I listened to three ex-Ministers in the Fianna Fáil Party talking about this budget—the Leader of the Opposition, Deputy Lynch, Deputy Colley and Deputy Haughey. One of the three will in due course be able to turn around and say: "I told you so" because all three spoke with different tongues. Some of their arguments bore some semblance of similarity, but others were completely divergent.
Deputy Brugha said we should not have gone for deficit budgeting. Deputy Haughey agrees that we should. Deputy Colley described the budget as a fraudulent budget. Deputy Haughey appreciates that prices have risen throughout Europe and in this country also as a result of our entry into the European Community. As well as that, we have to meet prices in countries outside the European Community. As the debate progressed, the tone changed somewhat.
I congratulate the Minister on this budget. I congratulate the Minister on what he has done since he came into office. He has certainly got guts. He is not afraid of change. There has been practically no change in the pattern of taxation since 1908. Deputy Burke used to say in this House: "Great things have happened in our time." I believe that quotation is very apposite at this moment. Year after year the old reliables were taxed—petrol, beer, whiskey, cigarettes and tobacco. Where drink is concerned we are one of the highest taxed countries in Europe. Fianna Fáil were always afraid to do what the country wanted. The Minister has now introduced a tax on very wealthy farmers. Most farmers admit that, if they make money, they should be taxed. Most people object to paying taxes or rates when they do not make money.
The Minister introduced a White Paper on capital taxation for discussion. Fianna Fáil are trying to persuade the people that this is the law already. There has been a great deal of talk about prices. Deputy Haughey did not dwell on these because he understands this is a worldwide pattern. However, those who followed him could not refrain from flogging this dead horse. Would the position not have been much worse had VAT not been removed from food? We took VAT off food. In our first year in Government we had a growth rate of 7 per cent and this budget is designed to ensure a growth rate of 3½ to 4 per cent.
Over eight years Fianna Fáil gave an average of about £7 million a year to social welfare. In our first year we gave £52.5 million, a very big difference. Total expenditure has amounted to £132.4 million, an increase of 43 per cent. We have given an increase of £44 million per year in the two budgets for which we have been responsible so far. We reduced the qualifying age for pension to 69 last year and we reduced it by another year to 68 years this year. It had not been reduced since the State was founded. Social welfare benefits have been provided for unmarried mothers and handicapped children. There have been improvements in home care and other welfare services. We have abolished the limit for social insurance and introduced a scheme for pay-related benefits.
In 1974, increased social welfare benefits will amount to £50.14 million: £37.62 million to March 1975 and £25.13 million to the end of 1974. The Exchequer will take up 75 per cent of that. Deputy Brugha spoke about the burden on employers and employees but, as I said, 75 per cent will be taken up by the Exchequer. A married couple over 68 years will now get £15 per week as against £12.35 prior to this budget. A window with three children will get £15.45 as against £13.05. A deserted wife with three children will get £14.50 as against £12.15. Children's allowances have increased by 30p and State pensioners will get parity as from 1st July. These are worthwhile improvements and are to be commended.
Wives of long-term prisoners have been brought into social welfare for the first time. The prisoners get three square meals a day. They are probably fed as well as they would be if they were at home and their wives and children suffer and struggle. This situation will not be allowed to continue as a result of this budget. The Minister is giving £100,000 for an investigation into poverty. During the election I canvassed a new corporation area and I met women there whose husbands were in jail. They did not know what to do or whom to ask. They did not know where to go for information. If they are put in touch with the proper authorities they will at least get that which will feed them even if it does not clothe them. If a woman in this situation is a smoker she will be inclined to smoke more, if she drinks she may drink more. She will do this because she may be worried but if she were sure of getting the money she would be better able to look after her family.
Extra provision has been made for unmarried mothers. If a social welfare beneficiary dies, his widow is paid for six weeks after his death. There will be no gap between the death of the husband and payment to the widow. This is an example of the thoughtfulness displayed in the budget, of the cutting of red tape. There is a great feeling of humanity displayed towards the needy.
Since I became a Member of the Dáil in 1963 there has been much talk about equal pay for equal work. However, nothing was done despite much talk in Dáil Éireann about the Treaty of Rome and so on. This Government have taken steps to ensure that there will be equal pay by 1975 and, this year, there will be an improvement in the situation in that 50 per cent of the differential will be abolished.
