I suppose there is no point in appealing to the Minister again to look at the section with a view to trying to do something about people who are being very heavily overtaxed?
Committee on Finance. - Finance Bill, 1969: Committee Stage.
Question proposed: "That section 1 stand part of the Bill."
The Deputy has my sympathy on that matter.
I was once told that sympathy is one of those rare things that is not worth a damn to anybody.
I will look into it.
I hope the Minister will not forget the man who has to travel to work and the working wives. They are the people who are really badly hit.
Could the Minister say what it would cost to increase the allowance in respect of the lowest paid people who are caught at present?
It would be very dear. The Deputy means the limit of £6 10s per week.
Yes.
Very expensive.
We got a figure of £2,800,000 from the Taoiseach last year when the Minister was indisposed. That was for £10. That was for single people. The figure was not correct and I do not know where he got it. I think he just multiplied 280,000 single persons by £10 and trotted out that figure. It was not correct and the Minister knows that.
No——
The Minister knows from the figures he produced this year that it cannot be correct.
Question put and agreed to.
SECTION 2.
Amendment No. 1 and with No. 1 we might discuss amendments Nos. 2, 3, 4 and 5 which are related amendments.
I move amendment No. 1:
In page 5, subsection (2) (b), line 20, to delete "in relation to an individual".
I think it would be helpful to discuss amendments 1 to 5 together. These amendments are all designed to improve the wording of section 2. Although the section as originally drafted was quite in order, nevertheless we felt that if we made these small changes in the wording we might make the section much clearer to all concerned. Nothing significant is involved in any of these amendments but I might, perhaps, mention No. 5.
The purpose of amendment No. 5 is to correct something in the original section which might have led us into difficulties. As Deputies know, the section provides that a claim must be made and, of course, people cannot procure an exemption until they have made the claim and the claim has been successful. In the section as originally drafted, a person might, make a claim and be rejected. Ten years later he might produce something of value which would entitle him to an exemption and he would be able to claim all the way back to the time when he made the first claim even though it was rejected. If Deputies will look at the wording now they will see that it says: "... the individual concerned makes a claim under clause (I) or (II) of sub-section (2) (a) (ii) in respect of which the Revenue Commissioners make such a determination as is referred to in the said clause (I) or (II), as the case may be." This simply means that it will apply only from the time a person makes a successful claim.
If a person did not fill out the appropriate form last year and was being overtaxed, and this year he went to the Revenue Commissioners and gave the necessary information, would he be allowed for last year?
Is the Deputy talking about income tax in general?
Yes.
Oh yes.
This limits us to the year prior to the year of assessment?
This amendment?
Yes.
This amendment means that you can get an exemption in the year in which you make a successful claim and in the following years.
Does this mean that if a person has one successful book, for the rest of his life he gets off?
Yes, as regards his earnings from books.
Even if he writes rubbish?
Yes, I think this is the only way. We went into it very carefully and considered it very carefully.
He would probably make nothing on the rubbish anyway.
We decided that once a person establishes himself or herself as being in a certain category that is the end of it. The Revenue Commissioners cannot look at every new work.
I see the point, but if a person wrote a good book and then did not make a success of the next book and started writing pornography and making money at it, would it be tax free?
This section is not in any way concerned with pornography.
If a person writes one good book and then fails and drifts on to this market and makes money out of it, is that tax free? Is there no sanction?
If a person produces a work whether it is a sculpture, music or a book, whatever it is, which establishes him as a person to whom the section applies that is the end of the matter. The Revenue Commissioners will not take up his next work and look at it critically.
I want to ask something which arises on sub-section (3).
We will be coming to the section in a moment.
We are dealing with the amendments to the section. The Deputy may raise it later.
It relates to the Minister's amendment to the section.
Then it would arise on the amendment.
Most of the people who write books are commissioned in advance to do it and do not make a penny later. The publisher is taking a chance on them. The bulk of the money that the writer gets often comes 18 months or two years before the book gets into print, before, therefore, anyone is in a position to say whether it is a work of art or not, even if we assume that it is. This is just an accident about the way in which writers are paid but it is a fact.
There is no problem there.
I read it to mean they could not claim for years previous to the years in which they were entitled to make an appeal.
No. Once a man has written a book, if there is any prospect of getting his money for it he claims straight away.
But he may have got it 18 months before from the publisher.
You mean he is getting his money in advance?
Yes. This is the way people who write books are always paid. They get it in advance from the publisher and the book might not be available for assessment as a work of art until 12 or 18 months later.
We shall deal with that.
The Minister has very effectively dealt with it in the amendment. He has tied them down so that nothing can be done about it.
Any moneys advanced in respect of a work of art would be taken into consideration?
Normally this would not arise, because if the man is of such standing that a publisher will pay him in advance then he is covered. We have deliberately drafted the section in such a way that the Revenue Commissioners will deal only with marginal cases. Most people who are known to be not even established but who are known to be writers or artists of cultural or artistic merit will be admitted automatically. It is only in the case where there is some doubt, where the Revenue Commissioners are not familiar with a person's reputation they will ask for submission of the work, or they might just refer a question to one of the bodies they will be consulting.
Is there any right of appeal for somebody who is told he has not produced a work of art?
Yes, the normal right of appeal, but it can only be an appeal on a point of law.
To whom can the appeal be submitted in regard to the standard of the work?
The Appeals Commissioners.
They have already turned down.
No. The Appeals Commissioners are different people from the Revenue Commissioners. There is also the Circuit Court, the High Court and the Supreme Court.
They might not be good judges of art.
The Chief Justice is a distinguished connoisseur. Anyway the High Court or the Supreme Court would not be deciding on the artistic merit; they would be deciding only a point of law.
There could be something in the point Deputy Keating made, that if an advance was given 18 months before a book was published, it is possible that, when the book is published and the writer makes his application to the Revenue Commissioners, more than two years would have elapsed. It seems to be worth looking into between now and Report Stage.
I hope Report Stage will be immediately after this; between now and the Seanad perhaps?
Yes, between now and the Seanad.
As I say, if the writer is the sort of person that the publisher would pay in advance, then he is probably an established creative writer and there is no problem. Even in the unlikely situation where a publisher would make an advance to a person for his first book, what I visualise would happen is this: immediately after the writer has received the money or before then, he would make his claim to the Revenue Commissioners and that would bring him in. When the book would be published the Revenue Commissioners would decide on it.
Amendment agreed to.
I move amendment No. 2:
In page 5, subsection (2) (b), line 22, after "individual" to insert "concerned".
Amendment agreed to.
I move amendment No. 3:
In page 5, subsection (3) (a), line 34, to delete "the work" and to substitute "a work".
Amendment agreed to.
I move amendment No. 4:
In page 5, subsection (3) (a), line 36, to delete "subsection (2)" and to insert "clause (I) or (II) of subsection (2) (a) (ii)".
Amendment agreed to.
I move amendment No. 5:
In page 5, subsection (3), lines 41 to 44, to delete paragraph (b) and to substitute the following paragraph:
"(b) The exemption authorised by this section shall not apply for any year of assessment prior to the year of assessment in which the individual concerned makes a claim under clause (I) or (II) of subsection (2) (a) (ii) in respect of which the Revenue Commissioners make such a determination as is referred to in the said clause (I) or (II), as the case may be".
Amendment agreed to.
Section 2, as amended, put and agreed to.
NEW SECTION.
I move amendment No. 6:
Before section 3 to insert a new section as follows:—
"Fees or salaries paid to actors and actresses as income from theatre promotions and films (made for purposes other than advertising) shall be exempt from income tax (including sur-tax)".
Could I suggest that amendments Nos. 6 and 7 be discussed together?
Yes, if the House agrees, it is in order.
Perhaps, I can say just a few words in explanation of this amendment. First, I think it is proper to commend the Minister and the Minister's intention in section 2. I want to assure him that we are not endeavouring to create a breach in the Act or in the intention through which a larger number of people could be smuggled, but we are endeavouring to widen the category of people a little. I think it is beyond argument that the theatre is one of the great Irish arts. There are arts in which we are weak and arts in which we are strong, and in the theatre we are magnificently strong. I am sure it is a source of pride to everyone. There are very distinguished theatrical people all over the world who would like to work more in Ireland, who would like to spend more time in Ireland and who would like to contribute their great stature to the development of the Irish theatre, but there is at present a taxation barrier against their doing this.
I want to emphasise that we are not asking that every performer — and by performer I mean actor and musician —be included; I am not asking that all one would have to do would be to produce a union card to qualify. I am saying it is perfectly possible for the Minister's servants to develop a method of assessing performing artists similar to that proposed for writers or sculptors. I would make this distinction: the Minister has made allowance for writers, for those who write music and for those who paint pictures. All those arts are, in a sense, private arts. They are arts created with a piece of stone and a chisel and so on. All one needs is a sheet of paper and a pen or a brush, a canvas and what have you. Experience all over the world has shown that the arts which are in great danger are the social arts, and they are becoming more and more expensive. By social arts I mean the theatre, opera, ballet, and performances of orchestral works. A writer or painter out of the necessity of his own soul will always go on creating, whereas the social arts which depend on an audience are in danger of dying. The most awful thing that could happen in the artistic area is that the Irish theatre would die.
It is an unfortunate decision to distinguish between the creativity of someone who writes a novel and the creativity of an actor who creates a part. The well-being of the social arts is in greater danger than the well-being of what I am calling the private arts. If it is the Minister's intention to encourage the flourishing of the arts in Ireland — I take it that is his intention and a very laudable one — would it not be wise to make allowance for performers, in other words for re-creators, as well as for those who create in the first instance de novo? If it is so desirable, then surely the mechanism for assessing artistic merit can be used in the same way for performers as for original works? Surely we would be carrying out the Minister's intention by contributing in a monetary way to the end that I think all sides of the House will agree is desirable, the flourishing of the arts in Ireland?
I support the amendment moved by Deputy Keating. I should also like to congratulate the Minister on his Budget proposal. It can, I suppose, be accepted as an attempt by the Minister to deal with what he hopes will be the increasing leisure for the masses of the people so that living may become more culturally valuable, as it were, from the aesthetic point of view. There is a distinction drawn. Does the Minister believe, as we do, that an actor or an actress can be a creative artist in his or her own right? This is part of the dilemma with which he finds himself faced from the point of view of what is art and what is rubbish. However, that is another problem altogether. There can be two opinions about the Minister's attempt to define a creative artist as a sculptor, writer, painter and so on. We believe that the actor, actress, violinist, pianist, solo instrumentalist, can equally be described as an artist.
As young people, we knew theatre in Dublin; we had the Hilton EdwardsMacLiammoir group, the Longford Group, the Abbey, the Gaiety. We certainly had a wonderful selection of alternative high-level theatre. Most of our education in drama was got in these theatres and, in most cases, these theatres ran under great difficulties. Theatre is still a very important component of the education of young people in a developing society. We, in our time, had Ibsen, Moliére, Shaw, O'Casey, Chekov and other great world dramatists. These are denied the young people today largely because the theatre is being drained of talent. First of all, there is the cost of production and, secondly, there is the powerful magnet of London and New York. There are too, commercial television and commercial films. It is becoming more and more difficult for artist actors and actresses to contribute towards maintaining a living theatre here unless there is some financial help given to them.
Will the Minister tell us if he thinks help should be given towards the promotion of living theatre? Does he think that would be desirable? He probably does. Everybody knows that the annual theatre festival has become a sort of senile euphoria of the theatre in decay. There is a very short season and then the theatre disappears from Dublin and from Irish theatrical life. From that point of view, the creation of a proper social life cannot be fully developed. Promotions tend to fail because people have got out of the habit of going to the theatre as we did when we were young. A taste for the theatre is a progressive development. It is a very desirable one. I believe this proposal would help considerably in promoting good theatre.
