Finance Bill, 1974: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

When I was speaking before Question Time, I was referring to the proposal of the Minister in this Bill to impose taxation on farmers this year for the first time ever. Like many other people, I think it regrettable that the year the Minister should choose to impose taxation for the first time ever should be one of the worst years for farmers in decades, certainly since the 1930's and in every part of the country to which one goes one hears the same type of story about the problems farmers are encountering at the moment and have been for the past six or nine months. Only yesterday I heard of men being forced to sell cattle, aged about 15 months, for £50, when 12 months ago those young cattle were worth £60 to £70 as calves. In the meantime, the farmers concerned have had the trouble and expense of feeding those cattle. The losses being incurred by farmers this year are enormous. I think the only consolation they can draw from the situation is that, even with the larger farmers with over £100 valuation being involved this year as a start, very few of them will make any profit this year which would make them liable to income tax.

As far as the notional basis of assessment is concerned, this has been put across by the Minister as some big concession on his part. I cannot see any concession in it. It is proposed to assume, in the absence of accounts, that each farmer in the country made £40 clear profit for every £1 valuation which his land bears. It appears from my reading of the explanatory memorandum on the section that the only deductions from that will be rates, wages and depreciation of machinery and plant. I am now asking the Minister to tell us whether it is proposed to allow farmers who are assessed on this notional basis their ordinary personal allowances. On my reading of the section it appears they will not be.

I am very glad it is not so. The explanatory memorandum leads one to believe that it is so. It is very specific and indeed I think the Minister's speech was specific on that point—that the only deductions which he thought would be fair in the circumstances were the three things I have outlined.

It is a calculation that has to be made in the computation of farmers' profits. When you have done that you take off certain allowances. Many people who opt for this system will pay little or no tax.

In his speech the Minister stated:

Under the notional basis for 1974-75, profits were arrived at by multiplying the rateable valuation of the farm land by 40. From that figure rates on land, depreciation of farm plant and machinery and the wages paid to farm labour can be deducted. I should point out that only these three types of deductions will be admitted in cases of assessment on the notional basis, since this notional basis of assessment by reference to a valuation-multiplier of 40 represents, as matters stand, a very favourable arrangement for farmers and there is no case for making it even more so by allowing further items to be deducted.

What possible meaning can I or anybody else take from that other than what it states? Is this another example of the Minister saying a thing apparently off the top of his head even though it is in writing, and then having to go back on it later? What the Minister tells me now is certainly going back on what he stated in his speech yesterday.

Not at all. In computing the profits of the Deputy's law practice there are certain deductions made. We do not deduct the Deputy's personal allowance, his marriage allowance or his children's allowances.

Very well. We shall only have to wait and see what the Revenue Commissioners do about it. When I spoke on the budget on the suggestion that men who had a few acres of land would, under the terms of the budget, have half their personal allowances in their non-farm activities disallowed, I was told that was not so. I was sneered at and laughed at, as were a number of other Deputies on this side of the House who said the same thing. We were told that that was wrong. But before the Finance Bill was even published the Minister for Finance came out and said he was amending his budget proposals and that this would apply to people with valuations of more than £20 only. Perhaps when the Revenue Commissioners explain to the Minister what is involved in this Bill he will amend this in the same way as he amended that. If so, I shall be very happy to see it because I cannot see any farmer, certainly in present circumstances, opting for this notional basis of assessment. It would be far above the profits that any farmer could reasonably be expected to make in this year.

From my reading of the explanatory memorandum, the last paragraph on page 2 refers to this notional basis of assessment without any limitation as to time, and one is led to believe that this is something which would be a permanent feature of the law on the taxation of farmers. However, if one goes to the Bill itself, to the index, one will find the heading for section 21 is: "Notional basis of assessment for 1974-75." It appears that this notional basis of assessment is for this current financial year only and that it will be dropped in future. It is a pity the explanatory memorandum is so misleading on this point. It is misleading on other points and I do not think it is good enough that an explanatory memorandum should be produced which would mislead the public and Members of this House in the way which this does.

As I have said, we have had a major change since the budget in relation to the disallowance of half the allowances of somebody who is engaged in off-farm employment. We have had another change in this Bill in so far as the taxation of farmers is concerned, to which we saw no reference in the budget, but which I regard as a very significant one. It is not realised or appreciated by a lot of people. It is the reference to the £50 valuation limit in respect of people who have occupations outside farms. The proposal in regard to the £50 limit, as I understand it, does not make any reference to the disallowance of half the personal allowance. What it does is to make the total farm profits assessable and aggregable with the total non-farm activities of both partners in a marriage.

In other words, this is the first of many chinks in the original figure of £100 PLV which we on this side of the House forecast would come about. We thought it would come about in the first instance by the fixing of a limit of £100, reducing it to £80 next year and to £60, and so on, in following years, but straightaway in this very Bill, before the thing is put into practice at all, we have a situation that will affect a large number of farmers, all of whom are unaware of it so far, that any one who has a trade or profession or a 25 per cent holding in a company outside of his or her farm will have all of his or her farm profits added to his or her income or to the total income of both spouses and income tax will be chargeable accordingly on the total profits or income from both the farm and other employment.

There are a lot of people who have farms with £50 valuation and who either themselves or their wives are engaged in another job or profession of one kind or another. They do not at the moment realise what is in store for them but they will realise it soon enough when they get an exorbitant bill from the inspector of taxes for the current year.

I will go on to deal with the question of reliefs for various expenses and payments which are allowable under the general income tax code and examine these in the context of the changes proposed in this Bill. It was pointed out by me and several other Deputies on this side during the budget debate that the Minister's proposals to have this graduated, or "progressive" as he called it, system of taxation, beginning at 26 per cent and going up to 80 per cent at the top, would cause unfair discrimination against the less well-off taxpayer with corresponding benefits to the better-off. The examples I gave at the time were the usual sort of payments on which relief can be claimed at the moment—life assurance premiums, the interest element in mortgage repayments and interest to banks on overdrafts. There are a number of other lesser matters as well on which claims can be made, but they are the main three. I was told, and so were the others who raised this point, that we were talking nonsense, that it was not correct. The Minister for Finance told us this.

The Minister now acknowledges in section 9 that what we said was right in so far as life assurance was concerned. The Minister referred in his speech to it and said that section 9 is necessary. He said:

Under the old tax code, relief from surtax was not given in respect of life assurance premiums but under the new system it is not possible to retain this exclusion. Accordingly relief may now arise at rates up to 80 per cent on the appropriate fraction of premium payments in the case of individuals with high incomes. It is reasonable, therefore, to take some offsetting measure to limit the effect of this change, and it has been decided to restrict to a maximum of £1,000 the amount of qualifying premiums. This limit should not adversely affect the vast majority of taxpayers who are saving through the medium of life assurance.

Furthermore, those who were paying more than £1,000 before budget day will be allowed to continue to pay it. That is an admission that what a number of us on this side of the House said on the budget debate is correct. In other words those who are paying higher rates of tax will gain correspondingly higher benefit from this change in the rates. Therefore, the more life assurance they have the cheaper they will get it. If they are paying tax at the top rate the net effective cost to them is only 20p in the £.

Previously everyone, irrespective of income, was entitled to claim at the standard rate of 35 per cent. We now have the situation that the standard rate is only one of four or five rates. A great many people who will not have more than £1,550 taxable income after their personal allowances and so on have been deducted will find that they can deduct all right in relation to a certain proportion of their life assurance premiums but they can deduct only at 26p in the £ whereas the wealthy man can deduct at 60, 70 or 80p in the £ depending on his particular total rate of taxation.

I regard it as totally unfair that it should be much more beneficial to a well-off man with an income of approximately £10,000 per year to have life assurance and to get these reliefs and at the same time for a man who is not well off and who pays tax only at the rate of 26p in the £ to save only 26p in the £. I thought on first reading that what the Minister said was that he proposed to rectify this by equalising the amount which might be deducted by anybody. It would be the fair way to deal with it. The Minister recognises the problem and says that the rich will benefit much more than the less well-off but in order to stop the rich benefiting he is putting a limit of £1,000 on the amount of premiums which will qualify. That is no consolation to the man who pays tax at 26p in the £ and therefore, gets relief at that rate. The man who pays 80p in the £ will get relief at 80p in the £ but he will be limited to £1,000 in doing so.

This is simply a gesture by the Minister. It does nothing to equalise the system of deductions or bring it back to what it was—a standard rate for everyone irrespective of how well or badly off he may be. So far as this is concerned it is a very simple matter for many people. I would like to refer to a leaflet which was sent recently to PAYE payers. It is headed "Budget, 1974". I refer particularly to paragraphs 4 and 5 therein because I believe they are misleading. One gets the impression that this leaflet was put out as a Coalition public relations exercise rather than anything else. The information it gives is misleading. It says that earned income relief is gone. It does not give the effect of the abolition of the earned income relief. It gives people the impression that the personal allowances are being raised. In paragraph 4 there is a heading "Unchanged Allowances and Deductions." It says that the following allowances remain in force— allowances for life insurance premiums, superannuation contributions and so on. This is a misleading statement. It is literally true. While the allowances in a literal sence remain in force they are not unchanged. The man who does not have more than £1,550 taxable income is at a disadvantage. The proof of that is in the next paragraph which says that for 1974-75 each allowance is deductible in arriving at tax payable. The effect of this is to give relief to those paying the highest rates of income tax which are chargeable.

That is the point we made in the budget debate. I am glad to see it confirmed in an official publication of the Revenue Commissioners even though the Minister denied it at the time. This is a very important statement. That is why they have section 9 in the Bill which makes a gesture towards meeting the point we made the last time. It does nothing towards meeting the principle of the objection we hold towards the favouring of the well-off at the expense of the less well-off. Now that that principle has been accepted by the Minister, in my view the same principle applies precisely to the other matter that is referred to by the Revenue Commissioners and to which we referred in the budget debate, namely, the question of allowances for interest paid in full.

What affects most people is the question of allowances for the interest element in mortgage repayments on a dwelling house. The situation exists in which if a man has a taxable income of £10,000 a year his marginal rate of tax is 80p in the £ and the relief, therefore, which he can claim for the interest element in his mortgage repayments is worth 80p in the £ to him. A man who is endeavouring to buy his own house on a much smaller income and whose taxable income is less than £1,550 after allowances, instead of being allowed to deduct at the standard rate of 35 per cent as heretofore, will be obliged if this Bill is passed to deduct only 26p in the £.

That is clear discrimination against the less well-off man who is finding it difficult. It is a clear encouragement to the better-off man to borrow more. The more he borrows the cheaper it becomes for him. When he gets himself to the top tax bracket every £ he pays in interest is only really 20p. The less well-off man who had the right to deduct tax and claim relief at 35 per cent is now entitled to do so at 26 per cent. This presumably is part of the Just Society which is gradually being foisted on us. This is practical socialism. I cannot see any justice in it. I cannot see any semblance of equity in it. I now say to the Minister: "We were right in what we told you about life assurance. I believe we are right in what we are telling you about mortgage repayments and bank interest on overdrafts. You should take steps immediately to equalise the amount of relief everyone can get, irrespective of what his top tax is. Not to do it is to be seen to favour the rich at the expense of those who are struggling".

I wish to refer to a very sinister section in this Bill, section 57, which proposes to impose for the first time ever in the history of this State, as far as I know, an obligation on solicitors to give information to the Revenue Commissioners about their clients. I am shocked to see such a section in any Bill introduced here but particularly shocked that the person introducing it is himself a solicitor. Does he think our colleagues will meekly accept this? I fervently hope they will not and I, for one— speaking for myself only—can assure my fellow solicitors opposite that this sinister, wrong and bad provision will be resisted all the way and that resistance to it will not end if and when this section is passed by the Oireachtas.

I am sure the Deputy would not like to set forth the limit to which the solicitors' profession wanted to facilitate tax dodgers.

The solicitors' profession will do nothing to help the Revenue Commissioners to pry into the affairs of their clients. If the Minister wants to do this he is doing immense harm to the solicitors' profession but, more important, he is doing immense harm to the relationship which has existed for centuries between solicitors and their clients.

That is not what I am doing.

That is precisely what the Minister is doing and he should be ashamed of himself. If this is to be done today in regard to the relationship between solicitors and clients what is to stop some other member of the Government coming in next year with some Bill that will interfere with the relationship between a doctor and his patient or between a priest and penitent or any of the other confidential relationships which the law of this country and of Britain has always respected?

No profession has a prerogative to act as a vehicle to assist tax dodgers.

That is not what is involved; it is something far more important.

This provision is in operation in every other European country and has been in operation in Britain since 1936.

If the Minister wants to have it on his head that he is the one who introduced for the first time the destruction of the relationship between a solicitor and his client, so be it. Let it be on his head: it will not be forgotten for him.

This is rubbish.

I can tell the Minister that, as a partially practising solicitor at least, if this section is enacted and put into force and if the Revenue Commissioners come to me and ask me for information about a transaction which a client of mine carried out I shall refuse to give that information. I think the same would apply to 99 per cent of solicitors in the country. I do not know what the sanctions are for the Revenue Commissioners to force this information from solicitors but if there are sanctions I am prepared to resist them and to put up with the sanctions if I have to. I certainly would not like to be in the Minister's shoes today in introducing that contemptible provision—or attempting to do so—into our law. I hope, since we have not sufficient Members on this side of the House to prevent such an insidious thing being introduced into our law, that at least a handful of those sitting mutely behind the Minister will not act as so often backbenchers behind the present Government act, like zombies walking through the division lobbies to vote into law things they themselves know are totally abhorrent and wrong.

I have not heard any Government backbencher seeking to defend section 57 of the Bill. I challenge any of them now to do so. There are doctors and lawyers over there who should be aware of the importance of a confidential relationship between a professional man and his client or patient. Now, in the interest of trying to gather more tax the Minister, Deputy Richie Ryan, solicitor, seeks to destroy that. On his head be it.

I do not want to talk about housing and housing problems because they are not directly relevant but let me observe in passing that we have a most serious housing problem today. Private builders, as is well known, are closing down all over the country and letting men go. They are all doing this for one reason—not that there is no demand for houses but because there are hundreds of houses all over the country which are completed and in which people want to live but which people cannot get money to buy. Therefore, as a matter of normal prudence in a budget or Finance Bill one would have expected that in these circumstances the Government would have taken some reasonable steps to make money available to building societies, one of the principal sources of finance for those who wish to build or buy their own houses. There is an obvious and easy way in which the Government could do that—by removing the income tax obligations from building societies on the interest they pay to their investors. This Bill contains a section continuing the very long standing exemption of building societies from corporation profits tax; it is an annual exemption which apparently has to be renewed but it has been there for many years.

If ever there was a time when the Government should take some steps in relation to income tax so as to increase the dwindling and almost negligible flow of money into the building societies it is now, in this Bill, that they should do so and introduce a section exempting the funds of investors in building societies from income tax. This would enable a higher rate of interest to be paid by the societies to potential investors; it would considerably increase building society funds and enable the societies to lend that money to those who need funds to build or buy houses and it would enable them to do it at, not a higher rate of interest but, if anything probably at a lower rate.

The cost of this, we are told, is about £3 million a year and yet the Government adamantly refuse to do it and allow building firms all over the country to wind down as they are doing now. Within the past couple of weeks I personally met two major builders of private housing who have told me that D-Day as far as they are concerned is the August week-end; the beginning of the builders' holidays and that if they have not by then seen some indication from the Government of a willingness to tackle this problem they will have to lay off men wholesale. This happened once before in the memory of most of us, in 1956. The coincidence is pretty obvious. There was a lack of confidence then on the part of the building industry and there is a similar lack of confidence now. It is easy to see why that was so then and why it is so now. The Minister has an easy solution of much of the problem within his grasp but he arrogantly refuses to do anything about it.

You gave a fat lot to the building societies when you were there.

The building societies had ample money when we were around. Money was pouring in in increasing amounts every month and the figures were published in the Central Bank and other reports to prove it. It was pouring in then; it is now pouring out.

Last year Fianna Fáil were saying exactly the same thing. They are prophets of doom and what is killing them is that the doom is all the time receding from them.

Why are building concerns closing down all over the country and why are there so many empty houses?

Could we get back to the Finance Bill?

I wish to refer now to a matter that is not of very great importance to many people. This is the provision in section 81 —a provision which was not in the budget— to double stamp duty on share transfers and transfers of security other than Irish securities. This is slipped in nice and quietly although last year's budget would have led us to believe that the Minister wished to abolish all stamp duty and that that budget was the first instalment in that direction. I do not think there are many people who realise yet that stamp duty has doubled on all non-Irish securities, a great many of which are held in this country. No apology has been made for this. It is something that is contrary to all that we heard last year.