I have referred to the grant of £100,000 towards the elimination of poverty. I realise it is only a drop in the ocean but at least it is a start. It is a pity it was not done many years ago. As the Parliamentary Secretary pointed out some time ago, we did not discover poverty, it has been with us for a long time. Although there is less poverty than 50 years ago, at least 20 per cent of our people are living below the breadline. I understand that a nun is taking charge of the programme on poverty and I wish her every success in her work. Perhaps next year the Minister for Finance may be able to give greatly increased benefits or introduce schemes to cater for people about whose problems we know very little now.
There has been an increase in the capital budget of £64.7 million. This includes £18.7 million for construction, half of which is for local authority housing. Prior to the National Coalition Government taking office, local authority house building in Dublin had reached an all-time low and local authority financing for private house building was in the same situation. The ceiling for loans was disgraceful. In my constituency there were housing schemes built but very few people could apply for a local authority loan because their incomes were above the limit. On the other hand, they were not able to put down the huge deposits necessary. The Minister for Local Government increased the ceiling limit and now many people who have building society loans, where the interest rate fluctuates, want to get local authority loans. This cannot be done because it is too costly to change and the money is needed for future work. In any event why should this Government be blamed for something Fianna Fáil did not do when they were in office?
There was another problem regarding the question of bridging loans from banks and what the building societies had to pay to people. In two years I have had at least 20 applications for bridging finance. I am not saying the 20 applications were solely the fault of the building societies; there could have been certain snags on the part of the people concerned. Much of this has now been cleared up. I am sorry the money cannot be given at a lower rate of interest. It is now given at 11 per cent, but on the money market in England one can get 22 per cent while the commercial banks are giving 16.5 per cent for short-term money. If possible the building societies should not increase the rate for the first two or three years. When a person purchases a house he has many expenses and the repayments are particularly difficult in the first few years. Taking wage increases into account he should be able to pay the going rate after a period of three years.
A sum of £8.3 million has been allocated for sanitary services and State building. Although there was a considerable amount of rainfall last winter, after a week of dry weather we were told there was a shortage of water. This shows how much money the previous Government spent on a water supply for Dublin. One would have thought there was enough water to last for a considerable time but after one week's dry weather we were warned about a shortage. This illustrates the neglect shown by Fianna Fáil during their years in office.
The cost of land in Dublin city has increased tremendously. Inflation may be blamed but one of the major reasons is the lack of serviced land. A sum of £9.5 million is provided for the ESB. I agree with Deputy Haughey when he says that the amount of money required by the ESB in future will be considerably more. With the advent of nuclear power and the number of new factories in the country we will be talking in tens of millions of pounds rather than amounts of £500,000 as we did some years ago.
It is estimated that there will be 40 per cent more spent on the telephone services. This is bady needed. We are in the EEC and communications, both road and telephonic, are as important as capital. A top executive must be assured of efficient and swift telephone services; a matter of 30 minutes could mean a large order for this country. During the years there was no real thinking or planning by the Fianna Fáil Governments on this matter.
It is amazing the difference there is when you are in Opposition as against when you are in Government. We had contributions from three ex-Ministers for Finance. Deputy Haughey suggested that we should plan five to ten years ahead and not just for one year. Deputy Lynch said we should charter a course for a year ahead and for a reasonable period in the future. It is not so long since we had a budget before an election in June and another in the autumn. Either they could not budget for six months or they did it to win an election.
As reported at column 1779 of the Official Report of 5th April, 1974, Deputy Haughey said:
Some years ago in the Departpartment of Finance a scheme of long-term capital budgeting was initiated.
He did not give the year. He went on:
The Minister has made no mention whatsoever of this in his budget speech. This is becoming one of the most important areas in economic programming and economic planning. The idea that one can put forward a capital budget for a period of 12 months on its own is now hopelessly out of date. Any sensible approach to economic planning must, I think it is generally agreed, be based on long-term budgeted capital investment. Increasingly our capital programmes must be looked at over five or even ten-year periods. The amounts involved are becoming enormous, and the period of years involved in capital investment is also becoming very considerably extended.
