Dáil Éireann debate -
Wednesday, 24 Jul 1974

Vol. 274 No. 11

Finance Bill, 1974: Committee Stage (Resumed).

SECTION 12.

Debate resumed on amendment No. 7:

In page 8, between lines 2 and 3, to insert a new section as follows:—

"Where, in any of the provisions of this Chapter and of Part I of the First Schedule, a specific sum is mentioned as a deduction falling to be made from the total income of an individual for the year of assessment 1974-75 such sum shall, for each subsequent year of assessment, be deemed to be increased by such percentage sum as is equal to the percentage sum by which the Consumer Price Index has increased during the 12 months period ending on the date to which the Consumer Price Index is calculated next preceding the commencement of the year of assessment."

—(Deputy Colley.)

Mr. Colley

Before we adjourned discussion of this Bill I was proposing amendment No. 7. As I said at the time, while there may be some objections from a technical point of view to its wording it is clear, on its face, what it seeks to achieve. What it seeks to achieve is to build into the Finance Bill a provision whereby the various tax allowances and personal allowances provided in the Bill would automatically be adjusted each year so that they would be increased by the same percentage as the percentage increase in the cost of living in the 12 months preceding the beginning of the new tax year. This has, of course, the effect that what would be done would be merely compensating for an increase in the cost of living the previous year. I acknowledge freely that is a defect but it is probably about the best we can do in the circumstances because I would imagine that to provide, for instance, that there would be an adjustment, say, every quarter with the consumer price index figure coming out, would prove to be totally impossible of administration for the Revenue Commissioners. I assume that is so, at any rate, and on that assumption I have proposed this amendment.

It may well be argued that we, on this side of the House, when we were in Government did not introduce a proposal of this kind and indeed maybe on some occasions might have resisted a suggestion of this kind. However, it is important to realise that the situation now is totally different from any situation we have ever experienced before. I say that because of the raging inflation from which we are suffering. I do not know whether it is generally realised that the increase in the cost of living this year between February and May was at an annual rate of 24 per cent. In other words, if it continued for the year the increase in the cost of living would be 24 per cent. We have never experienced anything like this before, and consequently whatever arguments may have been made for or against this idea in the past they are totally irrelevant because we are now dealing with a new situation. In that situation it is clear that without a provision such as is proposed in this amendment increases in allowances provided for in this Bill will be eroded by the time of the next Finance Bill.

Furthermore, past experience shows that there is a historic tendency in regard to allowances of this kind, and indeed various other kinds of ceilings that are placed on allowances and different things in Finance Bills, to adjust them regularly. It does not matter what good intention the Minister might have in that regard, there is no guarantee that this will be done.

In the circumstances of the present raging inflation it seems to me that equity demands that we should have a provision of this kind in the Bill, but there is more than equity involved though that is the first consideration. The other thing that is involved is that providing built-in adjustment in the allowances in relation to increases in the cost of living one can go some way to ensure that wage earners do not feel a total sense of oppression by the income tax system which they are tending to feel now seeing the rate at which prices are increasing and seeing that the increases announced in the budget and not yet implemented will, when implemented, be in the view of most taxpayers inadequate to compensate for what has happened. I have demonstrated on another occasion that they are quite inadequate even to restore the position to what it was under Fianna Fáil in the 1972 budget.

The special circumstances which I believe make this proposition a very urgent and essential measure are the circumstances in which we have this raging inflation such as we have never before experienced. This new situation requires a new approach. I know the acceptance of this amendment would present certain difficulties to the Minister for Finance, but I do not believe that the difficulties would be insuperable. Certainly I do not believe they would be such as to justify not providing in this way for some degree of equity and some degree of acceptability in our income tax system.

One of the side effects of accepting this amendment would be, of course, to impose on the Government and on any Government which would be in power a greater degree of discipline than is at present imposed in their budgeting arrangements. I do not believe that is a bad thing, particularly in the case of the present Government, who have shown themselves in the two budgets they have introduced to be totally undisciplined in their approach to the management of the economic affairs of this State.

I do not wish to elaborate on that I have elaborated on it in relation to both budgets and I am merely referring to it now to illustrate that the introduction of a certain degree of discipline, which would be consequential on the acceptance of this amendment, would not be a bad thing at all so far as this Government are concerned. Furthermore, I believe, whatever the theoritical view may be, that the practical effect of the adoption of this amendment would not be a loss to the Exchequer but rather a net gain, because I also believe that the fact that taxpayers knew that their income tax allowances would automatically be adjusted in relation to the cost of living would tend very much to assist in avoiding excessive claims for compensation in the form of wage increases which people make, quite legitimately in my view, where they are in a situation of raging inflation with no guarantee that they can protect themselves against it or catch up with it. While this would not be the whole answer it would certainly be a step on the road to making it possible to expect reasonably that there would be fair wage claims rather than excessive wage claims, which in turn simply fuel inflation and make the position worse. It would be a step on the road to combating that problem, which is a major one in the economy. For all of these reasons I hope the Minister will find it possible to accept this amendment.

Minister for Finance (Mr. R. Ryan)

I would remind the House and the country that the proposal of Deputy Colley was identified by the Central Bank in their recent report as a movement which had a new inflationary influence.

Mr. Wilson

On a point of information, surely the Central Bank were referring to incomes rather than to income tax.

Mr. R. Ryan

I am referring to the fact that they dealt in their report with the inflationary influence which is taken into account when the consumer price index is used as a reference to adjust——

Mr. Wilson

Surely I am right in saying that it was taken into consideration in reference to incomes rather than income tax?

Mr. R. Ryan

Perhaps if the Deputy was orderly and allowed the Minister to complete his speech he might then make his own contribution.

Mr. Wilson

I was not being disorderly. I only asked this on a point of information.

Mr. R. Ryan

The Central Bank pointed out that the consumer price index includes elements of taxation because a Government may find it necessary to impose higher taxes on expenditure for a variety of reasons such as to reduce the budget deficit or to meet the cost of health or social welfare improvements and, therefore, to use the consumer price index is to use at best a very crude weapon for the purpose of adjusting either tax levels, wage or income levels or any other items. The consumer price index is based on a basket of commodities and services, which is recognised today as being out of date, and as not including a number of commodities and services which are now very much in demand but is including some which ought now to be left out of it.

Furthermore, one cannot overlook the fact that the consumer price index, as the Central Bank pointed out, is based to some extent on taxes which are imposed for good, social reasons as well as for economic reasons, the social reasons being those which require that income be redistributed from those who can afford something out of their surplus to those who have an insufficiency. Therefore, if that in itself was to be used as a base for adjusting tax allowances it would mean they would continue to be adjusted year in and year out because in the previous year or years adjustments were made in the tax-load so as to effect redistribution. So, every year, the better-off would be compensated because in the previous year they were asked to distribute some of their surplus to the poor. The following year they would receive an increase which would compensate for what they did, so in fact we would not get the redistribution which should be the social objective of any progressive society.

