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Dáil Éireann debate -
Tuesday, 11 Jul 1972

Vol. 262 No. 7

Finance Bill, 1972: Report Stage.

Amendment No. 1 has been ruled out of order.

I am not happy with that ruling. The effect of this amendment is much wider than the amendment put down previously as it would not involve the limitation which there was in the original amendment to the period of service of the person concerned. In that respect this amendment is substantially different and I wonder why it has been ruled out of order.

This is not a new decision. It has always been the decision of the Chair to rule out of order amendments of this nature. A similar amendment was rejected in Committee.

This is a different one.

It is not different as far as the Chair can see.

May I suggest that if the Chair examines the amendment he will see that it is different from the original one?

We examined it carefully.

The previous amendment involved limitation of benefits on periods of service. This one eliminates that proviso and in that respect it is a different amendment. I cannot see how it could be thought to be the same.

I would point out to the Deputy that an amendment similar to this was moved by him during Committee Stage but was defeated.

The Chair uses the word "similar" but the word I would choose is "different".

Is it on that basis only that the amendment was ruled out of order?

Yes. The Chair has ruled consistently that amendments of this nature were out of order.

Could the Chair indicate——

I shall not argue with the Deputy.

I would have thought that to eliminate the proviso that was contained in the previous amendment would have rendered this amendment different. To suggest otherwise seems to be straining language.

I can assure the Deputy that the amendment was considered very carefully as a result of which the Chair is of the opinion it is not a different amendment and must be ruled out of order.

I move amendment No. 2:

In page 8, line 38, before "an" where it secondly occurs to insert "of".

This is a drafting amendment. It is concerned with the definition of proprietary director and proprietary employee contained in section 13, subsection (1) of the Bill. Subsection (3) of that section is intended to provide that for the purposes of these definitions, ordinary share capital owned or controlled by the spouse or infant child of such a director or employee is to be regarded as owned or controlled by the director or employee concerned. As it stands the subsection says:

... by a person being a spouse or an infant child of a director or an employee.

It should say: "by a person being a spouse or an infant child of a director or of an employee". This is what the amendment is designed to achieve. I might mention that this definition follows that in section 226, subsection (2) (a) of the Income Tax Act, 1967, which it is intended to reproduce.

Amendment agreed to.

Amendments Nos. 3, 4, 5, 6 and 7 in the name of Deputy FitzGerald have been ruled out of order.

But, a Cheann Comhairle——

The Deputy has been informed as to why the amendments were ruled out of order. The reason is that they contain a new matter of substance which did not come before the Committee. The issue raised in amendments Nos. 3 to 7 deal, inter alia, with the exclusion of minors from the provisions relating to discretionary trusts. The net point raised by the Deputy on Committee was whether a company could be of full age. The question of minors did not figure in the arguments put forward by the Deputy. I understand that on amendment No. 8 the Minister clarifies this particular point.

I do not wish to argue in respect of amendments Nos. 6 and 7 but in so far as amendments Nos. 3 to 5 are concerned it seems to me that we discussed this matter in the debate. By dealing with this question of minors, the amendments are designed to deal, in part, with the problem which was raised in the debate on section 32. In fact, the whole debate there was on this question of the phrase "full age" towards the end of the section and the point was made that this raised the question that a company cannot be of full age, and that the way of dealing with that is to exclude minors from the operation of the section, which is what these three amendments aim to do. If, as I understand it, the amendment is designed to remedy the defects which relate to section 32 in part, I do not see why they are ruled out of order.

The Chair is of the opinion that amendments Nos. 3 to 7 involve new matters of substance which were not before the Committee.

If the Chair has read the debate on section 32 the Chair will see that the debate was all about this question of the phrase "full age".

In relation to companies, surely.

Yes. If you then manage to eliminate that by excepting minors from it, I would have thought that would have helped the situation.

That is the trouble. We were dealing with companies, not minors.

But the point was that companies could not be minors. That was the difficulty. Therefore, by excluding minors from the earlier part of the section, one copes with this problem.

Surely from the Deputy's own argument, by excluding minors he is not excluding companies and the whole point of his argument as I understood it, was that he said as this could include companies he thought it could not stand up.