I remember saying the same thing when I was in Opposition when we were having two budgets per year or, if we did not have two budgets per year, something was slipped in by way of financial resolution, and so on. I said that any businessman, not a very big one, must plan ahead and decide whether he will diversify or stay in one business and keep all his eggs in one basket. I agree with Deputy Haughey that a period of five to ten years is right but Fianna Fáil, who never even budgeted for one year, now have the gall to ask us to budget for five or ten years all of a sudden, when prices are in a state of flux.
The Kennedy Report was not mentioned by Deputy Haughey but Deputy Lynch wants it accepted. Deputy Colley mentioned it in a non-committal manner. Deputy Lynch wants it adopted immediately. Deputy Haughey said we should do something about the interest rate as it is as important to a business as capital, or the working force, or the management. The dearer the rate of interest the more expensive it is to produce items. He said it is as important to a business as raw materials. I agree with him on that. We should try to bring down the interest rate, but it is very hard to bring down when you can get 20 per cent on the money market and bank interest is 15 per cent. We should try to bring down the rate to a more reasonable figure. I do not think we will ever get back to 5 per cent because there is a scarcity of money for development throughout the world. Let us bring it down to ten per cent or even 11 per cent, rather than 15 per cent or, perhaps, up to 19 per cent for term money.
As reported at column 1513 of the Official Report of 4th April, Deputy Lynch said about mortgages:
... No attempt has been made to deal with the problems of these people in any way.
He was speaking about purchasers of houses. He said:
The combination of higher house prices and interest rates puts house purchase out of the reach of many, not only newly married couples but married couples who have been saving for many years to buy their own homes. For example, repayments at the present time, on a very modest house, have risen by about 50 per cent, from £40 to £60 over the past few years. To deal with this certainly there should be a large increase in the size of the grants. As well as that, I believe there should be a large increase in the size of mortgages. Given that building societies may not be expected to advance the full amount of these mortgages, the Government should have a mortgage guarantee system—and they had a year in which to do this— available for those unfortunate people who now find house purchase beyond their capacity.
Deputy Lynch wants an increased grant. I think it was during the period in office of the inter-Party Government in 1954-57 that the grant was £275. The purchase price of a house at the time was somewhere in the region of £1,800. During that period of approximately 15 to 16 years Fianna Fáil increased the grant by £40 and the prices of houses jumped from £1,800 to £5,500 or £6,000. We are in office for one year and we are asked to increase the grant by 50 per cent. My feeling is that the giving of grants is nearly outdated. For the first four or five years after he buys his house, what a person wants is a grant to subsidise his interest. This is of more importance to him than what he is paying out of profit, rather than the few pounds he might owe at the end of the 35 years repayment. Deputy Colley has nothing to say about that kind of interest rate. He does have something to say about tax on loan interest. At col. 1486 of the Official Report of 3rd April, 1974, Deputy Colley said:
I have mentioned the Government's decision to restrict loan interest as a set-off against income tax. This was supposed to be directed against speculators but the real speculators have a way around it. There is no major problem in getting around it and it has improved the position of speculators from the UK in this country who are given an advantage over Irish citizens in this matter.
This is not true. He goes on:
One effect it has had is that it has crippled a number of Irish executives who have no wealth but their salaries.
He goes on to say that building societies will only give £7,500 of a loan so that there is no place they can borrow. If the Deputy would look at what the Minister said in introducing this he would see at column 1442 of the same report where the Minister said:
I have already announced that as from 10th January, 1974, the Finance Bill will restrict to a maximum of £2,000 a year the amount of interest on borrowings allowed to qualify for tax relief but that borrowings for genuine business activities will not be affected. In the light of the examples I gave, in last February's debate, of people with incomes of £13,000 and £24,000 a year claiming relief in respect of interest payments of £14,000 and £33,000 respectively, I think, Sir, further comment is hardly necessary.
