Dáil Éireann debate -
Tuesday, 8 Apr 1975

Vol. 279 No. 7

Capital Acquisitions Tax Bill, 1975: Second Stage.

Minister for Finance (Mr. R. Ryan)

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

This Bill is the final step in the Government's programme of capital taxation reform forecast in the Statement of Intent of the National Coalition Parties of 7th February, 1973, endorsed by the electorate in the general election of February, 1973, and amplified in further detail in the White Paper on Capital Taxation published on 28th February, 1974.

One of the least defensible features of estate duty was that tax was charged on the total value of an estate left by a deceased person without any regard to the amount actually received by individual beneficiaries. Thus, not only was estate duty charged irrespective of the degree of ability to pay but the estate duty system was also an inefficient instrument in distributing wealth. The capital acquisitions tax now proposed will promote a wider spread of wealth since the wider the distribution of wealth the smaller the amount of total tax paid will be.

Estate duty could be, and by the wealthy in particular often was, avoided by making substantial gifts during life. Appreciating fully the social and economic advantage of transfers of wealth to young enterprising people, the Government are anxious to secure the double objective of encouraging such transfers while ensuring that people of comparatively substantial means pay gift taxes on such operations. Gifts between living persons will, therefore, be charged at a rate of 25 per cent below the rate for inheritances.

Three anachronistic capital taxes— estate duty, legacy duty and succession duty—are being done away with and in their place, Ireland will have a capital taxation system trimmed to Irish requirements but reflecting the fiscal experience and wisdom of the world's most advanced countries.

Under the Bill it is proposed to levy a tax on gifts and inheritances in excess of specified limits differing in accordance with the relationship of the beneficiary to the person from whom such gifts or inheritances are received. As with the other two capital taxes, namely, capital gains and wealth tax, the broad outline of this tax as set forth in the White Paper was the subject of consultation with various interested persons and organisations. It is an indication of the extent to which the fairness and moderation of the capital acquisitions tax has been recognised that the lowest proportion of representations received on the White Paper proposals was concerned with this tax. Even among those who wrote making helpful suggestions for modifying the proposed outline, the comments were invariably prefaced with a statement of general acceptance of the justice of the tax. The National Economic and Social Council, for instance, accepted in principle the desirability of introducing a capital acquisitions tax on inheritances and gifts as an alternative to death duties, but also suggested some amendments to the White Paper proposals. Such widespread support for the taxation of substantial gifts is not surprising considering that most other countries accept the need for a gift tax. Of the 21 countries listed in our Capital Taxation White Paper only one— Luxembourg—besides Ireland has no gift tax.

Arising out of the submissions received and the resulting reconsideration given to certain aspects of the outline proposals, a number of modifications have been made and these are incorporated in the Bill now before the House. The principal modifications are: a reduction in the number of classes of beneficiaries from five to four by combining the originally suggested Classes III and IV in a single class; an increase in the exclusion limits for Classes other than the immediate family (Class I); an adjustment to the scale of rates for Classes I and II to correct certain anomalies in the White Paper "suggested scales"; the aggregation of gifts received by any one donee from any one donor in the period from 28th February, 1969 for the purposes of determining the rate of tax applicable, in accordance with the scales set out in the Bill, to gifts received from the same donor on or after 28th February, 1974, or to inheritances received from the same person as testator on or after 1st April, 1975. Other modifications include the extension of the favourable Class I treatment to the minor children of a deceased child of a disponer and, in certain circumstances, to a nephew or niece of the disponer; it is also being provided that the tax may be paid in instalments and that certain Government securities be acceptable at par in payment of inheritance tax. Certain Government securities in the hands of persons neither domiciled nor ordinarily resident in the State will also be exempt from the tax.

Given the generous exclusion limits of £150,000 per receiver proposed for property passing to the immediate family under the Bill and taking it in conjunction with the equally generous treatment of retirement disposals under the Capital Gains Tax Bill and the very high threshold of exemption and low rate of tax under the Wealth Tax Bill, it will now be obvious to all that the new package of capital taxation will leave untouched the great majority of persons who heretofore lived anxiously under the cloud of estate duty which could haphazardly cripple the small- and medium-sized farm or business and could force the sale of the very family home itself. Less than 1 per cent of estates passing on death are valued above £150,000 and most estates pass to the immediate family. This indicates the massive relief afforded to ordinary people by the abolition of estate duty and how few comparatively well-off people will be involved in the new taxes. The new system is aimed at those who have that capacity to pay, only when they have that capacity and only in accordance with their relative capacities.

I will now go briefly through the provisions of the Bill. Section 2 sets out the various definitions used generally throughout the Bill. Section 3 indicates the circumstances under which a person is considered to become beneficially entitled to property "on a death" as opposed to becoming beneficially entitled thereto as a result of a gift.

Section 4 is the charging section in so far as the gift tax is concerned and it levies a tax on the taxable value of every gift taken by a donee on or after 28th February, 1974. The tax chargeable on the taxable value of a taxable gift will be 75 per cent of the tax computed in accordance with the provisions of the Second Schedule.

Section 5 provides that property taken otherwise than "on a death" as covered by section 3 and otherwise than for full consideration shall be deemed to be property taken as a gift. The granting to the disponer of a life interest will not be regarded as consideration for the property gifted in any case where the disponer and the donee are related to each other. The section also sets out what a gift is deemed to consist of in cases where the donee becomes entitled to a limited interest or to an unsecured annuity or periodic payment. Subsection 6 of the section provides for the taxation of a gift completed on or after 28th February, 1974, even though it may be made in pursuance of a contract or agreement entered into before that date.

Section 6 defines a taxable gift. In a case where a disponer is domiciled in the State at the date of the disposition, or where the proper law of the disposition under which the gift is taken is the law of the State, or in the case of a gift taken under an Irish discretionary trust, the entire of the property comprised in the gift is a taxable gift. In any other circumstances only the property situate in the State is regarded as a taxable gift. The section provides that gifts taken on or after 28th February, 1974, and before 1st April, 1975 and which, because the disponer died in that interval, are deemed by the Acts relating to estate duty to pass on his death will not be regarded as taxable gifts for the purposes of this Bill.

Section 7 provides that liability to gift tax in respect of gifts taken by persons as joint tenants shall be the same as if they took as tenants in common in equal shares.

Section 8 is a necessary provision to prevent avoidance of the tax by gift splitting. It provides for looking at the transactions between connected persons within the period commencing three years before and ending three years after the date of a gift and for treating the gift as being made by the person who provided the property to the person who ultimately benefited. The provision will not apply to cases where no such manipulation of gifts as between disponers and donees takes place.

Section 9 provides for aggregating gifts taken by a donee in the five years preceding 28th February, 1974, with the gifts taken on or after that date from the same person or inheritances taken on or after 1st April, 1975, from the same person as testator for the purposes of determining the rate of tax applicable to gifts or inheritances after the commencement dates. These pre-28th February, 1974, gifts will not themselves be subject to the tax. The provisions of the section will not apply to gifts made in the period 28th February, 1969, to 1st April, 1975, where the disponer died in the period and these gifts were, therefore, deemed by the Acts relating to estate duty to pass on the death of the disponer.

Sections 10 and 11 impose the charge to inheritance tax and relate the charge to the property involved in the same way as sections 4 and 5 do for gift tax.

Section 12 defines a taxable inheritance. The whole of the inheritance is taxable in cases where the disponer is domiciled in the State at the date of the disposition under which the successor takes the inheritance or where the proper law of the disposition under which the successor takes the inheritance is the law of the State or in any other case where the whole of the property which was to be appropriated to the inheritance or out of which property was to be appropriated to the inheritance was situate in the State. In any other circumstances, only the property situate in the State is a taxable inheritance.

Section 13 provides that a gift or legacy which is gratuitously disclaimed by the donee or legatee is ignored for tax purposes and the disclaimer itself will not be regarded as a gift.

Section 14 provides that the survivor or survivors in a case of joint tenancy of property shall be regarded as taking an inheritance from the deceased person as disponer. Where there is more than one surviving tenant their liability to tax will be the same as if they each took a severable share.

Section 15 to 21 concern the valuation of property for tax.

Section 15 defines the market value of property as the price which it would fetch in the open market. Where the Revenue Commissioners nominate a valuer to prepare a valuation, the costs of such valuation will be paid by them.

In valuing unquoted shares and securities it is assumed that all the relevant information is available to a prospective purchaser in the open market.

Section 16 deals with the valuation of shares in a private trading company where control attaches to the donee or successor. This control element is taken into account in arriving at the value of the shares. Where no question of control arises, shares in such a company are valued in accordance with the general valuation provisions of section 15. Various necessary terms such as "control" and "private company" are defined in the section.

Section 17 relates to the valuation of shares in a private non-trading company which is controlled by the donee or successor. It provides for valuing the shares as a proportion of the assets of the company valued on a winding up basis without allowance for costs of winding up.

Section 18 provides that the taxable value of a gift or inheritance is the market value less allowable debts and other liabilities to which the gift or inheritance is subject. Any consideration given by a donee or successor who takes property as absolute owner is then deducted.

Where the donee or successor takes a limited interest in property the market value after deduction of allowable debts and other liabilities is first reduced according to the age and sex of the donee or successor or the period of time for which the interest is to last in accordance with the rules set out in the First Schedule and then any consideration paid by the donee or successor is deducted.

Section 19 deals with the valuation of agricultural property, as defined, taken by a farmer, as defined, as a donee or successor. A deduction of 50 per cent from its market value or £100,000 whichever is the lesser will be permitted. This will be known as the agricultural value. Allowable debts, liabilities and consideration, if any, will be deductible as under the previous section but only in the proportion that the agricultural value bears to the market value of the agricultural property. The special agricultural deduction is limited to £100,000 in respect of all gifts and inheritances of agricultural property taken by the same farmer, as donee or successor, from the same disponer. The section also provides rules where the agricultural concession can be availed of in certain other circumstances and where, in certain cases, it will cease to apply.

Section 20 provides that contingencies affecting property are ignored in computing the tax but if the contingency happens the tax will be adjusted (if by so doing a lesser amount is payable) as if the person took a limited interest for the actual period he has the property.

Section 21 provides that the valuation date of a taxable gift is the date of the gift and that of a taxable inheritance is normally the date of ascertainment of the residue or other benefit and of its retainer for the benefit of the successor.

Section 22 deals with distributions from discretionary trusts. These will be taxed as and when they are made after 28th February, 1974, in the same way as gifts. Where, however, the trust was created by will or where the disposition is on or after 1st April, 1975, and within two years prior to the death of the disponer or where the disposition inter vivos is limited to come into operation on a death occurring before or after the passing of this Act the distribution will be taxed as an inheritance.

Section 23 provides for applying the gift tax or inheritance tax, as the case may be, to the benefit taken by a donee or successor as remainderman when that interest falls into possession, even if he had earlier disposed of his future interest to a third party whether for full consideration or not. The tax payable would be determined by the relationship of the donee or successor to the disponer. The third party to whom the interest was transferred will be the person primarily accountable for the payment of tax, to the extent of the benefit transferred to him.

Section 24 deals with the termination of limited interests earlier than such time as they are limited to cease and provides for taxing the resulting gift or inheritance as if the event on which the interest was limited to cease had happened immediately before the termination of the limited interest.

Section 25 provides that the tax payable on the cesser of a life interest will not be avoided by the remainderman having settled his interest on himself.

Section 26 is concerned with the case where a limited interest in possession is enlarged to an absolute interest either by way of gift or inheritance. Tax will be charged only on the difference between the full value and the taxable value already held.

Under section 27 a person in using a general power of appointment which he has over property will be treated as a disponer, whereas a person using a special power of appointment which he has over property will not be so treated. In the latter instance the creator of the special power is treated as the disponer.

Section 28 provides for treating the benefit of a cesser of certain liabilities as defined in the Bill as a gift or inheritance as the case may be.

Section 29 deals with dispositions enlarging the value of property previously taken by a donee from the same disponer and provides for taxing the increase in value in the previously held property as a gift or inheritance as the case may be.

Under section 30 a person taking property subject to a power of revocation will not be taxed unless and until the power is released or is no longer exercisable.

Section 31 provides for treating the use of property in any year as a gift in that year, the value of which would be the value of that use. The section will apply, for example, to persons who are objects of a discretionary trust and to persons occupying property under a disposition which may be revoked.

Section 32 applies to a life assurance policy which becomes the subject of a gift or inheritance. In such a case tax becomes payable when benefits accrue.

Section 33 is necessary to prevent a double charge to tax in cases where a benefit by will to a testator's child or other issue is preserved from lapse where the beneficiary predeceases the testator but leaves issue living at the testator's death. The person who actually takes the benefit is taxed on a benefit taken from the testator.

Section 34 deals with dispositions by or to a private company and provides that the beneficial owners of shares and certain entitlements in the company will be treated as disponers, donees or successors, etc., as the case may be in the proportion of their beneficial interests in the company. Where there is no ascertainable beneficial owner and the shares, and so on, are held in trust, a disposition made by or a consideration paid by a company will be treated as paid by the disponer in the trust.

Sections 35 to 40 deal with returns and assessments for the purposes of the tax.

Section 35 indicates the person liable for payment of tax. Primary liability attaches to the donee or successor. If those with primary liability default in payment, the persons secondarily liable will be called to account. These will include the disponer, the trustees of the disposition under which the gift or inheritance is taken and every trustee, guardian, committee, personal representative, agent or manager who has the care of the property or its income and transferees other than purchasers. Those with secondary liability, other than the disponer, will be liable only to the extent of the property received and they will be entitled to reimbursement from the person primarily accountable.

Section 36 requires the person primarily liable to deliver a return within three months of the gift or inheritance if the gifts or inheritances exceed a certain value. Those with secondary liability need only deliver a return if required in writing to do so.

Section 37 provides for the signing of returns by an accountable person.

Section 38 deals with the Inland Revenue affidavit required for an application for a grant of probate or administration.

Section 39 provides that assessments and correcting assessments of tax will be made by the Revenue Commissioners.

Section 40 provides for computing tax in accordance with the provisions of the Second Schedule.

Section 41 to 50 deal with payment and recovery of tax. Tax will normally be due on the valuation date and simple interest of 1½ per cent a month will run from that date until the tax is paid. However, if tax is paid within three months of the valuation date or within 30 days of the assessment date no interest will be charged. In the case of a gift taken before the passing of this Act an adjustment is made so as not to charge interest in respect of the period before the passing of this Act. Tax and interest paid in respect of a gift which becomes an inheritance because of the death of the disponer within two years of the disposition will be treated as payment on account of tax subsequently assessed on the inheritance.

There is provision in section 43 for payment of tax in five yearly and equal instalments in the case of real estate and in the case of a limited interest in any property. There is also provision, in section 44, for postponement of tax in cases of excessive hardship, for remission of interest and of tax after a certain period and for compounding of tax in certain circumstances. Government securities which were issued with the condition that they might be used to pay death duty may, under section 45, be used to pay tax on inheritances.

Under section 46 overpayments of tax will be refunded and such repayments will carry interest, not exceeding the tax overpaid, from the date of the original payment.

Section 47 makes the tax a charge on the property comprised in the taxable gift or inheritance. Real property sold will cease to be charged with the tax after the expiration of 12 years from the date of the gift or inheritance.

Section 48 provides for the issue of certificates of amount of tax paid in respect of any property and for the issue of certificates of discharge from tax if the Revenue Commissioners are satisfied that tax has been or will be paid.

Sections 49 and 50 deal with the recovery of tax as a debt due to the Minister for Finance and apply the provisions of section 39 of the Finance Act, 1926 to court proceedings in relation to the recovery of the tax.

Sections 51 and 52 make provision for appeals in relation to the value of real property and in relation to any other case respectively.

Sections 53 to 59 set out the exemptions provided in the Bill. These include the first £250 of the total taxable value of taxable gifts taken in any one year, gifts or inheritances taken by charities and by the State and by public bodies in the State and Northern Ireland. Benefits taken by persons for public or charitable purposes will also be exempt. Gifts or inheritances consisting of objects of national, scientific, historic or artistic interest will be exempt if kept in the State, save for authorised absences and if reasonable facilities for viewing are allowed. The exemption will cease if the objects are sold within six years otherwise than to specified bodies, that is, the National Gallery or the National Museum.

Retirement gratuities, redundancy payments or employees' pensions will be exempt as also will payments such as contributions by an employer to a superannuation fund which are deductible for income tax. Certain Government securities owned by persons who are neither domiciled nor ordinarily resident in the State will also, under certain specified conditions, be exempt if comprised in a gift or inheritance. Payments by way of compensation for damages for certain wrongs or injuries will be exempt. Finally, a gift or inheritance taken by a disponer under his own disposition will not be chargeable to tax.

The remaining sections of the Bill, sections 60 to 72 are miscellaneous provisions dealing with, for example, extraction of a grant of probate or of administration, with the payment of money from a joint bank account in excess of £5,000 without a certificate from the Revenue Commissioners, with penalties for failure to furnish returns, information and so on, or for fraudulently or negligently doing so, and with the construction of references to death duties in deeds, wills and so on, in the case of deaths occurring on or after 1st April, 1975.

