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Dáil Éireann debate -
Wednesday, 22 May 1974

Vol. 272 No. 13

Committee on Finance. - Finance (Taxation of Profits of Certain Mines) Bill, 1974: Committee Stage (Resumed).

Debate resumed on amendment No. 10:
In page 10, line 30, to delete "whether" and substitute "where"; and in line 31 to delete "before".
—(Deputy Colley.)

Before the Taoiseach's statement, we heard from the Minister for Finance on a number of aspects of this matter, including some statistics in regard to the creation of new jobs. There are a few things I could tell the Minister for Finance about such statistics, and these in particular, but I do not propose to do so. I want to ask the Minister once more a question I asked on a number of occasions in the past to which I did not get a reply. The question is: why did the Taoiseach and other Ministers find it necessary to offer written personal undertakings that the exemption from income tax of profits on industrial exports would not be removed?

I have given the IDA information and that speaks for itself. The politicians can argue until the cows come home but the industries are still coming in, as well as the cows, and that is all that matters.

I asked the Minister a straightforward question. If he does not want to answer it let him say so, but I want to give him every opportunity to answer it. Am I to take it that he does not wish to answer the question?

I am saying the industries are coming in and Fianna Fáil do not like it.

Where are they coming to?

I heard what the Minister said. I take it from that—if I am wrong let him correct me—that he does not wish to answer my question. He knows, of course, that many things can be said about the figures he quoted, including in particular that the major amount of job creation to which he referred occurred on foot of commitments made while the previous Government were in office.

That is not so.

I can tell the Minister it is so. He should not say it is not because I do not believe for a minute that he has checked it. If he had any experience of the operations of the IDA he would know it must be so.

The figure of 16,000 on the basis of previous commitments has worked out to be 22,000.

The Minister should check again and he will find that what I said is correct. I am sure he is aware that the unemployment figures are considerably higher than they were in the corresponding period last year. That is the red herring the Minister is introducing. The real point is that the Taoiseach and other Ministers got up, made speeches and undertook personally to give in writing guarantees that the exemption from income tax applying to industrial exports would not be withdrawn. It is a simple question: why did they have to do that? The Minister has refused to answer the question. He can juggle around with figures or anything else but those facts speak for themselves. I submit they establish that the view this party took immediately the Government made their announcement, which they have consistently expressed since then and which we are expressing in the amendments, was the correct view, that the best interests of our economy, apart from any other questions, would have been served by not removing this exemption from existing mines. The Minister has heard the arguments but he is not prepared to accept them. As I said earlier, the consequences rest on the Minister and his colleagues.

All I can say is that I am collecting a few hundred million pounds in taxation from an industry that is well able to bear it and it will operate to the relief of the taxpayers. I will have the support of the Irish taxpayers in this.

What about the Irish workers?

Question put: "That the words proposed to be deleted stand."
The Committee divided: Tá, 50; Níl, 46.

  • Barry, Richard.
  • Belton, Luke.
  • Belton, Paddy.
  • Bermingham, Joseph.
  • Burke, Dick.
  • Clinton, Mark A.
  • Cluskey, Frank.
  • Conlan, John F.
  • Coogan, Fintan.
  • Cooney, Patrick M.
  • Corish, Brendan.
  • Cosgrave, Liam.
  • Costello, Declan.
  • Coughlan, Stephen.
  • Crotty, Kieran.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Dockrell, Henry P.
  • Dockrell, Maurice.
  • Donegan, Patrick S.
  • Donnellan, John.
  • Dunne, Thomas.
  • Enright, Thomas.
  • Esmonde, John G.
  • FitzGerald, Garret.
  • Flanagan, Oliver J.
  • Governey, Desmond.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hogan O'Higgins, Brigid.
  • Keating, Justin.
  • Kelly, John.
  • Kenny, Henry.
  • Kyne, Thomas A.
  • L'Estrange, Gerald.
  • Lynch, Gerard.
  • McDonald, Charles B.
  • McLaughlin, Joseph.
  • McMahon, Larry.
  • Malone, Patrick.
  • Murphy, Michael P.
  • O'Brien, Fergus.
  • O'Donnell, Tom.
  • O'Leary, Michael.
  • Ryan, John J.
  • Ryan, Richie.
  • Staunton, Myles.
  • Timmins, Godfrey.
  • Toal, Brendan.
  • White, James.


