Committee on Finance. - Finance Bill, 1974: Committee Stage (Resumed).

SECTION 4.
Debate resumed on amendment No. 1 a:
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 there-which 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".
—(Deputy Haughey)

I propose to refresh the Minister's mind by asking if Deputy Haughey's amendment is not accepted where does the section bind the tax-payer receiving the same treatment as he has obtained heretofore and what specific provisions are in that section or in any other section like this? In addition I requested information about the relief under section 332 of the 1967 Income Tax Act, what the position will be in regard to that and how it will be calculated.

The section as drafted does not change the law. What now applies will continue to apply. That is the effect of the wording that is used. As I said, I can see people's anxiety about the apparent lack of precision. Perhaps if the words had not been used at all it might have been better. As Deputy Haughey appreciates, I only received this amendment this morning, together with other amendments, so we have not had time to give as much consideration to this as we would want.

Perhaps, we might be able to meet it by deleting the last line of the proviso in the Bill, that is to delete all the words after "adjustment" and let it read as follows:

Such adjustment shall be made in the amount of the credit as may be necessary to give effect to the reliefs provided for in the said sections.

This would aim to give the reliefs that these sections provide. That, perhaps, would be a little more precise than simply using the phrase "such adjustment as may be proper". That is certainly the intention. Perhaps the other words might be more precise. I would like, before I commit myself to that specifically, to see if we could have a look at it and possibly bring in an amendment for the Report Stage. If some technical difficulty arises I will give the assurance that the law will be applied in that manner and at the first available opportunity, which might be the Finance Bill later this year, which, of course, primarily will deal with capital taxation, the matter could be tidied up.

Under section 332 of the 1967 Act the following would be the position. Suppose there is a dividend of £100. Tax is deducted at 35 per cent that would be £35. Tax repayable under section 332 would be 20 per cent of £35, that is, £7, leaving net income tax of £28. Sur-tax at 80 per cent only of the dividend, taking into account, the charge to sur-tax at the top rate of 45 per cent would be £36. Therefore, the total tax is £64.

The effect of the new provision is as follows: again taking a dividend of £100 and tax deducted at 35 per cent, that is, £35. We then take 80 per cent of the dividend—that is, under section 332 as amended by the deletion of surtax—that is, £80. Since the tax is chargeable at the top rate, the tax charged is £64. Against this there is a credit of £35, which would leave a net sum of £29; £29 and £35 leaves you once again with the figure of £64. Therefore, although you use different machinery you arrive at the same result.

Amendment, by leave, withdrawn.
Section 4 agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill."

I wish to ask a question on section 5. Section 5 provides for deduction of tax at the rate applicable at the date of payment of the interest or dividend. I think there is general agreement that this is an improvement, but I want to put to the Minister the case of an export company which has accumulated tax free profits. How will they now be situated in regard to the payment of dividends out of accumulated tax profits? If such a company will now have to deduct tax at the standard rate in operation at the date of payment, surely this will prevent them passing on the benefits that they might wish to pass on to their shareholders? I have been informed that a company went public on the basis that they would pay dividends free of tax out of their accumulated tax free profits. It seems that under the provisions of section 5 they will be prevented from doing that.

No. I fear the Deputy misunderstands the position. Again, as in respect of other sections, the position after the Bill is passed will be the same as heretofore. You can make your deductions and whatever is the appropriate deduction under the exports relief and so on will apply in the future as in the past. I do not quite understand the Deputy's particular difficulty, because the end result will be the same.

I am concerned with the case of a company which has accumulated profits which were earned as export profits, which fact made them free of tax. These profits have been accumulating, and if it were not for section 5 the company would be able to pay them out without any tax or at a reduced rate of deduction to their shareholders. It seems to me that section 5 will now require that any payments out of these profits which have accumulated in the past will have to be paid out at the standard rate applicable at the date of payment.

At the moment the appropriate rate applies to all such dividends, and then you apply to them whatever the export tax relief is, which ends up with a gross payment being made. Therefore the situation in the future will be precisely the same. You will treat it as though the standard rate were being applied, and then if the particular dividend is entitled to other reliefs, they are applied in addition.

Let us take the situation of a company before section 5 comes into operation. That company would have been able to pay out dividends out of their accumulated profits without deducting any tax or deductting tax at the reduced rate. If they pay out from now on, according to the strict terms of section 5, they will have to deduct tax from these dividends at the standard rate applicable now. In those circumstances I cannot see how the benefit of tax relief, because all the profits were earned in the export trade, would be passed on to the shareholder. I understand that one company which had considerable accumulated tax free profits went public on the basis that those tax free profits would be used to pay out tax free dividends to the shareholders and that they will be prevented from doing that now by the operation of section 5.

I would refer the Deputy to section 410, subsection 2, and section 456 of the Income Tax Act, 1967. There he will find the appropriate drill which explains exactly what happens at the moment. From that he will understand that we will apply the same principles of deduction in the future which will leave the net position exactly as it is at the present time.

In the case described by Deputy Haughey can the Minister state whether tax would have to be deducted at the standard rate from the dividends being paid out or not?

Would the Minister agree that is not clear on the face of the section? It would appear to read the other way.

This is not a consolidating Act which is purporting within the confines of this Act to explain it all. They all have to be read together with previous Finance Acts and the Income Tax Act of 1967.

This section makes a fundamental change. Up to now tax was deducted from dividends at the rate obtaining in the period over which the dividends accrued. Now section 5 states very specifically that where a dividend is paid in future tax must be deducted at the standard rate in operation at the date of the payment of the dividend, not in respect of the rate in the period over which it accumulated. There are companies with an accumulation of tax free profits which before this they would have been able to pay out at either a reduced rate of deduction or of no deduction at all. How will they fare under section 5? Will it not be obligatory on that company, even though these dividends are paid out of accumulated tax free profits, under the strict terms of section 5 to deduct tax at the standard rate applicable at the date of payment irrespective of when the profits were earned?

All section 5 is doing is changing the starting point. It applies to all companies, not merely those who are engaged in the manufacturing industry for exports and it is laying the drill which will apply to all payments. Sections 410 and 456 of the 1967 Act deal with the position of companies engaged in the export of manufactured goods. Those are the sections which will continue to give the benefit to profits made on exports in the future as in the past.

And the dividends?

Subsection 1 of section 5 is very specific. It states:

The provisions of the Income Tax Acts which provide that tax may be deducted from any payment at the rate or rates of tax in force during the period through which the payment was accruing due, or that there may be deducted from any dividend the tax appropriate thereto shall have effect as if they provided that tax may be deducted or shall be allowed at the standard rate for the year in which the amount payable becomes due.

That is very clear. It means that from now on it is the standard rate operative at the date of the payment of the dividend that will be applicable. Up to now it was the rate in operation during the period in which the dividend accrued.

The exclusions in section 410 of the 1967 Acts are not being done away with; they continue to be applicable.

So that section 5 will not then apply to tax relief profits? Is that the position?

It will not have the effect of denying the exclusions which existed in relation to tax free profits.

Can the Minister reassure me that a company which has accumulated tax free profits over a period of years, and has not paid out any dividends as yet out of those accumulated tax free profits, where that company wishes to pay them out now they will be free to do so without deduction of tax?

That is not at all clear on the face of the section.

If the Deputy was reading it in isolation that would be true but one cannot throw out the Income Tax Act of 1967 and the amendments made thereto. This year's Finance Bill is long enough without reiterating all that the earlier Acts contained.

Subsection I of this section appears on the face of it to throw out the Income Tax Act of 1967 because it states:

The provisions of the Income Tax Acts which provide that tax may be deducted from any payment at the rate or rates of tax in force during the period through which the payment was accruing due, or that there may be deducted from any dividend the tax appropriate thereto shall have effect as if they provided——

On the face of it that appears to exclude sections 410 and 456 of the 1967 Act.

The Deputy will not find in this Act any section repealing section 410 or section 456 of the 1967 Act.

No, but if there is conflict, as the Minister knows, the later section would be deemed to apply.

There is no conflict because this does not exclude exclusion.

Why is this section not related to the 1967 Act?

It does relate to that Act.

It does not relate to it because the 1967 Act is not even mentioned.

Would the Minister have a look at this with a view to making quite clear in the section that the exclusions will still operate?

I will certainly consider it though, as the Deputy knows, sometimes the more one tries to explain things the more complicated they become.

Even if it contained something to the effect that it was subject to sections 410 or 456 of the 1967 Act.

Or even subject to section 4. Section 5 is very clear and stands on its own legs.

I will certainly have a look at it.

I should like to ask the Minister if subsection (3) is the one under which allowances in respect of mortgage interest will be given and thereby would be given at the standard rate. Secondly, has a case been made to the Minister, and if so would he let the House know what his attitude is, to the effect that under this section a loss of revenue will arise where, for example, dividends are paid in the future to a UK resident out of profits which suffered a lower rate of income tax than the standard rate at the time of payment?

I cannot recall that that case has been made nor do I think it would be a valid one. This subsection ensures that in respect of any annual charges the payer is not to be charged with tax at a rate greater than the standard rate. He cannot therefore be required to pay tax in respect of the charges at the rate greater than that at which he is entitled to deduct.

Is subsection (3) the one operating in respect of mortgage repayments?

Where it refers to tax in respect of any property, profits or gains out of which he makes any payment in respect of annual interest, would that cover mortgage repayments and allowance of interest against income tax?

No, this is a question of profits being made from property which a person owns.

Could the Minister indicate which section deals with the mortgage interest allowance and the rate at which it is allowed?

The Deputy is confusing them. The mortgage interest payments are not usually paid minus tax. The gross amount is paid and the allowance is given afterwards. We are not dealing with that type of case here.

I appreciate that. I am asking if the Minister could indicate where in the Bill there is provision setting out the rate at which an allowance would be given against income tax in respect of mortgage interest. While the Minister is considering that could I ask him is he satisfied that this section as a whole will not result in a loss of revenue for the reasons I have outlined?

I cannot contemplate that it will. Quite frankly, if I thought it would, I would be taking steps to avoid it.

Perhaps the Minister will look into that.

