Dáil Éireann debate -
Tuesday, 17 Jul 1973

Vol. 267 No. 7

Finance Bill, 1973: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. O'Connor

At the outset I would like to take this opportunity of congratulating the Minister for Finance for the bold flair shown in his approach to this Bill. I would have been much happier if some of the people whom I thought needed assistance had been included among the beneficiaries under this Bill but they have not been. The Minister has assisted certain sections of the social welfare recipients. This is good. I know of some people who need the greatest assistance because they will never be in a position, and never were in a position, to act for themselves. These people are dependent on county councils to help them in their difficulties. The county councils are heavily overburdened and can give very little.

There are three people in my own constituency who need assistance very badly. They are two brothers and a sister. They have two cows and a donkey. The two cows last had calves about nine years ago. They still have them to give whatever little milk they can at their age. They have been completely without food. The neighbours told me about them and I succeeded in getting the county council to give them £5—£2 for each of the men, and £1 for the woman. The day that money was given I knew of a medium-sized farmer who sold seven of his cows at a Kerry mart for approximately £198 each. He left the mart and went to Killorglin to collect £11.10 assistance. I cannot accept a position like that in this day and age, where people who are really down and out cannot get anything.

In a letter I drew the attention of the Minister to these people. They are subnormal and were never in a position to help themselves. Their people before them were subnormal and were not able to earn enough for the necessaries of life or to make provision so that their family could survive after them. It is unfortunate that farmers and workers with plenty of money spend so much while unfortunate people like these cannot get enough to live on. If it is possible for the Minister to make any money available for such people I would be glad if he could make arrangements to have them looked after. It is beyond the capacity of the county council who are doing the best they can. Councils are heavily taxed. Every kind of inducement is sent out from central Government giving grants for this and that, provided that the county council put up 25 per cent of the money. Unfortunately, the poorest people who need assistance are left out.

I would ask the Minister to keep these people in mind. I can give him the names of the people concerned and the name of the farmer whom I know collected £11.10. He was a person who did not need it, but got it.

The assistance given to other social welfare recipients is very welcome. The easing of the means test has been of considerable assistance to many poor people. I want to thank the Minister, on behalf of my constituents, for this. People in receipt of social welfare benefits expected to get a little more than the £1 given, but the easing of the means test has compensated them.

There is a great danger in carrying a deficit of £44 million, such as that mentioned in the budget. It is rather expecting too much to anticipate, in this difficult year, that buoyancy of revenue will meet that deficiency. There are signs of trouble ahead for the building industry, which is one of the greatest employers in the country. This industry is also one of the greatest providers of tax revenue for the Minister because it is mostly our young single people who are engaged in this arduous work. They work long hours earning big money and this provides very sound income tax returns to the Minister. Those young men consume large quantities of spirits which brings in another type of revenue to the Minister.

There is great difficulty at the moment in getting supplies of timber and other materials. This could bring about a recession in the building industry. If that happens it will have a serious effect on the revenue collected by the Minister. We know that there is a shortfall of 25 per cent in world supplies of timber and that the Americans and Japanese have succeeded in buying up two-thirds of the world supply. They would have bought the entire supply if some independent people in Northern Europe had sold to them. Those people are now auctioneering their timber today. They will not quote prices. They invite you over to Europe and they try to sell the timber at their own price. This is having a serious effect on supplies of timber. Certain lengths of timber are not available at all because the Canadian supplies have completely dried up. We do not appear to be getting the supplies from Russia which we were getting up to recently.

We have had difficulty recently in having payment made of housing grants. This can hardly be caused by shortage of money because the Minister has provided the money for this in the budget, so perhaps it is caused by shortage of inspection staff. Every time I write about housing grants not paid to constituents of mine I get letters saying that "The matter is being investigated". It is rather upsetting to a person to receive nine or ten of those letters over a six months period. This matter should be investigated because people should not have to wait so long for those grants.

Many of our young people, who are earning big money, have to travel long distances to work, sometimes up to 30 miles. I know they did not get a bad deal in the budget. However, some concession should be given to those people who use cars to get to work. Many of them could remain at home and collect the dole but they prefer to work. This concession for the use of a car, which is applicable in Britain, should be introduced here. In Britain, workers get some concession towards the operation of a car and this enables them to travel long distances to work. Those young people work hard to earn a living. If the Minister cannot do anything about this now I would ask him to consider giving some relief to those people in the next budget.

I want to draw the Minister's attention to an anomaly which exists in regard to VAT. The previous Minister stated very definitely that goods sold before 1st November would not be subject to VAT. In a tax guide book this was clarified in one portion of the book, but later on it stated that all moneys received after 1st November were subject to VAT. In my business, when the turnover tax was introduced, we paid this on cash receipts but we found great difficulty in operating on this basis. We were not always able to pay the tax on the due date because we had to do a lot of exploration work to see what was taxable and what accounts were paid in. We do a large credit business and sometimes a man will pay £20, £30 or maybe £50 out of a much larger account. The Revenue people came down from Dublin and examined our books. They suggested the easiest way out would be to pay tax on invoices, that when the invoices for goods were received we should take the taxable side and add up our normal gross profit and pay the tax on that. We agreed to do this and we were working on that basis up to the introduction of the VAT. When that system came in in November we found ourselves having to go back again to cash because the regulations stated that as a proportion of our business was wholesale we had to give our tax returns on a cash basis. That meant all our cash receipts for sales before November were subject to tax.

I raised the matter with the tax authorities and pointed out we had already paid a higher rate of tax on most of the goods than we would have to pay under VAT. However, they stated that, although we had paid wholesale and other taxes, we were not entitled to remission of the wholesale tax, which amounted to 10 per cent. Thus, we were at a disadvantage in that we had to pay a 10 per cent tax and VAT. The law states that a person does not pay tax twice but in this case we were being asked to do that.

We are happy to pay tax on all sales if we get a refund of the tax already paid at the invoice stage. We cannot get clarification from the Revenue people at local level or from the authorities in Dublin and I would ask the Minister to get clarification for us. We are not sure if we can claim the entire wholesale tax but we know we can claim some of it. We are now being asked to pay a 5.26 per cent tax on sales before November for which we have already paid tax. Unless this matter is clarified we will be forced to go to the courts but it should be possible to get the matter cleared up now.

The references in the guide-book are at variance with the position and they need adjustment. I would ask the Minister to give this matter careful consideration. As far as I know, we have received approximately £40,000 since November for goods sold before November; out of this £30,000 was taxable at a rate of 10 per cent or 11.5 per cent, but now we are being asked to pay a further 5.26 per cent. We would be much happier if account were taken only of transactions after November and operate from that date as we do at the moment. If we are liable, as the guide-book indicates, we must be entitled to a refund of the extra taxation paid on the sales.

I would ask the Minister to refer to this matter in his reply and to give us some guideline on the matter. The position is confusing; the tax authorities in Tralee cannot clarify the matter except to tell me it is the law and that I had a part in passing that law. However, that does not help us when we are under pressure from the Revenue Commissioners to pay double or treble tax. For example, we had to pay twice as much for timber and other items as against the tax now payable and we are now being asked for a further tax on the same material.

I know the Minister will be sufficiently alert and broadminded to acknowledge the points raised here and to see the necessity for adjustments. If this matter had been clarified in November we could have made the necessary adjustments. A definite statement was made in this House that goods sold before 1st November would not be subject to VAT but the July issue of the guide-book has been slightly changed and is now more in line with Revenue thinking on the matter. The earlier issues stated that goods sold before November would not be subject to tax but now it is pointed out that all cash receipts after 1st November are taxable. The guide-book has changed; I do not know if it is as a result of what happened in the House or if it is to suit the interpretation that was given later.

The reduction in the grants for county roads has not helped the authorities in County Kerry, even though I realise that some of the money was channelled in other directions. A large percentage of heavy traffic uses the secondary roads in County Kerry, whether for the delivery of limestone and fertiliser or for the removal of gravel from mountain areas. This kind of traffic creates havoc on the roads. The road grants helped to maintain the secondary roads and I would ask the Minister to have them restored.

There is a necessity in County Kerry for land drainage. I understand money is being provided by the EEC which will help western areas and I would ask the Minister to keep this matter under consideration. It is essential that we improve our grasslands and the low-lying lands which are much more fertile than the uplands. The development of the cattle, sheep and the dairying industries in the mountainous areas is necessary and this is one aspect that has not been given sufficient consideration. Our greatest wealth lies in the land and the mountain farmers who are prepared to stay in those areas should be given every encouragement and help. This is the one way in which money can be provided for the improvement of back roads and for land drainage.

I had intended speaking on many other aspects of the Bill but it is not possible for me to continue speaking at the moment because of a throat infection. I congratulate the Minister on the extra moneys provided in the Bill for those who are in need. However, maybe the provision of these extra moneys has been a factor in the huge increase in the cost of living. Price increases have reached a very serious stage. This is reflected in the fact that a number of people have remarked to me recently that they consider their position to be similar to that of 40 years ago when it was not possible for them to buy meat or the other necessities of life. The position is very difficult for people whose incomes are limited. I suppose that our association with the EEC has been responsible, to some extent, for the present situation. People living in poorer areas, in particular, are hit hard by all these increases because their incomes are not sufficient to allow them avail of the necessities of life or to enjoy the standard of living that they have been enjoying during the past ten or 15 years. Even in my own household it has been found necessary to budget. This was not the case in the past.

An income of £30 or £40 per week would purchase very little compared with what, say, £20 would have purchased ten years ago. We must take steps to curb these rising prices. The Government must view the matter from all angles. Perhaps it is not so difficult to understand why meat is so expensive when one considers how expensive it is within the Common Market countries but there are many other foods which have become so expensive that they, too, are almost outside the capacity of any household budget.

I thank the Minister for the increased benefits that are to be paid not only to people in my area but to people all over the country. I would be very happy, though, if he would endeavour to help those people who are being hit hard now and to whom I have referred already.

Mr. Haughey

On this, the Second Stage of the Finance Bill, it is open to us to raise in principle matters which are not in the Bill but which some of us consider might relevantly have been included. Conversely, it is open to us to refer to matters which we are pleased to note are not included. In that latter category is the very welcome decision of the Minister not to proceed with the proposal announced in his budget speech regarding the abolition of the concession whereby the first £70 of interest on bank deposits is not liable to income tax. If that proposal had been proceeded with, it would have had very serious repercussions.

On an occasion such as this there is a natural temptation to berate the Minister for putting forward such a proposal and then withdrawing it and to accuse him of indecision. However, I intend to eschew any such criticism or castigation and to congratulate the Minister on his openmindedness in this matter and on his decision to recognise that such a proposal would not have been beneficial.

However, there are some aspects of his latest decision which require clarification and which I hope he will deal with when he is replying. In his budget speech he said that he had been approached by banks which were not members of the old associatedbanks club, as it were, and to whom this particular concession did not apply. The Minister said that in considering the representations made to him by these newer banks he decided that, rather than extend this concession to them, he would abolish it for the older associated banks. I may have missed something but it seems to me that in announcing his decision not to proceed with his budget speech proposal he has not indicated whether he proposes to extend the concession to those banks that are seeking it or whether he is merely leaving the situation as it was before his budget speech.

Perhaps, also, the Minister might avail of the occasion granted to him by his reply to the Second Stage debate to give us, at greater or lesser length, as he sees fit, a review of the savings field position generally. I gather that his decision not to proceed with the £70 interest proposal was because of some concern he has with this area. Obviously, he was satisfied that his decision would have had a detrimental effect on savings in so far as these savings were channelled into bank deposits.

At present there are a number of institutions and organisations competing for our pool of savings. There are the banks, the State—through the post office and other mechanisms—the building societies, the savings banks and the very rapidly expanding credit unions. Some of these institutions and organisations are advertising quite extensively. Others are not advertising. I wonder whether there is not a need for some code of behaviour to be applied universally to all those who are in the market for savings. I understand there is some suggestion now that building societies should restrict competitive advertising for deposits as between themselves. Perhaps the Minister might consider whether something is needed in this regard. The extent to which our community saves in any year and, equally important, the channels into which those savings are directed, have a vitally important influence on the development of our economy.

For instance, at present the situation regarding the building societies is very unsatisfactory indeed. I am sure most Deputies, including, perhaps, the Minister, have the same experience in this regard as I have. I am besieged, inundated, with persons anxious to purchase houses whose applications for loans will not even be entertained by building societies. I merely mention that to indicate the importance of some sort of overseeing of the direction in which the savings of the community are channelled. I hope the Minister will, in his reply, say something about this whole area.

There is something else which is not included in the Bill before us but which I would very much have liked to have seen included. I mentioned it in my speech on the budget. The Minister has made some very important and worthwhile concessions in the estate duty area. He has made provision in section 55 to increase considerably the abatement for a widow and for her children. In fact, he has in both cases doubled the amount but I would like again to draw his attention to the situation of a family where there is no surviving parent. It seems to me that in such a case, where there are only orphans, the case for a concession is probably even stronger than where there is a surviving widow. I would like the Minister to look at this sympathetically. There are a number of ways in which it could be done. He could increase the £2,000 abatement which he now intends to provide to a higher figure where there is no surviving parent or, alternatively, he could take the eldest orphan and allocate to that eldest child the abatement which would normally go to the widow.

From the public's point of view, perhaps, the one thing that is most patently and obviously lacking in the Bill is any real semblance of an improvement in the personal allowances in the income tax code. For many years now the question of improving these allowances has been very regularly raised in this House on all sides and, in particular I think, by the Minister's party when they were in Opposition. They did, with considerable justification, point out, from time to time, how inadequate these personal allowances were and they were supported from our side of the House when we were in government, Indeed I, in my time, did something to improve those allowances, perhaps in a very small way, and my successor, George Colley, did the same. In these circumstances it is very disappointing that the Minister, now that he has his hands on the financial levers, did not make some satisfactory contribution in this area on this occasion. This is a year when he, as Minister, has at his disposal an unprecedented level of buoyancy of revenue. He has the returns from very considerable increases on tobacco, beer, spirits and motor taxation and he has now introduced and at his disposal perhaps the most efficient form of indirect taxation there is, namely, VAT. In that sort of situation, with that, it would, perhaps, be going too far to call it superfluity of resources, available to him, the income taxpayer, the hard pressed salaried or wage-earning income taxpayer in particular, could reasonably have expected some significant relief in this field of personal allowances.

The Minister mentioned in his budget speech that he hoped to introduce soon a new unified structure of personal income tax with graduated rates which will take the place of the present dual structure of income tax and sur-tax. That would be very widely welcomed and I hope he will proceed as actively as possible with that proposal. It is in operation in Britain and the general impression seems to be that it is working well, so far as anybody is ever satisfied with paying income tax in any shape or form. There is nothing in this Bill which goes any way towards meeting that reform. Perhaps, however, the Minister can quite rightly claim that it is a major task and that he needs time in which to prepare for it so that while it is disappointing that there is no provision in this particular Bill for such a new unified structure as envisaged we do appreciate that it probably was just not possible.

Something that is in the Bill which has been very widely criticised is the rearrangement of the structures of the VAT and the changes in the rates. I believe, and I have said this in my budget speech, that the exemption of food in the VAT structure was a mistake and that time will prove that. However, it is done now and will come into operation in September and there is not much point in our railing at it from this side of the House except once again to indicate our disapproval of a move which I am afraid was saddled on the Government by the necessity to honour an exuberant election promise. Of course, it is important also to realise that the Government did not simply take VAT off foodstuffs and recoup themselves from the tax so lost by rearranging the other rates. They used the opportunity to take an extra £2.4 million out of the pockets of the consumer and that is something which must be regarded as underhand.

