Wealth Tax Bill, 1975: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. P. Belton

Last night I mentioned that this wealth tax was one of the taxes to replace death duties. Capital gains tax is a new tax but a certain portion of it is in lieu of death duties. I mentioned also that gift tax and inheritance tax were replacements for death duties. If one compared what is suggested in the gift tax and the inheritance tax with death duties one would see that the amount paid starts at a very high threshold, whereas in death duties it started at a low threshold. In some cases there was practically no threshold at all. Therefore, money had to be got from somewhere to replace death duties.

Cover by insurance for death duties cost something in the region of £400 to £500 for every £30,000. To cover for £100,000 cost in the region of £2,000 which is double what the wealth tax will be. For death duties all property was included, even the kitchen chairs, while for the wealth tax there is a threshold of £100,000 for a married man. In the case of gift and inheritance tax, there is a threshold of £150,000 per child. While I can see tremendous advantage in the wealth tax in combination with the others over death duties. I am worried about it in the short term. I am particularly worried about two sections which I shall deal with later. Under these sections a person may have to pay out of his profits and cash flow and if his cash flow is hurt it means that he cannot continue in business unless he increases prices or cuts down on labour costs.

This country consists mostly of small business. According to the newsletter of the Confederation of Irish Industry over a number of years many large and multi-national companies have appeared on the scene and, instead of getting rid of small businesses, they have created more. An example of this is Leyland Motors in England. Small firms make each component part for the vehicles produced by that firm and many of them employ 50 to 60 people. The Confederation of Irish Industry state that small firms play a particularly significant part in the prosperity of this country and that 86 per cent of all manufacturing establishments employ less than 100 people. These firms employ nearly 35 per cent of of all those employed in manufacturing industry and produce more than 50 per cent of the industrial growth output.

Small firms give most employment in the small towns and villages and they are needed for the seasonal work that ties in with agriculture. Anything that would hinder such firms from having a cash flow or take away some of their profit might be detrimental to us in the long term. At present small firms here are in trouble because of cash flow, many people would say financial disaster but I do not believe this. They have been caught in many ways. Whereas in Ireland it is the small companies that are affected in England huge firms have gone such as banks, property companies, big oil companies. Those companies have gone because of price control, because there was too much money being taken out of their profits and because they were not allowed to generate their own profits. I am frightened that in this country if we are attacked by the Government or the Revenue Commissioners with certain sections of this Bill we could end up with this trouble. At the moment we are in trouble because of insufficient demand and so on but I believe that if any more money is taken out of those companies we will be in trouble. If in the case of small companies owned by one or two people the Revenue Commissioners were to direct that wealth tax be paid on the capital employed in these companies or the value of the property, I am afraid many businesses would close up and there would be absolutely no profit or no money for anybody with consequent unemployment. I shall quote from the same newsletter:

With business, in general having severe liquidity problems, small firms are being particularly badly hit because of their size and consequent relative weakness:

—small firms are being subjected to the "nutcracker effect" with, on the one hand only short term credit available for raw material purchase while, simultaneously, the large customers of small firms are demanding longer credit than before.

—due to the energy crisis, fuel costs have increased enormously and accounts must be settled on delivery.

—labour costs and pay-related insurance contributions have increased unit costs.

—many small firms would need to hold larger, and certainly more expensive, stocks of raw materials to protect against fluctuations in price and supply.

Many firms have been caught because when they tried to replace materials they were double and treble the price and they could not finance the replacement. I know the Government have promised to help them in some ways.

When money is taken by a Government it is used, let us say, for social benefits, for reinvestment, for the IDA, to increase employment, to raise the standard of living. However, it is not much good if we have to take money from a successful business and in doing so create a liquidity crisis in that business and put it into financial difficulty while, on the other hand, the money is being given out with no great return on it. Any money taken in the form of wealth tax that would otherwise be used for reinvestment would be very bad for employment and very bad for this country. I know there is the question of the legality of it and it would be quite difficult to do but I always believed that if too much money were kept in a company and not paid out in dividends a tax directive could be sought and it could be taxed inside the company.

I believe if this law were strengthened, to some extent, a company, even though it was privately controlled or controlled in the main by a private individual, could be treated in the same way as a public company—on dividends—and shares could be valued in that way. If it is to be valued on property I can see instances—in which a business could be capital intensive or property intensive—where the wealth tax would be greater than the profit made. If a businessman owns, say, 99 per cent of a small company and if the capital in that company is to be treated as his capital and if he is to be charged wealth tax on that he would have to pay more wealth tax than he would earn, even allowing for the 50 per cent that is allowed. In some years he might earn nothing because of price control or pilfering within the company but he would still have to pay wealth tax. It would mean this man would have to sell out to pay the wealth tax and this surely is not the intention of the Bill. This should be looked at carefully by the Minister and by his officials.

Section 9 (1) reads:

(1) Where there are included in the taxable wealth of an assessable person on a valuation date shares in a private trading company which is a company controlled by that assessable person on that date, the market value of each share shall be ascertained by the Commissioners for the purposes of tax as if it formed part of a group of shares sufficient in number to give the owner of the group control of the company.

Could we have the method by which this will be done spelt out? How will it be valued? Are the Revenue Commissioners to decide the value of the shares? We would like something more specific on that section. Is the value of a person's interest in a company the value of the saleable value of that company, including all its equipment and so on? Is it based on the profit of the company? Is it based on the dividends of the company? If it is based on the total value of the property a company could have a bad year and the person would have to pay wealth tax even though he had made no profit and to do that he must sell out some of this property. Many firms work on a profit of 10 per cent or less. Money can be misused by staff, or the person may have bad debts, or severe price controls can affect him. Money may have to be paid out of the company to a shareholder. If dividends have to be increased to such an extent that a person has to pay wealth tax, this tax will be detrimental to business people.

If 1 per cent is taken from a property owner he has 1 per cent less to invest in the future. To make up for that he has to get higher profits. He will not be allowed to do that because of price controls. He has to get higher profits to pay the 1 per cent. Even if he makes no profit he still has to pay wealth tax. I can see no allowance for a new business. A person who buys a licensed premises has to stock it and furnish it. In the first couple of years when you take the write-off against tax there is no profit. If he is the sole owner he will be asked to pay wealth tax. A person starting a new business in a new area finds that in the first two years with the write-off for depreciation, and so on, he has no profit but he will still have to pay 1 per cent tax.

In the hotel business profits can be as high as 14 or 15 per cent but they can also be as low as 5 per cent before tax. The owner is limited in the amount of money he can turn over. The owner of a business with a turnover of £200,000 may be making no profit. Somebody may have his elbow too deeply in the till. Nothing can be done about this until it can be proved. Even though he thought he was getting 10 per cent he might end up with nothing. A person with no property can make a stack of money through importing. It is not correct to put a wealth tax on his property because he was not got any. It should be spelled out here whether the tax is on the dividends, or the profits, or the saleable value of the property, so that we will know what we are voting on.

The section provides:

Where there are included in the taxable wealth of an assessable person on a valuation date shares in a private trading company which is a company controlled by that assessable person on that date, the market value of each share shall be ascertained by the Commissioners for the purposes of tax as if it formed part of a group of shares sufficient in number to give the owner of the group control of the company.

Will the Revenue Commissioners decide what the property is worth? Will they tell us that we pay tax on the value of the property inside the company? Will they give us 50 per cent off or 25 per cent off? Will they work it on a dividend basis, or on a percentage of the total profits in the company? I do not see what they intend doing. We are being asked to buy a pig in a poke and, within a couple of years, the Minister will have to change the law.

If you have to pay wealth tax of 1 per cent the only way you can pay it without selling is to make more profit. To make extra profit you have to have price increases. If the Government insist on price controls you cannot have price increases. You have to pay your overheads, and so on, or you cannot out of business. You have one Minister introducing price controls and another Minister and the Revenue Commissioners saying that this is the way the tax will be paid. You have to get an increase to pay the tax or you are out of business. If you cannot get an increase, or if there is a delay in getting an increase, you are in trouble. Before the end of this debate I should like to know exactly how it is intended to value the shares of a private company. This is probably the kernel of the Bill. This is the troublesome part of the Bill. Most people would agree with the Bill except for this section and one other section which I shall come to later.

There is a general feeling in industry that small firms should have to pay less tax than large firms. As Deputy de Valera said yesterday, the small man cannot fight the Government but the big man can and he can find loopholes. There is a lot to be said for the suggestion that small firms should pay less tax than large firms. I do not accept that 100 per cent but I can see the point. Under section 9 the small firm is being hammered if it is owned by an individual, or by an individual and his brothers or his sons. They are deemed to be the owners in toto whereas, in actual fact, they need not be. But if one man owns over 50 per cent he is in control. If he owns over 75 per cent he can sell it whether the others like it or not. To me, this means that a private individual who has control of a company now will be taxed differently and in all probability at a different rate than if he had the same money invested in a public company, unless I can be told that if one is going to be paid on dividends with the right—I can understand that the amount of capital cannot be left there ad infinitum because then you would not have public companies—that wealth tax will be charged on a certain number of years' purchase of the dividend and with the right of the Revenue Commissioners to get tax direct if one was not paying out a sufficient amount. Something on that style could be acceptable, but certainly to treat a person differently just because he owns a private company and so force him to pay more is not equitable.

Along with being taxed at a higher rate it will mean that his cash flow would be cut to bits because where there is one-man ownership in a small firm the owner takes out sufficient on which he pays tax and surtax or a different rate of tax. He takes out what he requires and leaves the rest there for the development of his business but if he is charged right through on the value of his property in that company he has to give out more money, a bigger dividend, to pay the extra money the Revenue Commissioners will look for because he is considered to be the sole owner and in control of the dividends. If that happens, there will be no cash flow.

