Dáil Éireann debate -
Tuesday, 15 Dec 1970

Vol. 250 No. 7

Committee on Finance. - Finance (No. 2) Bill, 1970: Committee Stage.

SECTION 1.

Mr. O'Higgins

I move amendment No. 1:

In line 12 to delete "1970-71" and to substitute "1971-72".

The object of this amendment is to remove from section I the period in which this Bill takes effect. Section 1 proposes that the section should operate for the year 1970-71. I propose that we should substitute the year 1971-72. My reason for doing so is that section I is the taxing section and, while not altering the rate of income tax, its effect is that in relation to income tax payable by companies the former relief available on corporation profits tax is being removed with the result that under section 1 in respect of income tax and corporation profits tax a company will now pay 58 per cent of its profits instead of 50 per cent. That is an increase of 16 per cent.

This may be justifiable and defensible in relation to a normal trading year. A case may be made by the Minister for Finance in relation to a company that has due notice in relation to its trading position and that carries on its activities knowing what the score is. A case may be made to justify an increase in taxation of this dimension. It is a very significant and considerable increase to take from the trading profits of a company 16 per cent more by way of taxation.

Under the section it is proposed to apply that position in respect of income tax for the year 1970-71. It seems to me, on the information available to me, that the section as it stands would result in a very significant imposition of extra taxation on many companies. I refer in particular to a company with an accounting year ending on 30th April. That seems to apply to one-third of all Irish companies. That is a very large number of companies.

Under this section as it is drafted, such a company will be faced with the following position. It will already have paid corporation profits tax because corporation profits tax is paid as the profits are earned. It will then find that it has to deal with its income tax position. Income tax is necessarily paid in arrears as opposed to corporation profits tax which is paid immediately.

A company with an accounting period ending on 30th April, 1969, will be due to pay income tax in January, 1971, although it will already have discharged its corporation profits tax liability in January of this year. Having paid its corporation profits tax in January of this trading year, January, 1970, in its accounts for the year ending in April, 1969, provision will have been made for corporation profits tax and income tax at 50 per cent. The same will have been done in respect of the trading year ending in April, 1970.

Following from that, the shareholders will have received their dividends and their statement of accounts and the position will have been reached whereby a company, knowing its profits and dealing with its total tax liability, dealing with its position vis-à-vis its shareholders, will have declared an account. Now this section comes into operation and that company is fixed with the fact that it has made an under provision in respect of tax liability of 8 per cent for each year, for the tax years 1969 and 1970. In other words, it will have made an under provision to the extent of 16 per cent in respect of its tax liability.

In 1971 such a company will have to do a number of things. First of all it will have to make tax provision in 1971 for a new tax liability at 58 per cent instead of 50 per cent of its profits. It will have to deal with the taxation position in respect of the trading year 1969. It will be due to pay that income tax next month. It will now find that it has made an under provision to the extent of 8 per cent in respect of 1969 so out of its profits next year it must provide in addition another 8 per cent in respect of 1969.

It will also have to provide next year in respect of the tax liability for the current trading year and that will be another 8 per cent. This involves one-third of the Irish companies. On the information available to me under this section one—third of the Irish companies will have to face up to a tax liability next year which may represent a total of 74 per cent of their profits. That is a serious imposition. It is no good for the Minister for Finance to say, as he did say glibly in some Press interview, "Of course, that is all right in a normal year." When does one achieve a normal year? One cannot apply in a section of this kind a stipulation providing a change in the income tax laws in respect of 1970-71 and just say: "That is all right. It will be all right eventually." It may be all right eventually.

The only way in which an imposition of this kind can be prevented from falling on a company is to change the year in which this new imposition will take effect and the purpose of this amendment is to give at least a year's notice to companies. They have already declared their trading position this year. In relation to their position next year they can make provision. They will have to do it, and I am not saying they should not do it, at the expense of their shareholders by probably declaring a smaller dividend and retaining more in respect of tax. That is as it may be, but they should be given the opportunity of knowing a year ahead that they will eventually have to face a new tax position.

If this is not done a large number of companies will face a total tax liability of 74 per cent next year. Some of them will be able to do it—very, very few. If they are in a buoyant marketing situation, if their profits are rising and so on, they will be able to ride this particular obligation. Far too many companies in this particular period have a static profit position, with pretty well the same profit story in respect of each of the recent trading years. Such companies just will not be able to face this imposition.

I would urge on the Minister to consider sympathetically this amendment which I do not think could destroy the broad design of his Bill but will avert possibly an intolerable hardship on many trading companies.

Mr. Tully

I support Deputy O'Higgins on this. It is a perfectly valid point. On the Second Reading, I made this exact same point. I gave the Minister an instance of a company. When we met the Federation of Irish Industries we were told of one company that had been promised a grant of £250,000 from the Government to build a new factory and they had put aside £360,000 from the previous year's trading. They then found that they were in a position to build the factory and have done so. Having done it, they are now billed with £360,000. The Official Report said that I said it was the tax on £360,000; but it is a tax of £360,000, which is a heck of a different thing. It means that, in fact, that firm now have to beg, borrow or steal £360,000 odd after building a new factory in an effort to keep going. They are a strong firm and I am quite sure they will be able to do it. What worries me is this: how many smaller firms who have made an effort to modernise their factories and equipment and who are giving big employment will find themselves on the verge of bankruptcy because this Bill applies to the year 1970-71?

I do not know whether this point was fully considered by the Government before they introduced the Bill. I have no objection at all to taxation of this sort being applied in a sensible way, but it is no answer for the Minister for Finance to say that because they are paying tax a year in arrears they are getting away with it. They are getting away with nothing. The point which Deputy O'Higgins has made and which I should like to stress is that it is not a good idea that a progressive firm giving a lot of employment—they are needed in this country at present— should be dealt with in the way in which this section proposes to deal with them, by taking away money which they have put aside for the extension of their business. It may be said: "That is all right but we are after the people who actually take it out in profits." It appears that, in this case, in an effort to catch certain types of people, we are being most unfair to others.

Like the Prices and Incomes Bill—I do not know whether it is in or out at present—this is the type of retrospective legislation which is attempted. It does not work out. I would suggest that the Minister should, before it goes through, look at this aspect in order to prevent a lot of damage being done, as I believe can be done. I have no objection to the introduction of it with effect from the following year; but to introduce it this year and to ask those who have already earmarked that money for something else to produce it whether it is there or not is not a good idea.

Mr. B. Lenihan

I want to emphasise that section I of the Bill is not retrospective.

Mr. Tully

That is what the Minister for Finance said. That is playing with words.

Mr. B. Lenihan

No, the change only affects income tax payable for the year 1970-71. That is all that is involved and if that was not inserted in the section for the remainder of the current year the Minister's proposals taken in toto would be frustrated because it is quite obvious, as the Minister has explained on the Second Stage, that the purpose of bringing in this Supplementary Budget is to ensure that the deficit which is envisaged by the end of the financial year should not be inordinate and of such a nature as to be met almost totally by borrowing.

Mr. Tully

To clear my mind, is it not on profit earned in 1969-70 that this tax is being applied?

Mr. B. Lenihan

Yes, but it is in respect of the current year. That is the pattern in all tax situations.

Mr. O'Higgins

Of course it is retrospective.

Mr. B. Lenihan

That is making a point out of nothing.

Mr. Tully

The Minister is playing with words.

Mr. B. Lenihan

I am not playing with words. In respect of all taxation provisions the taxation is in respect of the profits of the previous year. That is in respect of all taxation and it has always been so.

Dr. O'Donovan

It is not assessed in December of the following year. It is normally assessed much earlier and people know where they are. That is the objection to it.

Mr. B. Lenihan

It is a technicality to call a taxation provision relating to profits of the previous year retrospective legislation.

Dr. O'Donovan

It is retrospective as of December, 1970. The real test of retrospection is time.

Mr. B. Lenihan

Anyway, I will not play with words.

Mr. Tully

Good for you.

Mr. B. Lenihan

Because that is what the Deputies opposite are seeking to do, to have a play on the word "retrospective". I want to come to the basic purpose of the measure as explained by the Minister : in order to achieve a situation at the end of the financial year where there will not be excessive borrowing to meet the deficit these taxation measures have to be brought in. It is quite clear that the estimated deficiency of £14 million, if it had to be met by borrowing to the order of £12 million, which would in effect be——

Dr. O'Donovan

It is all right to borrow £8 million but not £12 million.

Mr. B. Lenihan

——indeed there is a difference—which would in effect be the net result of the proposals in Deputy O'Higgins's amendment.

Mr. Tully

And another £3 million for CIE.

Mr. B. Lenihan

The proposal in the amendment means that the yield from the budgetary proposals would be reduced from £5.3 million to £1.8 million and it could only be offset then by borrowing which would come to the figure of £12 million. It would be very bad financing to rely on borrowing to meet a budget deficit of that kind. The limit of £8 million is what prudence would allow. Anything of the order of £12 million would just not be "on" for financial prudence. For that reason the deficit to be met is to be met by taxation as set out in the section and in particular by the increase in company taxation of £3.5 million for the current year.

Indeed, the situation would be even worse in the coming year if what is suggested in the amendment were done because it would then reduce the estimated yield for 1971-1972 to £4 million approximately. I must therefore, in the interest of good financing and good budgetary procedure and in the interest of having this deficit met in a way in which a balance is struck between borrowing and taxation, reject the amendment.

Dr. O'Donovan

The Minister talks about the way we use words. He has been talking about the "interest of good financing" and "good budgetary procedure". The present year's current budgetary expenditure is £491 million and the Government solemnly sit around the table and decide that it will be all right to borrow £8 million but it would not be all right to borrow £11½ million in relation to the £500 million. This is micro-analysis and anybody who can suggest to me that this type of micro—analysis can be done by the crowd over there on the front bench better go off and go asleep because he will not make any impact on me. There is no man left on those benches who would make any impact on me in relation to a matter of this sort. What this side have been asking for is perfectly fair and reasonable: it is that people should not be cut short. That is what is being done to them.

Certain people on the other side say that we are supposed to be socialists, yet here we are defending capitalists. Why should we not defend people against injustice no matter who they may be? I make no excuse for defending them. Both this amendment and the next amendment are very fair: that the Government get this for one year. The Minister says that this is not retrospective because it relates to the present year. It is retrospective. The Revenue Commissioners always go on like this. They make me sick the way they define a cat as a dog and a mouse as an elephant and all this kind of thing and they do this continuously in the Finance Acts. Some day somebody will take them by the scruff of the neck to the Supreme Court and they will be battered insensible. The trouble is that most people who do it cannot afford to do it and the people who can afford it are gypping them so much that they dare not do it. This is the truth.

Mr. B. Lenihan

This applies to every tax code in the world.