If they felt that they had to keep this foolish election promise about taking VAT off foodstuffs, then at least they should have confined themselves to doing that and should have simply rearranged the other rates to compensate them for the loss involved in taking VAT off food without going any further. Looking at some of the things on which they had to increase VAT to get this £2.4 million, I do not think it is something for which they deserve a great deal of credit.

I am also satisfied that this is very much an anti-motorist budget. In a variety of ways it hits the motorist and in some ways it hits him quite savagely. I do not know whether there still prevails an idea that motorists are wealthy people who must be mulcted on every occasion. If that view persists anywhere, it should be sat upon because nowadays the motor car is for many people practically a necessity of life.

I am not just referring to commercial travellers or people who have to use a motor car strictly in pursuance of their vocation. Increasingly tradesmen are, and rightly so, using the motor car to travel to and from their place of employment. They are being very severely hit by this budget both in increased taxation, increased cost of fuel and also by the fact that there is still no income tax relief for people who have to travel considerable distances to and from their places of employment in regard to the cost of that travel.

I see that the Minister has brought in a marginal relief in the provisions which he is making in the Bill for the children's allowances claw back. In so far as he is doing that it is welcome because one of the criticisms we made on this side of the House of the Minister's provisions in this regard was that there would be a very sharp cut off at the £2,500 limit. In so far as the Minister has introduced an element of marginal relief at the £2,500 level it is welcome.

In section 5 the Minister brings in a new provision in which he is abolishing the concession which existed up to now in the case of certain trusts. If a parent set up a trust for the benefit of the child the position up to now was that when that child came into possession of the trust moneys he, or she, could claim personal allowances against the income of the trust back to the time of its setting up. The Minister is abolishing that concession. From now on, as I read it, under section 5 it will not be open to such people when they come to receive the benefits of the trust to claim for these personal allowances in arrear.

I should like the Minister to give us his thinking in regard to this provision. I have a feeling, not a very concrete one, that it is unjust. I may be wrong and I would be open to persuasion by the Minister in regard to this. If he has some sound reasons for abolishing this concession, I would be quite prepared to accept them. I hope that he will indicate to us why he thought it necessary to make this particular change.

In section 11 the Minister makes a change, not a very significant one, in regard to trade union benefits. He proposes to raise the annuity limit from £350 to £450. I accept that that is desirable, even necessary, and I suppose that it is probably as a result of representations made to him by the trade unions concerned. I would be interested to know why the Minister has not similarly increased the lump sum limit which is £600. I would have thought that when the Minister was making this change, in view of the inflationary situation in which we find ourselves, he would have increased this figure to, say, £1,000. I have no great knowledge or information about this particular situation. It may be that the trade unions involved did not look for such an increase but, perhaps, the Minister would consider whether it should be done.

As I said during the budget debate, I find the provisions of sections 14 and 19 very intriguing. I want the Minister to tell me why these sections are there at all. I had a question down to the Minister today but, unfortunately, it was not reached. However, by courtesy of the Minister's Department it has been treated as a written question and I have been given the reply. This reply makes the situation all the more interesting and intriguing from my point of view.

The House knows that the combined effect of sections 14 and 19 is to place certain organisations in an unique position. The organisations concerned are bodies which have at present consultative status with the United Nations or the Council of Europe and have as either their sole or main objective the promotion or observance of the provisions of the Universal Declaration of Human Rights or the implementation of the European Convention for the Protection of Human Rights and Fundamental Freedoms, or both.

We would all surely agree that any such bodies are worthwhile organisations and deserving of public support and acclaim but why the Minister, in this Bill, singles them out for such favourable treatment is beyond my comprehension. The combined effect of sections 14 and 19 is to give such bodies a right to the covenant concession which up to now has been very severely restricted in its application and, at the same time, to grant them the exemptions which are given to charities. I think that this places them in a unique position as I do not know of any other bodies which have both of these concessions.

Furthermore, in the reply which the Minister, with great courtesy, gave me to my question today—I asked him to tell me how many such bodies there were, what their membership is and if he could give me a general indication of their status, hoping to find out from him what the thinking or motivation behind this section is—I found to my astonishment that the Minister apparently does not know. The Minister for Foreign Affairs does not know either because he transfered my question to the Minister for Finance and the Minister for Finance tells me, in effect, that he does not know.

Minister for Finance (Mr. R. Ryan)

The Deputy knows it is for the Revenue Commissioners to rule in these matters.

Mr. Haughey

Yes.

Mr. R. Ryan

It would not be proper for the Minister to rule by way of reply to a Parliamentary Question.

Mr. Haughey

Surely the Minister must have some idea of the revenue implications. Surely he must have some estimate of the number of such bodies and some idea of what this concession is likely to cost the Exchequer. I suspect—I hope I am wrong—that somebody in the Government, not necessarily the Minister himself, is riding a personal hobbyhorse here and singling out these particular organisations, if in fact there is more than one such organisation, for this very special treatment. I want to emphasise that I have not spoken to anybody from Gorta in regard to what I am about to say now. I would have thought, if we are going to make these very specially favourable concessions to any body, Gorta was one organisation which should come in for such treatment.

The Minister spoke about our contribution to the Third World. He has very commendably provided additional moneys towards this contribution. I believe that the best way by far to contribute to the alleviation of hunger in the Third World is through the activities of Gorta. Very often when one gives gifts of money or food in a particular area one does not improve the situation at all. The real way to improve the appalling situation in the Third World is to enable people to help themselves to provide the necessities of life for themselves. That is the sort of job Gorta is doing and I cannot for the life of me see why Gorta is not included within the ambit of this section and, indeed, many other organisations, too, which are certainly deserving of consideration. I await with considerable interest the Minister's further elucidation of the situation for us in this regard.

In section 18 the Minister, again very commendably and very generously, provides that payments made to thalidomide children will be free of income tax. That is something with which everybody will agree. I would like to ask just one or two questions. The section, as drafted, seems to me to apply specifically and only to payments made by the German foundation. I have a recollection that the Minister for Health announced that he intends to supplement these payments from the Exchequer. If that is so I would imagine that the supplementary payments from the Department of Health will also be relieved of income tax and I would be grateful if the Minister would clear up the point.

There is a small question as to what exactly is intended here by income. Section 18 speaks of "income to which this section applies" and subsection (3) defines that income as payments made by the foundation. Is it intended that, if this foundation give lump sums and annuities, both will be free of income tax, or is income to be strictly interpreted? If lump sums are paid by the foundation or, indeed, by the Department of Health, will they also be freed from income tax?

Section 20 is, again, something for which I must commend the Minister, namely, his provision in regard to payments to universities for the promotion of studies in market research and industrial relations and any other subjects the Minister may from time to time approve. I like the Minister's approach in this regard. He is getting away from the earlier type of provision in section 439 of the 1967 Act under which three year covenants had to be made. This is a much cleaner and better way of achieving the objective desired. The organisation concerned can simply make a straightforward contribution to the universities. I want to point out, however, that, as the section is phrased, it would seem to restrict these provisions to traders. I do not know if that was intended. Surely it would have been desirable to extend it to professional firms and individuals who might be enlightened enough to contribute to universities for these purposes. I hope the Minister will have a look at this.

He is quite right to give himself the power to approve other subjects which might from time to time appear desirable. If it were not for this provision I might be inclined to criticise the Minister for selecting just the two subjects, industrial relations and market research. There may be other subjects equally meritorious and the fact that he has given himself this particular power makes the situation quite satisfactory so far as I am concerned.

In section 23 there is something about which we will have a considerable amount of discussion on the Committee Stage. Perhaps, however, I might draw one or two aspects of the provision to the Minister's attention at this stage. I have discussed this with a number of people and there is some considerable questioning as to the necessity for the inclusion of the word "necessarily" in this context. The general impression would seem to be that the provision as to "wholly and exclusively" were quite sufficient for the purposes of the Revenue Commissioners in this regard.

I am wondering if putting in the word "necessarily" is intended to bring into question the amount expended on entertainment. I understand that the position at present is that if the expenditure is justified as being "exclusively and wholly incurred" then the Revenue Commissioners are not concerned with the amount. They do not inquire as to whether the amount of the expenditure was justified or reasonable. It may be that the bringing in of the word "necessarily," even though the entertainment was wholly and exclusively incurred, will involve the question of whether or not the amount, or the size, or the extent, was justified.

It is important to keep one aspect of this whole question in mind. There is, perhaps, among many people a feeling of annoyance that businessmen or executives of State companies or others are inclined to entertain each other either at the taxpayers' or the community's expense. But as anybody who knows anything about the situation knows, business entertainment is often a very necessary part of selling. Furthermore, whether we would be justified in making the existing provisions more stringent where we Irish are concerned in the entertainment of each other we should realise that there is also involved the necessity to entertain foreigners, people from abroad coming here to do business who could just as easily go elsewhere.

I would direct the Minister's attention to the situation which obtains in Great Britain. There no element of internal entertainment is allowable at all but entertainment of foreigners is allowable in full. If one wants to do anything in this area that is a logical approach. I understand it is working quite satisfactorily in Great Britain. Perhaps the Minister might consider bringing in what obtains in Great Britain, instead of all these rather complicated provisions in section 23, if he is convinced that something further needs to be done.

Sections 24 to 29 will involve a great deal of our attention on Committee Stage. These are the sections which restrict the capital allowances in respect of cars used for business purposes to cars which do not, in effect, exceed £2,500 in value. I find it very difficult to understand the necessity for this provision. I hope the Minister will do more than he has already done to explain why these complicated provisions are necessary at this stage. I find them inexplicable. Were it not for the fact that I have a very high regard for the machine from which these provisions emerged, I would be inclined to describe them as stupid. I will not use such a description.

However, I would re-iterate that I find them inexplicable, particularly in view of the fact that the Minister has referred on a number of occasions recently to his wish to simplify the income tax code. Here we have two or three pages of very complicated provisions which seem to go in exactly the opposite direction to simplification. Could the Minister quantify for us the extent of the saving to Revenue arising from these provisions? He mentioned in his budget speech that all his anti-avoidance measures would bring in a total of £600,000 a year. If that is so, when you take the scope of some of the other anti-avoidance measures into account, what is involved in sections 24 to 29 must be very minimal indeed.

There are a couple of aspects of the provisions to which I should like to draw the Minister's attention and which we will have an opportunity to deal with more fully on Committee Stage. I am puzzled as to the definition of a motor vehicle in these sections. The only definition of a motor vehicle for the purposes of these sections is in section 29 which provides:

... the vehicles to which sections 24 to 28 apply are mechanically propelled road vehicles constructed or adapted for the carriage of passengers ...

That is in contrast with the definition used in the value-added tax legislation. It seems to throw into some doubt whether the ordinary motor car is included. It seems to restrict the operation of the sections to vehicles which are constructed or adapted for the carrying of passengers only. However, I merely draw attention to that point at this stage, and it is something we can elucidate later on.

It seems to me that there will be an element of double taxation involved. In the case of a vehicle costing more than £2,500, the allowance to the firm concerned for wear and tear purposes will be restricted to £2,500. However, the full running costs of the vehicle will be allowable to the firm and will come into consideration for the benefits in kind provisions. We could have a situation where a taxpayer would be assessed for benefit in kind purposes on the full capital cost of a vehicle, whereas the firm would only be allowed on the new limited value. That is another point which we can discuss further and more effectively on Committee Stage.

I should like to ask the Minister to have a look at this whole proposal in the round and satisfy himself that it is fully justified, or that it will achieve anything significant. When we think today of the people who use motor cars for purposes of their businesses —commercial travellers, veterinary surgeons, doctors, even Dáil Deputies —I do not see why the Minister should set out to restrict the sort of people who have a lot of motoring to do, a lot of long journeys to make, to smaller type cars. In some of these professions and vocations a large car may be necessary and why people whose jobs necessitate their using larger type cars are being penalised in this way escapes me.

If it were simply a question of preventing company directors using large luxurious cars for their own personal comfort and pleasure I could see some merit in what the Minister is proposing, but the proposal goes far beyond that. Let us take the case of a commercial traveller. This will bring about a situation where an employer firm will reduce the size of the car used by a commercial traveller for the purposes of his business, even though he might have to travel from one end of the country to another during the course of any one week. I hope the Minister will have another look at this provision.

In section 33 the Minister is making new provisions in regard to the income derived from patents. I welcome this provision and I hope it will have the desired effect of generating inventive activity in this country to the benefit of not only the inventor but Irish industry and agriculture generally. The business of being an inventor is a very perilous and very often an unrewarding one and I think I this concession is justified. I think I am right in observing that the Minister is not providing in the Bill that the invention must first be registered in this country. I mentioned that in speaking during the budget debate and if I was instrumental in bringing about this improvement I hope the Minister will be generous enough to give me full credit for drawing his attention to that aspect.

In section 38 the Minister is making new provisions for carrying forward losses for tax purposes. I should like him to tell us when he comes to reply what is involved here. I do not know if this is a very serious problem from the point of view of the Revenue or whether there is any great loss of revenue involved in the existing situation. It might be difficult to quantify the extent of the loss but, perhaps, the Minister will give us some indication of what he thinks is involved.

I should like to know if the implications of these provisions have been fully thought out by the Minister and his advisers. I suggest we will have to have a very full and detailed discussion on these provisions during Committee Stage. One aspect that I will be raising on the Committee Stage will be whether the Minister in bringing forward this proposal had full regard to the evolving situation in regard to company taxation which our EEC membership involves. It seems to me that amalgamations and mergers and takeovers will become a very necessary part of gearing ourselves to the level of efficiency which will be demanded in EEC circumstances. We have all faced up to the fact that our going into the EEC will in some cases involve some firms going out of business, or if they do not go out of business they will have to change into other lines of activity in order to survive in the new circumstances.

In principle, I would hope that these new provisions will not interfere with that process. If it is necessary for the protection of the revenue that these new provisions be made in regard to the carrying forward of losses, well and good, we will all accept them, but they will have to be looked at closely. Let me instance the case of a firm which is ailing, which has incurred considerable losses and where a group of employees of the firm wish to take it over and have the ability to put it on its feet but who, before doing so, want to get a stake in the company, the provisions as framed at present might discourage such a thing happening. I can think of many other possibly desirable developments which might be prevented or discouraged from taking place by these provisions in regard to the carrying forward of losses.

It is simply a question of stopping what is known as the loss-buying transaction, where one company buys another which is defunct simply to use the losses carried forward to set off against its own profits, then I think the Minister is right in doing something about it, but I want him to be careful that in making provision for that sort of situation he will not catch a lot of other situations and discourage developments which we would all like to see happening.

In section 43 the Minister introduces a new type of penalty and I should like him to look at it again. I refer to the penalty which he is providing for the secretary of a company. He is singling out the secretary in a company and providing that a fine can be levied on him or her if he or she neglects to do certain things. Surely that is going a bit too far. Very often the secretary is not the most important person in a company. The statutory duty of being secretary can be allocated to a typist in the office of some associate like the accountant or the solicitor. I am wondering what the real necessity for this is. If it were phrased in a general way so that any person in the employment of a company would be liable to this penalty it might be more understandable but it seems to me to be a bit unusual to single out somebody who just happens to be named as secretary. It might not be the secretary's job within the ambit of the company's operations to carry out this particular function at all, but as the section is framed the secretary would be fined.