It was stated in the newsletter of 11th February that before this wealth tax comes in if we want to have any small businesses left we shall have to get the price control system completely liberated so that if somebody seeks a price increase he will be able to get it without having to give two months notice and then wait. I know this has been changed but it is still not sufficiently speedy. Actually, I do not see how you can have price control if you are to have a wealth tax. I can see price surveillance but not price control unless all small companies are to disappear. We have seen what price control has done in England. The bigger the firm the harder it fell, every one of them. It will not happen in small private business in the retail and distributive trade but in the case of the manufacturers, particularly those who go for exports—there is no price control for exports—in regard to the goods they sell at home, if the price control is not modified the Minister for Finance will have to come to the rescue of all these companies. Before we bring in a wealth tax which will particularly affect the smaller companies owned by one person the Minister should spell out how the Revenue Commissioners intend to tax the private company owned by an individual or by a family.

The Minister has made many improvements which I will deal with. One would need a month to go through the Bill unless one is a barrister. I agree with the concession the Minister has given to hoteliers and fishermen similar to that which he gives to farmers. This is necessary. I know it is very difficult to provide for the seasonal resorts but perhaps something could be done in their case. I do not know where you could draw the line. I also think the allowance of £100,000 for a married person is liberal. In this city and county we have many Georgian buildings. If it is a private house one is not charged on it but the cost of upkeep of these buildings which are beneficial from a historical point of view is considerable and I think some concession should be given in respect of them. I do not know how it could be done but it would be a good thing to do. Many buildings have been demolished in the city because they are too expensive to keep particularly because of increasing fuel and overhead costs.

It is provided that 80 per cent is the maximum you have to pay in income tax and surtax and wealth tax but that is subject to paying half whatever the bill is for wealth tax. Again, you can get into a position when times are difficult where you have property worth money but you may make no profit and yet you still have to pay wealth tax. You may have to pay more in tax than you make in profit so you are paying out of capital. I do not think 50 per cent of the wealth tax bill is a proper figure. There should still be a maximum in respect of what you pay on what you earn because in the bad times you would have to pay more than 100 per cent, not in the good times. In the good times one would be able to pay it but in the bad times that would be an impossibility.

Supposing the Minister was to put 6p on the pint. That would be a bad time as far as the value of public house property is concerned. Some smart operator could come in and wait for a few years and he would be all right. In this Bill the Minister is not helping people to get over troublesome periods. When times are good one does not mind throwing a few pounds around but when things are bad one cannot do it.

Section 4 deals with husband, wife and children under 20, if the children are not married. Putting the age at 21 is outdated. It should be 18 years. Boys who start serving their time at 14 may own businesses by 18. Are their businesses to be aggregated with those of their parents? Section 5 deals with trusts. The Bill is confusing on this. The explanatory memorandum states one thing and the Minister's speech another. The memorandum states:

Subsections (2) and (3) are designed to deal with special cases where hardship might arise if the particular trust were treated as an entity for the purposes of the tax. Where a trust is for the benefit of a minor child, with or without the addition of his parents and other minor children of the family, the trust property is treated as property of the husband, wife or children, as the case may be. Where a discretionary trust is solely for the benefit of certain named persons, who are incapable of managing their own affairs or for spouses of a marriage, the property comprised in the trust is regarded as the property of the individuals concerned.

Does that mean that if an individual is a trust and children are minors that the trust is treated as a separate person and that, if the minors are not incapacitated to any extent, the trust is treated as an individual? Is that trust voided if a niece or nephew is brought in for a small amount, say sufficient to put them through education? I do not know how it works. I do not know how the market values are reached as regards property. There will be very busy people around. It would cost any reasonably sized company a stack of money to have it done. Who will pay that money?

Section 9 deals with the valuation of shares in a private trading company controlled by an assessable person. Is control deemed to be where an individual has an interest of more than 50 per cent, or does it mean 75 per cent? A person with a 50 per cent interest can sell out the property without interference. I take it the figure is 50 per cent. This is outdated, something that obtained many years ago when there were small firms, say with two brothers in business together. I reckon two brothers in business together fight more often than strangers. I should prefer to deal with an outsider. If your brother is involved you will probably have your wife and his wife quarrelling as well and that is no way to run a business. What is being said here is that just because a man and his brother control a company, they are now deemed to have control. And a relative will bring one to court a lot quicker than would an outsider. In fact, control today is very often in the hands of management and the management have nothing to do with the individual concerned. The only time they tend to interfere is when there are decisions being taken as to whether or not to sell out. When that happens the person is caught by capital gains tax. I do not think such people should be included at all, if there is the feeling that there should be the power to bring in a directive to make sure that the dividends are not being paid purposely to avoid tax rather than improve business.

It is spelled out in subsection (2) of section 9 of the explanatory memorandum where it says:

... A control situation arises, for example, in the case of an individual where he, his wife, minor children or nominees of those persons are in a position to regulate and manage the affairs of the company. Where no question of control arises, shares in a private trading company are valued in accordance with section 8—the general valuation section.

On section 8 the explanatory memorandum says:

... in the opinion of the Revenue Commissioners, property would fetch on a sale in the open market in circumstances calculated to result in the best price for the vendor. Provision is made for the inspection of property and for payment by the Commissioners of the costs of a valuation where they require a valuation to be made by a person named by them.

Therefore, it is the value of the property inside the company. What happens if a company makes only 2 per cent of the value of its property? Does it pay 50 per cent wealth tax? I am afraid the only way this can be done is on the basis of the dividend and if sufficient dividend is not paid out, give the Revenue Commissioners power to issue a tax directive against that company. But if it is done on the market value of the company, it will break the company; it will stop the cash flow and create unemployment.

I refer now to the provision with regard to deferred payment in section 18. The Minister introduced this also with regard to capital gains tax and I disagree with it. Again, on section 18 of the explanatory memorandum, it is said:

... The tax is due on the valuation date and simple interest, at the rate of 1.5 per cent, per month or part of a month, runs from that date until the date of payment.

This is the tax charged on delayed payment. This seems to me to be wrong at all times because it is requesting the payment of 18 per cent per annum while Government Departments and all people in business should be endeavouring to get the interest rate down generally rather than encourage an increase. I know it may be necessary to have it 1 per cent or 2 per cent higher to make it penal. But I think it is penal enough that that tax is not allowed against income tax afterwards. In other words, it cannot be claimed as an expense. On the one hand we are seeking a reduction of the rate to encourage better business and employment and, on the other, asking 18 per cent for the Government. I have no objection whatsoever to a person being well paid for his efforts, or the staff of a company for theirs, getting good results and profits. I believe in a proper return to management and proper pay for those who work rather than those who pretend to do so. Basically, that is what we should be dealing with here.

As I have said, the wealth tax is not a bad one. In most cases it seems to me it can be compared to what a person had to pay for insurance purposes prior to the abolition of death duties. Therefore, it would not be costing many people much more. My only fear is the valuation on the property of a private company. I feel it must be treated in the same way as a public company, and the dividends treated as such, with the power already there for the Revenue Commissioners—which I think has been used twice only—to issue a tax directive against that company to pay its sur-tax, corporation profits tax, or whatever it may be inside that company, if necessary, if in the opinion of the Revenue Commissioners it is not paying out sufficient dividends. But it is completely wrong to say that because, to all intents and purposes. one is the owner of that company, one has to pay wealth tax, whether or not one has had a good year. I disagree also with the provision under which one pays a maximum of 80p in tax but one must pay at least 50 per cent under the provisions of the Bill in wealth tax. In fact, income tax should cease during a period in which a company finds itself in difficulty and increase when things are going well.

Those are the two points to which I object. There may be some other smaller points which can be dealt with on Committee Stage. Otherwise, the wealth tax, in conjunction with the other taxes, is better than the death duties we have had heretofore.

Mr. Healy

I cannot say I am entirely against the principle of a wealth tax but certainly I feel it is being introduced at the worst possible time. We are all aware of the present state of the economy, with seemingly uncontrolled inflation, rising prices and unemployment figures at an all-time high level. In such circumstances it is only natural that the public generally would be uncertain and uneasy about the future. That being so, our first priority should be to restore confidence in the future of the economy but instead we introduce a new form of taxation. When one thinks of taxation one thinks of income tax, capital gains tax, added-value tax, corporation profits tax and all the other means of taking money from people and redistributing it for the benefit, I would hope, of the community at large. If the situation obtaining today continues such taxation imposed will yield less and less as time progresses. If people are unemployed there will not be the same return as if there were full employment. If prices continue to rise people will have less opportunity to save than normally.

Again, in that respect, one must have some encouragement to save. There is not much point in putting money into post office savings or any other such organisation if, with every day that passes, the value of that money is lessening. Perhaps it would be better to spend it now and get something for it than find in a few years' time it is worth very little. That, I am afraid, is people's mentality: live for today and hope for the best tomorrow.

It is necessary, from the Government's point of view, that all of these detrimental effects would be checked and that something would be done to improve the situation. The one kind of person who can remedy that situation is the person with £100,000 and upwards who might be inclined and should be encouraged to invest it in either starting an industry or expanding some industry in which he is already interested. Of course, a person who goes into a business finds difficulties increasing every day; labour relations, difficulty with supplies, difficulty with marketing and competition. Therefore, he must have some reasonable profit for the risks he takes. Such a man could lawfully and would be tempted to put that money into Government bonds, put his feet up and smoke cigars for the rest of his life on the interest he would get for the investment. That would not be too bad if he invested it in Government bonds but he could lawfully and with no difficulty invest it in foreign bonds or stock, and that money would be lost to us. It is to entice people away from such temptation that our efforts should be directed.

Considering the state of the economy I wonder is this the best time to introduce this Bill. We will not know its full implications, whether it will be heavy or light, until we come to Committee Stage. However, it is bound to cause uneasiness among people who have a certain amount of money. Everybody in this House is anxious that those who, for one reason or another, are unable to help themselves, should be maintained at a proper standard of living. We all want to give as much as possible to the social welfare beneficiaries but, to do that we must generate industry and make money. We are still a largely private enterprise community, but one of the reasons why we have some State bodies is that we have not enough people of the status I speak of, with £100,000 or more. I am sorry we have not got more of them who would be prepared to invest what they have in Irish industry and give employment. We should realise that the man who invests money in the country and gives employment to half a dozen people, who in turn are able to keep their families working in the country, are greater patriots than those who merely indulge in flag waving or shouting slogans.