There could be difficulties in drafting proposals to prevent, as Deputy Keating says, the person with the union card coming forward but I believe the Minister has courageously faced the dilemma in his own provisions. They will be difficult to administer but he has taken on the job and he will do what he can to resolve any difficulties that may arise. I do not think it would be any more difficult to find a formula through the medium of which he could assess bona fide actors and actresses or professional solo instrumentalists if he really wished to do so. The proposal seems to us a logical progression following on the Minister's own excellent proposals. I recommend the amendment to the Minister.
I support the amendment because I think there is some merit in it. I do not like the surtax bit because when one hears surtax mentioned one becomes suspicious.
Does the Minister agree?
I see some difficulty in the fact that young people today may not care for Shakespeare but they certainly like Irish singers. These are artists and we must face the fact that youth today supports them. Should we not consider including these people if the amendment is accepted, or should they be excluded? Who will decide who is and who is not an artist? Generally speaking, there is some merit in the proposal.
I find it difficult to understand, particularly in the light of the Minister's very progressive step, why those who follow the profession of acting are not included. My colleagues have mentioned that one of the difficulties which probably influenced the Minister in excluding actors and actresses was the fact that difficulty might be experienced in determining who was a legitimate actor or actress. I do not think that should present any difficulty, particularly from the point of view of union cards. As far as I am aware — I speak subject to correction —Irish Equity have a system whereby one does not acquire full membership unless one reaches a certain recognised status in one's profession. They are quite rigid in regard to full membership of their association. The Minister has very rightly seen fit to encourage the arts in Ireland, and as mentioned by Deputy Keating, one of our most flourishing arts and one of which we can be justifiably proud is our legitimate theatre and the standard it has maintained over a long number of years. Not only may we be proud of its contribution at home but also abroad, where our reputation in this sphere is internationally known and recognised.
The Minister will be aware that the acting profession, particularly for those who are not established, is a very hazardous profession and a very badly paid profession. Its members are not recognised or appreciated in monetary terms until they have spent a long and difficult apprenticeship. Anybody who is familiar with the theatre in Ireland knows of the tremendous dedication shown by young people who choose to go on the stage and that they certainly could not hope to make a fortune. There is in this city at the moment quite a number of young actors and actresses who are trying to survive and who find it very difficult to pay their way. Frequently they have to go without meals. When these people are working they are not paid large sums of money. Some people seem to be under the impression that anyone who goes on the stage can earn anything from £30 to £50 a week. This may be true in very exceptional circumstances but I doubt if 85 per cent of average artistes earn more than £10 a week on average. They would consider it in many cases a very fortunate year in which they averaged £10 a week.
The Minister is fully aware of the contributions these people are making to the arts and I do not think he would be inclined to exclude them from this practical recognition of their contribution to the arts. No one would dispute the fact that actors and actresses who properly interpret a character as created by the author are truly creative artistes. I do not think that the difficulty mentioned, trying to separate the bad from the good, the legitimate actor from the chancer, would justify the Minister in what, in fact, would mean penalising legitimate or creative artistes. I would ask him seriously to consider adopting this amendment in order to do justice to these people.
Our prime purpose in tabling these amendments was to draw attention to categories of people which we think should legitimately and consistently be able to benefit from the principles which are enshrined, and which we welcome, in this section. The suggestions we are making and which we hope will be considered by the Minister are suggestions for him to bear in mind, to try to fit into the framework of this Bill if he thinks there is merit in them. Our idea is that these provisions should also be governed by the general cannon of recognition of cultural merit which is in the Bill as it stands. If the Bill without any amendment were to be passed an injustice would exist because there would be created a gross distinction and discrimination between the writer and composer and performing artistes.
Everybody connected with the arts will agree that the great performer is himself a creative artiste and his work has artistic and cultural merit and there is no logical grounds on which he could be excluded from the benefit of the principles in this Bill. Most of us remember the work of the late F.J. McCormack. Everybody who saw him and who benefited from his work recognised in him a creative and original artist of a very high order indeed. It would be most artificial and regrettable if such a man, or a woman in the same category, should be excluded from the benefit of this notable measure. We would agree, of course, that there are difficulties in distinguishing between categories of people here, difficulties which would often be invidious, but these also exist in relation to writers and composers. We hope that the Minister will at least go some way to meeting this suggestion at this time and may possibly meet it more fully in future years.
I understand that certain proposals are before him from Equity on this matter and I hope that he will give due weight to Equity's representations. We are concerned here with creating an environment which will be congenial and sympathetic and good from the point of view of the artiste. We put it that this cannot be created by simply making a concession to one very small but important class, writers and composers. The Minister's objective cannot be attained unless artistes and theatres are considered and unless the performing artistes receive their appropriate recognition.
I find myself compelled, regretfully, to oppose this amendment. I have to do so for a number of reasons, reasons which are mainly practical considerations. I must make it absolutely clear that I have no prejudice against those who wear the buskin. Indeed, I am very happy to number many of our actors and musicians among my friends. I have an enormous admiration for the work they do and I have an enormous admiration for their courage in taking on a life in the theatre with all its hazards and ups and downs and its insecurity.
The fact that I am not including them or bringing them within the provisions of this section does not at all reflect my opinion of them or mean that they are any less worthy or make a lesser contribution to the qualities of living in Ireland than the people who are included. Many Deputies have already said that this is a difficult area, a difficult undertaking, to try to do something which, as far as I know, has not been attempted anywhere else. It is wise of us as legislators to proceed cautiously. The exemption as it is designed at the moment is a reasonably specific one. We have confined it to the situation where there is an end product, something is produced, whether it is a book, a painting, a piece of sculpture or a musical composition — a work that can be examined. Furthermore, Deputies may not have noticed, but this section is confined to people who are self-employed.
This section applies only to earnings from a person's own individual efforts. The section does not apply to any form of salary or wages. It applies only to an artist who produces something from which he earns profits or income. There is a clear distinction there between that sort of person and a person who certainly is an artist and certainly creative but who merely performs, merely interprets. Whatever difficulties the Revenue Commissioners might have in administering the section as it is framed, they would have enormous difficulties in trying to administer a section which purported to bring in performers who simply, as I say, interpret and do not by the nature of their work create an end product.
However, I would like Deputies not to be too perturbed about this because I think that we can deal with the situation in another way. I want to assure the House that I am now going to act very quickly to help the live theatre in Ireland. I know that I have promised to do this on a number of occasions and that there has been very great delay in giving effect to my promise, but I hope to do it now and to do it very quickly. I think that is the right way to approach this matter. What we have got to do is to try to make sure that our actors, actresses and musicians at least earn a livelihood first before we worry too much about whether they pay tax on what they earn. Indeed, if we were to extend this exemption benefit to actors and actresses, it would not be of any great importance to them. What they want, as far as I can gather from talking to them and their representatives, is support for the theatre so that there will be more theatre, more jobs, with better employment, and better security in employment for them. That is the way I intend to approach this matter. Maybe, later on, when we have experience of the working of this we can go a step further but, immediately, what we should do is move positively to give financial assistance to the live theatre. Of course, I include opera and ballet in that as well.
One Deputy made the point that great actors or actresses of world renown would come here and perform for us if this exemption were given to them. I do not think there is any validity in that, for two reasons: first of all, such persons would hardly come and reside here exclusively and this section is confined to persons who reside here and reside here only but, more important than that, no matter what tax exemption we would give an actor or actress, the rewards, the amount they would earn, the amount that could be paid in Ireland, would be so meagre compared with what they could earn in the capitals of the world that this mere exemption from income tax would not tempt them to come here.
I do want to make the point again that the Deputies would be pushing me over a very slippery precipice if they pressed me to accept this amendment. It is very difficult for me to see where we would stop. There would be all sorts of other people who would have a reasonable claim if we depart from the position which I have taken up, namely, that there must be a product as it were and the person must be self-employed. I want to maintain that position, for the moment at any rate, maybe for a year or two. As I say, I do not think we would be doing any serious injustice to our actors, actresses and musicians because I do not think this really is their problem at the moment, and, until we do bring about a situation here where there is plenty of theatre and plenty of good theatre and plenty of employment in the theatre for these artistes, I do not think we need worry unduly about exempting them from income tax.
I do not think I can put my case much more strongly than that. I do not want to rely too much on the argument that this is experimental and that we must wait and see how it works out, although that is a reasonable position for me to take up. I do not want to rely altogether on that. I want to make the point, as I have been endeavouring to do, that there is another and, perhaps, a better way of helping the theatre. Again, I want to assure the House that I will act now very quickly in that direction.
Can the Minister indicate at this stage what form he intends the assistance to be? Is it grants?
Yes — financial assistance — straightforward financial assistance. In fact, in my personal capacity, I received a circular recently from some people who are proposing to raise some money for a well-known company and I think I might relieve them of their anxiety, to begin with.
Is it not a fact that the Minister is stating that he agrees that these people should be included and that the whole thing hinges around the point that he finds it difficult to administer?
It would certainly be very difficult to administer but I am not even going that far. I am not sure if I will ever depart from the situation where the exemption will only apply to people who are relying on their own efforts to make a living out of art. In other words, I do not know that we will ever go as far as including people who are on salaries.
The Minister is aware that a number of productions are put on by what is known as "shares"— a co-operative sort of venture by the complete cast?
If they formed a little co-operative society they would perhaps be free of income tax.
No, it is a kind of share; it is a theatrical arrangement.
That would be different perhaps.
The tone of the Minister's reply was that he is sympathetic towards these people and would try to find some means of helping them or including them in this. There are proposals from Equity, I understand.
I am afraid I have no recollection of having seen them in connection with this.
I got a copy of a letter which was sent to the Minister.
In connection with this section?
Yes.
I am afraid I do not recollect seeing that letter.
It asked for a particular allowance per year for actors and actresses. I think the sum mentioned was £300.
That is different. There is no sort of insurmountable obstacle in something like that.
I do not want to be tied to the figure — I am just quoting from memory — but would the Minister be agreeable to some particular sum being tax free for these people that come into this category?
I am sure they would not have any great difficulty in establishing that they have certain necessary expenses which could be allowed tax free.
Neither would an author or an artist or a painter or a sculptor.
I had better wait until I see the letter.
We would like to welcome — I think I speak for all of us who tabled these amendments — two positive elements in what the Minister has said: his promise of a positive encouragement to the live theatre and his promise to reconsider these aspects when it comes to next year. In view of these positive plans we do not intend to press these amendments which we tabled in order to bring certain factors to his consideration but at the same time we suggest that there may be a danger of looking at these essentially artistic questions from an excessively administrative and even industrial point of view; for example, the Minister spoke of creating an end product and said that the work of an actor like F.J. McCormack does not create an end product. I suggest that it does create an end product. The end product of art is a human aesthetic experience and a great actor creates that in the theatre. I have no doubt about that at all.
We have some doubts in principle about the distinction made between artists who sell their work for a fee — artists who are self-employed — and those who earn salaries or wages and who are to be discriminated against for the moment at any rate. We do not think that the Civil Service should be encouraged to divide artists into art operatives of grade A or grade B. We do not believe that that is the spirit of the principle advanced by the Minister.
It is not quite as simple as that. An artist who goes out and becomes a full-time artist and who relies on his own efforts to make a living is in a very special category. In the case of an artist who is employed by somebody else I am not sure that it is not the responsibility of the employer to look after that artist fully and to give him a decent salary rather than for me to look after him. As Minister for Finance, I certainly should be sympathetic towards an artist who lives by his art and by his own efforts only and who has suffered the ups and downs of——
Outrageous Ministers.
