Dáil Éireann debate -
Tuesday, 28 Jan 1975

Vol. 277 No. 7

Capital Gains Tax Bill, 1974: Second Stage.

Minister for Finance (Mr. R. Ryan)

I move: "That the Bill be now read a Second Time."

This Bill is a further step in the Government's programme of tax reform. In the Government's view the existing tax system is inequitable and indefensible in that huge tax-free capital gains can be made by people of means while less fortunate people are inescapably obliged to pay significant slices of their regular income in tax. Under this Bill it is proposed to tax realised capital gains. Whether a capital gain is fortuitous or as a consequence of deliberate design, the maker of such a gain can reasonably be expected to pay a proportion of it in tax without hardship.

As things stand at present, a person with means surplus to current needs can easily arrange to invest in low yielding investments with a view to converting them in due course into substantial tax-free capital gains. Clearly such gains are postponed income and in equity should be liable to tax as long as other incomes are so liable. The purpose of this Bill will be to collect tax at the lowest income rate of 26 per cent when such gains are realised.

One of the greatest hinderances to tax reform is the fallacious assumption held by many that the status quo is better than anything which could replace it. Regrettably the notion that “the devil you know is better than the devil you don't know” has been the foundation of much of the lethargy surrounding the unreformed Irish taxation system. But when, as is apparent, a tax system creates or maintains social imbalance and economic inefficiency, it is time to alter that system.

As I have frequently acknowledged, amendment of the tax system is a complicated and perilous task. The provision of concessions and exemptions, measures to avoid anomalies and provisions to prevent avoidance and evasion perforce result in complicated legislation. This Bill unfortunately is no exception to this general rule.

The Government were elected with a mandate to design a system of capital taxation to replace death duties, which are due to be eliminated as from April next. Because of the difficulty of establishing conclusively the detailed effects of any proposed tax changes on social justice, business motivation and economic efficiency the Government published, as the House is aware, in February last a White Paper on Capital Taxation. It was pointed out in the White Paper that death duties, the only form of capital taxation in Ireland, have two major defects: firstly, that they are imposed at a time of family bereavement on the family assets left by the principal family breadwinner and that because of past failure to revise the rates and thresholds of tax they are in many cases penally confiscatory.

On the other hand while death duties can certainly tax capital gains made during life if the maker of the gain has not taken avoidance action, liability to death duties can be easily avoided, and in fact has most frequently been avoided by timely anticipation and various sophisticated measures by people with the most means. Equity clearly demands that if income tax be inescapable, capital taxation be equally inescapable. There is no merit in maintaining a tax system in which one tax is compulsory while the other is voluntary.

As indicated in the Capital Taxation White Paper published last February the Government see a capital gains tax as improving the equity of the tax system. The taxing of such gains in many countries reflects the widely held conviction that such gains, even though irregular and though arising from different circumstances, should be treated as a form of income, and, as such, liable to a tax related in some way to the normal income tax. The absence of any tax on capital gains in the 'sixties and 'seventies gave rise to injustices in so far as those who realised capital gains, particularly from dealings in land and property, were placed at a considerable advantage compared with the great majority whose rising incomes were subjected to the full impact of income taxation. The White Paper indicated that the new charge to capital gains tax would commence from 6th April, 1974.

The views of interested persons and organisations were invited on the White Paper proposals for a new system of capital taxation and I am happy to say that the invitation was well received. Many helpful and constructive representations were made by the main representative organisations and by considerable numbers of private business and individuals. During the period of consultation I met deputations from various organisations and discussed the proposals and their implications for different sectors of the economy. Perhaps the most significant aspect of the representations which I received was the general acceptance of the desirability of introducing a capital gains tax. Such points of dissent from the Government's outline proposals as were made related in the main to rates and exemptions. The two significant changes in the capital gains tax outline are, firstly, a reduction in the rate from 35 per cent to 26 per cent in line with the reform of the personal income tax structure, made in my 1974 Budget, and, secondly, the complete exemption from tax of gains on the sale of a principal private residence and ancillary grounds of up to one acre instead of the first £15,000 gain on the disposal of such a residence.

The text of the Bill as circulated to Deputies before Christmas reflected the benefits of the consultative process and suggestions from many interests on the operation of the new tax. Many of these changes are rather technical in character, but there are two which might be mentioned at the outset:

(1) gifts are to be treated as disposals for the purpose of the capital gains tax. It has been necessary to treat gifts in this way as otherwise gift arrangements could be fabricated to avoid capital gains tax. Under section 9 of the Bill, however, it is provided that disposals of assets by way of gift prior to the date of publication of the Bill, namely, 20th December, 1974, will not give rise to chargeable gains or allowable losses.

(2) in addition to the exemption in section 27 which follows generally the White Paper proposal, of all gains made by an individual of 55 years and over on the disposal of a farm or business to one or more of his children or, as I will provide later on, to a nephew or niece in deserving cases, if the consideration does not exceed £150,000, it has been decided as an extension of this relief to provide for the exemption of gains on retirement disposals of farms or businesses to any person where the consideration does not exceed £50,000. This is provided for in section 26. Needless to say any individual who benefits under section 27 cannot also benefit from the relief under section 26.

I will now go briefly through the various provisions of the Bill.

Section 2 is concerned with the various definitions used in the Bill. Section 3 is the main charging section and levies a tax of 26 per cent on all chargeable gains accruing in 1974-75 and subsequent years of assessment. However, an alternative basis of charge for individuals is provided for in section 6. Section 4 applies the tax to all persons, including companies, unincorporated bodies and trusts as well as individuals. Persons resident in the State will be liable to capital gains tax on all gains realised on the disposal of chargeable assets, wherever those assets are situated. Non-residents will be liable only in respect of gains on the disposal of real estate, mineral rights, or business assets within the State or of exploration or exploitation rights on our Continental Shelf. Non-residents will also be liable when disposing of unquoted shares which derive their value from such assets. Under section 5 the due date for payment of the tax is either three months after the end of the tax year in which the gain accrued or two months after the date of assessment, whichever is later. This means that no revenue from this new tax will fall due for payment before the second half of 1975. Section 6, as I have already mentioned, deals with an alternative basis of charge available in certain circumstances to individuals. Under this section an individual will be able to have half of the first £5,000 of his capital gains and the whole of any excess over £5,000 treated as income for income tax purposes. This alternative should prove attractive to a taxpayer whose income from other sources is relatively modest.

