I move that the Bill be now read a Second Time.
In accordance with the usual practice, I propose to give a brief review of the provisions of this Bill which are explained in the memorandum circulated with the Bill. The Bill contains measures for implementing the Financial Resolutions and Budget proposals as well as provisions on a number of other matters to which I shall draw attention.
Part I of the Bill deals with income tax.
Section I contains the customary charging clause for income tax and sur-tax. There is no change in the rates, but the slice of income chargeable to sur-tax at 6/- in the £ is reduced from £3,000 to £2,000 which means that the highest rate of 9/- will come into operation at £6,500 instead of £7,500. The purpose of this change is to recover some of the cost of raising the special sur-tax allowance for earned income made available by section 17.
Section 2 is designed to ensure that payments for the acquisition of industrial "know-how" will be allowed as deductions for tax purposes, thereby removing any doubts that may exist as to the position under the existing legislation. This is the first of a number of measures in the Bill which are intended to encourage industrial efficiency and assist the expansion of the industrial sector.
Section 3 deals with a new relief not referred to in my Budget speech. The purpose is to assist the implementation of industrial reorganisation schemes by removing an obstacle to them which exists at present. This section provides that, where a worker is paid a lump sum to compensate him for actual or potential loss of earnings owing to the reorganisation of his employer's business, the tax deducted under the PAYE system will, broadly speaking, be reduced to the total amount which would have been payable if the lump sum had been paid to him in three equal annual instalments. Under existing legislation, tax is payable on the full amount of the lump sum in the year in which it is received. The present position regarding the tax payable, therefore, on these payments makes employees reluctant to accept them in some cases.
Under the provisions of section 4, the rates of wear and tear allowance on certain plant and machinery are being rationalised. Only three rates of allowance will apply to such plant and machinery provided on or after 1st April this year. At present there are some 18 rates in operation and the reduction to three rates will simplify matters for all concerned. The consequential changes in respect of corporation profits tax are made by section 29 (1) of the Bill.
Section 5 provides for the termination with effect from 6th April, 1969 of assessments under Schedule A in respect of the ownership of property and under Schedule B in respect of the occupation of land. It will, however, be necessary to make detailed provision to remove completely the charge under these Schedules and I propose to introduce the necessary legislation in the autumn. In accordance with assurances which I gave during the Budget debate, the legislation will include specific provision to secure that farming profits, formerly chargeable under Schedule B, do not as a result become chargeable under Schedule D.
Section 6 obliges traders, professional people and anyone engaged in a profit-making activity to keep records to enable them to make true returns of income. I gave notice in last year's Budget speech of my intention to introduce this provision which accords with recommendations made by the Commission on Income Taxation and the National Industrial Economic Council.
Sections 7 to 11 contain measures which were not referred to in my Budget speech. Their broad effect is to enable the Revenue Commissioners, where an employer has made no remittance or an inadequate remittance under the PAYE regulations, to estimate the amount which they consider he should have remitted. The Commissioners' powers to require an employer to give particulars of wages paid have proved inadequate in practice. The additional powers now being provided are on the lines of those in force for turnover tax.
I announced in my Budget speech that I intended to grant a special increase of £100 in the personal allowance for a married man in the year in which he marries in order to help him meet the increased expenses he incurs in that year. Section 12 applies this increased allowance to men whose marriage takes place on or after 6th April, 1968.
Under section 13, which was not referred to in the Budget speech, banks and other financial institutions will not be required to make returns to the Inspector of Taxes of interest of £70 or less paid on deposits without deduction of tax. The present limit of £50 was fixd in 1965 when the first £50 of deposit interest was exempted from tax. The tax-exempt figure was raised to £70 in last year's Finance Act.
Section 14 widens the scope of the relief given in respect of expenditure by a trader on scientific research by removing the existing condition that the expenditure should be related to his trade. Section 29 (2) makes a consequential amendment in respect of corporation profits tax.
Sections 15 and 16 provide that in certain circumstances the Appeal Commissioners shall "determine" an appeal and thus secure to the taxpayer the right of rehearing before the Circuit Judge. My Budget speech did not refer to these provisions.
Section 17 increases from £1,250 to £2,000 the amount of the maximum earned income allowance for sur-tax purposes. This relief will, it is hoped, assist Irish enterprises in attracting and retaining persons of talent in the managerial and technological spheres. As I mentioned earlier, part of the cost of this relief will be met by bringing forward the stage at which the 9/- rate of sur-tax becomes payable.
Part II of the Bill relates to customs and excise. Sections 18 to 24 provide for the increases, announced in the Budget, in the customs and excise duties on beer, spirits, hydrocarbon oils, tobacco and wine.