——that type of life.
I do not wish to quarrel with the Minister on that point. The Minister has met us fairly enough for the moment but there are, in fact, categories of performing artistes who are so to a very great extent in practice even if not always so in theory and in general I would hope that we will have an opportunity of looking at this matter again in the future and that the Minister will think it over and see whether more cannot be done for this very important category of artistes without whom the kind of environment he wishes to have created cannot be created.
By the grace of God and with the kind permission of the Taoiseach I shall be bringing in at least five more Finance Acts.
In which year will the supplementary Budget be?
When will we have the mini-Budget?
The Minister, in his obvious sympathy with this problem, has expressed differences of approach. I should like to emphasise the many differences there are. It is the promotion of the living theatre which I am nearly more concerned with than I am with the actors. In so far as we are all subject to taxation, I have doubts about the merits of this whole process of exemption but it is a good approach. It is the preservation of the living theatre which I believe depends on a number of its components which are the management and the people who produce — people who, themselves, are brilliant, the Edwards and the Sean Kennys and people like that. There are so many components of the theatre that it is not just a question of the actors and the actresses. One must think of all the people who also make up the living theatre. Therefore, if these proposals were satisfactory we would achieve our objective but the Minister says that the promoters should be able to pay the actors. I agree completely but it would seem that the Minister will concentrate on the promotion and I do not mind if he feels that this is what he should do but promotion and management in Ireland are a terribly adventurous and financially risky and dangerous enterprise.
Would the Minister, in relation to the management, consider that this idea of tax remission might be an assistance not only to our own people here but also to theatre managers in Britain who might find that this could become a good outlet for trial runs for theatre productions later to go on in London or——
The idea I have in mind would cater for that also.
As I said before, the question in relation to artistes is extremely difficult but say, in rela tion to the Abbey — I know it would be invidious to choose one against another — where there are fulltime actors and actresses, would it not be quite a simple matter to tell these people in the first instance that they can have some kind of tax remission even up to a certain level?
It would be better to pay them more.
Amendment, by leave, withdrawn.
Amendment No. 7 not moved.
SECTION 3.
I move amendment No. 8:
In page 6, lines 23 to 33, to delete subsection (1) and to substitute the following subsection:
(1) Subject to the provisions of this section, an individual who, in the manner prescribed by the Income Tax Acts makes a claim in that behalf, makes a return in the prescribed form of his total income and proves—
(a) (i) that, throughout the year of assessment, he was totally incapacitated by physical or mental infirmity, or
(ii) that, being a married man, his wife was, throughout the year of assessment, totally incapacitated by physical or mental infirmity, and
(b) that for the year of assessment he has employed a person for the purpose of having the care of the person (being the individual or his wife) who is so incapacitated,
shall, in computing the amount of his taxable income, be entitled to have a deduction of £100 made from his assessable income.
Amendments Nos. 8 and 9 may be discussed together.
I just formally move my amendment because it really arises out of a point made by Deputy Cosgrave. By my doing this it will give Deputy Cosgrave a chance to make his point.
I am glad that the Minister has met my amendment, at least I assume he has from the terms of his amendment. I raised this matter on Second Stage and it is a matter that has been raised here on a number of previous Finance Bills. The Bill, as originally drafted this year, confined the relief to the case of a married man whose wife or himself was incapacitated. Certainly one case has come to my notice where the individual is not married — in some cases the person might be a widower or for that matter a woman who is obliged to employ assistance because of her incapacity.
In so far as I can see, this meets the case. These are cases of very considerable hardship because the people concerned are obliged to employ help in one form or another in so far as their domestic arrangements are concerned. This assistance would be partly in a nursing capacity and the Minister's amendment meets the terms of the amendment which I have tabled. It deals with the defects which I mentioned on Second Stage. I believe this will be a relief to a number of persons and as such I am glad it has been included.
The Minister has included an amendment for Deputy Cosgrave which improves the section. This is skating around the problem which has been mentioned in the House on numerous occasions. It is the question of a family in which a woman stays on in the house after her husband's death, housekeeping for members of the family. She becomes ill and some female member of the family, usually a daughter, has to look after her. A son is working in order to keep the family going. There is no allowance of any kind given to that son. In what way can this section be stretched to cover that situation?
Would the dependent relative allowance not apply?
The dependent relative provision is for the mother. What about the person nursing the mother? The social welfare authorities do not take this into consideration.
The Deputy knows that we made provision for that situation this year in the social welfare provisions.
In the old age pension end of it? That is relatively easy to deal with. I know of numerous cases of hardship. Perhaps, the situation does not obtain so much in the city as in country districts where one has an old person incapacitated who is not yet 70 years of age.
Are they covered by this section now?
This section deals with a person who is totally incapacitated.
In certain circumstances you are giving an allowance for somebody looking after a husband or a wife. I am talking about the position where the mother is incapacitated and a son is keeping house by working, and a daughter is looking after the mother. This is a situation which arises again and again. It is a serious case of hardship which occurs often throughout the country.
Give me particulars of the case. Give me one concrete case.
There are numerous cases. Take a mother who has a son and a daughter. The son is working with Meath County Council or is a farmer and he is keeping the house while his mother is housekeeping. The daughter is working away from home. The mother is not 70 years of age but she becomes ill and the daughter must come home to look after her. There is no tax allowance given for that daughter who is looking after an ailing parent and housekeeping at the same time. I am not asking the Minister to give an instant decision or solution to the question. I would ask him before this Bill goes to the Seanad if there is any way in which this amendment can be stretched so as to cover cases of this kind.
The Deputy is talking about a son paying his sister to look after their mother. He supports her.
Exactly.
This covers a case in which a woman is disabled and she has to employ someone.
When I saw the first draft amendment I had doubts myself. That point struck me. For the record, perhaps, I might say a word about this. I found recently that we do things here in this House and provide certain exemptions and new allowances and so on but often people do not know about them. It is well to make clear what we are doing here. The original section which I drafted applied to a married couple where either the husband or the wife was totally incapacitated, either physically or mentally. We provided this new allowance for a spouse who employed somebody to look after the incapacitated spouse, whether man or wife. Deputy Cosgrave drew my attention to the fact that we were overlooking similar types of cases where there was not a husband or wife involved, but only an individual who was totally incapacitated and that individual had somebody employed to look after him. This amendment brings in such an individual. The original section only applied to a husband or wife, either of whom was totally incapacitated. Now we are extending the allowance to a single or widowed individual only, either man or woman, who employs someone to look after him. That person will now get the allowance.
I can underline what the Minister has said. I was under the impression after the Bill had been circulated prior to the dissolution and during the election that this case was covered. It was only when a case was drawn to my attention that I discovered that such a case was not covered. Consequently, I introduced this amendment.
During the election campaign, I discovered that various people were asking me to do things and I had the great pleasure of telling them what they were already entitled to.
It is a good job you are not going back to meet those people now.
I will be out with them over the weekend. That is the secret of my success.
I should like to welcome the amendment. I am puzzled how the Minister drafted it in the other form.
I have not got the Deputy's omniscient view of things.
It does not require omniscience to understand that the same hardship can apply to unmarried and married persons. There are two points I should like to raise. The wording is still fairly tight in its application of the concession to those to whom it is now being extended. It requires that one be "totally incapacitated" and that that incapacity shall be operative throughout the year. These are very stringent conditions. What exactly is meant by "totally incapacitiv tated?" Is it a medical phrase or a financial phrase? Does it mean they cannot look after themselves? I take it it is not simply that a person is incapable of earning his living but that he cannot look after himself.
I would have thought that there is no clearer grouping of words in the English language than the two words "totally incapacitated". If it is not clear to Deputy FitzGerald what "totally incapacitated" means, then I cannot help him.
We were talking about the medical condition of a person.
The Deputy is talking about it.
I wanted to be quite sure that I am not assuming too much. Has it to be proved that the person is incapacitated to a degree which requires that he must be looked after? Could we not do without the word "totally"? If we said "incapacitated" would that not be sufficient for the Revenue Commissioners?
This is my Bill. This is not the Revenue Commissioners' Bill. I am Minister for Finance and this is my Bill.
There are times when the precise wording of the Bill by the draftsman is designed to cover contingencies more than the Minister wished to cover. I want to ask whether we could do without the word "totally". Should we apply reliefs in relation to the whole year and not to a part of it? Could we not provide this relief so that it would apply in respect of any part of a year in which a person is incapacitated? It would appear to me that if a person became incapacitated on 7th April as he had not been incapacitated throughout the whole year no benefit would accrue to him until the next financial year. This seems very harsh. Is there any reason why the relief should not apply for the remainder of that year or that the relief should not apply pro rata? Do we have to give £100 or nothing? Why do we have to be so rigid about it?
Under no circumstances do we split personal allowances.
Is there any reason why we should not?
Excellent reasons. PAYE and 101 good reasons.
Administrative reasons?
Yes.
Does the Minister not feel an exception should be made in this case? It does not seem to me to create any great problems in this instance.
We are simply making this new relief available to relieve hardship. We are being generous. It has never been done before. We are simply making it fall in line with all other tax reliefs of this sort which are given over the whole year. We do not split them up.
Would the Minister look into the question in the future to see whether the administrative problem of splitting them up in certain cases could be got over? In this particular instance it seems very harsh on somebody who for example — I gave a very good reason where somebody became incapacitated on the 7th April — gets no benefit from this until the next financial year. Does the Minister not agree that this is rather harsh and would he not agree that this is something he could look into to see whether in the reforming of the code he could reform it in that direction?
I would not be very hopeful. If you started splitting those reliefs, then you would in fact take them away from people who have them for the whole year at the moment. For instance, the marriage allowance is given for the whole financial year even though the person might get married during the year. I do not think people would appreciate Deputy FitzGerald's suggestion that it should be apportioned over the whole year as is done in Britain.
If the Minister is now telling us that it is not necessary to be as stringent, would he therefore consider an amendment that at any time during the year the allowance would apply to the whole year? Why would the Minister be generous in the case of married people and not in the case of incapacity? It is an interesting distinction.
Married persons get it for the whole year. They are now getting an extra £100, thanks again to my munificence.
If the Minister will allow it for the whole year in the case of the marriage allowance why not allow it in the case of incapacity? Obviously there are no great administrative problems. There are of course fewer cases of incapacity than of marriage.
This is a question of relief where the person is employed. One does not employ one's wife, one marries her.
One could do both. Is there any reason why the Minister could not extend it for the whole year?
Why should he?
I think I have met Deputy Cosgrave very fairly in this case.
Amendment agreed to.
Amendment No. 9 not moved.
Section 3, as amended, agreed to.
SECTION 4.
Question proposed: "That section 4 stand part of the Bill."
This section refers to unused machines. It includes registers. Is that not right? Does it include cash registers which can be converted for decimalisation? Those are unused machines and not secondhand ones. Quite a number of machines were sold since 1960 and they will now be resold as secondhand machines which could be changed over to decimalisation. There are quite a few machines, such as registers, going around at the moment which people are buying secondhand. When they were built originally they were built with an eye to the future and they could be changed over.
I think we are being very fair with regard to this. We are allowing relief for the purpose of conversion or adaptation of this machinery.
I agree. On page 7 we say:
"decimalised machinery or plant" means machinery or plant—
(a) which before the 6th day of April, 1971, is provided for use in any area other than an undeveloped area for the purposes of a trade or profession and which, at the time it is so provided, is unused and not secondhand,
A lot of those machines are reconditioned and all that has to be done with them in the change over to decimalisation is not very expensive.
Conversion will be allowed.
Even if it is a secondhand machine?
