Dáil Éireann debate -
Friday, 27 Jul 1973

Vol. 267 No. 13

Private Business. - Finance Bill, 1973: Committee Stage (Resumed).

Question again proposed: "That section 52 stand part of the Bill."

Minister for Finance (Mr. R. Ryan)

This is a section which gives substantial relief from estate duty and, as I have mentioned, the reliefs given in this year's budget are greater than have ever been given before in the history of the State. The position is that all estates under £10,000 will in future be exempt from duty. Raising the general limit to £10,000 will of itself, without the considerable other benefits in the budget, relieve 530 cases from liability to estate duty in a year. Considering that the number of cases liable to estate duty is around 3,000 it will be seen that this one relief alone is quite significant. The cost in a full year is £330,000 and £160,000 in the current year.

The combined effects of the new exemption limit, the increased abatements and the higher limit for artificial valuation will be that approximately 1,300 cases per annum of deaths occurring after the 16th May will be dutiable but the balance which were previously dutiable will not now be dutiable. This is a very clear indication of the Government's anxiety to move towards the situation to which they are committed and that is one of replacing estate duty with another form of duty. I should like to draw the attention of the House to the fact that every responsible organisation accepts that estate duty cannot be wiped out instantly unless, at the time you do it, you provide an alternative form of taxation of wealth.

I might instance Mr. T.J. Maher who, in a letter which he had published in the papers last Monday and which he had previously sent to the Taoiseach, said that it was agreed by his organisation that estate duty could not be abolished without an alternative method being introduced which would have the affect of preventing speculation in agricultural land. He said that they accepted the situation now as they accepted it before.

It is important that that should be underlined because there have been a number of statements, inside and outside of this House, suggesting that there was a commitment to the outright abolition of estate duty without any provision being made for an alternative form of tax. The commitment we made was one to give relief in cases of hardship as quickly as possible and to replace the system of estate duty with an alternative form of tax which would enable a taxpayer to pay the tax by instalments over a working lifetime in place of the present system which requires his next-of-kin at the time of greatest family tragedy to pay it in a lump sum when the principal breadwinner is no longer available.

Accepting our responsibility to replace estate duty we are at present engaged upon the most intensive research that has ever been conducted in this country into the whole question of capital accumulation and distribution. We are sorry to say that the statistical information which we would have expected a Government to have available is not available because the previous Government made no studies in this field. Notwithstanding that, we are going to keep to our undertaking to have a White Paper on this subject available before the end of the year. We will then be in a position to fulfil the requests which were made to us to have consultations with all people who may be concerned, and they cover a wide spectrum of society, not only farmers but people in urban areas and in industry and commerce, and people who are expert in financial and taxation matters.

It is our anxiety to have these discussions expedited. It is our hope that when our proposals in the White Paper are published there will be a substantial amount of agreement that we have achieved a fair system to replace estate duty and, if and when that happy event occurs, we will be in a position to remove the iniquitous forms of estate duty which have been accepted all round as causing hardship at a time of greatest personal tragedy.

In the meantime we have given the greatest relief ever given in estate duty. This is going to provide relief for the majority of people who at present may be liable for estate duty. We consider that that is a very significant and important advancement.

Mr. Colley

Before we proceed too far into this matter there is one point on which I should like clarification. The Minister has said, and he said something similar on previous occasions, that the statistics which the Government required were not available. By implication, if not expressly, he said that it was because of the failure of the previous Government to ensure that such would be available. The Minister also said that notwithstanding this it was intended to go ahead and produce a White Paper on this matter before the end of the year. I should like the Minister to explain if it is proposed to produce a White Paper without what he considers to be the necessary statistics.

Mr. R. Ryan

We will issue the White Paper based on the best available information.

Mr. Colley

Can we take it, therefore, that either the statistics which the Minister has said were required were not essential or, alternatively, the White Paper which it is proposed to issue will be issued without the essential statistics on which it should be based?

Mr. R. Ryan

No. The kind of problem we have to face is this, as the Deputy probably knows, that estate duty is a system which makes it possible for wealthy people to avoid payment of duty, or a substantial portion of duty, by distributing their estate more than five years prior to death. Because of the systems of transfer and the calculation of wealth in the country there is no record available as to the extent of these distributions. However, it is quite obvious that extremely wealthy people can afford to distribute a large portion of their estate and, at the same time, retain sufficient to give themselves, in the autumn of their years, quite a good standard of living and ample security.

Somebody with assets worth £1 million could afford to distribute £950,000 and keep £50,000 for himself. We have no concrete evidence as to the extent of transfers of property in that way. As the Deputy is aware, a number of studies which have been made indicate that the amount of wealth in the country far exceeds what was captured by way of estate duty because the really wealthy were able to distribute their property well in advance of being caught in the estate duty net.

This is one of the reasons why we are publishing a White Paper because the inevitable reaction, I think, to a White Paper will be that the people affected by the proposals will then come forward to indicate the extent to which they are affected. It is a pity that we have not got more information of this kind because, if we had, it would be possible to move more expeditiously along the road which we consider most people expect us to move along, the road to a system of taxation which would not make it possible for people to avoid making their proper contribution to the taxes which society requires them to pay, and along the road which would ensure a fairer distribution of property.

Apart from the revenue aspect of estate duty I think it is agreed, in principle, that one of the purposes of estate duty is to stop the accumulation of too much wealth in too few hands. In fact, estate duty, in recent times has been operating to such an extent that it has encouraged property to transfer in advance of death, not into many hands but into a few hands. As long as people can reasonably anticipate the likely date of demise — and we all know that there is no certainty about that and that many a person has not been wise enough to make transfers of property sufficiently ahead of death — accepting all these possibilities of error, there is within the present system ample opportunity to avoid paying a capital taxation which, of course, is what estate duty really is.

Mr. O'Malley

I have no objection to this section. However, there are many things in what the Minister has said in moving this section that we, on this side of the House, query and are in disagreement with. The Minister spoke at some length on this section, even though it is not a controversial section. Presumably the reason he did so was because of the controversies in which he got himself involved in relation to the promises that were made before the last election by the group who now form the Government.

These are promises which in the opinion of a great many people who were influenced by them, the present Government have failed to fulfil. It was my experience, as a candidate in the last election, and it was the experience of many other Fianna Fáil candidates, successful and unsuccessful, that the statements made by speakers on behalf of the Coalition before the last election in relation to death duties had a bearing on that election and on the result of it.

It is difficult to quantify the precise number of votes influenced by these statements but unquestionably some votes were influenced and, remembering the very narrow outcome of the election eventually, it may not be going too far to say that this very point in fact caused a change of Government. Having caused a change of Government, those who were influenced to support Coalition candidates in the election as a result of the statements made and commitments entered into in advance, naturally felt let down, to say the least of it, when the proposals of the Minister for Finance and the Government in relation to death duties were disclosed in the budget.

Contradictory statements were made by the Minister for Finance and the head of one of the farming organisations. The Minister here this morning quoted a small selected passage from a letter which Mr. Maher sent to the Minister asking him to withdraw certain statements he had made and pointing out that, if that withdrawal were not forthcoming, the letter would have to be published. The letter was published some weeks afterwards when no retraction had been made by the Minister for Finance and the letter, of course, contained a great deal more than the small selected passage the Minister quoted. I have not got the letter with me and I cannot, therefore, read it all, but I think it would be a worthwhile exercise to contrast what was said in the letter and the whole point of the letter — it was one of considerable annoyance at the attitude and statements of the Minister for Finance — with the little selected passage the Minister read to the House this morning.

I listened with great interest and as much attention as I could command to the Minister's comparatively lengthy statement on this non-controversial section. One of the things I noticed was that the Minister kept talking about estate duty and the great reliefs being given in that duty. It is very significant that he never once referred to death duties and there seems to me to be an implication in that, the implication being that he and the Government will seek to reduce estate duty but will not seek to reduce death duties overall. That would seem to be borne out by section 54, which not just increases but doubles the rates of succession and legacy duties.

As I pointed out before, the Minister keeps away from these. There are three elements in death duties — estate duty, succession duty and legacy duty — and it matters little to someone called on to pay death duties which of the three he is paying if a substantial amount of money is being taken from him and paid into the Exchequer. It does not sugar the pill to say to that man that he is not paying estate duty, that he is paying succession duty or legacy duty. They are all death duties. We have the extraordinary situation then in this Bill that, after the promises, statements and commitments made by the Minister for Finance, in relation to death duties generally, there is actually a doubling of the rate of duty in two of the three elements in estate duty. The Minister gave figures in relation to estate duty and, quite frankly, I am doubtful if they can be correct. He quoted a figure of 3,000 cases in which estate duty is payable this year; he said estate duty, but he may have meant death duties. The estimated yield this year is the same as the actual yield last year, which was approximately £12 million, or very slightly under that. I find it difficult to do sums in my head when I am on my feet but, dividing 3,000 into £12 million, would seem to show that the average amount of estate duty payable must be truly enormous in each of these cases. My own personal experience is that these vast sums of duty, which the Minister would seem to imply are payable on average, do not represent the real picture at all. Regularly one pays quite small sums of estate duty, perhaps £50 or £100. Regularly there are old cases in which one has to take out grants to old estates and there is a fixed duty of £3 or £5, as the case may be. The Minister's figures can scarcely be correct. If they are correct they would seem to indicate an average payment of duty of something in the region of £4,000 in each case. I doubt that the average payment is anything remotely approaching that figure.

Having spoken a great deal about estate duty — the fact that it was not a satisfactory tax; that the really wealthy were able to avoid it by making distributions of their wealth in sufficient time before death — he went on to say that, in order to get at the really wealthy and prevent them getting rid of their capital by distributing it among their children or their relatives in sufficient time before death, some new form of taxation would be introduced after the promised White Paper and this new form of taxation would get at that wealth; and, in view of the fact, he stated, that estate duty was not bringing in sufficient revenue from accumulations of capital, this new tax would presumably bring in considerably more.