Section 7 provides that in general all forms of property shall be assets for the purposes of the tax, whether the property is situated inside the State or outside it, including incorporeal property generally. Section 8 deals with disposals of assets. Disposals will include all changes of ownership of assets whether by sale, exchange, transfer or gift. Section 9 provides that the acquisition and disposal of an asset will be deemed to be for a consideration equal to its market value. Where assets are transferred otherwise than by a sale on the open market, the market value of the asset must be substituted for the consideration, if any, given or received. Section 10 indicates the time at which a disposal and acquisition are deemed to be made and provides specifically for such transactions as conditional contracts, compulsory acquisition of lands and hire-purchase contracts. Section 11 deals with the computation of chargeable gains and applies the rules embodied in Schedules 1 to 3 of the Bill. Under section 12 allowance will be given for losses, which will be computed on the same basis as chargeable gains. As a general principle a loss will not be allowable if a gain on the same transaction would not be a chargeable gain. Allowable losses, not before 1974-75, may be carried forward for set off against subsequent capital gains, to the extent that they have not already been allowed.

Section 13 provides that the gains and losses of a husband and wife will be aggregated and the husband will be liable for the tax on the total gains. A husband and wife may, on application, be assessed separately on their individual gains but this will not have the effect of reducing the total tax liability. Disposals of assets between spouses will not give rise to a charitable gain or to an allowable loss. Section 14 deals with situations arising out of deaths. It provides that death shall not constitute a disposal. The legatee will be deemed to acquire the assets at their cost to the deceased and any gain on a later disposal will be calculated by reference to that cost. The section also provides that where an individual dies with a net balance of allowable losses, these may be carried back, for up to three years of assessment before death. Section 15 deals with the treatment of trusts and trustees. The trustees of a settlement will be treated as a single and continuing body of persons and will be chargeable on the disposal of any trust assets on this basis.

Part IV of the Bill, covering sections 16 to 24, deals with exemptions and reliefs from the tax and provides exexemption for certain bodies as well as exemption for certain types of assets and transactions. Section 16 provides for the exemption of gains not exceeding £500 a year in the case of an individual. Section 17 exempts from tax sales by individuals of chattels where the proceeds do not exceed £2,000. Chattels would include such items as paintings, jewellery, silverware.

Section 18 exempts from tax tangible moveable property which is a wasting asset such as a motor car. Sections 19 to 21 and section 24 indicate the types of assets which will be exempt. Examples are Government, local authority and statesponsored body securities, land bonds, prize bonds and sweepstake winnings, life assurance policies, superannuation funds, compensation for personal injury. Sections 22 and 23 indicate the bodies which will be exempt, namely, charities, local authorities, trade unions, friendly societies and the Central Bank of Ireland. Section 25 exempts gains accruing to an individual on the disposal of his principal private residence including grounds of up to one acre. Section 26 and 27 will grant relief from tax in the case of certain disposals of farms or businesses by persons of 55 years and over. This relief is being given in order to encourage the early transfer of business to the younger generation and also in recognition of the fact that part of the realisation price of such farm or business represents the provision for old age of the person concerned.

Section 26 is a general relief as it applies to transfers to any person but the relief is confined to a consideration of £50,000 or less. Section 27, on the other hand, applies where the owner disposes of his farm or business to one or more of his children and, in this case, the limit on the consideration is £150,000. I intend to extend this provision to cover the case of a disposal to a nephew or niece who stands, as it were, in the shoes of a child and who has been involved in the running of the business or farm for at least five years before the disposal. For this purpose, I propose to introduce a Committee Stage amendment. Where the consideration referred to in these two sections exceeds the limits indicated, marginal relief as explained in the Bill will be given. To prevent abuse these reliefs can be availed of only once in the lifetime of an individual and, in the case of the relief for the sale to the immediate family, this will be withdrawn if the farm or business is subsequently sold outside the family within the following ten years. I may add that provision is being made under section 30 to exempt from the consideration received for disposal of a farm, payments made to a farmer under the European Communities (Retirement of Farmers) Regulations, 1974.

Under section 28 it will be possible to claim deferment of tax in respect of gains made on the disposal of certain specified business assets provided the proceeds of sale are spent on new business assets for use exclusively in the business. In addition to trades, professions and farming, this relief will also be available to public authorities, woodlands managed on a commercial basis, non-profit making bodies, trade associations, and athletic and amateur sports bodies. The period within which the new assets may be acquired for the purposes of relief under this section will extend from 12 months before to three years after the date of disposal of the old assets. Discretion is being left to the Revenue Commissioners to lengthen these periods in individual circumstances. Section 29 allows deferment of the charge on compensation money received in respect of the damage or destruction of an asset where the money is used in restoring or replacing the asset. The charge is not imposed until the asset or the asset replacing it has been disposed of.

Section 31 sets out the general rules for applying the tax to unit trusts. Distributions of capital from the unit trust assets will be treated as part disposal of units by the receiver and taxed accordingly. Where the gains made by a unit trust are gains which would not be chargeable in the hands of the unit holders or where assets of a unit trust are all non-chargeable assets, such as Government securities, then the gains made by the unit trust will not be regarded as chargeable gains. Section 32 goes on to provide special arrangements whereby a unit trust registered in this country with a large public participation and provided certain conditions as set out in the section are satisfied may enter into arrangements with the Revenue Commissioners so that the effective charge to tax on the trustees is confined to the chargeable gains not distributed to unit holders. In this way the unit holder will get the benefit of reliefs applicable to individuals.

Sections 33 and 37 contain certain measures to deal with tax avoidance, such as transactions between connected persons at artificially low prices, transactions involving disposal of assets in separate lots, transfer at under-value by controlled companies or by the transfer of assets to companies and trusts abroad.

Section 38 empowers the Government to enter into arrangements with the Governments of other States to provide relief from double taxation on capital gains similar to reliefs now applicable in the case of income tax. Under section 9 in certain circumstances, as I have already indicated, the acquisition and disposal of an asset will be deemed to be for a consideration equal to its market value. However, section 39 provides that in the case of disposals to the State, to a charity, or to certain other national institutions and public bodies such as the National Gallery, the section 9 provision will not apply and the tax will be charged by reference to the unadjusted gain. Losses, however, will not be allowed.

The remaining sections of the Bill— sections 40 to 51—contain miscellaneous provisions dealing with the assets of insolvent persons, the position of company liquidations, the treatment of funds in court, the position where gains accrue abroad but cannot be repatriated and also where consideration money is paid by instalments over a period exceeding 18 months and where assets are switched or extinguished. Another of these miscellaneous provisions is that debts, apart from loan stocks, will not be a chargeable asset in the hands of the original creditor.