Yes.
Question put and agreed to.
SECTION 5.
I move amendment No. 10:
In page 8, lines 24 to 26, to delete paragraph (b) and to substitute the following paragraph:
"(b) any stocks or other securities to which section 474 applies and which are issued with either or both of the conditions specified in subsection (2) of that section."
This is merely a drafting amendment. It is just to correct a drafting error.
Amendment agreed to.
Section 5, as amended, agreed to.
Section 6 agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."
I might just say, not to hold up the House but to put it on the record so that people will know where they stand, that this section gives further relief in regard to health expenses. When we brought this relief in first, as Deputies will recall, it was simply to meet the case where a person had a serious illness during the income tax year. We confined it to the case where medical expenses were at least £50 or over for any one individual. Of course, that was a reasonable precaution to take when introducing something of that nature but it meant a man could have, say, £40 expenses in connection with three different members of his family and spend a total of £120 in medical expenses in any one year but get no allowance; whereas another family who had one individual member of his family with an illness which cost £60 would get an allowance. Now, we are going a step further and we are saying that, where a person has £50 expense or more in relation to one individual, or £100 for the family as a whole, the allowance can be granted.
I should like to welcome this very necessary and useful change, but I wonder whether the word "proves" in line 27 is not unduly strong? To have to prove something to the Revenue Commissioners is placing a very heavy burden on taxpayers. It is bad enough to show them something——
I am afraid if we did not put an obligation on people to prove things, we would not have much revenue left at the end of the year. We would find it very difficult to pay the Deputy's salary if we did not ask people to prove everything they said to the Revenue Commissioners.
I appreciate the Minister's dilemma but nonetheless I would have thought something short of legal proof was necessary in a case like this. Indeed. when we make our income tax returns and give whatever evidence we can and if it is given in good faith and considered adequate that is accepted.
Normally the Revenue Commissioners accept a claim. Words like this are only put in for reserve purposes; when the Commissioners suspect that some person is trying to get away with something, he has to prove it. Normally it does not apply.
All it says is:
Where an individual, having made a claim in that behalf ... proves that.
In other words, if he does not prove it he would not be legally entitled to get the benefit.
This is an allowance he has to claim.
It is one thing to allow the Revenue Commissioners to inquire into something but it is quite another thing to say that the person would not be legally entitled to get relief unless something is proved. The Minister must make that distinction.
The Deputy might consider going out to Cape Kennedy and giving them a hand out there. This is the phrasing used in relation to all such allowances. The individual taxpayer must prove something. There is nothing new, ominous, drastic or sinister about this.
Would the Minister say if proof was required in every case whether there would be more than 100 cases dealt with in the whole year? If every section here was debated in detail we would be here until Christmas. It is just the same.
Yes.
I am still not satisfied with what this section is saying.
The original section used the same word.
That probably explains why so few claims were allowed? Could the Minister explain how the Revenue Commissioners are going to ask for proof? If the proof is not furnished, will the relief not be given? Does the Minister not agree that the section goes too far?
It does not.
Subsection (c) of section 7 reads:
Where an individual, having made a claim in that behalf and having made a return in the prescribed form of his total income, proves that in the year of assessment he defrayed health expenses which were incurred for the provision of health care for qualified persons and which amount in the aggregate to more than £100, but excluding from the computation of that aggregate any such expenses in excess of £500 for any one qualified person, he shall be entitled, for the purpose of ascertaining the amount of the income on which he is to be charged to income tax, to have a deduction of the amount by which the aggregate of the health expenses so computed exceeds £100 made from his assessable income and such deduction shall be in substitution for and not in addition to a deduction under paragraph (a).
It is quite clear. On the face of it, this relief can apply only where he proves the claim not where he shows it is true. It would be quite different if the section said that on showing it he shall be allowed it but that the Revenue Commissioners shall be entitled to require proof.
Why did the Minister not leave it at the £50? Take a man who has a number of people dependent on him. A while ago, the Minister claimed the Bill was his. I think I see a more niggardly hand than that of the Minister in this section.
No. The history of this is simple. It arose out of a recommendation by the Income Tax Commission. They set out to deal with a case where a person had a serious illness and they had some other qualifications in it. We came along to deal with the situation. We wanted to exclude ordinary everyday medical expenses and to deal with a serious illness. We wanted to exclude the simple ordinary running medical expenses, as it were. The exemption was to be confined to a case where hardship arose to an individual taxpayer because he had a particularly serious and costly illness. We accepted the figure of £50 suggested by the Commission on Income Taxation. Considering the price of drugs these days, it does not take much of an illness to run up medical expenses. If any one individual in the family has an illness costing more than £50 in the year, he is in. Then we say that if the family as a unit has expenses of £100 or more for the family, they are in also.
The Minister is pretending not to see my point but he sees it all right. There is no reason why the Minister could not have left it at £50.
For the family?
Yes.
I could, but it would probably be very expensive. I would say that very few families today do not have £50 worth of medical expenses in any year.
The same applies both ways. An individual illness can very easily cost more than £50.
We are also raising the upper limit to £500.
This is so. I do not see any particular reason why it might not have been left where it was. However, having made my point, I shall leave it at that.
Question put and agreed to.
Sections 8 to 10, inclusive, agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill".
Deputy Cosgrave asked me to draw the Minister's attention to a point he raised on Second Stage on 15th instant. The reference is columns 1519-20 of the Official Report and he spoke as follows:
There is a similar difficulty in regard to section 11. My attention has been drawn to a case where a person is in receipt of a tax free allowance of £60 on his PAYE certificate in respect of his mother-in-law who has no income except a contributory widow's pension and whatever financial support she receives from her son-in-law. In the financial year 1968-69 the inspector of taxes advised that as an increase had been given with effect from January last and the mother-in-law's income had exceeded the limit of £140 per annum by £18, the allowance was consequently reduced by £18 at the rate of 7/- in the £ per year. In section 11 of the Bill it is proposed to raise the allowance from the sum of £140 to £196. Whether that increase will cover the case or not is not clear, but I mention it now so that the matter may be considered between now and Committee Stage. The present contributory widow's pension of £3 5s per week amounts to £169 in a full year, or a sum of £29 over the income limit. This reduces the tax allowance in this case to a mere £31. As a result of the increase of 10/- per week which will apply as from January next, this person will have an income of £195, or £55 over the limit——
No. The limit has gone up to £196 now.
Deputy Cosgrave made the point that the net tax allowance would be up £5.
That is precisely what the section does. It raises the limit to £196.
The Minister is aware of the point Deputy Cosgrave was making at that stage?
Yes.
Question put and agreed to.
Sections 12 and 13 agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill."
This section imposes additional taxation over and above the taxation hitherto payable in certain circumstances. I am wondering whether I am right in saying that, and, if it is so, if the Minister foreshadowed this in his Budget Statement and Financial Resolutions and, if not, if it is not normally the practice, where taxation is to be increased to give notice of it in that way?
A Financial Resolution has been passed by the House just now.
To cover this particular point?
Yes.
Question put and agreed to.
Section 15 agreed to.
SECTION 16.
Question proposed: "That section 16 stand part of the Bill."
Is it not the case that an assurance was given to a particular fibre company that legislation would be introduced to enable firms benefiting from export tax allowance to carry forward capital allowances?
We changed that. We decided to do this instead. It is much more favourable.
This is in substitution? This was not clear at all.
Where was it not clear?
It was not clear to me. Could I ask the Minister whether, in fact, when this was announced, it was made clear that this was in substitution for another concession and not in addition to it? I do not recall his announcement that he was withdrawing——
I may have omitted the Deputy, but I certainly drew it to the attenion of everybody concerned.
In this House?
And elsewhere.
But in this House, too?
I could not be sure.
That is what I thought.
Question put and agreed to.
Sections 17 to 21, inclusive, agreed to.
SECTION 22.
I move amendment No. 11:
In page 16, subsection (7) (b), line 20, to delete "receipt" and to substitute "respect".
This is a very simple amendment. The word "receipt" was wrongly included in the original Bill through a printing error. I want to substitute the word "respect".
Amendment agreed to.
Question proposed: "That section 22, as amended, stand part of the Bill."
On the section. Is there not in this instance an increase in taxation involved under this section and, again, has notice been given of this in the ordinary way? I understand that, under section 87 of the 1967 Act, which is being repealed, there was relief in respect of payments, in respect of an easement, if the recipient was, in fact, the sole occupier for Schedule A purposes. It appears here that any receipts in respect of any easement— this is in line 33 — are now taxable. Does this involve taxation of moneys which, up to this, have been relieved of tax, and, if so, was this indicated previously in the normal manner?
It was covered by Financial Resolution No. 8.
Question put and agreed to.
Sections 23 to 26, inclusive, agreed to.
SECTION 27.
I move amendment No. 12:
In page 20, paragraph (a), lines 2 and 3, to delete "definition of `long lease' " and to substitute "definitions of `long lease', `short lease' ".
Amendment agreed to.
Section 27, as amended, agreed to.
Section 28 and 29 agreed to.
SECTION 30.
Question proposed: "That section 30 stand part of the Bill".
Does this mean, now that Schedule A has been abolished, that rents on premises will be charged on the valuation? Throughout the country and particularly in Dublin, insurance companies will not insure a property, even with burglar alarms, unless somebody resides on the premises. The person may not like living there but the employer must get somebody to live there and very often a person gets a job because he is prepared to live on the premises although he might prefer to live in the suburbs. This type of person will be penalised.
I think the Deputy is concerned with the case of a person who gets apartments as part of his emoluments, is that so?
Yes.
The only change we are making in the law is that up to now the provision of those apartments was valued at the Schedule A valuation, but as there is now no Schedule A valuation, we are saying that they will be valued at the economic rent which is reasonable enough, I think.
It could be a lot more than Schedule A, in fact?
It could. We are only concerned here with the case where a managing director of a company is provided with a house. Up to now he added on the Schedule A valuation of the house for income tax purposes. Now he will add on the full economic value of the house.
Two things are happening here. When a grocery shop or a licensed premises is being built it must conform with other buildings beside it. Therefore, it must have two storeys. The person who owns it may try to get away without having an upstairs part because it does not pay him unless he wants to go into the flat business as a business——
I do not wish to interrupt the Deputy but this is not on this section. It is valid on the Bill as a whole but not on this section.
I am sorry. We are going so fast I thought it was this section.
This section is really concerned with a small technical point where a valuation is changed during the year. It is concerned with the deduction that may be made by the owner of a business premises against his business profits. The Deputy is speaking about section 31.
Question put and agreed to.
SECTION 31.
Question proposed: "That section 31 stand part of the Bill".
I understand that the Minister has got rid of most of the provisions of Schedule A tax.
All of them. I never do things by halves.
Sure, but there is one small point I want to bring to his attention. Section 544 of the Income Tax Act, 1967 deals with measures of relief for clergymen. I quote:
... and where any such clergyman or minister is in the occupation of a dwelling-house, but pays no rent therefor, he shall for the purpose of the foregoing provision be deemed to pay a rent equal to the annual value of the dwelling-house as assessed to tax under Schedule A.
That is, if he owned the house and paid no rent he got an allowance of one-eighth. With the abolition of Schedule A the clergyman's relief was not carried over by the special provisions and is completely done away with at page 53 of this in the Fifth Schedule. Is this not so?
Section 31 really means that for Schedule A we are substituting five-twelfths of the rateable valuation which brings about the same result.
Yes, but does page 53 of this Bill not completely do away with the words "and where such clergymen" to the end?
There is no Schedule A now.
Something else has been substituted which will bring in more money. There was great blow about Schedule A being abolished but something has been substituted which will probably bring in more money.
