Dáil Éireann debate -
Tuesday, 18 Feb 1975

Vol. 278 No. 4

Capital Gains Tax Bill, 1974: Committee Stage (Resumed).

Debate resumed on amendment No. 17:

In page 12, line 3, to add to the end of the section:—

Provided further that whenever a disposalinter vivos results in the payment of Capital Acquisitions Tax, no Capital Gains Tax shall become payable on such disposal inter vivos.

—(Deputy O'Malley.)

Mr. Colley

We have pointed out that what is sought in this amendment is that in the case of a disposal inter vivos, where it results in the payment of capital acquisitions tax, no capital gains tax would become payable on the same transaction. What we are proposing is what was stated in the Government's White Paper as being what would happen but the Government went back on that in this Bill. We sought reasons from the Minister for that and towards the end of the discussion on this amendment on the last occasion the Minister gave as one of the reasons for going back on what was stated in the White Paper the fact that the thresholds in the Capital Gains Tax Bill had been raised and the rates reduced as against those specified in the White Paper. I asked the Minister to tell us the basis on which he decided to apply both capital gains tax and capital acquisitions tax to the one transaction having regard to the change in the rates and in the thresholds—in other words, did he have calculations which would show the effect of the changes in the rates and in the thresholds on the revenue expected and did he, as a result, have calculations to show that the application of both capital gains and capital acquisitions taxes to the one transaction would recompense the Exchequer for the loss envisaged in the changes from the White Paper.

The Minister did not indicate, in the short time he had available to reply, that he had figures but I should like to pursue this a little further and find out if he has estimates of the consequences of the changes announced. If he has, I think the House is entitled to get them, estimates though they may be, but if he has not got them, it does not seem to me that the application of capital gains tax and capital acquisitions tax to the one transaction has any bearing on the matter at all.

It would seem then that it was done blindly without any knowledge of what the result of doing it would be. We are entitled to ask the Minister which is his position on this. Was it done on the basis of estimates with a reasonable knowledge of the consequence of what he did in changing from the White Paper or was it done blindly, not having any idea of the consequences of what he was doing?

Minister for Finance (Mr. R. Ryan)

I have pointed out again and again that one of the greatest scandals of the capital taxation position was that it enabled people to avoid paying any form of capital taxation. Any person who cleverly enough anticipated death by making a suitable arrangement, by giving a gift more than five years before death or by setting up a trust, could avoid capital taxation altogether. As a consequence of this, Ireland is unique in the western world in not having an adequate record of the holdings, transfer and distribution of wealth because a great deal of the wealth in the country has never come within the knowledge of the Revenue Commissioners.

That is one gross imperfection in the present system and it is also an injustice because under the present system of taxation some people with holdings of wealth of many millions of pounds have not to pay any tax whatsoever on such holdings which can generate for themselves certainly a much better quality of life than is available to persons who have not got such holdings, whereas persons with incomes of as low as £700 or £800 a year could find themselves obliged to pay tax week after week.

Such a situation is I believe an inequitable one. So that the time certainly has come to make a change in the system. It will be some time before one can say with certainty what would be the yield of these new taxes but one thing must be clear, that is, that if massive holdings of wealth which previously escaped any taxation are in future subjected to capital gains tax and wealth taxes and capital acquisition taxes they must generate a new source of income for the Exchequer which will then be passed on for the betterment of society as a whole.

The donor of an asset is giving away not only the asset at its cost at the time he acquired it but also the enhanced value of that asset during his period of ownership. So, the gift therefore is of an asset at its original value plus the capital gain and the tax under the capital gains tax system is chargeable at the point when the donor makes a deliberate decision to part with a valuable asset to another and at the time of making the decision to part with the asset the donor would be in a position to assess what capital gain had been made on the asset during the period of ownership. So, to that extent this tax is a voluntary tax. If a person does not wish to pay the tax or does not wish to make a gift, so be it, no liability to tax arises. If, however, with the law stated in an Act and with an assessment of the capital gain made during the period of ownership, a donor decides to part with an asset by way of a gift it is not unreasonable that the donor should at that time pay a tax related to the gain on the asset during the period of ownership.

Whatever a joint donor gets out of making a gift is surely represented by the full value of the gift at the time of making it, not merely through its original cost. It is logical, therefore, to regard him as having made a gain at the time he makes a gift. This is done by treating as consideration for the disposal its market value at the time of the gift.

It is also logical to tax the beneficiary as he has received value without any sacrifice on his part. The person who receives a gift not only improves his social position but also has his economic power enhanced to the extent of the value of the gift. In the case of the recipient of the gift he will be charged to capital acquisitions tax in those very rare cases where thresholds are exceeded.

One would think listening to the Opposition that there were many people in this country now being put at the risk of new taxes whenever they receive gifts from their parents. Of course, that is a totally unreal position. So far as capital gains tax is concerned there is, for instance, no question of liability to capital gains tax of a cash gift and most gifts from parents to children are in the form of cash and in cases where the assets take other forms the exceptionally high threshold arrangements under the proposed capital acquisitions tax and the thresholds also of exemption to capital gains tax will mean that well over 90 per cent, at least——

Mr. Colley

Only postponements.

Mr. R. Ryan

——well over 90 per cent at least will not find themselves charged in future to tax. But today if the holder of such assets were to die without having been clever enough or wise enough or prophetic enough to make advance arrangements to avoid the tax, the donees will find themselves subjected to horrific rates of tax which we propose to abolish. I suggest to those who are criticising us and delaying the progress of this Bill that they are not doing a service to the people whom we are out to relieve by the abolition of death duties.

It should also be noted that where a person acquires property he is treated for capital gains tax as taking the asset at its market value. This value will be the base for calculation of a capital gain in the event of a future disposal. Capital gains tax will be allowed as a deduction in computing the amount on which capital acquisitions tax will be charged if, of course, the donee has to pay the donor's capital gains tax.

There is also good reason for this treatment from the point of view of preventing avoidance. If gifts were not to be charged, all sorts of manipulations could take place to mask disposals. A gift of an asset could be given with a subsequent reverse gift in money by the recipient or the first gift or mutual gifts of assets could be arranged. If this were to happen the gain inherent in the enhanced value of the asset would escape taxation in the hands of the donor who had originally gained.

It seems to me that the amendment proposes that, where capital acquisitions tax becomes chargeable on the recipient, there should be no capital gains tax charged at all. This would cut across the whole principle which I have been speaking about. The amendment suggests that the mere payment of capital acquisitions tax by a beneficiary should exempt the donor from capital gains tax chargeable to him. It does not seek in any way to differentiate between the different situations which may arise and I should like to give a few illustrations.

If a gift of value £10,000 is made which carries a capital gain of £5,000 the tax on the donor will be £1,300 and if capital acquisitions tax of a mere £5 is payable by the donee it is suggested that the capital gains tax of £1,300 should be discharged from assessment altogether. If another donee were charged with capital acquisitions tax of £1,000, the same treatment would apply. Therefore, the amendment would not make any effort to treat these cases differently. If a person were to get total exemption of £1,295 because of the £5 capital acquisitions tax, a person who was involved in a capital acquisitions tax of £1,000 ought to get commensurate relief and not merely relief of the same sum.

This amendment, like many others from the Opposition, would frustrate equity, would multiply anomalies and would produce such a complex system that on the one side the taxpayer would be driven insane trying to get around the complex code while on the other side there would be so many avenues of avoidance that the whole tax would be a nonsense. Time and again I have stressed how narrow is the area in which there is likely to be a charge for capital gains tax on the donor or on the donee for capital acquisitions tax. There are very generous thresholds in respect of gifts within a family which ensure that the pictures of difficulty painted by the Opposition will have no reality in so far as the mass of people are concerned.