Deputy Colley agreed yesterday with what we are doing in this regard.

So far as stamp duties generally are concerned, there was a reduction last year on the smaller houses and land transactions but one of the anomalies that I pointed out to the Minister at that time was that, while small sales of houses or land, up to, I think, £1,000, were to be free of duty from last year —the duty on other small sales of up to £6,000, was reduced—leases or even ordinary weekly tenancy agreements which involved small rents continued to be subject to stamp duty. Last year the Minister agreed with me that there was no reason in principle why this should be so and he reminded me that there would be another Finance Bill this year and that this would be the time to consider the matter. However, the matter is not being attended to and, consequently, this anomaly continues with the result that small amounts of money are being taken from people on a basis that is unjustifiable.

There is no mention in this Bill of death duties. I presume the excuse for this is that it is proposed to abolish death duties from April of next year. Certain limits were set last year. These limits have not been increased this year. In the meantime our rate of inflation has been of the order of 16 to 17 per cent so that in effect one can say there is a corresponding increase in the net impact of death duties in the 12 months from April of this year to April of next year. The Minister makes no reference to this problem either in the Bill or in his speech.

During the past six months there has been incredibly heavy foreign borrowing by this Government. There was one loan of £83 million, payable in seven years.

Acting Chairman

I do not think this matter is in order on this Bill.

The taxation that is being raised as a result of this Bill goes in increasing amounts to repay this sort of panic foreign borrowing, borrowing carried out in an effort to keep this country afloat. The whole inflationary situation has now become such that the Government have a vested interest in its continuing in this way because inflation at this sort of rate keeps them away from day-to-day problems, keeps them going from month to month and from year to year. Some months ago in this House, shortly after there had been one of the numerous increases in the cost of petrol, beer and cigarettes, Deputy Brennan asked——

Acting Chairman

Again, I must remind the Deputy that what he is saying bears no relevance to the Finance Bill. I would ask him to limit his remarks to the contents of the Bill.

I am coming to that. Deputy Brennan asked what was the amount of VAT which would accrue to the Exchequer as a result of these increases. The increase on petrol was 1p per gallon and there was 1p also on spirits. The Minister for Finance informed the Deputy that the additional amount of VAT that these two increases would bring into the Exchequer in the current year—they were minor increases in the context of price increases recently—would be £850,000. Every time there is an increase in the price of any commodity other than food the Government get a vast additional amount of taxation. They do not appear to be collecting this extra amount because it is subsumed into the whole price increase of the commodity in question. It is this sort of additional revenue which is being acquired in this way—directly as a result of rampant inflation—that is keeping the Government and, accordingly, the country afloat. However, it is keeping the country and the Government afloat on a basis that cannot last and one which can only head us towards disaster.

One of the criteria used to define a banana republic in economic or monetary terms is the achievement of an annual inflation rate of 20 per cent. Unhappily for this country, we are set fair in this year to achieving that distinction——

Acting Chairman

Again, I must interrupt the Deputy to ask that he relate his remarks to the Bill.

——a distinction for which the people will remember this Coalition for a long time.

My contribution to this Bill will not be very lengthy. I have merely a few observations to make for the attention of the Minister and also, of course, for the records of the House. The Finance Bill gives an opportunity to all Deputies to review the financial structure of the country particularly in relation to the budget since the Finance Bill is the instrument by which the budget is implemented.

From listening to the speeches of Fianna Fáil Deputies one would think that the Minister for Finance had no achievements with which to present us. In this context let us take the question of employment. It is worthy of note that in 1973 total employment increased by 9,000 jobs compared with a decrease of 7,000 jobs in 1972. In May, 1974, employment was 5,000 jobs more than for the same period in 1972. The fact that there are more people at work, that jobs are being created and, above all, that very serious steps were taken in the Finance Bill of 1973 and continued in this Finance Bill to assist the weaker and poorer section of the community is most meritorious.

This Bill will give effect to the budgetary provisions. The efforts made by the Minister for Finance to improve the lot of the weaker sections in the community are appreciated throughout the country. The improvement in old age pensions, widows' and orphans' pensions, children's allowance, the provision for widows and deserted wives, the scheme announced by the Minister for Finance in regard to single women aged 58 years or over who will now be eligible for a pension, represent a considerable contribution to the elimination of loneliness and poverty. The provisions of the Bill will not eliminate completely the vast amount of concealed poverty that still exists but it should be the aim and ambition of every Member of the House to play his part in helping towards the elimination of poverty, distress and loneliness which, regrettably still exist and which we all have a duty to alleviate.

Unemployment benefits have been again increased. I am sure it is the policy of the Government to reduce unemployment and to create employment.

I would direct the attention of Fianna Fáil to the fact that they and the farmers' organisations speak with one voice in regard to the tax provisions of this Bill and the fact that a number of farmers will be liable to pay income tax. The income tax system must be overhauled so as to provide a fair system which would include everybody. It is most regrettable that to date the tax system has been such that some persons were obliged to pay while others got off scot free and in many instances those least able to pay were obliged to contribute generously while the law enabled certain sections of the community to be completely tax free. The farmers' organisations include the IFA, the Creamery Milk Suppliers' Association, the Land League and other organisations that represent persons engaged in activities on the land.

I want to put on record a recommendation which needs to be made and which I make in all sincerity. I represent a constituency which could be described as a good agricultural area in which there are some of the most progressive, hardest working and best type of farmers, some engaged in tillage, some in milk production and some in beef production. I do not think it is right in present circumstances, having regard to the necessity to increase exports in order to rectify balance of payments deficiencies, that there should be double taxation in respect of those engaged in agriculture. A fair system of taxation should include every citizen. There is no justification for double taxation of any section. Farmers who are landowners will be obliged under this Bill to pay income tax. The amount of rates which they will have to pay can be included in their income tax returns and there will be an allowance in respect of it. Nevertheless, the rates must be paid out of profits. The Government must seriously examine this because double taxation or, in some cases, treble taxation, could not be described as fair and just. A system whereby every citizen whose income so warrants would pay income tax would be fair and just. The question of persons being liable to double or treble taxation must be looked at again.

I want to express my views as a rural Deputy with very close connections with the farming community because of the profession in which I am engaged. I have been a Member of this House for very close on 32 years and I think I have always been noted for expressing what I believe to be a fair and honest opinion. I do not think that in all those 32 years I have experienced such a serious depression amongst the farming community as I have experienced in the past 12 months. What I am anxious about is whether there will be any danger of the Government not having their ear sufficiently to the ground. That is why I feel it part of my job as a Deputy supporting this Government to make it known clearly and without doubt that the depression and gloom hanging over the small, the medium and the large farmer is something which has caused extreme anxiety to all of us and particularly those of us who live amongst them because they are our neighbours and our friends. We share their delights and pleasures but also share their sorrows and depressions. I want to assure the Minister that no farmer in this country need have any worries or doubts about the income tax inspectors because their incomes will be so extremely limited in relation to this financial year that they will not present any difficulty. I am quite satisfied that the income of the farmers in my constituency has dropped dramatically and things have not been made easier for them.

I lament the hypocrisy of Fianna Fáil in pointing the finger at this Government and saying that they have in any way contributed to this most depressing and disastrous situation. Nobody knows better than Fianna Fáil that that is not the position. The Fianna Fáil Party know quite well and I may say that nobody knows better than the IFA, that on 19th September last a European gentleman called Hafarkamp, who I understand was in charge of European finances, a gentleman whose acquaintance I have not made and about whom I know nothing beyond reading his recommendation to the Irish Government, reported that it was absolutely essential for the Irish Government to tax Irish farmers and he criticised previous Governments for not having done so.

He went on to say that in addition to the Irish farmers being taxed, there should be a serious curb on wages and that banks as lending agencies should be advised by the Government to restrict their lending activities. In cases where loans had been issued and were being issued, according to Mr. Hafarkamp and his colleagues in Europe, rates of interest should be increased to such an extent that it would be prohibitive for borrowers to seek loans. Fianna Fáil know that this report was submitted to the Irish Government, and to the Irish public and Irish farmers' organisations. They read it and all protested against it. They questioned it and resented the intrusion of this gentleman or anybody else in the domestic affairs of this country in relation to who should, or should not, be taxed.

I want to assure the Minister and to put it on record that whatever the officers of his Department say, and I have no doubt that there is no Irish civil servant who would deliberately mislead his Minister, there is a very serious shortage of money for agricultural development, that the Agricultural Credit Corporation is bound up in large knots of red tape and that the farm modernisation scheme has added a serious tightening to these knots and from my knowledge both as an auctioneer and a Deputy, the Agricultural Credit Corporation is of little use to any of them. I also want to say that if we are obliged to introduce new forms of taxation on people already suffering from starvation of credit to assist them to produce more and to give them some encouragement to work harder, the situation calls for special examination by the Minister.

In relation to our competing with the rest of Europe, unless our farmers are to trot after the rest— we will have an opportunity of going into the whole concept of the Common Market in September or October—there is an extremely bleak future, not alone for Irish farmers but for French, Italian and all other European farmers because of the serious bungling which is clearly evident in relation to the whole structure of European agricultural policy. The Minister should dig his heels in the ground and when attending meetings of the Council of Ministers, should resist vigorously and determinedly any intrusion by European politicians, or semi-trade unionists, be they socialist, communist or conservative and should tell them to keep their noses out of the domestic affairs of the member states.

I am sorry to interrupt the Deputy but the measure we are dealing with is the Finance Bill, 1974, and this is purely a taxation measure which does not allow the Deputy scope to range into European affairset cetera.

I appreciate the anxiety of the Chair to keep Members within the limits of the Bill but this Bill imposes a taxation on farmers and brings them within the scope of income tax. As the Ceann Comhairle arrived, I was pointing out that the Government and the Irish public, viewed with concern and alarm the report from a European gentleman, Mr. Hafarkamp, in which he made certain observations as to who should and who should not pay tax here. I should like to record my resentment at any European politician imposing a tax on the farmers of this country or advocating the imposition of such a tax. The Government, elected by the people, and this Parliament can look after the domestic and internal affairs of this country without the intrusion of people who have advocated the imposition of these taxes. On the other hand, I have very little sympathy, if one can describe it as sympathy, for people who get themselves into trouble. The farmers of this country thought they would never get themselves quickly enough under the umbrella of people like the European gentleman I referred to. Perhaps they see the results of that now.

Within the next 12 months the whole question of taxation in relation to those engaged in agriculture will have to be examined. The question of the double taxation, or the treble taxation, by way of the continuance of the payment of rates will have to be examined and this examination will have to be carried out before the next budget. I genuinely feel that the farming community who have put forward proposals in relation to this double taxation system have a case and, in my view, it is one of reasonable merit which should be examined by the Government. I also feel that the Minister for Finance would be well advised to seriously consider some form of generous subsidisation in relation to the farming community so that they may in some way be compensated for the appalling, serious and disastrous losses they have experienced in recent times.

Everybody knows that not since the days of the economic war has there been such a drop in the income of those landowners who are engaged in livestock. Banks are putting on pressure, and let there be no doubt about it but that the banks are putting on pressure on certain landowners. Landowners have been notified by the banks that they cannot get a penny piece of additional overdraft from now until they lodge what is described as the annual harvest cheques. It is an appalling thing to have people without money. It is very fine for us to speak as Members of this House but we have not had the experience of the embarrassment of such circumstances.

The Deputy should speak for himself.

We all have a duty to speak for the people we represent and I am speaking for those in my constituency who have approached me professionally and otherwise. Their circumstances can only be described as appalling over the past 12 months.

I am sure the Deputy will agree with me that matters appertaining to agriculture are matters for another Estimate and another Minister.

I fully agree. I want to bring to the attention of the Minister the plight of these people who will be obliged, under the new taxation system proposed in this Bill, to pay income tax. Their incomes have drastically fallen off and to such an extent that they could not be included to any degree in the income tax provisions of this Bill.

The Deputy will appreciate that if there are losses no income tax liability can arise. It is doing a favour to bring people who are making a loss into the tax net because they can set off those losses against gains in future years.

If there are advantages in it I want them to go to the people.

So the Deputy is happy now with the Minister's statement that all the farmer has to do is run his holding at a loss?

Provided that the inspector of taxes will accept it.

The Deputy knows very well that the inspector of taxes will not accept that.

That is another question. Those of us who are accustomed to communicating with the income tax offices know that the inspector of taxes will not be as generously disposed towards the taxpayer as the Minister would be were he an inspector.

From my close connection with the farming community I have seen the very serious loss of income they have experienced. The Minister for Finance should keep this matter under review, particularly the question of the payment of rates.

Should the matter not be kept under constant review?

It should be kept under constant review but it may be possible for the Minister, after his discussions with the representatives of the farming community, to take the necessary steps in relation to rates. A substantial subsidy should be paid to farmers where it is established that serious losses in income have occurred and there is no trouble in establishing that beyond any shadow of doubt.

Would the Minister consider an amendment to this Bill at a later stage whereby rates will be removed from all community and parochial halls? We are advocating greater facilities, recreational and otherwise, in rural Ireland. These halls have been seriously handicapped by having to pay rates. All parochial and community halls in rural Ireland should be derated.

Hear, hear.

It is very necessary that this should be done. I had to appeal in the Circuit Court and elsewhere on behalf of a number of parishes in the midlands in an effort to have the valuation of different country halls reduced. There are voluntary committees running those halls in order to keep some form of activity alive in rural Ireland and it is very wrong that they should have heavy rates imposed on them.

I want to give the Minister an assurance, and he may accept my word for it if he has any doubts about the opinions expressed by members of the Opposition, that there is a serious problem in relation to money for housing. Let there be no doubt whatever about that.

Hear, hear.

This is hardly relevant on the Finance Bill.

Money, taxation, how it is spent.

The Chair will control these matters.

Whatever the views of the Chair are I will accept them but I want to assure the Minister that so far as housing is concerned and the amount of money that is being spent on housing and in so far as building societies are concerned there is a very serious hold-up on money to people for whom it should be made available.

These are matters for the Estimate for Local Government.

I appreciate that but I want to let the Minister know that there is at least one Deputy on this side of the House who feels aggrieved about this situation. It can have serious consequences if it is allowed to develop. I will leave it at that. The position in relation to housing is not as happy as many would like to believe.

I also want to direct the Minister's attention to the fact that we have, perhaps, the most expensive motoring in the world. When will there be some relief from tax for the motorist? The motorist must be very near the point of revolt. The motor car has become a necessity of life. A worker needs it to get to and from his work. It is high time there was a complete review of motoring costs. The cost of petrol is becoming prohibitive.

I was rather disappointed that the Minister when preparing his Finance Bill and his budget did not view more seriously the alarming amount of money that is being spent on drink. If people are prepared to spend all their leisure time in lounge bars and to spend lavishly, the Minister has a duty, if this is surplus money which they are spending and if there is no other way in which they can dispose of it, to see that Revenue get some of it. Figures recently released show that there has been an extraordinary increase in the amount of spending on alcoholic drink in Ireland. This has caused concern. I hope the Minister will bear in mind that it would be better if widows and orphans, old age pensioners and the less well-to-do sections of the community who cannot afford to spend any of their time in such places, got a share of this money.

Deputy O'Malley raised the question of solicitors giving information to the Revenue Commissioners under the provisions of this Bill. I believe there must have been talks between the Department of Finance and the Incorporated Law Society. If there have been, perhaps the Minister would indicate this to the House. I think it would be extremely wrong of any solicitor, auctioneer, surveyor or engineer who has the confidence of his client to disclose to the Revenue Commissioners or to anybody else details of his transactions with his client. I want to say, as an auctioneer, that if the Revenue Commissioners ever seek information from me professionally about any of my customers I will never reveal it. I think it would be wrong and I hope that before these provisions which apparently are in operation in Britain and other European countries appear on our Statute Book there will be suitable talks with the Incorporated Law Society and, if other professions are to be involved, with the professional bodies involved. It may be that certain guarantees may have to be given. Some steps should be taken to ensure the continued privacy of the client and to reinforce the confidence between client and solicitor and whatever other professional interests may be involved. If confidence is broken it may lead to a high degree of disrespect for the profession. A provision of this kind, however desirable, can also be dangerous.

I want to ask the Minister for Finance to arrange with the banking interests to take suitable action in regard to the rates of interest which they are charging to borrowers. It is both unfair and unjust. The Minister is well aware that under the existing banking system every bank loan creates a deposit.

I am sorry, Deputy. This does not seem relevant to the Bill.