The clergyman paid tax under Schedule A and now he will not have to do so.
He will pay on the rateable valuation now?
He pays nothing now for the ownership, the assessment is gone.
But he was deemed, if he owned the house but paid no rent——
He paid a Schedule A assessment.
As I have said before, where a manager of a business or a person is asked to live in a house he now has to pay this, added to his income. Is this not correct? He does not want to stay but the insurance company insists.
Whether he wants to stay or not, he gets the value of the free accommodation which is just the same as if he got additional money and he should pay income tax on it.
But he might prefer to live somewhere else.
Well, it is up to the employer to pay him danger money or absence money or something.
Throughout this Bill I notice that such people as the Minister for Finance and the Commissioners of Valuation are referred to in capital letters but the inspector of taxes is, by a grammatical discourtesy, reduced to small letters. Is there any reason for this?
I am sure the inspectors of taxes will be delighted to hear there is somebody in this House standing up for them.
Question put and agreed to.
SECTION 32.
Question proposed: "That section 32 stand part of the Bill."
We have all been under a misapprehension. Section 32 is the one which deals with Deputy Belton's point. Section 31 is what I said it was, it just deals with the case of a man who is entitled to make a deduction for business premises. Up to now he made a deduction under Schedule A valuation. Now we are simply providing that he makes a deduction of five-twelfths of the rateable valuation which is the same thing.
In fact, it is the same thing but it is revalued?
It is simply a consequential provision.
Is this covered by Financial Resolution No. 8?
All the Schedule A and B provisions are covered in No. 8.
Question put and agreed to.
Section 33 agreed to.
SECTION 34.
Question proposed: "That section 34 stand part of the Bill."
Has the Minister any comment on the price of beer in view of the statement that was made by somebody, whose name I cannot remember, connected with MOVE where he suggested that we might be pricing ourselves out of the tourist market? I feel the Minister and his predecessors must take some responsibility for this.
About four or five years ago when Dr. Ryan was Minister for Finance it was suggested that taxation on spirits, beer and cigarettes had almost reached saturation point, but we still continue increasing the price of all these things. The Minister says this is to pay for social welfare benefits: we believe they could be paid for in other ways. I believe the Budget proposals have been a contributory factor to the big increase in the past 15 or 16 months. We have had three Budgets — April of last year, then in November and in April or May of this year — in about 13 months and in that period the price of these commodities has been increased considerably, not only by the manufacturers and others but by the Minister himself. It may be premature to talk now in relation to the next Budget whenever it may be but I think the Minister must admit that, as I have found in the past few months, visitors are complaining about the price of these commodities, non-essential as they may be. Up to recently the price had been a tourist attraction. This does not appear to be the case now.
When this Bill came first before the House I worked out a calculation but since I lost my notes I can only make a guess now. My recollection is that the price of the ordinary pint has gone up by 6d in the last three Budgets. My recollection may be wrong but this is a fabulous increase in a period of 12 months, especially when we see such continuous reference to buoyancy of revenue and large Exchequer receipts. My view may have been a little jaundiced recently but I think the taverns are not as full as they used to be some months ago. Summertime is by far the best time as everybody knows. This fine summer weather attracts people to the local public house, the golf club and so on but I think the increase in the price of beer— I do not know why beer should be selected for such savage treatment in this relatively short period——
We dealt far more harshly with brandy in the last two Budgets.
Brandy is non est. It is gone.
Gone where?
The Minister is about to make a very interesting interruption.
I am told that when we put on the first 6d on brandy the upward trend of consumption did not even flicker. It had no effect.
The Minister must have regard to the type of people who drink brandy and those who drink beer.
That is why we hit it so hard.
But we are talking about beer now.
The Deputy said he did not know why beer was selected for such savage treatment. I am only making the point that we did not deal with beer in any way harshly and that, in fact, we were lighter on beer than on anything else.
I am prepared to concede that the Minister's graph might be right but I am convinced that consumption of brandy has been and will be hit and will go down substantially in view of the way the price has increased. I see scarcely anybody drinking brandy.
Let them drink good Irish whiskey instead; it is good for them.
In spite of what the Minister has said the price of beer has gone up proportionately very nearly as much as the price of brandy. We all know why that type of taxation was brought in not so long ago on those foreign spirits. I do not understand why the Government have such an awful edge on beer. They began with Deputy MacEntee in 1942 when he increased the price of beer by 40 per cent——
We have a tremendous lot of business to get through between now and the recess.
But it is no harm to remind the Minister of the history of this matter. It may seem a long time ago to the Minister but to persons of my age it does not seem so long ago. The difference between 11d a pint in 1951 and 3s 3d, or whatever it is now, is a fantastic change in a commodity used by the ordinary worker.
In 1957 the duty content of the pint was 39.4 — practically 40 — per cent of the retail price. Today, the duty content accounts for 43 per cent. The change is comparatively negligible.
Does that include turnover tax?
No.
That puts up the price also.
Turnover tax applies to almost all consumer expenditure. The Deputy should not try to talk me down.
I am not, but the Minister should not mislead us. It is still a tax.
We are talking specifically about duty and the Deputy was trying to make the point that beer had been very unfavourably treated in regard to duty. I make the point that the duty content of the point today is practically the same as in 1957.
What Deputy Belton has said demonstrates that what the Minister has said is false.
The turnover tax goes on most consumer expenditure.
This is no answer.
I should like to support Deputy Corish on what he has said. When I met the Minister I mentioned to him that over the years the increase in the price of drink had reduced tourism. I also mentioned that in the big hotels that were being built we did not cater for the type of tourist we had prior to this. The increased price of drink prevented them coming— I referred to the workers, miners and so on from England. We can see the amount of money that comes in when the Welsh international rugby match is on. The price of drink has been going up all this time and is now reaching the English price and, as a result, I feel we have lost a lot of tourist business. I do not know if we have to get the Minister's approval to reduce the strength of drink but to my knowledge both beer and whiskey are different here. In the case of whiskey there is a bigger measure with the same strength and the beer is a stronger drink in this country than in England.
The specific gravity here is higher.
Who wants to come over here to get drunk?
Most of the English tourists do not understand this. Our beer is dearer because the specific gravity is higher.
From the tourist point of view we are losing business. As the Minister knows — I mentioned it before to him — people stayed in houses in previous times. Then we built hotels, stopping that type of business. The medium-sized hotels, apparently, are not there to cater for this type of tourist. Drink is the big thing because it is dear and as a result we have lost a tremendous amount of tourism. This year I think the loss has reached its peak.
Look at the lovely weather we are offering.
They are not drinking as much in spite of that.
Beer consumption is climbing steadily.
What about spirits?
I have not that figure.
Because that has gone down.
Is the Minister chancing his arm on the beer?
Question put and agreed to.
Section 35 agreed to.
SECTION 36.
Question proposed: "That section 36 stand part of the Bill."
There is no question about it that, regardless of what one's views may be on taxation from a social point of view, from an economic point of view almost the worst type of taxation is this continuous increase in the taxation on petrol.
The Deputy voted for it.
That is not an answer at all.
The Deputy cannot talk against it and vote for it.
I did not vote for it.
Half the Minister's people did that in the referendum.
Consistency may be the hobgoblin of small minds, but it is not a bad political virtue.
I can only speak for myself, and I am speaking for myself now. I did not vote for it. Let us leave it at that.
Whip.
I do not know where the Whip was. I did not see it and I did not feel it either. This comes in again and again into commodities, into any commodity you care to take. It comes into the wheat which leaves the farmer's field and goes to the miller and to the flour which goes from the miller to the baker. It comes in again and again.
This does not apply to farmers. I want to make this technical point because there is some confusion. This increase does not go on to the oil used in tractors by farmers. I want to make that point because it is not generally realised.
The Minister is only interrupting my argument. He is not making any effective point at all. That is the truth of the matter. If the Minister wants to make a little techfusion nical point that is all right with me. The fact is that this further increase in the price of petrol will affect our tourist industry most seriously. There is no doubt about it. In my opinion the price of petrol is just ludicrous. It is extraordinary that it should be so expensive in view of the fact that the yield is going up all the time. Of course, it is an old tradition in revenue departments that you get your money where you can get it easiest. That is a wellknown tradition. I suppose there is something to be said for it from the point of view of those who are trying to collect revenue.
The Minister and his advisers should think again about the way they are handling this. Whatever about stopping people drinking, you do not want to bring the economy to a halt altogether by putting up the price of petrol and so reducing the amount of activity in the economy.
There are two points I want to make. One is that it does not apply to farmers and the other is that it does not apply to public transport.
That does not answer my case at all.
The Deputy was making the case that this is very bad because it increases the cost of transport and thereby goes into the cost of most commodities. In reply, I want to make the simple point that this increase does not apply to public transport which is a very important proportion of the transport in this country. That is all.
This is the most damaging tax of the lot. It will affect us in a great many ways. Practically all the distribution of food is carried out by means of petrol and, therefore, no matter what the Minister may say, it will affect the cost of living generally.
We have now reached the unenviable stage of having the third highest petrol rate in Europe. That is pretty good going when you consider that a few years ago we were particularly low on the list and, as such, had a continuing tourist advantage. We have lost that now. This tax will affect the cost of living more than anything else. It is all very fine for the Minister to say it is not on public transport. Of course, it is not. If it were there would be uproar from the word "go".
This is one of those insidious hidden taxes which will do us more harm in the long run than anything else and, in my opinion, the Minister would be well advised to take it off because of the advantages to be gained. It has already been said, not only in the press and on the radio but in many statements made by people generally, that our tourism this year is not measuring up to the standard to which it was expected to measure up. I want to put it to the Minister: will he gain anything by this taxation? I say he will not. There will be further pressure for an increase in wages as a result of the general rise in the cost of living. There will also be a further disadvantage to our balance of payments because the concealed, shall we say, advantages which accrue from tourism and so on will not be available to the Minister.
This poses the question: where is it going to end? Will the Minister for Finance, whoever he may be — I assume it will be the present occupant of the office for the next four years anyway— come in here every year and put an increase on the price of petrol? If he does, as sure as I am standing here, it will affect us nationally and economically and the cost of living will go up steadily.
Question put and agreed to.
SECTION 37
Question proposed: "That section 37 stand part of the Bill."
Might I inquire from the Minister, in view of the phasing out of the advertisements on RTE two budgets hence, and in view of the major importance of this source of tax revenue, if he has made or intends to make any particular studies into the decline in the buoyancy of this yield or if, in fact, he anticipates major changes in that regard, in view of the anticipated decline in the consumption of tobacco which one would expect?
We have been studying that fairly carefully.
Question put and agreed to.
Sections 38 to 42, inclusive, agreed to.
SECTION 43
Question proposed: "That section 43 stand part of the Bill."
Would the Minister explain the section?
It increases from £50 to £200 the penalty for offences against the regulations governing the excise duty on table waters. We are tightening up the revenue safeguarding provision.
Question put and agreed to.
Section 44 agreed to.
SECTION 45.
I move amendment No. 13:
In page 30, lines 26 to 38, to delete subsection (5) and to substitute the following subsection:
(5) (a) Subsections (2) to (4) of this section shall have effect subject to the proviso that——
(i) in a case in which the amount of a benefit is not affected by a liability to estate duty arising in connection with the death of the deceased, no abatement shall be made under those subsections in respect of that benefit;
(ii) in a case in which the amount of a benefit is affected by such a liability and the extent to which it is so affected is of an amount which is less than such abatement under those subsections in respect of the benefit as would be appropriate apart from this subparagraph, the abatement under those subsections in respect of the benefit shall be reduced to that amount.
