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Dáil Éireann debate -
Tuesday, 14 Jul 1970

Vol. 248 No. 7

Committee on Finance. - Finance Bill, 1970: Committee Stage.

Question proposed: "That section 1 stand part of the Bill".

Speaking for myself I do not like legislation which I feel does not tell the truth. This statement that sur-tax is levied after £2,500 only applies to unearned income and therefore it is not a credible statement. It is not the literal truth. I do not like legislation which is crooked and there is an awful lot of crooked legislation around in this kind of situation. The Minister might benefit from this kind of thing, or the Parliamentary Secretary might benefit, or I might, but that is not my point. My point is that there is a statement here that sur-tax for the year beginning 6th April, 1970, shall be charged in respect of the income of any individual the total of which from all sources exceeds £2,500. There is not one of us here who does not know that is not the truth. You do not pay sur-tax on earned income, broadly speaking, under £5,000 a year. Therefore, I do not like this kind of thing in a Bill which goes through this House. It is discreditable to this House and to the people who drafted this legislation and put it into the Bill. Therefore, I should like to ask the Minister why must it be done in this way?

I take it what Deputy O'Donovan has in mind is that the statement should have added to it something to the effect "subject to the allowances which by law are available to a taxpayer". I take it that this is what the Deputy has in mind?

Something of that kind.

It appears, therefore, that it is merely a question of drafting. What is in this Bill is stated in the Finance Bill each year. Nobody has been misled by it and I think it is putting it rather strongly, to say the least, to describe it as "discreditable" or "misleading".

Not alone should legislation be accurate and truthful but it should be seen to be accurate and truthful. This is not truthful in the sense that it does not tell the whole truth. During the fifties we were all paying sur-tax on incomes in excess of £1,500 which, of course, was quite unfair. Many of us with relatively small incomes were paying 2s 6d in the £ in sur-tax in addition to the ordinary tax. The reason the Government gave for making certain allowances was that we wanted expert executives to return here from Britain. This was nonsense because if those expert executives were true Irishmen they would come back anyway. In fact, the Government added £2,000 in two years to the £2,500 which was then the point from which sur-tax was levied. It is not quite just for the Minister to infer that my remarks are unfair. There are very few people in this country with unearned incomes in excess of £2,500 per year and yet this peculiar indirect method of legislation adopted by the Government results in this being the main section in the Finance Bill relating to sur-tax. This kind of thing should be laid on the line so that we will know that this country is a country of Green Tories if, in fact, that is the case. I do not think what is proposed here is reasonable and I do not care who drafted the legislation.

Question put and agreed to.

Amendments Nos. 2 and 3 are consequential. Amendments Nos. 1, 2 and 3 may be taken together.

I move amendment No. 1:

In subsection (1), page 4, line 27, to delete "two-thirds" and to substitute "three-fifths".

These amendments must be considered in relation to the section which it is proposed to amend and the section itself has to be considered in the light of the introduction of decimal currency on 15th February, 1971. It appears to me utterly incongruous that in section 2 it is proposed that an individual who makes a claim and makes a return in the prescribed form of his total income shall be entitled to be charged at two-thirds of the standard rate of tax on the first £100 of taxable income.

In relation to decimal currency the percentage two-thirds is unworkable: it produces a recurring decimal of 6.6 and does not operate. If we are to have decimal currency on 15th February, 1971, it is about time that whoever drafted finance legislation would live with the times and at least produce a fraction—maybe a fraction of ten or 100—that is workable from the income tax point of view. Accordingly, I have tabled amendments suggesting that "three-fifths" be substituted for "two-thirds". Regardless of whether my amendment is accepted, the fraction two-thirds cannot remain after decimalisation.

As Decimal Day is occurring not at the beginning or the end of a financial year but at a point in between, one has to choose between a rate that is suitable in decimal currency and one that is suitable in sterling. In practice, virtually all assessments will have been made before 15th February, 1971, and as of now the revisions necessary in anticipation of the passing of this Bill in the allowances for PAYE purposes have been almost completed. In other words, we have had to opt for operating on the basis of the present currency and not on decimal currency. To reverse that would lead to appalling difficulties and delays; there were some complaints on the discussion of the Second Stage about delays in issuing certificates of tax-free allowances under PAYE.

What is intended is that we operate as indicated here on the sterling basis and that will be the practice for this financial year. The change to decimal currency which will be necessary will be carried out in conjunction with the other changes necessary on the changeover to decimal currency, but the Deputy will appreciate that to accept his amendment would involve a calculation at the rate of 4s 2.4d in the £ as against 4s 8d which arises under the Bill as drafted. For practical purposes for the present year this is a much more operable arrangement. Some people might consider it a relatively minor objection to the amendment—I do not consider it such—that it would cost the Exchequer approximately £700,000, and for all these reasons I cannot accept the amendment.

Do I understand from what the Minister has said that this was a considered decision in relation to the fraction to be used? I am going to suggest that it was no such thing, that this particular section went into the Bill without regard whatsoever to the occurrence of decimalisation. The Minister is now very necessarily and understandably putting a bold face on what was a complete oversight by those who drafted or suggested the fraction used here. Decimalisation occurs within the financial year for which legislation is sought, on 15th February, 1971. I am quite certain if the full impact of decimalisation were understood a fraction appropriate to decimal currency would be suggested here. I cannot see what the complications are. The Minister has suggested that to alter it now would cause a variety of difficulties but I should like to know what the difficulties caused by getting some appropriate fraction— which would be appropriate for the portion of the financial year from February to April—are.

As I have indicated, the PAYE tax-free certificates for the current year are almost ready on the basis of the provisions of this Bill. If any change were made these certificates would have to be started again. I have also indicated that there have already been complaints in the House because of the delay in issuing these because people are operating on the basis of last year's assessment. Another difficulty is that the non-PAYE assessments would be affected and would be considerably delayed. In practice virtually all assessments would be made before 15th February, 1971, so that the practical choice with which one is faced must be dictated by the volume of assessments affected in the current financial year. On that basis one must clearly work on the basis in the Bill and not on the decimal currency basis.

This seems to be getting a little more confused. Under the Constitution we are the body designated to make laws. I would not like to think that the Civil Service or the bureaucracy behind the Minister make the laws for us. Are we to understand that without regard to this House and what it might decide, a group of civil servants have gone ahead and printed forms on the basis that section 2 of this Bill will be passed as proposed? The Minister has told us because that has been done Deputies here should not alter the fraction in section 2. We have had a fair amount of experience of this kind of situation, with particular reference to finance legislation over the years, where this House does not seem to count because some body outside, bureaucratically controlled, proceeds irrespective of what this House may decide.

I assert that these gentlemen made a bloomer. They provide in section 2 for a recurring decimal but they did not know about section 3 which provides for decimalisation. They have had all the forms printed on the basis that no one here would advert to the bloomer made. We are faced with the situation that because the forms will have to be re-printed some people will have to work a little bit harder undoing their mistakes. I do not think it is good enough.

Deputy O'Higgins has misunderstood me, whether deliberately or not I am not quite certain yet. I did not say anything about the printing of forms or the trouble involved for civil servants. I did talk about the many thousands of taxpayers on PAYE who, the longer the tax-free certificates giving the benefits of the increased allowances provided for in this year's Budget are delayed, the more they are inconvenienced. It was the taxpayers' convenience that I was talking about; it is the taxpayers' convenience I am concerned with. It is highly commendable that preparations should be made as far as they can be in anticipation of the passing of the Bill in order to convenience the taxpayer. If, of course, the House decides to change the Bill, then whatever changes are necessary in the arrangements will have to be made. It is highly commendable that every effort should be made to delay and inconvenience the taxpayer as little as possible. This is the reason I gave and not any other reason. I repeat this is the reason which I think the House should take into account.

The Minister is talking about the interests of the taxpayer. It is right to indicate at this stage that the Budget was introduced on 23rd April last. There has been a long conception of this Finance Bill by reason of difficulties of one kind or another in the Government Party, but we on this side of the House cannot be held to blame for that. A properly controlled Government would have had this legislation before the House a long time ago. It is a bit much if we are to debate this measure on the basis that our decisions do not count.

That is not true.

I hope it is not true. If there were any such suggestion I can assure the Minister there would be strong voices raised here expressing a contrary view.

If I thought there was anything like that I would be as strong in my opposition as Deputy O'Higgins.

Amendment, by leave, withdrawn.
Amendments Nos. 2 and 3 not moved.
Question proposed: "That section 2 stand part of the Bill".

Before world war II the rate of income tax here was half the standard rate on the first £100 of taxable income. The Minister made a great song and dance in the Budget about giving the concession of two-thirds of the rate on the first £100 equivalent to £20 before world war II. If it be the case that the State cannot afford to make this half the rate instead of two-thirds of the rate the same as it was before the war even on £100— even as one-fifth on real terms—it is a bit steep. The tax system is very unfair. Whole chunks of the population are legally free from paying income tax and other chunks of the population are able to evade it on a massive scale. When the Taoiseach delivered the Financial Statement on behalf of the former Minister for Finance he said that 50,000 people would be taken out of the income tax assessment by this particular provision. Everybody in this country who has anything to do with income tax knows that Dublin General has for years been an Augean stable. The Revenue Commissioners would be the last people to say it was anything other than that. The most dreadful blunders have been made down there and still the Minister would not take a couple of hundred thousand people out of these assessments.

Exception is taken to quoting the conditions at the end of the economic dispute with Britain. Let us come to the end of the 1950s. We find that there has been no change whatever until this year since 1959-60 in the allowances for income tax since PAYE came into operation, except in relation to sur-tax. This is the reverse of what the position should be. I do not mind what plea the Minister makes about it costing him so much to give half the rate on this small sum of £100. This is but 100 buttons compared with 1939. In real value it is only one-fifth. The Minister is going to assess people at two-thirds. This is the clear proof of the appalling state which has been reached in our community where people must be "grilled". The ordinary worker, the man who works essentially with his hands, and who makes £600 or £700 which is equivalent to £120 before the war when he would not have been liable to income tax, now finds that he is up to his neck in income tax payments. This may seem like a concession of some sort but it is only a piece of nonsense. If there were any serious effort to run the State on a proper basis, this kind of thing could be done on the inflation alone. One of the Minister's predecessors, Dr. Ryan, used to say that the revenue was buoyant. Is revenue not going to be more buoyant this year than ever before? It is. I regard this as a miserable concession.

I would like to support and endorse everything Deputy O'Donovan has said. Two-thirds of the standard rate of tax on the first £100 of taxable income is mentioned. The mountain has been in labour and has produced a mouse. I support fully what Deputy O'Donovan has said. I do not understand fully what subsection (2) does. I can feel what is in that subsection but it seems to me that the wording is rather obscure. What is it intended to achieve?

It is intended to secure the application to the new relief of those provisions of the Income Tax Acts which govern the general body of personal allowances.

Dependent relatives?