I certainly will.

Can the Minister enlighten me on the mortgage interest section?

There is no specific provision in this Bill dealing with that matter. It is an on-going provision and does not have to be re-enacted.

Since the Minister has introduced a different tax structure is it not necessary to make provision for it?

Perhaps I can raise it more appropriately on the next section and I will explain to the Minister what is on my mind.

Question put and agreed to.
SECTION 6.

I move amendment No. 2:

In column (3) of the Table to subsection (1) to delete "800" and to substitute "1,000".

The purpose of this amendment is to make the income tax relief in respect of a married man equal to double the income tax relief proposed for a single person. To do that it would be necessary to raise the relief for a married man from £800 to £1,000. The Minister may well tell me that we should have done this when we were on his side of the House. The fact is that the differential which existed heretofore and which was attacked as favouring living in sin is now being almost doubled by the Minister. The differential is being increased from £104 to £200. I feel pretty sure that the Minister does not really need convincing that he should not increase a differential in favour of living in sin and that he will not have any great difficulty in accepting this amendment.

The principal difficulty I would have in accepting the amendment is that it would cost £15 million to implement. Therefore £15 million would have to be paid by people who were not enjoying the blessings of married bliss. I do not think there is an obligation on the Minister for Finance to be a marriage broker in addition to his many other onerous obligations.

The reliefs given in this year's budget to all income tax payers are costing £32.1 million a year. Matters of this kind costing so much are obviously matters of major budgetary consideration. In the circumstances, we would not be warranted in entertaining this application at this time. I know the argument is frequently thrown out that the tax laws operate to encourage people to live in sin. There are greater bonds between man and woman than those of avoidance of tax liability. Were it not so, the human race would not continue to replace itself from generation to generation.

This can be argued as well on one side as on the other. It is good meat for a debating society, but it is not necessarily a valid consideration in fiscal matters. I am fairly well personally disposed towards this idea and I have made a study of it, but I have yet to find any country in which a married man and a married woman are treated as the equal of two single people for tax purposes. Perhaps that is because the married man in his wisdom has long since recognised that, if two people cannot live as cheaply as one, they certainly can live a lot cheaper than two people living separately.

I appreciate that if the cost of implementing this would be £15 million the Minister could not contemplate this with equanimity. Nevertheless, I imagine he would agree that it is a retrograde step to increase the differential, as is being done in this section. This seems to me to be retrograde and unfortunate. I wonder has the Minister any figure to indicate what it would cost to maintain the differential without closing the gap?

I am sorry; I have not. If we take £100 as a round figure it might be £7½ million. I am sure there are many variables in between. Obviously the figure would be not insignificant. Married persons were the principal beneficiaries of the improvements in the income tax code in this year's budget. That is another matter which has to be taken into consideration.

The increase in the gap is attributable to the fact that we have increased the allowances. As the Deputy knows, we are now providing a £200 working wife's allowance. That has been done out of consideration for the disincentive which some married women felt against working because of the very heavy tax load they had to carry as a consequence. The larger you make that concession towards the working wife I suppose the greater the differential might become. I am not opposed to the idea in principle. It is something I would like to do, but one must bear in mind that, like any other concession, somebody has to pay for it. I do not think this is the time to push this matter. We have given considerable additional benefits this year to married people. Perhaps at another time we might look at this.

The Minister is not helping them to get married first.

There are deeper reasons for marriage than tax relief.

The Minister states that the cost of this amendment would be £15 million. Taking the matter in round figures, as he did, it is fair enough to suggest that the cost to the taxpayer of increasing the differential from £104 to £200 is approximately £7 million to £7½ million. It is no harm, therefore, that we should realise that, in effect, what the Minister is doing is imposing between £7 million and £7½ million in new taxation. He is getting in an extra £7 million to £7½ million which he would have not got when the differential stood at £104. In examining these figures for personal allowances under section 6 —and this is only one of them—many people fail to remember that, as well as making nominal increases, or what appear on the face of them to be increases in allowances, the Minister is at the same time abolishing earned income relief so that the apparently more generous allowance is in many cases quite illusory. We should understand that by increasing this differential the Minister is getting more money out of taxpayers who come into this category rather than less.

That is not so. The Deputy's suggestion is that I should make the allowance of £96 less so as to reduce the differential. I have made it more; therefore I am losing revenue.

Would the Minister bring the differential to what it was or increase the lower allowances accordingly?

Can the Minister say if the new allowances are out? Are they being circulated to taxpayers?

The Deputy should read the evening papers. There are many people already celebrating the receipt of the new tax allowances.

Is the Minister saying that people have already received their tax free allowances?

They are receiving them.

The Minister said that one of the reasons he had to get this Bill through before the Recess was because he could not give these new tax-free allowances unless he had the Bill.

That is all right but we are anticipating the Bill.

Then the Minister does not need the Bill before the Recess——

There was no Opposition amendment suggesting that the allowances should be cut.

That is not the point. In the Second Stage debate I suggested to the Minister that because of the complexity of this Bill it should be left over. There is no technical reason why it had to be passed before 5th August as was usually the case. The Minister said he had to get the Bill in order to make the new tax-free allowances available. The Bill is still before the House; it has not been passed and people are getting tax-free certificates incorporating the new allowances. Therefore the Minister does not need this Bill now in order to make the new allowances available to the taxpayer.

Assessments cannot be made until the Bill passes. We are anticipating what the tax-free allowance will be but various other assessments must be made following preparation of certificates which indicate tax-free allowances. None of those can be done until the Bill passes.

We are proceeding step by step. It is now clear that the Minister does not need to have this Bill passed to issue tax-free allowance certificates incorporating the new allowances despite what he said on the Second Stage.

(Dublin Central): I wonder is the Minister sincere when he mentions the rejoicing in regard to the single person's tax-free allowance. If we look at the miserable allowance granted in the last budget we find it was exactly £51 for a single person. Prior to the budget the majority of single people expected far more. During the negotiation of the national wage agreement this was one of the vital factors taken into consideration and promises were given by the Minister for Finance and other Ministers that substantial allowances would be made in the income tax code, but when we examine the proposal in the budget we see it means exactly £51 income to a single person. The Minister stated the tax concessions in the budget would cost about £31 million. He also mentioned in his budget speech that the budget would put 60,000 people outside the income tax bracket. This is not now true. Since the first phase of the national wage agreement, which averaged about £3 a week, half of those people are back in the income tax bracket and the figure of £31 million worth of a concession is not now realistic.

Deputy Colley's amendment to some extent takes into consideration what the average person expected as a tax concession. I ask the Minister to consider the amendment seriously because the majority of single taxpayers are very disappointed with the concessions given in the last budget.

Would the Minister agree in regard to this famous relief concession he talks about in the budget that the personal tax-free allowance last year was 2p more than it is now and that there are many more cases such as that cited? The Minister does not agree?

No. I have said that again and again and nobody has yet been able to produce any cases in which a taxpayer with the same income would pay more tax as a result of the changes because in all cases they will pay less.

When the Minister talked of the allowances costing the Exchequer £31 million was he doing so in anticipation of a different result last week?

No, this was precisely the result of the concessions given in this year's budget.

I withdraw the amendment in the light of the case made by the Minister.

Amendment, by leave, withdrawn.
Question proposed: "That section 6 stand part of the Bill."

The Minister and a number of his colleagues, having first been told by us that they should make a public commitment to increase personal reliefs in order to assist the conclusion of a national pay agreement, told us we were talking through our hats, that it could not be done and that it would be a breach of budget secrecy. Eventually, they saw the wisdom of what we were saying and they made a public commitment. I said in regard to that commitment on a few occasions—and I want to say it again—that the very minimum any taxpayer would expect when he heard the Government making that commitment was that income tax reliefs would be restored to the position in which they were under Fianna Fáil in the 1972 budget.

In the budget debate I gave figures to show that this was not so, that the position under Fianna Fáil had not been restored and in fact in some cases the allowances were very far short of that position. Recently, in a discussion with me on this topic on radio, the Minister said when I mentioned this point that he had demonstrated that the statement was untrue —in other words, that he had demonstrated that the allowances provided in this Bill did restore the position to what it was under Fianna Fáil. I now challenge the Minister to say where and when he demonstrated this. If he has to admit—as I think he must—that he never did so, would he care to try to demonstrate it now?

I have done so twice already, once in reply to the budget debate and once in reply to the Second Stage of this Bill.

Could the Minister say specifically where he did it?

I have not got the reference but I referred to it in both speeches and, if the Deputy looks at these, he will find these matters were adequately dealt with.

They were not.

I say they were.

I have the debate here if the Minister would care to look at it just to show us precisely where he said it.

I have not got chapter and verse.

The Minister knows he did not, in fact, compare the position in 1972 with this position and, as I indicated to him then, he did not take into account the fall in the value of money; this is necessary if we are to compare one position with the other. Is it not true the Minister never did that?

It is not true.

I do not know what one can do with a Minister who persists in making statements of this kind. The fact is I listened to him and I went through the Official Report with a fine tooth comb and there is no such statement by the Minister and the reason there is not is because the Minister could not make such a statement. I have given the figures and no attempt has been made by the Minister, or anyone else, to show that these allowances proposed under this section do not restore the position to what it was under Fianna Fáil in the 1972 budget. That is the position and it should be clearly understood that that is the position. Despite all the claims made for the budget, and consequently for this Bill, by the Minister and some of his colleagues, that is the fact. This is not even restoring the position to what it was in 1972.

To come back now to a question I asked earlier, which may be more appropriate on this section: would the Minister indicate what provision is made under the revised system of income taxation for an allowance in respect of mortgage interest? This is of some importance, as the Minister will appreciate. He will recall that Deputies on this side of the House made a case in regard to the allowance in respect of mortgage interest. In answer to arguments as to what is happening to mortgage interest under this Bill, the Minister answers by talking about the allowances set out in this section, citing examples to show that the people concerned are, in fact, paying less tax than they would have paid under the old system. The Minister has not on any occasion specifically referred to the relief in respect of mortgage interest and the rate at which that interest is relieved. Could the Minister indicate now what the rate of relief will be in respect of mortgage interest? Where is the provision? Is it in this section or in what section does it appear?

