after one or two small children at home. My reading of this provision would be that that type of woman will not qualify. I am quite sure the Revenue Commissioners will be the very first to say that the law does not allow them to include her because she is not employed full-time. I do not wish to delay the House by pressing this, but surely it should not be beyond the competence of the Minister, between now and the introduction of this Bill in the Seanad, to have the matter investigated and try to find out something which would meet the wishes of the House? It is not a big matter. Deputy Byrne says there are not many of them; I think there are too many, but the amount involved is very small and it is not going to make or break the Minister's next Budget, if he has a next Budget.
It could be very large if we do not have some restriction on it. Deputies do not have to force me very hard to do things for deserted wives, and I should like to remind them that was the approach right from the Succession Act to the various other pieces of legislation which I introduced, and it is in that context I introduced this provision into the Bill. However, I have a difficulty, and it seems to me at any rate that this is the best and most flexible way of tackling the problem. I do not mind undertaking to look at it again.
Why not substitute "bona fide” for “full-time”.
I am not sure "bona fide” would help in that content.
I think it would.
I want to say in reply to Deputy Tully that it is not the hours that a person works the Revenue Commissioners will look at; it is the period of absence from home. If between travelling to her place of employment and the hours she works, a long absence from home is entailed, and if the amount she earns is reasonably equivalent to what is necessary to maintain a wife and family, that will certainly qualify as full-time.
Surely a person earning a taxable income must automatically be taken as full-time?
Regular employment.
If a salary is taxable over a year, surely the employment must be full-time?
Would Deputies agree to let it go for a year and see how it works out? I should point out that this is the exact phraseology used in the British Act and it has not caused any problem there.
What I am saying is that if a person earns sufficient to be taxable, say, £300 or £400, that alone proves it is full-time employment. Anybody who earns enough to come under the tax law——
It might be only £50 and there might be £500 private income or investment income.
Why not work it the other way around: let the amended provision run for a year and see if there is any bad avoidance?
I should like to try it as it is for a year, and if any Deputies come up with cases of hardship during the year, we can fix it next year.
I should like it done the other way, and if the Minister was able to come up with cases of avoidance——
There is nothing to be lost by undertaking to look at it between now and Report Stage.
I agree.
Amendment, by leave, withdrawn.
Section 2 agreed to.
Sections 3 to 6, inclusive, agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill".
Would the Minister just remind me what is section 335?
In what connection?
It is related to friendly societies.
What is the point of section 7?
This is to increase from £300 to £1,000 the amount by which a registered friendly society can insure a member and still maintain exemption from income tax under Schedules A, C and D. This is in line with the change made in the Credit Union Act.
Would the Minister say why section 335 is being amended and section 336 is not being so amended? Why is the sum there not raised from £600 to £1,000 and the yearly annuity from £350 to £500? Surely it should follow?
If there is a case for one, there would seem to be a case for the other.
Section 336 is covered by trade union legislation.
Yes. Has the Minister anything against trade unions?
No, not at all. This, as I say, is simply to bring this provision into line with the change in the credit union legislation.
The reason for introducing that legislation was the change in money values, and, therefore, the Minister is entitled to change it here. Surely section 336 would also require amendment because there is a change of money values there?
It would require a change in the trade union legislation first.
It would not. The Minister can change this without changing trade union legislation at all.
It would not make any sense.
Of course it would make sense.
Unless the trade unions are empowered to do it, there would be no sense in that. It would not exempt them from income tax.
If the Minister introduces the amendment to section 336, it can follow. There is no reason why we should not do it.
It is putting the cart before the horse.
A start must be made somewhere, and there would be no point in changing the trade union end of it without the provision being made in the Bill to allow it to happen. If money value has dropped in the other case, surely the case is just as strong for a change here? Would the Minister have a look at it to see if there is validity in the argument I am making?
Surely the trade union provision was altered in 1963?
Not in the same way. That was the first time since 1918.
As I say, it is a question of putting the cart before the horse. It seems to me that what we do here is follow practice. If the benevolent societies, the credit unions or anybody else want to raise these figures, then we make sure that our income tax provisions keep in line. As I understand it, the trade unions do not provide £1,000 or anything like that for their members and section 336 was agreed with the trade unions as adequate to cover what they are doing.
If I assure the Minister that it is as a result of a request from a substantial number of trade unions that I make this plea that they should be permitted to do this will be reconsider the matter?
The Deputy means there are trade unions which would, if permitted, give greater benefits?
If permitted, yes.
I certainly will consider that.
Question put and agreed to.
SECTION 8
Question proposed: "That section 8 stand part of the Bill".
This deals with section 344 of the Income Tax Act, 1967, into which was carried the exact wording that had been in earlier sections. I find considerable difficulty not in dealing with this administratively but in understanding the actual wording of subsection (1) of section 344. I am surprised that I should find that difficulty. The present position factually is that if a person has deposit interest which is less than £50 per annum, that deposit interest is exempt from income tax assessment. On the other hand, if a person has £55 deposit interest, the first £50 is exempt and the assessment is made on the excess over £50. The effect of this amendment is to change the £50 to £70. I have no difficulty whatever in understanding the wording of section 334 in relation to a sum by way of deposit interest received by an individual up to £70 per annum but, if a person has £75 worth of deposit interest per annum, after this section is passed, I take it the intention of the Minister is that the first £70 will be clear of assessment and the remaining £5 will be assessed. Am I correct in that?
No. I think the Deputy is overlooking the words "or in so far as".
Is it the intention that, if a person has £71 deposit interest in a year, he will get no exemption at all?
No. He gets the £1.
No. He gets £70.
Yes.
That is the intention. It is either going to be the first £70 of deposit interest, or less than £70, if it is less. In section 344 subsection (1), it is stated "said sums shall be disregarded for the purposes of this Act if or in so far as the said sums do not exceed £50". I cannot see where in that there is authorisation that only the excess on £50—£70 now—is to be taxed. I should have thought a more reasonable approach to the drafting of section 344, except that it had to be taken from the previous Act, would be that the basis would be that, if the interest were under £50——
May I interrupt? It seems to me that the words "in so far as" cover the position.
In so far as the sums do not exceed £50.
First of all, it says a sum of money; if it does not exceed £50, it is out.
Agreed.
In so far as it does not exceed £50, it is out.
But if it does exceed £50, what then?
Suppose it is £54, then the £50 is excluded. That is the old figure.
I am aware of the administrative way of dealing with it but I do not think that is the right interpretation from the point of view of language. It is interpreted the other way. The right answer comes but the phraseology is wrong.
Suppose a person has an income of £700 a year from investments, or something, is he taxed then on £630?
Yes.
I still do not think the phrasing is right. However, the result is right.
Question put and agreed to.
Section 9 agreed to.
NEW SECTIONS.
Amendments Nos. 4 and 5 may be discussed together.
I move amendment No. 4:
Before section 10 to insert a new section as follows:—
"Section 186 of the Income Tax Act, 1967, is hereby amended by the deletion of subsection (2)".
The purpose of these amendments is to ensure that it will not be possible in future for the income tax authorities to go back ad infinitum. Let me say at once that we all accept that, if there is a case of fraud, then there should be no time limit on that fraud. Everybody accepts that without question. However, the effect of subsection (2) of section 186 of the Income Tax Act is that the Revenue Commissioners can go back for 45 years. I am not quite certain if they can go back even before the inception of the State. Certainly they can go back 45 years. Very often it is extremely difficult for a taxpayer to have the kind of records to deal with what is required and the Revenue Commissioners are in a most unfair position vis-à-vis that taxpayer. This case has been made to the Minister on many occasions. It was made very forcibly this year in a joint memorandum submitted by the Institute of Chartered Accountants in Ireland and the Incorporated Law Society. They made it clear that they thought the time had come for a review of the time limits in the making of assessments, time limits which extend back over 44 years. Incidentally, are they entitled to go back beyond 1922?
No.
I am glad to hear that the 46th year at least is out. To go back to 1922 seems to me to be quite absurd in present circumstances. That was not the law originally. Up to 1936 there was a six-year time limit. The law was then changed to enable assessments to be made from 1922-1923 onwards. That meant the Revenue Commissioners were then entitled to go back 15 years. Now they are entitled to go back 45 years. I urge the Minister very strongly that is unreasonably long. It is, in fact, quite indefensible. On the other side of the water, assessments can be made only for six years, unless fraud is established. They have found there that the power of going back for six years is quite adequate and I do not understand why, if it is adequate there, it is not adequate here. The penalty provisions are such that if there is fraud, adequate compensation can be obtained by the State. Where no fraud has been established, it is unreasonable to have a state of uncertainty continuing for such a long time, for 40 years or more.
The merit of the amendment does not depend only on the submissions made by the two bodies. It is also dealt with in the Seventh Report of the Commission on Income Taxation, pages 91 and 92, paragraphs 301 to 305. It has been suggested that the time limit was extended to enable tax to be recovered because of delay in unearthing evasion. If there was evasion of that sort, there must have been fraud and the ministerial statement of 1936 was not a case at all for this provision. The Seventh Report comes down flatly in paragraph 305 and recommends that claims for recovery of tax should not be made later than ten years after the year in which the tax is chargeable. That is four years longer than in Britain and four years longer than was the case here in the period from 1922 to 1936. Bearing in mind that in most cases penalties can be raised which would greatly exceed the tax evaded, there does not seem to me to be any case in relation to the power to go back 45 years. I would ask the Minister to accept the recommendation made in the Seventh Report of the Commission set up by a most enlightened Minister for Finance.