The Government say they have very important legislation on the stocks and are complaining it is not being passed through the House as speedily as they would like. I have no doubt they think that, but if that is so, why bring in a Bill like this? Will this in any way help to relieve the unemployment situation? Does anybody believe it will reduce the unemployment figure even to ten people, except perhaps those who have to collect this extra tax? It is hard to discuss it without knowing the details, but I cannot see any merit whatever in bringing it in at this juncture.

I listened to Deputy Dockrell, who is against the Bill. I heard somebody saying he might vote for it. I do not think that matters. A member of a party is expected to vote for his party. However, both Deputy Dockrell and Deputy Belton had very cogent reasons to present. They are men of substance. I am sorry that everyone in the country is not as well off as they are. However, that is not the way things happen. There are many ways in which people can become wealthy, but some of us will never be so. However, I believe the words of these Deputies should be listened to.

I am not an economist or a financier. I know very little about such matters, but I am told by people in business in the city of Cork that a good deal of money has left the country since this wealth tax was first mooted. If that is so, it is a sad thing for the country and will be the cause of more unemployment and more depression. The first priority of any Government is to ensure confidence in the country's future, and that the economy is sound. If the country is going through difficulties, which, we all admit, are not all due to mismanagement, it is the duty of the Government to face those problems. There is no one either in business or at home who has not got problems every day, but people are judged on the way they meet and overcome those problems. There will never be a Government that has not to face problems. The important thing is the solutions put forward to meet them. In such a crisis as we are in at the moment it lessens the credibility of the Government when they bring in legislation like this which will have the effect of scaring people who should be encouraged and does little good for any one. Because whatever noisy outcry there is by fringe followers who shout about the distribution of wealth and so on, every day that passes wealth is being distributed by people who make money and invest it at home, thereby providing employment for their fellow citizens and, to my mind, these are as good patriots as a country could have.

I shall await the Committee Stage to deal in more detail with this Bill but I did want to put on record the fact that this is a most inopportune time to introduce a measure like this. There might have been some justification for it six or seven years ago. There might have been a case for it then and at that time it could have been argued dispassionately and deliberately in an effort to discover what exactly would happen but, at this stage, it is nothing more than just another ball for the Minister for Finance to throw in with all the other balls in the court at the moment in regard to taxation. This is, as I say, just another ball to further confuse people and it will certainly have the effect of weakening whatever confidence people have in the future of our economy.

Mr. Lalor

Whatever justification there might have been for this Government to introduce this measure two years ago a great deal of that justification has disappeared in the intervening two years. Deputy Healy said this is a most inopportune time for the introduction of a measure like this. Over the years the Government have dissipated a great deal of the wealth of the country. I agree with the views expressed by my colleague, Deputy Healy, and with the views expressed by our spokesman on Finance, Deputy Colley; this is part of the overall taxation package and, as such, it is quite uncalled for at this stage.

The Minister indicated in his opening remarks that the Government have fallen back from their intentions indicated in the White Paper circulated 12 months ago. He also spoke of the White Paper as a discussion document. Arising from what the Government have learned from representations and observations on the White Paper he went on to justify the fall-back in intent and the giving way to the pressures exerted on him and on his colleagues in the Fine Gael section of the Coalition Government subsequent to the circulation of the White Paper.

As I said at the outset, the real wealth of the country was squandered and wasted by the Government over the last two years. If and when this legislation is passed by both Houses of the Oireachtas it will have the effect of dissipating the remaining wealth of the country. The overall justification for the introduction of the various forms of taxation—capital gains, wealth and capital acquisitions taxes—is the result of demands for the abolition of death duties. The Coalition prior to the last general election promised to abolish death duties and substitute a more equitable form of tax. Death duties still have not been abolished.

From my study of the White Paper dealing with inheritance tax, capital acquisitions tax and the wealth tax, I cannot see that the Government are in any way honouring the undertaking they gave before the last general election. In fact, this is another failure on the part of this Government to honour their promises. They are using the threat and the promise they made to substitute death duty by a more remunerative form of taxation. In his statement yesterday, the Minister justified the imposition of the wealth tax in the first paragraph of his speech. He said:

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 farmer or business and injured families while the larger wealth holdings 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.

This is a glorious way of dressing up the justification for the introduction of this Wealth Tax Bill. I do not accept the situation outlined by the Minister. I will concede that the imposition of death duties was a hardship on a number of people. I will also concede that I, as a Deputy and a Minister of the former Government, had justifiable approaches made to me regarding the hardship of death duties arising from our entry to the EEC and the increased values of land here at that time.

Having listened to the Minister introducing this Bill one would have thought that inflation stopped with the coming into power of the National Coalition. I do not believe that any member of the Government would endeavour to convey at this stage that inflation had stopped although they will tell us that it is coming from outside and not from inside.

The Minister told us that the owners of large wealth holdings availed of the avoidance avenues inherent in the system of estate duty to minimise their liability or, in some cases, to avoid paying any duty whatsoever. In his three Finance Bills this Minister has introduced various anti-avoidance income tax systems but the only way he can see to deal with this evasion is to do away with a system altogether and introduce a completely new system. The new system was welcomed loudly by the Labour Party following the circulation of the White Paper 12 months ago. Their view was: "At long last we have Robin Hood and we are going to rob the rich and hand over to the poor." Since the National Coalition came to power we have had a tremendous expansion in the volume of people who could be described as poor and we are fast doing away with the rich. The end product is far worse than the sickness the Government proposed to remedy. As a result of Government measures we have a far sicker society now. This Wealth Tax Bill will not cure that sickness.

The Minister informed us that when this 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. Having got over the initial hump and said that the death duty system was wide open to evasion the Minister told us that the unfortunate widow who was not well off had to pay death duties on an estate over £7,500 and that a successor of a wealthy man who left an estate valued more than £200,000 did not have to pay death duties even though that estate was liable to duty at a rate of 55 per cent. However, the Minister is not introducing in this Bill, as he has done in the case of income tax in three successive Finance Bills, anti-avoidance measures in order to get at the inheritors of rich estates. He is not closing the loopholes. The Minister is introducing a system whereby such people will pay the wealth tax annually. He has tried to justify this by stating that under the existing law such wealth could be subjected to a 55 per cent tax but under the new Bill an annual 1 per cent wealth tax will be charged and the generation's liability will be less.

Having studied the Minister's speech I find it difficult to decide whether he was trying to let the rich off the hook or trying to catch them. Apparently, one of the problems of a Minister for Finance in a Coalition, representing the conservatives on the one hand and the ultra-socialists on the other, is that he is put in the position of having to speak from both sides of his mouth at once. Having listened to the Minister for Finance over the last two years I appreciate that he has no problem in this regard. Certainly, the representatives of the Labour Party appreciate this Bill although only Deputy Bermingham spoke in support of it. This morning I asked Deputy Coughlan if he intended speaking on this Bill and he replied: "What would I want to be talking about this Bill, sure I have no wealth?". I thought the Labour Party would be supporting this Bill as a measure to get after the wealthy people, the line taken by Deputy Bermingham.

Despite the fact that the Minister says that this taxing at the rate of 1 per cent per annum would be far easier on the wealthy than the subjecting of their estate to 55 per cent estate duty members of his own party have not got the message if one is to judge from the observations of Deputies M. Dockrell and P. Belton. I am inclined to share the concern of those Deputies because even if the Minister wants to create the impression to a certain sector that he is being easier on them than they had feared the message should be spelled out loud and clear. This fear is shared by industry. The overall impression is that this wealth tax will absorb money from people who up to now were willing to invest here to the national advantage.

Deputy de Valera asked a number of important questions last night but the most important in my view was when he asked the Minister for Finance to tell the House what the wealth tax would be worth when it became law. The Minister did tell us:

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.

If the wealth tax is to bring good to this country or if the Government propose to do good with the money they will receive from wealth tax surely there is nobody unaffected. As Deputy Healy asked, is the Minister in a position to tell us what extra employment will be created as a result of the money the Exchequer will take in wealth tax? That is a legitimate question. I believe that not alone will the money collected from it not develop further industry but that it will be required for the additional number of people who will become unemployed as a result of the non-availability of cash to the people who can use it for the benefit of the country by creating additional employment towards which this country has been working successfully since the Lemass era. We have endeavoured since the industrial revolution headed by Seán Lemass to generate additional industry.

I would like to know what type of observations or what memoranda have come from the offices of the IDA to the Department of Finance through the office of the Minister for Industry and Commerce on this Wealth Tax Bill. If no observations have come from the board and the executives of the IDA to the Minister for Finance the quality of the people in the IDA is not what I understand it to be. There are a board, executives and operatives within the IDA who have done an increasing amount of good work in recent years. The Minister for Industry and Commerce, in his Estimate speech before Christmas, was in a position to pay a justifiable tribute to the IDA for the wonderful work they were continuing to do in attracting industry to the country, despite the problems of recent times. We are told that almost 50 per cent of our problems at present are imported but here is a problem which is being created by ourselves, being created by the Minister for Finance and supported by his party and, for peculiar reasons, by Members of the Labour Party, and, as I see it, for the wrong reasons.

My colleagues and I are most anxious to hear from the Minister what money he expects to get from wealth tax. I anticipate that it will be small and decreasing because I have had experience in Dublin similar to that which Deputy Healy has had in Cork. I know from listening to people that money has been leaving the country, that money began to leave the country when the White Paper was circulated last year and the watering down that has been done by the Minister has not been sufficient to allay suspicion in this regard.

I am conscious of the fact that we are talking about a 1 per cent wealth tax, but that 1 per cent can be changed very conveniently. It is not necessary to introduce further legislation to do that. It can be done by order of the House under section 20 when this Bill has been got over the hump and when the Minister has satisfied some of the masses—the people from the rural areas, the representatives of the farming classes who have had their 50 per cent knock down in land valuation in order to allay their fears in this regard. This idea has been watered down in order to meet that type of objection but the big problem is the generation of further industrial development. Deputy Belton quoted from the CII Newsletter and Deputy Colley quoted from a Press release from the CII with their observations on the wealth tax. One of the justifiable fears of potential industrialists is that, if they endeavour to generate further employment and use their money for the benefit of the country, they will be heavily taxed for it. Once this Bill is on the Statute Book it requires only an order of the House to increase the rate from 1 per cent to 5 per cent or 10 per cent. I would be afraid that, if the Labour Party succeeded in having any greater influence in the Government than they have at present, they might stupidly—I use that word deliberately—for political expediency undermine further industrial development in order to capture popular support, something at which they are becoming expert.