Section 47 deals with options, section 48 with the rules for determining the location of assets which might otherwise be difficult to determine, while section 49 deals with the determination of market value with particular reference to shares and securities. Section 50 brings capital gains tax within the ambit of the Provisional Collection of Taxes Act, 1927, which would enable a change in the rate of the tax to be made by a financial resolution of the Dáil. It also places on the Revenue Commissioners the same responsibilities to account for capital gains tax as are imposed on them in relation to other taxes. The final section of the Bill— section 51—applies the Schedules and enables their provisions fixing the amount of consideration in a transaction to have effect before 6th April, 1974 where it is necessary to compute a chargeable gain by reference to circumstances before that date.

Schedules 1, 2 and 3 contain detailed rules for the computation of capital gains and Schedule 5 sets out the rules and procedures governing the administration of the new tax. As regards Schedule 4 which lists certain securities which will be exempt from the tax, I have decided on reconsideration to withdraw this Schedule and to deal with these exemptions in general terms in the body of the Bill. To this purpose I propose introducing a Committee Stage amendment.

As I indicated in my recent budget statement, the yield from the proposed new capital taxes which are being introduced instead of death duties is not likely to be large in the initial years.

Given that the capital gains tax will apply only to gains accruing since 6th April, 1974, given the expected problems associated with the introduction of any new tax and allowing for the present depressed state of the stock exchange and property markets, I can say that the net yield in the current year is not likely to be significant. However, eventually I am confident that the capital gains tax will make a useful and fair contribution to the Exchequer.

I am satisfied that the draft Bill now before the House contains a fair and reasonable scheme of capital gains taxation. It contains modifications and improvements introduced to meet the representations of the various groups, organisations and individuals who accepted my invitation to furnish their views. I intend to maintain the fairness and reasonableness of the scheme by appropriate adjustments to the thresholds which would cater for inflation. These will be in addition to the built-in allowance which has been made for it by the application of the lowest rate of income taxation to capital gains. It represents part of the package of capital taxes to replace estate duties and is a long overdue reform of our taxation code.

I commend the Bill to the House.

Mr. Colley

When one is dealing with a Bill entitled a Capital Gains Tax Bill and when one has regard to the present state of the economy. I suppose one might be forgiven for asking: "What capital gains?" However, God is good, there will be a Fianna Fáil Government in due course and we can look forward to a situation in which there will be capital gains——

Mr. R. Ryan

The market has been buoyant recently.

Mr. Colley

——and for that reason the necessity for this Bill can be justified. A mistaken view has been propounded by the Minister and others—perhaps so far as the Minister is concerned it is propounded in good faith—that Fianna Fáil are opposed in principle to capital gains taxes. Of course this is not true.

At the last Fianna Fáil Ard-Fheis there was a resolution in regard to capital gains and those who were present will recall that, when replying to the debate, I ended up by saying that if the Ard-Fheis passed the resolution I would take it that what they wanted was a capital gains tax that would be effective and would be directed against speculators. In fact, the resolution was narrowly defeated almost certainly because I was obliged by the exigencies of the situation to talk also about the iniquitous wealth tax proposals of the Government. It may well be that because of that the delegates were so appalled at what the Government proposed with regard to wealth tax that some may have thought they were voting against that. The fact of the matter is that we are clearly on record as saying we are not opposed to capital gains taxes in principle but we want them to be effective and directed against speculators——

Mr. E. Collins

Is the Deputy saying the Fianna Fáil Ard-Fheis made a mistake?

Mr. Colley

I have told the House what is the situation. No doubt Deputy Collins will enlighten us as to his attitude in due course. We will be glad to hear what he has to say, particularly in regard to the principles involved in this Bill, a matter on which I should like to say a few words.

First, I am glad to note that some of the major flaws in the Government's original proposals in the White Paper have been dealt with, at least partially. For example, a man's house is not now to be liable to capital gains. Some steps, although not enough in our view, have been taken to ease the injustice of the alleged capital gains on family businesses or farms that have been built up by hard work and skill during the years. However there are still a number of major flaws in the Bill, quite apart from numerous points of detail we want to take up with the Minister.

In considering the principle of capital gains, it is fair to say that to do something in the name of a more equitable distribution of wealth which in practice inhibits genuine enterprise and therefore, the generation of wealth, is to perpetrate injustice. For that reason I strongly urge the House, and the Minister in particular, to subject this Bill to a rigorous examination and to adopt a flexible approach to suggestions made in order to ensure that this Bill does not inhibit genuine enterprise as distinct from speculation.

I would very roughly define speculation as fairly quick profits with little or no economic input. That is the kind of thing we really want to get at, and that is the kind of thing that is getting off rather lightly under this Bill. At the same time, genuine enterprise which is generating wealth and employment is being subjected, in the view of this side of the House, to unnecessary penalisation.

In our view, pure speculation on the lines I have indicated should be taxed much more heavily than this Bill proposes to tax it, while ordinary capital gains, particularly those resulting from a person's hard work and skills over the years, should be taxed much less. I do not for one moment pretend it is easy to do this. If it were, it would have been done many years ago. One thing I can say with certainty to the Minister is that this Bill does not do that. It seems to me that the Minister appears to have started out from the basic premise that all capital gains are intrinsically evil and should be penalised. Only grudgingly has he departed from this doctrinaire approach, under pressure from this side of the House, and as a result he has agreed that such things as, for instance, a person's home should not be subjected to capital gains tax.

To give the impression that one is going after speculators when one is really going after the hard-earned gains of the small man may be good party politics, but it is not good Government. Having regard to the inherent difficulty I have mentioned in devising a method of distinguishing between speculation on the one hand and genuine enterprise on the other, a difficulty compounded by the Minister's basically wrong approach to this problem, any proposals for improvement of this Bill will not be perfect. I acknowledge that at the outset. Nevertheless, in Fianna Fáil we have made an effort to produce proposals designed to make the Bill more equitable.

I propose now to outline those proposals. First, a major factor in determining the rate of capital gains tax should be the length of time for which the asset has been held before the gain is made. This principle is recognised in a number of EEC countries, but it is not recognised in this Bill. We suggest therefore that there should be a sliding scale over a period from one year to 15 years after which no capital gains tax would be payable. On a gain realised within one year of realisation of the asset we suggest that the rate of capital gains should be 50 per cent and not the 26 per cent proposed by the Minister. Within two years we suggest it should be 45½ per cent and so on, descending by 4½ per cent for each year for which the asset has been held. If the gain were realised within 11 years of acquisition the rate would be 5 per cent. Thereafter the rate would go down by 1 per cent for each year so that a sale within 12 years would be liable to 4 per cent and within 15 years to 1 per cent. After 15 years there would be no capital gains tax liability.

In addition, in an effort to ensure that the capital gains tax would not be a deterrent to economic activity, which would of course generate expansion and employment, we propose that the rates I have outlined would be halved in the case of a farmer or a businessman who had been engaged full time in the operation of the farm or the business. We are not of course tied absolutely rigidly to the period of years or to the rates of tax suggested. This is obviously a matter on which different people can have different views, but we are tied to the principle involved.

