Dáil Éireann debate -
Tuesday, 27 Feb 1968

Vol. 232 No. 12

Finance (Miscellaneous Provisions) Bill, 1967: Report and Final Stages.

Mr. Sweetman

I move amendment No. 1:

In page 3, after line 34, but in section 2, to insert:

"(4) Any such general delegation shall be laid on the Table of Dáil Éireann."

We had some discussion the other day in relation to the power of delegation contained for the Revenue Commissioners in section No.2. I am worried about that power of delegation for a variety of reasons, one being, as I see it, that a delegated officer may have the right to put a taxpayer to a great deal of difficulty and expense and virtual impossibility of completing returns in some cases under the provisions of section 4 of the Bill. It is rather funny that we should have, contemporaneously with that, an article in the Irish Times dealing with a little old lady called Miss Gaye. I do not know whether the Minister has yet made the acquaintance of Miss Gaye but anyway it is quite clear from this article written by two people—one of whom, I know, is a member of the Minister's profession: I am not quite certain whether both are—in which they are dealing with the effect of the word “neglect” in the Income Tax Act, that these two eminent gentlemen accept the case that was put from this side of the House on Committee Stage in relation to the word “neglect” in section 4.

It seems that the method by which certain matters are dealt with by section 4 can be dealt with not by the Revenue Commissioners themselves but, by virtue of the provision of section 2 of the Act, by a person of a very much lesser rank. Indeed, the Minister indicated the other day one of the reasons he wanted section 2 in its present form was to provide that it need not be a person at all to whom this power was delegated, that it could be a computer. If the Minister were still in private practice, he would know that many taxpayers have—perhaps in the teething troubles of the computer, I do not argue about that—as a result of the malpractices of the computer, received assessments in the last couple of years that are quite off beam and far more have received demands that are quite off beam.

Minister for Finance (Mr. Haughey)

I spoke to the computer about that actually.

Mr. Sweetman

I can see the computer pays as little attention to you as the people will pay on the referendum in the summer because I got a demand from a client done by a computer this morning which is all wrong. It is upside down, backwards and forwards, and completely removed from the facts of the case. I am not surprised that those things are happening because we all know that a machine is as good and no better than the man who operates it. If the operator on the machine is not able satisfactorily to operate it, then we get crazy results coming out. It is not the right way to go about the serious matter of exercising the discretionary power that is in certain circumstances vested in the Revenue Commissioners by having it so that the delegation can be in those general terms without any restriction of grading or otherwise.

I was more particularly anxious to raise on this the question of neglect, whilst accepting of course the corporate undertaking of the Minister that if it were found that the time limit section involved a genuine mistake, then new amending legislation would be introduced. I accept, of course, without question such undertaking, but it is also well known to the Minister that many people are not in a position to fight an assessment by an inspector of taxes and are not in a position to know to whom to go to deal with such a matter and in consequence mistaken interpretation of section 14 will certainly arise if there is intention of delegation under this section.

I admit frankly I am not interested in whether this tabling is a statutory tabling or a non-statutory presentation. I am perfectly happy to accept the Minister's assurance that any general delegation, as is provided under this section, will be laid before the Dáil without having it implicit in the section itself. The reason I do that particularly is that I am certain if it has to be laid before the Dáil, the fact of the Revenue Commissioners knowing that their Minister may have to stand over that delegation will have the certain effect of making sure that no delegation will be made to a lower official than is desirable. As I say, I am particularly interested in this because of the manner in which section 4 will be interpreted. I commend to the Minister the case of little Miss Gaye and the wrong done to her by a gentleman called Barney.

Minister for Finance (Mr. Haughey)

I really feel that this limitation which Deputy Sweetman is imposing is quite unnecessary. Indeed, it is inappropriate. The administrative functions of the Special Commissioners which are now being transferred to the Revenue Commissioners, include the making of Schedule C and Schedule D assessments to recover income tax deducted by bankers, paying agents and brokers on cashing dividends and interest warrants, coupons and so on. There is no provision in the law for the making of any other assessment to income tax by the Revenue Commissioners. Accordingly it applies over a very small and restricted area. I do not really think that these assessments would be regarded as of any significance at all.

I consider it would be imprudent of Deputy Sweetman to insist on this. I understand that practical administrative considerations will require that the delegation should be to named officers, not to all officers in the specified grade. I do not think it would be appropriate to have that type of delegation laid before the Dáil. Furthermore, I consider that we here as a parliament by statute delegate the whole care and management of the administration of revenue to the Revenue Commissioners. Surely then we can assume they will exercise the limited power of delegation which the section gives them in a very reasonable and responsible manner? So I think this would be an inappropriate mechanism and one that is not necessary.

Mr. Sweetman

Will the Minister promise to become acquainted with little Miss Gaye and Mr. Barney?

Mr. Haughey

I undertake to read it assiduously this evening.

Amendment by leave, withdrawn.