I think they are both right. I think the Minister's idea is correct. A few professional people are willing to buy property and make nothing out of it if they can cover interest. They do not have to pay any tax, the interest covers the tax. They have capital appreciation and they are quite happy. It is mainly professional people who are doing this. I think Deputy Colley was right because when you take what the Minister said, that £7,500 was the maximum purchase price of a house in respect of which building societies would give a loan, it means that the person who wants to buy a house for, say, £20,000, at the old rate at which a building society lent which was 10 per cent, or 11 per cent now, approximately, he would be allowed £2,000 on that £20,000. But what happens today is that you cannot get a loan through the building society. You can get it from a financial house. I may be slightly wrong in the figures but the first two are correct: they give the money at 19 per cent over a 15-year period. He must take out an insurance policy which will cost about £1,000 and he has to pay about £2,000 a year back on which he will get no tax allowance. I think there is something wrong here and that this is something that should be looked into. In this case we must look at what top executives are paid. Very often the top executive is the person who can be the making or breaking of a company more so than the chairman or the principal shareholders. He can be No. 1 in the business. Unless we can give him a fair chance to buy a house and to make sufficient money for his time and effort and see that he will not be overtaxed, we will not get him. We have seen how top scientists in England have all gone to America because of better incentives and bigger money. We should look at this £2,000 limit on relief of tax on loan interest particularly when the building societies will not give loans on houses costing over £7,500.
Again, to show the difference between the financial experts who spoke in regard to income tax allowances, Deputy Colley said that the workers had been had. Deputy Lynch criticised the income tax allowances much in the same way as Deputy Colley and mentioned a speech in the chamber of commerce. Deputy Haughey said nothing of any significance on that matter, just making a passing reference. Speaking on April 3rd at column 1479 of the Official Report, Deputy Colley said:
In referring to the fraudulence in regard to income tax allowances and the way the workers have been had, I would draw the attention of the House to the fact that in the 1972 budget, the last budget introduced by a Fianna Fáil Government, there were increases in income tax allowances. Merely to restore the position as it was after that budget one would need to increase income tax allowances by approximately 25 per cent. The Minister has not made any provision for automatic adjustment of income tax allowances in the present situation of raging inflation under this Government.
He picked out 1972 but how many years was it before that that there was a change in personal allowances? But what he did not mention in regard to 1972 was the claw-back, the taxes that were put on to cancel that tax allowance. On this occasion we got a tax allowance and there were no taxes to take away from it, no claw-back.
Deputy Lynch, as reported at column 1510 of the Official Report of 4th April, 1974, said, in reference to the Minister:
... He knew as well as that, because of the successful negotiation of the recent national wage agreement, substantial tax allowances had to be given. He has failed miserably to match up his performance with his promise.
That is not true. We gave something and took nothing back. Most governments give with one hand and take back with the other. This is where most Fianna Fáil people stopped criticising the budget and realised they were getting nowhere. They had a feedback that the people accepted it as a good budget. At column 1510, Deputy Lynch said:
In a speech last Monday to the Dublin Chamber of Commerce I referred to the type of increases that ought to be made available. I said that because of the overall increase in our growth of 6 per cent caused by our entry into the EEC, on that basis alone without taking any account of inflation, the income of the lower groups, and particularly the social welfare groups, should be increased by 8 to 10 per cent. When I add to that inflation, which I estimated at that time to be 13½ per cent—the Minister said 14 per cent yesterday and I think we are entitled to anticipate without any exaggeration that it could be 15 per cent—the Minister should have raised social welfare benefits not by 18 per cent but by 25 per cent.
That statement was made four or five days before the budget was introduced. When I was in Opposition and I thought that 10 shillings were to be given to old age pensioners, I would say that they should be given £1. I exaggerated. I am sure Deputy Lynch did the same thing. He was not about to say 8 per cent when he thought we would give 12 per cent but he said 25 per cent. He made a big mistake when he said that because he did not realise that we were giving 18 per cent to the end of the year but it would be 24 per cent for the full year. Therefore, we gave more than he anticipated.
Deputy Haughey said he would have given more. This is where the Fianna Fáil ex-Ministers for Finance disagree. Deputy Colley and Deputy Lynch intimated that there should have been taxes. If so, I agree that tax-free allowances should go up, but there were no taxes. Farmers are being taxed. Deputy Colley made no reference to this. Deputy Lynch said that some farmers would be paying £500 and that £20 million would be taken in rather than the £4½ million mentioned by the Minister. In column 1515 of the Official Report, volume 271, Deputy Lynch said:
It is estimated by the Minister that 9,000 farmers only will be caught in the first instance. An estimate was given, I think, in one of the comments last night that each of these would pay an average of £500, making up an income of £4½ million. The Minister said yesterday he was unable to make any assessment of it and he ignored this completely for the purpose of his budget. I think it is not unreasonable that this £4½ million—if it is an accurate figure and I have no reason to doubt it—would rise quickly to, say, £20 million or £30 million in a year. Let us look at that and see what is fair and just...