Section 66 empowers the Government by order to enter into arrangements with the Governments of other States to provide relief from double taxation in respect of capital acquisitions tax or tax of a similar character.

Section 69 enables a change in the rate of tax to be made by financial resolution of Dáil Éireann and places on the Revenue Commissioners the same responsibilities to account for the tax as are imposed on them in relation to other taxes.

Section 71 empowers the Revenue Commissioners to make any necessary regulations to give effect to this Act and these regulations shall be laid before this House which will have 21 sitting days in which to consider annulling them.

Section 72 is the usual provision placing the tax under the care and management of the Revenue Commissioners.

The First Schedule to the Bill contains rules and tables for valuing limited interests according to age and sex in the case of life interests and according to the period of time in the case of an interest for a definite period.

The Second Schedule contains the special rules for computing the tax and the four tables which set out the rates of tax applicable to the four classes of donees or successors depending on relationship to the disponer.

I commend this Bill to the House.

Mr. Colley

This Bill is a perfect example of the Coalition confidence trick technique. The Coalition promised in the general election campaign that they would abolish death duties and they have since repeated that they are doing so. The Minister brazenly refers to this again in his speech today and arranged a handout —presumably—on 5th April, I think, to celebrate the abolition of death duties. But of course one has merely to look at the Bill or listen to what the Minister was saying to find repeated references to inheritance tax. So, the way to abolish death duties is to change the name and call them inheritance tax. This kind of confidence trick is not good enough.

The Minister may be tempted to say: "Death duties apply to many people to whom this will not apply" as part of his answer, but I wonder how many people realise that under the provisions of this Bill, a brother, a sister, a nephew or a niece can become liable to inheritance tax on an inheritance exceeding £10,000. Indeed, if any gift has been given by the testator to that brother, sister, niece or nephew in the past five years, that will be aggregated with the inheritance so as to increase the rate of tax. I do not think there is any other reasonable description for this kind of approach in the context of the loud trumpeting of the abolition of death duties than a confidence trick.

I do not think it is doing any good to the country to pretend that death duties are disappearing when in fact what is being done is to introduce a most elaborate package, not just of this Bill, but of other Bills, which will produce a great deal of money and work for accountants and lawyers for many years to come, and which are producing a vast amount of uncertainty, not only among the business community but among other sectors of the community as well. All this is in order to pretend that death duties are being abolished.

Of course, the death duties system could have been very substantially amended to give the kind of reliefs which are clearly required today, particularly with inflation running the way it is and with certain additions, possibly in the way of a gift tax. Instead of that we get this huge, elaborate battery of Bills, highly technical, which, as I said, will lead for many years to litigation and uncertainty and they are produced by the Minister at a time when he and his Department should be devoting the major portion of their attention to remedying the economic crisis in which this country finds itself. It is not alone that the Minister and his Department, who are charged primarily with our economic management, are dissipating their time and energies in quite an unnecessary way on this package of Bills, but the time of this House is also being taken up, and will be taken up for a very long time to come, in going through an unnecessary exercise. It is unnecessary in the sense that the changes that require to be made could have been made in a much more simple way by amendment and a small addition to the existing law.

This is all being done so that the Minister can say he is abolishing death duties. Whatever he says he cannot deny that a good deal of the Bill before us deals with inheritance tax. He can say that is not death duty but there are very few people who will believe him. The Minister spoke before, and he also spoke today, about the distribution of wealth being achieved by this Bill. At the beginning of his speech he said:

The capital acquisitions tax now proposed will promote a wider spread of wealth since the wider the distribution of wealth the smaller the amount of total tax paid will be.

I do not know what the Minister means by wider distribution of wealth but judging by some things he said in the House before I think his definition of redistribution of wealth is different from that of most people. On a previous occasion he was reduced to talking about the redistribution of wealth within the family. I can think of some very well known, wealthy people in this country and I do not think the Minister would convince the average person that if one or two of those well known wealthy people were to divide up their wealth somewhat more than they have done between members of their families that we would achieve a redistribution of wealth, as ordinarily understood. I do not think the Minister would get many cheers on the streets for that achievement.

What redistribution of wealth are we to get under this Bill? The only evidence we have available is what the Minister has told us. It will be recalled that on the occasion of the issue of the White Paper he stated that the expected income to the Exchequer from the whole package he is bringing forward would equal the amount of revenue received under existing death duties. Under pressure he changed a number of provisions that were in the White Paper, apparently with the effect of reducing the expected revenue but he said then, to justify that, that it had been possible to reassess the situation and it now seemed, even making these changes, he would get the same revenue. Taking it at its best is the position not that the only evidence we have, which is from the Minister, is that all of this operation, all the time that is being wasted, will produce the same revenue as the existing taxes? Where is the redistribution of wealth involved? It is apparently involved among members of wealthy families. I will come later to what will happen to members of wealthy families under this Bill. The Minister will find it hard to convince many people that there is any element of redistribution of wealth involved in this.

A notable feature of this Bill, as indeed of the other Bills the Minister has introduced as part of his overall package in connection with capital taxation, is the absence of any provision whatever to deal with inflation, the absence of any automatic adjustments of thresholds to deal with inflation. In the good old days when Fianna Fáil were in office the inflation rate was not such as to create a major problem in this regard, although it was approaching it. The Minister appears to be unaware that inflation at the last count was running at an annual rate of 32 per cent, that is extending for a year the inflation rate of the last quarter. Even if one does not take it that way it is clear enough that inflation this year is unlikely to be less than 25 per cent. When we are talking about that kind of inflation it is, to say the least, unrealistic—one could say a great deal more about it than that—not to provide automatically for the adjustments of the thresholds in this and other Bills we have been talking about in line with inflation.

The Minister has refused to do so. He has voted against, and caused his supporters in the lobby to vote against an amendment we put down to provide for this. I must confess I regard his persistent refusal to provide for inflation as very sinister. It is possible, of course, that the Minister believes and hopes that inflation will suddenly go down to manageable proportions but I doubt if there are many other people who would entertain that belief or hope in any realistic way. All the indications are that inflation will continue at a high rate for quite a long time to come. Indeed, the Minister's own actions and inaction give no ground for belief that in the short term there will be any substantial reduction in inflation. Therefore, unless one assumes that the Minister is being totally naive, one can only assume that he knows inflation will continue to run at a very high rate and nevertheless is refusing to provide in this Bill, and in the other capital taxation Bills, for automatic adjustment in line with inflation.

If that is his intention, knowing the likely consequences, one must accept that he is planning to bring many more people into the capital taxation net. He has been fond of telling us that very few people will be affected, a statement which of course is not true when one examines it in detail. The consequences for people who are not directly affected because of those who are directly affected are clear enough. Leaving that argument aside for the moment, the Minister's refusal to provide for adjustments in line with inflation can only have the effect of bringing many people into the net of capital taxation who at the moment have no reason whatever to believe they will be brought into that net.

The Minister may say that these thresholds will be reviewed from time to time. In the first place, he cannot give an undertaking about the regularity of those reviews because he will not be in the position he is now in for very long. In the second place, our own experience of this Minister with regard to provisions relating to inflation is most discouraging. The Minister will recall that, during the debate on the Finance Bill last year, an amendment was put forward by this side of the House endeavouring to build in provision for inflation relating to income tax allowances. He will recall that he resisted it but said that he and the Government were undertaking to review these allowances at regular intervals, having failed to do anything about them the year before with inflation running as it was then.

It is true that they are being reviewed this year and he is providing for an increase in the allowances of 15 per cent at a time when it is clear that for the relevant year—not nine months as the Minister tried to make out; there never has been a nine months year for income tax—the inflation rate was 20 per cent taking the very best views of it and, in fact, it was nearer to 25 per cent. That kind of experience of this Minister in his undertaking to review thresholds and other matters in line with inflation is not encouraging. I would suggest that his failure to provide in this Bill for adjustments in line with inflation is sinister, and is intended to ensure that more and more people who now think they will never be touched by wealth tax or other capital taxes will be brought in, and brought in quite fast at the rate inflation is running now.

I spoke in this House about a year ago on the proposals for capital acquisitions tax as then made known to us in the White Paper. I pointed out that, while it was quite right to make special provisions in relation to agricultural holdings, it was equally right and equally necessary to make special provisions in relation to businesses and family houses. The fact that special provision has been made in relation to agriculture presumably means that the Minister acknowledges the necessity for this, but there are equally compelling economic reasons for making special provisions in relation to businesses and particularly family businesses. I cannot see the logic of excluding them from these special provisions. The same kind of effect can occur if a family business becomes liable to inheritance tax. The finding of this money can create a very difficult situation for many businesses.

Apart from that, in the main, assets used in business are being productively used. Some recognition was given to the use of productive assets in the Wealth Tax Bill, but not sufficient in my opinion. I see no reason why recognition should not be given also in this Bill. There are very sound economic reasons why special arrangements should be made in regard to assets being productively used in business. There are also compelling social reasons why special arrangements should be made in regard to family houses. The problem which arose in death duties was contributed to frequently by the inclusion of the value of the family house in the estate. Particularly in the absence of provision for inflation in the thresholds, that problem will become acute in this Bill in a very short time. I want to urge that this Bill should be amended to provide special arrangements not only for the agricultural community but also for businesses and family houses.

In this Bill, as in the Wealth Tax Bill, distinctions are made between trading companies and non-trading companies and particularly private trading companies and private non-trading companies. Certain problems to which we drew the Minister's attention during the Second Stage debate on the Wealth Tax Bill arise again on this Bill. I want to draw the Minister's attention to the fact that, in the case of a private trading company, one year trading at a loss could put that company into the category of a non-trading company as defined in this Bill with consequential effects which could be quite serious as regards liability to tax. I do not think that it is a reasonable or tenable provision and it should be amended before the Bill leaves this House.

The Minister referred to the differential in the rate of tax on gifts, on the one hand, and inheritance on the other. It is a 25 per cent differential intended as an incentive to people to dispose of their property rather than hold on until the very last moment, a problem with which we are familiar particularly in rural Ireland. I want to suggest to the Minister that the 25 per cent differential is an inadequate incentive to healthy people to pass on their wealth to others. If he wants this to be effective the differential will have to be bigger than 25 per cent.

I also want to suggest to him that the special provision in the Bill under which the surviving spouse of a deceased person and certain nephews and nieces may be treated as children of the donor should be extended to include brothers, and sisters and grandchildren. There are many good reasons for this, reasons of which, I am sure, the Minister is aware, and I trust he will be able to tell us he is willing to do this. If he is not willing we shall be pursuing it on Committee Stage and spelling out for him in detail the reasons why this should be done.

There is another general proposition in regard to this Bill. Where there are reliefs or relieving provisions under death duty legislation, then these should also be applied to the inheritance taxation legislation before us unless the Minister specifies those he does not propose to apply and gives convincing reasons why they should not be applied. There are a number of instances where this is not being done. I shall refer to some. The list is by no means exhaustive. One is that, and this has been the position under death duty legislation since 1894, where a husband dies leaving a life interest in his property to his wife duty is levied on his estate and, depending on the size of the estate, under estate duty legislation that could be up to 55 per cent. The wife, or widow rather, continues with her life interest in the property; when she dies no duty is payable and the property is not aggregable for the purpose of estate duty. This has been the position since 1894. Under this Bill, assuming the husband died some years ago, duty will already have been paid; that duty could be 55 per cent or, perhaps, less. Putting it in the vernacular, the State has already got its whack. Under the provisions of this Bill when the widow dies inheritance tax will be payable and in the meantime she will have been liable for wealth tax. That seems to me to be a most unfair situation, a taking away of a relief which has existed since 1894. Some justification for this on the Minister's part is required. I notice that in Britain they took a different view; they preserved the existing relief under section 22 of the 1975 Finance Act.

In regard to gifts and gift tax there is a general proposition in the Bill which appears to me to be most unsatisfactory in that it will provide an enormous loophole for evasion. I drew the Minister's attention to this a long time ago but the Bill still contains the same principle set out in the White Paper. Under the Bill liability for gift tax depends to a very great extent on the donor of the gift. If one donor gives a number of gifts they are accumulated and the tax payable is assessed at an increasing rate as the total amount of the gifts goes up. As I pointed out, this provides a major loophole. Speaking on 8th May, 1974, at column 1122, I said:

Furthermore I would suggest that the proposals in the White Paper in regard to the gift tax are very much open to abuse because they propose to apply the gift tax to gifts from a single donor. It would be perfectly feasible for a syndicate of wealthy people to get together, to agree amongst themselves that each would nominate a recipient of a gift and each would give a gift to each of those nominees of £2,000 or just under £2,000. No duty would be payable. I would suggest that the right approach would be to operate on the basis of gifts from any source whatever, to accumulate them and to have a progressive rate of taxation, depending on the level of gifts as they accumulate.

I still make that suggestion to the Minister. I realise problems will arise in approaching it in this way, but I see no point whatever in enacting legislation in which the kind of loophole to which I referred can be created. The Minister has from time to time waxed eloquent on the subject of people who avoid liability for death duties. Discounting a good deal of his alleged concern, I take it that he does not want deliberately to create loopholes and, if he does not, there is no excuse whatever for leaving this Bill drafted in the way it is. The loophole is there readymade and, if the Minister does not close it, then he should not talk to us ever again about wanting to close loopholes and getting at people who have been avoiding liability for duty or tax.

I referred earlier to the fact that the Minister has said that only a small number of very wealthy people will be affected. This is not true. The significant thing is that if people are really wealthy they will be far better off under the Minister's package than they would be under death duty legislation. If somebody is a millionaire and he divides his property among five members of his immediate family they will pay almost £500,000 less in tax under the Minister's package than they would be required to pay under death duty legislation. If we assume this saving could earn 10 per cent per annum—a reasonable assumption at present rates—the family would be £40,000 a year better off even after having paid very heavy tax.

Furthermore, I can give the Minister an example of what would happen under his proposal. Let us assume that a wealthy man makes a gift of £50,000 each to two of his sons in 1975 and that in 1976 he makes a further gift of £50,000 to one of those sons, that in 1980 he dies leaving an estate worth £800,000 and that under his will he leaves £40,000 to one of the sons who had already got a gift of £50,000 and £90,000 to the other. If he leaves £100,000 to a daughter who had not got any gift and if he leaves the residue to his wife and, assuming that that is valued at £520,000 after a number of legacies of £5,000 each have been paid, apart from the inheritance tax payable by the widow the net effect in that case would be that the son who got the two gifts of £50,000 and a legacy of £40,000 pays no tax. Neither would the son who received a gift of £50,000 and a legacy of £90,000 pay any tax. The daughter's legacy of £100,000 would not be subject to tax either. It is important that people realise that under the Minister's proposals the really wealthy—and we have not very many of them—would be far better off than under the existing situation. People can speculate reasonably as to why this should be so, despite the Minister's perpetual posturing as the one who is out to get the rich. He is out to get people who are moderately wealthy. It is clearly demonstrable that he is bettering the condition of the really wealthy. One can speculate legitimately as to why this should be so. Certain reasons that occur to one are not all disconnected with politics and Fine Gael.

In the White Paper the Minister and the Government talked of giving people an opportunity to put their affairs in order in accordance with law. We are speaking of people who have made certain arrangements quite legally in regard to their families and otherwise in accordance with law. The White Paper spoke—and rightly in my opinion—of giving people an opportunity to rearrange their affairs in accordance with the new law. That is a right and proper attitude for any Government to adopt but that is not happening here. The Minister announced recently that death duties were abolished. I have dealt already with the falsity of that claim. The Minister is trying now to put into effect the alternative package to death duties without its being passed by either House of the Oireachtas. People who are subjected to it have no way of knowing what the law is to be. Until such time as it passes through both Houses nobody can know how it is to emerge.

We have the ludicrous position— ludicrous, if it were not so serious— that the Wealth Tax Bill is to come into operation from 5th July and that from that date people will be liable without being assessed. If they do not pay within three months they are liable to interest at 18 per cent. This is an intolerable situation. It is a disgrace to any Government that it should happen that people do not know and cannot know what the law is and that they are being subjected to tax and threatened with a penal rate of interest on that tax without the legislation going through this House. It is an indefensible situation. There are people who insured themselves against liability for death duties and whose insurance policies expired on the basis of the Minister's announcement. What is the position of those people now? The Minister should have some regard to the rights of citizens whether they be rich, middling rich or poor. One of the rights that citizens have is the right to know what is the law under which they are to be taxed.

Because of the mess the Minister has got himself into with these largely unnecessary Bills produced too late and clearly going to take some time to deal with, there is only one reasonable way to deal with the matter. In the absence of any better suggestion from the Minister the only way to deal with the situation with which we are faced is to provide that none of these new capital taxation provisions will operate for a reasonable period after they have become law, that is, passed by both Houses and signed by the President. That reasonable period should be related to the time required by people who wish to order their affairs in accordance with law. This requirement was recognised in the White Paper but is now being ignored. In the interval the existing legislation should be continued until that date is reached.