In section 64 the Minister is increasing the stamp duty on office block building contracts. I am fully in agreement with that proposal. I wonder if the Minister can give us some figures as to what this provision has realised in the past and what it is likely to bring in in the future.

I want to take the Minister to task on what I think is not a very serious but certainly a minor deception of the House in this matter. When he was discussing the situation in regard to rates with Deputy Colley he said that Deputy Colley was wrong to criticise him for taking rates off office blocks because, in fact, he was putting this additional impost on to them. Of course, he neglected to point out to the House that this provision would only apply to new office blocks and has no bearing whatsoever on the taking of rates off existing office blocks. This extra 5 per cent will only apply to contracts yet to be entered into for the erection of new office blocks. However, I do not regard it as a very serious transgression on the Minister's part during the course of that debate, but I felt I should draw his attention to it.

Mr. R. Ryan

There will be a gain of income tax, because no longer will rates be set off against it.

Mr. Haughey

Yes. But I must refer specifically to the Minister's technical argument in reply to Deputy Colley when he said in effect: "Never mind my taking rates off office blocks. I am putting this additional impost on to them," whereas, in fact, he is not, not on existing ones.

Part 3 of the Bill deals with death duties and here I believe the Minister is becoming increasingly aware that by this election promise of his party to abolish estate duty they have opened up a great new area of controversy. This is undoubtedly a problem area. The question of estate duty being levied on farms was something which was causing a great deal of trouble and was something that deserved to be looked at and dealt with because the spectacular escalation in the value of farm land had seriously aggravated the situation. Indeed, there are other areas where the impact of estate duty also needs to be looked at, but that is a long way from a sweeping commitment to abolish estate duty in its entirety. That is the mistake, and the Minister in contrast in this Bill is showing the right type of approach and the right type of thinking, by making concessions where they are needed. He has made some valuable and necessary concessions in regard to the abatement for widows and children and also in regard to life insurance and superannuation schemes, and that is the way in which this problem should be tackled. This sweeping commitment to abolish estate duty in its entirety will cause a great deal of trouble and it is something that this House will have to go into very carefully indeed when the time comes.

If one could eliminate any elements of hardship involved in estate duty, then that would go a long way to meet the case. The philosophy or thinking behind the imposition of estate duty is that the State can levy this tax on property when it is in nobody's hands, when, as it were, it is in the air, and to that extent, in theory, the tax does not fall directly on any particular person; it is, therefore, more acceptable. That was the original philosophy behind the introduction of estate duty. We are in a much more complicated financial situation these days than when estate duty was originally introduced, but I am not sure that for a proper balanced taxation structure some form of estate duty should not be preserved. However, we shall all have to await the White Paper which the Government have promised on this problem. I believe when we do receive it, it will take a considerable amount of time in this House before we will be able to come up with a fair and equitable solution which will be universally acceptable.

As I have said, I believe the exempting of food from VAT was a mistake, but it is done and I do not think there is any great purpose to be served at this stage in keeping on repeating the fact that one considers it to be a mistake. However, there is one aspect of the provisions in regard to VAT to which I should like to direct the Minister's attention. It is particularly important now because the high rate has been increased to 36 per cent. With the type of items included in the highly-rated bracket there is a problem arising in regard to their export. I understand that in effect, up to now 25 per cent was, and now 30 per cent will be, as it were, locked up in the price of the article, and that where that article is sold on the home market the trader will be able to recover only 5 or 6 per cent or whatever the exact percentage is. If, however, the manufacturer exports the item in question, he gets a zero rating. But if the manufacturer does not export directly, if an agent or factor exports or attempts to export these goods, then he will not get a zero rating because he is not the manufacturer. To that extent the export of these products will be seriously jeopardised, because they will still contain in their price structure what was up to now 25 per cent and which will be now 30 per cent. Perhaps the Minister would have a look at that aspect.

As other speakers have pointed out, this is essentially a Committee Stage Bill and in discussing it we are very restricted in our approach to it, although I must admit the Chair has not been too Draconian on this occasion. The rules of the House are that we cannot have another budget-type debate. On the other hand, the Bill is very much a technical measure and more suitable for examination in Committee. However, I think it can be said at this stage that this Bill will not go down to posterity as a great piece of tax legislation. I do not think there are any enlightened or significant tax reforms included in it. It is very much a pedestrian piece of legislation which simply seeks in the most mundane way to give effect to the Minister's budget intentions. Most of the announcements which he made in his budget speech—many of which were welcome and which we on this side of the House have not hesitated to acknowledge were welcomed —have now become realities or are on the point of becoming realities. There are practically no alterations we can make in them at this stage.

Things like VAT and so on, merely by force of circumstances, are pretty unalterable.

However, there are aspects of the Bill which we can still look at. I hope that there will be a number of additions and improvements which we will be able to suggest to the Minister, and that he will look on our proposals on Committee Stage with an open mind and in a constructive way. I am sure he will. Nobody knows better than I do that Ministers are inclined to have a paternal pride in their legislative children. That is only natural. There is no piece of legislation however coming into this House which cannot be improved on by the House. Even allowing for all the expertise available to the Minister, when preparing the first draft, I am sure that when we come to the Committee Stage we on this side of the House will be able to put forward some ideas or suggestions designed to improve the Bill and that they will be acceptable to the Minister.

Mr. O'Malley

This Bill, as we all know, is an extremely long one. There are 97 sections and 11 schedules in it. It is a very detailed Bill. As Deputy Haughey has just said, it is a Bill which most appropriately can be discussed in full detail on the Committee Stage. Nevertheless, there are general aspects of it which we should discuss at this Stage.

I picked out one part of the Bill which I did not see referred to in any way in the Budget speech of the Minister. To that extent, it is something new; it is something unexpected in this Bill. Chapter II of Part IV of the Bill is headed "Stamp Duty on Capital Companies". It runs from sections 66 to 74, inclusive. This is about six and a half pages. The explanatory memorandum on that chapter was just one page long. I spent many hours over the week-end reading and rereading Chapter II of Part IV. To say the least of it, I find it difficult to understand. I got almost no assistance whatsoever from the explanatory memorandum, which says that certain changes are proposed and, in a very general way, what the changes are; but it does not explain any of them. In so far as I can be satisfied, with my limited knowledge of this very obscure and difficult branch of law, some very major changes are proposed in Chapter II, Part IV of this Bill.

The whole basis of our stamp duty law, as it has existed since the Stamp Act of 1891, is totally and fundamentally changed in Chapter II. One would think, therefore, when our law, having remained basically the same in relation to stamp duty on companies—I am talking about companies only and analogous matters such as limited partnerships—is being radically changed for the first time in approximately 80 years, that the Minister either in his budget speech, when he did not mention it at all, or in his Second Reading speech on this Bill, or in the explanatory memorandum, would have explained the proposed changes in some detail.

Unfortunately, the Minister skipped over it in a paragraph on Chapter II, and the explanatory memorandum is really of very little assistance. Each one of the sections will have to be teased out in detail on the Committee Stage. That will be a lengthy, tiresome and boring process for those who have to do it. In the public interest however it should be done.

I have taken the opportunity to read in the second edition of the loose-leaf volume on stamp duties issued by the Revenue Commissioners all the law as it exists at the moment on the topic of stamp duty on companies. It is not very extensive. It is not very easy, but it is an absolute paradise by comparison with what is proposed to be substituted for it in Chapter II. Having read all the law on stamp duty on companies, I found that the maximum rate of duty which is payable by the taxpayer at the moment on the formation of a company or on increasing the capital of a company is 25p per centum, which is one quarter of 1 per cent. The rate of duty which is proposed in Chapter II, Part IV of this Bill is 1 per cent. In other words, the rate of duty on the capital of companies is quadrupled.

The matter goes even further and more seriously than that. While it has always been the practice under our law since 1891 to charge stamp duty on the nominal capital of the company, the practice in Europe apparently is not to have any regard for the nominal capital but to charge on the net value of the assets. Therefore, we find a situation where, instead of having stamp duty of one quarter of 1 per cent on the nominal value, we have a stamp duty which is 1 per cent on the assets. Anybody who knows anything about company law or companies knows that in a great many cases the real capital value of a company, or the net assets of a company, usually considerably exceed the nominal value of the company.

Therefore, since the basic rate of duty is being increased fourfold and since the duty is now being charged on the net assets rather than on the nominal value, it is no exaggeration to say, even though one cannot quantify it precisely, that the duty on the formation of companies or on increasing capital or assets in companies is now being increased approximately tenfold by the provisions of Chapter II, Part IV.

That is as near an estimate as I can make out. If I am right, or even nearly right, the Minister has not been frank with this House or with the country by sliding over such an enormous and radical change in our stamp duty law without drawing the attention of this House or of the taxpayers generally to it. This Chapter II, Part IV, is expected to come into effect on 1st August, 1973, or on the date of the passing of the Act, whichever is the later. We hopefully expect that 1st August, 1973, will be the operative date. I would say to anybody in the process of forming a company, or of increasing the capital of a company, to make sure to have this done before the 1st August, because a duty which heretofore was very small has now become a very significant duty. For every £1 that was payable before, perhaps £10 or more is payable now.

It was the duty of the Minister to explain all these radical changes in Chapter II, Part IV of the Bill. He did not do so. He glossed over it in a paragraph or two. It is a serious matter which needs and deserves a great deal of study. The legal and accountancy professions in particular should do a crash course on the provisions of Chapter II, Part IV, before this Bill is enacted, because I think they may well find things contained in this that will make life very difficult for themselves and their clients. The explanatory memorandum tells us on page 7:

The main changes which implementation of the Directive will bring about are—

(i) a change in the base upon which stamp duty will be charged;

I believe that statement is true— naturally one should accept it is true —because, instead of a charge of one-quarter per cent on nominal capital, we will now have a charge of 1 per cent on actual net assets. It is not enough, in my view, for the Minister in his speech either to ignore the matter altogether or in the explanatory memorandum to say that one of the main changes will be a change in the base upon which stamp duty will be charged. If there is such a fundamental change in our law as a change in the base upon which stamp duty will be charged, the duty of a Minister who proposes it to this House is surely to explain what that change will be.

The Minister has not done so. I have endeavoured to do so. I do not feel it is my job to do so but I feel it is my job to draw the attention of this House and, in so far as I can, of potential payers of this duty in the country to the fact that this most radical change is about to take place. The explanatory memorandum goes on to say:

(ii) a change in the rate of duty to 1 per cent.

It is significant that the words "change in the rate of duty" are used in the explanatory memorandum. A more truthful statement would be "an increase in the rate of duty to 1 per cent" and a further more truthful way of expressing it would be to say "a quadrupled increase in the rate of duty from one-quarter per cent to 1 per cent" and to say that that fourfold increase is on a base, which is referred to in the first line of this explanation, which is radically different and radically bigger than the base on which the existing duty of one-quarter per cent was charged.

The explanatory memorandum further states:

(iii) the exemption from duty of issues of loan capital as from January 1, 1973.

I take it that the exemptions, in so far as I can discover either from the explanatory memorandum or the Bill, relate to stamp duty that is at present payable on debentures and similar instruments. Lest anybody be misled into thinking that the stamp duty on debentures was the same as the stamp duty on capital formation, it was not. The stamp duty on debentures was, of course, the same—at 0.125 per cent or one-eighth of 1 per cent—as the stamp duty on mortgages. If the stamp duty on mortgages is abolished up to the figure proposed in this Bill, likewise it should follow in relation to debentures or duty on loan capital.

I would emphasise that the changes here are described as main changes. They are by no means the only ones, as a glance through this Bill will show. The next change is described in the explanatory memorandum as:

(iv) the introduction of the effective centre of management of a company as the prime criterion for determining the locality of a company.

There is that bald statement in the explanatory memorandum and there is the same bald statement in the Bill. Here you have an enormous change in the basis of finding the domicile of a company brought about for the first time in 1973, our company law having remained as it was since away back in the 1860s. We are told that, instead of the registered office, which is the significant thing up to now, a concept called "the effective centre of management of a company" will now be the dominant feature so far as domicile of a company is concerned.

Unfortunately, we are not told, either in the explanatory memorandum or in the Bill, what this phrase "the effective centre of management of a company" means. Does it mean, for example, the registered office? Clearly it does not, because these two phrases are used in contradistinction to one another in section 67. Therefore, it does not mean that. Does it mean where the directors live? Does it mean where the directors work? If the directors live and work in several countries, which is frequently the case nowadays, does it mean where the managing director lives and works or does it mean where a majority of the directors live or where a majority of the directors work? Does it mean where a majority of the shareholders live or where a majority of the shareholders work? None of these questions is answered. I can see litigation until the cows come home on that very phrase alone. It is a most important phrase because it determines whether or not there is a liability for this new increased duty on a great many companies. It will be well worth the time of many potential payers of this stamp duty to litigate this matter not alone throughout all the courts here but presumably in the EEC court as well. It is not enough that a new phrase like this should be used in legislation and we are not given any indication of what it means.

That sort of failure to define a new term like "effective centre of management" contrasts greatly with the most elaborate definition of the word "transaction" which is given in section 67 (1). There are eight different types of cases which are regarded there as a transaction. The definition of the word "transaction" runs to 33 lines in this Bill. If it is necessary to define that word in 33 lines one would have thought the equally important phrase in the context of this chapter "the effective centre of management" would deserve some sort of definition.

These are rather arid topics; they are rather arid concepts. They are not ones about which either the Members of this House or the people in this country will get excited. We are faced with the situation that we are expected to pass this Bill within the next week or two. I do not think that the chapter I have been talking about could be adequately debated in under one week. That chapter, comprising six or seven sections, is only a small fraction of this Bill. All of the Bill is complicated and difficult. Our existing income tax code, as we know and as the Minister has stated, is a very difficult and complex one. It is made much more so by the provisions in this Bill.

All Finance Bills are, to some extent at least, complicated; but I have never seen one like this. I do not believe there ever has been one like this. We, as legislators, are put in an almost impossible position in relation to this Bill for two reasons. Firstly, there are introduced into this Bill concepts which are wholly foreign to our law. No Irish lawyer can understand the concepts involved in Chapter II of Part IV unless he has some knowledge of the continental law on which they are based. It is impossible for anyone of us, if we have not got it already, to acquire that knowledge between now and the summer recess. Secondly, we are put in the position that, even if we were to endeavour to study this Bill to the fullest possible extent, there simply is not time to discuss it in this House in the way it should be discussed. I am afraid, to a very great extent, we take this sort of legislation on faith. It is wrong we should have to do it.

Obviously, it was not at the last minute that Chapter II of Part IV of this Bill was put in. The directive was, apparently, passed in 1969 and we must have been aware of it. The people who drafted the chapter should have prepared and circulated a full explanation of what it was about. I must make the frank confession that I do not understand Chapter II of Part IV and, presumably, in common with other Members—probably including the Minister—I shall have to take it on faith and will have to pass it. The fullest explanation of each provision in this chapter should be given by the Minister in his reply.

