Dáil Éireann debate -
Wednesday, 5 Mar 1975

Vol. 278 No. 10

Wealth Tax Bill, 1975: Second Stage.

Minister for Finance (Mr. R. Ryan)

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

This Bill is to give effect to the Government's proposals for an annual wealth tax in part substitution for death duties, which will be abolished from 1st April next, and as part of the reformed system of capital taxation. In the years before this Government came to office the growing demand for the abolition of estate duty was founded on genuine grievances at the unfairness of a tax which, in a time of rising capital values, crippled the medium-sized farm or business and injured families while the larger wealth holders availed of the avoidance avenues inherent in the system to minimise their estate duty liability or, in some cases, to avoid paying any duty whatsoever.

The parties to the National Coalition listened to these grievances, recognised their validity and promised remedial action. Within less than one year of assuming office, the Government made known, in a comprehensive form, what their approach would be—they would abolish the present death duties altogether and replace them with a new and fairer system. This new system would involve a broadening of the capital tax base and a lengthening of the time span over which such taxes would be paid. Henceforth capital taxes would be paid in times of liquidity as in the case of capital gains tax, in small annual instalments as in the case of wealth tax and would be related to the amount received by the beneficiary as will be provided for in the proposed Capital Acquisitions Tax Bill, which will be introduced shortly.

To properly evaluate this Bill and the Government's other capital taxation proposals it is necessary to compare our reforms with the whole system which we are replacing. When the Government assumed office in March, 1973, estate duty was levied at rates from 1 per cent at £7,500 to 55 per cent over £200,000. In addition legacy and succession duties were payable. Some reliefs were provided for the immediate families of deceased persons and for a limited and declining number of small farmers. In my first budget I increased the exemption threshold to £10,000. Nevertheless it was, and still is, apparent that the inequities of death duties cannot be cured by tinkering around with an archaic system and an enlightened pragmatic approach is demanded to exempt the masses from confiscatory property taxes on modest holdings, including their homes, while ensuring that people of comparatively substantial property pay their fair share. If wealth confers a capacity to pay tax, and it surely does, equity requires a wealth tax.

As happens with all taxation proposals, some of those about to be affected have understandably expressed great disappointment while the non-affected masses are silent. When the State is abolishing death duties, the only form of capital taxation, and foregoing as a consequence an annual revenue of £14 to £16 million, there is a clear obligation to provide an alternative capital taxation system. The abolition of death duties will relieve from any form of property tax on small properties many tens of thousands of people now at risk to pay punitive taxes at times of family bereavement. Means of tax avoidance will be denied in future to the better-off sections of the community and they are being required to pay a modest instalment tax on the top slice of their fortunes. A century of wealth tax will not inflict on anybody anything like the hardship of death duties. The emotive foggy arguments against wealth tax will evaporate in the sunshine of these truths and in the light of experience.

In their consultative White Paper of February, 1974, the Government indicated the broad lines along which the new capital taxes would be charged. The paper was deliberately broad in its approach so that the public could be involved in the refining and elaboration of the schemes suited to this country for this major overhaul of the capital tax system. The public's response to the outline White Paper was very encouraging. Individuals from all walks of life and numerous bodies and organisations offered many helpful and constructive suggestions, accompanied by reasoned argument. This dialogue proved the value of Government by consultation. The views received were carefully evaluated and the Bill now before the House reflects to a large extent the public's views in the matter. The major changes in the outline proposals are in the rate of tax and the thresholds above which tax becomes payable. There will be a single rate of 1 per cent and the exemption thresholds will be £100,000 for a married man and £70,000 for a single person. In addition a threshold of £90,000 will apply to widowed persons and there will be an allowance of £2,500 for each minor child. Certain items—principal private residence and normal contents, livestock in certain cases, bloodstock and pension rights— will now be specifically exempt from the tax while certain other items will get special valuation treatment. Of the latter, productive assets will be assessed at 80 per cent of the market value while agricultural land, fishing boats and hotel bedroom accommodation will get special relief, namely, a reduction of 50 per cent or £100,000, whichever is the lesser.

Considering the rate of taxation proposed and the levels of exemption to liability, it can be said truly that anyone liable to wealth tax is doubly lucky to have sufficient property to be liable and to be called upon to pay so little on so much. Past experience demonstrates that wealth at the level stated in this Bill is held on average for 30 years. Under the existing law such wealth could be subjected to a 55 per cent tax. Under a 1 per cent annual wealth tax a generation's liability will be less.

Significant aspects of the Bill in addition to those previously mentioned are:

(1) that persons will now be liable to wealth tax on their world property only if they are both domiciled and ordinarily resident in this country;

(2) there will be a limit of 80 per cent on the percentage of annual income which may be taken by income tax and wealth tax combined, subject, however, to wealth tax liability being reduced by no more than 50 per cent of the amount originally assessed; and

(3) to minimise the costs of valuation to the taxpayer, values of real property or non-quoted securities once agreed may stand for three years.

In addition I have already indicated my intention to revise the liability thresholds every three years to take account of inflation. I will now go briefly through the various provisions of the Bill.

Section 1 is concerned with the various definitions used in the Bill.

Section 2 is the main charging section and levies a tax of 1 per cent on the net market value of the taxable wealth of every assessable person on 5th April, 1975, and each subsequent year. There are three separate assessable persons for the purposes of this Bill, namely, an individual, a discretionary trust and a private non-trading company.

Section 3 concerns the taxable wealth of an individual. In the case of an individual who is domiciled and ordinarily resident in the State all the property to which he is beneficially entitled in possession, whether in this country or abroad, enters into this taxable wealth. In the case of any other individual only his property situate in the State enters into his taxable wealth. A person who has been ordinarily resident in the State for at least seven out of the preceding ten years will be regarded as domiciled and ordinarily resident here and a person who is, in fact, domiciled and ordinarily resident here on a valuation date will, even if he ceases to be ordinarily resident here after that date, continue nevertheless to be regarded as domiciled and ordinarily resident here for the next three valuation dates. These extensions of the concept of domicile are essentially anti-avoidance measures which are considered necessary because of the change made in the original White Paper proposal that mere residence or domicile alone would be the test of global liability. The section also indicates how the taxable wealth of a person will be assessed if such wealth consists of a limited interest or an annuity.

Section 4 provides for the aggregation of the wealth of a husband and wife and minor unmarried children. There is provision for apportionment of tax between the persons whose wealth has been so aggregated but the total tax bill and the liability of the individual primarily liable is unaffected by any such apportionment.

Section 5 applies the tax to the second of the three assessable entities covered by this Bill, namely discretionary trusts. These trusts are defined in section I. In so far as the taxation of a trust on its property situated in the State and outside the State is concerned, the test of liability follows broadly the same lines as those applied in the case of the individual. World property of the trust is taxable if the settlor is alive and is domiciled and ordinarily resident in the State on the valuation date or on the date of establishment of the trust or, if the trust is created by will, the settlor was domiciled here at the date of his death, or if the principal objects of any trust are domiciled and ordinarily resident in the State on the valuation date. To cater for cases where the taxation of a discretionary trust as a separate entity might give rise to hardship, the section provides that the trust property may be regarded as the property of the individuals concerned —and thus obtain the benefit of the exemption thresholds in section 13— if the sole objects of the trust are a minor child with or without other minor children and with or without the parents or, if the trust is solely for the benefit of named persons, incapable of managing their own affairs or for spouses of a marriage.

Section 6 applies the tax to the taxable wealth of a private non-trading company. Property of such a company situated outside the State will also be included in its taxable wealth if it is incorporated in the State, has its effective centre of management here or is under the control of an Irish individual, trust or company. The various expressions used in the section such as "company", and "private non-trading company", are defined and the various ways in which "control" of a private non-trading company can arise for the purposes of the Bill are also set out. Under this section, a foreign company whose income is derived wholly or mainly from real property in the State would be taxable as a private non-trading company.

Section 7 exempts certain items of property from the assessment of tax. These include a principal private residence and contents including grounds of up to one acre, livestock owned by a farmer, bloodstock, rights to certain superannuation benefits and annuities, funds in certain superannuation schemes, property held for charitable purposes, certain Government securities owned by persons who are neither domiciled nor ordinarily resident in the State, certain objects of national, scientific, historic or artistic interest, and shares in private non-trading companies which are themselves liable to the tax under the previous section.

Section 8 defines the market value of property as the price which it would fetch in the open market. Where the Revenue Commissioners require a valuation of property by a person named by them, they will meet the costs of such valuation.

Section 9 deals with the valuation of shares in a private trading company which is under the control of an assessable person. In such cases the control element is taken into account in valuing the shares. Where there is no element of control the normal market value rule in section 8 will apply to the valuation of the shares.

Sections 10 and 11 provide respectively for the determination of the net market value of productive property and of property generally.

Section 10 deals with agricultural property in the hands of a genuine farmer, with fishing boats and hotel premises and with other property used in the provision of employment in the State including stocks and shares in an Irish trading company.

In the case of agricultural property in the hands of a farmer, as defined in the section, and in the case of fishing boats and hotel premises, as also defined, a deduction will be made from the market value of 50 per cent or £100,000, whichever is the lesser, and a proportion of the debts and incumbrances appropriate to the reduced value of such property will also be deducted.

Agricultural property within a mile of an urban area and which has an enhanced value because it is likely to be used as sites for houses or factories within the following five years will be valued by adding 25 per cent to its agricultural value.

Productive property—other than agricultural property, fishing boats and hotel bedroom accommodation which benefit from the 50 per cent concession mentioned above—including stocks and shares of a trading company will be allowed a 20 per cent deduction from its market value together with a proportion of the debts and incumbrances appropriate to the reduced value.

Section 11 provides that the net market value of all property other than that covered by section 10 is the market value less outstanding debts and incumbrances other than those specifically disallowed. Examples of disallowed debts are debts not incurred for full consideration and debts incurred in the purchase of property exempt from the tax.

Section 12 provides that values of real property or unquoted shares agreed between the assessable person and the Revenue Commissioners for any one valuation date shall hold good for the next two valuation dates, subject however to the right of either party to reopen the value in certain circumstances.

It is also provided that two years after any assessment, an accountable person may apply to the Revenue Commissioners for a determination of the value of any property on a valuation date and the commissioner's valuation shall be final, subject of course to the appeal provisions provided in sections 23 and 24.

Section 13 sets out the thresholds of exemption provided for individuals. These are £100,000 in the case of a married couple, £70,000 for a single person and £90,000 for a widowed person. Where the wealth of minor children is aggregable a further exemption of £2,500 is provided for each child.

Section 14 indicates the persons who are accountable for the payment of the tax. Some persons will be primarily liable, others will have secondary liability. Those with secondary liability are liable only to the extent of the property they have received on behalf of, or from, the assessable person and they are entitled to be reimbursed by the persons primarily liable.

Section 15 requires persons primarily liable to furnish a return within three months of every valuation date, that is, 5th April each year, in respect of the property of the assessable person. Where an individual is concerned a return will not normally be required if the net market value of his taxable wealth is less than 75 per cent of the appropriate exemption threshold set out in section 13, so that in the case of a married couple a return need be furnished only if their net taxable wealth is over £75,000.

Sections 16 and 17 deal with the assessment of tax and the signing of returns respectively.

Section 18 provides for the payment of tax and for charging interest at the rate of 1½ per cent a month on tax due. If tax is paid within three months of the valuation date on which it becomes due and payable there will be no interest charged.

Section 19 provides that wealth tax due shall be a charge on real property comprised in an assessable person's taxable wealth and on that person's personal property while it remains in his ownership.

Where real property that is so charged is sold, the charge lapses after 12 years from the date the tax was due. In the case of genuine sales not exceeding £50,000 however, the charge on the property is extinguished as against the purchaser. To prevent avoidance by fragmenting sales, the charge remains if the total of all sales between the same parties in a two-year period exceeds £50,000.

Section 20 provides for the issue of receipts for tax paid and, on request, of certificates of the amount paid. Certificates discharging any property from liability to tax will also be issued at the request of an accountable person where the Revenue Commissioners are satisfied that the tax has been or will be paid.

Section 21 is a relieving provision in that it limits to 80 per cent the amount of total income which may be taken in income tax and wealth tax combined. If this 80 per cent ceiling is exceeded, the Revenue Commissioners will pay back the excess of wealth tax subject to 50 per cent of the original wealth tax assessment being retained.

Section 22 provides for repayment of any tax overpaid together with interest of 1½ per cent a month from the date of payment to the date of the repayment. These provisions do not apply to tax repaid under the provisions of the previous section.

Sections 23 and 24 make provision for appeals in relation to the value of real property and in relation to any other aspect of an assessment respectively.

Sections 25 and 26 deal with the recovery of tax as a debt due to the Minister for Finance and apply the provisions of section 39 of the Finance Act, 1926, to court proceedings in relation to the recovery of tax.

Section 27 provides penalties for failing to furnish returns, information, evidence and so on, or for fraudulently or negligently furnishing incorrect information.

Section 28 empowers the Government by order to enter into arrangements with the governments of other states to provide relief from double taxation in respect of wealth tax. The draft of every such order must be approved by Dáil Éireann before being made.

Section 29 provides that the loss of documents will not prejudice the recovery of tax.

Section 30 brings wealth tax within the ambit of the Provisional Collection of Taxes Act, 1927, which will enable a change in the rate of the tax to be made by a Financial Resolution of the Dáil. It also places on the Revenue Commissioners the same responsibilities to account for wealth tax as are imposed on them in relation to other taxes.

Section 31 empowers the Revenue Commissioners to make any necessary regulations to give effect to this Act and these regulations shall be laid before this House, which will have 21 sitting days in which to consider annulling them.

Section 32 is the usual provision placing the tax under the care and management of the Revenue Commissioners.

Accordingly, I commend this Bill to the House.

Mr. Colley

First, I should like to say that we on this side of the House are opposed to the taking of this Stage of this Bill today. We made that clear to the Government side and the matter is before us today at the insistence of the Minister and his colleagues in Government. We are supposed to be—this was added to by what the Minister has just said—in receipt of a packet of capital taxation. There are four Bills involved: the Capital Gains Tax Bill, this Wealth Tax Bill, the Capital Acquisition Tax Bill and the Finance Bill. We have partially discussed the Capital Gains Tax Bill and the Finance Bill. The Capital Acquisitions Tax Bill has not yet been published. All of these are supposed to be, as I understand it, passed by both Houses of the Oireachtas not later than 5th April next, a month away.

We on this side have demanded that all of the Bills be published so that a complete picture of what is proposed can be seen and then that we discuss and compeletly dispose of one Bill at a time. It should be obvious that this would be the logical, orderly way to tackle this programme of work in the field of capital taxation. Instead of that the Minister, not having produced one of the essential Bills involved, is hopping from one Bill to another in the case of the three remaining Bills. He is hopping around like a grasshopper in an aimless, confused, contradictory and unorganised way. His activities in this regard illustrate very clearly his whole approach to his work and especially to the management of our economy, which is equally aimless, confused, contradictory and unorganised.

We are opposed in principle to a wealth tax in our economic circumstances. Although it is called a wealth tax, it is in reality a property tax. We have indicated our support for a capital gains tax which would be directed against speculators and not against those who by hard work and enterprise over the years have built up our economy. We may be able to support some aspects of the capital acquisitions tax, although we cannot say so definitely as yet until we see the Bill. We are however totally opposed to the wealth tax because it is so opposed to the best interests of a country at our stage of development. It is, I suppose, a tribute to Fianna Fáil that the Coalition think our economy was built up so much under Fianna Fáil that it can now stand a wealth tax; but in this, as in so many other matters, the Coalition are wrong. While it is true that Fianna Fáil did achieve an enormous amount, there is a long way to go in developing our economy to the levels attained many years ago by our EEC partners.