If the Minister does not like that suggestion, I invite him to put forward an alternative but I will say to him with certainty that the position as it stands whereby people are liable for tax and, in a very short time, will be liable for interest on that tax without being assessed and without the legislation being passed, is an intolerable position and may well be unconstitutional.

People who wish to act in accordance with law and arrange their affairs in accordance with law must know first what is the law and when they then make their arrangements they should not in so doing be subjected to either gift or inheritance taxes because they are arranging their affairs in accordance with law. In the White Paper they were promised an opportunity to do this but they have not been given that opportunity. It would be doubly indefensible if in trying to arrange their affairs in accordance with the new law they were then subjected to further taxation.

There are a number of trusts in existence, some for many years, which legally cannot be broken and must be adhered to as constituted. If the effect of those trusts under this legislation is to produce heavy taxation which would not otherwise have applied to them I believe there is a case, in such circumstances where the trusts cannot by law be changed, for applying the old law to them. Otherwise the people concerned are caught in the grip of a vice, an unfair vice, and one that does not apply to anybody else. This does not apply to people who can arrange their affairs. I am speaking of cases where there are trusts which cannot by law be changed.

The people I am referring to want to comply with the law. I want to warn the Minister that apart from the overall effect of the package he is putting forward a situation in which people are being subject to tax not knowing what the law is is one which is bound to produce evasion—I am not speaking of avoidance but of evasion. This evasion would be forced on people who want to comply with the law but are being treated with scant consideration or respect by the Minister. If the Minister drives such people into that situation we will all lose out by it. In my view it is essential that the Minister announce, preferably when replying to this stage of the debate, proposals to ensure that the situation whereby people are being subjected to tax without knowing what the law is on the subject will not occur.

Section 47 of the Bill seems to provide that the capital acquisitions tax will be a charge on chattels. If that is so, and it seems to be the case on the face of it, surely the Minister will agree that it is unrealistic to be trying to provide a charge on chattels. The Minister in his speech, in relation to this section said:

Real property sold will cease to be charged with the tax after the expiration of 12 years from the date of the gift or inheritance.

I trust that is worded in that way simply because it is a small portion of a lengthy speech and that it is not intended to be an authoritative exposition of what section 47 means. If what it means is that in a situation in which even though property is sold for full value and consideration the charge to tax would still attach to it for 12 years that would be an impossible position. I trust that the wording in the Minister's speech is somewhat inaccurate in representing the provisions of section 47. The Minister should clarify the position when replying.

There is provision in the Bill for the entering into arrangements for double taxation relief relating to gift and inheritance tax. It is not clear that under existing double taxation relief agreements relief can be given. This may be so but it is not clear in the Bill If the position is that double taxation relief cannot be effected until new agreements or additions to existing agreements are concluded with various countries then a most disastrous position could arise, especially in the case of various businesses that would not be able to withstand the impact of the capital acquisitions tax here and of the foreign tax to which they would be liable. If there is any danger of that situation arising the Minister has an obligation to take unilateral action in regard to that liability for tax and to ensure, if necessary by foregoing the tax, that a situation will not arise in which people will be liable for the capital acquisitions tax and for foreign death duties. If it can be achieved under existing agreements well and good. If that cannot be done in due course new agreements or additions to existing agreements can be negotiated, but I am concerned about the interval between the operation of this tax and the operation of double taxation relief. That situation could be disastrous for some businesses and the Minister must provide a remedy for that problem. He cannot let it drift.

Earlier I referred to the fact that all reliefs which existed under death duty legislation should apply in the case of capital acquisitions tax unless the Minister specified the ones he did not propose to allow and gave convincing reasons for this. I have mentioned one already but another that appears to be missing is the rapid succession relief which applies to estate duty, where a husband dies and leaves his property to his wife who dies within 12 months. There is special relief under the existing death duty legislation for this but I have not seen any provision in this Bill which would provide a corresponding relief. If it is not there it should be.

Another matter that appears to be absent from this Bill is a corresponding provision to section 21 of the Finance Act, 1956, which provides for a reduced valuation of shares in Irish companies for estate duty purposes. I believe that the reduction can be as much as one-third. It is essential that this provision which was introduced to encourage investment in Irish industry should be continued. If there is not a corresponding provision in this Bill it should be inserted.

It is clear that there will be a number of administrative problems for the Revenue Commissioners in regard to the whole package of capital taxation. There are grounds for believing that the Revenue Commissioners are not geared to handle this administration and, with a view to reducing the administration problems, I suggest that the Minister have another look at the provision in the Bill whereby a record has to be kept over a person's lifetime of the gifts he gives and receives. As they build up, they can become liable to a higher rate of tax. This could present very serious problems of administration. The Minister might do well to consider having a fixed period —it could be a fairly lengthy period of ten or 15 years—so that the Revenue Commissioners need not keep lifetime files, from the cradle to the grave, on anyone who comes within the net of the capital taxation system. As the Bill is drafted, that is what they will have to do.

Since the White Paper was issued a number of the rates of tax have been altered. Although the Minister did not say so, this was done because the rates shown in the White Paper produced the most ridiculous results. Some improvements have been made in that regard. I notice that the rates in the Bill do not accept the principle that in no circumstances should the tax for a spouse or children exceed the tax paid on the same amount of gift or inheritance to any other class of beneficiary. In other words, under the rates proposed in the Bill it is possible that on a similar sum, be it gift or inheritance, people who are further removed than spouse or children of the deceased would pay less tax than the spouse or children. That is a bad principle. The Minister should recast the rates with a view to implementing the principle that the spouse or children will pay less than any other category.

I raised a point on a previous Bill, and this Bill is drafted in the same way, with the result that I will have to refer to it again today. So far as I can remember, the Minister did not deal with my point when replying to the debate. I refer to section 2 (1) which provides for adopted children. I do not know if I am totally misreading this provision but it appears that this provision and the corresponding provision in the Wealth Tax Bill excludes a child adopted under Irish law while bringing in a child adopted by foreign law. I know that was not the intention but it appears to be so. The relevant part of that section reads:

"child" includes a stepchild and, where—

(a) a child has been adopted under an adoption law other than the Adoption Acts, 1952 to 1974; and

(b) the adoption has, in the place where that law applies, substantially the same effect in relation to property rights (including the law of succession) as an adoption under the Adoption Acts, 1952 to 1974, has in the State in relation to such rights,

then, for the purposes of this definition, the child shall be deemed to be the child of the adopter or adopters....

Mr. R. Ryan

It does not define "child" as being the issue of parents. There are some definitions which are not written into the Act. The Adoption Acts confer certain rights on the child adopted by Irish law.

Mr. Colley

Under all laws passed by the Oireachtas?

Mr. R. Ryan

Yes, under all laws passed by the Oireachtas.

Mr. Colley

I trust the Minister is right. I will check that point later. I hope he is right because, on the face of it, it is ridiculous to provide for children adopted under foreign law and not for children adopted under Irish law.

Since the White Paper was issued another change was made in the Bill. The Minister referred to it but did not explain it. Why are gifts given five years ago to be taken into account in assessing tax? I say "taken into account" because they will not be subject to capital acquisition tax. They will be taken into account for the purpose of aggregating them with subsequent gifts or inheritance in order to determine the rate of tax. Why is this being done? This appears to be retrospective taxation. The Minister may say it is not taxation because we are not applying tax to gifts given or received in the last five years. That is true. But if the effect of taking them into account is to increase the rate, then while this may not be retrospective taxation, we are getting very close to it.

It may be argued that it is comparable to the provisions under death duty legislation whereby if a gift is made and the donor dies within five years, the gift becomes liable to death duty but it is not. In the case of death duties there is a fixed period after which, in accordance with the law, no liability for tax or duty arose. In this case, by bringing in the gifts given in the past five years, there is no fixed time limit involved. It can go on for another 20 or 30 years until ultimately it will come into account and affect the rate of tax involved. There may be some very good reason for introducing this but I have not heard it and the Minister did not give it when introducing the Bill. He simply referred to the fact that the change has been made. In my view, we are entitled to a more detailed explanation as to why that change was made.

I want to refer now to the interest rate of 18 per cent per annum which the Minister proposes to apply to unpaid tax. Having regard to current rates of interest and particularly as they have fallen recently, I do not think it is unfair to refer to this proposal as extortion and usury on the part of the Minister. When we discussed a similar provision in another Bill the Minister said he did not want the Exchequer to act as a bank for taxpayers.

Of course this is a completely false analogy. Let me remind the Minister that if somebody has to pay interest to the Revenue Commissioners he cannot claim relief against his income tax liability, whereas he can if he borrows from a bank or some other institution and is paying interest to them. Therefore, the rate involved, even if it were the same as an overdraft, would be far more penal on the taxpayer. Here the Minister proposes to make it bigger than that, to make it 18 per cent. I urge the Minister to reduce that figure. Weighing up the factors on both sides, it should not be any more than 12 per cent. Having regard to the non-availability of income tax relief, it would be a real incentive to people to pay their tax.

There is another provision in this Bill in relation to interest on tax that worries me considerably. There is a provision that in the event of a taxpayer overpaying his tax, the Revenue Commissioners can give it back to him or they can deal with it—I am not quoting exactly—as seems just. In other words, presumably they can set it off against other tax liability. This raises the question of why the man should be liable for the other tax—is it in his personal capacity or in his professional capacity, and is he really liable for the other tax or are the Revenue Commissioners saying he is? It seems to me it would be far more satisfactory to provide that if a man has overpaid his capital acquisition tax it should be refunded to him straight.

That is not what really worries me. The provision goes on to say that in such circumstances the taxpayer will be entitled to interest from the Revenue Commissioners on the overpaid tax at the corresponding rate that he would have paid if he had witheld the tax. That is fair and reasonable. I think that as Minister for Finance I introduced this principle. This, however, goes further. It provides that the Revenue Commissioners will not be liable, when they are liable for paying back tax, to pay back any more in interest than the amount of the tax. What is the reason for that limitation? There is no limitation in the case of the taxpayer as to the amount of interest he has to pay. Why then should there be a limitation in the case of the Revenue Commissioners? Why should it be limited to the amount of tax? Does this not contain a built-in inducement? One could visualise some Revenue official having a built-in inducement to hold back the repayment until the amount of interest that had to be paid on it exceeded the amount of the tax so that the taxpayer would lose out. I am not saying this is likely to happen but it could happen. I am saying there should be no measure passed by this House that would allow it to happen. There is no good reason why there should be any limitation on the Revenue Commissioners' liability to refund overpaid tax with interest on it at the same rate as the taxpayer had to pay. Unless the Minister can give us a very convincing reason for limiting it, I assure him we will be opposing that provision.

Section 56 provides for exemptions in cases of pensions and retirement annuities. The point I want to put to the Minister on this is that he should endeavour to ensure that the treatment afforded to those in the private sector will be the same as to those in the public sector. I do not think the treatment being afforded is equal. I think the treatment being afforded to those in the public sector is a good deal more favourable. The Minister must be well aware that there are many self-employed people trying to make provision for their retirement who are experiencing the gravest difficulty and anxiety at the moment, because of the level of inflation, in making any reasonable provision for their retirement. I am sure the Minister is aware that it does not seem to be possible to purchase an annuity which will provide for inflation at a higher rate than 5 per cent at a time when the rate of inflation is running at 32 per cent. That should be taken into account in section 56. The guiding principle should be that those in the private sector should not have worse treatment than those in the public sector, and by the public sector I mean not just the civil service and those employed by State bodies but Members of this House and of the Government and former members of Governments. Indeed, I believe that section 56 should differentiate in favour of the person in the private sector to try to even up the situation as between the public and private sectors.

This Bill, like the wealth Tax Bill, defines a minor child as somebody not having attained the age of 21 years. I repeat to the Minister that it is past time when this and all other provisions of a similar kind in our law should be changed to make the age 18 years. It is an anachronism to be retaining this in a Bill we are enacting now. It just does not make sense in this day and age to be describing somebody of 20½ years as a minor child. I do not think it is enough for the Minister to say that it has a much broader context. It has, but it needs to be changed in other areas as well. Why can we not change it in this Bill and in the Wealth Tax Bill? That would speed up the changes necessary in other areas.

I should like to know the reason for the provision "within two years" in section 3 (1) (c). This is the section which defines the phrase "on a death". The definition given in sub-paragraph (c) is:

under a disposition where the date of the disposition is on or after the 1st day of April 1975, and within two years prior to the death of the disponer;

I should like the Minister to explain why that provision has been included. I should like to know also what is the significance of subsection (3) of section 5, or what significance is it intended to have. I should like to know further what is the effect intended to be achieved by subsection (6) of section 5.

I should like to refer the Minister also to subsection (1) of section 11 which reads:

For the purposes of this Act, where, under or in consequence of any disposition, a person becomes beneficially entitled in possession on a death to any benefit (whether or not the person becoming so entitled already has any interest in the property in which he takes such benefit), otherwise than for full consideration in money or money's worth paid by him, he shall be deemed to take an inheritance.

I want to know why is the phrase "paid by him" included. On the face of it, it would seem that the consideration could have been paid by somebody else. The Minister may say, "Well, that is a gift if it is paid by somebody else." But it seems to me, if that is so, that the other provisions of the Bill will deal with the situation.

Section 44 contains provisions which, broadly speaking, one might say provide for hardship cases and what may be done in such cases. In so far as they do so, they are welcome. I must confess I am somewhat concerned about them because they seem to me to leave too large a degree of discretion to the Revenue Commissioners. I do not think that is fair to the Revenue Commissioners or to us. The provision for hardship should be included but an effort should be made to spell out in the section the kinds of conditions in which relief should be given because of hardship. At least guidelines should be spelled out. The principle involved is dangerous, the principle whereby very wide powers of relief from liability to capital acquisitions tax and interest on it—but even in respect of the tax itself—can be given to the Revenue Commissioners. In their discretion they can wipe out liability altogether. From my experience of the Revenue Commissioners I accept unreservedly that any such power would be used responsibly and in a way to which nobody in this House could take exception. But I am still unhappy about the provision for two reasons. One is that we can only go on the basis of our experience of the Revenue Commissioners up to now. But, like Ministers, Revenue Commissioners change and we do not know the kinds of people who may be Revenue Commissioners or officials of the Revenue Commissioners exercising that power in years to come. Therefore, we ought be very careful about conferring this power without spelling out guidelines. The second reason that I am opposed to it is on the principle that the power to remit taxation, perhaps very substantial taxation in individual cases, is a very dangerous one and its exercise should be limited at least by guidelines laid down by the Houses of the Oireachtas. For those reasons I would ask the Minister to examine the possibility of spelling out some guidelines in that section under which the Revenue Commissioners could operate.

Before concluding I want to recapitulate on what I said at the beginning —that this Bill is a confidence trick by the Coalition, that far from abolishing death duties it institutes inheritance tax. It retains the whole paraphernalia of the death duty system, the submission of accounts to the Revenue Commissioners, the obtaining of a certificate for the purposes of obtaining grants of probate or administration, the obtaining of certificates of discharge from tax. All of this paraphernalia is retained, all of the tax structure is retained. As I have pointed out, the liability is not excluded by high thresholds, as the Minister says. In fact, in Table III of the Second Schedule where the donee or successor is a brother, a sister, a nephew or a niece liability arises above £10,000, having added to the inheritance any gifts given by the testator in the past five years. We are not talking about people with very large amounts of money. We could be talking about people with very modest sums by way of inheritance or gift.

The over-riding problem I see in regard to this Bill and the other measures of the capital taxation package the Minister is bringing forward, apart from the confidence trick aspect, is that the Minister, his Department and now this House are being obliged to spend a great deal of non-productive time dealing with them, measures which could have been achieved in a much simpler way by reform of the death duty system, with some minor additions. We are being obliged to do this in order to bolster up the false claim by the Minister that death duties are being abolished. As I said earlier, we are being obliged to do so at a time when we have inflation running at an annual rate of 32 per cent, nearly 103,000 people unemployed, a most dangerous balance of payments problem and virtually no growth in our economy. This is an economic crisis. The Minister for Finance is the Minister charged with the responsibility for management of the economy. Instead of managing it, instead of taking action on those various fronts— and we have spelled out the kind of action he should be taking—to what is he devoting his time? Producing this kind of Bill which will keep lawyers and accountants in very successful business for many years to come. I believe it is an intolerable situation that unnecessary legislation, time and effort should be devoted to such things, when all our attention should be concentrated on getting the country moving again. However, the Minister and his colleagues appear to be emulating Nero. We have indicated what should be done. We cannot control the business before the House but we intend constructively to criticise this Bill and other aspects of the capital taxation packet to the best of our ability.

However, we are conscious of the fact that although we are doing our best with regard to all these measures the operation is largely irrelevant to the problems of the country. What the Minister should be dealing with, and what we should be discussing, is the management of the economy and getting the country going again but instead of this we are spending our time on measures such as this. The responsibility for that clearly lies with the Minister for Finance and his colleagues—not with this side of the House.