This has been repeatedad nauseam. I gave very specific examples, quoting hypothetical cases——

I agree.

——and I said these were examples of what would happen in relation to all other cases. Every taxpayer, including people with mortgage interest, will benefit; they will pay less tax as a consequence of the changes in this year's income tax structure. How many more examples do I have to quote? I make this challenge to anyone who believes he will not gain: give me a case and I will have it examined. No such case has been presented. There were certain references in the public media but they were quickly corrected by people who showed that the calculations made were erroneous. I am inviting people now who think they will pay more tax to give me the particulars and, if they can prove their case, I will be the first to admit I was wrong.

The Minister is missing the point, either deliberately or because I am not making myself clear. The Minister is quite correct in saying he took specific examples and gave details as to how they would work out, but he did not indicate in relation to mortgage interest relief at what rate it would be allowed. That is the point at issue. It is not the overall position of the taxpayers. If you leave out mortgage interest relief and increase the allowances as provided in this section, of course the taxpayer on the same income will pay less tax; but the point at issue is mortgage interest relief. That is the one we want the Minister to clarify now.

The relief is the rate at which the person is charged. People could be subject to different rates of relief. What matters is the end result. As I said in reply to the debate on the Second Stage, if income tax were abolished there would be a huge grievance because no longer would there be any set-off of interest against tax liability. Because we have reduced the rate of tax the complaint now is that there is a lesser tax benefit for some people, but there is no additional net payment out of the family budget. That is the important point. There is, in fact, a gain because the tax load will be less than it was up to 6th April of this year.

We are, I think, getting somewhat closer to the kernel. Is the Minister saying that under this Bill the rate of relief in respect of mortgage interest will depend on the rate of tax a person is paying?

If a person is paying at 26 per cent the relief will be at 26 per cent and the standard rate will be 35 per cent up to 80 per cent: is that what the Minister is saying?

In other words, the gross deductions will be deducted from the gross income and the calculations will be made after that.

That is right. You are charged your taxable income at the end when you have made all your necessary deductions. You take from your gross income your mortgage interest and then you set off the various tax-free allowances.

(Dublin Central): Is the Minister saying that, if a man has £5,000 income and he has £500 interest, he can deduct the £500 from the £5,000 and the taxable income then will be £4,500?

His total income will be arrived at after he has deducted all his allowances.

(Dublin Central): The entire interest is deducted: is that right?

I refer the Deputy to columns 847 and 848 of my reply to the Second Stage debate on the Finance Bill.

The Minister will note an interjection by me. I said he did not answer the point made by Deputy Fitzpatrick. The Minister did not disclose there the rate of relief and that was the whole point Deputy Fitzpatrick was making. The whole point of the argument was that there are people who will lose out under the provisions of this Bill.

Nobody will lose.

They are going to lose on the rate of relief.

They will lose out on the rate of relief. I am not talking about the overall result. That is irrelevant if you compare two people neither of whom have mortgage interest claims. The position should come out as indicated in this section. It is a separate item where mortgage interest relief comes in. That is the issue raised by Deputy Fitzpatrick.

If I understand the argument it is that the person should be given relief at a rate greater than the rate of tax he pays. That would be an anomaly. During the Second Stage I gave an example of a person with an income of £3,000 and with mortgage interest. That person saved £87.50. People do not give a hoot how the tax is calculated as long as they have more cash in their pockets. No matter how much the people opposite try to twist the formulae by which we have achieved this dramatic and significant easement of the tax burden, and also its simplification, the truth remains that there are substantial cash benefits for everybody under the tax code. That is all that matters. You can argue as much as you like that we are only jumping two steps at a time but that does not matter to anybody. People pay less tax. I will make you a present of any argument you want about any particular stage of this alteration. Everybody benefits.

It is important that we should understand exactly what the position is. I would like the Minister to confirm whether my understanding of it is correct. A mortgage interest payment by a taxpayer in any year is allowable in full as a deduction from that taxpayer's gross income in order to arrive at his taxable income. If that is so, it does not matter at what rate the tax is charged. It may be 80 per cent, 60 per cent or 35 per cent. If any particular slice of the taxpayer's income is being taxed he will get the allowance in full.

The confusion arises from the fact that often the inspector of taxes when making his calculation will relate the amount which is to be deducted in respect of mortgage interest to the different slices of the taxpayer's income and the rates at which those slices are taxed. If a taxpayer is entitled to say, £300 in respect of mortgage interest the income tax inspector would begin by taking the first £100 at 80 per cent and the next at 60 per cent and the next at 35 per cent, if they were the appropriate rates. If a taxpayer has a gross income of £X and mortgage repayment interest of £Y one can deduct Y from X in order to arrive at his taxable income and then proceed to make the calculations of the tax due at the appropriate rates. If I am right in that perhaps the Minister will say so.

If I understand the Deputy correctly I think he is right.

That is not good enough.

Does section 6 stand part of the Bill?

(Dublin Central): Would the Minister agree that there is no difference? There is a rate of 80 per cent coming down to 26 per cent. If a man has £2,500 and another man has £9,000 and if there is mortgage interest due of £500 each will the man on the higher salary get preference against the man earning £2,500.

He will pay more income tax. The set-off will be at a higher rate. I am glad to see Deputy Fitzpatrick supporting the limitation of £2,000 as the amount of set-off which there can be.

(Dublin Central): That is not the information I wanted. I am not clear about this matter. I get the feeling that the man on £9,000 with mortgage interest of £500 will benefit more than the man with an income of £2,500 who pays income tax at 26 per cent. He will not benefit to the same extent. Is that true or false?

It is not accurate. The man with £2,500 will save 13.58 per cent this year. The man with £9,000 will save 3.22 per cent. The tax savings in this year's Finance Bill are higher percentage-wise for people in the lower income group.

(Dublin Central): That does not answer the point about the mortgage interest of £500.

On the Second Stage mention was made of the man with £3,000. I was asked to explain his position before and after this year's budget. I showed that after all the calculations were made that that man had a saving of £87.15. The married allowance rose from £494 to £800. The child's allowance rose from £427 to £600 for three children. His taxable income, while it rose from £1,029 to £1,050, meant that the tax was levied at a lower rate on the larger sum with the result that he was better off by £87.15.

Question put and agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."

Would the Minister enlighten me on a certain point? In the explanatory memorandum it is stated that a taxpayer who maintains at his own expense a dependent relative having no income other than a non-contributory old age pension will not have the allowance reduced because of the increase in that pension announced in this year's budget. Is it the taxpayer or the dependent relative who is referred to here?

It is the dependent relative who is referred to. If we had not made this amendment the taxpayer would not get the full benefit of the concession made when the income of the dependent relative was increased. In making this amendment, we disregard the increase paid to the dependent relative so that the taxpayer gets the concession notwithstanding the increase in the dependent relative allowance.

The dependent relative with a non-contributory old age pension will not affect the tax of the taxpayer who is maintaining him?

That is correct.

If that dependent relative had a contributory pension and no other means would the taxpayer not be able to claim an allowance in that case?

There is an abatement £1 for £1 for every increase over the maximum of the non-contributory pension so far as the concession towards the taxpayer is concerned.

Over the £7.30?

I should like the Minister to explain why the process of putting in a table was resorted to here. Section 7 amends the 1967 Act as that was amended by the 1973 Act, but this simply changes the figures. When one sees a table inserted it is usually to make more readily available and in an up-to-date amended form a section which would otherwise involve a great deal of research to find out exactly how it now stood. Is subsection (1) of section 142 of the Income Tax Act, 1967, amended in any other way? When one sees a table like this it appears that it is. If one is only changing simple figures in the section why resort to a table?

We are trying to make this simple and uncomplicated. Maybe if we had put a table in section 4 instead of the particular formula we used, Members might not have had so many worries. We could have said that section 410 of the 1967 Act was rewritten in this way. This is purely to illustrate the effect of the change. This has been discussed at Government level and with the parliamentary draftsman. This particular form has been used elsewhere with great success.

I agree. I am all for the use of tables because they give in readily available and convenient form the sections as they now stand with all the amendments included. They are a very valuable drafting device. Here we are using the table system. repeating the whole of subsection (1) of section 142 simply to give new figures and, apparently, nothing else. The wording of section 142 (1) is not changed. Only the figures have been up-dated. While I am delighted to see a table at any stage, I am wondering why a table is being used here when only two or three figures were changed. Am I right in that?

As far as this particular table is concerned I agree that only the figures have been changed. There may be other tables with wording changes but only the figures in this table have been changed. This is a lot simpler than forcing a person to go back to the original Act. It does of course make this Act longer than it would otherwise be, but it is more readable. We could either put it in here or in the explanatory memorandum. Often the explanatory memoranda are lost——

The modern device of using a table is thoroughly commendable.

Question put and agreed to.
SECTION 8.
Question proposed: "That section 8 stand part of the Bill."

This will increase the allowances.

Question put and agreed to.
SECTION 9.

As amendments Nos. 3, 4, 5 and 72 are related I suggest that we take them together.

I move amendment No. 3.

In page 7, between lines 44 and 45, to insert a new section as follows:—

"Section 143 of the Income Tax Act, 1967, is hereby amended by the substitution for subsection (1) of the following subsection:—

‘(1) subject to the provisions of this section and of section 152 any claimant—

(a) who has paid any such premium as is specified in subsection (2), or

(b) who is under any statute or under the terms or conditions of his employment liable to the payment of any sum or to the deduction from his salary or stipend of any sum for the purpose of securing a deferred annuity to his widow or provision for his children after his death.

shall be entitled to have the deduction specified in subsection (3) made from the amount of income tax with which he is chargeable.'"

This section, as drafted, has at least one effect which I assume was not intended by the Minister: it increases the differential which exists by law in the income tax allowance as between Irish life assurance companies and non-Irish companies. It may possibly have other effects. That raises a number of problems, particularly as it is contemplated that in due course the differential will be done away with altogether. I say "in due course" because possibly under certain EEC developments and on the assumption that fair competition exists, I visualise in due course that the differential will disappear. Consequently, it seems the wrong approach altogether to start increasing the differential.