I am inclined to agree again but this is an opportunity of making it known to the Minister that there is uneasiness among existing and prospective taxpayers who are unable to meet the present rates of bank interest. If he cannot have that conveyed to the banks then he should come into this House with suitable legislation so that we may be able to do something to assist people who cannot assist themselves.

There are many practical provisions in the Finance Bill. Any criticism which I have offered has not been to create embarrassment for the Minister but to make it known that there is at the moment, particularly in rural Ireland, despair and depression and it is essential that Members of the Government be made aware of these facts. This can be done by the expression of views by Members of the House.

I wish the Minister every success and good luck. Every Minister for Finance has an extremely difficult job to do. It is not a pleasant one. It is one in which one can find oneself in a fool's paradise. One should always be eager to learn from politicians all over the country. If Parliament is to function effectively and properly it is essential, that every Member, no matter what his party affiliations are, should rise to make known the feelings of his constituents. I have done so in relation to the feelings of the farmers in my constituency, who have left me in no doubt whatever about the drastic reduction in their incomes. I have seen the records and I have consulted the agricultural advisers. I know the circumstances in which the small farmers have worked over the past 18 months. I want the Minister to bear this in mind as a guide for the coming 12 months which I hope will be more favourable for these people than the past 12 months.

There is little use in the Opposition pointing the finger across at the Government because they are equally responsible for the circumstances in which these people find themselves. I advise the politicians in the Opposition party not to play politics with regard to the plight of those people who are the victims of their work while they were in Government. Many of these people find that they cannot sell their young livestock because they carried out the advice Fianna Fáil gave them. They regret that today.

If they were dependent on Britain where would they sell them now?

I am afraid this is not relevant to the Bill. We must get back to the Bill.

They cannot sell them to anybody. It is no use saying they can sell them to Italy.

This is not relevant to the Bill under discussion.

Fianna Fáil got them into that mess. There is no use pointing the finger at the Minister for Agriculture and Fisheries, the Minister for Finance or anybody else. We want to try to assist those people.

That is why the Government is taxing them.

They would not be taxed if it were not for people like Hafarkamp, who advised on 19th September last that they should be taxed and the Government were not doing their duty if they did not tax them.


Order, please.

Who is that fellow the Deputy is talking about?

He is Mr. Hafarkamp.

We must get back to the Finance Bill.

I am very glad to hear Deputy Callanan asking who Mr. Hafarkamp is because I am sure every farmer in Ireland is asking the same question.

Is it "Hamp" or "Hump"?

As far as I am concerned with that gentleman it would be "Lump". In 32 years I have not seen the agricultural community in such a depressed state as they are in today. This calls for very serious action and the sooner it is taken either here or in Europe the better. Those people have had a bad time during the past 12 months and their prospects for the coming year are not too good. It calls for courage and organisation. It may call for subsidies. It may call for the Minister for Finance to come to their aid. One thing is certain. Unless someone comes to their aid, their plight will not only be serious but very unfortunate.

Hear, hear.

Having heard Deputy Flanagan's very open condemnation of the Labour-Fine Gael Administration, I should like to say to the Minister for Finance that it would appear to me that this will probably be the last time he will have the pleasure of introducing a Finance Bill into this House.

Much of what Deputy Flanagan said, particularly in relation to the agricultural industry, is very true. I should like to say, not for the record as Deputy Flanagan seems to say many things, but to him before he leaves, that if he is sincere in what he says he can table whatever amendments he feels should be tabled for Committee Stage. If he feels as strongly as he would like us to believe he feels—and particularly if at a later stage, we are referred back to the record—that something should be done and must be done now to prevent, in his own words, the double and treble taxation of the farming community, I respectfully suggest that he should do something positive about it.

He warned us that none of us should play politics with this situation. If anybody knows how to play politics with any situation, I would give full marks to Deputy Flanagan because, having spent 32 years here, as he said, I have no doubt whatsoever that, when it comes to us all being out of step except the one Johnny, Deputy Flanagan, from what he said here today, is trying to have 1/- each way. He has accused his Minister—not that I accept the accusation—of being in a fool's paradise. I do not altogether go along with that accusation. I would change it somewhat and say that the Minister is not in a fool's paradise but in a paradise of fools in relation to what is happening throughout the country at present.

Deputy Flanagan is on record here this evening as saying that he has a great fear that the Government have not got their ear to the ground. Deputy Flanagan can rest assured that his fear is more than just a fear. It is a positive fact that the Government have not got their ear to the ground. His condemnation of his Government, composed of Labour and Fine Gael, is a welcome sign that, for some reason or another, Deputy Flanagan sees the writing on the wall and wants to be prepared for the time when the Taoiseach will take that little trip to Aras an Uachtaráin and throw in the towel.

That is what the Deputy would like but that will not happen.

He will then say: "I was right. I advised my own that they were wrong. I spoke on behalf of the people of my constituency and I warned those fellows up there that A, B, C, D."

What he said about the housing crisis is in direct conflict with what was said here this afternoon by the Labour Minister for Local Government. That Minister boldly said here this afternoon that this crisis does not exist. To help my friend and colleague, Deputy Callanan let me refer to the gentleman to whom Deputy Flanagan attributed the new taxation system on certain members of our farming community, Mr. Hafarkamp.

I suppose Deputy Flanagan would like us to believe that it was this gentleman and nobody else who forced the Minister to introduce tax on farmers. It is not as simple as all that, I can assure Deputy Callanan, because the people who put the pressure on the Minister to do what he did are the people who should be sitting in that centre bench. These are the people Deputy Flanagan is trying for some reason or another to keep from taking their share of the blame by saying that this Mr. Hafarkamp, who visited this country on 19th September last, was the man who proposed what Deputy Flanagan is sorry is now involved in the Finance Bill.

It would appear to me that there was little or no consultation even within the Fine Gael Party as to what would be in this Bill. It was not explained to them at party level. If the Minister did not do that at his own party level, it would be difficult to expect that he did it for the Labour Party. I gather, as a matter of passing interest, that party meetings either of Fine Gael as a party or Labour as a party or, more important still, as a joint party since they formed the Coalition Government, are becoming a rarity and I gather that they will be no longer happening in the future.

This hardly arises on the provisions of the Finance Bill.

I had no desire to go beyond the terms of reference of this Bill but, having listened to Deputy Flanagan over the past hour or so trying to have 1/- each way, and trying to sit on a political fence, so that whatever way the ball might hop he might jump and say: "Did I not tell you that this would happen? Did I not urge that something should be done about it?" I was tempted to comment for a few minutes on some of the things he said.

I had hoped that, in my contribution to this Bill, I would deal mainly with it as it affects the farming community. The Minister said:

This Bill is the instrument by which the Government hope to achieve one of the main aims of this year's budget, namely tax reform, with the object of ensuring greater equity in the distribution and sharing of the tax burden.

These are the Minister's words. Unfortunately, he has failed miserably to achieve what he hoped he might achieve. It will be considered, particularly by the farming community, that this effort by the Minister for Finance in the Labour-Fine Gael Government is another failure. The Minister said:

In the interests of fair play the Bill contains a number of significant provisions to counteract tax-avoidance and evasion.

The Minister talks about fair play. If he is to be taken as seriously as his party colleague who spoke before me, I would not mind what appears in this document, but the Minister for Finance in our country is meant to be a responsible person. If he feels that what he purports to do in this Bill is to be regarded as fair play, on this score as well the Minister has failed. He said:

There will be one law for all, not one for the rich and another for the poor.

As I proceed during my contribution to this debate, which I hope will not be long, I will prove conclusively that what the Minister said about one law for all is something which he has failed, and failed miserably, to achieve. For the first time in the history of the State farmers are coming into the income tax net. It is understandable that as a result of this operation, it being the first time, many complex problems will arise and many difficulties will have to be faced up to if they are to be accommodated within the tax net in an equitable way. The Minister says that while perfection cannot be achieved in one move, that is no reason why we should not make an effort to make some advance in the right direction. He goes on to say:

The Bill is not a panacea for all taxation imperfections but it is a real and significant step on the road to an equitable, acceptable and reformed code of taxation.

These are grandiose sentences. They read very well on the records of the House and sound well when spoken in the House. They read well in our national newspapers, but let us be honest with one another. If the Minister wants us to believe that he will achieve what he sets out to achieve, to believe it is a real and significant step on the road to an equitable, acceptable and reformed code of taxation, then I would like to tell him, as did his party colleague, Deputy Oliver Flanagan, that he has failed miserably.

The Labour-Fine Gael Government have been in office for the last 15 months or so, and there has been a great deal of talk about open government, government by consultation: "We, the members of the Government, are always available to meet the people. We are there to discuss their problems with their representatives." The Minister says in page 4 of his brief:

I promised that full cognisance would be taken of the particular problems of farmers who were now being brought into income taxation for the first time...

Further down in the same page he says:

Since my budget statement, very useful consultations have been held with the National Economic and Social Council and with representative farming organisations regarding the considerations to be borne in mind in the taxation of farm profits.

It is only natural that consultations would take place. I commend the Minister for it and if what he has produced here today in the form of the Finance Bill before us were a product of consultations with the interested people, the farm organisations, then I would be pleased. But the Minister knows and the farming organisations know, and, far more important than the farmers and the farming organisations or the Minister, the people of the country know full well the limit of the consultations that have taken place. In the front of today's papers there is one article that says: "Why Ryan did not meet the farm bodies". Then there is another report: "The Irish Farmers' Association are very upset that Mr. Ryan is not available to meet them".

If the Deputy would sit down and if the debate could be wound up, I could meet them.

The Minister, Deputy Ryan, was not unavailable to meet the farming organisations prior to the Presidential election in May of last year, and I understand that since then the Minister has met the farming organisations once or twice. I believe, even this week, but only at the insistence of the Taoiseach, the Minister made himself available to meet the farming organisations to discuss the many problems they have as a result of what the Minister has unwisely provided in this Finance Bill in regard to the imposition of income tax on the farmers.

If we are to have government by consultation, then let us have it. I suppose I should say, in fairness to the Minister, we realise he is a very busy person. There are many calls on his time because of the office he holds, but in a matter of such great importance he should make time; he should avail of the opportunity being given to him to meet these people. If he were to do that, there would not be such headlines as are in today's newspapers where militant action is being hinted at by the farming organisations: "unless Mr. Ryan is pre pared to drop certain sections of the Finance Bill".

There is an implication carried by all the newspapers today that the farm organisations are angry with the Minister; indeed, that they are more than angry with the Minister, and that they would hope to do business with the Minister for Agriculture and Fisheries, Deputy Clinton, instead. They would hope that the Minister for Agriculture and Fisheries would be in a strong enough position to talk farming sense to the Minister for Finance and point out to him the error of his ways, and that if he persists with the proposals in this Bill it will lead to many problems for himself and his government.

It appears to me that the amount of background work that was put into this Bill was inadequate. If proper research and study of the situation as it now is were done by the Minister and his officials, then they would realise that, in the words of Deputy Flanagan, his own party colleague, some people are being doubly and trebly taxed for the first time. I would agree wholeheartedly with Deputy Flanagan that throughout the agricultural industry there is a feeling of grave anxiety, deep depression and gloom. It is no secret that the beef industry is tottering on the verge of disaster and not, as Deputy Flanagan might want us to think, because of our entry into Europe but, to my mind and to the minds of many people throughout the country, because of the poor quality people who are working in Europe on our behalf, namely, the members of the Labour-Fine Gael Government. It is known at large that we are not powerful enough or determined enough at the European Ministers' table to get what we are entitled to get, what is laid down in the Treaty of Rome, that is, preference for our markets. We are guaranteed preference for our markets. We are not getting it, and no satisfactory explanation has been forthcoming from the Minister for Finance, the Minister for Agriculture and Fisheries or the Government as a body.

Let us look now at the tillage farmer. He, too, has clearly demonstrated that he has no confidence in the Minister for Agriculture and Fisheries and, in proof of his lack of confidence, he has completely ignored the recommendations and advice of the Minister that more tillage should be cultivated this year. It is a fact that there is a 20 per cent decrease in tillage and that shows the lack of credibility in tillage farmers where the Minister is concerned.

This would be more appropriate to a debate on agriculture.

So I would think and I would not have entered into this area but for the fact that Deputy O.J. Flanagan had a field day, if I may use that expression, in this area. The pigs and poultry side of agriculture have suffered disastrously because of certain actions—perhaps inaction— on the part of the Government. Anyone who knows anything about the dairy industry knows only too well that one of the most profitable spin-offs in that particular sector is the income derived from calves. This year one could buy for £5 a calf that would have cost £80 12 months ago. I am trying to help Deputy O.J. Flanagan to get the ear of his Minister so that the Minister may be made aware of the fact that there is this deep gloom in the agricultural sector. Unlike Deputy O.J. Flanagan, we know why it exists. It exists because of Government action and inaction, because of what they did in some areas and failed to do in other areas.

There is grave disquiet within farming organisations because of the provisions in this Bill. This is not a time at which to engender further disquiet on the agricultural front. The confidence of those in the industry has been sadly shattered in the last 12 months and it is doubtful if they can take much more without very, very significant consequences. That is why I urge the Minister to meet the farming organisations immediately. I hope this meeting will take place promptly so that, on Committee Stage, certain major changes can be made in this proposed legislation. If these changes are not made chaos is inevitable. Nobody disagrees with the wealthier farmers contributing their fair share to the Exchequer.

One would not have thought that listening to the Deputy for the last quarter of an hour.

With all due respect to the Minister—I admit I have a certain fondness for him—the next time he is travelling between one city and another he should get out of his car, try to adopt a country accent and talk to the farming people. If he comes to my constituency I will bring him around to some of his own good cousins, who live quite near me, and he can hear what they have to say.

I was there quite recently.

I would have heard about it if the Minister had been there. I know what is happening in my area better than the Minister knows what is happening in his. I would like the Minister to keep a constant examination going as to the methods by which he hopes to bring the wealthier farmers into the tax net. There are many difficulties. I quite understand it is not easy to develop a system in a short time, certainly not in the short time the Minister is trying to put his systems into operation in order to catch certain sectors of the farming community in the tax net. Are we satisfied that the valuation system is the fairest system or the best system? There are many who believe that it is not the fairest and not the best. I know land in Limerick valued at £1 per acre and I know land as good, if not better, valued as low as 10p, 15p and 20p an acre. I do not believe the PLV system is the fairest. If taxation is to be collected, then let it be collected in the fairest way possible. The Minister said he wants one law for all. With all the expertise he has available to him I sincerely hope he will not now sit back and say we have the fairest system, the money is coming in, and leave it at that. That would be quite wrong. The Minister should put down an amendment on Committee Stage allowing farmers to write off loans against income tax.

They can do that.

The Minister can twist his words to suit every occasion.

But that is what this Bill is all about.

It is not. As I said, the Minister can twist his words to suit the occasion. My colleague from Limerick pointed out how the Minister changes to suit the occasion. Like all good legal men, I suppose the Minister cannot admit he was wrong and did say something. I doubt if the Minister really wants to do something which will be inevitable if this Bill goes through in its present form, namely, wipe out farmhouse holidays. I am sure it is not necessary for me to go into detail about the campaign which was launched by Bord Fáilte a number of years ago urging many of our farming housewives to get involved in this industry for obvious reasons—to supplement their incomes and provide a service for our tourist industry. This industry is in danger as a result of the Minister's proposals in this Bill.

On Committee Stage, the Minister must bring in an amendment to provide that rates on agricultural land will be written off against farmers' income tax payments if we are to have fair play all round. If he does not bring in a number of amendments I hope he will accept them when we put them down. The figure of £20 PLV for exemption of tax free allowances is too small. A figure of £30 or £40 would be more reasonable and acceptable. Section 22 provides 10 per cent allowance for the maintenance of farm buildings. This too is very small. Perhaps the Minister might be good enough to have another look at these figures.

If he feels that in further crucifying the small farmer, the man who must get another job to supplement his income in order to keep his wife and family, he is being fair and having one law for all, that shows how right Deputy Flanagan was when he said that the Minister had not got his ear to the ground and was living in a fool's paradise. If this Bill goes through without amendment the part-time farmer will have his tax allowance halved if his valuation exceeds £20. If this is the Minister's interpretation of fair play, it is not mine.

Sections 16 and 21 appear to discriminate against the farmer who has another trade compared with one who is a director of a company. In the first case he may be earning only £100 a year but he still must pay tax if his valuation is over £50 and he cannot use the notional basis of assessment. On the other hand, the director could hold up to 25 per cent of the shares of a large company and still benefit from the £100 limit and the notional basis.