With regard to stamp duties, during the debate on the budget I pointed out that the Minister referred to what he described as the very substantial reliefs given in this regard. I went to the trouble of doing a calculation of the actual saving in stamp duty to the taxpayer in this financial year and I found the answer was 0.8 per cent of what was collected last year. At that time none of us was aware that there would be a Chapter II to Part IV of this Bill and that certain stamp duties—for instance, the duty on the formation of a company—would be increased radically, that not only would the rate of duty be increased four-fold but that the base on which the duty was calculated would be changed considerably. Therefore, although I have no figures regarding the amount of duty that was collected from the stamp duty on the capital of companies, the likelihood is that the increase now proposed will change the saving of 0.8 per cent to the taxpayer into a loss. In other words, the taxpayer this year will be paying more in stamp duty than he was last year. I should like the Minister to let us have details regarding stamp duty on the capital of companies. In his budget speech and in his speech on the Second Reading of this Bill, the Minister described the changes made in stamp duties as very substantial reliefs. Clearly that is not so; in fact, there is heavier onus on the taxpayer in regard to stamp duties than there was in the last financial year.

The Minister has described as very substantial the reliefs given in respect of death duties. In my speech on the budget debate I worked out the relief on the sum which it was estimated would be collected this year and on the sum of £12 million I discovered the relief was 5¼ per cent. At that time I made a forecast, which I have no reason to change, that although on the basis of the estimates prepared for this year there would be a lessening in the amount payable by 5¼ per cent, in fact the amount the Revenue Commissioners would collect in this financial year would exceed that collected last year. I see no reason to think that forecast will prove incorrect.

In spite of a solemn promise prior to the general election to abolish death duties, not alone have they not been abolished but two of the three elements in death duties are doubled. Perhaps I might repeat the three elements in death duties, namely, estate duty, legacy duty and succession duty. Some reliefs have been given with regard to estate duty and I shall discuss these later.

The situation with succession and legacy duties is that they have been doubled; where they were 10 per cent previously they are now 20 per cent, and where they were 5 per cent previously it is proposed to make them 10 per cent. Indeed, they have been increased to 10 and 20 per cent since the date of the budget under the terms of the budget Resolution. It is extraordinary that the group now in Government, having made a solemn promise and, it appears having got votes on the strength of that promise, to abolish death duties at the earliest possible moment, now double the rates of two of the three elements of death duties. No doubt it is a matter they can reconcile with their own consciences; no doubt it is also a matter that the people will reconcile for them when they get an opportunity to do so.

In his Second Reading speech on this Bill and on the budget, the Minister made great play about the increased abatements with regard to estate duty. He gave an example of a widow with four children hitherto being free of duty up to £34,000 who is now free of duty up to £41,000; in other words, she can afford to have a net estate of £7,000 more before she begins to pay duty. I should like to draw the attention of the House to that fact that a farm that was worth £34,000 net after deduction of debts some 12 months ago is worth more than £41,000 net today. In other words, the increased abatement that has been given will not keep a widow and dependant children in the position they were in 12 months ago. Notwithstanding the increased abatement, they are worse off as a result of the increase in the value of land. All of us are aware that in the past 12 months the rate of inflation of land has been considerably greater than the increased abatement in duty for widows and children which is proposed under section 55 of the Bill. Therefore, it is illusory to suggest that any worthwhile concession has been given to these people. Indeed, anyone inheriting land other than a wife or child of the deceased is considerably worse off now than 12 months ago because he is paying twice the rate of both legacy duty and of succession duty.

I wish to refer briefly to section 56 which proposes to increase from £2,000 to £3,000 the limited value of an estate for determining the application of the artifical value of agricultural land. I want to make it clear to those who, perhaps, may not know what is involved, that this so-called concession is absolutely useless because it comes into effect only where the total assets of a farmer do not exceed £3,000, the only deduction that is allowed being debts charged on the land. When one considers that the value of a cow nowadays is between £200 and £250, it is easy to realise that a very small herd of cattle, whether they be dry cattle or milch cows, would immediately bring almost every farmer, but the very smallest, beyond the £3,000 figure, thereby, rendering this concession useless. The concession was introduced in 1909 and was probably of some definite value at that time to small farmers.

This Bill is so great and so complex that there is much one could say in regard to it. Principally, there is much that one could ask about it, because, like most Finance Bills, it is not easy at first or second or even third reading to understand what is involved. Unfortunately, this year, we have a particularly skimpy explanatory memorandum and we have a very short speech from the Minister in his moving of the Second Reading. We are given little or no information in relation to many complex matters and to the many major and radical changes that are proposed. Therefore, we must go slowly and ponderously through these matters ourselves and the difficulty is that, no matter how assiduously one may attend to that task, there is no doubt that there is a good deal which must, inevitably, elude us. It is wrong that that should be the situation. The drafting of a Bill is a highly specialised and skilled task. I acknowledge that skill, but those who prepare Bills have a duty to make their effect crystal clear to the legislators. The effect of much of this Bill is not crystal clear at the moment and many difficulties may arise in the future for citizens as a result of that fact.

I shall not deal with the large part of this Bill which concerns value-added tax because this is a matter that I find difficult to understand. It is an aspect of the Bill that has been dealt with fully and competently already by Deputies from this side of the House. However, I wish to make one reference to the income tax provisions of the Bill or, more accurately, to one provision which is not in it. I refer to the provision which the Minister proposed in his budget speech but which he has, prudently, left out of this Bill, that is, the proposal to withdraw the tax-free concession on deposits in most of the commercial banks where the interest payable per annum in any one account did not exceed £70. In his budget speech the Minister told us that for a number of reasons he proposed to discontinue that concession. During the budget debate I spoke on that proposal at some length and I pointed out to the Minister the foolishness of it and that it would lead inevitably to a considerable outflow of capital from this country, particularly from rural parts. I pointed out that capital withdrawn would not be re-invested in the Post Office Savings Bank, in the Trustee Savings Banks or in any other institutions here, but that it would go to Northern Ireland or Great Britain. I explained the high regard in which the ordinary commercial banks are held, particularly in rural Ireland, that there is a high degree of trust placed in them because of the confidentiality which has always been associated with them. I told the Minister that he had time to repair this error as the proposal was not to come into force until the beginning of the next financial year. I urged very strongly on him that he would drop the proposal.

I am glad to say now that he has acknowledged the strength of those arguments and that he has dropped the proposal but there is one aspect of his doing so which surprises me. His main argument in the budget speech in relation to the need for the abolition of this concession, apart from the fact that it would bring in, presumably, a fair amount of money, was the fact that the concession operated only in certain of the commercial banks. It operated in what I might call, for the sake of simplicity, the older banks. I think they used to be known as the associated banks but perhaps that term is now a wider one than it was. The concession operated in the banks which have a large branch network throughout the country, including very small towns, but it did not apply to many of the newer banks. The Minister's principal reason for abolishing the concession was that it was unfair that it should apply to some banks only. It is very difficult to know precisely what the Minister proposes to do but his argument defeats him, because if it was unfair to allow the concession to some banks only, why is he now allowing it to some banks only? Surely the argument he made on the budget, which was valid up to a point in that regard, defeats the action which he has taken now, that is, to allow the status quo to continue. I am glad that the Minister has taken this action but I would point out to him, in his own words, that there are other banks who hold licences from the Central Bank on the same basis as the older banks and that these do not have the benefit of this concession.

There is provision in section 3 of the Bill in relation to income tax on children's allowances and to which I wish to refer only briefly since it is a matter that has been covered in some detail by several speakers here. It would appear that there is a very unfair situation being proposed in this regard in that a man with, say, six children and having a net income of £2,501, loses all children's allowances while a man with only one child and having a net income of the same amount also loses all children's allowances even though the allowances would be only a small fraction of what the man with six children would be getting. It was not our belief that the Minister would propose the enactment of this clawback situation in this way because we regard it as very unfair and I am asking him now, before the Committee Stage, to change the situation and to render it equitable so that a man with six or eight children whose income is barely above the figure stipulated—I suppose that, of necessity, the figure had to be somewhat arbitrary—would not be in the same position as a man with only one child and who has a precisely equal income.

This proposal runs counter to all legislation in recent years or, indeed, in recent decades, in relation to concessions or allowances in income tax for children because, clearly, a greater allowance is needed and is the entitlement of a man with a large family rather than a man with a small family.

There is a great deal more that I could say on this Bill because I find it unsatisfactory, not only in its detail but in many respects in what it sets out to do. However, as I have said already, it is primarly a Committee Stage Bill. I propose to raise all these points in greater detail on Committee Stage and, indeed, I propose to raise many other points then also.

At the conclusion of what I have to say today I may be permitted to draw attention to what appears to amount almost to a boycott of the House by the Fine Gael and Labour Deputies because I think very few, if any, of them have spoken in this debate. I believed that the value of debate in a parliament or outside it was that there was a cross-fertilisation of ideas and that much benefit came from that cross-fertilisation. If that is so, I can only suggest that this Dáil is a unisex Dáil.

Mr. Enright

We are well able to look after our own affairs over here.

Mr. C. Murphy

Does Deputy Enright intend to speak?

An Ceann Comhairle

Order, please.

Mr. C. Murphy

I thought for one moment that somebody from the other side of the House was going to speak on this Bill.

Mr. R. Ryan

The Opposition asked for the time. We did not.

Mr. C. Murphy

It seems to be just one Opposition spokesman after another.

An Ceann Comhairle

Order, please. Deputy Murphy on the Finance Bill.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. C. Murphy

As we read in newspaper reports recently, it is very difficult for a layman without a certain amount of research and training to enter into and tear apart the underlying principles of a Finance Bill. It is with some trepidation that I rise to speak to a House which is fuller than it has been since Question Time even though some may be on the point of departure.

The budget and the Finance Bill together must be the regulator to strike a balance between various needs in society, such as the need to raise living standards, thereby increasing employment, and, on the other hand, to hold back inflation and adverse elements. The Minister in his speech at the beginning of the Second Stage said that the Government aimed to make Ireland a new and better land. Having gone through the Finance Bill and the budget, I wonder whether the overall population or only certain sections of the community will really benefit. I welcome the proposals to increase allowances to deserted wives and children's allowances to the needy. I know there must be a line of demarcation somewhere and it has been drawn at £2,500 but there is a certain discrepancy there and I join with Deputy O'Malley in calling on the Minister to review that so that the anomaly which he pointed out may be remedied somewhat.

Individual groups benefit but when we are dealing with a Finance Bill we must consider the overall benefit to the community and the economy. I find from the reviews that spending will rise this year by 20 per cent more than last year. This may increase employment and hence output will be increased but it certainly will increase the rate of inflation. I base my argument on the obvious fact that when you tax alcohol, tobacco, motor vehicles, increase postal charges and increase the rate of VAT, it must cause a spiralling of prices. Coupled with this another Minister of the Government has come out with a price regulating order. Will this improve matters for all sections of the community? Having read reports from the officers, secretariat and members of RGDATA I am not so sure. They feel, and rightly so in my opinion, that this Finance Bill will certainly squeeze out the small man. Let us take the case of a greengrocer with a light van who buys from the market for his small shop to keep his wife and family. What is in it for him? It is a rough budget, really. His overheads, his costs have been increased. His road tax for the light van may be increased from £20 to £31. Where will his profits accrue in order that he may meet these extra costs? Along with that his driving licence has been increased and VAT has hit spare parts very heavily. This individual must also meet an additional tax on his petrol.

In the removal of VAT from foodstuffs, something I welcome even though I cannot see it significantly affecting the fortunes of a lot of people, the small businessman must face another burden in his book keeping. He must keep a special column now for the zero rating thereby further complicating the situation. Imagine his cynicism to read the Minister's statement, "to make Ireland a better land". I am aware that people must tighten their belts but this small businessman must also tighten his belt.

The commuters from the county which I represent will find these increases in taxation a heavy blow. A lot of the people in County Wicklow are commuting to the city to work and I should like to ask if the Minister for Finance is making an effort to drive such people, "drive" being the operative word, to seek accommodation in an already overcrowded city or its suburbs.

Costs have escalated from the point of view of such people. Looking through a motoring magazine I saw that the budget was described as "Ryan's rocket". Having spoken to many people from my constituency I can say that they are worried and anxious over increased travelling costs. They ask what is the point in it especially when benefits are going to many people who are not fully entitled to them. These people seem to receive more incentive than the person who commutes. Certainly there is little incentive to the worker who commutes. He is on a fixed wage and must pay his taxes. Such persons, rightly, expected the Minister to give them an increase in their tax free allowance.

When one considers the depreciation in the value of the pound a rise in the tax free allowance would have offset, to some extent, some of the increases. This man's wife, if she works, only gets a marginal increase in her allowance. These are the factors which the person in the street looks into in the budget.

Looking at the budget, as it affects the country as a unit, we have seen improvements in the lot of those who are less well off. However, the person in the middle income group received little and he looks towards the upper class but does not see a capital gains tax or a wealth tax. Is this progressive thinking? No relief has been granted in this budget to ease the burden of the people in the middle income group who are already overburdened with repayments and tax commitments.

An Ceann Comhairle

I hesitate to interrupt the Deputy but I should like to remind him that the budget debate has concluded and we are now discussing the Finance Bill. The Chair desires that the Deputy confine himself to the Finance Bill and the proposals contained in it.

Mr. C. Murphy

I accept the reminder but I was side-tracked by part of the Minister's speech in which he stated that the Government aimed to make Ireland a new and better land. The Minister told us that the Finance Bill, taken with other budgetday proposals, was one of the prosaic but essential steps towards the attainment of that worthy objective.

An Ceann Comhairle

The Chair is inclined to give the Deputy a lot of latitude but, in accordance with the tradition of the House, the same scope is not permitted in the Finance Bill as is permitted in the budget debate.

Mr. C. Murphy

I take the point and I shall confine my remarks to the Finance Bill. In pre-election days various policies were outlined by the National Coalition candidates concerning the removal of death duties. In this Finance Bill provision has been made to raise the exemption figure from £7,500 to £10,000. Prior to the election we heard many statements to the effect that death duty would be removed completely. I suppose that in harness people have to tow the line. We find now that my colleague, Deputy Jim Gibbons, was possibly more realistic in his view that death duties could not be dismantled in one sweep of the pen as the population were led to believe would happen if the National Coalition were elected to government.

I am delighted that in this Finance Bill the example set by the previous budget has been followed and the exemption figure for death duties has been raised from £5,000 to £7,500. It is possible that in time, if time permits, the Government, if they use discretion and base their decisions on the experiences of Ministers for Finance in latter years, will do good. At least we hope they will. I am glad there is provision for raising the figure by £2,500. The amount was increased by the very same figure of £2,500 in 1972.

Death duties are a cruel tax. The tax comes at a very inopportune time. I have actually heard many of the farming community argue that they would prefer to have land derated and pay income tax if death duties were removed altogether.

The Minister said the Bill was designed to curb inflation. As I have pointed out, increased taxation on hardy annuals such as motor cars, tobacco, beer and post office charges will hardly curb inflation. There is, too, the question of borrowing. Borrowing is a useful means of meeting an end but it also puts a certain obligation on Ministers for Finance to meet repayments on the amount borrowed. Have the Government a vested interest in maintaining inflation, I wonder? As interest rates abroad rise so does the obligation falling on the people and on Ministers for Finance to meet heavier bills. As a result of this Bill, what will be the position of the various strata of our community? Will the poor have their lot improved, which is something we all earnestly desire, or will the spiral once more overtake them?