It is very difficult to discuss any alternative system of taxation until one sees it spelt out but, at this very early stage and long before we see the White Paper, I want to sound a note of caution in relation to these sorts of proposals because the economic damage which could be done to the whole financial structure by such proposals could be enormous. One cannot, admittedly, criticise these in advance when one has not got the details, but we had spelled out to us this morning by the Minister the outlines at least of some sort of plan which has not yet been developed. All I can say is that it sounds potentially a very dangerous sort of operation. I and my party have no objection to the wealthy being taxed and to accumulations of capital being cut down. The way in which this has been done in most countries up to now has been by a tax on the capital that exists at the time of the person's death. In the context of this country, with a free flow of capital between here and Britain, this proposal could cause a considerable outflow of capital funds in order to avoid taxation of that kind.

The Minister was critical this morning of the fact that people distribute their estates or their capital, in whatever form it might be, in good time before they die. He said that because they do that they do not pay as much estate duty as they should pay. The Minister has completely lost sight of the very desirable social factor involved here. We had a tradition up to comparatively recently that people held on to their assets, to their capital in whatever form it was, right up to the day they died.

The most important single asset we have is land. It is a form of wealth, if you want to use that phrase — it is not a very appropriate phrase in the case of land — because land is very much a capital asset. Up to comparatively recently, perhaps in the past five or ten years, land has always been held onto with an extraordinary tenacity by the people who owned it, notwithstanding the fact that they had families who were not just grown up, but often advanced far into middle age and more than capable of taking over the running of a farm and running it more efficiently and more productively than the rather aged father would run it.

It is only in recent years that we have seen the beginning of a willingness to make those transfers to the children in due time which are a feature of the social structure of other countries but unhappily have never been a feature of our social structure. The Minister is treading on potentially dangerous ground in the form of the alternative taxation he is talking about here. The statements which he made exclusively about estate duty today need to be clarified. We should know whether the Minister's proposals relate only to the replacement of estate duty as such, or whether they relate to the replacement of death duties generally.

The constant references this morning by the Minister to estate duty could be very significant. This may have been a slip of the tongue but, in view of the provisions of section 54, I rather think it was not a slip of the tongue but a deliberate reference.

We have no objection as such to the section under discussion but the Minister has opened up a very large field of discussion in relation to this alternative taxation he is proposing. I do not think this is the time to debate it in detail. In any event, we cannot debate it in detail, not having details of it. I should like to hear from the Minister in relation to the points I have raised.

Mr. Callanan

As a farmer I have to come in on this debate. I do not like farming organisations to be made political footballs. I was a founder member of the NFA which is now the IFA. I was vice-president for some years. It is a strictly non-political organisation. Before the election people tried to use that organisation. I agree with much of what Deputy O'Malley has said.

Death duty is a terrible burden on farmers owing to the increase in the value of land during the past few years. The Minister's people down the country said from every platform that, immediately they got into office, they would abolish it. They did not say they would consider abolishing it or reducing it, but that they would abolish it completely. This meant a lot to the farmers. I believe, with Deputy O'Malley, that our party lost a certain number of votes on this whole question.

This goes to show the irresponsible statements you can make when you have no responsibility. When I was a member of rural organisations I noticed that people who were conscientious objectors at meetings became responsible immediately they were given office. It is only fair that it should go on the records of this House that that statement was made by all the then Opposition speakers. I do not know what authority they had to make it, but it was made at every parish pump and outside every chapel gate. Anybody who studies the result of the election can see that, whatever votes were lost by this party, were lost in the country. Estate duty played a major part in the loss of a certain number of votes.

This is where the farmers showed intelligence. Anybody with common sense knows that you cannot abolish estate duty overnight. I agree with the Minister, and Mr. Maher agrees with the Minister, but people said it could be done. We knew it could not be done and we convinced the vast majority of the farmers that it could not be done.

As a farmer and as a man who was in this organisation, I could not let this occasion go without saying that it is a terrible thing to make a political football out of a farming organisation and to try to use it to get votes. I have been associated with voluntary organisations and I always left my politics outside the door. I object to anybody using a voluntary organisation for political purposes. I welcome all that has been done in this Bill but any intelligent person knows that you cannot abolish estate duty overnight. I would love to see it abolished because it is a burden on the farmers. It needs study and, therefore, it is a long-term policy. If those people had said that they would set up a study group to investigate the possibility of replacing estate duty by some other form of taxation they would have been justified, but they said they would abolish it after the election. That is the promise they made. It is only right to set the record straight.

Mr. R. Ryan

I love to rely upon facts, not speculation. The figures I gave can be acquired by the payment of 32½p to the Stationery Office for the Annual Report of the Revenue Commissioners. Taking the last six years this shows that the figures vary between 2,600, 2,900, 3,200, 2,500, and so on. The average number of estate duty cases is in or about 3,000 per annum. I am not at all diminishing the importance of giving relief and of replacing the estate duty system, but it would be wrong to exaggerate it because that, in fact, is the extent of liability for estate duty under the existing code.

We are amending it radically so that the numbers for next year and future years, even if we retained the system with the amendment — which we do not propose to do — would still be substantially reduced. That is why we are justified in saying we have made a most remarkable change in the whole incidence of estate duty. It is also wrong to take an average such as Deputy O'Malley did because, simply by dividing 3,000 into £12 million you may get an average figure, but it is no indication of the typical family case. Even with figures like £12 million there are on many occasions estates varying in estate duty liability — in other words, the amount they contribute in estate duty — from £1 million to £3 million. Obviously to suggest that the average amount paid is £4,000 is illusory and misleading. The vast majority are in the lower scales such as the scales to which we have given relief this year. The amounts of relief which we have given are quite substantial. We would like them to be more. I suppose it could also be said that they are small but even if they are small this has relieved many people who previously would have had to pay.

Mr. Crowley

There is a big difference between replacing and abolishing.

Mr. R. Ryan

We are on the way to replacing.

Mr. Crowley

Your party spokesmen said during the election campaign that the National Coalition would abolish, not replace, estate duties.

Mr. R. Ryan

No. If the Deputy would look at the documentation issued, rather than his own interpretation, it speaks about the replacement of estate duty.

Mr. Crowley

I heard them.

Mr. O'Malley

It is disappointing that the Minister confines his reply simply to reading out a few statistics from a volume published by the Revenue Commissioners. There are much more important matters at issue than the precise number of cases in which estate duty is paid or payable in a particular year. The Minister very gingerly kept away——

Mr. R. Ryan

The Deputy challenged me on my figures.

Mr. O'Malley

I questioned a lot more than the Minister's figures. I questioned the whole principle of what he has been talking about. The Minister, perhaps wisely from his own point of view, gingerly sidestepped the whole issue of this capital tax which he proposes to impose instead of estate duty. I cannot criticise this tax precisely because I have not got the details of it and presumably the Minister has not got the details of it.

Mr. R. Ryan

What the Deputy is doing is creating mischief which is not justified.

Mr. O'Malley

If the Minister answered some of what I said earlier there might be less mischief because I could then be told not to speculate but we have to think of what is a capital tax. There is one form of capital tax, death duties, which you pay on the capital that is there at death or that was transferred within five years beforehand. What the Minister is proposing is a tax on capital at any given time, on the capital of a young man who is in business or who is a farmer. The capital of a farmer is, for the most part, his land. It also includes his cattle or other stock and any money he might have in the bank. He has, at any given time, a particular figure of assets. What the Minister is proposing is that such a man will pay some form of taxation on those assets, that is on his land or on his cattle, each year and that no taxation will be payable on those assets after the man dies. Until we have the details of that taxation, the proposed new taxation which the Coalition Government are going to impose, we cannot discuss it in any detail but we should be clear in our minds as to what this new form of capital tax is going to mean. It will mean that a farmer or a businessman will pay something into the Exchequer annually on his land, his business, his shop or factory, and that he will have to pay that not just once but presumably annually. I am sure there are many people in the country who would like to think about it and about the implications of it even in advance of the White Paper.

When I was speaking earlier I did not have the letter which Mr. Maher was forced to publish. I think it was his own wish that it would not have to be published but he was forced, by the refusal of the Minister for Finance to apologise and to withdraw his statements, to publish it. The Minister this morning quoted a very small selected passage. There were other passages, including the much more important bit just before the little piece that was quoted, which might well have been quoted also. I quote from the letter published in the Irish Independent of July 23rd, 1973. Mr. Maher wrote:

This statement,——

that is the statement of the Minister for Finance

——if quoted correctly, contains very serious allegations against, and cast reflections on my integrity and that of my Association.

In my letter to An Taoiseach I drew his attention to the pre-Election promise of the Coalition Government to abolish Estate Duty. I went on to say: "There is dismay among the farming community that this promise has so far not been honoured and while we have been promised a ‘White Paper' in taxation, there is no indication as to when it will be published or when Estate Duty will be removed. These commitments solemnly given by the Coalition Parties before the (General) Election clearly influenced the outcome of same."

Later in the letter he said:

I want to state quite emphatically that I was not misled or pressurised by any individual or group of individuals into writing this letter to the Taoiseach and subsequently releasing it to the newspapers. Furthermore, I fail to understand how you could state in Dáil Éireann that I seriously regretted making this statement.

Those are some passages from Mr. Maher's letter to the Minister which are more indicative of the tone of Mr. Maher's letter and the disappointment and resentment caused to Mr. Maher and the organisation of which he is president and the farmers which that organisation represents; much more indicative of the tone of their feelings, than the selective little piece which we had from the Minister this morning.

An Ceann Comhairle

The Chair is very concerned that we do not have a debate ranging around a personality. The Chair feels that neither praise nor blame should be attached to a personality outside this House who cannot normally defend himself.

Mr. O'Malley

I accept your ruling, Sir, but you will recall that the gentleman in question was first named and quoted by the Minister and I felt I would be entitled to put the record right with regard to the statements that were made by the gentleman concerned. I wish to attribute neither praise nor blame to him but simply to place on the record of the House what, in fact, he said.