I respectfully suggest that an amendment should be proposed which would allow farmers to benefit from those concessions, provided they did not earn more than 50 per cent of their total income from an outside source. Unless there is a change in that section, the farm holiday industry, which the Minister and his colleagues must never have enjoyed, will be badly damaged. If a farmer's wife takes on a part time job it is unfair that her husband should lose the concession to use the notional tax basis. Farmers who are not allowed use the notional tax basis for this or any other reason will be in the same position as the ordinary businessman and should receive some allowance because a large proportion of their output is exported.

The most serious omission in the Bill is that rates on agricultural land cannot be offset completely against a farmer's tax bill. It is not enough to allow rates as an expense since they form such a large part of a farmer's costs. Many people are hoping that, even at this late stage and after proper consultations, the Minister will have a change of mind in this respect. I made my suggestions in good faith and every one of them is important.

The Minister may rest assured that the industry about which I have been talking is in serious difficulty on all fronts. He should not do anything which would aggravate these problems further. He should meet these people, talk to them and be reasonable. I hope he will not think it remiss of me when I say that I sincerely hope for the sake of our major industry, agriculture, on which many of us are so dependent, that he will be far more reasonable with their representatives than he was with Members of this House when he first brought legislation before us shortly after he became Minister for Finance. Let him be man enough to find the time to meet these people, hear their practical difficulties and do something about them rather than undermine the confidence of the farming industry.

The protracted delay in the production of the Finance Bill this year has very serious implications. It seems to me to be quite inexplicable. The budget was introduced reasonably early and, accordingly, we could have expected that the Finance Bill would come before us long before now. We could also have expected that we would have plenty of time to discuss it in detail before the summer Recess. In my view such a discussion would have been eminently desirable.

In any year the Finance Bill, from the economic and social point of view, is by far the most important piece of legislation to come before the House. It affects in a vital way, individuals, companies and organisations. It influences the entire economic climate. The taxation of the private citizen is one of the fundamentals of Government. We, as a Legislature, have a solemn duty to carry out a detailed and critical examination of every taxation measure which comes before us. We are the watchdogs of the private citizen in this regard. It might seem unnecessary to have to say that but I think it is no harm to remind ourselves from time to time of our duty in this regard. We should keep before our minds what that duty is. If we are to be a real Legislature, taxation is one area in which we must never neglect to carry out scrupulously and diligently our full parliamentary functions.

The tax gathering machine, as it exists in this and other countries, can be cold and ruthless. It is often very harsh in its operation where the private citizen is concerned. All of us have had experience of that. Once a piece of tax legislation leaves this House it grinds on inexorably under its own momentum. There is no scope in its operation for any concession on humanitarian grounds, no flexible interpretation is possible. We have seen measures that were brought in here with liberal intentions but in their detailed application turn into something completely different. Therefore, we have a solemn duty as a Legislature before a taxation measure leaves the House to try to foresee any problems or difficulties that might arise, and any hardships or injustices it might cause.

That is particularly so this year when a major change is being made in the taxation structure of the community as a whole. The largest single sector of our community are this year having imposed on them income taxation for the first time. It is in this year, above any other year, that we should be particularly vigilant in what we are passing and in the powers we are giving to the Minister and, through him, to the Revenue Commissioners. I have always had a personal belief that income tax is not a suitable vehicle for taxing farming as a vocation. I think the way things have gone during last winter and in the spring of this year proves I am right in that regard. I was glad to hear our spokesman on Agriculture speak of the contribution farmers should make to the community. That is the way we should be thinking about this matter.

Everybody accepts that the farming community, as any other section, should make a contribution to the common good through the common exchequer, but it is the way in which that contribution is made that is open for debate and discussion. To assess farming profits is a complicated and difficult matter. It is difficult from the technical point of view apart altogether from the social considerations that are involved.

During my contribution to this debate I shall mention some aspects of what the Minister proposes that, at first glance, appear to me to give rise to difficulties. If these difficulties can be seen at first glance, who knows what hardships and injustices may, and will, arise when these proposals are implemented.

This Bill needs careful study, particularly that section dealing with the farming community. A number of amendments will be needed but I do not think that in the time which the Government are allowing for this Bill it will get the scrupulous detailed examination and careful amendment it should get and which the farming community are entitled to expect.

I should like to know why the Bill was delayed for so long. When we had an early budget, why did we not have the Finance Bill in plenty of time to have the kind of full discussion about which I have been speaking? Was the delay political? Was the Minister simply not getting on with his work, or was he having political difficulties with his Government colleagues or his party? There is another possibility that I hope is not true, namely, that the Revenue Commissioners are not able to cope with everything they are being asked to undertake at this time.

On several occasions I have made known my admiration for the Revenue Commissioners as an organisation and as an institution. It is a heavy responsibility on any Minister or Government to make sure that this very fine organisation is preserved intact and maintained at the highest possible level of efficiency. The Minister has asked them in a very short space of time to do an enormous amount. He has asked them to produce White Papers and then to produce alterations to the White Papers. It is perfectly obvious also that they must have an enormous workload arising out of our membership of the EEC. If that is the reason for the delay in producing the Finance Bill, the Minister should tell us. He owes us some explanation and I hope he will give it in his reply.

Arising out of the unsatisfactory timetable which faces us in connection with this Bill, I want to question whether we must pass this legislation before the summer recess. The House will recall that there were no resolutions of the normal type in this year's budget. I will leave aside for a moment the fact that I believe there should have been a resolution dealing with the imposition of taxation on farmers. The Minister, with considerable cunning, avoided bringing in that resolution so as not to have a discussion on the subject before the local elections. I have already made that point and I will not deal with it agian. That resolution was not put before the House and there were none of the usual budgetary resolutions.

Standing Order No. 120 states:

On the completion by the Dáil of the consideration of any Resolution, or series of Resolutions, voting money for public services, or imposing taxation, a Bill shall be prepared and introduced by the member of the Government in charge of the Department of Finance, or another member of the Government acting on his behalf.

Arising out of that, we have always had a situation where the Finance Bill had to be passed before 6th August in accordance with section 4 of the Provisional Collection of Taxes Act. In other words, these resolutions had to be enshrined in legislation within four months. As I see it, that situation does not apply this year. I suggest to the Minister that technically there is no reason why a full discussion on this legislation could not be left over until after the summer Recess if we are—as we appear to be —very pressed for time between now and the time the House rises.

The Finance Bill before us has four principal parts. There is the first part incorporated in Chapter I which substitutes the new rates of tax for income tax and surtax. There is the section which deals with the taxation of farming profits. There is the section which deals with the anti-evasion and anti-avoidance measures and finally there is the part which deals with the restriction of relief in respect of interest.

The first part of the Bill, the part included in Chapter I, lays down the new system of income taxation, the new rates, for future years. The Minister has placed this before us as something to be welcomed, as a great reform; something which represents a simplification of the taxation code. I think that that is complete nonsense. I do not think the Minister should be going through this futile exercise of congratulating himself on simplifying our taxation structure. I think the evidence is there that, far from simplifying it in the short time in which he has been in office, he has complicated it to as great a degree as did any of his predecessors. If I may mention just one point, the Income Tax Act of 1967 codified the income tax law. It did a magnificent job in bringing all the law in regard to income tax together into one composite statute. To some extent, that was a step towards simplification of our income tax law, as a body of law, by putting it all together in one composite statute. But, in this Bill before us, the Minister has a sheaf of pages repealing enactments and amending the 1967 Act. Therefore it seems to me that, once this Finance Bill becomes law, the 1967 Income Tax Act, as a piece of codification, will be relatively useless.

Furthermore, in this Bill, the Minister is introducing a restriction on relief in respect of interest and to this effect is introducing a whole series of new, complicated provisions. I think it is foolish of him to go on with this pretence that he is simplifying our taxation code. I am not sure either that, if he were wise, he would lay too much stress on the desirability of simplifying the taxation structure because the fairer a taxation system is the more complicated it has to be and, if one wants to have a really just and fair system, it has to be very sophisticated and, therefore, necessarily very complex. Any time one wants to make exclusions or special provisions, one complicates the structure and, if there are special cases that have to be met, one complicates it further still. Therefore, a sophisticated, fair system of taxation is necessarily complicated.

In these days of computers—and the Revenue Commissioners have been very progressive in their adaptation to the computer world—I do not think the Minister should sacrifice the refinements which fair play and justice demand in a taxation structure for simplicity. In fact, I suppose, the ultimate in fairness in a taxation system would be a separate and distinct assessment for every individual in the community. Perhaps some day computers will make that possible. In fact, I understand that there is a relatively recent concept of negative taxation which, in effect, means that every citizen has a running account with the State. All his debits are totted up; all the credits due to him are likewise totted up and he either receives the difference from the State or pays it into the Exchequer. I suppose that is a very sophisticated and advanced concept. Certainly it is going completely in the opposite direction from which the Minister, in theory at least, is endeavouring to go.

If this new, unified rate of tax which the Minister has brought in has no other virtue than the one the Minister is claiming for it, namely, that it is simpler than the one he is discarding, then that is not sufficient reason for bringing it in. His primary consideration should be fairness, equity and the gearing of the taxation burden exactly to the individual's capacity to pay. I do not think what he is bringing in here, in Chapter I, is an improvement in that regard and some of my colleagues have already pointed out various ways in which this attempted simplification by the Minister in fact will lead to discrepancies and injustices of one type or another.

Whatever about that aspect of these new rates, the one important thing about them is that they go to a very high level indeed. If the Minister's ideas—as put forward in this Bill—are implemented, so far as personal income is concerned, we are going to be one of the very highly taxed countries of the world. I believe that is fundamentally wrong in our circumstances.

Would the Deputy not accept that we can correct that once we have drawn the base? Would he not accept that we might not be able to correct this until we have drawn a base?

I was about to mention that, and I will do so in a moment. I believe these rates are too high. I believe that very high rates of taxation are counter productive because they inevitably lead to evasion.

Hear, hear

There is a direct relationship between excessively high rates of taxation in any area and evasion: if customs duties are too high there is smuggling; if income tax rates are too high there are all sorts of devices to evade them. For a country in our circumstances I believe the tax rates on personal incomes are much too high. I should like to make this point—I was about to make it anyway—on the Minister's interjection. We now have VAT bringing in vastly increased revenues to our Exchequer, revenues from a totally new source, revenues which are on a scale that some years ago we never even visualised. I would say that a decade ago if a Minister for Finance in this country had visualised automatic monthly revenues of the order which VAT is bringing in today he could easily have contemplated abolishing taxation on personal incomes altogether.

We now have this new form of indirect taxation, VAT, bringing in greatly expanded resources regularly to the Exchequer, but at the same time we are to have these very high rates of personal taxation. I believe that there is something wrong with that equation. If ten years ago a Minister for Finance could have visualised revenue on this scale from an indirect source—many Deputies will recall the trauma there was when we were bringing in the turnover tax —he could certainly have contemplated abolishing personal income tax and even surtax.

There is another aspect of this. The Minister interjected about broadening the base. It is quite clear that it is only a matter of time until the natural resources which up to recently we did not suspect we had but which now, fortunately, have been discovered, will provide a considerably increased new source of revenue. Does the Minister think at this stage, with the produce of VAT readily available to him, with the prospect of vastly increased revenues coming in in some shape or form— whether through taxation or in royalties—from our mineral and other natural resources, that this is the time to be pushing through these new Draconian personal taxation measures?

Should the Minister not be looking now, in the light of this situation, to a very considerable reduction in taxation on personal incomes as a direct incentive to the development of the economy? I think the Minister's whole approach in this area of taxation is wrong. We are still a developing country——

And we need money to develop. The demand on the State is growing as fast as the revenue.

The Minister had to borrow £80 million from abroad and more than that went out.

We made steady progress in the past couple of decades but we still have a long way to go. Those of us who took an interest in the proposed European regional policy became very acutely and directly aware of the fact that by European standards we have a long way to go.En passant I might mention that it was very interesting for us to discover that what we always regarded as our rich neighbour, Great Britain, had herself in many respects a long way to go to come up to European standards also.

In that sort of situation we should be encouraging enterprise and initiative, whether in farming, business, tourism, or whichever area of economic activity is involved. We should be trying to give incentives, to encourage enterprise. But in the provisions in this Bill and in his package of capital taxation, the Minister is going in the opposite direction. In regard to personal taxation, I do not think the Minister is aware of or understands the modern technological world in which we are living. The people whom we need and whom we were getting in considerable numbers, people who have knowledge and expertise, in this modern world are free to go anywhere they like. They tend to move where taxation climates are favourable. They are very mobile people. I think our taxation structures should be devoted to creating a climate here which would attract these people and encourage them to stay here. An attractive taxation structure is one of the elements involved in attracting and harnessing the initiative and the enterprise that a developing nation like ours needs. I do not think any one taxation measure is all that important in this respect. It is the climate, the approach, and it is in this respect that I think the Minister's philosophy is wrong and the rates of taxation on personal incomes enshrined in this Bill are wrong.

I keep repeating the fundamental axiom that it is only by economic development we can get the social progress that we want and need. Those who go around preaching about social progress and social development without adverting to the fact that you can only get the resources to provide that social progress from economic development are simply putting the cart before the horse.

The next important section of the Bill is that devoted to anti-avoidance and evasion measures. Nobody will quarrel with this in principle. This game goes on from year to year. Deputies who have been in the House for any length of time fully understand the process by now. Those who devote their minds to these matters develop new ways, new systems of either avoiding or evading tax and it is the duty of the Minister and the Revenue Commissioners to keep a watchful eye on these developments and if they expand to any considerable extent to take action in the interests of fair play. But it is always a question of judgement and I want to advert to some statements the Minister made in this connection recently when he implied or inferred that some Fianna Fáil Ministers had not been as assiduous in taking measures to oppose evasion or avoidance as they should have been. That is not so. From time to time the question arises as to whether action should be taken in regard to a particular device or system that has developed. A decision must be taken as to whether the evasion or avoidance is on a sufficient scale or whether the practice is growing sufficiently to merit all that is involved in the provision of countervailing measures. I want to draw the Minister's attention to this aspect of the matter as it is very relevant to this Bill and particularly to section 57. In my view the Minister for Finance in the first instance, and this House in the second, have a very important custodial part to play in this regard. The Department of Finance, perhaps, to some extent, but more often the Revenue Commissioners in pursuing their bounden duty seek powers to deal with certain situations which come to their notice and it is here that political judgment must come into play. The Minister is the first line of defence and this House the second line of defence in ensuring that the taxation authorities in wishing to do their job properly and comprehensively do not get excessive powers. It is perfectly legitimate for them to seek these powers, to put forward the case, but it is our job to ensure that the powers they get do not represent an unwarranted intrusion on the rights of the private citizens.

I have seen in my time in this House a number of occasions when this issue has been fought out and when the Revenue Commissioners have been refused powers which they sought because in the opinion of the Minister, or the Government or the House, the powers they were seeking were excessive and could not be justified by the extent or the seriousness of the evasion or avoidance taking place. If the Minister believes that the measures he has put before us in regard to tax havens abroad are necessary, then he has the full support of every Deputy in taking whatever measures are legitimate to deal with that situation. None of us likes to think that somebody else, because he is cleverer or has access to better professional expertise than we have can, by using foreign tax havens, avoid paying those taxes the rest of us have to pay. We support the Minister in the measures he wishes to take in this regard with the exception of section 57. I fully support Deputy O'Malley in this connection. I would go further than Deputy O'Malley went in his criticism of this particular provision. It seems to be a clear case where the Minister is affording to the tax-gathering machine powers far in excess of what it is entitled to or really needs. Deputy O'Malley dealt very logically and succinctly with the situation of the solicitor. I strongly urge the Minister to drop that provision in regard to solicitors.

Could I remind Deputy Haughey that he was responsible for section 176 of the 1967 Income Tax Act which was even more stringent in requiring every person in whatever capacity—not merely a solicitor or a banker—to disclose a great deal of information about money, value, profits gained and so on?

That is a codification measure. I think the Minister will find that it is not my proposal. As the Minister knows, a codification measure is not the work of the Minister for Finance of the day. If the Minister looks into it, I think he will find I was not responsible for any such provision.

I do not want to attribute it personally to the Deputy because any Minister is only as responsible as the Government of the day.

No. The 1967 Income Tax Act was a codification measure which simply brought together in one composite statute the various income tax measures existing up to then. It put them together and codified them in one statute. It is a codification measure which, as the Minister knows, goes through a certain process in this House and is not the responsibility of the Minister for Finance of the day. In fact, you cannot put anything new into a codification measure; you can only include in it something which is already in existing law. I have no responsibility for whatever section the Minister refers to.

The Minister was caught out there.

No, I am not caught out: the Deputy did not change it. He strengthened it.

I could not change it.

You could change it subsequently at any time.