Many disposals, including gifts, do not give rise to capital gains tax charge. The most obvious one is money. Consequently, ordinary everyday money gifts will not be subject to a capital gains tax charge, no matter how large the amount. Neither will the gift of a house which has been the donor's principal private residence nor its contents give rise to any capital gains tax. Various forms of tangible movable property up to £2,000 in value are exempt also and Government securities are not chargeable assets. Also free from this tax are wasting assets, regardless of their value. These would include boats, motor cars, caravans or animals. Combining these exemptions with the £50,000 and the £150,000 exemptions for farms and businesses could well exempt a set of gifts of up to £100,000 in value in a non-family case and to £200,000 in a family case.

I am confident that 95 per cent of our people have nothing to worry about in so far as these taxes are concerned. However these Bills are not intended to be tax exemption Bills. We have never offered them as such. The tax exemption Bill this year on the capital front will be the Finance Bill which will exempt from death duties the estates of persons who die from April next. This Bill, together with the Wealth Tax and the Capital Acquisitions Tax Bills, are designed to impose tax on people who are fortunate enough to have very substantial property other than their principal private residences. A home and its contents are the only wealth the majority of our people can ever hope to acquire. So far as the majority of people are concerned, too, business properties are exempt and for others the taxes payable will be much less than anything that will be paid by way of estate duty.

I would remind the House again that within families there can be tremendous transfers that would not attract tax. A father with three sons could transfer his estate of £450,000 without there being any liability to capital acquisitions tax. Only those who are lucky enough to have property of substantial value will be asked to pay. It can be said truly that lucky is he who has wealth enough to be called on to pay capital gains tax, capital acquisitions tax or a wealth tax.

Apart from those in farming or business, others can gain gifts and assets in any form embodying a capital gain of up to £500 so that up to £15,000 could be acquired by way of capital gains during a period of 30 years and be exempt from tax. That would represent value of £30,000 or more, and if gifts by way of cash or national loans were added it is clear that the gifts could be very much greater and be exempt.

It was suggested that the provision relating to the £50,000 or £150,000 in sections 26 and 27 should be removed. Any law can be changed but it is not our intention to remove the exemption we are granting. For so long as the recipient retains a farm or business and passes it on on retirement, the whole exemption process will continue. What is said in section 27, subsection (3), is that if any of the assets forming the original disposals are sold within ten years there will be a charge based on the original donor's cost. Therefore, if all the assets are disposed of within ten years the exemption will not apply, but if there is a part disposal within that time there would be only a partial availability of the exemption. If a sale were made outside the ten-year period, the charge to capital gains tax would be by reference to the amount paid or, in the case of a gift, the market value at the time of the acquisition.

I have said here and elsewhere that the thresholds or exemptions will be adjusted from time to time in the light of experience. This shows a most reasonable approach on the part of the Government, an approach which indicates a thorough understanding of holdings of family wealth and the way in which they are used. It shows a proper appreciation of what is a sound social and economic policy. The objective is to free the majority of moderate sized farms or businesses from a charge of capital gains tax when they are transferred to members of the immediate families. The thresholds and exemptions we are providing ensure that this goal is achieved.

I emphasise again that the relief is not a deferment, as suggested by Deputy Colley and Deputy O'Malley, but that it is a real and permanent benefit. It is likely that that benefit will continue through generations of farmers and businessmen and will apply to more than 95 per cent of transactions of this kind both now and in the foreseeable future.

The question has been raised why gifts should be treated differently when made inter vivos and on death. The reason is obvious. Gifts are a matter of a deliberate, conscious and voluntary choice made during a life time. They can be arranged; they can be manipulated; they can be adjusted. The donor is aware of and can use the increase in the value of the asset and dispose of it as he wishes.

Normally, thanks be to God, death is not really a matter of choice. With the new treatment of gifts as compared with estate duty, there will be no scope for manipulations in anticipation of death. I emphasised that at the beginning and I repeat it now. That is the proper course to take. There are also tax advantages in distribution before death in so far as the capital acquisitions tax on gifts inter vivos will be at a rate 25 per cent below what it would be in the event of death. In addition, the very generous exemptions from capital gains tax of £50,000 and £150,000 to which I have referred so often, and cannot refer to too often, go a very long way towards encouraging people to transfer their property well before death.

Mr. Colley

We have listened to the Minister now for the best part of half-an-hour. I do not think anybody listening to him could possibly suspect that what he was doing was arguing against what he and his colleagues said in the White Paper they were going to do. That is what this question was all about. This amendment seeks to do what the Government said they would do in the White Paper. What the Minister has said is an argument against what he said he was going to do in the White Paper. It can be seen in perspective when one realises that.

The Minister has chosen suitably selective examples and has ignored the fact that, in the case of gifts benefiting from the exemptions proposed in this Bill, what is involved, despite what he says, is a postponement. The only way it would not be a postponement would be if the property concerned passed on from father to son from generation to generation. Once the property, or any portion of it, is disposed of either by way of sale or gift then, of course, the liability arises and that liability is related back to the date on which it was first acquired.

In other words, a farmer who got a farm either by purchase or by inheritance, say, 40 years ago, would find that the property was valued as at that date 40 years ago, and the gain would be estimated from that date up to, perhaps, 30 years hence when his son, having got it from him, disposed of the property. At that stage the liability would arise. There is no use in the Minister saying this is an exemption. It is a postponement.

May I come back to the question I asked the Minister and to which he did not reply in all he said? It is a fairly straightforward and simple question. When the Minister decided to go back on what was said in the White Paper, and to apply both capital gains tax and capital acquisitions tax to the one transaction, at that stage did he have any estimate of the consequences of doing this and any estimate of the consequences of the changes he made in the Capital Gains Tax Bill in the rate and in the thresholds? Did he have any estimate or did he not? That was the question I put to him and on which he spent such a lot of time in replying, without actually giving the answer and, in fact, arguing against his own proposal in the White Paper. Could I ask the Minister to answer the question now?

Mr. R. Ryan

I have already answered the question very explicitly. The piece of the answer which Deputy Colley does not like is that there is a huge hunk of wealth holdings which never came within the taxation net because they avoided tax. Nobody knows the size of them and I can only assume from the protests coming from some quarters that they must be quite sizeable. The vast majority of holders of wealth who came within the capital taxation net in the past and the estate duty net will be exempt under the code we are now offering.

Mr. Colley

I asked the Minister a very simple question and it is somewhat significant that he refuses to answer it. He says he answered it explicitly. If he calls what he said just now an explicit answer, I am afraid I cannot agree with him. The question is: did he or did he not have estimates of the consequences of what he was doing? It is implied in what he has just said that he did not have estimates. Is that what the Minister is saying—that he did not have estimates?

Mr. R. Ryan

No. I announced in the budget this year that we were making a provision of £3 million in relation to capital taxation. There is no knowing what is outside the net of the capital taxation code because vast property holdings have completely escaped liability to capital taxation in the past. Nobody knows the size of them. I have said that for over a year now. The venom of the protests from some quarters would appear to indicate that there must be substantial holdings there.

We will be exempting the vast mass of the people. Under the existing estate duty code a very large proportion of the assets which are caught at the time of death are the family home, money in the bank, personal property, furniture and things of that nature. They will be exempt under the packet of taxation we have, so it seems that the majority will be exempt.

Mr. Colley

Am I to take it from what the Minister is saying that he did not have estimates? Am I right in that?

Mr. R. Ryan

I told the Deputy what the estimate is.

Mr. Colley

The Minister cannot have it both ways. Either he had an estimate or he had not. He has been telling us why it could not be estimated. At least, if words mean anything that is what he conveyed to me. He was saying that there were vast hunks of wealth of which nobody knew anything and, therefore, they could not be estimated. That is my understanding of what he was saying. If I am correct, he is saying he did not have estimates. Would the Minister say clearly and explicitly did he or did he not have estimates on which he could rely?

Mr. R. Ryan

I have given the estimate.

Mr. Colley

Is the Minister talking about the £3 million.

