Go léifear an Bille an Dara hUair.
The Bill contains the provisions required to give effect to Budget proposals as well as provisions on a number of other matters to which I shall draw attention in the course of the review I propose to give of the contents of the Bill.
Part 1 of the Bill is concerned with income tax and corporation profits tax. Section 1 reimposes income tax and sur-tax for the year 1970-71 at the same rates as for the previous year. However, as announced in the Budget, the first £100 of taxable income will be charged to tax at a reduced rate of two-thirds of the standard rate and a new minimum earned income relief is being introduced. The purpose of these innovations, which are provided for in sections 2 and 6 of the Bill, is to reduce the tax burden for persons at the lower income level by removing some 50,000 taxpayers from the tax net and making entry into the net somewhat less painful. Under sections 7 and 8 the "age relief" and "small incomes relief" are improved in line with the new minimum earned income relief.
Section 5 enables the Revenue Commissioners to obtain the necessary information from employers to administer the minimum earned income relief and to deal with cases where employees' earnings during a year were not expected to, but did in fact, exceed £2,000, the point at which the maximum earned income relief begins to operate.
In recent years, industrial and other concerns have been finding it increasingly difficult to attract female labour. As a contribution to easing the problem, it was announced in the Budget that the earned income allowance for married women was being increased from £45 to £74. Effect is given to this increase in section 9.
Last year, as a step towards introducing a measure of selectivity in the scheme of children's allowances, some of the increase then given in the allowances was recovered by reducing the income tax deductions for children. A similar provision in relation to this year's increase in the allowances is contained in section 10.
The income limit for the purpose of the dependent relative allowance is raised by section 11 to £222 which is the annual equivalent of the non-contributory old age pension as increased in the Budget.
I now come to the provisions in Part I of the Bill dealing with matters which were not announced in the Budget. Sections 3 and 4 involve minor technical changes arising from the introduction of decimal currency and the adoption of the term "designated area" for "undeveloped area". The purpose of section 12 is to relieve friendly societies, such as credit unions, of the trouble and expense of making returns of the smaller amounts of interest paid by them to members without deduction of tax. Under section 13 the limit for tax relief for certain retirement annuity premiums is being raised to take account of the change in money values since the limit was introduced in 1958.
The main purpose of section 14 is to amend the provisions governing the making of wear and tear allowances in respect of machinery or plant so as to enable the amount of the wear and tear allowance for a given year to be arrived at on the basis of the true written-down value of the machinery or plant at the commencement of the year.
Sections 15 and 16 introduce a degree of flexibility in the date of operation of the relief in respect of dividends and interest paid on stocks, shares and securities of Irish companies. Another provision relating to industrial firms is contained in section 19 which enables a person who purchases a "ready-made" building to claim the industrial building allowance. There is a growing tendency for industrialists to purchase such premises rather than build their own and the provision is being introduced to take account of this development.
Section 17 is an anti-avoidance measure designed to deal with another recent development, namely, the system of sub-contracting in the construction industry, or "lumping" as it is commonly known. These sub-contractors have, for the most part, been escaping tax because of the difficulty of identifying them. The measure now being introduced will require tax to be deducted at the standard rate from payments made to these sub-contractors unless the Revenue Commissioners authorise otherwise. The Revenue Commissioners may make regulations for the operation of this provision.
Section 18 provides for the tax exemptions in respect of the new instalment savings scheme which I shall be dealing with later on when I come to section 51.
A separate chapter in Part I of the Bill contains a group of sections which bring into charge on tax certain receipts, not previously taxable, which come in after a trade or profession is discontinued or after there has been a change in the basis on which accounts have been drawn up. These are complicated provisions and I should like to give some background information on them.
In computing the profits of a trade or profession two alternative methods are generally used, namely, the "earnings basis" or the "cash basis". Under the earnings basis, the income of the trade or profession is computed by reference to the value of services rendered during the accounting period and, accordingly, accounts outstanding at the end of the period are included as part of the income. Where the cash basis is applied, the income is taken as the cash actually received during the accounting period and debts outstanding at the end of that period are ignored. In some cases, a variation on these methods known as the "fees furnished basis" is applied. In these cases, income is computed by reference to the bills actually furnished to clients, whether paid or not during the period in question.