Amendments Nos. 3, 4, 5 and 72, taken together, are designed to do certain things. I hope they do that and the Minister can tell us whether he feels they achieve what I set out to do. I tried to maintain the existing position, firstly, as between Irish and non-Irish companies and, secondly, so far as taxpayers are concerned to maintain the existing position, so that they would get the same relief as heretofore except in the case of taxpayers who are on the lowest rate, the 26p rate. The effect of these amendments taken together would be to benefit them because they would get relief at 35 per cent of the standard rate. The existing position would be maintained by adopting these amendments. I hope the Minister would bead idem with me in aiming at that position and will find it possible to accept these amendments.

As amendment No. 6 is related to amendment No. 5, will Deputy Colley agree to take it also?

If the Minister were to accept amendments Nos. 3, 4 and 5 I would withdraw amendment No. 6, because it would not be relevant. If he does not accept them, amendment No. 6 would be relevant and, therefore, I think it should be treated separately.

As I said in my budget statement last April, a number of reliefs, including life assurance relief, which up to now qualified for income tax relief only, will in future under the new unified personal taxation structure be available in full to income taxpayers whatever their rate of tax. As a result the absolute or cash amount of the differential relief which has operated in the past between premiums relating to policies taken out with Irish life offices and those taken out with non-Irish life offices has widened where the taxpayer is liable to tax at the higher rate than the statutory 35 per cent, although the relative ratio between the two reliefs has been maintained. I admit that was not intended.

Since the budget we have had very useful and constructive discussions with representatives of both the Irish and non-Irish life offices. The position of the non-Irish life offices is such that their competitive position, if the legislation were left unchanged, would be worsened. They have argued that the pre-budget differential position should be restored in order to leave the absolute or cash advantage to the Irish offices no greater than it was formerly.

I am prepared to accept these arguments in principle but there are several practical difficulties in making the changes, including adopting the amendments suggested by Deputy Colley. These difficulties arise primarily by reason of the short time we have to research the consequences of any changes which may be made.

Furthermore, many of the assessment certificates required as a result of the changes made this year have already been prepared. It would be unfair to amend the certificates later and recoup from the taxpayers concerned part of the benefits they had been given. If any further change were to be made other than that envisaged originally, it would mean a delay of up to three months in the issue of the amended tax certificates to all taxpayers. That would be a situation that would be unjust and difficult to justify. Accordingly, I have decided to allow the position as provided for in the Bill remain for 1974-75 but I will provide an amendment in the law—in next year's Finance Bill—which will have the effect of restoring to the pre-budget level the absolute or cash differential on existing income tax premium relief between Irish and non-Irish life assurance offices. The charge would operate from 1975-76 onwards and would apply to all life policies irrespective of when they were taken out. I might add that this formula has been discussed by us with the two groups concerned. They consider this to be fair compromise in the circumstances and that there will be no significant distortion or advantage flowing to either groups as a consequence of this arrangement.

I think we must all be fascinated by this admission by the Minister. Behind his very calm, matter-of-fact statement of the situation there lie a considerable number of legislative minefields. First of all, what he has just said severely indicts him for his handling of the Finance Bill and for the time schedule which he has set for it. Quite clearly the Minister admits that the provisions which he is making in regard to the new unified rates of tax have given rise to a situation in regard to insurance premium allowances which he did not envisage and which he now admits, here in this House—by virtue of the way in which he is handling the Bill—cannot be rectified this year. He has to leave the situation, with its injustices, stand this year and try to mend his hand next year. That is——

Disgraceful.

——a very regrettable situation. Deputy Colley has outlined quite clearly what is involved here; that the introduction of this new, unified system of rates gives very considerable, competitive advantage to Irish as against non-Irish insurance companies. The Minister has admitted that he did not want to do that; that he thinks it is wrong and that he wants to restore the situation. But because of the way he has mishandled this Bill he cannot restore it this year and has to wait until next year so to do.

The second aspect of the matter to which I would like to draw the House's attention is that it proves once again how fallacious is the Minister's case when he comes before us and preaches about simplifying our income tax structure. These new, unified rates of income tax are the gem in this crown of simplification by the Minister. In this one area alone it is leading us into complicated territory and causing problems. In order to rectify the situation in regard to these insurance premium allowances, the Minister will have to bring in a whole lot of provisions which will be, I believe, much more complicated than those Deputy Colley has put down in his amendments, and they are complicated enough. But the Minister states that Deputy Colley's amendments do not solve the problem. Therefore he is going to have to bring in much more complicated provisions. Where, then, is this great new concept of simplifying our income tax code? Even at this late stage would the Minister admit that it is all a myth—that this, as much as any other aspect of the Bill, proves that all his talk of simplification of our income tax structure is entirely misleading.

I should like to support Deputy Colley in his approach to this because I think it is a situation which needs to be rectified. My main interest in it at this stage is not so much the merits of the situation but the way in which this matter highlights the impossible situation in which the Minister has placed us this year, as legislators, dealing with this Finance Bill. This is something on which we would all have liked to have a good discussion here and have it straightened out one way or the other, but we cannot do it and the Minister cannot do it with all of the resources at his disposal.

We have just heard from Deputy Haughey the Fianna Fáil apologia for doing nothing, because by doing nothing one can never make a mistake. I have said on many public occasions—and I say it here again—we will never be put off doing what we consider to be right simply because the process of doing it is difficult or because in the process of doing it there may be some temporary anomaly. We could leave things as Fianna Fáil did and the situation would go from bad to worse. We could start off with 160,000 taxpayers and end up ten years' later with 730,000 because we did nothing to change the system.

That is the greatest compliment that could be paid to Fianna Fáil increasing from 160,000 the people who were in a position to pay tax——

Bringing in these smaller people while, at the same time, letting out some of the biggest and richest people in the country. I would not regard that as tax reform. Some of the great specimens of Fianna Fáil tax reform were to relieve from any liability to tax of any kind people who have some of the biggest incomes and accumulations of wealth in this country.

The Minister has got rid of them all now.

Get rid of the rich. That is the Minister's policy.

Interruptions must cease. Order please.

This difficulty rises not because of simplification of the income tax code, not because we are amalgamating income tax and sur tax into one system which leaves itself open to less avoidance, but because we are in section 9 providing a limit of £1,000 on the amount of premium in respect of life assurance which may qualify for income tax relief. The number of people in this country who can afford to pay life assurance premiums of £1,000 and over out of their current income are very few and far between. Notwithstanding the fact that they are few, we accept that it would be wrong to allow a gross imbalance to arise between Irish and non-Irish insurance companies, particularly at a time when because of EEC obligations we are moving towards a position in 1977 in which any preferential treatment of Irish assurance will no longer be permissible. Therefore all we are concerned with at the moment is not providing any significant number of years during which such a concession could be enjoyed which would operate to the detriment of any section of the insurance industry here. We could well leave it alone and say: Look, Irish industry is entitled to this and if there is a greater benefit here let Irish industry enjoy it. But, in fairness to the Irish offices, I want to say that they accepted that this would give them an advantage not required by them and they did not wish any injustice, temporary though it might be, to be done to the non-Irish offices.

I think this matter has been dealt with in a very constructive and responsible way by all of the people involved and I see no reason to accept the chastisement of Deputy Haughey. We could have done what he did so often—done nothing about it. I need not have come into the House here. I could have said: "We will leave this as it stands. This is a necessary consequence of stopping avoidance. It is a necessary consequence also of simplifying the rate and the whole tax structure." However we can provide an easement of this difficulty and that is what we are doing and that is what the insurance industry find acceptable. This will not be the only obstacle on the road to reform of the tax code but we will not be put off because the passage is rough. At the end of this road the taxpayer will find that the way is much smoother than it was before we began.

The Minister is doing himself less than justice in what he has now said in response to Deputy Haughey's case. In his Second Reading speech 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.

I think the Minister was quite right in that. He had to take action not to allow relief at 80 per cent in some cases but he should say now that he had to take that action as a direct consequence of the introduction of the new system. I am disappointed in what the Minister has said and I cannot let it go at that. The first thing I want to know is whether the Minister would explain in regard to the amendments I have put down what are the other difficulties that would arise in accepting them apart from the difficulty about tax certification?

I understand the Deputy's amendments, he is confining the relief only up to 35 per cent and not going beyond it. That would be contrary to the principle of simplification which I spoke about in my budget speech. That relief would apply across the board both to Irish and non-Irish insurance interests. In other words, above 35 per cent it would be applied right across the board in both cases. That is what we are doing up to a maximum of £1,000.

Would the Minister accept that whatever about the objections on the grounds he has now mentioned, the effect of these amendments would be to maintain the existing position except in relation to anything above 36 per cent?

I think it would be like that. This is one of the things I discussed with the industry.

Am I correct in understanding the Minister's proposal to be to leave the section as it stands for one year and then to amend the provision? I do not know if he has indicated the kind of new provision he has in mind but would he propose to maintain the £1,000 limit and what effect would he propose to bring about on the differential in regard to Irish and non-Irish companies?

It would give relief up to 35 per cent on the present differential which is two-thirds in the case of Irish and half non-Irish companies, but it would give relief in respect of any higher rate of tax above 35 per cent on a basis which would be uniform in the case of both Irish and non-Irish. This would maintain the benefits which at present accrue to Irish premium holders and it would extend to both Irish and non-Irish across the board at the higher rate.

That presumably would not maintain the existing differential as between the Irish and non-Irish companies at higher levels.

No, but it would within the level at which it now operates—up to 35 per cent. In so far as there is a distortion of our proposals, it would be above that but we are still conferring a benefit and an advantage.

Does the Minister propose to retain the £1,000 limit?

Yes. The £1,000 limit is one-sixth of an income of £6,000 and that is not unreasonable.