The Minister spoke this morning, as he spoke on the budget and on the Second Stage of this Bill, of what he called substantial reliefs in death duty. Again this morning he referred to them as the greatest reliefs ever and he told us that the saving in this financial year to the taxpayer on estate duty was £160,000 and £300,000 in a full year. That is if I heard him correctly. If I did not he will, no doubt, correct me.

Mr. R. Ryan

That is only in respect of this relief but the Deputy is aware that there are several reliefs.

Mr. O'Malley

I am so aware but I am aware also that there is a heavy additional imposition of death duty taxation in section 54 and as I stated during the budget debate and, I think, also when I spoke on the Second Reading of this Bill, the net saving to the taxpayer in death duties this year, on the basis of a percentage of the estimated yield is 5¼ per cent to describe that figure as a substantial relief is illusory and misleading, to say the least. It is very far from being a substantial relief because the minor relief which is given in this section, that of raising the bottom figure from £7,500 to £10,000, is more than covered by the rate of inflation which is current at present in this country.

The additional abatements which are given are more than covered by the increase in the value of land in the 12 months since the last rebate. When I spoke on the budget I made the prophecy that, notwithstanding the very minor reliefs proposed here in relation to death duties, because of inflation and because of the increase in the value of property, the amount of death duties which would be collected by the Exchequer in this financial year will not be less than the amount collected last year. Because this is a somewhat tricky field and because many people find it difficult to understand the various distinctions in the different types of death duties, they may be misled by the rash statement of the Minister that he was giving substantial relief. He has given scarcely any relief and he has done this within a few months of a solid commitment made before the general election, a commitment which had at least some influence on the outcome of that election. No wonder the farmers and others would be annoyed. They have been misled. They were misled before the election and if they were to take the words of the Minister today at face value, they would be misled further.

Mr. R. Ryan

I accept, Sir, what you say about not passing comment on people who are outside this House and I do not propose to do so but as a letter from Mr. T.J. Maher has been read, a letter which was published in the newspapers on the 23rd July, I consider it only fair that the House should be made aware that at the time that letter was published, Mr. Maher had already received from me a letter dated the 17th July which he did not deign to publish. In order that the House and the public may measure the good faith of the person who published one letter but who did not publish the reply I would like to read the reply.

Mr. Haughey

That is an attack by implication.

Mr. R. Ryan

It is not. It may well be that people will think he was right not to publish the reply. I will let people judge that. This is the letter:

Dear Mr. Maher,

I refer to your letter of 20th ult.

I delayed replying to your letter in order that I could check on the veracity of a report I had received that an employee of your Association boasted that an IFA statement some days prior to the Presidential election would be "a time bomb to stop Tom O'Higgins getting into the Park". I am satisfied that the account related to me is true.

There is doubt as to whether the date of delivery of your letter to the Taoiseach's Office was Thursday, May 24th, or Friday, May 25th. He personally did not see the letter until Monday, May 28th. As you say so, I accept that you were not consciously involved in plotting the publication of a statement to cause political embarrassment to the National Coalition Presidential candidate. I nevertheless consider that your Association has an obligation, not alone to consider the contents of any statement, but also whether the particular time of its publication is opportune.

I note that in your letter to me you state——

"That at pre-election meetings with the Coalition group and in our pre-budget discussions with you it was agreed that estate duty could not be abolished without an alternative method being introduced which would have the effect of preventing speculation in agricultural land. We accept now, as we did then, this situation.".

I note that in your letter of 24th May last to the Taoiseach and in the statement released to the press no reference whatsoever was made to the need to simultaneously replace estate duty with an alternative form of taxation. I feel that on reflection you may be prepared to agree that your omission was unfortunate.

I cannot accept that the very substantial reliefs in estate duty in the budget "will do little to alleviate the burden of estate duty on family farm holdings". As much as 25 per cent of the people formerly liable to estate duty have been relieved by the reliefs granted in this budget which were the greatest ever given. A larger percentage of farmers' estates have been relieved.

We are working on the preparation of a scheme of capital taxation to replace estate duty and the result of our labours will be published as soon as possible in a White Paper. In accordance with the promise which I gave to you in the pre-budget meeting I will be only too happy to discuss our proposals with the farmers' representatives. The speed with which estate duty can be replaced will, as I mentioned in the budget, depend upon the co-operation which we receive from interested organisations such as yours.

Yours sincerely,

Richie Ryan.

That balances the exchange of views between Mr. Maher and myself. I will leave it to the public to adjudicate on the relative value of the two points of view.

Mr. O'Malley

Now that the Minister has called in question the said Mr. Maher, I will stay out of the matter from here on because Mr. Maher is not here to defend himself against what the Minister has said and implied in relation to him. I do not wish to become involved on one side or the other in this dispute between Mr. Maher and the Minister but I would like to bring the Minister back to a question which is very pertinent and which I have put to him twice already in the course of discussion on this section, that is, is he referring deliberately to estate duty only? Why does he refer constantly to that and not to death duty?

I notice that in the letter he quoted he said specifically his hope was that, ultimately, estate duty would be abolished or phased out. I wish to draw the attention of the House to this matter as it is of considerable significance.

Apparently, at this very late stage the Minister is beginning to busy himself in regard to phasing out or, ultimately getting rid of, estate duty. It appears now that he has no intention of getting rid of legacy or succession duty. My surmise that this is so is confirmed by the provisions of section 54 of this Bill because if one is proposing to phase out something or to get rid of it gradually, one does not double it and that is what the Minister has done. We seem to be facing the situation now where the Minister will phase out estate duty and phase in this capital wealth tax that will be payable each year by the living and will retain succession and legacy duties.

The rates proposed in section 54 for succession and legacy duties are twice what they have been since they were fixed last, which, I think, was in 1909. They have been at 5 per cent and 10 per cent for a very long time. The Minister has reiterated again that he is interested only in getting rid of estate duty. He now proposes by implication —I have put this to him twice and he has not denied it—to retain succession and legacy duties and to retain them at twice the rates they have been up to now.

In other words, we are to retain two of the three elements in death duties and at the same time we are to have a capital wealth tax payable, presumably annually, by people engaged in business or in farming or whatever. If the Minister does not wish to say that I misread his statements, I can safely assume that what I have said now is correct and is the intention of the Minister.

Mr. R. Ryan

I just would say that we are at the moment discussing estate duty and the Deputy will not mind my saying that he has made some statements recently which have given some doubt as to the value of his comments. I will leave it to people to decide when they see the White Paper what our proposals are. I do not think he will be helped by being unnecessarily mischievous.

Mr. Colley

I do not wish to delay discussion of this matter but I do think that the point raised by Deputy O'Malley is of considerable importance and is not met by the comment we have just heard from the Minister. The fact is that the Minister said in the House this morning, and, again, in the letter to Mr. Maher which he quoted he said the same thing, that his aim and the Government's aim was to abolish estate duty, not death duty but estate duty.

Deputy O'Malley asked twice, before the Minister read out that letter, whether the Minister said this intentionally or whether it was a slip of the tongue. The quotation by the Minister from the letter to Mr. Maher seemed to indicate that it was not a slip of the tongue. It was still open to the Minister to clarify the position. You saw, Sir, when given that opportunity, the way he availed of it was simply to be evasive.

Mr. O'Malley

And abusive.

Mr. R. Ryan

No.

Mr. Colley

Not as abusive as he can be.

Mr. O'Malley

Personal, at least.

Mr. Colley

At the very least.

Mr. R. Ryan

I said people have a view of Deputy O'Malley. I did not say what that view is or should be.

Mr. Colley

People have a view of the Minister also. What is more relevant to the discussion is whether it is the intention of the Government to abolish death duties and replace them by an alternative system of an annual tax on wealth. Most people were under the impression that this is what the Government were saying but Deputy O'Malley has highlighted the fact that that is not what the Minister is saying and in talking on this section he did introduce the question of the Government's intentions ultimately in this regard.

I do think that it is reasonable of us to press the Minister to say specifically whether it is intended to try to replace estate duty only or to replace death duties entirely. If it is the former, then it would appear that what we are faced with is that the Government propose to retain death duties and to bring in a form of annual tax on wealth. It is true that since we do not have a White Paper yet it is not possible to discuss the matter in detail. We do, however, have on the record certain thoughts on this matter put forward prior to the election by the present Minister for Foreign Affairs who said that what was intended was to apply a tax, probably at the rate of 10 per cent annually, on people's wealth above a certain limit and to carry out twice-yearly surveys to assess people's wealth.

I do not think many people have grasped the implications of that proposal. Clearly, in order to establish whether somebody is above or below the fixed limit one has to examine the wealth of everybody. That would imply that everybody in the country will have the state of his wealth examined by or on behalf of the Revenue Commissioners at twice-yearly intervals and a person will have to pay a tax on approximately 10 per cent of his wealth if he comes above a certain figure and will at the same time be liable for two of the three elements of death duties which have always existed, as Deputy O'Malley has pointed out. We are not trying to be mischievous when we say this. This is what emerges from what the Minister has said and in particular from the letter which he quoted to the House. If, in fact, this is not true the time to correct it is now and the Minister has an opportunity to do so now. We are giving him the opportunity and inviting him to clear up this matter if he wishes to do so. If, however, he does not, then he cannot claim that it is mischievous on our part if the idea becomes prevalent that what the Government propose to do is to retain death duties as to two of its three existing elements and, in addition, to have an annual wealth tax payable, probably at the rate of 10 per cent, above a certain limit and, in the process, to have an examination and assessment of the wealth of everybody in the country at twice-yearly intervals.

Mr. R. Ryan

I have nothing to add. The record speaks for itself. The record said—this is the 14 point programme —that with a view to relieving the heavy and unjust burden on ordinary house purchasers and farmers the National Coalition Government will replace estate duty on property passing on death to women and children with taxation confined to the really wealthy and to property passing on death outside the immediate family. That is our commitment——

Mr. Colley

But do not propose to abolish death duties—that is clear.