Deputy Colley is quite right in recalling that he and his colleagues voted down an amendment proposed from the Fine Gael benches in 1968 which was on a par with what he is proposing today. At that time the esteemed Minister for Finance, Deputy Haughey, said about the Opposition Deputies, and I quote from the Official Report, Volume 236, column 163 of the 2nd July, 1968:

They know, as well as I do, that if anything substantial is to be done with regard to personal allowances, the money will have to be got somewhere else or else services that are provided will have to be cut down... The Fine Gael Party, however, want it both ways; they demand reductions in taxation and, at the same time, they demand increases in all sorts of services. If they want a substantial overhaul of the income tax code,...then let them demonstrate to me where I will get the money.

If those words were valid in 1968 they are valid in 1974. Inflation is not a rubber you can use to rub out those words. There is some validity in what Deputy Haughey said then. Those who are seeking to get cuts in taxes ought to say boldly, bravely and consistently where foregone revenue should be obtained.

I would like to remind the House that, for the first time in the history of this State, this Government, being the first Irish Government to do so, have gone solemnly on record, as we did on the 19th February last, to undertake that the increases in the income tax allowances in this year's budget could mark the first step towards a policy of reviewing the personal allowances regularly and at frequent intervals. That is what we will do. We will review the personal allowances regularly and at frequent intervals. With this object, which we also published, the object of this Government will be to avoid what has happened in the past, namely a substantial depreciation in the value of the allowances in real terms with the inequity caused as a consequence.

I have indicated that this Government's desire is to produce an indicator for tax purposes but it is not an easy job to produce an indicator which would be a true one and a fair one which will not, because it is unsatisfactory, generate more inequities. We want an indicator which will be as precise as possible, which will not include factors such as taxation, which are in the nature of redistribution, but rather an indicator which will take into account the real depreciation which may have occurred in the value of money.

That is not something which is very easily defined. If, for instance, we were to take the consumer price index as indicator, what would it mean in this year? It would mean that we would be using an indicator which in itself was a reflection of, say, the increase in oil prices which is taking £110 million out of Irish pockets. That is the reality of the increase in the price of oil, but it is also sending up the consumer price index by 3 per cent. You do not compensate yourself for the loss of £110 million out of your own pocket by pretending that you can add on 6 per cent to your income to compensate for that. That is the kind of folly which is being preached by foolish people, that you can solve all financial difficulties by printing money. You simply cannot do that. What we need is a true indicator which will exclude items for which we cannot compensate ourselves except by greater effort and greater productivity. That is the only way in which we can pay for the higher cost of commodities we have to import. We will not compensate ourselves by simply increasing the flow of money into our pockets, if that money is not based on an increase in productivity.

To sum up, what I am saying is that I accept in principle the desirability of having indextation which would relate to real decreases or increases in the value of money. What we have at the moment is not an adequate indicator for that purpose or for the purpose of adjusting wages and incomes generally.

Mr. Colley

Did the Minister say he accepts the principle of the indicator in respect of income tax allowances?

Mr. R. Ryan

I accept the desirability of having an indicator, but it is not easy to get the correct indicator, and it is certainly not the consumer price index as it is at present operated. The National Economic and Social Research Council has itself now seized on this problem to study what might be an appropriate indicator, but this is not something which we can solve by the adoption of the suggestion which Deputy Colley made.

The Government have given a very specific assurance that the income tax allowances will be regularly revised in order to ensure that the value of the allowances are not depreciated. That is the best we can do at the moment. It is, in itself, a very substantial advance and, indeed, may I say with some humility, a great improvement upon the attitude of the Government in 1968.

Mr. Colley

I am glad that we have got the Minister at least to accept the principle of this amendment. It would be difficult for him not to accept it in the light of the inflation which I have referred and which, again I would point out, was, between February and May of this year, running at the equivalent of the annual rate of 24 per cent.

As I understand it, the substance of the case the Minister has made against the amendment is that the consumer price index is not a suitable index for the purpose because, among other things, it includes items related to tax. That is not an unreasonable case as far as the Minister is concerned, and I would certainly agree with him that the consumer price index is out of date. However, it is the only index we have got. If the Minister brings forward proposals to revise the consumer price index we shall certainly give consideration to those proposals. I myself believe that there is a strong case not only for bringing the consumer price index up to date but also for the production of a separate index which will be based on the requirements of those who are amongst the lower paid or dependent on social welfare. There is a very strong case for a special index for them.

All this, of course, is theoretical. The fact of the matter is that our consumer price index, defective as it is, is the only index we have got. This is where we come to the practicalities of the matter. Even if it were not to be the ideal solution, would it not be better to apply the principle, which the Minister accepts, to the existing consumer price index? When we can produce a better, more efficient and up to date index, the provision can be changed, but in the meantime the argument for this amendment still stands. That argument was reinforced when the Government found themselves having to make a public commitment to increase income tax allowance in order to assist the climate for acceptance of the National Pay Agreement. Whatever the theory may be, that episode demonstrated the reality that a stage can be reached, because of inflation, where people will demand that they get adequate compensation in income tax allowances or they will get the benefit in some other way, in their wages. That, in my view, is a very strong argument for acceptance of this amendment, plus the fact that it is a step on the road to achieving some kind of equity in the appalling situation of inflation in which we are now living.

Since the Minister accepts the principle of the amendment, I would urge him very strongly to accept also the practical application of it. If he puts forward proposals for a better index we shall certainly be prepared to consider them and they can be applied when it is available. In the meantime, let us use the only index we have and apply the principle, which is acceptable in present circumstances to both sides of the House, to the income tax allowances.

Amendment put.

The Committee divided: Tá, 56; Níl, 59.

Tá

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

Níl

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

Tellers: Tá, Deputies Browne and Healy; Níl, Deputies Kelly and B. Desmond.

Amendment declared lost.

Dr. O'Connell

I move amendment No. 7a:

Before section 12 to insert a new section as follows:

"(1) In calculating income tax in respect of senior citizens payments made by the Department of Social Welfare shall not be taken into account.

(2) For the purposes of this section senior citizen shall mean a person aged 65 years or upwards."

This is something the State should consider doing for our senior citizens who are in receipt of social welfare benefits. These are usually retirement benefits. By senior citizens I mean people who are 65 years of age and upwards. They are mainly the working class people, the recipients of social welfare benefits. It would be a gesture by the State to these people if in computing their income tax their social welfare benefits were not taken into account.

Admittedly, it may be said by the Minister that their social welfare contributions in earlier years were allowed for tax purposes and in granting them tax relief in respect of their social welfare benefits it would be a case of double tax exemption. I accept that this may be so, but in Britain they have inserted this clause into the Finance Bill and they provided that their senior citizens would not be taxed on their social welfare benefits.