Sections 81 and 82 impose penalties in relation to value-added tax. They are quite penal in approach. If people do not meet their commitments to the State they will be penalised. The Minister said, when introducing this Bill, that it should be remembered that the employer's lot to remit PAYE tax deducted from employees' earnings is no more than an obligation to pay over money received by the employer for the State. That is all very well, but delay in paying over this money will in future bring a penalty of £20, plus £20 per day for every day that passes without the tax being remitted, and there is a penalty of £20 on the secretary. This is very penal.

Having studied the Bill and the explanatory memorandum, coupled, as they are, with the budget proposals, I doubt very much that the Minister will achieve his aim of making Ireland "a new and better land for every section of the community". This would certainly be my desire as it would be the desire, no doubt, of the majority, but I believe that once again a certain section is being used to meet the needs of those less well off and that section is the middle income group.

Mr. Crinion

The Minister referred to an increase in the economic growth rate. I see no possibility of this happening. Indeed, it will be well-nigh impossible in the light of his colleague's price control because that control will put industrialists in a very onerous position. It will be impossible for them to expand because costs will be rising all the time.

It is proposed under this Bill to fine employers who do not remit PAYE tax. Employers have always argued that they are acting as unpaid tax collectors for the Government and collecting costs them quite a bit because they have to pay staff. Most firms would have at least one full-time employee employed on PAYE. That is bad enough but now the Minister will penalise employers for not remitting the tax by a certain date. Firms will be very sore over this. They have to pay staff to do the work and now they will face penal fines if the money is not in by the appropriate date.

Under section 4 a person can claim a dependent relative's allowance. This is based on the maximum non-contributory old age pension. He will be able to get the full £60 if his income is under £347. I have always felt that this should not be confined to non-contributory old age pensioners. A contributory old age pension and a widow's pension should also be eligible for a dependent relative's allowance. Usually the person concerned is a son or daughter. The Inspectors of Taxes are not too stringent in operating the qualification clause. As I understand it, if your income is over a certain figure the allowance comes down, £ for £, until it reaches zero.

An Ceann Comhairle

May I remind the Deputy that the matters of detail which he is discussing are more appropriate to Committee Stage.

Mr. Crinion

I bow to your ruling. It is mentioned in the Bill and I thought it was in order. A welcome aspect of this Finance Bill is that any trade or industry which gives a grant or a donation to a university for research work gets a tax relief under section 20. I should like to see that extended to bodies like Macra na Feirme, Macra na Tuaithe, the ICA and different youth groups. They are doing a worthwhile job for the community and they depend largely on subscriptions. I chaired some of those bodies 15 or 20 years ago. They were always in financial difficulties. A concession was given about ten years ago. If a person committed himself to an endowment for seven years the charity could claim back the tax he had paid on that money.

The Minister should have gone further in this section to include those bodies interested in education and youth activities. Even if they committed themselves to an endowment for seven years they could claim at the end of each year the tax on the money paid by the firm, in most cases at the 35 per cent rate or higher in the case of firms. This would yield a substantial amount of money. If those bodies get £5,000 or £6,000 a year they would consider they are doing very well. If they got 50 per cent of that again it would be of immense value to them. The Minister should look again at section 20 on Committee Stage or make this provision in some future Finance Bill.

I am glad the Minister had second thoughts about the £70 limit on deposits. Had he gone ahead with this as proposed in his budget speech, a number of old age pensioners who had saved a few pounds in the bank to bury them would be persecuted at the end of the year. They would get a form with about six questions on it from the Revenue Commissioners asking what income they had. I have met a number of these people. A 79 year old widow whose husband had left money in the bank did not collect the interest for four or five years and when the interest was calculated it was over £70. It was hard to explain that the Revenue Commissioners would not touch the money which was put aside for burial and other expenses. The £70 limit on deposits could have created a number of problems, particularly for rural Deputies, who would have constituents coming to them upset and worried about it.

The Minister went out of his way to tell about the zero rating of VAT on foodstuffs but he said very little about the amount of the increase in VAT in regard to all other commodities and services. These increases average about 20 per cent. The increase from 5 per cent to 6.7 per cent is an increase of 28.32. In the middle range of commodities, the 16.37 per cent has gone up to 19 per cent and the 30 per cent has gone up to 36 per cent, an increase of 21.4 per cent.

It was a great gimmick during the election campaign to say VAT would be removed from food but anybody who is buying groceries will know that prices have gone way above the 5 per cent VAT which will be taken off. It will not stop at that and by September the price of foodstuffs will have increased still further. It will be interesting to see how prices of foodstuffs will come down during the week which the Minister says he is giving to shopkeepers to bring them down.

Oral medicines are zero rated as well as veterinary preparations. If the Minister had any experience of farming, he would know that no oral medicines are being given to cattle, sheep, pigs or fowl. All these medicines are administered by injections and farmers have become experts at administering these injections. Therefore, the removal of VAT from oral medicines will not mean a thing to farmers. VAT has been increased on building materials which in turn means an increase in the price of houses. As well, newly married people, who are put to the pin of their collars to save for house deposits, now find that there has been an increase of practically 20 per cent on furnishings of all kinds and on all kitchen equipment.

One of the most damaging increases is that of 6.75 per cent on cars and motor cycles. Cars and motor cycles cannot be regarded nowadays as luxuries. Most people have to travel long distances to work and either a car or motor cycle is an essential. A large percentage of the people in my constituency have to travel long distances, particularly to Dublin to work on buildings. I wonder if the Revenue Commissioners would be able to tell us how many cars are owned purely and simply as luxuries, how many people own cars merely to go for a drive in the evenings or on Sundays? In the country the not so well-off have motor cycles and they cannot be regarded as luxuries. Riding a motor cycle in the winter is a cold occupation——

An Ceann Comhairle

I would remind the Deputy that this kind of minute detail is more appropriate on Committee Stage.

Mr. Crinion

The Minister referred to some of these things in his opening speech, but I will keep my remarks to more general matters. In the Bill there is the question of the 1 per cent VAT which farmers are supposed to get back on sales of cattle. If you sell to a factory, they stick on the 1 per cent VAT but if you look at your return you will find you have not got it back. The VAT stamp of 1 per cent is always put on. The only people who get it back are the farmers selling corn to the millers. It is added on to their cheque when they are being paid.

Oral medicines are mentioned in the Minister's speech. There are practically no oral medicines given to livestock at present. Such medicines are usually administered by injection. Oral medicines are usually only given to poultry, and it is given in the drinking water. The day when you held the animal and bottled him with medicine is gone. The modern trend is for injections, so this provision means nothing to the farmer. I was amazed to see the tax being taken off horses and greyhounds. A great number of them are sold inside the country as well as being exported.

Mr. R. Ryan

Mostly by people who are not registered, so they would not be taxed anyway.

Mr. Crinion

I see. In the explanatory memorandum, in relation to section 38, there is reference to loss buying. That immediately brings to mind the question of the loss leader, a very dangerous practice which has crept into business. It is covered up in the actual returns but it is an inducement to people to go into supermarkets and bigger shops. It is very unfair that the ordinary shopkeeper in the country town or even in the city should have to compete against one of those. A shopkeeper might be doing a nice business and suddenly an area is bought up and a big supermarket comes in and starts this.

An Leas-Cheann Comhairle

Surely that has nothing to do with the Finance Bill.

Mr. Crinion

It was this loss buying that prompted me to refer to it. I was hoping the Minister could include this matter of the loss leader with loss buying. The Government promised that if they got into power they would take away estate duty. If I remember rightly, the Minister said in his budget speech he would introduce a White Paper before the summer recess. According to a reply to a Parliamentary question I put down the other day, it is now postponed to the end of the year. The farmers are very disgruntled about this. Outside the immediate family, not alone did he leave the rate of 5 and 10 per cent rate of succession duty but increased it twofold, rubbing salt into the wound.

This succession duty would apply to many people living on pensions or invested money. Twenty years ago they could live, you could nearly say, in luxury on these fixed incomes, but the same income is barely able to keep them today. They might have had one servant or a gardener with them for years. Although these employees might not have been receiving the normal rate of pay, through loyalty they have stayed with these people. The only way these old people can compensate them is to leave them something in their will. Since the rate of succession duty has been doubled, quite an amount of the money is taken away. There is an increased tendency for such old people to make provision in their will for the people who have looked after them and been so kind to them. While I am on the subject, I wish to refer to a section in the Finance Act, 1971, which makes a purchaser of a deceased's assets liable for the estate duty of the deceased, if it should happen that these duties had not been paid by the deceased. It is, therefore, dangerous to buy the effects of a deceased person at a public auction unless one is satisfied that all the duties have been paid. This could be covered by a bond that would ensure nothing would happen. The Minister might consider something like that later on.

The provision in relation to the payment of income tax by those earning over £2,500 has caused quite an amount of disquiet in the country, particularly among tradesmen and skilled employees who have incomes up to that figure. The Minister has mentioned £2,500 as a net figure. The allowances will be reduced in a full year. One portion of the Bill tries to simplify the taxation code. It will actually complicate that code. At the present time there are five rates for children's allowances. This will introduce two new rates. There is also the allowance for dependent relatives. It would be easier for all if the rates were the same for all. It would be easier for calculation purposes. It must be costing the Revenue Commissioners a lot to make up the assessments for income tax. It is hard for their staff to know all the different rates. In America there is one rate for everybody. It is easy to calculate the tax there.

The Minister has removed the subsidy on potash. I paid £24 per ton for it this spring. The quotations for the autumn supply are about £30 per ton. This manure is essential. The Minister made this change after most farmers had bought their manure for the spring. These farmers will get a rude awakening when they find they have to pay an extra £6 per ton for potash in the autumn, as well as any increases which the manufacturers may put on it.

Pressure was put on the previous Government to allow farmers to bring home cattle and sheep for their neighbours, even if they were paid a little for it. This saved the use of licensed lorries. The tax for the vehicles used for such work was £2.50 but this has now been increased. As well as that, the farmers will have to buy white diesel instead of red diesel and they will pay duty on that also. A farmer carrying cattle for his neighbour assisted his neighbour, because the expense was very small. This has now been done away with following the increase in tax.

The people in the middle-income group are expected to bear the brunt of this budget. They got no tax relief. If a man is self-employed he will find that a little van used for going around will now be subject to increased taxation. Many farmers have bought estate cars. They find them handy. These cars are really motorcars in which the back seat can be turned down so that the car can be used to carry, say, a few bags of meal from the shop or materials for fencing. These estate cars are very useful. They can be cleaned up on Sunday to carry the family.

Mr. Haughey

Deputy L'Estrange would know nothing about that.

Mr. Crinion

He would have greyhounds in them. It has been suggested to the Minister that he should take the taxes off greyhound races. The Minister is getting at us with these increased taxes. These estate cars are really a useful means of transport.

Mr. R. Ryan

You could call them sawn-off trucks.

Mr. Crinion

A farmer is inclined to have a useful little car that will serve as a car and a van. This Finance Bill has hit him badly with the increase in tax. The big lorries, like those used by Roadstone, have not suffered such tax increases.

This tax helps the well-off farmer at the expense of the small man who is trying to make ends meet. When the Minister made his budget speech it was noticed that the middle-income group suffered most. They got no taxation relief. The rates on goods vehicles such as station wagons were increased. It is safer to use such vehicles as commercial vehicles in order to keep within the law. Up to now the duty was £2 more to do so. When people come to pay their tax again on the station wagons they will find a great difference. Small shopkeepers use their vans for delivering goods to customers. The increases in taxation imposed on such vans are much greater than the increases imposed on private cars.

An ICA Guild approached me recently and asked me to press to have it removed as quickly as possible. When I get those requests the Minister and his two colleagues, the Parliamentary Secretary and the Attorney General, must get many of them. They had to make statements that it would be removed. I sent the Minister photostat copies of the cuttings in the papers as he felt I was paraphrasing what I read. There is grave disquiet in the country over the promises made. People hate to be led up the garden path.

The other day I met a widow who has a farm on which it looks as if there will be a duty of £8,000 to be paid. The farm was valued at about £40,000. She will get £2,000 relief and will have to pay £6,000. This woman's husband sold a few cattle, for which he got £800, shortly before he got sick. He put the money in the bank as he intended to replace the cattle. As a result of having that £800 in that man's bank account his widow was not able to claim the artificial valuation. The solicitor told her that she could have claimed the artificial valuation if that money was not in the bank and she would not have to pay any estate duty.

Mr. L'Estrange

How many children are there?

Mr. Crinion

None.

Mr. L'Estrange

If there were three children no estate duty would have to be paid.

Mr. Crinion

This man died last January. The valuation on this farm, although there was a fair acreage, was quite low but when the auctioneers arrived they based their valuation on the value of land in that vicinity. Most land in the area is selling at £500 an acre. This is a very unfortunate case which I felt I should bring up in the House.

We have a promise that a White Paper is coming out in relation to new taxation but the people will probably find that the old taxation is more acceptable than the new one. It takes at least a year to clear up an estate. I feel that all estates which were not cleared up before this new taxation came in, should have the estate duty based as low as possible. I hope the Minister will have second thoughts on some of the things in this Finance Bill.

Mr. Andrews

The main burden of the Minister's case in relation to the introduction of the Finance Bill is the emphasis on the social welfare element contained in the Bill. It is fair to say that any Deputy who does not welcome the social welfare advances would be unfair to the nation and particularly to the less well-off sections of the community. One of the great features of successive Fianna Fáil Governments has been that over the years they were conscious of their obligations to the less well-off sections of the community, that is the social security classes and the mentally handicapped.

When the Coalition take credit for these increases in social welfare benefits they should remember that the atmosphere in this respect was set by successive Fianna Fáil Governments. One of the great pieces of philosophy of the Fianna Fáil Party over the years was to ensure that those less well-off sections of the community were well attended to at budget time. When we have the trumpets blowing and the cymbals playing by the Coalition band it is as well to point out that the framework for those increases was set up and built on by Fianna Fáil Governments over the years. I see in the Minister's speech introducing the Second Stage of this Bill, that the Government aim at making Ireland a new and better land. Any Government of any nation aims to make their country a new and better land. In that context the Minister's statement reeks of cliché. I do not think any Government would go out with a policy aimed at making their country a worse off land. If we are to make Ireland a new and better land with the compliments of Fine Gael and Labour, let us see how much better is the land since they came into office earlier this year. They came into Government on the wave of a number of points in a programme which they produced as a policy and which the people in their wisdom and entitlement decided to accept. What kind of better land have they created?

One of the greatest planks in their 14-point programme was the question of price increases and the inflationary situation which they suggested was present at the time. What has happened since then? Food prices have gone up and, although the Government have told us that they will remove VAT from food, that is one of the most fraudulent pieces of political soothsaying this nation will ever be asked to accept. VAT will be removed from food but in the meantime price increases will have eroded the reduction. That is the reality of the situation. Last Thursday a Fianna Fáil Deputy was told in the House that prices had increased by some 3 per cent since last March—one of the greatest leaps in the history of the country. Housewives in urban and rural areas are being asked to pay more for their purchases despite the fact that we were promised a land of plenty by the Coalition Government in their programme prior to the general election.