I would also like to speak on this amendment. It seems to me that here is a matter of principle which can be understood by most people. We have often said that the income tax code, as a code of taxation, is not one that has enjoyed general popularity but I am sure that can be said in relation to any system or method of taxation. But when one finds, as one finds in this respect, that a system of taxation has features which appear, prima facie, to be unfair to the taxpayer, then we should entertain a suggestion for its amendment. The ordinary taxpayer who, for one reason or another, ignorance, confusion or mistake, has been overcharged in relation to taxation and has overpaid for a number of years is restricted by our present law in making a claim for overpayment to a period of six years. When that period of six years became part of our income tax code, the Revenue Commissioners were equally restricted on their side to a back date of six years. When the change was made which means that the State can go back effectively almost to the beginning of time, certainly to 1922-23, which covers the span of most people's earning life, the taxpayer was still restricted to a claim for six years. I do not think that is fair and I would be interested to hear what case can be made for providing an inequality of treatment of that kind as between the State and the taxpayer.
If the individual can go back only six years, why should it be that the taxation authority should have no such restriction? Why should it be that the individual taxpayer can never feel that he has settled his accounts with the State? The taxpayer must always be under the fear and the danger that an assessment can be mounted against him going back into years where, effectively, the taxpayer cannot deal with the matter. The six year limit which applies in relation to most claims for debt has been found on experience to be very fair and it is felt that if a six year is exceeded, a liability should not remain hanging over a person.
That is approaching the matter from the point of view of ordinary people looking at a code which, if it is to be maintained, should be as equitable as possible. In addition to that, there is the strong recommendation from the Commission on Income Taxation referred to by Deputy Sweetman which asks that the almost unlimited right to make a back assessment should be limited to ten years. Why the Commission recommended that period of ten years is another matter and personally I do not see why they did so. It seems an unduly long period and to my mind, the difference they make between the rights of the taxpayer and the rights of the Revenue Commissioners does not seem justifiable. What is accepted as fair for the individual should be accepted as fair for the State.
It appears as if the Deputy's amendment has a lot of merit. He says that in this case the State is trying to have it both ways. If the period over which taxation can be recovered by the citizen is six years, then surely there should be a limit on the period the State can recover tax which is considered due? Another angle which might have a bigger effect on the matter than anything else is that, over the years, the approach by the State to the matter may have altered. By going back 12 or 15 years, it could happen that a person would not be in a position to prove something which was easily capable of proof at the time and which justified the person in the amount of tax paid or the amount of tax he or she refused to pay. Such evidence might not be available after a period of years and is a very strong argument in favour of Deputy O'Higgins's amendment.
Nobody in this House holds any brief for the evasion of income tax. In so far as the continuance of the powers which we seek to repeal might be necessary in order to curb evasion, our case for repeal would be so much weaker. In this context, however, I think it is essential to have a look at the entire picture, to look at the developments, based on the recommendations of the Commission, which have transpired in the past few years in regard to strengthening the powers of the Revenue Commissioners to deal with income tax evasion.
The part of the Seventh Report to which Deputy Sweetman referred dealt with that aspect of the matter. Their report, advocating restriction on the right of the Revenue Commissioners to re-open cases to ten years, as urged by us, was a corollary of their major recommendation which was that the hand of the Revenue Commissioners should be strengthened. That has been done. The need for the continued existence of these undesirable and unjust powers is no longer there.
It is essential to have a look at the position in 1936 when the then Minister for Finance, Deputy MacEntee, repealed the six-year limit of British law. He was concerned about unearthing evasion in the troublesome 15 or 16 years prior to 1936 in this country. I do not think it was in the mind of the Minister for Finance or of the Revenue Commissioners in 1936 that this power should continue indefinitely. I am convinced it was not—and I read Deputy MacEntee's speech pretty carefully.
Our amendment is based on the report of the Commission on Income Taxation and is backed by the submission referred to by Deputy Sweetman, the submission made to the Minister by the Institute of Chartered Accountants and the Incorporated Law Society. I referred to this matter here a fortnight ago on Second Stage. I gave the Minister advance word of these amendments. The Minister then said it had been indicated to the Institute of Chartered Accountants that the practice was, except in cases of fraud, not to go back beyond the six-year period and that this practice has the formal sanction of the Minister for Finance.
As far as I am aware, there is no part of the income tax law which provides machinery for the Minister for Finance to indicate formal sanction of what is or is not good and practice, no matter how good, is not legislation. This House must look to its rights. This is a House of Parliament. It is our job to legislate. It is not for a Minister to come along and say what is good practice. If it were done by statutory order, duly submitted to the processes of the House, it might be quite another matter but there is no such machinery in existence.
We do not want Government legislation by practice, by promise of Ministers, by undertakings or by formal sanctions. That is not good parliamentary practice. It is not good legislation. It is unsound in principle. I cannot, for the life of me, understand why the Minister should resist the amendment——
He has not said he is resisting it.
Perhaps I am jumping to conclusions. Hope springs eternal. As I said here a fortnight ago, I am conscious of the fact that Deputy Haughey is the first chartered accountant to become Minister for Finance. I expect much from him in the way of tax reform. He understands these matters as none of his predecessors did.
Thank you.
I was referring to his Fianna Fáil predecessors. I am quite deflated and I do not think I can say very much more on the issue except to repeat that if the Minister was genuinely sincere in what he said on the Second Stage, then he must accept the amendment. Our proposed amendment, No. 5, comes from the British Income Tax Act of 1952. I have strong views about copying British legislation in this country but if it has got to be done, then let us go the whole hog and copy it properly and comprehensively. I urge the Minister to accept this very desirable amendment.
I should, just briefly, like to support this amendment. As Deputy Byrne has said, Deputy Haughey is the first Minister for Finance who is a chartered accountant and we all have high hopes that he will have a more broadminded approach to these problems. I do not know whether or not the Minister has as yet indicated his intentions in this matter. I would hope that his training as an accountant, plus his ordinary sense of fair play, will encourage him to accept the amendment rather than resist it. It seems very unreasonable that the Revenue Commissioners should have the die loaded very much in their favour while it is very much loaded against the ordinary private citizen. Ordinary justice demands that both sides of the balance get equal play. If a limit of six years is good enough for the ordinary citizen to claim back from the Revenue Commissioners, then they, in their turn, ought to be satisfied with claiming from the individual in respect of a back period of six years. If, as the Minister indicated, it is the practice not to go back farther than six years, then, as Deputy Byrne says, we ought to get away from the practice and make it formal by accepting this amendment so that everybody will know where he stands and will have the same degree of security in the situation which is what we have not now got.
I should like to support this amendment. Apparently, we increasingly live in an age of bureaucracy in which the State has one right on its side and the ordinary individual is denied rights in return. As I see the position, first of all, no estate under this could conclusively be wound up forever. There is nothing to stop somebody in the Revenue Commissioners or in the Department of Finance from deciding, for instance in the case of a person who died a great many years ago, that inappropriate tax was paid on his estate so that the whole position of the estate would be brought to life again. This imposes tremendous expense on those who succeed the deceased or even on the individual who is still living.
Section 211 covers that.
It covers the living taxpayer.
That is a small consolation. However, it is something. In any case, I do not see why the State should have any particular privilege over a private individual. Further than that, if the State owes me money, if I discover I have paid too much income tax—which I feel I most certainly have done over the years— after seven or eight years, I have no rights at all. I cannot get the money from the State because I am statutorily barred after six years. Here we are asked to legislate to make it right for the Revenue Commissioners to chase a person after six years and take the money from him. It is unjust and inequitable, and I am very strongly in favour of this amendment. We should resist the other proposal as much as we can.
It has to be accepted that the ordinary individual has not got a file or a shoal of clerks, officials, or typists to help him. Anybody who is brought into court or brought back into the arena of having to pay tax in regard to some years ago, is placed at a tremendous disadvantage. The Minister should consider these things. It is absolutely unreasonable to take a person back over a period of years and say to him: "You did not pay sufficient tax in 1947 and we are now going to bring it up again and bring you into court". It may be suggested that you committed fraud. If you are taken into court to argue the matter and you have to seek legal advice—and I may say that legal advice is not always cheaply obtained—you have to go to all these expenses. Are we to know that the State will pay the expenses if they fail to prove their case, or are we to find ourselves in the position that the State is free from any charges imposed on the private individual? The Minister could very easily accept this amendment. If he does, another deathblow will be struck at bureaucracy which is growing day by day to the detriment of each one of us.
I would appeal to Deputies to try, if possible, to see this from my side. Deputy O'Higgins does not approach this with the right attitude. This is not a game which is played between the Revenue Commissioners and the taxpayers. It is not a question of playing a game according to the rules and everybody being under the same restrictions. After all, there is a fundamental difference between the Revenue and the taxpayers in this regard. The taxpayer knows his own circumstances, knows his own resources, income, capital, assets and so on, but the Revenue do not. The Revenue can only find out and endeavour to assess and collect income tax on the basis of certain limited powers which we confer upon them.
Therefore, to begin with, the two parties are not at all equal. It is not, as I say, a question of playing a game; it is a question of trying to enable the Revenue to do their job, to give them the power to collect the taxes which we need to run the State. It is not a question of being able to outwit the Revenue Commissioners for six years and then you have got away with it. It is a simple matter that anybody who is liable to pay income tax, surtax or any other tax, should pay it, and that is that. Therefore, I do not think there is an analogy at all between the situation of the taxpayer claiming back overpayments from the State and the ability of the Revenue to re-open cases where there has been either fraud or wilful neglect. That is all we are talking about, cases where there has been fraud or wilful neglect, because it is the unvarying practice of the Revenue Commissioners not to go back further than six years except where they are satisfied that there has been fraud or neglect.