Part III, which contains only one section, increases the existing reliefs from estate duty for widows and dependent children as well as the range of estates to which the reliefs will apply.
Part IV of the Bill is concerned with corporation profits tax. Section 26 relieves Irish investment trust companies from tax in respect of dividends paid to them out of profits which have borne British corporation tax. Its purpose is to encourage the development here of investment trust companies which will attract capital, both domestic and foreign. The relief will be available only to companies which meet certain specified conditions.
Section 27 raises to £4,000 the limit on the amount that may be allowed, in respect of the remuneration of a director of a director-controlled company, in computing the profits of the company for the purposes of corporation profits tax. The present limit of £2,500 was fixed in 1964.
Section 28 continues up to 31 December, 1970, the exemption from corporation profits tax enjoyed for many years by certain public utility companies, building societies and the Agricultural Credit Corporation.
I have already referred to section 29 which is related to the provisions of sections 4 and 14.
Part V relates to the notification required to be given to a supplier by a person registered for turnover tax in cases where tax is chargeable.
Part VI provides that the selective wholesale tax is payable in all cases where registration numbers are not quoted to suppliers.
Finally, I come to Part VII of the Bill which, though entitled "Miscellaneous", contains a number of important provisions. The purpose of section 32, which is a customary provision is two-fold. First, it adjusts the annuity fixed provisionally last year for a period of 30 years for the redemption of the debt incurred on the voted capital services in 1967-68 by relating the annuity to the actual instead of the estimated expenditure. In addition, it fixes provisionally a new annuity, also for 30 years, to redeem the estimated expenditure on the voted capital services in 1968-69.
Section 33 extends exports tax relief to profits from export sales of certain engineering services carried out in the State. This provision, which was not referred to in my Budget speech, will, it is hoped, encourage the establishment here of enterprises providing these services in connection with works executed abroad, thus enabling our engineers and draughtsmen to find suitable employment in Ireland.
Section 34 provides a measure of double taxation relief for companies which derive dividends or interest from the investment in subsidiaries in countries with which comprehensive double taxation agreements are not in force, of profits which have been relieved from tax under the exports tax relief provisions. It has been represented to me that the absence of double taxation agreements with a number of countries acts as a deterrent to foreign investment in industry here. This relief will go some way towards the removal of this obstacle pending the completion of double taxation agreements.
Section 35 is also designed to encourage foreign investment in export industries. It provides for "Shannon" or exports tax relief in respect of profits from sales between associated companies which otherwise manufacture solely for the export market. Some firms, particularly foreign ones, prefer for organisational reasons to establish subsidiary companies rather than branches and the effect of this relief is, as it were, to put transactions between such subsidiaries on the same footing for tax purposes as transfers of goods between branches.
Section 36 is consequential on the coming into operation of the Redundancy Payments Act. Its purpose is to exempt employees from tax on sums received by them under that Act and to provide relief to employers in respect of payments made under it. The Budget speech did not refer to these provisions.
Section 37 increases to 60 per cent the initial allowance for capital expenditure on new plant and machinery incurred in the period 1st April, 1968 to 31st March, 1971.
Under section 38, the existing initial allowance of 20 per cent for industrial buildings is continued for a further three years.
Section 39 abolishes the corporation duty which was imposed in 1885 for the purpose of compensating the Revenue for the non-liability to death duties of certain property of corporate and unincorporate bodies. The duty yields less than £1,000 a year.
As I announced in the Budget speech it is proposed to authorise trustee savings banks to introduce a new type of account, to be known as an "investment account", offering a higher rate of interest than that paid on ordinary deposits with these banks. Section 40 of the Bill enables me to determine from time to time the rate of interest on deposits in the new account.
Section 41 is designed to deal with a technical point arising out of the free radio and television licence schemes.
Sections 42 to 45, which are concerned with motor taxation, were not referred to in the Budget speech. Section 42 gives relief from the taxation payable by disabled persons on their vehicles. I am sure everyone will agree with the desirability of the concession. Section 43 is designed to remove difficulties which have arisen over the years in regard to the taxation of certain vehicles consisting of a combination of tractor and large trailer used in connection with such operations as land drainage, housing schemes and road construction. Depending on the design of the combination, the tax payable can vary from £31 10s. to £145. The lower rate will, normally, now apply to all these vehicles.
Section 44 abolishes concessionary rates of taxation for certain vehicles of which there are, in fact, no longer any models in operation. Section 45 confirms an Order made under the Imposition of Duties Act, 1957.
I appreciate that Deputies may wish to have further clarification of these provisions, many of which are, admittedly, of a rather technical nature and I shall be glad to deal at the Committee Stage with any points raised.