Yes. The subsection reads:

All such provisions of the Income Tax Acts as apply in relation to every deduction specified...

The subsection continues:

...shall apply in relation to a reduction of rate allowed under subsection (1).

Why are these words used?

That refers to the reduced rate relief which is proposed in subsection (1). It refers to the relief which is being given by this section.

I appreciate that what is aimed at is that the personal relief, dependent relatives et cetera, shall apply to the rate of tax of two-thirds standard.

A reduction of rate is allowed under subsection (1).

I suppose the Minister is satisfied.

It is the title of the section which is so peculiar. The title is "Reduced rate relief." I am not saying it is wrong.

As the Deputy is aware the side note is not really part of the Bill. Perhaps I should mention that while I would like to be in a position to reduce the rate to 50 per cent or even further it just is not possible. Deputy O'Donovan may say airily that he does not care what is involved in it. I do care. I have to care. The Deputy talks about the way the country is being run. I wonder does the Deputy realise that to reduce the rate by 50 per cent would cost £10 million. Obviously the money would have to be found somewhere.

Not at all.

The two-third reduction is costing £7 million. The Deputy mentioned that he did not think much of the release of about 50,000 taxpayers from the net. He thought hundreds of thousands should be released. I would like to be able to do this but we must be realistic. This country has to be run. Deputy O'Donovan is not the least vociferous in demanding further services and further reliefs.

We must find money for all these things. I do not think it is unreasonable. We have made this improvement. It is some saving for many people. It releases 50,000 people from the net altogether. Last year we increased the personal allowances. While I do not claim these are the most that we would like to do, I think they are substantial. They cost a substantial sum of money and they are a move in the right direction.

When I said that I do not like the way the country is run there is no harm in giving an example. The Minister's Department is costing £750,000 more this year than it did last year. What is it for? For what kind of nonsense is this money needed? I deliberately say that. Since the Minister drew attention to my remarks let me say that if, in fact, my suggestions were to cost an additional £3 million a year all that proves is two things. First, it proves the decline in the value of money and, secondly, it proves that the workers as a whole are being grossly over-taxed. It proves the decline in the value of money and the fact that people who have very small incomes are being grossly over-taxed.

Question put and agreed to.
Sections 3 and 4 agreed to.
Question proposed: "That section 5 stand part of the Bill".

I should like an explanation on this section.

The purpose of the section is to add to section 127 of the Income Tax Act of 1967 a provision enabling certain further regulations to be made for PAYE purposes. There is a question of assessing people with incomes of less than £2,000 for PAYE purposes. Employers are asked to supply a list of those whose earnings they expect will not exceed the maximum under the PAYE system and there is an earned income relief of £500 coded in as a deduction from the income in the course of the preparation of PAYE tax deduction certificates. In these cases it can happen that if we do not have the regulations that can be made under this, we are going to have to demand from employers the returns in respect of these people earning more than £2,000 per year. Either we shall have to deny to those people the allowances to which they would be entitled and hold them until the end of the year or we shall have to come back to the employers in the course of the year and add considerably to their difficulties. The object of this is to enable the Revenue Commissioners to make regulations which will enable the system to continue to operate smoothly having regard to the changes taking place in the allowances granted under the Bill. Perhaps, I have not made the point very clear to the Deputy but if he could be a little more specific about his problem I shall try to explain more clearly.

From what the Minister has said, I gather that experience has shown the need for power to make regulations. I take it that that applies to employers generally?

This would apply to a specified class or classes. Can the Minister say what is meant by a "specified class or classes"?

This relates to those whose income might exceed £2,000 per annum.

Is the information not available at the moment?

Not during the course of the year. The Deputy will appreciate that a return must be obtained from employers as to those members of their staffs whom they expect will earn less than £2,000.

In relation to employers, is there not a danger that eventually there will be produced the straw that will break the camel's back because of giving them more and more to do?

There may be this danger. I know there are objections by employers as to the amount of work they are obliged to do but, by and large, the system has now settled down and works reasonably smoothly. I do not think that this involves any undue burden on employers.

(Cavan): Is this not a section that could not be enforced? At the present time, there is an obligation on employers to make a return of the earnings of employees but this is going a step further and imposing an obligation on the employer to forecast what he expects his employees will be earning in the coming 12 months. Is that not so?

(Cavan): If the employers do not wish to give the information, this is not a provision that could be imposed.

I know what the Deputy has in mind but I think that this will operate satisfactorily in the majority of cases.

(Cavan): What exactly is the information the Minister is seeking?

If a person earns more than £2,000, there is a personal allowance of £500 coded in the PAYE system as a deduction.

(Cavan): This would be earned income?

Yes. If he earns more than £2,000 he will not be entitled to allowances unless he has a certificate authorising the deduction of £500. If his income is more than £2,000 he will be receiving more than the allowance to which he would be entitled. In effect, this is to ensure that people will not find themselves in the position of having been granted allowances to which they were not entitled and then having to pay back the amount in a lump sum perhaps.

Question put and agreed to.
Question proposed: "That section 6 stand part of the Bill".

I am not clear as to the meaning of this section.

Section 134 of the Income Tax Act of 1967 enables an individual to claim a deduction of one-fourth of his earned income subject to a maximum deduction of £500. The purpose of the section is to provide the minimum earned income relief of £125 for single and widowed persons and £225 for married persons. Where the earned income is less than these amounts, the relief will be restricted to the amount of the income.

I can understand what is aimed at but I am a little anxious about the way it is put here. The earned income relief provided for in section 134 of the Income Tax Act of 1967 is clear. It is statutory subject to a limit of £500. Does it mean under this section that if the earned income deduction is more than £225 or £125 as the case may be the earned income deduction shall apply?

If the amount of the earned income happens to be less than £225 or £125, does the section not mean that the earned income relief applies?

It is not intended to mean that.

This is what it says. It starts off by saying that the minimum deduction shall be £225 or £125 on the earned income relief, whichever is less.

No, or the earned income.

I understand.

Question put and agreed to.
Sections 7 and 8 agreed to.
Question proposed: "That section 9 stand part of the Bill".

This is a relief section, but while the measure of relief in the section is welcomed, it is worth indicating that it is not a very notable step forward. I cannot understand why, since this first came in in 1920, no worthwhile step forward was taken in relation to allowances for the earnings of wives. We have a situation developing in our economy where the working wife will play an increasingly important part in the development of many small and growing businesses in this country. This mild, slight amelioration of the position, while welcome, is something which I do not think justifies much bugle blowing. I would like to indicate that I can see a growing demand for much more along the lines indicated by section 9.

Question put and agreed to.
Question proposed: "That section 10 stand part of the Bill".

Is this children's allowance vis-à-vis income tax allowance?

Yes. It will take account of the increases in the social welfare children's allowances announced in last year's Budget Statement as well as those announced in this year's Budget Statement.

I have no social objection to this proposal but I must say I always thought one of the ablest things Mr. Seán Lemass did was when he disregarded the income tax allowances in relation to children's allowances. The amount of administration work which goes into this kind of thing is phenomenal and I am doubtful if it is worth while.

(Cavan): Is this retrospective? I gathered from what the Minister said that it is.

No, it is not. I know what the Deputy has in mind. It is because I said it took into effect last year's and this year's Budget. This is true but it does not operate as of last year. It only operates from the passing of this Bill.

It cannot operate from last year.

It would have a different provision if it operated from last year.

With respect to the Minister, it could not be made to operate retrospectively.

Question put and agreed to.
Question proposed: "That section 11 stand part of the Bill".

Is this dependent relatives?

Question put and agreed to.
Sections 12 to 16, inclusive, agreed to.

Amendments Nos. 4, 5, 7, 8, 9, 10 and 11 may be discussed together.

I move amendment No. 4:

In subsection (2), page 9, line 51, after "person" to insert "other than a registered sub-contractor under this section".

Section 17 of this Bill is a copy of section 17 of this year's British Finance Bill and, like its British counterpart, it is aimed at an evasion of income tax by labour only sub-contractors. I want to indicate to Deputies that we are dealing with a section now which is of the utmost importance to every Deputy in this House because the effect of this section, if it is passed as it stands, will be felt in every constituency in the country. As I say, it is aimed at an evasion of income tax by what are known in the income tax code apparently as labour only sub-contractors, who are more often known as "lumpers" in the construction industry.

We are dealing in section 17 with what is a most complex and difficult subject. Before the similar section— it is almost precisely the same— appeared in the Finance Bill of this year in the United Kingdom, a committee of inquiry, under the chairmanship of Professor E.H. Phelps Browne, was set up to inquire into certain matters concerning labour in building and civil engineering. This committee of inquiry went into the whole question of how labour was employed, deployed, organised and remunerated in the construction industry. Eventually this year, following the report of that committee, a Bill was introduced in the British House of Commons known as the Construction Industry Contracts Bill. This particular Bill, following this report, set out to deal in effect with genuine sub-contractors who employed labour, who genuinely contracted with a contractor, who had a known business address and settled place of abode. It set out to provide a standard whereby genuine sub-contractors in the building industry in Britain would be recognised and it provided for their registration. It also provided for other consequential matters.

That Construction Industry Contracts Bill was, in fact, run in tandem through the House of Commons with section 17 of their Finance Bill of this year. However, the Construction Industry Contracts Bill did not get a Second Reading because Parliament was dissolved. The result was that section 17 of the British Finance Bill was dropped and excluded from the Bill which eventually went through the House of Commons.

We find here—without any explanation, without any investigation, without any inquiry—that the people who sponsored section 17 have taken section 17 of the British Bill and put it in as section 17 of our Finance Bill, 1970. Do they, I wonder, realise what they are doing? Do they realise what is proposed here? I invite all Deputies to study section 17 so that we may understand what it is we are being asked to legislate here. Section 17 provides that every contractor, before he pays any sub-contractor, shall deduct from what is due to that sub-contractor full income tax at 7s in the £. No reliefs, no earned income relief, nothing whatever. He must deduct income tax at 7s in the £.

The contractor, who is generally the big man, can afford to finance his operations and pay his tax in due course on assessment; he can make his reckoning with the Revenue Commissioners. Under this proposal, every small sub-contractor will face a deduction of the full rate of income tax at 7s in the £ on his bill. No relief. No PAYE. There is nothing of that kind because the Revenue Commissioners are out to get the "lumpers". The "lumpers" are the fellows who club together, who have nothing else except their own labour, no material, no business address, nothing of that kind; they just lump together to contract for labour only and they are paid a lump sum. Up to this they got away with it on the basis that it was a contract price and not an earning or a wage. Now, in order to get these, it is proposed in this section that every genuine sub-contractor will be charged at the full standard rate of 7s in the £ which will be deducted as a matter of obligation by the big contractor from the sub-contractor's bill when he quotes his contract price.