  • Allen, Lorcan.
  • Andrews, David.
  • Brady, Sylvester.
  • Brennan, Joseph.
  • Browne, Seán.
  • Brugha, Ruairí.
  • Burke, Raphael P.
  • Carter, Frank.
  • Colley, George.
  • Connolly, Gerard.
  • Crinion, Brendan.
  • Crowley, Flor.
  • Healy, Augustine A.
  • Herbert, Michael.
  • Kenneally, William.
  • Kitt, Michael F.
  • Lalor, Patrick J.
  • Lemass, Noel T.
  • Leonard, James.
  • Loughnane, William.
  • Lynch, Celia.
  • Lynch, Jack.
  • MacSharry, Ray.
  • de Valera, Vivion.
  • Dowling, Joe.
  • Fahey, Jackie.
  • Farrell, Joseph.
  • Faulkner, Pádraig.
  • Fitzpatrick, Tom (Dublin Central)
  • Flanagan, Seán.
  • French, Seán.
  • Gallagher, Denis.
  • Gibbons, Hugh.
  • Gibbons, James.
  • Gogan, Richard P.
  • Meaney, Tom.
  • Molloy, Robert.
  • Moore, Seán.
  • Murphy, Ciarán.
  • O'Malley, Desmond.
  • Power, Patrick.
  • Smith, Patrick.
  • Tunney, Jim.
  • Walsh, Seán.
  • Wilson, John P.
  • Wyse, Pearse.
Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Browne and Lalor.
Question declared carried.
Amendment declared lost.
Question put and agreed to.
Section 15 agreed to.

I move amendment No. 11:

In page 10, before section 16, to insert the following section:

16.—(1) Where a person who is carrying on the trade of working a qualifying mine is chargeable to income tax for the year 1974-75 and would, in accordance with the provisions of section 58 (1) of the Act of 1967, be charged to income tax under Case I of Schedule D on the full amount of the profits or gains of the year preceding that year, he may, by notice in writing given to the Inspector before the 1st day of August, 1974, elect to be charged to income tax for the year 1974-75 by reference to the amount of the profits or gains of that year.

(2) Where a person elects, as provided for in subsection (1), he shall be charged to income tax for the year 1974-75 as if the full amount of the profits or gains of the year preceding the said year 1974-75 were an amount equivalent to the full amount of the profits or gains of the year 1974-75.

As the House knows, the exemption in favour of companies mining scheduled minerals is being terminated as from 6th April, 1974, and those companies will, therefore, be subject to income tax for the year of assessment 1974-75. The normal basis of assessment is the profits of the preceding year but mining companies have claimed that the use of the preceding year basis means that their 1973 profits will be subject to tax, that this is a retrospective taxation, that they will have to reopen 1973 accounts——

I am sorry, I am finding it a little difficult to hear the Minister.

The case has been made that because the 1973-74 year is used as the basis of assessment for tax liability for 1974-75 there is some element of retrospection. Of course there is no retrospection simply because the basis of the previous year is used. The charge will be for 1974-75 and the preceding year's profits are merely used as a measure for the purpose of the 1974-75 charge. The mining interests have, however, continued to press this point and Deputy Colley also raised this matter on Second Reading. The amendment proposes to meet the point by giving the mining companies the option to be charged for 1974-75 by reference to the actual profits of that year instead of by reference to the profits of the preceding year. Whichever option they exercise there is no question of retrospection. We have given them, as we have done in the case of farmers, an option to choose actual profits or the preceding year's profits as the basis for 1974-75.

I am glad that the Minister has accepted the point I made on Second Stage that the Bill as it stood required amendment something on the lines of this amendment because as far as I am concerned the Bill as it stands does involve an element of retrospection. I would simply say at this stage that there is more to it than the income tax liability. The question of corporation profits tax arises in this matter but before I pursue that I took it on Second Stage, and said so, that the Minister did not wish to introduce retrospective legislation, that is retrospective before the 5th April, 1974, and the moving of this amendment by him is a clear indication that he does not want to do so. I am not entirely convinced that if that is his objective he has succeeded in achieving it with this amendment but it might help in pursuing this matter if the Minister could explain what is intended to be achieved by subsection (2) of the amendment. Subsection (1) is reasonably clear but subsection (2) somewhat mystifies me.