To refer to what Deputy Sweetman said, as he and other Deputies know, the Revenue Commissioners received a deputation from the Institute of Incorporated Accountants in regard to this matter and the whole business was discussed very fully and frankly. My understanding is that the Revenue Commissioners made it absolutely clear to the chartered accountants that in no case did they go back beyond six years unless there was fraud or wilful neglect.
That is what the amendment is seeking.
We are giving you ten years in the amendment.
I do not want ten years; I want six years.
Does that mean that they do not go back beyond six years?
Unless there has been fraud or wilful neglect.
When the Minister says that the Revenue do not go back except where there is fraud, does it not only become fraud when it has been proved to be fraud? Surely there are borderline cases where people do not know——
Fraud in the opinion of the Revenue Commissioners.
Perhaps this may arise after ten or 12 years when you may not have your receipts. Personally, I have not even got receipts after three years.
The Revenue Commissioners have to establish that there was fraud.
Then you have to defend yourself in a case which may be ten to 15 years years old.
You have to do that in any aspect of administration and——
But then you only do it——
If you committed murder 20 years ago, you do not get away with it because you say you cannot remember.
However, I want to put another few aspects of this to the House. Deputies are quoting the situation in Britain but the situation in Britain is not qute as straightforward or as simple as some Deputies have indicated. The British authorities evidently found it necessary to bring in a number of amendments to protect themselves. In particular, they brought in, by section 51 of the 1960 Finance Act, an amendment which extended the time limit for making assessments in cases of neglect —neglect now, not wilful neglect— neglect simpliciter which did not amount to fraud or wilful neglect. We confine ourselves to fraud and wilful neglect. In 1960 they brought in this provision and they extended the time limit beyond six years where there is simple neglect. They define “neglect” in that context as meaning negligence or failure to give any notice, make any return, statement or declaration, or to produce or furnish any list, document or other information required by or under the Income Tax Acts. That is a very wide and sweeping definition.
Does that mean where there is no return?
In any of these cases they say neglect covers negligence or failure to give any notice, make any return, statement or declaration or to produce or furnish any list, document or other information required by or under the Income Tax Acts. When they brought that in, they said that if an assessment had been raised within the normal six year period, they could go back a further six years dating from the year of assessment. I mention this to show that it is not true to say that in Britain they do not go back beyond six years simpliciter.
To go back again to the chartered accountants. They were received by the Revenue Commissioners at my request, and they had long and fruitful discussions about the matter, and my understanding is that they indicated that they would be satisfied if they could have from the Revenue Commissioners a letter confirming that the practice was that cases were not re-opened, other than cases of fraud or wilful neglect, beyond a limit of six years. That letter has been issued to the chartered accountants stating that in practice cases are not re-opened beyond a six-year limit. I have no evidence, and nothing to suggest, that the Institute are not satisfied with that assurance.
Another assurance I want to give Deputies is that there is no question ever of an inspector of taxes making, outside the six-year limit, an additional assessment on the same set of facts simply because he has changed his mind in regard to the facts. Deputies are inclined to look at this from one point of view very largely. I want to suggest that there is another point of view about the procedure that is there at present. It is a simple, flexible and well-established procedure, and it enables Revenue to go back and open up appropriate cases. We think they should be entitled to, where there is a deliberate attempt to deceive. If we spell out in a statute that they cannot go back beyond six years, we put the onus on them of establishing fraud and that is a very difficult thing to do. As I say, they do not in practice go back beyond six years.
Can the Minister say what happens about costs if fraud is not proven?
They follow the event.
I want to take up one phrase the Minister used. The Minister says: "Look, the Revenue Commissioners do not go back beyond six years unless it is a case of fraud or wilful neglect." I accept that that is the practice and experience judged from the point of view of the Revenue Commissioners, but we are legislating here and we are dealing with what the law of the land is. The law of the land provides that the Revenue Commissioners can go back in effect to any point. They can go back to 1922 or 1923. Applying the law to what the Minister says is the experience of the Revenue Commissioners, the fact is that when the Revenue Commissioners decide that this is a case of fraud or wilful neglect, they bring in a back assessment. That is a decision against which there is no appeal because the power is there to make a back assessment. It may be wrong, unfair, or contrary to the facts, but so long as we permit our taxation code to operate in effect under unwritten laws, the taxpayer has no rights and no remedy.
The situation is worse because he is then branded as a person who has committed a fraud on Revenue, a person who is guilty of gross and wilful negligence. He has no way of ventilating his case because the machine goes on, and there is a back assessment, and there is nothing he can do about it. In my view, that pinpoints how unfair this is. If the law said: "If there is a case of fraud or a case of wilful neglect, then there will be no time limit", that would mean that before some court or some independent person the Revenue Commissioners would have to say: "All right; here is our evidence that this is fraud or wilful neglect", and the taxpayer, in accordance with ordinary justice, would be entitled to say: "That is wrong because of A, B, C or D", and someone would decide the issue one way or the other. I do not see what is wrong with that. It is in accordance with what the Minister says is the policy of the Revenue Commissioners.
I am sorry to have to say this, but this is obviously the point of view of bureaucracy—and Deputy Esmonde is perfectly correct—as expressed by the Minister. I think that, on reflection, he will agree because he said that if we changed the law, we would be putting the onus on the Revenue Commissioners to prove fraud. Why should that onus not be there? If we all agree that it is fair and just that there should be a time limit of six years except in a case of fraud—and there is no disagreement about that—why should the onus not be on the Revenue Commissioners to prove fraud? Why should we allow a situation in which someone who is nameless in a back room decides for some reason, never stated, that this is a case of fraud, and the taxpayer can never answer that anonymous person who makes that allegation for reasons which are never disclosed? Surely that is unfair?
I agree entirely that there is an obligation and a clear responsibility on the taxpayer to settle his accounts with the State fully and honourably. I agree that it is a responsibility of the State and the Revenue Commissioners, within the framework of the law, to see that everyone discharges his just and due liability for tax. There is no disagreement about that. I would have no sympathy for people who feel it is a game, and who pit their wits and by blowing hot and cold, conceal these things. I am not making any case for people of that kind. I am talking about the majority of taxpayers, the person who endeavours to discharge his obligations, the person who does not wilfully conceal things, the person who is not in any way guilty of that kind of taxation fraud, but who, for some reason he is not told, finds, as has happened, make no mistake about it, that there has been a back assessment over that number of years, years he is not able to grapple with. Added to that back assessment, he is told in effect that the reason is that he has been guilty of fraud. He is convicted and tried in his absence. That is what I object to.
I want to join issue with the Deputy on that. It is not a question of trying a person for fraud at all.
I may have been exaggerating but I am stating it in that sense.
I want to put it as I see it. Here we say we have an inviolable practice that we do not go back beyond six years. We will go back beyond six years only if we are satisfied that there is fraud. All that fraud does is to operate to set the practice aside. The Revenue Commissioners are then free to abandon the practice and go back over previous assessments. The taxpayer is still perfectly entitled to defend himself on the facts before the Special Commissioners, the Circuit Court and even up to the Supreme Court.
On the facts of his liability, but not in relation to fraud.
If the Revenue Commissioners want to do anything about fraud, any person can defend himself again before the courts. It is not correct to say that somebody in a back room suggests there was fraud in this case and therefore the person is condemned. All that happens is that the decision of the Revenue Commissioners that this man is guilty of fraud simply enables them to set aside their standard practice of not going back and bringing the whole law into operation.
Is that not the same thing? I shall give an example. I am a taxpayer and have been having discussions perhaps over my tax liability. I find an assessment is made on me going back 20 years. I have to find out whether that assessment is right or wrong. The onus is on me to prove it is incorrect and I endeavour to do it one way or another. The only issue that arises from the assessment is my liability to the tax involved in the assessment and nothing else. But in fact the assessment has gone back 20 years because somebody decided I was guilty of fraud. That charge I cannot deal with. I have already been convicted of that.
If they charge you with fraud——
I am not talking about the penalties in relation to fraud. Somebody has decided I have been guilty of fraud and that is why they have gone back over the matter. In that sense, I say I have been tried and convicted.
Only to start the process.
There it is. All that is involved is whether the assessment is right and to what extent. In fact the assessment may be perfectly right. I make the Minister a present of that. But the reason I did not pay my tax was a genuine bona fide mistake, something that was not fraud, but I have to pay up. If in fact the boot were on the other foot and genuinely, through some mistake, I neglected to claim an allowance that I properly should have claimed and I find that for the past 20 years I should be getting such an allowance, there is no question of whether or to what extent my mistake was due to my fault or not. There is no discretion. There is an absolute barrier against going back beyond six years. There it is. I do not mean any disrespect to the Minister, but I have to go.
I should have liked to continue the argument with the Deputy, but no doubt he is leaving an able substitute. Deputies opposite lay a lot of stress on the situation in Britain. In fact, as we stand at present, we are more lenient than the British are. The British found themselves having to have a statutory dependence on fraud. That is what the Deputies opposite would like, too— that there would have to be a statutory barrier against going beyond six years unless there was fraud. The British found themselves in that position. They had a statutory dependence on fraud being established. They appear to have found it unworkable and brought in a provision so that in fact in Britain now you can go back indefinitely, providing there is "neglect", which is a much wider term altogether than we are using. We are confining it to fraud and wilful neglect. They can go back as far as they like in Britain, once they find simple neglect. Deputies cannot quote the British situation to me in favour of what they are arguing. I have a lot of sympathy with the point of view of the Deputies opposite, but I feel that, unless they can establish that the Revenue are not adhering to this practice and are in fact going back beyond six years in cases where there is not fraud or wilful neglect, they should not press the amendment.
