Dáil Éireann debate -
Tuesday, 27 Jun 1972

Vol. 262 No. 1

Finance Bill, 1972: Second Stage.

An Tánaiste

I move that the Bill be now read a Second Time.

The Bill contains the provisions required to give effect to the taxation concessions proposed in my budget statement as well as provisions on a number of matters, notice of which was not given in the budget statement or in the Financial Resolutions passed on budget day. I shall draw attention to these in the course of the review I propose to give of the contents of the Bill.

Part I of the Bill deals with measures relating to income tax, including sur-tax. It is divided into two chapters: Chapter I contains a number of general income tax provisions and Chapter II deals exclusively with the treatment of occupational pension schemes for income tax purposes.

Section 1 imposes, as is customary, income tax and sur-tax at percentage rates corresponding to those for last year, but provides, as I announced in the budget, for the charging of both taxes on a permanent basis. One beneficial effect of this change will be that, in a year in which no variation in the rates of tax is proposed, it will not be necessary either to introduce a Financial Resolution or to include a provision in the Finance Bill for the charging of these taxes. Section 12 effects certain amendments set out in the Third Schedule to the Bill consequent on the charging of income tax and sur-tax on a permanent basis.

The main purpose of the provisions in Chapter I is, however, to give effect to the increased income tax allowances announced in the budget. Section 4 increases the single allowance and widowed allowance by £50 and the married allowance by £70, and the income tax child allowances are increased, under section 5, by £20. These measures provide significant relief for all taxpayers and, in addition, remove some 50,000 from the tax net. Section 5 also provides an additional increase of £50, or £70 in all, in the case of a child permanently incapacitated by mental or physical infirmity. Section 3 secures the equivalent of minimum earned income relief of £175 in the case of single and widowed persons aged 65 or over and £300 in the case of married persons.

Section 10 restores full deductibility of corporation profits tax payable by companies in determining profits for income tax purposes. Further relief for industry in computing both income and corporation profits tax is provided in section 42 of the Bill which will remove a difficulty at present in the way of industrialists purchasing machinery or plant outside the designated areas which would not qualify for free depreciation under the two-year concession provided for in the Finance Act, 1971 because it could not be brought into use by 31st March, 1973. This is being done by increasing from 60 per cent to 100 per cent the initial allowance that may be claimed in respect of capital expenditure incurred between 1st April, 1971, and 31st March, 1973 on new plant and machinery.

Apart from section 9, which abolishes the maximum deduction of £500 health expenses that a taxpayer may claim in respect of each qualified person, the remaining sections in Chapter I of Part I of the Bill were not specifically mentioned in the budget.

The purpose of section 2 is to ensure that, when calculating the income tax deductible from an employee's emoluments under PAYE, an employer will, before subtracting any tax-free allowances from the gross emoluments, first take off the amount of the employee's superannuation contributions. In this way, any increases in an employee's allowable superannuation contributions, which in many instances vary with income, will be automatically allowed for at the time he is being paid. At present, some employers do not effect deductions of employees' superannuation contributions in this way, with the result that subsequent adjustments of tax-free allowances must be made annually in some 70,000 cases. Section 2 empowers the Revenue Commissnoners to make regulations, which are intended to operate for 1973-74 onwards, for the purpose of requiring employers to make deductions for superannuation contributions in the manner that I have described.

The income limit for the purposes of the dependent relative allowance is raised by section 6 to £295 which is the annual equivalent of the maximum non-contributory old age pension following the pension increases announced in the budget. Section 11 enables the Central Bank to pay interest on Reserve Bonds without deduction of tax, a facility enjoyed already by several other state-sponsored bodies.

Finally, both sections 7 and 8 are consequential on the raising of the limits of jurisdiction of the Circuit and District Courts by the Courts Act, 1971. The limits specified in section 485 of the Income Tax Act, 1967, which deals with the recovery of tax by a sheriff or county registrar and in section 486 of the Act which empowers authorised officials of the Revenue Commissioners to sue in the courts for the recovery of tax due, are being raised in sections 7 and 8 respectively, in line with the new court limits.

The purpose of Chapter II of Part I, together with the First Schedule, is to provide a new code of tax which deals with superannuation schemes for employed persons. Under existing law, the tax treatment of occupational pension schemes is contained in three separate codes enacted in 1921, 1922 and 1958. A single code is now proposed which will be more liberal and will remove existing anomalies.

The existing tax law governing occupational pension schemes is being repealed as from 6th April, 1980, and, on that date, the new code will be of universal application. In the interim, new schemes established after 6th April, 1974, or existing schemes materially altered after that date, will be required to comply with the new code. On the other hand, an existing scheme and a new scheme established before 6th April, 1974, will have the option of adopting the new code as from 6th April, 1972.

Section 13 is concerned with the interpretation of terms used in Chapter II. In particular, the attention of Deputies is drawn to the fact that the definition of "relevant benefits" ensures that the new code will apply to all schemes with benefits for widows and other dependants. The section in addition gives effect to the First Schedule which contains administrative, transitional and consequential provisions, and also widens the scope of the tax exemption under existing law in favour of life assurance companies in respect of that part of their investment income which is referable to pension schemes approved for tax purposes. Section 14 deals with questions of definition and interpretation in relation to "retirement benefit schemes" which it is not convenient to include in section 13.

Section 15 sets out, first, the general basic conditions, namely, the "prescribed conditions", which, if a scheme complies with them, will entitle the scheme, as a matter of right, to approval and, second, confers discretionary power on the Revenue Commissioners to approve schemes even though they may not comply with one or more of the prescribed conditions.

The various tax reliefs being provided in respect of private schemes approved under the new code and statutory schemes are set out in sections 16 and 17 respectively. Section 16 secures that investment income of a fully approved private scheme will be exempt from tax and that employers' and employees' annual contributions to the scheme will be deductible for tax purposes. Relief for employees' contributions to a statutory scheme is provided under section 17. There is no reason why tax relief should not also be allowed where a commuted payment in lump sum form falls to be made in respect of superannuation contributions to either a private scheme or a statutory scheme. Relief for such lump sums which may be apportioned over a number of years is accordingly provided in sections 16 and 17. Relief will apply, under section 16, from the date of approval of a scheme under the new code and, under section 17, from 6th April, 1973.

Representations have been made to me that lump sum contributions paid under widows' and orphans' pension schemes that have operated since 1968 in the public sector should qualify for relief corresponding to that under section 17 for statutory schemes. Under existing law, relief for lump sum contributions is restricted to certain private schemes and to statutory schemes providing benefits for an employee but not for a widow or dependants. A similar restriction has applied up to the present for the purposes of giving relief in respect of the ordinary annual contributions under statutory schemes but relief for such contributions has been allowed, since 1968, on a provisional basis pending the enactment of appropriate legislation. This arrangement is being put on a proper legal footing in section 25 of the Bill in which relief corresponding to that under sections 16 and 17 is, in equity, also being extended to lump sum contributions made since 1968 under both private and statutory schemes.

The extra cost of giving relief generally for lump sum contributions and for allowing them to be apportioned over a period of years is of the order of £75,000 to £100,000 a year, declining as the years go by. For 1972-73, however, the cost would be about £250,000 mainly because of the fact that lump sum contributions paid since 1968 by employees in the public service under the new widows' and orphans' schemes would qualify for relief.

Section 18 is basically a re-enactment of a provision in existing law, the object of which is broadly to charge to tax the amounts paid by an employer to secure a retirement benefit for an employee as if the amounts so paid were income of the employee. Exclusions from the charge imposed in section 18 are however made in section 19, namely, in the case of an approved scheme, a statutory scheme or a scheme set up by a foreign government for the benefit of their employees.

Under present law, tax at the standard rate must be deducted from some pensions and the pensioners have to make repayment claims to recover balances of tax due to them. The application of PAYE under section 20 to pensions paid under any scheme approved under the new code will remove these difficulties.

Sections 21 and 22 impose a uniform charge of 10 per cent on superannuation contributions refunded to employees and on the excess of lump sums paid to employees in commutation of pensions over the maximum amount to which the employee would be entitled under the ordinary rules of a scheme. The Minister for Finance is given power under both sections to vary by order the rate of tax charged, subject to the order being laid before Dáil Éireann. Repayments made to an employer from a fully approved scheme are to be treated, under section 23, as a receipt of the employer's trade or profession and charged to tax accordingly, but only to the extent that relief was allowed in respect of his contributions to the scheme. The rules of existing retirement benefit schemes may need to be amended, in connection with an application for approval, by the Revenue Commissioners, of the schemes to enable them to come within the ambit of the new code. Section 24 enables this to be done.

I announced in the budget a number of reliefs in the death duty field and these are provided for in Part II of the Bill.

