asked the Minister for Finance whether paragraph 89 (a) of the Government's White Paper on Capital Taxation envisages that profits derived by farmers from the sale of livestock in the normal course of their activities will be subject to capital gains tax.
Ceisteanna—Questions. Oral Answers. - Capital Taxation.
22.
Profits derived by farmers from the sale of livestock in the normal course of their activities will not be subject to capital gains tax.
May I ask the Minister if he will reconcile the statement he has just made with paragraph 89 (a) of the White Paper which says that profits from the disposal of all forms of property which arise to individuals or companies and which are not at present liable to income tax will be subject to capital gains tax?
Farm profits are liable to income tax. They are exempt but they are liable.
On that basis may I take it that the intention is that paragraph 89 (a) would not apply to any activities of farmers in the ordinary sense—that is full-time farmers—unless they become subject to income tax?
The Deputy may take it that profits derived by farmers from sale of livestock in the ordinary course of their activities will not be subject to capital gains tax.
What about their other activities?
Sin ceist eile.
Cén fáth gur cheist eile í?
Because the Deputy did not put down that question.
I am asking the Minister now. It arises directly out of this question. Is the Minister trying to be smart?
I have answered the question the Deputy tabled.
Am I right in taking it from the Minister's reply to Deputy Colley that the reason livestock will not be liable to capital gains tax is the distinction between liability to income tax and exemption from income tax?
No. Livestock would be an element which would come into the calculations in the process of calculating farmers' incomes. Under the law they are exempt from the payment of income tax in respect of profits. Nevertheless, theoretically the liability exists.
The reason why capital gains will not be caught under paragraph 89 (a) is the distinction between liability to income tax and exemption from income tax.
Deputies shall avoid making statements.
He is asking the Minister a question.
Liability for capital gains tax arises only in respect of gains on capital. Cattle which are processed and disposed of in the ordinary course of earning an income would not be capital. That is how it arises.
Is the Minister aware that as paragraph 89 (a) is phrased at the moment the reason why livestock would seem to us to be caught for capital gains is that farmers are not liable for income tax. Am I right in thinking that the Minister is saying that livestock profits to farmers are liable to income tax but they are exempt?
Yes.
If that is so, does the same situation apply to stud farming and bloodstock breeding as these activities are expressed specifically by statute not to be liable to income tax?
We said in the foreword to the White Paper and on many occasions since that there are many matters of detail upon which we will welcome representations and upon which we are only too ready to enter into discussions. We have already had representations about some of these matters. In the preparation of the White Paper we had to balance the desirability of dealing with all matters, with the desirability of publishing a document which would not be too lengthy. As the Deputy knows, if we were to have all possible taxation positions in a White Paper it would be as long as the ultimate legislation. The Income Tax Codification Act in itself was much greater in volume than all the other Acts of the Oireachtas passed in 1967.
Question No. 23. We shall have to pass on.
I am asking a very simple question.
And he is not getting an answer.
It is not a question of detail. It is a question of major significance arising out of the White Paper. My question is: will capital gains in respect of livestock in the stud farming industry be subject to——
That is a specific question.
It is directly related to Deputy Colley's question.
The question relates to livestock and I have given the answer in relation to livestock.
Does that include bloodstock?
23.
asked the Minister for Finance whether the surrender value of endowment policies and the capitalised value of pension rights will be regarded as assets for the purpose of the proposed wealth tax.
The proposed annual wealth tax as outlined in the White Paper on Capital Taxation would apply to all assets having a cash value. Endowment policies and pension rights would not be regarded as assets unless they were such as could be converted into cash, and the value for tax purposes in such cases each year would be the amount which could be obtained for them on the date fixed for the annual valuation. Normally, in the case of policies, this would be the surrender value and, in the case of commutable pension rights, the amount for which the rights could be commuted.
As the Deputy is aware the White Paper on Capital Taxation set out a broad outline of a capital taxation system to replace estate duties and I have invited representations on them so that all relevant views can be carefully considered before the detailed provisions of a new system are settled.
I am sure the Minister will appreciate that what I am trying to ascertain here is what was the Government's intention in issuing the White Paper. Was it intended to include endowment policies and the capitalised value of pension rights or was it not? Apart from any question of representations what is the intention?
Endowment policies and pension rights which cannot be converted into cash would not be regarded as assets. All pension rights of public servants and officers of local authorities are not commutable. They cannot be converted into cash. Therefore they cannot be and will not be treated as assets.
Does the Minister appreciate that certain pension rights which cannot officially be commuted in that way may, in fact, be commuted unofficially and, in those circumstances, would they be assessed for the purpose of wealth tax in the sense that a public pension could not be commuted with the Government but it could be with a private agency perhaps?
These are matters to which we are giving consideration. As I have emphasised again and again, we are anxious to devise a system of taxation which will be seen as fair and equitable. Towards that end I will be having consultations.
The Minister does not know what is in his own White Paper.
Does the Minister's reply mean that any person who is not eligible for pension, who is retiring and has saved a fair amount of money, must buy a pension with it rather than have it as an investment so as to avoid the wealth tax?
No, it does not mean that.
24.
asked the Minister for Finance whether any estimate has been made of the additional staff required to administer the proposed new systems of capital taxation; and, if so, the details of such estimate including numbers, categories and cost.
The number and grading of staff required to administer the proposed new system of capital taxation would depend on the precise nature of the taxes. Final decisions on many important details obviously cannot be made until representations on the proposals in the White Paper have been received and fully considered. Personnel at present engaged in the administration of estate duty, legacy and succession duties will, of course, be eventually freed from such work as the number of estates subject to such duties is reduced. At this stage, however, it is tentatively estimated that the annual cost of the additional staff required would be of the order of £350,000.
Since the Minister has been able to give us a tentative estimate of cost, I presume he should be able to give us what was asked for also—numbers and categories—or how did he arrive at the £350,000 without that information?
Until such time as the precise nature of the code of taxation is settled it is not possible to say what particular ranks will be dealing with various types of work. The Deputy asked for an estimate. I have done my best to give him the best estimate which can be made at this stage. It would be impossible to break it down.
I appreciate that the Minister cannot give a precise estimate at this stage. But is it not a fact that he has given a tentative estimate of £350,000? Is it not also a fact that, in order to arrive at that, he must have had to operate on the basis of certain numbers and certain categories of civil servants and, since the question asked for that information, would he please give it?
No, because were I to do that it might pre-determine issues which have not yet been determined and which will come up for determination only when the legislation will have been passed by this House.
Could I ask the Minister whether the estimate he has made includes categories of valuers and, if so, how many?
Again, it is not possible to say how many valuers may be required. This will depend upon the precise details.
But he arrived at a certain number for the purpose of his £350,000, or the estimate is not worth anything.
It is not possible yet to say how many valuations it may be necessary to carry out. Therefore, it is not possible to say the precise number of valuers that may be required. But we consider this money will be well spent if, in the course of spending it— as we hope—we will eliminate a number of the evaders and avoiders who have not paid a fair share of taxation in the past.
How did the Minister arrive at an estimate of £350,000 if he does not know the numbers involved or the categories? Could he explain that, please?
It is a tentative estimate.