In what other way could there be a mistake like that except through fraud or neglect?
There are two things. There is wilful neglect; in other words, a wilful omission to do something that the taxpayer should do. A taxpayer is compelled by law to fill in a return every year. If he wilfully does not do that, conceals his existence or his identity, that is wilful neglect on his part. Only in that case or in some such case could they go back beyond the six years and make additional assessments. In Britain they can go back six years by statute and back beyond six years if there is neglect. Neglect is a far wider term. It is defined as:
Negligence or failure to give any notice, make any return, statement or declaration or to produce or furnish any list, document or other information required by law under the Income Tax Acts.
So that a simple omission to supply some form or statement might mean that they are statutorily entitled to go back as far as they like.
Do the Revenue Commissioners collect much money on the basis of going back? Is there much money involved?
There is: a sum of £750,000 annually.
Is this in a normal year or only in the year of the big putsch?
The situation is not similar. From the time compulsory disclosure of bank deposits was brought in, there was a considerable fillip given.
That figure is for back duty, not for back duty in excess of six years.
Could I have some further clarification from the Minister? Is the position that, if anybody in the office of the Revenue Commissioners, maybe a junior clerk, decides that somebody has not paid his lawful dues to the State over a period further back than six years, they can re-open the case immediately? I take it the Minister is arguing the point that it can be opened only in a case of fraud? Surely any time they go back over six years it is, ipso facto, a case of fraud? Therefore, it brings in the point made by Deputy O'Higgins. What chance has the individual of defending himself against a charge of fraud? I cannot see any difference between the assessment being made by the officers concerned. They say: “You have not paid your lawful dues. Therefore, we are going to re-open the whole thing.” Again, there is fraud. There is no difference between the two.
On that last point, I want to put a very practical point of view to the Minister. It is not the full use of these powers unjustly which is to be deplored; it is their continued existence. While they remain, they are used in terrorem. They are used to intimidate the taxpayers, threaten them with a full investigation back for donkeys' years: “We will establish that there is fraud if you do not settle now”, and taxpayers may be bullied into a settlement which would not otherwise arise when dealing with the investigation. I think it is quite clear that at present on the question of fraud, there is no appeal. It is fraud “in the opinion of the Revenue Commissioners”. The Minister is endeavouring to give a group of civil servants superior rights to the courts of the land.
I would hope that the Minister would at least reconsider this matter. I do not know whether it would be wise to press him on this particular amendment at this stage because I would hope that he might see some better way of doing it than has been suggested in these two amendments. Like other Deputies, I do much prefer that all tax provisions should be enshrined in legislation.
I gather now from the Minister that the Revenue Commissioners have no hesitation in giving an assurance that their practice would continue to be that of limiting themselves to a period of six years, except in cases of fraud. If that assurance has been given without any pressure, it is only reasonable to assume that the Revenue Commissioners are perfectly happy with a period of six years for ordinary day-to-day operations. There was an intervention about how much money was recovered in arrear and I gather that a sum of £¾ million per annum was recovered in respect of arrears of tax but I do not believe for a moment that any considerable proportion of that sum would be in respect of periods in excess of six years previously. I doubt very much whether any statistics could be produced to show that this power is of any great value at all.
Similarly, I cannot see that the proving of fraud would throw all that amount of undue burden on the Revenue Commissioners. What you are dealing with is a man's sources of income and there is a very limited number of sources of income—wages, salary, commission, annuities, investments and property. I cannot think of any others on the spur of the moment and I doubt if there are any which I have omitted. A person can scarcely be able to be very credible if he says: "I did not know that I had a farm down the country" or "I did not know that I was in receipt of an annuity". If the Revenue can establish that there was an annuity or that there was property, it is almost an open and shut case that the taxpayer must have known and it would be very difficult for him to prove complete ignorance.
Here again, I feel that undue power is being given to the collectors of taxes, not because they need it but because in their imaginations, they feel that a situation might conceivably arise where they might conceivably want to use it and I do not like that for a moment.
If we do something along the lines of the two amendments—although I am not quite happy with them as they stand—it is quite possible for us to go back and rectify the mistake we have made if in fact it is discovered that we have made a mistake but I do not think we would be making a mistake by withdrawing this power.
Like other Deputies, I do not believe that this is a game to be played between taxpayers and collectors of taxes, with each one trying to delude the other. But mistakes can be made in all good faith and it is not really sustainable to say that a new assessment can be made at any time whether there is fraud or not. If the Revenue Commissioners have been perfectly happy to give an assurance that they will continue to limit themselves to six years except where they are satisfied in their own mind that there is some question of fraud, we should take them at their word and say: "If you are so happy with that arrangement, why not let us put it into a Finance Bill?"
I would hope that we would not have a collision on this particular point and that, at least, the Minister might give us some indication that he would be prepared to look into it further because my whole training, just as his whole training and the training of the other Deputies who have spoken here today, is that we must have certainty in any question of legislation, and particularly where taxation is involved. I do not like any system which imposes on the taxpayer the horrible doubt in his own mind that an extra assessment may be landed on him without any warning and real responsibility on his part for that situation. There are always questions of the possibility of a mistake in a return but to say that this must be subject to reassessment at any time during the lifetime of that taxpayer is going much too far.
If the Minister could say that the powers to go back for a period in excess of six years have been exercised over the past few years at an average of 50 times per annum and that the revenue recovered by reason of going back in excess of six years has averaged a considerable sum each year, I might be prepared to reconsider it, but, as matters stand, I am not happy with section 186 of the Income Tax Act. I think it does give unnecessarily wide powers to the collectors of taxes and I would ask the Minister to give some further consideration to it. We have a Finance (Miscellaneous Provisions) Bill still before us and even if the Minister cannot reach a decision here at this stage, I hope he might consider it under that heading.
I do not want to bulldoze the House about this. I would much prefer to persuade the House to agree with me than to proceed otherwise and I thought I was succeeding somewhat in presuading Deputies that this was not altogether unreasonable. I am afraid that when Deputy Booth got up to speak that hope was shattered because we all know that Deputy Booth is the most reasonable of men and if he cannot be persuaded as to the reason in this, I will have to look at it again. But I want to deal with a couple of points he made and I will deal with the net issue he put forward.
Deputy Booth says that it should not be difficult to prove fraud. That is probably the nub of the matter. This seems to be what drove the British to amend their statutory position as distinct from practice. It is difficult to prove fraud. You have to prove mens rea and all that sort of thing. I do not mind its being difficult on the Revenue to prove fraud when the proving of that fraud would lead to penalties and so on. I think it is perfectly legitimate that they should have to go to trouble to establish that there was fraud if they are going to punish a man on the basis of the fraud committed but that is not what we are concerned with here.
We are concerned here with a situation where fraud exists and all that does is to operate to relieve the Revenue Commissioners of the restaint they have put on themselves not to go back. If they want to do anything about the fraud, they still have to prove it fully and comprehensively, and if they want to do anything about the assessment, they still have to prove it in court. The only thing I am objecting to is that they would be statutorily prohibited from re-opening a case unless they could prove fraud, because fraud is difficult to prove. Deputy Booth said it is not difficult, but the British evidently did find themselves in difficulty in that regard.
There are some other points about which Deputy Esmonde was worried, for instance, that some faceless clerks with brown boots in back offices might be taking the vital decision in regard to these matters. That is not so. First of all, the ordinary inspector of taxes is not permitted to re-open cases. It is only the Investigation Branch which can begin to operate this at all. All cases of this sort, before they can get under way, must be personally approved by the Revenue Commissioners, so there is no question as to the level at which these decisions are taken.
The Revenue have to operate an efficient administration. They do not pull figures out of the air and slap assessments gaily around the countryside in the hope they might stick somebody. These cases are based on evidence and information that has come to light. We all know the usual case where some bank account or some assets have come to light which had hitherto been suppressed. It is only where there is some material evidence like that that the Revenue Commissioners decide to take any action; otherwise they would be wasting a great deal of time and money.
I do hope that I can persuade the House that the present situation is reasonable and flexible and operates fairly well. It is clear practice—and I am sure Deputies accept that when we say it is the practice it is the practice— not to go back for other than serious reasons. If you force me to legislate that the Revenue Commissioners are statutorily prevented from re-opening a case unless they can prove fraud, then I think that would be putting an unreasonable restraint on them. I do not think it should be pressed. Perhaps it would be a solution if I were to undertake to the House to discuss this matter again with the Institute of Chartered Accountants between now and Report Stage and see what their present view is about it. For myself, I am not convinced there is any need to provide this by statute.
Would the Minister consider putting a floor on the amount, stipulating that investigation would be made only in respect of a reasonably substantial figure? In other words, would the Minister accept that where small amounts were involved and where in the bulk of the cases possibly ignorance or wilful neglect was involved rather than deliberate fraud, the Revenue Commissioners would not pursue the matter?
Apropos of what Deputy Booth was saying, I have some more information which may help him to come to a decision on this matter. The annual yield from back duty cases is around £900,000 a year. It is very difficult to give reliable information on this, but the best information I have is that about half that amount is applicable to the six-year period; in other words, back duty cases outside the six-year period account for about half of that.
How much of that is fraud?
Presumably it is all fraud.
Therefore, the amendment would not lose any revenue.