Dr. O'Donovan

I am just saying what applies here. I do not believe in injustice; I believe in fair play and decency. I would have no objection to giving this to the Government for the coming year but I do object to its being brought in at this stage of the year and in fact throwing it back to, in the case of most companies, 1968-69. All for what? To get £3½ million. A few days ago the House without question voted an additional £3 million subsidy for CIE. I have no criticism to make about that subsidy but it is unreasonable to push people around and the only people who will be pushed around are the people who are progressive and used the money in their company. The people who pushed it out to their shareholders are not going to be caught at all in the same way. Those who put it into machinery or bricks and mortar, and perhaps borrowed money, are now going to be in a difficulty. No matter how we argue there is an Alice in Wonderland aspect in this thing, of people having to run to stay in the same place—they will have to do more than run if they have committed themselves to expenditure. The Minister for Transport and Power spoke about good financing and good budgetary procedure and this is from a Government who are spending £500 million in the current year. Who do they think they are trying to cod?

Mr. O'Higgins

I do not know whether the Minister for Transport and Power, who has now left, was doing a spoofing operation on this House in defence of the section as it stands, but it appeared very much like it. He said that this was not retrospective but that is in the teeth of the meaning of the word "retrospective". As a result of the section, as it stands, in the month of December, 1970, a company find that in relation to their trading position, already declared and finalised, they have to face, for the previous year, a new tax liability next month. Of course, this is retrospective because it removes a deduction which was part of the tax code when the company were declaring their final net profit position.

When that was declared last April the position was that under the law they had to provide 50 per cent of their profits in relation to tax. They are now told under this section: "We are very sorry. Although you have declared your profit position, you now have to find another 8 per cent in respect of each trading year already concluded." It is not only retrospective. it is retro-active. This kind of taxation is symptomatic of the lack of policy and the lack of any clear programme which is demonstrated time and time again by this Government. Deputy O'Donovan, Deputy Tully and I are not concerned primarily for companies with a fat and strong profit position; we are concerned with the effect this kind of measure will eventually have on industrial employment and about the instability it is going to bring into the employment market.

Irish companies, doing their best at a time of growing competition in the home market, have to face a tax situation and they look to a situation in which there will be one Budget each year. In relation to the Budget introduced in May of this year they were entitled to expect that that Budget represented the score for this financial year, but as has so often happened in the past, because of the persistent incompetence of members of this administration, who cannot even plan 12 months ahead, another Budget had to be introduced. By October it was perfectly clear that another Budget was going to be introduced. After a period of six months, in the dying days of the calendar year, companies have to face another completely unanticipated tax liability which may work out in relation to a third of the companies to an additional tax liability of 24 per cent of their profits next year.

The Minister for Transport and Power blandly told them: "Oh, think nothing of this. Forget about it. It happens everywhere. It is not even retrospective." Were they to expect this to happen? Are we to have a situation in which no person engaged in business, using resources in order to provide employment, can be certain as to what the position is going to be in one month's, two months or three months time? If that is to go forth from this Government at this time, it will have a disastrous effect on Irish industry, on the development of our own resources and the provision of employment for our people.

I think this is a disgraceful provision. It is utterly indefensible. I have little doubt that a stand by the Minister on this section, as it is proposed, can only result in a considerable feeling of loss of confidence by the business community in the position of the Government and in Government policy. The case has been made for this amendment. It stands clearly as a proper and worthwhile amendment. I certainly did not gather anything from what was said by the Minister for Transport and Power which causes me to change my mind in relation to the merit of this proposal.

Minister for Finance (Mr. Colley)

I do not wish to dwell at too great length on this because I did deal with this point on Second Stage. Whatever meaning one takes out of the word "retrospective" the fact of the matter is that this Bill proposes to change the income tax liability of companies for the year 1970-71 in respect of tax payable next month.

If Deputy O'Higgins's logic is to be accepted then it would be true to say also that any change whatever in the income tax rate at any time of the year would be retrospective in respect of some companies, depending on their accounting year. If that is his contention, and if because of that the tax rate cannot ever be changed because it would be retrospective, it is a proposition I cannot accept. He seemed also to be making the proposition that because people did not expect or should not have expected a supplementary Budget they should not therefore have been exposed, in the case of companies at any rate, to additional taxation. This again is a proposition which I could not accept and which Deputy O'Higgins, if he were in Government, could not accept either.

Indeed, as far as my recollection noes, I think he was a member of a Government which at one time introduced a very substantial number of import levies in the middle of the financial year. They had a much more disturbing impact on the operation of Irish business than this Bill will have. He would defend, and I would defend with him, the right and duty of any Government to take such steps as are necessary to manage the economy whenever it is necessary to do so. This is not to say I recommend there should always be supplementary Budgets. I think they are to be avoided if they can be, but I could not accept the proposition that we cannot ever have a supplementary Budget and that seems to me to be the logic of what Deputy O'Higgins is saying.

The fact that companies are taxed on their earnings in the previous year is a matter of administrative convenience. It is certainly very convenient for companies and it has the effect that many of them, for a period of up to 20 months, have in their possession moneys which they would otherwise have paid over to the Exchequer and in many cases the value of that concession is far more than the imposition of this tax.

In those circumstances I must say I find it difficult to have sympathy with the case being put forward. I would remind the House again that many companies make provision for a tax equalisation reserve because of this very position. They can only calculate tax on the basis of existing tax rates. Therefore, inherent in the calculation they make is that, if there is a change in tax, that provision may either be too large or too small. They know this when they make that provision and consequently many companies have, as I say, a special reserve fund to deal with this kind of situation. To say that because companies do not do that they are being subjected to retrospective taxation in an unfair manner seems to me to be twisting the facts far beyond anything that logic would enable one to do. I could not accept this amendment.

Dr. O'Donovan

Neither the Minister nor his deputy, when he was here, dealt with the point I made that this is December, 1970—it is not May, 1970 —and that is what makes it retrospective. It is time that makes a thing prospective or retrospective.

Mr. Colley

It operates next month.

Dr. O'Donovan

I am just defining something now: time makes a thing retrospective. It is not nearly as complicated a definition as the way the Revenue Commissioners frequently write into a Bill that, "the word `prospective' in this Bill shall mean `retrospective' ". This is something they do regularly. The Minister talked about companies getting a concession by being assessed on last year's profit. That was the way since the system was set up. It was not set up as a concession. It was set up in that way because it was the only way the blooming system could be worked.

Mr. Colley

That being so, why say then "retrospective"? Surely that is changing around?

Dr. O'Donovan

It is retrospective because of the time element. I have already defined why it is retrospective. It is because of the time element. If this had been introduced last May no company would have the same argument as they have now in December.

Mr. Colley

That would depend on their accounting year. Would they not be in the same boat?

Dr. O'Donovan

No, they would not because this will be calculated on the figures for 1968-69 depending on when the financial year of the particular companies ends. This is what makes it retrospective. In May, 1970, the figures for 1968-69 were in an entirely different position as compared with the position they are in towards the end of their second accounting year. That is the problem. My own opinion, for what it is worth, is that this was brought in as a counterblast to the Prices and Incomes Bill to show that the Government were being fair as between all sections of the community. Frankly, so far as the finances of the country are concerned, it is a mere bagatelle. To use another metaphor, it is the merest fleabite in relation to the yield of tax on incomes of all sorts. What this side has been concerned about all the time is that this could get a certain type of company which was in a particular development phase into serious difficulties and no amount of argument about words will alter that position. However, I have no doubt at all that there will be no change because, once a Minister commits himself nowadays to something, unless he feels there may be political consequences, he sticks to it.

Question put: "That the words proposed to be deleted stand".

The Committee divided: Tá 59; Níl 43.

Tá

• Aiken, Frank.
• Andrews, David.
• Barrett, Sylvester.
• Boylan, Terence.
• Brady, Philip A.
• Brennan, Joseph.
• Briscoe, Ben.
• Brosnan, Seán.
• Browne, Seán.
• Carter, Frank.
• Carty, Michael.
• Childers, Erskine.
• Colley, George.
• Collins, Gerard.
• Connolly, Gerard C.
• Cowen, Bernard.
• Cronin. Jerry.
• Crowley, Flor.
• Cunningham, Liam.
• Davern, Noel.
• de Valera, Vivion.
• Dowling. Joe.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Fitzpatrick, Tom (Dublin Central).
• Foley, Desmond.
• Forde, Paddy.
• French, Seán.
• Gallagher, James.
• Geoghegan, John.
• Gibbons, James.
• Gogan, Richard P.
• Haughey, Charles.
• Healy, Augustine A.
• Herbert, Michael.
• Hilliard, Michael.
• Hussey, Thomas.
• Kenneally, William.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Lenehan, Joseph.
• Lenihan, Brian.
• Lynch, John.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Meaney, Thomas.
• Molloy, Robert.
• Moore, Seán.
• Nolan, Thomas.
• Noonan, Michael.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Des.
• Power, Patrick.
• Sheridan, Joseph.
• Smith, Patrick.
• Timmons, Eugene.
• Tunney, Jim.

Níl

• Belton, Paddy.
• Bruton, John.
• Burke, Joan.
• Burke, Richard.
• Clinton, Mark A.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Coogan, Fintan.
• Cosgrave, Liam.
• Cott, Gerard.
• Creed, Donal.
• Crotty, Kieran,
• Dockrell, Henry P.
• Dockrell. Maurice E.
• Donegan, Patrick S.
• Donnellan, John.
• Dunne, Thomas.
• Esmonde, Sir Anthony C.
• FitzGerald, Garret.
• Fitzpatrick, Tom (Cavan).
• Fox, Billy.
• Governey, Desmond.
• Hogan, Patrick.
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kavanagh, Liam.
• Keating, Justin.
• Kenny, Henry.
• L'Estrange, Gerald.
• McMahon, Lawrence.
• Malone, Patrick.
• O'Donnell, Tom.
• O'Donovan, John.
• O'Hara, Thomas.
• O'Higgins, Thomas F.
• O'Sullivan, John L.
• Ryan, Richie.
• Taylor, Francis.
• Thornley, David.
• Timmins, Godfrey.
• Treacy, Seán.
• Tully, James.

Tellers: Tá, Deputies Andrews and Meaney; Níl, Deputies R. Burke and Cluskey.

Question declared carried.

Amendment declared lost.

Mr. O'Higgins

I move amendment No. 2:

In lines 12 and 13 to delete "or for any subsequent year of assessment".

This amendment is a fair test of the bona fides of the Minister for Finance. When the announcement was made last month that, in order to deal with inflation, a package deal would be put into operation, the Minister for Finance envisaged the freezing of wages, of prices, of dividends, of fees, and so on. He made it clear that these decisions would operate merely for the year ahead-1971. This Finance (No. 2) Bill was tabled in tandem with the Prices and Incomes Bill and the Minister for Finance described it as part of the package deal.