The amount would not be much because some of these people have nothing else. Where they have a small pension from their employers it is grossly unfair that the total sum, the social welfare benefit and the pension, are combined for tax purposes. Neither on their own would qualify for income tax. The people concerned are ordinary working class, social welfare contributors, and to combine the social welfare benefit and the company pension together for tax purposes is a serious injustice to these people. Because of that I ask for the inclusion of this amendment and I hope the Minister will give it favourable consideration.

Mr. R. Ryan

I can sympathise with the objectives which Deputy O'Connell has in mind and he is to be complimented for raising the difficulties of the people about whom he is very properly concerned. However, the way to tackle this is to so amend the tax laws that we exempt from any liability to tax the people who are in the lower income groups. If we can sufficiently alleviate the people who are in the lower income groups then such people would automatically go out. There is a particular difficulty if we identify the certain class of people who are exempt because if, for instance, we were to exempt all social welfare pensioners we could have a situation in which social welfare pensioners would be exempt but people with small incomes from some other source would not be exempt.

I feel we have a common objective, to relieve these people, and the Deputy knows that there is an additional relief available for elderly pensioners which operates to the advantage of the people he has in mind. I can assure the Deputy that this is one of our objectives but the particular amendment, in itself, is confined to too small a class. If we can advance, as we are advancing, along the road towards exempting a large number of people then we will be exempting the people he has in mind. For instance, of the 60,000 people taken out of the tax bracket under this year's budget several of them would be amongst the pensioners the Deputy is anxious to relieve. In my view that is the way to go about it. In that way we do not leave any anomalies or any hardship cases behind.

If we try to define what particular classes are to be exempt we are bound to leave other people in who would have, not unnaturally, a sense of injustice.

Dr. O'Connell

Would the Minister know what the cost would be?

Mr. R. Ryan

It is very difficult to assess what the cost would be because as far as the tax code is concerned we have no break-down of the figures of people who are pensioners as such or who have similarly small incomes from some other source.

Mr. Haughey

Is the Minister suggesting a computer would not draw this figure for him?

Mr. R. Ryan

As I understand it, the computer does not distinguish between and old age pensioner and someone who is not an old age pensioner.

Mr. MacSharry

Could the computer not be told?

Mr. R. Ryan

I suppose it could and we could see what would turn up but, at the moment, it has not got that particular diet.

Mr. Haughey

I do not think the Minister bothered to try.

Mr. R. Ryan

The computer is a fairly new acquisition.

Acting Chairman (Mr. Cunningham)

Is the Deputy withdrawing his amendment?

Dr. O'Connell

In view of the Minister saying he will try to alleviate the hardships of this particular class by greater tax reliefs, I am prepared to withdraw the amendment.

Mr. Colley

We consider there is a good deal to commend the amendment and we think the Dáil should pass judgment on it. Under Standing Order 41 the Deputy requires the leave of the Dáil to withdraw the amendment and we do not propose to give that leave.

Question put: "That leave be given to withdraw the amendment."

The Committee divided: Tá, 60; Níl, 55.

Tá

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

Níl

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

Tellers: Tá, Deputies Kelly and B. Desmond; Níl: Deputies Browne and Healy.

Question declared carried.

Amendment, by leave, withdrawn.

Mr. Colley

Deputy O'Connell's sincerity and his protestations are now revealed in all their colours.

(Interruptions).

Mr. M. O'Leary

The Deputy is not an example of sincerity.

Question: "That section 12 stand part of the Bill", put and agreed to.

SECTION 13.

Mr. Haughey

I move amendment No. 7b:

In subsection (1), page 8, line 13, to delete "‘farm land'".

Section 13 is the first section in the chapter which deals with the Minister's proposals to apply the provisions of the Income Tax Acts to the farming community. This represents a very important and significant change in our income tax code and in the situation of the farming community. They are now moving from a relatively tax free situation into a situation where they are subject to the income tax code. It is essential, therefore, that we give the greatest possible attention to sections 13 to 28.

Again, I wish to say that I regret very much that we will have to discuss them in a sort of pressure situation. They represent a fundamental departure. The proposals to bring farmers inside the income tax code is quite a complicated exercise. The manner in which income tax to be applied to farming deserves the closest possible study by this House. We will not be able to give that study in the time available to us.

In this particular item I have endeavoured to direct attention to one aspect of the Minister's proposals which will give rise to a serious problem. In section 13 (1) the Bill defines farming, farmland and occupation. It says that these words shall have the same meaning, for the purposes of this Chapter, as they have in section 18, subsection (1) of the Finance Act of 1969. First of all, I should like to complain about the drafting here. As Chapter II represents a new set of proposals in regard to taxation of the farming community I think it would have been worth the draftsman's while, and desirable, to give new definitions which would be applicable to this chapter ad initio and not just give definitions in this way by reference back to other Acts. I think it would have been preferable that farming, farm land and the occupation of farm land would have been freshly defined for the specific purposes of this chapter. Subsection (1) states that these words shall have the same meaning as they have in subsection (1) of section 18 of the Finance Act of 1969.

When we go back to subsection (1) of section 18 of the Finance Act of 1969 we find that we have to go back further again because subsection (1) of section 18 defines farming as meaning; farming farm land, that is land in the State, wholly or mainly occupied for the purposes of husbandry, the profits or gains from the occupation of which would, but for the repeal by this Act—of schedule B of the Income Tax Act of 1967—be chargeable under that Schedule. So we find that section 18, subsection (1) of the Finance Act of 1969 brings us back to Schedule B of the Income Tax Act of 1967 if we are to find out the meaning of "farming" and "farm land" and "occupation" for the purpose of the Finance Bill we are discussing.

The Income Tax Act of 1967 states at subsection (1) of section 30 in regard to Schedule B:

Tax under this Schedule shall be charged in respect of the occupation of all lands, tenements and hereditaments in the State chargeable to tax under Schedule A, except—

(a) any dwelling-house, or the domestic offices thereunto belonging, unless occupied, by virtue of one and the said demise, together with a farm of lands or with a farm of tithes, for the purpose of farming the same.

Schedule A is stated in the same Act to cover:

...the property in all lands, tenements and hereditaments in the State...

and

"Paragraph I does not apply to lands, tenements and hereditaments the property in which, by virtue of section 53, is charged under Schedule D, Case 1."

This process of definition brings us right back to Schedule A, as defined in the Income Tax Act of 1967. Schedule A covers all lands, tenements and hereditaments in the State except those excluded by section 53, and section 53 includes mines, quarries and so on but, in effect Schedule A covers all farm land, tenements and hereditaments.

Schedule B brings things a stage further and results in the definition that we now have for the purposes of this Finance Bill covering any dwelling-house and buildings which are on the land. The only dwelling-house or domestic offices which are not included are those which are not occupied together with a farm of lands or with a farm of tithes, for the purpose of farming the same. Therefore, the outcome of all this tedious, complicated process of definition, as I interpret it, is that "farming", "farm land" and "occupation" for the purposes of subsection (1) of section 13 of this Bill include the farm dwelling-house and the farm buildings.