The Minister for Finance said that with the abolition of death duties the State was foregoing, as a consequence, an annual revenue of £14 million to £16 million. Before Christmas there was an imposition of taxation on petrol, roughly calculated at £30 million. The Government entered into a commitment before the last election to do away with death duties. This meant a loss of £14 million to £16 million to the Exchequer.

We are budgeting for a deficit of £150 million. The Minister made an order before Christmas increasing the price of petrol and bringing in twice the amount of revenue. We have a Social Welfare Bill under which people will have to contribute more. This will bring in sizeable amounts of money. In order to honour a Government commitment entered into before the general election, this Parliament has before it a Finance Bill, a Capital Gains Tax Bill, a Wealth Tax Bill and a Capital Acquisitions Tax Bill. This is the greatest doublecross in the history of the State.

Two or three weeks before the general election the component parts of the Government, the Fine Gael and Labour Parties, committed themselves to a small unfortunate group of people and said they would abolish death duties and replace them with a more equitable form of capital taxation. When they are in operation, the capital gains tax, the wealth tax and the capital acquisitions tax will bring in annually ten times—and probably more than ten times because capital gains is an enormous tax— more than revenue from death duties.

All these taxes are part of the package. They are linked together. From my reading of the White Paper on Capital Acquisitions Tax, I am fully satisfied that death duties are only half done away with. I accept that so far as the immediate family are concerned—widows, sons, daughters, sisters and brothers—the imposition of the tax will not be as severe or as conducive to hardship as the former tax but, in order to confer the promised benefits on those people, everybody will be taxed in one way or another. Of the 14 points in the National Coalition promises before the general election I should imagine, looking objectively at them, that the people would be willing to let them off the hook on the promise in relation to death duties. The honouring of that promise is being used to introduce a disastrous level of taxation which will seriously affect the further industrialisation of our nation.

To look at it from the other point of view, if the Government were really serious in their claim that they were willing to tax the rich, nobody could seriously say that a threshold of £100,000, on present-day standards, was a low enough figure to get at the alleged rich. On the other hand, with inflation a man can appear to have assets of £100,000 from the Revenue Commissioners' point of view and still be an extremely poor man.

The Minister said:

Considering the rate of taxation proposed and the levels of exemption to liability, it can be truly said 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.

Here, again, is the Minister's each way bet.

The Minister appears to me to be trying to achieve a situation in which, if you want to qualify for having hats raised to you in the street, you should be labelled as being liable for wealth tax, as being a member of a particular stratum of society. Up to now the criterion was that you drove a Rolls. At one stage the Jaguar nearly qualified. I do not know the name of it but I saw in the paper yesterday some new type of Rolls Royce and the tax on it would more than buy two ordinary family cars.

Listening to the Minister uttering those words yesterday, it struck me that the ambition should not be to avoid paying wealth tax and that you are considered lucky to be in the bracket in which the Revenue Commissioners will honour you by asking you to make this return to enable you to confer an honour on the country by paying wealth tax. The Minister said that it can be truly said 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. What side is the Minister on? If a person is genuinely as wealthy and as lucky as the Minister says he is, why does the Minister not ask him to pay his share? Why does he tell him he is lucky to be asked to pay so little on so much wealth? Is that what the Minister calls the distribution of wealth? He went on to say:

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.

I find it very difficult to get to the bottom of the mind of the man who wrote and delivered that speech.

This brings me back to what I said earlier about a Minister's capacity to speak from both sides of his mouth in two different ways. We were promised a Wealth Tax Bill that would extract money from the wealthy and distribute it beneficially among the poor. The most beneficial way that could be done might be to enable the enterprising man to spend his money by generating further development, particularly industrial development. On the other hand, we have a Minister who complained earlier in his speech about the fact that under the old death duty system the really rich were able to find ways of avoiding paying tax, now introducing a Bill which he says, or endeavours to say, will mean that a man whose liability under the old, bad law was 55 per cent will, under this law, be charged only 1 per cent per annum and that one is unlikely to live long enough to pay 55 per cent.

My mind boggles at the effort of trying to analyse this from both points of view. I cannot understand the mentality of the Minister who is trying to convey to the have-nots that he will get them money from the people who have it and trying to convey to the rich people that he is letting them off the hook, that where they were crucified until recently they will now be allowed to pay on the never-never system and that it would take years and years for them to pay what originally they would have to pay under the old, bad law existing up to now.

When the Minister came to deal with the various sections of the Bill some of the real facts came to light but it would not be proper to leave the Minister's speech without further comment. I should like all Members of the House and the people of the country to read a copy of the speech made by the Minister in introducing this Bill. I should like it to be given as an exercise to a class of 100 students doing this year's leaving certificate and have them read it and ask them to give their conclusions as to whose side the Minister was on or who he was endeavouring to tax. He is getting money to help the poor but he is not taking it from the rich—it is one of the most extraordinary speeches I have heard from the Minister who in the past two years delivered some rather extraordinary speeches.

The Minister has been influenced in this Bill by contributions from this side of the House on the Capital Gains Tax Bill and I am pleased at this. Our spokesmen dealt with the necessity to build in consideration for inflation in that Bill but it met with a good deal of stone-walling from the Minister. Built into this Wealth Tax Bill there is the intention to revise the liability threshold every three years to take account of inflation. This is necessary and I am glad the Minister has done this and I hope the elasticity he has displayed here in certain instances can be stretched into having another look at his very different reasoning in the case of capital gains.

The Minister said there would 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 to wealth tax liability being reduced by no more than 50 per cent of the amount originally assessed. Recently, we had a Finance Bill where we spoke in terms of 70 per cent maximum for income tax and it is rather difficult, with a 1 per cent wealth tax, to visualise a situation where 80 per cent of the annual income could possibly be exceeded. I do not meet many people at the 70 per cent taxation level. My daily round does not involve meeting those people, but on the other hand the insertion of that paragraph in the Minister's speech worries me.

This Bill, according to the Minister, has been prepared following circulation of the White Paper on Capital Taxation and following representations from interested parties and he conceded that he has altered his views and watered down the provisions. I find it hard to understand how arising from this watering down we could have a combination of income tax, plus wealth tax at 1 per cent, which could have the effect of creating a need to build into the Bill an 80 per cent limit on the percentage of annual income that may be taken by wealth tax and income tax combined.

That indicates that this Bill will merit line-by-line and word-by-word consideration on the Committee Stage. There is more in it than appears to the eye and as proof of that I instance this paragraph in the Minister's introductory remarks. I do not understand why it was necessary to spell out the need for this limit when we have a 1 per cent wealth tax. I hope the Minister will allay my suspicions on whether there is a hidden aspect in this. That would be rather frightening. It may not arise but I do not think parliamentary draftsmen put in something like that unless they think it is necessary. The Minister said in his speech:

... 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.

This gets down to the technicalities of the Bill's operation. Will we be faced with a type of speculator who can see to it that he will be ordinarily resident in the State for six-and-a-half years out of ten? In the definition section the requirement is ordinary residence for seven out of ten years. As I see it, the type of person we will be dealing with might be operating in two states, a non-productive person, a man living here in retirement with a villa in Bantry or Connemara, the type of person who would follow the sun for six months and the fishing and shooting here for the other six months. Here there seems to be an escape clause. The type of person I have been referring to would have money and a residence elsewhere. He would have the ability to fly away, perhaps in his own plane, and defeat the qualifying period. He could be domiciled here for six years and 11 months. I do not fully appreciate what is covered in that section.

Section 6 applies the tax to the taxable wealth on a private non-trading company. In this regard the Minister's speech states:

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.

This section worries me. I have said that the Bill can act as a discouragement to the creation of new employment here from within. I am worried about the Minister's intention in this section in relation to imported industries. I can think readily of valuable industries in Shannon and in industrial estates in Galway and Waterford where there have been several developments under the control of Irish individuals. I am afraid this section might be used as a discouragement in relation to further industrial development of that kind. I should dearly love to know what was in the memorandum that should have been sent by the IDA through the Minister for Industry and Commerce to the Minister for Finance in this respect. This is the most dangerous section in the Bill.

Section 7 introduces exceptions. Since the circulation of the White Paper on Capital Taxation I have been reading the complaints and legitimate objections that arose and were submitted to the Minister and which are responsible for the exclusions in section 7. I represent Laois-Offaly, not a constituency that has a major involvement in the bloodstock industry, a most valuable industry.

I spent some time as Parliamentary Secretary to the Minister for Agriculture and Fisheries and there I got some insight into the possible further development of the bloodstock industry. Under the exemptions in section 7 there are certain items of property excluded from assessment to tax. They include a principal private residence and contents, grounds of up to one acre, livestock owned by a farmer, bloodstock, the right to receive certain superannuation benefits and annuities, the funds held in certain superannuation schemes, property held for charitable purposes and so on. Most of them are justifiable exclusions.

I am glad the Minister for Lands is here. In my capacity as a Deputy over the past 14 or 15 years, in the various pressures I brought to bear from time to time on the Department of Lands in relation to the acquisition of holdings, I found, under the old Land Acts, that such holdings were not being worked in order to have them divided amongst uneconomic small holders. One of the ready-made defences against compulsory acquisition proceedings, acceptable under the law, was the stipulation that a farm be a stud farm. I have seen farms in my constituency where sizable non-productive landowners would buy in an old nag in order to establish their farm as a stud farm and so keep the Land Commission off their backs. Section 7 is a rather large one incorporating a lot of technical language which bogs me down but I should like an assurance from the Minister for Finance that we will not have a situation in which some genius can buy in an old nag and have himself established as a bloodstock breeder.