What we are doing here is simply emphasising that we are taking that year as the basis of the liability and that it will not be assumed that that was the actual profit position in the year in question. We are using an artificial basis. There is no reason for giving the person the double benefit that could arise unless that particular subsection was there.

Perhaps I could get the matter a little clearer if I put to the Minister a possible way in which this would work out and he could tell me whether it is correct or not. Under the amendment as drafted, in subsection (1) the person has to make his election before the 1st August next. Let us assume the taxpayer elects under subsection (1). Then under subsection (2), as I understand it, the basis on which he would be taxed would be the actual income for 1974-75 but presumably that cannot be ascertained until after April, 1975, and, indeed, in some cases depending on the date of the company's accounts it might go into 1976. Is it the intention to operate on the basis of 1973-74 figures and then make an adjustment and if it is not intended to do that how is it intended to operate when the actual amount of profits or gains for 1974-75 may not be ascertainable until 1976?

I think we had better explain the whole background to this subsection because it is only by an understanding of the particular difficulty which is created by the new corporation tax that the need to have this particular structure set out in this way arises. Subsection (2) provides that where an election is made the charge for 1974-75 is to be made as if the preceding year's profits were equal to those for 1974-75. The reason for this approach is to ensure that while substituting the 1974-75 profits as the measure of the charge the preceding year's basis of assessment was being preserved. This arises as a consequence of the move towards corporation tax. If we did not do this there would be quite an amount of tax lost as a consequence. There will be no additional revenue earned by the State by this but it ensures that there will be none lost either.

I rather gathered subsection (2) meant something like what the Minister has said but I was not quite sure. I do not think he will blame me when I say when one reads it it is not clear what it is saying. There are a few points I want to raise on this. When the Minister says that one is preserving the previous year's basis, I appreciate that but is the consequence of that that a liability for corporation profits tax will arise in relation to profits earned during 1973-74?

No. The Deputy will appreciate that corporation profits arise after the income tax year but if we did not identify the appropriate starting point for the corporation tax then there would be tax lost. We are providing that if a person goes to the 1974-75 period, the actual profits will not as a result of that be deemed to escape corporation tax for one year.

I will not pursue that point at the moment but it has been suggested to me, and perhaps to the Minister, that the objective which I believe the Minister has in mind could be achieved simply by providing that these companies will be liable to corporation tax, under the new arrangement, from the 6th April, 1974. Leaving aside the technical difficulties that that tax does not exist at the moment, if that is the Minister's only difficulty would it in fact achieve what he is trying to do if one could do that?

No. There would still be a year's tax loss. In any event, it seems to me that the problem here is one which could best be dealt with when we are dealing with the corporation profits tax legislation. We are dealing here with the liability of mining profits to income tax. We are dealing with an income tax situation and the corporation tax situation will be dealt with separately.

I appreciate that but it is important to know, leaving aside the technical difficulties, whether, if one could do it, that a provision that these companies would be liable to corporation tax as defined in the White Paper, from the 6th April, 1974, would achieve what the Minister wants or whether that would, in the Minister's view, mean a loss of revenue.

It would. We are concerned here with income tax. This is an Income Tax Bill in relation to mining profits. Therefore, if we were to give the concession which has been sought by the mining industry we would be losing income tax, as the law now stands.

If we ignore for the moment the question of whether it is income tax or corporation tax and think only in terms of revenue, if there were to be an enforcible provision in substitution for this amendment to the effect that these companies would be liable to corporation tax from the 6th April, 1974, would the revenue received be the same as what the Minister is trying to achieve under this?

This is what I am trying to get at.

We would lose a year's income tax.

In that case I suspect the Minister is really engaged in retrospective taxation.

Absolutely no retrospection. As there is no retrospection neither will there be postponement. The Bill proposes to impose the tax liability as from April, 1974. That is what we are very neatly doing, no more, no less.