Section 26 imposes a new scale of estate duty rates, as set out in the Second Schedule, which provides that no duty is being charged on estates up to £7,500, while the rates of duty on estates in excess of that amount and up to £11,000 are being reduced. The general exemption limit for legacy and succession duties is also raised, in section 27, from £5,000 to £7,500. As a consequence of the increases that I have mentioned, I have also made provision, in section 28, to raise from £5,000 to £7,500 the special exemption limit for estate duty purposes in respect of death benefits payable under superannuation schemes. This measure was not mentioned in my budget statement. Section 29 increases the widow's and dependent child's abatements to £2,000 and £1,000 respectively from the existing figures of £1,500 and £750. Section 31 increases form £500 to £50,000 the jurisdiction of the Circuit Court in cases of appeal against decisions of the property arbitrator in relation to the value of lands or house property for estate duty purposes. If the value of any other property is in dispute, there is already a right of appeal to the Circuit Court up to £50,000 in value. Deputies will recall, however, that I undertook in the budget to make provision in the Finance Bill for a right of appeal, in the first instance, to the appeal commissioners in relation to the value, for estate duty purposes, of non-quoted securities. This is being done in section 33 of the Bill.

Section 30 provides that all foreign debts must be deducted, for the purposes of estate duty, from all foreign property and not merely from foreign personal estate only, before any balance is deducted from the Irish estate. Section 32 replaces section 21 of the Finance Act, 1965, which is being repealed under Part III of the Fourth Schedule to the Bill, with a new section to deal as comprehensively as possible with avoidance of estate duty through the medium of discretionary trusts. Neither of these last two provisions was mentioned in the budget.

I now turn to the stamp duty provisions contained in Part III of the Bill, none of which was referred to in the budget. Section 34 exempts from stamp duty loan stock issued by a state-sponsored body where payment of interest on the loan is guaranteed by the Minister for Finance. So that the recent ESB loan will come within the scope of the proposed relief the section will be effective from 1st April, 1972. Section 35 provides for the extension to group pension policies of the arrangements for the payment of stamp duty by way of composition, thereby obviating the necessity to stamp each policy physically. Following the provision, in section 33 of the Bill, for the right of appeal to the appeal commissioners in regard to the valuation of non-quoted securities for estate duty purposes, it is desirable that the same appeal procedure should operate in the stamp duty field and provision is made accordingly in section 36.

Part IV of the Bill deals with corporation profits tax. The exemption from corporation profits tax of certain public utility companies, building societies and the Agricultural Credit Corporation is extended under section 37 for a further year, pending completion and consideration of the report of the inter-departmental working group which is examining the position of building societies.

Section 38, which is an anti-avoidance provision, abolishes with effect from 19th April, 1972, which was of course budget day, the exemption from corporation profits tax in respect of companies precluded by their constitutions from distributing profits amongst their members and a new exemption in favour of companies permanently precluded from distributing profits to members is provided for in section 39. This is being done by adding to section 43 of the Finance Act, 1922—which already exempts from corporation profits tax companies prohibited from distributing profits to members and which are either licensed under section 24 of the Companies Act, 1963, or established solely for the advancement of religion or education—two new classes of company. The first class is a registered company that by their constitution are prohibited from distributing profits to members and are required, in a winding-up, to dispose of their surplus property to the Minister for Finance, a charity or another company with similar provisions in their constitution and, finally, are prevented from altering these provisions without the consent of the appropriate Minister of State. If a company were, before budget day, exempt from corporation profits tax under the old exemption they will be allowed a period of grace, up to 19th April, 1973, to amend their constitution in order to comply with the additional requirements that I have just mentioned. The second class of company covered by the new exemption provision are statutory companies. As it is the intention that all of these should continue to enjoy exemption from corporation profits tax, the new provision is so worded that the necessity to amend their constitutions for the purposes of the exemption will not arise.

Finally, I come to Part V of the Bill. It contains two provisions not referred to in the budget.

Section 40, which is an annual provision, fixes the annuity for the redemption of the debt incurred on voted capital services in 1971-72 and fixes provisionally a new annuity to redeem the estimated debt in 1972-73.

The Capital Fund was set up in 1956 to receive the equivalent of the proceeds of the special import levy and to apply them for development purposes of a capital nature. The levy was abolished as from 1st April, 1959, and the amounts available for advancing from the fund are now so small that its continuance serves no useful purpose. It is accordingly being wound up under section 41 which authorises the transfer of the fund's assets to the Exchequer.

I have referred earlier to the increased initial allowance of 100 per cent provided in section 42. Section 43 exempts a credit union, with effect from the date of their registration, from income and corporation profits tax on all their profits. Section 44 provides relief from death duties, stamp duty and customs duty for illegitimate children inheriting property from their mother as if they were legitimate and section 45 provides similar relief in respect of children adopted abroad if the adoption laws in the foreign country have substantially the same effect in relation to property rights as our Adoption Acts.

Section 46 effects the repeals of enactments in the Fourth Schedule to the Bill which are consequential on the charging of income tax and sur-tax on a permanent basis under section 1, the new provisions governing occupational pension schemes under Chapter II of Part I and the prevention of estate duty avoidance through the medium of discretionary trusts by a new provision in section 32.

Sections 47 and 48 are self-explanatory.

I commend the Bill to the House for a second reading.

Dr. FitzGerald

This is, as is usual for this Bill, a difficult and complex Bill, one that does not lend itself readily to a general discussion, one which we term a Committee Stage Bill. However, there are a number of comments I think I can make relevantly on the content of the Bill and which, I hope, will prepare the way for Committee Stage. I know that in this debate one has to walk a tortuous path. If one errs on the side of generality, one is told that one is out of order because one should confine oneself to the Bill. If one errs on the side of particularity, one is told one should keep that for Committee Stage. And I sometimes feel it is quite difficult to be relevant at all in these circumstances. But I intend to remain relevant, and I hope, a Leas-Cheann Comhairle, you will find me so.

The changes in the tax allowance in the earlier part of the Bill are, of course, generally welcome. The section on occupational pension schemes is a very complex section and I cannot claim to have absorbed or understood it at this stage and I shall have to reserve most of my comments for the Committee Stage if, indeed, even then I have sufficiently absorbed it to make useful and relevant comments. I was puzzled by one feature of it. I had understood this was intended to bring into effect a more liberal pension code, although I do not think the Tánaiste, in introducing the Bill, said that. I think it was said earlier, perhaps by the Minister in his budget speech. But if it is to be more liberal—and I am not saying it is not, because I have not studied it sufficiently to make a judgment—one is a little puzzled as to the need for that part of subsection (4) of section 15 which says:

In applying this subsection to an existing scheme the Commissioners shall exercise their discretion, in such cases as appear to them appropriate, so as—

(i) to preserve benefits or rights arising out of service before approval under this Chapter or before the commencement of section 18, whichever is the earlier, and

(ii) to preserve any rights to death-in-service benefits conferred by rules of the scheme in force on the 19th day of April, 1972.

If it is a more liberal system why then do people's rights have to be preserved against this new scheme? There is perhaps some technical reason for this.

With regard to the next section on estate duty and death duties, I have a number of comments to make. First of all, in so far as that part of the Bill dealing with death duties makes provision to vary the rates in a favourable manner, raising the lower limit and lowering the rate of tax at the lower level, it is welcome and useful. However, the fact remains that, although our death duties are supposed to be, and are sometimes presented as being at a lower level than those in Britain, and although a strong case can be made for keeping them so, in that, because of our state of development it would be undesirable for us to have heavier estate duties or heavier duties on capital than in Britain, nevertheless owing to the different method of computation, our rates are now, following the increase from 40 to 55 per cent some time ago, comparable with and close to and perhaps even arguably in some cases above the British level, and this is a matter about which we should be concerned.

The Minister has quite rightly mitigated the effect of estate duty at the lower level but has not done anything to overcome the difficulty created by the increase in the rate which owing to the different method of calculation, does involve higher levels of tax at certain points. The fact that our rate is a rate on the total sum, whereas the British rate is expressed in marginal terms—the British marginal rate of 65 per cent yields on £200,000 an average rate of tax of 50 per cent, means that the British rate while seeming to be higher is, in fact, in that instance lower than our 55 per cent. It is that which concerns us to a degree.