Mr. T.J. Fitzpatrick

(Cavan): I do not think it is as simple as that.

Mr. Lalor

It happened in Lands.

Mr. T.J. Fitzpatrick

(Cavan): I do not think so.

Mr. Lalor

If the Minister cares to check the files in relation to some holdings in Laois-Offaly, he will find that I am correct. But I am glad to get that assurance from the Minister for Lands. I hope the Minister for Finance will stand over it in the same way. The Minister for Lands is a legal gentleman as well and I presume he is satisfied there is not a loophole as he sees it, in section 7.

I find I am going into detail on section 7. I did not want to because I appreciate it is more appropriate to Committee Stage. The Minister for Finance went through the sections in his introductory remarks. Therefore, I am assuming I am not out of order in referring to this.

An Ceann Comhairle

The Deputy is right in that respect. Detail might more appropriately be left to the Committee Stage.

Mr. Lalor

I shall not go into detail and find myself drawn into an argument with the Minister for Finance on it. I shall have more to say about that aspect when we get to the Committee Stage and section 7 because, as I see it, bloodstock is spelled out there. And, from my experience of practical politics, bloodstock seems to have covered an old nag on land being described as a stud farm. One does not have to have two to have bloodstock. I presume bloodstock can be anything from one to 100.

I listened to Deputy P. Belton who did not appear to be very enamoured of the Bill. Indeed, Deputy Maurice Dockrell was not enamoured of it either. They are justifiably worried about the wealth tax and I have to concede that it is a worry at present. There is the danger of a development into a situation in which more is thought—and unfortunately this is true—of the idler than of the worker. One may have whatever views one likes in regard to capitalism. I see a caption in The Irish Times today, under a photograph of Deputy M. Dockrell, which says: “Mr. Maurice Dockrell ... does not believe in Socialist principle that capital is a bad thing”. I share his views. I want to get on the record of this House that we should not have an expansion of the development under which the harder one works the more one is crucified. At a much lower level than wealth tax we have not perfected a social scheme for the self-employed man—such people are dying out now —the old traditional tradesmen, such as the blacksmith, the shoemaker, the local handyman. If for one reason or another such a person becomes ill there is no Department of State to which he can turn. The peculiar thing about this country is that we have no political party representing the big farmer, the racketeer, the exploiter, those sort of fellows. They are not represented at all until we start to come to grips with the wealth tax and then we hear a few squeaks.

The problem is that we have people whom Deputy P. Belton would probably designate as being private companies. There have been small businesses that have developed. I am thinking specifically of one in my constituency, one of the most successful businesses in the country today, with a wonderful export business, which used to be a family concern. I do not want to spell out the details but every penny that that family business made down through the years was ploughed into further development. Every penny they have made in recent times has been expended on developing business, particularly in the North Americas. It has been done very successfully, to the benefit of the country and, incidentally, of very great benefit to the private company. This private company suffered its own hardship and problems under the old death duties but the finance which will be taken up in wealth tax would be used gainfully by this firm in further expansion of its business. The people there are imbued with national ideals, and, as Deputy Healy said a while ago, this country at this stage wants the people who will do good for it rather than the banner wavers.

There appears to be developing— and this is why I am fearful of this ultra socialist type of idea—the idea that it is not really wealth we are envious of but the successful not so wealthy. There is a lot of talk these days about Members of this House declaring their interests. There are many Deputies here like myself who have nothing but a great number of people think we have something.

Mr. Staunton

It is good to have the name of it.

Mr. Lalor

Exactly, and if I have to declare my interests it will be disastrous because they will all cop me on. It is bad enough to have something and have the begrudgers after you, but it is worse to have nothing or less than nothing and still have the begrudgers after you thinking you have something. Limits of £70,000 and £100,000 have been set for this wealth tax liability. With inflation one does not have to be extraordinarily rich, and in fact one could have trouble with the bank manager and still be exciting the interests of the Revenue Commissioners in connection with wealth tax.

I am principally thinking of the ordinary middle man. We hear a great deal already about the way in which the middle man is being crucified, and if we do not hear enough here we can always switch on to Gay Byrne who feels that we should be running "The Late Late Show" and that he should be here running the country. However there are men who are spending 14 hours to 18 hours a day working and trying to build up businesses. This wealth tax is going to get at them. Not alone that but it will get them down, so that genuine people will eventually say: "Why should I be killing myself? I will call it a day." The day that a number of those people call it off there will be much greater unemployment created.

It is rather difficult to deal effectively with this Wealth Tax Bill in line with the Capital Gains Bill and the Acquisitions Tax Bill because we have not seen the last Bill. I should like to add my voice to that of Deputy Colley in saying it is most unfair of the Government and of the Minister for Finance to have a White Paper circulated 12 months ago indicating that the Government were proposing to bring in a capital gains tax, a wealth tax and a capital acquisitions tax, that we should be half way through the capital gains legislation, that we should be discussing the Second Stage of the Wealth Tax Bill without ever having seen the other piece of the jigsaw which I would regard as the major collector of money.

Mr. Esmonde

The Deputy left one thing out, the abolition of estate duty.

Mr. Lalor

It has not been abolished yet. I welcome the intervention of Deputy Esmonde on this matter.

Mr. Esmonde

The Deputy said nothing about that.

An Ceann Comhairle

Order. The Deputy in possession without interruption.

Mr. Lalor

I have been speaking for an hour and ten minutes. I am sorry the Deputy was not listening to me. I was speaking about the fact that the amount of money the Minister proposes not collecting next year on estate duty or death duties is £14 million to £16 million. He is going to do the big thing and forgo—that was the word he actually used—the taking up of that amount of money from the families of people who had died and he will replace it by three other forms of taxation which the National Coalition representatives of both Labour and Fine Gael call an equitable alternative and which when fully operative will bring in £114 million to £116 million. I am making that projection and I would welcome the Deputy hitting me back with it in three years' time if I am far wrong.

Mr. Esmonde

That is if the country becomes wealthier.

Mr. Lalor

I have already said there might have been some justification for introducing this wealth tax two years ago when there was a few bob in the country. Now, because of the squandermania of the Government over the past two years, there is no point in bringing in a wealth tax at this stage, a tax which will act as a deterrent to further industrialisation.

The Minister for Finance, in an interjection, said that both Deputy Belton and Deputy Dockrell should regard themselves as doubly lucky to have sufficient property to be liable and to be called upon to pay so little on so much.

Mr. Esmonde

There is an intercom in the House and the Deputy does not have to repeat himself.

Mr. Lalor

I shall leave that to the Ceann Comhairle to determine. The Minister referred to section 15, the section requiring a person 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. I ask the Minister to take a serious look at this and to make clear what his intentions are when he comes to reply. I know that his principal intention is to collect as much tax as he can but, in reference to section 15, he says:

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.

A married man with a wife might believe that his net taxable wealth did not exceed £75,000 but it might subsequently transpire that the Revenue Commissioners would decide, as a result of investigation, that his net taxable wealth was £125,000. That is not an unusual situation. If I go to my bank manager or to the ACC for a loan I have no problem telling my bank manager or the ACC that I am well off and have the capacity to pay back the loan. On the other hand, I have a completely different approach when I go to see the Revenue Commissioners. This is quite normal and understandable. Deputy Dockrell referred to the distinction between tax avoidance and tax evasion. Tax avoidance is a legitimate operation and Deputy Dockrell said it was something we all endeavoured to do because the less tax we pay the better we are pleased. But tax evasion is an offence and it is something that should not be allowed. I am not saying that I try to avoid paying tax but if I had the kind of wealth that would qualify me for taxation under this Bill I would put a valuation on my property; I would decide, probably justifiably, that my property was worth only £70,000 and there was, therefore, no reason for me to send in a return to the Revenue Commissioners. The Revenue Commissioners might come along and decide I was worth £125,000 and therefore assessable. Under section 15 they would say I should have sent in a return and, having failed to do so, they would say that under section 27 I had contravened section 15 and was therefore liable to a penalty of £1,000. This is a very penal clause and I trust the Minister will explain the reasoning behind it and the justification for it.

Deputy de Valera drew attention last night to the powers given to the Revenue Commissioners to make regulations, regulations which would be placed before the House, and the Minister reminded him this was one of those built-in provisions in legislation of this kind. Section 27 (2) gives the right of entry to the commissioners to come in and make their own market value in those cases in which people have failed to send in returns under section 15. Section 27 (2) provides:

Where, under or for the purposes of any of the provisions of this Act, a person is authorised to inspect any property for the purpose of reporting to the Commissioners the market value thereof and the person having custody or possession of that property prevents such inspection or obstructs the person so authorised in the performance of his functions in relation to the inspection, the person having such custody or possession shall be liable to a penalty of £1,000.

There is a penalty of £1,000 for failing to furnish a return. Following the passing of this Bill if somebody eligible to pay tax does not furnish his return within the three months specified, is the Minister saying there is an arrangement built into this Bill whereby he shall be liable to a penalty of £1,000? On the one hand, the Revenue Commissioners can be very sympathetic but, on the other hand, they say that that provision is built into the Bill—as in the case of customs and excise—and the man could be accused of trying to "smuggle" tax. Section 2 of that Bill says that "where, under or for the purposes of any of the provisions of the Act a person is authorised to inspect...". Is that a standard provision or an innovation? I remember strong opposition in this House when the Minister for Justice tried to bring in similar legislation to deal with squatters' rights. The champions of the oppressed at that time are the same people who are drafting this Bill. They have a different way of looking at legislation now that they are in Government.

What prompted me to ask that question was the way the explanatory memorandum was prepared. It reads:

Section 15 requires a person, who is primarily liable for the payment of tax by virtue of section 14, to furnish to the Revenue Commissioners a return within three months of every valuation date in respect of the property of the assessable person. In the case of an individual, however, a return is not normally required if the net market value of his taxable wealth is under 75 per cent of the appropriate threshold in section 13. For instance, a married man will not have to furnish a return unless his taxable wealth exceeds £75,000, that is, three-fourths of the threshold of £100,000.