That is a non sequitur. If Deputies had their way, the Revenue would be prohibited from re-opening these cases unless they could prove fraud, and as I say, fraud is very difficult to prove. Deputy Booth is saying the taxpayer could not conceal the fact that he had an annuity, but the taxpayer could say: “I did not know that that income was taxable. I did not know that receipts from such a source were taxable,” and the Revenue would have to prove that he had mens rea, that he wilfully concealed it.
But a person has to return all his income, whether it is taxable or not? Is that not right?
A person only has to prove taxable income. For instance, let us take the current topic of builders' profits: the code applies only to income; it does not apply to capital gains. A taxpayer might affect innocence and say: "I thought that was a capital gain. I did not realise that was taxable income." I think Deputies would all agree that where the Revenue would set out to inflict penalties for fraud, then they should be obliged to establish it beyond yea or nay, but where it is simply a question of giving them power to abandon a restraint they have placed on themselves, then I do not think it reasonable to expect them to prove fraud in that case.
Could the Minister give us any information as to how many fresh assessments were made in respect of a period more than six years previously? I know what he has told us now is that of the arrears of tax recovered per annum about half of the total is in respect of over six years. To my mind, that is not sufficient, because what I should like to know is in how many cases have the inspectors, with the approval of the Revenue Commissioners, made fresh assessments, say, last year, in respect of a period more than six years ago. I have a very strong suspicion that in actual fact they have done that. Cases may be under review or under discussion and the final assessment agreed may date back over six years, but it is quite different from the provision here where a new assessment could be raised in respect of seven or ten years back.
We shall accept the Minister's suggestion that he is going to look at this between now and Report Stage, withdraw the amendments and put them down again on Report Stage. However, I think there is an unanswerable case for them and the Minister gave us the unanswerable case when he admitted that the moneys collected in back duty cases in excess of six years were, in fact, all based on fraud. Nobody is trying to cover up the fraud cases at all, and that seems to me completely to make the case for the amendments. In the unlikely event of the Minister being able to find any valid argument to reject this amendment between now and Report Stage, I would put this to him—I do not think it is likely he will find any valid argument, but if he can find one and persuade us——
I thought I was putting them rather effectively.
The Minister has not made much of an impression on me so far. He certainly cannot put forward any argument for the rejection of these amendments with any validity, without at the same time saying that he proposes to withdraw completely the restriction on the taxpayer getting a refund for six years only. What is sauce for the goose must be sauce for the gander.
The Deputy is not listening.
I was listening to what the Minister had to say from the little room at the back actually. The position is that, if it is necessary for Revenue to retain these provisions, and I do not accept that it is, there is certainly nothing to justify the retention of the six-year repayment rule. The argument the Minister made about the taxpayer knowing what he had, and so forth, is not a valid argument at all. If it works one way, it should work the other way as well.
On the Report Stage would the Minister have the amount involved—the total, the average, the amount for six years, for ten years, for 15 years? At the moment we are in the dark.
I will try to get any useful information possible. Deputies who have experience in these matters realise that it is not a very clearcut situation at all. Usually what happens is that the Revenue Commissioners discover that Seán Citizen has £100,000 tucked away in the bank about which he never told them. They can establish roughly that he must have accumulated that amount over a period of ten years. They issue assessments for the ten years to cover that £100,000. What happens then is that Seán Citizen comes in and makes a clean breast of it and a settlement is made on the basis of agreed figures. From that point of view, the figures of assessments would not really convey very much. However, I shall see what I can do about it, but I am not very optimistic about getting a clear picture.
Amendment, by leave, withdrawn.
Amendment No. 5 not moved.
I move amendment No. 6:
Before section 10 to insert a new section as follows:
"Section 480 of the Income Tax Act, 1967, is hereby amended by the repeal of subsection (6)".
This amendment deals with the Revenue's right of distraint set out in section 480 of the Income Tax Act. That section has been repealed in part at the behest of the President. Our proposed amendment relates to the right of distraint in respect of lands not occupied at the time of distraint. Subsequently these lands may be occupied by another person and distraint can then be made on that new occupier. The property of the new occupier can be seized. That is a very bad principle.
I do not know that the Deputy has a very valid point. This deals with the attempt made by the collector to collect Schedule A tax. The position is that, if the collector calls and finds no goods there, then he can come back again, and again, until such time as he finds some goods to satisfy his warrant. If the land is sold, the collector can do nothing. He cannot seize any property belonging to the new owner. That is clearly set out.
If the lands are let, what happens then?
Then cattle or, whatever it may be, can be seized. The situation we are confronted with here is one in which we want to avoid putting the collector in an impossible position. If we were to accept this argument, then the occupier could say that the property was not his, that it belonged to his sister, or his aunt, or some other relative. The collector of revenue should not be frustrated by that device.
Surely, when it is pointed out to him that he has taken property belonging to someone else, he should return that property?
That is a risk we must all take; otherwise the law could not work.
Could we not give the sheriff power to seize the land rather than the cattle?
Land is not a very negotiable security in Ireland.
It is better than pinching someone else's goods, is it not? To allow Revenue to pinch another fellow's goods is surely the line of least resistance.
It is not a question of the line of least resistance. It is a question of making the law work.
Judgment could be obtained against the land.
This is an anomaly— to all right thinking people I should think a somewhat shameful anomaly— in our law. Leaving aside the question of anonymous cattle, is it not true that under the Local Government Act, if you drive your motorcar up to the door of the defaulting ratepayer, the rate collector can come in and collect your car although that car is registered in your name and it is possible to demonstrate conclusively that the car in question is not the property of the defaulting ratepayer but the property of a visitor on his tenement. Whether that is constitutional is open to doubt. It is a right which any rate collector has and the Revenue Commissioners have it by the same principle of law if you can call it a principle at all. I see the force of the Minister's argument that distraint becomes impossible if the Revenue Commissioners are prevented from distraint by the simple denial of ownership by the person on whose land the chattels happen to be. On the other hand, how can he justify the local authorities or the Revenue Commissioners taking property which they know does not belong to the defaulting ratepayer or taxpayer?
That is not strictly what is at issue here.
That may be so, but is it fair that if a man owes Schedule A income tax and it is proposed to distrain against him and he sets his land in conacre and his tenant puts 20 cattle on the land, the Revenue Commissioners can come along, collect his 20 cattle and sell them for the debt due by the owner of the land, although the cattle belong to the conacre tenant? The Revenue Commissioners say to the tenant that that is his bad luck and that he must sue the owner of the land. I know that this procedure makes the enforcement of the income tax code simpler than it otherwise might be and I sympathise with the view the Minister advances when he asks us to show him some other way in which the ultimate sanction of distraint can be invoked against the property owner. The fact that such enforcement is difficult does not justify us in legislating unjustly and in representing the Revenue Commissioners as ravening wolves preying on the citizens.
We are accustomed to inveighing blandly against the Revenue Commissioners, oblivious of the fact that they are only doing what we are telling them to do. I do not think we ought to give them the power to do this and if the Minister asks me to tell him how to get the tax without having this weapon, I cannot see why the Exchequer or the local authorities cannot proceed like an ordinary creditor, that is, secure a judgment, register it as a mortgage on property and in due course close the mortgage and sell the property. The Minister may say that no one will buy the property in such circumstances, but so long as the mortgage remains, the property cannot be sold. The whole commercial life of the country carries on through the collection of debt by the ordinary processes of law.
If any of us should get a judgment against our neighbour for £10 or £20 or £100, nobody would suggest that we should have the right to distrain the chattels of a third man which happen to be in our debtor's tenement but we place the obligation on the Revenue Commissioners to do this. I have not heard any convincing argument advanced as to why the Revenue Commissioners should not proceed in the ordinary way. It is true that it is not always easy to sell land to realise a mortgage but the man who owns that land will not be able to sell it without discharging the mortgage because no one else will buy it. It might be difficult to sell the land over the debtor's head but if a third party bought the land subject to the mortgage, I do not think anybody in rural Ireland would object. It would be no harm if the Minister would look at this matter from the point of view of the Revenue Commissioners and the local authorities. I expect that Deputy Sweetman is saying to himself that this is the kind of nonsense that all Ministers for Finance have to listen to from their colleagues——
I have not spoken on this matter yet.
I know that, but I think I know also what is running through his mind. I have had to do with many Ministers for Finance and they are all inclined to think that the Revenue Commissioners have a dirty job to do and that they should be given the means of doing it. That is the occupational hazard of all Ministers for Finance and they come to realise that the Revenue Commissioners are not Balubas or savages but decent people doing a job of work. They are conscientious public officials who carry out our instructions but people like Deputy John Costello and I, who are at the other side of the fence, look at these matters with a more disillusioned eye. I would suggest to all Ministers for Finance that they should stand back from the situation and ask themselves if they think it right that we should authorise the Revenue Commissioners to seize the property of a third man and whether it would not be better to put the Revenue Commissioners and the local authorities on a par with the ordinary creditor who has his remedy in law.
There is a distinction between the Revenue Commissioners and the ordinary creditor. The creditor gives credit voluntarily; he creates the debt and no one forces him to do so. The Revenue Commissioners do not do this. The Revenue Commissioners find that a debt has accrued under the law with the making of which they have nothing whatever to do. They have an obligation thrust upon them to recover that debt. However, fully conscious of that distinction, I still think we ought to invite the Revenue Commissioners to proceed as ordinary creditors do, even if that should involve substantial inconvenience.
If the Minister for Finance does yield to the pressure put upon him by my colleagues in this respect, I would ask him to make sure at the same time that he also deals with another similar type of power by virtue of which the customs side of the Revenue Commissioners are entitled to seize a train, the whole train to Belfast, because somebody on it is found with a smuggled handkerchief.
