Committee on Finance. - Finance Bill, 1974: Committee Stage.

Sections 1 and 2 agreed to.

I move amendment No. 1:

1. To add to the section a new subsection as follows:—

"(3) Under this section, interest payable to investors in registered building societies shall be exempted from the charge to income tax."

I think it is clear on the face of the amendment that it is designed to ensure that income tax at present levied on deposits with building societies will no longer be levied. I know from a previous discussion in another place that the Minister has taken the view that this would be inequitable having regard to the fact that income tax is levied on investments other than building societies. There is in operation and there has been for many years a special arrangement in regard to income tax on investment in building societies, the practical effect of which is that the normal rate of income tax is not levied on the interest paid by building societies to investors. Therefore there is, and has been for a long time, a precedent for special treatment of income tax in relation to interest on building society deposits.

Over and above that, there is the fact that the house-building programme is a major national priority and the adoption of this amendment would contribute very substantially to an improvement in our efforts in the house-building field. It would improve the situation from two points of view: first, the adoption of this amendment would enable building societies to reduce the interest they charge to borrowers by at least 1½ per cent. Some people argue 2 per cent, but we are prepared to settle for a figure of 1½ per cent. This is a matter of major significance to those who have to borrow money from building societies. In addition, it would lead to a substantial inflow of funds to building societies. Both these results are extremely desirable and, indeed, necessary in our present situation in which the building construction industry from the point of view of providing homes is, to say the least of it, in some jeopardy.

It is incumbent on us to do everything possible in order to improve the situation. This amendment presents a method which is not unduly expensive from the point of view of the Exchequer, having regard to the results which can be achieved, namely, a substantial reduction in repayments by borrowers and in stepping up the flow of money to building societies, thereby enabling loans to be obtained by potential borrowers who at the moment simply cannot obtain loans; there are some hundreds, if not thousands, of houses lying unsold because of this inability on the part of borrowers with a consequent disruption of the whole building industry and a threat of redundancy to employees in that industry.

For all these reasons I believe this amendment has an overwhelming case for it. The argument against it, that it would be inequitable, is somewhat academic having regard to the fact, as I said earlier, that there has been for a long time special treatment given to the interest paid to depositors in building societies from the point of view of income tax. For all of these reasons, I hope the Minister will see his way to accept this amendment.

I support this amendment. It is directed solely at this area of building societies and not at any other area of investment. The purpose of it is to try to solve the twin problems in the situation: first, there is the borrower who is unable to get money because the building societies have not got it and, secondly, the aim is to encourage building societies to create a fresh flow of funds so that they will be able to process loans for borrowers wishing to purchase their own homes.

As Deputy Colley said, we are anxious also to relieve the very serious condition in which builders find themselves in a number of our cities, with houses lying empty on their hands, houses they cannot sell because borrowers are not able to get money from the building societies. This is a reasonable amendment and, if accepted, I believe it will achieve the aim for which it is designed.

The cost to the general body of taxpayers, if Deputy Colley's amendment were accepted, would be £5 million and the beneficiaries would not be the purchasers of houses through building society mortgages but the very well-to-do who would invest large sums in building societies in order to avoid liability to income tax. It would be an anti-social measure. It would be against what we are endeavouring to achieve: equity in the system of taxation.

The fact must be faced that money, like any other commodity, has its price and anybody who borrows must pay the going rate. There is no such thing anywhere as cheap money in the context of the economic and financial circumstances prevailing throughout the world. Money is like water; it finds its own level. If an interest rate is not offered to investors sufficient to attract money then that money will go elsewhere. If this Government, or any other democratic government, has reason to float a loan or borrow money it must offer a competitive and attractive rate of interest or it will not succeed in getting the money required. Again, public bodies or private individuals who borrow money for business purposes, for the establishment of industries, the provision of employment, the provision of housing, or any other purpose, cannot expect to get the money unless they are willing to pay interest at the current market price. If money is drawn away for one particular purpose it will be so much less money available for other purposes. There is at the moment an exceptionally high rate of interest across the world because the supply of money is not sufficient to meet the demand. This problem is being aggravated very seriously by the grave imbalance in money markets as a consequence of the exceptionally high charges for oil by oil producing countries. World-wide inflation is shoving up interest rates. It is not any factor within our own domestic environment that is shoving up interest rates. This is a harsh but inescapable economic fact of life and it must be faced by everybody, irrespective of the purpose for which he seeks money, and that includes all those people desirous of getting money to purchase houses.

Building societies and other financial institutions can provide only so much money as they can attract and they will not attract money if they do not offer a competitive rate of interest. Very few investors are philanthropists and people will not invest money in building societies unless they get what they regard as an attractive rate of interest; if they do not get an attractive rate they will put their money where they will get a higher rate of interest, provided there is no risk. This is a factor many people do not take into account and possibly some of the recent collapses of what were considered to be reputable financial institutions abroad in recent times might persuade some people that it is against their own interests to be perpetually chasing high rates of interest. They might see merit in investing their savings in reputable building societies which are safe and which are based upon resources which themselves are continually appreciating.

The building societies are anxious to get further release at the expense of somebody else—perhaps of this mythical body called the Exchequer. It is well for everybody to remember that there is no goldmine in Merrion Street. The suspicion seems to exist that there is a goldmine, but no Minister for Finance ever found one there. Any money provided by the State, including the £5 million which would be required to accept the amendment of Deputy Colley, would have to be taken from the general body of taxpayers. There is no other source whereby Revenue could make good the loss if Deputy Colley's amendment were accepted.

The building societies are receiving a number of very substantial forms of assistance from the State which means that they are receiving assistance at the expense of the general body of taxpayers. They receive assistance in the form of income tax concessions both for their depositors and savers and for the borrowers. They are totally exempt from corporation profits tax. At present these concessions are costing in the region of £6 million per annum. There is also significant and unique direct assistance from the Exchequer in the form of a subsidy costing £2.4 million annually. The Exchequer is also subsidising a very specially favourable borrowing arranged by the Government with the Associated Banks. This makes it possible for the societies to pay 1 per cent extra to the depositors while keeping the rate to 1¼ per cent less than borrowers would have to pay otherwise.

The total State aid to building societies today is in the region of £9 million. I do not consider that we would be justified in asking the hard-pressed taxpayers to render further assistance. We are seeking to ease still more the borrowing problems of the building societies. We are seeking —and feel confident that we will succeed in getting—more moneys for house purchasers. Whether that money becomes available through building societies or the ordinary bank system does not matter as long as it becomes available for house purchase That should be our objective. We should achieve it, if possible, without imposing further burdens on the ordinary taxpayers. This is the right approach. We would be doing an injustice if we were to pretend that we could wipe away all the difficulties by fiddling around with the tax system. It is the rich who would benefit most. It could have a very damaging effect on the whole money supply position.

It can be clearly seen that the Coalition Government have no interest in the person who wants to buy his own house. The Minister's argument would be valid in normal circumstances in which people could get money from the financial institutions, the banks or some other agencies. We have reached the position, as a result of Government policy, where people are not able to get money anywhere to buy their houses. There is an example here of a small builder in Dublin who built 28 houses and got £1,000 deposit on each of them. Of these 28 persons who paid deposits only seven got loans. Any Government who could ignore warning signs like that and say that it is going to cost the Exchequer £5 million if our amendment were accepted are burying their heads in the sand or are deliberately endeavouring to channel all potential house-buyers away from owning their own houses.