That figure was taken out of the air. Deputy Haughey said it would be £40,000 or £50,000 and he spoke at length on this. He cried for the small farmer whose wife is out working. There is no intention to tax the small farmer. A farmer's wife could be earning £30 or £40 a week working as a nurse or teacher and she gets her money free of tax, whereas a single person or a married woman not a farmer's wife must pay full tax. Deputy Haughey mentioned the figure of £40,000 or £50,000 and if there are more than 9,000 such farmers here then there are a number of moneyed farmers who do not know just how wealthy they are.
I am more worried about wealth tax than income tax. It is very hard to tax a farmer in a particular year. One year he could have a loss and the next year he could have a huge profit because of the sale of cattle. I should hope that his good year will be levelled out with his bad year by the Revenue Commissioners. A farmer can sow a crop and spend all his time working but the profit for that crop would not be shown until the next year.
I could not believe what I read about mining. It was said that we were breaking our word and robbing the miners. They were going to take two or three billion pounds out of the country in lead, zinc or whatever they were mining. We were told that we were left wing. It is surprising that when the feed-back comes to the people how things can change. Deputy Lynch in the Official Report, Volume 271, column 1512, said:
... I will give the Government credit for this though not much credit—we have seen the new mining tax legislation.
Since we promised to introduce mining legislation every Fianna Fáil man said that we were breaking our word and taking money from the miners. We were not fair to them. We, on this side of the House, felt that they were not going to dig a big hole here and then take the wealth to another country. Deputy Haughey at column 1791, Volume 271 of the Official Report said:
What intrigues me is that in the piece of legislation which the Government are now bringing forward I find all the proposals, solemnly set out, with which I was confronted at that time. I am quite prepared to speculate that the result of this piece of legislation ultimately will be almost exactly the same as mine and that when all the allowances set out in the Bill are given effect to no income tax will in effect be payable by most mining concerns.
Deputy Haughey said it is exactly the same as his. Up to this budget I did not hear a Fianna Fáil person speaking for it. In fact, the ex-Ministers for Finance should tell their colleagues they had better stop talking about it around the country because they said the opposite in Dáil Éireann.
Deputy Lynch wants no inflationary measures, wants no budget deficit. Deputy Colley at column 1492 of the Official Report for 3rd May said:
This Budget should have been moderately expansionist, as I indicated. I would have thought, taking the best view of the situation, a deficit of £20 million to £25 million would have been tolerable as allowing for growth related to the capacity we have for growth in this coming year and still not lead us further into inflation. Instead of that we have had this unbelievably irresponsible Budget Statement by the Minister, backed by every member of the Government, of a £76 million deficit in circumstances in which no reputable economist could possibly justify such a deficit.
Deputy Lynch wants no deficit. Deputy Colley wants £25 million and Deputy Haughey at column 1797 Volume 271 of the Official Report said:
I know that the Minister in his outline of his budget strategy has indicated that in his view the increase in prices with which the economy would have to contend was serious enough without his adding to them by increases in taxation and, therefore, he went for a budget deficit rather than attempting to balance the budget by the necessary taxes. I suppose that at this stage we have no option but to accept the fundamental decision by the Minister in his approach to the budget this year but it is as well on this side of the House that we should indicate our apprehension about the Minister continuing with deficit budgeting of this sort.
We had Deputy Haughey warning that you cannot do this for ever. We all know you cannot do this for ever.
The Opposition have been talking about price increases. Prices have risen. They have risen in every EEC country. Wages have risen in every EEC country by 12 to 20 per cent. They have risen in most countries outside it at a greater rate. Prices inside the EEC have risen continually over the last 12 months but in latter months there has been a slow down. In some cases food prices have come down and our farmers are now cribbing about this. Outside the EEC prices are going up at a faster rate.