The Minister will appreciate that this amendment came rather late and I have not had a chance to look into the very technical aspect involved. I would like to do so because I suspect we are not ad idem. The date of election is to be not later than the 1st August next. I assume the reason for giving the right of election to the taxpayer is that he can assess for himself, which is the most advantageous method. Of course, he cannot assess this before the 1st August next because he could not possibly know what the returns will be for 1974-75. Therefore, it would seem that the date of election provided in the amendment is much too early. Perhaps the Minister will comment on that.

We are dealing here with whether or not the taxpayer should have the right to avoid his profits of last year being looked at for the purpose of deciding this year's liability. He will know last year's profits before the 1st August. That is the matter on which he must make his election. If he decides to eliminate that and go on this year's, well and good. He has the knowledge in relation to last year's profits to make that choice. It is not proposed, nor would it be reasonable, to propose that he should wait until the end of the year 1974-75 before he makes the choice. He wants to eliminate and he looks back to the past. He can do that before August this year. He will have all the information ready for that at that time.

It is not much of a right of election.

It is. After all, this is a concession which he is being given which is not being given to other people who will pay on the basis of their previous year's profits.

Yes, but I understand that the Minister undertook, and intends, not to charge tax on profits earned prior to the current financial year. Is that correct?

That is right. The liability will only arise from the comencement of this year.

Yes, but the Minister is purporting to give a right of election to people where their choice is between a blind shot, not knowing what the figures are for 1974-75, or alternatively, last year's figures, which effectively is charging tax on last year's profits. My understanding was that the Minister's intention was not to charge tax on profits prior to this financial year. I think the area of misunderstanding boils down to whether he did not intend to charge tax on profits earned prior to 5th April of this year or whether he did not intend a tax liability to arise prior to 5th April of this year. There would seem to be a year's difference involved in this. My understanding is that the mining companies who met the Minister were under the impression that he did not intend the tax to be charged on any profits arising prior to the 5th of April of this year.

I think Deputy Colley will concede that we are meeting the point which has been made. These people sought to have the right to be adjudicated on the profits for the year 1974-75. They asked us not to assess them on the basis of 1973-74. We said: "OK, we will give you a choice. You make up your mind and you can choose what way you want to do it." I do not think that is unreasonable. It is a concession that is not given to the general body of taxpayers. We are giving it also to farmers who are becoming subject to income tax liability this year. It can be argued fairly for both that they are coming within a tax liability which previously did not exist and, therefore, it is reasonable that they should be given some transitional arrangement which they can operate to their own advantage. If a person wants to get this benefit it is not unreasonable that he should exercise his option before next August because once the option is exercised the inspector of taxes has to get around to assessing what the liability may be.

Does the Minister think that he conveyed to the mining interests that no tax would arise or be payable prior to this financial year or, alternatively, does he think he conveyed to them that no tax will be payable on profits earned prior to this financial year? I understand the latter is what they think he conveyed to them.

I am quite certain I made it clear that we would make mining profits subject to tax as from April, 1974. What arrangements or understandings may have been understood at that conference by the financial advisers to the mining industry I do not know. In any case, a choice has been given and they can exercise it if they wish to do so. I do not think that is in any way unreasonable. They asked for it and we are giving it to them.

As I indicated, I shall look further into this. I am not quite sure that the position is as the Minister has indicated.

Amendment agreed to.

Amendment No. 12 has been discussed with amendment No. 10.

Amendment No. 12 not moved.
Section 16 agreed to.
Section 17 agreed to.
Title agreed to.
Bill reported with amendments.

This day week?

I suggest a fortnight.

I do not want to press unduly but at the same time the legislation is urgent.

I would not anticipate a lengthy debate on Report Stage but there are some technical points I should like to look into. How urgent is the Bill from the Minister's point of view? I know he has to get it in this session.

We would like to give the companies as much time as possible to exercise their option before August. The sooner the Bill is through the better.

That is now incorporated in the Bill and so they have notice of it.

The Finance Bill is also on the way. However, I do not want to press the Deputy unduly.

It might be quicker in the long run if we take the Report Stage this day fortnight. The discussion might be shorter then than if we take it in a week.

Report Stage ordered for Wednesday, 5th June, 1974.

By agreement, it has been decided that the Dáil should now adjourn until 11.30 a.m. tomorrow.

The Dáil adjourned at 9.45 p.m. until 11.30 a.m. on Thursday, 23rd May, 1974.