Amendment No. 8.

I move amendment No. 8.

In page 20, line 5, after "number of" to insert "individuals who are".

The object of this amendment is to clarify the meaning of subsection (6) of section 32 of the Bill. The object of section 32 is to prevent the avoidance of estate duty through the medium of discretionary trusts. To achieve this object a person who is in receipt of payments, as defined, from such a trust is deemed to have had an interest in possession in the trust property and this interest is deemed to cease on his death giving a claim for estate duty under section 2 (1) (b) of the Finance Act, 1894. The interest ceasing is deemed to be an annuity equivalent to the average annual payments made to him in the five years preceding his death.

A problem arises if the trust property includes a house, lands or chattels of which the deceased was in occupation or possession. Section 32 (6) deals with this situation by providing (a) that if the deceased was the only object of the trust in occupation or possession of the land including a house or chattels his occupation or possession is deemed to be income at the rate of 6 per cent per annum of the market value of the said lands or chattels or (b) if there were more than one object of the trust in occupation or possession the occupation or possession is deemed to be income at 6 per cent of such market value or 6 per cent divided by the number of objects in possession including the deceased if there is more than one object.

On Committee Stage Deputy FitzGerald argued that a company could be an object of a trust and that such company could, therefore, be in occupation of a house and he contended that it was meaningless to refer to a company as being of full age. I am advised that this problem is not one that arises. However, the amendment proposed now does clarify the matter and I hope makes it quite clear to Deputy FitzGerald and everybody else that a company is not included in this. In fact, the whole intention is to exclude the company because by bringing in a company there can be large scale avoidance. Therefore, since I hope this will clarify that aspect of the matter I am proposing that this amendment be made.

I accept the amendment as meeting the particular point made and I am glad that we have had a Report Stage which has given the Minister an opportunity to introduce the amendment.

Amendment agreed to.
Bill, as amended, received for final consideration.
Question proposed: "That the Bill do now pass."

There are a few things I want to say on this Stage. I am not happy with the way we have handled this Bill. I know we have had this problem before but it is my first experience of it. The time we had from publication to Second Stage was too short and various people who could offer useful advice on this did not get an opportunity to study it in the time available which was very limited. As a result, some amendments have come forward which the Chair has—in some instances I would agree, properly, although in other instances I might contest this—ruled out of order on the ground that they introduce new matter. It is certainly true that some of them introduce new matter. I can see that on reflection. They introduce new matter because the new matter did not come to light in the very short period available between the publication of the Bill and Committee Stage. We have this very short period in which we have not time to study the Bill extensively— and these Bills are very complex—and see the defects in it and then that these Bills go through the House somewhat hurriedly with all the pressure from all the Deputies who are not interested in the Finance Bill—and that must be about 140 of them—who want to go on holidays. Then, the Bill is rushed through. It then goes to the Seanad which first, only has power to recommend a change which, I gather, falls if the Dáil does not accept it and secondly, with the Dáil not here the Minister will resist such recommendations and certainly will not be prepared to recall the Dáil for some technical points in the Finance Bill.

The combined effect of all this is that Finance Bills are rushed through in a way that leaves them defective and the next Finance Bill or a later one must pick up the pieces. We go on with this all the time. This procedure is unsatisfactory and I urge on the Minister that in future adequate notice must be given. Promises have been made in the past and have not been kept. As far as I am concerned and if I occupy this post a year hence, as shadow Minister I shall be concerned to ensure that there is an adequate interval and I shall not agree to the Bill being taken until an adequate interval has elapsed for consultation with the various interests.

That would not be necessary if the Seanad had a real opportunity to consider it but owing to the adjournment of the Dáil there is not such an opportunity. I wish to put the Minister on notice of that now. I think we are not doing our job here. I have always taken the actual job of legislating in the House very seriously. I know it is under-rated by the general public because much of the intricacies of Committee Stage debate are unreportable and virtually un-understandable——

Unreportable? We are having all this published.

Unreportable in the sense that it is not to be expected that newspapers will give a very full report on matters as technical as this.

I agree with the Deputy on that.