The position I have been referring to, was that obtaining two years ago when we left office. The present position is far worse. There is no growth in our economy now. Our national wealth is not being added to. Indeed, it may well be reducing. There are over 103,000 of our citizens unemployed. Agriculture is just beginning to lift its head out of one of the most damaging recessions it has ever experienced in living memory. During that recession it got little or no help from this laissez-faire Government whose principal characteristic in the management of the economy is to do nothing. The private house-building industry, which is perhaps more amenable to Government action than any other sector of the economy, is in dire trouble and, again, this laissezfaire Government have done nothing to help. Industry in general is suffering from the most acute cash flow shortage it has ever experienced with many firms on the verge of bankruptcy, but instead of helping the Government have actively hindered industry by increased taxation, culminating in the savage increases in social welfare contributions that are now being imposed. Price increases are very close to the hyper-inflation level and our balance of payments deficit is proportionately the worst in Europe. It is against this background that we must judge the wisdom or otherwise of the introduction of a wealth tax at this time.

Given our circumstances as I have outlined them briefly, everyone except this do-nothing Government can see that our first priority should be an emergency programme designed to break the inflationary spiral, to create employment and to encourage exports. Fianna Fáil have spelled out the details of such a programme which would get the country moving again, would create confidence and harness enterprise for the benefit of all our people. What have the Coalition Government done in the circumstances? They have introduced a wealth tax. Talk about fiddling while Rome burns.

No one can deny the appalling state of our economy and the need for emergency action. Can anyone tell us how a wealth tax will create one productive job, reduce the price of one commodity or encourage the export of anything except assets we want to keep at home? I invite the Minister or any Fine Gael or Labour Deputy to explain how a wealth tax will add to our growth, that is, increase our national wealth. In giving that invitation I am looking for a practical, down-to-earth explanation that will make sense to our 103,000 unemployed people. I am not looking for a farrago of airy-fairy doctrinaire nonsense and I hope no one will try to inflict on us here the old claptrap about the redistribution of wealth. On the Minister's own figures to the effect that the yield from the new taxes will equal the yield from death duties, there can be no question whatever of redistribution of wealth. The Minister made that statement before he watered down the original proposals in regard to wealth tax and, therefore, the talk about redistribution of wealth is even more irrelevant and dishonest in this context. People who have shown themselves indifferent to inflation and who have made no effort to break the inflationary spiral have no moral right to talk about redistribution of wealth because there is no more potent instrument for the redistribution of wealth in the wrong way, that is by making the poor poorer, than inflation at 20 per cent or more per annum. That should not be forgotten.

Deputy Barry Desmond spoke on the radio on the day this Bill was published and he gave a classic exposition of the "I'm all right, Jack" philosophy. He was not going to have to pay wealth tax and, therefore, there was nothing wrong with it. No doubt some people may think Deputy Desmond has a contribution to make to our society but in the context of a wealth tax one is entitled to ask, I hope without offence, how many jobs Deputy Desmond has created. If, as I suspect, he has created few or none then the question of whether he will be affected personally by the wealth tax is totally irrelevant. Many thinking people who will not personally be liable to wealth tax are very concerned about its effect on the economy and, therefore, on every man, woman and child in the country.

The Confederation of Irish Industry have issued a document from which I should like to quote fairly extensively for the following reasons: first, coming from the Confederation of Irish Industry it has considerable weight in this area and, secondly, because it sets out quite clearly some of the major objections to the Bill now before the House. The document is a Press release from the CII and it is headed as follows: "Lead article for next CII Newsletter, Volume 23, No. 14." On page 3 of that document the following is stated:

The effective tax on profits increases as the return on capital diminishes. The proposed tax, therefore, bears most heavily on firms experiencing difficult trading circumstances. In a buoyant developed economy this approach might be defended on the basis that it pushes less profitable firms out of business more quickly and encourages the transfer of funds elsewhere, presumably to more profitable outlets. However, in a depressed developing economy, a wealth tax on productive assets accelerates the rate at which the relatively unprofitable firm must contract or disappear, because it aggravates cash flow pressures. The proposals are, therefore, most unsuited to firms whose profit margins are being eroded because of intense competition, caused by falling tariff barriers, and by foreign products being sold at marginal cost on the Irish market in order to utilise spare capacity. This is a situation against which our dumping legislation is relatively powerless. The application of wealth tax to productive assets makes the situation worse.

An example is given with various figures in the document and the article goes on to say:

In contrast, if the business quoted in the example is owned by a foreign company, even if the shareholders of that company belong to one family, wealth tax would not apply. The maximum tax rate would be 50 per cent of whatever profits are made. The proposed Bill, therefore, gives a clear preference to foreign company ownership of Irish assets compared with Irish family ownership.

This situation contravenes the recommendation in Report No. 2 of the National Economic and Social Council, Comments on Capital Taxation Proposals, paragraph 22, which states “In determining the treatment of productive assets, it is important that such assets in Irish ownership should not be treated less favourably than if they had been in foreign company ownership.”

The document goes on to say:

The proposals, therefore appear to provide an incentive for the sale of Irish family owned manufacturing, distribution and property firms to foreign companies.

The document makes other points and the summing-up says:

Therefore, it appears that, if a businessman comes to live permanently in Ireland and invests money in industry, then he is not taxed on the value of his house, but is taxed on any productive investment in Ireland or elsewhere. Furthermore, if a businessman, resident abroad, invests directly in Ireland, a situation which occurs frequently, he is taxed on those of his Irish assets which exceed £100,000. A further anomaly occurs in that he would have to draw income from the company in order to pay the wealth tax, and this, in turn, would be taxed in his country of residence. Thus, a British resident would, typically, for every £35 drawn from the company to pay wealth tax to the Irish Revenue, also have to pay £65 to the British Revenue. The net effect of the proposals in this situation would be to reduce considerably the amount of money invested in Ireland, and to distribute almost two-thirds to British Revenue.

It is clear that each of these proposals is likely to deter private foreign investment in this economy.

The confederation goes on to make points somewhat similar to those I made earlier and expresses difficulty in understanding the introduction of these proposals at a time when unemployment is running at record levels historically and investment growth needs to be greatly accelerated and it lists three major undesirable effects of this legislation. It claims it will dissipate the amount of money invested in assets which are used in the production of employment, directly discriminate against Irish family ownership of such assets in favour of foreign company ownership and discourage private foreign investment in Ireland.

That is a pretty damning indictment of this Bill and it seems to me from my examination of it and of our economic circumstances, which cannot, of course, be divorced from consideration of this Bill at this time, that there is ample justification for that indictment by the Confederation of Irish Industry. One might almost think that the Minister was going out of his way to damage Irish industry, particularly Irish owned industry, and to discourage foreign investment in Irish industry. I give the Minister credit for believing that is not his objective but I cannot give him credit for not being responsible for attempting to bring about that result which, in some ways, may be almost worse because, if he is achieving these results and does not intend that, that is even worse than if he wanted to do it and knew what he was at.

The fact of the matter is that the requirements of our economy and of our people at this time are almost directly contradictory to what the Minister proposes to do in this Bill. If the Minister were to introduce a wealth tax which was designed to create an incentive for the employment of wealth and property in productive enterprises by penalising its use in non-productive enterprises there might be some argument for it because one could see that this would be directed to what our requirements are at this time, directed to attacking our unemployment problem and directed towards producing growth in our economy again. But that is not what this Bill is doing. There is a gesture towards the productive use of capital, but no more than a gesture, and the practical effect will be as outlined by the Confederation of Irish Industry. It is difficult to understand the thinking that produces such a Bill at such a time.

There is a further aspect of this matter, namely, the commencement date of liability for wealth tax. It would appear that payment of the tax will have to be made within three months of 5th April next, which even the Minister must admit leaves a wholly inadequate period of time for individuals to prepare their initial returns and make the appropriate valuation. Indeed, I doubt very much if it is leaving sufficient time for the Revenue Commissioners to handle the problems either. One must remember, of course, that failure on the part of the taxpayer to pay within the three months will render him liable to a penal rate of interest on outstanding taxes. Apart from the practical difficulties involved, and the probable injustice involved, for many taxpayers who could not possibly get their first returns and necessary valuations completed in the time, there is another rather serious aspect. The White Paper issued by the Government indicated that the date of commencement of the wealth tax would be 6th April, 1975, and the White Paper suggested that the wealth of a taxpayer would be assessed on the last day of the tax year and it is clearly implied that there would be time after the introduction of the tax for taxpayers to submit their returns. The implication of that is that the tax would not become payable until the end of 1975-76. It seems highly unreasonable now to accelerate payment by almost a year, accompanied as that is by the enormous physical difficulties involved for the taxpayers and almost certainly for the Revenue Commissioners.

We find in this Bill, as we found in the case of the Capital Gains Tax Bill, that there is no provision at all for inflation. At the rate at which inflation is going at the moment there are very many people who think they will never have to pay wealth tax who may well find themselves paying wealth tax in a few years' time, possibly even Deputy Barry Desmond; whether his tune then will be different remains to be seen. The failure of the Minister to provide for inflation in this Bill, in the Capital Gains Tax Bill, in the Finance Bill last year in relation to income tax allowances, and presumably also in the Capital Acquisitions Tax Bill, when we see it, is raising grave suspicions in many people's minds of the Minister's motives.

It simply is not sufficient for the Minister to talk about reviewing the thresholds at regular intervals. Experience has shown that this does not happen. In this year's Finance Bill the adjustment in relation to income tax allowances, which the Minister is proposing, does not take account of the inflation with which the taxpayer will have to cope. With inflation running at the present level, this is a serious matter. It is not good enough for the Minister to say it is his intention to review thresholds and other provisions at regular intervals.

Section 1 defines a "minor" as a person unmarried and under 21 years. The time has come, not only in relation to this Bill but to all other fiscal and taxation legislation, to fix the age of a minor at 18 years. For some time we have been operating votes for people at 18. It seems an anachronism at this stage to keep the age of minors at 21. Furthermore the definition of a minor appears, on the face of it, to exclude children who have been adopted under Irish law, while including children adopted under foreign law. I am sure that was not the intention, but that appears to be the result. Special reference is made to children adopted under foreign law but as the definition is worded it seems to effectively exclude children adopted under Irish law. If that is so, I trust the Minister will remedy the position.

Under another section of this Bill any wealth which belongs to or accrues to the benefit of a minor, as defined —that is, a person under 21 years—is assessed against the father and he has to pay wealth tax if the amount involved is sufficiently large. There are many other aspects of this but I should like the Minister to consider the effects of that thinking.

It is not uncommon for a minor, aged say 19, to earn very large sums of money, for example, as a pop artist. It is conceivable in such circumstances that the father of such a minor might have little or no wealth or income but would be legally liable for payment of the wealth tax. That does not seem to be a reasonable or practical proposition. It is a further reason, although it does not answer the question completely, for reducing the age of minors to 18. Indeed the whole principle involved here, whereby one person becomes legally liable in respect of another person's wealth, is to me a doubtful principle that may lead to a great deal of difficulty in practice.

The approach in section 4 seems anachronistic. Why is it necessary to refer to the wife in this and other sections? Should the reference not be to the spouse? If our protestations about the equality of the sexes are to mean anything, especially in International Women's Year, I suggest that this archaic approach, whereby the wife is treated as an ancillary appendage of the husband, will have to stop.

Section 5 deals with discretionary trusts. I get the impression from the Bill that the general thinking is that discretionary trusts are a bad thing and were designed to do down the Revenue. There is a saving clause which clearly recognises that not all discretionary trusts are so designed. I suggest that the consequences of that thinking can raise very serious problems.

I want to give the Minister two examples, although there could be many others. The Bill, as drafted, provides that, where a discretionary trust was set up to provide money for a spendthrift son and this can be shown to be the genuine purpose, what will happen is that the money in the trust will be deemed to be the property of the spendthrift son, and not of the parents. Consequently he will be assessed and will get the benefits of the exemptions provided in the Bill. There could easily be, and are, cases in which a trust, discretionary or otherwise, was set up by parents for their daughter who was a deserted wife. It is done deliberately in this way so that the husband cannot get his hands on the money. A trust of that kind ought to be treated in precisely the same way as the trust for the spendthrift son.

Furthermore there are discretionary trusts in existence where the whole income, or a substantial part of it, has been paid out in the past. In such cases it is quite clear that these are not anti-avoidance measures, because income tax would have had to be paid on the income paid out and by paying out the money death duties would attach to the slice of the capital attributable to the income paid out. Clearly there is no attempt at avoidance of liability in such cases. Where such cases exist—and provided it can be demonstrated clearly to the satisfaction of the Revenue Commissioners that they do exist—they ought to be treated in the same way as the spendthrift son type of discretionary trust.

There are a couple of other points in connection with that section to which I should like to draw the Minister's attention. A part of section 5, subsection (3) states:

... beneficially entitled in possession in equal shares ...

I am questioning whether that is correct; whether the payments that were made out might be in other proportions than in equal shares and, therefore, whether the phrase "equal shares" is appropriate. The words "person aforesaid", also in that subsection, appears to be most ambiguous and imprecise. I urge the Minister to have a look at that phrase because, in my view, it could lead to a great deal of litigation if it is not clarified.

Under section 6 it appears to me that double wealth tax can arise on the one hand in the case of a private non-trading company, first, on the company itself and, secondly, on the shareholder in respect of the same property. The same thing can hold true where one company holds a large stake in another company. In answer to that the Minister may say that there is provision to deal with it in section 21 (2), but I have some doubts as to whether it deals with it. I should like the Minister to have another look at this. Section 21 (2) reads:

Tax shall not be paid more than once on the same property on the relevant valuation date and the same property shall not be included more than once in taxable wealth on that date.

That may appear to deal with the problem I am raising but the use of the word "property" in that subsection makes me wonder. Does the word "property" in that case mean the property plus the shares in a company which owns the property? If it does not then that section does not avoid double taxation in the kind of cases I have referred to.

In relation to section 6 I should like to know why should the wealth held in all companies, including private non-trading companies, not be taxed through the medium of the shares in the hands of the individual shareholders as is proposed in the Bill in the case of companies which are not private non-trading companies? The principle whereby, in the case of private non-trading companies, it is the company that is liable and not the owner of the shares is one that I question. The practical effect is to exclude the benefit of the exemptions in the case of private non-trading companies and I should like to know the reason behind this. Another aspect of this provision in regard to private non-trading companies that concerns me is that if a company is basically a trading company but has some investments and if it makes a loss then in the year in which it makes it it seems to me that its income in the 12 months preceding the valuation date will consist wholly or mainly of investment income. That would appear, under the definition, to make it for that year a non-trading company so that on top of suffering the trading loss it will be taxed more heavily under the wealth tax.

If that is so it is indefensible in my view and I should like the Minister to elaborate on how he would see such a situation working out in the event of what is basically a trading company suffering a loss and finding that its income then is wholly or mainly consisting of investment income.

Section 7 (1) (b) as drafted, in my view, is likely to lead to many volumes of law reports of decided cases interpreting the paragraph. The Minister should clarify his intention as enshrined in the phrase "normal contents of a dwelling house." Does this depend on the type of dwelling house and on the lifestyle of its occupants? If it does not it means that one has to determine some standard normal content which would apply to any dwelling house and any people residing in such dwelling house. If, on the other hand, it depends on the type of house and lifestyle of the people involved I am sure the Minister can see clearly that this is raising all sorts of hares and difficulties. I should also like to know whether personal chattels such as clothing, a watch or a motor car are to be deemed part of taxable wealth.