Mr. Crowley

It could equally be £33 million according to himself.

Mr. R. Ryan

That is very interesting.

Mr. Colley

Is the Minister saying that the estimate is £3 million, or is he saying: "A figure of £3 million was taken out of the air but, because we believe a whole lot of money is there, but we do not know anything about it, this estimate is not worth anything." Either he has an estimate or he has not. Which is it?

Mr. R. Ryan

Clearly the income from capital gains tax in the initial stage will be very small because there has to be a period during which the gain is made before the gain becomes significant. We have said that. It was said in the White Paper in February, 1974.

Mr. Colley

Perhaps the Minister is losing sight of the reason why this question is being put to him. Let me refresh his memory. He told us that one of the reasons why he departed from what was in the White Paper, and what is proposed in this amendment, was that, because he had reduced the rate of capital gains tax and altered the thresholds, there would be a reduction in yield and, therefore, he would apply both capital gains tax and capital acquisitions tax to the one transaction where that applied to counterbalance that. That is why I am asking him did he have an estimate.

You can see, Sir, how difficult it is to get any kind of an answer out of the Minister on that question. I am putting it to him, through you, Sir, that if he has an estimate we should have it, and he should tell us what he thinks the effect was of the changes he made, and to what extent they are being counter-balanced by the Minister refusing to do what is provided in this amendment, and what he said he would do in the White Paper. Either he has some estimates on this or he has not. Would the Minister say, if he has the estimates, what the figures are, and what are the consequences of doing what he did and what he proposes to do now? Could we get that right?

Mr. R. Ryan

The Deputy has not been listening to me since 4 o'clock.

Mr. Colley

I have been listening rather intently.

Mr. R. Ryan

I am afraid the Deputy was not but, if he were listening intently, he is now trying to pretend he did not understand. I have said very clearly that estimates cannot be accurately forecast because these accumulations of wealth have never been on record here. Although every other European country has them on record, we never had. Added to that, we do not know what the pattern of behaviour will be. Capital gains tax will probably change the pattern in so far as holding on to wealth is concerned. It will also change the pattern where the purchase of wealth is concerned. Those tempted to engage in speculation to make a quick gain may decide not to so engage in future because of the tax they will be called upon to pay. As far as gifts are concerned, many gifts in the past were made for the purpose of avoiding death duties; they were made by people in the prime of life and in the whole of their health who decided they should anticipate their passing on and prevent any portion of their accumulated wealth going to the State.

Mr. Colley

It will now be done to avoid capital gains tax.

Mr. R. Ryan

As I say, this was never on record here but we know for a certainty that the better off made these decisions and thereby avoided paying tax. They were entitled to do that since it was quite legitimate under the unsatisfactory law that existed. We have no way of forecasting, and I have said this repeatedly over the last year, precisely what the income from these taxes will be but, on the basis of the best information available to the Revenue Commissioners and published in their annual reports of such accumulations of wealth as are known, we anticipate that in or about £3 million will be the income this year from these new taxes. If the figure is greater than that it will be because estates which escaped tax in the past will be now caught in the net. If it is less it will be because we made an overestimate of the likely impact of the new taxes. What is particularly difficult is knowing what will be the pattern of behaviour in the early years of the operation of these new taxes. If one looks to the experience of other countries one finds a similar difficulty existed in assessing what the tax would produce by way of revenue. It is equally impossible to anticipate the pattern of property acquisition and transfer because the new régime will be bound to affect people's disposition towards property holding and property creation.

Mr. P. Belton

Suppose a person is building an office block at a cost of £100,000 and there is two years' interest at 15 per cent, if he sells that block for £200,000 is that a capital gain of £100,000 or £70,000? Will he be allowed interest as part of his capital investment?

Mr. Colley

He will not.

Mr. R. Ryan

Interest is set off against income.

Mr. Colley

He is allowed whether or not it is set off against income tax.

Mr. P. Belton

There should be some relief in the case of someone who has to sell in order to pay debts. If a slump comes and one is paying interest at the rate of 15 per cent, £15,000 on £100,000, surely that should be treated as a capital investment when one is compelled to sell. In the case I mentioned the figure should be £130,000 and not £100,000.

Mr. R. Ryan

Interest is not available for set off against capital gains tax. It is available for set off against income tax liability. Clearly, there cannot be a double exemption and a double set off in respect of the one liability.

Ruairí Brugha

Would it not be chargeable if he were deemed to be engaged in business?

Mr. R. Ryan

If he were engaged in business it would be set off against the profits of the business and it would therefore, be an income tax set off.

Ruairí Brugha

Deputy Belton was talking about the person engaged in the business of development. If part of the development is an interest charge on the loan does it not then become a charge as a business?

Mr. R. Ryan

I have explained why one cannot have it available twice.

Mr. M. Dockrell

In the case mentioned by Deputy Belton, if there was no actual profit but there was a loss, what would happen then? Would the person concerned get the benefit of that? It seems rather unfair.

Mr. R. Ryan

No. One cannot have a situation in which there is a choice of election as between the set off or a particular liability. If that were to be the position one could arrive at a situation in which capital losses could be set off against profits arising from income.

Mr. Crowley

But the example Deputy Belton gave was a once only investment, not an on-going thing.

Mr. R. Ryan

Deputy Belton was dealing with the situation where someone was in the middle of a business deal and was obliged by circumstances to terminate that deal. He might well have become an office block builder and speculator when Fianna Fáil——

Mr. P. Belton

But if he were a speculator it could be used against income.

Mr. Colley

The fact of the matter is that in the situation visualised by Deputy Belton there is a specific provision excluding allowance for interest and it is also a fact that this does not apply in Britain. Interest which is properly capitalised is allowed, as any logical view of the situation would provide, and in regard to Deputy Belton's query, I do not think there is any dispute. The answer is that it is not allowed and therefore the question of electing whether one will set it off against capital gains tax or income tax does not arise. It is perfectly easy for the Minister to provide that one does not have the election but the Minister specifically excludes any allowance for interest. We will be dealing with this matter again on a later section and I hope to pursue it further then. I do not know if Deputy Belton wants to pursue it further at the moment.

I should like now to come back to what I was asking the Minister earlier. He said a great deal and I must confess I was reasonably sure from what he had said up to the last time he intervened; I was reasonably sure that what he was saying was there were no estimates available but, in view of what he said on the last occasion, I am not sure now if he said there is an estimate of £3 million. But there is not any estimate. Perhaps I could break it down a little further. He said that when he changed the proposed rate of tax and the threshold this had an effect on the amount of revenue expected. Can he now indicate what effect it did have on the amount of revenue expected?

Mr. R. Ryan

For the reasons I have already given this cannot be said with certainty.

Mr. Colley

Even to the extent that the £3 million is said with certainty? Even with that degree of certainty?

Mr. R. Ryan

I have indicated on many occasions that there must be an element of speculation in that figure as well.

Mr. Colley

Accepting that.

Mr. R. Ryan

If we had an obligatory census of property holding in this country then we could say with greater precision what the result would be. We cannot say with complete precision because we do not know what the pattern of behaviour in the future will be. Therefore it is not possible to determine with precision what the result of the taxes will be. It will take a number of years' experience of the taxes before we can get positive accuracy into our forecasts. This has always been the experience of people in the introduction of taxes of this kind. The same problem no doubt faced the originator of estate duty. It could have been related to the pattern of deaths.

You could to some extent, on the basis of vital statistics, expect so many people to die, but unless you happen to know their possessions of wealth at the time they die you cannot say with certainty what the result of any particular rate of estate duty is going to be. We know, in the light of the experience of the past, what the income has been from estate duty and the annual report of the Revenue Commissioners spells out the percentage of estates above and below certain figures and the amount of receipts which came from estates of different size.