And no blame to them either. If they did, I do not think anybody would read them except people expertly involved. The whole situation is unsatisfactory and I think we should consider it further. If we are going to legislate in this House we should do so properly and with due consideration. I want to illustrate that point by referring to what seems to be the several defects in the Bill as it now stands. I shall not dwell on these points but I want to draw them to the attention of the Minister and urge him to take early remedial action though I know there is a problem about that.

In regard to section 13 there is the matter of relevant benefits. We had a discussion on this before. I want to urge on the Minister that what he has done has been inequitable to an extent that, perhaps, he has not fully appreciated. His point is that it is unfair that somebody should be put at an advantage because there happens to be an accident policy on his life and he benefits from this and may get one extra year's benefit. May I ask the Minister how he would measure that benefit? What price could you put on a benefit of this kind? I suggest the price you put on it is the premium payable for it.

In other words, the advantage which he is trying to ensure that somebody does not get over other people is the advantage that would be bought by an insurance policy. If a man went along and sought a policy individually with the words "during the period of service" rather than "in the course of his duties" how much more would he pay for it? I made inquiries today and I can tell the Minister that if an individual went along and sought a policy of the wider kind, which would ensure that if he were on a visit to Brussels and went out to the pictures with his wife at night, leaving the group he was with, for a few hours relaxation, and if he were knocked down and injured, he would benefit— under the provisions the Minister is insisting on he would not benefit—the extra cost of such a premium to him would be nil. The difference in risk involved is so small that it is virtually incalculable and in the case of an individual no extra charge is made for it. If a company is insuring a person for, say, his annual salary of £3,000 a year and the company wants to get an accident premium covering a period of a year, so that if he were killed in an accident any time during that year when in the service of the company he would be covered, it would have to pay for that policy of £3,000, £2.7. The narrowing down of that policy, so that it covered only a period when he is actually in the course of employment in the company, would reduce the premium to £1.8. The difference between the two is £.9 in such a case. The Minister, in order to ensure that somebody does not get the benefit of 18s worth of insurance, is forcing companies to underinsure their employees and to insure them in a manner which no reputable company uses. All reputable companies now insure for the period of service because if a man slips on the street going into the office and has not actually reached the door they do not want to deprive him of benefit. That is the effect of what the Minister is doing.

Yes, I have checked this out. An employee, once he reaches the office and is inside, is insured; but on his way to work he is not insured under the scheme as the Minister is now insisting on it. If he is away from home and goes off on his own from a group he is not insured. If he stays with the group he is insured. Why should the Minister wish to do something which simply involves something which is worth 18s for a £3,000 policy? That is all that is involved and yet he is forcing all employers all the time to cut back on their accident benefit and make it such that the average employer would consider inadequate. The Minister should re-consider that. I see the difficulty of re-considering it now because the Ceann Comhairle felt it necessary to rule this out of order, but I think an inequity has been done and should be remedied as soon as possible.

In section 32 we have left a situation which is unsatisfactory. I have difficulty in following this fully and the best thing I can do is to read out to the Minister the points that have been made to me on the section as now drafted. This arises from amendment No. 7, ruled out of order, in which I proposed to delete the word "subsection" and insert the word "section". The effect of the Bill being left in its present from is unfortunate. This section has been introduced to nullify the decision of Kenny in Royal Trust Company v. Revenue Commissioners, a case in which a decision against the Revenue Commissioners was secured in a claim for estate duty. The section repeals section 21 of the Finance Act, 1965, which dealt with discretionary trusts. Section 21 dealt only with cases where the trustees had discretion to pay or apply income or capital for the benefit of one or more of a class of several persons. The new section applies where the trustees have discretion to pay or apply income or capital for the benefit of one person or of a class of persons. Subsection 5 of section 32 applies where property is deemed to pass on the death of a person contingently entitled by reason of his failing to attain a particular age—thereby in effect repealing section 5 (3) of the Finance Act, 1894, and the decision of Chief Baron Palles in Attorney General v. Power (1906). There is a proviso that the subsection shall not apply where property is held in trust for an infant contingently on his attaining full age. This leaves subsection (2) of section 32 applying in such a case, so that if any income is applied for the benefit of the child pending his attaining the age of 21, and he dies under that age, there will be a claim for estate duty against the settled property. This appears to be unreasonable and would have been met by my amendment. I would ask the Minister to look into that point and to see whether, if not now, in a subsequent Finance Bill a modification could be introduced.