Would that paragraph be clearer if it read like this:

The normal contents of a dwelling house or part of a dwelling house including furniture, household effects and personal chattels.

In my view the Minister will find it necessary to make that paragraph clearer than it is unless he wants a great deal of wealth in the country which would be liable to tax to be dissipated in legal proceedings. I should also like to know whether section 7, paragraph (e) (iv) covers a policy of assurance or insurance such as would be effected by a self employed person to provide either a lump sum or a pension in his old age.

It seems to me that the effect of section 10 would be that very wealthy people would pay less wealth tax if they are not genuine farmers as defined in the Bill than if they are. This is because, although the agricultural relief is 50 per cent of value, it has a ceiling of £100,000 while other productive assets although having only 20 per cent relief have no ceiling. Consequently, very wealthy people would pay less wealth tax if they are not genuine farmers. I should also like to know whether in section 10 (4), the word "woodland" includes the timber as well as the land itself. If it does not I suggest that this matter should be looked at again.

Section 13, which lays down thresholds of exemption seems to me definitely to favour living in sin because the exemption for two single people amounts to £140,000 while that for a married couple amounts to £100,000. The Minister knows that the same kind of situation was operated under the income tax code and that it took many years to remedy it. I would urge him not to start off on the wrong foot with the wealth tax. I would contend that a spouse should be entitled to the same rights as a single person and unless the Minister can deny that proposition the exemptions should be amended to provide that a spouse would be entitled to the same exemption as a single person.

Mr. R. Ryan

Would the Deputy allow two houses, too?

Mr. Colley

The Minister will have to consider the implications of what he is doing. There are snags, of course, but he has to justify saying that a single person is entitled to more than a married person. He is saying: "If you two single people want to live together I will give you a bigger allowance than you two who have gone to the trouble of getting married." That is what he is doing. There may be snags in doing it the other way but there are snags in what he is doing and he must recognise that.

Mr. R. Ryan

I do not think moral guidance is necessarily the function of a Finance Minister.

Mr. Colley

I suggest the Minister should not build in an inducement to people to live in sin. Some people thought Section 21, because of the reduction in the top rate of income tax proposed in the Finance Bill, would have the effect of reducing total liability between income tax and wealth tax to 80 per cent. Of course, it does not do that. Indeed, the provisions of section 21 can, in some circumstances, result in a liability, between income tax and wealth tax, of more than 100 per cent of a person's income because the reduction in liability for wealth tax for people on the top rate of income tax is limited to a half of what would otherwise have been their liability for wealth tax. Therefore, there is no upper limit to a person's liability for income plus wealth tax. Of course, the consequence of being liable for more than 100 per cent of one's income is to eat up capital and erode the base of this tax. This concept seems to be basic to the whole idea of wealth tax because it is either an additional form of income tax or it is a tax which will be paid each year by selling off part of the capital. There are a number of cases I can envisage in which the sale of part of the capital will be the only course open. The long term consequence of that is the erosion of the base of the tax. I do not know if that is the Minister's intention but that is certainly how it is going to work out in a number of cases.

In regard to section 22, I want to urge on the Minister that overpayments of tax should carry interest at the same rate as that charged on outstanding overdue tax and that this should apply to all overpayments. I do not understand why that principle should not be applied to overpayments under section 21 except, perhaps, for purposes of administrative convenience but that is not a good enough reason. I tried to introduce the principle when I was Minister for Finance that whatever rate of interest was chargeable on outstanding tax would equally be payable by the State on overpaid tax. That is a good principle; it is a fair principle and it is one that is of assistance to the Revenue Commissioners. I do not think the Minister should depart from it.

Section 24 is referred to in the explanatory memorandum which says of it:

Broadly speaking, the provisions of the Income Tax Act, 1967, apply.

What is intended is that they would apply to an appeal under section 24. The section then goes on to provide that 75 per cent of an assessment for wealth tax must be paid before the right of appeal can be exercised. I want to know whether this is in the Income Tax Act, 1967, because I do not think it is and if it is not then the explanatory memorandum was very broadly speaking when it referred to the Income Tax Act, 1967. It seems to me that this introduces a new principle which could be greatly abused by over-assessment. Supposing a taxpayer is grossly over-assessed and he wants to appeal against it. According to this section he has to pay 75 per cent of this gross over-assessment before he can even exercise his right of appeal. That does not seem to be equitable or just and I would ask the Minister, when replying, to explain the thinking behind that section.

I have noted that quite a number of sections of this Bill appear to be based on Indian wealth tax legislation but I have also noted that the Bill does not contain detailed rules for the manner in which assets are to be valued. I have, however, come across a book of about 200 pages which gives the case law of court decisions in India based solely on valuation of assets. It seems to me that the absence of detailed rules in regard to the valuation of various types of wealth may well mean that whatever the consequences of this Bill for taxpayers or for the Revenue Commissioners, one group who will gain very substantially from it will be tax lawyers and accountants because there is great scope for argument, and for appeal, and for litigation, in the absence of such rules.

The Bill proposes to make liable for wealth tax a foreigner whose only assets in Ireland may consist of shares in an Irish company. I wonder how it is proposed to enforce liability for wealth tax on such a person in such a case.

I note also that, as in the Capital Gains Tax Bill, in this Bill the term "ordinarily resident" is not defined. I should like to remind the Minister that, in connection with this phrase in the Capital Gains Tax Bill, as a result of certain exchanges which took place between the Minister and myself, he undertook to let me have, not in the House but privately, details on which he based the claim that this phrase has been adequately defined, and that I have not yet heard from him. I am not faulting him for that. I am just reminding him that that is so. I would appreciate getting that information as soon as possible in relation both to this Bill and the Capital Gains Tax Bill.

I have already referred to the fact that, as the Bill is drafted, in the case of private non-trading companies there is no exemption of any kind. This, of course, applies also to discretionary trusts, with certain small exceptions. Therefore in these cases apparently even £100 of wealth will be liable to wealth tax. It seems to me that the Revenue Commissioners may well end up with a great accumulation of cases yielding very little, but producing a great deal of work both for the Revenue Commissioners and for the taxpayers concerned, and that a great deal of unnecessary administrative work may arise. I would suggest that some thought should be given to exclusions of smaller cases coming into this category to avoid that unnecessary administrative work.

I should also like to know where a private residence is held by a company, which might or might not be a family company, what is the position about liability in respect of wealth tax on the value of that private residence in such a case. If the Minister could clarify that position when he is replying, I would appreciate it.

There is another area where I can see some difficulty and on which I think clarification is required. There are some cases of large gardens around a house, gardens exceeding one acre in extent. The question is how they should be valued. They do not seem to be building land and they do not seem to be agricultural land. Would they be regarded as ancillary to the house, or in what way would such portions of the gardens outside the one acre limitation be valued?

There is another matter in regard to the section which deems an annuitant or a life tenant to be the owner in possession of the appropriate part of the capital out of which he is receiving the annuity or, in the case of a life tenant, the capital in respect of which the life tenant is a life tenant. As I understand it, the provisions in the Bill are to the effect that in such cases the annuitant or the life tenant, as the case may be, having been deemed to be the owner in possession of the relevant capital, will be liable for wealth tax on that portion of the capital.

I want to question the principle involved here. I would remind the Minister that many of the cases which will come within this section will be cases in which a man has made provision for his widow, has died, and the widow is the annuitant or life tenant. Why should the annuitant or the life tenant be the person responsible for the wealth tax in such a case? All he is in receipt of is an income, whereas this is a capital tax. I would suggest that, in principle, the liability ought to apply to the trustees—normally it would be the trustees—or those in control of the capital, since it is a capital tax.

There are many cases in which because of inflation, and for other reasons, the income intended by the deceased for his widow is now very much less in real terms. The effect of this is to add an additional tax on to the liability of the person in receipt of the income without any greater assets being made available or any access to the capital. On the face of it it seems to me to be unjust.

I also feel that the principle whereby in the case of an annuity, that portion of the capital on which the annuity is charged is deemed to be the property in the possession of the annuitant, is wrong. In many cases you could have very valuable capital producing quite a low income. In such cases, if the annuity is charged on the capital, the annuitant will find himself or herself liable for wealth tax on something which is grossly out of proportion with his or her income. In or out of proportion, the annuitant will never have any grip on or right to spend the capital.

It seems to me that the principle involved here is wrong and that we should provide that the liability would arise on the value of the annuity or the value of the life tenancy. In the case of an annuity its real value relates to the age of the annuitant and not to the capital on which it is charged. The whole basis of the charge seems to be wrong. First of all, the liability should be based on its real value and not on what it is charged on, and secondly liability for payment of the tax should be on the proceeds and not on the annuitant or the life tenant.

There is one other matter to which I want to refer and it is this. While there are provisions in the Bill in respect of pictures, prints, books, manuscripts, works of art, jewellery, scientific collections or other things not held for the purpose of trading and which are kept permanently in the State and for which reasonable facilities for viewing are allowed to the public, there are certain things not included in the Bill, certain show places or houses, certain gardens in respect of which a great deal of money and effort over many years have been invested and for which provision should be made where there is reasonable access for the public. It does not seem to be in principle that one should deal with the items which are mentioned in the Bill and omit these.

I have been detailing a number of points which occur to one on a reading of the Bill which is not in the detail one would engage in on Committee Stage. I have been doing so only because I recognise the reality that the Bill having been introduced we shall be stuck with it. I want to reiterate before concluding that I regard the application of a wealth tax in our present economic circumstances as totally irrelevant and lacking in understanding of what our economy needs at this time. I have not dwelt on the inhibiting effect—possibly—of a wealth tax on the creation of wealth or growth in our economy. One could develop this at considerable length but, having regard to the circumstances of our economy, the raging inflation, the 103.000 unemployed, the state of agriculture, industry's cash flow problems with many firms on the verge of bankruptcy and a dangerously high level of deficit on our balance of payments, can anybody reasonably say that the introduction of a wealth tax is relevant or helpful to the problem we are facing? Is it not obvious that what should be the preoccupation of the Minister now is the production of an emergency programme designed to break the inflationary spiral, create employment and encourage exports. The absence of such a programme is bad enough—it is very serious—but I suggest that the situation is being made far worse by the introduction of an irrelevant wealth tax—property tax is a better name for it—at this time instead of the Minister carrying out his duty to produce the emergency programme I mentioned and get the country moving again.

While I have an obligation as spokesman on Finance for the Opposition to concern myself with the details of the Bill and have tried, and will continue to try to do so, I want to make quite clear that I believe that as far as our 103,000 unemployed are concerned we are fiddling while Rome burns.

Mr. M. E. Dockrell

This Bill falls into two caegories. The first, and to my mind the overwhelmingly important side of the Bill is its fundamental meaning. Then there is the discussion of various aspects of it. But if one has a profound objection to, or disbelief in the underlying reason for the Bill, in one's heart and mind one hopes that the details will never arise. Nevertheless, they do arise.

To begin with, I do not like this Bill. When the White Paper was introduced last year it had a number of ominous phrases in it one of which was that the redistribution of wealth on property —whichever one likes—was apparently considered to be a need. In that we have a large number of under-privileged people and of unemployed people, we are certainly in need of wealth for many citizens but, unfortunately, a large number—I believe the majority—of people in this country do not believe that desirable condition can be brought about by a redistribution of property or wealth as it exists at present. Help for those unfortunate people, and education for their children are things which cost money and we can only go along these lines of helping in those ways as long as we do not injure in our efforts the body politic or the industrial efficiency of the country. That is one reason why I object to this Bill. I do not think it will bring about the effects the Minister thinks it will bring about. I do not think it will be accepted by the majority of our citizens. It is all right to say that there is a threshold of £100,000. During our lifetime we have seen £100,000 change from being a vast fortune to a greatly reduced fortune and at the current rate of inflation it will be reduced very much more even during the next 12 months. Employers are asking for a three months' stay on increases in wages, whereby indicating what they fear the rate of inflation may be in the future. The Minister included some safeguards in the Bill although Deputy Colley did not seem to think so. However, with the best will in the world, those safeguards cannot be effective. It is very likely that inflation will increase at a very high rate and that the three-yearly review may be something that we cannot rely on to bring about any degree of fairness in the assessment of wealth tax.

I do not wish to become lost in a forest of detail and to describe, so to speak, the individual trees because I object profoundly to the principle of this Bill. The idea seems to be that capital is something bad. That idea was inherent in the White Paper. It is a socialist doctrine but it is a view that I do not hold and neither is it held by the people generally. I was not sent here to support a Bill of that nature. This tax will have a very bad effect on our industrial growth. It will inhibit the growth of capital and it will prevent the inflow of capital to the country. The idea both in this Bill and in another on which I am not very keen either—the Mergers, Take-Overs and Monopolies (Control) Bill—seems to be that the growth of capital is something which no State should foster but, rather, inhibit.

The adoption of this principle can only place our people and, in particular, our business, at an enormous disadvantage in owning part of the share of capital wealth or in managing and running their own businesses. I say this because of our membership of the EEC, a body which includes some of the greatest capitalist countries in the world. Apart from this consideration there are many side effects that spring from such a policy. For instance, businesses will not be able to find capital in the same way as they could find it up to now. There will not be capital available because people will try to prevent touching their capital and, instead, will use the profits of their investments. Human beings are like squirrels in that the squirrel will expend the greatest efforts in building up a hoard for the rainy day but, having built it up, will not wish to see the nuts dwindle and consequently will eat fewer nuts. In the same way human beings do tend not to live on their capital and are prepared to starve themselves of income in order to maintain their capital at the level at which they inherited it or to which they have built it up.

There is the question, too, of discretionary trusts. According to the Confederation of Irish Industry a discretionary trust will pay 1 per cent of its wealth regardless of the £100,000 threshold. I do not know whether that is a fair reading of the relevant part of the Bill but it has been put forward by that very responsible body as being their understanding of it. Again, there seems to be the implication that a discretionary trust is something that is bad. There has been much mention in other Bills of the question of tax avoidance. Tax evasion is illegal, and rightly so, but tax avoidance is something in which every prudent man indulges. If a person were acting on behalf of a company he would be considered to have acted wrongly if he did not ensure that no more tax than was absolutely necessary was paid. An accountant would say that if he did not give skilful advice as to where tax could be avoided legally and properly, he would be failing in his duty. The same would be true of a solicitor or a bank manager.

A good adviser will inform people who have capital but who may not be aware of the many ways in which they can avoid handing their money to the taxman—for instance, widows—of how this avoidance can be achieved. There is no good individuals in this House standing up with a holier than thou attitude, pretending something terrible is being done and that it is high time the good Christian Members of this Dáil put a stop to that sort of thing. That is rubbish. There is no good putting on one coat one minute and another the next.

Deputy Colley appeared to be very shocked that the threshold payment for two individuals was lower than that for a husband and wife. A husband and wife are to be allowed £100,000 in relation to their joint incomes but two separate individuals are to be allowed £70,000 each, that is £140,000. He felt that was placing a premium on living in sin. I am not completely in agreement with the Bill but I will not beat the poor Minister with a stick. The whole tax code places a premium on dishonesty or living in sin. Income tax is presumably cheaper for two individuals than it is for a husband and wife. Some other countries do things which we are much too nice to do. If somebody is opposed to, let us say Mr. Smith, and he knows Miss X but for some reason they cannot get married she can change her name by deed poll to Smith. They can live quite happily and the neighbours do not know anything about it. That has never happened in Ireland and I hope it never does. This Bill will not make such a thing any more likely.