The Minister attributed it to me as a proposal. He said I brought it in and I am quite certain that I did not because one of the things about which I was always anxious as a Minister for Finance was to try to keep a careful balance between the needs of the situation as seen by the Revenue Commissioners and the rights of the private citizen and the taxpayer.

But this provision is on the Statute Book since 1918 and was re-enacted in 1958 and 1963 and again in 1967. It is far more stringent than section 57.

The Minister is not correct in attributing that to me as Minister. I did not do that.

There were a number of measures in 1967.

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.

Is the Deputy suggesting that we treat people equally if, for example, in the case of two women in similar employment earning the same income with the one who is single but supporting elderly relatives subject to tax while the other who is married to a farmer who can set off all the family allowances against the wife's income paying less tax although the income is far greater and the dependants may, in fact, be less?

I do not follow the intricacies of the Minister's question but I maintain that it is a radical and fundamental departure to create a situation where any one taxpayer is not allowed the same full allowances as any other taxpayer. Allowances should be equally and impartially given to all taxpayers.

Even to people with double incomes?

The Minister, because a particular type of taxpayer is engaged in a certain type of activity, namely farming, is going to disallow that person allowances which if he were in any other occupation he would be allowed. If a man is a carpenter and he has a wife working as a nurse nobody suggests that his allowances should be cut in half.

But he will be paying tax on his profits from carpentry.

That is not the point.

It is the point.

The point is whether or not personal allowances should be equally and objectively given to every taxpayer. I maintain it is morally wrong, but apart from that moral aspect of it, it is socially disastrous. The Minister will regret doing this because it is going to put the clock back. It is going to discourage these people from trying to stay on their farms and seek for either themselves or their wives off-farm employment.

From my own knowledge of rural Ireland I know I am right in making this appeal to the Minister. Some of my colleagues have mentioned the farmhouse holiday scheme. It is an excellent example of what is involved here. Why will people bother to supplement their farm incomes in future if we are going to have this penal provision brought into operation whereby if they do so their personal allowances will be reduced by half? They should in fact be encouraged and given extra allowances.

I do not think I have to elaborate for the Minister the struggle it is for those living even on fair sized farms to provide a reasonable decent standard of living for the family, to educate them and so on. Far from their being penalised in this way for adding to the farm income they should be actively encouraged to do so. This proposal is ill-timed to say the least. This is not the time to be imposing any further burden on the farming community. It is all very well and easy to point to some farmers who do well or are prosperous but here we are legislating for the bulk of farmers and not for the odd exception or the small minority. These proposals are going to have a serious disincentive effect on farming in general.

There are exclusions and special provisions in the Bill for a number of things but the whole atmosphere is going to be one of disincentive. This is a time when farmers need encouragement. The process of adjusting to EEC conditions has been much more difficult than we anticipated and farmers who were encouraged to make investments now find themselves in serious difficulty. To postpone these particular proposals would, in my view, have a very encouraging effect throughout the rural community.

In general I should like to criticise the Bill because there are no incentives in it. The whole approach is a penal one. Nowhere in the Bill is there the slightest suggestion of encouragement to anybody in any sector of the economy. That is the greatest single criticism that can be made of the Bill apart from the particular provisions which are comprised in it.

The whole atmosphere created by the Bill is one of restriction and discouragement. This is a time, and the Minister should not blind himself to this reality, when there is a crisis of confidence in the community. There is uncertainty and doubt not only among the farming community but in the business world. Investment decisions are either being deferred or cancelled altogether, and looming over the whole situation like a sword of Damocles is the Minister's package on capital taxation. The whole atmosphere is one of doubt and uncertainty. The Minister was inclined to reject suggestions made by some of my colleagues that there is a crisis in the building industry. I want to assure him, from my information, that that is the position. If there is a crisis in the building industry, if there is a shortage of finance in the building industry, together with a crisis in the farming community, ultimately the whole economy must be seriously affected.

I raised here last week the question of the directive on credit which the Central Bank issued. I think that was seriously ill-timed. There is a crisis of confidence already and it was a serious error of judgement for the Central Bank to come out as it did at that time with these further restrictive proposals. I regret the fact that there is no way in which we, as a House, can now have a full discussion on that directive of the Central Bank because it is, in its own way, as fundamentally important as some of the things which the Minister is proposing in the Finance Bill.

The Minister cannot be unaware of the very depressed conditions of the stock market at this time. I suggest that he should direct his attention to the whole situation prevailing in that regard. I believe that many Irish businesses at this moment are in serious danger of foreign take-over and, indeed, I would not put some of our major financial institutions outside the realm of that possibility because of the very difficult situation which obtains in the money market and in the financial institutions. The Minister should take positive action to ensure that vital financial institutions cannot be taken over from the outside because of the present difficult financial situation here.

I conclude by coming back to my general criticism of the Bill, that it does not provide any single incentive for promotion, for development, in any single sector of the economy. All its provisions are penal and cannot be regarded as in any way contributing to the progress or the development of the economy. I also want to reiterate my complaint that it is not good enough for the Minister to bring forward this Finance Bill at such a late stage and ask us to deal with it, to bundle it through the House, in the annual end-of-session stampede which takes place here every year.

I shall have it in April next year.

If the Minister is still there by April next year, I hope he will bring the Finance Bill forward in plenty of time for us to give it the discussion, give it the attention, give it the critical examination which we should afford to such an important measure.

I shall begin where my colleague left off on the question of the Bill being so late coming before the House. Never before has a Finance Bill been so late. Normally, within a month of the budget everything that was in the budget is in the form of a Finance Bill. There must be serious disagreement within the Cabinet on many financial matters when the Finance Bill, even coming at this late stage, does not carry all the provisions that were mentioned in the budget. That leads me to believe that things are not right within the Cabinet. We heard Deputy Oliver Flanagan today openly criticising the Minister for Finance. Such things are usually the smoke signals of dissension, of possible break-up. As well as that, the Minister for Posts and Telegraphs at present seems to be the Minister for Foreign Affairs. Everybody seems to be going his own way.

I do not know how they stand each other.

This is one of the worst possible years to bring in a tax on farmers. For 10 years farmers have not had as bad a year as this one with cattle prices dropping dramatically. In January, 1973 fat cattle were making £20 per cwt. At present fat cattle are being sold at around £14 to £16 per cwt. On a 10 cwt beast that is a drop of £40. On fat cattle of 12 cwt the drop would be £48 to £50 a head. At least there is some support for the price in that bracket but for store cattle there is no support at all and the prices there have dropped even further. This is the year, when the farmers are crucified with losses, that the Government, who claimed throughout the length and breadth of Ireland that they represented the farmers particularly when they were on this side of the House, are bringing in taxation to crucify the farmers even further. Naturally, they brought it in for farmers of over £100 valuation but that is just the thin end of the wedge. Every Minister for Finance knows that when he is imposing new taxes he must bring in the wealthier sections first. It leaves a better gloss on it and it is more acceptable. In succeeding years we can bring it down. We can take it that he has set the headline in this Finance Bill that he is bringing it down very soon. In this Bill a farmer who is working and whose wife is working, if his farm has a £50 valuation, or more, has to return books as well as pay tax on his job. When farmers of £100 valuation have the choice of returning books of 40 times the valuation why was the choice not given to the people of £50 valuation who have a job? Those people are not given the alternative.

The people I am really concerned about are the uneconomic farmers about whom the Land Commission are always talking, those with £20 valuation. Those people have to go out and look for other jobs and it is usually when the farms get run down that they do so. Those people lose half the allowance and nothing is taken into regard about what income they get. This allowance is cut in half, irrespective of whether the man is a single man or a man with up to 14 children, with large allowances. When a small farmer goes out to work we usually find it helps the farm because he has money to invest in it and production of the farm increases. This is also found to be the case in Bavaria, Western Germany, and other places in Europe where there are small farms.

The Fianna Fáil Party always believed we should try to help the small farmers. Over the years we set up different small industries and gave incentives to industry so that these people could go out to work if their farms were uneconomic and the Land Commission had not got enough land to bring them up to an economic level. Many of those small farmers are working with the Board of Works on the Boyne. They will now lose their allowances and this Bill will hit them very hard.

When the Minister introduced his budget he mentioned the increases he was giving in dependants' allowances to bring them up from £60 to £80. That is the real conjuring trick which I am afraid we expect from this particular Minister. He has taken away the earned income relief so if a man had £60 tax free under the old system and you put on the earned income relief of one-third it brought it up to £80. The Minister said he increased the dependent relatives allowance from £60 to £80 but in actual fact he has left it the same. If the person is earning more than £30 a week not alone has he lost the earned income allowance but he will be paying 35p in the £ as well.

This morning I came across one of the new tax free allowance forms where an individual is allowed under this Bill, £500 tax free. On this particular tax free allowance form he was only allowed £400 and no explanation was given why it was only that amount. I did not have time to look into this matter fully but I know that in this case for two dependent relative allowances of £80 each a figure of £160 was given and underneath it was written this figure of £400. This must be a mistake because the Finance Bill says the allowance this year is £500. Perhaps this is because we are working on nine months this year, although the figure would not be correct for that length of time.

We have pointed out when speaking on both budgets introduced by this Government that each of them was inflationary. We were told they were not and we would see the effect of those budgets. We are certainly seeing the effect of them. Inflation is rampant at the present time. The Minister for Industry and Commerce last week, in answer to a supplementary question spoke about the necessity for increasing prices. When he was on this side of the House he criticised the lack of activity on the part of the Fianna Fáil Government to curb prices. I can assure him that the price rises that took place at that time were nothing compared with what is happening at present.

We have inflation running at over 20 per cent. Those are the figures for the past 12 months. The £ we had in our pockets when the National Coalition Government came into office is worth 17p less today. It will be worth a good deal less before the end of the year at the present rate of going. This has been caused purely and simply by the Government not taking advice and not heeding what we have been telling them, by introducing schemes and spending money frivolously, and not taking into account that they must meet their commitments. A typical example in the budget was budgeting for a deficit of £66 million. Last year it was £55 million.

This year VAT will not bring in the money the Minister expects it to bring in, as can be seen by the official returns for the first three months of this financial year. VAT is up by less than £1 million. Taking into account the high prices in the previous 12 months, we would be expecting that VAT would bring in another £8 million to £10 million. The simple fact is that with inflation people have not got the money to spend. Our taxation is absorbing the purchasing power of the individual. This has been brought home forcibly to the Minister in the past week by the Chamber of Commerce in Navan. In their petition they pointed out that people have not got the purchasing power they had 12 months ago. The cold hard fact is that they just have not got the money.

We are seeing the signs of inflation. The unemployment figure has risen by 3,000 in the past 12 months. In tonight'sEvening Herald we read that 5,000 people may be laid off before the summer holidays in the building industry. In a joinery firm, a subsidiary of a big builder, 100 people were laid off last week.

I have allowed the Deputy quite a lot of latitude. I find that he is straying from the subject matter of the Bill which is essentially a taxation Bill. I would prefer if the Deputy related his remarks more precisely to the Bill under discussion instead of bringing in these extraneous matters.

I was pointing out the Government's policy on financial matters. I accept your ruling. There is a provision in this Bill under which people who invest money abroad must declare it and, where firms or individuals are taking money out of the country, they must show a reason for it. This section comes six months too late. It is like the old story of closing the stable door when the horse has bolted.

The Government introduced their White Paper on capital taxation and within two months money literally flowed out of the country. This section admits what has happened. The result has been the unemployment figures, the borrowing of £83 million within the past few weeks from Brussels, and the Agricultural Credit Corporation having to borrow money from America. That money would have been here if the Government had been thinking of the consequences of their actions. There would be no need for this section. Most Irish people prefer to invest their money in their own country. They used to have confidence in their own Government instead of going to tax havens where the situation could change overnight.

When you see certain proposals in a White Paper, emphasised in the budget speech, naturally you run to wherever you think is safe. This has a detrimental effect on the economy. Anything that was to go is gone and the Minister will not get it back unless he can recover the people's confidence that the Government are capable of running the country. I suppose the question of the curtailment of credit might be outside the provisions of the Finance Bill.

In Navan people are feeling the effects in the furniture trade of dumping from the United Kingdom. This country is being used to dump cheap furniture to the detriment of the people in Navan. I do not see anything in the Finance Bill to cover that. We have asked to have VAT reduced on furniture which is a very essential commodity. We want to save the industry. I pointed this out to the Minister four or five weeks ago by way of a parliamentary question and I was told I was doing a disservice to the people in Navan and that I was doing harm to the furniture trade.

I hesitate to interrupt the Deputy again, especially in respect of the matter to which he has adverted which is very important, but it is not relevant to this debate.

The Minister should have some section in the Bill to safeguard these people.

This is essentially a taxation Bill.

We want VAT on furniture reduced. The Minister could not even see this problem and now he has it on his lap when he could have taken some action at that time. With regard to income tax for farmers, they should get the same facilities and the same benefits as industrialists get. There is no taxation on profits derived from exports. A large part of the cattle industry is exported in one form or another. Profits derived from the export of cattle by farmers should be tax-free. This industry is of tremendous advantage to the country and it has a big bearing on our balance of payments. We have the raw materials here.

In introducing taxation for farmers in a particularly bad year like this, the Government should give agriculture the same benefits industry receives in respect of exports. For other industries a large amount of raw materials are imported and the finished products are exported, but in the farming industry most of the raw materials are based here in Ireland. We do not import very much for farming except proteins and machinery and that would be a very small proportion of the value of the exports. Therefore, recognising the advantage to the balance of payments which agriculture provides, it should be afforded the same concessions as industry.

There has been great disagreement in the Cabinet regarding what provisions should be included in the Finance Bill, and they are trying to rush it through before it can be given any real consideration. I notice that the Committee Stage has been ordered for Tuesday week and the Government will expect to have the Bill passed in that week because it is coming up to 1st August. That is a very short time to go through the Committee Stage of a Finance Bill which may not be the most controversial measure to go through the House but it is certainly the most important one and must be brought in.

When Fianna Fáil were in Government, the Finance Bill was always introduced in plenty of time, allowing about two months for discussion, and then it was passed with plenty of amendments in it. It speaks badly for any government coming in so late with a Finance Bill which has provision for taxing farmers in a year when farmers are losing large sums of money, particularly in the cattle trade, and then rushing it through without adequate consideration. However, I hope the Minister will introduce some amendments when the Bill reaches committee Stage.

We have heard throughout the last couple of days rather confused and conflicting statements from the members of the Opposition. I recognise they were caught on the horns of a dilemma. They know that the principle which we are applying to the whole code of taxation is a fair one, that is, that people with similar incomes should pay a comparable amount of tax. They know that it is the application of that principle, certainly in part, which has caused us to bring within the ambit of income tax wealthier farmers. We need to recognise that the possibility of releasing the smaller man from the bottom of the income tax scale is directly dependent upon the number of wealthier people we can bring in at the top of the scale.

There is no use in ranting and raving about the injustices and the imperfections of the Irish taxation code and at the same time taking no action to correct these injustices, these imperfections and inequities. Similarly, there is no point in protesting about the unfairness of the code and then opposing any improvements in that code. A considerable amount of time spent by the Opposition on this Bill was to produce one extraordinary case after another to indicate certain anomalous positions that could be created by the application of the new provisions in this Bill. I did not, however, hear any of those Deputies dwell on the anomalies and intolerable situations which exist under the present code of taxation under which a man with an income of say £10,000 a year out of a large property need not pay tax, while he deducts week in and week out income tax from the pay packets of his workers. To me, that is a situation which cries out for remedy and it would be intolerable if we had to suffer the continuation of a system exempting the comparatively well-to-do while crucifying those with small means. One would think that we were taking a broad sweep at all farmers, whereas the provisions we are introducing this year, if they deserve criticism at all, can be criticised only on the ground of their timidity because they will touch no more than 9,000 who have holdings above £100 rateable valuation and an uncertain number who may have holdings above £50 valuation and some other source of income from a business or profession. If the general body of taxpayers knew the scandals we are bringing to an end they would not hesitate to approve our proposals.

I cannot give names or particulars which would identify people who have been involved in avoidance and evasion practices but it is as well that people should know what we are endeavouring to do. A veterinary surgeon, for instance, has claimed that his income from his veterinary practice was no more than £1,500 while his income from an 80 acre farm exceeded £45,000. There are cases of people claiming from an obviously profitable retail business in a town profits of about £2,000 and claiming to earn from a farm of comparatively small acreage profits of £35,000. That is what has been happening where people were able to transfer profits from their legitimate business or their legitimate profession to their tax-free farm income so as to produce accounts which allowed them to escape paying taxation, or a proper share of taxation, on incomes which netted £20,000, £30,000, £40,000 and £50,000. This has been going on for several years past and it appals me that is should have been tolerated for so long.