In other words, the popular conception that, for the purposes of these provisions, it is only the valuation of the farm land itself which is to be taken is not correct and that, in the case of the ordinary farm holding, the valuation with which we will be concerned will be the total valuation, including the valuation of the dwelling-house and farm buildings as well as the farm land. I think that is something of very considerable importance and significance. I think also it is as well, when we are discussing this Bill that we make it perfectly clear, if my interpretation is correct, that what we are dealing with in this Bill—when we talk about valuation—is the valuation of the entity, including the valuation of the land, the dwelling-house, and the buildings. I do not think it requires a great deal of imagination to realise what precisely that involves.

Valuation in this respect is going to be important at three points. It is going to be important at the point of £20; £50 and £100. Anybody in general who has a valuation of over £100 is going to be fully taxed on their farm income; anybody between £50 and £100 valuation is going to be taxed on the profits from their farming in certain circumstances. And people with a valuation of over £20 but between £20 and £50, or between £20 and £100, will have certain provisions applicable to them. So these exact points—£20, £50 and £100—will be important in deciding whether or not farmers are in or out for certain purposes of these income tax provisions. If the farm dwelling-house and the farm buildings are included in the valuation, it will have a very significant disincentive effect on farm activity. If a farm bears a valuation of say £18, £48 or £98 the definition, in this section will have the very definite effect of preventing that farmer, in any circumstances, improving or adding to any of the buildings on his farm because, if he is anywhere near the limits—if he is anywhere near £20, £50 or £100—any improvement or addition that he might make would almost certainly have the effect of bringing him into a new category and making him liable, in two cases, to income tax on profits and affecting the allowances to which he is entitled in another.

It is a very serious mistake for the purpose of the operation of these provisions to include farm dwellinghouses and farm buildings in the valuation. The purpose of my two amendments is to bring about a situation where the valuation figure that will be used throughout this chapter will be the valuation of the farm land only. The valuation of the dwelling house and buildings will be excluded from the valuation to be taken into account for the various purposes of this chapter. If my amendments are accepted, what will be taken into account will be the valuation of the farm land only.

I recommend the amendments to the House. This is a very important matter. Whatever criticisms we may have regarding these provisions, the inclusion of the farm house and farm buildings in the valuation would undoubtedly have serious repercussions on the development of Irish farming in the future. It is important that only the valuation of the land be included.

Mr. R. Ryan

If there was any need——

Mr. Blaney

I wish to make a very strong appeal to the Minister not only to consider sympathetically the amendments put forward by Deputy Haughey but to reconsider the question of the introduction of a taxation system for the farming community having regard to the circumstances prevailing today.

This is not the time a matter like this should be discussed. The main objective is to catch the few big speculators who are engaged in other profitable businesses and who shove their profits into land. Presumably that was the basis on which a case was made for this legislation, but I would appeal to the Minister to consider the gloomy times in prospect for farmers. It is not the time to discuss new taxation for a new category of persons.

Acting Chairman (Mr. Cunningham)

We must confine discussions to the two amendments before us.

Mr. Blaney

I appreciate the position of the Chair in trying to confine the discussion in this matter, but it is very difficult when trying to amend sections 13 to 28 to strictly confine one's remarks to any particular section. Deputy Haughey's amendments seek to ensure that only the valuation of the land will be taken into account. In that regard promises have already been made here. We know that under the various farm building schemes, buildings of more recent structure are not rateable; they do not carry any onus to pay rates and in other cases they are only partially rated.

I would ask the Minister to deal with this matter at a more suitable time when we may be in a better frame of mind and, in turn, he will get a more reasoned approach from the farming community. They are up against it at the moment and, in fact, they have suffered massive losses. They do not know with any certainty when the situation will improve. Would it not be better for the Minister to withdraw the entire group of sections and to come back to the matter at a more suitable time?

Mr. R. Ryan

With regard——

Mr. Sheridan

I have a brief comment to make.

Mr. R. Ryan

I have already yielded to Deputy Blaney in the belief that the intervention might have been relevant to the amendment but it was not.

Mr. Sheridan

I will be very brief.

Acting Chairman

The position is that the Minister wishes to reply to the statement by the proposer of the amendment. After that, any Deputy will be free to speak.

Mr. R. Ryan

I will deal only with the amendment, not with the general issues raised by Deputy Blaney. I will deal with them later. If there was need for clarification or a more precise definition I would accept Deputy Haughey's amendment but it is unnecessary. There cannot be any doubt but that the test is the test of the rateable valuation of the farm land. Farm land does not include buildings. The amendments, therefore, are unnecessary.

The Deputy has referred to section 13 which says that "farm land" has the same meaning as in section 18 of the Finance Act, 1969. That defines "farming" as:

farming farm land, that is, land in the State wholly or mainly occupied for the purposes of husbandry, the profits or gains from the occupation of which would, but for the repeal by this Act of Schedule B of the Income Tax Act, 1967, be chargeable under that Schedule:

If you go to that Schedule you find it refers to more than land. It also refers to tenancies and hereditaments. We are dealing only with farm land, not with anything else, and there is no doubt but that this legislation can relate only to farm land and not to buildings. It is, of course, land that is occupied for the purposes of husbandry.

If there was any doubt about it I would be only too glad to have a look at Deputy Haughey's amendments, but it is a very good rule of parliamentary draftsmanship never to put anything into a Bill which is unnecessary and, as there cannot be any doubt but that the valuation is one related to farm land, I believe it is better to leave the situation as it is. If any area of doubt arises in the administration of this Bill I will be the first to admit that Deputy Haughey was right and I will be only too ready to bring in an amendment on some future occasion to clarify it if there is anybody so foolish as to put a construction on this which would include buildings. But, as drafted, I am satisfied that it relates only to farm land and I am strengthened in this belief by the fact that the parliamentary draftsman's office is of precisely the same opinion. We are dealing with farm land only and accordingly the amendment is superfluous.

Mr. MacSharry

What is wrong with accepting it then?

Mr. R. Ryan

It is very bad draftsmanship to put anything into a legal document which is unnecessary.

Mr. Haughey

I would ask the Minister if only ex abundanti cautela to accept my amendments but there is much more to it than that. Certainly I am putting forward these amendments to endeavour to clarify the situation, but I think I can show that as the section is drafted at the moment farm land, for the purposes of chapter 2, will include not just farm buildings but the dwelling house as well. I propose to endeavour to do that. In any event if some very fine interpretation can be put on the wording which would indicate that I am not correct in my interpretation I still think my amendments could well be accepted if for no better reason than simply to clarify the situation but I think they are necessary. I will go over the different steps in the definition again as I see it.