It makes little or no difference over a period of years, from the tax point of view, which basis is adopted so long as the business continues to be carried on. It is only when the business is discontinued and payments continue to be received in respect of services rendered before the discontinuance that a practical distinction arises as between the different methods of assessment. In the case of persons who were on the earnings basis, these post-cessation receipts will already have been brought into charge. Persons on the cash basis, however, are not liable to tax on their post-cessation receipts and persons on the fees furnished are not liable in respect of the post-cessation receipts arising from billings made after the discontinuance.
The main purpose of the provisions contained in chapter II of Part I of the Bill is to rectify these anomalous situations by ensuring that all receipts are brought into charge. It will be noted that, in the case of cessations, the charge will apply only to sums received after the date of passing of the Bill and the charge arising by reason of a change of basis of accounting will apply only to changes taking place after that date.
I feel that I should inform the House that I have a personal interest in this matter.
This chapter also contains provisions dealing with the valuation of work in progress at the discontinuance of a business and the case where a trading debt already allowed as a deduction in computing profits is subsequently released by the creditor.
Part II of the Bill deals with customs and excise matters. This year, there has been no increase in the main duties. The sections in this Part of the Bill are, therefore, confined to giving concessions of advantage to trade interests and to tidying up details in the law which have become rather restrictive in some respects for modern conditions. These provisions were not announced in the Budget.
Existing legislation specifies the sizes of bottles and the quantities in which wines and spirits may be bottled and packed in warehouse and cleared for the home market. To ensure greater flexibility in this sphere, I am providing in section 27 of the Bill for exercise of discretion by the Revenue Commissioners in deciding on variations in bottling and packing.
It has been put to me that distillers should be allowed to defer payment of duty for a period on clearance from warehouse. I am satisfied that this is necessary and I propose that an arrangement similar to that allowed for the tobacco manufacturers should be made. Section 28 of the Bill gives effect to this intention. To recoup the Exchequer for part of the cost of making this concession, I am increasing the rate of excise duty on spirits by 8d per proof gallon of spirits benefiting from the concession. Of course, no increase in the price of spirits will result from this arrangement. At present, white spirit is technically within the charge to duty on mineral hydrocarbon light oil but, as it is used for industrial processes rather than in road vehicles, it is relieved from duty by the issue of licences. For reasons of administrative simplification I am excluding white spirit from the scope of the definition of mineral hydrocarbon light oil by way of section 29 of the Bill.
Section 30 enables the Revenue Commissioners to extend the period in which claims for repayment of part of the duty on fuel used in buses may be submitted.
Section 31 of the Bill is being included, in response to representations made to me, in order to help the small tobacco manufacturers whose annual leaf intake does not exceed 50,000 lbs of tobacco. The firms in question handle less than 1 per cent of the tobacco used in the State and the increased rebate will help them to continue in production.
Section 32 confirms two orders made under the Imposition of Duties Act, 1957. One order related to the reduction from 5 years to 3 years in the limit for liability to the duty on immature spirits and the other order effected a change in the motor tax on self-propelled processing machines, such as concrete mixers.
Part III of the Bill deals with death duties. The provisions were not announced in the Budget. Section 34 is designed to prevent avoidance of duty by the device of forming a private company to take over such property as lands, houses, stock exchange securities or a business. Section 20 of the Finance Act, 1965, introduced certain provisions to deal with the matter but it has been found that the provisions could be avoided where the company was not, at the time of the disposition of the property to it, a company controlled by the deceased and only afterwards became such a company. Section 34 also contains provisions designed to prevent avoidance of duty through the under-valuation of certain private company shares.
A further anti-avoidance measure is contained in section 38. Government securities, securities of semi-State bodies and of some municipal corporations are usually issued with the condition that they should be exempt from death duties while in the beneficial ownership of persons resident and domiciled outside the State. It has come to notice that this condition can be brought about artificially by the use of a foreign based private company or other means and section 38 is designed to counter this.
Section 33 contains provisions in regard to estate duty consequent on the amendments being made in the income tax legislation by sections 15 and 16 of the Bill to which I have already referred. Sections 35 and 36 widen the definition of a dependent child for estate duty purposes so as to bring it into line with the definition in force for income tax purposes.
Existing legislation provides certain reliefs from estate duty in respect of gifts to the State. Where, however, the donor interposes a life interest before the State's right to possession, the relief operates only in respect of the death of the life tenant and not on the death of the donor. It has been represented to me that this is inequitable where the life interest is held by the spouse of the donor. I propose to remedy this situation by providing, in section 37, that in the case of a gift vested indefeasibly in the State no estate duty will be payable on the death of either the donor or the spouse.
