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Dáil Éireann debate -
Thursday, 23 Jul 1970

Vol. 248 No. 12

Finance Bill, 1970: Report Stage.

I understand the Bill is being recommitted in respect of section 17. Amendments Nos. 1 and 2 are related and may be discussed together. They arise out of proceedings in Committee as reported in Volume 248, columns 1055, 1104 and 1191 of the Official Report.

Bill recommitted in respect of section 17.

I move amendment No. 1:

In page 10, to delete lines 7 to 20 and to substitute:—

"(4) In so far as a sub-contractor is chargeable to tax in respect of any profits or gains arising or accruing to him from a trade or vocation, he shall be treated as having paid on account of tax so chargeable any tax which was deducted from payments brought into account in the computation of those profits or gains and which has not been repaid or for which a set-off has not been given; and the Revenue Commissioners shall make regulations for giving effect to this subsection and those regulations shall in particular include provision—

(a) as to the manner in which, and the periods for which, tax deducted under this section is to be brought into account as a sum paid on account of the liability to tax of a sub-contractor,

(b) for repayment, on due claim made for a period (hereinafter referred to as the repayment period) commencing on the 6th day of April in a year of assessment and ending on the 5th day of the month following the date of the payment or, if the payment was made on or before the 5th day of a month, ending on the 5th day of that month, of such portion of the tax deducted from payments received by a sub-contractor during the repayment period (reduced by any amount of such tax repaid or set off) as appears to the Revenue Commissioners to exceed the proportionate part of the amount of tax for which he is liable, or is estimated to be liable, for that year of assessment, and

(c) for repayments in cases where the total of the tax deducted from payments received by a sub-contractor and not repaid to him exceeds the amount of tax for which he is liable."

During the Committee Stage Deputies were critical of the provisions of section 17 on the grounds that the section would prove, in the main, to be unworkable and where it did operate the amount of the deduction would cause grave hardship. To meet these criticisms I am proposing these amendments which I trust will meet the main objections voiced. The new provisions will ensure that an established sub-contractor will be furnished with a certificate which will enable him to be paid contract money due to him in full without any deduction of tax. In order to obtain that certificate he must satisfy only two simple conditions. The first is that he should have an established place of business and the second is that he should have furnished, or undertake to furnish, accounts of his business to the Revenue Commissioners. Anyone who can satisfy these conditions will get a certificate and possession of this certificate will mean that he will not be subject to tax deductions on the amounts he receives from contractors during the year.

There will, however, be sub-contractors who will not have a certificate either because they are unable or unwilling to satisfy those simple conditions. Tax will be deducted at the rate of 7s in the £ from payments made to such sub-contractors. I agree that this is a severe deduction but the second of the new provisions will enable a sub-contractor from whom these deductions are made to claim repayment on a monthly basis of the excess of tax deducted over his proportionate tax liability for the year. On the basis of these two provisions in the two amendments I think that I have gone as far as I reasonably can to meet the objections that were raised, to ensure that what might be called genuine, normal sub-contractors will be in a position no different from that of any other taxpayer and that in the case of people who cannot or will not comply with the simple conditions I have mentioned, they will be obliged to pay their tax by reason of the deduction at 7s in the £ but, on the other hand, in the case of such people I have gone as far as I can to ensure that the tax deduction does not operate unduly harshly by enabling them on a monthly basis to get a refund of tax overpaid by them in relation to their proportionate liability for the month in question. I trust that the House will accept that this is a reasonable approach to the problems that have been raised.

These two amendments go some distance towards meeting some of the points made on this side of the House during the Committee Stage. I think they are a very useful improvement in legislation which otherwise would be extremely onerous in its operation. It has been worthwhile having an extensive debate in order to achieve these changes. They do not take the form proposed by the Opposition but nevertheless they go a good distance towards meeting the points made. They contain, however, these slightly ominous phrases, "as appears to the Revenue Commissioners" in one amendment and something similar in the other. In the second amendment there is the phrase "satisfies the Revenue Commissioners". This leaves a very wide discretion to the Revenue Commissioners in the matter. I wonder how, in fact, in the first amendment, this will work. Can sub-contractors be assured that in the actual operation of this provision, in so far as a deduction of tax has been made which exceeds the amount which should be payable, they will get the full amount back in the following month. I find difficulty in following the wording as to how these repayments are to be made. Amendment No. 1 (4) (b) speaks of "repayment, on due claim made for a period commencing on the 6th day of April in a year of assessment and ending on the 5th day of the month following the date of the payment or, if the payment was made on or before the 5th day of a month,..." Is this a cumulative repayment?