In the circumstances when one reads in section I that in order to deal with what one hopes is a temporary inflationary period the Minister proposes, on account of that situation, to alter the tax position of companies not merely in respect of one year but to apply the altered taxation to all subsequent years, one sees this is contrary to the package deal he announced. It seems to be an effort to impose a permanent increase in the tax liabilities of Irish companies arising from an emergency situation. It tests the bona fides of the Minister at this stage. In an emergency situation, in a supplementary Budget, to increase permanently, as this measure proposes to do, the tax liability of companies is in my view utterly wrong. It is contrary to what the Minister had announced and beyond the exigencies of the economic situation with which he was dealing.

I want to add that under the section as it stands not only will Irish companies have to face this year and next year, by reason of the operation of the income tax code, a situation in which they have to provide in a normal year 58 per cent of their profits for tax purposes, but this will continue to be an imposition which they must bear. That comes at a time when they are competing on the home market against British companies which now enjoy in relation to Irish companies a far better tax position. English companies retaining their profits have a total tax liability of 42½ per cent and they will trade in the Irish home market for the Irish home market against Irish companies that have to pay 58 per cent of their profits in tax. This is utterly absurd. It seems to me to be selling Irish companies down the river. It may be an understandable measure in relation to an emergency situation for a specified period and it was in that way it was introduced and understood but in this legislation it appears as a permanent measure.

I said that British companies retaining their profits, ploughing them back into development, enjoy now an increasingly advantageous tax position. One way in which they can retain their profits is by utilising them for advertising, by putting their profits into press advertising beamed at the home market or into television or radio advertising beamed at the home market. They can do that and they will get a preferential tax position when they do it and in doing it they are at the same time making it more difficult for Irish companies to compete particularly when these Irish companies have to pay a 16 per cent higher tax liability—in fact, a 30 per cent higher liability.

I think it is wrong, and I think the Minister could agree to this amendment without in any way minimising the strength of the measures which he put forward designed to deal with a temporary situation in an emergency atmosphere. If he agreed to this amendment it would help considerably to stabilise the position and restore some confidence to the industrial sector of the economy. Quite frankly, they are utterly confused by what is now taking place and feel that improvisation is taking the place of planning and that considerable damage may be done to our industrial fabric. I, therefore, urge this amendment on the House.

Mr. Tully

I want to make a few brief points. First, did the Minister mean it when he said that this was a one year only effort?

Mr. Colley

I did not say that.

Mr. Tully

Then I misunderstood the Minister and not for the first time. It appears that over the last couple of weeks the whole country has been misunderstanding him.

Mr. Colley

Perhaps the Deputy would quote what he misunderstood?

Mr. Tully

What I thought the Minister said was that this was a special tax and that all the measures were for the purpose of providing money which had to be obtained this year; that a sum of £21 million had to be found of which a certain amount would be provided by economies and the balance by borrowing or by this means. That is what I understood, and that it applied to this year. The only trouble I see is that when any type of taxation is written into legislation it is extremely difficult to get it out again. The Minister need not have included those words if he did not want to do so. Deputy O'Higgins made that point: he need not use those words; he could put them into next year's Budget and that would be that. Therefore, putting them in when it is unnecessary to do so in my opinion is wrong.

Secondly, this appears to be penal legislation against Irish companies because we cannot catch foreign companies in the same way. They are able to get out of it. This is a mistake. I said, and so did Deputy O'Donovan, that if companies have the money to pay we do not object to their being taxed. We did object, in the case of the amendment before this, because we felt it was retrospective legislation. This is different. At least this gives them warning that in future they will have to pay this tax. Is there a danger of companies being unable to continue because this is written into legislation, a danger that it will cause unemployment? That is my only objection to it. Otherwise, I see no reason why people who have a good deal of money should not be made pay their share of fair taxation. Therefore, I would be glad if the Minister would explain why specifically he includes those words in the Bill.

Mr. Colley

In response to the second last point made by Deputy Tully—I said it before but perhaps I should say it again—I have no evidence that the imposition of this tax will have the dire effects which have been suggested by some people. I do not say Deputy Tully suggested it but some people have suggested that various factories would close down and people would be put out of work as a result. I have no evidence to suggest that is true.

First, let me say I did use the phrase "package deal" in relation to this Bill and the Prices and Incomes Bill taken together. Perhaps Deputy O'Higgins will recall that the Labour Party at least was not prepared to treat it as a package deal and would not take the two together.

Mr. Tully

I am glad you have taken our advice.

Mr. Colley

Have we?

Mr. Tully

You can withdraw the other Bill and perhaps you will withdraw this one.

Mr. Colley

I did use the phrase "package deal". What I intended to convey was that the Prices and Incomes Bill was endeavouring to deal with an inflationary situation so far as it could be dealt with in the matters covered by that Bill. To do that and at the same time have in prospect a very substantial deficit in the current Budget, which would of course be inflationary, would be an indefensible position for the Government. Therefore, to that extent those two Bills were part of a package deal attack on inflation. However, it may be that some people misunderstood what I said, although I venture to suggest the misunderstanding was not very widespread. I should like, in particular, to quote from the Official Report what I said in relation to this tax when introducing the Supplementary Budget, Volume 249, No. 1, column 73:

The change will come into effect this year and will increase the amounts of tax due for payment by companies on 1st January, 1971. It will yield an additional £3.5 million in the current year and £6 million in the year 1971-2.

That states specifically that it will not be confined to the current financial year. As further evidence of the fact that I do not think Deputies were unduly misled let me point out that there are no amendments down in relation to the other taxes being imposed in this Bill to provide that they will only apply for the current year. This suggests that Deputies did not think that the introduction of those taxes was being accompanied by a statement to the effect that they were only to apply in the current year. I want to say, having said that, it is possible and conceivable in the next financial year that this tax might be taken off or might be modified in some other way.

Mr. Donegan

Or increased.

Mr. Colley

Yes, or increased. The Deputy just took the words out of my mouth. It is a possibility. All of those things are possibilities in relation to any tax. I do not think any Minister for Finance could undertake in advance that he would not increase, reduce or modify in any way any particular existing tax. I could not undertake to tie my hands in that way. As I said, I made it clear when introducing the Supplementary Budget that in fact it was intended to go on in the next financial year as well and in those circumstances I do not think that the case that has been made for the amendment stands up.

Mr. Tully

Why does the Minister put in "for any subsequent year"? Could he not have included that in subsequent Budgets?

Mr. Colley

Of course, that could be done, but it would mean that in every Budget you would have all sorts of resolutions covering any new tax introduced. I made it clear, as I quoted, that it was intended to apply in the subsequent year as well. I gave the estimated yield.

Mr. Donegan

I intend to deal with the corporation profits tax increase on the relevant section and therefore, in order not to be repetitive, I will not deal generally with its application now. I want to refer to the question of the package deal. There have been many changes since. As far as the Government are concerned we could refer to it as the striptease period of Fianna Fail politics. In the first instance there was to be a freezing of the 12th round increase, but this was changed in 36 hours. Various other things have happened since. It is like the seven veils. We are not so far from the seventh and then we shall be entirely naked before the people.

In the Prices and Incomes Bill workers, and indeed shareholders, who are not all rich people and directors of companies were asked to accept certain strictures. Shareholders were asked to accept the fact that they could not have their remuneration by way of dividend, by way of directors' remuneration or any other remuneration increased for a certain period. As I understood it, part of the package deal was that business was to accept strictures as well.

I intend on the section to deal with the bad effects this will have. Surely, if it was a package deal, then the position was that this stricture was to be on the general body of people. One section of it has been removed already because of the declaration by the Government that they are not proceeding with the Prices and Incomes Bill at this moment. This means the House will adjourn this week and we will not see again until some date late in January or perhaps the first week in February any legislative action on that Bill. The other side of the package deal is being pressed on by the Government. The Government will not even accede to Deputy O'Higgins's request that they would come back to the House at a later date if they decided that the provision in relation to company taxation was in the interest of the nation.

There is no reason why Deputy O'Higgins's amendment could not be accepted. Then, if the Minister wished, he could come to the House at a later stage and provide for this in an ordinary Budget. This legislation does not transcend an ordinary Budget. I do not understand why, if one section of the package deal has been frozen or set aside, another section is to be proceeded with.

Sir Anthony Esmonde

A very important point raised by Deputy O'Higgins on his amendment has not been answered by the Minister, that is that Irish companies have to pay 58 per cent taxation as against 42 per cent by British companies. This is a vital point which the Minister for Finance, who holds a very important office, should answer. We are at the moment negotiating for entry to the Common Market. We are not in too happy a position industrially in regard to a free trade area because we are not advanced enough industrially for that. If we have to go in, surely it will be a heavy load around our necks vis-à-vis our British competitors, who are our closest neighbours. The Minister, when replying, did not refer to this vital point.

Mr. Colley

I have already dealt with the case made by Deputy Donegan and I do not propose to go over it again. With regard to the point raised by Deputy Esmonde, I dealt with this in some detail on the Second Stage. I will not go over that again but I would briefly point out that there is an important difference between the method of taxation here and that in Britain. When companies pay their tax here that is the end of the matter as far as the shareholder is concerned, but in Britain the shareholder is again taxed when he receives his dividend. If you make a comparison on that basis you will find that the tax rate here is a constant 58 per cent, but in Britain in the case of a company which distributes all its profits the tax goes up to 65 per cent, although I agree it can go down to 42½ per cent where there is complete retention. I also pointed out a number of the very important concessions which are made to Irish companies in respect of their profits invested in the way of depreciation allowances, export tax and other reliefs. I detailed them on the Second Stage and that is why I did not deal with the point again when Deputy O'Higgins raised it.

Sir Anthony Esmonde

I am sorry to intervene again but am I to take it that the shareholders of Irish companies do not pay any tax on dividends? That is what I understood the Minister to say. I find it very hard to believe that.

Mr. O'Higgins

Of course they pay tax on dividends.

Mr. Donegan

The Minister has put his big foot in it again. Of course they do.

Mr. Colley

When an Irish company has paid its tax, the shareholder does not pay any further income tax.

Mr. Donegan

Personal income tax.

Mr. Haughey

The company deducts tax when paying dividends and recoups itself to that extent.

Sir Anthony Esmonde

But the shareholder's dividend is taxed.

Mr. Haughey

In England the company pays and then the shareholder pays again separately. The Minister is right.

Sir Anthony Esmonde

That does not equate the situation.

Mr. Colley

If you want to compare the taxation in Britain, which Deputy O'Higgins was doing, you have to look at it from the point of view of the shareholder and what he gets into his hand.

Mr. O'Higgins

What I am looking at is the trading position of the company. The shareholder may draw an income from the company and the shareholder's tax position vis-à-vis his own personal income is a matter for him and it is aggregated with whatever other income he has, but the trading position of the company, the company's own liability for corporation profits tax and income tax where there is retention in England, is recognised as justifying a preferential tax position. The tax liability of such a company is limited to 42½ per cent of its profits. That company has a trading advantage on the Irish market and, indeed, on the British market too. It has a trading advantage in relation to any Irish company which has to face a 58 per cent profit tax liability.