I think also to use this spurious argument that this would benefit only the rich is playing the type of politics which we have come to expect from the Minister for Finance. The people who would benefit in the main from this amendment would be the people who want to buy their own houses. They are mostly young people who want to set up their homes. If we ignore these basic institutions, namely, the building societies, this will have repercussions throughout the whole economy. The £5 million which the Minister talks about will be a very small amount in relation to the damage that his attitude will result in.

We have arrived at a serious situation when we find that after the local authorities have advanced loans the banks are not even giving bridging loans following the letters from the local authorities. The Minister, who said earlier that there was no goldmine in Merrion Street—which we accept—should tell us where potential house-buyers will get the money to buy their houses. We, recognising this problem, tried in some way by this amendment to alleviate the problem which exists. The problem affects the house purchasers, the builders and the people employed in the building industry. Concern is being expressed on all sides about the importance of the building industry to the economy and yet the Government are talking about anti-social measures if this amendment were adopted. Could anything be further from the truth? This would be a most social measure. It would encourage people to buy their own houses at competitive rates of interest.

The Minister spoke about the vast sums that would be invested in the building societies as a result of the acceptance of this amendment. Perhaps the Minister is right. I personally would welcome the day when people would invest in the building societies. This would be the soundest possible barometer of the vitality of our economy. The only conclusion one can draw from the attitude of the Minister is that there is an ideological tug-of-war going on in the Government in regard to private ownership and municipal ownership. Obviously the left-wingers are winning.

We would ask the Minister to use his common sense at this stage and ensure that the building industry does not collapse because of lack of finance. The Minister's acceptance of this amendment would be a positive step towards ensuring that we do not bring about this type of calamity.

I am pleased— and I am sure my colleagues in the Labour Party within the Government are pleased—that the Government have rightly rejected this quite preposterous proposition by Fianna Fáil. Are Fianna Fáil seriously suggesting that if a multi-millionaire decides to invest half a million pounds in a building society his investment should automatically be exempted from income tax?

Would the Deputy rather see the money invested in the Channel Islands?

I am sure as a solicitor the Deputy would not like to see the money invested in the Channel Islands——

I would rather see the money invested in house building here.

It would be very interesting to hear Deputy Colley's defence of solicitors and barristers under section 57——

If the Deputy stays around he will hear it.

If somebody goes to Deputy Colley and says: "I want to invest £1 million", does Deputy Colley then say: "Do you want to invest it in a building society or in the Channel Islands?" When we are dealing with section 57 the republicanism of Fianna Fáil will be exposed. If this Government have £5 million to hand out we will invest that money in the construction industry.

We will do the same type of thing which was done by this Government when they decided to advance local authority loans and local authority housing an extra £9 million of capital. That is the way any sane, democratic Government will handle their finances. I do not believe in giving special exemptions to people who invest their money in building societies. I get confused when I read the amendments put down by Deputy Colley and Deputy Haughey. Some of them appear to be contradictory. It is interesting to note who is dictating the financial amendments of Fianna Fáil.

Are we now to have a suggestion that perhaps investment in the Post Office should be exempted from income tax? That money would go into the national, economic and industrial development of the country. Should anybody who invests £25,000 in the Post Office, and gets an income, be exempt from income tax? Is that being seriously suggested by Fianna Fáil now? Are they suggesting, that if some individual decided to put £2 million or £3 million into an Irish insurance company which gives money for housing automatically his income from that insurance company should be exempted from income tax? There might have been some credence——

Has the Deputy read the amendment?

If I may continue without interruption. The very peculiar sense of income tax equity shown by Fianna Fáil in this amendment is unique in the history of this House. For example, one would have thought that if they were serious they would have fixed some limits, say, the first £1,000 or £3,000 on interest should be exempt.

The Deputy is mixed up. He does not understand the amendment.

In my view £3,000 per annum income from a building society requires a fair amount to be invested. For these reasons this amendment is so ridiculous that not by any stretch of Dáil imagination could it result in an ideological tug-of-war between the Coalition partners. To be quite blunt, the amendment is so stupid that it would not even merit that type of consideration by the Fine Gael or Labour Parties. Under no circumstances would I support that kind of special treatment.

(Dublin Central): I never thought I would see the day when a member of the Labour Party would oppose an amendment deliberately designed to reduce the interest rates on housing in——

It is not. It has nothing whatever to do with housing.

What are building societies for?

This is income tax payable for investments.

(Dublin Central): I am surprised Deputy Desmond went along these lines because in my opinion this would go a long way to relieve the high interest rates——

Not at all.

(Dublin Central): Of course it would.

Such an assertion by Deputy Desmond does not answer the question.

The Deputy should get more advice from the Minister similar to the advice he got for his contribution a few minutes ago.

Deputies must allow Deputy Fitzpatrick to continue.

(Dublin Central): Everybody knows that building societies are starved for money. If one goes around this town one will see a number of young married couples trying to get house loans. If one reads the reports in the newspapers one will realise the deplorable state which exists in the housing construction industry. It is obvious that there are no loans available at present for house builders.

When we tabled this amendment our intention was to encourage money into building societies. When one realises the high rates of interest paid by certain financial institutions one can understand that the building societies will find it very difficult to encourage people to invest under the present circumstances. The Minister is very unwise not to accept this amendment. When house purchasers go to other financial institutions for loans they are charged interest at prohibitive rates. Because of inflation, borrowers will not be able to repay these loans unless the Minister takes practical steps. Today borrowers are paying one-third of their salaries for loans. This cannot continue.

I get the impression that the Minister is not concerned about the private building trade. He appears to be interested only in local authority housing. By accepting this amendment he will be helping the building societies by making more money available to them. Then people will be able to get loans at reasonable rates. If this amendment is not accepted less money will be invested in the building societies. More houses will be completed but nobody will buy them.

I was surprised when I heard Deputy Desmond's contribution. I was not surprised when the Minister tried to put up a smoke screen by implying that this amendment was intended to subsidise the wealthy. I would accept the arguments put forward against that form of subsidisation. That is not the object of the resolution. I think Deputy Desmond makes a mistake in accepting the manner in which the Minister replied to the arguments on this amendment. The object of the amendment is purely and simply to enable building societies reduce the interest rate chargeable to borrowers. I am sure Deputy Desmond has attended at least as many resident association and ratepayers' meetings as I have, since we represent similar constituencies, and that he must be aware of the problem facing existing borrowers of money from building societies because of increasing mortgage interest rates. He must also be aware that in the private sector the whole building programme is slowly coming to a halt because prospective purchasers of houses are not able to borrow money from building societies and that the building societies are not able to provide the money because they have not got it. The 1½ to 2 per cent Deputy Colley mentioned, in the case of a reasonably sized loan on a house today, would amount to something between £2.50 and £3 per week. If the Minister can consider the amendment from the point of view that it should be applied only to the reduction of interest charged to borrowers from building societies, I think he will see that it has nothing whatsoever to do with the argument he put forward of subsidising millionaires and so on. This has nothing whatsoever to do with it and was not intended in that way.

