Whatever about that, the Minister is now putting section 57 before us and I wish, as part of my duty as a Member of this House, to draw his attention to certain aspects of it, to ask him to reconsider it and to consider carefully whether these powers are really necessary to combat the tax evasion about which he is worried. On reflection, the Minister might consider abandoning the bulk, if not all, of section 57. In his discussion across the House with Deputy O'Malley the Minister did not seem to think there was anything particularly wrong in asking a solicitor to disclose information about his clients.
I shall draw an analogy for the Minister in this regard. He said that a solicitor should not be used as a vehicle whereby a taxpayer could avoid paying taxation for which he was responsible. If, however, a person commits a crime and goes to his solicitor asking that the solicitor take up the case, if the Minister is right in his approach in this instance there would be nothing to prevent the Minister for Justice bringing in legislation that would compel the solicitor to go to the Garda and disclose that his client had committed a crime. The Minister is dealing here with something that is fundamental to our whole system of law and jurisprudence which recognises the privilege that extends to the relationship between a solicitor and his client. For the sake of this one piece of tax evasion it is not worth even tinkering with the confidential relationship between solicitor and client. If the Minister considers this situation from a broader point of view, I think he will agree with me. If we should tamper, even for this limited purpose, with the confidential relationship between solicitor and client we would be starting something that could be very injurious in the long run in other situations.
At this stage I do not wish to go into the details of the section except to say that it is cast very widely. We can deal with that in detail on Committee Stage but I would draw the Minister's attention now to some of the wording. For example, subsection (1) of section 57 states that the Revenue Commissioners
.... may by notice in writing require any person to furnish them within such time as they may direct (not being less than twenty-eight days) with such particulars as they think necessary for the purposes of sections 55, 56 and 58.
Subsection (2) of that section reads:
The particulars which a person must furnish under this section, if he is required by such a notice so to do, include particulars...
I would draw the Minister's attention in particular to the word "include" there It seems to me that in this regard the Revenue Commissioners can direct the taxpayer involved to give them any sort of information about anything, provided it is related to the sections in question. We shall have an opportunity of dealing in a more substantial and detailed way with the section on Committee Stage but I would urge the Minister to have another look at the section to see whether the game is worth the candle.
Another aspect of this matter that I wish to put to the Minister is the question of whether at this stage, in view of the proposed enactment of the anti-avoidance provisions set out in Chapter IV, there will be a need for Chapter III. I have a particular reason for this suggestion because these interest rate restriction provisions are causing a great deal of concern and disquiet. It seems to me that they were introduced to meet a very short-term situation. During last year there was a sudden spate of company financial manipulations. There were all sorts of take-overs, amalgamations and flotations. People were borrowing either to speculate on the Stock Exchange or to finance these sort of transactions. However, the Minister must know that circumstances have changed radically since then and that most of the paper profits that were made then have disappeared. We are now reaching a situation where we will have to try to persuade people to go back into the Stock Exchange. Many of these people have taken such a beating that it will be a long time before they can be persuaded to invest in anything ever again. The much publicised and spectacular-type profits which seemed to be made at that time by different groups and organisations have largely disappeared since. Therefore, our problem in the future will be to persuade people to invest in stocks and shares for genuine development purposes.
The change which has come about in the market and on the Stock Exchange leads me to believe that the sort of situation with which the Minister was endeavouring to deal by way of these proposed interest rate restriction provisions no longer exists. It seems to me that his tax haven provisions deal with the other type of situation, namely, the situation whereby people were borrowing money here and placing it abroad in tax havens while using the interest on the money borrowed here to offset income arising in this country. That situation will be dealt with now by the Minister's proposals in Chapter IV. So, I am putting forward for consideration whether or not it is still necessary for the Minister to proceed with these restrictions of relief in respect of interest provisions, because the reason for them seems to have largely disappeared and they are undoubtedly causing very considerable concern and disquiet among the business and the commercial community. The Minister has already introduced some easing of his original proposals and I think he might in view of what I have said consider whether the whole of Chapter III might be dispensed with.