Mr. R. Ryan

——and that will ensure that the families to whom we gave undertakings will be relieved. They are getting immense relief this year and, as I said, we have brought so much that it was not possible for Santa Claus to put any more in his bag this year but there will be more next year.

Mr. Colley

Death duties are not going.

Mr. O'Malley

I should like to reiterate that what Deputy Colley and I have worked out and have spelled out in relation to death duties and capital taxation on the living has now been accepted by the Minister, by default, as being correct.

Question put and agreed to.

SECTION 53.

Mr. O'Malley

I move amendment No. 7:

In page 31, subsection (3), line 31, after "legacy" to insert ",estate".

After Deputy Colley and I had put down that amendment the Minister put down another amendment which is not on the green sheet. I find it confusing because some of the white amendment sheets came out before the green sheet.

Mr. R. Ryan

The Deputy will find the amendment on the Order Paper for today.

Mr. O'Malley

The amendment on the Order Paper for today was put down subsequently to amendment No. 7, on the green sheet, that Deputy Colley and I put down. The effect of the Minister's amendment, described as 7a seems to be the same as what Deputy Colley and I intended to achieve by our amendment. I would like the Minister to clarify that. Perhaps 7 and 7a could be discussed together, if that would be in order.

An Leas-Cheann Comhairle

That is in order, if the House agrees.

Mr. O'Malley

The point that Deputy Colley and I were endeavouring to make in our amendment was that the marginal relief which is given in section 53 in relation to legacy and succession duty should also, of course, include the estate duty element and the proposal of the Minister, therefore, to insert after the word "property" in line 33 the words "after deduction of the amount of estate duty referable thereto" seems to me to achieve the same effect, and possibly to do it more neatly or more clearly than my own amendment would have done. It is very difficult to read this, because it is a rather long sentence with two amendments in it, but if this is so, we would be prepared to withdraw our amendment and agree to the Minister's amendment.

Mr. Ryan

I think we are ad idem for once. As the Deputies know, estate duty is deducted before legacy and succession duty is assessed and must, in fact, be deducted, but I fear the effect of the amendment as drafted by the Deputies would lead to the situation of the snake eating its own tail, as it were. The purpose of my amendment is to ensure that the value of the estate will not be reduced below £10,000 by the payment of death duties. If an estate is valued at, say, £10,500, the estate duty at 4 per cent is £420, leaving a net estate after payment of estate duty of £10,080. Legacy duty on this figure would be £1,008 at the minimum rate of 10 per cent, ignoring, of course, the costs of administration which might alter these figures.

Subsection (3) of section 53 restricts the amount of legacy duty to £500, the amount by which the value of the estate exceeds £10,000. If, however, £500 is deducted, the legatee will get £9,580, that is £10,080 less £500. If the testator had left £10,000 the legatee would get £10,000. He is worse off, therefore, by £420 than he would have been if the testator's estate had been valued at £10,000. Therefore, the amendment ensures that the total duties will not reduce the net amount of an estate below £10,000. I think that is the objective the Deputies had in mind.

Mr. O'Malley

That was the objective which Deputy Colley and I sought in our amendment, and we are happy that the Minister put down a similar amendment afterwards. We are willing to withdraw ours and agree to his.

Amendment, by leave, withdrawn.

Mr. R. Ryan

I move amendment No. 7a:

In page 31, subsection (3), line 33, after "property" to insert ", after deduction of the amount of estate duty referable thereto,".

Amendment agreed to.

Mr. O'Malley

I move amendment No. 8:

In page 31, subsection 4, line 35, after "1973" to insert "or to successions conferred or arising on or after that date".

Mr. O'Malley

The purpose of the amendment, in relation to succession duty, is to cover successions which are conferred or arise after 16th May but where the death took place earlier. Section 53 raises the limit of exemption for succession and legacy duty from £7,500 to £10,000. It is expressed in subsection (4) to have effect only in relation to persons dying on or after 16th May, 1973. That is all right as far as legacy duty is concerned, because the legacy duty would become payable on a death, whether testate or intestate, and payable as a direct result of the death and potentially at least payable as from the date of the death.

Succession duty, as the Minister appreciates, is a different matter. The succession has been conferred or can arise a substantial time after the death of a testator whose will creates that succession. It would be unfair if a succession which only arises and arises for the first time on or after 16th May, 1973, did not have the benefit of the higher bottom limit for payment of duty. It would be unfair, particularly when any question of payment of legacy duty would be covered but succession duty would not. The sort of case I have in mind is where a testator died, say, well before 16th May, 1973, left his property to X, with the remainder to Y when Y attains 21. Y attains 21 on, let us say, 20th May, 1973. If the property comes within the category which is covered by the section, Y is caught for duty, is probably caught twice, because he is caught on the higher rate of duty and he has not got the benefit of non-liability for duty between £7,500 and £10,000. This amendment is designed to obviate that situation.

Mr. R. Ryan

I am sorry, but the amendment cannot be accepted. First of all, it is immaterial for the purposes of section 53 when the succession was conferred. The section makes it clear that no matter when the succession was conferred, the claim for succession duty would be restricted. A claim for succession duty is conferred when the settlement is executed. The succession arises and the duty is payable when a beneficiary becomes entitled in possession on a death. If the death is after May 16th, 1973, no legacy or succession duty is payable on the free estate where the value does not exceed £10,000. No legacy or succession duty is payable if the value of the free estate plus the value of any property which is settled by the deceased does not exceed £10,000. If the value of the free estate exceeds £10,000 the amount of the legacy or succession duty cannot exceed the amount by which the value of the estate exceeds £10,000.

Subsection (3) excludes property settled otherwise than by the will of the deceased. A claim for succession duty on such property would be independent of the value of the free estate of the deceased. For example, A died in 1960; by his will he had settled land worth £10,000 on his widow B for life, with the remainder to his nephew C. On B's death in July, 1973, there is a claim for succession duty at 5 per cent on the present value of the land. B may have no free estate or may have free estate valued at £100,000. B is the deceased for the purposes of section 53. The succession of C was conferred in 1960 but C's succession arises only in July, 1973 on B's death.

Mr. O'Malley

At the lower rate.

Mr. R. Ryan

Yes.

Mr. O'Malley

But without the benefit of the increased exemption. Say it happens to be an estate that falls between £7,500 and £10,000.

Mr. R. Ryan

The old thing is he gets the benefit.

Mr. O'Malley

He does get the benefit?

Mr. R. Ryan

He does, at the lower rate, so he is doing well.

Mr. Colley

I appreciate the circumstances are somewhat different but perhaps the Minister would explain if that is so why it is that it was necessary to provide in section 54 (2), which is the amendment in relation to the rates of legacy duty and succession duty, in the case of succession duty, where the exemption arose, where the succession was conferred before that date.

Mr. R. Ryan

That is the very section I am relying on for what I said already. This is the section which preserves the lower rate.

Mr. Colley

It does not appear to be so. The treatment in regard to legacy duty in section 53 does not make it so.

Mr. R. Ryan

Of course, section 53 does not deal with the rate of legacy duty or succession duty. All it is providing is marginal relief so that the estate will not be less than £10,000 when duty is deducted but it does not deal with the actual rate.

Mr. O'Malley

Agreed. The point of our amendment is to give the benefit to successions arising after the 16th May of the new bottom limit. In other words, what we are concerned about are successions of between £7,500 and £10,000 arising after the 16th May, that they will get the total exemption. For example, a legacy arising at that time would get it.

Mr. R. Ryan

They will. I think the Deputies are under a wrong impression. They will get the relief.

Mr. O'Malley

If the death took place before the 16th May, but the succession arose on or after that date it would appear on the face of it that they will not get that exemption.

Mr. R. Ryan

I do not think we are ad idem on this matter.

Mr. Colley

The Minister does not think we are?

Mr. R. Ryan

No, I do not think we are if the Deputies are dealing with a situation which is not covered in sections 53 and 54. What they are saying is not contained in sections 53 and 54.

Mr. O'Malley

That surely is the point. That is why we are trying to insert something that will cover it.

Mr. R. Ryan

I am not quite certain of the situation which the Deputies want to cover which is not already provided for here. We are providing additional reliefs and we are also providing that the lower rate will operate where the testator by whose will the legacy is given and on whose legacy the duty is payable, died before the 16th May. The old rate will be paid here.

Mr. Colley

Could we take a concrete example which may help? I think one was given by Deputy O'Malley earlier where somebody is to succeed to an estate, say, on attaining a particular age and that that age is attained, say, on the 20th May. We will say the value of the estate is £8,000. What happens in that case in regard to the succession duty? The rate appears to be covered under section 54 but will the exemption that is provided under section 53 be operative in such a case and, if so, how?

Mr. R. Ryan

First of all, I am assuming the Deputy is talking about a nephew or a stranger, and is not talking about father and child.

Mr. O'Malley

We are talking about somebody who is liable for succession duty.

Mr. R. Ryan

The father and child case would not arise anyway. The Deputy is saying that the event which conferred the right occurred prior to the 16th May but the contingency was only fulfilled after the 16th May.

Mr. Colley

That is correct and the value of the estate is within £7,500 and £10,000.

Mr. R. Ryan

Yes. The Deputy is concerned now with the value of the estate of the testator or the value of the property when it comes to be assessed.

Mr. Colley

The value of the property as determined for the purpose of assessing succession duty.

Mr. R. Ryan

That would be post-16th May, 1973?

Mr. Colley

Yes.

Mr. R. Ryan

Then it would be taxed at the lower rate.

Mr. Colley

I can see the lower rate from section 54. Does the exemption, which is conferred by section 53, between the £7,500 and £10,000 range not operate in this case? If it does not that is what we are trying to achieve.

Mr. R. Ryan

The liability is determined by the conditions as at the date of death of the person who made the gift. The contingency which the Deputy has in mind is one which arises to a living person on reaching a certain age, and so on. That case would be covered by the conditions at the time of the death of the person creating the gift.