This is known as Women's Year and it is high time they were given a right to their own income without it being part of their husband's income. The Bill states that there will be a special case for an annuitant's farm. I hope that means that the capital sum which produced the annuity is not taken as a part of the capital of the individual. If a man invested £15,000 at a certain age he could start off with an annuity of about £1,200 a year. If this Bill goes through in its present form I hope there will be no danger that money will be taxed.

When a man retires and receives a lump sum he can buy a pension. Some people would like to take the £15,000 but the law in this country does not allow the pensioner to take that sum of money. He is told he must buy a pension with three-quarters of that sum. He can only withdraw one quarter of that sum. If he invests it, when he dies it can go to his children or some other person to whom he wishes to leave it. A special case should be made so that the quarter is treated in the same way as the capital which produced the annuity.

Some people say that insurance companies should not be allowed to get three-quarters of the money, that the annuitant should be free to do what he likes with it. The Bill will, no doubt, place our nationals in a disadvantageous position in relation to other people who are starting business or who have already started business in this country. We know that in England the Government are introducing a measure something like this but the British electorate knew perfectly well before the election what their Government proposed to do. However, two wrongs do not make a right. Other countries have a property or a wealth tax higher than here but quite a number of countries do not have such a tax.

One of the difficulties is that once a tax is introduced it is easy to increase it. When income tax was introduced in Napoleonic times, I am sure Pitt thought it would only be a temporary measure and that it would remain quite a small amount. All of us know the level of income tax nowadays. I am nervous about the wealth tax and when the Minister reads the speeches made in the Dáil perhaps he will alter the Bill. I will not shed any tears about it.

I am sorry to have to speak in this way. There is the superficial idea that it is better to pay a wealth tax than death duties but I am not sure that people agree with this. At least in the hereafter people do not worry about their property or wealth. I do not think there is any mileage to be gained by arguing that it is better to pay now rather than have the Government deduct the money by way of death duties. We know that payment of death duties entailed tremendous hardship on people and I do not think the wealth tax in this form will do that. However, it may alter considerably the face of the country, and it may not be for the better.

Mr. Crinion

One of the promises of the National Coalition Government was that they would remove death duties. That sounded very well but the Government did not explain to the people what they intended putting in their place. The electorate thought the money would come from the general funds of the Exchequer. Little did they know when they were fooled on that occasion what floodgates would be opened. They did not realise the Government would introduce a capital gains tax, a wealth tax and a capital acquisitions tax as well as the budget. The last budget gave the Exchequer more money than any other budget in the lifetime of the State but it was not sufficient for the Government and they had to introduce this measure.

This is one of the worst types of tax, particularly when 104,000 people are unemployed, and when we want to encourage business and industry to invest money here. The Minister for Industry and Commerce said that industry must be allowed to reinvest money but this tax will cut across such reinvestment. The Minister did nothing for industry in the budget and now he proposes a wealth tax.

The Minister said that only a small number of people will be affected by this wealth tax but this is a classic case of getting the foot in. There is a budget every year and once a tax is imposed it can always be increased. This tax will be detrimental to the industrial development on which we have spent so much money and time in the last 16 years, when we had to remedy all the mistakes made by the last Coalition Government. It took planning, development and thought to encourage industrialists to return to Ireland.

This Bill discriminates against Irish nationals in that their wealth is calculated on what they have in this country and what they have invested abroad. Foreign industrialists who establish industries here are charged tax only on projects in the State. That shows how unjust and unfair this is where Irish nationals are concerned. Most of our industries and businesses have been founded on the family unit. Families have worked hard to develop and enlarge their businesses because they, like everyone else, have to compete. In many cases the families engaged in these businesses have never drawn what might be regarded as a salary or income out of the business. Under the old system of estate duty and death duty, if a husband divided his property with his wife only half the value of that property was taxed. If a son ultimately showed an interest in the business the father could apportion part of the business to that son and in that way exempt himself again from estate duty. He, as it were, spread the load. The proposed tax can only be described as vicious because it will tax the wealth of the father, of the mother and of any children involved in the business.

The Minister is obviously terrified of leaving any loopholes. At all costs he wants to get his claws on this alleged wealth. He can then come in here and increase the rate of tax and increase the income levels. This is typical of a doctrinaire socialist Government. There is no advertence to investment for the purpose of creating employment. The present Labour Government in Australia recently suspended capital gains tax in order to inflate the economy. A month ago we heard a great deal about reflating our economy. The economy could be reflated simply by withdrawing this Bill. The Confederation of Irish Industry have published a document dealing with the average family business or industry with a capital value of £400,000 and they have given the return on capital employed at different rates—at 5 per cent, 7½ per cent, 10 per cent and 20 per cent. This is typical of what is happening in the agricultural field because, on the gross margin, they have "poor", "average", "good" and "excellent". The basis in industry would be the same.

It has to be remembered that quite a number of industries were often set up with a high paper value because that makes it easier to borrow, to expand and so on. Taking company profit before interest and tax, on a 5 per cent return one gets £20,000 gross; at 7½ per cent one gets £30,000. These would be the normal run of companies. The £80,000 company would be exceptional. Take a company employing 70 people: to meet their interest charges they would need £2,500. That is one of the reasons why at the moment quite a number of industries are going broke, closing down or going on short time. Unemployment has risen from 63,000 when we left office to 104,000 this week. It may have increased still further by Friday night though there was a slight reduction last week. The industry that can only get a 5 per cent return on capital is losing money. The Minister proposes to take £1,000 off such an industry for wealth tax and the industry will finish up losing £4,300. With a 7½ per cent return and paying interest, income tax, corporation profits tax, the net income would be £2,500. Quite a number of the employees would be getting more than that by way of salary and wages. This industry will have to pay £1,000 wealth tax. By the time all the taxes are taken into consideration 65 per cent would actually be subject to tax. When you come to the 10 per cent you are getting into what might be called the good business.

Mr. R. Ryan

I do not want to interrupt the Deputy, but I have already pointed out there are several errors in these calculations.

Mr. Crinion

I am very glad to know that. I will just refresh the Minister's memory so that he can deal with the matter when he comes to reply. On a £40,000 gross profit tax would represent £17,500. On top of that there would be £8,500 company tax. The net profit would be £8,750 and from that the Minister would take another £1,000 wealth tax. That is practically 57 per cent of the total profit taken by way of tax. The bulk of industry is in these two areas. There are very few in the top bracket. The people getting the 5 per cent return are being ignored. There is no point in saying they got a reduction of 20 per cent because of employment. There are 70 people employed in each of those businesses. This means that now there are 70 people out of work. Two years ago when people got a 5 per cent return they were able to keep going until things picked up. They had time to get in consultants to put them on the right road. Now this extra tax will cripple them.

The Bill provides that the maximum anybody can pay between income tax, corporation profits tax and wealth tax will be 80 per cent of income. That sounds very nice but how can a man keep his business going with 20 per cent of his income? It must be remembered that he has also to keep himself and his family and meet other commitments. People earning £20,000, £30,000 or £40,000 —and there are very few of them— would have to pay this 80 per cent. When it comes to employment, it is not fair that firms should be expected to pay this high rate and ultimately operate at a loss.

If a person inherits property and must give money, even reasonably small amounts, to sisters or brothers, that will lower the creditworthiness of the business. Naturally it will devalue the property in the eyes of financial institutions when they are asked to lend money. I have seen that happen with State institutions— the Agricultural Credit Corporation and the Industrial Credit Company. Financial institutions might say that the money could be withdrawn immediately and the businessman would not be able to meet his repayments that year. In other words, this being a State charge, it will be a first charge on the property and will lower the creditworthiness of the estate.

I suppose it could be said that we are lucky it was reduced from what was originally intended—to which there was a great deal of opposition. The amount of money which left this country this time last year was fantastic. A conservative estimate would put it between £500 and £600 million. Any bank could tell you that the amount of money leaving the country in a day was frightening. That is why we are short of money at present.

Mr. R. Ryan

We have more money than we had last year.

Mr. Crinion

Yes, because the Minister has been borrowing all round the world.

Mr. R. Ryan

Leave out the borrowing.

Mr. Crinion

When Fianna Fáil were in office, I can only remember them borrowing from outside the country on two occasions. The Minister borrowed £137 million last year. Meeting these repayments will cripple the country. The Minister put a heavy tax on petrol to try to convince some people that we were providing for interest repayments. If we had kept our money at home he need not have borrowed abroad. Our people would have paid income tax on the interest and the economy would have benefited.

Coalition Deputies were saying it was a dangerous tax. They were telling their supporters that it was better to have them in Government than to call a general election. Their supporters told them to vote against the tax and they would take care of them when the general election was held. In spite of that pressure, the Minister refused to yield until the week before the Ard-Fheis because he and the Government were afraid to meet their supporters. They did not know how they would be treated. The Minister then announced the reduction in the wealth tax, increasing the thresholds, certain reliefs to farmers and reducing the limit to 1 per cent.

Labour Deputies are going around the country saying that this wealth tax is the thin end of the wedge. If they are still in Government after the next election they will really turn the screw. That is the type of talk heard from the Minister's socialist friends.

This tax discriminates against Irish people. It will apply to the world assets of people ordinarily resident and domiciled in Ireland. This, normally, relates to people who are in or take up permanent residence in Ireland. Principal houses and paintings to which the public have access are excluded from the Bill but productive assets are not.

There might be something to be said in favour of this where one has idle wealth hanging around the walls. We saw last year where £8 million worth of paintings were stolen. A person with such wealth hanging on his walls is exempt from this wealth tax because he leaves the country for a certain period every year and gives the paintings for safekeeping to the National Gallery where the public can view them while he is away. How much employment would that type of money give?

An Ceann Comhairle

I must remind the Deputy that persons outside the House should not be referred to nor should they be referred to in such a manner as to be identifiable.

Mr. Crinion

There are valuable paintings in different places and the owners are all exempt. The one significant feature about this Bill is that idle wealth is exempt but productive wealth is taxed. Because of that this is bad legislation. It appears that if a businessman comes to live permanently here and invests money in industry he is not taxed on the value of his house but he is taxed on any productive investment in Ireland or elsewhere. If such a person lives in another country he is only taxed on his productive assets here.

The Confederation of Irish Industry are amazed and find it difficult to understand the introduction of these proposals at a time when unemployment is at a record level and when investment growth needs to be greatly accelerated. The proposed legislation would have three major undesirable effects. It would dissipate the amount of money invested in assets which are used in the provision of employment; it would directly discriminate against Irish family ownership of such assets in favour of foreign company ownership; and it would discourage private foreign investment in Ireland. The Government said they would give particular consideration to reliefs for productive investment but the reliefs proposed in the Bill are completely inadequate. Priority should be given to the maintenance of employment through investment in productive assets. Therefore, I recommend that all assets used in the provision of employment be exempted from application of wealth tax.

This Bill is completely against the reward of free enterprise, namely, the acquisition by hard word, thrift, skill and investment, the three main components needed to build up an industry or a firm. If we discourage this we will be depriving those with ambition and skill of the necessary incentives. I know of one industry where the target of 50 extra jobs per year was set and achieved over ten years and of another industry that successfully increased employment by 15 per cent annually. The latter industry employed a man to explore possibilities for reinvestment and the provision of more jobs. That is the type of patriotism we should have; it is the type of initiative that we should not stifle as we are doing in this Bill.

We are a developing nation and for this reason we should give those engaged in industry and farming every encouragement. I can remember 15 years ago when a number of industries were on the rocks from a similar unimaginative and poorly led Government. Unemployment then was 90,000 and more than 60,000 emigrated in the same year. It took up to three years to cure that but the National Coalition have succeeded in increasing the unemployment figure to more than 100,000 in just two years. We are fortunate that emigration is not at the same rate but that is more good luck than anything else. It is mainly due to the fact that the economic climate across the water is not as good.

To deal with the question of farming I will go on the same basis as the Confederation of Irish Industry did when dealing with industry. The Confederation instanced a company of £400,000 and I will make a comparison with that. Such a company would employ about 70 people. A farm of that size would not provide anything like that employment. I will not even go to the level of a poor return, even the average farm of that size would be losing money. In the case of cattle raised from 0 to 2 years of age— I am using official figures—the gross profit margin would be £46 per head. That would give a farmer a return of £23,000 assuming he had 500 cattle which is about one and a half to the acre and that would be good. One can then deduct £3,000 for interest because a farmer with a farm of that value would not be able to get the type of overdraft accommodation an industry would be able to get. An industry of that size would probably be able to get £150,000 overdraft accommodation. On average I would say such a farmer would get something in the region of £20,000. That would leave his interest rate at £3,000 bringing the figure down to £20,000. If one takes depreciation of buildings, wealth tax at £1,000, labour, depreciation on machinery, oil and other essentials it would add up to £19,600. That would leave the family with only £400 to live on for the year. Those figures are the ones used for the farm modernisation scheme and that is not the lower rate, it is the one for the average farm.

If a farmer was in tillage and was growing barley he would be above average if he got 34 cwts. to the acre. His return in that case would be £49, just slightly more. It probably would not be more in practice because the depreciation on machinery would be much greater than in the other case. If he was in wheat he would get a little more but even then it would not be more than an income of £1,000 or £1,500 for himself, his wife and family. If there was excessive interest or HP payments, which a man doing tillage would have because his investment in machinery would be so high, the average or above-average farmer would be losing money and still he would have to pay £1,000 wealth tax. The farmer's only hope would be to be in dairying although his investment in capital and buildings would be much higher than if he were in any other type of farming. Such a farmer would need to be in the good to excellent category and there are not too many people in any field that can be classed as excellent. The difference between good and excellent is only £7 a cow so there is not too much to be made even in that field and he would have to pay more in wealth tax than he would in income tax.

The Government, through the Department of Agriculture and Fisheries, and the banks in the last few years have been encouraging people to invest in cows and to single suckle them if they were not in dairying. The gross profit there would be £40 a cow provided the calf at six months was 4 cwt. which is a fair target. On that farm there would be perhaps less than 400 cows because this type of farming takes a fair acreage. It takes two acres to rear a cow and a calf for six months—taking the cow for 12 months, of course. On that type of return the farmer would be losing money but still he would have to pay wealth tax. There was a huge slaughtering at the back end of last year of cows, in-calf cows and young cattle because people were finding after a couple of years that it just was not paying and when the market collapsed there was no use in the bank manager saying he would give a farmer money to tide him over or in the Department saying they would give a low interest loan of up to £500 to tide him over until April because that would only sink him further in debt. He realises that, even if cattle are making a good price, that type of farming will not pay.

I have heard of bankers going to farmers' meetings and telling them how they looked on this type of investment. The farmer would have a calf each year. He would sell it and half of the price would be paid to the bank and he could live on the other half. They were thinking in terms of a much higher stocking rate, which was not on. Even with good management stocks must be kept at certain levels. At £40 per cow they were still losing money. The gross profit margin was too low for them to meet all their commitments. They had to get out and set the land. There was a good market for silage pits. Those men are finding it very hard to get back into farming again.

There is the concession that only half of the valuation is taken into account up to a threshold of £200,000. After that the tax must be paid. Quite a number of farms will be caught. I have never seen a Minister for Finance reducing a tax or withdrawing a tax.

Mr. Kelly

What about VAT being taken off food?

Mr. Crinion

Prices kept rising. The general public did not know the Government took off food in that famous September and prices have gone sky high since then.

Mr. Kelly

I admit that but it contradicts what the Deputy said about taxes never being removed.

Mr. Crinion

We still have to pay VAT on quite a number of products. It has been said that this is crippling the car industry and causing unemployment.