The memorandum says: "a married man will not have to furnish a return unless his taxable wealth exceeds £75,000." It should say "a married man will have to furnish a return if his taxable wealth exceeds £75,000" rather than the reverse. This is softpedalling. This means that if a man's taxable wealth is £77,000 he is not liable to tax because the threshold is £100,000. He is expected to give the Revenue Commissioners warning that he will be within the tax net within the next two or three years. If he thinks he is worth only £70,000 but the Revenue Commissioners find he is worth £80,000, he is liable to be fined £1,000. I am surprised that these radicals who were shocked at the bulldozing tactics of the former Fianna Fáil Government, can stand over the making of these laws and regulations. Section 27 (2) reads:

That is an unfair provision. That is all I have to say at the moment but there are a number of other matters I wish to discuss on Committee Stage.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. Staunton

I would like to put on record my thanks to Deputy Lalor for giving such an excellent House.

Mr. Lalor

I wish the Deputy luck with them and hope he can keep them.

Mr. Staunton

I agree with the content of the Minister's speech and his remarks about emotive foggy arguments which do not have a rational base. This is not getting to grips with the reality of this issue of taxation. I do not think there is sufficient clarity around the country for what is involved in this Bill and the background to it. While we are getting philosophical arguments against the concept of wealth tax they are utterly illogical in the sense that a wealth tax already exists here. In Ireland, and other European countries, there has been and continues to be estate duty taxation and death duties. This is nothing other than taxation of wealth. We have had a wealth tax by definition for many years.

Because of the reforming nature of the Government and the reforming character of the Minister for Finance it is considered desirable to introduce a more equitable form of taxation. It must be stressed that we are discussing this issue of a new means of wealth tax against a background of death duties being abolished. There have been extraordinary strong pressures to abolish death duties and this Government was committed to their abolition. In the past I described death duties as being utterly penal and inequitable. I pointed out that they did not have a rational base because there were means of avoiding such taxation. If an individual with reasonable wealth arranged to pass on his assets to his heirs and was fortunate enough not to die within the five-year statutory period of having passed on his assets, his dependants were absolved from liability to death duties. If he had not so passed on his assets or if he was unfortunate to die within a five-year period, then the liability of the particular family was immense. We were talking about a type of Russian roulette under which if one pulled the trigger at the wrong time there would be a horrible situation.

Death duties were not a rational means of taxation. It is interesting when we talk about this question of estate duty and death duty that the reforming nature of this Government is such that they are going to abolish estate duty taxation completely in circumstances in which death duty taxation exists in all of the other countries of the EEC. I am not aware of plans in these countries to abolish this taxation. It is reasonable that if the Government are going to abolish estate duty taxation and death duties they must get an equivalent source of funds. Revenue must flow to the Exchequer unless we are to cut back in areas of activity such as the roads programme, or the social welfare programme. Unless we cut back in some area of Government expenditure to the degree to which tax was accruing to the Exchequer from death duties the Government must replace it by another means of taxation. The Government have decided to replace death duties by two measures, capital gains tax and wealth tax.

It is significant that this Bill is entirely different to the suggestions contained in the White Paper of February 1974. It is different in content because we acknowledge that at that time the concept of capital gains taxation was acceptable to the vast majority, even among those who would be liable for such taxation, largely because of the fact that a profit was being made on the capital gain and where profit was being made there was a capacity to pay. There was a severe reaction against the wealth tax proposal as conceived in the White Paper and as a result of that reaction and representations made by vocational groups the Minister changed the proposals of that time and introduced a wealth tax of an infinitely diluted proportion to that which was proposed a year ago.

It is noteworthy that the threshold has approximately doubled and that we are now talking about assessing people for wealth tax at a baseline of about £100,000. We are leaving exempt private houses and reasonable contents therein. It is noteworthy that the percentage of tax to be applied has been approximately halved. There is a quintuplicating effect between the threshold being doubled, the percentage of tax being reduced and taking into account the other exemptions. We are talking about an entirely different issue to that contained in the White Paper. The outcry about estate duty arose out of the enormously increasing value of assets due to inflation. Whereas in the past an assessment of 1 per cent on £7,500, rising to 55 per cent on £200,000 might not have affected that many people in recent years, especially in the farm situation with the enormous increase in the value of land and buildings, there has been a necessity to look at the issue.

We are not introducing a new concept of taxation of wealth because this had already existed in the capital gains area. The Opposition are very critical of this measure of taxation but we have not heard from them how they stand in a positive sense. Do the Opposition feel that death duties should be retained? Deputy Lalor seemed to be reverting to this position and seemed to express the view that there was nothing wrong with estate duty in the first place. Is this his view? Does the Deputy agree with the penal nature of death duties? We should like to know where Fianna Fáil stand in a positive sense. Alternatively, if they want death duties abolished and do not want the wealth tax introduced where do they suggest the cutback in public expenditure should be made to allow for the shortfall?

This new tax will not affect the vast majority of people because if the baseline is £100,000, a person in that category would have a house valued about £20,000, and, therefore, we are talking about an effective baseline of £120,000. If under the death duty system an estate valued at £80,000 was liable for duty the equivalent rate is 40 per cent making an assessment of £32,000. It is obvious that a family involved in such an instance—it could be a farm, a firm or a business in a market town—being assessed for such a payment would find it catastrophic. This has led, and is continuing to lead, to harrowing situations with people having to sell land and property or arranging substantial overdraft accommodation which can be crippling for future generations. Under this Bill this estate valued at £80,000—a substantial estate by Irish standards—will not be liable for assessment. We are talking about a new situation where families holding assets up to an effective valuation of about £120,000 will have no liability to taxation based on their wealth. We are speaking about an estate with an assessment of £32,000 benefit to the Exchequer.

Under the new wealth tax proposal to get the equivalent £32,000, for example, the Revenue Commissioners will be getting an annual sum of £300 each from 107 individuals whose estates are valued at about £150,000 each. In other words, there is no assessment up to the £100,000 level. We are giving people in this category houses valued at probably £20,000, which is a base line of £120,000, so the assessment on each of those estates valued at £150,000 is on £30,000 which at the rate of 1 per cent is an annual liability of £300. It seems to me a much more equitable situation that individuals with estates valued at £150,000 should now pay £300 each and that absolved totally from any liability are people in a lesser category.

We are not really arguing about a penal load on people of substance or penal taxation on members of this community. We are merely talking about a much more rational means of revenue accruing to the Revenue Commissioners than obtained under the estate duty taxation. If the Revenue Commissioners are not to get any more money from the new source of taxation than they got from the old estate duty taxation it seems to me that, by definition, it is not penal and that, by definition, you are merely having a better spread. One could equally argue, if one were against the concept of taxation on capital, that death duties are against initiative, that they are stultifying to Irish business. Opposition spokesmen to date have been talking about this tax as being penal to enterprise and penal to people earning money. I disagree completely because the very fact that death duty is to be abolished is in itself going to be a tremendous fillip and incentive to many family business situations because the more equitable load is much more acceptable.

The one reservation I would have about this new taxation measure is the possibility of future Ministers for Finance looking on this as a base for further substantial revenue. I agree with this measure if it is a measure being introduced to bring in an approximately equal level of revenue to the commissioners but I would not like to see it used as a base on which we are going to start lowering thresholds or doubling percentage rates for the future because at that stage we would get into certain problems.

The question of the definition of wealth is important and the means by which we are going to tax wealth of different types is relevant in this. We must, in looking at this wealth tax, have some regard to the objections which we made in the past in regard to local taxation. The rates position in various county councils has been criticised because in some cases property was valued at a certain level which meant that the individual had a certain liability for local taxation which was sometimes beyond his capacity to pay because he may have been in business in a town and was not doing very well. The Government have been taking the health charges, for example, off the rates, to reduce somewhat the liability locally. The question of the capacity to pay impinges on the question of wealth tax because profitability is very important and I see no problem whatever in assessment where the wealth held by individuals is in liquid form. In other words, if wealth is held in the form of cash, securities, stocks, there is not a problem and there is obviously the capacity to pay the burden because presumably the investments are yielding a certain return, the money is available in liquid form, so physically it is tangible and there to pay the price.

We are in an entirely different category, which was touched on to a degree by the Minister in his speech, and in the details of the Bill, when we think about wealth in forms of fixed assets. I am speaking now of wealth in the situation of farmland, of property which is part of businesses in towns. Fixed assets would be the contents of those properties and working capital to a degree. The position here is entirely different in that the assets in this instance are being used productively because there is business involved and while some of the fixed assets may be valued very substantially in a property sense in some cases, in market towns, for example, where there is rationalisation going on in certain trades such as the drapery, grocery or hardware trades, it is possible to see a situation where property is valued quite highly but where little or no return is being made on the assets or on the investment. In our approach to this wealth tax, if we are to be sufficiently enlightened, we must arrange by some means or other that taxation is being paid by individuals who have the capacity to pay. This question of capacity to pay was one of the reasons why the capital gains measure received practically no objection because profit was being made and where profit is being made there is the capacity to pay.

It is for that reason that the Bill proposes that productive assets should be valued at 80 per cent of what is termed their valuation. This is in the right direction but we may need to go a little further because I am coming back again to the situation where the assets from a property point of view may be valued quite substantially but profits are not being made. You may have a property in a market town at present with a valuation of the order of £170,000 and it is possible that there may be no profit or profit of the order of £2,000, £3,000 or £4,000 on it. In some of those situations because of family problems, problems in the type of trade or in the part of the country, there is not the capacity to pay wealth tax. I hope that in approaching the assessment for wealth tax in this situation assets will be valued on their value as a going concern. In the type of business I am talking about the value in the market place in the morning is the value the goods are going to be sold at or the business is going to be sold at in an auction. One of the means of assessing it is by capitalising the earnings. If earnings are at a level of £2,000, giving a return of about 20 per cent on investment, you would multiply that £2,000 by five and arrive at a figure of £10,000 which is an infinitely different figure from the situation that arises if you are going to carve up this business and sub-divide it and sell off property lots. This is something we would need to look at because we will have an equitable situation if we sort this out. The wealth tax assessment will in some sense be comparable to profits being made.