With those two illustrations I have shown how undesirable it is to rush this legislation through. I would urge on the Minister in future to leave ample time for points to be made and discussed.

On every Finance Bill for a number of years I have asked the Minister for Finance to do something about income tax for lower paid workers. On a number of occasions the Minister has adjusted this very slightly. For almost 20 years, while wages have trebled in volume, if not in value, income tax has remained basically the same. The Minister or his successor must ask the people responsible for preparing the figures to make more effort to deal with this problem. It is no answer to say that slight adjustments are being made.

The Minister must get down to the fact that if somebody has to travel a certain distance to work he must use a vehicle. Thank God, many people are doing that instead of staying at home and trying to live on unemployment assistance or unemployment benefit. There should be an allowance for transport. It is very unfair to see those people having to pay out so much for income tax.

The third point I want to make is the question of gross and net wages. I know an adjustment is being made with regard to superannuation but it is not sufficient. Compare the gross wage of these people with the net wage. They are taxed on the gross wage and you find that somebody who is being paid £25 a week finishes up with less than £15 a week after working not five days of eight hours but six days of nine, ten, and 11 hours. It is grossly unfair and the Minister must do something about it. People do not want to work overtime because it is no use to them. By the time the State and the local authority, for housing, have their share out of it there is very little left to the person who works the overtime. The Minister should make some effort to see what the real problem is. I appreciate that he has many other things to do but it seems that this is being overlooked, and in view of the tremendous increase in the amount of money being taken in in income tax over the last few years I would ask him to consider it. When trade unions and trade union officials are attempting to negotiate a wage increase, the fact that out of every £ increase in wages the State now takes, in many cases, 35p must affect the thinking of those who are looking for wage increases. There is no use telling people that they will get an increase of £3 per week when they know that the State will take over £1 of it in extra income tax. I would ask the Minister to consider these matters because something must be done to try to remedy them. It could have an effect on the whole wage structure if an effort were made to rationalise them.

The first point I want to deal with is the general issue of the amount of time available to Deputies between the circulation of the Bill and the taking of the Bill in the House. I confess that I have not actually worked out what it was this year as compared with previous years, but I know that this year's Finance Bill, relative to any other Finance Bill of which I have any experience, is far less complex. I hasten to add that, having said that, I am not saying it is not a complex Bill. What I am saying is that in relation to Finance Bills in previous years it is far less complex.

If the Minister tried writing it in English sometime it would be far less complex.

Sin ceist eile.

All things are relative.

Having regard to that factor, and having regard to the fact that many of the provisions of this Bill are in easement of the taxpayer on foot of the budget and otherwise, many sections of the Bill did not require as detailed discussion and examination as did most previous Finance Bills. This should be taken into account in deciding whether or not adequate time was allowed. That is the first point I wanted to make.

The second is that I think Deputy FitzGerald is mistaken in thinking that, because Finance Bills come in here and regularly contain amendments and alterations to previous Finance Bills, this illustrates that previous legislation has gone through with some defect in it. Normally what it means is that some loophole has been discovered by somebody whose job it is, and who is paid very well, to discover loopholes in Finance Bills, and that we are closing the loophole. If we spent a year on a Finance Bill we would not produce one that had no loopholes in it when the well-paid and well-qualified experts got to work on it. This is a fact of life which we have got to recognise.

I am not saying that a mistake has never been made in the passing of a Finance Bill. Of course there have been some but, if Deputy FitzGerald goes back over the record, I think he will find that the vast majority of the amendments to Finance Bills in successive years related to the closing of loopholes, not necessarily in previous legislation but rather, as I explained on another occasion, loopholes discovered in Britain, perhaps, and closed there, and people here taking up the running to operate them here.

In those circumstances I do not think there is too much validity in Deputy FitzGerald's complaint about the timing. However, primarily it was a matter for the Whips as to when the Bill would be taken and how much time would be given to it. There was a certain scarcely veiled threat in what Deputy FitzGerald said about next year. May I suggest to him that the first avenue he ought to explore in this regard is his own Whip.