It depends on individual circumstances. I do not know if the Minister has done a sum about what it would cost to secure the superannuation benefits enjoyed by higher civil servants and Ministers. If he did he might find that he would not have spoken quite so glibly of this figure as being a large one. I am quite unhappy at the Minister's approach to this problem. He has told us that this is the method most acceptable to both Irish and non-Irish companies. Of course I have to accept that but I am surprised to hear that for one year we will be operating a system which is unsatisfactory. I personally would prefer the Minister to approach it on the basis of my amendments because they merely maintain thestatus quo.

The industry are reasonably content. They prefer our formula.

(Dublin Central): Just as a matter of clarification, the Bill states you would be entitled to relief on one-sixth of total income, or £1,000 at the maximum. I cannot find in the budget statement a mention of a limit of £1,000. If a person took out a policy of £4,000 after the budget, will that be honoured by the Minister? It is obvious that certain people would have taken out policies between the date of the budget and the circulation of the Bill. I should like the Minister to clarify the position.

This limit will apply to all policies taken out since the budget.

As Deputy Fitzpatrick correctly pointed out, the restriction of £1,000 was not mentioned in the budget speech. Surely the Minister should limit this restriction to the date of publication of the Finance Bill? Otherwise, he is misleading people who may have taken out policies between the date of the budget and the date of publication of the Finance Bill——

(Dublin Central): That is dealt with in amendment No. 6.

That is why I was holding it back, depending on the Minister's attitude on this amendment.

Deputies have said we are doing something that was not announced in the budget but the Finance Bill is the legislative instrument. In fact, Deputy Colley's amendments are suggesting something that would be in conflict with what was said in the budget. If it works one way, it must work the other way also. Either we are tiedin toto to what was said in the budget, not being able to depart from it, or else we may depart from it. The budget statement is no more than a broad indication of what is contemplated; it does not exclude other possibilities.

My amendments were not disproving anyone's position.

The Minister in his budget speech announced the new rate of unified tax and he also announced that insurance premiums would come within the ambit of the new unified rates of tax. Deputy Fitzpatrick was quite right to point out that what the Minister said in his budget speech about income tax relief and the new unified rates, could have encouraged taxpayers to take out new policies. They will now find that this restriction will adversely affect them and they will not get the benefits the Minister led them to believe they could expect.

Deputy Fitzpatrick referred to the case of a man with an income of £24,000 because it is only a person with such an income who could have taken out a policy of £4,000 and expect to get tax relief on it. There are people in far greater distress than someone with an income of £24,000——

(Dublin Central): I was making the case——

Perhaps the Deputy disputes the fact that there are people in greater distress than those with incomes of £24,000? The budget contained many indications that any legislative provisions that are used by people for the purpose of avoiding their fair share of tax would be corrected. This is one of the areas where reasonable people would agree there should be correction. A person with an income of £24,000 would be in the top income tax rate group of 80 per cent. I cannot think there would be any justification why this Legislature should impose on society the obligation of paying 80 per cent of the premium of persons in the £24,000 bracket. We must have a sense of proportion here; a proper proportion is to be found in the limits we are suggesting.

Is the amendment withdrawn?

Reluctantly. On the strength of the Minister's assurance that what he is recommending is the most acceptable course to both the Irish and non-Irish life offices, I am prepared to withdraw amendments Nos. 3, 4, 5 and 72.

Amendment by leave, withdrawn.
Amendments Nos. 4 and 5 not moved.

I move amendment No. 6:

In page 7, line 55, to delete "3rd day of April, 1974" and to substitute "2nd day of July, 1974".

As I indicated earlier, I wanted to hold this amendment until I saw the Minister's attitude to the previous amendments. Now that he proposes to maintain section 9 as it stands, this amendment becomes of considerable importance. The section provides that the new provisions imported in this section would apply on contracts of insurance made on or after 3rd April, 1974—I think that is the date of the budget. In his Second Reading speech the Minister stated with regard to section 9:

One section which was not mentioned in my budget statement is section 9 which makes a change in regard to the amount of life assurance premiums which may qualify for tax relief.

In the light of that I assume the Minister will have no objection to my amendment which proposes to operate this provision in regard to policies of insurance entered into before 2nd July, 1974, namely, the date of publication of this Bill, which was the first indication any one had of the Minister's proposals.

I am assuming the Minister will have no objection to accepting my amendment because the case for it is self-evident. Clearly there must have been a number of people who, prior to publication of this Bill, in good faith entered into a contract of insurance on the assumption that the position as outlined in the budget statement was the one that would obtain. However, on publication of the Bill they found a new situation was to operate. It is self-evident that common justice demands that we should not operate a retrospective section of this kind and, therefore, the correct date to be inserted in the section is the one indicated in the amendment, namely, 2nd July, 1974.

Interestingly enough, we received no representations on this matter. I would have expected, had there been any significant numbers of people taking out policies——

I think the Minister is mistaken. He may personally not have seen them but I think his office received representations. Certainly I received them and I think I got a copy of what the Minister received.

I do not want to make any point of it but I made an inquiry while the Deputy was talking. Let us study what we have been asked to do here. This amendment is intended to make the £1,000 limit apply only to policies taken out after 2nd July. In other words, those people who took out insurance policies after budget day and up to 2nd July in the hopeful, even presumptuous, expectation that they would get full relief without limitation would, as a result of Deputy Colley's amendment, get relief without regard to the £1,000 limit not only for this year but for decades. It would be most unreasonable to expect the general body of taxpayers to bear the cost of the advantage given to people who would be in the five-figure group and upwards.

For example, if a person with an income of £18,000 took out a policy with an Irish company before 2nd July, 1974, with a premium of £3,000, he would have a tax saving in 1974-75 on that premium of £1,600 which would be £900 greater than he would have earned under the old system. I do not think that can be warranted. Similarly, a person with an income of £30,000 taking out a policy with an Irish company with a premium of £5,000 would get a tax saving of £2,666. On a £5,000 premium £2,666 would be paid for that person with an annual income of £30,000. By whom? Not by himself but by the general body of taxpayers because that is what happens when people get an exemption of that kind. I do not think that would be warranted.

(Interruptions).

I was criticised on the day of the budget for the length of the budget speech but if he were to cross every "t" and dot every "i" the Minister for Finance would be on his feet for many hours. I have given the clearest indication to people that we would not permit concessions which are in the tax system to provide relief for the ordinary person to be used by the well-to-do to gain for them massive subventions at the expense of the ordinary taxpayer, to build up for themselves massive incomes in the future or massive accumulations of wealth.

Poppycock.

If people cannot understand that, they can understand nothing. We will take the case now of the person who might have had an income of £30,000 and spent £5,000 premium, taking £2,666 out of the taxpayers' pockets to help him to pay it.

There are an awful lot of those around.

On maturity of that policy in, say, ten years that person would have collected, with the aid of £2,666 from the taxpayers every year during those ten years, a capital sum of £75,000, which capital sum would be entirely free of income tax. I do not think the Deputies opposite, when they reflect seriously on this matter, will consider that that would be right.

If the Minister reflects seriously he will know that that could not happen.

If Deputy Crowley wishes to intervene in this debate he is entitled to, but——

We have no objection to people buying these policies for themselves. They should be encouraged to do it but not at the expense of taxpayers whose incomes do not even reach £2,666 or anything like it. Why should a person who has a very substantial income collect from the pockets of the ordinary "Joe Soap", who is squeezed to pay his income tax and cannot avoid it, amounts of that kind?

It seems to me it would be manifestly unfair to the general body of taxpayers to give the special tax advantages which are sought by the Opposition and bearing in mind the necessity to be fair and bearing in mind that apparently there is no significant purchase of these policies by people who are purchasing them for their own need, as distinct from possible avoidance of tax, I cannot see my way to accept the amendment.

I must confess I am quite appalled at the attitude displayed by the Minister. I do not care whether a person is a millionaire or a pauper he is entitled not to be got at by the Minister for Finance or the Revenue Commissioners retrospectively. If the Minister does not accept that principle there is nowhere on which we can stand. Why does the Minister provide in this section the 3rd April, 1974? Why does he not say whether before or after the passing of this Act. Why apply any limit? He did not say anything about this on the 3rd April so what is the significance of the 3rd April? Why does he not go back to the people who benefited to the extent he is talking about last year and the year before? If his case is justifiable in principle why does he stop? He is losing money to the taxpayers by stopping on 3rd April. This is a principle of great importance and I hope the Minister will reconsider his attitude. More than that, why does the Minister pretend that all that is involved here is people who take out policies at a premium of £1,000 a year? Why does he pretend that that is the only effect of section 9? Does he not know, for instance, that the people who are affected by it are the Irish companies and the non-Irish companies and those employed by them? Does he not know that there are many people who took out policies between 3rd April and the date of publication of this Bill not for £1,000 but for very much less premiums per annum and decided which policy they would take on the basis of the relative advantage or disadvantage of Irish or non-Irish companies and what they could offer? Does he not know that this section is fundamentally affecting that position and, therefore, the people involved with this section are numerous and in many cases not at all wealthy? They entered into contracts freelybona fide and on the strength of what the Minister said in his budget statement. The Minister has no right to come in here behind their backs and say: “No, we are going back retrospectively. We are changing all the rules. You entered into your contract believing me but that is your hard luck because we are going to change it”. If that is the Minister's attitude in this matter it will make life difficult for him but it will also make life difficult for the Revenue Commissioners and if that attitude is to be continued it will lead to a breakdown in the whole system the Revenue Commissioners operate.

For as long as I can remember, and long before that, on both sides of this House it was always accepted that you did not operate Finance Bills retrospectively. There have on occasions been some arguments as to whether a thing was retrospective or not but the principle that you did not go back and operate it retrospectively was never questioned to my knowledge in this House until this Minister for Finance took office. I want to tell him that he is totally unjustified if that is the attitude he is taking up and that we will, and must in pursuance of our duties, do what any Opposition would do in this House, and what any Opposition in the past did, and that is to oppose tooth and nail any attempt at retrospective legislation on behalf of the Revenue Commissioners.

I feel very strongly and I do not want to go too far on this because I am hoping the Minister will reflect on what he is doing. I do not think the significance of what he was saying has occurred to him yet. I hope that before we conclude our debate on this amendment the Minister will see the dangers of retrospection of this kind. There are other examples we will be dealing with later but it is terribly important that the Minister should accept what has always been accepted in this House. There may have been arguments about whether something was retrospective or not but I have never before heard anybody in this House argue against the principle that you do not apply legislation of this kind retrospectively.

