It was, I suppose, a moment of light relief to hear the Minister for Finance advising Deputy O'Malley not to engage in political abuse and instead to stick to facts as given by the Minister for Finance. The facts to which he referred included the provision of a 30 per cent increase in the availability of money for housing this year. He knows, as we do, what that represents in terms of additional houses—nothing. He also referred to the increased provision for IDA grants. The Minister knows that, allowing for inflation and allowing for the fact that industries in general now attracted by the IDA are far more capital-intensive than they have been and this is a tendency which will increase, what he is talking about in terms of money—and it is a projection for 1975, not a performance—is approximately the same level as in 1974 in terms of jobs, and I repeat it is a projection.
The sad fact about all this discussion is that the Minister for Finance clearly does not understand what Deputy O'Malley was describing when he was talking about the climate for investment. The Minister for Industry and Commerce, who was directly responsible for the IDA, should understand this. I do not know whether he does or not—he may have ideological difficulties—but it is vitally important that the Minister for Finance should understand it, too, because it is the Minister for Finance who brought before this House the mining legislation referred to by Deputy O'Malley. We are not talking about future mining; in fact, I have expressed the view that the rate of taxation imposed in that legislation is too small. We are talking about going back on an undertaking given to existing mines and to existing industries. The Minister does not understand that even the suggestion of doing this affects the whole climate of investment, the whole operation of the IDA.
I have personal experience of this, and I must confess I am absolutely appalled at the performance of this Government when it is repeated. Goodness knows they should have learned from what happened in mining, where the Minister and the Taoiseach and other Ministers had to get up one after the other and promise that they would give an undertaking in writing, although we had it in legislation, that the incentive for industrialists would not be taken away. I do not think the Minister has grasped the significance of the second point quoted by me and by Deputy O'Malley from the IDA brochure, and I shall quote it to him again:
Complete freedom from Government control over investment of profits.
The Minister may argue semantics on that, but I want to tell him— because he obviously does not know— what that means in practice to a potential industrialist from abroad who is going to invest here and create employment. I have had these discussions with a number of these people myself and I know the questions they put to me. What they say is: "We know of other countries which have various inducements better than those available in Ireland, but they are no good to us because we have seen what they have done to people who went in. They went in on the basis of the inducements and then the rules were changed. They tied up our money so that we could not take it out, and they imposed this, that and the other restrictions afterwards." The thing they were vitally concerned with from their point of view was, what was the use of investing quite successfully in this country if the ultimate result was that they were not going to be able to repatriate the profits that were available? Therefore they wanted a complete assurance on this. That is why the IDA have said here: "Complete freedom from Government control over investment of profits."
If you are to have complete freedom as to what you will do with your profits when you generate them, one of the freedoms you must have is to repatriate them immediately. Another is that, if you wish, you can reinvest them in this country. Then if you do that, you may reach a stage where you will want to repatriate some either to your home base or to an investment in another country. I am not describing a situation of selling out the whole operation, to which the Minister and Deputy Belton referred. I am describing where there is a portion of the operation being disposed of and the proceeds taken out of the country for whatever purpose.
The Minister says in that case the capital gains tax applies only to the gain, but I pointed out to him that on the basis of inflation and his refusal to accept a built-in arrangement in this Bill for inflation, unless the money is invested in something like stocks and shares—which people of this kind do not invest in in this country; they invest in business and in real assets—any investment will show a nominal gain, so they will become liable to capital gains under this.
If the Minister thinks he can argue semantics with these people and tell them what he is proposing to do is not a breach of what was promised to them, he is wasting his time. This is what he apparently does not understand: it is the climate that is created that is important, and the climate which he and his colleagues are creating is, as Deputy O'Malley described it, one of distrust of this Government, distrust of the ability of the people dealing with us from abroad to rely on what is promised to them by and on the authority of the Government.
Whatever problems we may have had under successive Governments in the past, we never had this one. It is only under this Government that this problem has arisen. Apart from whatever may be the opinion of people in this country, numerous people outside the country now find themselves in the position of not being able to depend fully on undertakings and assurances given by this Government. That sort of situation is appalling in so far as our reputation and honour are concerned but it is worse from the point of view of the possibility of economic development and growth and of industrial development.