I hope the Minister will give serious consideration to this kind of approach. As I have indicated, there is ample precedent for it in some of our EEC partners. I believe that, when one examines the situation, it makes sense. It would result in a much more effective method of getting at pure speculation and would, on the other hand, recognise and give encouragement to genuine enterprise, which this country needs now more than it ever has. We feel this should be a basic principle in dealing with capital gains. Therefore, on the basis of the Bill before the House, we must disagree very substantially with the Minister. However, we hope he will give our proposal serious consideration.

There is another major flaw in this Bill—the Minister referred to at the end of his speech but he has not dealt with it—the fact that there is really no provision in this Bill for adjustment in line with inflation. I shall come back in a moment to what the Minister said about this, but first I should like to consider the imposition of capital gains tax on the basis of an increase in monetary value of an asset between one given date and another. Is it not clear, given the rate of inflation from which we are suffering, that what one is doing is imposing capital gains tax on apparent monetary gain but not on real gain? Indeed, it should be clear that in some cases this could easily amount to confiscation.

I should like to make it clear that the figures for different rates which I have suggested, and in particular the rates of tax our party have suggested which are higher than those provided for in this Bill, are put forward on the assumption that the Bill will be amended to adjust for inflation; otherwise we believe a very grave injustice will be perpetrated. The Minister stated in his speech today:

I intend to maintain the fairness and reasonableness of the scheme by appropriate adjustments to the thresholds which would cater for inflation. Those will be in addition to the built in allowance which has been made for it by the application of the lowest rate of income taxation to capital gains.

I have only had an opportunity of looking at that very quickly, but I must confess the latter sentence does not mean anything to me: "These will be in addition to the built in allowance which has been made for it by the application of the lowest rate of income taxation to capital gains". Perhaps the Minister would explain that when he is replying.

Mr. R. Ryan

Could I just add: "instead of applying rates progressively". In other words, they will not be rising from 26 to 35, to 45 and so on.

Mr. Colley

But surely what the Minister is proposing to do is to apply a rate of 26 per cent?

Mr. T.J. Fitzpatrick

(Dublin Central): The Minister is making no provision at all for inflation.

Mr. Colley

No matter what the rate of inflation, he will be applying 26 per cent. I do not think in all seriousness he can suggest that that contains any provision for inflation. However, what he does say in addition to that is that he intends "to maintain the fairness and reasonableness of the scheme by appropriate adjustments to the thresholds which would cater for inflation." With all due respect to the Minister, that is not good enough. It would not be good enough in the case of any Minister for Finance at a time of inflation at 20 or more per cent. We all know the difficulties that arise for a Minister for Finance if this is a matter for discretion for him at the time of preparing his budget and if he is subjected to all the pressures which are normal at the time of the budget and which are abnormal for the Minister in present circumstances. In particular it is not good enough with the present Minister for the very reason that this argument about adjustment for inflation was urged on him very strongly in relation to income tax allowances, and amendments providing for this were put down to the last Finance Bill, and they were resisted by the Minister with the same arguments he has here. What happened was that he did make some adjustments, but they did not match inflation, and there can be no guarantee whatever that if you do not build it into the Bill, there will be regular and appropriate adjustments for inflation. For that reason, when you are dealing with a tax of this kind, where you are basing the tax on what are called capital gains, it is absolutely essential—it is not a matter of "it would be desirable or advisable"— to build into the legislation a provision which will ensure that any tax levied under this Bill will be a tax on real capital gains. I would hope that the Minister and those behind him, who know very well that what I am saying is true, will adopt a reasonable approach in this matter. It is probably more important in this Bill than in any other Bill that it should be done because of the nature of the tax.

A further matter with which we are very concerned in this Bill is the provision that a person who is subjected to compulsory acquisition of his property by a local authority, a State body or some body which has statutory authority to acquire property compulsorily, should find himself not alone forced to give up his property but, in addition, subjected to capital gains tax on that unwished-for disposal of property.

We recognise that practical difficulties would arise for local authorities, in particular, if one were to exempt completely all compulsory acquisition transactions from capital gains tax, and as a minimum we would urge that, in cases of compulsory acquisition, provision should be made whereby the person subjected to the compulsory acquisition would be allowed to purchase a comparable asset or piece of property and to deduct the cost of that purchase before any assessment of gain arises under the capital gains tax legislation.

I was glad to note in the Minister's statement today that he proposes to introduce an amendment or amendments on Committee Stage to include nephews and nieces in addition to sons and daughters in the relief provision he has in the Bill. This is a matter on which we felt quite strongly, knowing the pattern of life in this country, particularly in the case of farmers but also in the case of other kinds of businesses. I have not had an opportunity of examining in detail what the Minister said about this, and in any event we shall have to see the amendments he puts forward. At a quick glance it seemed to me it might not meet what is required, but it is a step in the right direction and we welcome it.

There is another matter to which I had intended to refer and to which the Minister did refer in his speech, but I would ask him to spell out the position a little more clearly; that is, the extent to which the legislation before us departs from the provisions of the White Paper in relation to gifts. The White Paper seemed to make it quite explicit that, having regard to the Minister's other proposals for capital acquisitions and so on, gifts would not be subjected to the capital gains tax. However, he now proposes to subject gifts to capital gains tax. He gives an anti-avoidance reason in his speech, but presumably the situation has not differed from that which obtained when the White Paper was issued. The Minister owes the House a more detailed explanation of the radical departure from what was indicated in the White Paper to what was provided in the Bill.

I referred at the beginning to the economic situation and to people, perhaps reasonably, asking in the context of this Bill, what capital gains. In so far as it is proposed to levy the capital gains tax on business assets, it is not unreasonable to say that it is being introduced at a most inappropriate time, and that it is also not unreasonable to say that the enactment of the Bill, as it is drafted anyway, is bound to have an adverse effect on investment decisions which are already, because of the economic climate, seriously inhibited. There is a good case for saying that as far as the economy in general is concerned it would be advantageous and make good sense to include a provision in this Bill which would postpone the operation of the tax on business assets until an appointed day which would be fixed by ministerial order.

Again, I would strongly urge the Minister to give consideration to that suggestion having regard to the difficulties being experienced by business at the moment, difficulties with which he must be very familiar, and the consequential drawbacks arising not only for the owners but for the employees who are being laid off at such an alarming rate.

If I might revert for a moment to the proposed relief in regard to children and the introduction of an amendment to include nephews and nieces, I would ask the Minister to clarify the position of adopted children under this provision.