(b) This subsection shall not operate to reduce the amount by which the estate duty payable in respect of a widow's benefit is abated by reason of the fact that a child's benefit is either not affected by a claim for duty or is affected to an extent less than £500.
Put very simply, this is to improve the position of widows where estate duty is concerned. It is to make sure that they get the full benefit of the allowances which have been made available for them.
Amendment agreed to.
Question proposed: "That section 45, as amended, stand part of the Bill."
Is this the section which deals in its entirely with estate duty?
Not exactly. The Deputy may recall that recently we brought in a special provision to lighten the burden of estate duty on the widow and children of a deceased person. Briefly, the provision is that estate duty is abated by £1,000 for the widow and £500 for each child. It worked in such a way that in some cases the family did not get the full benefit of all the £500 allowances, as it were, and we are trying to provide that the family does; in other words, that none of these £500 allowances in respect of children, or any portion of them, is lost to the family, as it were. Would the Deputy agree with that?
Is the position at the moment in relation to estate duty that, where there are no specific allowances, estate duty operates at the £5,000 level? There is no duty on an estate up to £5,000? That has been increased by certain allowances?
In effect, yes. A widow with children does not pay estate duty until a much higher level than that.
The Minister has not taken into consideration the amendment I have put down without success in the last two years. My suggestion was that, whatever the estate might be, deductions would be made at the £5,000 level.
I have not done that and the Deputy knows well why.
I have not put it down this year because I do not want to keep the House unduly in this hot weather. On the last occasion I even got the Minister to go as far as saying he would think about it for the future. Has the Minister done this and, if not, would he think about it for next year, or explain to the House if there is any reason why this could not be made operative?
The principal reason is money. It would cost a great deal of money to do it. Secondly, I do not see why, in the case of a man leaving an estate of £1 million, you should take £5,000 off and exempt it from duty.
I am not considering such a case. How many people in this country have £1 million? I am considering people with smaller estates, estates of maybe £10,000 or £15,000. It does not take a tremendous amount to run up an estate to £15,000 today.
We are going the right way about it by giving allowances to widows and children.
We are giving the Minister every credit but there is a certain amount of injustice in the fact that if a person has an estate of £6,000 it does not mean he is a well-off person. It is not equitable that a person with an estate of £6,000 should be asked to pay on £6,000. Why should he not pay only on £1,000? I am not asking the Minister to deal with millionaires; I am not even asking the Minister to deal with estates of £100,000. I can assure my socialistic friends on my right I am not thinking on these lines at all. I am prepared to accept the limitation of £20,000.
I cannot do it now. My Budget is balanced.
All I would ask the Minister to do is to look to the future.
I shall look into it for next year.
I know the urgency with which the House is dealing with this Bill and I do not want to detain the House. The Minister, I am sure, appreciates the point made by Deputy Sir Anthony Esmonde, that at the present time a relatively small house can be valued at more than £5,000. I know of a number of cases where a widow was left with a nice little house and practically no income at all. In one case the person was forced to sell the house for the purpose of paying money to the Revenue Commissioners. I do not think that should happen.
That cannot happen now where there is a widow.
Let me prove how much of a conservative socialist I am or a socialist conservative or whatever I am supposed to be, by asking the Minister where he got this figure of £100,000. I do not see why it should not be £50,000, which is a sizeable sum of money.
Would the Deputy be surprised to know there are a number of members of the Workers' Union of Ireland who leave estates of £50,000?
I should be very surprised and I would not believe it for a moment.
Airline pilots.
They are very good negotiators.
A simple case is an airline pilot.
That is an insurance policy mainly.
No, superannuation.
He must have been a very economical individual or else a successful speculator.
The Deputy does not understand anything about him.
I understand that £100,000 is still a very sizeable estate. How did the Minister fix £100,000? Why did he not take £50,000? It ties in with the point that Deputy Sir Anthony Esmonde was making. He was trying to get the Minister to push it up a little bit at the very low level of £5,000, and here am I saying that the higher level should be brought down.
I shall tell this academic Deputy the reason. It would be a great thing if the Deputy would come out of his academy into the real world. As soon as I would fix the level at £50,000, I would have arriving into my office immediately the widow of a man who was prudent enough to leave a good insurance policy, have a reasonable house and have very good superannuation, and the estate would come to £51,000. That is the simple, practical reason.
And the Minister would weep bitter tears over that.
I would.
Over an estate of £51,000, and he is not moved at all by the case made by Deputy Sir Anthony Esmonde in respect of a widow who was left a house valued at £5,000.
The point is that that unfortunate widow might not have a shilling in cash.
This is an old problem. Some years ago a well-off merchant in this city complained to me about the position in relation to estate duty, that it was a very serious problem for a man who had a fair-sized business to get the cash for the duty on the estate.
The Deputy should consult some of his practical colleagues before he makes any more of an ass of himself on this issue.
I am not going to be one bit irritated by the Minister. What we have in mind are relatively small sums compared with the figure proposed by the Minister, but he says: "It is in the Bill. Let it stay in the Bill." There is no logic in this or in the attitude towards Deputy Sir Anthony Esmonde's point.
I would support Deputy Esmonde's point. In this era of galloping inflation £5,000 is a very low level for exemption from estate duty. I would appeal to the Minister to make it £20,000.
I have already promised the Deputy's colleague I will consider it for next year. I cannot do it this year.
Surely the concessions given up to now have been eroded by inflation in the last couple of years?
No.
A house which cost £1,700 to £2,000 in 1961 is sold today for £4,500.
That is part of the problem, but the real problem is the modern superannuation schemes and the necessity to capitalise the value of annuities. That is what is shoving up the value of estates.
I agree, but the house and everything one buys is valued and it is that that is pushing it away up. This extra £500 is nothing. This came in last year.
Oh, no.
Of course, it did. This is not a concession at all. The Minister is merely trying to keep up to date and he is not succeeding.
There was no concession before, none at all.
Subsection (8) applies to deaths occurring on and after 1st March, 1968. Why not 1967 or 1966?
We must start somewhere.
Would it cost much to start earlier, even a year earlier?
I could not say, really, but any hardship cases about which I know will be covered.
That is the point I am trying to make.
I have had a number of hardship cases brought to my attention pace Deputy Dr. O'Donovan and I am trying to cover them.
It is only slightly more than a year after and I can foresee marginal cases in which hardship could be caused.
I am almost certain that, if there were such cases, I should have heard about them. I am covering any cases I know of.
There is no reason at all why any date should be put in. The Minister could simply leave it wide open. Why not do so when it is a question of winding up estates? The difference in revenue would be negligible. The Minister says he has to start somewhere; he does not have to start somewhere. He is just chancing his arm and throwing out words at us.
If I did not put in a date I might have to go back very far.
No, because estates are wound up. They come to an end.
It would result in a ridiculous situation. If I did not put in a date people could come along with an estate that was wound up years ago and claim a rebate of duty.
It is only the Revenue Commissioners who can do that kind of thing.
The Minister could start at five years ago.
I have gone as far as is reasonable. This concession was not there five years ago. It only came in in 1965.
Why not stick to 1965?
Would it be possible to consider some differential duty-wise on the capitalised portion of the estate as distinct from assets like houses and so on? That would encourage people and give an impetus to pension schemes. By and large, this relief is welcomed generally.
I would be prepared to consider that, but this is a very tricky area and there are shrewd gentlemen waiting to avail of any little loophole in estate duty legislation. That is something we have to consider very carefully. We would have to consider whether we could make any concession with regard to the capitalised value of superannuation annuities and whether we could do something for the genuine cases, something which would not be availed of by the shrewd operators.
What is usually capitalised?
It depends on the widow, her age and so on.
I want to raise a matter that I have raised on an earlier occasion. It is quite possible for people nowadays, people who are not well-off, who wish to provide protection for their families through the medium of insurance policies, to end up with an estate the nominal value of which can be very large from the point of view of estate duty. As I said, I raised this matter before, but nothing has been done about it. My knowledge of the problem arises from my own personal experience. I pay an insurance premium of £100 in respect of a particular policy. It is not a very large sum. There are many people with policies of this kind. The real benefit accrues only if I have the good fortune to die before a certain age. If I die before reaching that particular age the value of the policy for estate duty purposes will be £45,000. This is arrived at by the rather odd method of adding up all the annual payments and treating them as a capital sum. This involves an inequity. As a matter of fact, I discovered that my wife would have to find a sum of £15,000 estate duty because, by virtue of my paying £100 a year premium, I put myself into the second or third highest estate duty bracket. The thing is absurd. A widow would have no hope of finding £15,000 and she could not benefit from the policy unless she agreed to commute part of it and that would reduce her annual income to £600. In fact, the insurance policy is not a true insurance policy at all. There is a hidden element which reduces its value. I think the Minister has some responsibility to see that estate duty does not apply in these cases.
I must apologise. I have not had time to go into it, but I will. In the meantime, I suggest the Deputy consult a good firm of accountants before he takes out another policy.
Why not a firm of brokers?
It is a good point and I shall certainly do so in future. The Minister will, no doubt, be able to recommend firms to me. I am glad the Minister will look into this. It is several years now since I raised the matter. Some solution should be found by providing there will not be any tax levied on the premiums payable.
We will have to keep the Deputy alive. That is the simplest solution.
For the time being, I should like the Minister to do that, until this matter is settled.
I know of cases of the kind referred to by Deputy FitzGerald. There is a serious hardship. It is up to the Minister and his advisers to examine the matter. I have had practical experience of this.
Question put and agreed to.
Section 46 agreed to.
SECTION 47.
I move amendment No. 14:
To add to the section a new subsection as follows:—
"( ) Where any person, not later than the 31st August, 1969 satisfies the Revenue Commissioners that he had completed prior to the 8th May, 1969 a contract for the purchase of any land, the instrument giving effect to that contract whenever presented for stamping, shall be liable for duty at the rate in force prior to the 31st July, 1969 and not at the rate provided by subsection (1) (a) (iii) hereof".
The point here is fairly clear. The Bill is very stringent in the way it applies this new provision and it seems reasonable to provide that the duties should be payable only in the circumstances set out in the amendment. Where it can be shown to the satisfaction of the Revenue Commissioners — a process not itself easy — that the contracts had been completed prior to the 8th May they should in those circumstances be exempt. The Minister might reasonably give consideration to this. There has been considerable concern over this matter which has been raised by many people since the Bill was introduced and it is something that should be considered.
I think we have gone far enough in the Bill. I must confess when I first saw this section drafted I got a bit of a shock because my original idea was to make this provision operative from the day of the Budget. However, wiser counsels, perhaps, prevailed and it was pointed out to me by my advisers that it would be unfair to make it apply immediately after the Budget because there would be transactions in the pipeline which would be unfairly caught. I decided then to postpone it to the 1st August and to give everyone who had transactions in the pipeline time to finish them up and get them through. I would not be prepared to go further than that. Everybody was put on notice in the Budget very fairly that this was on the way and there would be plenty of time for those who had projects in train to get them finished before 1st August.
The Minister will probably know that good firms of accountants and solicitors have experienced difficulty in carrying this through by 1st August. Considerable problems are being created, great pressures are being put on at the moment and undue haste is being required in the execution of a number of these documents and this may cause difficulty later. In light of the number of complaints it is clear that the Minister's expectation that the execution of those documents could be carried out within a period of ten weeks was over optimistic and he should be prepared to alleviate the position.
I have had no particular representations.
The Minister must be fortunate because I and my colleagues have had.
It is widely known that I am a receptive and sympathetic individual.
That is exactly why the amendment was put down. I am sure Deputy Sweetman tabled the amendment because he knew this.
I cannot agree to it. It would leave too many loopholes.