First of all, let me say I am somewhat surprised at the Minister's estimate of £5 million as the cost of this. I would have put the figure somewhat lower. However, if we accept that the cost would be £5 million, I wonder has the Minister considered the fact that the adoption of this resolution could well save the Exchequer a great deal more than £5 million, because unless some method is found whereby we can ensure an adequate supply of money for the building of houses, the direct cost to the Exchequer of the breakdown and redundancies that will occur—the loss of income tax, VAT and various other forms of revenue—would far exceed £5 million. Therefore, purely on the question of cost, I think the Minister is mistaken in imagining that he should have regard only to the direct cost of this without having regard to the cost in the other direction if this amendment is not accepted.

The Minister said that the only beneficiaries of this would be depositors in building societies. Indeed, if he did not say it, he implied that all these people would be very wealthy, a fact we know is simply not true. But we know also that the beneficiaries in this case would be primarily, as Deputy Brugha said those who are repaying loans on their houses and who are put to the pin of their collar to meet those repayments. They would be the first people to benefit by the reduction in interest. Secondly, thousands of people at present employed in the building industry whose jobs are at risk at present would be beneficiaries of the provisions of this amendment if it were accepted.

It seems to me to be a useless and futile exercise to be talking about equity in the taxation system if, in order to achieve that equity, one is going to produce a situation in which no loans are available to people to purchase houses. We are very close to that situation now. It does not matter how much denial comes from members of the Government, we all know the facts. One has only to get in touch with any building society to find out just how difficult it is for people to get loans. That is the factual position. This amendment is designed both to ease the burden on borrowers and improve the flow of money to building societies. I agree with the Minister that I do not care from what source the money comes, whether it be from insurance companies, banks, building societies or any other, as long as there is an adequate flow of money to maintain the housing programme.

But that is not the situation at the moment. If the Minister can spell out specifically where the necessary money for the building programme, particularly the private sector, is to come from, I am quite prepared to withdraw this amendment. I think that should indicate very clearly to Deputy Desmond at any rate, if not to the Minister, that the object of this amendment is not simply to benefit wealthy depositors. But I suggest that the Minister is not in a position to spell out any such thing. I would suggest that in the circumstances in the building industry and in the circumstances in regard to borrowers trying to obtain loans, it is simply not good enough to talk about idealogical notions.

Deputy Desmond amazed me in the approach he took to this. He is concerned only with whether some people are going to avoid a certain amount of income tax and does not seem to be concerned in the least with whether there would be a reduction in repayments for borrowers and an increased flow of money for house loans. I just cannot understand Deputy Desmond's approach to this, unless of course he is so blinded by some idealogical hang-up that he cannot see the wood for the trees. We all know what is the situation, and unless Deputy Desmond, the Minister and other people on that side of the House come out now and tell us precisely how that situation in the building industry and the availability or non-availability of mortgages is to be remedied, they are not entitled to start prating here about equity in the taxation system while people are queuing up, at their wit's end, trying to get loans on houses. It simply is not good enough for Deputies on the other side of the House to approach this problem in this way.

Deputy Desmond made a reference to the announcement by the Minister for Local Government about a further £9 million for local authorities. Deputy Desmond should know by now that that is merely a window-dressing operation. He knows there was no announcement about an increase in the limits either in the amounts of loans available or in the qualifying salary. That being so, it is purely a window-dressing operation. It will not build one more house, and he should know that.

We are interested in seeing that the housing programme is kept going. We are interested also in seeing if it is possible to reduce the burden on borrowers. We claim that this amendment is a rational approach to achieving these objectives. We have had no answer from the other side of the House other than ideological arguments about inequity in the taxation system. In fact, it would not be unfair to summarise what Deputy Desmond was saying as that he would prefer that millions of pounds would go abroad rather than be invested in the building industry in this country, through building societies, if getting the money into the building societies—and therefore into the building of houses here— were to result in some people not paying as much income tax as they do at the moment.

Of course, there is also the fact that the continued starvation of money for loans from building societies for privately-built houses will have the effect of sending people even further seeking local authority houses at far greater cost to the taxpayer than the cost of implementing this amendment. For all those reasons I would hope that the Minister and his colleagues on the other side of the House would have a little sense and would approach this in some kind of a rational down-to-earth way.

The Minister should forget the theory and face the reality. If he has a better way of dealing with it he should let us know, but if he has not he should not be talking about theoretical points while the building industry is running down and while people are at their wits end to get loans for housing.

I intervene as a person not unacquainted with the building society world. Deputy Colley's amendment is to my mind somewhat sweeping. In my opinion some extra help is necessary for the building societies at this moment.

Hear, hear.

I should be glad, therefore, if the Minister could do something in that respect. I am not sure whether Deputy Colley means that all investors in building societies would be free of income tax.

That is what he appears to mean. I do not think that would be possible or advisable, but there are other methods by which a somewhat similar result could be achieved. The result I should like to see achieved, and I trust Deputy Colley would too, is not to make a sort of tax haven for wealthy people——

Hear, hear. The Deputy has a good Labour colleague on his right.

I do not think that is necessarily a desirable or an entirely undesirable end in itself. What is desirable is to encourage an inflow of funds to the building societies. We are all anxious to do that and I am sure nobody is more anxious to do it than the Minister. I am not at all sure that Deputy Colley's amendment would be desirable from that point of view. There are other ways in which it could be done. One would be through the subvention which is being granted to building societies. It is a complicated matter, but the subvention recognises the encouragement building societies give to housing generally, to housing of a private nature, not necessarily houses for the wealthy. Indeed, building societies usually do not cater for that type of person on account of the ceiling limit placed on the amounts of individual loans.

One way would be to increase that subvention. Another way which would bring about the desired effect of helping to get over this famine I will come to later. There is no doubt there is a famine in the building society world which is not now able to advance money for the purchase of houses. We know that builders are being held up for money. I do not want the Opposition to take any comfort, so to speak, from that because it does not arise out of Government action. It is one of the inescapable results of the price of money and that leads to another inescapable fact, that if building societies temporarily can give better value than other financial institutions money would tend to flow into them. Nobody wants to see a millionaire putting his money, tax free, into building societies, but the amount which an individual and his wife can put in at present could be raised. I should be glad if the Minister would consider that between now and Report Stage. I should also like him to consider increasing the subvention because at the moment the finances of building societies, though essentially sound, are such that they can only lend the amounts which come in to them. Like the Government, they have not a gold mine and are strictly bound by the input of investors.

I merely want to chide Deputy Colley. He was a very prominent Deputy between 1969 and 1972. I do not have it with me, but I would urge him to read his own White Paper on housing of that period and I think he will find that a good deal of what he has suggested today was then thrown out by Fianna Fáil.

There was no famine for mortgages as there is now.

May I remind Deputy Colley that he should be well aware the suggestion that tax free investment should be made in building societies was one which he as Minister for Finance, and his party in the period 1969 to 1972——

It was not necessarily the same.

If I may make a point without interruption, the suggestion is that every wealthy person should invest tax free in building societies. The suggestion is that if a person had £40,000 in the PO Savings Bank it should be taken out and put into building societies, with tax free interest. Is the Deputy seriously suggesting the Government should say to everybody with money in the Post Office or, say, in the Dublin Savings Bank, or in an insurance company: "Release all these investments, even if they amount to £1 million, in institutional investments. banking institutions, speculatory institutions——"

What are speculatory institutions?