I should also like to ask him whether it is the intention that life assurance funds would be liable to capital gains tax under Schedule I, 2 (1). If it is intended to subject such funds to capital gains tax that would appear to be contrary to paragraph 88 of the White Paper. I would appreciate it if the Minister would clarify this matter and, if necessary, we can pursue it on the Committee Stage.

I should also like the Minister to make clear—I hope he can do so; if he cannot it will be another matter to pursue at a later stage—that no gains liable to income tax purposes will be liable for capital gains tax. There is a general proposition which is particularly important in relation to share option schemes. If a company becomes liable to capital gains tax on the sale of an asset and the proceeds of the sale are distributed to the shareholders, it would appear on the face of this Bill that a second charge to capital gains tax arises on the proceeds in the hands of the shareholders. If that is so this would, of course, greatly increase the effective rate of capital gains tax in such cases and I would ask the Minister to clarify precisely what will happen under his proposal in such cases.

I should also like the Minister to clarify one very important matter in which there are two possible interpretations of the provisions in the Bill. Will the IDA induced foreign industry become liable to capital gains tax? The Minister will remember that such industry was induced to come here on the basis of an undertaking that export profits would get full relief from taxation and it is a matter of record that many, if not the majority, of these foreign industrialists have retained the profits they earned here and used them for further re-investment and expansion. Where these profits are repatriated in capital form they would appear to be subject to capital gains tax and, if this is so, then it would certainly appear to be a breach of the undertaking given by the IDA on behalf of the Government and this House and a serious disincentive therefore to such companies to continue to retain profits for reinvestment here. I would ask the Minister to explain clearly how he sees the Bill operating in this regard, the thinking behind it and, in particular if the position is as I have outlined, to explain how he reconciles it with the undertakings given to such companies.

As I said earlier, the Minister responded to pressure, particularly from this side of the House, in regard to imposing capital gains tax on a person's home. But he has provided in the Bill that no capital gains tax will arise on the sale of a person's house situated on land up to but not exceeding one acre. I would ask the Minister to have another look at that provision. He will be aware that section 33 of the Finance Act, 1961, and section 45 of the Land Act, 1965, both specify a figure of five acres with a house as being exempt from certain other requirements. This would appear to be the statutory definition: one may have up to five acres and they are part of the house and, beyond that, one is getting into farming proper or a commercial enterprise. If that is the statutory definition there would seem to be a good case for applying the same provision in this Bill. It may be that there is a very good reason for departing from these previous enactments, but I am not aware of any such reason. If there is any such reason perhaps the Minister will tell us what it is. I suggest to the Minister that he ought to give consideration to the existing statutory limit of five acres and, if it is necessary to apply the one acre limitation, then it should apply only in relation to future acquisitions and not in relation to existing acquisitions. I do not think that is an unreasonable proposition and I hope the Minister will consider it.

I should also like the Minister to clarify the position in regard to the charge of capital gains tax on UK residents. Again, it seems to me there are provisions in the Bill which can be read in two ways and I have had two views expressed to me as to what the Bill means in this regard. One view is that the charge on non-residents does not extend to residents of the United Kingdom who are exempt from Irish income tax under the double taxation agreement. I am certainly not clear on this and it is important that the Minister should spell out what he intends and where he thinks what he intends is achieved in the Bill.

There is another provision in the Bill that if a farm is left by will, the disposal of the farm on the death of the owner will not produce liability of itself for capital gains tax, but that the person who gets the farm under the will will, in due course, if he sells the farm, become liable to capital gains tax, but that the assessment of the gain will be on the difference between the price at which he sells and the price at which the dead man bought, which could be going back 30 years or more. I should like the Minister to explain the thinking behind this provision because, on the face of it, it does not appear to me to be equitable, particularly in the case of a farm. I can see considerable inequity arising out of this provision. I am not at all sure that the provision should not be that the market value of the farm, or whatever the asset is, at the time the legatee gets it is the appropriate base date from which to work.

There are provisions in regard to unit trusts and what I said in regard to companies may well apply to them, in that liability to capital gains tax may arise twice on the one gain. There is a provision to enable the Revenue Commissioners to enter into a special arrangement with unit trusts which meet certain conditions. On the face of it, it does not seem possible for any unit trust to meet the conditions laid down. If that is so, I presume the Minister will make some effort to amend that provision.

Of course, most of this legislation is based on and, indeed, copied from similar legislation in Britain. There are some differences, and some of them are significant. Since he has copied most of the legislation the Minister should explain to the House why he has made the change he has made? One example of this is in regard to the capitalisation of interest. In Britain when a company borrows money for the construction of a building and charges the interest to capital, the interest capitalised is deductible in calculating the gain on the disposal of the building. I cannot find any corresponding relief in this Bill. If it is not there, I wonder would the Minister explain when replying why it is not and what is the thinking behind its omission.

There is also an operation in regard to shares which goes on in Britain and which is known colloquially as the bed and breakfast operation. It is basically disposing of shares and re-acquiring them within a very short period in order to convert an accrued loss into a realised loss. The provisions of the Bill before the House are different from those in Britain. I am inclined to think they should be but I should like the Minister to spell out in more detail why he has departed from what the British are doing in this regard. It is important to have it on the record.

There is another difference between the legislation here proposed and that operating in Britain. I understand that in Britain where an individual provides a house free of charge for a dependent relative he may dispose of that house in addition to his own residence free of capital gains tax. That provision does not appear in this Bill and again I will ask why it is not there.

In regard to partnerships, the admission or retirement of a partner or a change in profit sharing ratios would seem to constitute disposals and acquisitions between the partners as defined in the Bill. I understand that in Britain, as a matter of practice, the Inland Revenue ignore these types of transactions for capital gains tax provided that no cash consideration changes hand. I should like the Minister to spell out whether it is proposed to follow the same practice here. I should also like to know whether the liability to capital gains tax will extend to exempt artists who dispose of copyright for a lump sum, or companies whose royalty income from patents is exempt.

It would also be possible to argue from some of the provisions in the Bill that a foreign domiciled person who is resident in Ireland and in the UK may be subject to a double charge on gains on certain assets. Again, if the Minister could clarify that situation, it would be appreciated. In regard to the question of residence there is a very important matter which the Minister must spell out. The Bill provides that persons who are resident or ordinarily resident in Ireland are liable to capital gains tax, but "ordinarily resident" is not defined. There is no doubt at all that very great practical difficulties will arise in establishing the scope of the charge unless "ordinarily resident" is defined. As the Minister knows "resident" is pretty well defined in law and in court decisions, but not "ordinarily resident".