Would the Minister not accept that there could be some loopholes in the transfer of property and land which it would be technically impossible to get over before the specified time?
We gave fair notice. From May to August was reasonable.
The Land Registry is cluttered up——
These are large transactions we are talking about. We are not talking about poor people.
In cases where estates——
This has nothing to do with estates.
In cases where the transfer of land is involved, where probate has not been granted due to some hold up——
That transfer would not attract stamp duty.
Amendment, by leave, withdrawn.
Section 47 agreed to.
Section 48 agreed to.
SECTION 49.
I move amendment No. 15:
In subsection (1), line 17, after "thereof" to insert the following: "or to the transfer of a house erected under the Labourers Acts and which is still subject at the date of such transfer to the restrictions contained in the Labourers Act, 1936 as amended under section 98 of the Housing Act, 1966".
I cannot accept this amendment.
We can discuss it on Report Stage.
Amendment, by leave, withdrawn.
Question proposed: "That section 49 stand part of the Bill."
There is a problem here which perhaps the Minister has not considered, although I hesitate to suggest that. A situation can arise that a house fails to qualify for a grant because there is some defect in it. In such a case it seems hard that the owner who has already suffered from having bought a defective house, and thereby is at a disadvantage, should be doubly penalised by losing the estate duty exemption for reasons outside his control. The Minister's intention is clear: that this exemption should apply to the smaller type of house only rather than to large and luxurious buildings. In seeking to achieve that perhaps the Minister has overlooked the particular case I have mentioned. It should be possible to devise an amendment to deal with such cases and I am prepared to help the Minister in that regard.
I do not think so. This is a very good way of defining the type of house that should attract the concession. It might not be good social policy to encourage the building of this other type of house. The grant is confined to certain houses for good social reasons and we are following them here.
I am completely with the Minister there. This is a very good way to devise the section, but perhaps the Minister has not allowed sufficiently for the fact that there are two reasons why a house does not qualify for a grant. One is that the design and size of the house leave it outside the grant limit, and the other is that the house may have some defects in construction.
The grant would then be reduced. As I understand it, nowadays if there are defects in the house the grant is reduced. That is the current policy.
That is true.
In that case some grant would still be paid and there is no problem.
If there are defects— perhaps the house is short of a room— then you are reduced; but perhaps if the matter is a little more serious no grant is given.
No.
Even if, as in the case in Cork, the foundations were not properly constructed?
Reduced grants were paid.
Question put and agreed to.
SECTION 50.
Question proposed "That section 50 stand part of the Bill."
The Minister states that ten per cent would be paid on contracts of £50,000. Is this a completed contract? The Minister may know that nowadays if you get an office block, for instance, you can buy it completely finished or you can buy just the structure and finish it yourself. I see a loophole here straight away, that rather than finish——
I will bring in a mini-Finance Bill if I find loopholes in it.
The practice is that one or two developers finish a building completely and then hand it over and you have to decorate and furnish it yourself; but others just put up a structure and do not even finish the electrical installation and you have to finish it inside yourself. In what way does this work? Is it ten per cent on the——
It is on the value of the building contract.
The building contract could be for a building which is half-finished or completely finished, is that right?
No, if we find any of that sort of thing——
This happens at the moment. The contractor who at present is only going a certain way will continue to do this. He is not trying to "do" you. What is the total contract?
The building contract. Does the Deputy mean that a person would have a contract to erect half a building and build the rest later? I know that they come along and do interior partitioning and so on.
The contract is for the building of the structure and afterwards sub-contractors do bits and pieces to make up the whole contract.
All we are concerned with is any building contract. If there is any building contract of more than £50,000 it will attract this tax.
What is going to happen now is that all the people will not finish. They will only complete the structure and let the person renting the offices finish it.
There would not be much of a structure in these days which would not cost £50,000.
The finishing costs about 60 per cent of the total cost.
That is another cost, not the same.
The developer will not be involved in this. The developer will get a builder to build the structure and will rent it at some few shillings a square foot cheaper to the person who rents the offices and this is not catching the developer at all, then. Is that not correct?
I do not follow the Deputy. If anybody has a building contract for anything costing £50,000 or more he pays stamp duty of 10 per cent and if there are two contracts costing £50,000, he pays 10 per cent on each of them.
Supposing a small office block costs £100,000, the cost of the building, the four walls, the roof and the plumbing may be only £46,000. That is what the developer has asked to be done.
It is almost impossible to conceive of a building contract relating to that building which will not come to £50,000. These things cost millions.
They can build it in sections, giving sections to four builders.
I am not concerned to catch the small office development. I am concerned to catch these huge office blocks which return enormous profits to the developers.
All right. The Minister has seen a house being built many times. The actual structure, the walls, would not cost £500 or £600 where the house would cost £4,000. The outside structure, the four walls, floors and ceilings in a building that would cost £180,000 would cost only £40,000. That could be your contract and you could rent the space on that and let each office renter finish it.
That is very unreal but if we find that that sort of thing happens, we can deal with it.
I, at the moment, have rented a property and that is the way the property is dealt with. You finish it yourself. The only thing they do is the four walls, the plumbing. The rest, you finish. This is the way they rent it. In this structure there are offices too. This is a system in operation in this city and in England.
I would support Deputy Belton on the particular point. What we are trying to do here is to get at the excessive profits of developers, which are very large, indeed.
They are caught anyway. The man in the business of developing is caught for income tax, corporation profits tax or surtax of whatever it may be, on his profits. This is a new type of tax, the nearest thing to a capital gains tax.
This particular tax is, perhaps, the wrong approach to the problem. What we are concerned with are the profits made by developers. I think that is the thing we are trying to catch. These are caught at the moment, the Minister says. I know — by a tax in respect of which they pay at the standard rate of tax. What we should be doing, it seems to me, is taxing at a higher rate in view of the scale of profits made and the fact that they are exploiting a semi-monopoly situation. I do not think the right approach is to put a tax on the building, which merely pushes up rents; and they are not going to pay the tax. This tax will not be carried by the developers. They will simply increase the price of the building as they are operating in a semi-monopoly situation, as is clear from the scale of the profits made at the moment, and the rents go up. Indeed, the main effect of the section, I am advised, will be to increase the amount that the Government will be paying because such a high proportion of these office blocks are rented by the Government, they will find themselves paying ten per cent extra on their rents. Moreover, as the system of reviewing rents at the break point, say, seven years after the construction of the building, is to review the rents on the basis, not of the cost of living or something like that, but on the basis of the current construction and completion costs of similar buildings at that time, the Minister will find that when the office blocks which he is at present renting come up for renewal of the lease the increase in the rent he will have to pay will be forced up by virtue of this tax which, because it will affect the current costs of building and of renting in the years ahead, will, in fact, be the determining factor in the revision of rents. The Minister, therefore, will find himself as a result of this tax paying higher rents on new buildings he acquires and also suffering a bigger increase in rents when the blocks he now occupies come up for renewal of lease.
I am all for fixing developers' profits but it seems to me that what the Minister is doing is taxing the Government primarily. It is they who will have to fork out extra money for this to the people who own these properties. It seems to me that the net effect of this is the opposite to what the Minister intends because he will be paying the developer more than the developer is paying him.
I wonder whether the whole problem here does not arise from our peculiar concept of the income tax code as applies to corporations. We have accepted for many years past that as applied to individuals the income tax is to be progressive. We have a surtax system which is cumbersome as a system because it is superimposed on an income tax system but by adding the two together you get a progressive system in which people with higher incomes pay at a higher rate. In the case of taxation of companies we adhere to the ancient 19th century principle that there must be one standard tax rate for all profits, regardless. This seems to me a very conservative viewpoint, may I put it to the Minister who is found of accusing other people of being conservatives? I think it is because we have this extremely conservative approach to company taxation that we find ourselves adopting inappropriate expedients of the kind proposed in this section which will, in fact, rebound on the Minister and the net effect of which will be that he will be paying out a lot more money.
I am afraid the Deputy is getting away from the section which is strictly a limited section dealing with the stamp duty on contracts for construction of office buildings.
That is precisely what I am talking about.
The Deputy must not go through this process of inventing imaginary problems for me and then solving them for me.
It is a very real problem.
The Minister will have an opportunity of explaining why he thinks the problem is imaginary. The section in its present form has this defect which I have mentioned. It has other defects. First of all, it has this defect, that in trying to tackle the problem of developers' profits the Minister will be taxing firms which in the legitimate pursuit of their business find it necessary to expand their office accommodation. The Minister will, as I understand it, be applying this stamp duty to a firm which builds offices for itself and where there is no intention of achieving speculative gains through the process of property development.
Nobody does that any more. No sensible business builds an office block for itself. That has gone out. The Deputy should come up to date.
The Deputy will. Whether it has gone out or not, it will be out after this. That is not, in fact, the case, as the Minister knows. Firms frequently do this. In fact, most industrial firms have their office accommodation near the factory, as part of it, and they build the office accommodation as an integral part of the factory.
The whole trend is the other way about. Most firms today sell their premises and lease them back.
The vast majority of Irish industries, in fact, have their offices as part of the factory. The factory is their property. It is not, in fact, leased back. The Minister knows that it is only a minority of sophisticated firms that employ these techniques. The ordinary firm——
That is why we made it £50,000, so that a firm like that can provide its own office accommodation.
The ordinary firm in building offices attached to its factory will find itself caught by this unless the office accommodation is so small that it is less than £50,000 worth. There are very many Irish firms whose office requirements will be beyond that and it seems to me that the section should exempt office accommodation built by a firm for its own use to the extent that it remains in the continuing use and occupation of that firm, the stamp duty to be payable if at any stage that accommodation is disposed of, or any part thereof, by way of sale or lease to any other interest because when that happened the firm would, in fact, be engaging in property development at that point. I think the Minister should consider an amendment here, should exempt the office accommodation built for a firm's own use.
There is a further point here which I should like to take up and ask the Minister to consider seriously and that relates to section 4. The procedure proposed here is one under which, if a contract is in any way varied during process of construction, notification has to be given of the new terms involved. I should like the Minister to explain how this operates. If the purchaser of the building decides during the process of construction that he wishes to have a change, for instance, to have a mahogany door instead of a deal one, he must, according to the terms of the Bill, notify the Revenue Commissioners because of the stamp duty required. Would it not be better to wait until the project is completed and then, if the cost were greater the additional payment could be made and if the cost were less, stamp duty could be refunded?
Surely this would be more appropriate. The Minister may believe that this could be used in some way to postpone payment of stamp duty but I do not think this would be so. There are several ways of getting over the problem. The Minister and his officials have sufficient ingenuity to devise ways and means of doing so.
I agree with Deputy FitzGerald that this particular piece in section 50 is rather difficult in terms of taxation. I would certainly question the particular paragraph which says:
If at the expiration of ninety days after the making of a contract of a kind referred to in subsection (1) of this section the instrument containing it is not duly stamped, all the parties to the contract, as well as being liable for the duty unpaid, shall jointly and severally be liable to a penalty equal to twice the said duty, and the penalty shall be recoverable in the same manner as if it were part of the duty.
Certainly, I would envisage a great deal of difficulty there between the Revenue Commissioners and persons intending to initiate construction or alteration of a building in that regard. Nowadays with so many blocks in so many areas being used partly for industry and partly for office accommodation, there could be a very great deal of difficulty with the Revenue Commissioners particularly as there has to be a statement of intentions on the part of such persons.
The suggestion seems rather tangible in so far as it imposes a particular duty on the value of the construction rather than on the income to be derived from the sale of that building. It is all very well to have a 10 per cent on building costs but if, for example, a person constructs a building of 200,000 square feet in Hume Street and if he then proceeds to sell that building, he will have according to current values, an income of £300,000 on which there will be no taxation.