I want to say very seriously that, of course, there is no element of retrospection here whatever. Any person who took out a policy after the 3rd April, which is the date of the budget, did it in expectation or presumption of a benefit which might accrue to him in the future. It wasin future not in the past that such a policy would have been taken out if it was taken out but I have great doubts. If it was taken out it was taken out in expectation of a benefit which no reasonable person would have contemplated the Legislature would provide.

Suppose somebody took it out in February?

No restriction would apply on a policy with a premium of up to £1,000.

It might be £50.

Such a person is not going to be disadvantaged.

If, when one goes above that, it goes into the areas I have been talking about, areas which lead one not unreasonably to believe that the policies are entered into primarily because "Séan Citizen" is paying the lion's share of the premium then I think there is a very clear obligation to take steps to prevent that occurring. That is what we are doing.

Why not in February?

We do not want the situation to arise where such people could have policies to apply for years to come where the premiums would in fact be paid for by the ordinary taxpayer.

Would the Minister deal with that point? Take somebody who took out a very large policy of the kind he is talking about in February, why is he allowing that person to do it? Why does he pick 3rd April?

Because we are dealing with a new regime of taxes as and from the commencement of this tax year, which allows the benefit on such policies above 35 per cent. Primarily that benefit would not have been available above 35 per cent so there is no question of retrospection here. We are dealing with a new situation which arises by reason of the simplification of the tax code.

I want to agree fully and strongly with what Deputy Colley has stated in relation to section 9, the injustice of which he is endeavouring to rectify in amendment No. 6. I am horrified the Minister attempted to do what he did. I am more horrified now, having heard him reply to Deputy Colley, to see him endeavour to justify his action. He appears to me, to put it at its most charitable, entirely to miss the point Deputy Colley is making. I do not think he is that foolish, that he misses the point. I think he is deliberately giving the impression that he misses the point in order to avoid having to attempt to reply to the nub of this argument.

The problem that arises, arises because for at least the second time in this year's budget the Minister for Finance made a serious error which he subsequently had to rectify. The first of these serious errors which he made in this year's budget was in relation to the disallowance of half the personal allowance of people who possessed even the smallest quantity of land. When the consequences of what he proposed in the budget were pointed out to him he immediately backtracked and said that it would not apply to anyone with a valuation of less than £20, even though the budget was perfectly clear and set it out in black and white, that it applied to everybody, no matter how small a quantity of land he had.

The second one is the one which results in this mess, that is now section 9 of this Bill. When the Minister introduced this new system of tax, with the top rate at 80 per cent and the lowest rate at 26 per cent, he completely forgot when framing the budget the sort of consequences which would arise on claims for relief on payment of insurance premiums, on mortgage and bank interest and similar matters where a taxpayer was entitled to certain reliefs before his taxable income was arrived at. About four Deputies on this side of the House, during the budget debate, pointed out to the Minister the gross inequity of what he proposed to do. We pointed out that whereas relief under the old system was the same for everybody at 35p in the £, relief would now depend on one's top marginal tax. If you were not a very well-off-man, who had a taxable income after allowances of less than £1,550, you could benefit only at the rate of 26p in the £ but if you had taxable income after allowances in excess of £9,800 per annum your marginal rate of tax would be 80p in the £ and, therefore, on life assurance premiums you would get relief of 80 per cent on each £ on half your premiums with a foreign company, or ? of your premiums with an Irish company.

I, and to my recollection, three other Deputies on this side of the House, on the budget debate pointed that out to the Minister who poohpoohed, told us we were wrong, that we did not understand the thing and we were talking through our hats. We insisted we were not, that we believed we were right. The budget debate ended conclusively with four of us on this side of the House saying we were right and the Minister telling us we were wrong. We heard no more about the matter and the public did not hear any more about it until 2nd July when the Minister published this Bill. In the course of his Second Reading speech he said that among other things in this Bill which were new, that were not in his budget speech, was section 9 which sets a limit of £1,000 on premiums. He said the reason this was being done was that because of the new graduated rates of tax the well-off people would benefit considerably and the less well-off would lose by it. He said, while he was not doing anything for the less well-off paying tax at 26p in the £ at least he would curb those at the higher end of the scale and put a limit of £1,000 in premiums on the amount for which they could claim.

I would remind the House that a lot of the people who will be allowed to claim up to £1,000 premiums relief will be those claiming at the second highest rate of 65 per cent. The vast majority of people are at the lower rates of 50 per cent, 35 per cent and 26 per cent. They stand to lose under section 9 as it stands. The better off you are the more you stand to gain on this. I have no objection to the principle of putting a limit on the premiums involved, particularly if it is those who are best off who would benefit. However, I object very strenuously to people who read the budget speech, read the debate afterwards in this House and saw it was the very clear intention of the budget that they should be allowed to benefit to a greater degree than heretofore from insurance policies, and bought policies between 3rd April and 2nd July on the strength of what the Minister for Finance said and now they turn around after publication of this Bill to find that the Minister, for the second time in this year's budget, and for about the fourth or fifth time in his short career as Minister for Finance, has gone back on his word and welched on what he publicly announced.

It is bad enough to have a situation in which someone announces before a particular game is about to take place that he will change the rules to suit himself but with the present Minister for Finance the situation is considerably worse. He plays the game first. He finds you beating him and then when the game is over he says: "We are changing the rules now for the game that began three months ago. We cannot let you away with that. We will clip your wings now. You cannot rely on my word. I am entitled, after you have beaten me, to change the rules in order to bring you down to earth."

The argument which the Minister put up on this amendment is specious and dishonest. He went into his usual long cant, that we have heard so much of in the last year, about trying to get at the rich, that it is only the rich who are affected by things like this and why should the ordinary taxpayer have to pay for the benefit the rich get from these policies they might have taken out in good faith. That is a dishonest and specious argument.

The fact is, as was clearly demonstrated by Deputy Colley, the Minister set out the date of 3rd April in this section because it was the day of the budget and said that anyone who had taken out a policy before budget day would be entitled to all the normal reliefs without any limitation. There was nothing in his budget which gave anyone reason to believe that there would subsequently be a cutting down of these reliefs. There was nothing to show that there would be any cutting down until this Bill was published on 2nd July. There is, therefore, no answer in principle, in honesty or in equity to the amendment in Deputy Colley's name, because the equities enjoyed by those who took out policies between April and July are every bit as great as the equities enjoyed by those who took out policies prior to 3rd April. The argument Deputy Colley made here now, and which was in no way answered by the Minister, is a perfectly valid argument in principle, that is, that if the Minister, in order, as he puts it, to get at people who have large insurance policies, picks out the 3rd April as being the day on and after which they no longer get these reliefs, to take as much money as possible from them. He should not pick out the 3rd April. There was nothing said in the budget that gave anyone reason to believe that this section 9 would ever appear subsequently.

The Minister's own speech on the Second Reading of this Bill made it clear that this was something entirely new and was not in the budget. If his only reason for doing what he is now proposing to do in this section is to try to take as much money as he can from people, why does he not fix some day like 1st January, 1960, as the relevant date? He will catch umpteen more people if that is what he wants to do. He will get far more money for the Exchequer. But he is being totally dishonest in picking out a date which has no relevance at all, because nobody who would be affected by this would have known anything about it until 2nd July, 1974.

If this system is going to be operated, it is totally wrong and quite contrary to the whole spirit of our financial or other legislation, that any date, earlier than 2nd July, 1974, should be picked for it. If the Minister insists on trying to push this provision through, I can assure him that he will be a long time doing it and that is something which he will regret. I can only hope that some people who appreciate the propriety of legislation will explain clearly to him just how much in default he is in what he is now trying to do.

Is it not very odd what some people can pick out of the budget statement? Is it not very odd indeed what Deputies opposite want to overlook? What they want to overlook and what they want the people of Ireland to overlook is—I have been chastised for pronouncing this again and again as an objective of this Government—that the budget statement is an important aspect of tax reform and contains measures to counter tax avoidance and evasion. I said one of the reasons why our rates of income tax are so high is that a great many people who ought to pay a lot of tax pay very little or none at all. I indicated that it was my policy in the interest of fair play to take firm action against those avoiders and evaders and to ensure a more equitable tax system.

If people choose to take the risk of using concessions which are there for the relief of ordinary people to get for themselves vast accumulations of wealth by using the money of the ordinary taxpayer as a subvention to their investment, they have no right to complain when the Legislature takes corrective action to stop such developments taking place. The change in the whole structure of the tax system operates only for the commencement of this tax year, that is, from 6th April.

No, the 3rd April.

But on the 3rd, indications were given that there would be a new tax structure. That is so, but it was only applying in the future. As we were giving an indication that we would be making changes, we gave fair warning that if the laws of this land, actual or potential, were to be abused by tax avoiders, we would take action to stop them being so abused. That is what we are doing in this section, and that is why we cannot find our way to accept the amendment which would give these massive tax free gains to people who are in a position, if they want to make such gains.

I want, with some seriousness, to suggest to the Minister that he has no alternative but to accept Deputy Colley's amendment. In this respect I want to read for him the exact words he used here in this House on budget day in his budget speech, the most important statement of the Minister for Finance in any year. I quote from his speech:

Under the existing dual system of income tax and sur-tax some reliefs namely, life assurance relief, health expenses, wife's earned income relief, and age allowance, apply for income tax only. As it would be anomalous to maintain this distinction under the unified system now proposed, these reliefs are being placed on the same footing as other reliefs and allowances and will be available in full to income taxpayers whatever their marginal rate of tax.

I want to submit to you, a Cheann Comhairle, that is an unequivocal statement by the Minister for Finance on budget day that anybody who was contemplating taking out an insurance policy could do so with a solemn assurance from him that the insurance premium would be allowable in full. I suspect, and I think Deputy Colley will agree with me, that the Minister has walked himself into the position without fully realising what he is doing. In the light of that statement on budget day, he was encouraging taxpayers to take out insurance policies on the basis that under the new unified structure of rates of tax their insurance premium would be allowable in full right up the whole range of the new rates of tax.