Mr. Colley

I do not know if I can put this any further. The position is as I have stated it. There is a difference between the way this matter is treated here and in Britain. If you want to make the comparison between the two, as Deputy O'Higgins was doing, you must compare like with like. The only way to do this is to have regard to the total tax which is paid. Here, when the company has paid its tax, this comprehends the tax on the dividend, but in Britain the company pays its tax, the dividend is paid out, and then the further tax is applied.

Mr. O'Higgins

I have in mind an Irish company that does not pay any dividends, a company that tries to retain its profits.

Mr. Colley

That is a special case.

Mr. O'Higgins

This is what we want to encourage.

Mr. Colley

Agreed.

Mr. O'Higgins

Surely we want to encourage Irish companies to plough back their profits? There is no question about dividends. An Irish company that wants to expand will be taxed on its profits to the extent of 58 per cent under this proposal, although they are going back into expansion, while an English company competing against it and also following the same policy of expansion is taxed only in relation to 42½ per cent.

Mr. Colley

If you wanted to make that comparison you would have to go further back on the scale because what is taxed here at 58 per cent is the income of the company which is liable to tax. To arrive at that you would have to take account of the various allowances which the company would get including, as I have said, the initial allowances and the export tax reliefs, and so on. You would have to compare them with those in Britain if you wanted to make an exact comparison. I do not think it can be done on the basis Deputy O'Higgins suggests.

Sir Anthony Esmonde

Surely the Minister would agree that the British company has a greater margin of profit because they can plough back more into the firm and have a greater opportunity of expansion than any Irish company will have in the future. What earthly chance has any company, if its gross profits are being taxed at the rate of 28½ per cent, of ploughing anything back for further expansion and, if you like, further employment?

Mr. Colley

I think the Deputy is mistaken because the assessment of tax arises only after the various allowances I have mentioned are given. It is not the gross profits, as such, that are taxed at 58 per cent.

Sir Anthony Esmonde

The Minister is making a good case for his point of view but he is not convincing me.

Mr. Donegan

The Minister is trying to suggest that we have got better initial allowances on capital expenditure, better depreciation allowances on machinery and better, what I might call without using the proper tax word, initial allowances of all kinds but, at the same time, this is opening up a field of very detailed comparison which, if one wanted to debate it, would take up an extremely large file and keep the Minister until 10.30 tonight. In the case of the two companies mentioned by Deputy O'Higgins, both following the same policy of ploughing back profits as capital expenditure, I do not think that the difference between 42½ per cent and 58 per cent could be made up by any differences there are in the case of the initial allowances and the various other allowances to which the Minister has vaguely referred.

I should like the Minister to give us a list of the essential and important differences in these allowances, but there is this factor which must be remembered. In this country most companies are young by British standards. Many British companies have reached the stage where their rate of capital expenditure is much lower and their re-investment of profit is much lower than is demanded of young companies here which are growing and which must, as every growing company must, restrict the profits they give to their shareholders or proprietors and plough them back as capital expenditure.

In that situation there are more companies here in Ireland in the industrial sector paying this 58 per cent than there are in Britain. Many centuries of industrial operations there have meant that there is not the same necessity for companies to plough back their profits. I agree that there is a difference in relation to taxation on unearned income but the top of the scale mentioned by the Minister would, perhaps, include shareholders in the absolute top surcharge class in Britain. On the other hand, we have no such people. I think it was Deputy Haughey who limited them to less than 200 people. Therefore, in my view, it is quite clear that this is a heavy imposition on Irish industry. It was a package deal which was meant to end on December 31st, 1971, according to the spoken word and policy of the Government, which at the moment are not worth a two penny ticket.

The Minister is now refusing to accept Deputy O'Higgins's amendment knowing full well that, if he accepted it, it would only mean that he would have to come back to the House with a Budget or a Supplementary Budget and seek power to continue it after 31st December, 1971. It is a sad business that one section of this package deal, namely, the prices and income policy, is in mid-air and the other section is on the ground, with the Minister stonewalling to see to it that the normal approach indicated by his package deal is not adopted.

Mr. Colley

I said this before but let me say it again. If Deputy Donegan heard me he knows that I quoted from what I said when introducing the Supplementary Budget. I made a specific statement on the yield in 1971-72. In the face of that, I do not think Deputy Donegan is entitled to come in here and cast doubts on my word on this. I made it quite clear to the House and I also pointed out that Deputies on the other side tabled no amendments of a similar nature in regard to the other taxes. Did they think they would end in the current year or not?

Mr. Donegan

An irate Minister is of course one who has the wind up and therefore a bad Minister: I am entitled, no matter what the Minister said on the Second Stage or even on the First Stage, to express from this side of the House what my opinion is in relation to the legislation. My opinion is that this Bill is sister legislation to the Prices and Incomes Bill. which has since been suspended in mid-air. I submit that the measures contained in this Bill should only have the same duration as those contained in the Bill suspended in mid-air. The heavy strictures imposed on Irish industry are improper and incorrect. I do not give a two penny ticket what the Minister said on any previous stage.

Mr. Colley

Because it does not suit the Deputy.

Mr. Donegan

It does not suit me. It does not suit Irish industry.

Mr. Colley

It does not suit the Deputy. I do not mean in regard to his business. I mean it does not suit him in this House.

Mr. Donegan

The Minister knows I sat opposite him in Industry and Commerce for years. I never was personal once and neither was he.

Question: "That the words proposed to be deleted stand" put and declared carried.

Amendment declared lost.

Mr. O'Higgins

I move amendment No. 3:

To add to the section a new subsection as follows:—

"( ) This section shall not, in relation to any year of assessment, apply to a company which establishes that it has in that year ploughed back or retained for investment in the company the major portion of its profits".

We have covered this amendment in the discussion we have had. I propose to add a new subsection providing that the paragraph in section I which imposes an increase in tax liability from 50 to 58 per cent should not apply in relation to any year of assessment to a company which establishes that it has in that year ploughed back or retained for investment in the company the major portion of its profits.

I do not want to go back over what we have said but under the section as it stands, with the increase from 50 per cent to 58 per cent, this represents a tax increase of 16 per cent and will result in a general fall in Irish company earnings of 16 per cent in companies paying tax at the standard rate. It follows that dividend cover for all companies paying the standard rate of tax will fall by 16 per cent. If dividends are maintained, as they may be in some companies, retentions will undoubtedly fall and if retentions fall then expansion will be in danger.

In England, under British taxation, they have recognised the importance to be attached to the encouragement of expansion in all companies, particularly trading companies. They have recognised the necessity for that by giving a benefit or preferential treatment in relation to taxation. Here, up to this, we have not recognised that, and whether a company regards immediate and future expansion as being more important than paying an increasing dividend to a shareholder, so far as taxation is concerned they are all regarded in the same way.

I do not think that in present circumstances we can continue with that kind of outlook and policy. We are on the threshold of Europe. We are certainly facing now the full effect of trade liberalisation. We are facing a situation in which Irish companies are finding it more and more difficult to fight for their own markets, not to mind expanding into other markets. It is essential that our tax code should be a nice balance, a constructive balance, aimed at encouraging expansion. I do not suggest that my proposal in itself will bring a wonderful change, but the proposal carries with it an important principle: that the taxation policy should recognise and benefit the company that has a large retention factor as its permanent policy. If our taxation recognises that and recognises its effect on future employment, on the creation of job opportunities for our people in the future, that is an important thing.

I would urge the Minister to consider favourably this amendment. I have no doubt that, no matter how it is worded here, the sense of the amendment is constructive and would be helpful to the economy.

Mr. Tully

This is an amendment which makes a lot of very good sense particularly because at present there are so many companies going to the wall and looking to the State for help to keep going. Surely an effort should be made to give those that are doing well and prepared to expand some extra incentive? The Minister will read out the incentives they are already getting but so are those which had to get substantial financial help from the State. I believe that the effect here will be that many smaller companies that were giving big employment may find it difficult to expand or to keep going at all if the full effects of this legislation are applied to them.

This is a reasonable suggestion. I am not sure whether the wording of the amendment exactly covers the point, but it is something the Minister should seriously consider. After all, we do hope that there will be an effort made by companies that are doing well to take up the employees from the companies that have been going out and the big numbers leaving agriculture must be employed somewhere. If extra incentives are being given to new companies starting up, is there any reason why an extra incentive should not be given to old established companies which are being hard hit?

One of the things I have commented on over the years in regard to the encouragement of industry is that the old firms which have been in operation for many years seem to be the ones to which the State are not prepared to give any assistance at all. I saw in my own constituency a number of them going to the wall mainly because the Government, while they were prepared to give financial assistance and tax remission of every kind to new companies starting up and ones in regard to which there was no guarantee that they would give substantial employment, were not prepared to lift a finger to help the older firms that had given employment down through the years. This is one thing which requires attention from the Minister and I would appeal to him to do something about it.

I mentioned to his colleague, the Minister for Industry and Commerce, the case of a firm which had done everything possible not only to give employment but to get export orders and while they had done that and had achieved substantial export orders the State, through one of its subsidiary bodies, refused to give that company the money they required to carry on. I do not know what the situation of that company will be but this is the sort of thing which seems to be repeated in this section. The Minister does not intend that. No more than we do, he does not want any company to go out of production, but this is something which is well worthy of consideration.

Mr. Donegan

I am very pleased to hear what Deputy Tully has been saying. There are companies which have been operating on the home market— and they would be operating under pressure too—who have been paying their workers for perhaps generations —a lot of them have been notable for the fact that there was never a strike in them—but these companies have not perhaps the attraction for a politician or a Government which a new company has. Neither have they available what is available across the water, namely, a large money pool from which debentures may be sought or from which a fresh investment may be sought so that the necessary blood transfusion can be effected and without which a lot of companies would go to the wall. In the next two years we are going to face a pretty severe credit squeeze which means that the pool of money available for investment in companies will be severely restricted. Here we have a situation whereby those people who are retaining their profits and ploughing them back will be at a disadvantage as far as their overseas counterparts are concerned. Deputy O'Higgins in his well-thought-out and well-considered amendment seeks to set this right.

I should like to know how the Minister can say that the sort of company referred to by Deputy Tully—and it is important that he saw the type of company that would be deeply affected by this type of legislation—can get this sort of incentive which is so necessary here. I should like to remind him that the defence of existing jobs in parlous circumstances in industry is just as important, job for job, as the creation of new ones.

Mr. Colley

I have never seen any study of a comparison between the State assistance made available to new industry as against that made available to existing industry but a lot of people might be surprised at the results of such a study. There are very many schemes in operation which in practice apply, in the main, only to existing Irish industry and do not apply to new or foreign industry. This is overlooked when the comparison is being made, as we heard in the last few minutes.