This is an outrageous proposal. I do not believe the Minister was responsible for it. The Minister is experiencing what so many other Ministers for Finance have experienced over the years—stuff put in without Ministers being fully acquainted with it. It is the old system we always find here—legislation by bureaucracy. This section was, in fact, dropped in Britain because in Britain they were not able to get the associated legislation through the House of Commons. If section 17 of the British Finance Bill were enacted in Britain the income tax law in relation to sub-contracting would have provided that all sub-contractors genuinely in business, having a business address, or a known place of abode, observing the law of the land, providing for employers liability insurance, providing for PAYE in relation to their employees, would be registered and any sub-contractor who did not qualify would not be registered. The British Act would have provided that it was only in relation to a non-registered sub-contractor that the main contractor, when making payment, would have to effect a deduction of tax and so on.

Since this section was borrowed from the British Bill, the amendments I propose are designed to ensure that, if it does comes into our financial legislation, it will come in in the sense in which the British proposed it would operate in Britain. The purpose of the amendments is to provide, in effect, that the Revenue Commissioners, who desire to deal with the tax evasion involved in lumping, or in labour only contracting, will be obliged to establish and maintain a register of sub-contractors containing full particulars of their Christian names, surnames, addresses and, to qualify for registration, sub-contractors must satisfy the Revenue Commissioners that they, first of all, have a settled residence or business address; in other words, that it is not a nominee representing a floating group operating from construction site to construction site throughout the country which is, I gather, what this legislation was intended to cover; secondly, that they comply with the requirements of the Social Welfare Acts and operate employment in the sense that the proper social welfare contributions are paid; thirdly, that they comply with Statutory Instrument No. 28 of 1960, which is PAYE; fourthly — I regard this as of the utmost importance—that they provide in relation to those whom they employ proper employers liability insurance cover. That is what was proposed to be done in Britain. That is what this report is all about. That is why they introduced in Britain the Construction Industry Contracts Bill. That is how they proposed to deal with this problem in Britain.

I do not think it is unreasonable to ask that the same thing should be done here and, if it is done, it will be possible to differentiate between the genuine, hardworking, small contractors, who have a difficult job to keep things going, and whom it is proposed to tax under this section and discriminate against in a most unjust way, and those who fail to be registered because they have no fixed place of abode, no business address, do not observe the law in relation to social welfare contributions, or anything else. Let the section operate against them, which is what I anticipate it was designed to do.

My amendments are intended to achieve this end, subject to this: the genuine labour only sub-contractor organised himself and his mates to evade income tax, but what he did was lawful. It was not prohibited by the law as it stands and, therefore, I do not see why, if a section is being brought in to deal with that kind of tax evasion, such people should not get the ordinary reliefs available to other taxpayers. I do not see why the provisions governing PAYE, providing for the various personal reliefs, should not be available to them. That is the purpose of my amendment No. 6. It may not be very happily worded but the purpose is that the Revenue Commissioners should be in a position to allow a sum, in relation to the tax, to be deducted which is fairly representative of the reliefs such people would have been entitled to had they fallen naturally into the taxing ambit. I consider this section inappropriate. It is a pity that a practice, referred to frequently in this House on Committee Stage of this Bill, should be continued so blatantly. Sections are borrowed from British legislation and put into our Bills here without any association in relation to background or circumstances—in this instance, without any of the safeguards that were envisaged in Britain: just put into a highly technical piece of legislation.

No matter who we are in any part of this House, we are dealing here with legislation which is highly technical. It took me hours to work out the scheme behind section 17. I feel the loss in this debate of a man who was an acknowledged expert on these matters— the late Deputy Gerard Sweetman— but we have to carry on. It is a matter for protest that a section, described in the side note as one dealing with "tax deductions from payments to sub-contractors in the construction industry" should be designed to put a discriminatory tax imposition on every sub-contractor throughout the country. That this should be put into our legislation here, without any explanation, is wrong and I want to make a protest on that ground.

Amendment No. 12, which reads as follows,

In page 10, subsection (11), line 54, after "appoints" to add "but not before the 6th day of April, 1971".

proposes that the section, as amended. and dealing with what it should deal— purely the problem of tax evasion— should not operate until at least 6th April of next year. A fair warning should be given in relation to such a complicated matter. I have here the report on the distribution of labour in the building industry in Great Britain. Anyone reading it will appreciate how dangerous it is suddenly to alter a habit and a practice that has grown up. If this change is to come about, it is only fair that a warning of some six or eight months should be given as to what is involved and that this legislation should then take its effect after that due notice.

We are concerned in this Bill primarily with fiscal considerations and fiscal matters. At times, one forgets that the very operation of a tight, Draconian, fiscal legislation may have a very unintended but inevitable result on the economy. I do not blame the Revenue Commissioners. Their concern is merely further to tighten and to abolish loopholes in relation to the tax net. The very doing of that can, at times, have a very disadvantageous economic effect on the country. This is an example. At the moment, this country requires skilled labour. There is a need in this country for every man with a skill to be here at home. This kind of legislation can drive them away. If we have to hasten at all in this respect, we should hasten very slowly, indeed.

The purpose of the different amendments is to write into section 17 an obligation on the Revenue Commissioners to establish a register of genuine sub-contractors; to provide that on payments an employer or a main contractor may make to a person not registered as a sub-contractor there will be allowed the appropriate measure of relief that normally would be allowed to a taxpayer earning money on a building site; and, lastly, that the section itself should not come into operation upon the proposed day, which I think is the date of the passing of the Act, but after due warning has been given: the date I suggest is 6th April of next year.

The House is indebted to Deputy O'Higgins for the work he has put into this appalling section. Essentially, what is written in it is "Trust the Revenue Commissioners." It is a long way back in history since the Greeks, in their financial system, spied on one another. I would not trust the Revenue Commissioners outside the door of this Chamber. The essence of subsection (7) is: "It will be all right. The Revenue Commissioners will leave out honourable, decent people and will look after them."

There is nowhere in this section a provision for expenses incurred, let us say, by a sub-contractor buying materials. Why? Because it is intended to catch lumpers. Why then, when the section was being drafted, was not the word "lumpers" in inverted commas put in with a definition. This would be quite a simple straightforward job. Instead of that, we have these involved phrases, including the phrase at one place: "where a contractor makes a payment to another person whether a contractor or not." That could be construed as "whether to himself or not."

This is an appalling section. I had great sympathy with Deputy Gallagher on Second Reading when he made a rather different case against it from the case I am making now, just as Deputy O'Higgins made a different case against it a while ago. Let us not misunderstand the situation. Nearly everybody in this House who will speak on this section will pay his proper income tax. Therefore, he will not shed any tears over people who have been escaping the net being caught. At the same time, fair is fair and there is no point in delivering people bound hand and foot into the net of the Revenue Commissioners.

To err is human. The officers of the Revenue Commissioners being so hard pressed as they are—and everybody knows they are hard pressed; they cannot get staff at present—are bound to make errors, and these errors can cause grave trouble to people who, if they are lumpers or semi-lumpers, are hard-working people. I do not agree with creating difficulties for people who work hard. I do not think this House should create such difficulties. I hope the Minister will either approach the matter in the simple straightforward way I have suggested which, of course, never appeals to people who go in for this kind of legislation, or else that he will take the section out of the Bill altogether. I believe the Minister could get at this matter in a completely different way. I am convinced of this.

This group of amendments is designed to do something quite similar, in fact, in some ways to the proposals contained in the British Construction Industry Contracts Bill, 1970, which was abortive in the situation described by Deputy O'Higgins.

One can see at a glance that the group of amendments envisage a much more elaborate type of machinery than is envisaged in the section. This matter was considered by the Revenue Commissioners but it was quickly realised that the problems with which they were faced in Britain were very much more complex than the problems with which we are faced. There were many more items with which they were concerned; for example, the selective employment tax which does not operate here and many other items. Presumably they decided, because of the complex nature of their problems, that this elaborate structure was necessary.

However, in our circumstances it does not seem to us that a very elaborate arrangement of this kind is necessary at all. If it should eventually turn out to be necessary to have a more elaborate arrangement, this can be done. As of now, it is intended to have this arrangement as simple as possible and to impose the least possible burden on the construction industry. I might point out that the acceptance of these amendments could very well impose a much greater burden on the construction industry.

It seems to me that Deputy O'Higgins, in something he said and repeated at least once, if not more than once, did not advert to the provisions of subsection (7) because he stated that this subsection would operate in relation to all the sub-contractors in the country and would have the effect of deducting from payments due to them income tax at 7s in the £. This just is not so. To get this into perspective we must realise that.

Because of the provisions of subsection (7) this section should operate only in relation to sub-contractors or lumpers who are not paying their tax and making no returns to the Revenue Commissioners. The majority of the sub-contractors make returns and pay tax, so that we are dealing, in the first instance, with a minority of sub-contractors. Secondly, of that minority, those who have not heretofore made returns or who have not heretofore paid tax, have the opportunity now, before being caught by this section, of making arrangements with the Revenue Commissioners whereby they will get the certificate, and this section will not operate. There will be no deductions from the payments made to them if they have this certificate from the Revenue Commissioners.

So, we are left with a small group and they, in turn, may be divided into two classes. On the one hand, there are those who might be regarded as genuine sub-contractors, genuinely self-employed, who, despite the provisions of this section, intend to continue to evade their liability to tax. I do not think anyone in this House will shed a tear over them. The other class remaining are those who heretofore were employed people and in substance were working for a wage but, in order to avoid liability for tax, operated on the basis of being sub-contractors. These people in their own interests should be operating under the PAYE system and, if they go back into that system, this section will not operate against them at all.

What we are really talking about and dealing with here in this section are sub-contractors who have not made and will continue not to make returns to the Revenue Commissioners, people who do not want the Revenue Commissioners to know they exist. In speaking of them we are speaking of a small minority of sub-contractors. It seems to me that, while this is a problem, it is not a major problem. It certainly has not the dimensions or complexities of the same kind of problem in Britain and we do not need a very elaborate system to deal with it. At least, it does not appear at the moment that we do. In my view the simpler the system we have to deal with it the better and the less we impose on the construction industry in this way the better. Consequently, what is proposed in this section seems to me to meet the requirements of what needs to be done with the minimum amount of dislocation.

I want to reiterate that a sub-contractor who submits returns and accounts to the Revenue Commissioners, or who satisfies them that he genuinely intends to do so, will get the certificate required under subsection (7) and will, therefore, have no difficulty in the operation of the section. That being so, and dealing with a small class that could theoretically, at any rate, be divided into the two groups I have mentioned, it seems to me that what we are providing for here is designed to deal with this small group and, at the same time, to deal with them in as simple a way as possible.

The group of amendments proposed by Deputy O'Higgins are much too elaborate for what we need to do. I certainly think we ought to see how this section operates before we impose such an elaborate system on the construction industry.