Mr. Brennan

I am sure every Member is interested in this major change in the taxation system that was brought about by stealth. A number of measures have been sneaked through this House and the Government have been guilty of cowardice. They know perfectly well that these measures are totally in contradiction to what was preached by them when they were in Opposition but they have not the courage to admit it.

In the last 30 years this country has depended to a very large extent for its development on the inflow of foreign capital. We could not have developed were it not for the amount of outside capital invested here by people who recognised that in our country development could take place with the least possible infringement on the freedom and liberty of the people. We succeeded in getting that development to a very considerable extent but we realised we had a long way to go. However, it has now been decided that if there are a few extra pounds it must be taken from the people, by hook or by crook. That is the exercise we have been indulging in in the last few weeks. As Deputy Colley pointed out, this is happening when the country is in a very serious situation, when both sides of the House should be engaged in emergency discussions to find means of rescuing the country. The value of money is declining, people are finding it impossible to meet their commitments and the unemployment situation has become a serious problem.

One has only to read the magazines that publish the bankruptcy lists or to meet business friends to realise the state of industry and business generally. There are liquidity problems and the cessation of the cash flow has brought the country to its knees. The question might fairly be asked: what are the Government doing about the matter? Under the guise of the redistribution of wealth, they are thinking out new ways of extracting more money from the people until the situation is ultimately reached that this country will no longer be a desirable place in which to live. The reason given for this is that other countries are taking these measures. It appears we must emulate everything done in Britain, even though we have no evidence that it has led them anywhere except ruination. Yet, we must slavishly follow what is done in that country.

There were many commitments in what was referred to today as the "statement of intent". It appears the 14-point programme does not sound so good now. There were some rather laudable proposals in the 14-point programme but if the parties who agreed to that programme had stated clearly at the time that they were going to abolish death duties but that they would collect three times as much from the people, I doubt if the Minister would be on that side of the House today. We are told this Bill is in fulfilment of the statement of intent published in February, 1973, when the parties concerned agreed on the 14-point programme.

The Minister could have given his attention to some of the points that captured the support of the people in 1973. However, if he thinks the people gave a mandate for the introduction of this legislation, I challenge him to go to the country now and ask the people if they supported this measure in the so-called declaration of intent in 1973.

As I pointed out in relation to the capital gains tax and the wealth tax legislation, it is easy to say that it will apply to only a few people. In reading the explanatory memorandum to this Capital Acquisitions Tax Bill one would think the Bill was conferring some benefits on people. The memorandum points out how generous the Government are in not implementing all the proposals set out in the White Paper on capital taxation. Such a White Paper could have ignored, amended or even adopted but it did not impose any obligations whatever. There are many White Papers that have never seen the light of day but it appears that when it is a case of extracting money the White Paper is regarded as binding. The function of any White Paper is merely to point out the pros and cons of the question being examined. The explanatory memorandum to this Bill points out the benefits this legislation will confer and it states this measure does not go as far as was proposed in the White Paper.

Is there any obligation on us to follow what other countries are doing? Would it not be a good time to stand up, as we have done before, as an exception to the rule, so that people would continue to regard this as a desirable place in which to invest? While legislation like this is put over by a supposedly socially-minded Government under the guise of redistributing the national wealth, the fact is that ultimately, if we avoided this type of taxation, developed our economy, attracted investment, got employment going, we would have much more money to distribute, and this would be a much better place for people to live in and there would be fewer people requiring handouts.

As I have said time and time again, we are taking from the few who produce more than they can afford in order to distribute to the extending line of persons who have to be seen to as a result of unemployment, sickness, retirement and so on. This is certainly not progress and it is getting away from the development which became so evident in the past and was made possible mainly by foreign investments. For a time this country was regarded as not a bad place in which to retire. We had the pleasure once of seeing our emigrants coming back from the United States on retirement, because they found that their retirement pension gave them a better standard of living than was possible in the country they were leaving. People come here now and they are appalled when they find the little country which had been getting on its feet has suddenly found every possible means of crucifying the people with taxes and ensuring that they will not accumulate, and that those who are thrifty and prudent will be victimised and penalised by the system of taxation we are introducing, comparing ourselves with other wealthy countries who have this type of taxation.

It has often been sneered at when it was said that Fianna Fáil had to come back after Coalition Governments had been in office and do certain things that were unpopular so that the country could progress again. When something is oft-repeated it is inclined to be dismissed, but I have no doubt that Fianna Fáil will have to provide a policy and a programme for the people that will put the country back on the road on which we were travelling before. I have some responsibility for the co-ordination and the up-dating of Fianna Fáil policy, and one does not have to stretch one's imagination too far to find a realistic and progressive programme which will get the support of the vast majority of the people, so that, instead of doles and hand-outs people will get employment and wealth will be created by investment in the people, which is the only real investment. By this means we will have the necessary moneys to give to those who, through no fault of their own, are unable to live due to retirement, age, infirmity or any other reason.

We have a small population which, thank God, is increasing. We have to depend on exports. We must develop those exports which will not contribute too much to our imports, to develop things which will use to the maximum the raw materials which are available to us here. We are not doing much in that direction at present. We are making sure that we will not be an attractive place for tourists. This is one industry we can develop without creating a serious imports problem, an industry for which we have all the raw materials, so to speak, here. All we have done is to ensure that anything the tourist wants in the line of petrol, spirits or anything else for his enjoyment or his amusement is taxed as high as it is in any other more advanced or better developed country.

The fishing industry is another industry which does not contribute to the deficit in our balance of payments, one for which we have 100 per cent of the raw material available to us. We are doing absolutely nothing for it. All we are interested in doing is getting after the few pounds that any prudent or thrifty person has saved by his own hard work in life, and there will be no loophole through which he will get through the net that is cast for the collection of revenue.

Many people have to think these days what to do with their money. Anybody who invests money creates employment. I do not think many people will be too quick to involve themselves in any business or industry or indeed any of the services when they take a look at the scene as it is developing. Does anybody want to get coronaries or ulcers working for the employment of others in a country where they are accused of being speculators or of trying to accumulate wealth by some dishonest means? Prudence and wealth are almost dirty words at present. It is almost a crime to be a person who can invest money and show signs of succeeding in business. If people believe that the development that was going so well will continue under this system, then they are not getting the message properly.

I would not sit at a Government table while the present system was operating creating a disincentive every day against our further economic development as if one were deliberately trying to destroy the good already done. Let us go completely over to State ownership or else get on with private enterprise and allow it the necessary free play which is essential to it. We should not be ashamed or afraid to say this. We have a thousand examples of what has happened in other countries and we do not have far to look to know what the present system leads to and what happens as a result of that policy.

If any one thing is to be the ruination of this country it is political expediency—promising something and seeking to implement it in a devious manner. We are supposed to be abolishing death duties but while we are abolishing death duties we are ensuring that three times as much money will be taken from the people in other ways. If death duties were an undesirable way of collecting taxes there were many simple remedies. At a time when we had introduced new forms of taxation such as PAYE and VAT, we were surely moving towards the time when we could have abolished death duties without substituting anything for them.

The Minister and the Government have created unnecessary expenditure because of political expediency and finding the money is a problem that is now baffing everybody. The Department of Finance, all the officials and the Revenue Commissioners are working overtime to think of ways and means to bring in money to finance deficits and meet the ordinary running costs of the country which are going completely beyond the ability of the people to pay while, at the same time, the value of money is rapidly depreciating.

We are living in a crisis situation. The ESRI say things will be better at the end of the year. I asked the Taoiseach on what assumption this prophecy was based by the Economic and Social Research Institute but the Ceann Comhairle ruled out that question and pointed out that the ESRI are an independent body and it is none of the Taoiseach's business how they reach their decisions. Are we waiting like Micawber for something to turn up? When things go wrong it is due to something beyond the Government's control but if they go right the Government take credit without doing anything. That is the situation in which we are, hoping that something will turn up, that things will not be as bad tomorrow as they were yesterday but every day they seem to become worse.

I do not see much hope for anybody wishing to invest money in this country now. It is admitted in some of the legislation here that we are scourging certain people. The fact that certain incentives are being granted is in itself an admission that this is happening. We are not discussing the wealth tax now but we have a whole chapter of legislation here in which the granting of certain thresholds and exemptions is no more than an admission that we are scourging people who are not capable of meeting the demands being made on them. This is legislation which is already in effect and no doubt is being processed and operated in certain Departments in anticipation of it being passed by this House. It is retrospective to last year in certain respects and we are already past the operative date, 5th April. I do not think there is any precedent here for the type of legislation we are now being asked to deal with.

Deputy Colley went through the Bill almost section by section which is a Committee Stage operation but I would ask the Minister whether he should leave the Bill go to Committee Stage. Would he not consider, as I suggested to him in respect of other legislation of a similar type, which he introduced, that he is doing a disservice to the economy at present and withdraw the Bill, even temporarily, until some time when the people could see the brighter side of the darkening clouds at present engulfing the whole economy?

The Irish people have a traditional respect and regard for ownership. They like to accumulate; they like to own things and have property and anything that discourages that tendency is anathema to the Irish tradition. We are getting away from the type of development which people were led to expect and for which they hoped and prayed and which they saw emerging in the recent past. We are changing rapidly here. In the last year, we have done much to set at nought, if not reverse, the development and actual progress of the recent past. The Minister will have much to account for. The demoralising effect alone of these three or four pieces of new legislation, all imposing new taxes in their own way, will be very serious. This is legislation one might get away with if it were introduced when the economy was making rapid progress. The present is not the time for it when people are dismayed and discouraged, a time when we must create all possible incentives to attract capital not only from abroad but encourage people at home to invest in productive development and get the economy moving by the employment of more people, better utilisation of our resources and improved production generally. If we cannot get our people to work and create wealth, legislation of this type is a waste of time and is no credit to the Government or the Minister introducing it. We must concentrate on giving the people confidence in the economy and in the jobs they hold, get them to believe and understand that if they produce more they will be better paid and the economy generally will be improved, that we will have fewer people on the soup line, fewer people requiring welfare payments, have less need for the distribution of the national wealth and that we will have a developing economy and a happier and progressive people, which after all is the greatest wealth of any country.

We are doing the very opposite. We are discouraging people. We are discouraging the very sources from which wealth must spring. We are not doing the things we should be doing, unless we go about the development of the economy in a totally different way. If that is the case, we should stand up and say we are going to change the whole system.

This Bill is a retrograde step so far as the economy is concerned. It is not the type of thing we should be discussing in April, 1975, when we are facing a deficit in the balance of payments, a huge spiral of inflation, rising unemployment, an unbalanced budget and wondering where the money will come from to meet the ordinary current account in Government spending. There are many things we should be discussing at this time, particularly ways of minimising the effect of inflation, so far as it is possible to control it domestically. Now that the Taoiseach has publicly admitted that the major portion of inflation is domestically generated, let both sides of the House get together to try to do something to minimise the effect of whatever outside influences are disrupting our economy. We should get the people back to work and get those with money to invest in the creation of employment and get a better output from the work we are doing. If we keep wages rising to meet the cost of living then we should ensure we get some improvement in output and that we invest in our people. We should engage in that exercise now instead of chasing after the few pounds we think are still knocking around in a limping economy.

This Bill is an ill-advised exercise and should not commend itself to the House. I believe the Government will have a lot to account for sometime in the not too far distant future. I have no doubt that, when Fianna Fáil put before the people our programme and policies in the next election campaign, the people will bring us back to power. This will put an end to a lot of the nonsense we have had over the past year.

Mr. M.E. Dockrell

I find myself once again speaking with a degree of difficulty. This Bill is an extremely complex one. If it is to be understood properly it has to be taken in conjunction with the Wealth Tax Bill and the Capital Gains Tax Bill—the three Bills which deal with money matters and taxation in relation to the individual and what he wants to do with his money, if he has it.

The complexities are tremendous. In order to explain this Bill one would need to have the gifts of a clever accountant and of a lawyer skilled in the law in relation to death duties, company law, discretionary trusts—indeed all branches of the law —and at the same time know something about farming, estate management and running a business. Unfortunately, Members of this House have not got all of those gifts rolled into one.

It is very difficult to understand this Bill. I want to say straightaway that I do not welcome it. The underlying philosophy behind the Bill is that, with the so-called abolition of death duties, certain changes have to be made in order to catch the money that used to be paid in death duties. It is very difficult to understand how far the Bill is designed to increase those types of taxation over a long period and how far, generally, there is a certain element of reduction of those taxes in it.

The emphasis in these taxation Bills sometimes seems to be placed on a certain amount of alleviation here and there but it does not appear to be so in the long run. I think it was the great economist, Adam Smith, who laid down that one of the fundamentals of good taxation and good legislation was simplicity. This Bill is certainly not simple. It is not entirely bad on that account. But it is very difficult and will be increasingly difficult to understand if it becomes law in its present form.

I wonder can the Department of Finance and our fiscal machinery cope with the tremendous changes enshrined in this Bill and in the two Bills which preceded it. They must be judged in toto and in relation to each other. They remind me of a musical composition which has to be judged horizontally and vertically, which is an extremely complex art.

A fundamental requirement of taxation matters is that they should be clear and simple. I do not think our taxation law will be any simpler as a result of this Bill. We will try to simplify it. The House is entitled to know how much money this Bill is expected to raise. How much are we talking about? Have we any idea how much we are talking about? Is there an accurate computation? I would be very interested to know.

While I am on the subject of complexity, I have always understood that before the French Revolution the movement of goods and, doubtless, the movement of money were so tied up in Government regulations and local regulations that commercial transactions were gravely hindered and trade was slowed down enormously. In our effort, presumably, to bring about changes in our fiscal system and in our taxation system, we may make matters more complex and more difficult for business and farming. I may be wrong in that but I do not think so. A comparison springs to my mind relating to the London money market. London was the leading financial city of the world and in spite of difficulties of various sorts, is still a great centre of finance. One of the reasons for that was the simplicity of their tax system and the ease with which transactions could be carried out.

It is not an exact analogy, but states and cities which rose to financial power and thereby brought considerable wealth to the inhabitants of those states and cities did so by clearing the decks and making everything simple. This Bill will be endlessly complicated. To use a cliché, at this moment in time I do not think there are many people who understand exactly the ramifications of these Bills. They do not know exactly how they should plan their estates. They do not know whether they should give away money to their dependants now, or wait. They do not know where they are. I hope that will be cleared up as soon as possible.

Deputy Colley mentioned something which had been in my mind. I should like to ask the Minister how far gifts made before the introduction of this Bill will be aggregated in the future. Will tax be charged on gifts made in the past five years?

Mr. R. Ryan

No.

Mr. M.E. Dockrell

If it was that would be retrospective taxation. Retrospective legislation is bad enough, but we have never had retrospective taxation. I am very glad to have that assurance from the Minister.

Mr. R. Ryan

Perhaps the Deputy would allow me to say for the sake of clarity that I am referring to five years prior to 28th February, 1974. Gifts made since then would be liable.

Mr. M.E. Dockrell

I cannot say that I am enamoured of that either, but at least it is not five years before that.

Mr. R. Ryan

This was the date of the publication of the White Paper.

Mr. M.E. Dockrell

I am glad the Minister has mentioned the White Paper bcause I am afraid that I do not consider it to be a lily white document. White is not the colour I would choose to describe it. The Minister talked about the redistribution of wealth in that White Paper. He still talks about the redistribution of wealth. I do not think taxation is in itself a redistribution. I would call it an appropriation of capital.

Mr. R. Ryan

The Deputy will appreciate that when I was talking about that today I was talking about it in the sense of those people who take action to avoid paying taxes. The more effective action there is to prevent tax avoidance the more wealth is redistributed.

Mr. M.E. Dockrell

I have never known of any Government which redistributed wealth.

Ruairí Brugha

Governments merely collect taxes.

Mr. M.E. Dockrell

I would not call collecting taxes a redistribution of wealth. Admittedly, some Governments have sometimes indulged in handouts. As I see this Bill, sometimes it is veering to the left and sometimes it is veering to the right. Having entered that caveat on the philosophy contained in the measure, to me it is very largely a Committee Stage Bill. It bristles with various aspects of law and accountancy and if we are going to have our taxation system changed by 1st July next—that is the date the Minister has in mind—I am afraid we shall have to sit here all day and all night for quite a long time.

Mr. G. Fitzgerald

And Saturdays, Sundays and Mondays.

Mr. M.E. Dockrell

Perhaps we will reach some measure of agreement. I hope we will. I am sorry the Minister did not explain what is intended more clearly. There is litle more in the Minister's introductory speech today than what appeared in the explanatory memorandum. I look forward to hearing him conclude the debate. I hope we and people generally will then find ourselves clearer on the different aspects of the Bill.