Many of my colleagues on this side of the House have spoken about the difficult situation in which the farming community finds itself at the present time and we should all admit this as a fact of life. Farmers have incurred very severe losses, indeed, and the whole atmosphere in the farming community is one of doubt and uncertainty. The Minister should seriously consider whether at this time and in these circumstances he should proceed at all with his proposals to tax farmers.
Deputy George Colley yesterday made the suggestion that these particular proposals should be postponed and I would very strongly support that suggestion. If the Minister were at this stage to say: "I will delete Chapter II entirely from this year's Finance Bill and I will just put it in cold storage until I am preparing next year's Finance Bill", his decision would have a tremendous effect on the farming community. At the moment their confidence is shattered. They geared themselves for expansion; they incurred very considerable capital expenditure; they borrowed heavily and suddenly their markets have collapsed in every direction. Psychologically, this is the worst possible time for the Minister to be coming along with this new proposal of his to bring them into the income tax net.
There is an interesting thing about the approach in this Finance Bill in regard to the taxing of farmers and it is something which reinforces me in my belief that a decision has been taken that all farmers are going to be brought by this Government inside the provisions of the income tax code and that this is only a start. The proposal is being put across in this way for political reasons to begin with but it is only the first step. What persuades me that that is so is the approach in this Finance Bill. The approach is comprehensive. All farming activities are brought in and then various exclusions are made by the different sections. The approach is a comprehensive one and all farming profits are being made liable to tax in an overall comprehensive way and then by particular provisions various exclusions, as I have said, are made. It seems to me that approach sets the scene for ultimately widening the net to cover the entire farming community. The way the Bill is framed and the way the provisions are put forward, if farmers ever again have a few prosperous years and if it seems a popular thing to do it would be quite a simple matter just to wipe out the exclusions and make every farmer in the country liable.
As I think Deputy O'Malley pointed out the £100 valuation limit has already been breached by the very unjust and iniquitous provision in regard to liability if a husband, wife or a partner engage in other business activity.
There are many aspects of these proposals in regard to the taxation of farmers on which I would like to comment but I propose to make these comments in much greater detail on Committee Stage. There are however, some aspects which I would like to mention even at this stage on the broader aspects of the provisions.
First of all, there is, as has already been adverted to, and the Minister should clear it up immediately—the discrepancy which exists between the explanatory memorandum and the terms of the Finance Bill itself on this question of the notional basis of assessment. The explanatory memorandum would lead one to believe that the provision in regard to the notional income equivalent to forty times the poor law valuation is something which will prevail as a permanent feature of this new system, but the wording of the Finance Bill itself is quite specific, quite clear and quite definite that this provision only applies for the year 1974-75. This is a matter of such fundamental importance that the Minister should deal with it and let us know at once what exactly is the position. Is the provision only as it appears in the Bill itself or is what appears to be the implication of the explanatory memorandum correct?
Another aspect of this question is the option which the Bill provides for farmers. For 1974-75 they will in the normal course of events be taxed on their profits for the previous year, that is, 1973-74 but they may, if they wish, opt to be taxed on their actual profits for 1974-75. But, if they wish to exercise that option, as I read the Bill, they must give notice within six months. In other words, they must give notice by October of this year. I suggest that that is much too soon. The Minister knows enough about farming to know that the outcome of a farmer's operations for 1974-75 will not be known to him with any sort of certainty until well after October of this year. That is something which the Minister should consider seriously.
Also, on this whole question of treatment of losses, the farming community are being set aside and treated in a way which is completely different from other taxpayers. The Bill provides that a farmer has the option to be taxed on his figures for 1973-74 or 1974-75 in regard to the year 1974-75 but what about losses which have been incurred in previous years? Farming being the unpredictable sort of vocation it is, it is quite possible that many farmers have had, for one reason or another, serious losses in 1971-72 and 1972-73, and surely if they can establish these losses, they should be able to carry them forward until such time as they are used up, as any other business can do.