I think the Minister for Finance does not know a great deal about the building industry. I do not say that just to be critical of the Minister or of what he has said but some things which he said this evening give me the impression that he does not understand the situation. Deputy O'Higgins's amendments have been fairly well documented and thought out and well presented. In my opinion he was dealing with the position of the sub-contractor and what the Minister was talking about was a different type of people, those we refer to as the lumpers—call them sub-contractors or anything you like. They are not as scarce in the building industry as the Minister seems to think. The situation has been forced on them because very many of these people travel long distances to work and do very hard work. The hardest work on building sites is usually the work taken on by the group who do the lumping job. Because they get no compensation of any kind from the Department of Finance they must meet their full income tax payments if they are making returns in the normal way despite the fact that they have to provide their own transport, meals and so on. They get no allowances for that. Their answer is that a group of them get together and carry out jobs under a verbal contract commonly known as a lump job.

There are so many loopholes in this that I cannot see that it makes very much difference. I agree with Deputy O'Higgins that this provision will catch the genuine sub-contractor, the little man who is doing small jobs of sub-contracting, who carries on a business. It will catch him because he works from a regular base at the same type of work and keeps accounts. Those the Minister is talking about are people who do not work from a regular base and do not keep accounts and in order to compensate themselves for their long journeys and the type of work they do they undertake this work under a verbal contract. Perhaps they work longer hours than is usual, work in all kinds of weather, and they work very hard.

What the Minister seems to have completely overlooked is that this is not a matter for him. As I said on Second Reading, this is a job for his colleague, the Minister for Social Welfare, who could very well do it, because I think the big point in this case is not the fact that they cannot be caught for income tax but that they do not stamp insurance cards and when one of them becomes ill or unemployed he gets no benefit from anybody. I believe the Government could very well investigate this aspect of the matter and do something about it. Usually, these people pass from one job to another. Some may stay with one firm for some time but that is rather unusual. Usually they go from site to site doing certain jobs under lump conditions. They move around until they find a site where they can do the same type of work. They do not have regular employment. In effect, the Minister is saying that somebody, say the first man to employ them, will deduct income tax at 7s in the £ from what they get even though there may be ten of them in the group and some may be entitled to tax free allowances or others —many of them have big families— even if they filled in income tax returns, would not be liable for tax in any case.

For days or even weeks they may not be employed on this sort of work. Then they go along to a new site. They move around from place to place. How does the Minister suggest they could be traced or that it would be possible for a main contractor to keep track of such people for the purpose of finding out what income tax they have already paid or should pay? Is the Minister about to create a new class of people who will be taxed on everything they earn whether they are entitled to allowances or not? He referred to the fact that this is different in the case of England but the only difference I see is that workers here cannot declare a wife in Ireland which very often happens in the case of a worker on the English side. He may get a tax allowance on that basis. They cannot do that here because it can too easily be checked. I believe the Minister is using a very big mallet to crack what is relatively a very small nut. The amount of tax involved is relatively small and the amount of trouble involved for the contractor and the Revenue Commission will, in my opinion, far outweigh the amount of money that could be collected in this way.

I do not know if this is a result of what was done in the British Parliament. That may be at the back of it, but if the Minister were determined to catch people who were not paying tax he could have looked in other directions rather than towards those people who are not earning such very big wages and whose income is not so great that it will yield the type of money commensurate with the work involved.

I appeal to the Minister to get somebody in the building industry from one side or the other to have a look at this matter because I am quite sure that while the Revenue Commissioners, from their ivory tower, may see this in a certain light, if the Minister gets the advice of somebody who really knows the situation he will find the problem is not what is suggested to him.

I do not know if the Minister knows what happens when contractors, not in the city, but in the country, take on, perhaps, 20 or 30 houses scattered over a big area. The usual thing is for them to get somebody to dig the foundations, somebody else to lay blocks, somebody to do the timber work and somebody else the tiling, and so on. These people are employed for only a short time and move from one job to another. They may have many other types of work. Small farmers particularly, are involved in this in a big way. Does the Minister suggest this provision should apply all round and that the main contractor should deduct tax at the rate of 7s in the £ from every £ irrespective of whether they are employed full-time or entitled to tax-free allowances or anything of that kind?

Perhaps I should have mentioned when I spoke that it is intended, before making regulations under this section that the Revenue Commissioners will have consultations with the various people involved, particularly in the construction industry. No doubt they will learn more about the building industry than I know but despite what Deputy Tully has said since he began he did not tell me anything about it that I do not know. I do not see what his difficulty is. He may have a difficulty in mind but he has certainly not made it clear to me that there is any insuperable difficulty in the operation of this provision. When he spoke about people moving around and not having fixed jobs or even fixed addresses, he suggested that the main contractor would not know what their allowances should be or anything else.

I agree this is so if the situation were to be that the main contractor were expected to know this, but he is not, and it is not only the main contractor, remember. The person who is paying the money to somebody like this will either have to deduct tax at 7s in the £ or the man to whom he is paying the money will produce a certificate from the Revenue Commissioners in which case the contractor who is paying the money can forget about it.

How long does the Minister think it takes for a certificate to come, at peak times, from the Revenue Commissioners to somebody who applies for it?

It depends on the kind of certificate.

I can tell him. Any type of certificate takes months.

I imagine the Deputy has in mind certificates of tax free allowances under the PAYE system. They cannot, of course, be issued until this Bill is passed.

They are not issued because the staff are not there to issue them.

That is a new point which the Deputy did not make before.

I did not think I would have to make it. I thought the Minister knew it.

I think he has to say a little more than that to make that a valid argument against acceptance of the section.

If the Minister goes down and looks at the offices he will see for himself.

From what Deputy O'Higgins and Deputy Tully have said, and even from the Minister's own remarks, this is not a particularly big problem here. If it is not, can the Minister explain why this section was taken holus-bolus out of a British Act without any inquiry such as Deputy O'Higgins has quoted from and in circumstances — and I think the Minister should advert to this — of a particularly difficult year for the building industry? There has been a protracted cement strike. There is a bank strike still continuing. The Minister himself is aware, as are the other Deputies here, that a great deal of the building in this country is done by small builders, particularly in respect of housing, and I suppose in a matter of this sort we are anxious to assist in every possible way with the construction of houses.

Undoubtedly in England it is a bigger problem and the extent of tax evasion and the amount of revenue lost may have been considerable. At any rate, it was so important that the authorities there, apart from the comparable section in the legislation there, had also drafted this other legislation, which as Deputy O'Higgins and the Minister remarked, has fallen by the wayside because of the election.

If, as the Minister says, there is a very small group that may be caught, then the extent of the loss of revenue cannot be considerable, and I think Deputy Tully is to a great extent correct. Already this year I have known of cases under PAYE where, because of the changes in the allowances made in the Budget and the need to amend certificates of tax free allowance or other allowances that are granted under PAYE, at least two amendments had to be made in order to effect them. In these cases the person's income was known because the salary was a fixed one and there was not any of the complications that arise in this instance. However, I would suggest to the Minister that what should be done is to consider the substance. It may be in the circumstances that the type of machinery which Deputy O'Higgins has provided is more elaborate than is necessary, but the only reason for introducing it is the manner in which this section was originally drafted and the fact that the safeguards and the machinery that were intended to be provided in the British legislation are not being provided here.

Some indication should be given, before a section of this sort is drafted, of the estimated revenue loss. It is important not to make a change especially at a time when the Minister's colleague, the Minister for Labour, announces that he is making special efforts to attract back Irish personnel who have particular skills, who are working in Britain and who have been canvassed or notified of suitable vacancies existing here. In many cases the people commonly described as "lumpers" are people with special skills and, as Deputy Tully rightly pointed out, in most cases they go from job to job and they might be very far away before the detailed particulars which the revenue certificate would require to be available.

I should like to support the idea behind Deputy O'Higgins's amendment and also the pertinent remarks which were made by Deputy Tully as to the possible serious effect of this particularly in a year in which builders, especially small builders, are having a difficult time because of the credit situation, the prolonged bank strike and the lengthy cement strike. The provisions that are being made here should at least allow for notice, such as is provided in the amendment tabled by Deputy O'Higgins, that this section would not operate until April, 1971.

(Cavan): The Minister has taken a section, section 17, out of a British Act of Parliament and put it into this Finance Act as section 17. Normally objection could be taken to that, especially if it deals with a problem which has assumed considerable magnitude in England but which is a very much smaller problem, if it is a problem at all. However, the Minister has gone much further here, because he has taken out of an English Bill a section which was subsequently deleted from that Bill before it became law, because another Bill which was going through the English Parliament and which provided certain safeguards against the effect of this particular section was dropped.

This is unpardonable. It shows that once the Minister gets the scent of something in a British Act of Parliament which he thinks might be useful here in enforcing his revenue laws he will hold on to that at all costs and he will out-do the British. Even when they have decided that it would not be safe to proceed with it in certain circumstances, the Minister says: "I will operate it here anyway. I will enforce it."

I should like to ask the Minister how he draws a distinction between a sub-contractor who is operating for a large contractor and a small contractor-in-chief, if he knows what I mean, a small one-man contractor who is carrying out small contracts for citizens. How does the Minister draw a distinction between these two? I feel that this is the thin end of the wedge and that it is imposing a very heavy burden on the contractor and on the sub-contractor. Furthermore, it seems to me that it is an extension of the practice which seeks to make the citizen a collector of taxes; it is an extension of the PAYE system. It is hard to see where the line will be drawn or how far this practice might be extended to cover other forms of service rendered by one person for another. This was obviously the brain child of the British Department of Finance or its equivalent and they did not proceed with it. That is the important thing. They apparently did not consider that it would be reasonable to proceed with it without building in certain safeguards.

I agree with Deputy O'Higgins and other Deputies who have spoken about subsection (7) which says that the tax need not be deducted if a certificate is provided. I could see a genuine sub-contractor being held up for ages in obtaining the necessary certificate while the Revenue Commissioners made inquiries about him and got him to fill in forms. Very often the sub-contractor will not be a very learned person. He will not be skilled in the art of filling forms and he will be reluctant to fill them up. The result will be that it will be well-nigh impossible for him to get the certificate under subsection (7) of section 17 which would enable the contractor to pay him in full.

The Minister should give much more consideration to this and he should drop it until such time as he has considered it and is able to put before the House or to write into the Act adequate safeguards. Failing that, he should accept Deputy O'Higgins's amendments which are designed to provide the safeguards which the British Minister and the British authorities thought necessary before introducing this section.

I merely want to support the other speakers. The Minister here has become the great lumper himself. He has lumped together what are known as "lumpers" and genuine sub-contractors. He has made no effort to distinguish between them in the legislation he has drawn up. We have often heard complaints in this House about government by regulation where the Minister passes an omnibus section and then makes regulations under it. We are going a step further now: we have government by the Revenue Commissioners. It is not written into a statute; it is not written into a regulation which can be considered by the House afterwards; it will be done by a certificate issued by the Revenue Commissioners. This is going a step further than usual; it is legislation by somebody outside this House.