I do not think it is appropriate for the Minister, in replying to this debate, to throw out figures of £24,000 or £75,000, as if we were dealing with tax avoidance or some undesirable aspect of the income tax code. We are dealing with life assurance. It is prudent for taxpayers to take out life assurance to look after their families. The income tax code since the twenties has written into it special provisions to encourage taxpayers to take out life assurance.

I submit to the Minister, and I think if he thinks about it he will agree, that any impartial observer reading his speech on budget day would regard it as an encouragement to people to avail of these new provisions, would assume that from the date of the budget people could expect these premiums to be allowed in full for income tax purposes.

I believe the Minister must accept Deputy Colley's amendments because nobody had any indication that there would be any restriction on the allowance of these premiums until the Finance Bill was published. Indeed the Minister should allow a week after the date of the publication of the Finance Bill because very few people get time to see what is in the Finance Bill until they have examined it carefully.

Neither Deputy Colley, Deputy O'Malley nor anybody on this side of the House, objects to the restrictions coming into force from the date of the publication of the Bill because then everybody knows that the restriction is there and nobody is going to take out an insurance policy under false pretences. However, between budget day and the date of the publication of the Finance Bill a situation obtained in which any taxpayer who had read the budget speech, and God knows thanks to the Minister's efficient propaganda machine, the budget and everything in it was sufficiently publicised, was perfectly entitled to feel encouraged to take out an insurance policy in the light of the fact that the full premium would be allowable under the new rates of taxation right up to the maximum rate of tax.

I suggest to the Minister that he is doing himself a disservice by endeavouring to create a smoke screen of envy in this and trying to stir up people to be envious of some other group of taxpayers who can take out insurance policies of up to £30,000. That is not what is involved: what is involved is the word of the Minister for Finance as solemnly given in a budget speech, the most important pronouncement he makes in any year.

Deputy Colley's amendments would, in fact, be a contradiction of what I have said. Deputy Colley's amendments, if I understand them correctly would limit benefit up to 35 per cent.

We are on amendment No. 6.

I know and that is the effect of all the amendments. What the Deputy was proposing earlier would limit this to 35 per cent. I am aware that the Deputy has withdrawn them.

Does the Minister recall that when the Ceann Comhairle was dealing with these I said that I would withdraw No. 6 if the Minister accepted the earlier ones but if the Minister did not then No. 6 became relevant. We are discussing No. 6 on its own and it is not relevant to the others. I am sure the Minister agrees that I made that clear.

I am prepared to accept that Deputy Colley has changed his ground from one amendment to the other.

(Interruptions.)

Smart alickey.

Is the Minister trying to meet the case genuinely and make progress on this Bill? The Minister knows from experience that if he approaches it the way he did a moment ago we will make no progress.

I am trying to be as helpful to the Deputies as possible but I want to point out several contradictions in what they are saying. I am not seeking to impose a limit upon the rate of benefit which taxpayers can get but I am suggesting that there should be a ceiling. The argument of the Opposition is that, apparently, once one proposes to make any change there can be no change in any of the ceilings. Great reference has been made to a portion of the budget statement which dealt with the application of the rates across the board for all reliefs.

The full rates are available within whatever the ceilings are.

Reliefs and allowances will be available in full.

The ceilings perpetually change. There was a ceiling even on the day of the budget which limited any concession to a premium which was one-sixth of income. Are we now to be told by Fianna Fáil that we must not touch this thing at all?

Not restrospectively, and that is the whole point.

There is no retrospection. The ceiling applies only from the date upon which the new package of taxes applies. From then onwards it applies.

It should have been the 6th April and not the 3rd April.

The Deputy can have his present of the few days if he wishes.

It is important.

One would think that somebody in this House rushed off to an insurance company while I was speaking and took out a new policy in order to try and jump the gun.

The Minister encouraged them to do so.

I made it perfectly clear that the new system of taxation, and that was what I was dealing with at that time, would be such as to enable the rates to be applied whatever the particular relief was permitted by the law. We say, without apology, that we consider the appropriate limit at this time for relief of this kind to be one-sixth of a person's income or £1,000 premium, whichever is the greater. As I pointed out last week, that would buy for many people policies in excess of £30,000. What we are listening to here is a protest on behalf of the very well to do who could make quick decisions to try and avail of a concession which was being given to ordinary taxpayers in order to accumulate for themselves——

Does the Minister believe that?

Of course that is what it is all about.

If the Minister believes that he is even more stupid than we thought he was.

Those are the only people who could possibly benefit from the concession that the Deputies opposite are trying to provide. We consider that would be anti-social legislation; it would be inequitable and would be in complete conflict with our efforts to produce for this country a fair system of taxation which would be related to the capacity of people to pay and which would not be available for misuse by people who use ordinary exemptions for ordinary people in order to avoid paying their fair share of tax.

Last year the Minister closed the gap in relation to insurance policies based on a couple of years' premiums and brought the tax avoidance system in operation. The Minister was quite correct in doing so. This year on the budget the Minister referred to tax avoidance systems and methods. I welcomed his approach in trying to close any gaps or loopholes there might be.

I urge the Minister to take a second look at what he is talking about here under section 9. When the Minister was replying on the first occasion he threw out big figures and big premiums. I am not sure whether he was doing so in order to weight the argument in his favour so as to win the argument by using the examples of some cases of people who took out large premiums. I do not know whether this exists or not. I would be influenced if I thought there was a large number of people but I am inclined to doubt it. What concerns me and the other speakers is the element of retrospection.

It is very important that the Minister for Finance keep in mind that individuals and companies must be able to rely in the probity and the rectitude of the Government financial policy. This is quite dangerous. There may be a couple of cases but Members on this side of the House are not interested in those who may have involved themselves in premiums exceeding £1,000 per annum.

If there are any such people.

I do not know whether there are or not. I would not cry for anybody who could afford a premium of more than a couple of hundred pounds.

They are all in the Seanad as the Taoiseach's nominees.

References should not be made to the Seanad.

I was concerned that the Minister, on behalf of the Government, should not engage in retrospective action which may shake the confidence of people in our financial and budgetary policies. A few moments ago the Minister stated that this will apply only from the date on which the Act will apply which is 3rd or 6th April. I would accept that from the Minister if he had referred to it in his budget speech. He did not refer to this element of tax avoidance based on large premiums. If he had mentioned it that would have been a warning to people that, if they took out a very large premium, they would be caught. He did not do so. Consequently, I would suggest to the Minister that he should reconsider this, not because there may be a couple of cases, of which I have no knowledge, of individuals who may have been smart enough to believe that they could anticipate what the Minister would do in the Finance Bill, but because of the principle of retrospection which I should not like to see the Minister breach.

I should like again to try to disabuse the Minister of the idea that the only people affected by this are people taking out very large insurance policies. The fact is that in the light of what the Minister has told us, that is, that he proposes to retain section 9 as it stands and to amend it in the next Finance Bill, there are people—and there must be quite a number of people—who took out quite small insurance policies and whose rate of tax relief is being affected.

Furthermore it is more than possible that a number of these people made their choice as to which company they would deal with on the basis of a certain differential between Irish and non-Irish companies. This section is changing that differential. It is no good pretending that the only people affected are those taking out huge policies. That simply is not a fact.

Secondly, I want to remind the Minister again that when he very kindly made me a present of a few days in April he was adroitly trying to avoid a very important point. When I asked him why he was not applying this, for instance, to people who took out a policy in February he said it was because there is a new regime of taxation in operation now. The new regime is operating, as he said himself, as from 6th April. This section does not refer to 6th April. It refers to 3rd April. The reason it refers to 3rd April is that that was budget day. There can be no other reason for referring to 3rd April.

As has been demonstrated very clearly by Deputy Haughey in his quotation from what the Minister said, the fact is that nobody listening to the Minister on budget day could possibly be deemed to have noticed anything of the kind of thing which is contained in this section. There is no logic whatever in stating in this section that the section operates in respect of policies entered into on 3rd April. If it were to be any way logical at all it would have to say that it would operate from 6th April.

The real truth is—and the Minister should admit it—that a mistake was made. This should have been mentioned in the budget speech. If it had been mentioned there would be no problem but it was not mentioned, for whatever reason I do not know. Perhaps it was overlooked or the speech was too long or whatever. That was an omission. The Minister is not justified in penalising people because of that omission. Even if the result of accepting the amendment were to cost the Exchequer some money—and we have no indication at all whether that is so or if so how much money would be involved— surely it is more important that the Minister should be seen to uphold a principle which this House has always upheld of not legislating retrospectively in Finance Bills.

It is simply not possible for the Minister credibly to argue that what is in this section is not retrospective. Surely it has been demonstrated clearly by this side of the House that what is provided here is retrospective and must be retrospective. The only circumstances in which this would not be retrospective would be if the Minister had mentioned it in his budget speech. If he had, 3rd April would be the correct date and there would be no problem about it. The fact is that he did not mention it in the budget. He should not frame the section and he should not argue as though he did mention it in his budget speech. Let him acknowledge that it was omitted for whatever reasons and act accordingly.

To me it is self-evident in all the circumstances that the correct date is the date of publication of the Bill. We have no knowledge—and I doubt if the Minister has any knowledge—of any large insurance policy taken out in that interval. I doubt if there is any such evidence but even if there were the principle involved here is far more important than the amount that could be involved to the Exchequer. The principle of not applying Finance Bills retrospectively is one on which we simply must stand or there is nowhere we can stand. I hope the Minister agrees with me on that general proposition even if he does not agree with its application in this case. Could I ask the Minister does he agree with that proposition that we should not operate retrospectively?

I agree with it but Deputy Colley was acting against that principle.