In addition to food prices, the cost of cars, clothing, footwear, agricultural machinery and petrol have increased. Post office charges have also been increased. The Minister for Industry and Commerce produced what was called a prices freeze but since the introduction of that freeze the cost of a number of items has increased. There can be no denying this. This is part of the Coalition idea that if you present a good shop window people will not look behind the store. It is part of a well-conducted propaganda campaign by the central propaganda office, known as the Government Information Bureau. I am not critical of that to any great degree. If people are employed to put across a message on behalf of the Government they should do their best having regard to the terms under which they operate. This is the kind of reality with which the people have been presented.

Today Deputy Davern asked the Taoiseach why Government policies were announced outside the House. Ministers are tripping over themselves in their anxiety to get the headlines in the newspapers. Last week the Minister for Local Government delivered a wonderful message in connection with the differential rent scheme. This evening we read a headline in the evening papers that it was not all it was made out to be, that the old age pensioner and the widow living in local authority houses will have to pay more. It is a "grab back" situation— these people are given increases in social welfare benefits but they are taken back again—and the Government expect people to thank them for doing that.

We were told that the Coalition Government were to be thanked for reducing health charges on the rates and the housing subsidies by 25 per cent per annum for the next four years. I asked the Tánaiste where the money was coming from with regard to the reduction in the rates and I respectfully suggest to the House I was not given the correct answer. It is my belief that this will be vindicated when we will probably have a minibudget in the autumn to pay for the "bonanza"—I put the word in inverted commas—which we are allegedly being given by this bonanza Government. I suggest we must have a minibudget in order to carry out some of the schemes set out in the budget and the other schemes that have been announced subsequently. The money will come from taxation; whether it comes from direct or indirect taxation it is, nevertheless, taxation and the people will have to bear the brunt. No matter how the tax packet is wrapped, no matter how it is presented to the people, they will have to pay for it and there should not be any doubt about it.

We were told we had to thank the Coalition Government for not increasing the rates this year. I admit the rates bill in 99 per cent of the local authority areas was increased by a small percentage but nevertheless it is the same type of burden people had to bear year in and year out. It may have been increased by 6p or 7p in the £ over last year but people living in suburbia and in urban areas who are forced to live on the kind of wages they get must meet this savage, penal burden. It is a penal tax——

Mr. L'Estrange

The Deputy did not say anything about it for the last 16 years.

Mr. Andrews

I have said this during the years. Even when Fianna Fáil were in Government I always propounded the idea that people should not have to pay rates on urban dwellings. The rates burden is one of the harshest forms of taxation that urban dwellers are asked to bear. It is a form of taxation that is both unfair and inequitable and one which takes no account of the difference in the income of various households. Hundreds of thousands of urban dwellers pay rates. We are expected to thank the Coalition Government for what they are doing in this regard but Fianna Fáil would have removed the rates altogether from urban dwellings.

Mr. L'Estrange

From where would they have got the revenue that would have been lost in this way?

Mr. Andrews

We went to the country on that platform.

Mr. L'Estrange

The people did not believe you.

Mr. Coogan

They did not go at the last minute.

Mr. Andrews

As usual, Deputy Coogan does not know what he is talking about.

Mr. Coogan

I will go out for my glass of Andrews.

An Leas-Cheann Comhairle

Deputy Andrews.

Mr. Andrews

I would advise the Deputy to look after his electrification schemes in Galway and also the bus shelters. The Deputy's social philosophy is the electrocution of itinerants in Eyre Square.

An Leas-Cheann Comhairle

The Chair would prefer the Deputy to keep to the Bill.

Mr. Andrews

I appreciate that that is not in the Finance Bill of 1973 but it may be in the Finance Bill of 1974 if it reflects Fine Gael philosophy on itinerants as propounded by Deputy Coogan. However, to come back to the rates question—the imposition of rates is a penal tax and the people of urban Ireland, in particular, are not fooled by the Coalition promise but I am satisfied that many people were taken in by these choice, juicy promises made by the Coalition parties prior to the general election. Ratepayers may be told that their rates are only up by 9p this year—maybe the increase will be 27p next year—but, nevertheless, they are receiving increasing rates bills. The people indicated the mood they were in by the way in which they voted in the recent Presidential election, the result of which indicated that the budget was not as saleable a product as it was meant to be in the context of that election. The budget was one of the elements in the defeat of the Coalition candidate in that electoral context.

The Leader of the Opposition has stated that this country was handed over in good shape to the Coalition Government. That statement was supported substantially by a publication issued by the Allied Irish Banks giving a review of the economy and in which it was stated clearly and unequivocally that the economy of the country was in a sound condition. It would be unpatriotic of any Deputy to come here and express the wish that any Government might be responsible for the wrecking of the economy. It would be my hope that the present Government would not be responsible in any way for such a deed. Regardless of which party or parties are in Opposition it must be the wish of every one of us to see the country improving but if no such improvements can be effected by the Government of the day, the only course for that Government to take is to go to the people and let them decide as to whether the Government are making a mess of the nation. As I see the position, when this test arises, these people will answer very clearly as to how the Coalition Government are running this country.

We have been promised a White Paper on estate duty, the abolition of which was another pre-election promise of the Coalition parties that was not fulfilled. However, we are told that we are to have this White Paper. I expect we will get it with all the florid verbiage and clichés which will amount to saying: "We cannot give you this concession now but we will give it to you at some future stage."

As one who has pursued the cause of deserted wives I thank the Minister for granting an increase to these people. It is an increase that will be taken up by successive governments, regardless of whether they may be Coalition or Fianna Fáil governments. In this context I would like to bring to the Minister's attention a group known as AIM and to pay a special tribute to that group. I have been at a number of their meetings, including the one at which they inaugurated their campaign in relation to the deserted wife. It was a stormy meeting but politicians must be prepared to take a little flak from time to time. Nevertheless, that meeting was a very worthwhile one. It has been followed up by a number of other meetings and the group's campaign for justice for the deserted wife continues unabated. I am sure that every Deputy here would join with me in paying tribute to the AIM group but as well as paying tribute to them we must do something concrete to help those women who, through some misfortune or other, are now in the category of deserted wives.

Much remains to be done in relation to reciprocal legislation with England and the Continent so that we may catch up with the husbands of these women. I understand that the Minister for Justice took over legislation from the previous administration in the context of attaching the salaries of husbands in Britain and on the Continent for the purpose of ensuring that they pay for the maintenance of their deserted wives and children, of children in particular.

I would like to see this legislation being introduced as a matter of urgency and also that there would be legislation that would have the effect of attaching the salary of the husband in Ireland. That may not be within the exact contex of the Minister's statement but it arises in a general way. It is a constructive point and one that has been made previously by others. However, as one respected Deputy of Fine Gael who has now gone from this House said, sometimes one must repeat something as many as ten times before the message is put across. From time to time since 1966 I have asked questions here in relation to the plight of the deserted wives. It has been only in the past two years that anything concrete has been done for these people. If we are moving towards what the Fine Gael Party would describe as a just society those people must get top priority in the context of any set of objectives in relation to an overall philosophy of social security.

The question of illegitimate children was also raised by me on a number of occasions in this House. I do not want to take up the time of the House with that problem. My words are clearly stated in the various Dáil debates over the last number of years in respect of the illegitimate child in our society. Again I will hand it to the present Minister, he did recognise the plight of the unmarried mother. It is by way of entitlement that she received this recognition but I should like to thank the Minister for recognising her entitlement.

The pattern for the present increases in social welfare benefits, given by way of entitlement and not by way of charity to our people, was set by successive Fianna Fáil Governments and carried on by the present Coalition grouping. That is the reality of the social welfare increases. It is my intention at some future time to articulate on the question of the social security structure within our society. There is quite a considerable amount of duplication and triplication in relation to our social welfare structure. It is not in order to bring it up in this debate, but nevertheless it is appropriate that the House should be put on notice of the intention of the Fianna Fáil Party to articulate and to make known their philosophy in relation to the social security structure in the society in which we are living. We are not satisfied with it and it is important to put the House and indeed the nation on notice that we will be propounding policy, and articulate policy, in this field in the not too distant future, if not during the summer recess then some time early in the autumn, either inside or outside this House.

It is not my wish in any way to indulge in the insidious practice of playing one group in the nation off against another, on the contrary, but nevertheless it is apparent in this budget that the real sufferers—and I agree that people must pay a fair amount of tax—are the middle income group. They are hit all over the place. They are punch-drunk from taxation. When we are talking about a fair distribution of the wealth of the nation let us keep those people in mind. I have already outlined the type of taxation they are paying anyway. VAT off food, of course, is one of the greatest political myths, political jokes. The rates—decreases so-called. Rates have increased in almost every local authority in the country. The Minister's package in regard to differential rents, which was announced last week, is now being rent apart by a closer look at the actual package offered. The string has been untied, the package is opened up and it is now being scrutinised very closely, as was witnessed by headlines in this evening's newspaper. Rates, car taxation have been increased. The middle income group are suffering and suffering hardship in many instances as a result of the budget which the Minister so glibly introduced.

The Labour Party, since the introduction of the Banks Act, signed by our respected President Childers the other day, have clearly joined with the Fine Gael Party. As I have said on a number of occasions, the Labour Party have been subsumed by the Fine Gael Party. They are no longer the party of Connolly, as they would want people to believe. They are no longer a socialist party. They are members of a right-wing, conservative grouping whether they like it or not. They are no longer socialists.

An Leas-Cheann Comhairle

This is hardly appropriate to the Finance Bill.

Mr. Andrews

It is appropriate in the sense that we must examine the philosophy propounded in the Finance Bill itself and on the basis that we have to deal with a Coalition or collision— call it what you will because it will become a collision in the not-too distant future—we should be entitled to make a comment on these two groupings describing themselves as a Coalition. Those people in the Coalition, and particularly in the Labour Party, who were so vehement in their condemnation of some of the legislation we introduced to protect the national wage agreement in the interests of the nation—the vulgar abuse we received from them—had to eat humble pie in this House recently.

An Leas-Cheann Comhairle

That would have been appropriate in the debate we had on the Bill we had before the House recently.

Mr. Andrews

I should like to thank you, Sir, for bearing with me as patiently as you have done and to thank the Minister for introducing the benefits which have been given by way of entitlement to the groups I have mentioned in the course of my short contribution.

Minister for Finance (Mr. R. Ryan)

The difficulty I have in replying to this debate will be illustrated by an unusual occurrance in the course of this debate. I have had the privilege of representing the people of Ireland in this House for 14 years and during that period I never saw the Press gallery empty until a period during the course of this debate when the gentlemen of the Fourth Estate expressed their boredom with the contributions of the Opposition by leaving the Press Gallery unoccupied. My immediate predecessor has complained about the treatment which he and his colleagues are receiving at the hands of the Fourth Estate in recent times. He might well examine as to where the fault lies. I have never known in this country the gentlemen of the Press failing to give adequate attention to worthwhile statements and worthwhile contributions by people in public life. If the Opposition are feeling the draught at present they might well look into their own hearts and find where the blame really lies.

We left the debate to the Opposition in the closing hours of this debate deliberately to see if we could evoke from them any worthwhile criticism or any indication as to what their attitude is on economic and social matters. We left it to them to see if we could detect any particular line which would indicate what their philosophy would be for the future. All we found was a sequence of contradictory statements which contributed nothing except greater confusion and boredom to the proceedings of this House.

It will not be possible, and it would not be appropriate, for me in the course of my reply to deal with the many points of detail raised. I think that these are more appropriate to Committee Stage. Some of the points I regard as valid ones to make. I do not necessarily accept the validity of the criticism but I think it was appropriate that Members should raise them in order that they might get some guidance as to the intention behind some sections of this Bill. I will, as far as possible, endeavour to reply to such points. Any other points to which I may not reply tonight I will endeavour to deal with when we come to Committee Stage next week.

This Finance Bill is equalled in length by only one other Finance Bill in the history of this State, the Finance Act of 1963 which also had 78 pages. This Finance Bill has 78 pages, 97 sections and 11 schedules. I accept that certain sections of this Bill are difficult to comprehend and that one would need to be a practitioner in tax law to be fully aware of all its implications. However, some criticisms of this Bill are worthwhile noting.

I should like to draw the attention of the Members opposite to a comment on the Finance Bill which appeared in The Irish Press of the 12th July. While some Deputies opposite criticised the budget and criticised the Finance Bill their opinion is not shared by the leader writers of The Irish Press. On the 12th July The Irish Press said that the Bill, like the budget, was a social document. The leading article went on:

It does much for the less well-off sections of the community, it assists charities and projects for the public good, it provides encouragement for industry, its clauses on VAT are designed to help stabilise the cost of living, and it attacks certain flagrant abuses in the tax avoidance and evasion trade. There is almost literally something for or something against almost every member of the community and, on the whole, the financial help predominates. As our first EEC Finance Bill it gives a spur to the national economy which should see a marked rise in the national growth rate this year.

I do not imagine that the leader writers of The Irish Press find it easy to comment favourably upon a Finance Bill introduced by a Government which is not in alliance with the political philosophy of the founders or shareholders of The Irish Press and yet that, significantly, is the objective comment of the leader writers of The Irish Press of the 12th July.

Recently Deputy Colley challenged me about the size of the tax increases in this Bill. On that occasion I answered that both in percentage and absolute terms the tax increases in this Bill were less than some of our previous experiences. I want, again, to emphasise this because of the mischief which Members opposite have endeavoured to generate in relation to this year's Finance Bill.

The percentage increase in tax revenue imposed in this year's budget is 3.6 and this compares more than favourably with an increase of 10.8 per cent in 1963; 9.8 per cent in 1966; 6.5 per cent in 1968 and 8.4 per cent in 1970. In absolute terms, the budget of 1970, when money represented far greater value than today, imposed an increased tax burden of £27.3 million. Only three years ago the increase in tax was £27.3 million but this year the additional tax which we imposed to meet an opening deficit of £20 million is only £22.2 million in a currency which is depreciating.

Mr. Colley

Is the Minister comparing like with like? Is he comparing this year an estimate and in previous years the out-turn? Is he also comparing the total in relation to the budget as distinct from the Finance Bill?

Mr. R. Ryan

I am comparing the budget figures for each year and this shows that although we are giving much greater benefits this year the actual increase in taxation is less than it has been in years when nothing comparable was given by way of concessions or social welfare benefits to the people.

Mr. Colley

Are the Minister's figures based on the out-turn or on the estimate for that year?

Mr. R. Ryan

They are based on the actual budget figures given in the respective years. These are the actual figures quoted in the budget for the years to which I have made reference. In out-turn they, of course, would vary as, indeed, the figures may vary this year. I think it is significant that in respect of the forthcoming year the actual additional taxation, as a result of buoyancy in revenue, is more than twice any additional tax which is being imposed in the budget.

Mr. Haughey

Surely in a deficit budgeting situation these figures are meaningless?

Mr. R. Ryan

They are not. The opening budget deficit this year is more than half of the deficit which we had at the end and, I suspect, that by the end of this year, as I have indicated in my budget statement, the final estimated deficit will be considerably lower than that which we estimated when we were in the course of preparing the budget. These figures, therefore, like all other figures which I can produce, show that there is no reality to the criticism offered by the Opposition party to the Finance Bill or the budget. They have engaged in a propaganda campaign which is totally false and which can be shown to be without foundation. I hope, in the course of my remarks, to identify several of the fallacies which exist in this regard.