There would be income tax on it.
Not in the context of what the Minister proposes here. I suggest to the Minister that it would be much more effective if the proposal envisaged by him were to base the tax on the amount to be derived from the sale and use of the particular construction. I share the anxiety to have some social penalty placed on extreme office construction.
Mr. J. Lenehan
What about Liberty Hall?
However, I do not think the Minister has gone far enough in this regard and I suggest that he have a further look at the effectiveness of the proposal.
Surely there is 25 per cent extra on the construction of every building?
That is covered in the section.
Where is it covered?
This section is designed as much as anything else, to slow down office building. I am as much concerned with getting away from office block building as I am with raising revenue. The building industry is strained at the moment and even if I were to make more money available for houses, the industry could not build them at present. In bringing in this section I was motivated by a desire to try to inhibit people from office block development to some extent. However, there is a lot of substandard office accommodation and there is great need for new office accommodation but, at the same time, it seems to me from the number of applications for planning permission that are submitted to Dublin Corporation and to the Minister for Local Government that too much of our scarce building resources are being devoted to office block development. This section, therefore, is to some extent directed towards a slowing down of the rush to build these huge office blocks. I am reasonably satisfied with this section. I think it will achieve its purpose. There are fairly adequate anti-evasion provisions in the section as it stands. The type of buildings which we are after is a major financial undertaking. These things do not go ahead unless there are pretty big financial institutions involved in them. I do not contemplate the large-scale financial institutions who would be engaging in this type of activity and putting up the money for these buildings having anything to do with shady practices or evasion.
Some of these fellows move in from England——
The Minister's sense of humour betrays him.
If a person is putting up £2 million or £3 million for office block development he is not going to take a chance on hookey or doubtful practices which would bring him in conflict with the Revenue Commissioners. That is the best safeguard we have in this regard. This is a new thing. I do not know whether it applies anywhere else. It has been fairly carefully thought out. We have given it a great deal of thought and feel that it will achieve its purpose. I am reasonably satisfied with it as it stands. If it appears that it is not achieving its purpose we will not hesitate to bring in further provisions which will tidy up the situation.
Is it not true that there is practically no tax which the Minister for Finance can impose under his economic system which will not in one way or another be passed on to the consumer?
I did not invent the economic system. It is not an economic system which is personal to me. This whole field of taxation, and where the real burden of taxation falls, is one for experts. I would not attempt to be a pundit about it. The Deputy reminds me of a point made by Deputy Desmond. People who are developing and building office blocks and engaging in property development are taxed on their profits. They are engaged in the business of property development. All their activities as such are taxed. They have income tax and corporation profits tax if they are a company, and income tax and surtax if they are individuals. They do not put the money in their own pockets and go free. Deputy Dr. FitzGerald mentioned corporation tax as distinct from corporation profits tax, of separating personal income tax from taxation of companies. This is a matter which we have actively under consideration at the moment.
They can get a capital profit tax out of the developers. The developers can make money by avoiding this tax, first of all, by only doing 50 per cent or, perhaps, 30 per cent of the work. There is no doubt about that. It is being done at the moment. The £1 million or £2 million finance which these companies get is not given to a company. It is given to a person in that company on his ability. There is nothing to prevent that company, if they were making £300,000 and the building is worth £1½ million capitalised, and worth £3 million in ten years, from selling their shares to an insurance company and they would not be taxed on it. Does the Minister mean to tell me that a person from London who was never in Ireland before is not going to do this? He can get the money in England because they have known him working there and can come in here and set up a company. He will get money because they know in England that he is a good operator. He can sell the shares to an insurance company and get a good return and go off with £3 million in his pocket, not taxable.
The Minister is purporting to be naïve in speaking as if there was no avoidance or evasion of taxation on profits. I should like to go back to Deputy Dr. Browne's point. While the Deputy exaggerates his point, it has merit. Some taxes have the effect of being put on to the consumer more readily than others. In Dublin at the present time, we have the value of buildings, their capital value when built and the prices at which they can be sold to an insurance company, which are determined by the market situation as regards building of office accommodation in Dublin and the people have suddenly become alert to the desirability of new office accommodation, there is a demand for office accommodation which far exceeds the amount of modern office accommodation available. rents. Owing to the fact that there have been many decades of a backlog in the There is a monopoly-value attaching to the modern office blocks which far exceeds their cost. We have the rentals of the blocks which are fixed by the demand and supply situation. The monopoly situation involves rents being fixed at very much above the cost of construction. We have the cost of construction which is determined by the constructional costs and the price at which land can be bought. One does not need to know much about property development to know that the profit margin available to developers at the moment is, perhaps, of the order of 50 per cent on their cost. They can buy land, build a building and make arrangements to rent it, and then sell those rentals at a price which exceeds by 50 per cent the amount they have paid out in respect of the entire transaction up to that point. That is a fairly normal ratio.
Some developers may do better than others. There is no relationship between the cost to them, fixed by the building costs and the cost of land, and the rentals and capital value of the property when developed. There ought to be some relationship under our economic system. If free enterprise is given free rein long enough and if nobody does anything to prevent office blocks being built at some point in the 1970s or the 1980s supply and demand will come into balance and the monopoly values will disappear. We are faced with a monopoly situation for a short time in which monopoly profits are being made. In that situation if we, in fact, taxed more heavily than at 10s in the £ the profits of property developers we should not push up, possibly at all but certainly perceptibly, the rentals of office accommodation, or the value of office accommodation for sale, because of the fact that those rentals are determined by the supply and demand situation and not by the cost. I am not suggesting there is no relationship between the two, but it is a weak relationship at the present time.
If a tax at a little over 10s in the £ were imposed on developers' profits it would secure additional revenue to the Exchequer. It would be a very desirable kind of tax. It would not push up office rentals significantly. The Minister would find himself not having to pay higher rents now, or on renewal of existing leases. The point Deputy Dr. Browne made gives a basis for suggesting that we are imposing the wrong kind of tax here. The Minister took it that I was suggesting having a corporation tax system instead of the existing system based on personal income tax. That may be technically necessary but I am not convinced of it.
It seems to me that there is nothing to prevent us, in a Finance Act, saying that the rate of income tax chargeable on a particular kind of profit, or the rate of corporation tax payable, shall be at a higher level on a certain kind of profit than on others. I do not see why it is technically impossible for the Revenue Commissioners to operate this system on, say, a 35 per cent or 40 per cent corporation profits tax on profits on property development. If such a tax were imposed it would not significantly affect the cost of accommodation for rental. Therefore, I would commend to the Minister, when he gets around to changing the whole tax system, to consider something of that kind. It would be better than what is here and might be introduced in substitution for the proposals here.
I should like to come back, however, to the points the Minister has not dealt with. I think I am right that this Bill in its present form, that is subsection (4) of section 50, imposes an obligation to notify every change in the contract, every change when a building is being built involving additions to the building costs.
That would be administered in a practical way.
Now, that is exactly what one worries about. We should not pass laws that can be administered in what the Minister describes as "a practical way". We should legislate to achieve the objectives we want to achieve.
That is academic nonsense.
On the contrary, it is practical.
Every law passed in this House must be administered sensibly.
The Minister is talking about an academic Bill which he now says cannot be administered in accordance with the wishes of the Dáil as laid down in this Bill. He says he is going in some way to ensure that it will be administered "in a practical way" and he will depart from the letter of the law to do so. It is wrong that we should pass laws here when we know that when they are put into operation they have to be applied otherwise than in accordance with the wishes of the Dáil. We should pass laws in the form we want them to apply. I suggested to the Minister how this could be done. I would like him to tell me why it could not be done in one or other of the forms I suggested and why he must instead pass a law which he does not, in his own words, intend to apply literally.
I have nothing to add.
That is a weak definition "nothing to add". The Minister sees no point in replying.
I want to say in conclusion on this section that——
The Minister hopes to conclude.
——this is an attempt by me to grapple with the situation. It is a situation which to my mind presents two aspects. One is the directing of much of our scarce building resources into office block buildings and the other is the substantial profits being made by people going in for office block development. This section is designed in a feasible way to try to deal with both aspects of this problem. I want through this piece of taxation to try to get my hands on some of the profits which are being made. I think I have succeeded in doing so.
I also think this section will have something of an inhibiting effect on the rush into office building development which we are experiencing in Dublin at the moment. It is a sensible and practical proposal. Nobody was doing anything about this situation until I came along with this section and this Bill. This is some attempt to deal with this matter.
This is a very real problem. It will not do anything about this development of buildings because the rents will be increased proportionately. I should still like the Minister to tell us why it has to be administered in the particular way he proposes and to give some answers to the points I made in that respect.
Question put and agreed to.
Sections 51 to 54, inclusive, agreed to.
SECTION 55.
Question proposed: "That section 55 stand part of the Bill."
Is there any increase in the turnover tax? Would the Minister explain exactly what this section means?
It is a technical section to tidy up the administration a bit. There is no increase.
What does it mean?
At the moment those taxes are levelled on the basis of socalled moneys received. There is a loophole in that a person might not actually receive the money but leave it with a financial institution. We want to cover that situation. That is what is involved.
Question put and agreed to.
Section 56 agreed to.
SECTION 57.
Question proposed: "That section 57 stand part of the Bill."
Is there an increase here?
Yes.
Does the Minister not agree this will affect the cost of living considerably?
It is not an unreasonable thing to do. We are trying to raise money for desirable social purposes. We are putting this tax on a luxury type of article. At the same time, the section has some significance from the point of view of sound economic management in damping down consumer expenditure.
I think there are some exclusions.
Yes.
Such as?
It is a limited tax. It is on a limited number of items, such as television sets, motor cars, yachts, caravans and things like that which are generally regarded as luxury items.
In other words, it will make motor cars dearer than they are at present.
Yes.
By how much?
By five per cent. The tax will now be 15 per cent. It goes up by five per cent.
It will push up the cost of living.
In this table it says invalid carriages and other vehicles of a type designed for use by invalids are excluded. Does that apply to motor cars where the attachments are put on afterwards? Some of those vehicles are constructed solely for invalids but in other cases attachments are put on mainly for driving. They are for use by invalids.
Motor cars sold with special attachments are excluded.
Would the Minister consider exempting motor vehicles up to, say, ten horsepower which are not really luxury type vehicles? They are a necessity rather than a luxury. Would the Minister consider excluding small type caravans? Many people, who cannot afford to pay for hotel accommodation, go on holidays in caravans. Would the Minister also consider exempting radio sets for blind persons and disabled persons?
Radio sets for blind persons are exempt.
Those are not luxury items. Would the Minister accept that a car up to ten horsepower is a necessity rather than a luxury?
On the other hand, a big car is not a luxury to a taxi driver. It is hard to make this distinction.
I would ask the Minister to consider excluding motor vehicles up to ten horsepower. It is not an extravagant request to ask him to exclude small type caravans. I would not consider those a luxury item.
I am afraid I will have to regard the Deputy's request as having been received, considered sympathetically but unfortunately rejected.
All cars will go up by £100 at least.
Question put and agreed to.
Sections 58 to 67, inclusive, agreed to.
First Schedule agreed to.
Second Schedule agreed to.
THIRD SCHEDULE.
Question proposed: "That the Third Schedule be the Third Schedule to the Bill."
What is this about "Irish wine"?
There is a firm engaged in making wine. We bring in the busks to make wine.
Question put and agreed to.
Fourth Schedule agreed to.
Fifth Schedule agreed to.
Title agreed to.
Bill reported with amendments.
Agreed to take remaining Stages today.