Another matter to which I should like to direct the Minister's attention is that, as he knows, the stock market was at a low level in April, 1974, and share and property values have fallen very substantially since that date. Despite the recent little flurry values are way below those of April, 1974. Serious problems are likely to arise for persons who wish to take assets out of private companies. The assets may originally have cost more than their market value on 6th April, 1974, and substantially more than their present market value. On a transfer of the assets to the shareholders, the cost under the Bill to shareholders will be the market value at the date of transfer. If the assets subsequently appreciate substantially, and are sold, a very substantial chargeable gain may arise even though the proceeds are less than the April, 1974, market value or the original cost. If that is so, it would seem on the face of it to constitute an inequity which ought to be remedied during the passage of this Bill through the House.

In regard to section 26 I should like to direct the Minister's attention to a different approach in this Bill from that operating in Britain. In the Bill the criterion for chargeability is the amount of the consideration. In Britain the criterion is the amount of the gain and, on the face of it, the British approach appears to be more logical than the one in the Bill because, for example, a person might buy a farm for £10,000 and sell it far £45,000. The amount of the capital gains tax that he will pay on £35,000 gain under the Bill is nil but on the other hand a person may buy a farm for £45,000 and sell it for £55,000 and he will be liable for capital gains tax on the £10,000 gain. I suggest that it seems more logical to approach the liability being dealt with under section 26 on the basis of gain rather than the amount of the consideration. There is a provision in section 6 which gives an option, an election to the taxpayer, but it imposes the obligation on the taxpayer to make the election. I understand that the provision in Britain is that it is the Inland Revenue who make the option and they have to do it on the basis of which is the more advantageous course to the taxpayer. I do not think it is reasonable to expect that any ordinary individual will have read, studied and understood the provisions of this Capital Gains Tax Bill and, therefore, there is a strong case for doing what I understand is done in Britain—impose on the Revenue Commissioners the obligation to give the taxpayer the benefit of whichever course is more favourable to him.

As I said earlier, the Minister has moved in the right direction—although not far enough—in providing the relief under section 26 but the provision includes a requirement that the person in question must have been in full-time working as a director in a company or on a farm for the ten years preceding the disposal and he must have reached the age of 55. There does not seem to be any provision for a person who is prevented, for example, by health reasons from being a full-time working director during the ten years ending with the disposal. In fact, in real life what happens in cases like this is that a man becomes ill and carries on for as long as he can and eventually recognises, or his doctor does, that it is not possible for him to carry on and then he has to make arrangements. I think the Minister will find there are very many genuine cases of this kind that will come up and that provision should be made for such cases in section 26.

Another matter in regard to partnership is that the Bill provides that gains on the disposal of partnership assets are to be charged to the partners separately but there appear to be no rules provided in the Bill for allocating the gains to individual partners. This, for those concerned, is a very serious omission. Perhaps the Minister will explain why they are not provided or would undertake to provide the necessary rules to effect this operation.

Very briefly I direct the Minister's attention to section 8 (2) (a) (ii) and section 8 (2) (b). They appear to be meaningless in conjunction with each other. On the face of it 2 (b) would need to be redrafted and perhaps the Minister would have a look at it before Committee Stage.

There is a small difference in the charging section of this Bill and what is in the corresponding British Act. The provision in this Bill is in section 3 (1). It is slightly different from the British provision. In this Bill the words are "that is, in respect of". In Britain it is "that is to say". It may seem to be a minor matter, and may be minor, but would the Minister explain, when replying, what is the significance, if any, of the difference of the wording considering that most of the wording in the Bill is the same as in the British measure?

The provision in regard to losses in section 12 seems on the face of it to be unduly restricted. Section 12 (7) restricts the allowance of losses, except in the year of death of an individual, to the year of loss or a later year but under this arrangement a person may be taxed on gains and within a short period afterwards suffer serious capital losses, for instance on a forced disposal of an asset. I think there is a case for saying there should be provision to carry back losses for at least the two preceding years of assessment as the capital gains tax is, by its nature, a long term one.

In regard to the provisions in section 12 (4) it is not clear where there is any right of appeal provided, if there is any. If there is not any effective appeal procedure this subsection in practice would provide no worthwhile relief and would probably leave the claimant in a hopeless position especially in regard to intangible assets and shares in unquoted companies.

Furthermore, the Minister should give an interpretation of the word "negligible" in this subsection. It is a very relative term.

In regard to the computation of gain and the treatment of interest, under Schedule 1 it would appear that interest is expressly excluded as an item in calculating acquisition costs to the person chargeable even where such interest may not have been allowed in computing tax on income derived from the asset or in computing any other tax. If interest is incurred and is correctly capitalised as an element of cost in acquiring or holding an asset, on the face of it there does not appear to be any logical reason why it should not be allowed. It is important for us to note that this provision applies even to business assets.

I should like to ask the Minister to either explain—I hope satisfactorily —the thinking for disallowing the interest properly capitalised or, alternatively, to undertake to amend the Bill. I should like to ask the Minister if, in relation to section 28, subsection (5), ships and aircraft are covered by the classification "plant or machinery".

Another matter, though not of major importance but of some importance from the point of view of administration having regard to the position of the staff of the Revenue Commissioners, arises in regard to capital distributions under Schedule 2, paragraph 1. It would appear that where a shareholder receives a capital distribution, no matter how small, in relation to the shareholding a charge to capital gains tax arises, subject to the exemptions for individuals. This could well involve a great deal of time wasting on trivial items. I understand that in Britain in cases like this they treat distributions which are small in relation to the shares held as a reduction of the cost against future disposal. If this was done here the Minister would save a great deal of unnecessary work on the staff of the Revenue Commissioners.

A major omission from this Bill is the absence of any spelling out of relief for companies within a group, that is in relation to whether capital gains will arise on the transfer of assets between one company and another, all of them being within a group of companies. This is a matter on which I am certain the Minister has received representations. It is a matter which is dealt with in detail in the corresponding legislation in Britain, but it would appear that there is no provision in this Bill in relation to it. It may be that the Minister intends to deal with it in the Corporation Tax Bill, but it is important that the manner in which it is proposed to deal with this problem is spelled out in this House as fast as possible so that the people will know where they stand.

At this stage of the Bill we are not intended to take the Bill section by section and I have not attempted to do that because it is a lengthy and very technical Bill, particularly having regard to the provisions of the Schedule. I have tried to indicate some matters of detail to the Minister so that it would be of some assistance, if the Minister can deal with it in reply, in speeding up the Committee Stage proceedings. I should like to summarise our approach to the principles involved in this Bill by saying that we think the Minister's approach is the wrong one. We think that the capital gains tax should be directed against speculators and where this can be done the rate of tax should be higher than it is here. I have outlined the different basis of approach which would be far more effective in getting at speculators than this Bill and at the same time would be of assistance in encouraging genuine enterprise, which we need so badly at present.