We are concerned here with a very net issue. It is simply that if the collector goes along to a property and finds no goods he can distrain, he may come back again and again and find something distrainable. I think that is perfectly reasonable particularly as there is the proviso that if, in the meantime, the property has been sold for valuable consideration and the original debtor is no longer in occupation there is no power left to the collector to seize. Subsection (6), as it stands, is a very necessary provision. It is true that it is a complication if the lands have been let in the meantime.
What about Deputy Dillon's suggestion that the mortgage on the land should be taken out or, as a last resort, why not give it to the Department of Lands?
That does not arise on this amendment. I am dealing with amendment No. 6 which seeks to delete subsection (6) of section 480 as it now stands. All that that subsection says is what I am saying.
It would be silly of us to invite the Minister to abandon his power of distraint without offering some constructive suggestion or alternative methods to enable the Revenue Commissioners to collect the tax. Our suggestion is that, if the Revenue Commissioners are to be asked to operate our law without this power, there is an alternative method by which they can proceed.
That is a much bigger question. Deputy O'Higgins, in his amendment, is not getting at the power of distraint as such.
A third party's chattels on the land.
It could be the same party's chattels. It could be the same man. It could be the debtor's own chattels.
Without regard to whether this is or is not, I think that is the purpose of the amendment.
No.
The amendment may be wider than was intended but the issue raised by Deputy Byrne on the propriety of allowing the Revenue Commissioners to distrain the assets of a third party which happen to be the assets of a defaulting third party——
Deputy O'Higgins's amendment was quite clear. In effect, he is saying that the collector may not go back again to seize anybody's goods, even those of the original debtor.
That is clearly a mistake in drafting. All we want to cover is that the collector may not seize anybody else's goods.
Amendments Nos. 7 and 8 are more relevant to this other argument.
Then consider my argument as made on amendments Nos. 7 and 8.
Amendment, by leave, withdrawn.
I move amendment No. 7:
Before section 10 to insert a new section as follows:
"Section 481 of the Income Tax Act, 1967, is hereby amended by the deletion in line 33 of the words `or from the occupier of the property charged,'; the deletion in line 35 of the words `to whomsoever they may belong' and the insertion in line 35 in lieu of the words deleted the words `property of the person charged'."
I do not propose to repeat what I have already said. I beg the House to take now what I have already said as such.
This is a very desirable amendment for many reasons. It deals again with the right of distraint with more specific reference to Schedules A and B tax. This is one of those odd provisions of the 1918 British Act, re-enacted in Section 481, which originally was made applicable to Ireland only. The very severe powers held by the collector of taxes under this provision were not bestowed on collectors in equivalent posts in the United Kingdom. I think that is very significant. It brings us back to a certain approach in Ireland by British Governments to a situation which could be dealt with in a very different manner —perhaps a much more severe and harsh approach—in other parts of what was then the United Kingdom of Great Britain and Ireland.
This is a very objectionable provision in respect of tax under Schedules A and B, that is, profits arising from the ownership and the occupation of lands, enabling the collector to distrain the person charged or the occupier of the property charged and all goods and chattels to whomsoever they may belong may be distrained. This is most objectionable in this country in relation to Schedule B by reason of the system of eleven-month lettings under conacre which is widely operated here.
A lot of land is let on the conacre system. If I own the land and let it to Deputy Sweetman on the eleven-month system I am the legal occupier liable to Schedule B tax. The position could well be that Deputy Sweetman has paid me his rent and then finds himself in the position of having his cattle on the land seized by the collector for my tax. That is the position Deputy Dillon spoke about so eloquently. It is an outrageous situation. It is gravely unjust. It is one of these situations of inequity which so angers, enrages, upsets and annoys the public at large. There is nothing more to be said on the case. The machinery of the State and of the Revenue Commissioners can fully and effectively be operated without the continued existence of powers such as this.
Can the Minister say, for the information of the House, whether he has sought or has not sought the opinion of the Attorney General on whether this provision is consistent with the terms of the Constitution, particularly those parts of the Constitution that deal with the obligation of the Government and of this House to uphold the rights of private ownership? Has he obtained that opinion or not?
I have not sought it.
This may be set aside by some court and some individual, at his own expense, perhaps, will have to bring it right up to the Supreme Court in order to do something which we have the power to operate and to put right, if necessary. The Minister will remember that for some time last year we spent a considerable time discussing the question of the constitutionality or otherwise of a provision which was not far removed in principle from what we are discussing now. It is wrong for this House to pass this very particular power which Deputy Byrne said was——
We are not passing it; it has been there for 40 years.
It was passed before the Constitution. One of the obligations of this House, as far as I know, is to see that we do not pass or approve legislation which we know is inconsistent with the Constitution. If that section is inconsistent with the Constitution, it is null and void under the Constitution and therefore it is ridiculous for the Minister to say that we are not passing it. We are approving it if the Minister does not accept the amendment.
I want to say in regard to this whole matter again, that tax must be collected. Tax which one taxpayer succeeds in not paying simply falls to be collected from the general body of taxpayers. We must always keep that in mind. It is all very well for Deputies to fulminate about the outrageous powers in the hands of the Revenue Commissioners, but we, as responsible legislators, have always got to come back to the fact that people do not like paying taxes and unless the Revenue Commissioners have efficient methods of collecting, then the whole machinery of the State will grind to a halt. This is a question here of trying to maintain a balance between the rights of the individual on the one hand, and his obligations on the other.
I want to draw a distinction here. This right of the collector of taxes, or the Revenue Commissioners, to seize the goods of a third party applies only to the two particular property taxes, either Schedule A or Schedule B, and they are, if you like, directly applicable to the property of the individual. The Revenue Commissioners, presumably on that basis, have been given the right to go specifically against the property to collect the tax. This right to collect and to seize the goods of a third party does not apply in the case of other income tax, surtax, or what have you. We are only dealing with the goods and chattels of a third party in relation to Schedules A and B.
I suggest to the House that we might as well abandon these two taxes if you do not leave with the Revenue authorities this power, or seek to remove from the Revenue Commissioners the right to seize these goods. The Revenue have found invariably in regard to the other taxes in which they are confined to the individual's own goods that they get a return of nulla bona because the invariable answer which they get from the man is: “Oh, this land is let and these cattle do not belong to me”, or, if there is any other type of chattel involved, the answer is: “I only have that on loan; it belongs to a neighbour” and so on. Therefore, if this system is to work—and I must emphasise again that it applies only to taxes under Schedules A and B —we must leave this power with the Revenue Commissioners to seize any goods on the property because, as I say, the tax is leviable on the property and therefore any goods on the property should be seizable in satisfaction of the taxes. For instance, if you remove this power from the collector, what happens in the case of a man who has property here and lives abroad permanently and refuses to pay Schedules A or B taxes?
Mortgage the land.
Seize the property.
I am afraid that would just not work. It would place such a legal burden on the Revenue Commissioners if they had to go to the extent of getting judgments, registering mortgages and putting lands up for auction, that it would be getting them to do something which would not be physically possible.
How many cases would there be?
If they had not got the power? Deputy Dillon well knows the answer, that if we had not got the power at the moment, there would be far more cases. That is precisely the point. If people knew that the Revenue Commissioners had to go through the whole gamut of getting judgments and registering and selling the property and so on, then I do not think anybody would pay his Schedules A and B taxes. At least, if I were a professional man, I would certainly advise them not to.
The Minister is getting the institutional disease worse than any Minister for Finance I knew.
Commonly called occupational myopia and maybe it is, but I cannot see my way out of this problem. I just do not think it would work. The Revenue Commissioners could not carry out the administration of these two Schedules if they had to go to the length of registering judgments and mortgages on lands all over the country, particularly in most of rural Ireland. Whatever about the neighbours being prepared to buy a farm being put up by an ordinary creditor, they certainly are not going to buy it if the Revenue Commissioners are putting it up.
Could the Minister not compel the Revenue Commissioners to insert an advertisement in the local paper stating that this man's land was now in this position and that anyone putting cattle on it would do so at his own risk? In this way there would be some opportunity for the innocent bystander to be protected. The Minister's argument is that the Revenue Commissioners must be efficient but they must also be fair. The Minister also said that when somebody does not pay his tax, it must fall on the shoulders of the general body of taxpayers but that would be better than that it should be put on one particular individual.
But he owes it.
I am talking about where the third party is involved. I am not talking about the individual who owes the taxes; that is his look out. I am talking about where the third party's chattels are involved. This is what we are concerned about. It is better that it should go on the body of taxpayers than on one individual.
I submit it is a matter between the two individuals, the defaulting taxpayer and the person who has rented land and put goods on that property. I would not like the Deputy to think that this is purely a rural problem because it is an urban one as well. This applies to factories, houses and shops, and not just farms.
It may be that because I am a private individual, I think more of private individuals than the Revenue Commissioners. The burden should be put on the——
I would like the Deputy to rise if he is addressing the House; otherwise I do not know whether the Deputy is actually addressing the House or not.
Sorry, I stand corrected.
The Deputy is standing now, anyway.
It would be better if the Revenue Commissioners had imposed on them the obligation of bringing proceedings against individuals. I doubt if any great number is involved. I have not come across any professional people who would give advice which is contrary to ordinary commonsense.
Has the Deputy seriously thought about this? Does the Deputy seriously think that the Revenue Commissioners should put an advertisement in the newspapers stating: "We are going into Mr. John So-and-So's land on next Wednesday"? Apart from third parties at all, is that not giving Mr. John So-and-So every indication that he should get any property off his land forthwith so that it will not be seized?