Ruairí Brugha

I should like to enlighten Deputy Dockrell on what the Minister means when he talks about five years. If anybody has donated a gift during the last five years to a brother or sister or the child of a brother or sister the total value of the gifts donated will be totted up and the rate of tax begins at that point for any additional gift after the five years. This is a device I dislike. I have no objection to gifts being taxed, but every citizen should be equal under the law. The Minister is here creating a situation where some citizens will be considerably less equal under this law because what the Minister is doing is increasing the tax ratio on any gift over the past five years, that ratio to apply to any gift by the same donor to a relative. I can quite understand why the Minister picks a date in 1974 as the operative date. If he did not do that, then people would be in a position to transfer property and might transfer it before the Bill becomes law. That is totally different from what the Minister proposes in Table 3. If a gift valued at £30,000 was donated over the last five years to a niece or a nephew the level of tax on that would now be 15 per cent. If the donor were to transfer an additional gift today amounting to an additional £28,000 the rate of tax on that £28,000 would be 27 per cent. This is an inequality written into the Bill under which one citizen will be at a disadvantage as against another citizen.

In his introductory speech the Minister made statements which simply are not true. He said the capital taxation reform envisaged in this measure was endorsed by the electorate in 1973. What was endorsed by the electorate was—this is what the electorate understood from the statements of the Minister and his colleagues—that death duties were to be abolished. There was no statement to the effect that another duty would be imposed in place of death duties. The Minister went on to say that estate duty was an ineffective instrument in distributing wealth. I do not really know what the Minister meant by that statement. This Bill is not a means of distributing wealth. It is a method for collecting more tax. The Minister also said:

The capital acquisitions tax now proposed will promote a wider spread of wealth since the wider the distribution of wealth the smaller the amount of total tax paid will be.

I do not understand what the Minister is talking of there. If he were really interested in the distribution of wealth among the people he would reverse his tables. He would place a higher ceiling on the transfer of estates and properties to immediate family and he would have a lower ceiling in respect of other people. I cannot say where this Bill does anything to promote a wider spread of wealth. It simply enables the Minister to collect some money. We know that it is the function of a Minister for Finance to collect money from every possible source but where the Minister and his colleagues are fooling the people is by reimposing a tax similar to death duties.

Mr. Cunningham

On a point of order, is it not very discourteous to the House that a Minister, dealing with an important taxation Bill, has time for a tête-à-tête with a member of his party who can be interviewed at any other time?

An Ceann Comhairle

That is not unusual, Deputy?

Mr. G. Fitzgerald

This conversation has gone on for a long time.

An Ceann Comhairle

Deputy Brugha.

Ruairí Brugha

I am not surprised that Deputy Dockrell should find himself in extreme difficulty in speaking and one of the reasons for this was, as he mentioned, the complexity of the Bill. When one considers the Minister's statement of some time ago that we were modifying the taxation system and setting out a simpler form of taxation and then reads this Bill which is one of three, one would need a qualified accountant, a solicitor and one of the gentlemen who advises the Minister to understand what all this taxation means.

The Minister's activities during the past 15 months in relation to taxation can be only a source of dismay to those of us who are genuinely interested in the future of our economy. I shall not go into this very complicated legislation in depth but would emphasise that the Minister is taking up the time and the energy of this House and of his staff instead of getting the economy out of the morass into which he and his colleagues have managed to steer it.

Mr. Cunningham

Hear, hear.

Ruairí Brugha

Apart from those who are fortunate enough to be able to look forward to a State pension with built in cost-of-living clauses, when they retire, everybody else who is trying to earn a living and to put something aside is in a quandary because, assuming that he has been able to save something, he knows that £1 today will be worth only 65p in 12 months' time and only about 42½p in two years' time, that is if inflation is to continue at its present rate. Speaking of inflation that, too, is something for which the Minister and his Government are largely responsible. The problem is that the situation has got so much out of control that there is nowhere for anyone wishing to provide for himself to invest. Therefore, the policy that is being encouraged is to spend everything that one has and, consequently, to become a charge on the State.

Mr. Haughey

Or a fiddler.

Ruairí Brugha

Yes. I am not one to object at any time to realistic taxation but we may well ask what the Minister is doing in regard to these three Bills. Basically, he is chasing capital out of the country. One has only to read the newspapers to know that. Every £1 million driven out of the State reduces the tax yield to the Exchequer by at least £50,000 per annum. Also, it contracts the economy and reduces spending and employment.

I ask the Minister to have the courage of the Australian Labour Government and to abandon this sham socialist approach to finance. I ask him to think about the effects of what he is doing. I ask him to endeavour to retain some capital within the country instead of creating a situation whereby the Government must chase around the world in an effort to borrow capital. That is a situation that did not arise in our economy until a couple of years ago because up to then money was available on the Irish market.

The type of legislation being promoted by the Minister will not create a £1 in wealth. Rather, it is chasing money out of the country which could otherwise be used as capital for the creation of employment.

Basically, that is my approach to this Bill in particular and to the other two Bills also. I am concerned, not because I am a member of the Opposition, but because I have experience of business. I know what is happening to people at present. I know, too, of the difficulties that are being created for people who try to do a good job. I trust that the Minister is aware of some of the things that are happening. If he takes these matters seriously he will endeavour to persuade his colleagues to agree to a change in their approach to this whole situation. We need to build up the economy, give people confidence, provide employment and not to be juggling around with theoretical tax Bills to create a sort of window dressing operation in order to keep the two Coalition parties together.

Mr. Malone

Like a previous speaker I confess that I am not a barrister, a solicitor, an economist or anything approaching that high realm and, consequently. I cannot claim to understand the Bill fully. However, I understand the thinking behind it as part of the package which will relieve us of the iniquitous death duties. In putting forward suggestions for improvements I should like to state that I believe these matters were overlooked when the Bill was being drafted. The Bill does not, as the previous speaker alleged, create a sham socialist approach. That was an unkind remark.

Because I do not possess the qualifications I feel are necessary to understand this Bill it is possible that I have misread portions of it, but I believe that a number of corrections should be made on Committee Stage. There is no reference in section 2, subsection (4), to the relationship of brother and sister, grandfather and grandson. A problem could arise where the owner of a business or farm dies leaving the holding to a brother who worked with him. Under this Bill that brother would be liable for taxation at a rate of 19 per cent on the takeover. If the property involved was a 50-acre farm—this is not a very big holding seeing that the Land Commission consider a viable holding to be in the region of 50-acres —it may be valued at £40,000 with stock and machinery amounting to £15,000. On the value of the land the inheriting brother would be liable for more than £6,000 tax. That situation should be rectified. A similar situation arises in the case of a grandfather and his grandson. If the grandson is given something by the grandfather while his father is alive he is liable for gift tax. That is a terrible situation but I feel sure that it was overlooked by the Minister and that he will rectify it.

In regard to section 9 I should like to know if I am correct in assuming that parents who transferred property to their children five or six years ago —they were encouraged to do so—and paid the appropriate stamp duty will now be liable for gift tax. It would be contrary to the spirit of the Bill and to the thinking of the package on capital taxation if this is so. These people have done something which was legal and have paid the necessary duty.

The term "full-time farmer" is used in the Bill but there is no clarification as to what constitutes a full-time farmer. Because there is reference to full-time farming certain people could be penalised. Some people who had to supplement their income from other sources would be excluded as full-time farmers. It should be written into the Bill that a person earning most of his income from agriculture would qualify as a full-time farmer. The best definition I have come across is given by the British, who say that a full-time farmer is a person who derives not less than 75 per cent of his total earnings from farming in any one of five out of seven fiscal years. That should cover the main complaint of the farming community—that a man with a very small income outside agriculture is not considered a full-time farmer. This could be corrected on Committee Stage.

Section 19 states that an inheritance derived from agriculture would have to be reinvested in agriculture within two years. That period is too short. It should be extended, as in other Bills, to a minimum of three years. Anyone who has ever looked for a suitable agriculural holding will agree that he may get it the day after he decides to acquire a holding or he may have to wait three, four, or even five years before he gets exactly what he is looking for.

It is a pity that the 28th February, 1969, was written into section 29 of the Bill. It is completely wrong to relate what one received in 1969 to 1975 prices. I agree with the Members on the other side when they say an inflationary clause should be introduced. People who received gifts in 1969 and have them valued at 1975 prices would find this a grave hardship.

Section 41 states that the rate of interest repaid by those in default is 1½ per cent. I hope the Minister finds some other way of arriving at what he would regard as an equitable rate of interest. I do not think anybody at the moment is charging 18 per cent. That seems extremely harsh. On the other side of the coin, it would pay people to overpay tax because if they are paid interest at 18 per cent they would make money.

Mr. Cunningham

They would certainly do that.

Mr. Malone

I am certain not too many people overpay. Those who are overcharged tax should be paid back with interest at a rate comparable to the bank rate paid by the Government. As I said, 18 per cent seems excessive.

I hope the Minister will keep those points in mind. This Bill is welcomed throughout the country.

Mr. G. Fitzgerald

People in Kildare think it is no good.

Mr. Malone

The Deputy must not have read The Farmer's Journal——

Mr. G. Fitzgerald

You know who is leading that.

Mr. Malone

——and the big banner headline——

Mr. Cunningham

"Richie I love you".

Mr. Malone

——which stated that, with the inflationary clause, this would be a good Bill. They do not shower compliments on us unless they are deserved. They said that, if there was an escalator clause, this would be a good Bill. As this is a very technical Bill I cannot argue its pros and cons. If we get the improvements I have mentioned, in my view the Bill will be excellent. We will be able to look back on it in a few years and ask what was the row all about.

Mr. Haughey

We have before us in this House at the moment four major pieces of financial legislation. A part from any other criticism which I might offer, I should like to protest very strongly about the way in which our parliamentary procedures are being treated by the Minister for Finance in this regard. These major pieces of financial legislation will have far-reaching repercussions. Apart from their more obvious implications they will have side effects and implications which none of us at this stage can possibly foresee. These measures are so comprehensive and of such a fundamental character that we cannot possibly visualise their full effects and implications, and I do not think it is good parliamentary practice or good government to be rushing these four major pieces of legislation through the House at the same time—the Finance Bill, the Capital Gains Bill, the Wealth Tax Bill and now the Capital Acquisitions Tax Bill.

I do not think this House as a Legislature can attempt to do its duty fully and adequately in regard to these four Bills in this way. Last year we had the experience of having an all-night session to try to deal with the Finance Bill—a Bill which made very important changes in our taxation system and in particular one which brought farmers within the scope of the income tax code for the first time. We had to let that Bill through almost completely unamended and to a large extent unexamined.

Here now we have four major measures and I do not think we can be expected to produce what amounts to an entirely new system of taxation, as we are being asked to do, in this way. I make that protest. I do not think it will be of any avail because the Minister for Finance, and the Government presumably, are embarked on this course of action, but it is proper that we should protest even if unavailingly about the way these matters are being dealt with.

There is another aspect of these four Bills on which I should like to comment. Between the four of them, and they are massive pieces of legislation, they do not make a single contribution to solving our economic problems. Deputy Brugha mentioned this aspect and I want to emphasise what he said. This country at this moment desperately needs an economic resurrection. We desperately need to get the country, to get the economy moving forward. But again, in any of the four of these measures, is there a single thing that can be looked on as contributing beneficially to the economic situation?

We have mounting unemployment and for me—I do not know what other Deputies think—the really disheartening and discouraging aspect of the unemployment situation is that there are no jobs for young people. My experience in this regard has been harrowing in the past six months. Young people leaving school cannot get employment of any sort anywhere. We have a dismal procession of business and industrial failures and closures. We have one of the highest rates of inflation in Europe, running at the moment at about 20 per cent. Other countries, Germany and France, seem to be able to get inflation under control and indeed to reduce the rate, but our inflation rages on unabated. Our balance of payments deficit is rising to an intolerable level. We have a depressed and demoralised agriculture: farmers have had to suffer setbacks and losses and hardships on an unprecedented scale.

The whole economic climate is gloomy and depressing and foreboding and that is the sort of situation to which the Minister for Finance should be directing his attention. Against that background this package of complicated proposals is irrelevant. It makes no contribution whatsoever to the situation I have outlined.

One cannot avoid noticing this coincidence: the Government published a White Paper on Capital Taxation on 28th February, 1974, and our economy took a downward turn from that moment. One cannot help having a suspicion that the downturn in our economic affairs was related to the publication of that White Paper.

What we need, what we are entitled to and what the people want, is some comprehensive attack on the current problems of unemployment and inflation. The Minister has not related these taxation proposals to some overall strategy of economic recovery. He did not because he could not because there is no such strategy. I have said here on many occasions, and I am quite convinced, that taxation is one of the most powerful weapons at the disposal of a Minister for Finance for achieving economic development. These major taxation measures are not related by the Minister to any economic plan or programme.

I think the Minister for Finance has his priorities entirely wrong. He is not an economics Minister, he is a taxation Minister. He is nothing more, I am afraid, than a taxing master. He has made taxation an end in itself. He is obsessed with it. He thinks the taxation mechanism is more important than the economy it is meant to serve. Let me simply point to a sentence, I think it was the opening sentence in his speech on the Second Reading of the Finance Bill. He said:

This Bill is another milestone on the road to an equitable and efficient taxation system.

There you have the kernel of his thinking, the essence of his approach. Taxation is everything. It is the taxation mechanism that really matters. That was the greatest tribute he could pay to his Finance Bill, that it was another step along the road to an efficient taxation system. I think Deputy Ryan as Minister for Finance presents a not uncommon spectacle in politics. It is something we have seen before. It is the case of a Minister who becomes completely oversold on one aspect of his responsibilities to the detriment of all the others. I have seen other instances of it in my time in this House. It is a sort of occupational hazard where Ministers are concerned. I do not know how it has come about in the present Minister's case, whether it has been sold to him by somebody, or whether it arises from his own social or economic outlook. But wherever this preoccupation with taxation has arisen from the results are disastrous. I find it cynically amusing to see members of the Minister's own party—I suppose through loyalty —taking to praising the Minister's reforming zeal when we all know that what the Minister is doing is the antithesis of the fundamental thinking of the Fine Gael Party and, indeed, of the more sensible members of the Labour Party.

Again it is with some cynical amusement that one sees the Fine Gael Ard-Fheis muzzled in this regard. Once the Minister for Finance embarks on this course he can count on the loyalty of his Fine Gael organisation. But let nobody be under any impression that it is anything more than that. It is simply the Fine Gael Party rallying to the party cause.

This programme of taxation on which the Minister for Finance has embarked has contributed largely to our present problems. I do not think it too imaginative to relate the commencement of the downturn of our economy to the publication of the White Paper on Capital Taxation. People who should be investing, whether they be Irish or people from outside who want to come in here to invest, have become convinced that the emphasis has changed and that we are no longer primarily concerned with encouraging investment and development.

There is not any great merit in my attempting to do what Deputy Malone did with, I must say, a great deal of honesty. It is of no great use in my attempting to go into the merits of the different proposals enshrined in this measure. In fact, I do not think we can consider this measure at all, as Deputy Malone tried to do, separately from the others. It is part of a package and to make any sort of sensible assessment, one must look at the package as a whole.

An Leas-Cheann Comhairle

The Deputy will appreciate that in a debate on this Bill we should not attempt to overlap with the other Capital Taxation Bills. Rather should we deal with this one.

Mr. Haughey

I do not think it is possible not to do so. I think the Minister himself has opened the door to this sort of discussion. At any rate, I have not overlapped with anything, as yet. I do not think the Minister for Finance will alter or amend this measure in any way because of my comments. I have heard Deputy George Colley, our spokesman on these matters, argue very cogently on different aspects of the capital gains legislation. He put forward what were, to my mind, irrefutable arguments, but to no avail. I do not think the Minister is open to reasoned arguments on this or any of the other measures. I shall not waste time trying to persuade the Minister on any of the individual aspects of these measures or to abandon any individual proposal enshrined in them. On the basis of experience to date, I do not think there is any point in so doing. Instead, what I shall do is talk about the Minister's general approach to taxation. I do not think, a Leas-Cheann Comhairle, I can be censured for doing that.

An Leas-Cheann Comhairle

The difficulty of the Chair—as I am sure the Deputy and others will appreciate —is that where there are a number of Bills dealing with taxation, we can have an overlapping of debate.

Mr. Haughey

I did not bring these four measures of taxation before the House together. In fact, I protested at their being brought in in this way. I am very sympathetic to the difficulty of the Chair in this regard but I do not think I can be prevented from discussing, as I hope to do, the Minister's general approach to taxation on a taxation measure. What I want to try to do is persuade the Minister that his approach to taxation in general is erroneous. If I cannot do so—and really I do not think I can—I can only hope there might be some others, perhaps the Parliamentary Secretary, who might listen to my arguments in this regard and see where we are heading as a community and an economy.

It is well worthwhile reviewing and assessing the whole approach of the Minister to his taxation responsibilities. Indeed, it is particularly important that we do so. Changes in the taxation apparatus at any time are important. How much people have to pay in taxes, when and how they pay them and for what purposes they are paid are all matters of great concern to the individuals concerned. But, when the Minister for Finance of the day undertakes unilaterally a comprehensive change in our whole approach to the function of taxation in regard to economic development, it is time every one of us sat up and took notice. It is time to try to elucidate what exactly he is about.