It would be rather interesting if I went to my bank manager and said to him: "Deputy Colley has a brilliant idea. Could I have a loan of £15,000? I want to invest it in a building society, tax free". I do not think a bank manager could find a more lucrative——

Deputies on the opposite side will clearly remember the substantial Government assistance given to the building societies with four or five strings attached. For example, there was the embargo on loans for non-housing purposes. That is not included in the Fianna Fáil amendment. There was also an embargo regarding the upper limit on the amount of individual loans.

Does the Deputy think that is relevant or in order on the Finance Bill?

I am not suggesting it is but I am telling the Deputy that the Government told the building societies they would give them a subsidy if there was an upper limit on loans, if they gave precedence to loans for new houses, and if there was an embargo on loans for non-housing purposes. The Government made this approach to the building societies and it was a very substantial and costly one. The Government handed out many hundreds of thousands of pounds to subsidise interest rates.

Are Fianna Fáil seriously suggesting that the most logical approach is that we abolish income tax for investors in registered building societies? I have intervened in this debate simply because I found the suggestions of the former Minister for Finance quite incredible and irresponsible. I am as concerned about the state of the construction industry as anyone else but I do not believe it to be as disastrous as Deputy Colley suggested. There is a considerable amount of scaremongering by Fianna Fáil with regard to this matter.

I am concerned about the needs for additional capital in the building societies. I suggest Fianna Fáil Deputies should go to an ordinary cumann meeting and tell an ordinary member that he must pay his income tax while another Fianna Fáil supporter can put £30,000 in a building society without paying interest. Are Fianna Fáil seriously suggesting that is the way to run the country? I do not want to drag Deputy Haughey into the matter. I always had the greatest regard for his common sense when he was Minister for Finance and I am sure he would accept that this kind of suggestion is so preposterous that it is laughable as a means of getting extra money from building societies. I do not think we should delay unduly with this kind of naive, unsophisticated rubbish.

I do not wish to pursue the argument that one could pursue in considerable detail, particularly with Deputy Desmond. I would point out that neither I nor my predecessors in Fianna Fáil Governments introduced this arrangement. We did not do so because it was not necessary, however much Deputy Desmond may try to pretend otherwise. Had he listened to Deputy Dockrell he would have got the message regarding the building industry. Deputy Desmond said that our proposal was naive and unsophisticated. His own approach to this matter and his knowledge of the situation clearly is naive and unsophisticated. Apparently he thinks the adoption of this amendment would result in a vast outflow of money from, say, the Post Office.

Has the Deputy ever wondered why people leave their money in the Post Office when they could get much better returns in other places with ample security? This is the fact, not only in this country but in other countries. I am interested in trying to do something to improve the flow of funds to building societies and, for that reason and bearing in mind something that was said by Deputy Dockrell, I am asking the Minister if he would be prepared to consider an amendment that would limit the amount of investment free of income tax to an agreed figure. I do not know what the figure should be but, off the top of my head, I am suggesting a figure of £5,000. Would the Minister consider that in principle?

At present investors in building societies are liable to income tax at only 70 per cent of the standard rate. Therefore, they have a 30 per cent reduction in their income tax liability. This is quite considerable and is costing about £2½ million. Any concession given to one person means that someone else has to carry the loan. The fewer exemptions you have in the tax system that can be enjoyed by the well-to-do and the rich the better. We want to get rid of those if we can——

The Minister wants to get rid of the rich?

We want to get rid of the privileged——

That is his policy.

That is tripe and the Deputy knows it. We want to get rid of a tax system that can be used by the rich to make themselves richer at the expense of the poor.

We want to build houses.

We want to get rid of a system used by the rich to the disadvantage of the poor. That is the slogan over the door of the Department of Finance while the Coalition Government are in power.

More than £100 million has gone out of the country because of the Government's madcap policy.

Let us deal with the problem with which we are supposed to be dealing. Through the Minister for Local Government, the Government have let it be known that they are examining carefully the position of building societies and are involved in steps that will improve the flow of money to building societies. We are satisfied that the way to improve this flow is not by building in a concession the well-to-do can enjoy but which will not operate to the benefit of the economy as a whole.

Earlier, I emphasised there is so much money available, that it is needed to generate jobs, to finance stock and agriculture, and that if we draw too much money away from one necessary purpose the economy is distorted, with consequences as evil and harmful as those which people here are overemphasising. There is no justification for the sense of alarm generated from the Opposition benches in the course of this debate. I would point out that the amendment put down by Deputy Colley asks that the concession be made available to investors in building societies but there is not one word about passing it on to borrowers.

I assumed the Minister would impose that.

The capacity to draw money would be minimised if the benefit were passed to the borrowers. Deputies opposite know that the real trouble of the building societies is the world price of money. We cannot escape this and the entire banking system has to offer higher rates of interest to stop money flowing out of Ireland to other money markets in the world that offer attractive interest rates. If you take, for instance, November, 1972, and compare the bank rate then with what applies now you find that it has increased from 3 per cent to 8 per cent. That is one whale of a jump. In fact, there are other increases from 3 per cent to 9 per cent. Against that, building society rates have risen from 5.5 to 8 per cent. That 8 per cent is receiving a unique, exceptional Government subsidy of £2.4 million which makes the rate for building societies today, as far as investors are concerned, in effect 12.3 per cent, which is not inconsiderable.

I would emphasise what I said earlier, that there are people chasing hot money in this country and others and they should learn a lesson from the number of banks that have collapsed abroad in recent weeks. Chasing hot money carries a risk and that risk may mean total loss of money. Central banks and Finance Ministers in other countries have made it clear that they are not prepared to come to the rescue of people who have invested their money to get hot rates of interest. People at a time of international monetary instability might think well of putting their money where it is safe, as safe as houses, that is in building societies.

It would be totally wrong for us to provide a distortion, because distortion it would be were we to provide the tax exemption which Deputy Colley suggests. The effect of that would be that other financial institutions in this country, and that would mean the banks who were lending to industry and commerce and to farmers, would, as a consequence of this concession which would be paid by the general body of taxpayers to building societies, themselves have to increase what we consider to be rates of interest which are already too high in order to attract sufficient money to keep the money flowing through the system.

I would ask Deputies very seriously and conscientiously to consider the inadvisability of providing any further distortion. We are going through a period of serious difficulty in this country as a consequence of world madness in money rates. It would be very wrong for us to start building in domestic distortions of our own. We are satisfied that the money supply in this country can be so ordered that the construction industry will receive adequate money. I can give the assurance to the House that this is a matter which the Government are treating as a top priority. Just as last week we produced the money necessary for local authorities to maintain their building programme, so in the not-too-distant future we will be providing the money flow necessary to ensure that the total house construction industry gets the money it so badly needs.

I regret the Minister finds himself unable to accept the amendment and indeed apparently unable even to consider in principle the further proposition I put forward, that a ceiling should be set on the amount of money which should be free of tax in building societies. I do not think there is anything further to be gained by arguing the case again. I think we have put the case clearly. The Minister has rejected even the limited suggestion I made. I regret that. I think he is mistaken but it is quite clear we are not going to persuade him even to accept that limited proposition. It is regrettable. I think the Minister will regret it himself later but it is his business. He has made his decision.