But one can claim it each month in respect of whatever has not been repaid up to a previous month?

That is right.

It is not entirely clear to me, at any rate, from the reading of it. In fact, what people would do here is claim each month the amount that has been overpaid and in so far as it has not been repaid in a previous month, and to the extent that it has not been, then any additional cumulative overpayment will be refunded?

That is right.

Will this be operated in such a way that people will get back immediately the amount they are due? Experience of the Revenue Commissioners does not suggest that they always proceed exactly in that way. They seem to like to keep a reserve in case of doubt. Can people be assured that they will get back the amount they should get back? There is a difference between people paying tax when due and, if they can argue that it is not due, not paying it until it is established that it is due. If the tax was taken from them without their consent through this mechanism it is important that the repayment mechanism should be as equitable as the process by which the tax would have been charged in the ordinary way. People could be in difficulties if the Revenue Commissioners adopted delaying tactics or gave themselves the benefit of the doubt which would have accrued to the taxpayer if he had actually paid the tax, whereas arguing his case where something was due to be paid he could put off the payment until such time as that was settled.

Special sections are being set up by the Revenue Commissioners to ensure prompt repayment under this section and also in the event of any argument about liability, the taxpayer has a right of appeal. This would be spelt out in the regulations made under the section.

A right of appeal by a man trying to get back money that has been taken from him is less valuable than the right of appeal by a man trying to prevent having to pay money.

I agree, but, as I have said, special sections are being set up by the Revenue Commissioners to ensure prompt repayment on foot of this section.

In the ordinary way that repayment will be of the full amount claimed?

Yes, the full amount that appears to be due to be repaid.

One could always have some doubts as to whether people would be as well off this way as they would the other way. However, there is not much more we can do and we must accept the Minister's assurance on that point.

Can the Minister indicate if there will be the same prompt hearing of appeals, because many of these cases will apply to people in a small way of business?

I am not sure if arrangements could be made in that connection. This brings up another issue, as the Deputy will appreciate. I would expect that in most cases there would not be appeals, certainly not appeals on the major amount involved.

Do I read the second amendment correctly in thinking that someone who wants to benefit from it has to undertake to deliver the amounts? He does not have to satisfy the Revenue Commissioners?

No. He has to undertake, yes.

There is a slight ambiguity. He has to satisfy the Revenue Commissioners as to his established place of business. "Satisfy" does not govern the second part? The only thing about which he has to satisfy them is the established place of business?

Amendment agreed to.

I move amendment No. 2:

In page 10, to delete lines 31 to 39 and to substitute:—

"(7) Where, in any year of assessment, a sub-contractor satisfies the Revenue Commissioners that he has an established place of business and—

(a) had delivered to them accounts of his trade or vocation for the purpose of computing the profits or gains on which he is chargeable to tax for the year preceding the year of assessment, or

(b) has delivered, or has undertaken to deliver, to them accounts of his trade or vocation for the purpose of computing the profits or gains on which he is chargeable to tax for the year of assessment, the Revenue Commissioners shall issue to him a certificate in respect of a year of assessment which will, on production thereof by him to a principal, entitle him to receive without deduction of tax any payments which are made to him by the principal in the year of assessment to which the certificate relates and which are made subsequent to the production of the certificate."

Amendment agreed to.
Question proposed: "That section 17, as amended, stand part of the Bill."

The Minister has introduced amendments here which go part of the way towards what we are trying to do. I have not had an opportunity of going into the matter to see whether or not they cover the points. If the sub-contractor has a fixed place of business, that has been covered all right. I do not think there will be any difficulty there. I am still not happy that this covers the people we were talking about, the "lumpers" and that these people may be put out of business, but perhaps that is the object of the exercise. It does not appear that it will be possible for them to carry on within the law. Some Members have said here that the result of the section—and indeed the amendment here copper-fastens this—will be to make certain contractors break the law. Either they close their eyes to what is happening and allow it to continue or alternatively they are going to adhere to the strict letter of the law.

Maybe it is impossible for the Minister to cover all the points it would be necessary to cover once he has entered into this field, but does the Minister consider that this will cover completely the type of group who will come on a site working as day labourers, hourly men, who will make a deal with the contractor to do certain work by task, lump job, call it what you like? These men will do that job and proceed from that site to a different job altogether, not the complete gang but portion of the gang and will do the same type of work in the new job. This may happen four, five or six times in the year and if they get used to this way of working it is possible that, during periods between one contract job and another —I am calling it "contract" for convenience sake—they may not be working at anything at all.