In regard to the amendment, I have doubts as to whether the proposition that a company who retain profits simpliciter, irrespective of what they do with them, should get special tax concessions. I have some doubts as to whether that is a proposition which I should accept. Certainly I would not be willing to accept it in advance of the results of the study to which I referred some time ago, the study into the structure of company taxation which is going on. I think what Deputies have in mind is that there should be an advantage for a company who retain profits and plough them back effectively into the expansion of the business. That, in fact, is not what the amendment provides; it may have been intended but it is not, in fact, what it provides. Under the amendment as it stands, if it were accepted, a company could say they were setting aside a certain amount of profit for the purpose of reinvestment or re-equipment and could, the following year, change their minds and distribute it. The administrative difficulties of assessing tax on the basis of what a company say they intend to do with their profits are very considerable. As I say, the principle I mentioned earlier is one I am doubtful about and I would not be inclined to accept it until I get the results of the study. Apart from that, on the practical aspect, the administrative difficulties would be enormous.

However, I would not like Deputies to overlook the substantial reliefs already provided under existing law in respect of investment in plant and machinery, industrial buildings, scientific research and acquisition of know-how. These reliefs are given in respect of expenditure actually incurred on these purposes and not merely by reference to money put aside for investment. That is a fair indication that the kind of things Deputies have in mind are covered to a great extent in existing legislation. I do not say they could not be improved, but they are substantially covered by existing legislation. Certainly at present I would not be prepared to accept the proposition which seems to be emerging from this amendment that the mere retention of profit as such would qualify for some taxation advantage. It may be argued on economic grounds that this is advantageous, I do not deny it, but certainly I am not convinced of it yet and I do not think that that is what Deputy O"Higgins really had in mind when he put forward this amendment.

Mr. Donegan

I should like to take up the Minister's words "the mere retention of profits" and direct the Minister's attention to the fact that Deputy O'Higgins's amendment says "shall not, in relation to any year of assessment, apply to a company which establishes that it has in that year ploughed back or retained for investment in the company the major portion of its profits".

In a continuing company, of course, if one must make a statement through one's auditor of intention to carry out certain capital expenditure that would be brought up by the Revenue Commissioners in the following year if one did not do it. Therefore I do not see the administrative difficulties in regard to this. The new industries set up for export get complete freedom from taxation for a long period on all profits on their exports.

Mr. Colley

So do the Irish companies which do the same.

Mr. Donegan

Agreed. These new companies are very often satellite companies of parent companies abroad and they have come here for that tax concession. Let us be blunt about it. They may lose it in Common Market conditions with results about which we can only conjecture. I am thinking about the existing company who have employed people for a considerable period of time, who very often are a family company, who never took out any profits and were, in fact, in a low profit trade where the profits were insufficient to provide the new investment that was necessary. I am thinking of a company existing only on bank overdrafts and not on any new investment for capital expenditure. This company is going to be affected by the situation and Deputy O'Higgins's amendment seeks to look after that position. The Minister would be well advised to accept this amendment. I feel it will have bad effects all over the country in relation, as I said in my previous contribution on this amendment, more to the struggle to retain existing jobs than in the creation of new ones, where life can be made very easy for the honeymoon period. A lost job is just as bad as not providing a new one.

Amendment put and declared lost.

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

Mr. Donegan

This section imposes taxation on companies and it is meant to provide £3.5 million in the remainder of this financial year and £6 million in a full year. I want to suggest to the Minister and the Government that in their efforts to collect this money they have created a situation whereby the withdrawal of funds from Irish industry to parent bodies overseas will be even greater than it has been. They have produced hurried legislation which will not have the desired effect from the taxation point of view, namely, the collection of the sums I have indicated, and will have a very bad effect on employment and on industry itself.

I use as evidence for saying that the fact that the largest sums in taxation collected from companies here are collected from companies which are subsidiaries of parent companies overseas. I waited until the section to make this general observation on taxation. Parent companies overseas who have subsidiaries here have considerable power and considerable control. With very few exceptions the raw materials are supplied by parent companies overseas and if they are not supplied there are always charges for services and advertising so that the degree of profits indicated to the Revenue Commissioners here by any of these large subsidiary companies is a movable figure, one that can be moved up or down by the accountants dealing with the parent company overseas and the subsidiary companies here.

Large oil companies can, if they wish, pay their tax in Kuwait instead of here. There are three large oil companies operating in this country, and as it is not a practice of mine to mention the names of companies in this House I shall not do so, but the tax paid by one of these companies in respect of the sale of almost 50 per cent of the petroleum products in this country, last year was £6,000. The parent companies abroad made millions and millions of pounds, and without exaggeration they paid millions of pounds of taxation; yet this Government decided by the stroke of a pen to try to create a situation whereby tax can be collected here and at the same time money will be invested here by companies.

This is not so because parent companies can raise, on subsidiary companies here, charges for advertising, know-how, management and other services which will reduce the tax payable here, if it is more advantageous to pay tax abroad. Whatever way the Minister has succeeded in answering us from a personal point of view, I think we have indicated from a company point of view that it will pay companies who have that choice to pay their tax abroad.

I am certain, and I have good authority for saying this, that the result of this legislation will be, not what is intended by the Government who produced it in about ten days, but the paying of less tax here and the paying of more tax by parent companies abroad where the rate of taxation is lower.

There is an even more serious situation. If profits are declared here there is then the situation that the parent company abroad might use those retained profits, if they retained them, for capital expenditure. I have discussed before now the necessity for natural investment here to keep our people employed and also, as Deputy Tully stated, to employ the people who leave the land and school leavers. We have put ourselves in the position where companies will be withdrawing moneys because there is a more advantageous tax position abroad. This will mean that less profits are declared here and consequently there will be less profits to retain. This is one of the great weaknesses of this legislation. If a company wants to invest in capital expenditure it has to produce the necessary capital from one source or another but if the tax rate was more advantageous here it could pay tax here, retain its profits and re-employ that money in capital expenditure thereby maintaining existing jobs or creating new ones. I remember describing a piece of legislation relating to taxation on beer, which was introduced by one of the Minister's predecessors, as a man with two club feet walking over a flowerbed. I shall liken this legislation to a man with three club feet walking over the same flowerbed.

Major de Valera

I do not feel I should allow this section to pass without making one comment on it. I understand the Minister's difficulty and the urgency of getting money. I do not agree with the amendments which were put forward and have been dealt with but, when all is said and done, it is unfortunate that this additional taxation should be imposed on companies at the present moment.

I sympathise with the Minister when he says he finds it difficult to differentiate between profits which are actually employed in a business and profits which are distributed. Nevertheless, there is a very important distinction. Where companies make profits they do not distribute them all; a large part of what is called "profit" is necessary for the continuation of the business.

Mr. Donegan

Hear, hear.

Major de Valera

Ploughing back makes it possible for a business to keep up to date and expand. Many companies at the present moment are facing an extremely difficult situation, as I think I mentioned when speaking on the Transport Bill when I was dealing with the problems of Córas Iompair Éireann. Companies which are faced with the problem of inflation and rising costs, particularly where they have to import the material from abroad where costs have also risen, are further faced, and have been further faced, with a great increase in tax liability for several years past. Some of these companies are able to pass on that increase to consumers but, passing on the increase has an inflationary effect. The companies which cannot pass on the extra burden have to carry the burden themselves and are thus far inhibited. As I said, there are certain companies which are getting very near to the "back to the wall" position. They find taxation a major problem in their costs and, for that reason, I think we have to have a provision of this nature. I am not now talking about particular problems; I am talking about profits on a year's trading and the proportion of those profits ploughed back into the business for its future continuance and future expansion.

Mr. Donegan

And of necessity.

Major de Valera

And of necessity, I agree. While I do not go the whole way with the amendments put forward to this section I think that the points of view which have been expressed are points of view which should have been voiced. This is unfortunately a continuance of a policy which is bearing very hard on companies and which will quite possibly, and even probably, only add to inflationary effects because, when all is said and done, if the further increase in taxation results in putting costs up, and that is the only effect it can have, the company has either to find revenues to meet the extra taxation or, if it cannot do that, it fails and one then has to face social and employment problems. If, however, the company tries to find revenue, the only way it can do so is by putting up prices and so, in the last analysis, this type of taxation is undesirable socially. If a company tries to recover the extra revenue it can only do so by increasing its own revenue and it can only increase its own revenue by increasing prices. In the particular situation in which the Minister finds himself he probably has to get the money, but it is no harm to express this point of view.

We can all of us, if we wish, make very persuasive arguments when it comes to details and statistics, but I do not know that that helps us. The Minister says he has no evidence that this will have any adverse effect. I do not know if the Minister sought any evidence, but I greatly fear the evidence will be forthcoming and I believe that the pressures will be towards inflation rather than in any other direction.

Mr. Colley

In regard to Deputy Donegan's contention that international companies will always minimise their tax liability by reference to the profits of their subsidiaries, they have always done this. It is their constant aim. There is nothing new in this and they will continue to do this.

The second point I want to make is in regard to the comparison made earlier between tax rates here and those in Britain, 42½ per cent in Britain and 50 per cent here. I dealt with the fallacies in that comparison but, for the purpose of the argument, if one accepts that as true, there was a disparity between the two tax rates but that did not mean people would not invest here or were withdrawing their investment here. What we are saying is that an increase of 8 per cent will drive them out. I do not think anybody can say with any degree of certainty that that will be the case. There is, in fact, plenty of reason to say it will not be the case.

I appreciate the difficulties put forward by Deputy de Valera but I would point out to him that any addition to overheads presents problems and I have heard the argument made in regard to this additional taxation also made in relation to certain wage increases granted by companies. The argument did not always turn out to be true because companies found that the method of dealing with the additional overheads was not always simply a question of increasing prices. In some cases prices had to be increased; when, however, they found they were really up against it they discovered they could become more efficient and could absorb all or a great deal of the additional impost on their overheads. I am not saying every company will be able to do this. I am saying that the increase in the taxation involved is not so enormous as to make a substantial difference. We have heard about small companies being hit by this tax. I pointed out the other day—perhaps I should point it out again—that in the case of a company whose taxable income amounts to £2,500, the additional taxation involved here is £65.

Mr. Donegan

The Minister, of course, takes the best situation.

Mr. Colley

I could take better than that—lower.