Before the debate on this amendment concludes I should like to take up where Deputy Colley has been speaking and point out to the Minister that, as matters stand at the moment I understand there is a limit of £5,000 per person on the amount deposited with a building society which qualifies for the limited relief, which the Minister has referred to here as I think 30 per cent, on income tax at the moment. I think that limit is not always observed where the societies are lucky enough to get more than that amount from any one depositor. In any event it could be got around by placing some of the money in the name of the wife of the depositor or a child. Nonetheless, the principle appears to be there, that for the limited relief that currently exists there is a limit. If full relief of income tax on those deposits were to be given I see nothing wrong in principle in applying some similar limit to the amount that might be deposited as has been suggested by Deputy Colley and as was suggested by Deputy M. E. Dockrell. If the Minister is serious in trying to solve the very serious situation that we all know, including Deputy Dockrell, exists at the moment so far as loans and building work are concerned surely this is an obvious way to do it. We are not asking that a man be allowed to deposit £50,000 or more in a building society free of tax.

You are. It is there in the amendment.

We are asking that, with some limit being placed on it—and we will put down an amendment on Report Stage if necessary, if this amendment is defeated, in order to make that clear—that principle be accepted now. I am sure we will not have any objection to any reasonable limit which the Minister suggests. Anything that will bring more money into the building societies will be agreeable to us. Of the various sources from which housing is financed the source which is in greatest difficulty at the moment is the building societies. The local authority end of it is in a different category. That is borne out by the fact that the reaction of most people, who know anything about the problem, to this £9 million which was produced out of the hat last Friday evening by the Minister for Local Government is that, of course, it is fraudulent. It seems extraordinary that the Minister for Local Government, who made great efforts to get in with his Estimate last week and finally got in on Thursday, should have said nothing about that in the House but should have made an announcement through the Government Information Services on Friday evening at a stage where it was no longer possible to question that announcement in the House this week at Question Time. Presumably the Local Government Estimate is not going to be resumed which means there can be no discussion on a fraudulent gesture by the Minister for Local Government and the Government to cod the people into believing that something was being done to increase the amount of money that would be made available for housing. It is absolutely no good giving £9 million, or £90 million, to local authorities to be given out in housing loans if the limit of the loan remains as it is and if the income limit for eligibility for that loan remains as it is.

Is the Deputy suggesting that loans are not being taken up?

They are not being taken up and there are counties and cities where money——

Come out to Dún Laoghaire.

——was already available before this £9 million was talked about at all for small dwelling loans but they were not being taken up not because there were not people there ready, willing and anxious to get a loan in order to buy a house if they could but because of a combination of either or both of two factors— that the loan was too small anyway at £4,500, or that their income was too high, because it exceeded £2,250. The Government might just as easily have announced an additional £90 million as £9 million because that money is of only limited value to a very limited number of people. If you are going to solve the difficulties that face the building industry at the moment you will have to solve them in the category for which building societies have been providing money up to now. There are builders laying off men at the moment, irrespective of what the Minister or Deputy Desmond may say. There is a considerably larger number of builders who will lay off men in August when the builders' holidays begin. Unless they can see some finance coming from a source that will be of some value to them, to their current and potential customers, then these lay-offs will continue. A maximum limit of £4,500 by itself is no use nowadays when the average house in most of our cities and towns costs £7,000 to £8,000. People are not in a position to make up the difference out of their own resources. If the building societies had the money available to them they would be in a position to lend enough on those houses to enable them to be bought. There are plenty of people anxious and willing to buy them and there are plenty of people anxious and willing to build them. The difficulty is that the money is not there from the particular source that is the most vital of all, the building societies.

The Minister has an opportunity by accepting this amendment, with it necessary a limitation on it—to which we have no objection—to increase the intake into the building societies overnight. Deputy Maurice Dockrell, who knows a good deal about these things knows that what I am saying is true. The Minister could remove the income tax requirement up to a certain limit of investment in the building societies and this would enable them to pay a higher rate of interest. This would get in more money but would not entail, as the Minister suggests, the building societies raising their rates of interest to borrowers.

We are told by the Minister that if the limit was removed altogether the cost would be £5 million. Surely that £5 million could be paid as interest to investors without raising the borrowing rate of interest at all? If that sort of money became available to investors there is no doubt they would invest immediately very much more heavily in the building societies. When I look at where money appears to have been going in this country in the past three months I am confident that the bulk of that new investment in building societies would not come, as the Minister suggests, from the Post Office and other financial institutions in this country, but would come back from Northern Ireland, England and other places abroad, where it has gone because of the way it has been frightened off in the past three or four months.

That is the most valuable type of money because it is money which has now been lost to our economy. Unless it is brought back through a gesture of this kind by the Government it will remain permanently lost to our economy with all the long-term consequences that flow from that. The Minister has an opportunity here by the stroke of a pen, by accepting this amendment in principle at least, even if he puts some limitation on it—we have no objection to that—to solve many of the problems of the building industry overnight. He knows he can do it. Deputy Maurice Dockrell knows it can be done. We ask the Minister to remember those who will lose their jobs, to remember those who cannot buy houses now and forget about ideology and trying to "screw" the rich and all the other nonsense that has gone on in this country over the past 18 months.

I do not want to prolong the debate but I could not let the particular point raised by Deputy O'Malley go without making a comment. Fianna Fáil proposed an amendment as follows:

... interest payable to investors in registered building societies shall be exempted from the charge to income tax

When it was conveyed to the Opposition that their amendment was ridiculous the next thing they reverted to—this is normal when one is in Opposition as I remember during my four years in Opposition—was to ask the Minister to accept it in principle. As Deputies Colley and O'Malley know, the very principle is equally odious. When they failed at that level the next proposition was to put a limit on the amount. If I heard Deputy Colley correctly the limit suggested by him was in the region of £5,000. I am not sure if it was an investment of £5,000.

I do not think it makes much difference to the Deputy.

Is Deputy Colley suggesting that if I had £60,000 tomorrow morning I should have the sanction of the State to put it into a building society and to have interest free investment from that particular sum of money, and that I would pay no income tax? This is what Deputy Colley and Fianna Fáil are suggesting. The proposition of Fianna Fáil, even if accepted in principle, would create so much excitement that there would be such a swamp of money going into building societies that the very credibility and financial standing of the Government would be called into question overnight. We would have to close down the banks of the country. The bank managers would get very excited at this proposition of the Fianna Fáil Party on how to make a lot of money without having to pay any income tax.

I suggest to them that, even in principle and in terms of the particular limit, their amendment is not a viable proposition. If the Minister wishes to consider the matter that is his privilege. Are we to suggest that investment in insurance companies in relation to housing should also be exempt from income tax? The life assurance companies in this country currently invest £10½ million in house building. Are we to suggest that any person putting his money into an insurance company can say to the investment portfolio manager: "I want that £300,000 to go into housing and I do not want to pay any income tax on it. You give money to the people for house loans and therefore I do not want to pay any income tax on it."

Is there something in the amendment about this?

The Deputy should have a quiet word with the investment portfolio manager of Irish Life or a few of the insurance companies and he would discover that if they accepted the import of his amendment they would have no money for the next 50 years to give to anybody for housing.

They are not doing anything about housing at any rate.

The particular proposition of the Fianna Fáil Party is ridiculous. Contrary to the opinion expressed by Deputy O'Malley there has been a marked increase in loans by local authorities: from 5,087 loans, valued at £15.13 million in 1972-73 to 10,000—twice the number—valued at £39.17 million for 1973-74. During that period the amount of the loans and the income eligibility levels were raised. Deputy O'Malley comes whining into this House trying to scare the living daylights out of the construction industry, trying to suggest to people they have no hope of getting loans when he knows perfectly well that in the past 12 months the number of local authority loans doubled from 5,000 to 10,000 throughout the State.