Mr. Haughey

I move amendment No. 2:

In page 7, to delete lines 42 to 49 and substitute as follows:

"9 — (1) In section 53 (1) of the Income Tax Act, 1967, the reference in paragraph (f) of Case III to income arising from possessions outside the State shall be deemed not to include a reference to any pension or similar benefit to which this section applies.

(2) This section applies to any pension or similar benefit which —

(a) is given in respect of past services in an office or employment or is payable under provisions of the law of the country in which it arises which correspond to provisions of the Old Age Pensions Acts, 1908 to 1967, the Widows' and Orphans' Pensions Acts, 1935 to 1967, or the Social Welfare Acts, 1952 to 1967, and

(b) if it were received by a person who, for the purposes of tax of the country in which it arises, is resident in that country and is not resident elsewhere, would not fall to be regarded as income for those purposes.

In this paragraph ‘tax' means, in relation to any country, a tax which is chargeable and payable under the law of that country and which corresponds to income tax in the State.

(3) This section shall have effect in relation to income tax for the year 1967-68 or for any subsequent year of assessment."

I mentioned this on Committee Stage. As Deputies know we decided in the first instance to exempt from Irish income tax certain specified foreign pensions, namely, pensions payable under the US Social Security Act and the US Railroad Retirement Act. Both of those types of pensions are free of income tax in the US but it has been put to us that there are other pensions arising in other countries which are free of income tax there, so we have now decided to enlarge the scope of section 9 and to say that the exemption from Irish income tax will extend to any pension which would have been free of income tax in the country in which it arises, if the recipient continued to reside in that country.

Mr. James Tully

Could the Minister extend that to the contributory old age pension here? Surely it seems a little odd that recipients of any social welfare benefits are exempt from tax here until they reach 70 years of age when they become liable for tax on their old age pension, unless it is a non-contributory old age pension? Maybe the Minister has not considered this question. If he has not, will he now have a look at it and see if there is something he can do about it? There are not many people involved but it seems a little out of the way that if somebody has a small income and can qualify for a contributory old age pension, both are combined and he is assessed for income tax purposes. In view of the fact that the Minister has been generous to those other people who receive pensions outside the State, perhaps he will now do something for those people who receive pensions inside the State. It does not apply to a great number of people.

Mr. Haughey

I will have a look at that in another context.

Amendment agreed to.

Mr. Haughey

I move amendment No. 3:

In page 8, after line 37, to add the following new subsection to section 12:

"(3) The stamp duties imposed by the Stamp Act, 1891, under the heading ‘Conveyance or Transfer on Sale of any property' in the First Schedule to that Act upon a marketable security not transferable by delivery shall not be chargeable in the case of a foreign loan security issued by or on behalf of a company or body of persons corporate or unincorporate formed or established in the State."

This is about the stamp duty. I think Deputy Sweetman owes me another glass of brandy. The purpose of this amendment is to meet a point raised by Deputy Sweetman on Committee Stage. This provision will ensure that foreign securities as defined in subsection (1) of section 12 will be transferable free of all stamp duty, whether the security is in bearer or registered form. The only stamp duty which will arise in the case of foreign loan securities will be a duty of 2/6d per cent payable on issue.

Mr. Sweetman

I am obliged to the Minister for this amendment, which meets the point raised by me on Committee Stage. The only thing I am sorry about is that I was not in a position to urge the amendment on the Minister at the substantial time a couple of years or so ago. It would have saved a great deal of trouble if it had been instead of trying other methods in an endeavour to meet the situation. I am obliged to the Minister for meeting me.

Amendment agreed to.

An Ceann Comhairle

Perhaps it would be possible to take amendments Nos. 4 and 5 together.

Mr. Sweetman

It would, as amendment No. 5 is an alternative to amendment No. 4. I move amendment No. 4:

In page 11, to delete lines 27 to 44 and to substitute:

"(1) Where, apart from this subsection the activities of dealing in or developing land, carried on by any person, would not be regarded as activities carried on in the course of a trade within Schedule D but would be so regarded if every disposal of an interest in land included amongst those activities was a disposal of the full interest therein, then notwithstanding any rule of law to the contrary, the activities carried on by such person shall be deemed to be wholly a trade within Schedule D or, as the case may be, part of such a trade and the profits and gains thereof, shall be charged to tax under Case I of Schedule D accordingly.

(2) Where, but for the fact that any land which is disposed of by any person for any interest therein in the course of activities in dealing in or developing land, carried on by him had been acquired by him otherwise than with the intention of being used for the purpose of the trade of dealing in or developing land, the activities carried on by such person would, or would be deemed by the preceding subsection to be regarded as activities carried on in the course of a trade, then notwithstanding any rule of law to the contrary the activities carried on by such person shall be deemed to be wholly a trade within Schedule D or, as the case may be, part of such a trade and the profits and gains thereof shall be charged to tax under Case I of Schedule D accordingly."

In the beginning, in circumstances of which the Minister is aware, this amendment was put down rather hurriedly and before it had received the polishing one would like to have done on it. That is not at all to say that it fails to get across the point involved. I say that so that the Minister may understand that I am standing on its effect rather than on the actual wording.