There are two types who do this: one is the hard-pressed man who has a big family and he must of necessity get more money. I explained on the other Stages of the Bill that they must do this because of the expenses for travelling and so on. The second type is the fellow who likes a few "jars" and will probably consume most of what he gets over the weekend. I can see great problems in this and I should like the Minister to assure me that most of them have been ironed out. I am quite sure all of them cannot be ironed out but if a genuine effort is made I shall be reasonably happy.

I wish to impress on the Minister that there is grave danger that this will materially affect the building industry which over the last couple of years has come to depend a great deal on this type of work. There is one other type, the man who is fairly handy himself and decides to build his house by direct labour. He does a certain part of the work and employs people with different crafts to build the house at different stages. The people in these crafts can be found on one house one month and then they move off to another house. They are never employed by contract as such because they prefer to do it in this way. Does the Minister feel these people can be dealt with fully? They are not time and material men. They sell only their labour. I am sorry I have come in at this time but I was engaged on something else and I was not aware the matter was being discussed.

The difficulties envisaged by Deputy Tully will be covered in these amendments as far as it is possible to do so. I have given a great deal of thought to this whole problem and the approach I have adopted is basically this. First of all, you have what can be called the genuine, established sub-contractor and, as Deputy Tully says, they do not present any problem. Then there are the people described as "lumpers" and I should like to divide them into two categories: first, those who I will not say are anxious but are willing to pay their tax, and, secondly, those who are not.

If we take the first group, those willing to pay the tax, we have gone as far as possible to meet them. It must be realised that because of the nature of the work and the way in which it is carried out, moving from one place to another, and changing from one gang to another, it is not possible to deal with them in any way except on the basis of deductions. We are now, as I say, dealing with people who want to pay their tax and do not want to be in difficulties with the Revenue Commissioners. What will happen in their case is the tax will be deducted from payments due to them at 7s in the £ but they will report to the Revenue Commissioners and on that basis they will be enabled on a monthly basis to get a refund of an excess deducted from moneys they receive over and above the proportionate liability for the month which they are estimated to have. This is as far as we can go to convenience them, and I am anxious to convenience such people. I have given a lot of thought to this and this is the uttermost limit to which I can go.

The third category is those who do not wish to pay tax, who are doing their best to avoid it, and for these I have no sympathy. What will happen to them is that deductions will be made and they will not get in touch with the Revenue Commissioners to get a refund. They will suffer deductions at the rate of 7s in the £ and will be suffering deductions for more than they are liable, unless they have an income from some other source, in which case it may be worth their while not to make any return at all. These, however, will not be very many. The bulk will suffer over-deduction but as I said they will be enabled to get a refund each month of the over-deduction. The Revenue Commissioners will be setting up special sections to deal with the prompt repayment of tax on foot of claims under this section.

On the Committee Stage the Minister indicated, if I understood correctly, that the "lumpers" who will be considered under this would be a type of sub-contractors and they might possibly qualify for an allowance for their vehicles which they use to travel to and from their jobs. Can I take it that that will be the position, that although they are day workers and are not entitled to claim for a vehicle which they use, if they are being considered as sub-contractors they will be entitled to claim for at least wear and tear as they must use the vehicle for the purpose of carrying out the contract? The Minister said that the other day.

No. The only circumstances in which they could make that kind of claim would be where they were submitting accounts and so on as contractors. In the case of genuine contractors they can make a claim for travelling expenses between their home and their job, where their home is also their place of business and their builder's yard, but if they are not the same places established contractors cannot make this claim.

But they have the habit of driving around to the yard in the morning and qualifying that way. The people I am talking about do carry small tools which they will require and as far as they are concerned their homes are their builder's yard.

But if they are to be treated as such they would come under the earlier part where they would satisfy the Revenue Commissioners of the established basis of their business, that they have undertaken to submit accounts, and then they will get a certificate. If they come within that section then the question of travelling expenses would arise on the basis I mentioned but if they come in on the basis of deduction at the rate of 7s in the £ from the moneys paid to them they would not be able to claim.

That is not what the Minister said the other day and that is why I want it clarified. The records will show that the Minister said something different.

When the Minister talks about a sub-contractor having an established place of business is he talking about a man who is organising this for all the participants?

I do not think he is talking about the "lumper" at all.

Most of the people who will come under this will not be "lumpers" but where there is a gang that stay together and they nominate one man to receive the money they could come within it but sometimes they change and——

Usually there is one man who is nominated, the top man.

In the case Deputy FitzGerald visualises where there is a permanent arrangement one man would be operating as a contractor and would be responsible. In effect what he would have to do would be to operate PAYE in relation to the others.

In those circumstances the others would not be eligible for travelling expenses?

That is true, nor would they suffer deductions at 7s in the £.