The provisions in Part IV of the Bill, which relate to stamp duties and which were not announced in the Budget, are concerned mainly with introducing a measure of rationalisation of the stamp duty code and, at the same time, making the necessary changes in preparation for the changeover to decimal currency. Section 39 provides for a new first schedule to the Stamp Act, 1891. A number of obsolete and unproductive heads in the existing schedule are being abolished. Where the heads of charge are being retained, the rating structure is in a number of cases being simplified and, where necessary, the rates are being expressed in amounts which will have exact equivalents in the new decimal currency.
In making these changes in rates, care has been taken to ensure that as far as possible there will be no additional burden of duty. There is, however, one exception to which I wish to draw attention. At present, on the sale of a business premises, the transfer of assets, such as goodwill, attaching to the premises attracts duty at a lower rate than the transfer of the premises. This has given rise to avoidance of duty by the placing of an inordinate value on the goodwill, etc., thereby reducing the consideration for the transfer of the premises. In the new first schedule this means of avoidance is blocked by bringing the rate of duty for such assets into line with that which attaches to the premises.
Section 40 provides that with effect from decimal day the rate of duty on bills of exchange, including cheques, and promissory notes drawn in the State will be one new penny instead of the existing rate of 3d. It was represented to me that, following the British example, this duty should be abolished from decimal day. In view, however, of the not insignificant yield from this duty—over £½ million—I was unable to accept this proposal. There will, of course, be a loss of some £100,000 in the adoption of the rate of one new penny in place of the existing rate of 3d.
Sections 41, 42, 45 and 46 contain other provisions arising out of the introduction of the new first schedule or from the changeover to decimal currency.
The purpose of section 43, which abolishes stamp duty on the transfer of securities guaranteed by the Minister for Finance, is to facilitate the development of a market in the securities of semi-State bodies.
Last year, a new stamp duty charge of 10 per cent was imposed on contracts for the building of office blocks. This charge was intended to discourage or slow down the building of offices on a speculative basis so that available resources might be diverted to more essential purposes. I have received representations that this charge imposes an unfair burden on firms who find it necessary to build office accommodation for the use of their own staffs. I have decided to accede to these representations and in section 44 I am abolishing the duty on such office blocks, subject to the condition that there is no change of occupancy for five years.
Part V deals with the turnover tax.
Section 47 provides for the Budget increase from 2½ per cent to 5 per cent in the rate of the tax.
Representations were made to me to raise the limit of £750 per month at which certain classes of traders are required to register for the turnover tax. I am convinced of the merits of the case for an upward adjustment and have provided in section 48 for raising the limit in question to £1,000 per month. Registered traders affected who wish to avail of this concession should aply to the Revenue Commissioners.
Section 49 enables an accountable person to pass on the increase in turnover tax in cases where taxable receipts accuring after 1st May arise under contracts entered into before that date.
Finally, I come to Part VI of the Bill. Section 50, which is an annual provision, fixes the annuity for the redemption of the debt incurred on voted capital services in 1969-70 and 1970-71.
Section 51 contains the necessary provisions for putting into operation the new instalment savings scheme announced in the Budget. The purpose of this scheme is to encourage people to save by regular monthly instalments for a specified period. If they retain their savings on deposit for a further period they will be repaid the amount deposited together with a bonus or interest which, in accordance with the provisions of section 18, will be tax free. The new scheme will be launched in the autumn and I have every hope that it will prove a valuable medium for increasing the level of savings.
Section 52 removes a technical restriction in the existing borrowing powers of the Minister for Finance. Section 53 provides against a situation where, because of a continuation of the bank closure, it would not be possible to redeem certain Government stocks on the due date of 15th July, 1970. The section gives the Minister for Finance power, in such circumstances, to postpone the redemption date and to pay interest in respect of the period of postponement.
Credit is given by section 54 against Irish tax in respect of tax spared under tax incentive schemes operated by countries with which we have double taxation arrangements providing for similar treatment for our own tax incentive reliefs. Section 55 extends to the investment abroad of profits earned in Shannon Airport the measure of unilateral double taxation relief provided in the Finance Act, 1968 in relation to profits which enjoy exports tax relief. Section 56 enables any securities guaranteed by the State to be accorded the same tax treatment and privileges as are at present applicable to securities issued by certain semi-State bodies.
I commend the Bill to the House for a Second Reading. I appreciate that a number of its provisions are of a complicated and technical nature and I shall be glad to deal with any points on which Deputies may require further clarification.