All that is known. To the extent that that is a guide it has been used as one of the bases on which the Revenue Commissioners have made their assessments. In the absence of any record of the age at which people hold wealth, the age at which they accumulate wealth, the age at which they transfer it voluntarily inter vivos and so forth, there is no possibility of making the precise forecast one would like to make. Clearly if, as we did, we adjusted the thresholds so as to remove from liability people who were previously in it, that meant a minus quantity as far as income was concerned, but in so far as we generated a liability to capital gains tax as well and in some cases a liability to capital acquisitions tax, there was likely to be a plus. We could not say with any absolute precision what the precise adjustment would be in respect of the removal of one liability and the creation of another.

Mr. M.E. Dockrell

The Minister is aware that William the Conqueror had the same problem after 1066 and he got out the Doomsday Book.

Mr. R. Ryan

I will deal with it differently.

Mr. Colley

The Minister seemed to be trying to take both sides at the one time but I think finally he came down in favour of the statement that he does not know and could not know what the effect would be of reducing the rate of tax and increasing the thresholds. I am accepting that that is what he is saying. If that is so, I am now asking him why, not knowing what the consequences would be, he decided to apply capital gains tax and capital acquisitions tax to the one transaction having stated in the White Paper that he would not do so. It would appear that he does not know what the effect was of reducing the rate and increasing the thresholds but he advanced as an argument for not doing what is in this amendment the fact that he had done so and had to counterbalance this by putting capital gains tax and capital acquisitions tax on the one transaction. I am asking him now, in the light of what he has said, why did he do this when he does not know what the effect is.

Mr. R. Ryan

It is a good job I am a patient man. I explained this on the second last day we were talking about capital gains tax.

Mr. Colley

Maybe the Minister thinks he did but I am saying he did not.

Mr. R. Ryan

Maybe Deputy Colley was out of the House at the time.

Mr. Colley

No, I was here but he did not explain it.

Mr. R. Ryan

I explained it again here today——

Mr. Colley

The Minister could have fooled us.

Mr. R. Ryan

——in my statement which he said was too long.

Mr. Colley

I did not say it was too long. I just commented on the length the Minister took not to answer the question.

Mr. R. Ryan

I answered the question and the Deputy did not like the length of it because I answered all the questions that had been posed, including one of the reasons we changed the outline as indicated in the White Paper. The Opposition would love to crucify the Government and nail them down to some passages in the White Paper but in regard to other ones they say we were right to move from the original outline and in other ones they say they will do their damndest to make sure we move either from what was in the White Paper or what is in the Bill. Apparently there is some strange virtue about preserving an exemption which would confer considerable benefit on the comparatively well-to-do. Fianna Fáil, the latter day converts to capital gains tax, want to preserve this exemption for the comparatively well-to-do, showing what we suspected all along—that they knew the tide of public opinion was against them and they resolved at their Ard Fheis last year to have a capital gains tax. Therefore they went through the face-saving exercise of pretending that they were now in favour of it but they are doing their damndest as far as this debate is concerned to ensure that the whole capital gains tax system is watered down to become a nothing.

Mr. Colley

That is a very wide answer to a precise question.

Mr. R. Ryan

They will not find any disposition on the part of the Government to assist them in making a nonsense of capital gains tax legislation. Again and again I have told the Opposition that if we did not subject gift disposals to capital gains tax the way would be wide open to avoidance.

Mr. Colley

That is another point. The Minister said that but I have spent since we began trying to get the Minister to explain the one point which he himself made. Would he, for the moment anyway, confine himself to that one point?

Mr. R. Ryan

You just cannot win. Deputy Colley lays down the rules all the time. There are other rules. There are the rules of general, free and open debate.

Mr. Colley

If the Minister wants to prolong the debate that is all right.

Mr. R. Ryan

Deputy Colley's explicit questions have been explicitly answered. He does not like answers which show how shallow the Opposition are, that they are carrying on a debate and holding up the working of Parliament to protect the exceptional few who will be caught in a situation of having a gift——

Mr. Colley

We are proposing to do what the Minister said he would do. What he is saying must be judged in that context.

An Leas-Cheann Comhairle

An tAire.

Mr. R. Ryan

Those who are in thresholds of——

Mr. Colley

Was the Minister trying to protect the rich?

Mr. R. Ryan

——over £150,000 are apparently to enjoy indefinitely getting gifts without any liability to tax. We do not consider this is appropriate in a society——

Mr. Colley

Why did the Minister propose it in the White Paper?

Mr. R. Ryan

——which is as deprived as ours and in a society which is riddled with so many financial and taxation anomalies as exist in our society.

Mr. Colley

Why did you propose it in the White Paper?

Mr. R. Ryan

The Deputies opposite want to nail any proposal in the White Paper which would tax the well-to-do.

Mr. Colley

Why did you propose it in the White Paper?

Mr. R. Ryan

They want to alter everything in the White Paper which proposes to tax the well-to-do.

Mr. Colley

Why did you propose it?

Mr. R. Ryan

We are not proposing to assist them in that line. We published the White Paper to do what Fianna Fáil never did, to give the people an opportunity of expressing their views on outline proposals. They did that. We had the most exhaustive consultation for many months.

Mr. Crowley

Then you changed your minds.

Mr. R. Ryan

We listened to people to hear how they saw the implications of the taxation and, as a democratic Government, we then produced a package which took account of the views which were expressed to us. They are reflected in this Bill, which grants exemption to 90 per cent or 95 per cent of our people from their small and comparatively humble possessions of wealth while it proposes to tax capital gains on the comparatively well-off when they are making transfers of their property, when they are in a position, because they have disposed of their property, to pay the tax out of the profits they have made because the gain has grown while the property was held.

Mr. Colley

The Minister appears to want to prolong this discussion and if that is the way he wants it that is his business. We are not trying to hold up the passage of this Bill although we want to discuss it in detail. In view of the fact that the Minister simply becomes politically abusive when he is asked to answer a specific question, and when one remembers his political abuse is directed at a proposal which he made in the White Paper, one can judge the sincerity of that abuse.

I am going to ask the Minister the question once more and if he wants to get on with the Bill I would ask him not to go off on other tangents. Will he answer the question, which is a straightforward one? In view of the fact, as he has told us, that he had no worthwhile estimate of the consequences of reducing the rate of capital gains tax and increasing the thresholds, why did he depart from the White Paper and apply both capital acquisitions and capital gains taxes on the one transaction as a counter-balance from the point of view of revenue? That is one of the reasons he gave us and I am only dealing with that. On what basis did the Minister decide to apply the two taxes to the one transaction as a counter-balance to the loss of revenue estimated by reason of the changes he made in the rates of tax and the thresholds? That is a simple, straightforward question and it does not require political abuse to answer it. It is a simple question, if the Minister is genuine in the reasons he is putting forward. If he is not, of course, we can expect more political abuse instead of an answer.

Mr. R. Ryan

Anyone who reads the official record will find I have said ad nauseam that we were out to frustrate avoidance practices. I have nothing further to add.

Mr. Colley

It is a matter of record in this House that the Minister said that one of the reasons he departed from the White Paper and was proposing to apply capital acquisitions and capital gains taxes to the one transaction was because of the loss of revenue involved in the changes in rates and thresholds. Does the Minister agree he said that? Does the Minister deny he said it? We may take it quite clearly that the Minister cannot deny he said it. He knows as well as I do that he said it and now he is being asked to explain it. However, he became abusive and finally he comes back to another reason that he gave, namely, as an anti-avoidance measure. It is true he said that and we discussed it before but I made it clear I was simply asking him about the other reason. Once more I am asking him if he will answer the question? He gave that reason to the House and will he now tell us on what basis did he decide to apply the two taxes to the one transaction as a counter-balance to loss of revenue, having regard to the fact that he does not know what is the loss of revenue?

Mr. R. Ryan

The Deputy should read the Official Report and let us get on with the debate.