The same principle, I think, should be accepted in the case of capital allowances. The Bill provides differently for capital expenditure on buildings and capital expenditure on machinery. In effect, a farmer who will now be brought within the tax net will in regard to any particular piece of machinery bought before April 1974, be treated reasonably fairly because the written-down value as at April, 1974, of that particular piece of machinery will be taken into account for capital allowance purposes but that does not apply to expenditure on buildings. There is a serious question involved here because in the years immediately preceding April, 1974, farmers did incur considerable capital expenditure on buildings. The Minister proposes that in so far as there is any expenditure after April, 1974, that expenditure will be allowed over a ten-year period. I will come back to that in a moment because I think the ten years is inadequate but it is grossly unfair that farmers who have incurred expenditure on buildings in 1971, '72-'73 in preparation for the Common Market, because they were encouraged to do so, will not be allowed to charge any of that capital expenditure against their profits from 1974 onwards. That is something which certainly should be revised. I should also like to ask the Minister to look again at the provision to allow the expenditure to be written off over a ten-year period. In the case of some farm buildings, that ten-year period might be quite adequate but in the case of other buildings, it might be far too long. I think a much shorter period on average would be fairer and much more appropriate.
The Minister also makes provision whereby the cost of farm machinery can be written off over a period and here, unlike the farm buildings, he is allowing expenditure incurred before April, 1974 to come in for the purposes of this allowance. I should like to underline the fact again that farming is a very hazardous and uncertain occupation and the provision for wear and tear allowed for factory machinery or machinery in other trades or businesses is completely inadequate and inappropriate where farm machinery is concerned. I hope the Minister will examine again his proposals in this regard and consider shortening very considerably the period over which both farm buildings and farm machinery can be written off in the accounts. Farming, as I say, is a very hazardous vocation and in particular, I should like to emphasise the unfairness of the proposal in regard to capital expenditure on buildings which was incurred before April, 1974 and which farmers were encouraged by the Government and all the institutions and organisations concerned to undertake.
There has been a considerable amount of discussion about the proposals in regard to disallowing the personal allowances to which a farmer would otherwise be entitled where off-farm income arises. I strongly and sincerely urge the Minister to drop that proposal in its entirety. I think I know the sort of argument that was put to the Minister and which persuaded him to bring in this provision. We have all heard it in discussion from time to time but it is really only a publichouse type of argument. It does not stand up. The repercussions of what the Minister is proposing to do are so serious that I urge him to have a further look at it with a view to discarding it completely. I doubt if there is anybody who is concerned about the development of this country who did not support and favour the idea of farmers being encouraged to stay on their farms and seek to augment their limited farm income with off-farm employment. This is something which is socially desirable and was widely supported by everybody concerned with the problem of rural depopulation. It seemed to be one of the main basis on which the prosperity of rural Ireland could be promoted. Many farms were of such a nature that with the best endeavour, with the best will in the world, they could never provide a farm family with the standard of living to which they were entitled and the obvious answer was for the farmer himself, his wife or some member of the family, to seek off-farm employment to augment the farm income.
I think there may have been some criticism of the sort of situation in which a farmer's wife was employed in some reasonably remunerative occupation and the combined married allowances were available against the wife's income. That may have been the sort of argument which caused the Minister to bring forward these provisions but unless there is something else involved he should discard it because it is going to have disastrous repercussions on this very desirable process of adding off-farm income to the farm income and enabling farmers in this way to provide a reasonable standard of living for themselves and their families.
The Minister, in regard to larger farmers, may, or may not, use the argument that large farmers should make a contribution through the income tax code to the Exchequer the same as everybody else. Some people feel he is entitled to use that argument but I do not agree. Whatever about the validity of that argument, and I think it is something that has not been finally established, nothing of that sort applies with regard to the particular provisions I am talking about. It is unique and a total departure in the income tax code that persons who would otherwise be entitled to income tax allowances should have them disallowed in this way. In my view it is morally indefensible and represents a completely new concept being introduced into the income tax code. Anybody who is entitled to an allowance should get that allowance and all taxpayers, whether they are in farming, or any other industry, should get their allowances impartially and equally across the board.