The Minister has quietly referred us to subsection (7) and there it is stated that people will be exempt if the Revenue Commissioners give them a certificate. If they get that certificate all they need do is produce it and they have no further trouble. Bob's your uncle after that. They must get the certificate from the Revenue Commissioners. Deputy O'Higgins has endeavoured to provide safeguards. He has put a lot of work into this and he has endeavoured to include stipulations in the Bill to protect the taxpayer so that they will be written there in black and white and he will not have to go afterwards cap in hand to a Revenue Commissioner to get his exemption.

The law in this country as regards revenue is very different from the ordinary law. Under the ordinary law one is innocent until one has been proven guilty. When one is dealing with revenue one is guilty until one has proven one's own innocence. The position here will be that the citizen will be obliged to go along and try to get this certificate from the Revenue Commissioners. The Revenue Commissioners may do it very fairly; they may not. It is only proper that the citizen should be given protection and that his exemption should be written into the Bill now going through the House.

The Minister in effect has said: "This is all right. None of the general effect that I have indicated will happen. This will fall only on those for whom nobody in this House would hold a brief." That is all very well. We must regard all legislation here, particularly financial legislation because it is imposing taxation, with considerable suspicion. This is not said in any aggressive or vindictive manner. It is the duty of Deputies so to regard legislation of this kind in this House.

Section 17 tells us that in this section

"construction contract" means a contract whereby a person is liable to another person to carry out construction operations or to be answerable for the carrying out of such operations by others, or to furnish his own labour or the labour of others, in the carrying out of such operations.

That is what a "construction contract" is and that applies to any agreement between one man and another relating to any aspect of the building industry. Therefore, this section is of general application.

Subsection (2) says:

Subject to the provisions of this section where in the performance of a construction contract, whether made before or after the commencement of this section,...

The next thing we know is that in this section of general application provision is made that it will have retrospective effect.

It will apply to all contracts whether made before or after the introduction of the section.

The Minister says "No".

May I interrupt the Deputy?

Certainly, I would be glad——

I say "no" because the effect of it is that it would apply to payments made after the passing of the Act, whether made on foot of a contract entered into before or after the passing of the Act. It only relates to payments made after the passing of the Act so I do not think that it is accurate to describe it as retrospective.

What would you describe it as, Minister?

I do not think it is inaccurate to describe it that way. A contract has been entered into today, say, before the passing of the Act, under which a building operation is to be carried out at my behest because I have entered into a contract with Deputy Fitzpatrick or Deputy Tully. That is entered into, say, even before the Bill was introduced here. Payment comes to be made on the 1st August and under the provisions of this section when I am paying Deputy Tully for the work he contracted to do for me I am obliged to deduct tax at 7s in the £. Now, that obligation was not there because it could not be there when the contract was entered into; it was not there because it could not be there because it was not the law when the contract first went into operation. It is the law when the contract is completed and when the contractor exacts the contract price from the principal. Surely that is clearly retroactive and retrospective legislation.

I indicate that for the moment because we have a Constitution, people seem to forget, which does not look kindly on legislation which is retroactive and retrospective. That is as I read subsection (2). It applies to contracts entered into before the commencement of the Act under which payment is made after the operation of the Act.

Yes, but after the operation of the regulations. The principle is the same.

The principle is the same. It is, in effect, putting a charge on the consideration of a contract which could not affect and was not properly affecting that consideration, or purchase price, or contract price at the time the contract was entered into. That is retroactive in the sense I have said so that we find a section of general application applying to all contracts between one man and another affecting building operations, which affects contracts entered into before this legislation is passed.

What does it do? This section provides that where the principal, that is, the person who engages the contractor to do the building operation, whatever it may be, makes a payment to another person obviously in pursuance of the contract, where he proceeds to pay him as the contract provides for the work he has done, he shall deduct from the payment and pay to the tax collector at the rate of 7s in the £, or at a rate equivalent to 35 per cent on the amount of such payment. Now, that is an extraordinary Draconian piece of penal legislation, putting this obligation on a principal, who may be a building contractor, probably would be, who is a big man in a big way, who is well able to finance his own business and pay his own tax in his own time. When he is dealing with the small contractor he has an obligation imposed on him to stop 7s in every £ and pay it over to the collector of taxes.

I call that Draconian; I call it punitive and I call it penal. I do not understand why it should be imposed. After all, the person being dealt with, be he a lumper or a labour only contractor, is not a criminal. He is a person who did something which was perfectly lawful to do, who entered into a perfectly valid contract, who was infringing no law, who was offending no regulation, who was doing something which the law entitled him to do, freely to enter into a contract with his fellow man, freely to engage that man, to pay him a contract price, whatever it may be. That was his lawful right so to do. However, under this legislation we are providing that when he comes to be paid the other contracting party is put under a legal obligation to take from him 7s in the £ and give it to the collector of taxes.

I wonder do Deputies appreciate what we are doing? This was never a liability. There was no such tax known to the income tax code and still when this man, having fulfilled his contract, comes to be paid his other contracting party is suddenly turned into a punitive tax collector, stopping from him 7s in the £. Is it appreciated what is involved? The Minister says it is only going to be the fugitive itinerant lumper. Mark you, you will hear a lot about them. I warn the Minister. He says it is only going to be those but will that be so? This is of general application and the very moment this is passed — let every builder in the country realise what we are doing — in relation to every payment a builder makes from the moment of the passing of the Act he will have to deduct 7s out of the £ in regard to his electrical sub-contractor, his decorator, the person who does the heating installation, or whatever it may be on the site and pass it over to the collector of taxes. That is what the section says.

There will be no earned income relief, not even the 25 per cent that is provided in the Income Tax Act, that cannot be stopped; no allowance in respect of children, dependent relatives or anything of that kind. Seven shillings in the £ must be stopped and not a halfpenny less. That is what we are providing here. This is all done because suddenly in the last few months people began to be sensitive about the term "lumper". In England they have a more complex society. They have greater problems and they have problems arising from people who go to work there and whose relatives may not be precisely recorded or known.

We have none of these difficulties. It is not very difficult in this country to know where a person is at any time. I suggest that this is not a problem here which justifies this kind of section. This is something which was done because it was being done in England and the people responsible for our finance legislation got the wind of the word and adapted section 17 of the English Finance Bill, put it into this Bill and then, lo and behold, they dropped it from the English Bill and we are faced with a problem.

The Minister has got to make a defence for it now. Whatever problem there is regarding "lumping" it does not justify the kind of disorganisation that this section will cause in the building industry. As an afterthought the Minister said that regulations will be made and that there will be consultations with the affected people, but how does the Minister know that? If I asked the Minister a Parliamentary question as to what the Revenue Commissioners propose to do about some matter, the Minister could tell me to mind my own business and say he had no statutory responsibility for what the Revenue Commissioners might do.

Regulations under this section are made not by the Minister but by the Revenue Commissioners and with whom they consult is known only to the Commissioners. In this House we cannot afford to take this attitude. It is our job here to pass legislation and not to do so in the fond expectation and belief, born of charity, that the Revenue Commissioners will do the right thing. All these matters should be written into our legislation and the only way to write them in is to do what I suggest: compel the Revenue Commissioners to draw up a list of genuine registered contractors in this country. Once they do that there cannot be any quiet undertakings given and everybody will know precisely where they stand.

Deputy Tully said something I consider very important. One of the problems associated with "lumping" in this country—and the practice is not so extensive as to justify this section—is not tax evasion but it is the fact that a group of men are organised together to work for a lump sum price and they are not insured. For the course of their employment their cards are not stamped and contributions are not paid in respect of social welfare and there is no insurance in respect of ordinary third party liability. That is the important point and it was that aspect of "lumping" that was dealt with in the English Construction Contracts Bill providing for legislation. They made it a sine qua non of a genuine contractor that not only should he have a permanent place of business or abode but that the statutory provisions in relation to insurance contributions and so on should be observed. I do not see why this cannot be done here because it is a perfectly simple thing to do.

There is no urgency in this legislation. If it goes into operation immediately its impact will be felt at once on the building industry and many people will be upset and troubled. The Minister says that you can get a certificate under subsection (7). I say to the Minister that to suggest that as a satisfactory answer to the problem posed here is utterly impracticable. It just is not on that there will be a blanket safeguard for the genuine sub-contractors in this country, that they will get certificates from the Revenue Commissioners directed to the other party — the larger contractor — to pay them without deductions. The Revenue Commissioners will not drop all their work and issue certificates for all the sub-contractors in the country.

What will happen is that many inoffensive, small, hardworking contractors, who are trying to better themselves, will find the money they earn reduced by 7s in the £. It will be handed over to the collector of taxes and they will spend the next two or three years trying to get it back. In England they had a problem and they proceeded to deal with it. However, the people in this country who read the English Bills said: "That is a very good section; we will put it into the coming Finance Bill" and that is why it is in our legislation. In common decency it should be removed and with its removal we will have a vastly improved Bill.

There is no doubt that one of the difficulties with which this House is faced in regard to this section is that the Civil Service can never be wrong and of all the people in the Civil Service the group who can absolutely never be wrong are the Revenue Commissioners. The draftsmen might make mistakes in drafting and even the lordly Department of Finance have made occasional errors, but not the Revenue Commissioners. The best thing the Minister could do would be to scrap this section completely, but of course he will not do that.

(Cavan): He might.

I do not believe he will. The Minister may have gone up in the world but he has not gone up in the world to that extent.

The Deputy spoke this evening about support for the prevention of tax avoidance. I hope we will continue to get it.

I certainly agree with that. The law should be stated so that people will understand it and, when they understand it, that it will be seen to be the most direct and reasonable way of collecting the tax. There is nothing direct or reasonable about this section; in fact there are many extraordinary statements in it. I shall quote one such statement:

"construction operations" means operations of any of the following descriptions...

(b) the construction, alteration, repair, extension or demolition of any works forming, or to form, part of the land...

The land is there and yet there is reference to works forming part of the land. Definitions like this are complete nonsense and there are many such definitions in this Bill. There are all kinds of contradictions in it. Regardless of how cleverly it may be construed, it is an unalterable fact that subsection (7) means, "Trust the Revenue Commissioners", but they do not even trust themselves because in subsection (7), having said they will give a certificate, they go on to say:

Provided that the Revenue Commissioners may at any time withdraw such notification...

Subsection (9) states:

Every regulation made under this section shall be laid before Dáil Éireann...

That is just rodomontade. To the best of my knowledge, no regulation ever laid on the table of this House has ever been rescinded. There is no use in contending that by the insertion of a subsection like that anyone is being safeguarded.

The Minister has not answered the point I made originally which was: Why was this problem not tackled in a direct way by saying that in the case of "lumpers" a deduction may be made for tax? Of course, in the case of "lumpers" it would have to be made as a deduction on PAYE. Let us take the case of a "lumper" who earns £2,000. I have a contract to pay him £2,000 but when he comes along to be paid I hand him £1,300 and I tell him that he is now paid under this section. If he is a genuine "lumper" I can imagine the language he would use. He would soon tell me what I could do with the money.