I think the Minister does not disagree that section 13 relies entirely on section 18 (1) of the Finance Act, 1969. Subsection (1) states quite clearly that "farming" and "farm land" are to have the same meaning as they have in section 18 (1) of the Finance Act, 1969. Subsection (1) of section 18 of the Finance Act, 1969 reads as follows:

"Farming" means farming farm land, that is land in the State wholly or mainly occupied for the purposes of husbandry, the profits or gains from the occupation of which would but for the repeal by this Act of Schedule B of the Income Tax Act, 1967, be chargeable under that Schedule;

What we are concerned with here are lands which, had it not been repealed by the 1969 Act, would have been chargeable under Schedule B of the Income Tax Act, 1967. It is quite clear that Schedule B of the Income Tax Act, 1967, applies to land and to all dwelling houses and buildings and offices which are occupied together with a farm of land for the purpose of farming the same. I do not see how the Minister can argue that the definition of farm land which in the old days was chargeable under Schedule B was not transferred to section 18 of the Finance Act, 1969, and from there transferred into subsection (1) of section 13 of this Bill for the purposes of Chapter 2. This chain seems to me to be unbreakable.

If the Minister wishes I will go over it again. Subsection (1) of section 30 of the Income Tax Act, 1967, defines farm land and it defines it as including dwelling houses and offices which are occupied with a farm for the purposes of farming the same. That definition is brought into section 18 of the Finance Act, 1969, and from there it is brought into section 13 (1) of this Finance Bill.

Mr. Sheridan

I agree with Deputy Blaney that the farmers are not in any mood for new taxation at the moment. I wish the Minister to know that valuation, either land valuation or building valuation, is no indication of whether a farmer is down and out or whether he is going well. Deputy Haughey stated that buildings, offices and dwelling houses on lands will be taxable. Let us consider the old estates, of which there are plenty in the part of the country in which I live. Such an estate may have been taken over by the Land Commission. Some unfortunate person has been put into a holding on that estate which contains the old buildings and out offices. This person has a valuation of, say, £90 for land and perhaps £50 for buildings.

It is not bad enough that the local authority or the county council can come along and say "we will charge you £6 in the £ valuation on buildings" when the buildings are good ones but it is much worse when it is a small farmer and he has only a few small out-buildings. There will be an absolute revolution in relation to this. The farmers were never more up in arms than they are at the present time. I appeal to the Minister to give an undertaking to the House that this amendment of Deputy Haughey's will be accepted. I would like to take the Minister for a walk some day and show him the type of building I am talking about. They are an absolute burden on the people who own them. They are not compatible with what we call modern buildings. I am very glad to support this amendment and I hope it will be accepted.

Mr. R. Ryan

There is no difference of opinion between us. We are excluding buildings. They are not in contemplation at all. Deputy Haughey wants this underlined. I do not believe it is necessary to write in something which——

Mr. J. Gibbons

Why is it not necessary?

Mr. R. Ryan

——in the terms of the Bill and the strict application of the law they are not in. That happens to be the reality. It is bad draftsmanship to put into a document something which is superfluous.

Mr. Haughey

The Minister's draft includes them.

Mr. R. Ryan

It does not include them because the draft is based on the 1969 Act. That Act exempted only farming from farm land. The 1969 exemption is being removed. It was based on farming and farm land. I do not want to argue too long about semantics. This is something I will certainly take a look at between now and the Report Stage. If the clarification is needed I will consider putting it in but I do not believe it is. There is no construction that could be put on this except that the rateable valuation test is in relation to farm land. If anybody put any other test on it it would be condemned by the High Court. There is no doubt at all about that. Whatever about a layman's reading of it any legal reading of it relates only to farm land.

(Interruptions).

Mr. Haughey

I know I am right about this. I know as this piece of legislation that is before us is framed in the way in which it is it undoubtedly includes within the ambit of this Finance Bill for the purposes of the taxation of farmers the dwellinghouse and the farm lands of the farm in so far as they are occupied for the purposes of farming that farm. The Minister spoke about an exemption. We are not talking about an exemption but about definitions. There are three definitions involved, Schedule B, as defined in the 1967 Income Tax Act, farming and farm land as defined for the purposes of section 18 of the Finance Act, 1969 and the definition here.

They all add up to one simple fact that, arising out of Schedule B of the Income Tax Act, 1967, they specifically include dwellinghouses and offices which are occupied for the purposes of farming a farm. I am so convinced about this that I feel the Minister should accept these amendments now to put the matter beyond any doubt. If I could have his assurance a little bit more specifically I would be prepared to withdraw my amendments. He has not brought forward anything to defeat my argument on the definitions but I am prepared to accept the situation if he is prepared to give me a categoric assurance that if there is any doubt whatsoever in the interpretation of these definitions, as to whether farm buildings are included or not, he will put in a specific definition which will make it absolutely clear that farm buildings are not included.

Mr. R. Ryan

The assurance is so given.

Mr. Haughey

The Minister is giving that assurance?

Mr. R. Ryan

Yes.

Mr. MacSharry

Will it be written into the Bill?

Mr. R. Ryan

Yes.

Mr. Haughey

If there is any doubt the Minister will spell it out?

Mr. R. Ryan

Yes, if there is any doubt I will do it.

Mr. Haughey

I accept that.

Mr. Callanan

I do not intend to say very much as Deputy Haughey has accepted the Minister's assurance but like Deputy Sheridan I want to assure the Minister there would be a revolution down the country if it was thought that farm buildings were included. Like Deputy Sheridan I object to valuation altogether. I put my case during the Second Reading of this Bill and I am not going back on it. I listened very carefully to Deputy Haughey when he quoted the different Acts and their relevant sections. It seems to me, from what he quoted, that there is a grave danger that it may be found in a court case that buildings are included. Apart from the big buildings Deputy Sheridan referred to, which are dotted all over the country, you have the man who, as Deputy Haughey says, has a very bad house. He could not do anything with his house because he would immediately go into the classes for taxation. The inclusion of buildings would make the thing look ridiculous. If Deputy Haughey is satisfied with the Minister's assurance I am satisfied but from what I have heard when Deputy Haughey quoted the relevant sections in the various Acts I would be very wary about it. We should not let it go forward from this debate that there could be any misinterpretation on the question of buildings being included.

Mr. J. Gibbons

I would like to say, especially in the light of what we heard going on this morning about the Minister's assurances, that I would have the gravest apprehension in accepting his assurance that Deputy Haughey's amendment is unnecessary. The matter could be very simply dealt with by accepting the amendment. The question is—the Minister has not clarified it at all—whether in the assessment of valuation, which of itself as a basis for the implementation of an income tax is totally wrong because it is not, in fact, an income tax at all, it is more related to a notional valuation, are all farm buildings included or are they not? The Minister intimated they are not. Will the final interpretation of this Bill rest with the Minister? Surely the final interpretation, when it becomes law, will not rest with the Minister but with the Revenue Commissioners?