The Minister may argue if he wishes on particular instances. I said at the beginning that there have been arguments in the House from time to time as to whether something was retrospective. I would hope that the Minister would at least accept the principle that we should not operate retrospectively. Apparently he has indicated now that he does accept that principle. If he does, is it not a fact that if he had mentioned this in his budget speech there could be no question of anybody saying this was retrospective? He did not mention it and the section is framed as if he did. If the section were to be framed on the basis of a new tax regime the date should be 6th April but it is 3rd April, the date of the budget. The framing of the section indicates that it is going on the basis that the Minister indicated in public on 3rd April that this section would operate. He did not indicate that. It may have been an oversight. I do not know what the reason was. Let him acknowledge that because it was not mentioned in the budget speech he should not operate a section framed as though he did mention it and let us get on with this Bill and not be wasting time on what, on the face of it, is a small point but in principle is a fundamental matter which we on this side of the House cannot concede. The Minister must understand that.

May I ask the Minister a number of questions which may seem rather simple but the answers to which may be rather interesting? I seldom get a simple answer.

The Deputy did the other day.

In his various contributions since I came into the House the Minister has indicated that some inequity is emerging under this Bill if what is sought in the amendment is granted. In making that case he has posed questions to me to which I would very much like to get answers. What is the merit in granting relief on the payment of premiums no matter whether they are large or small? That is question No. 1. If it is a good thing to give relief and there is a good reason for it—and I am not saying there is not—what yardstick is used to determine that when the premium exceeds £1,000 it becomes a bad thing to continue it? That is question No. 2. Question No. 3 is: if, as would emerge from what the Minister has said, it is the new rate of tax that is the variable rating from 26 per cent running up to 35, 65 and 80 per cent. If this is held to be the cause of the difficulties that now seem to stand between the Minister and various Fianna Fáil Deputies who have put down amendments, surely the new scale should be examined. Judging by some arguments put forward this would appear to be the cause of problems that cannot amicably be resolved between the Minister and the Opposition.

I would also ask the Minister to consider that while he has said that those paying premiums greater than £1,000, particularly on policies taken out since 3rd April, would benefit at the expense of other taxpayers, is it not fair to ask at whose expense are reliefs given to those who pay premiums under £1,000? I cannot see the sense in the argument that anything over £1,000 in premiums is a mortal sin and that if a concession were given in respect of this, it would be done, at the expense of the poor, as it were, according to the Minister. I should be grateful if the Minister would throw some light on this.

If the Minister is now legislating against those who have existing premiums in excess of £1,000 before 3rd April last why has he not taken the obvious step to ensure that under the new scale of tax they will not get a windfall as a result of the new scale? Will he allow the windfall to benefit such people because they were in before 3rd April and because they are people in the tax bracket paying up to 80p in the £ and would therefore get relief at 80p in the £ whereas up to now they would not get relief at a rate greater than 35 per cent or, in the surtax bracket, perhaps 50 per cent or so?

Getting down to what the Minister is perhaps most concerned about, although somewhat obscured by other things he said the small premiums, if the Minister is really concerned about those which come from people of modest means and if they previously were paying tax at 35p in the £——

Acting Chairman

I am sorry to interrupt the Deputy but he appears to be speaking on the section. Actually we are on amendment No. 6 which relates to operative dates.

I am quite aware of this although in referring to what the Minister and others have said I may have appeared to wander.

Acting Chairman

The Deputy will have an opportunity of discussing these matters on the section.

I am asking questions now so that I may be in a position to discuss them with more relevance than appears to be evident now——

Acting Chairman

The Deputy's question would be more relevant to the section than the amendment we are now discussing.

I have about 1½ more questions to ask and I have already posed about seven to the Minister. The question I was about to ask is entirely relevant to the amendment and not to the section only. It is quite obvious that a loss is being incurred by payers of small premiums as a result of the Minister's action in this legislation. This loss can readily be calculated, depending on the premium being somewhere under £1,000, in relation to the 35p in the £ standard tax payable up to this year and which is now being reduced to 26p in the £. How does the Minister justify their losing money when it appears that the purpose of the whole section—and indeed of the amendments—would be to favour the small, modest investor through insurance premiums? May I ask the Chair whether we are dealing solely with section 6 or——

Acting Chairman

We are on section 9, No. 6; amendment 6 only.

How were the other three amendments Nos. 3, 4 and 5, dealt with? I was not aware that they had been conceded by the proposer's; perhaps I missed that.

Acting Chairman

Amendments Nos. 3, 4 and 5 were withdrawn.

My hearing must be even worse than it was last week when I could not hear the Taoiseach. Not only did the Chair not hear him, but I did not hear him either. I am sorry: I understood that amendments Nos. 3, 4 and 5 together with amendment No. 6 were relevant. I apologise to the Chair if I have wandered very widely from amendment No. 6, I thought all four were being discussed. Nevertheless, I would ask the Minister to try to give some answers to the many questions I have asked which I think go to the root of the matter of these sections which deal with relief on insurance premiums.

Several of the Deputy's questions, as the Chair pointed out, are not relevant to this amendment but if the Chair would bear with me I shall reply briefly. Tax reliefs are given on insurance premiums because, as I understand the will of the Legislature in the past, they wished to provide incentives to people who were saving through insurance. Like any other exemption given to relieve ordinary people and promote thrift among them, if it reaches the stage where it can be abused by the well-to-do without any deprivation of themselves of their standard of living and if they engage in it because one of the major considerations they have in mind is that somebody else really bears a large share of the burden, you have then reached the stage where it is proper to draw a line and say that beyond that line the tax system may not be used by any person because it reaches the point of abuse. It is very difficult to set the correct threshold. Up to now the law said one-sixth of income was the total premuim which could be availed of to get income tax relief, but the maximum relief was 35 per cent. Now that we have amalgamated sur-tax with income tax we are saying that we should apply this new ceiling in addition to the one-sixth of income ceiling of £1,000 and that means that a person with £6,000 could still lose one-sixth of the income.

If a person goes beyond that, and wants insurance of a larger amount, we say he can do that but he will not get relief of income tax beyond £8,000. He gets relief up to £6,000 but, beyond that, he has gone into a level of income, status and comfort which does not need to be supported by the rest of the community and we do not think it is proper that it should be so supported.

Is not the £1,000 a direct consequence of the 80 per cent relief which would otherwise obtain?

Yes. If we did not have a ceiling there might be no limit then other than the one-sixth and we would come to the figures I was quoting earlier.

We are not disagreeing with the Minister on that at all.

A person with a £4,000 premium would get a capital gain of £75,000 at a net premium of only £1,334 a year because £2,666 of that could be claimed.

The Minister knows we accept that.

That is the loophole I am trying to close. It was argued that I was closing too soon and some smart aleck between 3rd April and 2nd July had an opportunity to make a quick gain.

Has the Minister any knowledge of such a case?

What about the earlier ones?

Anyone who took an earlier date than 3rd April took it in the light of the then existing tax structure and not in anticipation of "making a kill", as would be the case on the application of the new system of tax.

We are talking about life insurance, not stock exchange transactions.

I know that, but there are cases of life insurance being used for tax evasion purposes. I am sure many professional people in this House have from time to time advised clients of the uses to which life insurance could be put in order to ease their tax burden. Fair enough, but it is the duty of the legislature to ensure that the law is not used in a way never intended by the legislature. I accept that the Opposition do not intend that the system should operate in that way. All that is between us is that we are saying we should apply this new tax system from the date of commencement of the financial year.

That is not what the Minister is saying.

All right—three days earlier. The reason why we are taking three days earlier——

It is important.

——is because three days earlier people get an indication that, if they moved quickly enough, they might be able to use this system in a particular way once the new tax laws come in, but these laws are not operative until the Finance Bill is passed, and if any person decided he could take a chance that the Bill would not cover these things, notwithstanding the clear warning I gave in the budget statement that I would close all loop-holes, there is no reason for this House now to weep for him or delay the passage of the Bill. The ceiling is reasonable because people can provide reasonable insurance for themselves at the level of £1,000 available as a set-off against tax liability.

What about those who are getting a windfall as result of what the Minister is doing, apart altogether from those the Minister is cutting off with one-third or one-sixth, as the case may be? There are those who, as a direct consequence of this, will be adversely affected.

It is very unfortunate that the Minister should use the phrase "make a kill" in relation to life insurance.

Some people have used life insurance to "make a kill" at the expense of the taxpayers.

This side of the House would agree with everything the Minister has said in regard to dealing with deliberate methods used to evade tax particularly in relation to the changeover in the tax structure. Those involved would be a minority. I doubt if any here would be included. The point the Minister does not seem to be able to grasp is that, if there are these two or three black sheep—I do not know of them; the Minister may have knowledge we have not got—that is no justification for the Government breaking a very important principle in regard to retrospection. The Minister did not say in his budget statement: "I am going to deal with tax evaders." Had he said that the Government would be justified in saying that the new system would relate to any insurance premiums taken out from the date of the budget onwards, that would be another matter, but that was not said. I am afraid the Minister is breaking a fairly important precedent from the point of view of retrospection and that is not good from the point of view of public confidence in the propriety of this Finance Bill.

Does the Minister agree there are more people affected by this than those who took out large insurance policies?

No. The bulk would be below the £1,000 premium——

But does the Minister accept that there are people affected by this other than those taking out policies with a premium of £1,000? Does he accept there are other people affected?

Does the Minister accept there are people, other than those taking out policies requiring a premium of £1,000, affected by this section?

I am not sure what the Deputy is getting at.

What I am getting at is that the case the Minister was making exclusively was that of people taking out large insurance policies to "make a kill". Does he now accept there are far more people affected by this section than those taking out policies with premiums of £1,000? Would the Minister accept that?

No, I am not accepting the Deputy's claim.

That means we have to go through it again. Is the Minister aware that, as a result of this section, the rates of relief from income tax have been changed? Is he aware that as a consequence there are people taking out numerous small policies affected by this? Is he further aware there are people whose decision as to which company they would deal with was affected by the existence of a certain differential which was changed by this section? Is the Minister aware of that?

Is the Deputy on amendment No. 6 now?

I am dealing with the fact that there are numerous people affected by this—not the small number the Minister says, and they could only be small, "making a kill" in life insurance—and the Minister is trying to go behind their backs retrospectively and we cannot concede to the Minister that he is entitled to do that.

Progress reported: Committee to sit again.