Neither in his Budget speech nor in relation to this section has the Minister told us what amount of money is involved. He has not told us whether £10,000 a year revenue is involved or whether it is £100,000 or £1,000,000. I do not see why any legislative assembly should be asked to swallow this kind of legislation without being told what amount of money is involved. Having watched the Revenue Commissioners operate for many years I have great respect for their estimates of what the effect of any change in tax will be. They are usually accurate to a degree that nobody would expect. I have not the slightest doubt that the Revenue Commissioners have told the Minister the amount of money they believe is involved but the Minister simply will not discuss it here.

Despite what the Minister said to Deputy O'Higgins, I do not know whether they expect by indirect methods, and this business about the certificate, to get back tax by making the section retrospective. How will a person get a certificate? It is no use for the Minister to come into the House and simply say, "There it is".

Subsection (2) says:

...the principal makes a payment to another person (whether the contractor or not and hereinafter referred to as the sub-contractor)...

That is one of the best phrases I have ever seen in a Bill. He is a contractor one minute and "hereinafter he is referred to as the sub-contractor". One might also say the contractor pays himself.

Will the Minister tell us two things? First, will he tell us there was no other method of dealing with this problem than this? I do not believe that is the case. I believe there was a simple and direct method of dealing with it. Secondly, will he tell us what amount of revenue is involved and what the Revenue Commissioners have been losing up to the present time? If the Minister answers these questions the House may be able to come to a reasonable decision on the matter.

I have enough respect for the Minister's common sense to feel very strongly that this section of the Bill has not come to the House through his initiative. The only concern of the Revenue Commissioners is to get the maximum amount of money but when a piece of legislation comes before the House it is our job to try to ensure that it is not passed unless it is sensible and unless the effects of it will be good for the country. If ever there was a provision which could be described as penny wise and pound foolish it is the piece of legislation which we are considering here this evening. I cannot believe that any sensible person would expect us, as Deputy Hogan said, to put what are normally known as sub-contractors and "lumpers" in the same category. The Minister knows enough about the building industry and about contracting to appreciate that it is possible to have a sub-contractor who is a much bigger man than the main contractor but who is now expected to be responsible for his tax. For instance, a small builder might have to bring in a heating contractor who may be carrying enormous contracts throughout the country. Nevertheless, this small builder, if this legislation goes through, will be expected to be responsible for the big man's income, so to speak.

Deputies have spoken about what has happened to the building industry in the past year with the enormous increases in the cost of building houses and the consequences of those increases in the enormous prices of houses and the inability of people to pay these prices. So much work is now done in the way described that the immediate effect of this legislation can only mean that labour costs will increase by one-third. Does the Minister want to do this? Does any Deputy in this House want to see labour costs in the building industry increased by one-third? We all know that the labour costs of any building today amount to 65 per cent of the total cost of the building. We should not allow this consideration to pass lightly, because, if we are not concerned about the price of houses and the cost involved, we ought to be. The price of cement this year was allowed to be increased by £1 19s per ton. The price can go up again and the Minister for Industry and Commerce is unable to do anything about it. Nearly 5s of the most recent increase was attributable to wage increases and this has added to the cost of building, which nobody in the Government seems to be concerned with. The effect of this piece of legislation will be to increase labour costs by one-third. It seems incredible to me that anyone could contemplate costs in such legislation.

Deputy Tully spoke in some detail about the conditions under which these unfortunate men who are referred to as "lumpers" have to work and the reasons why every penny should not be extracted by the Revenue Commissioners. These men have to travel long distances all over the country, sometimes on motor bikes and sometimes in old cars or in buses. My belief is that if we try to extract the pound of flesh from these men we will strike the building industry a further blow in this present year. This is a serious matter. These men are called on to work long hours when the weather is good. They may be idle for long periods due to severe frost or heavy rain or for various other reasons. They are treated as if they were normal workers going a normal distance to their work and having a 9 a.m. to 5 p.m. job. If they are getting away with something in the tax line, I believe they deserve to get away with it. They work in extraordinary conditions.

The only effect this legislation could have, if passed, would be to slow down the building industry. Every county in Ireland needs a large number of houses. Do we wish to reduce the number of houses being built? If anything has given a fillip to the building industry it is the "lumping". It has induced men to work as they never worked before and has induced them to stay out in bad weather, travelling long distances and feeding themselves in a haphazard sort of way. As regards income tax they are treated as if they were earning their wages in a normal way under normal conditions. There is nothing normal about a building worker's job. That is generally recognised. If this legislation goes through I hope the Minister will have the good sense to see that this section is deleted. The Minister will be sorry later on if he does not have it deleted because its effect will be apparent almost immediately in the increased cost of houses and in reduced output in the building industry. Men will not slave and do overtime and, as I have been told, they will not work for the Revenue Commissioners. Even though they might be doing an extremely important job to assist many families living in overcrowded conditions they will not work if we extract the last penny. By the time it is collected there will be an amount of evasion which it will be impossible to track down. We will have inspectors watching if this legislation goes through. If ever there was a piece of legislation that demonstrates the meaning of the saying "A penny wise and a pound foolish", this is it.

Deputy O'Donovan made a comment which we have been discussing on these benches. If a group of people take on a job for £2,000 and do the job, when they are finished, according to this Bill if passed, the contractor will give the sub-contractor £1,300 and say: "That is yours. The Revenue Commissioners want the other £700". The Minister said earlier that a certificate can be obtained which will make it unnecessary to have this done. As I see it the contractor will employ a number of people on timerate. This happens often. They are getting no allowance for their travel if they decide to take on "lumping jobs". A few years ago the "lumping job" was the bane of the building industry. It was felt that the type of work being done was not good. Eventually those in charge realised that the clerk of works was responsible for inspecting the work and for seeing, whether it was time rate or a "lumping job", that it was done properly. It became known that the men would not be paid if the job was badly done. "Lumping" has developed into something respectable. "Lumping jobs" are being done in the building industry because otherwise the men who are employed on the jobs would not earn enough to compensate them for the long hours.

It is not unusual for men to get up at 5 a.m. and to leave their homes at 6.30 a.m. so as to arrive in the city, 40 miles from their homes, at 8 a.m., and to work until lunch-time at 12 noon on a cup of tea that had been boiled in a black can. The men might have a few sandwiches and tea around 1 p.m. and then start work again. After more tea in the afternoon, they would work until 6.30 p.m. and they might work until darkness fell and then drive home again. They get no allowance for travel or for meals. The income tax authorities say they are not entitled to an allowance for the car used travelling to and from work.

The employer of these men can start from the same base several hours later and travel to his office, inspect the work and drive home after entertaining business associates to lunch. The employer gets an allowance for everything. This does not make sense.

It became known that some men were trying to make extra money and to defraud the Revenue Commissioners of something which the men believed the commissioners were not entitled to. An elaborate section is being put into this Bill for the purposes of preventing this. The Minister would be well advised to have a look at this provision before going further. Many of these people might be entitled to a tax remission. It is no answer to say that it is easy for them to get a certificate from the income tax authorities if they go on "lumping jobs" and that the certificate would relieve them of paying income tax. At the present time the Revenue Commissioners are unable to get PAYE forms out to the people who are entitled to them. They cannot get the amended tax forms out because they cannot get staff.

We have not passed the Bill yet.

They have sent a few of them out. The Minister should be sure of his facts.

It is not our fault that the Finance Bill is not passed.

It is the Minister's party's fault.

The Opposition have been talking at length on all sorts of subjects and would not take the Bill.

You were too busy.

It is the Deputy's party who were too busy. This Bill was offered to the Opposition a long time ago.

You were too busy discussing the best place from which to buy arms at a cut price.

That is the Deputy's version. Keep to the facts.

The Deputy must discuss only what is relevant to the Bill.

As we may yet see, the Finance Bill may be very relevant to the buying of arms. When somebody speaks from behind the barrier, a Leas-Cheann Comhairle, it is usual for the Chair to make some comment.

I was only saying, under my breath——

The Parliamentary Secretary speaks rather loudly under his breath.

He was soliloquising.

——that the Labour Party are not a political party but that they are the lengthiest political crisis in history.

Listen to the lecture.

I am not lecturing anybody. It was just a thought that came to my mind at the time.

It was not what the Deputy said from outside the barrier. There have been many strange happenings in the Deputy's party and some extraordinary results have been produced, including the Deputy.

The Deputy should not threaten the House.

I am not threatening anybody. I have been in this House for much longer than the Deputy but because of certain happenings within his party, the Deputy was appointed a Parliamentary Secretary and he now has the audacity to interrupt from outside the barrier a speaker who has been here very much longer than he.

I had the courage to come inside the barrier and repeat my remark.

I have never attempted to threaten anybody in this House and I do not propose to start doing so now with Deputy Andrews because it is not necessary.

One of the points I wish to make about the Bill is that the Minister or whoever was responsible for drawing it up was not sure as to what was meant by "construction operations". In this country, the phrase is usually taken as meaning the construction of buildings of one kind or another but, lo and behold, this Bill interprets "construction operations" as including alteration, repair, extension or demolition of any works forming or to form part of the land, as pointed out by Deputy O'Donovan, including walls, roadworks, power lines, aircraft runways, docks and harbours, railways, inland waterways, pipelines, wells, sewers, industrial plants and installations for the purposes of land drainage. If that is construction work then I am afraid that some of us have been using the wrong dictionary because the dictionary which defines all of these activities as "construction work" is one which I have not yet had the opportunity of seeing. Perhaps the Minister will lay it on the Table of the House at some stage?

The question of land drainage raises a point which strengthens the argument I made earlier. It is not unusual for persons who normally do not carry out any type of contract work to take up a job on land drainage. They may be employed on such work for a couple of months but they may never do that type of work again. However, if this Bill is passed, the person who is paying the money must ensure eventually that 7s in the £ is deducted from these people who, in the normal way, never had anything to do with employment or tax of any kind. This is written into the section in a vindictive kind of way.

I cannot understand why this type of work should be singled out for inclusion in a section of a Finance Bill thereby ensuring that the people concerned can be hounded for the small amount of money that would be recovered as a result. I said earlier that it is difficult to get the certificate which the Minister seems to think it is easy to obtain. I would go further and say that it is not because the employees of the Revenue Commissioners are not doing their job but because they cannot overtake the work. I would suggest that the number of staff available and the conditions under which they work render it almost impossible for them to keep their work up to date.

As the Minister is aware, I am the general secretary of a trade union and in that capacity I receive complaints every day from people who have not received their tax-free allowance although they have returned completed forms. This is because the staff have not the time to overtake the work. That being so, is it not then remarkable that here an entirely new set of arrangements are being introduced which are supposed to be operated by the Revenue Commissioners for what I believe will produce only a very small amount of money?