Deputies referred to the size of the increases in duties on beer and spirits. I want to put this into its proper perspective. This year's increase in tax on beer of .73 pence per pint represents a rise of 9½ per cent in the duty content and a rise of only 4 per cent in the price of the pint of beer. In 1966 and 1968 the duty content on beer went up by 15¼ per cent and 23¼ per cent respectively. In those two years the price of the pint was increased, because of the duty charged, by 7½ and 10 per cent respectively.

I recall that in 1952 the price of the pint of beer, as a result of a tax imposition, rose by 25 per cent under Fianna Fáil. This year there is an increase on the price of the pint of beer of only 4 per cent as a result of the tax change.

Mr. Colley

The Minister is juggling the figures.

Mr. R. Ryan

I am not juggling with figures. Small wonder that the licensed trade are laughing because since this budget they have found no diminution in consumption. In fact, the reverse is the case because the general prosperity that the budget has engendered is leading to greater spending than ever before.

Mr. Colley

Already.

Mr. R. Ryan

Already, yes. In the case of spirits, the duty content went up in this year's budget by 17 per cent and the price of spirits rose by 8 per cent. On the other hand, just to take one year, 1966 for instance, the duty content of the glass of spirits went up by 14¾ per cent.

Mr. Haughey

This is twaddle.

Mr. R. Ryan

It is not twaddle. It is a specific answer to the specific allegations made by Opposition Deputies that this year's tax burden on everything, and particularly on the luxuries of life, was exorbitant and greater than had ever been experienced before in the history of the State.

Mr. Colley

Was the price of the pint ever increased by as much as it was in this year's budget?

Mr. R. Ryan

The price of the pint was increased time and time again by a far greater percentage than the percentage in this year's budget.

Mr. Colley

That is not the question I put.

Mr. R. Ryan

I will deal with tobacco in a moment. First of all, not by way of complaint but to draw attention again to the behaviour of the Opposition, during some of the more boring contributions to this debate I counted the number of times that my closing speech on the budget debate was interrupted by the Opposition and I found that it was interrupted on no fewer than 92 occasions; on no fewer than 92 occasions did the Opposition find it necessary, because they felt provoked, to interrupt. I regard that as an indication of their unwillingness to hear the facts because the facts destroy the criticisms they have offered against the budget and against the Finance Bill. I hope they will not now endeavour to imitate or excel their misbehaviour when I was concluding on the budget.

Mr. Colley

We could make a pact with the Minister.

An Leas-Cheann Comhairle

Order.

Mr. R. Ryan

I want to deal now with a slight concession we propose to make in respect of the duty on tobacco. For the reasons I announced in the budget we found it necessary to increase the rate of duty on tobacco and the increased duty included a special excise duty on duty-paid tobacco stocks held by manufacturers at five o'clock on the day of the budget. That was in line with the practice of my predecessors and was designed to divert to the Exchequer the enhanced value of the stocks. Since then I have given careful consideration to the representations from the small tobacco manufacturers and from Members of this House to the effect that the duty on stocks caused particular difficulty for the small manufacturers. These manufacturers specialise in plug and twist tobaccos. Their customers are mainly elderly rural people and the manufacturers maintain that there is little scope for passing on the effect of the rise in duty on stocks without jeopardising the present level of sales of their products. I propose, therefore, to allow full relief from the special excise duty in those cases where the total stocks held by a manufacturer did not exceed 5,500 lbs in order to reduce the risk of a loss of employment that might result from a contraction in sales and I propose to introduce the necessary amendment to the Finance Bill on Committee Stage.

I was sorry Deputy Tunney was not here today to resume his address on the arrangement in the Finance Bill to obtain a refund through the tax system of the substantial increases in children's allowances given in the budget to people whose income exceeded the statutorily assessed income of £2,500. Deputy Tunney, in common with many other Deputies on the Opposition benches, was most indignant that the Government were not giving the increased children's allowances to people who were in that upper income bracket. Deputy Tunney painted a picture of many people in that bracket finding it difficult to make ends meet. I will acknowledge that I have a certain sympathy for people in that bracket. I am quite well aware of the burdens which lie upon them but, as I have sympathy for them, so, too, I have sympathy, indeed greater sympathy, for the people who are in the £1,500 to £2,500 bracket. In this year's budget and in this year's Finance Bill we are giving the full increase in children's allowances to the families in that income bracket of £1,500 to £2,500. The Deputies opposite who criticise us for not giving the children's allowance increases above the £2,500 limit themselves proposed not to give any increase to anybody with an income above £1,500. Did we ever in the history of this Parliament experience greater hypocrisy on the part of Opposition Deputies who come in here weeping crocodile tears about the nonavailability of children's allowances to people whose incomes exceed £2,500 per annum when their own proposal, announced six days before the last general election, would have cut off the children's allowances from people with incomes in excess of £1,500?

(Interruptions.)

An Leas-Cheann Comhairle

Order.

Mr. R. Ryan

I have already pointed out that in the course of the budget debate there were 92 interruptions by Opposition Deputies during my concluding speech, but not one interrupted me on that particular point. They have made several contributions to this Finance Bill and none has contradicted what I said then. Now we have Deputy Colley in the closing moments of this debate wanting to contradict when he had all those opportunities before this and availed of not one of them.

Mr. Colley

I did not hear it before today but, whether I did or not, it is either true or false.

Mr. R. Ryan

Opposition Deputies would have denied the increase in children's allowances to anybody in this State earning more than £1,500.

Mr. Colley

Prove it. What is the Minister's authority for that statement?

Mr. R. Ryan

What I have said is the reality of it and, if I were wrong, I am quite certain the Deputies opposite would long since have contradicted me.

Mr. Colley

Has the Minister any authority for his statement?

Mr. R. Ryan

The reality of the situation is that of all the families receiving children's allowances only 40,000 will be asked to hand them back, and not in toto; they will still be left a small amount of the increase. The reason we chose the income tax system is that this avoids doing what Fianna Fáil wanted to do; they wanted to introduce a means test children's allowance scheme which would have obliged every family to apply annually for children's allowances and to accompany their application with a certificate from the employer as to the applicant's income. We were not prepared to impose upon all the families in this State the obligation of applying annually for children's allowances and we do not consider it an undue hardship to ask people, 40,000 families, who are above the assessable limit of £2,500, to refund, through the income tax system, most of the increases they receive. Our proposal affects 40,000 families. We would wish it was not so, but what we are doing means an annual saving of £2 million which enables us to give that £2 million to families in greater need and, if there are those who begrudge handing back the money, we have little sympathy for them. We believe the money should go where it is most needed to relieve hardship. Under the Fianna Fáil scheme it would not be 40,000 families who would be required to refund the money; the Fianna Fáil scheme would have meant that 140,000 families would have been denied any increase in children's allowances. We are asking 40,000 to hand most of the increase back. Fianna Fáil come into this House to fault us for doing that and under their scheme there would have been no fewer than 100,000 families added to the number who would not receive any increase at all in children's allowances this year.

Mr. Colley

What is the Minister's authority for that statement?

An Ceann Comhairle

Order. Deputies had ample opportunity of giving vent to their feelings on this Bill and the Minister must now be allowed to reply without interruption.

Mr. Colley

Yes, but could we ask the Minister when he attributes——

An Ceann Comhairle

The Chair must be obeyed.

Mr. Colley

Are we not entitled to ask the Minister to make his speech in relation to the Bill? If he wants to attribute to us things that are false we must defend ourselves.

An Ceann Comhairle

The Deputy may raise the matter, with the Chair's permission, when the Minister has concluded. In the meantime the Minister must be allowed to make his remarks without interruption.

Mr. R. Ryan

There is one point which Deputy Briscoe made in relation to the wife's earned income allowance. He seemed to feel, in common with some of his colleagues, that this meant absolutely nothing in present day terms. We are increasing the wife's earned income allowance from £74 to £104. I wish it were more but, in a full year, this will cost £850,000. The combined married allowance of £494 and the wife's earned income allowance of £104 brings the figure to £598 or double the amount of the present single allowance. We consider that this is a significant step, a small one, not as great as we would wish it to be, but nevertheless a move in the right direction.

Mr. Haughey

Up to a certain point in income.

Mr. R. Ryan

This is of benefit to the vast majority of income earners and certainly to those we sought to assist, the families in the smaller income brackets, so that they would be relieved to some extent of the burden of paying income tax which at the moment is a disincentive for many people. Apart from being socially wrong it is also industrially undesirable because the heavy burden of taxation which lies on such families at the moment has amounted to a disincentive to many married women who are available for work and, as a result, particularly in Dublin, several industries are starved of labour which they could do with in order to bring them up to full capacity.

I am in considerable sympathy with views expressed in this House about the inadequacy of income tax allowances. Of course they are grossly inadequate. It is encouraging to hear so many Members of the Fianna Fáil Party acknowledge this, because they would not be so grossly inadequate today if the Fianna Fáil Party, when in Government over the past 16 years, had made the necessary progressions in income tax allowance to keep them in pace with depreciation in money values. They did not do that, and now we are faced with the burden of having to overcome all this backlog.

Obviously we could not do it in a year in which we were so significantly improving social welfare allowances, increasing them by as much as 44 per cent in one year. We make no apology for making this dramatic advance in social welfare benefits. We believe it was long overdue and, as we did it, we knew we would be faulted for not making concessions on the income tax front. Now that we have made this dramatic forward advance in social welfare, we are hopeful that it will be possible in some future Finance Bill and budget to make the necessary advance in the income tax field. It is true that there are people paying income tax today who are finding it difficult to make ends meet. I believe it is socially desirable, even if from the point of view of Revenue disadvantageous, to make concessions in the income tax field. We cannot do it all in one year and I do not think any reasonable person would fault us for not providing that relief this year.

Deputy Fitzpatrick raised the point regarding insurance policies that the exclusion up to £7,500 should apply to policies which mature shortly before death. The point here is that it would be difficult in such a situation to identify policy moneys because, if the policy matured before death, the money paid on foot of the policy would be absorbed in the general assets. Quite clearly difficulties of identifying the proceeds would arise. They could be spent or they could be given away before death. Once you entered into this field it would be equally logical to exempt or exclude the proceeds of property which a person sold before his death but which, if he had kept, would have been exempted. The administration and practical difficulties involved would rule out the possibility of the relief which Deputy Fitzpatrick sought.

There was some considerable comment about the section of the Finance Bill which deals with stamp duty on capital companies. It was amusing to hear Deputy O'Malley extend himself at such great length today about this. He complained that he had not got an adequate explanation; he complained that the explanatory memorandum to the Bill was inadequate and short, when, in fact, it was longer than is customary. Of course, I accept that Deputy O'Malley probably never read a Finance Bill before. I accept also that, although he was a Member of a Government, he has not yet read a directive which was issued by the EEC four years ago today. It is four years today since the EEC issued the directive which obliges us, by reason of our membership of the EEC, to bring in amendments to stamp duty on capital companies.

Mr. Colley

They speak of nothing else in Skibbereen.

Mr. R. Ryan

Deputy Colley was Minister for Finance and I would have expected that he at least would have made himself reasonably familiar with the provisions of the EEC directive in respect of capital companies. It was his duty to be familiar with it and to be aware of it before he exhorted the people of this country to join the EEC. But Deputy Colley, like Deputy O'Malley, came into this House full of indignation that this Bill should be making the necessary legal provisions to comply with the EEC directive——

Mr. Colley

Does the Minister think that that is a fair representation of what I said?

An Ceann Comhairle

Order.

Mr. Colley

Does the Minister think that is fair?

An Ceann Comhairle

Deputy Colley must desist from interrupting in this fashion.

Mr. R. Ryan

——which was issued four years ago. I accept that many of these directives are technical and do not make suitable reading before you go to sleep at night, nor are they the kind of documents one would read for relaxation. But a Minister for Finance has a certain obligation on him at least to acquaint himself with what the general effect of such directives would be. Whatever about Deputy O'Malley, whom I am prepared to excuse on the grounds that he could not be familiar with this particular field, I could not excuse Deputy Colley.

Mr. Colley

From what?

Mr. R. Ryan

From not studying or having an understanding——

Mr. Colley

Evidence of that please?

Mr. R. Ryan

——of the EEC directive on capital companies.

Mr. Colley

Evidence of that please from what I said?

An Ceann Comhairle

Order, please.

Mr. R. Ryan

Deputy Colley was quite lengthy in his criticism of this section of the Finance Bill dealing with stamp duty on capital companies.

Mr. Colley

I asked questions.

Mr. R. Ryan

I will endeavour to answer the questions which Deputy Colley put to me. The first question he raised was the definition of capital companies. The definition in the Bill is on the lines of that contained in the EEC directive and, as far as Irish companies are concerned, this will make practically no change. All Irish companies will come within either paragraph (a), or paragraph (b), of section 66. Paragraph (c) which is, I think, the one with which Deputy Colley had difficulty applies, in effect, only to foreign companies which become liable to the duty here. Unlimited companies are not liable to capital duty under the present system. This position will continue. It is only in exceedingly rare cases, where there is an unlimited company and where there are members with limited liability for the company's debts, that any question of duty arises. Even then the duty will be only on the assets contributed by the members with limited liability.

As for the rate of duty, which was criticised by Deputy Colley and by Deputy O'Malley, we have adopted the lowest possible rate of duty permissible under the directive. One per cent is the lowest rate permissible and that is the one we have chosen. This chapter of the Bill has nothing to do with transfer duty, which will continue to be payable as heretofore in appropriate cases. As regards transactions which involve the transfer of assets to a company, liability to duty arises only where the transfer is in consideration of the issue of shares in the company or in consideration of rights analogous to those shareholders. Transfer of assets for any other consideration, cash, for example, does not come within the charge imposed by the Bill. If any other difficulties arise in relation to that section I will be only too happy to deal with them when we come to Committee Stage.

We have had criticism of the Government's intentions to remove VAT from food as from 3rd September next. Once again, courageously, Deputy Haughey today expressed his view that it was folly to remove VAT from food. He said in the course of the budget debate that if he had his wish in the matter he would see value-added tax imposed on foodstuffs if there should ever be a change of Government.

Mr. Haughey

No.

Mr. R. Ryan

If I am wrong in that I crave Deputy Haughey's forgiveness. If it was not Deputy Haughey, and I accept I may be wrong, it was Deputy Seán Flanagan, indicating as I mentioned earlier——

Mr. Colley

Another of the Minister's inaccuracies.

Mr. R. Ryan

——that there is considerable conflict between members of the Fianna Fáil Party. I am prepared to accept that I cannot keep pace with the confusion that exists in the Fianna Fáil Party and I am prepared to acknowledge that I have wronged one man. If I have, I will attach the blame where it lies and it lies over there.

(Interruptions.)

An Ceann Comhairle

Order. The Minister without interruption.

Mr. R. Ryan

Deputy Crinion strongly faulted the removal of VAT from food. The reality is that the removal of VAT from food reduces the cost of living by 1.5 per cent.

Mr. Haughey

It has gone up by 5 per cent.

Mr. R. Ryan

The changes which we make in other VAT rates means that the net reduction in living costs is only 0.5 per cent but we regard that as a worthwhile reduction. There are Deputies opposite who cannot understand that this could be so because they say we have shifted the burden of VAT from food to other commodities and have collected £2 million or more in the process. This helps to underline what we have been saying all along, that most families spend a larger proportion of their incomes on food than on other commodities. It also indicates that we have transferred the burden of VAT from essential to less essential items, some of which are regarded as so luxurious that they do not even come within the cost of living index because they are so rare and are not the kind of purchases which are made by people in their everyday living.