Is the Deputy satisfied with the housing situation and the availability of money?

I am satisfied with the measures taken by the Government.

We now know where the Deputy stands.

The £9 million is not a mirage. The money is being made available to local authorities immediately for their loan commitments in the next 12 months. There has been a huge expansion in local authority loans. I am not particularly satisfied with the income limit. I would like to see an income limit of £3,500. But lest this House be under any illusion, there are not that many workers earning £2,500 a year. There are hundreds of thousands of families who are below the income limit for housing loans. These are the people this Government are most concerned about. I would remind Fianna Fáil sharply that notwithstanding the substantial increase in inflation running at 14 or 15 per cent a year—in Deputy Colley's time it ran at 11, 12 and 13 per cent——

It is running at 24 per cent a year now.

Notwithstanding that very substantial increase in the amount of loans available, we have very substantially increased the income eligibility limit. In relation to the construction industry I want to challenge Fianna Fáil on this point: come into this House and name the builders who are laying off their workers. Stop the spurious scaremongering, trying to create a construction industry crisis. Name the towns where they are being laid off. Name the construction firms. Name the builders' providers. Name the trade unions concerned.

There is nothing more irresponsible, no more effective way of doing down Ireland, than that an Opposition should come into this House and inquire about redundancies in the construction industry when they know quite well that people are laid off during the holiday period around August and are taken back later on in the year. I would advise Fianna Fáil not to be the pawns of some builders who want the Government to abolish the £7,500 income limit. I would urge that party to behave themselves in a responsible manner rather than to try to create a crisis where none exists and where there is every opportunity for the construction industry to prosper.

I did not intend to speak, but having listened to Deputy Desmond I feel it incumbent on me to appeal to him to take heed of the words of Deputy O'Malley, who put forward very sound arguments. Deputy Desmond asked us to name the firms who laid off workers. Do not take our word for it. Inquire from the trade unions who since last Friday afternoon are carrying out an investigation into the number of people who have been sacked, including apprentices. Unless the Minister does something drastic there will be a crisis in the building industry.

You said that last year.


Deputy Moore is in possession.

I want to appeal in all earnestness to the Minister and all other Deputies over there to do something. This is not Fianna Fáil propaganda. The stark reality of the situation is that building workers are being laid off. One firm I know of has 30 houses cancelled for people who cannot take their loans for them now.

Name the firm.

I would appeal to Deputy Desmond to inquire from the trade unions. Do not take our word for it.

Listen to Deputy Dockrell.

Get in touch with the trade unions and ask them how many workers are being laid off and what are the prospects. If the Minister does not act now, in a month's time it will be too late to act, and we will be back again in the rut of a decadent building industry with thousands being laid off and workers emigrating.

I have listened to Deputy Desmond on three or four occasions here today and each time he has contradicted himself twice or three times. He is making a case against the amendment in Deputy Colley's name and he enforces his argument in opposition to it by saying that the SDA loans have doubled in the last 12 months, both in regard to the number or applicants and the amount of money, which, in my opinion, proves that something has got to be done in relation to investment and the availability of finance from the building societies. That is the first contradiction.

The second contradiction is that we have been accused of scaremongering over the last few weeks, and in the last few weeks the Minister for Finance is on the records of this House, as is also the Minister for Local Government, as stating that there is sufficient money in the building industry at present. Yet last Friday the Government had to announce an increase of £9 million for house purchase, £9 million which, as has already been stated by Deputies, will not sell one additional house, simply and solely because the very people Deputy Desmond is pleading for here, the people under the £2,500 income limit, are not in a position to get from any financial house the £2,500 to £3,000 that is necessary to make up the price of their house. They will get £4,500 loan from the local authority, but they have no where else to go to get the additional funds to purchase their house.

I would like any member of the Government or any member of the parties supporting the Government to tell me and the many thousands of people throughout the country who would like to purchase and own their own home where they will get these houses at £4,500. Where do they exist? Do they intend to provide them, because, as has already been stated, the average price of any house worthy of the name, no matter what part of the country you are in, is £7,000 or £8,000. The only source of funds is proven by the statistics produced by Deputy Desmond and provided by the Minister or some of his advisers with a little note. Incidentally, these figures were available to them but not to us. When the question was asked here in the Dáil two months ago we were told those figures were not available; yet Deputy Desmond could produce them today. The facts are that the building societies, down through the years that the Fianna Fáil Governments have been accused of not doing this very thing we ask be done, had sufficient funds to supply the demands of the market. The situation is not the same today, and the question I should like to ask the Minister and in particular, Deputy Desmond, is, if they are satisfied that there is sufficient money available from the building societies to finance their target of 25,000 houses until 31st March next year, in addition to the amount of money that is made available for financing houses through the SDA loans.

We are asking that this amendment be accepted. To initiate discussion the amendment must appear in some form, but naturally in the course of the Committee Stage of any Bill both sides should be prepared to pull back from any suggestions that were originally made. I would appeal to the Minister to pull back from the statements he read out in answer to Deputy Colley's proposal. Is the Minister afraid of Deputies in the Labour Party like Deputy Barry Desmond? The only Member who spoke on behalf of the Fine Gael Party, Deputy Maurice Dockrell, seemed to be in favour of the suggestion put by this side of the House. It is possible that the Minister is afraid of repercussions from Deputy Barry Desmond and his colleagues in the Labour Party.

We are concerned about this position and the Minister would be telling an untruth if he said he is not concerned about the position that exists in the housing industry. Deputy Barry Desmond has asked us to give names. I could give him the names of several companies in the north-west who have left off workers, of builders' suppliers and factories involved in the supply of materials to builders who are affected by the present position. I do not intend to do so in the interest of the companies concerned. All of us are aware that in the building industry the holiday period starts in about seven days' time. We are also aware that most people involved in this industry would not, because they have a conscience, lay off people two weeks before they commence their holidays.

If they are doing that why are the unions not doing something about it?

Thousands of workers get their cards every year at or about this time.

Do the workers forfeit their holiday pay?

If the Minister treats this amendment with contempt, as he has done so far backed up by people like Deputy Barry Desmond, when this House meets after the recess thousands of people will have been laid off work and that will cost another Department of the Government millions of pounds before 31st December.

In the interests of the construction industry we appeal to the Minister to think again. It is possible that the Minister has better proposals in mind. The Minister did say last week that the matter concerning the building societies was still under review and what help might be given in that regard he had not decided on. The Minister should satisfy us that he is going to do something to restore confidence in the construction industry generally. If Deputies on the Government side are sincere and serious about being public representatives they must agree that the situation that exists today in relation to the building industry and the financing of the building industry is critical. It just cannot be brushed aside.

The little bit of whitewashing that was done on Friday, possibly in anticipation of the discussion on this Bill today and tomorrow, is not going to help in any way the difficult situation that exists. The Minister knows that and he should be honest with the House and state the true position. This is not the kind of industry that one can bluff one's way through. Redundancies have already taken place and that is an undeniable fact.

No matter how many multi-millions the Minister makes available through SDA loans or in any other way through local authorities the vacuum that has been created because of the lack of finance from the building societies and the banks will not be satisfied. Anybody who applies to a local authority for an SDA loan can. without great difficulty, obtain a loan of £4,500 to purchase a new house. However, we are all aware that any house at present costs in the region of £7,000. This means that a person obtaining a loan from a local authority must find almost £3,000. Where can a young couple or anybody find that kind of money? The only way out of this present crisis is for the Minister to up the limit for local authority loans or accept, in principle, Deputy Colley's amendment.