I am not sure whether or not there is some particular aspect of this which the Minister has in mind but which he has not disclosed to the House. I would suggest to him that if he is aware of some shortcut by which this scheme could be operated, he should tell us. Would he tell us what exactly he means when he says that a certificate can be obtained from the Revenue Commissioners? How will that operate as between one employer and another? Will it be on the lines of a P 45 form? What will happen with regard to this year, for instance, where very many building workers have been out of work for 20 and 21 weeks?

Hear, hear.

Will they be able to obtain the certificates that will allow them to go tax free or, at least, to pay a reduced amount of income tax? Why has the figure of 7s been decided? Will the 7s apply in cases where the sub-contractor, as somebody over here said, is bigger than the contractor himself? If he does not complete a tax form, how will he prove to the contractor that he has done so? What sort of documentary proof is required? If this is not done will it follow that, whether he is liable to tax at 9s in the £, the tax he will be paying will be 7s in the £1 because some of the contractors would be very glad to get away with paying 7s in the £1? Some of the bigger contractors would find it very convenient if that were the case.

These are questions which, although it might be boring for the Minister to explain to the House, must be answered. If we are to deal with this matter we should be made aware of all the aspects involved. The section is very extensive. It is extraordinary that so much trouble has been taken. It is even more extraordinary that in this Bill of more than 60 sections, no effort has been made to deal with the matter I have referred to twice already, that is, the question of travelling allowances for these same workers. If they got a fair deal on that question, I believe they would have no objection to working ordinary hours at hourly rates and having income tax deducted in the normal way.

First, I shall deal with some of the criticisms made against the wording of this section. Deputy Tully seemed to be amazed at the definition of "construction operations". However, I would suggest if I were to tell him that a building operative entitled to rates negotiated by his trade union was the only one who was engaged in the construction of a building Deputy Tully would very quickly tell me I was talking through my hat and would proceed to list the various operations to which those rates would apply and he would give me the list which is in this section.

Except land drainage.

That is not the case. He did not refer to land drainage but he referred to all the others. I am talking about the wording of the section first and the criticisms made of it. Deputy O'Donovan also criticised it. In the beginning of the debate on section 1 he made a similar criticism of the wording of it and he made a plea for a simple straightforward placing before people of the law. It is surprising really coming from a man of the experience of Deputy O'Donovan. We would all love to have this situation. If it were possible the legal profession would never have been heard of but it is one of the oldest in the world.

It is the second oldest.

I said it was one of the oldest. The efforts of people to do this simple straightforward thing produce a lawyers' paradise. I regret it and I am sure most of the Deputies here regret this. Inevitably in any system, but particularly in the interpretation of law, certain jargon and technical terms are developed which may be objectionable but which mean precisely certain things. When you depart from that you run into trouble.

I had something to do with Finance Bills and every time I drafted something I tried to draft it simply.

I would accept that the Deputy endeavoured to do it very simply but I would not say he succeeded. The next thing I want to refer to is that Deputy Clinton said the implementation of this section would add one-third to the cost of labour in the price of houses. He can only have arrived at that conclusion on the assumption that every single sub-contractor or every single housing jobber (a) was not paying his tax, (b) was not willing to say: "I will submit accounts and therefore give me a certificate" and (c) was saying: "Because I was not paying tax before and now I will have to pay tax, my prices will have to go up by one-third." There is no other possible justification for what the Deputy said. It is obviously ridiculous. We are talking about a relatively small number of people.

Did the Minister never hear the term in the building trade "lumping"?

Has the Deputy just come in?

The Minister may have been talking about it all night but obviously he does not know what it means or how it operates.

The application of this section, as has been pointed out, is relatively wide, certainly in regard to anything to do with what is commonly known as the building industry. Theoretically it is relatively wide. This is why I said at the beginning that in practice we are concerned only with a minority of sub-contractors because the vast majority of sub-contractors are people whose operations are within the definition of this section but are people who submit accounts to the Revenue Commissioners and pay tax. Such people, of course, will not be affected by this section. Even if you take those who have not been submitting accounts and have not been paying tax, they can get in under this section. They can get a certificate and they will not be affected by this proposed deduction.

The people who are generally referred to as "lumpers", as distinct from those who have been referred to as genuine sub-contractors, will be affected. Some genuine sub-contractors will be affected too but they are a minority. The people known as "lumpers", whose activities have been described, will be affected. It is intended that those people should be affected.

Is it intended that some genuine sub-contractors will be affected?

None who either have been submitting accounts or who now undertake to submit accounts and thereby get their certificate from the Revenue Commissioners. I was asked a question about how much was involved in this. Indeed, Deputy O'Donovan expressed the view at the time that I had been told by the Revenue Commissioners what the number was but was not disclosing it to the House. May I suggest to Deputy O'Donovan and to the rest of the House that it is impossible even for the Revenue Commissioners, to whom Deputy O'Donovan paid a tribute for the accuracy of their estimation, to estimate the amount of revenue lost by evasion. Evasion by definition means that you have not got a record of it and you do not know it so you cannot estimate it. However, although it cannot be estimated with any degree of accuracy there is evidence available to suggest that this practice is fairly extensive with a consequent loss of revenue. Perhaps even more important, this practice is likely to grow with consequent substantial increase in revenue loss, unless some action is taken.

The amendments which we are discussing are, I think, designed to deal with the case of what might be described as genuine sub-contractors. Such people have no worries at all in this because they just carry on as they have been. They will get their certificate and carry on as before. Assuming they have submitted their accounts and paid tax, there will be no problem for them under this section. A case has been made for the need for skilled men, the need for productivity in the building industry. I acknowledge both of those needs but I do not think we ought to try to satisfy those needs by saying: "Let them carry on evading tax." If we think a special case exists because of the grounds mentioned, the need for skilled men and the need for increasing productivity in the building of houses, for a special incentive by way of exemption from tax then it ought to be done in that way and not simply by closing our eyes to evasion.

I am sure other Deputies in this House have as much experience as I have of the ill-feeling which can be generated by people making substantial sums of money not paying tax. This applies in various areas but in particular it applies in this area. I know from my own experience of the ill-feeling that this can generate. I do not want to depart from the terms of the Finance Bill except to say that it operates outside the area of evasion of income tax.

The British proposals have been referred to. Some Deputies appear to have misunderstood the position; they seem to think the British decided not to go ahead with their proposals because they thought better of them. I think one Deputy did say that. That, of course, is not the position. The position is, as was stated by Deputy O'Higgins: the proposals were in tandem — one was in their Finance Bill and another was in the Construction Industry Contracts Bill. They were bringing both forward together but, because of the advent of the general election, the Construction Industry Contracts Bill had to be dropped. It could not be proceeded with and, consequently, the provision in the Finance Bill was dropped.

In our consideration of the matter, irrespective of whether or not the British had gone ahead with their proposals, we did not intend to go ahead with similar proposals for the reasons I have indicated. Our problems are different. They are less complex. It seems to me we ought to try the relatively much simpler arrangements proposed here before we start elaborating further. If, as a result of experience, we find it necessary to make our provisions more elaborate, we can think about it, but we should not start on that basis.

Can the Minister say if the provisions introduced in Britain apply in Northern Ireland?

I could not say offhand. Whether they do or not is not really relevant to the problem we are dealing with.

Except that their conditions would probably be similar to conditions here.

That could be, I agree. It has been suggested that the effect of this section is to operate retrospectively. I want to make it clear that, first of all, we are dealing only with an obligation to pay income tax, an obligation which existed irrespective of whether or not the contract from which the income arises was entered into before or after this Bill comes into operation. Deputy O'Higgins contended that what we are doing is applying this to moneys arising from payment on foot of a contract entered into before the Bill was introduced at all. If you take a contract which was entered into before the Bill was introduced, then any moneys falling to be paid on foot of that contract, whether before or after the passing of the Act, would in the hands of the recipient be liable to tax.

What is the need for the section then?

That is what I am coming at; they would be liable to tax. This is merely dealing with the evasion of that liability. To suggest that we are retrospectively applying provisions to liabilities which did not exist when the contract was entered into is misreading the situation. The liability to tax existed.

They would not be liable to tax.

Why not?

If they were taxable under Schedule D they would be entitled to all the various allowances, reliefs and so on. This deprives them of all of those.

It does not. I am coming to that point. The liability to tax and the right to allowances are no different before and after the passing of this section. The position is exactly the same before and after. The only difference is that persons who had this liability and evaded it, and intend apparently to go on evading it, will suffer the deduction at the rate of 7s in the £. But, even then, that is not the end of the story. Their actual liability and their actual allowances will, of course, be assessed and will be accounted for in relation to the money so deducted at 7s in the £. In regard to the point made by Deputy Tully as to people who might be liable for more, they will not of course discharge their full liability by paying at 7s in the £ if they owe more than that.

But the Bill is very explicit.

No, this is a payment on account.

It is — 7s in the £.

That is what the deduction is, but it is contemplated most people's liability would be less and there will, therefore, be a subsequent adjustment. But it does not say that this is their only liability.

The liability will be only after payment.

After receipt of payment.

Would the Minister say how he proposes to deal with those who travel from job to job?

The sub-contractor would have a certificate from the Revenue Commissioners——

The "lumper" is the sub-contractor.

That is right. He would have in his possession from the Revenue Commissioners a certificate to the effect that the payments to which he is entitled in the course of his business as a sub-contractor are payments in respect of which the Revenue Commissioners will hold him, that is the "lumper", liable.

No, not the "lumper"— the genuine sub-contractor.

Deputy Tully is talking about the "lumper".

Surely this is entirely unworkable? First of all, if there is a break in employment from one "lumped" job to the next, there will be a period in which there will be no liability and that cannot be taken into account. Secondly, suppose there are ten in the first gang and two drop out and two more come on, how will this situation be covered?

The basic thing that is required here — and this is behind the whole idea of the certificate — is that the "lumper", who is on the books of the Revenue Commissioners and who will have to account for his earnings, will get his certificate and any troubles he has about income tax will be between him and the Revenue Commissioners.

Ah, that is just great.

I think the Deputy is thinking in terms of tax-free allowances under PAYE where they would change depending on whether one worked for a certain length of time and did not work for another period. That is not what operates here. The certificate does not relate to the amount of tax one owes.

In fact, the "lumper" sells nothing except the labour of himself and his pals and they are, therefore, in effect the same type of people as would be paying PAYE. Therefore what the Minister suggests could not apply. The Minister is talking as if it was a job for which a contract is made and a certain amount of profit accrues to the man in charge and it is on that profit he is taxed. This is a different thing altogether. All they are paid for is the labour they give to the contract they are doing and the Minister's suggestion, therefore, is not workable at all. It makes matters even more complicated.

I did say earlier that in many cases people who are operating this should really be under PAYE and, if this puts them back under PAYE, it would be better for them and for the Exchequer. It may well have that effect. The principle of the certificate is really to ensure that the person in receipt of the money is somebody about whom the Revenue Commissioners know and from whom they have some hope of getting accounts and, if they do not get accounts, they can get after him.