More generally, the whole estate duty code is unsatisfactory, and the fact that repeatedly in Finance Bills we have to have further legislation to get around the problem of avoidance suggests that as a method of taxation it is seriously defective. It should not be necessary to have such constant revision of legislation. No legislation should be so open to avoidance, open to so many schemes to get round it, and this is particularly unfortunate, because, in the nature of things, the benefits of avoidance tend to accrue to the very rich. The man who has a limited amount of property, because he has an insurance policy and a house, is brought within the range of estate duty—as indeed are many people of not great wealth today—and does not have the opportunity of avoidance. It is only the people who have very great wealth who not only have the wealth to afford the necessary legal advice to solve a crucial problem but who also can afford to set aside part of their wealth in a manner that will prevent it from incurring estate duty but will inevitably prevent them from making use of it during their lifetime. The result is that, as one company lawyer put it crudely some time ago, anybody with over £100,000 would be a fool to pay tax on anything over that sum; anyone with less than that sum would find difficulty in avoidance without locking up money which he might at some time need.

It is that kind of situation which is inherently unsatisfactory. It really is not an answer to keep on year after year amending the provisions to catch up with the latest dodge of the people skilled in getting around this legislation. It is clear there is a fundamental defect there. The system of taxation which is designed to fall so rarely and so haphazardly over time is one which is bound to create pressures for avoidance, is bound to create the kind of situation we should be trying to prevent. The fact that this tax falls due, on an average, every 29 years, means that the amount of tax payable has to be very great, because if you are going to take enough capital from people every 29 years to prevent capital accumulating in too few hands —and we do not tax heavily enough for that—then you will have to take such large sums that it puts a great premium on avoidance. Moreover, when the period of 29 years is merely an average of periods which can range from a week or two, through deaths which occur in short succession, to 80 or 90 years, if they do not occur for the whole lifetime of a person, anything which is prone to such variations as that is obviously an unsatisfactory basis for taxation.

I have always been persuaded that this is something which would best be tackled by having some kind of tax on capital which would be levied more frequently. I am aware of difficulties about this, but it is a pity that so much of the energies of the Revenue Commissioners have to be dedicated to trying to stop up the holes in the existing legislation that there does not seem to have been time for them to think out a method of taxation on a more frequent basis which would involve payments small enough for avoidance not to be practicable, desirable or worthwhile and one which would be more equitable in its incidence. The estate duty code is unsatisfactory from every point of view. From the point of view of the person who has to pay it, the fact that so many people can avoid it is very frustrating.

In an article in The Economist about nine years ago it was estimated that avoidance in Britain amounted to as much as two-thirds of the total sum. I have no reason to believe that lawyers and accountants in Ireland are any less skilled than those in Britain. If the proportion avoided here is less, it would only be because there might be a lesser number of very wealthy people and perhaps a lesser proportion of very large estates. Certainly there is avoidance on a large scale. For those who have to bear the tax this is frustrating. It means that, in order to raise a given amount, the level of the tax has to be much higher than would be necessary if everybody had to pay it. It is, I think, higher than in Britain at certain points and to that extent it is a bit too high. If we had a different system of taxation I think it would be possible, on the one hand, to avoid taxing people at a higher rate than in Britain at certain levels and, at the same time, to take much more taxation. I would hope that, with relatively small reductions in the average rate in terms of annual rather than occasional payments arising from debts, it would be possible to make some reductions in rates, so that overall, taking one 100 years with another, the rate would be somewhat lower and yet yield a much higher return. There is need for more imagination to be applied to this problem and to get away from this niggling approach every year in trying to stuff up loopholes.

The extent to which legislation has to keep on being amended has been very evident in recent times. We have had the 1965 Act substantially altered. Section 20 has now been heavily amended. Section 21 is repealed here and replaced by a new section. Section 22 has been amended, and indeed an error in the amendment has been corrected in this Bill. We are correcting a drafting error in section 24 of this Bill. Part 7 was repealed. The 1965 Finance Act, brought in by the present Taoiseach as Minister for Finance, was one of the most unfortunate pieces of legislation to come before this House. I do not recall any legislation which has had to go on being amended so often. Its flaws become more and more evident as time passes. It was a very ill-thought out piece of legislation. It is unfortunate that legislation so badly drafted should have come before the House at a time when inadequate publicity was directed towards it and when some of the defects therefore escaped the Members of this House. In legislation of this kind we are dependent necessarily in this House on the representations of expert people outside this House to draw our attention to defects in legislation. No matter how much attention a legislator may pay to his work he is not going to be able, unless he happens to have a most extraordinary range of skills, to detect flaws and defects in legislation as technical as this.

This raises the whole question as to whether our method of legislation takes sufficient account of this problem. This Bill, for example, was published last week. There is very little time for people to consider it. We have no procedure by which legislation of this kind is sent out for comments to various bodies that might have useful comments to offer. We are dependent entirely on the extent to which individual Members of the House can get advice or assistance and the extent to which people outside this House may feel an obligation to examine legislation and to come forward with suggestions to legislators in order to improve it. It is a very haphazard system and the extent to which it is haphazard is being highlighted at the moment by the Value-Added Tax Bill.

It is a bit disturbing to find that the process of legislation in that instance has taken such a form and that negotiations between the Revenue Commissioners and interested groups have gone on so long and to such a late stage, up to the point of the Committee Stage of the Bill. I was approached even yesterday by three different groups of people in respect of different problems which they have found in the Value-Added Tax Bill and it is only in the very recent past they have discovered that these have not been dealt with in the way they had hoped they would be dealt with as a result of their discussions with the Revenue Commissioners. Even in that instance, a Bill where considerable trouble was gone to to ensure that various interests had an opportunity of putting forward their views and where time was given for it, there are still problems arising and people are still finding that they have not had sufficient time to put forward their views on particular problems.

We got this legislation last week and have to stand up in the House and comment on it this week. It is no wonder, with a time scale like that, that legislation sometimes goes through this House in a defective form and presumably it is not practicable for Members of the Opposition, who inevitably lack expert knowledge on particular aspects of legislation, such as estate duty, to do the necessary home work or even to find relevant experts and consult them and get their views in time as short as this. I hope the fact that legislation has to be rushed through will not this year give rise to as many difficulties as has been the case with earlier Finance Acts.

In this Bill we have section 28, which is remedying defects in section 24 of the 1965 Act. It is conferring a benefit in terms of raising an exemption limit but it is also remedying a defect in drafting in that Act which has now come to light. In section 32 there is something similar, provisions which are designed, in part at least, to remedy defects in the 1965 Act. Section 30 is remedying a flaw in a Finance Act of last year. One can see how many mistakes have been made which have to be recovered at this stage. Section 32 hinges on the word "payment" which is defined at the beginning of subsection (1). Last year there was a similar provision in which the words "income and benefits" were used. I am not clear as to why a different formula has been used in coping with the problem in another aspect. Perhaps I could be enlightened on this later on. The effect of section 32, as I understand it, is to repeal section 21, which is repealed in part 3 of the Fourth Schedule.

This repeal seems to me to give rise to some problems because section 20 (4) (b) (i) of the 1965 Act seems to depend on section 21 (5) of that Act. Its operation is expressed to be dependent on section 21 (5). That being the case the elimination of section 21 as a whole and its replacement by this section raises a question as to whether section 20 (4) (b) (i) of the 1965 Act is now operable, as there does not seem to be anything in this Bill to replace this provision. It is true that section 32 contains a section, 32 (6), which, in part, is similar in wording to section 21 (5) of the 1965 Act. I suppose an argument could be made that this is intended to replace it that in some way one is meant to read section 32 (6) of this Act with section 21 (5) of the 1965 Act. But when one is attempting to apply section 20 (4) (b) (i) of the 1965 Act, it does not seem to me good drafting to leave the matter so vague.

It is not at all clear that section 32 (6) of this Bill can be interpreted in a way that makes sense of section 20 (4) (b) (i) of the 1965 Act because there are references in subsection (6), in the last few words, to payment of income at an annual rate of six divided by the number of objects of the trust of full age, including the deceased. It is not at all clear how, when you come to shareholders of a company, references to people being of full age have any relevance. On grounds of the inapplicability of the wording to the case to which it would have to apply and because of the absence of any specific reference to the fact that section 32 (6) now substitutes for section 21 (5) in the interpretation of section 20 (4) (b) (i), there is a defect here that would need to be looked at on Committee Stage. I am simply giving notice at this stage of intention to raise the matter at that point. It may facilitate the debate if I mention these things as I go along without dwelling on them.