Mr. Colley

If the Minister made a mistake let him say so and we will get on quickly——

Mr. R. Ryan

I did not make a mistake. I have answered the Deputy's question——

Mr. Colley

If he did not make a mistake will he justify what he said? We should not run around in circles, making a nonsense of the procedure of this House.

Mr. R. Ryan

The debate on the last two days shows one thing clearly —that Fianna Fáil are trying to obstruct passage of this measure and the other capital taxation measures so that we can get rid of death duties. I am not going to participate any further in that game.

Mr. Colley

The arrogance of the Minister in trying to plough through with legislation he does not understand is just too much to take——

Mr. R. Ryan

How long has the Deputy been speaking on this amendment?

Mr. Colley

I did not direct attention to this before but I am going to do so now in view of the abuse we are getting from the Minister. Is it not a fact that the Minister introduced an amendment to this Bill which he had to withdraw because he did not understand it and could not explain it? Let the Minister not talk about obstruction in this House when we are dealing with a Minister who does not know the legislation he is introducing.

I am asking the Minister to explain the reason he gave in the light of what we now know, that he did not know the figure. It is no answer for the Minister to say it is on the record, that it is an anti-avoidance measure or anything else. That does not answer the question. If we are to make any progress, at least we must have some slight regard to logic. Will the Minister answer the question? If he cannot answer the question, if the reason he gave was not a true one, let him say so and we will ignore it and carry on. However, if it was a true reason we are entitled to ask him to explain it.

Mr. R. Ryan

If Fianna Fáil have not enough troops in the House to vote on this matter I can understand why they are carrying on in this way. I have given an answer to every question and I suggest that the amendment be put.

Mr. Colley

I have asked the Minister the question and I will ask him again——

Mr. R. Ryan

If the Deputy continues like this until 6 p.m. his troops might be in at that time.

Mr. Colley

Would the Minister, for once, care to explain why he went back on what was in the White Paper in the context of one of the reasons he gave in this House? In fairness to the Minister I want to make it quite clear it was not the only reason he gave. However, one reason he gave was that it was a counter-balance to the loss of revenue involved in changing rates of taxes and increasing thresholds. It now emerges he does not have any idea of what the loss of revenue involved could be and, on that basis, I am asking him why did he decide to put the two taxes on the one transaction as a counter-balance. How did he arrive at this, what figure did he have? If he had no figure, will he agree he did it having no figure in mind?

Mr. R. Ryan

The figures are those contained in the annual report of the Revenue Commissioners.

Mr. Colley

Will the Minister refer us to the precise figure in the annual report of the Revenue Commissioners that will answer the question I have asked?

Mr. Crowley

The note the Minister got from one of the civil servants does not give the page number.

Mr. R. Ryan

They are the only figures available in the annual report of the Revenue Commissioners. I have held it up three times in the House in the last hour. If Fianna Fáil would like to show how few Deputies they have in the House, why do they not call a division?

Mr. Colley

I accept that in the nature of things it is not possible to get a precise estimate but that is not what I am asking the Minister. Since he put forward as one of the reasons for refusing this amendment—an amendment that is seeking to do what he said he would do in the White Paper—the fact that he was counter-balancing the loss of revenue involved in changing the rates and increasing thresholds, what was the basis for that action in the context of counter-balancing revenue when he did not know what revenue was involved either by way of loss or gain? This is a simple, straightforward question.

Mr. R. Ryan

Does the Deputy expect there would be a gain of revenue as a result of the application of the two taxes?

Mr. Colley

It would seem on the face of it that to apply one tax only to a transaction would yield less than to apply two taxes. Would the Minister accept that proposition?

Mr. R. Ryan

That is what I have said from the beginning. If the thresholds of exemption are increased the revenue goes down and if one increases liability the revenue goes up. I have set my plus and minus but perhaps the symbols were not understood by the Deputy. I said that 20 minutes ago.

Mr. Colley

For the first time since the Minister made the point he is now directing his mind to the point. He could have saved a great deal of time if he had done this at the beginning. What seems to be emerging from what the Minister is now saying is that yes, he did expect there would be an increase of revenue by doing this and on the other hand there was going to be a loss of revenue by reducing rates and increasing thresholds. Is the Minister not also saying that this is a general proposition and that he did not know how much loss or gain of revenue would be involved?

Mr. R. Ryan

I am saying also that the mesh has been made smaller by these changes and the opportunities for avoidance are less and that also increases yield.

Mr. Colley

We are making slight progress. We now have established that one of the reasons why the Minister did this was to counter-balance the expected loss of revenue but he had no idea of the amount of revenue that would be lost or of the amount of revenue that would be gained by applying the two taxes to the one transaction. I accept the fact that it would be difficult, if not impossible, to have any accurate estimate of the sums that would be involved. I never argued that they would be available but the Minister implied that they would be in what he said, that he was counter-balancing one against the other.

The point I am coming to in the context of the argument the Minister made is that the application of the two taxes to the one transaction is not just a watering-down or a peripheral change in the proposals in the White Paper; it is a pretty fundamental change. The White Paper states that only one tax would be applied to a particular type of transaction and to say now that two taxes will be applied cannot be dismissed by the Minister as a minor change. It is a major change, indeed, it is a change in principle. It now appears that it was done not with any accurate idea or even remotely accurate idea, of what amount of money would be involved. In fact, I doubt if that reason given by the Minister had any bearing on the matter at all although it has taken us a long time to establish that he did not know what was involved in the way of figures and, therefore, it could not nor should not have had any real bearing on it.

This amendment is designed to do what the Minister proposed to do according to the White Paper. The change the Minister has made is a fundamental change in principle and we can now accept, in view of what we have extracted from the Minister, that the reason about revenue is totally irrelevant. The Minister's real reason for doing this is because he believes it is an anti-avoidance measure, that it is necessary to do this so as to prevent avoidance of liability. I have certain doubts as to whether it is necessary for that purpose. If it is so, it was so when the White Paper was published and when the Minister proposed to do precisely what is sought in the amendment.

Will the Minister tell us if there has been any change in the situation since the White Paper was published or was this something which was overlooked at the time of the White Paper, that this would provide a loophole for escape, or why does this change come about now? The only cogent reason the Minister has put forward for what he is proposing to do is anti-avoidance. Even the Minister will agree that in view of the fact that he proposed in the White Paper not to do this we are entitled to ask him what has changed since. Is it that it was not known at the time the White Paper was issued that this would provide an avoidance loophole?

Mr. R. Ryan

I have answered these questions ad nauseam and I cannot add anything to what is already on the record.

Mr. Colley

The Minister's idea of answering a question may be different from mine. We only got an answer to the question—which I put to him when this debate started today—in the last few minutes, although the Minister might have thought he was answering the question up to that. I put it to the Minister that he has not replied to the questions I put to him. Would the Minister reply to these questions now, briefly? I have no desire to hold up the House on this; I am simply seeking an explanation. If there is delay in dealing with this Bill it is largely due to the Minister's unwillingness or inability to answer straightforward questions.

Mr. R. Ryan

I have done so to the best of my ability, and conscientiously also.

Mr. Colley

Restraining myself somewhat, could I ask the Minister if he would oblige the House by repeating, very briefly, his answer to the question as to what has changed between the issue of the White Paper and the issue of the Bill? Is it a fact that this possibility of a loophole here was unknown to or not adverted to by the people who drafted the White Paper?

Mr. R. Ryan

The White Paper was a broad outline and never professed to be anything more than that. In the course of consultations we made several amendments. Those in one direction were apparently welcomed by the Opposition and those in another were not. It would be extraordinary if there was only gain for some people and no disadvantage in any direction at all.

Mr. Colley

I submit that the question of whether changes from the White Paper were welcomed or not is irrelevant to this issue. The fact is that the White Paper proposed what I submit is a fundamental matter, that two forms of tax would not be applied to the same transaction. The Minister has now departed from that and the only reason given is that he regards that as providing a loophole for avoidance. In my view it is reasonable to ask, if that is so, has there been a change in the situation which would create a loophole between the issuing of the White Paper and the publishing of the Bill? Alternatively, was the position always the same but not adverted to in the preparation of the White Paper?