I am sorry for the long pause but the Deputies opposite will have shared similar problems in their daily professional lives. There is not always an easy solution to problems.

If a person died in 1962, at that time £5,000 was the level of estates below which no duty was payable—if at that time property was left to someone on a contingency which only now arises, no duty is payable, even if that property is now worth £20,000. The matter which determines the liability arises on the date on which the benefit was conferred. The benefit would have been conferred in 1962 and not now, so it does not matter what the value of the property is now. If the estate was above the appropriate figure in 1962, the rate of duty which should now apply would be the lower rate of duty. The rate of duty of 1962 would apply.

Mr. O'Malley

Accepting that the 1962 rate would be applied, you would also have only the exemptions appropriate to 1962. You would not get the exemptions appropriate to 1973.

Mr. R. Ryan

That is right.

Mr. O'Malley

We are trying to avoid that, because it seems unfair that should be so in relation to succession duty and that it should not be so in relation to legacy duty.

Mr. R. Ryan

The right is different.

Mr. O'Malley

It arises immediately on death and succession.

Mr. R. Ryan

The benefit only passes at this stage. It was a contingency benefit before. It only passes now. What we are doing here is what has always been done in the past.

Mr. Colley

We will not press it further.

Amendment, by leave, withdrawn.

Section 53, as amended, agreed to.

SECTION 54.

Question proposed: "That section 54 stand part of the Bill."

Mr. R. Ryan

We have fairly clearly indicated that it was our policy to provide for the relief of the estate duty within the family and we considered that this is the appropriate thing to do. Where property is passing to a stranger it is in many cases in the nature of a bonanza. It is a gift. In most cases there is no entitlement to it. Payment of legacy or succession duty on a gift by a stranger is no more a hardship than payment of a very small proportion of the value of anything on getting something at a very small price. A gift is a gift. All that happens on the payment of legacy duty or succession duty is somewhat to diminish the value of the gift. Nevertheless, what remains is still a gift, and a very substantial gift. We gave an undertaking to provide benefits within the immediate family. What we are doing in this Bill is not in any way a breach of what we have undertaken to do. We consider it is perfectly legitimate to impose tax in this way.

Let me mention that a very large number of countries impose taxation on gifts of all kinds, irrespective of whether they pass on death or otherwise? In some cases the rates of duty are even higher than what are proposed here. It must be emphasised that these rates apply only to people outside the immediate family. Taken together with the other reliefs in this budget in regard to estate duty and the artificial valuation on farms, we consider that no undue hardship is being created. The small amount of revenue which is accruing to the State is an indication that there is not real hardship. It may be argued that the revenue is so small we should not bother about it. I do not think that is the correct approach. It is significant enough. It has enabled us to give greater benefits to widows and dependent children. That is the proper way to distribute it—to take the money from the stranger getting the gift, where there is no obligation to give the gift, and provide relief to the widow and dependent children who have been denied the benefit of the skill and work of a breadwinner.

Mr. O'Malley

This section proposes not just to increase the rate of two or three elements of the death duty, but proposes to double that. It must be without precedent in any Finance Bill that the appropriate rate of death duty payable should be doubled at one stroke.

We have had already this morning an indication that when the Minister for Finance and his colleagues before the last election were talking about the abolition of estate duty they were referring to estate duty only, and they were not referring, as the people of this country and particularly the farmers believed, to death duties. We have already established this morning on a discussion on an earlier section that this Coalition Government propose to retain death duties and at the same time introduce a capital annual tax.

It is a fact that a significant proportion of the farms of this country are owned by bachelors or spinsters. I do not know what the proportion is. I would say it is not less than 25 per cent. It is an unfortunate social fact, but it is a fact. There are a certain number of childless married couples as well. Many of those farms or estates which are liable for death duties, and where the owner dies on or after 16th May, 1973, will, in fact, have to bear considerably more death duties than before the budget. In the limited sort of practice which I am able to engage in at the moment, I have come across one case of a death where the amount of death duty payable as a result of the budget on a death post-16th May, 1973, is going to be significantly higher than if the same man had died before this unfortunate budget was introduced.

There are a great many cases in this country of farmers, landowners, leaving land to nephews and nieces, to brothers and people like that who are the most immediate members of the testators' families. If a landowner does not make a will, if a bachelor does not make a will and if his brothers and sisters are dead, the property must go to his nephews and nieces. They are the closest members of his family. Now there is this savage new rate of taxation imposed. There are many cases throughout the country, in every county who will suffer from this abnormally high percentage. The Minister refers to nephews and nieces, who are the closest relatives that a testator might have, as strangers who deserve to be burdened in this way.

Mr. R. Ryan

I did not. Strangers are those who pay at the higher rate of 20 per cent.

Mr. O'Malley

Nephews and nieces are to pay 10 per cent. In "strangers" the Minister technically is using the right word because the 1894 Act refers to strangers in blood, and first cousins may be referred to as strangers in blood. If a bachelor dies without nieces or nephews and his closest relatives— this is a frequent occurrence in this country—first cousins or their children are regarded in the words of the Minister and of the Act as being strangers who will have to pay 20 per cent. I hope this will be got home to people generally so that they will appreciate how totally and appallingly they have been misled by statements of the Minister for Finance before and since the general election because he announced in the most brazen way how he would give substantial reliefs in death duties.

Mr. R. Ryan

As a matter of historical interest, when the rate of legacy duty was last increased it was doubled from its previous rate.

Mr. O'Malley

Yes, but it was then only half its present rate.

Question put.

The Committee divided: Tá, 64; Níl, 60.

Tá

• Barry, Peter.
• Barry, Richard.
• Begley, Michael.
• Belton, Luke.
• Bermingham, Joseph.
• Bruton, John.
• Burke, Dick.
• Burke, Joan T.
• Burke, Liam.
• Byrne, Hugh.
• Clinton, Mark A.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Coogan, Fintan.
• Cooney, Patrick M.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan.
• Coughlan, Stephen.
• Creed, Donal.
• Crotty, Kieran.
• Cruise-O'Brien, Conor.
• Desmond, Barry.
• Dockrell, Henry P.
• Dockrell, Maurice.
• Donegan, Patrick S.
• Donnellan, John.
• Dunne, Thomas.
• Esmonde, John G.
• Finn, Martin.
• FitzGerald, Garret.
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Patrick.
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kavanagh, Liam.
• Keating, Justin.
• Kelly, John.
• Kenny, Henry.
• Kyne, Thomas A.
• L'Estrange, Gerald.
• Lynch, Gerard.
• McDonald, Charles B.
• McLaughlin, Joseph.
• McMahon, Larry.
• Malone, Patrick.
• O'Brien, Fergus.
• O'Connell, John.
• O'Donnell, Tom.
• O'Leary, Michael.
• O'Sullivan, John L.
• Pattison, Seamus.
• Ryan, Richie.
• Staunton, Myles.
• Taylor, Frank.
• Thornley, David.
• Timmins, Godfrey.
• Tully, James.
• White, James.

Níl

• Ahern, Liam.
• Allen, Lorcan.
• Barrett, Sylvester.
• Blaney, Neil T.
• Brady, Philip A.
• Brennan, Joseph.
• Breslin, Cormac.
• Briscoe, Ben.
• Browne, Seán.
• Brugha, Ruairí.
• Burke, Raphael P.
• Callanan, John.
• Calleary, Seán.
• Carter, Frank.
• Colley, George.
• Collins, Gerard.
• Crinion, Brendan.
• Cronin, Jerry.
• Crowley, Flor.
• Cunningham, Liam.
• Daly, Brendan.
• Fahey, Jackie.
• Farrell, Joseph.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzpatrick, Tom (Dublin Central).
• O'Malley, Desmond.
• Power, Patrick.
• Smith, Patrick.
• Timmons, Eugene.
• Flanagan, Seán.
• French, Seán.
• Gallagher, Denis.
• Geoghegan, John.
• Gibbons, James.
• Gogan, Richard P.
• Haughey, Charles.
• Healy, Augustine A.
• Herbert, Michael.
• Hussey, Thomas.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Leonard, James.
• Loughnane, William.
• Lynch, Celia.
• Lynch, Jack.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Moore, Seán.
• Murphy, Ciarán.
• Nolan, Thomas.
• O'Kennedy, Michael.
• O'Leary, John.
• Tunney, Jim.
• Walsh, Seán.
• Wilson, John P.
• Wyse, Pearse.

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

Question declared carried.

SECTION 55.

Question proposed: "That section 55 stand part of the Bill."

Mr. R. Ryan

This is another section dealing with relief in estate duty given in this year's budget. The cost of giving this immense concession in estate duty is another £800,000, added to the other concessions which I mentioned this morning.

Mr. O'Malley

I want to put the statements of the Minister in perspective and to recall that in the budget statements one example which was given of the effect of the increased abatement was that a widow with four dependent children—not just four children, but four children under 18 in full-time education—would begin to pay estate duty on a net estate of £41,000 as opposed to a net estate at present of, I think, £34,000. If I am wrong, perhaps, the Minister will give the figures, I am disregarding the hundreds and mentioning only round figures of £34,000 and £41,000.

Mr. R. Ryan

I shall reply.

Mr. O'Malley

The point I made previously which, of course, is equally valid now, is that the increased abatement of duty will be covered by the increase in the value of the land in the 12 months since the last abatement was fixed and that in real terms there will be very little benefit from this proposal. I am glad to welcome the abatement but it is not anything as significant, in an inflationary situation such as we have at the moment, as the Minister would suggest.

Mr. R. Ryan

Deputy O'Malley is quite wrong and, for the second time, he has produced figures out of his head which are inaccurate. All that can be said today is that his figures, while as inaccurate as the previous ones, are somewhat more confusing. The actual figures for a widow and four children I will now detail. Prior to the reliefs given, a widow and four children would have relief on £33,330.

Mr. O'Malley

I was £600 and something out.