In sections 33 and 36 there is a right of appeal in respect of non-quoted shares. This, of course, is welcome but it should be widened. Indeed, this Bill itself contains, in section 32 (1), lines 33 to 36, a reference to market value in relation to property and market value is defined as the price which, in the opinion of the Revenue Commissioners, the property would fetch if sold on the open market at the time of the death of the deceased but there is no provision in this Bill for any appeal on this point. If we are going to introduce an appeal—and it is long overdue—on the question of the value of non-quoted shares, it seems to me that that appeal ought to apply more generally and ought to apply immediately to this concept of market value which is defined in this very Bill. In regard to any question of value which is open to dispute and where the view of the Revenue Commissioners and the view of the people being taxed may be at issue with each other and where each of the two parties has an interest in fixing the figure at a level appropriate to their particular concern, the provision should be the subject of an appeal. It is unsatisfactory that the final determination of something of this kind should be left to the Revenue Commissioners and the recognition of this by the Minister in respect of non-quoted shares raises the question immediately of why he does not recognise a similar need in relation to other forms of property. I would urge that this appeal procedure be widened now and extended to other cases where genuine dispute about the value of the property can arise.

Section 38 seems to be a very desirable tightening up of the charitable provision which has been abused. We would all support this. The provision in respect of charities that is affected by this is one which is inherently desirable but that it should be abused, that people should be able to set up a commercial company earning profits but not paying dividends and then to liquidate the company and take their profits in that way, having expressed the company to be non-profit making, seems to be inherently undesirable and in so far as I understand this section here to be designed to eliminate this abuse, it is a very welcome amendment and I think we would strongly support it.

Section 43 refers to credit unions. It does not, however, define a credit union and I wonder whether, in fact, in the absence of a definition in this Bill, "credit union" can necessarily be taken to mean credit union as defined in the Credit Union Act. I would like clarification on that and, if there is any doubt about that, "credit union" should be defined in this Bill or reference should be made to the definition in the Credit Union Act. I have not checked that Act. I assume it does contain a definition. It is important that we should be clear on the definition of credit unions for the purposes of section 43.

Sections 44 and 45 are very welcome indeed, dealing with the problems arising in relation to illegitimate children and adoption. It is important that in any case that has not been settled here these provisions should apply. This morning I received representations on this very point from somebody who has been adversely affected and who has, in fact, taken the matter up with the Revenue Commissioners and, I think, with the Minister and has got a negative reply. It is something very unsatisfactory that we should be legislating here to deal with a very understandable grievance, that foreign adoption is not recognised for estate duty purposes, and that, at the very moment we are amending the law, somebody should be put in a disadvantageous position because of a mere defect in the time, that the Bill was not introduced in time.

I would hope that the provision in respect of children's adoption would be so amended as to apply to any case where the liability has not been determined and the amount has not been paid and that we should not be in the position of seeking at this stage to remedy a defect which has arisen, perhaps, because of a particular case, remedying it for people in future and doing nothing about the particular case which has arisen. I hope it will be possible to make some retrospective provision. Retrospective legislation which involves extra taxation is objectionable but in respect of a provision which involves applying a law being introduced to cases which have arisen and which have drawn attention to the need to amend the law it is entirely acceptable and we should do that at this stage.

On the Third Schedule of the Bill, I am just interested to know what we are doing now amending the 1942 Act. This, as I recall, is the Act which authorised the Taoiseach in time of war, if the Dáil could not meet, to impose taxation. I was not aware that such legislation was still in force. I am not sure what kind of war we are envisaging which requires this. I wonder why we are at this stage amending that Act or why that Act is still necessary. Perhaps we could be told something about that.

In regard to the Fourth Schedule, Part II, I am not satisfied that the repeal there is expressed in terms that are adequate. It seems to me that the reference to paragraphs (a), (b) and (c) of section 63 as being repealed is inadequate and that, in fact, some words immediately preceding (a) will also have to be repealed if we are to make sense of the relevant section. That is something that we will have to look at on Committee Stage. It is a small point.

These are the points of detail which seem to me to come up on this Bill. As I have said, the lack of time to examine the Bill has made it difficult for me to deal adequately with it and I am sure that, especially in the operation of a pension scheme, there is more to be said. It seemed worth while, in dealing with the Bill itself, to be specific and to indicate the points on which difficulty seems to arise and where further attention may be needed on Committee Stage.

If I may speak more generally about this Bill and its economic effects, this Bill is designed to give effect to a budget which was introduced several months ago. There is always a certain time-lag between the date of the budget and the date of the Bill. In this instance it is nine or ten weeks. This Bill is designed to give effect to a budget which itself was designed to achieve a specific and particular economic effect in the light of the situation of the economy as it was then seen to be. There was very general agreement on the shape of the budget. Indeed, the Minister must have been gratified by the extent to which on the Opposition side the overall shape of the budget was endorsed, especially as the budget involved the very revolutionary innovation of an open and, indeed, in this instance, very large budget deficit. But, at the time, I remember remarking and the Minister also remarked that the particular shape of the budget would need to be kept under review and that the changing economic circumstances might at some stage require further action to be taken.

A budget of this kind is one which can only be drawn up on the basis of the facts as they are known to be at the time that it is introduced. Our system of annual budgeting does not take any account of the rapidity with which the economic situation can change, both domestically and externally. The Minister said, quite rightly, and we endorsed it on this side of the House, that we would need to keep an eye on the economic situation thereafter.

It seems to me that there are three things that have happened since then which make the Minister's warning all the more appropriate and which show that the budget to which this Bill gives effect is one which will need to be kept under review from the point of view of the economic situation. These three factors, which I shall deal with briefly, suggest that the budget could turn out to be more reflationary than is appropriate. I am not being critical because Members on both sides of the House agreed that at the time the budget seemed appropriate but several things have happened and this means that the Minister will want to keep a close eye on the situation.

First, some of the economic indicators as I interpret them suggest that the growth of the economy in the first quarter of the year may have been more rapid than the Minister thought when he prepared the budget. It may be that the tax provisions in this Bill would have been somewhat different had the Minister known as much as we know now. When we look at the indicators we have—they are very out-of-date here—we cannot but think that the first quarter of the year saw a revival of the economy greater than the Minister or any of us thought when the budget was drawn up. I do not want to overstress this, but it is a point we must bear in mind.

More important are two developments which occurred recently and which are relevant. One is the economic situation in Britain which casts doubts——

An Leas-Cheann Comhairle

The Chair does not wish to interfere with the Deputy's train of thought but this Bill deals with taxation and with the effect of such taxation on the Government's proposals. It is not the same kind of economic debate as there would be on a budget.

Dr. FitzGerald

For that reason I intended to confine myself to a few brief remarks on this point. In so far as we are talking about a Bill imposing and remitting taxation, the extent of the Bill as it is at present may seem a little less appropriate to the economic needs than it did when the budget was introduced. Therefore, one is entitled to refer to the reasons as a general comment and reflection on the Bill. I shall not speak at length on the subject; I merely wish to list these points as I think the Minister should bear them in mind, as the country will have to bear them in mind.

The second point is in relation to the economic situation in Britain which has had such remarkable results in the last few days. It raises a doubt about the growth rate it will be possible for the British economy to achieve this year. This Bill is based on a budget which assumed a certain growth in the British economy which would help us to get out of difficulties here which would help our exports and help the budget and this Bill from leading to too large an external trade deficit and too large an external payments deficit. The rapid change in the British situation is a reason for watching carefully and perhaps looking later this year at our budgetary situation and the provisions in this Bill.

Thirdly, the breakdown of the negotiations for the next wage and salary round raises a serious domestic issue. When introducing his budget the Minister said that it was based on certain assumptions about the way in which wages and salaries would develop. We do not yet know what will be the outcome of the breakdown in negotiations but if it should lead to a significantly larger increase in wages and salaries than would have come from the wage round itself—already high by comparison with what would be appropriate to our economy—it would raise the question of the appropriateness of the budget. Those three points would need to be borne in mind in the coming year.

In retrospect, the shape of the capital budget seems to have been unfortunate in that it has involved a substantial growth of investment in equipment and machinery but not in construction activity. It has led to a sudden dampening down of activity in the construction industry and to a serious aggravation of the already unfortunate unemployment trends in that industry. To that extent that aspect of the budget seems to have been ill-conceived; perhaps none of us appreciated how out of line it was with the general needs of the situation when it was presented to us last April.

Those are the main remarks I wanted to make on the background to this legislation. I had hoped, but I think my hopes will not be fulfilled, that the debate could be wide enough to enable the Minister to tell us something about the situation we face with regard to our currency——

An Leas-Cheann Comhairle

The Minister will be equally confined—he will have to stay with the Bill.

Dr. FitzGerald

That will be a pity but I hope there will be another opportunity for the Minister to explain what is happening. One would need to be an initiate in financial affairs to understand precisely the effects of the last few days so far as our currency is concerned. However, I am not in a position to develop that theme any further. In the light of the Chair's ruling I must leave the matter there but I hope on Committee Stage to develop some of the points I have raised.