Mr. Donegan

The Minister could but at that stage he might leave the realm of fact and enter the realm of fantasy which, in my view, this legislation entered before ever it reached the draftsman. I want to know why the Minister says that a company operating here and abroad, which can declare profits here, pay tax on them and retain them for capital expenditure, will not be affected in its decisions in the boardroom by a heavier rate of tax when that rate of tax must be compared with the rate of the tax abroad. To me, it is as clear as crystal. Nothing will convince me but that, if you increase the rate here, the position will be that the man sitting on the two boards—on the board of the parent company abroad and the subsidiary here—will advise whether or not extra charges are made for raw materials from the parent company or for the other things I mentioned and a profit declared abroad rather than here. Surely one of the sources of reinvestment is profit and it is from that source the reinvestment so necessary for the creation of new jobs and the maintenance of existing jobs comes. I do not say the Minister deliberately twisted my words, but either he did not get the gist of what I was saying or else he is not prepared to answer. It is quite clear that the parent company in Britain and the subsidiary company here will compare the rates of tax in each case and, if there is to be a source of capital expenditure in the retention of profits, then the degree of tax they will have decisions and this particular piece of legislation will be a disincentive to the declaration of profits here.

I have been involved in a small way in business over the years. There have been many occasions when an employer has said in the Labour Court, and so on: "This is the end of the Company. The extra wages which we shall have to pay will cripple us"— and yet it turned out not to be the end of the company because extra prices, as a result of the extra wages, balanced up the position. The Minister's comparison is not valid. When you come along from your trading account and bring across your gross profit and raise your charges in the profit and loss account what comes out is the net profit. Wages affects net profit. To compare charges made in relation to extra wages to a charge made in relation to extra taxation is invalid. Extra taxation reduces your net profit. Extra wages do the same thing but it is at a stage where you have to come back to the trading account, look at your prices and apply for higher prices so that you afford the wages. You can do nothing about extra taxation. Your auditor and accountant will not tell a lie. He will certify your accounts when he is absolutely certain they are correct.

The Minister made my argument rather than his own argument. This Bill and this section are a disincentive towards profits for capital investment in Irish industry. In Britain, there is a huge money market where the interest rates are very high at the moment. Because of the size of that money market, investments are always available to good, thriving companies. Just look at the size of the Dublin Stock Exchange. The only place they can get their money for re-investment is from profits, after tax, retained, and if they are less here than they are in Britain where a parent company can move from one place to another, it is a disincentive to the employment of Irish people in Irish industry.

Question put and declared carried.

SECTION 2.

Question proposed: "That section 2 stand part of the Bill".

Mr. Donegan

There was a day when the owner of a motor car was the envy of all but that day is gone. In our cities, with certain exceptions, people have to drive to and from work. The number of people driving to and from Shannon, for instance, must be very high. County Louth is embarking on a policy of dormitory areas whereby we shall build houses in the various villages which are within five, ten, fifteen miles radius of an industrial site. The people will live in a residential rather than in an industrial area and will utilise their motor car to get to and from work. The increase envisaged here is nothing more or less than a follow-up on the tax on people who will be hit by the operation of section 1.

Question put and declared carried.

SECTION 3.

Mr. Kavanagh

I move amendment No. 4:

To add to the section a new sub-section as follows:—

(2) The provisions of the foregoing subsection shall not apply in any case where it is shown to the satisfaction of the Revenue Commissioners that a caravan (including a mobile home) has been or is being purchased by or on behalf of a person either as a permanent home or as a temporary home while such person is awaiting housing or rehousing.

When the Minister looked around for luxury goods to tax he must have thought about caravans in the sense of items which are used by people on holidays rather than as homes where people are glad to live until they can get a house. These are not people who use their caravan as a second home at the seaside and live in it at the weekends. Caravans are to be seen behind rural cottages and, in the cities and towns, behind small houses and in gardens. These are not brought there for safe keeping during the winter. Families where some of the older members get married frequently have to help out in the matter of accommodation until the married couple can get a house. The only way many of them to pay in each place will affect their have of solving their problem, in a temporary or a permanent way, is to build on the piece of land adjacent to their house or on part of their garden or to provide a caravan, temporarily, on a plot or in the yard or the driveway. The married couple are thus able to use the facilities of the home for family living. I do not think the Minister imagined he was including such people whose chance of getting a local authority house is very slender for years. Their only way out is to buy a mobile home or caravan.

We are asking the Minister to add these words to the section so that this type of person is not further hurt. The pressure on people in overcrowded houses is great enough without the addition of taxation of this kind which would mean a very large outlay and would undoubtedly cause hardship to young people. It is reasonable to suggest that these words be added, thus allowing people unable to set up permanent homes to buy caravans or mobile homes so that they will, at least, have some independence, if not the complete independence we should all like to see them have in permanent homes, while they are waiting to be selected from the housing list or accumulating sufficient money to build their own homes. We appeal to the Minister not to take advantage further of this very bad situation in housing. Only this weekend the Minister for Local Government admitted that if he had £10 million or £20 million he would spend it on housing. The Minister should exclude those people from the Bill so as not to increase further the hardship of their condition.

Mr. Clinton

I fully support this amendment. I represent an area where these caravans and mobile homes are all over the place at licensed and unlicensed caravan sites. They may be regarded by the Minister and by local authorities as unauthorised structures, but unfortunately they are necessary as homes for the people. Far too many people cannot buy houses for themselves at present prices with the present loans and grants that have remained static for a very long time while prices have increased enormously.

Houses are now costing £5,000 or £6,000 while the maximum loan through the local authority is £3,000. People are no longer able to use the Local Loans Fund to finance house purchasing and the incomes of these people are insufficient to qualify them for loans from the normal building agencies. In these circumstances, people are forced into mobile homes and caravans.

Last week, I inspected an unauthorised site where there were about 25 mobile homes. I was very impressed. These homes cost £2,500. They are entirely constructed of timber and in my view would be liable for the full 20 per cent tax. You could have £500 taxation on these people who are unable to buy a more expensive home, but they have been able to secure through a hire purchase agreement, and perhaps their own savings, a home that is comfortable and even centrally heated, and provided with normal sanitary facilities. These homes, in present circumstances, enable people to live and rear families. They told me: "This home will suffice for some years until we have saved more money and are able to provide a deposit for a permanent home. Then we can trade this in, so to speak, towards the cost of a permanent dwelling."

Probably the Minister did not foresee that in bringing in this Bill he was putting extreme hardship on many people by this extra taxation, over and above the price of these mobile homes. The same applies to caravans which are lower-priced but the people who are buying caravans at a lower price have that much less money and are less well able to buy homes for themselves. Local authorities are not providing houses fast enough. This applies particularly in the Dublin area. I do not have to tell the Minister this. Every time he tours the suburbs of Dublin city or county he will see a very large number of caravans and mobile homes because there is insufficient local authority housing and because people cannot meet the cost of the present SDA loan type of house. It is beyond their reach. The Minister should bear this strongly in mind. I appeal to him to accept the amendment in the names of the Labour Party Members. I am glad they thought of putting down the amendment which is a very worthwhile one and deserves the support of the House.

Mr. Donegan

I indicated earlier that I was delighted to support Deputy Tully on this matter. His amendment is an excellent one. It certainly excludes people who want mobile homes for holidays or such purposes and at the same time includes those mentioned by Deputy Kavanagh and Deputy Clinton. I need do no more in supporting the amendment than give some examples that have not yet been given. They involve the use of mobile homes by the local authorities to house people that they are unable to house for, perhaps, years to come. When I drive into Dublin city from the north side I see many mobile homes when I come down by the Four Courts and these are provided by Dublin Corporation for old people who can remain there until the corporation are able to rehouse them. This began when houses were falling down on the people because the Government had not built new houses for them. There was a disgraceful situation where families were housed in Griffith Barracks and I cannot refrain from repeating this because it was such a terrible situation when husbands were allowed to see their wives and families for one hour in the afternoon each day. Many of these people are now rehoused in temporary dwellings or mobile homes by the local authority.

Earlier, I mentioned that I was chairman of Louth County Council, an interesting if arduous political exercise, and I want to mention a certain operation of that council also. There was a decent old woman living in a caravan at Clogherhead because she had nowhere else to live. The caravan was deteriorating as all timber structures do and would scarcely last another year. Members of the local development association sent a deputation to Louth County Council asking us to rehouse this old woman. Our county medical officer of health verified that what they said was correct. We had no house for the woman but the council decided to provide her with a mobile home. We provided this mobile home. If we were to do so after this legislation we would pay 20 per cent tax. I am proud we did this. In the scheme of houses we are providing in the field beside where this lady now resides we are including a certain number of permanent houses for old people. Until those houses are provided that old lady will get comfortable accommodation in her mobile home.

In the list of luxuries which the Minister has sought to tax at the rate of 20 per cent, plus of course turnover tax, he has made no exception in relation to mobile homes for those purposes and the purposes very properly indicated by Deputy Kavanagh and Deputy Clinton. Is it a fact, if the Minister is not accepting this amendment, that everything his Department tells him and everything which comes from the official side of the House is right, and, ipso facto, everything else from this side of the House, of whatever merit, has to be wrong?

Surely the Minister knows that Deputies from all sides of the House here are a cross-section of the people of Ireland, elected by the people of Ireland? Those of us who live in various parts of the country and who conduct our political and business affairs, must surely be people of experience and perception. If we perceive and from our experience decide on the reasonableness of an amendment of this sort, which will only cost the Government a drop in the ocean, but which will provide at a cheaper rate mobile homes for unfortunate people of the various types indicated by the three Deputies here, then surely in the Minister's wisdom it is his job to accept Deputy Tully's amendment.

Mr. Colley

Deputy Donegan knows that I have demonstrated on a number of occasions in the past in this House, and in the other House, where an amendment is put forward, for which a reasoned case is made and which is feasible, that I have been prepared to accept it no matter which side of the House it came from. In regard to this particular amendment we discussed it on Second Stage and I indicated to the House that I certainly favoured the idea which was involved in it but I also indicated that I foresaw difficulties in implementing it. Unfortunately that is the position. When I investigated it I found there are what seem to me to be virtually insuperable difficulties in implementing this.

I should explain, first, that caravans and mobile homes are sold mainly by retailers and garages and not infrequently by private people. None of those people is normally eligible for registration for wholesale tax purposes. Wholesale tax on the caravans sold by those people will already have been paid by their suppliers before the articles are offered for retail sale. It would normally be impossible for those reasons to determine the precise amount of the tax element in the retail price which was paid. It is obvious it would not be practicable to consider a relief at the point of wholesale sale since the ultimate use to which the caravan or mobile home might be put would not be known at that stage.

There would, apart from those difficulties, be a great deal of difficulty about controlling a scheme of relief on the lines suggested by this amendment. If the scheme were adopted the price of a caravan or mobile home would have to be adjusted by the seller or a refund would have to be made to the purchaser by the Revenue Commissioners on the basis of the purchaser's representations that he intended to use it as a home for himself or some person awaiting rehousing. In those circumstances it would be very difficult, if not impossible, to prevent a person buying a caravan or a mobile home at a lower price on the basis of those representations and subsequently either using it for pleasure purposes or, more difficult to deal with, selling it to somebody else. in which case you would find it almost impossible to follow him up. Therefore, for the two reasons I have mentioned, I am afraid I cannot see how this amendment could be implemented.