This all goes back to the discussion on Committee Stage, that it is undesirable to introduce the word "business" and that the use of the word "business" means that something the Minister quite honestly does not intend to cover will, in fact, be covered. One of the worst dangers involved in this is that we would have an interpretation of the word "business" such as that which was taken by Mr. Justice Rowlatt on tax cases, page 179, which the Minister can look at in due course, where he said that business was a very wide word, and it is a very wide extensive, elastic word with two distinct meanings.

It is extremely bad tax legislation to include something (a) that is too elastic in definition and (b) that has two distinct meanings so that it is not clear on the face of it that either meaning is the one restricted to this section or, indeed, both meanings but it goes wider than that.

The purpose of these amendments is to endeavour to meet what the Minister has in mind and to do so without introducing the word "business" at all. As will be seen, therefore, I have utilised the word "trade" with certain definitions of that word as it is here. I am not clear at all why the Minister stood the last day so very firmly on his opinion, though I did see towards the end of that discussion some shaking of his faith in the section as introduced by him.

Let us go back to a specific instance. The word "business", as I have said, has an extremely elastic meaning. If an owner of land is selling sites piece-meal to strangers at arms length I think he is engaged in the business of dealing in land or, perhaps, held to be so engaged. If he did not acquire the land for the purpose of dealing in it, then in the ordinary course he would not be held to be engaged in the trade of dealing in land. However, under section 17, as it is now, it is quite clear that we may have a decision that the business can be deemed wholly to be a trade. The effect of that is that unless amended it is undesirable to introduce the phrase "the business" at all and both of these amendments—amendment No. 5 being an alternative to the second subsection of amendment No. 4 — are phrased in an endeavour to get at what the Minister correctly wants, avoiding the danger, because of the unnecessary introduction of the word "business", of a situation in which something other than that anticipated, or other than that visualised, or other than that intended would be brought within the scope of the section.

Mr. Haughey

I have given a great deal of thought to this whole matter. We have sought anxiously for some other formula that might meet the requirements we have in mind. We have considered this question of the use of the word "business" and looked to see whether any other word could be substituted, but we have by the circumstances of the situation been inevitably driven back to the section as it stands.

I feel it meets the situation. I do not anticipate that it will give rise to any of the difficulties of interpretation which have been suggested. I became more and more convinced that it was the right way of tackling this problem when I studied the suggestions and solutions put forward in substitution for it particularly the most recent attempts and indeed previous attempts by Deputy Sweetman to avoid the use of the word "business" at all.

His amendment, I think, recognises the two hurdles about which we have been speaking but he tries to overcome these two hurdles in two separate provisions. It is quite clear that his draft of subsection (1) would cause a great deal of difficulty. In fact, I doubt if it would work at all. It is quite clear that the consequences of it would be that if a builder had one private transaction in a year, the whole profit of his normal house building and leasing operations would escape tax. The suggested subsection (2) incorporates the word "intention" which of course is the thing that has caused all the trouble.

The impossibility of proving intention or disproving it has started this whole process which has got us to this point in time. With all due deference I feel that Deputy Sweetman's two proposals would not work and that what we have put forward does meet the situation and will work. I do not think that the House need be unduly apprehensive about the use of the word "business". Taking the thing as a whole, it does meet the case. For an assessment to lie in the future, there will have to be a whole lot of things which I have mentioned before on Committee Stage. These will ensure that the type of case we are after — the man who is making profits out of dealing in and developing land as a business — will be caught and the other type of person who is just carrying out a capital type of transaction will not be caught.

Mr. Sweetman

I cannot put the case further. I think the Minister is wrong but there we are. I used my ingenuity to the best in an attempt to persuade him to the contrary.

Amendment, by leave, withdrawn.

Amendment No. 5 not moved.

Bill reported with amendments and received for Final Consideration.

Question proposed: "That the Bill do now pass".

Mr. Sweetman

On the Fifth Stage there is an old comment in relation to a certain type of legislation that would be applicable to the 1965 Act and could be said to be applicable also to this Bill. First comes the Act imposing the tax, next comes an Act to amend the Act imposing the tax, then comes an Act to explain the Act that amended the Act imposing the tax, and next comes an Act to remedy the defects in the Act explaining the Act that amended the Act and so ad infinitum. That is rather like what I am afraid we are going to have as a result of the method adopted in 1963 by the former Minister for Finance and in 1965 by the former Minister for Finance, but at least we have taken out some of that. The 1965 Act was rather like a ship built in a dockyard which put to sea on its first voyage before it was realised that the rudder had been forgotten. After every voyage some defect was revealed: it had to be caulked, then it had to be planked, then it had to get new rigging and then it had to careened, after all these expensive alterations the vessel had to be broken up and rebuilt. In fact, this Act went through as many transformations as a butterfly's egg goes through before is emerges as a butterfly. Part VII of the 1965 Act which we told the then Minister for Finance was rotten has been proved by the present Minister to be rotten. It had to be taken up and thrown away. In the words of the simile which I read the other day, it had to be broken up and rebuilt.

Question put and agreed to.

An Leas-Cheann Comhairle

This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.