I think you will see a complete change in this "lumper" system to take advantage of the position.

Suppose they form a partnership?

Without forming a partnership, because it would not be practicable, they just group together with one man in charge.

Suppose that the group state that their place of business is the home of the leader of the group, that they are operating jointly and are sharing the proceeds, rather than having one man act as the employer and the others as the employees, will they not be then entitled to be under Schedule D?

That probably would not conform with the requirements which would enable them to get the certificate.

I am saying that I think they would not because it is a question of the established place of business and the submission of accounts. In practical terms they do not have accounts. If they are prepared to organise themselves on a basis like that of course they would be treated like any other business but the bulk of them are not organised and would not be able to be organised.

But if they constituted themselves a group, no matter for how short a period, and said that for the sake of the job they were a group with an established place of business, that they shared the proceeds and submitted accounts, would they be entitled to be treated as self-employed persons under Schedule D and entitled to expenses? That is the first question I would ask.

If they conform with the ordinary requirements in regard to a business partnership they will be treated as such but, from my knowledge of the situation, I think this is a most unlikely thing to happen.

It is most unlikely and it appears now there will be a considerable number of headaches for the Revenue Commissioners, the building trade, trade union officials and Members of this House as a result of this section. I hope somebody will get some good out of it.

I agree with the Minister that this is unlikely to happen. The position then will be that these people will operate loosely as a partnership but not in such a way as to justify being under Schedule B and, because of that, they will not get travelling expenses. I pointed out on Committee Stage that there is a special problem in the case of building workers. It arises with some other types of workers, too, but not many. I refer to the fact that their place of work changes all the time. If people have a fixed place of work they can fix their homes in relation to it. They can minimise travelling expenses by fixing their homes near their place of work.

In those circumstances there is no case for travelling expenses, or the case is much less, but, in such cases, if an employer required an employee, as a condition of employment, to involve himself in additional expense of any kind, other than the normal expense of getting to and from work, and does not compensate him for that additional expense, then such an employee, even under Schedule E, if he can show that this expense is necessarily incurred and he was not reimbursed, can claim this as an expense under Schedule E. It seems to me that principle should apply also to building workers because the building worker cannot locate his home in relation to his employment and he is involved in the expense of getting to and from work and that expense is different from and normally greater than the expense incurred by other types of employee. It is not within his control and it is a condition of his employment that he should present himself for work at the particular place. If the employer compensates him or collects him in a lorry and brings him to the site there would be no case. If he is not reimbursed by his employer or compensated in some way, then the expenses are necessarily incurred in relation to the work he undertakes. I asked the Minister on Committee Stage to have a look at this. He said he was prepared to look at it but he would make no commitment. It seems to me that there is a real injustice here. Even without legislation, by administrative decision to apply the Schedule E principle here the problem could be solved.

Is the Deputy talking about "lumpers" or ordinary building workers?

Having established that the "lumper" cannot overcome the problem, having got that out of the way, and having got the Minister to say that this is most unlikely to happen, I am then left with the problem in regard to "lumpers" and other building workers. It seems to me that the best solution—this should apply to all building workers—would be to deal with them as I propose.

There is a difference in the way they operate. The ordinary building worker normally turns up at the builder's yard and, if the job is some way away from the yard, he is either paid travelling time or transported to the job.

I am afraid the Minister is not au fait with the situation. There are building workers who may be “lumpers” today and not “lumpers” tomorrow. The ordinary building worker may have to travel 30 or 40 miles directly to the site and back again. Normally, they never go near the builder's yard. It may be only half a mile from the site but the workers may be living 40 miles away. Usually, what happens is a group of workers get together, buy an old car, tax and insure it—insurance is a heavy item now— and run it into town to the job. They get no allowance whatever for this. Deputy FitzGerald is correct in saying the jobs may move but on the big sites they go direct to the site and they will do that for, maybe, three months, six months, or even a year. They get no allowance whatever. The Minister could solve a great many of his problems if he would consider some type of allowance to these people. Many of these people take on lump jobs because they must earn more money than a job would normally pay in order to meet travelling expenses on which they are taxed. If a building labourer has £16 a week, a married man with no family, he is taxed on £5 10s of that. In addition, he must pay his travelling expenses and those expenses average £3 to £4 a week. That reduces his wages to quite a small figure. The Minister could do a great deal more than he is doing if he would allow some expenses for tax purposes to these people. If he did that he might solve this problem. It could be done by administrative decision.