I think that when the Whips get a sniff of a Finance Bill they also sniff the sea breezes.

That may be the Deputy's impression but it is not mine. However, he can deal with his own Whip.

That is a bit unfair to the Whips and as an ex-Whip I must protest.

There is nothing wrong with a sea breeze when you have got your work done.

We have not got our work done. That is the trouble.

I also want to deal with a number of the more detailed points which were raised. There is a certain amount of validity in what Deputy Tully said about income tax. I would not try to contest that. He is as well aware as I am of the difficulties involved in any worthwhile relief from income tax. There is the difficulty of the large amount of revenue involved. There is also difficulty of finding alternative sources of revenue. If we did not find alternative sources of revenue nobody would be faster—and this is intended as a compliment—than Deputy Tully in pointing out to us in this House what we were cutting out and the damage that was being caused by cutting it out. I am sure he realises that there are practical problems. Having said that I want to reiterate that we have gone some way along the road in this Finance Bill in giving relief. The bulk of the income tax relief, although it applies all round, applies, in my opinion, to those who are most in need of it, that is, married couples with large families of young children.

I accept that, but would the Minister accept this? When the wages of a rural labourer were £6 a week his tax free allowance was £6.50. His wages are now £20 a week and surely a tax free allowance of £6.50 could not still be right?

I think it was to Deputy Tully that I gave some figures on a previous occasion which showed what had happened over the years, taking non-agricultural wages in relation to income tax liability, and the value of net income after payment of tax. It has increased substantially over the years.

Surely 50p 20 years ago could not be the same as £14 now which it would have to be in order to prove the Minister's point. However, I know there are difficulties.

I gave the Deputy the figures. In regard to section 13 and the point made by Deputy FitzGerald on the question of accident insurance, I do not want to go back over all the ground we went over on Committee Stage. I should point out—and it is an example of what I was saying earlier —that because of the fact that a number of the sections in this Bill are in easement of the taxpayer there was not all that much discussion on them. It may not be obvious to the House that what we are doing here is in considerable easement of the taxpayer. Under the existing law the maximum lump sum payment is one and a half times final remuneration. The proposal in this Bill is that the new maximum will be four times the final remuneration. If the employer provides accident insurance for one year's remuneration under the retirement benefit scheme—that is, under the scheme provided for in this Bill—a lump sum payment of three times the remuneration may be given, and that is twice what is available under the existing law.

Under the generality of the schemes covering ordinary employees the lump sum payable is one year's remuneration and, therefore, the only schemes which would get the additional benefit sought by Deputy FitzGerald would be what are known as top hat schemes. I am not condemning them on those grounds but we must keep the matter in perspective. That is what Deputy FitzGerald was really complaining about. The case he has made is not sufficiently compelling, but it is certainly a matter on which I will be keeping an eye in relation to the kind of schemes being produced to the Revenue Commissioners. If it appears that this is creating any substantial problem we will certainly have another look at it.

I am grateful to the Minister for that.

I think Deputy FitzGerald is misinformed in relation to the subject matter of what was his amendment No. 7 which was ruled out of order. As I understand it he said in the circumstances of a minor in receipt of an income dying, this would be treated as a cessor and subject to duty. I am advised that that is not so. I do not wish to go into all the details but I want to make it clear that it is not a question of trying to legislate ourselves out of the decision in the Powers case to which he referred.

In fact, since that case it has not been the practice to claim estate duty on the death under age of one of the children in the type of case envisaged here and, therefore, in the situation described by Deputy FitzGerald he assumed, on the advice available to him, that duty would be levied. I want to tell him that that is not so; it would not be levied.

That is reassuring. I thank the Minister for that.

A further point to which I wish to refer is in relation to section 32. It is a point raised by Deputy FitzGerald on Committee Stage and which I said I would have another look at although I told him at the time that I did not think it was necessary. Deputy FitzGerald contended in relation to section 32 that, as section 21 of the Finance Act, 1965, under which discretionary trusts are dealt with at present, is being repealed by virtue of Part III of the Fourth Schedule to this Bill, it would not seem possible to avail of subsection (5) of section 21 for the purpose of calculating the value of benefits which a deceased person derived from the occupation or possession of land or chattels owned by a company established by the deceased, under section 20 (4) (b) (i) of the 1965 Finance Act. Section 20 (4) (b) (i) provides that where the benefits enjoyed consist of or include the occupation or possession of lands or chattels the value of the occupation or possession shall be determined in the same manner as the value of similar benefits is determined under the provisions of subsection (5) of section 21 of this Act.