The land is not much use if there are no crops or cattle on it. He will have to do something with it.
I should like to ask one question and make one observation with regard to what I would call the utterly exaggerated statement the Minister made a few moments ago to the effect that if this power is taken away from the Revenue Commissioners, they will not be able to recover taxes. I cannot imagine anything more exaggerated than that statement. In order to test the Minister's accuracy, I want to know if he can tell us, or if he will inquire from the Revenue Commissioners, how many times during the past three, four or five years has this power been resorted to.
That is precisely what I am saying.
Let me finish. If as I believe, he will not be able to give me one single case in the past five years, his statement that without this power the Revenue Commissioners will not be able to collect taxes is utter nonsense. I believe this power has scarcely been invoked. The Minister said that if they had not this power, the owner of the land could take the cattle or the goods off the land, and they could not be distrained. That is a position which habitually faces any county registrar trying to distrain goods.
It is a non sequitur to say that if a third party has an interest in the land, the Revenue Commissioners should have the right to seize property that does not belong to the person who owed the tax. That is the position which faces the sheriff or the county registrar acting as sheriff not every day but very frequently during the course of the year. There is a remedy. The Revenue Commissioners can enter plenary procedures. They can say: “We will interplea”, and that would “larn” him, as they say.
The Minister says that if the Revenue Commissioners are deprived of this power, they will not be able to collect. Of course they will be able to collect. I think my colleagues should realise that this privilege was given to the Revenue Commissioners by British Revenue years ago. It is based upon the old British legal theory that the Crown must be above all law, and must have privileges in the exaction of taxes which the ordinary collector has not. That runs through the whole law. It applies not merely to the Revenue Commissioners but to all Crown debts, as they used to be called. It was carried over into our Constitution. That is the privilege which is being given and there is no reason why it should extend to an interference with a third party's rights.
Deputy Dillon said that when we talk about bureaucracy and the powers of the Revenue Commissioners, we forget that it is this House that gave those powers. This is a matter we have to consider very carefully. I know that civil servants, including the Revenue Commissioners in particular, insist that they want every possible power. They say: "We will never exercise this power but we want it all the same." They want to grasp these powers.
As I say, this privilege has its roots in the old Crown privileges which were carried over into our Constitution. This is the privilege the Minister wants to keep here. There is no reason why the Revenue Commissioners should not be in the same position as an ordinary collector with exactly the same powers of collecting money as the ordinary collector would have. This is a device which has been resorted to frequently. When a person was threatened with an action for breach of promise, he shifted his cattle to another person's land, or he put someone else's cattle on his land and said they were not his. That is a device which is endemic in the country and it is not confined exclusively to moneys due to the Revenue Commissioners. We have the courts and there is ample power to collect the money and to prevent an injustice being done.
The only thing I can say about Deputy Costello's question is that I thought I had already replied to it—at least to Deputy Dillon. The very fact that the Revenue Commissioners have this power means that it does not have to be availed of. Therefore the figures which Deputy Costello asked for would mean nothing. We have to contemplate the situation which would arise if they did not have this power. I am quite satisfied that all Deputy Costello's suggestion would succeed in doing would be to clutter up the already over-burdened courts with a monumental amount of additional work.
Rubbish.
It is easy to say "rubbish".
It is a power they say they do not want to use. It is an in terrorem power.
I accept that. To suggest that the Revenue Commissioners should have to sue civilly for every item of taxation owing to them is, to my mind, to approach this whole matter from an absurd point of view. I do not think the Revenue Commissioners should be in the same position as an ordinary collector. The collection of the revenue of the land is different from any other process. As Deputy Dillon pointed out, an ordinary collector exercises a choice and vets the person to whom he affords credit. He takes a deliberate decision. That does not apply to the Revenue Commissioners. They have no knowledge of the people from whom they have to collect taxes. They administer taxation in an omnibus way. We could all be wonderfully liberal about this matter and drive a coach and four through the whole revenue code, but I should like to know where we would finish.
The Minister thinks the Revenue Commissioners should have more power than ordinary people. I listened in the Supreme Court to counsel on behalf of the Revenue Commissioners insisting that they were entitled to hang on to a sum of nearly £20,000 which they had obtained from a taxpayer and which they admitted in open court they had no right to get or to keep. The court asked them again and again: "Do you say the Revenue Commissioners cannot give it back, or will not give it back?" and the answer which was finally extracted was: "We will not." Eventually the Supreme Court said they must. With that attitude taken by the Revenue Commissioners in open court, we are bound to curtail as far as we possibly can these extraordinary powers given in legislation which was in operation before this State was founded.
I have so profound a reverence for the opinion of Deputy Costello on almost any topic that I find myself in some embarrassment at having to dissent from his view in any way. His vast legal experience usually in defending the rights of the individual against the machinery of the State, has naturally given his mind a certain bent.
As I said in the first instance, the Minister is suffering himself to acquire a Treasury squint too soon. I am bound to say quite frankly in Deputy Costello's presence that I do not agree that there is no difference between the position of the Revenue Commissioners and the ordinary trader. There is a fundamental difference. The ordinary trader makes a choice; the Revenue Commissioners do not. Deputy Costello has much longer experience of government than I have. I can only speak of my own experience. I have met some pretty tough Revenue Commissioners in my day. I found them to be stiff and unyielding in doing their duty as imposed upon them by us. I have never failed to advise persons in difficulty about their taxation problems, if they were in good faith, to tell them to the Revenue Commissioners, in the firm conviction that the Revenue Commissioners would not only give them what was their due but perhaps suggest additional advantages to which they were entitled and of which they had no knowledge.
I believe that if a taxpayer seeks to deceive the Revenue Commissioners, the Revenue Commissioners react against him by enforcing the full rigour of the law rather than its spirit. If I thought the Revenue Commissioners' general attitude was that described by Deputy Costello, I would not hesitate to join with him in speaking very trenchantly of it but I speak only of what I know from my own experience.
I want to suggest that something Deputy Costello said earlier is of coercive importance to the Members of this House. It is true we are not now dealing with the Income Tax (Consolidation) Act. Therefore, we are not making de novo these offensive provisions or taking them over in a codifying Act. What we are doing is looking at the Income Tax Act, 1966. We have already amended it in order to make it conform to the Constitution of 1937. We are now suggesting in the case of the Finance Bill, 1967, that further amendment is necessary if we are to give effect to the terms of the Constitution of 1937.
That duty devolves on us—not on the Revenue Commissioners but on us—so long as we leave in existence a certain power with our direction to the Revenue Commissioners in the last analysis to use that power. The Revenue Commissioners have to use it if they believe the circumstances conform to the situation for invoking the ultimate sanction for recovery. As Deputy Costello pointed out, and I think the House ought to consider it, suppose we deliberately adhere to the provision in the 1966 Income Tax (Consolidation) Act, which we know is unconstitutional, on the ground that it is expedient to retain the power, on the ground that it is really held in terrorem and on the ground that it has not been used, suppose we accept all the Minister says—which I do not—that a vast amount of litigation would arise if we required the Revenue Commissioners to use the ordinary processes of the law for the recovery of income tax debts under Schedules A and B—suppose all that were true and still it is also true that this provision is contrary to the Constitution, it is a dreadful injustice to individual citizens.
For instance, take a trustee of a minor's estate or somebody in such a position that he has an obligation on him to protect the assets in his care. He says: "You have seized the assets and chattels for which I am trustee in satisfaction of a debt you say is due by them." The Revenue Commissioners invoke that power and he says it is unconstitutional. The Revenue Commissioners say it has been fully argued here and we are satisfied it is, where-upon there devolves upon the trustee an obligation to vindicate his interest in the High Court. The Revenue Commissioners have a corresponding obligation, as a result of our legislation and as a result of the debate we have here today showing we are fully conscious of the problem, to fight the case in the High Court. If they are defeated, they have a clear obligation to go to the Supreme Court. The burden of the costs on the individual who finally gets his judgment in the Supreme Court may be in part met by the costs awarded against the Revenue Commissioners in their unsuccessful suit, but will almost certainly not be fully met. The Supreme Court will declare that our failure to act in regard to this amendment showed our indifference to the terms of the Constitution.
There is great power in Deputy Costello's proposition. He reminds us that the Constitution places on the Legislature an obligation to legislate in the spirit of the Constitution. Now, surely it is a reasonable proposition on the part of Deputy Costello to say to the Minister for Finance: "With all these questions present to your mind, do you think you have a duty, once your mind has been directed to this, to submit this whole business to the Attorney General and ask him `In your judgment, does this power which the Revenue Commissioners at present have conflict with the Constitution of 1937? If you certify to me that in your opinion it does not, then I accept the opinion of the law officers. Of course, that is subject to the overriding authority of the courts, but my duty as Minister for Finance is to come back to Dáil Éireann and to say that the best advice I can get from the law officers is that we are not legislating in violation of the Constitution'?"
Once the question is asked by Deputy Costello: "Have you sought the opinion of the law officers in this matter?" I think the Minister for Finance is put in a position in which I have not seen any of his predecessors put before. There is an obligation cast on him which I think he has an obligation to discharge. We want to know the reason why. In the codification Act, we found we had collided with the Constitution. We overcame that by a rather odd legislative device into which it is unnecessary to go today.