Mr. R. Ryan

Now the figure is £46,200 so that the total relief earned by a widow is £12,867, or something in excess of one-third. Whatever inflation has taken place it has not reached that level so that it is quite clear that we have given abatements here, together with other abatements in this year's budget, which are generous by any possible measure. I recall, as I see Deputy Haughey is about to intervene, that Deputy Haughey was, perhaps, the only person on the Fianna Fáil side of the House who was gracious enough to acknowledge the extent of the reliefs which were given. They are extensive, and I do not think that we are acting in a sensible way by trying to stimulate fears and anxieties amongst widows.

Mr. Haughey

I had hoped that the Minister would have taken some notes of a point I made earlier which was to the effect that he should have a look at the provisions where an orphan family is concerned. By an orphan family I mean a family who have lost their mother and father at the same time. I do not know whether there are any great difficulties in this but, unfortunately, this sort of situation can arise frequently enough these days, perhaps more often through a motor car accident than anything else. It can happen that the husband and wife can be killed together.

It seems to me that in that situation the dependent children are, perhaps, more in need of relief than a family where there is a widow. Would the Minister consider granting to the eldest child in that sort of family the same abatement as would be granted to a widow where a widow remains? Even if that was not technically possible, perhaps in the case where there are no surviving parents the abatement for each child could be brought up to equate with the sort of situation which would prevail if there was a surviving widow.

Mr. R. Ryan

As I have mentioned already to Deputy Haughey, I am very sympathetic to the problem which he illustrates because it does seem to me that where both parents are dead and there are orphaned children whatever property they have is divided amongst them, or probably held in trust until they attain their majority if the property is held intestate or divided equally amongst the children. Where a person dies intestate the property has to be divided equally amongst the children, either because of that or because of the will. Probably some next-of-kin or relatives have to look after the upbringing of the children. Such relatives, while having some right to use the capital for the children's benefit, have, for estate duty purposes not got the benefit of whatever would have gone to a surviving spouse if a spouse had survived.

I did take a look at this matter. It did create a number of administrative problems and as we are proceeding, I hope without undue delay, to the abolition of estate duty for immediate families, we felt that for this year we should take the steps which we have taken, but not proceed to make any further amendment which might only, in the long run, generate more difficulties. It is a good point and one wonders why such a good point was not, long before now, translated into legislation. It was not and I am sorry that the time available this year, together with the administrative difficulties involved, did not allow me to do something about it. I would not like to say that we will be doing it in next year's Finance Bill because I hope that there will be no necessity to consider that relief in next year's Bill.

Mr. Colley

It will not be worrying the present Minister.

Mr. R. Ryan

No, because we will be getting rid of estate duty so far as the immediate family is concerned and this would cover the case of the orphans.

Question put and agreed to.

SECTION 56.

Question proposed: "That section 56 stand part of the Bill."

Mr. Haughey

The problems in regard to estate duties, which, as Deputy O'Malley rightly pointed out this morning should be described as death duties, have centred very much on the farming community situation. A great deal of the criticism of the present system arises from the fact that it bears very heavily on the farming communities. Perhaps it would be more accurate to say that in recent times it has come to bear very heavily on the farming community because the difficulty has largely arisen from the escalation in land values, and also the spectacular increase in the value of livestock.

These factors have combined to ensure that estate duty, or death duty, has become a problem for farmers Rather than making a sweeping commitment to abolish estate duty, or death duty, I would have thought that the better approach would be to look at the difficulties arising and try to see where hardships were arising, to deal with particular situations rather than to just say that because death duty is causing problems let us get rid of it. I do not think that we should get rid of death duty entirely. Rather, we should make sure that it falls equitably on the community as a whole.

In that situation, while one naturally welcomes this proposal by the Minister in regard to the artificial valuation provisions to increase the figure from £2,000 to £3,000, would this not, perhaps, have provided a very useful method of bringing at least temporary alleviation to the farming community so far as death duty is concerned. I understand from practitioners that these provisions work quite satisfactorily where they apply and that they can be quite readily administered. It is a very valuable little provision in the type of case which comes under its ambit and I wonder why, when the Minister was doing anything in this area, he did not go further than just increasing it from £2,000 to £3,000.

I should like the Minister to give us some figures of what is involved here. I understand the £2,000 provision can operate to exempt estates of up to £150 PLV. I am not sure if that is so and, perhaps, the Minister would confirm it or give us at least a typical illustration of what sort of farms or agricultural holdings would now come within the £3,000 provision. I do not know whether these particular provisions result in any great loss of revenue but I doubt very much that they do. The Minister might tell us, if he has not already done so, what is involved in this increase from £2,000 to £3,000 and he might give us an example of the typical sort of holding that will now be exempt. When he is doing that, would he keep in mind the fact that the price of livestock and cattle today is very different from what it was when the £2,000 limit was fixed. A man does not have to be a very strong farmer to have £9,000, £10,000, £11,000 or £12,000 worth of livestock.

Mr. R. Ryan

I am glad Deputy Haughey raised this question. I had intended in my introductory remarks to deal with this, but Deputy Haughey got in first. This agricultural assessment, which is an artificial one, is of immense benefit to farmers. Out of every 67 farmers who die 43 avoid estate duty because of the artificial value at the old figure of £2,000 and it is expected that that figure will be increased by another 10 per cent at least so that, out of every 67 farmers who die, there will be 47 or 48 who will not pay estate duty, and this is taking into account current values of land and stock and the general economy of the farming community.

One aspect of the farming community at the moment, and it is a good one, is the fact that farmers are now borrowing a great deal of money for farm improvements and this means that in many cases this artificial value has become really significant because any liability is taken into account in assessing the artificial value. I should like to correct something that Deputy O'Malley said on a previous occasion. He seemed to infer that the only liability that could be taken into account was the debt which was upon the land. That is not so. Every liability has to be taken into account in assessing the artificial value. The estimated cost of this relief will be £100,000 this year and, in a full year, it may possibly be more. It will certainly be £100,000.

The increase we have given is obviously quite significant. It will certainly compensate not alone for increases in the value of land but it will also confer a benefit on people who would not otherwise have enjoyed this relief. The section increases from £2,000 to £3,000 the limit of the net value of an estate in which purely agricultural land may be valued on an artificial basis. The Finance Act of 1894 provides that the value of property for estate duty purposes is the open market value but subsection 5 of section 7 of that Act contains a proviso to the effect that, in the case of purely agricultural land, the value of the land should not exceed 25 times the rateable value, less certain deductions. In reply to Deputy Haughey, there is, in fact, no limit to the value of that property to which this artificial value may apply. There is, of course, an upper limit when you have completed all your calculations and, if you are above that particular limit, then benefit is not conferred but, ab initio, there is no limit at all on the rateable value of the property.

The scope of the proviso was restricted somewhat by the Finance Act of 1910; section 60 (1) of that Act repeals the proviso. Section 61 (1) provides broadly that the proviso should continue to apply to purely agricultural land passing under the will or intestacy of the deceased in any case where, by using the artificial value, the net value of the estate did not exceed £1,000. The £1,000 limit was increased by the Finance Act of 1969 and section 46 of the 1971 Finance Act provided that the artificial value should cease to apply and the market value as at date of death should be restored in the event of the sale of the lands outside the family within six years of death. One could give a number of actual examples but, for the reasons I have already given, it is not desirable to give details which might help people to identify those involved. I will pick one case at random: a person died about five years ago; the artificial value of the lands, which contained 267 acres, resulted in the lands being valued at £200.15; the lands were sold on 13th April, 1970, two years after death, for £110,000. In that case there was no duty payable.

Mr. O'Malley

What was the rateable valuation?

Mr. R. Ryan

The rateable valuation of the land was £215 and buildings were rated at £36.05.

Mr. Colley

I think I remember quoting that case on the 1971 Finance Bill.

Mr. Haughey

Were there any changed circumstances? Was there any question of building?

Mr. R. Ryan

No. The land was not designated as building land. If land is so designated, agricultural value is not attached to it.

Mr. Haughey

How about when it was sold five years later?

Mr. R. Ryan

It was sold two years later and from its location, somewhere in Ireland, I can say from my own knowledge that it would not have been in a development area and nobody could, with any reasonable degree of confidence, anticipate development of that kind. Maybe "there is gold in them thar hills", but I do not think that has been established.

Mr. O'Malley

Would the Minister not agree that is a case where there was obviously nothing in the estate except the land?

Mr. R. Ryan

There were buildings as well in fact.

Mr. O'Malley

If the land was an ordinary farm stocked in the ordinary way, and there were no significant debts on it, the situation could be different. Nowdays, with cows making anything in the region of £200 each, and sometimes more, even a moderate amount of stock on a farm could mean that the value might exceed the £3,000 now proposed. I am sure the Minister will agree with that. When Deputy Haughey suggests that the provision is of less value, perhaps, than appears at first sight, I think he is quite right.

My experience of working this artificial valuation is that it happens to suit the owner or the successor to the deceased owner of an unworked farm or an underworked farm, and a fully stocked farm does not benefit, because the value of the stock of itself usually is in excess of the amount involved, and the artificial valuation does not create any great benefit for that reason. It is only where there is considerable debts or considerable understocking that it seems to benefit farms of that kind. It would in the normal way benefit very small farms with very low poor law valuation. In my experience, and I have a fair amount of experience of working this section, there are considerable limitations on its value.

Mr. Callanan

In other words, the farm that is worked efficiently benefits and the farm that is not worked at all gets away with it. If you are efficient and have stocked your land you are caught, and if you do nothing with your farm you get away with it.

Mr. R. Ryan

A great deal of the stocking which is taking place is taking place on the strength of loans. The immense increase in loans granted by the Agricultural Credit Corporation and by the Associated Banks, from the information available to us, is in respect of stocking. In such cases where a man is working his land well, he is almost certain to get the benefit. The increase we are giving will, we are quite satisfied, add at least 10 per cent to the number of people who will get the advantage. No matter what private view Deputy O'Malley or anybody else may have, the facts speak for themselves. When you have a situation where 47 or 48 out of every 67 will get the benefit of this and not pay estate duty, it is quite significant.