The tragedy is that members of the Government and, in particular, the Minister for Finance do not seem to understand the importance of this. In the past, in relation to undertakings given in respect of existing mines and, here again, the Minister demonstrates that he does not understand it is in the economic interest of this country that, even if the Government consider a particular deal to be a bad one, they should carry it through in order to maintain our reputation as people with whom a deal can be done and honoured. If we lose that reputation we may never recover it. Once it has happened, and it has happened under this Government on too many occasions, replacement of the Government will not solve the problem because so far as investors abroad are concerned it is something that can happen again. Is is of no interest to those people whether Fianna Fáil, Fine Gael or Labour are in Office. They are dealing with the Irish Government and to them one is the same as the other.
Up to the advent of this Coalition whatever Government were in Office, we had one reputation of which we could be proud, that was that anybody who made a deal with an Irish Government could be sure that deal would be honoured and that there would be no attempt by way of clever semantics or otherwise to go back on the spirit of the agreement.
With all the sincerity at my command I impress on the Minister that what he is proposing in this section is very clearly in breach of the spirit and, to some extent, the letter, of the undertakings given to the various industrialists who have invested here. I am referring to undertaking given by the previous Governments, by previous Ministers and by the IDA.
There is another aspect of this which was referred to both by the Minister and by Deputy Belton and which revealed a great deal. Each of them asked why, if these people are taking their assets out, they should not pay capital gains tax. That is a plausible argument but I would remind the Minister of the undertaking that was given to such people. This was that they could have complete freedom in regard to the investment of their profits, whether here or abroad. To suggest that one can advance theoretical arguments or alleged arguments of equity, as the Minister endeavoured to do, to justify this is to miss the wood for the trees. These undertakings were given to these people most of whom, surprisingly, reinvested their profits in this country.
Whatever the Minister may say about undertakings, about the wording of them or about the wording here, he cannot deny, as indicated by Deputy O'Malley, that a foreign investor faced with the choice of reinvesting his profits productively in this country and paying capital gains tax ultimately or, alternatively repatriating his profits immediately free of tax, will opt for the latter course. It is obvious that he would do so. Can the Minister suggest seriously that it is in the best economic interest of this country that this should be so? There is no point in talking of equity in taxation if what the Minister is doing in trying to achieve equity is reducing the national cake. That is creating inequity. I did not believe that we would ever see such a situation here. On another occasion when the Minister was arguing in favour of the principle that comparable incomes should pay comparable tax, I said to him that if he could carry that to its logical conclusion he would find himself abolishing the export tax relief. The Minister became very annoyed and said I was being mischievious. However, here he is trying to advance a somewhat similar argument to justify what is happening but the effect of what he is doing can be disastrous.
One could break this into two parts. First, there is the situation of those firms who have invested already in this country on the basis of the IDA, Government-authorised inducement and the second category could be those who may do so in the future. To take the first category, I suggest there is no answer but that such people will regard, and rightly so, the consequences of this section as a breach of the undertakings given to them. In my view that is a totally indefensible, untenable position. In respect of the second category, those who may invest in the future, the Minister would be on strong ground in saying that this taxation would be applied. He would be wrong in saying that but at least there would not be any question of a breach of an undertaking and of the horrible consequences that could result for all our people from any such breach.
I would suggest that if the Minister were to consult with the IDA who are in the field in this area—I have no knowledge of what is their view on what the Minister is proposing— their view would be that, in relation to people whom they are trying to induce to come here and help to reduce the appalling problem of unemployment, they will have their hands tied if this section goes through as it stands. They will have to tell people that they could reinvest in the country but that should they make profits they will have to pay tax, whereas if they took their profits out quickly they would not pay any tax. Surely the Minister cannot suggest that is something that is in the economic interest of the people and, in particular, of the unemployed.
I urge the Minister to think again about this section. The consequences of what was done in the past were serious but the consequences of doing the same kind of thing again are incalculable. The damage would be very serious. We have built up our economy, given it a much broader base and made it strong but there is a limit to what it can stand. I am afraid that under this Government which seems to be lacking so much regarding knowledge of what is needed in order to induce investment and get our economy moving, that even the strength that was built into our economy in recent years will not be sufficient to stand the strain being imposed on it by this unthinking approach which appears to be totally ignorant of the importance of a suitable climate for investment and of the major role of the Government—or any Government—in creating that climate. That being so, I have not a great deal of hope that the Minister will see the light. I hope he will, but if he does not, I want to make it quite clear that we on this side of the House saw the light and warned him. We did our best, but despite all these warnings, the Minister went on, backed by his colleagues, each of whom will be responsible directly for the consequences of what is involved in this section and what it will do to investment here and to our unemployed.