Mr. Tully

I should like to ask how necessary is legislation of this type, presented in this way? Is it the only way in which the budget proposals can be put through the House? The late Deputy Seán Dunne used an expression about these matters which comes to mind every time I see this kind of legislation—the expression was "gobbledegook". If anyone wants to know what I mean let him refer to section 2 of the Bill which has the following gem:

2. —(1) Section 127 (1) of the Income Tax Act, 1967, is hereby amended by the insertion, after paragraph (e), of the following paragraph:

"(ee) for requiring any employer making any payment of emoluments to which this Chapter applies, when making a deduction or repayment of tax in accordance with this Chapter and the regulations thereunder, to make such deduction or repayment as would require to be made if the amount of the emoluments were the emoluments reduced by the amount of any contributions payable by the employee and deductible by the employer from the emoluments being paid and which, by virtue of Chapters I and II of Part XII of the Income Tax Act, 1967, or Chapter II of Part I of the Finance Act, 1972, are for the purposes of assessment under Schedule E allowed as a deduction from the emoluments;".

Dr. FitzGerald

It is almost as long as a sentence of mine and even less comprehensible.

Mr. Tully

As incomprehensible, yes, if not quite so long. Until all of us start speaking the native tongue, would it not be possible to frame legislation in plain English? This kind of phrasing is repeated again and again; referring backwards and forwards to sections of other Acts which are not presently before the House. One would have to bring in an armful of books in order to follow the various Acts which are either being amended or being added to in this legislation. Possibly this system has been built up during the years but something must be done about it. If we are so good at appointing committees, I do not understand why we do not appoint a committee to ensure that legislation is framed in language that can be understood by the ordinary people.

We welcome some of the provisions in the Bill, for instance, the extension of allowances and some other provisions. However, it cannot be suggested that in 1972 this type of income tax legislation, particularly with regard to the lower paid workers, should be in operation. Many people who are earning modest wages and salaries are required to pay out, or have deducted from their wages, one-sixth of the amount they are earning. There is something wrong when this happens

Recently a man who was earning, on paper, £24 per week proved to me that when he had paid £6 per week for his house, when he had paid for a car which was necessary to take him to work, and had paid other expenses, he and his wife had less than £8 per week to spend on themselves. Taxation and the various other charges he had to pay had taken the remainder. It is very unfair that any Minister should come into this House and attempt to put across to us, and through us to the general public, that legislation which we are being asked to enact is fair when that sort of thing can happen. Surely it is terribly unfair that out of 1972 wages, we should take a tax rate which refers back to the early sixties? Surely some effort should have been made to bring the rate of allowances up to 1972 levels?

It can be said that, because of inflation, the value of wages has dropped and the answer to that is that the value of the tax being collected has dropped also. To charge tax to a single person on all money earned from about £7 a week up, when it is agreed that a single person even in a country district requires more than double that to live, means that he is in fact being asked to pay tax on money which he requires to exist. That is wrong and something has to be done about it and if this Minister will not do it, if this Government cannot face up to it, there is a very good reason why this Government cannot continue very much longer in office. It is ridiculous to suggest that, with all the talent they have available in the Civil Service, they are unable to produce a scheme which will give the necessary relief to taxpayers. The former Minister for Finance, Deputy Haughey, was the man who in this House gave the explanation as to why it was not being done when he said it would cost too much. In other words, the lower paid workers in this country are the people who are paying the vast amount of income tax being collected under PAYE and in an effort to keep that system going, while there is fiddling around with the tax system, no Minister for Finance has come along with a worthwhile change in the system. We talk about giving an extra allowance of £50 per year. That is £50 at 7s in the £ and how little can be bought with around one-third of £50 over a 12 months period. Something has to be done.

Deputy FitzGerald referred to the difficulties in the value-added tax, which I believe is going to make matters far more complicated and cost the ordinary person a lot more in his efforts to live, and we have on top of it this penal taxation system which is being operated through income tax. At present—this is, I believe, relevant because it has a big effect on the people who are paying the tax—it appears as if our income taxation offices must be in complete chaos. We are told that computers are preparing and sending out the tax free allowance certificates. If every other public representative has as many representations as I have from people who claim and are able to prove that the tax free certificates they are getting are incorrect, very much incorrect, there must be something dreadfully wrong with the whole system of preparing for the deduction of tax and when somebody who should be paying tax from 5th April last in a small amount finds that in fact he gets a tax free allowance and then four or five months afterwards an amended certificate showing that he was under-deducted for four, five or six months and must hand out half his wages in an effort to level up, there is surely something wrong with the whole system.

I am aware that the conditions in which these people work are not ideal and that many of the people there are being asked to do far more than they should reasonably be asked to do, but in spite of all that, if we are going legally to rob the workers of this country, at least we should do it in a way which will allow them a little certainty as to how much they have to pay and when they have to pay it. Last night I met a man with six children, out of whose wage packet of £18 last week a deduction of £5 was made. I asked what his tax free allowance was and it was £22.50, and yet somebody decided, as between the income tax authorities and his employer, the Board of Works, that he should pay £5 out of his wage packet for that week. After he had gone away, three others came along and told me that they were in exactly the same position. The whole system of income taxation here is wrong and fiddling around with £50 more here and £25 less there in respect of the allowances is not the answer. Somebody must eventually get down to re-writing our income tax code because the present one is entirely unacceptable. Nobody wants to pay tax but practically everybody has to pay it, and at least people should be asked to pay only what they can afford and what they are legally liable to pay and no more.

I am glad that a decision has been made with regard to increasing the allowance for sickness to over the £500 limit. It was rather stupid to include the £500 originally and I am glad it has been changed. I am also glad that it is proposed to guarantee by law that credit unions will not be subject to tax. Unlike Deputy FitzGerald, I think there is a legal definition of credit unions and there should not be much difficulty in proving who the credit unions are. I am also pleased with the decision taken with regard to children legally adopted. This is a very great improvement in the code but taking the Bill all together, it is absolutely impossible, in my opinion, to offer a balanced judgment on it as it has been presented to us. We have the Bill itself and we have the explanatory memorandum which deals with certain sections and does not deal at all with others, even though apparently the person preparing it thought the others self-explanatory—I do not think they are; maybe I have not been able to understand as well as I should what they refer to— and then we have the Minister's brief.

Apart from the fact that the Minister is not here—and we understand why he cannot be here—to deal with the Bill, it was not a good idea to have the matter dealt with in his absence because there is not much point in making a case here when the Minister, who I assume will be replying, is not here to hear that case. The speech which has been given to the Tánaiste for this Bill is simply a repeat of what is in the explanatory memorandum, with a little added here and there. I have come to the conclusion that a number of these Bills—and this had to be done with a very elaborate Income Tax Bill some time ago—will have to be referred, as the Value-Added Tax Bill had to be referred, to a Special Committee of the House. That may mean a lot of hard work for a very small number of people, but the attendance in the House for this Bill now and I predict that there will be very few comments made by Members on the Bill as it goes through, is proof of the fact that it is so complicated that people do not want to try to take part in a debate which they do not fully understand.

I would say with Deputy FitzGerald that whatever chance there is of attempting to have something done with the Bill on Committee Stage— there is not very much one can do with it, because the charge-on-the-Exchequer regulation will prevent numerous amendments being tabled— it is almost impossible to have a reasonable discussion on the Bill at this stage. It is one of the most complicated Bills that I have seen since coming to this House. There must be a more simple way of stating what is contained in Bills. The present Bill indicates a falling back on the clichés that we have now become used to. In describing sections of Bills difficult words are used in cases where simple ones would suffice. Perhaps I am being somewhat unfair to the Parliamentary draftsmen because the phraseology they use has been handed down to them. However, we should be able to update our thinking and introduce proposed legislation which it is possible for everyone to understand.

Mr. Donegan

The first point I should like to make is that although there was no significant increase in taxation in the last budget, the percentage rate of taxation in this country was extremely high even before the budget was introduced. Despite certain alleviations such as those in respect of people who are 65 years and over and in respect of dependent relatives in regard to death duties, the general rate of taxation remains extremely high. In addition, there is the fact that a person who pays tax under the PAYE system begins paying at a very low level. I am aware, of course, that any move upwards in this respect would cost the Exchequer a huge sum but, at the same time, it must be borne in mind that turnover tax at 5 per cent and selective wholesale tax at 20 per cent are percentage taxes and that as the value of money decreases and as the State needs more money for the services that it must provide, the amount of money collected by way of selective wholesale and turnover tax comes up automatically to meet that need.

The introduction of turnover and wholesale taxes marked a big change in the method of taxation used in this country during the previous 30 years. Never before had there been such a windfall to the State as was provided by these taxes, yet the rate of taxation that bears most on the poorer sections of the community remains very high, both as a percentage and as a tax which is applied at an extremely low level of income.