I accept the point which Deputy Callanan makes that the inefficient can possibly get greater benefit but, in modern farming conditions, most efficient farmers have a liability to a bank, or the Agricultural Credit Corporation, or somebody else. That liability is deducted. It may be said by some that this is an encouragement to borrow, but I do not think people would borrow simply to avoid estate duty. That would be a very risky and foolish way in which to borrow, particularly at the present-day rates of interest. It is working to a very substantial extent. We are providing this relief because we believe it will relieve a very large number of farmers. It is interesting to note—I know these figures are now historical—that in 1971, of the total number of people paying estate duty, only 4 per cent were farmers. The figure may vary somewhat now because of increase in the valuation of land.

Mr. Callanan

It is a different situation.

Mr. R. Ryan

I accept that there is a different situation but it is not multiplying so fast that there will not be considerable relief for people in this year's Finance Bill. I believe that the improvements we have given will restore us to the 1971 situation, if I may put it at no lower level than that. Through the provisions in this Bill we are giving some alleviation against the inflationary trends which have exhibited themselves in recent times. I think that is the right thing to do, while we proceed towards a system which the farmers themselves have requested, that is, a system which would replace the once in a lifetime estate duty, an almost penal tax, with a system which would enable them to pay the tax by instalment.

Question put and agreed to.

SECTION 57.

Question proposed: "That section 57 stand part of the Bill."

Mr. Colley

Is there anything the Minister wants to say on this section?

Mr. R. Ryan

This section converts the £7,500 exemption for superannuation death benefits into an exclusion and extends the exclusion to all beneficiaries. In other words, this £7,500 is completely excluded and will not be taken into account in assessing the total of the estate. The existing exemption applies to widows and dependent children only. It is another of the presents I am giving.

Question put and agreed to.

SECTION 58.

Question proposed: "That section 58 stand part of the Bill."

Mr. R. Ryan

This section gives effect to the proposal to exclude from the value of an estate for estate duty purposes the first £7,500 of life insurance benefits. It is another of Richie Ryan's give aways.

Mr. T.J. Fitzpatrick

(Dublin Central): If the policy matures some months before a person dies some consideration should be given. Providing the policy is taken out with this in mind for ten years and the person dies three months later, some consideration should be given to excluding this from the estate. It will be included in his estate if it matures a few months before he died.

Mr. R. Ryan

The Deputy will recall that I answered this argument before. It has some merit but it would be virtually impossible to deal with under the law. Once an insurance policy has matured, the money would be received and could be dissipated, or it could be in other forms of property. It would be mingled with the person's estate. If we were to say it would be taken into account if a policy matured within two months or six months or a year before death, there would then be a demand to provide that every insurance policy, no matter when it matured, should be taken into account.

We must remember that insurance policies get more benefit by way of estate duty relief than many other forms of saving which are equally meritorious. I do not think it would be justifiable to say that one should give an exemption in the cases the Deputy has in mind and not give an exemption to somebody who put money into a savings bank so many months before death, or even over a period. I would say it would be virtually unworkable without opening the floodgates to 101 abuses.

Question put and agreed to.

Section 59 agreed to.

SECTION 60.

Mr. R. Ryan

I move amendment No. 9:

In page 33, to add to the section the following subsection:

(2) This section shall have effect in relation to the death of any person dying on or after the date of the passing of this Act.

Amendment agreed to.

Section 60, as amended, agreed to.

SECTION 61.

Question proposed: "That section 61 stand part of the Bill."

Mr. R. Ryan

Perhaps I might explain that the commencement date of 1st August, 1973, or the date of the passing of the Act, whichever is the later, on which the provisions in this part of the Bill will come into operation coincide with the revocation in the final section of this part 65 of the Imposition of Duties (No. 206) (Stamp Duty on Certain Instruments) Order, 1973, made on May 29th, 1973, which brought into operation from 1st June, 1973 the various alterations in the rates of stamp duty on house purchase, office building contracts and mortgage deeds introduced in the budget.

Question put and agreed to.

SECTION 62.

Question proposed: "That section 62 stand part of the Bill."

Mr. R. Ryan

This section gives exemption for stamp duties on mortgages for sums not exceeding £10,000.

Question put and agreed to.

SECTION 63.

Question proposed: "That section 63 stand part of the Bill."

Mr. O'Malley

I have an amendment down to the Ninth Schedule which arises out of this section because I think the charging is done in the section although the details are set out in the Ninth Schedule. The purpose of the amendment is to overcome what seems to me to be an anomaly. Small conveyances up to £1,000 are free of duty and mortgages up to £10,000 are free of duty, both of which are perfectly commendable, but, at the same time, a letting agreement, even the lowest form of agreement, an ordinary weekly tenancy, no matter how small the consideration or the rent, is subject to duty. The Minister will probably agree that it is anomalous that this should be the situation even if the weekly rent of the premises is as low as £1.

I have suggested in my amendment that a corresponding exemption for lettings and short-term leases should be given up to a rent of £500 a year which is £9 odd per week. I would have no objection if the Minister wants to pick a somewhat lower figure than that but I think it is anomalous that very small weekly lettings at small rents should be subject to duty. Admittedly, the duty is not very great but the duty on conveyances under £1,000 was not very great up to now anyway. It seems a bit unfair that somebody who is in a position to pay out a sum of money as capital to acquire a premises should be free of duty but someone who does not have that capital and pays for the use of the premises by the week should have to pay duty on it, irrespective of how small that duty might be. Perhaps we can go into the details of this more on the Ninth Schedule but I wanted to make the point in principle on this section.

Mr. R. Ryan

This section deals with the premiums on the disposal of the property and not with rents as such. As must be apparent, I was concerned in this Bill to do something about the stamp duty payable on smaller properties for two reasons, firstly, in order to relieve the purchasers of small holdings, to relieve people who were obliged to take on mortgages in order to purchase their homes, and also to provide some relief on the administrative side because you can often have, as we have on the Statute Book, provisions which cost more to administer than can be justified. I do not close my mind to the suggestion made by Deputy O'Malley. As I said yesterday, I am giving a lot of jam this year and I believe in spreading it around. I will take a look at this between now and next year. We are dealing with the premiums on transfers this year and we can have a look at the rent position next year.

Question put and agreed to.

SECTION 64.

Question proposed: "That section 64 stand part of the Bill."

Mr. Haughey

Can the Minister give us any figures in regard to this? I should be interested to know what this duty has been bringing in and what would be involved in increasing it from 10 to 15 per cent.

Mr. R. Ryan

It is difficult to give accurate figures for these things because the rate of building can vary greatly. We do not know yet, although we may suspect, what new projects are in the pipeline but a figure of the order of £1 million would not be surprising.

Mr. Haughey

What has been coming in since it was first imposed? I have a certain legislative parental pride in this.

Mr. R. Ryan

There are some people, I am not among them, who might think it should be parental shame.

Mr. Haughey

The Minister is doubling it.

Mr. R. Ryan

I thought the parental pride was in relation to the erection of office blocks. The Deputy's parental pride is in relation to the imposition of the tax?

Mr. Colley

The present Minister's parental pride will be in relation to relieving the office blocks of rates.

Mr. R. Ryan

No, Deputy Colley misunderstands the situation.

Mr. O'Malley

Unfortunately for the Minister, he does not.

Mr. Haughey

It is all right, I will raise it on the adjournment.

Mr. R. Ryan

As I estimated in my budget statement, it is thought that the increase from 10 to 15 per cent will yield an additional £.33 million this year or £.375 million in a full year. This represents 5 per cent. When you treble that you see the justification for my £1 million. It will grow, of course, if office blocks continue to grow and it will diminish if they do not.

Question put and agreed to.

Section 65 agreed to.

Question proposed: "That section 66 stand part of the Bill."

Mr. R. Ryan

The House might like an explanation on this.

This chapter of this part of the Bill implements Directive No. 69/335/ EEC dated 17th July, 1969, which was issued by the Council of the European Communities to the member States "concerning indirect taxes on the raising of capital" by companies and firms in the member States. The purpose of the treaty establishing the European Economic Community was to create an economic union whose characterstics are similar to those of a domestic market. One of the essential conditions for achieving this union is stated to be the promotion of the free movement of capital. The differing indirect taxes in force in the member States on the raising of capital give rise to discrimination, double taxation and disparities which interfere with the free movement of capital. To ensure this free movement of capital, the tax on the raising of capital within the EEC by a company or firm should be charged once only and the level of the tax should be the same in all member States. In short, the theme of the directive is that harmonisation of the duties on the raising of capital both as regards the structure and the rates of duty is essential. The directive sets out the lines which that harmonisation should follow.

The law in this State which is required to be harmonised in accordance with the directive is the law of stamp duties.

The main changes which implementation will involve in our present system are the following:

(i) the base upon which the duty is charged. The directive substitutes as the base the assets contributed to or belonging to a company for the existing base, which is the nominal share capital of a company.

(ii) the rate of duty chargeable, until January 1st, 1976, may not exceed 2 per cent or be less than 1 per cent. The Bill proposes that our rate should be 1 per cent. The existing rate is 0.25 per cent which is chargeable on the nominal share capital.

It is difficult to estimate what effect these two provisions will have on the revenue from capital duty in the current year. It should eventually result in an increase in revenue which it is not possible to quantify at this stage.

(iii) issues of loan capital are totally exempted. The revenue under this head is negligible.

(iv) the effective centre of management is constituted the prime criterion for determining the locality of a company for the purposes of the duty. Under the present system, only limited companies or partnerships which are registered here come within the charge to duty. In future, the location of the registered office will come into the reckoning only when the effective centre of management of a company is outside the EEC. In the vast majority of cases, however, the place of effective management of a company and their registered office are in the same country.