Mr. Kavanagh

I am very disappointed the Minister is unable to accent this amendment. I believe he could have cot around the difficulties. The Minister mentioned insuperable difficulties but I do not think they are insuperable. One way this could have been done is if the people on the housing list of councils or local authorities purchased those mobile homes or caravans and indicated to the Revenue Commissioners that they were doing so, and that they were on a housing list, this should be sufficient evidence to the Revenue Commissioners to allow that deduction. If the Minister accepts there is a problem of housing here, then he should make a better effort to look for a way around the difficulty he feels there is in implementing this amendment.

A reasonable case has been made on this amendment for people who feel they must get a home of their own. Even if it is only a caravan, it is better than living in overcrowded conditions with in-laws or in the very bad housing conditions we have not only in Dublin but also in places like Wicklow, where I believe there are at least 1,000 people in need of homes. I am disappointed the Minister has not made an effort to accept this amendment.

Mr. Clinton

If I were in the Minister's shoes—convinced, as he is, of the injustices of this tax on a large number of people and knowing full well the immense hardship it will impose on people in unfortunate circumstances— I would say to my advisers: "I want this done and your job is to find a way." I have no doubt a way would then be found. We come up against this thing regularly in this House. We are told something is too difficult to administer. People are paid to find a way to administer what is justice for the people.

Has the Minister considered at all that a mobile home costing £2,500 could carry £500 tax, whereas a permanent home costing double the figure will carry only £150 tax? Surely this is not justice and surely the Minister must see that a way must be found not to impose this increased burden of taxation on the unfortunate section of the people who are compelled because of lack of means to do better for themselves and have to accept those standards? Surely we should not put this additional load on the backs of those people?

The Minister spoke about ways of recouping those people and giving them the money back. Surely it should be possible to identify those people. We know that many of them can be certified as having lived for years in those circumstances because they have not been able to get out of them. There would be some satisfaction for them, even if they had to wait for some period to qualify for reimbursement of the money they had paid, if they knew at the end of that period the money would be recouped to them. I can see the mobile home costing £2,500 going up to £3,000 as a result of this tax. I know that is not the Minister's intention, but this tax is imposed right across the board regardless of the fact that it takes into the net those people who have made such an effort to provide themselves with homes. You will have more and more of those caravan sites and more and more of those mobile homes throughout the country before we have half solved the housing problem.

We know what has happened in Britain and we know what must happen here. The local authorities are only now becoming really conscious of the need to provide caravan sites and places where people can have mobile homes because they cannot find the amount of money required for a house. The loans which are granted from the Local Loans Fund are insufficient, and the grants are insufficient to enable them to provide their own homes.

We are just seeing the beginning of this. People are getting married younger now and more and more homes will be required. This type of accommodation is quite good for a few years after they are married. It is quite acceptable to many people. They are at an age when they can endure a certain amount of hardship, and they are prepared to put up with the inadequacies of this type of home. If the Minister is going to saddle them with £400 or £500 extra in taxation, when they are relieving him of his responsibility to provide them with homes—it is the responsibility of local government— something is wrong. The Minister is not happy with this type of legislation and. if he is not happy, he should say to his advisers: "Find a way. It must be done."

Mr. Donegan

Did the Minister ever hear of an application to the Revenue Commissioners for a licence? That is standard practice. Deciding on whether or not to give a licence might add to the work of the Revenue Commissioners, but this is a point of principle. The Government have failed to house the people and they cannot house themselves.

This is merely an interim measure. There is no reason why people should not be able to get homes without having to pay this selective wholesale tax of 20 per cent. It is totally unfair and improper. There is no reason why the Revenue Commissioners should not do this by licence, and there is no reason why it should not work. The person residing in the home could be subject to a further call from the Revenue Commissioners in six or 12 months time. People have been caught using the wrong type of diesel oil in their cars. When people are caught under this it will be found that there will be no such thing as evasion, or certainly not any great degree of it.

This was supposed to be a package deal right across the line. I have already said that the Prices and Incomes Bill is now in Limbo. It was part of the package deal. This is probably the hardest and most restrictive provision in this legislation and yet it is being retained and is being bulldozed through the House. The Minister is insisting on getting this legislation. The restriction on dividends which was part of the package deal is now in Limbo. The restriction on certain increases of remuneration for directors is in Limbo. It is not wanted during this session and, in fact, it may never be wanted if the Minister and his advisers reach agreement in certain other places.

There are other matters to which I may only make a passing reference but, under this provision, a poor old person who has not got a house will be charged an extra 20 per cent taxation on the purchase of a mobile home just because some bod, if I may use the expression, in the Revenue Commissioners has decided that this is not workable while to every ordinary observer it clearly is workable if a little trouble is taken. This indicates to me that the Government are round the bend, a non-Government, and that they have not got the needs of the people at heart.

Mr. Tully

Coming from tea a few moments ago I was talking to somebody who thought it was impossible to get something done and I said that where there is a will there is a way, and that if a thing is tackled in the right way it can be done. This is something which can be done if it is tackled in the right way. I am very surprised at the Minister's objection to this and I think he has either got the wrong idea about what we are asking for or he is being badly advised.

The Minister says he cannot exempt these people. A few weeks ago I made the request that firemen's earnings should be exempted from income tax and I was told that it could not be done. Yet it was found possible to exempt artists who may have a very large income from something else, and their earnings on what are by certain people considered works of art will be exempt from income tax. It was found possible in that case to differentiate without any difficulty but it is not found possible here.

I do not know whether the Minister —I suppose it would depend on the speed of the car or the amount of attention he was paying to what he was passing—realises the number of mobile homes and caravans that are being used as homes throughout the country, and the number is increasing. A few weeks ago a man told me he had got married and he was looking for a house because he was living with his mother- and father-in-law and 15 of their children in a county council cottage. Unfortunately, the county council could not wave a wand and produce a house for him immediately. Eventually he decided he would buy a caravan. After scrimping and saving and borrowing everywhere he could, he went to buy the caravan and found it would cost him about £1,800. If the Minister now proposes to put another £350 on top of that, the purchase of a caravan will be completely out of the reach of people like him.

When this matter was being discussed on Second Stage the Minister said that the people who make the caravans had been talking to him about it and were very anxious, I assume, to ensure that this type of person was exempt.

Mr. Colley

Actually they were concerned with certain import duties.

Mr. Tully

Import duties?

Mr. Colley

That was the context. I did not say it at the time but that was the context in which the manufacturers had approached me.

Mr. Tully

About caravans in general?

Mr. Colley

And mobile homes, and distinguishing between them. There could be a different import duty involved.

Mr. Tully

I am talking mainly about caravans which are made in this country. Quite a number of excellent caravans are made here. Many people are finding it impossible to get their own homes. We need only go out to the Naas Road to see the number of people who are living in caravans because they cannot produce the necessary down-payments on a house, apart from people who are trying to rent a house.

I am particularly anxious that the Minister should accept this amendment because, if he does not, the tendency will be to rent caravans instead of buying them. Those of us who know people who are renting caravans as homes know that exorbitant rents are being charged, amazing rents. When a man has to find some place for himself and his wife, he will agree to pay more per week than he can afford.

It is really a simple matter. Either the Minister understands the position or he does not. Does he understand that there are literally thousands of people who have no houses to live in? I would include in those all the young married couples who are living with their in-laws because, with very rare exceptions, the home of the in-law is the last place any young married couple should settle down. Even with the most decent people in the world, something may arise between them, there is a row and the next thing the young people are out and have nowhere to go. This is the only solution I can see as things stand.

Deputy Kavanagh commented to me while Deputy Donegan was speaking that people occasionally extend their houses to provide accommodation for young people until they can get their own accommodation. What is a caravan except an extension to a home? It is a temporary accommodation. I would not like to see anybody condemned to live in a caravan all his life. It is true that many people are now finding that they must get some place to live and are falling back on caravans and mobile homes. It is relatively easy in a country district to get a site for one of these.

If the Minister could say to us that his colleague, the Minister for Local Government, had a scheme which he proposed to introduce on 1st January to supply a house for everybody who needs one and cannot provide one for himself, then I could understand what he is doing. I cannot understand what he is doing in view of the fact that he knows that is not so.

Unfortunately, Deputy Joe Dowling is not here. He is the man who was prepared to say that there were "only" about 4,000 people in Dublin looking for houses. One could reasonably double that number and claim that there are at least 8,000 people who are not properly housed, which amounts to the same thing. Go to any town or village in the country, go to any TD or county councillor and ask him how many people have visited him within the last few months asking him what is the possibility of getting somewhere to live. One will be amazed at the number that will come up.

Therefore, this is a very reasonable thing. All we are asking is that the unfortunates who cannot get a home for themselves at present should not be saddled with another £200, £300 or £400 which will go into the State funds when they try to provide even temporary accommodation for themselves.

Mr. Colley

This ought to be kept in perspective. One could be forgiven, in listening to the debate, for thinking that the only people who occupy caravans or mobile homes are those who are otherwise homeless. It reminds me of something I read the other day in a slightly different context where a writer referred to the fact that the moment one talks about restricting dividends all the recipients of dividends turn into widows and orphans. Of course, we know that very many people are using caravans and mobile homes for luxury purposes. I do not quarrel with them for that, but I do say that it is a suitable item on which additional revenue can be raised.

What we are concerned with here is the question of people who require mobile homes and caravans as permanent houses. I have explained that I would be anxious to assist these people if such a thing were feasible. I should, however, point out that some of the figures that have been quoted in regard to the effect of this Bill are quite inaccurate. Deputy Clinton referred to an extra £500 in taxation on a mobile home costing £2,500. If that is so it is not because of this Bill. He must be taking the whole of the wholesale tax.

Mr. Clinton

Yes.

Mr. Colley

What we are doing here is putting on 5 per cent. These items have been liable all along to wholesale tax.

Mr. Clinton

I am taking the full burden of taxation.

Mr. Colley

Yes. It is not an extra £500. Deputy Donegan said something similar. I want to point out that these items have been subject to wholesale tax. Nevertheless, I would be prepared to avoid the incidence of this taxation in this Finance Bill on those kinds of people if a feasible way of doing it could be devised. I have explained to the House what the difficulties are. I have explained the two main difficulties. It is not sufficient simply to say to one's officials: "Solve it." That is very often just a way of passing the buck. I am quite willing, if anybody can devise a method of doing this that overcomes the difficulties I have outlined, to implement that.

Mr. Tully

Does the Minister not understand that if one took a caravan which was being bought for the purpose of being lived in and if a certificate were produced to that effect it would be the easiest thing in the world to exempt that from the tax just as if it were a different article altogether? The Minister will admit that that is so.