An Ceann Comhairle

I am anxious that the Deputy should get back to the subject matter of the measure before us, the wealth tax.

Mr. Crinion

This tax can only be paid by people with excellent management who can show a 20 per cent return on their capital. The return on capital invested in a farm is in the region of 1 per cent or 2 per cent. Taking into consideration the value of the farm and the stock on it, a farmer would be lucky to get a return of 1 per cent or 2 per cent. I think the official figure is around 2 per cent.

This wealth tax and the other measures will force owners to adopt the American system, to give up their ownership of the land and become tenant farmers. We were crucified for generations by landlords. We had to fight extremely hard to get fixity of tenure and to get full ownership of our land. Now a native Government are sending us back to those days. The landlord will not be an individual but a multi-national company. In the United States they are usually insurance companies. They give you about 95 per cent of the value of your farm and a long-term lease so that you will have liquid capital to develop your farm and pay your rent. With this type of wealth tax farmers will have to sell to people like that. The money may be exempt from tax because they will put most of it into the farm for redevelopment. Having fought for generations they want to keep ownership of the land.

We have seen businesses erected here and taken over by insurance companies who gave a long-term lease to the builders. The Government are doing this themselves. The Department of Agriculture and Fisheries at the back of this building is owned by an insurance company. The Government have taken it from them on a long lease. The Americans have always maintained that our farmers are foolish to have so much capital tied up in the land instead of having it worked. We like to feel that the family farm is the backbone of the community. The farmer likes to hand the farm on to his son and he in turn passes it on to his family possibly having enlarged it in some way.

We do not want the continental system where the average farm ownership is about 15 years, or half a generation. If the farmers ran into trouble they had to sell and buy a smaller farm. I spent some time on a farm on the Continent. The owner was in bad health for a year, which could happen to anybody. He had to sell his farm and buy one about half the size. His original farm was 120 acres and now he has about 60 acres. We should not drive our people to the extent that the average length of ownership will be half a generation. In this legislation we are going in that direction and we will find that that will happen.

It is well known that if a farm is sold once it will be sold again within a short time. Rarely will the new owner be able to keep it. In most cases he over-commits himself and his new farm has teething troubles even if he was already a farmer. It may not be the type of land to which he was accustomed or other problems will arise: he is not able to make ends meet and the farm is again on the market and he moves to a smaller farm. We do not want that type of thing happening as a result of this legislation. The Coalition Government seems to be pandering entirely to the doctrinaire, socialist end of that Government.

Mr. Kelly

That is the exact opposite of what ex-Fianna Fáil member, Dr. Noel Browne, says.

Mr. Crinion

I have not seen what he said.

Mr. Kelly

He says it is the other way around. That is one thing that makes us sure we are on the right road.

Mr. Crinion

If the Parliamentary Secretary had heard Deputy Dockrell he would realise Deputy Dockrell is very worried, and rightly so, because that family has been a household name in Dublin for generations. This kind of legislation will put people like that out of business. I felt sorry for him, realising that he was supporting a Government which was bringing in this legislation. The Parliamentary Secretary will be whipping him through the Division Lobbies making him vote for something that he knows in his heart is bad for this country, for himself and his family.

Mr. Kelly

The Deputy will agree that any member of a political party makes a general commitment to the party and is willing to submerge, on occasion, his private belief for the general good. The most striking example in recent years was on the Fianna Fáil benches in 1970 when Deputies who were fit to cut the throats of the men leading them voted confidence——

Mr. Crinion

The Parliamentary Secretary was not able to get them through the Division Lobby with all his whipping in the case of the Contraception Bill.

An Ceann Comhairle

These matters are quite irrelevant to the Wealth Tax Bill which is now under discussion.

Mr. Crinion

I was only pointing out something to the Parliamentary Secretary.

Mr. Kelly

If I am to be asked to make an act of faith in the party loyalty and solidarity of Deputy Crinion's colleagues he will have to do the same with Deputy Dockrell.

Mr. Crinion

I am sure Deputy Belton will be speaking on the same lines——

An Ceann Comhairle

We must get back to the Wealth Tax Bill.

Mr. Crinion

——as to how detrimental this measure will be. Deputy Dockrell said it was better than estate duty because you are paying a high insurance premium to cover the liability to estate duty. When he was insuring at least he was making an effort to keep the business or industry going and to maintain employment, but the Government have not said that they will put the taxation gained by this Bill to good use by investing in further employment. Instead, the Government are taking out money that would normally be used to increase employment, because very rarely did these business men take much out for their own benefit. They are all dedicated people trying to enlarge and develop their businesses to meet the growing needs of the country regarding employment and investment.

Only the really excellent people in industry will have a chance of paying this tax without it becoming detrimental to their business. Farmers will not be able to pay this tax in addition to income tax. It is a deterrent to thrift, hard work, investment and skill. I hope some Deputies who have spoken against this measure will have the courage of their convictions and vote against it, just as their Leader and some other Ministers did in regard to a Bill which was before this House last summer. I hope that the Minister, even at this late stage, will reconsider the folly of bringing in a Bill like this, the damage that it has done and will do in future to the Irish business and farming communities.

Mr. Bermingham

I welcome this Bill for more than one reason. I have listened to all the arguments against it. I listened to Deputy Colley for quite a while, although I was not present for his opening remarks. I found it very difficult to know if he was opposing the Bill and he was near the end of his speech before I discovered that he was opposing it.

I welcome the Bill because I believe that the most unfair taxation ever applied in this state was in the form of death duties. I am amazed that Deputy Crinion should say that he would prefer to keep death duties on the Statute Book than replace them with something like this Bill.

Mr. Crinion

I did not say that I would prefer to keep them.

Mr. Bermingham

The Deputy implied it. I hold that Deputy Crinion supports a party which did nothing to relieve death duties in their 16 years in office. In my constituency I know of several people, small or medium farmers, who were forced, on the death of the owner to sell their homes. These people will welcome this Bill.

We all know the burden placed on families by the payment of death duties. One case that comes to mind concerned a single man who, on death, left a farm of about 70 acres which, when combined with his other assets for the purpose of estate duties, totalled about £60,000. He willed his property to a nephew but made a number of bequests the cash for which was not available with the result that the beneficiary had to pay three-quarters the value of the farm before being able to consider it his own.

I agree with Deputy Crinion when he says that people endeavour in so far as possible to retain family farms but I have known of a number of people who were forced to sell in order to pay estate duties. During our term of office the level at which estate duty becomes payable has been increased to £10,000. Deputy Dockrell said that most people do not worry about what must be paid after they die but I do not think that is a fair assessment of Irish people because most would be anxious that their dependants would not have to sell their homes in order to pay death duties.

It was obvious that there was a desire generally for the abolition of this undisirable tax. A good case in this respect was made by farming organisations and others but I do not member anybody suggesting that the revenue lost in this way should not be recouped from some other source. The tax reform in this Bill and in others that have been produced by this Government indicate the right approach on our part. I do not think anybody would complain of having to pay a yearly contribution in order to ensure that later his dependants would not be forced into the position of having to sell their homes.

Those people who will be required to pay a 1 per cent wealth tax will be people of very substantial means, because, for instance, a married man with two children would need to have wealth to the extent of £105,000 before becoming liable for that element of taxation. Is it not only right that he should contribute in this way to the upkeep of the State and its institutions and to ensure that the lesser well-off are catered for? I see no reason why a single man having property to the value of £70,000 should not be asked to contribute his 1 per cent. In the case of a farmer there will be no liability for this tax unless his property is valued at £200,000. The Minister has been very generous in regard to the thresholds.

Regarding industry, those people in the upper income groupings who will come within the ambit of this Bill have been given relief in the budget because their tax was reduced then from 80 to 70 per cent and for them, too, the contribution will be 1 per cent in respect of property valued at £100,000 in so far as a married man is concerned and £105,000 in respect of a married man with two children.

We are labelled as doctrinaire socialists but there is nothing doctrinaire in regard to the principle of wealthy people contributing their share to the State by way of taxation. I hold that principle and I call myself a socialist. I believe the very rich should contribute to a greater extent than other people. The principal worry in the minds of most people is that it will not be as easy to have tax avoidance as it was formerly. When a person's assets are valued there will be no way out of paying tax. It is freely admitted on all sides that the people with a lot of wealth, who run their own businesses have always been able to devise ways and means of avoiding taxes.

The ordinary worker has to pay income tax on his full earning. He cannot get away with this because his employer deducts from his salary, under the PAYE system, what he is expected to pay. When one contrasts the number of people who pay under PAYE and those who pay taxes in other ways one begins to wonder who are the rich and who are the poor or if the ordinary PAYE people have to carry the whole load and people who have wealth contribute nothing. The ordinary workers are very upset about this. They are not prepared to carry this load any longer. They want a just system brought in so that the people who have the wealth and who can pay more do so. I believe the ordinary workers recognise that the Government are attempting to bring in an equitable system of taxation so that the people who can afford to pay will have to bear a fair share of the load as against those who are already paying under the PAYE system.

I feel the Minister has not gone far enough in the wealth tax. He should have gone higher than 1 per cent. I believe he is on the right road and that at least he is trying to show that the Government are determined to be fair in regard to the taxation system. When the White Paper was issued it was stated that the rate would be 2½ per cent. Several representations were made to the Minister and he has now come up with what he considers to be a fair assessment at 1 per cent.

We have heard many people saying that all sorts of disasters will happen as a result of this Bill. I never knew of anybody who wanted to pay tax. Naturally the people who will be affected by this Bill do not agree with it. We must have an equitable system of taxation. The young man of about 22 years of age, who contributes £5 a week in taxes, has a legitimate reason for grousing when he looks at the wealth around him and he sees he has very little to bring home after taxation. The Minister is more generous with the people who have wealth and who up to now have not paid their fair share in taxation and contributed to the running of the country and the less well-off people.

There has been a lot of tax avoidance. This Bill and the other Bills, which have been introduced by the Minister will make this more difficult. I attended a meeting with a number of other Deputies to discuss the imposition of tax on farmers. I was asked what I had to say about it. I stated I believed anybody who had a taxable income should pay income tax. If he can claim certain reliefs the tax burden is much easier on him. Anybody who has great wealth, such as a single man with property over £70,000, a married man with property in excess of £100,000 or a married man with two children with property in excess of £105,000, should contribute at least 1 per cent in taxation towards the upkeep of the country.

The Minister stated today that people will now be liable to wealth tax on their world property only if they are both domiciled and ordinarily resident in this country. I do not agree with the Minister there. He should be taxed on his property here even if he is resident elsewhere. No matter where he lives he should be taxed on property he owns in this country.

Section 5 deals with trusts. If a trust has property and an income from that property there is no reason why tax should not be paid in the same way as income tax is paid on it—there is no reason why the trust should escape the provisions of this Bill.

I welcome the Bill and congratulate the Minister on bringing it in. Perhaps the amount is not enough but the Minister knows better than I do. My party will support this type of legislation which tries to bring in a fairer system of taxation, level it up and, perhaps, reduce the amount lower income groups have to pay.

Mr. O'Connor

This Bill appears to be one more dangerous incursion on the right of individuals to own property. Is it the thin end of the wedge, the initial step in going completely to the extreme left in this country? This should be clarified by the Government so that we will know the position and what the future may hold. In the past month we have been discussing capital gains and inheritance taxation designed to take from our people a position they have through the years tried to build up for themselves, a position in which they were able to own property and to develop it.

I remember 12 years back when millions of pounds were removed from this country because of the passing of legislation which meant that the banks had to disclose the interest on lodgments of money by people above a certain amount. I was then a member of the finance section of my party. The banks were by law obliged to keep liquid 40 per cent of their assets. It came down to 16 per cent and it took four or five years for us to build the position up again so that the banks had sufficient liquidity through which they could save the people's and their own holdings.

This legislation is of the type that will have disastrous effects because of its interference with rights which our people have built up in past years. There was a time when our people were not allowed to own anything. They did not even own their land. Later they were able to establish a right to property. It is the one ambition of every Irishman, even the man living in a labourer's cottage on the roadside, to own property and to develop it. This legislation is another inroad into that fundamental right.

Deputy Dockrell expressed fear and was very disturbed. He is not alone in that. The bulk of our people are extremely worried about this. We know that a number of very wealthy people have already backed out of the country carrying their wealth with them. If this type of tax is going to cut into the wealth—if one can call it wealth— of people who have tried to build up the country, who have large properties mortgaged to financial houses to try and promote industry, whether it be a large factory building, a series of factory buildings, or a large tract of land which may be of high value today because things are going well for us but which in another year or two could be worth very little and which, indeed, could earn very little money even by way of getting an advance from the bank.

We are delving into the future on the assumption that everything is going to keep flowing to our advantage. We have seen the effect of these taxes in other countries. We have seen the disastrous results it has had on our neighbours across the water where they are in dire trouble, where they cannot even get moneys advanced to them any more because their nation is mortgaged to the hilt. Are we trying to drive ourselves into the position in which there will be nobody who can hold the fort, if it comes to the stage, it well might, where our exports will be depleted, where we will be unable to maintain our export markets? This is the type of taxation being imposed on our people and their land which they cannot bear.

As I said at the outset, it is a dangerous incursion into the realm of the unknown. I do not think any financial concern in the country can predict the future the way the world is shaping today. Of course, these taxes are designed at present for large land and property owners but the very nature of this Bill implies that it will be a matter of time only until it envelops everybody. That is what happens with all taxes that are imposed. They end up catching people down the scale. For instance, the income tax code was designed to catch as many people as possible. We find now that it catches social welfare recipients, even old age pensioners. I do not think it was ever designed to do so but that is what is happening at present. I predict the same happening in relation to this Bill.

We have seen what happened in Britain in their attempt to nationalise their industries. We have seen one of the most powerful concerns in the world—British Leyland—get into dire straits in such a way that they cannot honour their commercial commitments. They cannot even supply materials to the firm in Dublin. That is a disastrous situation. Those of us who have visited Europe and gone further afield, who have been behind the Iron Curtain and have seen what happens there and seen particularly what is happening in some of the satellite communist countries, such as Yugoslavia, where their people own nothing, where they work for the wage they are given, where they are all more or less of the same standard and where the person with energy and ability has no interest in developing them and where such a person works at the same rate as another who can hardly work. That is what they have brought themselves to behind the Iron Curtain. As we know also from outside sources this is what has crippled Russia. The great nation that she is, in spite of everything, she has never been able to get the production she needed or that she could achieve because initiative was stifled. Everybody worked at the same level of production. Is this what we are heading for here? We are a young nation developing our resources and abilities. Our better off people threw in their assets to the building up of the country and to the production of things that made for the benefit of our people generally.

It is far too early to introduce a Bill of this type. One can merely view it as being the thin end of the wedge designed to take us to the extreme Left and bring our people to the type of subjugation imposed in other countries. By our very nature as a nation we are and will be opposed to any type of coercion. We have learned that lesson throughout the years. And this Bill is coercive in its design. It may not be too harmful if its provisions are confined to the people mentioned in the White Paper before me. But I think nobody seriously believes it will stop there. It must and will come to a stage where it will apply slowly down the ladder to envelop everybody, to catch them in the net of this type of taxation which will bring about stress and strife. This nation has always fought against anything coercive and will fight against the provisions of this Bill if they bring about a situation such as I have described and of which I am convinced. I am convinced that that is what we are heading for. It would appear that we are attempting to legalise the confiscation of people's property in a certain respect. If such is the intention behind this Bill, it is immoral and hits all hard working people, people who are prepared to work long hours utilising their energies and abilities—most people have that extreme energy for a period of ten or 15 years only in their working lives, during which they work early and late to develop that type of wealth, not extreme wealth—to improve their lot in life for the benefit of their wives and families. If this is an attempt to hinder that type of development, it can have nothing but disastrous results in the long run and certainly cannot be of benefit to the nation as a whole.