Mr. R. Ryan

In 95 per cent of all cases of transfer of property here no question of liability to both taxes will arise. That is a fact under the Bill as it now stands.

Mr. Colley

I do not accept that as a fact. That has nothing to do with the question I put to the Minister.

Mr. R. Ryan

In relation to the balance of cases the additional liability in cash will, in the overwhelming mass of cases, be negligible and if there is a departure from a hope or an intention expressed in the White Paper in effect it is negligible so far as the effect of the new tax package is going to be. We have a situation now in which we spend hours and hours of wonderful debate for those who love to see gladiators in the ring taking strips off one another but it does not help to produce an equitable, efficient system of capital taxation such as we intended to bring in. I suggest that if we regard that as our objective we could proceed instead of trying to score debating points based upon phrases and sentences in a White Paper which at the time it was offered was offered as a broad outline for discussion and consultation.

Mr. Colley

The Minister has a remarkable capacity for refusing or being unable to answer a straightforward question. We have heard what he has just said as a reply or a purported reply to a question I put to him, had anything changed between the issue of the White Paper and the issue of the Bill which produced a loophole situation. I also asked him if the explanation for the departure from what was in the White Paper in this instance was that the possible lophole was not adverted to. It is a simple question and it does not require the Minister to go around in circles in the way he has been doing. Would he please answer the questions and we will get on with the job?

Mr. R. Ryan

I have answered them.

Mr. Colley

When?

Mr. R. Ryan

During the progress of the debate.

Mr. Colley

Does the Minister think he has answered them today?

Mr. R. Ryan

The Deputy can read my speech on Second Stage.

Mr. Colley

I am asking the Minister does he think he answered them today?

Mr. R. Ryan

I do not think the Minister's opinions are relevant in that respect.

Mr. Colley

If that is the way the Minister wants it, that is the way he will get it. He has the choice. I have assured him that we have no desire to hold up this debate but if he thinks he will get away with this kind of nonsense and contempt for the House he will not. I am not so stupid as to expect that this Minister will listen to reason and actually accept amendments which would improve the Bill; that is expecting far too much: all I am asking is that he will direct his mind to the points put forward and answer them. We had an example today—not by any means the first either in this debate or from this Minister in other matters—of the waste of the time of the House by the refusal or inability of the Minister to answer straight questions. When it ends in the contemptuous treatment the Minister is now trying to give us, if there is delay in the passing of the Bill, the Minister can know well where the fault lies.

I shall now ask the Minister once more: will he please say—I shall break down the question to make it simpler —first, has there been any change in circumstances between date of issue of the White Paper and the date of publication of the Bill which would make acceptance of this amendment provide a loophole for evasion or avoidance?

Mr. R. Ryan

I have answered it.

Mr. Colley

It is a simple "Yes" or "No"—has there been any change? Is the Minister willing to give a short answer like "Yes" or "No"?

Mr. R. Ryan

Read the debate, or else get the troops in but let us get on with the business of Parliament.

Mr. Colley

Will the Minister give a short answer to that simple question? All he has to say is "Yes" or "No". In case he forgets I shall repeat the question for him: has there been any change in the circumstances arising between the date of publication of the White Paper and the date of publication of the Bill which would as a result provide a loophole if this amendment were accepted? That is a simple question. Is the Minister refusing to answer?

Mr. R. Ryan

I have answered.

Mr. Colley

When did the Minister answer that question?

Mr. R. Ryan

During the debate.

Mr. Colley

When during the debate? Does he think he answered it today? It is the Minister who will suffer more than we will if he persists in this attitude. I am trying to be reasonable but if the Minister persists he will find it will be far more disadvantageous for him than for me. I am asking a simple question which requires only a simple "Yes" or "No" answer.

Mr. R. Ryan

My personal comfort, status and standing do not enter into this. I have answered. Would the Deputy not have a division and we shall see how few Fianna Fáil Deputies are in the House?

Mr. Colley

The Minister seems to be in a great hurry to have a division. We shall have a division when we want it and when the time is appropriate in relation to the progress of the Bill. The Minister is being asked to answer a simple question "Yes" or "No" and he need not think he will avoid his responsibility by trooping the Government Deputies through the lobby. He is simply acting in a childish manner. I will restrain myself. I will not add another epithet as I was going to do to describe his activities. I am asking a simple question. Why does the Minister refuse to answer? He is refusing to answer.

Mr. R. Ryan

Perhaps it is an increase in wisdom—does that satisfy the Deputy or is he of the view that he can dictate what words the Government must use or that any Member of the House must use?

Mr. Colley

If the Minister wants to pursue the line he has being pursuing and take a long time to say "Yes" and "No" as he did before, he can do that. We will eventually get to the answer. But it is a straight, simple question. Would he say whether there has been any change in the circumstances arising between the date of publication of the White Paper and the date of publication of the Bill as a result of which acceptance of this amendment would create a loophole? Will the Minister answer?

An Leas-Cheann Comhairle

Deputies will appreciate the position of the Chair in regard to repetition which is now becoming monotonous.

Mr. Colley

The Chair will appreciate that the House is entitled to get relevant information from the Minister and I submit that where there is a very substantial, not to say fundamental, change in the legislation brought in by the Minister from that proposed in the White Paper we are entitled to ask the reasons for it. One reasonable question in regard to that is whether there has been some change in the circumstances as a result of which what would not have been creating a loophole at the time of the White Paper is now creating a loophole because that is the reason the Minister has given for this change. That is a reasonable question and the Minister is totally unreasonable if he refuses to answer it.

Mr. R. Ryan

I have answered and at length that the Deputy considered to be too long but I suppose I am a fool to be feeding the Deputy because he will just keep on filibustering.

Mr. Colley

I suggest the Minister has not answered the question but he need not waste any time of the House; all he has to say is "Yes" or "No" to the question: have the circumstances changed? Why is the Minister refusing to say "Yes" or "No" to that? Very well, I shall take the second part of the question. Perhaps the Minister will think better of it. I rather suspect his reason for not answering is that he knows what the second part of the question is. It is this: at the time of the preparation and publication of the White Paper, was the fact, as alleged by the Minister, that acceptance of this amendment and acceptance of what is in the White Paper would provide a loophole overlooked or unknown to the Minister and his advisers?

Mr. R. Ryan

Read my speeches. If the Deputy has not read them, they are on the record now and they answer all his queries.

Mr. Colley

The persistent refusal of the Minister to answer straightforward relevant questions——

Mr. Crowley

This is the open Government we have been hearing about.

Mr. Colley

——is very disedifying. It also illustrates the attitude of the Minister and a number of his colleagues to the House. The fact is that we are now discussing an amendment which proposes to do what the Government proposed to do in their White Paper. The only real reason advanced by the Minister for not doing what he said he would do in the White Paper and for not accepting this amendment is that to do so would provide a loophole for people to avoid liability for tax. If that is the reason, I submit we are entitled to ask whether the existence, or the possible existence, of such a loophole was known at the time of the preparation of the White Paper. If it was known, then one set of circumstances arises. If it was not known, we are entitled to be told it was overlooked or not adverted to in the preparation of the White Paper if that is what happened. Why can the Minister not tell us this so that we can get on with the job and understand what we are talking about and why we are doing what the Minister is proposing to do.

Mr. R. Ryan

Deputy Colley said earlier that he wanted to make progress and get this legislation out of the way before we started on another Bill. At the rate he is going now, it will be about 1980 before we get anywhere.

Mr. Crowley

At the rate the Minister is going——

Mr. Colley

I would suggest——

Mr. R. Ryan

I have answered these questions ad nauseum.

An Leas-Cheann Comhairle

Deputy Colley.