The adjustments that are made every two or three years in respect of death duties are not keeping pace with the fall in the value of money and with the increase in the value of property. Property may be a house in which resides a widow and her family. A person charged with the duty of valuing such a house must, because of its appreciation, assess the widow at a higher rate for death duties. However, that property is not providing income with which the widow can feed and clothe her children. Therefore, the increases that have been given in the rates of exemption for widows and dependent children have not kept pace with the decrease in the value of money. In any case, death duties are an unfair tax but equally unfair is the imposition of income tax on a person who begins work in a factory at £7 or £8 per week. Revenue must be derived from some source but there should not be these unfair elements in taxation.

The many measures that can be introduced at budget time do not seem to have been considered this year. The Minister's predecessor. Deputy Haughey, was a past master at producing what might seem like gimmicks but which were sometimes very fair approaches which helped in particular the old and the poor. One can recall in particular the provision whereby free travel facilities were granted to old age pensioners and also the one allowing for free broadcasting licences to such persons. Such concessions did not cost very much but they meant a lot to the people concerned. There were many measures that could have been considered by the Government in introducing the last budget.

As we enter Europe our selective wholesale tax and turnover tax will be replaced by the value-added tax system.

An Leas-Cheann Comhairle

The Chair would point out to the Deputy that that tax is embodied in another Bill and that we are confined solely at the moment to the Bill before the House.

Mr. Donegan

I realise that but I hope that when these changes occur, selective wholesale tax and turnover tax should be considered to see whether it would be possible to exclude from taxation certain parts of the food or clothes bill in a household. Such exclusion would be a great step forward. It is difficult to speak on the Finance Bill this year because there is very little in it. We had a stay-as-you-were budget this year. I wonder whether that was a good approach but irrespective of whether there is wisdom in this Finance Bill I do not think it will help us very much as we move towards Europe.

I am disappointed with the allowances given in respect of death duties. I am disappointed with certain other parts of the Bill. I am pleased that the Government have at last seen fit to remove the iniquitous increase in corporation profits tax and company taxation which they imposed between 12 and 18 months ago. That is all I wish to say at the moment.

Mr. Carter

I will intervene briefly at this stage, not having had a chance to examine all aspects of the Finance Bill, which is a very complicated measure at all times and a Bill which touches most aspects of our mode of living.

Unlike Deputy Donegan I feel that, even though there may be some clauses in this Bill with which I would disagree, on the whole the Bill shows an advance in so far as it relieves certain sections of the community from the imposition of taxation. A Bill which has such provisions is not wholly bad. During the past few years we have gone through a difficult time and if there is one Minister in the House with whom I had a certain amount of sympathy in the past few years it was the Minister for Finance. The Minister was faced with a number of difficult propositions. We know that it is unpleasant at any time to have to impose taxation, especially if it is imposed on the marginal element in the community who could be said to be hardly able to bear it. In this respect I would refer to certain sections of the Bill which allow a number of people out of the taxation net.

There are sections here which do certain things. At this stage we must agree with the Minister that he is called upon to provide funds for ever-increasing services, and that those ever-increasing services, strangely enough, seem to beget a desire for the spread of such services. As Members of this House and of local authorities, we know that, far from being able to contract any services, in recent years the call is usually for their expansion. If we proposed to reduce or decrease such services we would be subject to fierce criticism.

I welcome the reliefs provided by way of increased allowances to those in the lower income group. I welcome the proposals which provide that employers may make PAYE calculations deducting the employee's superannuation from the sum, and that this releases this part of his money from taxation. I also welcome section 3, where the increases in respect of minimum age allowances are adjusted. This Bill mentions a number of persons with whom we, as Deputies, come in contact daily. For example, single and widowed persons are mentioned in that their allowances are adjusted upwards. This Bill also ensures that persons aged 65 years will enjoy certain relief. In this context and in this age group people who are entitled to those age allowances will, where their income is wholly earned, obtain the same relief as they would get if their income was wholly unearned. This is a step which will enable people in this category not to be dependent on the public service. It will create a desire on the part of those people to do a little better for themselves.

Section 4 of the Bill provides that the married allowances shall go up by £70. A sum of £100 is allowed in the case of a marriage. This is a good provision because when newly-weds are setting up house they have items of expenditure which they have not foreseen. Deputy Donegan said that there is nothing in this Bill to commend it to him or the House. I disagree with him in this regard. No extra taxation has been imposed this year. This is the first of what we hope may be many steps in this direction. This would be the right direction in which to go.

Dr. O'Donovan

At a snail's pace?

Mr. Carter

It may be slow, but if it is sure it is all the better for that.

Dr. O'Donovan

The trouble is that snails are not inclined to go in the same direction all the time. They are inclined to change direction.

Mr. Carter

We often hear of ambitions here to provide services. We often talk like people who live on a champagne income rather than a soda water income. If one takes the matter in this context, we see the extent of our vote and the extent of the budgetary sum here in this House. We see the many Departments of State which make calls on the budgetary sum. We meet thousands of people in our everyday dealings during the week, and at functions as Deputies, who have to have resort to the Exchequer resources on the social side. Therefore, any relief in taxation is good. Even if we are able to achieve it in only a small way we are proceeding in the right direction.

Many other aspects of the Bill could be commended, for example, the increase of £52 in the income limit of a dependent relative in respect of whom the maximum deduction of £60 may be given. This is a step forward because frequently we find our economic aims clashing with our social aims and it is not easy to reconcile the two. One meets areas of policy where this clash occurs. If one has only a certain amount of money one must strike a nice balance in order to distribute it where it will do most good. We live in a social age and we realise people are living longer. Last week the Minister for Health told us we had a better chance in life even at the beginning of it and that there was a much higher expectation of life now at the age of 50. Inevitably, this results in a greater number of dependants especially as most of the public service employees are now called on to retire at 65.

Last night when reading some articles in this connection I came across some prognostications about what we might expect in the year 2,000 but, to round off the point, the fact that this relief is given for dependent relatives is good. We are anxious in dealing with social welfare that as people grow older they should be provided for at home, socially, if possible rather than institutionalised. Workers responsible for dependent relatives will find some consolation in this measure.

Dr. O'Donovan

Not too much. It was £25 in 1939 and it is now £60. In real terms it is about half what it was in 1939.

Mr. Carter

That is to take it out of its context. If one looks at budgetary expenditure in that year it has increased since and so have the services accordingly and, therefore, calls on the budget are much greater.

Dr. O'Donovan

The Deputy is shifting his feet.

Mr. Carter

No. My point is that any relief in respect of a dependant's allowance is a good one. It is a social aid and I stand by it. If one is to compare like with like one must take into account that we are a growing concern. You cannot compare conditions obtaining in 1939 and those obtaining now. If you take the growth factor into account, the growth of service, you see that it is much more difficult now to find money for a purpose for which one would like to provide it. Most of us believe we should have at least reasonably good social conditions. This is my point, that this Finance Bill strives towards this end.

This is the first time that I have had a sort of friendly feeling towards the Revenue Commissioners. I cannot say I am an advocate of Revenue but they have bent their activities in a social direction. Possibly the Minister for Finance had something to do with it but it is for this reason that I think there are many provisions in the Bill which are welcome. Taking only the first part of the Bill, every section down to section 12, has provisions most of which are calculated either to relieve some taxpayer or allow somebody out of the tax net or relieve the taxpayer by increasing the allowance in respect of a dependant. In that context I could refer to widows and others who must also earn a living.

Therefore, I am not disposed to agree with Deputy O'Donovan when he said that the Bill makes no appreciable difference. I think it does. All else being equal, if we can continue to reduce taxation rather than impose it in any year it is a step forward. On the other hand, there is growing concern with the growth of taxation because every service provided means that more money will be needed on the capital side or the housekeeping expenditure side. If you increase social services you must make budgetary provision for it. If, on the other side, you want to build schools or a hospital you must have recourse to capital funds. It requires a fine balance in any year to be able to give relief where it is most needed and at the same time be able to develop the public capital programme and expand it with budgetary measures calculated to ease the hardships of the social side of life.

That is all I propose to say on the Bill. I think it is a step forward. I hope we will have an even more socially orientated Bill next year.

Mr. Kavanagh

I wish the last speaker explained to us who are the people who will get relief from the income tax burden and who the people are who are being let out of the tax net as a result of this Bill. I believe that more and more people are being taken into the income tax net as a result of the very meagre increases given in the income tax allowances to all sections of the community. Since I came into this House a number of pensioners approached me and asked me about income tax on their pensions. Many of them were ignorant of the fact that they had to pay income tax on their pensions. They thought it was only paid on wages earned. Recently the widow of a garda had her full pension stopped for the month of April because of income tax she owed.