I believe that what is involved is a comprehensive change in our whole approach, as a community, to the function of taxation. It is important that we, in this House and, indeed, outside, try to assess what are the implications both in the short term and long term of this programme on which the Minister has embarked. That has not been done. It has not been done in this House or outside it so far. In this House our discussions have been limited to particular measures which the Minister is bringing forward. In that regard we have been hemmed in by the exigencies of the parliamentary programme and our procedures. As far as I can see, comment outside the House has been restricted mainly to reaction on a sectoral basis to the implications of particular provisions by those affected by them. There is need for a far-reaching, comprehensive, national debate on what exactly is being done by the Minister. There is need for an assessment of the effects on our social structures as well as as on our economic development potential. In effect, what is happening—and I want to say this as emphatically and strongly as I can—what is happening is that overnight this country is being turned into one of the most comprehensively taxed communities in the western world. I challenge contradiction on that statement. I am not saying whether people want or do not want it; I am only saying that it is a fact and that we should fully understand and comprehend it. It is a major political, economic development.

Both in this House and elsewhere, I have sought to direct public attention to the extent and the significance of what is happening but I must confess that neither I nor my colleagues have had any real success in this regard. Perhaps it is that the public generally are so benumbed by the effects of the economic disaster that has overtaken us that they are not aware of—perhaps they do not even care about—the Minister's taxation programme. I wonder if the entire Cabinet are fully aware of the fundamental, all-embracing nature of the Minister's programme. It is vital that there should be a realisation but I must confess to feelings of frustration at not being able to get across to friends, colleagues and the public generally the urgency of this issue, to try to get it understood throughout the whole economic and political spectrum.

I am convinced there is a great deal of unconscious acquiescence in what is being undertaken by the Minister in the name of people who do not understand what he is doing. The people do not realise the full implications of these four taxation measures. I believe many people in Fine Gael who might wish to do so are intimidated from standing up against the fundamental changes the Minister is introducing. It takes courage to oppose a measure that is put across in this House or outside it on the basis of "squeezing the rich for the benefit of the poor". It takes courage to oppose something that is sold in that way because it is very easy to be misrepresented. I have no doubt I shall be misrepresented in the attitude I am taking. In opposing the whole apparatus the Minister is foisting on the Irish community, it is difficult to get it across that perhaps one cares as deeply for the ultimate well-being of those in whose name this measure is being done as those who support it.

It is difficult to get it across that one abhors the fact that the old-age pensioners comforts are being undermined by inflation, that one cares that a great industrial project that could have transformed an entire area in County Mayo has faltered and failed because those involved decided they were no longer wanted in this country. However, it is a task somebody must undertake. I believe the Minister's philosophy and approach are catastrophically mistaken. He is a man out of his time. He has misread in a fundamental way our needs and his function in regard to those needs.

It may be necessary that we should restate that our fundamental need is for economic development; perhaps we were inclined to take it for granted during our progress in the sixties. We do not want economic development for itself but we want it for social progress and the cultural development it makes possible. During the sixties we were on the way. We were catching up with our western neighbours and in every aspect of our economy there was development, expansion, progress and innovation. Nothing seemed unattainable in those days. I believe that an integral part of that successful approach during the sixties was a sensible, balanced taxation policy. On the one hand taxation was designed to provide on an increasing scale the resources needed to develop social welfare, health and educational services and other community services and, at the same time, it was skilfully tailored to encourage enterprise, initiative and investment. That was a successful formula and it brought results.

I should like to quote from an article by the Minister for Industry and Commerce in the Allied Irish Banks' REVIEW on this question. He said:

Ireland's development as an industrial nation is perhaps best exemplified by looking at a few very significant statistics. In 1950 only 6% of Irish export earnings came from the industrial sector—not a substantial income from industry no matter by what the yardstick of comparison. By 1970 however, a dramatic change had come about. In that year Irish industrial exports accounted for 54% of total visible exports, exceeding overseas agricultural sales for the first time. Two years later, in 1972, Ireland's largest single export category was manufactured goods, totalling more than £280 million. In little over 20 years Ireland had moved from a largely agricultural-oriented home-consumption based economy to the threshold of being a modern industrial nation.

This was stated by the Minister for Industry and Commerce, Deputy Keating, who can not be regarded as a great propagandist on behalf of the previous Government. He went on to say:

Many foreign firms have contributed to this rapid growth. During the sixties, 70% of industrial investment and more than 75% of estimated new employment in projects approved by the Industrial Development Authority came from overseas. Since 1960, over 700 new manufacturing plants, involving a total capital investment of £275 million and 64,000 jobs at full production, have been established in Ireland.

These statements were made in an article entitled "Economic Transformation" by Mr. Justin Keating, T.D.

I have quoted from that article to prove my point that the balanced formula of taxation we employed in the sixties achieved results but it has now been abandoned. The delicate balance of encouraging enterprise while at the same time ensuring social justice through redistribution has been abandoned by the Minister. Instead, he is introducing this laboriously constructed juggernaut of his own. Here we have the central issue in regard to the taxation measures, the central point on which economic debate should focus. Everything else is subsidiary and the division is clear: it is a choice between gradualism and absolutism.

Our approach during the 1960s was to use the taxation system to promote economic growth and social progress side by side. The Minister has embarked on a different sort of programme, a programme of total taxation, a programme which affords complete priority to tax gathering and which eliminates incentive and enterprise entirely from the equation. I believe that this measure and his other measures will seriously upset fiduciary relationships built up over many decades: the relationship between accountant and client, between banks and their customers. All these fiduciary relationships which are such an important part of our whole economic set-up are going to be thrown aside so that these new measures can be implemented by the Revenue Commissioners without any trouble.

Down the years when Finance Bills came along, I have seen this House jealously protect some of these important fiduciary relationships and cut back the powers Ministers looked for for the Revenue Commissioners in different directions because they interfered unduly or unnecessarily with the commercial and economic freedom of the individual or the corporation. But here at one fell swoop they are all abolished. Under these new measures the Revenue Commissioner's powers are unlimited. They can go into a bank and demand to see any record a banker may have. They can demand all sorts of information from a solicitor or an accountant. Nothing is sacred any more.

I believe that approach is wrong, and I believe furthermore that it is unjustified. We are not a rich community with large accumulations of private wealth crying out to be redistributed in the name of social justice. Anybody who thinks that is daft. The Minister would like to justify this programme of his on the basis of social justice, but he cannot. The return from this whole new complex structure of capital taxes will be negligible in the context of the overall redistribution machinery. A very minor change in one of the rates of VAT would bring in far more than all these complicated mechanisms can possibly produce, but, in the process of getting in this relatively unimportant tax income into the Exchequer, he is going to seriously impede and inhibit our capacity to generate the economic growth we need, and from which alone real social progress can derive.

We can have a semblance of social progress in the way the Minister is going about his task, but it will not be real social progress, because inflation and other developments will ultimately vitiate it and render it meaningless. That to my mind is the fundamental fallacy in this Minister's approach. He is promoting a complex, intimidating machine and giving incredible powers to the Revenue Commissioners to redistribute a pool of wealth that does not exist and which his taxation approach will make sure will never exist.

The comprehensiveness of the Minister's taxation measures, will cause this country to become a tax collectors' heaven. The most important individual in this country will be not the governor of the Central Bank, not the chief executive of the Industrial Development Authority, not the chairman of the Agricultural Credit Corporation, but the chairman of the Revenue Commissioners, and that is perhaps the most succint way one can sum up this whole approach by the Minister for Finance to his responsibility. He is, as I said, a taxation Minister not an economics Minister.

Deputy de Valera, on another occasion here, raised the vitally important question of the capacity of the Revenue Commissioners and their machinery to cope with this unprecedented volume of new work which is being thrust upon them by the Minister. I raised that same question last year on a similar occasion. I asked for a reassurance, and I did not get that reassurance. I want to ask for it again now, because in the interval since I raised the matter before the Revenue machine has been loaded with vastly increased duties and obligations.

The Minister talks about and justifies what he is doing on the basis of spreading the load of taxation fairly among all sections of the community. That is an aim we would all agree with, but if you have an existing tax which is not being thoroughly and comprehensively administered, then that is a far more important matter than bringing in some new tax in the name of spreading the load more widely and more evenly. There is a greater possibility of injustice if some existing tax is administered on a hit and miss basis. I hope the Minister will be able to give me an assurance on this, because I am told that in certain important areas the Revenue Commissioners are now operating on a hit and miss basis, because they have not got the resources or the machinery to cope with this fantastic volume of new work which is being unloaded on them by this House.

I said I was not going to waste the time of the House discussing the merits of individual proposals in this legislation, because I do not think it will have any effect on the Minister or that he will amend anything as a result of what I say. However, in the context of the overall position, I think I should perhaps make one comment on one aspect, that is, this element of retrospection. We have run riot on this whole matter of retrospective legislation where taxation is concerned. There is a new technique of Government now invoked by this Coalition Government. It seems now that you can get over the difficulty of not having retrospective taxation legislation by going to a chamber of commerce dinner or an official opening of some sort and announcing in a ministerial speech that some new taxation provision is to be introduced and by making it operative from that moment. This technique has been widely used by this Minister for Finance.

We are discussing legislation here which is operative from a date over a year ago. That is not good enough: taxation is one area in which the Oireachtas should be scrupulously careful and should avoid any element of retrospection. It is neither right nor proper nor good parliamentary practice nor good government that we should now be discussing legislation, which will decide what taxes people will pay, when these taxes are already effective for over 12 months.

The Wealth Tax Bill, the Committee Stage of which has not been reached in this House, became operative on 5th April: it is already in operation even though nobody as yet knows what its exact terms will be. Let me give an example of that. In my constituency there is a hard-working, progressive hotelier who has a moderately-sized hotel. For good business reasons, he has that hotel in the name of a company, a sound, commercial practice. In effect, it is his personal property because he and his wife own the company. He now finds that in his situation he will not be allowed the allowance—£100,000 or £150,000, whatever it may be—for wealth tax and capital acquisition tax purposes. He, and other hoteliers, are putting forward a case to the Minister to have these allowances made available in circumstances such as theirs. We do not yet know if the Minister will listen sympathetically to their case. I think he should. I think it will give rise to a serious injustice if he does not. But the tax is already operative from 5th April and, as far as anybody knows, the situation is as outlined in the Bill and this is now the law of the land. This man does not know where he stands. That is not good enough; it is not the way to run a country or a taxation system. If the Government and the Minister are serious about their parliamentary obligations they will postpone the operation of all these new taxes until the legislation is passed by this House. That is the only decent, straightforward and, perhaps even, constitutional way of conducting taxation business.

The element of retrospection is specifically brought into this legislation. There is a departure here from the White Paper. The whole legislation is retrospective for one year. Even though we have not passed it yet it is already 12 months in operation. Now somebody has had the brilliant idea of going back five further years, back to 1969 and bringing in, for purposes of calculation, the aggregate amount of gifts made between 1969 and 1974—gifts made by people who had no idea this legislation would ever arise. Again, I do not think that is good enough and I hope, whatever else may finally become law, that particular provision will be abandoned.

I want to make one emotional point. I should like to have some opportunity of consulting the theologians, or philosophers, or moralists about this new concept of the Minister of taxing gifts one makes to one's own children. I may be old-fashioned about this but I think there is something very special about the family, something very praiseworthy, something worthwhile, something deep-rooted and fundamental about a man striving to do his best to achieve some degree of prosperity so that he will have something to pass to his children. There is nothing reprehensible in that and it should not be discouraged. Whatever one may say about the rest of this socialistic juggernaut of the Minister, that is one aspect of it which, personally, I find objectionable. I believe if it were put to the Irish people as a straightforward proposition it would be treated with contempt. The false position in which the Minister finds himself can be epitomised by one paragraph in his opening speech. It shows the inherent falsity of his whole position that he has to resort to this sort of argument. He said:

Estate duty could be, and by the wealthy in particular, often was, avoided by making substantial gifts during life. Appreciating fully the social and economic advantage of transfers of wealth to young enterprising people the Government are anxious to secure the double objective of encouraging such transfers while ensuring that people of comparatively substantial means pay gift taxes on such operations.

There is a classic example of the double-think: in one part of the sentence the Minister pays lip service to the idea of encouraging, for social and economic advantage purposes, transfers of wealth to young enterprising people and in the second part of the sentence he says he is going to tax them. I have never yet heard of any instance where human wisdom devised a system whereby you encourage something by taxing it. That sort of argument springs inevitably from the false position in which the Minister finds himself with this series of proposals.

There is another instance of that sort of argument to which the Minister has to resort in his speech where he says:

It is an indication of the extent to which the fairness and moderation of the capital acquisitions tax has been recognised that the lowest proportion of representations received on the White Paper proposals was concerned with this tax.

That is simply jocose. The reason the Minister did not receive any more correspondence about the capital acquisitions tax is simply that nobody understood what it was all about. If they had he would have been inundated with protests.

I do not expect, as I said at the beginning, that anything I say will have any influence or effect on any of these measures but I hope that, perhaps, I have done something to direct attention to the way we are going and to the direction in which the Minister is leading us. As far as I am concerned, neither from the point of view of taxation, and the negligible amount these measures will produce, nor from the point of view of our economic development, are any of these three measures worth the time this Oireachtas will spend debating them.

Mr. G. Fitzgerald

At approximately 4.30 today the Minister sat down and commended the Bill to the House. Since then no speaker from either side of the House praised the Bill. All have been critical of it. If I were in the Minister's shoes I would say to myself that there must be something wrong with me, with my Bill or with the programme I am introducing. It is time the Minister began to think in that way.

We have before us a long document, much of which is in technical and legal jargon, that obviously took a lot of time, energy, thought and money to introduce in its present form. The only two spokesmen from the Minister's party who contributed today were critical of that production. I say to the Minister that he better examine his conscience and see if he is spending the nation's money wisely. If he is not he should think again how it might be spent at a time in our economic situation when leadership was never needed so badly.

Deputy Haughey covered very adequately the difficulties created for the economy by the actions taken by the Minister. As he said, it was surely a bit more than coincidental that the downward trend in our economy was expedited by the issue of the White Paper on Capital Taxation a year ago. I will have some things to say about that later. This Bill and the long speech by the Minister today take a lot of study and a lot of interpretation. I am not surprised that the ordinary Members of the House, as well as the general public, are confused by the various taxation measures introduced recently.

It is difficult to isolate one Bill from the group. This Capital Acquisitions Tax Bill is taking its place in the queue. It is significant that they are all queuing up for Committee Stage. Is there any particular reason for that? Is it because agreement cannot be reached in the Cabinet on certain amendments or within the two parties forming the Government? It is understandable that Members of the House are confused but the general public are absolutely lost with regard to what is happening in relation to changing taxation by the introduction of complicated measures at a time when the country never before needed leadership as much from the man handling the protfolio on finance. The Minister and his advisers would be better employed devoting their attention to the economic situation.

Our wheels of industry are grinding to a halt. Jobs are being lost daily. The concern and lack of confidence among our working people do not seem to be realised by the Minister. Those people dread the redundancy notices when their firms join the dismal stories we read about day after day. We hear vague hints from the Minister that we are over the worst of the crisis but the following day we hear that a further 250 or even more are laid off work. We have no leadership from the Government or no positive action taken to correct that situation. Surely it is pretty obvious that instead of the Government giving the desired leadership they are showing an absolute lack of concern about the people who are losing their jobs.

What is the problem? Surely the Minister realises there is a problem. We have many problems facing the country but nothing is being done about them. What will be the future of the school leavers this year? Will the Department of Finance devote their energies in that direction and say where are the opportunities for these young people? They would be far better employed doing that.

Mr. R. Ryan

Is the Deputy talking about young people acquiring capital?

Mr. G. Fitzgerald

I am not. The Minister is again showing his lack of concern and interest. Where will those people get work this year? Have the Department of Finance given any thought to that serious matter?

An Leas-Cheann Comhairle

The Chair has already pointed to the fact that we should keep to the measure before us.

Mr. G. Fitzgerald

I accept that but I think what I am saying is very relevant to the measure before us. It is an elaborate document which took a lot of time, energy and money. The result of all this is that we have a wishy-washy measure. It means very little when taken on its own but when taken with the other measures——

An Leas-Cheann Comhairle

The Chair has already pointed out that we cannot have duplication of debate. The Chair agrees that these measures go together and that a general reference is in order but we cannot have duplication on this Bill of what has been said on the other Bills.

Mr. G. Fitzgerald

They are very similar.

An Leas-Cheann Comhairle

They may be similar but we cannot have duplication of debate.

Mr. G. Fitzgerald

I certainly accept that but I am sure the Chair agrees it is difficult to divorce them. It is difficult to divorce this Bill from the other taxation measures that are at present affecting us.

An Leas-Cheann Comhairle

The Chair would like Deputies to keep to tax on gifts and inheritance.

Mr. G. Fitzgerald

We will do that but this measure relates to some of the other measures before the House. This Capital Acquisitions Tax Bill is introduced allegedly to eliminate estate duties. It is one of a number of measures introduced as a result of the Government's White Paper on taxation. For that reason it is very difficult to deal with it on its own. There has to be a certain amount of overlap. The people will realise what the overlap is when they have to pay the various taxes being imposed under these different measures.

