I move amendment No. 3.
To add to the section the following subsections:
"(9) In this Act, a reference to a gain shall be construed as meaning the relevant gain appropriately reduced in accordance with the calculation of the Central Statistics Office relating to the reduction, if any, in the value of one Irish Pound during a period commencing on the date of acquisition of the asset in respect of which the gain accrued and ending on the date of disposal of the asset.
(10) In this Act, a reference to a loss shall be construed as meaning the relevant loss appropriately reduced in accordance with the calculations of the Central Statistics Office relating to the reduction, if any, in the value of one Irish Pound during a period commencing on the date of acquisition of the asset in respect of which the loss accrued and ending on the date of disposal of the asset."
This amendment is designed to build into the Bill a provision that will allow for inflation. When we discussed this on Second Stage, it seemed to me that some of the arguments advanced by the Minister were not relevant to the question of allowing for inflation. He will recall that I suggested to him at the end of that debate that he might consider this matter further. I had hoped he would do so and we would have an amendment from him designed to achieve that objective. However, I have not been able to discover this in the Minister's amendments unless it is very heavily disguised.
The Minister argued that he could not produce an indicator that would deal with inflation because one asset may increase in value at a certain rate and another asset may increase in value at quite a different rate, or may even go down in value. I suggested to the Minister, and I repeat my suggestion now, that this is totally irrelevant. The rate at which the value of an asset increases is totally irrelevant to what we are trying to do here. Particularly with regard to a capital gains tax, the application of a tax to a gain in capital, the objective should be to tax the real gain. If one can do that, if one can build in an indicator —as I have attempted to do in this amendment—it does not matter at what rate, or differing rates, assets may increase or decrease in value because the real gain or loss will be reflected. That will be the item on which tax will be levied. In other words, there will be a built-in adjustment for differing rates of increase in value of different assets.
The Minister indicated on Second Stage that there was no perfect indicator available in regard to the fall in the value of money. From a purely academic point of view that is correct. There is no known system that one could stand over and say it was 100 per cent accurate but there is a system available that is considered sufficiently accurate to enable successive members of successive Governments to reply to parliamentary questions in this House and to give figures, as they do from time to time, regarding the value of the £ on a certain day with a base of two years ago, ten years or some other period.
All of us have heard such replies in this House. There is a method of calculating this used by the Central Statistics Office, considered sufficiently accurate to be used in reply to a parliamentary question and frequently used in that way. Therefore, I suggest that what this amendment is proposing to do is feasible. I am not suggesting in relation to this, or in relation to any other amendment in my name, that it is perfectly drafted and covers every possible angle of repercussion in other parts of the Bill. It is not my job to do the work of the parliamentary draftsman. Indeed, I can point out some snags in this amendment. The aim of the amendment is to bring before the House the principle involved, to suggest a method by which the objective could be achieved and, hopefully, to get the Minister to accept that principle and the method of achieving the objective.
In my amendment I have suggested that where a gain is referred to in the Bill it will be taken to mean the nominal gain, suitably adjusted in accordance with the calculations of the Central Statistics Office as to the value of the Irish £. There are two dates involved in any calculation of this kind. To calculate even a nominal gain it is necessary to know the value on the date of acquisition and on the date of disposal. If it is possible to get from the Central Statistics Office a figure that will show the value of the £ on the date of acquisition and the value on the date of disposal then one has a method of calculating the fall in the value of money in that period which I venture to suggest all but the most academically-minded person would cheerfully accept as accurate.
In order to illustrate the necessity for a provision of this nature, I should like to point out a simple example to the Minister of what may happen if this is not done. I am taking this example in order to clarify the issue and, in doing so, I am ignoring exemptions and particular years and dates that are referred to in the Bill. If one ignores them one can see more clearly what is involved. Assuming an asset has been secured for £1,000 and that it is disposed of one year later for £1,100 then, on the principle enshrined in the Bill, there is a gain of £100. I am suggesting that this is a nominal gain. Let us assume that during that year inflation had been running at 20 per cent, as it was in 1974, then in real terms the sale price of £1,100 is £880. Therefore the individual suffered a loss of £120.
Unless this amendment, or something similar, is accepted in the Bill the individual involved will be paying tax on £100 which is his nominal gain, while in real terms he has suffered a loss of £120. That example illustrates precisely what will happen unless we have built into this Bill a provision against inflation. A few of the remarks made by the Minister on the previous stage suggested that in his opinion a capital gains tax was analogous with income tax and was a kind of a substitute for income tax in the case of people who were making capital gains. I suggest that that is a mistake, that there are many aspects of capital gains tax that are not comparable with income tax.
One thing I should like to say in relation to this amendment and that argument is this: if people are not taxed on their loss of income they should not be taxed on capital losses. Unless we can build in some provision of this nature, that is precisely what will happen. People could be taxed on their capital losses as though they were gains. I cannot see how the Minister can purport to justify that kind of procedure or to claim that it is equitable. I urge the Minister to accept the principle involved in this amendment because it goes right to the root of any capital gains tax. Failure to build in a provision of this nature will ab initio make the Capital Gains Tax Bill an unjust instrument of taxation.