As a result of the system of wage rounds, workers are getting increases more or less on an annual basis. As a result of the 25p increase in the allowance given to a single person a worker who received £2 under the national wage agreement gets an increase in his tax allowance of 12p but on the other hand he has to pay an extra 50p a week. The net result of getting an increase of £2 a week is that he has to pay an extra 38p income tax in the week. If there is a further increase under the second phase of the 13th round, this man will pay more income tax.

I agree that income tax is a more preferable way of getting money into the Exchequer than getting it under indirect taxation. Under direct taxation the person who earns money pays according to his ability rather than according to the necessities he has to buy. Because allowances have been allowed to remain reasonably static during the last few years wage increases are viewed under net value after deduction of taxation. The Government policy of increasing personal allowances by such small amounts was one of the main factors why so many general workers refused to accept the 14th round national pay agreement. People who have to wait another year before they felt the effect of that agreement saw the possibility of having to pay more and more taxation as a result of this year's budget and, taking into account the increase in the cost of living of from 8 per cent to 10 per cent, the real increase they would get would be very meagre indeed.

I would prefer to see people paying their taxes through income tax rather than through turnover tax or VAT but if decent personal allowances are not given to workers and pensioners then the demands by the working sections of the community for further wage increases will continue. We will then have a continuation of the turmoil we had in the past. If the Minister felt the budget would have relieved this problem and would have encouraged the working section of the community to accept the terms of the 14th round wage agreement, then he should have looked at the personal allowances and should have gauged the increases in the personal allowances to allow for the increases which workers are likely to receive as a result of the national wage agreement. He should have ensured that the allowances given were net figures and that a worker would know whatever was offered to him was a net figure and not liable for further taxation.

As long as the present trend in income tax allowances continues, we will not find any great desire by the wage and salary earners to agree to national wage agreements. The Minister should have known that this was a likely result of his budget policy. He should have gauged the increases to ensure that any wage increases given over the next few years would be net increases and not gross increases which are liable to income tax over and above any relief given in personal allowances.

Mr. T.J. Fitzpatrick

(Cavan): Deputy Carter hails the budget and this Bill as a step forward socially speaking. I am afraid, having regard to the reduction in the value of money and the steep increase in the cost of living, it is a very short step forward. Since the introduction of PAYE the Government should have made sure that the application of the income tax code was equitable. Under the PAYE method of collection there are certain classes who cannot escape the net of the inspector of taxes. Broadly speaking, they are the people in the lower income group, people who are not earning large sums of money. They cannot escape the net because their tax is collected from them at source by their employer.

It must be conceded that there are certain categories of income tax payers who find it easier than others do to evade their full liability and do, in fact, evade their full liability. So long as we operate a system of taxation of this type we have a moral duty to do our best, at any rate, to see that justice is done between one type of taxpayer and another. The income tax code is unjust for the reasons I have given. While it is possible to enforce it rigidly against one section of the community it is not possible to enforce it rigidly against others.

Dr. O'Donovan

It is savage.

Mr. T.J. Fitzpatrick

(Cavan): The increase in the single allowance of £50 and in the married allowance of £70 is worthless. It does not make up for the fall in the value of money. I do not think there was any increase in the personal allowance last year or in the past few years. When the personal allowance and the married allowance were introduced into the code I suppose the intention was that the allowance for a single man would at least enable him to keep body and soul together and that the same would apply in the case of a married couple. Everybody knows that allowances of £299 for a single man and £594 for a married couple do not measure up to present day requirements.

We have been told from time to time by Ministers for Finance that if the personal allowances were to be increased by anything worthwhile it would cost millions. I suppose that is one of the shortcomings of having a system like this built into our method of financing the State and of collecting our taxes. Once it becomes built into the system it is impossible to get rid of it without upsetting the whole tax structure. We have nothing to be proud of in regard to these allowances. People on smaller incomes are taxed from the very beginning and there is no use in the Minister saying that 50,000 people have been taken out of the tax net. Some just escape it by the skin of their teeth, I suppose. It would be interesting to know out of those 50,000 how many saved what and how many were relieved from what percentage in pounds and pence. It sounds well to say that 50,000 have got out of the net but I wonder how much were they paying, or how much were the great majority of them paying?

Income tax is charged on all sorts of incomes. It is charged on bank interest once it exceeds £75 per person. On the question of bank interest, the banks have modernised their methods of doing business. There have been mergers. They now believe in running their business on a businesslike basis and charging for services which they rendered free in the past. They will charge the full cost of keeping customers' accounts and different rates of interest are charged in various cases. If they are to do that they should also allow reasonable interest to customers.

There are many simple people of the farming type with deposits in banks earning only 3 per cent. If, instead of having that money on straight deposit, as I shall call it, they had it invested in the finance houses attached to these banks they would get more than double the amount of interest. If they had it invested in the Agricultural Credit Corporation they would also get more than double the amount of interest. There should be an obligation on the banks to put up a notice in every office drawing the attention of customers to the fact that they could earn more money by putting the money they have on deposit into certain finance houses which are owned by the banks. They do not do that. Not only do they not do it, but many bank managers, under instructions I am sure from their directors, conceal this knowledge from the customers and encourage them to leave large sums of money on deposit. It is amazing to find, as a solicitor, when a deceased person's estate is brought in to you, that thousands of pounds have been lying on deposit for several years resulting in a fantastic loss of interest to the depositor.

I raised this matter by way of supplementary question and I said that the Minister for Justice should take some steps to make it incumbent on the banks to bring this information to the knowledge of the depositors or himself cause notices to be published in the papers to that effect. This would be equitable. Simple people who have inherited the idea that money in the bank is safe and it is not safe any place else are the type of people who are being "done". In recent times all the banks have got control of hire purchase companies of one sort or another, or finance houses, and they lend out money at high rates. Money is just as safe in those institutions as it it in the banks and it would earn 7 or 8 per cent instead of 3 per cent. I wanted to get that off my chest. I hope I have made it clear.

I should also like to draw attention to the death duties section of the Bill. This is becoming another serious matter for people of comparatively small wealth. The Bill proposes to increase the exemption from £5,000 to £7,500. With the change in the value of money, with money becoming less and less valuable every day, I do not think this exemption is sufficient. A house or a farm, certainly a house in the country, that could be bought for £2,000 in 1960 now costs more than £6,000, and a farm which a few years ago could be bought for £1,000 will go to £4,000 or £5,000 nowadays. The value of property has gone up by leaps and bounds and the value of money has gone down. Therefore, this imposition of death duties at the rates outlined in the Bill —8 per cent on £15,000 and 10 per cent on £17,500—is unfair. At first sight an estate of £17,500 may look very big but a comparatively small farm, fairly well stocked, would be worth that.

Admittedly, if there is a widow left behind there is an allowance in respect of the duty of £2,000, and there is £1,000 in respect of each dependent child. If the children are grown up and if it is a case of a grown up married son inheriting the farm which had not been transferred to him more than five years, there is not allowance at all. He becomes immediately liable for full death duties and this can have a crippling effect.

I believe there should be a distinction drawn not alone in the case of a widow and dependent children but relief should be given where the farm or business is going to a son. I know there is no succession duty charged in such cases but I think there should be exemption from death duties. I do not think it was ever the intention of the people who introduced death duties that they should invade the family farm or business. That is what they are doing at the present time.

They are some of the points I wanted to deal with, particularly income tax, bank interest and death duties. I submit that in future years the Minister for Finance must have a look at death duties because in recent years the period necessary to gain exemption on a gift was increased from three to five years and either last year or the year before, for the first time in the history of this form of taxation, the marriage settlement was abolished for all practical purposes. Until then, a gift by way of marriage settlement was deemed to be a gift for valuable consideration and escaped death duties. That was abolished and I think it was an anti-social step of the greatest gravity. Until then the idea was to encourage parents and others to transfer farms and property generally to sons, daughters or other relatives on getting married, and the law recognised that as socially desirable and gave exemption in respect of death duties. But the Minister for Finance seems to be anxious as far as death duties are concerned to grab and to extract all he can by means of that form of taxation. I do not think it is socially desirable or socially sound and I ask the Minister to direct his attention to it at the earliest possible moment.

Mr. Tunney

As I see it, the key to the merit of this Bill is to be found in the approach of the Opposition speakers. Deputy Donegan said, and I agree with him readily, in reference to this year's budget that it was very hard to say anything about it. Coming from a leading member of the Opposition that can be interpreted as his indication that this year's budget was a very good one. I am quite sure that if it were not Deputy Donegan and others in the Opposition would have had quite an amount to say about it.