As Deputy Blaney has just said, this Bill is being given to the Revenue Commissioners to batter the farming community who were never in the history of this State harder pressed than at present. It is typical of the cynicism of the National Coalition Government, who do not have a single farmer in their ranks—practically all of them are Dublin city-based and hostile to farmers generally—that they would come forward with a measure to tax farmers as well as load them with ever-increasing rates. There is no reasonable farmer who would object to reasonable taxation, no farmer who would protest that everyone must be taxed except farmers. That would be an untenable position which nobody would attempt to defend. However, the imposition of double tax is plainly unjust, and it is being implemented now on the very people that the National Coalition deceived so cynically 18 months ago with their talk about the reliefs they were going to give in estate duty. This is the answer of the National Coalition.

It was suggested in this debate that farmers have never been taxed before. This is the greatest nonsense. This is the type of thing that is peddled by the Minister and his party and the jackals that follow them from the Labour Party. Farming has been very cruelly taxed, as the House knows through the medium of rates.

Mr. R. Ryan

On a point of order. We are dealing with an amendment by Deputy Haughey. If there is to be a general debate at this stage as to whether or not farming profits should be brought into the tax net, I want to join it. It is unfair that some people should be asked to play the game according to Standing Orders while other people disregard them. I would suggest that we would stick to this amendment and when we deal with that, then get on to the general debate.

Acting Chairman (Mr. Governey)

We must adhere to the amendment. We cannot have a Second Reading speech.

Mr. J. Gibbons

The House has, for some considerable time been attempting to extract from the Minister preferably an agreement to accept the amendment which would put the thing beyond doubt—and that is the only way to do it—or at least an assurance that we can depend upon, as distinct from the other kind of assurances that the Minister gives, that farm buildings will not be included. I personally am not prepared to accept the Minister's word after his exhibition here this morning and after these exposures by Deputy Colley and Deputy O'Malley. Therefore, I suggest that the Minister's best course would be to accept the amendment without any nonsense. This section 30 as it is in the Bill is, in my eyes, as a layman, a deliberate attempt to obfuscate the definition in order to provide the chance at a later date for its interpretation in another way. Therefore, if the Minister is sincere in what he says let him accept the amendment.

Mr. Colley

I do not wish to be unnecessarily offensive, but, like Deputy Gibbons—and I gave notice of this this morning—I cannot accept an assurance from the Minister, as I said at that time, without looking a little more closely at it and what is behind it. Therefore, I would wish to hear the Minister refute in some detail the arguments put forward by Deputy Haughey. If he would take them step by step and explain to us why the arguments made by Deputy Haughey are incorrect, I would feel happier about the situation and about any assurance he gives. It does seem to me that what the Minister has done is to give an assurance based on another section of another Act than that relied on by Deputy Haughey. I would be happier if the Minister would deal in a little more detail with the actual arguments put forward by Deputy Haughey and show us where they are wrong.

Mr. R. Ryan

It is very difficult to know just what you can do to enlighten the Opposition benches. I repeat exactly what I have said already: I cannot go any further. It is plain English; it is straightforward language, and it cannot be further explained no matter how often I repeat it. At the end of that I expect once again to be subjected to the vituperative abuse which went on for about three hours this morning. But I suppose this is an example of what every reformer can expect at the hands of those who are opposed to reform.

(Interruptions).

Mr. R. Ryan

So be it. I can either stand up and exchange similar unpleasantries or turn the other cheek. I will turn the other cheek, and if that exasperates the Opposition they may remain exasperated. I have no intention of engaging in the kind of accusations that were made against me this morning, of lying, of breaking my word, of engaging in misleading conduct, of breaking assurances. These are things which are not said by people who have any regard for proper Parliamentary procedures, and which are totally contrary to the facts as seen by any fairminded person. That is why they may indulge in that reprehensible activity if they wish, but they will not find me ready to respond to them.

May I return to the relevant amendment tabled by Deputy Haughey, who, I accept, had a problem in understanding the section, and many reasonable people might have. I would point out that the root of the definition we have here is that which is contained in the 1969 Act.

Mr. Colley

In which section?

Mr. R. Ryan

The 1969 Act, if my memory serves correctly, was Deputy Haughey's Act. This defines farming as "farming farm land". That is the 1969 root definition which we take. It is not going beyond that into anything else which was in Schedule B. The 1969 Act also referred to Schedule B, but it took out of Schedule B only that one piece which referred to the farming of farm land. That is exactly what we are doing. We are not taking anything else out. There are other things in Schedule B as there were in 1969. I have given a categorical assurance. Deputy Haughey seemed prepared to accept it; others engaging in a game of casting personal aspersions on me were not prepared to accept it. So be it. If the assurance is not accepted then the matter will now have to go to a vote. However, as things stand at the moment I am satisfied that this Bill here has the same validity as the 1969 Act which has never been used to suggest that buildings were involved. Buildings cannot now be involved, but I shall have this matter studied in whatever time is left for careful consideration of it, and if there has been a misreading—and people will now have the benefit of this debate to consider whether there is a misreading or misinterpretation which could arise— then I shall certainly offer an amendment for the Report Stage.

Mr. Blaney

Is it not true that, regardless of what any Minister may say in respect of any piece of legislation going through this House it is what is interpreted by the courts ultimately that really stands? This is not casting aspersions in any way on the Minister as to whether he is giving an assurance in good faith or not.

It has been expressed clearly and unequivocally by the courts in various cases over the years that what a Minister or any contributor in this House, by way of explanation or otherwise, from front bench or back bench, has said and is on record as saying has no significance whatsoever and does not stand up in the ultimate judgment by the courts as to the interpretation of the words used. Their judgment is based on the words used in the Act, not on the intention or the spirit in which the legislation was introduced and debated and ultimately passed.

The Minister should keep in mind that any assurance, no matter how well meant, no matter in what spirit it is given, is not worth the paper on which it is recorded. The right spirit or the right outlook or the right wish is not enough. The Minister should just not hope to ensure but should undertake to ensure, if we are to discuss this further here this evening, that his interpretation is in fact the proper, legal interpretation of what is in section 13 and that it is not just what he hopes or thinks or wishes it to be. During that time there must be available to him sufficient know-how and expertise to consult, even at this stage, even at short notice, to give him that assurance so that he can in turn assure us, if it is a fact, and inform the House that that assurance comes from an even closer scrutiny than undoubtedly the proposed legislation would have got in the normal course of events.

Let us not cod ourselves that what the Minister wishes or the spirit in which he presents any piece of legislation counts in the slightest when it comes to interpretation by the courts. The courts, perhaps jealously guarding their own autonomy, lean the other way more often than not, just to show that they are, as they are entitled to be, above being directed by this House. They are there to do a job. It is their job and when they come to do it they lean rather against what a Minister may have said by way of explanation of the spirit that prompted him to introduce the legislation and they will interpret strictly on the basis of the wording used in the legislation.

From what I have listened to both from the Minister and from Deputy Haughey and others and the references to the 1969 Act and the 1967 Act and Schedule B, I would be inclined to the view that Deputy Haughey's interpretation is the more reasonable and more likely interpretation and the one which would be held and upheld if the matter went to the court via the Revenue people or in any other way. In that context I would ask the Minister not to forget the appeal I made to him earlier in this connection. It may have been out of order then but it may be more in order as we proceed.