We are a great country for promising the people of Africa or of South America that we will do this and that for them but we did nothing for them. All we did was to get cheap food from them. England bought the cheapest food that she could get and she kept our prices down. Now those countries have got their independence and are emerging. I read the other day that we will no longer get cheap tea from India or Ceylon which control 90 per cent of the tea imported by Europe. They will look for their pound of flesh. The nuts from which margarine is made are dearer. In whatever country they are grown their price will be pushed up. Margarine is now within 3p per pound of the price of butter, whereas a couple of years ago it was half the price of butter. Perhaps this will be good for the farmers. Citrus fruits and other seasonal fruits are grown in some wealthy countries but mostly in developing countries. They are looking for top prices. The western world is fully developed and has many luxuries which they do not have in those countries. Why should the western world be subsidised by those who are in poverty? Let us take the example of oil. We were getting oil at a very low price, for practically nothing. The big oil combines took their cut and when we got it to western Europe we hammered it to get all the tax we could out of it and gave it out in social welfare. Why should the people in those countries not get a cut out of it and give it out in social welfare there? This is what we would do. There are many resources in these underdeveloped countries which have not been tapped. Imports from those countries will increase in price every year. If a country had enough money they could stockpile. Those countries will say now: "Who will give us the biggest price?" and they will get it on the world market. They are entitled to get it and we are going to pay for it.
We will no longer get cheap raw materials or cheap food. We depend a lot on imports and re-exports. Our wages have gone up which means that with the increased wages in these countries and the increased prices which the Third World are getting we have to pay increased prices. Our farmers sell foodstuffs in Europe and have to get increased prices in order to pay for the increased price of oil.
Prices have certainly gone up but there has been a levelling off. We promised to take VAT off food. We did that last year. If Fianna Fáil were still in office VAT would still be on food and prices would, therefore, be much higher. As well as increased prices there is the important factor that we are tied to the £. British Governments in recent years have not done much to keep the value of the £ steady. It is now a floating £. Most European countries have a currency which is of much better value than the £. There have been increases in costs in Germany as well as increased unemployment but so far as we are concerned the £ will not buy as much as it used to.
These are all causes of inflation. Fianna Fáil go around trying to fool the people. They will probably try it again before the local elections. They will not succeed because the people read the newspapers and they know the prices in various European countries. Deputy Haughey mentioned prices as well as some other points. He mentioned the capital budget and long-term planning. Fianna Fáil only planned for six months but this budget plans for a year. He mentioned interest rates and I agree with him that if at all possible they should be tied to the money market and the scarcity of money for developing business.
Deputy Haughey said that some of the Ministers who spoke had more to say about the 70,000 unemployed than about anything else. I have heard many budgets being introduced since I came into the House in 1963, and even before that, but I never heard a Fianna Fáil Government mention unemployment in a budget statement. They kept far away from it and it was often greater than 70,000. The Deputy also spoke about the western seaboard. I have heard references to the Irish language, to the Gaeltacht being kept, to this that and the other being done for the west, in budget speeches. Nothing was done then but now we have the Minister for the Gaeltacht doing something about the west.
The budget, after Deputy Colley's speech, was in many ways praised by the Opposition. They said less about the budget and more about other things. Deputy Colley spoke first and you would think we had given him arsenic. The next speakers did not say so much about it. They said nothing against it. In some instances the budget was actually praised by the Opposition. Most of the attack came on the White Paper on capital taxation. Members of the Fianna Fáil Party have spoken about the White Paper at various cumainn meetings around the country. They have supplied scripts to the papers. Deputy Haughey, in Volume 271, column 1788, of the Official Report said:
Yesterday the Parliamentary Secretary to the Taoiseach attacked me, I understand, for stating that the proposals will mean the end of private property. He suggested that I would have to backtrack on that statement. I have no intention of backtracking on it. I want to reaffirm emphatically that it is so. Ultimately, if these proposals go through in their entirety as outlined in the White Paper, it will mean the abolition of ownership of private property in this country. If there is a taxation mechanism which is designed to annex 2½ per cent of the property of every member of the community every year surely it is a simple mathematical calculation to project that after 40 years the entire property of each individual member of the community will have been appropriated.
Deputy Haughey is an accountant and should know that not alone is that wrong but it is mathematically impossible. If you take 1/40th from 100 you are left with 97½ and if you take 1/40th off that you are left with something more than 95. You will never be left with nothing. This is what the Fianna Fáil Party are saying to the people. If they are criticising the White Paper they should be honest about it. They should say what is good or what is bad about it. The Minister for Finance asked people to tell him what they thought of the White Paper.