In its approach to the problem the Bill follows as closely as possible the existing practice which has grown up over many years and which has worked smoothly and efficiently with little or no inconvenience to the taxpayer, the Companies Office or the Revenue Commissioners. As a result, it is expected that the new system will create relatively few problems for practitioners and that, in a short time, it will operate as heretofore.

As regards the date of implementation, the directive, in common with the "other acts adopted by the institutions of the Communities" was, under Article 2 of the Treaty of Accession, stated to be binding on the "new member States" from January 1st, 1973—the date of accession. However, arising out of protracted negotiations between, on the one side, Ireland and the UK and, on the other, the EEC Commission regarding mergers and the rate applicable thereto, Ireland and the UK were granted an extension of time until January 1st, 1974, to implement one of the articles of the directive. The negotiations have been completed satisfactorily from the Irish point of view so that there is now no obstacle to the implementation of the directive.

As regards share capital, the Bill proposes to implement the directive as from August 1st, 1973 or the date of the passing of the Act, whichever is the later. The doubt remains, however, that January 1st, 1973, should have been the operative date and a company might challenge in the European Court the State's entitlement to duty on the old basis after that date. To avoid possible litigation, therefore, it is proposed to give any company that paid duty on that basis in respect of a transaction which took place since January 1st, the option to have the duty re-assessed on the new basis. As regards loan capital, the Bill abolishes this duty on loan capital as from January 1st, 1973—the duty involved is negligible.

Mr. Colley

Because the Minister appears to be in a more reasonable manner and frame of mind than he was yesterday, I express the hope that today he will not indulge in the silly kind of statements he made when replying to the Second Stage debate.

Mr. R. Ryan

I was aware that the Deputy was seeking guidance and I have given it to him.

Mr. Colley

I raised certain questions in regard to this section on other occasions that I did not receive replies to them. However, I got a certain amount of vulgar abuse.

Mr. R. Ryan

Not from me.

Mr. Colley

Before I put these questions again I wish to point out that in this and following sections there is the introduction of an entirely new concept in our law in relation to companies and in the method of assessing the revenue payable to the State on the formation of companies and in regard to other transactions in which they indulge. Furthermore, we have a four-fold increase in the duties being imposed.

There are reasons why this is being done as the Minister has indicated but our main complaint in this regard is that this was slipped in to the Finance Bill without any reference being made to it by the Minister. It is an important matter since it represents a substantial increase in duty. When we asked for some clarification during the Second Stage debate we did not get it.

Therefore, I ask the Minister for some clarification, first, in regard to paragraph (b) and the reference to capital or assets being dealt with on a stock exchange. Does that mean that a company whose capital at present is quoted on a stock exchange or whose capital could be so quoted, would be granted a quotation if they were to make an application for such? The wording of the paragraph is rather loose. Indeed, I might make the same comment in respect of some of the wording in consequential and subsequent sections.

In paragraph (c) there is the phrase "without prior authorisation". That, too, is a very loose phrase. By whom is there to be authorisation? I think it means that what is involved is the kind of thing that is involved usually in the articles of association of a private company which normally would provide that there could not be a transfer of shares without offering them previously to the other members of the company. However, that meaning is not clear from the wording of the paragraph and I ask the Minister to spell out what he thinks it means and then to consider whether it is not necessary to make the meaning much more specific in the Bill.

The third question I am putting to the Minister is whether we can take it that, if my interpretation of the phrase referred to in paragraph (c) is correct, what we know today of private companies are excluded effectively from this concept and would not be capital companies within the meaning of the section?

Mr. R. Ryan

It might be as well to bear in mind in relation to the section that the European Commission have launched already a protest against Britain which may involve the British Government being brought to the European Court for their failure to implement this directive as and from the 1st January last. The Commission are aware also that we have not done so and that is one of the reasons why we are providing for adjustment to take effect from 1st January last.

This is the first occasion on which we are faced here very seriously with the obligation of fulfilling the duties which lie on us by reason of the directive of the Commission. If we did not make this provision in the Bill which is the first opportunity that we have had of so doing, we would find that Ireland would be hauled before the European Court and could be fined for failure in this regard. I am not saying that is the reason why we should rush the measure through without considering it. I am prepared to deal as best I can with any queries raised by the Opposition but we must realise clearly that there is this obligation on us to comply with the directive in relation to our company law and stamp duty.

If I did not advert to it in the budget speech it was because I did not regard it as a major financial matter because in monetary terms it is not such. In fact, we do not know at present whether Revenue will gain or lose as a result of the measure. As Deputies opposite know, there are a large number of companies registered where the nominal capital is stated to be, perhaps, £100, £500 or £1,000 and that stamp duty is paid on all such small sums although such companies may, eventually, have and be known at the time of their formation to be about to have assets which exceed to a large extent the nominal capital. In future it might well have the reverse effect: there might be companies registered in terms of hundreds of thousands of pounds of capital because duty would not be payable on it at that stage and their assets might be much less. So, we just do not know at the moment what the impact of this will be but we expect that there will be no significant pattern developing one way or the other and that the situation will be very much the same. That is the only reason why it was not referred to in the budget statement. Having regard to the fact that I read the longest budget statement ever in the history of the House, I could be excused for not making it longer by getting into a dissertation or long explanation on the implications of a directive of the EEC.

Mr. Colley

It could have been mentioned at the end of the budget debate. The Minister will recall that he was rather more interested in other aspects at that time.

Mr. R. Ryan

I was trying to be helpful. Members opposite will recall that there was at that stage a time limit. Again, I had these restrictions.

Mr. Colley

The Minister did not make very good use of the time available to him.

Mr. R. Ryan

I have difficulties today also. So, I may not be able to say as much as I want to say. The phrase, "can be dealt in on a stock exchange" is taken directly from the EEC directive.

Mr. Colley

I suspected that.

Mr. R. Ryan

We had to.

Mr. Colley

Do we have to take the exact phrase or rather get the meaning they want?

Mr. R. Ryan

The prudent lawyer uses precedent if he wants to avoid trouble.

Mr. Colley

That is my point. I think the Minister would agree with me as a legal man that that phrase is loose and could certainly lead to litigation for interpretation in the event of any conflict of interest arising out of it.

Mr. R. Ryan

Perhaps it is somewhat better than the French phrase which, I understand, is "which are susceptible of being dealt in on a stock exchange". So, we have gone for the English version and all I can say is that I think it has more to commend it than the French version.

Mr. Colley

I did also ask the Minister in regard to paragraph (c) about the phrase "without prior authorisation". I assume that it is the same in that case, that it is taken from the English translation of the EEC document?

Mr. R. Ryan

Yes.

Mr. Colley

I am sure the Minister will agree with me that it is very imprecise for a statute. Without prior authorisation by whom? I am assuming that it would cover the case of a private company with articles of association, as is normal, prohibiting transfer of shares without their first being offered to the other members of the company. I am assuming that but I am not quite certain that it does mean that.

Mr. R. Ryan

I think that is true. In other words, it is a company in which the shares cannot be transferred without getting prior authority or consent of other shareholders or, perhaps, some other person or entity. There are, for instance, cases of State-sponsored bodies where sometimes the consent of the Minister or more than one Minister might be required. One of the difficulties the Community have in drafting directives is that they have to draft them in language like this so as not to exclude situations in different countries. I know that we lawyers are horrified when we see loose drafting. However, in this case it has to be done this way.

Mr. Colley

The Minister mentioned, for instance, a State company which, perhaps, could not transfer shares without the consent of the Minister. I agree with the Minister that it would appear that this phrase would bring in such a company but it is very possible, in fact it is more than likely, that it is not intended that such a company would come in under this.

Mr. R. Ryan

There are some provisions in the directive which I think could not be applicable to Irish companies, only British companies, within our company law as it at present operates. Nevertheless, the directive requires all these things to be put in because we are one community and we are supposed to have one law, one legal umbrella. There are and there will be for some time to come in different countries different concepts as to what companies are. In the meantime there has to be a directive written in this way to cover all possible forms of companies.

Mr. O'Malley

Could I make the point, in support of what Deputy Colley has been saying, that I have in front of me the directive and that the Bill follows very closely the wording in the directive? The wording in the Council's directive is deliberately vaguely phrased because it has to cover nine countries. It has to guide, as it were, the legal systems of nine countries. I would imagine that what the Council had in mind was that they would state their requirements in broad general terms and that they would then let each of the nine countries put it in legal form in their own countries. I do not think that the Council of the EEC envisaged that the precise wording they use in their directive will be reproduced in the domestic legislation of any one of the nine member States. What the Minister is doing here is to a very great extent reproducing in the Bill almost the exact wording that is used in the directive. He may say that, of course, he is keeping very close to what the Council are directing him to do when he does that but the Council consists of Ministers from nine countries. They have no single common legal system and they do the right thing in this sort of directive in expressing their desires in a kind of neutral, non-legal, non-technical language.

Neutral, non-legal, non-technical language might be a desirable thing in Bills but, unfortunately, we are going to be faced with the situation that a tremendous number of words in revenue law mean precise things and there is a whole set of new concepts brought in here in vague phrases which may be clear enough on a surface reading but which will have to be interpreted by our courts and interpreted in some detail. I am afraid all of this Chapter 2 of Part IV will give rise to considerable, unnecessary and, perhaps, rather petty litigation where many of these things will have to be defined. It will cost the State and individuals a lot of money to find out these things.

Deputy Colley has referred to certain phrases. There is another phrase in the chapter—"the effective centre of management". I do not know what that means. It has no meaning in English or Irish law. It has a fairly obvious meaning to the layman but the manner in which our courts will interpret that phrase is beyond my powers to prophesy and, no doubt, beyond the Minister's powers.

The article from which much of this section is copied, Article 3 of the directive, goes on in paragraph 2 to say:

For the purposes of the application of this directive any other company, firm or association or legal person operating for profit shall be deemed to be a capital company. However, a member State shall have the right not to consider it as such for the purpose of charging capital duty.

I wonder has the Minister availed of the "out" that appears to be given to him in that paragraph?

Progress reported; Committee to sit again.