Amendment put.
The Committee divided : Tá, 53; Níl, 60.

  • Allen, Lorcan.
  • Andrews, David.
  • Barrett, Sylvester.
  • Brady, Philip A.
  • Brennan, Joseph.
  • Breslin, Cormac.
  • Browne, Seán.
  • Brugha, Ruairí.
  • Burke, Raphael P.
  • Callanan, John.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Gerard.
  • Crinion, Brendan.
  • Cronin, Jerry.
  • Crowley, Flor.
  • Cunningham, Liam.
  • Daly, Brendan.
  • Davern, Noel.
  • Farrell, Joseph.
  • Faulkner, Pádraig.
  • Fitzgerald, Gene.
  • Fitzpatrick, Tom (Dublin Central).
  • French, Seán.
  • Gallagher, Denis.
  • Geoghegan, John.
  • Gibbons, James.
  • Gogan, Richard P.
  • Haughey, Charles.
  • Healy, Augustine A.
  • Herbert, Michael.
  • Hussey, Thomas.
  • Kenneally, William.
  • Kitt, Michael F.
  • Lalor, Patrick J.
  • Lemass, Noel T.
  • Leonard, James.
  • Lynch, Celia.
  • Lynch, Jack.
  • McEllistrim, Thomas.
  • MacSharry, Ray.
  • Meaney, Tom.
  • Molloy, Robert.
  • Moore, Seán.
  • Nolan, Thomas.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Power, Patrick.
  • Smith, Patrick.
  • Timmons, Eugene.
  • Tunney, Jim.
  • Walsh, Seán.
  • Wilson, John P.


  • Barry, Peter.
  • Barry, Richard.
  • Begley, Michael.
  • Belton, Luke.
  • Belton, Paddy.
  • Bermingham, Joseph.
  • Bruton, John.
  • Burke, Dick.
  • Burke, Joan T.
  • Byrne, Hugh.
  • Clinton, Mark A.
  • Collins, Edward.
  • Conlan, John F.
  • Coogan, Fintan.
  • Cooney, Patrick M.
  • Cosgrave, Liam.
  • Coughlan, Stephen.
  • Creed, Donal.
  • Cruise-O'Brien, Conor.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Dockrell, Henry P.
  • Dockrell, Maurice.
  • Donegan, Patrick S.
  • Dunne, Thomas.
  • Enright, Thomas.
  • Esmonde, John G.
  • Finn, Martin.
  • Fitzpatrick, Tom (Cavan).
  • Flanagan, Oliver J.
  • Gilhawley, Eugene.
  • Governey, Desmond.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hegarty, Patrick.
  • Hogan O'Higgins, Brigid.
  • Kavanagh, Liam.
  • Kelly, John.
  • Kenny, Henry.
  • Kyne, Thomas A.
  • L'Estrange, Gerald.
  • Lynch, Gerard.
  • McDonald, Charles B.
  • McLaughlin, Joseph.
  • Malone, Patrick.
  • Murphy, Michael P.
  • O'Brien, Fergus.
  • O'Connell, John.
  • O'Leary, Michael.
  • O'Sullivan, John L.
  • Pattison, Séamus.
  • Ryan, John J.
  • Ryan, Richie.
  • Spring, Dan.
  • Staunton, Myles.
  • Thornley, David.
  • Timmins, Godfrey.
  • Toal, Brendan.
  • Tully, James.
  • White, James.
Tellers: Tá, Deputies Lalor and Browne; Níl, Deputies Kelly and B. Desmond.
Amendment declared lost.
Section 3 agreed to.

I move amendment No. 1a:

In page 6, to delete lines 7, 8, 9 and 10 and to substitute the following:

Provided that where tax is deducted from a dividend at a rate as reduced by virtue of section 396 or 410 of the Income Tax Act, 1967, or section 14 of the Finance Act, 1973, the amount to be included in the relevant income in respect of the dividend shall be an amount which bears the same proportion to the amount of the dividend as the rate of income tax deducted therefrom bears to the standard rate of tax and the amount of the credit to be given shall be the amount of tax deducted from the dividend. Where tax is deducted from a dividend at a rate as reduced by virtue of section 363 such adjustment as may be proper shall be made in the amount of the credit.

The purpose of the amendment is to delete the existing proviso in section 4 and substitute what I have set out in the amendment. The proviso, as it stands, is inadequate. It says:

Provided that where tax is deducted from a dividend at a rate as reduced by virtue of section 363, 396 or 410 of the Income Tax Act, 1967, or section 14 of the Finance Act, 1973, such adjustment as may be proper shall be made in the amount of the credit.

I submit that is bad law in relation to something as important as the amount of tax to be paid by a taxpayer that it should be left in those vague terms—"such adjustment as may be proper". The legislation should spell out exactly the adjustment to be made.

I might draw the attention of the House to the matter we are dealing with in section 4. It concerns the rate at which income tax is deducted from a payment being made in accordance with the various provisions of the Income Tax Acts. The provisions with which we are dealing in this proviso are the provisions of the Income Tax Acts which up to now have governed companies paying dividends out of profits made from the coalmining or export industries or from ordinary mining which are themselves free of tax. Up to now special provisions applied to the payment of these dividends which had the effect of passing on to the individual shareholders in these companies the benefits of the exemption from income tax to which the companies were entitled.

The new unified rates necessitate a change of procedure. In future when dividends are being paid income tax will be deducted at the standard rate in force at the date of payment. Up to now income tax was deducted at the rate in force over the relevant period. That change causes problems in regard to these dividends which are being paid out of profits which are themselves free of tax. The proviso to the section as framed leaves the matter very much in the air. My amendment is designed to spell out in more precise terms the treatment which should be afforded these dividends in relation to the tax-payers total income for tax purposes.

My amendment is directed to the amount of these dividends which should be included in the person's income as assessed under the new income tax provisions set out in this Bill. In the amendment I set out that the amount which is to be included in the relevant income in respect of the individual shall be an amount which bears the same proportion to the amount of the dividend as the rate of income tax deducted therefrom bears to the standard rate of tax, and the amount of credit to be given shall be the amount of tax deducted from the dividend.

I think that is a reasonable approach and is in line with the approach in general adopted up to now. I cannot see that the Minister can have any objection to accepting this amendment. I am sure he cannot be satisfied with the wording of the proviso as it stands and in everybody's interest it is proper that this Bill should spell out precisely the way in which these dividends are to be treated in future. My suggestion is that you take the rate at which tax is deducted from the dividend and relate that to the standard rate of tax and bring in that proportion of the total dividend as the amount of that dividend which should be included in the taxpayer's income for tax assessment purposes. I hope I have made myself clear.

I have noted a number of matters I should like the Minister to clarify because the section is certainly not clear. I support Deputy Haughey's amendment. It goes a long way towards clarifying that which is obscure in the section. I shall be interested to hear what the Minister has to say on this amendment. There are other matters which will arise more properly on the section in regard to which I shall ask him some questions. As it stands, the section is not clear and Deputy Haughey's amendment goes a long way towards clarifying it.