Capital acquisitions tax will never worry me whether it is inheritance or gift tax, any more than capital gains tax will, or any more than wealth tax will. All the time and effort which have been put into these measures could have been put to better use for the Irish people. This legislation introduced by the Minister for Finance has contributed in no small way to our unemployment situation. Posterity will remember the Minister for this. Instead of taking positive action and programming in a positive way, he directed his attention to legislation which is difficult and complicated, which will be difficult to enforce, which has cost a lot of money already, and which will cost a lot more to enforce at a time when that money could be put to better use. The revenue which will be recovered from it will be small by comparison with the effort put into it.

The Minister is becoming more of a tax gatherer all the time. At present the wheels of industry are grinding to a halt. Post primary education is in chaos, financial chaos, and people are parading in the streets.

An Leas-Cheann Comhairle

The Deputy should appreciate that we cannot discuss education.

Mr. G. Fitzgerald

I accept that.

An Leas-Cheann Comhairle

I hope the Deputy will co-operate with the Chair.

Mr. G. Fitzgerald

The best the Department of Finance could do was to produce a document like this. I was interested to hear a speaker say he was not a lawyer, or an economist. or a solicitor. Neither am I. It will be difficult for us to understand many of the technical aspects of this Bill. It will be of immense benefit to the legal profession. It will be of immense benefit to the accountancy profession. Accountants and accountancy firms will be in their element being paid by their clients for advice and guidance on this measure. This will put an added burden on many people.

The Minister is playing a record we are getting very used to and which means so little. In his speech today he said:

The capital acquisitions tax now proposed will promote a wider spread of wealth since the smaller the distribution of wealth the smaller the amount of total tax paid will be.

It would be hard to drag that apart and find out specifically what the Minister means by it and what it means in the context of the Bill. That is said for one purpose: to pull the wool over some people's eyes and to indicate that this measure and others like it are designed to promote a wider spread of wealth. I would be in favour of a wider spread of wealth provided that it did not harm the living standards of very many people. If my efforts to promote a wider spread of wealth ultimately mean that I am creating poverty among the working people of my community, I would have grave reservations as to whether I was doing the right thing.

The Minister also said:

This Bill is the final step in the Government's programme of capital taxation reform forecast in the Statement of Intent of the National Coalition Parties of 7th February, 1973, endorsed by the electorate in the General Election of February, 1973...

The first part of the sentence is that this Bill is the final step in the Government's programme of capital taxation but all the steps are now on an equal footing. I presume the steps he is referring to are the other Bills already introduced.

Mr. T.J. Fitzpatrick

(Dublin Central): They are half way up the ladder.

Mr. G. Fitzgerald

They are stuck at that rung. There is something wrong there. The Minister said "... endorsed by the electorate in the General Election of February, 1973...". That is another interesting one. The electorate were conned into believing that estate duty would be removed, full stop. Is estate duty being removed? The Minister for Lands is in the House and I am sure he knows as well as I do the problems created by estate duty. Will this Bill and the other measures introduced by his colleague eliminate the difficulties for the men mainly affected by the estate duty problem, the men in the farming community and, to a lesser extent, the business community? These measures are not doing what the electorate believed they were endorsing in February, 1973. This Bill is an attempt by a very silly Minister for Finance to confuse the people into believing that something is being done.

Other Deputies are better equipped than I to go into the details of the Bill but there are a number of points which must be made. I was interested to hear Deputy Malone, one of the Minister's colleagues, saying that the Bill should be examined on Committee Stage. What he was saying to his Minister was: "There is a load of tripe in it. It has to be amended after all the time that has been spent on it. We must go back over it again and correct it for you and put it right for you."

The Bill seems to be centred around the concept of domicile. I am not too sure what "domicile" means. It probably refers to somebody living in the country for the greater part of his time. I have often criticised Bills for not being more simple for the benefit of the layman. Why is it mainly centred around domicile? Do I understand that gifts made to people outside the State are liable to tax? If a man is domiciled in Ireland and if he hands over a gift outside the State, can tax be recovered under this Bill? Maybe it can and maybe it cannot. Maybe I am reading it wrongly. If there is a difficulty about it, is it not bad legislation, because it cannot be implemented?

Some of the previous speakers referred to the thresholds at length. I will be very brief. As I understand it, if a father passes on his farm as a gift to his son the threshold limit is £150,000. Suppose the son dies and the farm reverts to the father, am I right in assuming the threshold limit there will be £15,000? It seems a ridiculous situation.

There is a great deal of vagueness in this Bill and I can well imagine the difficulty there will be on Committee Stage. I think it was one of the Minister's colleagues who referred to the fact that all these Bills must be passed by 1st July. I think the Minister's colleague was too polite to say he thought the Minister a bit of an optimist; I think the Minister can be regarded as a super-optimist.

With regard to the operative date, if a gift is made before 28th February, 1974, and the transaction is not finalised until after 28th February, does that mean the gift is caught in the net? Deputy Haughey dealt at length with retrospection. Retrospective legislation is always bad legislation. It should never be introduced except possibly in an emergency situation.

There are penal interest rates. There is mention of 18 per cent or 1½ per cent per month. People may not be in a position to pay up and these people may be the very people who need a break. I am not concerned about the rancher. I am concerned about the average farmer, the man I represent. He may have a sideline to give him a decent livelihood for himself and his family. What will be his position? If he has a small bit of agricultural machinery on hire and works for neighbours what will his position be? All these situations need to be clarified.

Deputy Colley pointed out the necessity for an escalation clause or an inflationary clause. The effort before us will achieve very little, and is in need of a great deal of correction and clarification. The Minister should get his priorities right. He should get the wheels of industry turning and the people working. He should sort out our post-primary education system. When he has done these things we will be prepared to come back and discuss different taxation measures.

An effort is being made to create the impression that these taxation measures are popular and are doing something for the benefit of the people. These measures will do nothing for anybody. Our priority on this side of the House is a better standard of living for the vast majority of people and full employment. These financial measures seem to be designed to achieve the opposite result. The Government are showing no concern whatever for the serious state of the economy. I would advise the Minister to direct his attention to the serious problems that exist in our society because it is the solution of these problems that is really important.

Mr. T.J. Fitzpatrick

(Dublin Central): This is the fourth taxation measure to come before the House since Christmas. All were and are complicated Bills and all impinge on one another. It is difficult to discuss one Bill exclusively. We have before the House the Capital Gains Tax Bill, the Wealth Tax Bill, the Finance Bill and now this Capital Acquisitions Tax Bill. We really should have a general debate first of all on capital taxation. We could then view these measures in their proper perspective. They are all inter-related.

I welcomed the abolition of death duties. I always thought them most unjust. They invariably came at a time which was most inopportune, a time when families were not in a position to pay them. I believe all Members on this side of the House welcomed the abolition of death duties. When this promise was made by the National Coalition Government no one thought for one moment that their abolition would result in the introduction of a massive taxation programme. We all agree fair taxation is necessary in order to distribute the wealth of the country and ensure that weaker sections are properly protected. I doubt very much if any of these four financial measures will achieve that particular aim. I doubt very much that the economy will be expanded.

It is useless for any Government to pursue good health policies or education policies if first there has not been established a good economic policy to provide the money for all these Departments. It is towards this end that we should direct our taxation policies. For that reason I criticise these Bills, especially the Wealth Tax Bill.

The Bills are not designed to expand our economy. It is obvious from our economic situation today that it would not help in any way to tax the economy out of existence. Instead of generating employment and creating industry, these taxation proposals will have the opposite effect. It is not the role of the Minister for Finance to devise such policies. His role is to ensure that confidence is generated within the community by whatever legislation he will introduce. In this instance it is obvious that he has not directed his mind towards an economic policy but only towards a taxation policy without considering the economic implications of his actions. This is where the Minister has failed, and as time goes on the results of this failure will manifest themselves. Business people usually are slow to react. They have a subtle way of doing things. If the Minister does not reconsider his proposals at this stage, it may be too late to do so later.

I agree that money must come from somewhere to make up for the revenue lost to the Exchequer as a result of the abolition of death duties. It would not be fair that the category of people who now contribute this £13 million a year should be free completely from taxation. However, if this Capital Taxation Bill were taken in isolation, I might be able to welcome it—although in saying that I may not be re-echoing the views of all Members of this party. But we cannot take it in isolation because of the other Bills that make up this taxation package. In order to recoup the £13 million lost by way of the abolition of death duties the Government have introduced three Bills. In a current capital budget of almost £1,200 million, £13 million is an insignificant sum, but it is obvious that the three Bills before the House will bring in a lot more than £13 million. There are no statistics available either to the Revenue Commissioners or to anybody else which would indicate the real wealth of this country; but we can be sure that as time goes on this taxation will bring in a substantial amount to the Exchequer, probably an amount in the region of £60 million per annum within a short time.

In the Capital Gains Tax Bill the Minister refused to make any provision for inflation. We may take it therefore that the threshold will be reduced by half within two or three years because of inflation, which is running at 25 per cent and which possibly may reach 30 per cent in the coming year. Unless the Minister is prepared in this Bill and in the Wealth Tax Bill to state specifically that he is prepared to put in an escalation clause to take account of inflation, his proposals will not be acceptable to the people as a whole.

A threshold of £150,000 may seem fine but there is no suggestion that in 12 months' time either this or any of the other thresholds will be increased by 25 per cent to take account of inflation. There are many who do not realise the effect inflation will have on the thresholds proposed. If such a clause is not inserted now the Minister will not be obliged to make an adjustment each year. This Bill taken in isolation and with the inflation clause built in could be acceptable because within the family unit there are certain amounts which are generous but they are only generous in terms of this year.

It is a mistake to introduce all of this sophisticated legislation at this time. I would prefer the Government to concentrate on the expansion of our economy first and to build up the wealth of the country. We should not ape the other European countries whose development is much more advanced than ours and whose resources have been put into their development down through the centuries. We have not great wealth here, certainly nothing like the wealth—such as minerals —that exists in other European countries. For this reason it was a mistake by the Minister to introduce these measures now.

The Minister intends taking into consideration the position of a niece or nephew. It is his intention to put them into the same category in some respects as a son or daughter. This is advisable. We all know of couples with no family of their own who have nieces or nephews involved in their business and it is only right that they should be given some consideration in regard to inheritance. In my view the same concessions should apply to brothers and sisters. I know of many cases where a sister has been housekeeping for her brother for upwards of 30 years but under this Bill such a sister would be allowed only in the region of £15,000. There is need for adjustment in that figure. Such people should at least be granted the same concessions as nieces and nephews.

The amounts allowed for the transfer of property to nieces and nephews, brothers and sisters is very low. When one considers the price of property at present a figure of £10,000 is very small. In my view the limits within the family circle are too low. I am not at all concerned about the position outside the family circle but within that circle, irrespective of whether the relatives are living on the property, the rates are too low.

I notice that the Minister has, as he did when he introduced the Wealth Tax Bill and the Capital Gains Tax Bill, increased the rate of interest payable on outstanding debts to 18 per cent. This figure is extraordinarily high particularly having regard to the fact that the banks have reduced their rate of interest. I can see a case for applying this figure of 18 per cent to income tax or to VAT because they relate to money already earned or collected. I do not believe it should be applied in the case of capital acquisitions or wealth tax because it is more difficult to obtain this money. In this regard I would not be too concerned about the capital gains tax. It will not be that simple to find the money to pay these taxes within the three months specified.

The Minister has made special provisions in relation to agricultural land. He agreed that all investments do not give the same return and this principle should apply to industries. In the case of many industries the return on capital is about half of what would be obtained if the money were invested otherwise. The provision which is to be applied to agricultural land should be applied to family businesses. During the debate on the wealth tax the Minister conceded that a number of hoteliers were exempt and for this reason it is hard to understand why the same concessions do not apply to the family business.

I should like to know what form the evaluation of property will take. Will businesses and industries be assessed on the gross or net profit or will there be some other way of assessing the value of the property? The thing that worries me most about this Bill is the fact that inflation has not been provided for. If there was a clause dealing with inflation it would be a lot easier to speak in favour of this Bill. I am aware that the Minister has stated that this matter will be reviewed occasionally. In this connection I should like to quote from the White Paper on Capital Taxation:

The Government recognise that, in time of inflation, capital taxes may over time be taking a bite of capital which represents an increase in nominal values as distinct from a real increase in asset values. To cope with this problem, the thresholds set for the new capital taxes would need to be reviewed at regular intervals; such review would, however, be less necessary in the case of the threshold for liability to capital acquisitions tax by the immediate family in view of the high exemption figure proposed.

Does the Minister consider it necessary to review the thresholds for capital acquisition? It is obvious from that paragraph in the White Paper that he will review them only every ten years. If this is the case half the wealth of this country will be taken by the Revenue Commissioners and there will be very little wealth generated from now on. Too much of this type of taxation is being introduced.

I welcome the abolition of death duties, but are we paying too high a price for that abolition? That is the question we must ask ourselves. We must consider that there is no longer any such thing as a gift, except within the immediate family. Is the incentive to accumulate wealth being taken away? Should this happen, it would be disastrous for the country because at this stage of our economic development we need a massive transfusion of wealth. Under no circumstances must we discourage outside investment, because we cannot generate the wealth within ourselves. We do not have the money to build new factories. Although I would like to see them built by Irish money, we must face reality and realise that there is not sufficient wealth here to ensure economic expansion.

Over the next ten years we must create about 25,000 jobs if we are to be successful. We all know there will be a fall-off in agricultural employment. That has happened in every European country. It has happened here over the past number of years and will continue. These people must be absorbed into the industrial sector of society. It is the duty of the Government to make provision whether by a proper taxation system or a proper economic policy, to secure jobs for the people. That is why they are elected. They were not elected to bring in taxation Bills only.

Since Christmas we have spent days discussing four taxation Bills here. One factory in the west would be more beneficial than that. I would not mind spending six months discussing taxation if I thought it would create further employment, establish 10,000 new jobs, reduce the cost of living or check inflation. If it did any of these things I would say we were serving a useful purpose. As I said, we have spent days discussing capital taxation. If anything, this has worsened the situation considerably. We have done more harm than good to our economy by the proposals discussed here. We have discouraged outside investment which is badly needed. On the other hand, we have encouraged people to send capital out of the country. We would have been more usefully employed thinking out proper economic policies and seeing how we could get our people back to work.

The Minister for Finance should have been giving the people a lead. He is leading the country economically. He should give the business community confidence instead of undermining it. In one of today's newspapers a businessman said he was making financial provisions in other parts of the world. We do not want to encourage people to leave this country; on the contrary, we should be trying to get them to come back. We can use their money to expand our economy. Let us not take a negative view of how we should manage our affairs.

I do not care what type of taxation they have in other European countries. I do not know why we should ape them. There are at least four European countries who have no wealth tax although they have a higher standard of living than we have. We follow our own policies and decide what is best for our people. We look after ourselves. Irrespective of what they are doing in the Common Market, it is up to us to expand our own industrial arm and give businessmen confidence to create more industry. Let us try to check inflation. I doubt if the Minister for Finance is interested in economic expansion. Almost everybody knows that you cannot have a good social policy without a good economic policy. People must be working and paying taxes to the Revenue Commissioners to keep a good social policy going. Unfortunately this is not happening today.

I welcome the expansion in the social services given this year. My only regret was that they were not bigger. Unless they money accrues to the Exchequer, these services cannot continue. We must be realistic and face facts. We cannot pay out all the time. No one wants to depend on unemployment benefits. Social welfare benefits should be for the old, the weak and the disabled. The average working man wants a decent job to give him a decent standard of living to keep his family. He does not want unemployment benefits. Therefore, there is no point in the Government boasting about the unemployment benefits. It would be better if they directed their minds towards generating more employment. The philosophy of the Government is to orientate towards a sophisticated type of taxation.

We have now before us four Bills dealing with taxation. When these complicated Bills are on the statute book, I do not know where the Revenue Commissioners will get the staff to administer them. How are they to carry out valuations and to make assessments? Who will handle this in the Revenue Commissioners? Has the Minister made arrangements to appoint sufficient staff to do this impossible task? It is no use introducing Bills if you have not sufficient staff to administer them. All that seems to matter is to have new tax legislation on the Statute Book.

Taken in isolation, this Bill might have been acceptable had it made some provision for inflation escalation, but when it is taken as part of the package it is entirely unacceptable. If the Minister were prepared to come in to tell us he has found a solution in regard to an adjustment for inflation on a yearly basis then it is possible this Bill might not be so objectionable. However, there is no sign of any such undertaking. Another Minister for Finance might sit over there and refuse to adjust the threshold for five years because these Bills have not an adjustment clause written into them.

Until the Minister decides to make such an effort to meet inflation he will get very little help on these Bills from this side of the House and when the full impact of these measures has been explained to the people a very serious view will be taken of this taxation package. I hope that in his reply the Minister will give us some indication that he will make adjustment provisions for inflation.