Deputy Haughey said there was no profit in the country. If that was the case we would have no foreign companies here. The White Paper was sent out as a discussion paper. Every professional group and every business group in the city have accepted the Minister's statement. They are all sending their views into the Minister. Some of them have even met him. Various business organisations have sent in their impressions of the White Paper to the Minister. Every business is different. A business with a big capital outlay may have a small profit and capital gains built in over the years. Another business may have an import business with very little capital but big profits. You must look at the whole picture before you make a decision. Fianna Fáil are trying to make political capital out of it.
There are three main taxes in the White Paper and they are open for discussion. The first is a capital gains tax. I have met no business people who have objected to this. They have all said it is fair and should be done. No man should get away with a capital gain of £100,000 and certainly he should not get away with £1 million on one deal. One person can make this type of money and another person can go through life without any chance of making any profit at all. A huge profit like this should certainly be taxed. Such profits should have been taxed 40 years ago. They should have been taxed under Fianna Fáil for a hell of a long time and had that been done, particularly in relation to building land in the last ten, 12 or 14 years, there would be very little inequality in wealth at the moment because that is where most of the wealth was made on capital gains.
Capital gains taxes here should not be any greater than they are in England. Perhaps they should be a little less. I am 100 per cent in favour of a capital gains tax but there are a few aspects I would like the Minister to consider. One is the case of the sale of a private house; in nine cases out of ten the person who sells is putting the money back into another residence. That person should not be brought into the net. The situation is different where the house is sold for development purposes, a block of flats or an hotel, which may net a huge capital gain. There the position is quite different.
There is a little ambiguity in paragraph 90 especially in relation to family businesses. There is a possibility of what amounts to double taxation as between a company and its shareholders and the provision being made to eliminate this hardship. This could arise in the case of liquidation. Assume an asset is purchased for £8,000 and subsequently sold for £20,000. In the first instance it is owned by an individual and, in the second instance, by a company which disposes of it in the course of liquidation. The computations are as follows: when the asset is owned by an individual the sale price is £20,000, the cost price £8,000, capital gains £12,000, tax of 35 per cent £4,200, net proceeds by the owner £15,800; where the asset is owned by a company and sold in the course of liquidation the sum received by the liquidator is £20,000, the cost price £8,000, capital gains £12,000, capital gains tax at 35 per cent £4,200, net proceeds £15,800. Assuming this was a family company in which all the shares except one were held by the owner and his wife, the shareholder would receive from the liquidator the net amount secured on the sale of the property: net proceeds of sale £15,800 and from this would be deducted the original cost of the shares to the shareholders, £5,000, carrying subject to capital gains tax in the hands of the shareholder £7,800, which, at 35 per cent is £3,700. The shareholders receive eventually £15,000 minus assessable capital gains £3,782. Therefore the transfer represents £12,000 in one case against £15,000 in another case, the same money.
There are also cases where capital gains could arise in groups of companies transferring property from one to another. It is really a matter of transfer without a sale being involved and with different shareholders only. They might be caught under this. I do not see why they should be caught. There are three main taxes suggested and the companies are against them all. They think the whole thing is wrong. I think it is a good thing. I believe it was time it was brought in.
The inheritance and gift taxes are very fair and very lenient. I would say too lenient. Take the case of a married man, like myself, with six children: he could leave each of those six children £150,000 free of tax and he could leave his wife another £150,000. That would be £1,050,000 free of tax. Under the former system death duties on that amount of money would amount to approximately £450,000. On £2,500,000, the tax would be £500,000; under death duties it would be approximately £1,260,000. These are rough calculations. I may be out a few thousand. I always disapproved of death duties because very often those who died young were caught and a widow and children could be left with practically nothing when the debt to the State had been paid. Death duties were most unfair. The new tax is a much better idea. It must be remembered, too, that the number caught for death duties was always pretty small. The number is getting smaller. One has only to take up the paper to read about all the trust funds that have been established. Before they start in business people have a trust fund practically set up so that they cannot be caught for taxes and one cannot blame them. In fact, I had a trust. It was not solely for my family but also for the considerable number of people involved in the business. In any business there is more than one person involved. If the owner lives until he is 55 or 56 years it is not unlikely that his employees range in age from 40 years to 60 years. If the owner leaves more than £200,000 55 per cent is paid.