Mr. Haughey

There is no such conception as "less essential".

Mr. R. Ryan

There is such a conception as less essential. There is not in the Fianna Fáil outlook and I am prepared to accept that. I do not think Deputy Haughey was speaking for himself alone when he said there is no such conception as less essential but there are those who regard the luxuries of life as being less essential than food.

Mr. Colley

The Minister is talking about footwear, clothing, fuel.

An Ceann Comhairle

Order.

Mr. R. Ryan

I am interested to hear what Deputy Colley has to say about clothing and footwear because the Leader of the Opposition, Deputy Lynch, criticised the Government because they did not go for a 10 per cent rate of VAT.

Mr. Colley

That is as dishonest a statement as the Minister has ever made.

Mr. R. Ryan

It is not. Deputy Lynch said that we should have gone to the same rate——

Mr. Colley

He said "if you had to change—".

Mr. R. Ryan

He said we should have gone to the same rate——

Mr. Wilson

He did not.

Mr. Colley

This type of dishonesty is intolerable.

An Ceann Comhairle

Will Deputies Colley and Wilson please restrain themselves?

Mr. R. Ryan

He said we should have gone to a 10 per cent minimum rate on clothing and footwear, things which I would regard as more essential, but less essential if you accept the Fianna Fáil outlook. Then you do not accept anything as being less essential.

Mr. Wilson

Will the Minister quote Deputy Lynch correctly?

An Ceann Comhairle

Will Deputy Wilson please desist? If Deputies find it difficult to listen to what is being said they have their remedy.

Mr. Colley

We have, Sir, and we will use it.

Mr. R. Ryan

If Members opposite do not like to be reminded of what their own Leader said——

Mr. Colley

We do not like lies.

An Ceann Comhairle

The Deputy ought not to attribute a lie to the Minister.

Mr. Colley

I did attribute a lie to the Minister.

An Ceann Comhairle

The Deputy must withdraw the word "lie".

Mr. Colley

In deference to the rules of this House, I withdraw the word "lie" but I say the Minister has made a statement which is untrue and which he knew to be untrue.

Mr. R. Ryan

I am not prepared to accept that from Deputy Colley. He does himself no credit by these charges——

Mr. Colley

The Minister is doing himself no credit by the dishonest statements he is making.

Mr. R. Ryan

——particularly when I said what I have been saying now in reply to the debate on the budget and there was no word of contradiction——

Mr. Colley

That is not true. There are exchanges on the record.

An Ceann Comhairle

Deputy Colley must restrain himself.

Mr. R. Ryan

There has been no contradiction in the debate on this Bill of what I said on that occasion. There cannot be. Deputy Lynch's words are on the record. He criticised us because we did not go to a 10 per cent rate on clothing and footwear and other items which we regard as necessities of life.

Mr. Haughey

I am only concerned with the use of language——

Mr. R. Ryan

Is this a point of order?

Mr. Haughey

It is indeed. I am concerned with the misuse of the English language. At least let us have some definitiveness in the use of language in this House.

Mr. R. Ryan

A very solemn contribution to the Finance Bill.

(Interruptions.)

An Ceann Comhairle

Will Deputies allow the Minister to make his remarks without interruption?

Mr. R. Ryan

All right, I now understand it is not the concept Deputy Haughey objects to but simply the terminology.

Mr. Haughey

Correct.

Mr. R. Ryan

In other words, his view is that there are many items which are not essential, and those are the items which we have asked to bear the burden of the transfer of VAT from food. If he wants it expressed in that way he now has it in that way. He does not agree with that approach because he said here today, as he said on the budget, that he opposed the removal of VAT from food. Not only are we justified in removing VAT from food because of the contribution it will make this year to stabilising to some extent increases in living costs, but I believe that historically we will be proved to be right because the likelihood is that the EEC will shortly take the view that there may not be any further changes in VAT rates. We have, therefore, taken our decision knowing it was justified socially and economically, knowing it could be proved to the EEC to be necessary particularly in the Irish context, because we are absorbing within our economy much faster rates of increases in food prices than any other EEC member nation with the exception of Britain. However, as we do it we are also getting the benefit of it because we are getting a much better return for our agricultural produce than we previously obtained.

This is the principal reason for the increase in living costs and it certainly is a disadvantage to people who are buying, but there is more benefit flowing into the economy through these increases than there is flowing into any other economy in the EEC.

As I mentioned in the budget, the Government are most anxious that the reliefs in VAT rates on food will be passed on to the consumers. We accept that the trade is also anxious to pass on these concessions to the consumers and I would like to express my gratitude to the trade for meeting with us to ensure these benefits are passed on. It is partly as a consequence of those meetings that we have postponed the operative date for these VAT changes from 1st to 3rd September, so that the traders will have the weekend in which to mark down their prices in order that the consumer will be able to confirm on the morning of Monday, 3rd September, that these decreases in prices have taken place.

A certain amount of petty scoring was indulged in by Members opposite in relation to the exemption of horses and greyhounds from VAT. But this exemption has its origin in difficulties arising on the importation of these animals, and I am sure at least some Members opposite appreciate the importance of this to the bloodstock industry and also appreciate that in revenue the change is of negligible significance. There is, of course, great traffic in horses, mainly racehorses, and in greyhounds between this country and Britain, in particular, for such purposes as breeding, rearing, racing, training, show jumping and so on. It has been found in practice both troublesome and unproductive of revenue to charge tax on importation. The difficulties arise mainly from the fact that most importations are temporary and tax would, in any case, have to be refunded on re-exportation or suspended in the meantime. An elaborate administrative system would have to be set up if each importation were to be followed through and tax charged if the horse or greyhound were not re-exported. Domestic sales of these animals will also be exempted, but since most owners and trainers are at present unregistered and therefore effectively exempt, the revenue cost of the concession will be insignificant.

Deputy Fitzpatrick and Deputy O'Connor raised questions about traders who opted into the registered class in order to obtain a repayment of tax of their stock in trade and they wanted to know whether such persons might opt out again once they had obtained the refund of tax. Small traders who are under the appropriate limit of turnover and who have elected to be registered may cancel the election at any time, but I should add that arrangements exist for adjusting the net tax position of such a person to what it would have been if no election had been made by him. There is nothing to be gained therefore by a quick cancellation of an election, and I think Deputies will agree with me that that is as it should be.

Deputy Gallagher asked about the arrangements for farmers and fishermen. Under the VAT Act farmers and fishermen are not obliged to register or to pay tax on sales of their produce. As a result, they must bear whatever tax may be charged on their purchases of farm requisites. In order to keep this input tax as low as possible the position from 3rd September next will be that the zero rate will apply to animal feeding stuffs and animal medicines used in agriculture, to fertilisers and to seeds and plants used in the production of food. Farmers may also obtain a refund of VAT borne by them on farm buildings and land drainage. As regards fishermen, the zero rate of VAT applies to fishing nets and sections thereof, while tax on certain fishing boats is refunded.

The remaining input tax suffered by farmers and fishermen on such items as machinery and fuel is recouped by way of an addition which the farmer or fishermen may make to his output price. This addition is facilitated by the fact that registered purchasers of farming and fishing products can obtain from the Revenue a refund of 1 per cent of such purchase provided they obtain the authentication of the farmer or fisherman on the purchase documents. Because the 1 per cent addition is being refunded to registered wholesalers and retailers it should have no effect on the price of food at the wholesale and retail level, and there will, as a result, be no interference with the operation of the zero rate on these items. Farmers and fishermen may register for VAT if they so desire, in which case they will be entitled to a direct credit or refund on all their input tax and will be liable, mainly at the zero rate, on all their sales.

As regards the general trend of the economy I would like to reply to a number of specific questions. Deputy Haughey asked me how savings were developing. I am glad to say that savings are developing very well at present. The associated banks, between April, 1972, and April, 1973, have shown on current account a growth of £33 million, or an increase of 11 per cent, and in their deposit accounts, they show a growth of £103 million, or an increase of 18 per cent. The non-associated banks have shown even greater growth. On current and deposit accounts the non-associated banks have shown a growth of £138 million or 61 per cent. Building societies have shown in the same year an increase of £45 million or 40 per cent.

I have been thanked and congratulated in varying measure for not proceeding with the proposal to abolish the tax concession which is given to earnings on deposit accounts with the associated banks. I would like to remind the House and the public why I made this change, and I make no apology for changing it. I accept what Deputy Haughey said today, or at least his implied commendation, that by changing I have shown a fertile mind and a mind which can react as the situation requires it to react. I think perhaps that it is a valid criticism of the whole system to say that the economy does not move in such a way in the modern day that the best way of controlling it is by way of annual budgets.

However, since the budget this year there have been three significant changes in the whole money supply here. First of all, in order to ensure that building societies got their share of the increased saving which was essential if the whole programme of housebuilding was not to be discouraged, the Government intervened to provide temporary relief for building societies to enhance the rate which they could offer to share investors. That situation did not exist at the time of the budget, at which time I indicated my intention to do away, as and from April next year, with the tax concession which was given to people who deposited money in the associated banks. We have also indicated since then that we are considering the giving of trustee status to building societies, and this would also enhance the attractiveness of building societies to savers. Also, since the budget, the associated banks have themselves reduced their interest rates by ½ per cent. Therefore, in a matter of a few weeks these three significant changes occurred. We also saw the consequence of these changes, which I am happy to say resulted in a significant improvement in the flow of funds to building societies. I do not think, therefore, that we would be justified in withdrawing the tax concession from the associated banks.

Deputy Haughey and Deputy O'Malley put to me the question: "If you are maintaining the status quo in regard to the associated banks, why do you not extend this to the non-associated banks?” I think the figures I have given already indicate what the answer is. Non-associated banks have a growth rate which is more than treble that of the associated banks, as things stand at the moment, and I do not think they need the additional advantage which the associated banks have now in order to maintain their present position. They are well able to do it for a variety of reasons which I need not go into at the moment.

It is best to let the status quo remain. We indicated that our whole budget philosophy was related to an anxiety to make a worthwhile contribution to a reduction in unemployment. I am happy to say that the latest figures indicate that there is a reduction of 8.7 per cent in the number of unemployed people now as compared with this time last year. This is because we have deliberately set about a programme of taking up the underused capacity in our economy. We have also deliberately generated new employment opportunities. On that account, we have made the most significant reduction in unemployment which has occurred at any time in the last decade.

Mr. Colley

The Minister cannot be serious.

Mr. R. Ryan

Yes. This justifies the whole basis of our approach——

Mr. Colley

Damn lies and statistics.

Mr. R. Ryan

—which has generated this new atmosphere of confidence in the economy. Deputy Haughey surprised me by the way in which he appeared to be anxious to belittle the provision in the Finance Bill which makes certain concessions in relation to people who convenant moneys in favour of reputable organisations which are concerned with the promotion of fundamental human rights.

This country has a disgraceful record in respect of signing, ratifying or implementing international conventions governing fundamental human rights. This is something which irritated us when in Opposition and when we had an opportunity to make some amendment we considered that it would be appropriate to make this concession in favour of organisations which are concerned with the promotion of human rights in accordance with the international convention of the United Nations and the Council of Europe.

We have deliberately confined this benefit to organisations which have consultant status with these organisations. We are aware that there are a number of spurious organisations in our midst which profess respect for human rights, although their actions lead one to believe that they have scant regard for fundamental human rights and decencies. There are a number of such organisations here. It would not be appropriate to spell them out. I did not give the information requested in relation to a question raised by Deputy Haughey because, as he knows, these are matters for determination by the Revenue Commissioners in the final analysis. They must look at the objectives of every covenant. I am perfectly satisfied that this provision will be of some value to these organisations who are very short of funds to promote their praiseworthy causes.

Other points can best be dealt with in the course of the Committee Stage of the Bill. As Members have recognised, it is a very technical Bill and one of the longest in the history of the State. I believe that when it is implemented in law——

Mr. Allen

On a point of order, in view of the Minister's lengthy speech and because there is only one Member behind him, I wish to call for a quorum.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. R. Ryan

I conclude.

Mr. Colley

I should like to ask two questions. In regard to the concession for the small tobacco manufacturers which the Minister announced, could he say whether the category in question is the same category as that to which certain concessions have been applied previously?

Mr. R. Ryan

I am not sure, but there are only three concerns involved. I think they are all in the provinces.

Mr. Colley

I think it is the same category. The other question I wanted to ask is: does the £2,500 income limit for increased children's allowances apply irrespective of the number of children in the taxpayer's family?

Mr. R. Ryan

Yes. That is the statutory figure.

Mr. Colley

I hoped that the Minister was going to confirm that when speaking.

Mr. R. Ryan

There is marginal relief.

Question put.

The Dáil divided: Tá, 56; Níl, 52.

Tá

• Barry, Peter.
• Barry, Richard.
• Begley, Michael.
• Belton, Luke.
• Belton, Paddy.
• Bermingham, Joseph.
• Bruton, John.
• Burke, Dick.
• Burke, Joan T.
• Burke, Liam.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Coogan, Fintan.
• Cooney, Patrick M.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan.
• Crotty, Kieran.
• Cruise-O'Brien, Conor.
• Desmond, Barry.
• Desmond, Eileen.
• Dockrell, Henry P.
• Dockrell, Maurice.
• Donegan, Patrick S.
• Donnellan, John.
• Dunne, Thomas.
• Enright, Thomas.
• Finn, Martin.
• Fitzpatrick, Tom (Cavan)
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Patrick.
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Keating, Justin.
• Kelly, John.
• Kenny, Henry.
• L'Estrange, Gerald.
• Lynch, Gerard.
• McLaughlin, Joseph.
• McMahon, Larry.
• Malone, Patrick.
• Murphy, Michael P.
• O'Brien, Fergus.
• O'Leary, Michael.
• O'Sullivan, John L.
• Pattison, Seamus.
• Ryan, John J.
• Ryan, Richie.
• Timmins, Godfrey.
• Tully, James.
• White, James.

Níl

• Allen, Lorcan.
• Andrews, David.
• Barrett, Sylvester.
• Brady, Philip A.
• Brennan, Joseph.
• Breslin, Cormac.
• Briscoe, Ben.
• Browne, Seán.
• Brugha, Ruairí.
• Burke, Raphael P.
• Callanan, John.
• Carter, Frank.
• Colley, George.
• Collins, Gerard.
• Connolly, Gerard.
• Crinion, Brendan.
• Cronin, Jerry.
• Crowley, Flor.
• Cunningham, Liam.
• Daly, Brendan.
• Davern, Noel.
• de Valera, Vivion.
• Dowling, Joe.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Flanagan, Seán.
• French, Seán.
• Gallagher, Denis.
• Geoghegan, John.
• Gibbons, James.
• Gogan, Richard P.
• Haughey, Charles.
• Healy, Augustine A.
• Hussey, Thomas.
• Kenneally, William.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Leonard, James.
• Lynch, Celia.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Moore, Seán.
• Murphy, Ciarán.
• O'Malley, Desmond.
• Power, Patrick.
• Smith, Patrick.
• Timmons, Eugene.
• Walsh, Seán.
• Wilson, John P.
• Wyse, Pearse.

Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Andrews and Browne.

Question declared carried.

Committee Stage ordered for Tuesday, 24th July, 1973.