I can understand the unease of Deputies in regard to the language used in the phrase "such adjustments as may be proper" but it is of interest to note that the same language was used in the 1956 Finance (Miscellaneous Provisions) Act, in the Finance Act, 1958, and in section 410 of the Income Tax Act of 1967, so it is not a new phrase. That, of course, is no reason why we should not look at it to find out whether or not it is appropriate. But it is not new. It is not a question of our adopting something which is not time honoured.

The purpose of the amendments is to ensure that where a dividend is paid out of tax and there is relief to profits—export tax relief, Shannon relief——

It does not apply to Shannon.

Exports and mining relief—a proper share of the relief will be available to the recipient of the dividend which will be chargeable to tax at a higher rate. Tax relief was available in the case of a person liable to surtax. It took the form of having included in the taxpayer's total income for surtax purposes only the proportionate part of the dividend, that proportion being the same proportion as the reduced rate of tax bore to the standard rate of tax. I take it the Deputy's amendment is intended to carry through the same provision for the purpose of the higher rates of income tax which are to replace surtax.

Section 4 makes provision for the granting of such relief. The language may be faulty, but that is the effect of the provision: "such adjustments as may be proper shall be made...." The Deputy says the provision is not specific enough and it does not state precisely how the relief is to be granted. He hopes his amendment has the necessary precision. In fact the Deputy's amendment, if accepted in its present form, would not alone provide relief from the higher rates corresponding to the relief formerly available in respect of surtax but would also have the effect of reducing the income tax liability ordinarily existing. The amendment would work in such a way that a greater benefit than that which Deputy Haughey has in mind would accrue.

The difficulty we face is no doubt a difficulty which faced legislators in earlier years—the difficulty of devising precise language to suit all cases—but I am advised by the parliamentary draftsmen that it is not possible to do this. If we use any other form we will not avoid the pitfalls Deputy Haughey's well-reasoned amendment aims at avoiding and, on that account, I would ask him not to press it. The intention is to apply the provision so that precisely the same result will be arrived at under the new system as was arrived at under the old system. We are following a form which has in practice achieved the right result, notwithstanding the looseness of the language, and I believe we have no reason to fear that it will not be similarly beneficial in future to both the taxpayer and the Revenue Commissioners.

I am grateful to the Minister for his explanation, but I cannot regard it as satisfactory. I should like to tease the matter out a bit more before we come to a decision. The Minister admits that the language used is just not adequate. The proviso stipulates that the adjustment to be made will be such adjustment as may be proper. I do not think it is good enough for us, as legislators, to enact legislation which leaves someone else to decide what may be proper.

And who is to decide?

Presumably the Revenue Commissioners. We are not here dealing with things which are either proper or improper. We are dealing with taxation, with money, with the question as to whether or not people will get certain credits. This whole matter touches on something of vital importance, namely, income tax relief on exports. From the point of view of the economy generally this is a very important aspect of the income tax code. It is perhaps the most successful device ever adopted to promote industrial and economic growth. As a corollary to exempting the profits of companies from the export of industrial goods—incidentally this also applies to coalmining and mining generally—we had these provisions whereby the benefit of the relief from taxation was passed on to the individual shareholders. The Revenue Commissioners, the Minister or, if you like, the Establishment, adopted a very sensible approach to these dividends. They took a very straightforward and reasonably simple formula. If the rate at which the tax was deducted by the company was half the standard rate then half the dividend was included in the taxpayer's income. My amendment seeks to carry that forward. We should here say what the adjustment will be in regard to these dividends.

If the parliamentary draftsman comes up with something better than leaving it to the good sense and moral judgment of the Revenue Commissioners I certainly will be satisfied with that situation. I am not quite clear what faults the Minister finds with my amendment. It seems to me to meet the situation. If it does not I would like the Minister to indicate precisely in what way it does not. I am keener on my amendment now when I hear the Minister saying that in fact the Revenue Commissioners intend to do precisely what I am spelling out in my amendment. They will continue the existing system of adjustments. If that is their intention let us put it into the Bill. Let us not be legislating in an imprecise and vague sort of way. Unless the Minister can say specifically what is wrong with the forms of words used in my amendment, he should adopt the amendment.

The best thing to do would be to illustrate what I am saying. An example is better than words. Suppose we say a taxpayer's total income is £2,000 consisting of one dividend taxed at 17.5 per cent Tax free allowances amount to £1,000. The treatment as proposed by section 4 would be as follows:

Total income, £2,000.

Tax deducted, £350.

Repaid Tax-Free Allowances of £1,000—£175.

Net tax payable, £175.

That is the present position. That is what the section as drafted would maintain.

Not as drafted?

Yes. When we come to the amendment, what would happen is this:

Total income, £2,000—multiply that by 17.5 over 35. That would equal £1,000.

Tax deducted, £350.

Tax free allowances, £1,000.

Taxable income—Nil.

The taxpayer would not be liable to income tax in which event all the tax deducted—£350—would be refunded. Taking off a proportion of the dividend for the purposes of the total income was confined to surtax in 1973-74 and previously. This did not apply for the purposes of income tax. This is where the proposed amendment conflicts with the existing income tax position, which we are now dropping. Under the scheme included in the Bill the proposed credit on the relieved amount of the dividend for the purposes of the higher rates of tax will ensure that the same measure of relief will be afforded for 1974-75 as was available in respect of surtax for 1973-74 and previous years.

I would accept that there may be some little imprecision in my wording. I would accept what the Minister says if his proviso spelled out what he says: The Minister is interpreting the proviso, but all it says is "such adjustment as may be proper". If the Minister writes in what he has said across the House I shall withdraw my amendment in favour of the form of words he puts in. I do not think the Minister should ask me to withdraw my amendment in favour of his vague wording. It is all right for the Minister to spell out what the practice will be, but we have no guarantee that that will be the practice. Once this Bill leaves this House the Revenue Commissioners and others will look only at the wording. They will not look at what we hoped or what was suggested. They will look at the exact wording.

The only arbiters would be the Revenue Commissioners. They are entrusted with the care and management of these taxes. I do not think the Minister can discredit my amendment by putting forward against it something which is not in the Bill as such, but is merely his intention of how the Bill should be administered. I am not sure what the procedure will be as regards the Committee and Report Stages. Is there any suggestion that on the Report Stage the Minister might put in a proviso such as he has spelled out to us?

I cannot anticipate the progress we can make on the Committee Stage. It would not be unreasonable to assume that it would not be over this evening. I can assure the Deputy that between now and the completion of the Committee Stage I will endeavour with my advisers, the Revenue Commissioners, to see if some tidying up can be done. The Deputy sees the difficulty in relation to his amendment. I am not very happy about the language. It does not become any better if we say "such adjustments as may be necessary". If we could find any happier phrase which would be more precise I would only be too glad to offer it to the House on Report Stage.

Is the amendment withdrawn?

I have no objection, but I would like something clarified. Because of the nature of the section could the Minister tell me is it correct to say that under the law as it stands if an individual receives a dividend from which no tax has been deducted no tax is payable on the dividend for the individual?

Could the Minister indicate where in the section is it made clear that the taxpayer is to receive the same treatment as he received this year? I do not know whether the Minister can clarify the point for us. What is the position in this section in relation to relief under section 3 (3) (2) of the 1962 Income Tax Act? How is it to be calculated?

May I look at that point over the recess?

Will Deputy Colley report progress?

I move to report progress.

Progress reported; Committee to sit again.