There are people who have saved money down the years and deposited it in banks. Those of us in business might have thought they were foolish to leave it there at 1 per cent but somebody had to put money in the bank so that the rest of us could borrow it. These thrifty, hardworking people have served the nation well. Perhaps in recent years they invested that money in land and buildings in order to ensure that its value was not eroded by inflation. The fact that such people are caught by the capital gains tax is the sort of thing that tends to prevent the saving and thriftiness for which our people have been noted. I know the answer will be that it is not intended to interfere with those people, but somewhere along the line they will be caught.

I am not making the case that the Minister is not entitled to tax any such people. However, legislation like this which is designed to take away from the value of property that people have built up for security reasons is a new approach to taxation. The deterrent effect of such legislation on our way of life must leave us all the poorer.

This Bill has created grave concern among the industrialists from outside who have set up in business here. One industrialist in my own area flew across to Dublin last week for the sole purpose of finding out how his property would be affected. People who have been interested in coming here have stalled for the moment about coming here at all. If this taxation makes people think twice about coming here, then it must have a serious effect on investment. Perhaps it is not intended to tax such people, but it is necessary to clarify the position, because the Bill is quite vague in many respects. It does not specify the type of person it is intended to tax.

Our business people are adventurous and if they see an opportunity of building up a way of life that gains something for them, they will take a chance. If this Bill goes through, as I suppose it will, it will curb initiative. Any attempt to tax industrialists and their property must have a repressive effect. Therefore I stress that clarification from the Minister is needed so that these people will know what they are facing. I had the case of an industrialist recently who already had his factory built in this country. He had a complete development plan laid before the IDA. He put up 60 per cent of his requirements and was seeking the other 40 per cent. However, he has been told his grants will be reduced. This man made his plans in good faith, and it is not good that people should be treated in this way.

The previous speaker said that people with colossal property and colossal sums of money should be taxed. I do not think there are any people in this country with that type of wealth. One hundred thousand pounds is not a lot of money today. The number of people who have that money is not great. They are already liable for income tax or corporation tax but trying to squeeze more money out of them is too much.

This is a dangerous incursion into the unknown and the Minister should give careful consideration to this matter. Too many people in the country consider that this is an attempt to move to the extreme left, to imitate what is happening in other countries, and it is a system that our Irish people will not gladly accept. At times we are a volatile people, we are energetic and we put our energies into developing our economy. Generally we have not the extreme poverty that exists in other countries and this is a pointer to the fact that there is not a great gap between the poorer and the richer sections. The wealth and the assets of the country are reasonably well distributed, and while some people may have considerable amounts of money, generally they have brought it into the country. Such money has not been earned off the backs of our people. When we were under the conqueror we were not allowed to develop the country and accumulate wealth. We had to work the hard way, particularly in the last 20 or 30 years and I do not think we have extremely wealthy people here. We have no millionaires.

The Government should clarify their position with regard to the wealth tax. Will it remain as it is now, or is it an attempt to move to the extreme Left and to start us on a campaign that the people will not accept? They are afraid that it is only a matter of time before this wealth tax will apply to people who are earning much less than those now liable for wealth tax. It is up to the Government to tell us if they intend to extend this tax in the future.

Major de Valera

I should like to approach the problems that will arise as a result of this measure from three points of view. First, there is the political view. I must consider this aspect as a Member of an Opposition confronting a Minister in Parliament where I will argue certain matters against his proposals and I hope I shall do this in a reasoned way. That is the first duty of a Member of an Opposition. Secondly, there is the philosophical basis of this Bill and its broader context in our whole approach to economics and finance. Thirdly, there is the contents of the Bill.

With regard to the political aspect, I recall the old adage that politics is "the art of the possible". It is very much the art of the practical, both for the politician and the community. In exercising the art of the practical consideration should go a little further than the mere power considerations of the group in office. The reason some of us have always opposed the idea of conflicting interests in government is because it can bring about situations that distort the practical application of the art of politics for the benefit of the community. It can prejudice the community in the interests of the political advantage of the competitors in the arena of democratic politics.

I hope the Minister will accept what I have to say in the same spirit as I have tried to approach these considerations. The difficulty I have here is the reconciliation of the Fine Gael point of view as I was led to understand it—and I can only go by public pronouncements and their avowed intentions at election times and otherwise—and those of their colleagues in Government, the Labour Party.

As I said very recently, the proper approach for us is to give due credit for good intentions and not to start off by imputing wrong ones. However, I may legitimately ask where Fine Gael stand in this. I perceive in this National Coalition, as it is called, an influence at work, an influence that was indeed at work before ever this Coalition was formed, and quite understandably so. This is the third Coalition this country has seen. On the first two occasions Fine Gael succeeded in neutralising most of the policies of their Labour colleagues. I suppose it was to be expected that that would also be a problem in the formation of this third Coalition. This is where we come to the basis of this Bill.

Before ever the present Coalition was formed it was quite apparent the Labour Party were not going to be content once more with a term in office and a reversion to the status quo. Beneficial and all as that situation was for Fine Gael, the tensions were there and manifest. There are Ministers, Fine Gael Ministers, who thought the best policy was to stay on traditional Fine Gael lines. There were others who were influenced by an attitude that is best summed up in the adage “If you cannot beat them join them”. The Minister will not, I hope, take offence if I say that I believe he was one of the people prepared to foresake the Fine Gael tradition and throw his lot in with the Labour element.

The difficulty that existed is to be seen in the structure of the financial legislation coming before the House. It is to be seen in the structure of this Bill. The political problem involved is further compounded by the attitude of the Labour Party in Coalition. As I say, there is a traditional element in Fine Gael and I will mention only the one Member who spoke here though I could mention Members on the front bench. The traditional Fine Gael outlook exists right on the front bench where the Minister is sitting and Deputy Dockrell typified that in his approach today. Fine Gael is trying to ride two horses at one and the same time. On the other hand, I do not think there has been any tradition in the Minister's own attitude because in all fairness I must concede, though I have reproached the Minister with inconsistency on other occasions, prior to taking office he was one of the left-wingers of his party and there is in this Bill a compounding that worries me.

I want now to say a word about the Labour wing of the Coalition. Deputy Bermingham and I have worked very happily on committees and I have found him to be a reasonable and helpful colleague on committees. It seemed to me that his reference to doctrinaire socialism stemmed from a remark I made last week about Deputy Barry Desmond, a remark which seems to have got under somebody's skin. I am glad it did because I should like to clarify this alleged socialism, Deputy Bermingham was proud to proclaim himself a socialist. He has every reason to be proud. There is nothing to be ashamed of provided one is a reasonable socialist, an intelligent socialist, a genuine socialist seeking the greater benefit of the greatest number of people and seeking particularly to improve the lot of the under-privileged and the deprived. If that is the basis of socialism it has nothing to apologise for and I happily and wholeheartedly describe myself as a socialist. I will go further and say that, accepting that approach to socialism, which is a reasonable and basically intelligent approach, let us face the facts.

In these days of organisation, technology, mutual dependence by every man upon his neighbour, the necessity for collaboration, the days of individual independent action are gone. We must perforce and of necessity all of us be socialists. What I complain of is doctrinaire socialism, this plethora of catch cries, this talking about wealth, capital, millionaires, down-trodden workers—the sort of stuff we had the other day from Deputy Barry Desmond. There is a difference. I accept Deputy Bermingham's intelligent and reasonable approach. It is the doctrinaire approach I protest against. It is the doctrinaire socialist approach that has so bedevilled the neighbouring economy. It is the doctrinaire socialists, the products of the schools of economics, the academic dabblers, the selfinterested politicians, the exploiters of the masses—not, mark you, the capitalist exploiters of the masses but those who exploit the people for political ends and for power—to whom I object. These are the people who have reduced what was in my young days a proud and powerful and profitable economy, for the country concerned to the lamentable condition in which it is today. I put these facts to the House in order to ask a question: Again it does not help to impute malice to anyone and I give the Minister and everybody else credit for the best of intentions. Let us ask ourselves if the road we are taking with regard to legislation will lead to the same consequences as on the other side of the Irish Sea. Instead of seeing a State of which we are all proud and to the building of which all parties contributed, there would be a downward turn and we would have a situation similar to that which exists across the water. As I said before, I do not share the admiration expressed by Deputy B. Desmond for the British economy.

With that political approach I should like to think we have a certain agreement between ourselves as to what we want to do. In my view that consensus is there. We are professedly, and should be at heart, socialists. In this context I equate the word "socialist" and "Christian", because we are seeking to improve the lot of mankind in our community, to raise the levels of prosperity, to promote community peace and happiness and to lift and assist the more unfortunate members of our community—those described as underprivileged or deprived. We can all go that far.

Furthermore, we say we subscribe to the principle that those at the other end of the scale who have been blessed with good fortune have a responsibility and should contribute, co-operate and actively assist in helping those less fortunate than themselves. Having agreed on this, it is here that we must ask ourselves some very personal questions. It is here that what I have labelled "doctrinaire socialism" is so diabolically dangerous. It leads to a levelling at the lowest level unless there is proper organisation.

The Minister may feel impatient with my philosophy, and I now come to what I call the philosophy behind this Bill. It is all too easy to think in envious terms of the person who has something and concentrate on stripping him of it without giving enough thought to how it could be used for the benefit of those who profess to help. Beware that your benevolence is not a perverted form of jealousy and envy. That is what doctrinaire socialism leads to. That is what true, progressive and constructive socialism guards against.

Originally there were ideas which might not qualify as doctrinaire now because they were untried. Much of what is enshrined in the canonical doctrine of the academic socialist has been tried, weighed in the balance and found wanting. It behoves us to think of these things, too. Nobody can be anything but a socialist in principle. As man must be a sympathetic, complete and right-minded human being in one sense and a simpleton in another, because technology, organisation, the crowding of populations and all the facts of our environment dictate that none of us can live by ourselves. That would be like the neolithic man and the more organised man going back to the paleolithic age. Call me a conservative, or anything else, if you like. Anyone can challenge me if they wish. They might put forward reasons which in my view would not be very acceptable to the community, but the general objectives of socialism as I have already stated them are unacceptable. If anyone wants to argue about the consequences of the doctrinaire approach, I will argue with him. However, we have to accept facts as they are.

The context of the Bill has another aspect which does not follow my argument of philosophy. It is a very definite point in mechanics, as I said on other stages. Has the Minister put himself in the best position possible, or in a good position, to bring about reforms that will result in a certain levelling for the benefit of the community? Will action be taken that will result in the raising of levels and not reducing them to the lowest level as followed the doctrinaire approach as demonstrated across the water?

In order to do that one must have a plan; there should be a manageable programme. The whole approach to financial business in this House makes it practically impossible for the House to deal with it. It must make it very difficult for the Minister and I shudder to think what it will mean to the people who have to implement it. This Bill comes before us in a context where we have taxation by dribbling. At one time it was possible to have, at least for a year, some view of what money was to be collected in taxation, where and how it was to be applied and accountability for it. This Bill can best be described as just another dribble in the process of taxation by dribbling. While the Minister may think I am a little hard on him I feel I am justified in using this term.

Members will recall that before Christmas the House debated a Financial Resolution on petrol, which was taxation. After Christmas the House debated, and passed, a Transport Bill which, as I pointed out at the time, was nothing more than a grant-in-aid dressed up in another form. That was taxation. We then had the budget which traditionally was the occasion for providing for taxation. On that we had a number of resolutions, including resolutions for reliefs. I give the Minister credit for giving these reliefs but taxation was levied. A criticism I should like to make in regard to the budget is that presenting a budget like that gives the appearance of putting on very little taxation and giving reliefs but the chain of events masks the true weight of taxation.

The Minister may say that he foretold certain things but that is too vague for financial business. After the budget the Capital Gains Tax Bill was introduced and that is taxation —naturally, I am putting the Finance Bill along with the budget where it belongs. This Bill means more taxation and we have a Capital Acquisitions Tax Bill to come and that looks like meaning more taxation. The Social Welfare Bill will mean more taxation, no matter how we look at it. I do not think I am being too rough when I say that we have now developed a process of taxation by dribbling. I hope that is not the case but there are times when a spade must be called a spade.

It is extremely difficult, on Second Stage, to deal with this Bill in a constructive way because the context is so broad that it requires definition. What are we trying to implement? Are we trying to pander to the doctrinaire socialists or are we trying to put into action a constructive social policy? It is very hard to answer the question as to the philosophy of the Bill. It is doubly impossible to answer it in the context of the way the taxation is coming because it is hard to know just what is involved. It may be that I am stupid or that the Minister did not think it necessary to summarise the position but when we add up the dribbles what is being collected from the taxpayers? I am not able to get a satisfactory answer to that question. The Minister's Book of Estimates proposes to deal with an expenditure of the order of £1,000 million. Is that correct?

Mr. R. Ryan

The Deputy can add £200 million.

Major de Valera

We have had this dribbling method of collection but no certainty as to the figures involved. I should like to be given these figures. The Minister has gone to some pains to inform us that he is foregoing, in the abolition of death duties, £14 million to £16 million. That would be 1.4 or 1.6 per cent of the tax bill as shown on the face of the estimate. I take it that is not all coming from the wealth tax. I have not heard anyone suggesting that the rate of 1 per cent in this Bill is directly related to the percentage I have mentioned now but a percentage of the order of 1 per cent to 1.5 per cent related to an expenditure of £1,000,000—if I have done my sums correctly—is of the same order as the percentage charged on wealth here. I take it that is a pure coincidence. If it is not, I think the Minister should have told us before now.

As the Minister was so forthcoming as to tell us what he is losing on death duties would he mind telling us what the Exchequer will get as a result of this Bill? The Minister may have told us but if he did I missed it. It would be informative, to say the least, to hear the figure that is to be got.

I do not want individual cases mentioned and I do not want any narrowing down that would give away anything confidential but the House is entitled to know roughly how many individuals it is estimated—I know the number of private companies or discretionary trusts might be difficult to ascertain at present—are likely to be caught under this and on what basis. I ask that question, following my question as to amount, to know whether the whole exercise is worthwhile. It has been made quite clear to us that death duties would amount to £14 million to £16 million. I agree with the Minister that that is a sizeable amount but, as the Minister said, there were many reasons for revising that legislation anyway. I wonder is this the best way to do it. These are preliminary questions simply designed to show that we have not all the necessary information. The process of taking taxation in a series of steps at the rate at which it is being done is quite contrary to tradition and I personally believe it is contrary to the general intention as to how our finances should be dealt with in this House. Added to that difficulty we have real difficulties in regard to information. It is very difficult for a Deputy who is not specialising to have a clear picture of the proportions of things, of the money collected and how it is being applied.

With regard to the philosophy of the Bill, my problems are compounded by the context of the Bill, its political context arising from the very nature of the Coalition Government who sponsored it. This is all too clearly reflected in the Bill though I will pay the Minister the compliment of saying that he has done his best and I will pay him the compliment, and through him his advisers, of saying that he tried to assemble and present what is essentially a fuzzy idea in concrete form. I will not fault him either on his advocacy. However, the intrinsic fact remains that this ambiguity is basically here and I find it difficult to see what exactly we are at. Are we merely trying to level down? I hope the type of mind that thinks in terms of envy, of stripping and of political power, without giving constructive thought to giving where it is wanted, is not at work here too strongly. That remark is not directed at the Minister. The Minister is doing the best he can and technically I appreciate the skill and the work that has gone into drafting this legislation because I cannot conceive of the Minister finding a more difficult way of doing what is a tough enough job anyway than producing this legislation in what I suppose it is too early to call a series of somersaults. It is difficult to be sure.