The Minister spoke about the woolly rumours and the emotive foggy arguments going around. They do not relate to reality. There are misconceptions about the liability of the individual or the company. It is important to stress that this wealth tax assesses the individual person, and has nothing whatever to do with assessing companies, limited liability companies, or public companies. We are merely taxing the individual and the value of the assets of the individual above the threshold, above the exemptions.

Because of that business, as such, are not in any sense involved in this issue. They are not liable. We are talking here of assets valued at about £130,000 plus. When you allow for the exemptions, effectively that is £150,000 plus. When we are getting above that level we are talking about a very small proportion of businesses in this category privately owned by a single individual.

Even in the family situation where a family business is involved in a market town, or in Dublin, in the category we are speaking of, the valuation is £150,000, or £200,000, or £500,000. Even when these businesses are held by families, more often than not, it is in the form of shareholdings by different members of the family. In a substantial type of business very often the load is shared in terms of shares and assets by perhaps three members of the family.

While a business might be valued, for assessment purposes, at £300,000, if there are three members of the family involved in this quite substantial business by any Irish standards, it means that the shareholding in the case of each individual is £100,000. Bearing in mind that the Bill proposes that productive assets be valued at 80 per cent of the valuation, we are talking about an assessment for each member of this family of about £80,000 as part of his personal estate.

If this individual is assessed at £80,000 in terms of personal wealth, and if he has a house valued at, say, £20,000—it would probably be in that category—it still allows him to hold assets amounting to £20,000, apart from that business, without being liable for one penny of wealth tax. This is the reality and this is a very far cry from all the cries about socialist doctrinaire marxism which are flying around about the penal nature of this Bill.

I want to repeat that because I think it is important and significant. We have taken a case here of a business in an Irish market town valued at £300,000 in which three members of the family are involved in shareholdings. Because of the 80 per cent assessment instead of 100 per cent assessment, the assessment for each of these individuals is on £80,000 and, allowing them a private house valued at about £20,000 each, we are still allowing them to hold assets valued at a further £20,000 each, before they are liable for one penny of wealth tax.

We have heard people talking about the killing of incentives for industry and business. In this family we are talking about, the cloud of estate duty is lifted completely from the head of the family. This is no longer at issue. If the head of the family, the father for example, had made provision and most, unfortunately, died before the statutory term had expired and the assessment on the £300,000 was at the rate of about 55 per cent, we are talking about an assessment of about £170,000 in death duty taxation.

Instead of that, we find that this Government are abolishing death duty taxation completely and lifting this load and this fear. At the same time, the individuals in the company can arrange matters in such a manner that there is no assessment whatever on a single individual for wealth taxation. This is the reality. I say this as a member of the business community, as well as being a Member of this House, in no way do I see this as being penal, or anti-productive, or unproductive, or restrictionist in tone.

One of the reservations I would have would be if this Government, or some future Government, used this tax as a base for more penal efforts in the future. The most desirable situation I see is that which apparently is happening. We are abolishing estate duty taxation. Accruing to the Exchequer from estate duty taxation was revenue at a certain level. We want to try to arrange, by other types of wealth taxation and capital gains tax, an approximately equal sum accruing to the Exchequer to get this more rational and reasonable approach.

It is important to say this. There are many foggy philosophical arguments flying around about the Government becoming anti-wealth, and introducing doctrinaire socialism, and introducing a wealth tax. We are not introducing a wealth tax because already death duty taxation was, by definition, taxation on wealth. It was based on the value of the assets of the individual. This was taxation on wealth. This exists in every other country in the EEC. We are the first country in Europe to abolish it. We are not introducing a new concept of wealth taxation. I described earlier the penal nature of the Russian roulette system of estate duty. We are merely replacing an irrational and unjust and penal form of tax with a much greater spreading of the load.

I am glad the Minister proved to be such a good listener in the intervening period between the introduction of the White Paper last year and the introduction of the Wealth Tax Bill. The land exemption was provided for and land is being valued at 50 per cent of its value for computing purposes. I am glad he has introduced fishing boats into that area. I am particularly pleased that he has brought the hotel bedroom situation into play too. In the hotel industry, we are talking about a rather odd industry where there can be a tremendously high valuation of assets which does not bear a normal relationship to profits—that is normal by any other definition in the world of commerce. There was a need for special treatment in this area. The reduction in the valuation of these kinds of assets is very necessary and very fair, especially because of the problems we have had in the tourist industry in the past two or three years.

What the Minister has done in the hotels area is an example of what I was suggesting might need to be done to ensure an entirely equitable approach in the wealth tax where business in market towns can be valued substantially but where profits, in some instances, due to rationalisation do not bear any relationship. When we get into the details there will obviously be heart-searching about some sections. In this area we might have a look to see what we can do to make certain that there is not any question of people being assessed who do not have the capacity to bear the burden.

I gave examples of estates valued at £80,000 up to £100,000 which now have no assessment whatever. Even if we tackle those which are assessed, to people in that category there is a certain advantage in the introduction of this Bill. Take an estate valued at £200,000. The base line is £100,000. Most people holding an estate valued at £250,000 are living in a house which would probably be valued at about £30,000 on average. The effective baseline is about £130,000. The assessment is on about £70,000 of a valuation of assets of £200,000. The £70,000 at the rate of 1 per cent is £700 a year. In the case of an individual with an asset holding valued at £250,000, taking into account that the estate duty has gone, what is happening at the present time is the introduction of a means for a person with assets of that value to ensure against the disaster that happened under the Russian roulette system of death duties.

To the individual with assets of £200,000, the annual payment of £700 is a safeguard against the horrible situation that has existed. We are talking about a very modest approach to an estate of that value.

The situation in Denmark is that there is wealth tax at the same rate which we are proposing of 12.9 per cent. The interesting thing there is that the assessment starts after the first £21,000. That is entirely in contrast with five times that value here. Instead of talking about doctrinaire socialism of a penal nature and flogging the country with all of this damn nonsense, let us be sensible and get back to this particular approach in one of the EEC countries. Let us also bear in mind that death duties still exist in all of the other countries, nor are they proposing to abolish them. In many of those EEC countries capital gains taxation exists in all of them other than here, and wealth tax exists in half of them. If we are talking about the treatment of wealth and people of substance, and if we have these crazy suggestions about money flying out of the country to the El Dorados abroad, we are talking a lot of nonsense.

There is an interesting sidelight in regard to the Danish experience in wealth tax. It comes back to the reservation I had about the possibility of certain assets such as farms and businesses being valued at levels beyond the capacity to pay. I note from the remarks about Denmark that the full impact of the wealth tax begins only where the wealth is yielding 6 per cent or more and that there are reductions up to 80 per cent if there is no return on investment. In other words, they are relating their wealth taxation to the capacity to pay. This is what we must look at in some degree. There must be some relationship—we must not fall into the trap that exists at present in local rates where a business that existed 20 years ago with a high valuation, without any capacity to pay, had a completely penal load. We have got to get around that trap.

Deputy Lalor spoke about the IDA and the question of industrial development and expansion here and the penal nature of this load. It is important to say that this taxation is aimed at the individual, not the company. The vast majority of industry coming into this country comprises either limited liability companies or multi-national companies with very wide shareholdings, so that in most instances there is no liability whatever to this tax. If Deputy Lalor is being serious he must relate it to the overall investment climate.

We have seen what exists in the other EEC countries. What does not exist is that the vast majority of them are not getting capital grants as a proportion of fixed assets as they are in this country and in none of them are Governments giving any reliefs from taxation on profits based on export sales. This Government and the IDA are giving complete freedom from tax on sales abroad. We are talking about a situation where if a small manufacturing company make £40,000, with a normal taxation system of a 50 per cent levy, the normal assessment for income taxation would be £20,000. Here we are discounting that completely. We are discounting the £20,000 profits that would be assessed in most other countries anywhere in the world today. We are one of the few countries anywhere in Europe offering this incentive.

Let us take that £40,000 company and put a value on it by multiplying the profit by six. It gives us £240,000. If we are taking an 80 per cent assessment of the valuation of the productive assets we are talking about the value of £200,000. Even if that company with that valuation is owned by a single individual, at the 1 per cent wealth tax assessment the figure is £2,000 against a background in which there is no assessment of death duties and where you have complete exemption from export sales tax. We are talking about a very small sum of money.

That manufacturing company is held by an individual. Normally the shareholding might be between two or three people and in that case there is no assessment whatever. If the shareholding is in a multi-national or a limited liability company there is no liability whatever for wealth tax. Therefore, to suggest that this is keeping industry out of the country is a lot of hooey, a lot of damn nonsense and does not relate in any sense to reality.

One of the more striking side issues of the capital gains and wealth tax areas is the suggestion of a lessening of confidence in business and industry in this country. The amazing aspect is that in a country such as this, relatively underdeveloped, we more than our EEC partners have managed to attract foreign investment. While all these little tin gods are running around this country talking about lack of confidence and there being no capacity for putting the show on the road in future, we are in an era when we are managing to attract the highest level ever of foreign investment. It shows how totally irrational is most of the debate in this sphere. The people who are coming in here are doing so to get one simple thing—a return on investment. They are not interested in the Irish political situation other than that it impinges on issues such as security and good climate for investment. They are not interested in the slogans here nor in creating prosperity for us. We have this massive confidence by foreigners in the Irish economy and we are apparently trying to scare ourselves into the position within the country of saying that we must lack this confidence. That is a lot of nonsense.

The Government are not introducing a new concept of wealth tax. Estate duty and death duty taxation was by definition, a tax assessed on wealth and there was already wealth tax here before this Government was elected. There was an outcry about the penal nature of this Russian roulette method of collecting death duty. This Government, with a reforming Minister for Finance decided to tackle this inequitable situation by re-arranging capital taxation—not introducing a new concept of wealth tax—and getting rid completely of death duty taxation, replacing it with capital gains tax and a very mild form of wealth tax which is only one-fifth as penal as the wealth tax which now exists in Denmark. In my view this is justice; it is progressive provided we do not see it used by this or any future Government as a lever to raise the ante when we are looking for funds. So long as it is merely a means for replacing death duty taxation it is progressive and welcome and, in my judgment, is in no way a retarding factor to the development of the country.