One must be, I think, wary when pursuing equity and absolute equality of treatment that one does not provide disincentives. We have taken great care in this Finance Bill not to create any disincentives. There is nothing punitive in any provision in this Finance Bill. We are not applying new or higher rates of tax on anybody. All we are doing is bringing into the net people who should be in a position to pay a fair contribution to the revenue. We accept that the farming community are going through a difficult time and we are doing everything within our power to overcome their difficulties. Several speakers on the opposite benches, including Deputy Callanan, were generous enough to acknowledge that the creation of most of the difficulties was not the responsibility of the Government.

We accept, of course, that in a democratic society there will always be criticism of action or inaction to remedy such difficulties. There are difficulties and I will repeat now what I said to the farming organisations when I met them: if there are difficulties this year, and farmers are making losses, there is no reason whatever to complain about the introduction of income tax because income tax cannot be charged on a loss-making situation. Income tax arises only when profits are made and, if farmers are making losses this year —unfortunately, some of them are, but it is only some—they will be entitled to set off those losses against profits in the years to come. If taxation of farming profits is to be introduced, the best year to introduce it from a farmer's point of view is in a year of loss because you do not pay tax on losses now and the losses can be set offin futuro against profits. That is very important and, perhaps, now some of the critics who have been rather unfair in their criticism might bear that in mind if the losses are as genuine as they are claiming.

Deputy Colley claimed that the increases in the personal allowances announced in the budget were inadequate having regard to the rate of inflation. He suggested there should be a built-in provision to ensure that personal allowances would automatically increase to keep pace with the rate of inflation. That reminds me of similar remarks made from the Opposition benches in 1968 when the then Minister, Deputy Haughey, was most indignant that that suggestion should be made. He said it was irresponsible of the Opposition to make a criticism of that kind unless the Opposition provided an alternative source of revenue. I shall leave it at that. If those words were valid in 1968, they are just as valid today.

The situation is different.

It is not different. Everything is relevant. If the cost of living is rising—as, indeed, it is primarily due to factors outside our control—incomes are rising faster than the cost of living and one cannot look at one side of the equation without looking at the other side. I am not saying income tax allowances should not be regularly revised. As a Government, we have already given a very specific and public undertaking that we will revise the allowances from time to time to take into account the cost of living and we will certainly honour that promise. I am not averse to the idea of providing statutory indicators which would control allowances of all kinds. I have given an undertaking that I will be providing an indicator in the new package of capital taxation, but it is not an easy matter to either define or refine a suitable indicator which will do justice in all cases because different factors exist in relation to the incomes of different people. But this is something we are continuing to examine very carefully and, if a fair system can be devised, I shall be the first to introduce it.

Deputy Fitzpatrick queried the mortgage interest in the new scheme of taxation. He quoted some figures and he asked me to provide an example to show the position of a taxpayer paying mortgage interest in 1973-74 and in 1974-75. I am very glad to take the case of the man he used for purposes of illustration, the man with an income of £3,000. He is not, however, typical of a large number of people. If we take the man with £3,000, married with 3 children, and he is paying mortgage interest of £550, the position is as follows: in 1973-74, gross income £3,000, mortgage interest £550, total net income £2,450. Against that he would be entitled to set off his marriage allowance, earned income relief and child allowances amounting to £1,421. That leaves a taxable income of £1,029 and, taxed at 35p, the tax liability amounts to £360.15p.

Under the reformed package of this year's budget let us take the same man with the same income—assuming there is no variation in income in the meantime. Again his gross income would be £3,000, his mortgage interest £550 and his total net income £2,450. His allowances deducted from that would be £1,400 which would leave him with a taxable income of £1,050. The taxable income is marginally higher than the old taxable income— the old taxable income was £1,029 and the new taxable income is £1,050. But watch where the reduction comes in. Under the old system he was taxed at 35p in the £ but under the new system he is taxed at only 26p in the £, with the result that his tax liability is £273 with a gain of £87.15p. That clearly indicates the very significant reductions given under this year's budget and Finance Bill.

It does not answer the point made by Deputy Fitzpatrick.

It answers that pointin toto.

In relation to mortgage interest?

Yes. Mortgage interest has to be deducted from the gross income in order to get the net income. Against that income you set off the personal allowances to get the taxable income and then you calculate the appropriate tax. As the appropriate tax this year is 9p less than it was last year, the taxpayer pays substantially less in tax this year than he did last year.

I am not pretending that this is easy to understand. The truth is it took many months of very hard work in the Department of Finance and the Office of the Revenue Commissioners to make the necessary adjustments in a whole mixture of tax provisions in order to produce a formula which could literally be printed on the back of a demand notice. That is what we have done. We have condensed a whole mixture of variations, qualifications and reliefs into a clearly understood system.

Of course, one of the reasons why the income tax law is so complex is because it is full of qualifications and reliefs. Many of the requests made to me in the course of this debate, if accepted, would make this year's Finance Bill, which is no easy thing to understand, even more incomprehensible and about four times its present length. Deputy Colley, as a former Minister for Finance, will appreciate the truth of what I am saying in this regard. The more one tries to tailor a system to deal with all particularly difficult cases, the more complex, lengthy and incomprehensible becomes the law. We have produced a comprehensible and fair system, and one which also provides very substantial reliefs for the overwhelming majority and some relief for everyone.

The lower paid workers are getting the highest percentage of relief. This relief varies from 14 per cent to 1 or 1½ per cent for those in the top bracket. A significant relief was given where it was most needed. We are happy to have removed 60,000 people from the tax net. I recall that Deputy Colley was pleased when he removed thousands of people from the tax net in 1972.

Taxpayers, particularly those in the PAYE system: I have been looking carefully at their weekly wage sheets to see these reductions in taxation reflected in their pay dockets. So far they have not appeared. I explained in the course of the budget that it would take some months before these reductions could be reflected in actual income tax certificates. I would like to remind everybody of this because there has been a certain amount of understandable grumbling in recent times. The actual reductions cannot be made and the alterations in the tax allowance certificates cannot be made until the Finance Bill is passed.

Deputy Haughey asked if it was absolutely essential to pass this Bill before the recess of the Dáil and Seanad. For a variety of reasons it is, but I can think of no better reason for passing it than the necessity to ensure that all income taxpayers are given the reliefs at the earliest possible date. As the reductions will not actually appear in their wage packets for some months, I want to emphasise to them that they will get, for the remainder of the financial year, reductions in their income tax calculated on a 12-month basis. In other words, whether it takes two, three or four months actually to start this process of refunding these very substantial allowances to income taxpayers, they will get them in the 12-month period up to April next. If there is an outstanding balance at that time it will not take long to clear it off. Towards the autumn and winter of this year income taxpayers will see significant reductions in the amount of income tax deducted under the PAYE system.

Deputy Colley raised a number of points about farming profits. Like many points raised by other speakers, many of his can be more suitably dealt with on Committee Stage. In so far as I can provide to Members a better understanding of the Bill before the Committee Stage, I will try to deal with the points raised. Deputy Colley wanted to know whether the notional income would apply for one year only or in future years. He will recall that I said in the budget debate, and when introducing this Bill, that it would apply for a transitional period. I am not in a position at this stage to say how long the transitional period will be. It will be recalled that the Commission on Income Tax recommended whenever income taxation was introduced for farmers—in order to cope with the difficulties which would arise because they were not accustomed to keeping accounts—that a notional basis should be provided for a transitional period until all necessary details of a scheme were drawn up with appropriate precision and until such time as farmers had an opportunity to prepare and keep accounts.

It is worthwhile recalling that that advice was given as far back as 1960 and repeated in 1961 together with a recommendation that farming profits should be subject to tax. Unfortunately, instead of taking the advice of that commission, the previous Government exempted all farming profits in 1969. However, that is all water under the bridge.

This matter has been raised by the farming organisations who came to see me. I explained that once we have studied all their recommendations and the farming community has become accustomed to keeping accounts, we will consider whether the time has come to terminate the transitional period. Frankly, I do not think it will happen this year. We will need a few years before we see any variation.

If the farming situation is as pessimistic as people indicated in this House today, they need not opt for the notional system but may go for their actual accounts. If they are able to establish losses, no liability arises. If they are able to establish very small profits below the 40 multiplier, then their liability will be correspondingly less.

A number of Members queried why we have chosen a multiplier of 40 and why we allow only those deductions against that notional income, that is, in respect of rates, wages and depreciation of farm machinery. If one were to take the calculation of notional farm income on the basis on which it has been calculated in previous years, it would have been at 53 before last year and for this year, prior to the slump in beef, it would be somewhat higher. Even on the basis of current estimates, the figure is certainly higher than 40.

We have chosen a figure that is lower than what has been generally accepted by the farming community as the notional income. Because of the peculiar situation of rates we are allowing deduction of rates; in order not to provide any disincentive in relation to farm employment we are allowing deduction of wages; and, as I emphasised in my introductory speech on Second Stage, we are also allowing payments to contractors who do work which the farmer, in days when labour was available, might have had done by a regularly employed person. We are allowing depreciation in respect of farm machinery because it is a very important and costly element in modern farming.

If a farmer goes for actual profits or losses, he will be entitled to deduct other items such as interest payments, depreciation in respect of farm buildings and so on. We are providing that a farmer must opt within six months of the introduction of the budget——

From the beginning of the financial year.

Yes. Argument has been advanced that it is too short a period and that we should extend it. I think the 9,000 farmers who may be involved and some others are well aware by now that income tax may affect them. It is not as though they will be taken by surprise next September or October. So far as the Revenue Comissioners can identify such people they will notify them of their potential liability. I would be very surprised if there is anyone who will be affected by this legislation who will not be aware of it long in advance of six months. I do not think there is any necessity to extend the period but I am prepared to look into it. If an extension is absolutely necessary, I will certainly consider it.

Deputies Colley, Haughey and others raised the question of farm holiday income which a family might derive from providing farmhouse accommodation for people during the summer season. I would be very loath to do anything to discourage the farming community from taking in guests. From personal experience, I can strongly recommend to people the excellence of farmhouse holidays in Ireland. It is the kind of a holiday I invariably choose for my family and myself and I think it has a great deal to commend it. However, income from farmhouse holidays is already liable to tax; we are not bringing in any new provision in respect of such income. I cannot see how any element of disincentive is going to arise. Most of the farmhouse holidays are operated in farms that have a land valuation of less than £50. Those in excess of that who have substantial incomes cannot reasonably complain about being subjected to income tax like anyone else.

I have been amazed at the vehemence of the protestations from the Opposition about applying income taxation to the farming community. By and large I have found that most of the people who are about to be affected accept the reasonableness of income tax. Several of them have told me that they always found it very awkward to deduct income tax from the pay packets of their employees while they themselves were exempt. They knew if that situation was permitted to continue it would develop antagonisms and resentment that would be difficult to mollify. We would be doing a grave disservice to the farming community if we did not contradict the vehemence of the Opposition argument in the last few days——

There was some of it on the Minister's side.

I did not think there was any vehemence on this side. If urban dwellers thought that the remarks of the Opposition, with a few honourable exceptions, really reflected the mind of the farming community, I feel it would be a very evil contribution of antagonism between urban dwellers and the rural community. We do not want this as it would be extremely injurious to the social fabric and the traditions of our country. It is only a minority of urban dwellers who are more than a generation or two removed from the rural community. We want to remain a united community. We are comparatively united, which is more than can be said for other countries where there is a great clash between city and country. We do not want that here. On behalf of the farming community whom I have had the pleasure of meeting, both personally and in a ministerial capacity, I would point out that the attacks made on our proposals do not reflect the overwhelming mass of the farming community who accept our proposals as reasonable. This is not surprising as about only 5 per cent of farmers are affected.

They will affect only a fraction of full-time farmers and a minority who are not full-time farmers. There will be less than 15,000 or 20,000 in the whole country who are potentially within the net. Of course, like other potential taxes one cannot say with certainty beforehand the precise number who will be affected. If the figure is greater than the one I have quoted, it will be because there has been more avoidance and evasion than we know about. I am not talking about avoidance and evasion by the genuine farmer but by people who are not genuine farmers, who get most of their income from other sources but have gone into farming in order to set off profits from their other occupations ——

Nobody wants to stop the Minister taxing such people.

I appreciate that. When I met the farming organisations and put this issue to them, almost to a man they were of the view that the Government would be doing the right thing to suppress that kind of activity which is of little benefit to the genuine farming community. In many cases it meant that land was bought by people who were merely hobby farmers. Such land was not used properly, while people who wanted to make a better livelihood for themselves and their families, as genuine farmers were unable to compete against the very high prices which these fly-by-night people were able to pay. We are closing that gap and I believe it will benefit the farming industry as a whole.

I was criticised last night in a rather sweeping and inaccurate statement by a spokesman for the Irish Farmers' Association because I said that, because of pressure of parliamentary duties in these coming weeks in relation primarily to the Finance Bill, I would not be easily available to them and, as they were looking for an immediate meeting, I suggested that they might see some senior officials of my Department. Incidentally, that was an invitation which I first extended to them when I met them last April and May. I suggested that matters of detail might well be very usefully thrashed out—for as long as they wanted to thrash them out—with the experts in my Department and in the Revenue Commissioners and if necessary with myself if there were any outstanding issues. I am sorry to say that in the interval we did not have an approach from the Irish Farmers' Association to tease out these problems although both my officials and myself were more than anxious to be available to them if they had approached us. But, when I received a request on Monday morning looking for an instant meeting, when my calendar of appointments was already full for the next month. when I had the obligation to be in this House and in Seanad Éireann, I did not think it was at all unreasonable that they might see some officials of my Department and of the Revenue Commissioners.

Deputy Colley, I am sure, will join with me in saying that we have every reason to have confidence in our officials—at all levels. When they meet delegations they keep a very full note of what is said and report in due course to the Minister. I was not at all ruling out the possibility of being able to meet, and certainly I was not saying that I was, on any occasion in the future, unwilling to meet the Irish Farmers' Association or any other farming organisation. I was more than willing to meet them and I think I have shown them that for several months past. Indeed, I have seen no fewer than nine different farming organisations in relation to the taxation of farming profits and as many farming organisations in relation to the capital taxation proposals in so far as they might affect farming. I have received innumerable submissions from them and this is the first occasion on which there has been any criticism of my lack of availability, a criticism which, on the record, I can show not to be justified. Therefore, I must have some suspicions about the genuineness of these allegations made last night. The truth is, and I want to put this on the record, that while I was in this House today representatives of the Irish Farmers' Association met officials of my Department to discuss whatever problems they had in relation to this Bill. That is the proper way to do it and it is unfortunate that some people resorted to propaganda, in order, as it were, to have "a go". I believe in constructive and meaningful consultations and I think they can best be conducted when there is mutual respect. It becomes difficult to accept the genuineness of people when they use an offer in order to endeavour to embarrass the person who made it. I have just been handed a note to say that apparently the arrangement with the IFA to meet with representatives of my Department has now been postponed until tomorrow.

In relation to section 16 of the Bill which, in general, provides that where a person who is carrying on farming also has a trade or profession, or a controlling interest in a company will be chargeable to tax on his farming profits, on an accounts basis, it has been suggested that this should apply only where 50 per cent of the income came from a non-farming source. But, if this suggestion were followed, the section would lose a great deal of its impact, if not its entire point. This section is primarily an anti-evasion measure designed to prevent a person in these circumstances attributing what are obviously business profits to his farming activities so as to escape the tax charge.

In all of these cases, the amount of profits being attributed to farming income is in excess of that shown for their business activities so that if the 50 per cent criterion were to apply these people could continue to evade tax on their business profits. For the same reason the notional basis is not being extended to them since, if this were done, it would facilitate them in avoiding the tax charge on their business profits. I do not know if Deputy Colley was here when I quoted some figures earlier to indicate the extent of avoidance by attributing to farming activity profits made from another business or profession. The actual figures are scandalous and could not be justified for a day longer because, as I revealed, we have cases in which people with net incomes of £20,000, £30,000, £40,000 or more have been avoiding income tax by attributing profits from non-farming activities to farming ones.

Deputy Colley queried why section 25 should deny depreciation allowances for years prior to 1974-75 whereas the new farm buildings' allowances provided for under section 22 would not cover expenditure incurred prior to the current year. The position is that, under the general law, wear and tear allowances have always been available in relation to plant and machinery. But, as is the normal practice when exempt activities are being brought into charge, allowances which were properly due for years during which the profits were not chargeable to tax, are not allowed to be carried forward and set off against profits coming into charge. I am sure Deputy Colley will recall that when we were debating this point recently in relation to the taxation of mines it was explained that what happens is that the balance of any such wear and tear allowances available—at the point at which the profits are being brought into charge—will be allowable and that is what section 25 achieves.