I ask the Minister not to feel tied to his own proposals in this regard. Unless he can show that the approach I have outlined is defective in principle —if it is a number of our EEC partners are defective in their principle and approach to it—I urge him to accept at least the general proposition of this basic approach to capital gains which I have outlined. I am convinced it is wrong to approach it on the basis that virtually anybody who makes a capital gain, subject to the exemptions of the Bill, should be taxed at the same rate whether he got it from pure speculation with no economic input or whether the gain is the result of 40 years of hard work by him.

That is a wrong approach which we should not perpetrate in this House. One should have regard to the nature of the gain and how it was made. It is not easy to do this; it is difficult. But I suggest that the approach which I have outlined on behalf of this party—this matter has been discussed in some detail by this party—is one that goes a good deal of the way to achieve a really effective capital gains tax and one that is primarily directed against speculators. That has always been the position I, and this party, have adopted in regard to capital gains.

Mr. E. Collins

It is right that we should keep in mind the background which led to the introduction of this Bill. It was a background against which many people suffered from penal taxation in a number of forms, generally under the heading of death duties. It was a system which, especially in the last decade, brought about unfortunate disposal of farms and businesses by families because they had to pay death duties.

In introducing the White Paper on capital taxation, laid by the Minister for Finance before the Houses of the Oireachtas on 28th February last, the Government took what could only be considered a major reforming step in our taxation structures, a step of which I fully approved.

I want to make it quite clear that I support the Bill. What annoyed me a little was the fact that, when Deputy Colley was speaking, he decried speculation, quite rightly so, and the damage speculators did to our society especially in the past 20 years. Such damage was considerable and the ordinary citizen felt that the structure of society favoured those who had money or the use of it. That was so and it is right to decry such a system known to be equitable and seen to be inequitable. But what this House should note is that for 16 long years while this speculation in land banks, in property and in all the other areas written about in the Press and seen on television was rife, the Fianna Fáil Government did nothing about it.

Mr. Colley

Neither does this Bill. That is the trouble.

Mr. E. Collins

I am glad to note that Deputy Colley admits that the Fianna Fáil Government did nothing about it.

Mr. Colley

I mentioned the difficulties involved. I said this Bill does not do it but we tried to help.

Mr. E. Collins

I realise there are difficulties involved. I have reservations about the Bill which I shall enunciate in my own time. But the difference between the two Governments is one which the people will appreciate. No matter how difficult it is to formulate a Bill, at least we are trying.

Mr. Colley

That is not the answer. That is not good Government. One must do it properly or one will do more damage. That is what the Deputy should consider.

An Leas-Cheann Comhairle

Deputy Collins.

Mr. E. Collins

People saw speculation rife in all its forms on our society but for 16 long years the Deputy admits Fianna Fáil did nothing to stem its tide.

Mr. Colley

We did not impose capital gains. That is true.

Mr. E. Collins

But we have stemmed it. I am not saying that the Bill is perfect. I do not think any Bill brought before the House is perfect but our approach to the subject is a damned sight more constructive than that of Fianna Fáil during all the years in which speculation was rife.

That speculation, and I mean speculation as opposed to investment, gnawed at our society in a very invidious way. The ordinary worker in the factory, the farmer, the shopkeeper saw thousands upon thousands of pounds being made on speculation. He was feeling it in his VAT returns, his PAYE returns, his turnover tax returns, his wholesale tax returns at expense to himself. He paid his taxes down through those years of inflation when he felt he was being unjustly hit, and I agree with him.

Mr. Crinion

At least he had a job, not like the 100,000 unemployed today.

An Leas-Cheann Comhairle

Deputy Collins without interruption.

Mr. E. Collins

Of all the wrongs Fianna Fáil did that was the worst because it evoked an attitude, on the part of people of: "Right, speculators are getting away with it, so we shall get way with it, we will avoid tax." In a situation in which a large section of the population sees a small minority, and I suppose most minorities are well in with that well-known charitable organisation called Taca—

Mr. Colley

The Deputy should know there are few on those benches over there.

Mr. E. Collins

Where they saw that happen they were right to adopt an attitude of questioning their payment of taxes. That was the damage done by the lack of interest—and I say interest—Fianna Fáil showed in the problem of speculation which was a very serious social one. That is why I am proud to be supporting this Government and this Bill because we are tackling what for many years was seen to be a grave social injustice in society.

This Bill marks also the end of death duties taxation in two months' time. I am sorry that death duties were not abolished a year ago because people who have suffered deaths in their families since then feel aggrieved that they have to face such duties. One of the possible flaws in this Bill is that people who have died within the past year and whose families will have to pay death duties are faced also with the prospect in the future of paying further capital taxation, perhaps in the form of capital gains tax which to them, and I feel rightly so, appears to be an invidious form of double taxation. I would suggest to the Minister in his examination of the Bill going through the House that he examine also the whole question of double taxation of the estates of people who have died within the past year or even extend it back further if possible. After all, the effects of the Capital Gains Bill have been felt, in theory, since April last. But there does exist a serious problem of the double taxation of the estates of people who died within the past year which I would ask the Minister to investigate.

Mr. T.J. Fitzpatrick

(Dublin Central): We had amendments to last year's Finance Bill which were opposed.

An Leas-Cheann Comhairle

Deputies will have an opportunity of speaking later.

Mr. E. Collins

For 16 long years Fianna Fáil could have introduced Bills. There is no point in their coming along now and saying that last year they introduced amendments. Sixteen years is a fair period of time within which to make some social progress.

Mr. Colley

The relevant thing is that the Deputy's party opposed the amendments. Remember they voted against them.

Mr. E. Collins

I am sure Deputy Colley is only too well aware of the time it takes to introduce a Bill. Sixteen years is a fair time in which to do so.

Mr. Colley

Remember we had the economy growing. The Deputy knows what is happening around him now. That is the important thing to remember in all this talk about capital gains.

Mr. E. Collins

The Deputy accepted earlier that Fianna Fáil did nothing about speculation. There is no point in his trying to change now.

Mr. Colley

I said we did not introduce capital gains.

Mr. E. Collins

Fianna Fáil did nothing about it for 16 long years. There is no point in Deputy Fitzpatrick saying we opposed amendments. We introduced immediately abatement of the payment of death duties on estates.

I am saying that this is an opportune time under this Bill to ensure there will be no double taxation of estates of people who died, especially in the last year and, possibly, in previous years. I realise it may mean a loss of revenue to the State but there are good social grounds for so doing. I thought Deputy Colley spoke tongue in cheek. However when I reflected on the fact that he referred to his party's Ard Fheis not being in favour of capital taxation, I realised that he was in an awkward situation to have to speak on behalf of the party while being in favour of taxation on speculation. It is interesting to note that Fianna Fáil are against capital taxation in the form of a capital gains tax.