Unless we get a certain clarity in our thinking on this, the House will be unable to appreciate what is before it, and we will pass another milestone in the process of deterioration in our approach to financial business. That is an aside. The Ceann Comhairle will not mind my coming back to my Delenda est Carthago on this.

So far, human experience and economics have brought a few salient factors to mind, and economic experiment has proved a few things over the past 50 years. The past 50 years since the First World War may be described as the era of economic experiment. In historical time, it coincided with the development of technology, the socialisation of man, if you like, through the development of communication and organisation. The sophistication of the elementary processes of economics which sufficed man for such a long time—simple buying and selling—have given way to banking, financial structures, company organisation, new concepts, new complexes. In that time we had experiments and theories. We had the theory, so dear to the heart of the doctrinaire socialists, that profits do not matter. The world is now realising that, in a real sense, you cannot live unless you have profits. The question is not the making of profits but how you measure them, and how you apply them and where they go. I think that will be universally conceded nowadays.

Theories about finance and economics were tried out but, at the end of it all, I do not think that today in 1975 we can assail very strongly the attitude of the prudent businessman at the beginning of the century who acted on the Dickensian principle that if you earned £1 and spent 19s 11d you were solvent and you could live, and if you earned £1 and spent £1 0s 0½d, in the end you were broke. I know this is getting right down to bedrock and I could be befuddled with figures, economics, statistics, and so on. The ordinary businessman and, indeed, the Minister and his advisers and all Governments will realise that basically that will always be the position. Of course, mechanisms come into it. I freely admit that one of the curses of the present day, as I mentioned on another occasion—and I am not referring to State services now—is the superimposed financial and brokerage system, the international finance and paper structures which in our day are swamping the productive units and constraining the production and distribution of real wealth in a prejudicial way.

In this era, this is one of the facts. Facts like this have been established and whether or not we like them, they are true. There are certain things we know about the workings of trade cycles—things can be modified, if you like—about the factors which operate socially to influence such things as levels of standards of living, costs and employment. We know a great deal about these factors and how far and how little we can control them. We also know that many of the pie in the sky theories will not bring practical results. This is the doctrinaire socialist fallacy.

Finally, a revealing and very important result of this experimental age which brought out basic facts of reality such as those I have mentioned, and the conservation of energy which I mentioned in a debate last week, is that there have been two approaches. One has been the attempt to recognise the human being as the unit, to respect his dignity, and to adopt the democratic approach. The other has been the frank, what I will call, militaristic dictatorial approach. In our time we have seen it operated in two forms: one which extinguished itself at untold cost in human life and misery, and the other which is developing in its own way. I refer to the communist system. I do not wish to refer to it in any pejorative way. Nor do I wish to enter into polemics of communism or anti-communism, but I do want to make this remark which I hope is valid.

The democratic approach, or if the doctrinaire socialists want it, the capitalistic approach has certainly got its disadvantages and drawbacks, its dangers and its weaknesses, one being the one the Minister is focusing on here, that is, a tendency if left unrestrained to allow wealth to concentrate at a higher level and to have insufficient regard for the lower strata, so to speak, for the under-privileged and deprived. That undoubtedly is an inherent defect and this is why the proper socialistic approach must be made in the democratic context to correct it. On that I think we are all one.

Let us also realise that there is another side of the Iron Curtain, if you like to use that phrase, which demonstrates that there are other dangers. There socialisation, except for the very few privileged power people at the top, is levelled out and controlled. What problems are there? One of the difficulties confronting that other system is to have sufficient incentives to make the individual and the manager function efficiently.

If we have troubles with entrepreneurs in our system and with people being too active in generating wealth and perhaps accumulating too much in certain sectors, on the other hand they have had the problem of people generating insufficient wealth to have the standard of the community maintained—for instance, the difficulty of getting managers to manage—of having a standard of living comparable to that available at the other side. I mention these things because they go to the philosophy of the Bill and what we are trying to do. Obviously, what we want to do in this Bill and in the whole taxation code is to try to learn from others' experiments, avoid the disadvantages and gain the advantages. Compare the economies of communist countries with those of the west and you see both have advantages and disadvantages but I see no great measures on either side of the Iron Curtain for doctrinaire, theoretical or academic purposes to apply a process that may very well bring about, on either side, an importation of what is undesirable without getting corresponding benefits. Here again, I warn against the doctrinaire approach and say that we should look at facts.

Who are we getting after and for how much? Is it worthwhile? Who will benefit? Envy is a poor motive. Even if somebody has some good luck, to take, for the mere purpose of taking from him, is hardly justifiable unless it is of real benefit to somebody else and then by all means arrange for a share. I am pleading to ensure that what we are doing is equitable, productive and economic. With Deputy Bermingham I shall be glad to accept the socialist label if we guard against the dogmas and doctrines that have now brought that honoured name into disrepute with many people.

I have mentioned the problem across the water. This type of socialism has not brought much more than strikes, obstruction to reduction, lowering of levels, unemployment and the complete debasing of the community concerned. If there is one factor more than another responsible for the decline of our neighbour, it is that. One may argue that it was a symptom—and probably it was. Perhaps it was partly in development but we must guard against it here and look to realities. Who are we getting after in this Bill? I have asked the Minister how much revenue he expects from it and is it worthwhile. I shall repeat that question later when I ask him how he will get the revenue. First, I ask how much he will take. Later, I shall ask how much it will cost to take it and then I shall ask, cui bono? Assuming there is a benefit to the Exchequer who will the Bill get at?

Presumably the Minister wants another method of taxation to get more into the kitty because he will want it to pay for everything. It will not be applied for a particular purpose but globally, as part of the funds the Government need to give welcome reliefs and provide social services with which we shall deal when that Bill comes, to pay for administration, cost of collection and so on. I have asked what individual areas this money will come from. I hope the envy motive is not the dominant one in some quarters—I am not accusing the Minister of having this as his dominant motive and I want to make that clear.

Let us get down to brass tacks. I want to give the Minister credit where it is due. He is attempting to be fair in many respects and that is one reason for the complexity of this Bill. There are some reasonable statements in the first part of the Minister's speech but I am sure he will not mind if I mention this sentence in which he says that if wealth confers a capacity to pay tax, and it surely does, equity requires a wealth tax. That is the kind of doctrinaire statement in which he seems to suggest that it is the balancing of what one might call formal equities that is influencing him more than the realities of the situation but, by and large, the Minister is giving reliefs. He has bills to meet and must get revenue but in the case of this Bill from whom?

It may not be a very popular thing to say in some quarters but if the Minister caught the people who had that type of wealth I would not be as critical. I can understand the petrol legislation; our objection was to how it was done. I can understand the social necessity for the Transport Bill. The budget is a normality; the principle of capital gains tax in the modern situation is fair enough also; our objection was not so much to such a tax but to the way in which it was being imposed. And with due reservation—not having seen it yet— possibly the same can be said about the Capital Acquisitions Tax Bill and, subject to what we shall have to say on the Social Welfare Bill, the Minister has to find the money there also. But this Bill strikes me as one with more dangers and less benefits and for this reason: there are few enough people in the country with wealth of the level necessary to give a substantial return, people who have personal wealth which they are enjoying in a personal way. Are there sufficient people in that category to justify this Bill?

My basic fear is that the speculator will be astute enough, notwithstanding the care and diligence incorporated in this Bill, to engage in evasion. In other words, the honest man will be caught for tax while the "chancer" will not be caught. I fear, too, that it may not be understood sufficiently either by the Minister or by some of the greatest advocates of this Bill that wealth and power are difficult to segregate. I wonder how the Minister envisages dealing with the problem that will be created because of this situation. The trouble is that when we go into the field of big wealth, or financial groups, of banking structures and of international finance there can be quite modest personal assets but a real wealth measured in terms of the disposal of money and property, the control of production, of factories and of individuals and even international powers to the prejudice of the proper functioning of democratic government. This Bill will not deal with that situation. In so far as the intention is to curb such a situation, I am ad idem with the Minister but I fear that in this respect the Bill will fail and that while it will fail in its social purpose it will not fail to bring about the undesirable consequences that are inherent in the very nature of this legislation.

The Minister said that one of the significant aspects of the Bill is that people will now be liable to wealth tax on their world property only if they are both domiciled and ordinarily resident in this country. To what I have said already I would pose the question as to whether we are not simply asking people to get out. I am not worried unduly about those who might be considered rich people running away but I am worried that the capital resources and the resources of energy, know-how and individual activity that may be represented in the sector at which this Bill is directed, may get out and that the result may well be to the detriment and not to the benefit of the community, a detriment so great that even if the Minister were to get ten times more than is anticipated from the taxation he is proposing, there would be a loss to the community.

Another misconception of the doctrinaire socialist is his idea of the equality of man. Of course men are equal in their human dignity and in so far as possible they should be made equal in their prosperity. However, men are not simply mass-produced replicas from the one mould. The true and the free man wants to be himself. One aspect of our society that is wrong perhaps it is a hangover from the past —is a tendency to snobbery and class distinction. It does not matter to me how a man earns his living. Each is doing his thing in his own way and the question is one of co-ordinating each individual in the community.

There are some who are gifted with energy and with, perhaps, ambition but there is no harm in ambition so long as it is of benefit to the whole community. Is there any successful politician in this House who is devoid completely of the element of ambition? There is no harm in that because by and large it is of benefit to the community. Humanity is made up of individuals and the wealth and prosperity of humanity is the sum total of the wealth created and possessed by the individual.

I share the fear expressed by other Deputies, that is, that this type of taxation may bring about a situation of discouragement, of not-worthwhileness. Such a situation would not help any of us. It will not even help the Minister to get his revenue. Let us talk in terms that we understand because we are discussing here an area to which none of us, so far as I know, belongs and the Minister has not given us enough information to pinpoint what we are talking about.

Let us get down to talking about a problem which has come up nowadays. There was a time in the very recent past—I was tempted to date it but I will not for obvious reasons because I might be accused of making political capital out of it—when many workers were earning so much in this city in certain employment between their ordinary wages and overtime that they thought it better to miss a night or two and upset production. There were other cases following that —it is in this context I want to refer to it—where people were earning so much and taxation was so heavy that it was not worth their while to do it. They considered that when the tax was taken off the extra money they were earning it was not worthwhile doing the work. Instead of the higher wages and the availability of work being an incentive, this acted as a disincentive.

I feel we are embarking in this Bill on a process of creating disincentives to activity. Is that a good thing? In the absence of more specific information I cannot answer that in relation to this Bill. This is a point for consideration. I have an open mind in regard to what the answer is, but I want the data in order to come to a conclusion.

From the time the State was founded, and especially in the expanding era of the 1960s, the post-war period, one of the difficulties was to get the capital resources and investment here to get things going, to provide expansion, more jobs, to raise standards of living and so forth. At that time everybody seemed very keen to encourage people to come in from outside. I do not think any party in the House opposed that policy. This Bill is a complete reversal of that policy. Is it wise? Even if I am wrong in my philosophical approach, will there be enough return from this to justify the depressive effect this approach will have on the type of people who will feel it is a worthwhile country to live in and that it is worthwhile putting a drive into it? I do not accept the argument, which may have been true at one time, that all the wealth goes into one man's pocket. Any profits that are made in expansionary activities by and large go back into the community either through taxation or by being ploughed back into industry. We all benefit generally from this. Is it wise to discourage that process? We should consider that question very carefully.

I started by saying I hoped I could keep the discussion on as objective a plane as possible and I have tried to do so while still exercising my right of criticism. I believe I am most helpful to the Government if I criticise and I am most helpful to the Minister if I raise these points and also express my willingness to listen to the answers and to give attention to the Minister's point of view and accept it where I am convinced. These are the inherent general difficulties in the Bill, what I might call specific Second Stage matters. This is not a compromise as the Coalition are a compromise, I do not say that in any offensive way. There is nothing disparaging to either of the two parties making up the Coalition when I say there is a discrepancy between the traditional Fine Gael view and the Labour Party view. I refer particularly to the attitude of the section of the community which was traditionally represented by the Fine Gael Party. I do not think it disparaging to say that the Labour Party had their traditional view. It is in this type of legislation that the difficulty of the marriage arises, notwithstanding the bridging efforts of people like the Minister, whom perhaps I have a little uncharitably described as one of those who adopt the policy: "If you cannot beat them join them".

Mr. R. Ryan

Will the Deputy agree with the observation that sometimes opposites attract and make very successful marriages?

Major de Valera

Yes. I am not suggesting anything worse. Let me leave it at that. The Minister might tempt me into unseemly development of some of the ideas he has suggested. I am glad he takes my remarks in good part. I hope I am not being unduly hard when I point out that this difficulty goes to the root of this Bill. I have queried the unworkability of it. Fine Gael, Labour and Fianna Fáil will agree on the principle of socialism that we are talking about here. The implementation may easily bring forth the bitter fruits of the doctrinaire socialist approach that has not realised the realities of economic experience in the past 50 years and they have failed to apply that experience to the development of a constructive social policy.

I ask whether the Bill is really worthwhile, a question I cannot answer in the absence of the information I have asked for, whether it will catch the speculator, the get-rich-quick merchant on the big scale whom the Minister would like to say is his main target but who I say is the most likely person to get away with it. They are my general remarks on the Bill in its entirety, but I am far from finished with it.

Let us take its construction. For a step in a series of steps by which taxation has been imposed this year—we had the Capital Gains Tax Bill and the Finance Bill—this Bill is a substantial bit of legislation and drafting. Not only should it get critical attention at Committee Stage but it should be analysed deeply on Second Stage. We had points mentioned by Deputies Dockrell, Bermingham and O'Connor and all require considerable examination in Committee. The explanatory memorandum stated:

The Bill is intended to give effect, with certain modifications, to the proposals for the introduction of a wealth tax contained in the White Paper on Capital Taxation which was issued in February, 1974. The modifications have been made following consideration of the representations received from numerous individuals, corporations, organisations and others.

"With certain modifications". I seem to have read somewhere that subsequent considerations made certain proposals and adjustments necessary before the Bill could be brought in in its final form.

Mr. R. Ryan

We said we would listen to all the views and that the Bill would reflect them.

Major de Valera

Unless you are all masochists you do not look for all that work unless you have to. There are 33 sections, complex and difficult. I do not think it is too late to improve the general concept further by having a general discussion on Second Stage and I would ask the Minister to consider that before he lets the Bill go to Committee so that amendments may be brought forward. However, before we get to amendments at all, it is necessary to have such a complex Bill fully analysed. The Minister last week admitted objections to prolixity and I do not want to contribute to that dilemma but, having regard to what the Bill is trying to do, I wonder if it is not too complex. There must be a series of interpretations in a Bill of this kind but must we have such a complex section as this? I am rather afraid we may be slipping into individual definitions of certain words for particular purposes in different Bills. That is a point we might follow up in Committee.

Section 2 deals with taxable wealth. I wonder will the Minister's concept of taxable wealth preclude a number of law cases at a later stage. Most people have been deterred from going to law because of the cost and very often because the amount and the interest did not seem to justify the cost and inconvenience of invoking the judicial process. But here we have a Bill aimed at just the sector of the community who can afford to take the legal approach and who furthermore have the incentive to do so because of the amounts involved. If the Minister is right and there is wealth of the order involved from which he can collect a significant return to justify this Bill, then there are wealth and resources available with which to contest the Minister. Therefore, it behoves this House, if it passes legislation of this nature, to be particularly careful that one of the consequences of the Bill may not be big bills of costs on the State. We have had examples in the not too distant past where actions have been taken in which the State has been involved and in which the State has lost and paid costs. And who paid the costs? The taxpayer, because that is where the money came from.