Mr. Colley

There cannot be one person who has been listening to this debate who could agree that I have been holding up the debate. Is it not quite clear what the reason for the hold up is?

Mr. R. Ryan

It is because Fianna Fáil have not enough Deputies in the House and do not want a vote. That is the answer. Every time I have purported to explain the rationale behind this, all I do is feed the Deputy with information or some debating point on which he can deliver another discourse.

Mr. Colley

Would the Minister give a "yes" or "no"?

Mr. R. Ryan

Yes, because Deputy Colley would make mischief out of nothing.

Mr. Crowley

The Minister is known as Mr. Mischief himself.

Mr. Colley

The Minister is now saying that he does not propose to give the information sought because he feels it might be used by me and others to hold up the debate.

Mr. R. Ryan

The Deputy already has the information. All he wants me to do is assist Fianna Fáil to get a respectable lobby behind them for a vote.

Mr. Colley

I can assure the Minister, in case he thinks that it is what this is all about, that he is totally wrong.

Mr. Kelly

We could have ordered Estimates for today. Had we done that we should have been criticised for free-wheeling. We are trying to do serious business but we have been an hour and a half dealing with one amendment.

Mr. Crowley

Whose fault is that?

An Leas-Cheann Comhairle

Deputy Colley.

Mr. Colley

Has the Parliamentary Secretary been listening to this debate.

Mr. Kelly

No.

Mr. Colley

I suggest that if he were he would not have said what he just said.

Mr. Kelly

I have listened to enough debates of this kind to know the difference between work which is being seriously done and work which is simply being held up. I heard the Deputy say an hour and a half ago that he expected to see a large volume of financial legislation in print before he was prepared to make headway with this, that or the other. He also wanted headway made with this Bill. That cannot happen if we go on at this rate. We have reached amendment No. 17 and about one quarter of the way through the sections. When does the Deputy think this Bill will have made what he thinks of as substantial progress at this rate?

Mr. Colley

As the Parliamentary Secretary admitted, he did not hear the discussion here since 4 o'clock. If he had, he would have found that the best part of an hour was spent before the Minister could be got to answer a question put to him. The moment he did, we dealt with it and passed on. Now the Minister has spent the best part of 30 minutes refusing to answer two straightforward questions which could be answered with a "Yes" or a "No".

Mr. R. Ryan

I gave an answer for half an hour and the Deputy said it was too long.

An Leas-Cheann Comhairle

Deputy Colley, please.

Mr. Colley

I never complained that the Minister's answer was too long. I said it was lengthy and that in the course of it he did not reply to the question but that is another matter. For the benefit of the Parliamentary Secretary, let me repeat my simple and straightforward questions.

Mr. Kelly

I could not answer them. Therefore, the Deputy is wasting the time of the House by repeating them for my benefit.

Mr. Colley

Is it a waste of time for us to ask questions or are we to lie down under the arrogance of this Minister who refuses to answer reasonable questions? That is the choice we are faced with and the Parliamentary Secretary should realise it. He should also realise that as long as the Minister persists with this arrogant attiude, we will not let them away with it. I suspect if the Parliamentary Secretary were to consult with some Deputies on his side who have listened to this debate, they would not disagree very violently with my description of what has been going on.

Mr. Kelly

This reminds me of the Committee Stage of the Finance Bill last year where we had the earlier sections filibustered until we were all sick of it. The rest was driven through under the lash.

Mr. Crowley

The same Minister.

Mr. Crinion

The Finance Bill was only in for one week last year and we spent the whole night.

Mr. Kelly

The Opposition agreed to dispose of the Committee Stage in three days, which they did, but only after we spent 24 hours on our feet.

Mr. Healy

With respect to the Chair, I do not think it is in order for the Parliamentary Secretary who was not listening to the debate to come in here and talk about what happened last year. In all justice, he should sit in the House when the Minister is conducting business and see who is delaying. I do not like to interrupt but this, in my view, is completely irregular and uncalled for.

Mr. Colley

We are discussing an amendment which seeks to do what the Minister himself proposed to do in the White Paper. I have asked him to say whether there was any change in circumstances between publication of the White Paper and the publication of the Bill which would make acceptance of this amendment to provide a loophole for evasion. That is a simple question which requires a "yes" or "no" answer and we have not got it. I have also asked whether, as a result of the change and the reason given by him for this change from the White Paper, which is not to provide a loophole, that this was so at the time of the White Paper and was overlooked, inadvertently or otherwise. This is very relevant to consideration of whether this amendment is justified and the proposal in the White Paper was justified, or, alternatively, whether we should accept what is in the Bill. I can assure the Minister that if he would answer these questions, and he can answer them very briefly with a "yes" or "no", we will make progress.

Mr. R. Ryan

Our best efforts to devise suitable anti-avoidance measures came to naught because there were so many avoidance avenues open that no suitable anti-avoidance measures could be devised. In order to prevent the Bill becoming unworkable by allowing systems of avoidance in the future, as existed in the past in respect of estate duties, we had to drop our wish not to make transfers of this kind subject to a capital gains tax.

Mr. Colley

I accept the Minister said that a long time ago but that does not answer my question.

Mr. R. Ryan

It is the answer I am giving. There is no obligation on any person to answer a question in the words the questioner puts when such an answer would not reveal the true position. I have given answers very conscientiously, patiently and at great length—about which Deputy Colley complained——

Mr. Colley

I never complained.

Mr. R. Ryan

I did not give the answer Deputy Colley wanted but that is not a negation of democracy, or obstinacy on my part. That is not any sense of intransigence on my part. That is discharging my public duty as responsibly as I see it. It is my obligation to do that and I will continue to do so.

Mr. Colley

The Minister may be under the impression that what he has just said is an answer to my question. He said that a long time ago and thinks I am ignoring the answer he gave but that is not so. I am well aware of the reason he gave—the real reason he has given for departure from the White Paper is that to fail to do so would provide a loophole for avoidance.

I accept that is the reason he has given but that is not the answer to the question I have been asking him. One of the questions I have been asking is: "Has there been a change in the circumstances since the White Paper was issued which at the time of the White Paper would not have provided a loophole and now provides one?" Does the Minister appreciate that is a different question from the one he answered?

Mr. R. Ryan

No.

Mr. Colley

I am afraid the Minister is not directing his mind to the question.

Mr. R. Ryan

I am convinced Deputy Colley thinks the Minister is stupid and obstinate. Does that confession assist the Deputy?

Mr. Colley

No.

Mr. R. Ryan

I did not think it would.

Mr. Colley

I am more concerned with getting at the facts of the situation.

Mr. R. Ryan

I think Deputy Colley pretends to be convinced that the Minister is stupid and obstinate.

Mr. Colley

I think the Minister can be very stupid and very obstinate when he wants to be. I am not sure if he is stupid at the moment. I rather think that in the longer term, he is, but he is certainly being obstinate. It is not an answer to either of the questions I put to him to say that this change was made as an anti-avoidance measure. Of course it is an explanation why the change was made. It is on the basis that that is the reason for the change that I am asking the Minister the question: "Was it known when the White Paper was issued that to do what was proposed in the White Paper would provide a loophole?"

Mr. R. Ryan

Yes. It was believed we could devise a suitable system to close them off. As I said already every effort made to devise an anti-avoidance measure was frustrated by there being other avoidance avenues open.

Mr. Colley

At the time the White Paper was issued, as the Minister knows, it was proposed not to apply the two taxes to the one transaction. The Minister says to follow that through would provide a loophole. I am asking him: "Was it known at the time of the White Paper that to follow that through would provide a loophole?"

Mr. R. Ryan

It was clearly apparent in certain circumstances it would. No country has exempted the transfers, which we have been contemplating exempting. The reason they have not done so is that they found it is not possible to devise anti-avoidance measures. Our wisdom is no greater than the collective wisdom and experience of the world, including many parts of the world that have been operating these taxes for a long time past. We do not pretend to be superior to these people in wisdom or experience but we have learned by their experience We have endeavoured with all the skills available to us, to devise anti-avoidance measures. It is simply not possible to produce anti-avoidance measures. As I have said again and again the liability of the two taxes will fall on only a tiny fraction of people. The additional tax burden will be negligible in relation to the very substantial holdings of wealth these people will have.