Mr. Colley

Fianna Fáil are in favour of an effective capital gains tax on speculators.

Mr. E. Collins

I understood that the Ard Fheis were against this form of taxation but I do not know in which light the Deputy regards the opinions of his party's Ard Fheiseanna.

Mr. Colley

What I said at the Ard Fheis, I said here today also.

Mr. E. Collins

The Deputy referred to the distinction between the position of the Ard Fheis and his own position on this matter. He was right to have done so. However, it is interesting to note the official position of Fianna Fáil as pronounced at the Ard Fheis as against Deputy Colley's position as spokesman for finance for the Oireachtas Fianna Fáil Party. However did the Tánaiste not refer to official and provisional speakers in that party? No doubt Deputy Haughey will be putting forward his point of view on this Bill later. I am proud of the social progress being made in this Bill. This is apart from the contribution within the package deal to abolish death duties. Provisions of this kind are some of the reasons for my being in politics. This party are endeavouring to change iniquitous and social injustice.

Having said that, I have reservations regarding some aspects of the Bill. The first of these relates to the rates of taxation proposed. It is my opinion that the blanket rate of 26 per cent should be changed. I suggest that the rate be higher on short term capital gains, in respect of which, say, a 50 per cent tax should be applied. Deputy Colley referred to such gains as speculation.

On medium term gains—gains on assets held for a period of, perhaps, 15 years—I would suggest a 25 per cent or 26 per cent tax, but for gains on investments for longer periods I would suggest a 10 per cent tax. I know that this system would lead to major administrative difficulties, but there are sound social grounds for a sliding scale of this nature. There is the danger that in certain circumstances investment decisions may be upset by the introduction of a capital gains tax, but that is not of major importance in so far as genuine long-term investments are concerned.

There is the problem, too, of distinguishing between real capital gains and financial capital gains which at times of inflation may not be very real. I am glad to note that the Minister intends to increase the threshold levels to take account of inflation. To do this on a proper basis would be difficult, but I hope that a just scheme will be provided so as to ensure that one pays on real capital gains rather than on financial or monetary capital gains.

The question of the date of valuation—6th April, 1974—is of interest in that at that time the stock exchange was at a relatively low level. Indeed, it has dropped further since. If one accepts that the level at April 6th, 1974 was, say, 60 per cent of a level two years previously, there should be a mechanism to allow for different values of shares, especially, and of property for the two years prior to that date. I say this in view of the improvement envisaged in western economies during this year and in the expectation that towards the latter part of the year, stock exchange values should revert to their pre-1974 levels. It should be easy to do this because the values then were fairly well known.

The exemptions envisaged in the Bill are welcome, especially that in respect of the sale of a house and up to one acre of land. The provision in relation to chattels, which allows for the exemptions from tax of such items as relatively unimportant household furniture and goods, is sound and will avoid unnecessary administrative expenses. Socially this policy is correct too, as also is the exemption in respect of gains of up to £500 in any one year. I do not think a Bill of this nature could be administered so very closely. We would not welcome the Revenue Commissioners availing of privacy any more than is necessary, but by allowing these exemptions and reliefs the Minister is avoiding a possible trap. The provision in relation to inter-family transfers is sound and the inclusion of nephews and nieces in this regard is very welcome. I wonder if, in certain cases, a transfer to a brother or sister especially a transfer from an older to a younger brother may not also be allowed. This should be encouraged. As liberal an interpretation as possible should be allowed to these transfers in order to encourage the movement of businesses and farms to another generation.

The exemptions transferring the farm or business to children and allowing the limit of £150,000 are very wise. I hope this will be adjusted to take inflation into account. The roll-over provisions are, perhaps, more important than they appear in the Bill. Small firms and farmers of less than 80 acres should be allowed these roll-over provisions when they sell a smaller unit to buy a larger one. I would not like this transaction to be looked at by a taxation expert as bringing money into the coffers. As I said, the roll-over provisions are welcome.

Deputy Colley made a good point when he spoke of compulsory acquisition. Steps should be taken to alleviate taxation in these circumstances. When replying I should like the Minister to explain administration. Will there be separate annual returns? Does one make a return when one makes a capital gain? How detailed will the return be? What measures have the Revenue Commissioners in mind to prevent avoidance? This major Bill will considerably change the present taxation structure and the House in my view is entitled to a full explanation of the procedures to be adopted by the Revenue Commissioners in collecting this tax.

Many shopkeepers are disgruntled sending in returns from VAT and PAYE and rightly so. At some stage the Government should allow them to retain a small percentage of the revenue collected to cover the costs of collection.

I have a few more points which are more appropriate for Committee Stage. I support this Bill and the principles behind it. This Bill is designed to eliminate the iniquitous system of death duties. I am sure this Bill will be welcomed not only in this House but also throughout the country.

Mr. Crinion

I agree with the principles of the Bill but not with the terms which, in my view, should be devoted mainly to the speculators who are making a fast buck in the shortest possible time, and without giving employment. The speculators came down the country and bought land at a high price which the farmer could not afford. The farmers often needed the land to bring their farms up to an economic holding. Allowances should be made for the person who spent 15 or 20 years building up his farm.

When a breadwinner dies suddenly and leaves a young widow and small family, she may have to sell the business or farm because she would not be able to continue with the business. She should be exempt from death duties. If the man was a wage earner he would be insured under the national health. Sometimes in private business a person may not be covered by an insurance scheme. As a result, his widow is victimised and has to pay this tax at 26 per cent. The Minister said the tax should be at the lowest rate. He also said he was tying it in with the Provisional Collection of Taxes Act, 1927, which would enable that charge to be increased if necessary by resolution of this House. This is very significant and only the thin end of the wedge.

Mr. R. Ryan

I did not use the word "increase".

Mr. Crinion

No, but it is implied.

Mr. Colley

Deputy Crinion got the message all right.

Mr. Crinion

I got the message. The Minister need not worry. I hope plenty of other people did too. Deputy E. Collins mentioned nephews, nieces and young brothers. Orphans who have come to live with relations should also be included. They may be living with the families but are too old to be adopted under our Adoption Act. If these children have been reared as members of a family, they should be exempt and treated as a son or a daughter. I am sure such cases are few and far between but we should still provide exemptions for them.

Provision should be made for inflation. With inflation running at 20 per cent per annum, in four years a property worth £100,000 will almost have doubled in value. If this property is disposed of the Minister will collect £26,000. Provision should be made to safeguard the real capital gain involved. On that point the Bill is sadly lacking. We propose a very high capital tax gradually decreasing down along the line and exemption after 15 years.

Debate adjourned.