Listening to Deputy Fitzpatrick, I was at a loss as to the genuineness of the point with which he started in regard to his concern for the person who might be described as a payer of income tax. The Deputy seemed to have little regard to the fact that this year 50,000 people were released from payment of income tax. That is no myth: it is a fact that 50,000 people, having regard to the allowances granted, single, widowed, married and with extra allowances for children, have been relieved.

Deputy Fitzpatrick, having played that section down and reduced it to insignificance, went on to express his concern for the many thousands of people —I am not sure whether he said they were in his own constituency—who have bank deposits. Personally, I try to be concerned for all sections but I must admit, and make no apology about it, that my first concern is for the fellow who has no deposit. My first concern is for the married man living in Dublin, going out to do his work from 9 to 5 or 9 to 6, endeavouring to pay his rent and other immediate commitments, and who is extremely fortunate if at the end of the week he is able to balance his budget.

Having regard to the number of that type of person we have in the country we must all if we are sincere welcome the reliefs which have been granted in that area. To me, that man takes priority over the many thousands whom Deputy Fitzpatrick knows who have deposits in banks and elsewhere and whose only complaint apparently is that the interest which they are getting is not more substantial. If we pursue that and have regard to the fact that all moneys there should be available for use within the country, the case Deputy Fitzpatrick made is that money should be more expensive to the Government, to the local authorities and to all those bodies who are concerned in the task of improving our economy and the lot of the rest of the community.

Dr. O'Donovan

Are not all bank deposits levied every year? Do they get any real interest?

Mr. Tunney

My former educator and professor and expert in economics will presently be speaking and he will, I am sure, be able then to indicate how I failed to learn from his words of wisdom.

Dr. O'Donovan

The Deputy has, I think, a special case to make.

Mr. Tunney

For the moment I will pursue, in my helpless, student fashion, economics as I understand them.

Dr. O'Donovan

Arithmetical economics.

Mr. Tunney

Deputy Fitzpatrick's next priority was death duties—property. This is the indication we have of the priorities on the benches opposite. They consider insignificant and immaterial the considerable allowances given to those most deserving of them and they concentrate instead on the pretended plight of the moneyed people, the people of property.

There is one particular allowance here to which I wish to refer. It is the allowance of £50 in respect of any child permanently incapacitated. I am, perhaps, a little critical of the regulations which prevent the Revenue Commissioners looking at a worthwhile case made to them and I welcome this allowance because of an experience I had last year. I had occasion to plead the case of parents who found themselves with a permanently incapacitated child of ten or 11 years of age. The father worked overtime and he borrowed in order to get sufficient money to invest in a small car, solely for the purpose of providing that child with some of the amenities that were not available to her otherwise because of her physical condition.

We must, of course, ensure that allowances are not abused. On the other hand, we should be able at any time to look at a particular case. I made representations—I am sure other Deputies also made representations— and the officials with whom I dealt were most sympathetic. They agreed that allowance should be made but they told me that, because of the regulations, they could not act as they would wish. It might be advisable to give the Revenue Commissioners discretionary powers. Other bodies have these powers. When we are dealing with human problems there should be no fixed regulations. Every regulation should be subject to alteration or modification if a case can be made that by so altering or modifying justice is done.

I welcome the Minister's decision not to make credit unions subject to tax. There is no need for me to elaborate on the excellent work being done by these credit unions. They are not to be compared with other organisations or institutions in the financial field.

With regard to the allowance for medical expenses, what I am now about to say arises from circumstances which affected me personally but which are, I think, of general application. That is why I mention the matter. I pay to the Voluntary Health Insurance something in the region of £45 a year. I am thankful that I have never had to avail of any of the entitlements accruing to me. However, during the year, as a result of some physical exercise in which I indulged I was not entirely happy about my physical well-being. As a contributor to the VHI I was entitled to enter hospital and occupy a bed for a week or perhaps two weeks. I was not anxious to do that, not because I wanted to save the VHI people money but because I preferred to go about things in another way. I visited my local doctor. He sent me to a specialist. I had X-rays. There was nothing wrong and my discovery that there was nothing wrong with me cost me something like £22.

We are advised to have periodic medical checks. Presumably, if my wife felt like having a periodic check it would cost her a similar amount. The point is, there is no allowance at all for this kind of medical expense. Most people do not like parting with money and if the same circumstances arose next year, and my considerations were purely financial I might take another course and deprive someone more in need of a bed in a hospital. If income allowances are available on the production of certified medical expenses, it is possible that a considerable number of people who are at the moment moving into hospital would be happy to have private consultation.

Mr. Colley

I wonder does the Deputy realise that some at least of the exepenses he mentioned may be covered under the voluntary health insurance scheme, if one contracts for it. This is a fairly recent development, but some at least of those expenses could be covered.

Mr. Tunney

If only for that one reason, I am happy that I spoke. I did not know that.

Dr. O'Donovan

I think the Minister is going to be let down relatively easy on this Bill in that Deputies are not speaking for very long on it. I think he has earned it and I do not begrudge it to him. To begin with, I have great sympathy with Deputy Tunney's point about medical expenses. In regard to the allowance for £50, it is only the excess over £50 medical expenses that is allowed for. I see that in the Bill there is now no upper limit and, I suppose, where it really hurts the Minister has made a concession and the public should be grateful. What I want to talk about is the disgrace of income tax as at present levied. First of all, there is the legal exemption from income tax of immensely wealthy people. A man who owns 1,000 acres of fertile land pays no income tax. They can yell all they like about the rates they pay on their land.

Mr. Colley

And they do.

Dr. O'Donovan

I know well. You should have heard the horror with which a good lady said to me: "We pay £1 a day." I did not make any remark at all on the subject, but I could have told her what people with very moderate incomes pay in income tax. I do not believe in levying people on the basis of wealth, although it has been many times suggested. There have been occasions in England—I think twice since the war—when they have had measures like a once-for-all wealth Act, but I do believe that a man who is an efficient farmer and who makes a very big income out of a large area of land should pay income tax the same as a man who has a large public house or who has a large business or has a big salary as a public official, if any public officials any longer have big salaries, relatively speaking; I am not quite sure about this matter, and I am open to conviction.

As I said earlier when Deputy Fitzpatrick was speaking, the level at which income tax is now levied is savagery. Let me get back to arithmetical economics for once, although I am extremely suspicious of it normally. There was a time when 1s used to bring in £1 million in income tax. That was pre-war, and then the day came when 6d used to bring in £1 million. I was just looking at the figures for this year's Estimates of Receipts and Expenditure, and 35p will bring in £175 million, that is to say, that 1p now brings in £5 million. If it were required from me to demonstrate my point arithmetically there is no simpler and more conclusive method of demonstrating it than that. It is no answer for the Minister to say: "If I make this concession I will lost £20 million. If I make that concession I will lose £25 million." Let us look at the figures. The original figure of the yield from income tax in the Estimates of Receipts and Expenditure for this year is £183 million, very nearly as much as from customs and excise put together and five times the wholesale tax, the tax on the purchase of luxuries. I do not think anyone objects to a purchase tax on luxury goods or to such tax being pretty severe, except perhaps the manufacturers of these goods. However, there is no doubt when one compares, in this social age, as Deputy Carter described it a while ago—social age in words but not in deeds——

Sir Anthony Esmonde

A socialist age.

Dr. O'Donovan

Yes, let us be frank about it. It is a socialist age, and we in this country are socialist the same as any other country, except that we have this extraordinary mixture: we cannot quite make up our minds whether we stand on the right foot or the left foot. We are standing jointly on both feet, I suppose.

Mr. Cunningham

A good way to stand.

Dr. O'Donovan

The snag is that for a great number of people the pressure on the left foot is very hard whereas for another group of people the right foot leans on them very easily.

Mr. Colley

We shall all be watching with great interest Deputy Esmonde supporting the socialist policies that Deputy O'Donovan says will be facing us.

Dr. O'Donovan

I have not made any proposals so far. My work here is comparatively easy. All I have to do today is to point out what a savage method of taxation this is.

Sir Anthony Esmonde

Am I to take it that Deputy Colley has gone to the right?

Dr. O'Donovan

It is all right for the Minister to talk about 50,000 being taken out of the net. In his opening statement he said:

These measures provide significant relief for all taxpayers and, in addition, remove some 50,000 from the tax net.

"Significant relief", my foot. Literally speaking, it is next to nothing, and the fact that the Minister can quote how many millions it is costing him is a proof of how savage this system is. Let us compare with pre-war years. The relief for a single person at that time was equivalent to £800 a year today. The Minister is very proud, according to his brief, that he is now increasing the figure for the single person from £240 a year to, I think, £290, that is, by £50; and he is putting up the married relief from £420 to £490, that is, by £70.

Debate adjourned.