In relation to the new allowance in respect of farm buildings, it is also customary to provide that, when a new allowance is being brought in, it is made applicable to expenditure incurred as from a current date. A look through the various provisions in relation to all new capital allowances brought in over the last 20 years will confirm this point.

Deputy Colley also asked how the marginal relief provision would operate in relation to restriction of allowances where the farmer had other income. That section provides that personal allowances are to be reduced by one-half or by an amount arrived at by multiplying the excess of rateable valuation over £20 by 80. In other words, if we take a married man with a farm valuation of £21, whose wife is working—perhaps she is a teacher or a nurse—the reduction,prima facie, would be £500 but this reduction would be limited to 80 times the excess over £20; that is, a reduction of £80. Therefore, in such a case, a farmer would be able to set off £920 of his allowances against his wife's earnings. If the farm was of a valuation of £22, the reduction in allowances would be limited to £160, so that £840 of the personal allowances would be available for set off against the wife's earnings. I think it will be very obvious, therefore, that the restriction on the allowances of farms of just over £20 valuation is very modest indeed.

What is the upper limit?

£119. At £119 this marginal relief would be eliminated.

That would be on a valuation of how much?

£119. I am saying that the limit on the valuation would be £119. I am sorry—I have just got a note to remind me, we are dealing with reducing allowances—if we take it on the basis of the allowances, it would be about £30 in practice. There are so many different variations now to avoid hardship I am getting confused by the complexities of the code which we are trying to make comparatively simple.

The Minister will learn that it will contain as many complexities as its predecessor.

As I said earlier, the more you attempt to refine income tax so as not to do an injustice to anybody, the more complex you make the code. The basic income tax code now is a lot simpler than it was. We have eliminated a vast number of refinements, calculations and variations which had become archaic and which could no longer be justified.

On the question of the £2,000 limit of interest on borrowings which could be set off against tax liability, I realise that a special problem could arise for a person who is selling one house and buying another, particularly when the first house might be subject to a mortgage or where a man would be buying a new house before selling the old one. In such circumstances he might have to resort to a bridging loan or to borrowing far beyond what would be normal. I will be introducing an amendment on Committee Stage to deal with that comparatively temporary difficulty so as to avoid difficulties which I would not intend.

Deputy Colley suggested that the interest restrictions might be got around by use of shell companies and other devices and that it would be necessary to close loopholes. Needless to say, I am very anxious that nothing should be done to impede the development of commercial enterprises whether by people or by corporate bodies or which would facilitate the take-over of domestic businesses by foreign interests. Accordingly, the legislation in relation to companies extending their business by acquiring propriety interests directly or indirectly in the companies has been drafted in very wide terms. I think that if any criticism can be offered it is that the terms are too wide. I am giving fair warning that if in the light of experience it is found that the terms are over generous, they will be modified.

There has been some criticism of our proposals from people who have made a packet out of tax avoidance and evasion and who complain at the suddenness of change which may create difficulties for them. If people knowingly engage in tax avoidance or evasion, if they fly in the face of what they know the legislature would do or would want to do, they have no right to complain if some temporary difficulty is created for them by stopping an abuse.

I agree.

One would have personal sympathy with somebody who assumed the legislature would not take corrective action, but such people are usually resourceful enough to find some way of cushioning themselves. They are far more resourceful in means and in experience and in access to advisers than ordinary taxpayers who from time to time as a result of budgets or financial resolutions have found themselves disadvantaged.

I could not quite follow the suggestion of Deputy Colley that some of the provisions might encourage British residents to purchase houses and office blocks here. He seems to think that the restriction of £2,000 on interest would mean that British residents would move in here to purchase property which otherwise might be purchased by Irish people. It is important to remember that in Britain relief on interest on money borrowed is not available in respect of money borrowed on a principal private residence. If a British resident came rushing in here he would find that if he borrowed money he would not be able to set off the interest on the money so borrowed against tax liability in Britain, and if he tried to overcome that disability by moving to Ireland, he would become an Irish resident and therefore liable to tax here——

Before the Minister leaves that topic would he comment on the complaint made about the sudden change in respect of people who were buying their own houses as distinct from speculators?

Again we must look at the practical effects of what we are doing. If we take the case Deputy Colley has in mind of a man buying a £20,000 house who has made a very substantial borrowing to purchase that house, what would be the position? He will still get complete exemption for about the first £14,000 in borrowing, roughly equivalent to £2,000 interest, and it is only the excess over that £14,000 which he has borrowed which would no longer enjoy the income tax set-off. Presumably he has put down a deposit of 20 or 25 per cent. So the actual amount which will now be no longer available to him is no more than £1,000 or £2,000 of his total borrowing or £300 interest.

I appreciate the Minister is dealing with that point, but the question is in regard to the sudden change for people who had entered into these commitments and who are not speculators—the absence of notice to such people.

Every budget except this year's budget, which is unique in that respect, contained new tax impositions which were sudden, presented without notice——

There was another one in 1972.

Unique as well—we are two unique gentlemen. It is not as though a terrible disservice is being done by the new interest limits. The margin which will no longer be entitled to the exemption is comparatively small. In the case of the £20,000 house, the £14,000 is set-off, the man has put down a deposit of £4,000 or £5,000 leaving only about £1,000 or so which will no longer enjoy the set-off. I pose this question: is it right that the general body of taxpayers should provide a subsidy to a person who has ambitions for a comfortable home of his own which he would not attempt to purchase if he could not set-off a substantial part of the cost against the Exchequer? The Exchequer is not some distant mythical enemy of the people. It is all the people, and I have never been able to understand why a person should be able to buy a home worth say £50,000 because he has sufficient wealth to be able to command sufficient respect from his bank manager to get a substantial advance and then be able to set-off 50 per cent or 60 per cent or 80 per cent of the cost against the remainder of the taxpayers. That is what has happened. If somebody is subject to an income tax rate of 80 per cent and buys a magnificent home on a mortgage, he sets off 80 per cent of the cost——

Of the interest.

All right, of the interest, but the House is increasing in value. That has been the trend for a long time. At a time when we are proposing to grant total exemption from all capital taxation for a principal private residence, a situation which did not exist heretofore because it could be caught ultimately for estate duty, there is no further justification for continuing a system under which people of substantial wealth and substantial means can acquire homes with borrowings enjoying tax exemption, homes which would ultimately become tax free assets. I think we have been more than fair. The provision which we have made would certainly cover the homes and the house owning ambitions of 98 per cent of our people without doing any serious disservice to people who might have operated under the old system and thought, I think unreasonably, that it might continue forever. It is more than six years since in Britain limitation was put on the amount of interest which could be set off against income tax liability. In France, often quoted here as a country with fair tax, the maximum amount of interest which can be set off against income tax liability is £500. We are making it £2,000. In Australia they do not go by the amount of interest but rather by the income of the taxpayer and there the maximum income allowed is £9,000 to qualify for the interest set off. With us the loan being permitted is between £13,000 and £14,000 on the present very high rates of interest.

Has the Minister any comment to make on the suggestion about the injustice of the evaluation as a method of assessment?

I was coming to it. I am sorry. The debate ended sooner than I had anticipated and I have not been able to get my notes in order. I shall certainly take it up now.

I do not think the Minister has nearly finished.

I am trying to cover as many points as possible to help Deputies in the debate on Committee Stage.

I think Deputy Callanan thought the Minister was about to sit down.

No. In common with Deputies on the opposite side I accept that the valuation system is not a very good way to assess the capacity of a person to pay income tax but it is the best available. This is acknowledged in the reports of the commissions and inter-Departmental committees that have been reviewing this question for many years. When they tried to pick a suitable system, the view expressed was that the best system would be actual profits and losses. All these reports or any advice I received—this is going over a period of 14 or 15 years—were all to the effect that there should be for farmers a transitional period during which the system of valuation should be taken as a basis. There will be some people who, if the property were to be revalued in relation to current values of a neighbour's property, might be below £100 rateable valuation andvice versa. We did not pretend we were achieving perfection. If anybody does not like the rateable valuation he can produce actual accounts and if the rateable valuation is high but the actual profit from a farm is low, then the actual accounts will give that person an opportunity to prove the faulty multiplier of his rateable valuation is not suitable.

The real answer to Deputy Callanan's criticism or that of anybody who speaks against the valuation system is not to take the valuation system at all, not use it as a rule of thumb at all, but to bring in all farmers and look at their actual accounts. I do not think the Deputy or anybody else is suggesting that.

I referred to the classification under Directive 159, commercial development and transitional, and said that the lower two should be excluded and top ones included because they have reached an economic income according to this directive. That is the case I was making. I was not excluding the top fellows. I thought it was fairer and something that the Minister should think of.

I assure the Deputy that I have a very open mind on this. One of the reasons for the transitional period I referred to earlier is that there are difficulties in relation to farm income and taxation of farming profits. Deputy Haughey also referred to them but I think he was wrong to do what he did in the past, run away from these problems altogether and do nothing about them. It is better to tease them out and in this transitional period we shall be teasing them out. I hope it will be possible to find a better way of assessing the ability of people to pay income tax on their farming profits.

Deputy Colley argued that the figure of £1,000 which I am providing for in the Bill as the maximum of insurance premiums which would qualify annually for tax relief, should be at least £2,000. Ireland is exceptional—I am not saying we should not be—in the preferential treatment given to insurance. There are other forms of saving which are as commendable and which make as many demands on man's thrifty nature as insurance but, accepting that insurance deserves some special consideration because people should be encouraged to insure against risks, let us look at what a premium of £1,000 would buy by way of capital sum. This premium of £1,000 on an insurance policy with profits which would mature at age 65, if taken out by a man of 30 years of age would provide a sum of £100,000; if taken out at 40 years of age, a sum of £55,000 and at 50 years of age, £25,000.

Those are very substantial sums and I would find it very difficult to ask the general body of taxpayers to absorb the cost of providing any further benefits. Deputy Colley suggests a ceiling of £2,000 but a premium of £2,000 would buy, at 30 years of age, £200,000; at 40, £110,000 and at 50, £50,000. I am not saying that people should not be encouraged, if they have the means, to take out insurance policies of that kind if they want to provide for their families or provide liquid resources in the event of death or at a time of advancing years but it is wrong that the general body of taxpayers, the vast majority of whom have no possibility of setting aside £1,000 a year for any purpose should be called upon to pay the cost. We have tried to mix the conflicting needs of the community and I think we have done it comparatively fairly.

To turn again for a moment to the middle income group, Deputy Gallagher suggested that married men with a number of children in the middle income group were worse off now than ever they were. I would like to produce actual figures to refute this. A married man with four children earning £2,700, assuming he has no other allowances in respect of mortgage repayments or anything else would pay in 1973-74 £460.25. As a consequence of this year's Finance Bill the tax payable by him will be £286. This typical man in the middle income group has a saving in taxation of £174.25 which I think is a very dramatic saving for people who last year were complaining that they were being asked to bear the full brunt of the Government's social policy.

This saving arises from two causes. One is a saving of £94.10 because of the improvement in the income tax code and the other is because we are no longer obtaining a refund of the increases which were made in social welfare, children's allowances under last year's budget and this year's budget. Altogether that typical man in the middle income group has a saving of £174.25 this year.

Many of the comments in the debate were directed to section 57 which proposes to require solicitors and bankers to give certain minimal information to the Revenue Commissioners. I would remind the House that the Income Tax Act, 1967, which was a consolidation Act repeated a provision from legislation of 1918, of 1958 and of 1963 which required—I quote from section 176 of the 1967 Act:

(1) Every person who, in whatever capacity, is in receipt of any money or value, or of profits or gains arising from any of the sources mentioned in this Act, of or belonging to any other person who is chargeable in respect thereof, or who would be so chargeable if he were resident in the State...


... prepare and deliver, within the period mentioned in such notice, a list in the prescribed form, signed by him, containing—

(a) a statement of all such money, value, profits or gains;

(b) the name and address of every person to whom the same shall belong;

(c) a declaration whether every such person is of full age, or a married woman or is resident in the State or is an incapacitated person.

(2) If any person above described is acting jointly with any other person, he shall, in like manner, deliver a list of the names and addresses of all persons joined with him at the time of delivery of the list mentioned in subsection (1).

Surely that relates to persons in possession of money. This Bill provides for people in possession of information which they received in their professional capacity.

This is a case of people in a professional or business capacity receiving money for or on behalf of other people. They are required to give to the Revenue Commissioners:

(a) a statement of all such money, value profits or gains;

(b) the name and address of every person to whom the same shall belong.

We are not seeking to do anything more radical in this legislation. I find it very difficult to accept the sincerity of the protestations of the Opposition. Some of them have said they are opposed to tax evasion and avoidance. If one is opposed to tax evasion and avcidance it is logical that one must ensure that the Revenue Commissioners are given the means to combat evasion and avoidance but if a person by resorting to a professional person or to a bank were able to conceal his activities from the scrutiny of the Revenue Commissioners he would have open to him a very convenient way of engaging in evasion and avoidance. I am sure Deputy Colley will not challenge me when I say, as a solicitor, that the rights of a solicitor are no greater or no less than those of his client. A solicitor has no right to say that his rights are greater than those of his client. His client is not entitled to engage in tax evasion and avoidance. A solicitor is not entitled to provide a cloak to shield a client engaged in such activity.

We are not asking that a solicitor should reveal all intricacies and information regarding his clients affairs. The Revenue Commissioners will seek sufficient information to enable them to go after the person from whom they wish to get further information. It may well be that on pursuit of the person in question no liability to tax will arise. I would be loath, in view of my professional training and experience as a solicitor and the code which was drilled into us from the time we became law students, to permit of any breach of confidentiality between client and solicitor or for that matter between banker and client. We are not seeking to breach that area of confidence which must exist if a client is to obtain objective advice from his legal adviser or from his banker. All we are saying is that the people who are consulted in this way must, if called upon identify the person on whose behalf they have been acting. The Revenue Commissioners would pursue the matter thereafter.

Can the Minister say if this Bill gives to the Revenue Commissioners the right to go to every cattle mart, creamery or co-operative society in the country and from such places to obtain knowledge that they did not have before?

No. The only provision in relation to cattle marts and so on is that which provides for the Revenue Commissioners or the gardaí to enter such premises in order to examine the fuel in the tanks of vehicles so as to ascertain whether it is fuel that has enjoyed a rebate. That is the only form of investigation with which they would be concerned in such cases.

I am talking of farmers' accounts.

The question of accounts does not arise.

Therefore, the Minister is assuring me that the Revenue Commissioners may not visit cattle marts, creameries or co-operative societies or any other such places in order to obtain information to which they would not have been entitled up to now.

The Revenue Commissioners are like ordinary members of the public and I suppose they can go wherever they wish.

The ordinary public are not interested in this matter but I am sure the various farming societies or agencies would not object to the presence of the general public in such places as cattle marts but they would object to the presence of the Revenue Commissioners.

If I understand the Deputy's question correctly, he visualises that the Revenue Commissioners might be able to descend on some of these places and demand particulars in relation to other people's income and so on. That is not contemplated by this Bill.

Have I the Minister's assurance on that?

It would be for each taxpayer to furnish accounts in whatever form the Revenue Commissioners require. The Revenue Commissioners may query accounts and ask for further proof but the picture of the kind of regime of terror which the Deputy has painted is without any foundation.

Be that as it may, I do not think the Minister can give the Deputy the assurance he is seeking.

If the Minister were in a position to give me that assurance I would be prepared to place my faith in a certain direction. The Minister must be aware that at present farmers are undergoing enough hardship without having something like this imposed on them.

I do not resent the Deputy's intervention but——

If I can get from the Minister the assurance I am seeking the people whom I have in mind will be happy to hear it.

Might I indicate to Deputy Sheridan that at the moment the Minister is replying. If the Minister would like to take questions at this stage the Chair would not interfere but, ordinarily, questions would be put when the Minister would be about to conclude.

My apologies, Sir.

I have no objection to taking the odd question but it would be unfair to the other Members of the House if I were to engage in speech at this stage with one Deputy. I can assure the Deputy, however, that the picture he has painted of a horde of inspectors decending on innocent people, demanding that they produce figures and accounts of other people's affairs, is not justified and that it will not happen.

A number of Deputies raised the question of building societies. This is a matter that is not relevant particularly to this Bill but I do not mind dealing with it since it has within it an element of taxation. I assure the House that the Government are well aware of the true situation of building societies and the building industry in general. I would emphasise that in the first six months of this year more houses have been built than were built at any time in the history of the State. That is established by the figures which anyone can obtain from the Central Statistics Office. Therefore, the gloom which some people tried to cast over the proceedings here in relation to the building industry is totally without foundation.