The point here is that references to subsection (5) of section 21 of this Act must in future be read as if the words "as re-enacted"—that is, by section 22 of this Bill—were inserted after it since it is, in fact, being re-enacted by section 32. However, as I indicated at the time, there is not any need to effect such an amendment because of the provisions of the Interpretation Act, 1937. Section 20 (1) of the Interpretation Act, 1927, was specifically intended to cover this kind of eventuality and it provides as follows:

Whenever any statute or portion of a statute is repealed and re-enacted with or without modification by an Act of the Oireachtas references in any other statute or in any statutory instrument to the statute or portion of the statute so repealed and re-enacted shall, unless the contrary intention appears, be construed as references to the portion of such Act of the Oireachtas containing such re-enactment.

Therefore, under that provision it is not necessary, as I say, to provide for the addition of the words that could be deemed to be interpolated, that is, "as re-enacted".

It might be no harm if I made it clear that there is no connection between section 20 of the 1965 Act, on the one hand, and section 21 of that Act, which is now section 32 of this Bill, except to the extent that the same method is adopted under section 20 as is adopted under subsection (5) of section 21 in valuing benefits which are derived from the occupation or possession of land or chattels of a deceased person from a company. However, section 20 deals with avoidance of estate duty through the medium of family companies, whereas section 21, now section 32 of this Bill, is concerned with avoidance through the medium of discretionary trusts. That is the only connection between the two.

The final matter to which I wish to refer is that, again in the course of previous discussion, it was suggested that we ought to provide under section 45, which deals with foreign adoptions, that these provisions would be made retrospective so as to give relief to cases in which duty has not yet been paid. I am afraid I could not accept this proposition in principle. If we were to confine relief to such cases we would create the anomaly that taxpayers who had met their obligations would be placed at a disadvantage as against those who delayed in settling claims for duty made against them. Consequently, if the section were to be made retrospective, the retrospection would certainly have to be adequate to cover all cases whether or not duty had been paid. I think the House will accept this principle. But, if one accepts this, the next problem is that one comes up against the question, where does one draw the line, and it is very difficult to suggest a retrospective date without running the risk of being accused of selecting the date to meet a particular case. Therefore, whatever date would be chosen should be defendable on the basis of having been chosen on general grounds. For instance, the relief given by section 39 of the Finance Act, 1960, to informally adopted children, was made retrospective to 1st January, 1953. This was the date when the Adoption Act, 1952, came into operation. It could, therefore, be argued, I suppose, that section 45 of this Bill should be made retrospective to that date, that is 19 years back.

However, many cases have arisen since 1953 and all of them have been settled on the basis of existing law and they would all have to be reopened. There is the obvious difficulty that can be involved here and, perhaps, there are difficulties that are not as obvious. It is not merely an administrative difficulty; it could affect the whole administration of estates which have now been wound up and you could find yourself dealing with persons at the tenth remove and making small adjustments as a result.

However, even overlooking that difficulty, if we were to go further, to make section 45 retrospective in this way, there is not any valid reason why section 44, which deals with illegitimate children, should not also be given retrospective effect from the same date. This would not meet the case of all illegitimate children who first acquired inheritance rights under the Legitimacy Act of 1921 and I suppose, by analogy with section 45, therefore, section 44 would have to commence as far back as 1931, which, I think, would be accepted as being unrealistic.

However, that need not be the end of the matter. If we were to do that, there are other relief sections in the Bill and a strong case might be made for making them retrospective if we make sections 44 and 45 retrospective. So, any date chosen would be arbitrary and would introduce a new set of inequities.

For all of these reasons, all of the estate duty sections are designed to take effect on the passing of the Bill and I do not propose to alter that position.

Question put and agreed to.

This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.

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