I am citing my own example to show how bad was the system. I employ about 300 or 400 men. If I were obliged to dispose of some of my property and let go some of my staff, some of whom are 50 or 60 years of age, the Government might find they would have to pay a considerable amount to them by way of benefits. If I died, although the Government would collect quite an amount of money by way of revenue, they would also have to pay social welfare benefits to the men who might not obtain employment. I have always been in favour of profit-sharing, of employees having an interest in business. No matter who he is, the fact that one person dies should not mean the entire staff is victimised.
In the new inheritance and gift taxes one would not have to pay at the rate of 55 per cent despite what Deputy Haughey said. It may be that there will be a change in the income tax rate every year; this is something that should have happened during the years.
Farmers can charge half the valuation of their estates, from £200,000 down, for death duties. Unless a farmer has 2,000 or 3,000 acres, I cannot see him paying any death duties. However, he should pay something every year, rather like an insurance policy. In the old system of death duties it was necessary to have an insurance policy of £500 or £600 to cover death duties, which was added to the estate. It is not too much to ask them to pay a small amount each year.
The night after the White Paper was introduced I had to go to a function for the Mater Hospital, which many business people and doctors attended. After the introduction of the White Paper I was not surprised there were some remarks made but the only people who made any comment were the doctors, not the businessmen. I attended another function some time later and the only people who were cribbing about the wealth tax were those who had not got it or would not have it for the next 20 years. They were interested only in pretending to their neighbours that they were worth that much money. Those who were wealthy kept their mouths shut, probably hoping to get away with it in the future. I am not saying that the wealth tax is 100 per cent right.
With regard to the inheritance and gift taxes, the trust fund is no longer of use. Whether one gives money away when one is alive or leaves it to somebody, if it is in excess of £150,000 it is necessary to pay tax. Prior to this wealthy people could have a trust fund for seven years, they could leave £8 million and not pay one penny to the Government. The amount the Minister has set is extremely liberal; I think he would have got away with £100,000. It is not a hardship to ask these people to pay something during their lifetimes. There should be a maximum. It should be no greater than the old surtax, 80 per cent. In Sweden you can pay a maximum of £104 on £100 income. If you are paying 80 per cent of your income it is a lot of money. A lot of thought should be given to this. When I talk about companies I mean private companies. We are different from England and the big industrial countries where they are all public companies and wealth tax is tax on dividends. In our case my fear is that we will be taking money out of reinvestment which gives employment. This should be looked at very carefully.
I do not think that private residences should be subject to capital gains tax or gains from insurance policies. The Minister said he would not do that. The disposal of assets by a trading company will attract tax. This would have a very serious effect on the cash flow of a company. If a company has suffered trading losses and sells some property to provide working capital, the money left after the sale will be reduced tremendously when capital gains tax is taken off. It may not be 25 per cent, as suggested, but the purchase price will come off it too. People may say I am looking after the rich and that in most cases I have mentioned taxes which hurt me personally.
If a person with money wants to go on three or four holidays a year he can spend £2,000 or £3,000 in Europe and the money is not spent in this country where it was made. If a person elects to make a gift rather than wait for somebody to pay inheritance tax the amount of tax is cut by 25 per cent. This should be encouraged so that parents especially in the farming community will give the younger people an opportunity to get the business going and have a proper transition of the business while the parents are alive instead of somebody being thrown in at the deep end.
My fear is that this tax might take money away from private investment and private enterprise and investment credit enterprise which produce a lot more capital profit than the State bodies who have a social element. People domiciled in Ireland have to pay this tax. It is the same in Denmark. If a person goes to America for five years and still has Irish citizenship, when he returns he is liable to wealth tax for that period so far as I can read this. This is wrong. There is also provision that residents have to pay wealth tax. This means that an American multi-millionaire will have to render an account to the Revenue Commissioners here of all his world-wide assets. No matter where he has property, he must give a complete record of it to the Revenue Commissioners. This means that any American who has £2 million invested in Ireland and is worth about £25 million in America will pull up his stakes and clear out of the country.