Mr. Carter

I have not had much time to read the provisions of this Bill or fully comprehend its ramifications. The previous speaker referred to death duties and the Minister is very fond of referring to them. I think he spoke in terms of £14 million to £16 million but the last time I looked at the Revenue returns, the returns from death duty for 1973 were a little over £9 million—perhaps that was for 1972 and in 1973 it was something in the region of £13 million. While we objected to death duties, in the present setting, with a range of taxation which I think is a record for a Minister for Finance at any given time, in a year in which the national cake is growing smaller, in which we have 104,000 unemployed, a large deficit on the budget and £300 million of an external deficit, I do not see how the Minister can justify his argument for this wealth tax.

In the past we never had enough wealth or wealthy people here. If we had, we would not need to offer special incentives to people from outside to invest here. Therefore, his death duty argument is on the over-kill side; he is merely using death duties as an excuse to initiate a regressive system of taxation which will ultimately have the effect of killing incentive. A man who earns his money likes to hold on to as much as possible of it but under this Bill the State will progressively see that the claws of the Revenue Commissioners will be in every pocket henceforth.

In the White Paper we heard of three taxes, wealth, capital gains and capital acquisitions. Now, this Bill is before us following a bad year, a year of low returns for the rural community and for the industrial community. Irrespective of what any Government speaker may say, this tax will be seen as a means of putting the hands of the Revenue Commissioners into the pockets of those who work hardest. Earnings in industry were low last year. We are taxing companies that are advised to borrow money from the State or any other agency to buy raw materials. We grant the Minister certain leeway in respect of last year and this year in that he was possibly swimming against the tide but this is the third budget that the Minister has introduced and I think he is about to introduce a fourth next October.

I am not trying to create panic in saying that but any thinking person will agree that when we are not able to pay our way at home or abroad it is a bad time to talk of taxing. It amounts to lesser shares of the national cake. If we did not get investment from abroad from the beginning of the industrial drive we would not have been able to generate the funds necessary for investment here. Hence our search in Europe and elsewhere for people with wealth who would come here to step up our industrial activity.

Taxation is very old—we had tax gatherers in the Gospels. We have pen pictures of them and we know they live with us but for a long time we have not heard so much talk in this House about taxation in general as we have had this year from the Minister for Finance.

One would hope for and look towards the generation of wealth. One should be encouraged to generate wealth in any country. But the three taxes the Minister mentioned certainly will not be met with enthusiasm by people investing money here, if they have it—and I strongly suspect they have not—or by people coming from abroad, because it is merely the thin end of the wedge. When this Bill becomes an Act its terms can be broadened to become very regressive. It would not be too bad, were we not bearing the other taxes loaded on to us. We have the businessmen of this country acting as unpaid tax collectors for the Revenue Commissioners. This year, if they are in arrears with their income tax payments, they will be doubly loaded.

When we speak of taxing people, we speak of equity, of comparisons with what may be happening in Europe. Denmark was mentioned here. Without going very deeply into it, if one compares the history of the two countries, one will see the relative period of calm the Danes have enjoyed, apart from the war, for the last century. I remember the first time I walked into the Tivoli Gardens in Copenhagen and looked at the plaque on the wall there, showing that the gardens opened in 1845 or 1846, the year before the Famine here, and I said to myself: "well, the Danes have had a long period". It is very hard to compare our circumstances with those of any other European country. When one says that the wealth tax is not regressive in Denmark, in Germany or elsewhere, one must compare the other taxes, compare the industry of the people concerned, their figures of unemployed, their rate of inflation, their savings and their techniques and skills. When one does, one will soon see that we started at a very low level. Today, in comparison, and I do not say this by way of condemnation, envy or anything else, when one sees the relative skills, one has to say to oneself—and certainly, when one speaks in terms of a raft of taxation in 18 months or two years— it is overkilling the aim of the tax, first of all, and certainly will kill incentive. If the cake were growing bigger, there would be something to be said for it.

For example, it would be different were the Minister to say: "Look, we are going to strive to make the cake larger, when we will have fairer shares for all and, in those circumstances—when the yeast or the soda in the cake starts to swell—we will be able to afford a greater share of our relative incomes in taxation." But when one sees the cost of Government growing in the gigantic way it has in the last two or three years, one asks oneself: "What am I paying this tax for?" One might well ask the same question when one sees wage agreements negotiated with employers, even the thresholds of which they are unable to pay. What does one begin to think when there is the bizarre position of workers picketing public companies which are unable to meet last year's demands for threshold payments?

My contribution may be disjointed because I have had no time to make notes on this proposed wealth tax system. What I am referring to is the timing of its introduction. We want to rejuvenate incentive here; we need to increase the effort to attract people to bring in skill and industry here. Lastly, and by no means least, we have reached a position in our rural economy in which we will not make a lot of progress on the agricultural side either.

Mr. Coughlan

Did the Deputy see the rural vote from the two Galway constituencies, the two strongholds?

Mr. Carter

The Deputy must have been having nightmares or something of that kind.

Mr. Coughlan

A lot of people in Galway gave their answer, and they were not nightmares but daymares.

An Leas-Cheann Comhairle

Deputy Carter.

Mr. Carter

I am referring to the lack of advance in the rural economy over the past year and I am not altogether blaming the Government. But, in that regard, the Government and the Minister sponsoring this Bill relied too much on the statements that we were importing inflation here. There is no incentive to wealth on behalf of any individual while money is losing value, while the pound is losing from between 20p to 25p a year.

Mr. Coughlan

Yes, but we were exporting employment under Fianna Fáil since the mining industry started in this country.

An Leas-Cheann Comhairle

Deputy Carter is in possession.

Mr. Carter

I think the Deputy thinks he is back in Galway.

Mr. Coughlan

The Deputy is a sure, hard-thinking businessman and Fianna Fáil were exporting employment since the commencement of the mining industry here.

An Leas-Cheann Comhairle

Deputy Carter.

Mr. Carter

It has been argued here that this Bill is aimed at the individual. Of course it is. It is aimed at the pocket of every individual regardless of whether or not he is a member of a company. The Minister is going to have his hand in the pocket of this individual. Not only will he relieve him of a certain amount of wealth tax but will fleece him if he is in arrears in his payments of income tax. He will flay him for value-added tax and he will be after him for capital gains tax as well as capital acquisitions tax.

Therefore, one cannot say this is not a bar to incentive. It may well have the effect of going in the opposite direction to what we are aiming at. As Deputies, we all know that sometimes, even with the best will in the world, our policy cuts across what we are aiming at. When one sees companies being milked for tax at one end and press-ganged at the other end to borrow money for the State or some other agency to meet pay demands, then there is something wrong with our policy.

The aim here is to extract money from the wealthy, and this means that people who work hard during their lifetime will be taxed in relation to the amount of work they do. In the long run, what is the sense of saving when you are losing from 20 per cent to 25 per cent of your saving each year? What is the incentive to invest when you are surrounded by this atmosphere, that if you invest you will be caught by the terms not merely of this Bill but of other Bills on the stocks as well and other systems of tax which are operating at the moment?

If we were doing better on our balance of payments, if we were making ends meet at home, if we had fewer unemployed, if we had not so many workers on part-time—I could go on in this vein—one might be able to accept such taxation. The terms in which the legislation is presented might be plausible enough but the time at which it is presented and the arguments the Minister advances in favour of it are out of joint, and certainly do not take account of the very relevant factors I have just mentioned.

We shall be discussing this Bill section by section at a later stage. Having read it and having had advice and consultations on the various sections in it, one would hope to be able to make some amendment to it. But I would caution the Minister that he can rely too much on imported inflation as an excuse for the loss in the value of money. He can rely too much on the argument of increasing oil costs. He can rely too much on those comparisons he is making with other European countries. Certainly he will find in the end that the proposals he is making here are regressive and not in tune with our aim of generating industry here.

Incidentally, when the Minister talked so much recently about imported inflation I had it in mind to write and ask him why the Government did not produce an energy policy early on. I do not propose to go into that aspect of it, but since the Minister is so fond of quoting other economies in Europe he might look at what the French are doing for fossilised fuels. We seem to be marking time all year here. A farmer said to me recently at the by-elections: "I seem to be going round in circles." We seem to be engaged in the same sort of exercise. We are talking about wealth we have not got. We are trying to induce wealth in from outside, and at the same time we are considering the various ways and means of extracting a slice of this wealth not merely from our own people who invest at home but from those coming from abroad as well.

I would ask the Minister to withdraw this Bill. It has not got the mature consideration it requires. This is no time to start an argument about regressive legislation when we are, as I said earlier, partly winged on the agricultural side and partly winged on the industrial side. Our two arms are more or less tied up——

Mr. Clinton

I thought the Deputy was saying "partly winning on the agricultural side".

Mr. Carter

Partly winning of late, I would agree, but we have not been winning all the year. I am not blaming the Minister for that, but I am saying in blanket terms that this is a very bad time for this Bill, and I am asking the Minister, in the interests of clear thinking and better planning, to withdraw this Bill and have it reconsidered more maturely. It has been talked about, but sometimes in political debate the real ramifications of a Bill are lost, and the Revenue Commissioners or the people who frame the Bill are in no way annoyed at this. One of the Departments from which it is hardest to extract information is Revenue. I think I referred to this elsewhere, and while I intend to come back to it again this is not the time to mention it. However, it has a bearing on it. The great majority of the people do not know the ramifications of the Wealth Tax Bill, the Capital Gains Tax Bill or the Capital Acquisitions Tax Bill, which has not been introduced yet. Therefore, my appeal to the Minister would be to wait until the cake gets larger and then do something in the direction of improving the quality of the cake——

Dáil Éireann debate - Thursday, 6 Mar 1975

Wealth Tax Bill, 1975: Second Stage (Resumed).

Dáil Éireann debate -
Thursday, 6 Mar 1975