Here is another matter which I think is deserving of consideration in this context. Deputy Costello says: "You have to tell the House have you consulted the law officers. If you have, you are out of the picture. Now it is for the courts to take the matter over." Suppose the Minister came back to us and said: "I have consulted the Attorney General and he says it is unconstitutional," what would we all say? Would we say: "To hell with the Constitution. Let us go straight ahead until the Supreme Court declares the whole Finance Act to be invalid"? If that is so, why does not the Minister for Finance arm himself with the considered opinion of the Attorney General? Certainly, so far as I am concerned, if the Minister for Finance came back on Report Stage and said: "I am advised by the Attorney General that this is in accordance with the terms of the Constitution", I do not think he has any further duty on constitutional grounds but if the Minister for Finance says: "I have not asked the Attorney General and I will not ask the Attorney General, because I am not at all sure of the answer I would get", then I ask the Minister for Finance, is he acting in the spirit of the Constitution, are the Government acting in the spirit of the Constitution and, if they do not set that example, how do they expect anybody else in our society to act in the spirit of the Constitution or of the law itself?
I can only say in response to that very eloquent speech by Deputy Dillon that since I have come into this House or since I have been a Minister in this House, particularly as Minister for Justice, I have been listening to Fine Gael lawyers asking day in day out in this House: "Is the Minister satisfied that this is constitutional?" That is probably only equalled by the number of times Deputies on the other side of the House have got up to assure me that umpteen things that were in pieces of legislation here were certainly not in accordance with the Constitution and would undoubtedly be ruled unconstitutional the first time they came before the Supreme Court. So I am not the slightest bit impressed by all this constitional nonsense.
Did the Minister say "constitutional nonsense"?
Yes—from Fine Gael lawyers.
They have usually beaten you in the Supreme Court.
Not very often.
Always.
Fluoridation.
Remember back in 1933, 1934, 1935, 1963—the Government could not win a case.
I am talking about my time. The Deputy is going back a bit.
I have never been in a case when the present Government or their predecessors came into court to uphold the Constitution since it was passed in 1938.
I know it would suit Deputy Costello and the Fine Gael front bench admirably to have everything dragged through the courts and to have constitutional cases day in day out. I am concerned with the practical business of running the country, collecting revenue, paying the country's debts, and I have not a great deal of time for these fringe areas. I am quite satisfied that it is a perfectly reasonable proposition to say that where tax is owing on a piece of property, you can go in and seize in settlement of that tax and that debt for tax any goods or chattels on that property. I have not the slightest hesitation in my own mind that this is perfectly constitutional. If anybody ever decides otherwise in this country, the Supreme Court or any other body, I think they would be wrongly interpreting the Constitution.
Everyone is to be out of step but our Charlie.
It may come to that, but that is my simple, straightforward view and belief as a practical man concerned with practical administration and I have not the slightest doubt in my mind that this is a reasonable, practical proposal. Without it, I do not see how either of these two taxes can continue to be administered. If the House wants to say to me: "Let us abolish Schedule A and Schedule B and increase income tax by 3d or 6d, whatever it is, in the £", that is a separate proposition. As long as we keep these two taxes, we have to ensure that everybody pays them equally and the only way we can do that is to give the Revenue authorities some speedy, efficient way of collecting them, and I do not see anything seriously wrong— I do not see anything wrong at all— with the provisions as they stand at present.
Amendment put and declared lost.
Amendment No. 8, being cognate, is not moved.
Amendment No. 8 not moved.
I move amendment No. 9, in the name of Deputy T.F. O'Higgins:
Before section 10 to insert a new section as follows:
"Section 482 of the Income Tax Act, 1967, is hereby repealed."
I must confess that when the effect of section 482 as it reads was pointed out to me I was quite appalled and certainly it is not as any of us would wish it to be if it means what it says in ordinary language. This section is the re-enactment of section 163 of the Income Tax Act, 1918 and I think the same section, in the same wording, is contained in section 75 of the British Income Tax Act, 1952.
The ordinary meaning of this section is that if I am a creditor of any person and I am in possession of a decree, I cannot get the sheriff to execute my decree which is given in pursuance of a judgment in a court unless I am satisfied myself and can satisfy everybody else that the person against whom the decree is to be levied does not owe any income tax. That, of course, is nonsense and yet that is what the section means in its literal, parsing interpretation. It would mean, in effect, pushing it to its ultimate conclusion, as it is phrased, that before you put any decree in the hands of the sheriff, you would have to satisfy yourself that the debtor did not owe any income tax. You have no means to satisfy yourself that the debtor does not owe any income tax because, obviously, the Revenue Commissioners could not disclose whether a debtor did owe tax or not and it means, in effect, that this section, interpreted as it is drafted— and I accept that the drafting has been carried through—means that no decree can be enforced in any circumstances.
I draw the Minister's attention particularly to subsection (1):
No goods or chattels whatever, belonging to any person at the time any tax becomes in arrear, shall be liable to be taken by virtue of any execution or other process, warrant, or authority whatever, or by virtue of any assignment, on any account or pretence whatever, except at the suit of the landlord for rent, unless the person at whose suit the execution or seizure is made, or to whom the assignment was made, pays or causes to be paid to the Collector, before the sale or removal of the goods or chattels, all arrears of tax which are due at the time of seizure, or which are payable for the year in which the seizure is made.
It is not in respect of goods that had been taken in charge by the collector. but it is the ordinary goods that belong to the debtor, and if the debtor happens to owe any income tax, then any seizure in pursuance of a decree given by the court is negatived by this section and can be set aside. I could understand the situation if it were in relation to goods that had already been taken and charged under the power of distraint by the collector of taxes, but this does not concern those. It is a phrase that is completely at large, and when one comes back and looks at the note at the side of the section for the purpose of trying to understand it, one finds this reference: "Priority of tax over other debts". However, subsection (1) has nothing to do with any such priority. Subsection (2) might be properly annotated as being a case of priority. Subsection (3) appears to deal with the cases where the collector has to distrain for the tax due, and that subsection—whether one agrees with it is another thing—is understandable. But as far as subsection (1) is concerned, I simply cannot understand what it means. I admit at once that it has been there all through the years but the fact that it has been there all through the years does not make it any more right. When one reads it in its present form, it is quite clear that no decree in pursuance of a direction of the court is operative unless at the time of operation the debtor concerned owes no tax. No one can find out that and no one can know that except the Revenue themselves, and very often not even they, because the case might be under appeal.
The preference which exists for the Revenue in this case is analogous to the situation which obtains in regard to a company in liquidation or a bankruptcy. In both of these cases, the Revenue has a preferential right to one year's tax. That is all that is involved here. The mechanics of this might be a little difficult, as the wording might indicate, but all that is involved here is the Revenue's preferential right to one year's tax in the case of seizures or judgments against the taxpayer's property.
I am not going to argue with the Minister about the right of preference. That is a different matter. This does not give the right of preference; it nullifies decrees of the courts.
It is perfectly feasible for a creditor in these circumstances to ascertain what tax is outstanding.
How?
From the Revenue Commissioners.
No. The Revenue Commissioners are not empowered to tell anybody other than the taxpayer what is due.
In the case of any transfer of property, does the solicitor for the vendor not get a form signed——
Yes, but it it acting for his own taxpayer. That used to be section 6 of the Finance Act 1928. That is abolished now. One taxpayer, one charge, abolished that automatically. However, when that was done, it was the solicitor for the taxpayer who asked for the certificate. This is the other side, and the Revenue cannot answer it; if the Revenue did answer it, they would be leaving themselves wide open to an action.
I did not realise that the Deputy's point was the mechanics of the thing. I thought he was objecting to the preference.
No. I do not think subsection (1) does what the Minister wants to do. I think it blots out a wide number of cases. In fact, it negatives any decree in any case. However, I shall admit at once it is a bit revolutionary to suggest that such an interpretation of a section that goes back to 1918 is in fact wrong, but it is a matter which, having been ventilated here now, will have to be examined seriously by the draftsman between now and Report Stage.
I understood the purpose of the Fine Gael amendment was to object to the preference being given. As Deputy Sweetman indicates they are more concerned with the form of the machinery, I certainly shall look at that aspect of it.
May I interpolate this remark: when the Income Tax Bill was going through, I did venture to suggest to the Minister that the law was so complex that no living creature could understand it, and I think on that occasion the Minister indicated he was prepared to say he was aware of what it contained? This incident should illustrate very eloquently to his mind that, though he did believe all the legislation was present to his mind, the possibility to which I referred has now transpired.
I do not agree.
I do not blame the Minister for that in the least. The Act has become so vast that no one could know what is in it, and dilemmas of the kind we are now considering will inevitably arise.
I do not agree. I knew, and Deputy Sweetman knew, that the purpose of this section was to give the collector of taxes a prior right to one year's tax in a case where creditors move against a debtor, but Deputy Sweetman has now questioned the machinery whereby that can be achieved, which is a different matter. As I say, it is something that can be looked at.
As a matter of information, would the Minister say, if somebody owes a number of years' tax and the Revenue has prior right to one year's tax, which year do they take: is it the year that is outstanding longest, the most recent year, or an average?
That is spelled out in the section. They can elect as to which year they want.
They take the one that has the most tax due.
Acting Chairman
Does the Deputy propose to withdraw the amendment?
Yes, and I shall put it down again on Report Stage.
Amendment, by leave, withdrawn.
Progress reported; Committee to sit again.
Would the Minister like to indicate when he expects to take this Bill up again?
I am in the House's hands in that regard. I am quite agreeable about taking it tomorrow or leaving it until Tuesday. I was given to understand that tomorrow might suit the convenience of some Deputies.
Tomorrow would suit us, but we are quite agreeable to anything the Minister prefers.
I shall consult the Whips and let the House know.
We would like to know as soon as possible.
I will let the House know immediately.