Up to the present—and this is one of the reasons that suggest there are not the large numbers of people there who can indulge in that type of litigation— it has usually been the State doing the big fellow which has taken actions. I do not want to refer to recent times only. I took part in a case many years ago—and it is almost 25 years since I practised—in which the State very confidently took an action against a small man. The State paid a very large sum both in compensation and in costs which might very well have been adjusted at the beginning were it not for the arrogance of the people concerned, which is what happens when the State meets an antagonist of sufficient proportion. I remember another case where a State agency took an action against a small man—and I am talking from personal knowledge—where again the State paid the costs. If the Minister wants the references to both cases I will give them to him. And we have had a recent experience. This is the type of legislation that can very well attract that type of thing and the bills involved may be substantial, at any rate substantial enough to go some distance towards aggravating the costs of enforcing what is in the Bill.

I say that by way of warning because that one's battle may be very meritorious but it might be as well to reflect what one is taking on. It is for that reason I worry about the form of this Bill. This is absolutely no reflection on the Minister or on his advisers in the drafting of the Bill. I commend the industry and expertise used in the drafting of this Bill. Daniel O'Connell said he could drive a coach and four through any Bill. I suppose in modern times one could say any competent lawyer could drive a coach and four through it if the resources were available so to do. But, bearing that experience in mind, this is a Bill about which to be careful; and I say that without any reflection on the Minister, his Department, the experts who did this job so competently, the legal profession or anybody else. I state it as a matter of fact that it is a danger.

Therefore I have some disturbing thoughts in contemplating not only the philosophical vagueness of the basis of the Bill but also phrases like "taxable wealth" and possibly others with which I should like to have time to deal with in Committee. This will probably be done in Committee in the House and it will be very difficult to have the ordered attention a Bill of this nature requires. For that reason I wonder would the Minister consider setting up a special committee on this Bill, or perhaps a joint committee?

Mr. R. Ryan

The Deputy may not be aware that we have already made suggestions of that kind which have not been acceptable.

Major de Valera

To be honest, I was not aware of that. But I am a little worried about that aspect of the Bill more than any other. The definitions section raises the whole tendency we have had in recent times towards specific interpretation as against the old canons which were more universal. In the substantive part of the Bill I find sections 2, 3, 4, 5 and 6 so long and with so much provision, I have a certain feeling of apprehension about them generally rather than any pinpointing of them at present. Naturally, and correctly, there is in section 7 the exemption which has to be taken in context. There is in other sections the market value. Practically all of those sections demand more than normal consideration in the case of a Bill such as this.

The Minister has tried to do a fair job here. Let me be fair to him in that respect. Apart from those general matters, there is one thing in the Bill on which I want to raise an objection in principle. Here I want to make it perfectly clear that there is no ambiguity in my admiring attitude to the Revenue Commissioners or no detraction whatever from anything I have said about that body. If there is any body in the State that I would trust with powers it is the Revenue Commissioners. I merely wish that we could have a committee on this type of Bill such as the one we had on the Income Tax Bill years ago. That committee was the best I ever sat on in this House. It was presided over very efficiently by a late Deputy who was exceptionally well qualified, personally and otherwise, the late Deputy Sweetman. I should like to pay that tribute to his memory, though I was on the opposite side of the House to him. The staff work done on that committee was such as I have never seen anywhere. The Revenue Commissioners produced briefs, documents, advice, evidence, with a frankness and an efficiency I have never seen anywhere, and even within the past month the efficiency of that committee has been enhanced because, as a member of that committee, I received the amending Acts to bring the file of Acts that was given to us at the end of that committee up-to-date.

I say these things lest it be taken that what I am about to say now is in any way disparaging of the Revenue Commissioners. Far from that, in making these remarks I wish to some extent to protect the Revenue Commissioners. As I say, I have a definite criticism in this regard. Last week I had to point out that the burden that was being placed on the Revenue Commissioners by this rapid accretion of taxation proposals, aggravated by the introduction of extraneous loads like the social welfare load, must make their official functioning difficult, must involve them in extreme pressure, must require very expanded resources to cope with the problem and to maintain the standard of equity and efficiency which we all appreciate.

This Bill will be another load on the Revenue Commissioners, but on top of that—and here is my criticism of the Bill—we are now going to delegate ministerial powers to the Revenue Commissioners in a way that goes beyond what has been customary. If there was any body, person or group of persons in the State that I would give the powers to if they had to be given, it is to the Revenue Commissioners, but since we have already, in the democratic Constitution which we have, delegated the powers of the executive to a Government, I do not think it is right that the Government should now delegate those powers to commissioners or others. Delegatus non potest delegare. However, whether it is possible or not, is it wise? It may seem expedient, and when the Revenue Commissioners get this kind of thing with the other Bills, I can sympathise with them saying: “We cannot do the job unless we have these powers”. But the finality of this delegation worries me, and I wonder if it is fair to the Revenue Commissioners. Here we have another process of deterioration in the doing of our financial business which is only a part of the complaint I have had with this House, with ourselves. The fault is in ourselves, not in the stars or anywhere else.

The process has become necessary through the complexity of our legislation. The process started with simple taxation, then complex taxation, evasion and disequity. The Revenue Commissioners or the Minister's Department say: "There is an abuse. It must be stopped." Then you get an anti-evasion clause in a Finance Bill. That adds more complexity and more difficulty. Then a vicious process of complications sets in which can only impede the Government and the Revenue Commissioners and reduce the business of this House to a farcical formality.

I am specifically directing my attention to a clause in this Bill. It may be in other Bills, for all I know. I have never felt it was necessary to worry about this kind of thing in the past but having regard to the way we are pushing everything on the State service and the Revenue Commissioners, in particular, what I am saying has a particular relevance. Section 31 reads:

(1) The Commissioners shall make such regulations as seem to them to be necessary for the purpose of giving effect to this Act and of enabling them to discharge their functions thereunder.

(2) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next twenty-one days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

Who is the Minister? Where is his executive power? What is the House? Lastly, is it fair to the Revenue Commissioners? Goodness knows there is burden enough put on them without asking them to make the law as well and take the odium for it, because that is what they are being asked to do here.

We all know what a farce—and it is about time the public knew—this placing of regulations on the Table of the House is. As far as I ever understood it "Table of the House" means the Minister makes an order and he places a copy in the Library. I am afraid the average citizen is misled by that phrase. He thinks there is a table here that we can see. The document is stuck in the Library and the Deputy can find if if he looks for it. It may be noted on the Order Paper all right. I would love to see what would happen if somebody moved a resolution. If a private Deputy tried it, the 21 days is gone anyway. In plain language, to use the expression of a very distinguished member of the Minister's party when he was over on this side of the House, it is all cod.

Mr. R. Ryan

I do not want to upset the Deputy's thinking; I know it does not go to the root of what he is saying, but the practice he is condemning has been in operation for a long time on multitudes of different taxation formulae. It is not a new one.

Major de Valera

All right, but it is time to take notice of it now. Before the Minister intervened I said it may have been there before but I think it is going too far now. It was in Finance Bills when we had nice tidy business but now it is nearly the same as ministerial orders. I am saying this for two purposes: first, to protect the Revenue Commissioners and, secondly, to point out our defects here. It is the fault of the House that allows a Government to do that kind of thing. That is the point I am making and I should like it to be clearly understood. We will have to mend our ways in dealing with financial business if the whole process of democracy which we so laud is not to become totally ineffective.

Even if I were to admit a case for what the Minister has done, as a matter of urgency I should like to see the Revenue Commissioners take part, as they did before, in a consolidation measure. This would go a long way to meeting the difficulties I have mentioned. The income tax code has been effectively dealt with by the Revenue Commissioners. I admit it has been simplified and I give the Minister credit for that. It would be well to up-date that code in a consolidated form but I must say that I think it is fairly all right now.

Having regard to the complex situation that arises as a result of legislation, clearly a consolidation measure is urgently required. An accounting process is also needed, one that will take into consideration pertinent revenue and expenditure. Revenue accounting may be easy enough but expenditure is a different matter and I do not want to deal with that now. The difficulty in this matter is that we have no chance of really dealing with the Estimates in the House.

It must be made possible for the Revenue Commissioners to function effectively. Loopholes must be blocked and simplicity of procedure must be achieved. I have no objection to giving them power; in fact, I would be very hesitant to refuse them any power they ask for in the pursuance of their job. What I have queried is the way that power should be conferred.

So far as the structure of the Bill is concerned, I am concerned about two points: first, to ensure so far as possible its invulnerability in the face of legal attack and, secondly, to point out the problems that will face the Revenue Commissioners and to make it possible for them to deal with them. I am afraid all of this will simply mean expansion of organisation in the Department. Notwithstanding the use of computers and so on, I do not see how this kind of problem can be tackled without such expansion. This will entail more money being spent on the public service and this means a diminution in the net return for the Minister. In turn, this leads to the question: Is what the Minister is doing really worthwhile?

I have asked the Minister and Deputies to consider the political aspects involved in this measure. I have asked what this Bill will do for the community, what is the motivation behind it and what is the intention of the Bill. Secondly, I have referred to the philosophy behind the Bill. We should be clear about that so that implementation will be governed by proper considerations. Thirdly, I referred to the contents of the Bill, to the disadvantages and the dangers and to the difficulties for those who will have to implement it.

The Minister mentioned what he was giving up by removing death duties. What will he get in return? Will he give us the data that will help us to judge whether the exercise is worthwhile, particularly in view of the dangers inherent in the Bill? I hope the Minister will accept my remarks as a useful contribution to the debate.

We are, I hope, at least paying him the compliment of taking the measure seriously and of understanding the work and consideration that went into the preparation of it. I hope, too, that we all have the common desire to do our duty as public representatives and produce the best kind of legislation we can or to decide whether or not legislation of this nature is the right approach at all. As a responsible Parliament these are the things we should be discussing. I hope my approach has conformed to that norm. I invite the Minister to comment on the worthwhileness of the Bill, quite apart from its, shall I say, social desirability. What will the real use of the Bill be? I should like the Minister to help us by giving us the appropriate information.

Mr. P. Belton

This Bill was drawn up by lawyers for lawyers. It is not always easy for the layman to interpret what is meant by a Bill of this nature. I have been on many committees on which accountants and lawyers sat and they could not make head or tail of Bills and, on occasion, they brought in experts to help them assess whatever piece of legislation it was. Of course, on Committee Stage when we deal with the measure section by section it is only then we seem to get anywhere.

One thing that always worries me about taxation is whether or not it is worthwhile. I think of dancehalls here; we set out to collect tax on dancehalls and the collection costs more than the tax gained. There is no point in throwing money away, no point in giving out £11 in order to get £10.

To me, this Bill is an improvement on the existing situation. It is very rarely anyone gets a reduction in taxation when new taxation is imposed. The only time one may gain is when allowances are improved or it would cost too much to collect a particular tax. Deputy de Valera and others have argued that, as a result of this measure, people will leave the country. Where will they go? Other countries have wealth taxes. Will they go to one of these alleged tax havens? They will have to invest their money somewhere. In Denmark the taxation authorities actually go back to the source of the total income. Sometimes there may be a short gain but in the long run as much will come into the country as may go out of it. I do not anticipate any tremendous flow of capital out of the country.

This tax will replace death duties. These duties were always unfair. The wrong people were caught in the net because it was generally the widow and children who suffered. There were people who gained an advantage by setting up trust funds five years prior to death. That situation, of course, no longer exists.

The Capital Gains Tax Bill passed its Second Stage and both sides were agreed except for a few sections. There was objection to there being no compensation for inflation and to the threshold but, apart from that, the Bill was accepted by the House. The gift tax was approved, again with certain exceptions. It is certainly a better tax than death duties but there should be a lower rate on gifts than there is on acquisition. There can be as much as £150,000 per person before acquisition tax is paid. Those who establish trust funds will pay no death duties whatsoever. The wealth tax will be at a rate of 1 per cent.

In the case of insurance, on a policy of £100,000 tax would be in the region of £16,000. That works out at 2 per cent as against the proposed 1 per cent here. If one were unlucky enough to be put into another bracket one paid 55 per cent instead of 50 per cent or 45 per cent. This was the evolution when Deputy Lynch was Minister for Finance. When it was a case of a policy of £20,000, £30,000 or £100,000 —whatever it was—and an estate of £50,000 each was judged separately and one had to be used to pay off the other. Fianna Fáil were taking more from that person than the taxes proposed here tonight. When the estate of a person who had died was being assessed for death duties his house, furniture, car and practically his clothes were included under the old system. If the sum reached was £200,000, 55 per cent of that sum would have to be paid. The estate of a man dying now and leaving £600,000 equally to his wife and three children would not be caught for death duties. Property given now to children over 21 is not liable to gift tax.

Capital gains tax will help to make up for the £14 million or £15 million lost through the abolition of death duties. This is a new tax which should have been introduced ten or 15 years ago. If that had been done, the Government could have collected a great deal of money. Under the old system it would have been stupid for a man to take out an insurance policy worth £600,000, because he would have had to pay tax of £330,000 on it. A person in the £500,000 and upwards bracket would probably look on a policy of £100,000 as an insurance against death duties. As there are no death duties today, he does not have to insure himself against such an eventuality. As the Minister said in his speech, centuries of wealth tax would not inflict the same cost as death duties did in the past and would have done in the future had they continued.

Small property owners are completely relieved from tax in this Bill. A single person must reach the threshold of £70,000 plus his house and chattels, before he is involved. A married person can have £100,000 plus his house and £2,500 for each child before he is caught. A widow is allowed £90,000 and £2,500 for each child before she pays tax. In some cases livestock is involved. I will not go into detail about this because there are others who are better qualified than I to discuss it. Often bloodstock is involved. If one horse is worth £1 million and another is worth £500,000 I cannot understand why the owners do not have to pay wealth tax or even income tax. In many cases a stallion is bought and six or seven people can have mares serviced by this stallion but they do not pay any tax on the sale of the foals. In my view, this is a capital gain and should be taxed in some way. There may be a very good reason why bloodstock is excluded but in my view if it does not come under the wealth tax it should come under income tax.

In my contribution to the budget debate on 30th April last I referred to hotel bedrooms. It would be unfair to put a wealth tax on anybody in the hotel business, especially those in seaside resorts and country towns who are busy for such a very short time each year. A survey made some years ago showed that the return for investment in the hotel business was from 1 per cent to 1½ per cent. The tax applicable to the hotel industry will put them on a par with agricultural land and fishing boats. These are three essential industries, because we do not have the same resources or traditions as other countries such as England, who built up their know-how during the Industrial Revolution. If our people in those three sectors have to pay a wealth tax it will cut into their profits. This would mean that the Government through Bord Fáilte, would have to give grants or loans rather than this reduction of 50 per cent. I commend the Minister on this. The tourist industry should be encouraged as much as possible. The tax rebate to the hotel industry is essential to our tourist trade.

While I can see tremendous advantages from the wealth tax rather than death duties, I am worried in the short term about the wealth tax on productive assets and capital. In the long term it might work out but in the immediate future, until the people involved become accustomed to this style of taxation and price accordingly, tourism will suffer.

Debate adjourned.

The Dáil adjourned at 10.30 p.m. until 10.30 a.m. on Thursday, 6th March, 1975.