Dr. O'Connell

If a person is not a houseowner.

Mr. Tully

It does not matter anyway. I do not know if I understood the Minister correctly when he referred to the fact that he knew many people who were using mobile homes or caravans as luxury homes. Is that what he said?

Mr. Colley

As holiday homes. And people rent them out for holiday homes.

Mr. Tully

Certainly, but does the Minister suggest for a minute that during this weather, for instance, anybody is living in a caravan who could get somewhere else to live? Is somebody finding it luxurious to live in a caravan in this weather?

Mr. Colley

I think it was Deputy Clinton who pointed out that some of them have central heating in them.

Mr. Clinton

They still only cost £2,500.

Mr. Colley

Yes.

Mr. Tully

Are they staying in them because they want luxury?

Mr. Colley

Some of them are staying in them for a holiday.

Mr. Tully

I am talking about people who never had a holiday in their lives. All these people are interested in is to get somewhere to live.

Mr. Colley

I have told the House I agree with the principle of this.

Mr. O'Higgins

Is the formula used here not adequate?

Mr Colley

I explained to the House that there are two main difficulties. There is the question of the wholesale tax. These things are normally sold by such people as retailers, garages and even private people. Those kind of people are not registered for wholesale tax purposes, so therefore they would have paid wholesale tax before they sold it to the consumer. What one would have to do, then, is to provide that such a person would get a refund of the wholesale tax. That is the best one could hope to do as regards that part.

Mr. Tully

Are there not drawback arrangements all over the place?

Mr. Colley

That is only one aspect of it and even then to determine the precise amount which they should get —and people will want to be treated fairly if they are to get this—is not as simple as it looks because one is dealing with somebody on the basis of the retail price he paid for it.

Apart from that aspect there is another question. If people are to either have the price adjusted by the seller, or the Revenue Commissioners are to refund the tax, this has to be done on the basis of the purchaser producing some certificate that he is using it for the purposes envisaged in the amendment.

Mr. Tully

I was still on my feet. I thought the Minister was just interjecting.

Mr. Colley

I am sorry. Deputy, I did not realise that. I thought the Deputy had finished. In the circumstances I have described, how can you ensure that the person who gets such a refund or gets the price adjusted to correspond with the wholesale tax will not subsequently use it for pleasure purposes or, as I said before, more difficult from our point of view, sell it, because there is a substantial market for these things, and the amount involved, if they were exempt from the whole of the wholesale tax, would certainly be substantial and would encourage people to do that.

Mr. Tully

What about the person who gets a grant for a house and sells it within the requisite period? The Minister knows the answer to that.

Mr. Colley

Yes, but you see that is because houses within the category concerned are required but all caravans and mobile homes are not desired to be exempted from this at all; on the contrary, we want to have most of them subject to this.

Mr. Tully

The Minister started off by objecting to this proposal completely and he is now——

Mr. Colley

No, I said from the beginning that I was in favour of it.

Mr. Tully

If the Minister is in favour of it what are we arguing about?

Mr. Colley

How to implement it.

Mr. Tully

Does the Minister want time to find out how to implement it? If he does and he says that he will be able to do something with it, in the Seanad even, we are prepared to withdraw the amendment.

Mr. Colley

No, all I can say is that I have had it examined and for the reasons I have given to the House it does not appear to be possible to do it. I have said that if anybody can produce a method of overcoming these difficulties I will be prepared to implement it, in the Seanad or anywhere else.

Mr. Tully

The difficulty is that the Minister is now passing the onus back on to us. If we suggest some method then all he has to say is "I do not think that will work," it will have gone to the Seanad and we will have lost our opportunity. I do not care how the Minister kicks this amendment around as long as he ensures that homeless people who buy either mobile homes or caravans to live in do not have to pay this tax. If the Minister makes an attempt to do that I will not hold up the Bill for one second longer but this is such a serious matter that it is not just good enough to say that it cannot be done. I genuinely believe it can be done. I do not believe it is beyond the ingenuity of the Minister and his advisers to have it done. They have been able to do other things which appeared to be impossible but they eventually succeeded in putting them across.

Dr. O'Connell

Would it not be sufficient for the Revenue Commissioners that a person should be on a registered housing list of a local authority? There is very great depreciation on these, a depreciation which is far in excess of that relating to any other type of home. There would be no question of a re-sale. Anybody selling a caravan or a mobile home after a year would find that the loss from depreciation was considerable. I do not think there would be a question of a person making money on it. The fact that a person is on the registered housing list should be sufficient for them to benefit.

Mr. Colley

I do not think it is as simple as that. There are many people on the housing list who have not at the moment got caravans or mobile homes. For one reason or another they have not adopted this method of looking after their housing. Is it not reasonable to assume that a lot of people who would be on the list and would be thereby entitled to get these things considerably cheaper and avoid the depreciation about which the Deputy was speaking, would be very tempted to get them and sell them?

Dr. O'Connell

You might as well say that about anything. Could it not be said that the same would apply to people who might get drugs or home assistance to give to other people? That argument is illogical.

Mr. Colley

I do not think the Deputy is thinking about it.

Mr. Clinton

Some of us on this side of the House do an immense amount of local authority work and we are brought into contact with the type of hardship we have described. Deputy Tully sees a good deal of this but be does not see half as much as I do because my constituency is strewn with this type of person who will have to endure this hardship which is being imposed by the Minister. The Minister has repeatedly stated that he is convinced of the injustice of this taxation on this whole group of people.

Mr. Colley

Of the desirability of not imposing it, which is slightly different.

Mr. Clinton

What else does it mean? The Minister says he is anxious not to impose this if he could find a way. If I was evading taxation he would very soon find a way of making me pay it and so would his advisers. That is their job. The only reason the Minister is Minister for Finance is because he is supposed to be able to solve difficult problems.

Mr. Donegan

I thought there were other reasons.

Mr. Clinton

The only reason he is allowing this to go by default is, he says, because he cannot easily find a way around it.

(Interruptions.)

Mr. Tully

This is a serious discussion. Will the Deputy go back to where he was all the evening?

Mr. Clinton

This problem of mobile homes may not have reached Mayo yet but if the people ever go back to Mayo it will. Perhaps if we have a change of Government they may go back to Mayo and this would be one of the things we would have to do.

(Interruptions.)

Mr. Tully

Must we put up with this, Sir?

An Leas-Cheann Comhairle

Deputy Clinton.

Mr. Clinton

I have produced evidence that with this added taxation you can have these mobile homes, which are now costing £2,500, carrying £500 in taxation. The Minister said that this extra bit is only putting on £125 but it is the extra straw that is going to break the camel's back. I am sure the Minister does not want to do this to these people who cannot afford to do better for themselves under the present inadequacy of Government loans and grants for houses and where we have such an enormous backlog of housing needs, for which the Government must take full responsibility.

The Minister says that the only reason he is doing this is because he cannot single out these people, that it is a difficult job. As I said, it is his job to be able to overcome difficulties. I see no difficulty in identifying these people. Anybody who is prepared to live in a mobile home or caravan for a winter is not doing that for luxury living but because circumstances compel him to do so and because he is unable to provide himself with a permanent home. He may be a man whose salary may increase to the point where someday he may be able to provide a permanent home for himself. I know many of these people who are using this as an interim measure for five, six or seven years until a family comes along and until their incomes are large enough to enable them to buy a more adequate home. We are only at the start of this and we are going to see many more of these homes if we are not to see more and more people leaving the country. People are anxious to get married younger. If the country is doing well they are in jobs and they want to get married and this accommodation is good enough for them for a number of years when they are able to take hardship.

We are deliberately setting out to impose taxation of £500 on this type of person, whereas a man able to buy a house double the price of a caravan pays only £150 taxation. This is deplorable. I am very surprised and disappointed to hear the Minister for Finance blandly say that he cannot find any way round this difficulty. It is the easiest difficulty any man could be asked to solve. Any Minister who says this difficulty cannot be solved is not fit to be Minister for Finance.

Dr. O'Donovan

As I am associated with this amendment and I spoke about the matter on the Second Stage. I do not go around the outskirts of Dublin very often but I have seen these homes on all roads out of the city. They are on the road to Naas, the road to the airport, which the Minister might know better than I do, and they are on the road to Bray.

People who want to buy one of these homes—it may not be a permanent home but a place in which to live when they first get married—should be able to buy one without paying heavy taxation on it. The people who buy these mobile homes are either people who cannot get a corporation house or cannot afford to pay the kind of deposit now required on a permanent home. What horrifies me about this situation is that the Revenue Commissioners want to collect 20 per cent on these mobile homes.

During the recent election in South County Dublin I went round Dundrum Heights and there were any number of these caravans parked in the front gardens of the houses there. We are not interested in people who obviously have these caravans for the purpose of going on the summer holiday; we are concerned about the people living on the outskirts of Dublin in conditions which are genuinely sub-normal. These people should not be taxed 20 per cent on the price of a mobile home.

The amendment, as we put it together, was the best way we could concoct it. We were trying to be fair in every way. We were not trying to let anyone off paying taxation who should pay taxation; we have no intention of that sort. We feel the evidence is coercive. Any person who travels out of Dublin, particularly along the Naas road, can see all these caravans parked along the left hand side of the road. I do not know if the Minister has seen them; I take it he occasionally goes to Cork. Taxation at the rate of 20 per cent on this kind of effort by human beings is intolerable and should not be put up with in any community. I do not believe people would be expected to pay this kind of tax in any reasonable community on a fundamental commodity such as a home.

I am not interested in what the Revenue Commissioners tell the Minister. I know the way they are built. There is nothing in this which could not be dealt with at the drop of a hat. The Minister knows this as well as I do. I believe the Revenue Commissioners are not prepared to abrogate any part of their function or the system they believe in. There is no difficulty in assessing this situation. I appeal to the Minister to accept this amendment.

Mr. J. Lenehan

While it appears possible that I shall have to vote with the Minister, if a vote takes place, I come from a county where we have something like 4,000 bad houses. I admit this Government have built more houses than all other Governments put together, but at the same time we have to be realistic. Deputy O'Donovan is being reasonably fair. It would be unfair to impose any kind of penalty on people who buy caravans as a form of housing, just as it would be unfair to impose a penalty on any other kind of housing. Even if the recipient of a house did not have to pay it, rate-payers would end up paying for it, because county councils would be paying for these houses.

We should not put a tax on houses. It is hard enough for the richest man to build a house, but the ordinary man finds that a house which could be built for £150 forty years ago, now costs something in the region of £3,000.

Many people are not in favour of caravans, but it is very difficult to get contractors for conventional homes. In my own part of the country I have to ask people to take caravans and prefabricated houses. Am I to take it there is a tax on prefabricated houses? If there is, I think it most unfair and I do not agree with it. The main point is that we must provide people with a roof over their heads.

Progress reported; Committee to sit again.