Mr. Haughey

In order that we may proceed, I would suggest to my colleagues that we accept the Minister's assurance. I understand now that he is saying to me that he is giving a categorical assurance that if on examination with his advisers between now and whatever time we have left it appears to him that this is open to any interpretation other than the one which he intends it to have he will bring in an amendment on Report Stage. I think we can accept that categorical assurance from the Minister but when he and his advisers are considering this matter I would ask them to keep this following point in mind.

The definition in this Bill is governed by what is set out in subsection (1) of section 18 of the Finance Act, 1969. It seems to me absolutely clear —and this is the point I want kept in mind in this examination—that in subsection (1) of section 18 of the 1969 Act farm land is farm land which would have been chargeable under Schedule B—it is as simple as that— farm land means farm land which, had Schedule B not been abolished in 1969 would have been chargeable under the provisions of Schedule B of the Income Tax Act of 1967 and Schedule B clearly and specifically included lands, buildings and out-offices. That is the only point I want the Minister to keep in mind in this re-examination of the matter which he has promised us.

Mr. Crinion

There is one aspect I would like the Minister to look at. For the purposes of every other Department it is always taken as farm land and buildings and the Revenue Commissioners could take their interpretation of the section when it is enacted and could say that all other Departments of Government take in farm land and farm buildings in assessing the full valuation of a farm. Therefore specific mention should be made that farm buildings are exempt. It is very easy for a civil servant to quote what is done in other Departments and the precedent set in other Departments. Therefore there should be specific mention in the Bill.

Acting Chairman (Mr. Governey)

Is the amendment withdrawn?

Mr. Haughey

On the categorical assurance of the Minister, yes.

Mr. R. Ryan

Fair enough.

Amendment, by leave, withdrawn.

Amendment No. 7c not moved.

Question: "That section 13 stand part of the Bill", put and agreed to.

SECTION 14.

Question proposed: "That section 14 stand part of the Bill."

Mr. Colley

Could the Minister tell us what is the purpose of this?

Mr. R. Ryan

This is to repeal the exemption farming profits enjoy.

Mr. Colley

I am sorry I thought Deputy Haughey was going to contribute.

Mr. Haughey

In case anybody wants to talk on this section we have only dealt with the amendments?

Mr. Colley

I think section 14 will provide the opportunity.

Mr. R. Ryan

We are on section 14 now.

Mr. Blaney

The section was not passed.

Mr. R. Ryan

It was.

Mr. Colley

I think the Deputy will get the opportunity he wants in a moment.

Mr. Blaney

I am not worried about the opportunity. There are loads of opportunities. I did not hear the section being put.

Mr. R. Ryan

It was. I never knew Deputy Blaney to miss an opportunity or even to miss an opportunity to manufacture an opportunity.

Mr. Blaney

Do not rise me.

Mr. R. Ryan

The Deputy made a good opportunity a few minutes ago and I did not interrupt him.

Mr. Blaney

Perhaps we could have a little more volume? I cannot hear what is happening.

Mr. J. Gibbons

I was not aware that section 13 had been put to the House because if I had been so aware I would have opposed it.

Acting Chairman

We have debated section 13 and we cannot go back on it. We are now dealing with section 14.

Mr. R. Ryan

Section 14 repeals section 18 (2) (a) of the Finance Act, 1969 which exempted farming profits from income tax. The repeal of the section prepares the way for the scheme to tax farming profits which is set out in succeeding sections. Section 18 (2) of the Finance Act of 1969 provided that profits or gains arising (a) from farming, or (b) to the owner of a stallion from the sale of services of mares by a stallion or to the part-owner of a stallion from the sale of such services or of rights to such services, or (c) from the occupation of woodlands managed on a commercial basis and with a view to the realisation of profits.

The repeal of (a) means that farming profits no longer attract a general exemption from tax although profits from farms of less than £100 valuation are not being brought into charge by virtue of section 15 (3).

Mr. Gibbons

I should like to ask the Minister on what basis this very cryptic section is included in the Bill. On what basis did the Government, and the Minister, come to the conclusion that while beef farmers, dairy farmers and other farmers, get the full belt of rates on their lands and income tax, one fortunate class should be exempt from this, the stud farmer? I do not think it is necessary to say that people engaged in this particular trade very commonly come from the more wealthy sections of the farming community. It strikes me as extraordinary that the Minister, and presumably his Government, especially the Taoiseach who has many friends among this particular class, should include in the Bill a provision that all farmers will be subjected to a full belt of income tax as well as rates in their lands while this privileged class, and this privileged class alone, are exempt from it.

I should like to hear the Minister's justification for this particular action. It has been said that the breeding of bloodstock is a notoriously uncertain game. What could be more uncertain than ordinary livestock or tillage farming under the management of the present outfit, the National Coalition, who have not a single man for the land in their whole number? There is only one rural Deputy sitting behind the Minister at present. The Minister should tell us why the nobility, who are commonly associated with the breeding of bloodstock, are to be treated in this special, favoured way. Is it for the same reason that the Taoiseach, when he was nominating his eleven to the Seanad, felt obliged to bring some of them in?

Acting Chairman

The Deputy may not refer to the Seanad in this House.

Mr. Gibbons

I did not refer to the Seanad but I asked the reason why certain people were introduced into the Seanad.

Acting Chairman

The Deputy may not refer to Senators in that fashion.

Mr. Gibbons

Persons engaged in this business, and who will probably be exempt in this Bill from paying income tax, were nominated. The richest people in the land bar none, never mind where the riches came from, will not pay income tax on their agricultural operations. The ordinary working farmers—the acting chairman and I represent them in Carlow-Kilkenny—will get the double belt, the belt of income tax and rates increasing all the time. It is probable that in due time the acting chairman will go in and vote for this measure.

Acting Chairman

To refer to the Chair in that fashion is completely out of order.

Mr. Gibbons

I should not have done it and I am sorry.

Mr. Sheridan

I should like to ask the Minister how he arrives at the figure of £100 valuation?

Acting Chairman

That does not arise on the section.

Mr. Sheridan

I feel I am entitled to ask that question. Deputy Gibbons has been talking about the bloodstock people but I am sure that he, the Minister, and the acting chairman, are aware of the position in the country. It would make one's flesh creep to see, in parts of this country, people throwing away their calves, their milk and their cows. At Goffs they were cutting each others' throats as to where the next centre will be for bloodstock sales. It is there we can see the millions being put into this business.

Mr. MacSharry

And marts are closing down.

Mr. Sheridan

These bloodstock people will be exempt from income tax. I do not wish to cast any reflection on the present Minister but it seems that the Irish farmer's luck in the EEC is not going so well. The Minister must be aware that farming is completely on the floor and for this reason the average farmer in rural Ireland is not prepared to accept any tax. There are such farmers who are not able to meet their commitments. I want an explanation as to how the £100 valuation was arrived at. It is a simple question.