Where is the certificate referred to?

Subsection (7).

That is the certificate to the genuine sub-contractor.

That is right. That is where the difficulty occurs.

Subsection (7) refers to the genuine sub-contractor.

The Deputy says that the certificate is for the genuine sub-contractor?

It can only cover him.

It says:

(7) No deduction of tax shall be made by a principal under this section from any payments in respect of which he has been notified by the Revenue Commissioners that they are payments which are made to a sub-contractor in the course of a trade or vocation carried on by that sub-contractor.

That is the "lumper". That is not a "lump". This is a certificate to the effect that the payments are being made to a genuine sub-contractor and therefore no tax deduction is to be made.

Why does the Deputy say it is not a "lump"?

It would not be a payment made to a sub-contractor in the course of a trade or vocation.

While one man may take the amount of money for the job, he divides it equally among the remainder. Therefore, all they are getting is a week's wages. Unless the ordinary PAYE certificate applies—and that will be difficult because that certificate will not be held by the contractor who is supposed to be deducting 7s in the £——

I appreciate what the Deputy says. The "lumpers" are carrying on a trade. Maybe they are doing plastering or digging a foundation. They get a price for the job. Anybody who is getting the price for the job — who is in receipt of the payment for the particular job — will be able to get a certificate on foot of subsection (7).

One of them.

Anyone in receipt of the moneys.

One fellow will get the money.

If he is, is the problem involved in getting this money not that he might become liable for the tax on the whole lot?

That is the problem. Very often, those fellows have not the foggiest notion of keeping any type of accounts. It would be ludicrous to suggest that they can keep any type of form——

I suggest that the man who receives the money on behalf of the group, and applies to the Revenue Commissioners for a certificate so that there will not be a deduction of 7s in the £ on the payment, will, in his own interest, inform the Revenue Commissioners of how much of the money is going to him and how much of it is going to each of the others.

Every week? They may get different sums from day to day.

It depends on which jobs they are doing and how often they are being paid.

I should hate to see something introduced which would not be workable. It will do one of two things. It will kill "lumping" altogether or there will be more evasion and prosecutions. I cannot see that section being operated by anybody. As it stands, the section is not workable.

It is a group of fellows getting together to make a contract: it is frequently the labour contract of digging. I can see no possibility of (a) records or (b) PAYE. If the money is paid to one nominee who says that each person will get £20, say, a week, on which he would be liable to PAYE, how would he operate it?

The man in receipt of money will, in his own interest and for his own protection, ensure that he is not billed by the Revenue Commissioners for tax on the whole proceeds.

He will be.

He will — if he does not furnish to the Revenue Commissioners an account of what has happened to the money.

He cannot. They may start off digging a foundation and, half way through that operation, the contractor may want them to do something else. They may move away to a different type of job. The number of men may be changed. There will be switches backwards and forwards from day work to "lump" work. This thing is terribly complicated.

The basic requirement is that the earnings of each of the people involved should be made known to the Revenue Commissioners. This is what this is all aimed at. A lot of objection seems to be taken to this section — it seems to me, in many instances — on mistaken grounds. There is one aspect of it that I think deserves a little more attention. Subsection (7) may be a bit weak in so far as the exact circumstances in which the certificate referred to is obtainable, or the right of the person concerned to obtain the certificate, are not spelled out. I think the point has been put — in theory, anyway — that the person is dependent on the goodwill really of the Revenue Commissioners to get it. I said on the Second Reading that the Revenue Commissioners would not be entitled to withhold their certificate in order to collect arrears. I agree that, on the face of it, subsection (7) does not perhaps spell this out as well as it should be done. Between now and Report Stage, I shall consider in what way subsection (7) might be amended to spell out more clearly the right to the certificate and the circumstances in which the certificate referred to in subsection (7) would be obtained.

Would the Minister have a look at the whole section? It might be better if the contractor — where he employs people for labour only: not machinery or materials — was responsible for seeing that PAYE would be collected from them.

And insurance pay.

And insurance pay. If that were done, there might be a possibility of operating it. I think that is a better way of doing it than this one, which appears to be too complicated. People who have not experience of the trade might possibly think differently. There is at least one Member of the House whom I should like to hear offer an opinion on that.

I have done that.

I shall examine Deputy Tully's suggestion. I do not know if it is possible.

I do not know myself; I think it is.

Would the Minister consider this on Report Stage and, if necessary, recommit the whole section? The Minister may or may not find it possible to suggest an amendment in relation to subsection (7) or an amendment along the lines suggested by Deputy Tully. If he does find it possible, it will be necessary to consider the effect on the section. It may involve a recommittal of the section.

I will agree to do that.

May I ask the Minister a question at this stage? I have listened to the debate with interest. I am not familiar with the problems in the same way as other speakers are and, therefore, I have stayed out of the discussion. One thing puzzled me. From Deputy Tully we heard that people engaged in this activity are not entitled to charge legitimate expenses as employers are and, yet, in the section itself there is a reference to Schedule D. Is tax charged under Schedule E or Schedule D (a) to the person responsible for the money and (b) to those who are in receipt of it and sharing with him?

I think Deputy Tully was somewhat mistaken in what he said. People operating as "lumpers", and therefore carrying on a trade, are entitled to claim in respect of the expenses to which he referred. What he had in mind, I think, was that such people carrying on simply as employees were not entitled to these allowances and that is why, he said, they went into the "lumping" trade. Is that right?

If a number of people join together in a co-operative enterprise for this purpose as equal partners, possibly nominating one of them to be the person to whom the payment is made because somebody has to receive the money and distribute it, are they not all equally engaged as partners in a trading operation? On what possible grounds are they excluded from Schedule D in those circumstances?

They are not excluded from Schedule D.

Is the Minister saying that only the person who receives the money comes under Schedule D and that the other people who are engaged in the operation and receive payments come under Schedule E? Is that wrong?

What I said was that persons engaged in "lumping" operations are engaged in a trade. They come under Schedule D.

All of them?

Yes. What I was saying was that Deputy Tully had made the case that people employed in the normal way would come under Schedule E because they did not get the allowances under Schedule E and then went into the "lumping" business and came under Schedule D.

I appreciate that point.

I want to ask the Minister a question in respect of subsection (3) which is deemed to be a Schedule D payment. Apparently 7s in the £ will be deducted immediately from the "lumper" and no allowances are made at that time. Later on allowances are worked out from whatever deduction he may be entitled to. If that covers a prolonged period it means that the Revenue Commissioners have got his money for a long period. The ordinary person paying Schedule D tax submits his accounts and, before he pays anything, all his allowances are deducted. This individual pays 7s in the £ and, at a later stage, he is allowed — presumably through some form of rebate — whatever allowances accrue to him. If the arguments are protracted the Revenue Commissioners have the use of his money, so to speak, for maybe six months or seven months or a year. Revenue can keep on arguing these things for a long time. It does not cost them any money. Is any provision made to compensate this individual? Does he get any interest on his money while Revenue are holding on to it? If I had not paid money to Revenue I would have to pay interest. I would have to pay 1 per cent per month or whatever it is.

It is too much.

How is the "lumper" compensated for Revenue holding on to his money?

What the Deputy says is true. It could be that the money would be held up for some protracted time while arguments ensued. I hope it would not, but I could visualise that it might happen. There is no provision for paying interest on the money but what there is provision for is very simple, that is, avoidance of this happening at all. All he has to do is either make returns or undertake to make returns of his income to the Revenue Commissioners like any other tax-payer. He gets his certificate and this problem does not arise at all.

May I refer to the point I raised before, now that I fully understand the point that Deputy Tully was making? If the position is that people have an incentive to lump because they are then entitled to expenses under Schedule D to which they would not be entitled under Schedule E, does this not suggest that there are grounds for seeking even a limited reform of Schedule E taxation in this respect? As the case involved here relates to the building industry and the problem arises because building workers have to go from their homes to different places on different occasions because, unlike the ordinary worker, they cannot site their homes near their employment if they wish to do so, could there not be some provision under Schedule E that at least there would be an entitlement to expenses in respect of travelling where people have to travel not to the same place every day for their employment but to different places and, therefore, the possibility of minimising or avoiding travelling expenses by siting one's home near one's employment does not arise.

I recognise the difficulty of moving to a situation where all travelling expenses to and from work would be allowed under Schedule E, but it seems to me that the problem here giving rise to or partly contributing to the growth of "lumping" could be overcome by such a provision. Would the Minister agree to look at it because otherwise there will be a continuation of this practice for tax avoidance reasons despite what the Minister is doing? Even if the Minister's proposal goes through people will still be avoiding, not evading, tax. Presumably the Minister wishes not only to prevent tax evasion but to discourage tax avoidance. The best way to discourage tax avoidance is to change the law if there are anomalies in the law which are encouraging people to adopt expedients designed to avoid tax. If there is an artificial incentive to "lumping" at the moment through the difference between the expense accounts provisions of Schedule D and Schedule E, this could best be got over by dealing with the situation under Schedule E in the way I suggest. Would the Minister be prepared to consider that?

I am prepared to look at it but I am making no commitment. In fact, to be quite honest, I think I will have to come back and say it is not possible for me to do it. I am certainly prepared to examine it. I would add that, despite what Deputy Tully said which, to a simple person like me, might indicate that he believed it was only because these allowances for travelling were not given that these people engaged in "lumping", I think Deputy Tully knows that there are certain other inducements to engage in "lumping" besides the fact that allowances for travelling are not available to people operating under Schedule E.

I went into great detail in pointing out to the Minister that there were a number of inducements, one of them being the fact that because they get no tax free allowance when they are on day work and the fact that they have to pay their car expenses——

That is one but there are some others.

They leave home at 5.30, 6, 6.30 or 7 a.m. and work very hard all day and return home at 10 p.m. and the only way they can get compensation for the distance they travel, which is often up to 60 or 80 miles a day each way, is by going on to "lumping" jobs. In that way they can earn as much money in one day as they otherwise would in a day and a half. That is the point.

Deputy FitzGerald may have been a little confused as he came in a little late on the argument. He may have assumed that Deputy Tully meant that such people were given a tax relief, because of travelling, under Schedule D. I do not think that is what Deputy Tully meant. I think what he meant was that they did not pay any tax.

Does the Minister accept that it is undesirable that a situation should exist where, if people adopt this "lumping" practice which, on general policy grounds, we might wish to discourage, they can avoid tax legitimately on part of the amount of money involved? It seems to me that if it is open to them to do that we ought to give the same entitlement to people under Schedule E.

I would point out that they are not avoiding tax legitimately.

The people we are concerned with are just avoiding tax.

I am concerned about people who decide to do "lumping" rather than the ordinary method — if such people exist; they may well exist; I suspect they do — simply and solely to get over this problem of the non-allowance of expenses under Schedule E.

They may do; and, if they go on and pay their tax, they do not come under this section.

Progress reported; Committee to sit again.
The Dáil adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 15th July, 1970.