We are as aware as anybody else of the difficuly of getting sufficient money to finance such a magnificent building programme because, not only have we built more houses in the first six months of this year, but we have had to build them at a higher cost than ever before.

Is the Minister talking about the financial year?

No. I am talking about the six months January-June, 1974. There were more houses completed than ever before in the history of the State. The Central Statistics Office now have the figures and I have them from the Central Statistics Office and they will shortly be publicly available. If only I could lay my hands on them now I would give them to Deputy Colley.

When we asked at the start, the Minister could not give them to us. We will take his word.

I would be only too glad to embarrass the Deputies opposite. Let us come to the situation affecting building societies. Since 22nd June the interest rate on deposits with the Associated Banks has been reduced by 1½ per cent. It is too early yet to say what the significance of this will be for building societies but the time of greatest growth for building societies here was a time when building societies had an advantage of 3 to 3½ per cent over the banks. For reasons far beyond the control of anybody in this country or for that matter in most individual countries, interest rates have risen by 4 per cent and more in many cases over the last 12 months. If the bank rate in Ireland had not risen by an equivalent amount there would have been a massive out-flow of funds from this country. That is an absolute reality from which nobody can escape.

No doubt the Opposition would be only too glad to try to plead that the present difficulties of funds in the building societies are attributable to the Government. The truth is, of course, that they are due to international factors far beyond our control but they are factors which are being rectified and very significantly have been rectified by the action taken by the Central Bank last month. This action I notice was criticised by Deputy Haughey last month and again today. He apparently thinks that it is wrong that action should be taken which would cause money to go into the building societies; he would prefer our banks to act in an undisciplined way without any guidance from the Central Bank so that money could be freely available for speculators. That is not in accordance with the Government's policy and the Central Bank in what it did last month was faithfully reflecting the views which I expressed in this year's budget about the use of credit. It is worthwhile recalling that when I recommended people to be prudent in the use of credit and when I said that it was necessary to ensure that credit be used for productive purposes and not for the purpose of speculation, Deputy Haughey sneered at my comments. He said they befitted the editor of some small country newspaper. I regarded that as the highest commendation. I did not regard it as an insult. Deputy Haughey apparently thought it was. Sometimes from rural Ireland you get words of wisdom which Deputy Haughey might reflect upon.

It is now probable that funds will start flowing into building societies but I want to deal with a particular issue that was raised here, namely, the request that building societies would be exempt from income tax. I want to say with the clearest words possible that building societies are not liable to income tax in respect of the moneys which they receive from people who invest money with them. They are agents for the people who deposit money with them and because they are agents for the people who deposit money with them the depositors with building societies pay only 70 per cent of the income tax which they otherwise would pay on those deposits if they deposited them elsewhere. That is very important to remember because when building societies and others on their behalf are clamouring for the abolition of income tax on building societies what they are asking for is abolition of income tax liability on people who put money with building societies. The effect of that would be to give the biggest exemption, the biggest profitability, to the richest people. Those who placed more money with building societies would get the highest exemption. I do not think that would be in accord with our objective to produce an equitable system of taxation which would be related to the capacity of people to pay.

Building societies are also exempt from corporation profits tax on their annual surplus since 1920. That is another and very significant advantage to building societies. They get interest free of income tax in the hands of shareholders and depositors. The composite rate of income tax payable by societies in respect of interest paid to their investors is only 70 per cent of what should be the standard rate. Although this in theory applies only on investments up to £15,000—and it would be quite a comfortable person who would invest £15,000 and by so doing get this concessionary rate of income tax—in fact, a large number of people and institutions deposit sums far in excess of £15,000 and enjoy from building societies a similar reduction in their income tax liability. The effect of that is a saving in interest of 1.7 per cent to the building societies and it lowers the charge to borrowers by 1½ per cent. For the purpose of surtax assessment, interest paid to shareholders and depositors is based on the tax-free amounts received by investors and not, as in other cases, on the gross amount including income tax. For example, an interest payment of £65 free of tax would normally be treated for surtax purposes as the equivalent of £100 but if paid by a building society it is treated as only £65.

In addition to that—and these are very substantial reliefs given to building societies, to the investors in and the borrowers from them—they are also getting an unprecedented direct Government subsidy of 1¼ per cent which enables the societies to pay an additional 1 per cent to their shareholders. Borrowers from building societies today are borrowing at 11¼ per cent and if it were not for this Government subsidy it would be 12½ per cent, a figure which would still be well below the rate at which anybody can borrow money for any purpose from anybody else in this or in almost any other country at the present time.

So that when certain people are clamouring about the very high rate of interest on loans from building societies they should recall that they are paying the lowest rate of interest for any purpose. I am not saying that it is not a burden on them. I am not saying that it should not be less. I wish it were less. But the realities must be faced and there is no way of getting money in this world of ours other than by paying the going rate for it or else by printing it and this Government are certainly not going to print it.

Also last year we obtained for the building societies a special borrowing of £6 million from the associated banks and that borrowing is at a preferential rate and the State is taking up the difference in cost of it.

I am saying these things because there has been a great deal of propaganda and confusion in relation to the building societies and a great deal of emotive comment which is unhelpful and is, I am sorry to say, being voiced by people who have scant regard for the welfare of the many homeless people who are seeking to get homes of their own, who are willing to pay a fair price for the money if the money were available. To those who have been endeavouring to persuade people to withhold repayments of interest and principal from building societies I should like to say this: borrowers are not entitled under the law to any set-off against income tax liability unless and until they pay the interest on their mortgage loans. So, if people are foolish enough to withhold repayments from building societies they do it at their own peril because the income tax concession cannot be given to them unless and until the interest on the money is paid.

Somewhat outside the scope of this debate, a number of Deputies opposite spoke about the rate of inflation at the present time and suggested that this Finance Bill, of all things, should have provided the all-time cure for inflation. No Finance Bill could provide a cure for inflation, in particular the kind of inflation we have at present.

The interesting aspect of this year's debate is that while we were told that there was no cure for inflation in this year's Finance Bill, most of the Deputies did not at least have the temerity to suggest that we should promote inflation by increasing prices, although a few of them did and, indeed, Deputy Flanagan joined in suggesting that what are called the old reliables, cigarettes, whiskey and tobacco——

He got the lead from the Minister last year.

——might have had additional taxation attached to them. If this year's budget had increased the prices of these commodities, the Members opposite would have been saying what they said last year, that we were adding fuel to the fires of inflation by increasing the prices of such commodities. That was said last year and I am prepared to admit, said with some truth, because when any commodities are increased in price, even by taxation, they come into the Consumer Price Index. If the index had been increased as a result of indirect taxation imposed by this year's budget, it would have been doubly inflationary because it would in itself have increased the consumer price index and by virtue of the national wage agreement there would have been a further injection of inflation later in the year when compensatory amounts would have to be paid in pay packets in respect of such increases. It would appear that the people opposite do not really understand sufficient about inflation or the consumer price index, or they would not have been arguing as they were.

I am glad to see that the Minister is learning.

Of the 16.2 per cent inflation which we, unfortunately, had over the past 12 months, over 8 per cent came from outside our shores. If we did not have to import inflation over the past 12 months and if taxation had not been imposed in last year's budget for the purpose of redistributing money from the better off to the less well off, the actual rate of inflation would have been only 6½ per cent, which on the performance of the world at present would be a very small percentage indeed.

This brings me to a point which I think we as a community will have to consider very seriously. It is : is it right that taxation which is imposed for the purpose of transferring wealth from the better off to the less well off should be taken into account in the consumer price index and as a consequence, taken into account in calculating further increases in wages based on the consumer price index? To do that is, in fact, to compensate the wealthy for money taken from the wealthy for redistribution to the poor and only leaves the poor poorer at the end of the day. A number of other countries have seen the fallacy of so doing and now eliminate from the calculation of the base for future wage increases any taxation which is in the nature of a redistribution of wealth from the better off to the less well off. If we are to do something to stop the merry-go-round under which the better off do better and the less well off do worse, we will have to reflect seriously upon that consideration. I trust that we would be able to do it objectively and irrespective of partisan advantage we might seek to gain from the argument. It is a very pertinent matter which we will have to take very seriously in the not too distant future.

I hope I have addressed myself to the main points raised in the course of the debate and if I have not, I feel certain that we will get an opportunity in the course of Committee Stage to tease them out in greater detail, but I would like to finish with another fact. There were complaints about the cost of energy, and particularly of petrol, and I said that petrol in Ireland was the cheapest in Europe. A number of Members opposite laughed and sniggered at that. I do not know whether they really disbelieved it or were merely trying to pass the time, but the following are the prices of petrol, premium petrol, per gallon in Europe today: Italy, 90p; Portugal, 85p; Belgium, 73p; Spain, 70 to 72p varying by region; Germany, 71p; Denmark, 70p; France, 68 to 70p, also varying by region; Switzerland, 62p; Netherlands, 60p; Britain, 65p; and poor little Ireland, sniggered at by the Opposition, 50.8p.

That is not the full picture, of course.

That is a clear indication of the grasp which the Government have on prices and of the refusal of the Government to add to the burdens of people by unnecessarily increasing taxation. It is clear evidence that we have things under control. It is only one case, but it is a very useful case at a time when the rest of Europe are paying prices 50 per cent and almost 100 per cent dearer than here, that we have kept the price of petrol here to the lowest in all Europe.

Road tax is much higher here.

If you want to go through it all some other day, we will do so.

There are three or four other factors.

We will go through it some other day.

You are not getting away with these figures today.

I will come back to it again. You were accusing the Government of inflating prices and I have shown that in relation to what is regarded as a critical commodity which many of you waxed indignant, we have the lowest price in Europe and you are embarrassed to discover it at the end of the day. The wage structure here is higher than in several of the countries I have quoted.

It is 40 per cent dearer now.

You stood up here as though you were cheer leaders for inflation. You wanted to hurry on inflation so that it would burst through the 20 barrier and I only wish that we had television here so that people could have seen the evil glee on your faces as you hoped that unfortunate situation might descend upon us. I am not saying it will not, because when we are importing inflation at a rate greater than you had to deal with and importing inflation which accounts for more than 50 per cent of the inflation we have, it is no wonder we are in these difficulties. We are now at the average of inflation rates in the OECD countries. You had us at the top of the league of OECD countries for about seven years but we are now well down, and that is a fair indication that this Government —with an economy which is now more open than you had, because we are increasing our trade both ways, which leaves us, as it were more vulnerable —are helping to keep the level of inflation here below what the pressure from elsewhere might otherwise generate. That is clear evidence of the Government's success which you do not like, and there is nothing in the Finance Bill, good, bad or indifferent which adds in the least to the pressure of inflation. It has had quite the reverse affect and that is your great disappointment.

Could I ask the Minister one question in order to clarify the position in relation to a matter raised by Deputy Sheridan? Is it not true that the Revenue Commissioners will be able to get details from the marts in relation to the transactions by farmers?

I do not see how that can arise from the Bill.

The Minister does not know, again. It is a simple yes or no.

The Minister cannot surely give an undertaking to Deputy Sheridan that that will not happen.

How would one get it from a businessman and if one cannot get it from a businessman how can one get it from the marts?

The Deputy was not present when Deputy Sheridan asked his question.

The position of farmers will be the same as it is in relation to other income earners.

I believe that the Minister has given me an assurance that the Revenue Commissioners will not be empowered to descend upon cattle marts, co-operative societies, creameries and others.

The Deputy is joking.

I am not joking; I am serious about this.

The Deputy did not get that assurance and the Minister cannot give it to him because he does not know.

Acting Chairman

Deputy Sheridan should be allowed to put his question to the Minister and if the Minister feels so disposed he can reply.

I have already given the answer and it is that there is nothing in this Finance Bill that covers the situation the Deputy visualises.

Will the Minister bring in an amendment to cover this point?

There is nothing in the Finance Bill to cover this point.

Is the answer to Deputy Sheridan's question that it will not happen?

The answer is that there is nothing in the Finance Bill to cover the situation mentioned by Deputy Sheridan.

I want the Minister to know that I am not raising a hare at all. I am serious about this.

So am I when I tell the Deputy that there is nothing in this Finance Bill to cover the situation mentioned by him.

My question is still seemingly at large. I want an assurance on this point because the farmers are in terror of this.

The farmers will be treated the same way as everybody else.

Everybody knows what the Revenue Commissioners are. Most of us know that they are vultures. I am asking this question on behalf of the people I represent who have made representations to me. I am entitled to an answer. I want an assurance from the Minister on this matter. In the event of this tax, God forbid, being imposed on farmers who will make the valuations of farmers' incomes or of stock on land or of farmers' chattels? Who is in a position to make that valuation or who is to be appointed to do so?

The Revenue Commissioners have already been appointed to do this.

It will be the same as it is for anybody else. The taxpayer will make his own return and the return can be discussed with the Revenue Commissioners if they are not prepared to accept it.

None of the people I have met as Revenue Commissioners' representatives, or anybody else, are capable of going down to the bogs, up to the mountains, or to the flat lands of Ireland to make valuations for any purpose.

They will go into the marts to assess the means.

The Minister was unable to give the assurance sought by Deputy Sheridan.

If there is any provision in the law of the kind that will affect the situation described by Deputy Sheridan it is not in this year's Finance Bill. Perhaps the Deputy should look at the Income Tax Act of 1967 to see who has responsibility for such a situation if it arises.

The Deputy sought an assurance and the Minister has not given it.

And I have told the Deputy that there is nothing in this year's Finance Bill relevant to the issue raised by him.

Question put.
The Dáil divided: Tá 63; Níl 59.

  • Barry, Peter.
  • Barry, Richard.
  • Begley, Michael.
  • Belton, Luke.
  • Belton, Paddy.
  • Bermingham, Joseph.
  • Bruton, John.
  • Burke, Dick.
  • Burke, Joan T.
  • Burke, Liam.
  • Cluskey, Frank.
  • Collins, Edward.
  • Conlan, John F.
  • Coogan, Fintan.
  • Cooney, Patrick M.
  • Corish, Brendan.
  • Cosgrave, Liam.
  • Coughlan, Stephen.
  • Crotty, Kieran.
  • Cruise-O'Brien, Conor.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Dockrell, Henry P.
  • Dockrell, Maurice.
  • Donegan, Patrick S.
  • Donnellan, John.
  • Enright, Thomas.
  • Esmonde, John G.
  • Finn, Martin.
  • FitzGerald, Garret.
  • Fitzpatrick, Tom (Cavan).
  • Flanagan, Oliver J.
  • Gilhawley, Eugene.
  • Governey, Desmond.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hegarty, Patrick.
  • Hogan O'Higgins, Brigid.
  • Keating, Justin.
  • Kelly, John.
  • Kyne, Thomas A.
  • L'Estrange, Gerald.
  • Lynch, Gerard.
  • McLaughlin, Joseph.
  • McMahon, Larry.
  • Malone, Patrick.
  • Murphy, Michael P.
  • O'Brien, Fergus.
  • O'Connell, John.
  • O'Donnell, Tom.
  • O'Leary, Michael.
  • O'Sullivan, John L.
  • Pattison, Seamus.
  • Reynolds, Patrick J.
  • Ryan, John J.
  • Ryan, Richié.
  • Staunton, Myles.
  • Taylor, Frank.
  • Thornley, David.
  • Timmins, Godfrey.
  • Toal, Brendan.
  • Tully, James.
  • White, James.


  • Ahern, Liam.
  • Allen, Lorcan.
  • Barrett, Sylvester.
  • 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.
  • Cunningham, Liam.
  • Daly, Brendan.
  • Davern, Noel.
  • Dowling, Joe.
  • Fahey, Jackie.
  • Farrell, Joseph.
  • Faulkner, Pádraig.
  • Fitzgerald, Gene.
  • Fitzpatrick, Tom (Dublin Central).
  • Flanagan, Seán.
  • French, Seán.
  • Gallagher, Denis.
  • Geoghegan, John.
  • Gibbons, Hugh.
  • Gogan, Richard P.
  • Haughey, Charles.
  • Healy, Augustine A.
  • Kenneally, William.
  • 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.
  • Noonan, Michael.
  • O'Connor, Timothy.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Power, Patrick.
  • Smith, Patrick.
  • Timmons, Eugene.
  • Tunney, Jim.
  • Walsh, Seán.
  • Wilson, John P.
Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Lalor and Browne.
Question declared carried.
Committee Stage ordered for Tuesday, 23rd July, 1974.