Acting Chairman

The Deputy is getting away from section 14. He should raise this matter on the next section.

Mr. Sheridan

In the last few days many farmers have come to me, supporters of all parties, and asked me to speak on this Bill and to vote against every section that refers to them. They feel that they will not be able to pay this tax.

Mr. R. Ryan

The largest number of people that could have approached Deputy Sheridan are those who will be affected by this, about 9,000 people. That is the figure for the whole country. There must have been an awful crowd of them running down the road to Deputy Sheridan.

Mr. Sheridan

They are afraid of next year, and the year after. It is a valuation of £100 this year but that may be brought down to £50.

Mr. G. Collins

With Deputy Barry Desmond to twist the Minister's arm.

(Interruptions.)

Mr. B. Desmond

Stop the selectivity.

Mr. R. Ryan

The Government's approach to this matter was set forth in my budget statement.

When we said we considered the time had come to end the exemption enjoyed by people who had incomes generated from farming profits, we considered that those who had rateable valuations above £100 should in future be asked to pay their fair share of tax——

Mr. Crowley

The Minister said at first £100.

Mr. R. Ryan

——which everybody else who generates an income other than from farming has to pay.

Mr. J. Gibbons

That is not correct.

Acting Chairman

The Minister must not be interrupted.

Mr. R. Ryan

Would the Deputies please let me finish?

Mr. J. Gibbons

Do not get cross. This is not income tax. This is based on rates.

Mr. R. Ryan

The only people exempt from tax are people who generate profits from farming, from the construction of works of art or who are engaged in the manufacture of goods for export. We said we considered it proper that people should pay tax in accordance with their capacity to pay and that people with comparable incomes should pay comparable amounts of tax. That is the cardinal principle upon which we stand. I have said, and I say it again because it bears repetition, that Ireland has one of the most unjust tax codes in Europe because we have failed to apply the principle that people with comparable incomes should pay comparable amounts of tax.

One of the reasons why reform did not take place before this was because Ministers baulked at such reform. They anticipated an onslaught against them if they had the courage to make the change. We see a living example of it today and, no doubt, it will be with us until the end of the debate on this Finance Bill. The truth is bad teeth have to be extracted and, even if it is uncomfortable for some people, at the end of it the body politic and the social and economic body will be a great deal healthier.

I want to reassure Deputy Sheridan that stud farms with valuations of over £100 are not being exempted. The farm will be brought into charge in the same way as any other charge. It is only the stud fees earned which will continue to enjoy exemption. I am sure Deputy Haughey will explain to Deputy Sheridan the reason why it is desirable to have such exemption. It is because the stud industry is an international industry and many of the animals at stud here are owned by people outside the country, by international syndicates, which could switch animals around with perfect ease to various tax havens. The main pressure for special treatment for stud fees earned in the bloodstock industry came not from the people who were chastised by Deputy Gibbons but from the owners of brood mares, the small people, and from the large number of people getting very good employment in the bloodstock industry. These are the people who asked that their employment should not be jeopardised as, indeed, it would be if the animals could be airlifted from here to France, Japan or anywhere else. The owners could do that by lifting a telephone. That is the only reason for the exemption.

I do not suppose it will be accepted by the Deputies opposite or, even if they accept it, I do not suppose they will remain silent. They are bound to have their little bit of fun at the expense of the Government. So be it. There is no reason why we should not proceed with the overall reform of the tax system. Another reason for ending exemption on farming profits was because such exemption gave a spur to tax evasion and tax avoidance of a very substantial nature. It was becoming more and more widespread and many people involved in the farming industry, genuine farmers, were becoming very fearful of the way in which people with no serious relationship with farming were buying up farms in order to set off profits made elsewhere against their farming profits, thereby avoiding paying their fair share of tax on their non-farming activities. There were several avoidance practices injurious to the genuine farmers. It is very significant that all the farming organisations which came to see me, and I have seen innumerable organisations, thanked us for taking the steps necessary to stop these practices which were so injurious to the genuine farmers.

If, in this year, farmers make a loss, the loss Deputies are suggesting they may make, and some farmers will make losses this year, they should realise that we are doing them a favour by introducing the taxation of farming profits in this year because one does not pay income tax if one makes a loss. By bringing in the liability this year they will be able to use the losses generated this year to set off against gains in future years. Far from crying about the change, if this year turns out to be a loss-making year, from the farmers' point of view it could not be a better time to introduce a tax.

(Interruptions.)

Acting Chairman

Order.

Mr. R. Ryan

Perhaps it is that Deputies opposite are themselves unfamiliar with the taxation system because they are not paying tax. Any person who pays tax knows of the right to set off losses against future gains. This is a very, very substantial concession.

(Interruptions.)

Acting Chairman

Order.

Mr. R. Ryan

If we were to postpone the introduction of farm taxation, as has been suggested, we would be doing farmers a disservice because, if they made a profit in 1975, they would not be able to use against that profit any losses they may make this year. You cannot use losses to set off against gains until the liability exists. I suggest to Deputies, including Deputy Sheridan, that they might carry that piece of good news to people who may be anxious, naturally about the losses they are making this year and, if they are not prepared to accept it from me, then let them go and consult their accountants.

Mr. Crinion

What are they to live on?

Mr. Sheridan

On a point of order, may I ask one question?

An Ceann Comhairle

It is hardly a point of order. It is a point of information.

Mr. Sheridan

Would the Minister not consider giving the same latitude to cattle breeders and cattle owners and feeders as he is giving to stud owners? That is all I ask. Remember, the cattle industry is our greatest industry and the cattle export trade brings in more millions than anything else. Really and truly——

An Ceann Comhairle

I have allowed the Deputy to make an inquiry, not a speech.

Mr. R. Ryan

It is determined to end the exemption previously enjoyed by large farmers in respect of their profits generated from farming. We cannot, in justice, move away from this position. The vast majority of our people are full of envy and frustration because they are obliged, week in and week out, to yield up their share of taxes while they see many people in the community who are much better off than they are not paying anything——

(Interruptions).

Mr. B. Desmond

That is the issue.

Mr. R. Ryan

——towards the burden of taxation. That is a scandal. It is a simple black and white situation——

(Interruptions.)

An Ceann Comhairle

Order.

Mr. R. Ryan

We must correct that injustice. The Opposition will have to decide whether they are on the side of the angels or of the avoidance devils so far as this issue arises.

Mr. Colley

Is that what the Minister calls farmers?

(Interruptions.)

Mr. R. Ryan

I am not calling the farmers anything. We will have to decide now whether we are on the side of the angels who are prepared to pay their fair share of tax or take the side of those who believe in all kinds of devilry in order to avoid paying their fair share. The issue is very simple. There can be no prevarication. One either agrees to pay one's fair share in tax or else one is welshing on one's fellow citizens.

An Ceann Comhairle

Will the Minister move to report progress?

Mr. Sheridan

Farm workers got chits last week to pay something they had never to pay before.

Progress reported; Committee to sit again.