Mr. Colley

I do not accept what the Minister said at the end about the small number affected but I will not pursue that. Accepting that what he says is correct, that other countries have found the same problem and no way around it and that he similarly is unable to find a way around this possible loophole, is it not a fact that all that was known at the time of the White Paper? Therefore, at the time of the White Paper was it envisaged that this loophole would be allowed or was it envisaged it would be closed in some other way?

Mr. R. Ryan

We hoped to close it.

Mr. Colley

The Minister hoped to close it and then found it impossible to do so.

Mr. R. Ryan

Yes.

Mr. Colley

We are making a little progress. Could the Minister indicate what way it was proposed to close the loophole? The reason I am asking this, in case he thinks I am simply trying to waste time on it, is that I believe that the principle involved in this amendment and the principle involved in the statement in the White Paper is the right one and one should not jettison it because of some difficulties in closing the loophole, which the Minister says exists. I should like to know in what way was it proposed to close the loophole and in what way was that proposal defective? I should like to be sure there is no way of closing the loophole, which the Minister says exists and which he intended to close.

Mr. R. Ryan

We made a very thorough examination and we found it was impossible to do so. It would be most inappropriate to use Parliament for the purpose of illustrating a multitude of tax-avoidance measures that could be taken. As I said no country has yet provided a weapon for doing this and it would be extraordinary if we were able to do it. I have not given up hope. We have made a number of quite radical and useful departures in tax reform. We might produce more.

Mr. Colley

To say that no country has succeeded in doing it and therefore it is unlikely that we will do it would seem to suggest that at the time of the White Paper the Minister thought it could be done, despite the fact other countries could not do it. I have not got all that much faith in the Minister but I have perhaps a little more faith in his advisers. Therefore I am not entirely convinced that the loophole the Minister says exists could not be closed.

In regard to the loophole as I understand it what the Minister is saying is that if you did not provide for the payment of both capital acquisition tax and capital gains tax on the one transaction, where both are applicable, people could avoid liability for capital gains, although presumably they would be liable to capital acquisition tax. Is the Minister's position that the avoidance would be on capital gains rather than on capital acquisition?

Mr. R. Ryan

There could be avoidance of both.

Mr. Colley

Surely that is not correct? The amendment provides that where capital acquisition tax applies no capital gains tax will apply. I would not object if it were reversed, that where capital gains tax applies no capital acquisition tax applies. It is the principle of not paying both I am more concerned with. If it turned out to be less of a loophole to switch around the position of the two taxes in this amendment, I do not think it would present any great difficulty from our point of view. If it were to be provided that where there was liability for capital gains there would not be liability for capital acquisition tax, I do not know which would be the greater liability. Does the Minister accept that if there is liability for one of the taxes one should not be talking about avoidance of liability for the other tax? He should only be concerned about avoidance of liability for the particular tax being imposed, whichever one it is.

The point I am trying to make is that if a man is liable for capital gains tax, without being able to avoid it, the fact he would not also be liable for capital acquisition is not of itself a reason for imposing the two. If he is definitely liable for one of them we should not be concerned about his not being liable for the other. It is only of the failure to apply both enables him to escape from both that we should be concerned, and that there is a genuine loophole.

Mr. R. Ryan

The tax on the capital gain is paid by the donee. There are two separate people, two separate liabilities for tax. One pays tax on the business gain and the other pays tax on the advantage he has gained because a gift has been given to him. He does not pay tax unless the amount reaches the threshold, which is £150,000 in respect of a child. The capital acquisitions tax is payable only on the element of the gift which is above that figure.

Mr. Colley

I should like to draw the Minister's attention to the principle of this rather than the details. It seems to me that what the Minister is saying is that we have to ensure the liability for both taxes because they fall on different people although they are in relation to the same transaction—the Minister does not want to let one out. I wonder is he right. As indicated in the White Paper, he contemplates a different situation where the liability would arise only for one tax—the person involved would be liable for only one tax. Is it not a misnomer to talk about avoidance when referring to somebody being liable for one tax when, if you do not apply the two taxes, one person will not become liable for the other tax? I do not think that is avoidance in the ordinary sense of the word. I wonder if the Minister would look at it again because I suggest he is misdirecting himself. Originally what he contemplated was liability for one tax and the reason he has given us for changing that is he wants to stop avoidance. It seems that what he means by avoidance is avoidance of the other tax. Why should there be two taxes on the one transaction? The Minister's reason is that two different people have liability.

Mr. R. Ryan

Avoidance arises because a person could make a gift to somebody and then get the proceeds of the sale of the gift from the person to whom the gift had been given.

Mr. Colley

Would that person not be liable to capital acquisitions tax?

Mr. R. Ryan

There is a threshold and it would arise only if the threshold were exceeded. If a father had a property and gave it to his son, the son could realise it the day afterwards and hand the cash back to the father. There would be no question of a capital gains tax being paid or no question of a capital acquisitions tax being paid either. Although one might think that might be a simple transaction, at least we would have an anti-avoidance measure. Money has mercurial qualities. It is very difficult to come to grips with it. The proceeds could easily be lost through a multitude of different distributions. At the other end of that machine there could be the person who got the proceeds of the sale of the gift and in that way escaped liability for capital gains tax. That is one element of avoidance.

Mr. Colley

Would they not be liable to capital acquisitions tax?

Mr. R. Ryan

There is the threshold.

Mr. Colley

The Minister is making this a lot more complex than it need be. He seems to be visualising a situation in which no liability for either capital gains or capital acquisitions in taxes would arise. All this amendment seeks is that where liability for capital acquisitions tax arises then no liability for capital gains would arise. That is not the situation envisaged by the Minister because the non-liability would arise in respect of one tax only where liability arose in respect of the other.

Mr. R. Ryan

Supposing the property disposed of was £150,005, there could be a percentage of capital acquisitions tax paid on the excess of more than the threshold figure. Under the amendment there would be total exemption.

Mr. Colley

I dealt with that earlier when I said we would not object if it were switched around to provide that where capital gains tax was payable no acquisition tax would be payable.

Mr. R. Ryan

The opportunity to engage in avoidance practices would be just as open if you were to reverse it.

Mr. Colley

It may be due to my density, but it is not clear to me why it should be that there would be opportunity for avoidance in any case. We are talking about exemption for one of the taxes which would only arise if a person were liable for the other tax. Therefore avoidance can only arise in respect of the other party to the transaction. One tax is being paid, so what is being avoided?

Mr. R. Ryan

It would be easy to set up an arrangement whereby a person disposing of an asset with a capital gain would pass it on and some element of acquisitions tax would arise. Under the amendment this liability would not arise.

Mr. Colley

What the Minister fears would arise only in very substantial cases where very substantial capital gains would be made.

Mr. R. Ryan

That is a presumption one cannot make because situations could be fabricated where liability for capital gains tax could arise and this amendment would grant a massive exemption from capital acquisitions tax for the donee.

Mr. Colley

Would the Minister have another look at it, solely on the principle that no exemption arises unless one or other of the taxes is payable—that unless there is liability for either tax this would not apply at all?

Mr. R. Ryan

We have gone to the extent of providing that the donee's gift will be measured by deducting from the gross value of the gift whatever is paid in capital gains tax. That is as far as we can go.

Mr. Colley

Could the Minister provide that one of the taxes would be payable, whichever was the greater?

Mr. R. Ryan

Again, there are two people here. We are not dealing with one taxpayer.

Mr. Colley

I accept that, but originally, as envisaged in the White Paper, the Minister was prepared to live with that situation.

Progress reported; Committee to sit again.