Deputy FitzGerald brought the matter away completely from the case of the man on the lump job. The men on a lump job form a gang and the reason the gang changes so often is that a fellow who is not able to work very, very hard will not survive. It is not a question of his being told to go. He realises before very long that his pace is not good enough and he moves back to day work or time work and the lump job gang recruits someone else or continues the job with a smaller group. It is a very difficult problem and the only reason I make so much about it is that, having introduced another impediment to the earning of a decent living by a group which is already harassed and which is working so very hard, we should do something to ameliorate their position. The Minister has attempted to improve the position by bringing in amendments but I doubt if he has reached the kernel of the problem. Perhaps he will let us know before we conclude whether or not he thinks he can recommend some alteration to help these people.

Particularly where the long distance is outside their control because they cannot locate their homes near their place of work since their work keeps moving.

The present Taoiseach once told me that there was no reason why these people should not go and live near their jobs. He must have thought they were some species of snail and that they carried their homes on their backs.

We are, I think, in danger of confusing some issues here. In the first place, there is never an allowance for travelling between home and place of employment or one's own place of business.

Suppose an employer travels from his home to his office and from there to his place of business, a mile or two away and, in the course of his job, he is using his car, there is an allowance, is there not?

Yes, but we are talking about a different thing. He is allowed from his office if he is travelling on various jobs. We are talking here about "lumpers". Either the ordinary building worker who is not a "lumper" will be paid travelling money or he will negotiate a rate of pay to compensate him for the travelling he has to do. In the building industry, he is in a position to do this. "Lumpers" are a different proposition. One may assume that the prices they fix for the job will take account of the expenses.

They work harder and they work longer hours.

The Deputy is idealising these people perhaps a little more than they deserve.

I know many of them.

While travelling costs are of some importance in this, the major reason why people engage in "lumping" is not that they do not get a tax allowance in respect of travelling or travelling money—it may be a contributory reason——

The employer wants the job finished quicker.

There is another reason.

There are other reasons.

The Minister has suggested that in most cases building workers are either carried from a regular place of business at which they have to report to the place where they work or are compensated by being paid extra money to get there or, in the case of "lumpers", a higher rate is charged to cover travelling expenses. Where a building worker is not so compensated but has to pay his own expenses to get to the place where he works, where that place of work changes and he cannot control the distance from his home to there because the place of work changes all the time, a special case can be made for being allowed expenses which cannot be made in other cases. Even applying the Schedule E principle with some flexibility in these cases, it should come within the principle. If they are paid for this travelling, it does not arise. The Minister does not answer the point by saying that it happens most of the time. This is very important for people who travel long distances because of change of work location and get no compensation. If a man lives in Kells, for example, and the office is in Monaghan and the job is in Navan the Minister's suggestion is that the man travels to Monaghan before he goes to Navan and then gets the expenses from Monaghan to Navan. All the man wants is his expenses from Kells to Navan.

I am not suggesting that. The case of a man going to Monaghan and back to Navan would apply to a very small proportion of the number engaged in the building industry.

Deputy FitzGerald knows his job very well. The Minister knows his job very well.

And Deputy Tully.

The way to get experience of a job is to work in it. My experience in the building industry—I was a trade union official—is that the people paid for travelling to the job are craftsmen—for instance, in Dublin city—who are required to go outside. The very name of the money they get, "country money", explains the situation.

"Country money" sometimes applies in the city.

It means that workers attached to a firm are sent outside the normal area to do a job and are paid "country money". We are talking here about people who travel from outside the city—mostly labourers; sometimes craftsmen—at their own expense, into town to a particular site and who do not receive any payment until they report on the site and, when they are there, are paid a rate for the number of hours they work on it. Deputy FitzGerald's point was pretty good: he developed it very well. However, we have gone completely away from the main point. I do not think we will get anywhere with this problem.

It does not arise on this section.

Take a person whom we may now consider a sub-contractor— who is what we call a "lumper"—who travels and works in a group and has a leader who receives the payment which he divides among the others. Would that group, without a formal partnership, be able to claim expenses for travelling to the job?

The answer is "No".

The other day, the Minister said the answer was "Yes".

No, I did not—not in the circumstances just described by the Deputy.

Perhaps, at the time, the Minister was not as well aware of the circumstances as he is now.

I am talking of the circumstances just described by the Deputy.

The record will show that what I have said is correct.

I suggest it will not show that.

I shall be glad if the Minister will find out if the man travelling to do ordinary day work, and indeed the "lumpers", could be given an allowance for travelling expenses. We should all be very happy if they could be given that.

Question put and agreed to.
Section 17, as amended, reported and agreed to.

I move amendment No. 3:

In page 28, line 26, after "Minister" to insert "for Finance".

Amendment agreed to.
Bill reported with amendments and received for final consideration.