Mr. Andrews

The views expressed by Deputy Fitzpatrick are shared by this side of the House in general on this Bill, which introduces another form of capital taxation. The Government have introduced into the debating chamber of the nation an air of Alice in Wonderland through the introduction of this Bill in addition to the Wealth Tax, the Capital Gains Tax and the Finance Bills. We are facing one of the worst economic crises in the past 40 years. Factories are closing daily, according to the GIS, inflation is running at the rate of 25 per cent per annum and one would imagine that in these circumstances some effort would be made to combat inflation which, according to some economic experts, will reach a rate of 32 per cent.

The Government would have us believe that the Minister for Industry and Commerce is not everyday signing new price increases. If this legislation were to perform a function in relation to this economic crisis, to unemployment, inflation, price increases, if this package of taxation legislation made some effort to reduce unemployment and to stabilise inflation, then some useful purpose might be served. The introduction of this package has created a legislative backlog in the House. We believe the Labour branch of Fine Gael are largely responsible for this latest piece of capital taxation. Already we have had the courageous performance of Deputy Dockrell absenting himself on a Bill which introduced capital taxation. We believe that this represents the attitude of members of the Fine Gael Party, the conservative wing of the present Government. Effectively what Fine Gael are pretending to do is to give a sop to the so-called socialist element. But a sop it is. Deputy T.J. Fitzpatrick (Dublin Central), Deputy Colley and Deputy Haughey outlined exactly what this third part of the capital taxation package effectively means in income. When the Minister is replying to this debate he might tell us how much it will cost to administer this part of the capital taxation package; in addition to the administration of the Wealth Tax Bill and the Capital Gains Tax Bill, how much it will cost to collect the taxes—administration versus actual income. It would be an interesting exercise in mathematics and we on this side of the House would welcome an exposé of that element. As I have said, this is effectively a sop to the so-called socialist element within the Government. It is a piece of gimmickry. The Government have distinguished themselves in the arena of the politics of promise. They have not delivered the goods, as it were, in the discharge of those promises. We do not consider that good enough. That is basically why we will be opposing the main elements within this Bill.

There has been certain criticism by a prominent member of the Labour Party about the slow progress of legislation in this House. On the basis that the Government are not prepared to do their duty in relation to the Capital Taxation Bills which have been introduced, we, as an Opposition, have a duty to examine critically each Bill coming before the House. If it is the intention of the Government to introduce complex, and sometimes confusing, legislation of the nature of the Wealth Tax Bill, the Capital Acquisitions Tax Bill and the Capital Gains Tax Bill, then they must expect a tortuous passage of such Bills through this House. Those outside commentators who would condemn the Opposition for not—as they would describe it—letting those pieces of legislation through expeditiously might remember that we are dealing with probably some of the most complicated legislation ever to come before this House.

For instance, the Bill before us contains 72 sections of a highly complicated nature. The prominent member of the Government party who criticised the House for being slow in the production of legislation might go to the fount from which this legislation emanated. The Government prepared the legislative programme. The Government have placed before the House this third in a series of capital taxation proposals, excluding the Finance Bill.

We have an obligation to examine these proposals closely having regard to the economic circumstances in which we live, economic circumstances which, in the words of the Taoiseach, can be no longer attributable to the Arabs but to national sources. These are not being dealt with by the Government and the Government are to blame in this respect.

With the economic crisis outside the walls of this House unrecognised and uncontained by the Government, the Government should bring forward practical legislative proposals to deal with it; to deal with unemployment of approximately 103,000 people; to deal with the record rate of inflation and record rising prices on a daily basis. Of course, the Government have taken credit for increasing social welfare benefits, benefits which would have been increased by whatever Government might be in power. I think people in receipt of unemployment benefit would prefer to be in employment. There are many people unemployed at present who would wish to be employed. Unemployment carries its own indignity. Employment carries its own dignity. We talk and boast about the large amounts of unemployment benefits being given to people. If the Government conducted a survey amongst the unemployed, I think the vast majority would answer: "Certainly, unemployment benefits assist us; however, we would seek and wish employment."

An Ceann Comhairle

I am sorry to interrupt the Deputy, but he does not seem to be dealing with the measure before the House, the Capital Acquisitions Tax Bill.

Mr. Andrews

I am, with the greatest respect to you, Sir.

An Ceann Comhairle

The Chair is ruling otherwise, having listened very carefully to the Deputy.

Mr. Andrews

I am pleased that the Chair listened carefully to me. The point I am making is that we would welcome this Bill if it did something to deal with one of the most serious economic crises confronting the country. However, I will bow to your ruling, Sir, as I do generally and move on to the areas of concern in relation to this Bill which have been mentioned to me in my capacity as a public representative.

We seem to be in an atmosphere of "Alice in Wonderland" dealing with this, the third of the new capital taxation proposals placed in legislative form before the House by the Government. The features of special concern in this Bill could be summarised as follows, as stated already by Deputy T.J. Fitzpatrick (Dublin Central) and others who have contributed to this debate: the Bill does not take into account inflation at a rate of some 30 per cent per annum, unchecked and controllable—not uncontrollable—unchecked and controllable, as we see it on this side of the House. According to the Coalition conclusion, the gospel has been that inflation has been attributable to outside circumstances. To use the words of the Taoiseach at the last Fine Gael laugh-in—effectively we can control inflation. But we do not and are not controlling inflation. If those are the words of the Taoiseach, the political Leader of the country for the time being, who else are we to believe? If he, as Taoiseach—charged as head of the Government with control of the political destiny of this nation—does nothing to control that inflation, then there is an option open to him.

But the areas of special concern to us are (a) that the Bill contains no provision for increasing thresholds to take account of inflation; (b) the definition of a private, non-trading company could include a company making a trading loss in one year, if it had small, non-trading income— certainly, that second area is of special concern to us, as an Opposition having examined the Bill closely—(c) the 25 per cent difference between the rate of taxation on gifts and inheritances is an inadequate incentive to healthy persons to pass on their wealth; (d) there is no provision for reducing the market value of productive assets, such as is proposed in the Wealth Tax Bill; (e) there are broad guidelines for valuation but no details; (f) the exemption thresholds for lineal issue other than children and for brothers and sisters appear very low by comparison with those for a spouse and children on the one hand and strangers on the other. This seems to be extremely unfair; (g) there is no indication that the reduced valuation for estate duty that applied to shares in Irish companies under section 21 of the Finance Act, 1956, will be continued for gifts or inheritance under the new tax. The reduction amounted to 33? per cent of the valuation and (h) the special provision whereby the surviving spouse and certain nephews and nieces may be treated as children of the donor should be extended to include brothers, sisters and grandchildren. We may ask: why not?

These are some of the areas that concern us. We have been treated, particularly in the last few weeks, to the Parliamentary Secretary to the Taoiseach saying there has been a large legislative backlog in the Dáil and this backlog has been attributed to the lack of co-operation by the Opposition and their reluctance to co-operate with the Government in the expeditious passing of legislation. Nothing could be further from the truth. In relation to legislation that may be passed through this House, if the Parliamentary Secretary and others of a like mind can relate the Capital Acquisitions Tax Bill to the reality of what is happening outside the front and back gates of Leinster House, they might reconsider the statement that we are not prepared to co-operate. Of course we are prepared to co-operate in the passing of legislation but not with regard to legislation of this nature that is totally out of touch with reality.

This Bill contains 72 sections and it is a highly complex measure. We have been told the Bill is the third in a trilogy of capital taxation measures— the Bills with regard to wealth tax, capital gains tax and capital acquisitions tax. Can the Minister for Finance really tell us there is a great urgency about these Bills when there remains the undischarged promise about legislation on family law? We would welcome a discussion here about the whole area of poverty, as well as a general debate on what constitutes the quality of life in our nation. What really concerns us is that the Capital Acquisitions Tax Bill does not measure up to the reality of what is happening outside.

There is another element of the Bill which is grossly unfair, namely, the retrospective element. This matter was referred to by Deputy Colley and he has told us that perhaps a constitutional issue will arise about the retrospective element. Those who produced the Bill might consider the advice given by Deputy Colley.

When the Minister is replying, he might answer my question regarding the cost of collection of the various taxes under the three Bills contained in this capital taxation packet. Perhaps he would tell us what it will cost to administer the legislation and the amount that will be collected. I think he will find that the efforts to confuse those people most affected will react on him at the next election, but in the meantime he might answer the questions.

Major de Valera

This Bill presents the same problem that a whole series of Bills recently presented, namely, the difficulty of dealing with each Bill alone when they are closely related as an integrated series of transactions all dealing with the same matter. It poses a problem of how to deal with the matter and one can quite easily be technically out of order.

All of us have tried to take this matter extremely seriously and not to use it as a political football. This House should be more than a mere debating society. In principle it is the place of decision although in practical terms, when it comes to voting, the voting will be carried out along party lines. Because the Government have the majority of votes in the House what they propose will be enacted and the role of the Opposition at that stage will be practically always simply that of protest and objection. Nevertheless, this House is the place where decisions are made and the Government have a constitutional and moral responsibility to pay as much attention to the arguments put forward in this House as they do to their own technical advice.

For that reason I shall make at the outset the same objection to this Bill as I made to the other Bills that are part of this series. It is this: first, that we are asked to approach a measure of this nature being already committed, without knowing what was in this Bill, to part of a series of transactions that vitally affect the contents of this Bill; and secondly, that even when this Bill comes before us we get generalities from the Minister, certain explanations that any of us can read in the explanatory memorandum to the Bill. But we get no further information to help us to deal with the Bill.

This is pressing the democratic process too far in the bureaucratic direction, reducing this House, as I have said on many occasions before, to a rubber stamp. In addition to giving us the handout the Minister has given us at this stage, he should give us factual, stastical and accounting information that would enable us to make a judgement. Before I can address myself to this Bill, I should like, for instance, to have some specific estimates as to how much this Bill will give and take in terms of revenue. I should like to have some estimate of the administrative cost, both in personnel and in money terms, of implementing this Bill. Surely in a Bill such as this, as in a budget, it is of some considerable importance to know the cost, the profit and loss of the transaction. We have absolutely no information to enable us to know that. I hope the Minister will not take this criticism in any personal or polemic spirit.

I should like to come back to something that some of us have been dedicating ourselves to, that is, trying to make parliamentary democracy really work in this House when all the forces are moving the other way. Furthermore I hope the Minister will not take it amiss if I characterise his introductory speech as a poor compliment to the House. In his first two pages he makes some general statements directed more, I think, to the morning newspapers and the radio than to any useful purpose in the House. He has already circulated to Deputies his White Paper on the Bill, and we have the Bill. Having given us these few statements suggestive of what one would say opening a factory or something like that, the Minister gives us a detailed summary of what is in each of the sections of the Bill. That is nice and helpful enough, but is that not already in the explanatory memorandum? Are we not supposed to be serious people who know our business, and anyway should we not be able to read the Bill? As the Minister, as a lawyer, will know, it is a most dangerous thing to read any document but the legal document itself. What lawyer would rely on a paraphrase such as this, on an explanatory memorandum or anything else but the document which is to be the law? We are working under a system where it does not matter what the Minister says or what I say. The only thing that matters is the Bill formally passed by both Houses of the Oireachtas, signed by the President, duly converted into an Act of Parliament. That is the law, and nobody can go outside that Act, which must be interpreted under the accepted canons of interpretation. Debates in this House are not the law.

I would have found it much more helpful and my comments would be of much more use to the Minister on the Committee Stage if the Minister had supplied the information to which I have referred. If the Minister, instead of, I am almost tempted to say fobbing us off—but I do not want to be disparaging—with those opening remarks, had given us accounting and statistical information saying: "In this area we are getting from estate duty such-and-such an amount" and so on, it would have been more useful.

The Schedules to these Bills seem to be closely related, to overlap. The Minister talks about benefits, and there are parts of this Bill that are beneficial to some people. But no more than the Minister gets, neither can the Minister give, reality out of a vacuum. The money does not come out of fresh air. If there is a genuine giving, then the State will be at a loss of that. If some money is taken from the taxpayer, the State is the beneficiary. This is the type of information one should get. I know the Minister can say to me: "We published a paper on capital taxation", and he may refer me to chapter VI, to the tables there and his comments on the present system of taxation in Ireland. However, such information as is given is not enough for us to deal with this Bill in a businesslike way. If we were the board of directors of a business concern—and the country has to be run as a business concern—we could not make decisions of this nature without having the accounting and statistical information necessary. Therefore I find myself at a disadvantage in weighing up what the Bill really does just as I do with the other Bill in assessing the value of it.

There is no use in either side of the House being black and white on this. This Bill, like the others, and indeed like all practical measures no matter from whom emanating or from whatever side you look at them—and there are many sides—and from whatever point of view, partakes of the fundamental quality of the curate's egg: parts of it are excellent. This raises the problem as to the degree of excellence that is sufficient to condition the edibility. I find it hard to talk as I should talk about this measure and to recognise the benefits in the Bill and the drawbacks in it or, shall I say, the problems. Let us be frank about it and get it clear. I feel that the Minister is so anxious to put the best side out that he is not being frank enough about the problems—I call them problems. Of course, there are problems. If the Minister could produce a Bill of this type without a problem there would be a great future for him on a much wider front than in being Minister for Finance here. But that is an impossibility.

So, at the beginning, we can say in general terms that this Bill, parts of which are excellent, definitely has its problems. The great difficulty is to disentangle and analyse it. I find there is a danger of taking up the time of the House—I do not want to do so— with repetition of matters discussed on the other Bill and which, if relevant to this Bill, I should be prefectly entitled to discuss. If the Minister had come here at the beginning and said we would have to take this in series—he did in a sense say that—and if he was rather general in his two-part budget and the Finance Bill, that would be fair enough provided he was specific on the measures themselves. But he has not been specific in this regard on any of the measures. On the Capital Gains Tax or the Wealth Tax or Capital Acquisitions Tax Bills or the Social Welfare Bill which was also involved, we did not get the information which I think is essential.

I am reminded of an occasion to which I have often referred in discussing these matters which was really a very interesting experience for any parliamentarian, the occasion on which the Revenue Commissioners did their staff work for a Committee of the House on the Consolidation of Income Tax Bill. Why could not the same type of staff work be done in the case of this series of Bills? Surely, it would have been logical for the Minister, having adopted the approach he did adopt, to nail us down to the realities of the Bill in each case. These matters are far too serious for us to claim political kudos or try to score points over the Minister but if we had factual, numerical, statistical, accounting information, we could make an estimate. In the absence of that information I could make what would amount to charges which might be utterly wide of the mark but no more so, in a sense, than the eulogies of the Minister for his legislation when he does not back up these eulogies with factual information.

For instance, I might suggest that these measures were part of a desperate effort—in a sense of desperation—to get in all the money necessary to maintain the State's structure and that the Minister was bankrupt. If I were to make that charge—cynically if you like—I would be as justified in that as the Minister is in some of the general statements he has made in support of this measure. The Minister could hardly blame me if I chose to develop that line because he has given no factual information and no good reason to show that I am wrong in this. If this is a possibility, as a Member of the Opposition it would be my duty to raise the point in the discussion of such a measure.

I still do not know either in qualitative let alone quantitative terms whether this Capital Acquisitions Tax Bill will result in a net loss to the Revenue or a net gain as far as can be estimated. I know that parts of this Bill are desirable. There are many sides to it on which I would commend the Minister, taking them in isolation. In its context, I might question its timing and the social and economic environment in which it is being introduced but on its intrinsic content the Minister can certainly claim credit. But I do not know whether the Minister will gain or lose on this Bill. Certainly, he is giving certain benefits and reliefs but the legislation ranges over such a wide field that it is very hard even to guess the answer, guess whether the Minister will give more than he is taking or whether he will make a nice extra profit himself in the course of talking a lot about the abolition of estate duties and in the course of giving definite benefits in certain quarters. I do not want to minimise that or to take away from the Minister credit for what he is doing in certain ways here.

I hope the Minister appreciates the dilemma created for anyone who wants seriously to examine this measure when one meets this kind of situation. Am I being too rough on the Minister if I say: "Yes, you are abolishing death duties but you are really bringing them back under another name"? He is really making certain adjustments in the incidence and applicability of these former inheritance duties. Am I right in saying, to some extent, there is just a change of name here with, of course, the adjustments? We all know the quotation "a rose by any other name" but it strikes me that a thorn in the side of the taxpayer is one in any shape or form, no matter what you call it.

I am not saying this Bill is not justified or that in certain circumstances it is not socially desirable. I am saying that we should be frank about this. It is not a question of being honest. I am not suggesting that anybody is being dishonest but I suggest there may be a little bit of coyness on the Minister's part. If we had a bold frankness about these things the Minister's credibility, the efficiency of the House and the co-operation he could get even from his political opponents would more than offset the political dangers, which I appreciate. I sat long enough behind a Government to understand how one's frankness and honesty can be used against one, but I think it is worth taking that risk to achieve the other benefits.

The Minister may talk about abolishing death duties. He is just changing the death duties code. It would be very easy to dispose of this matter if we had the information I am asking for. Has the Minister not skilfully spread his net, although there may be great talk about social justice, benefiting the child and the widow, all of which are laudable aims—it appears to me we are all in a great hurry to be quicker than the rest to claim that we are all for this—in relation to this Capital Acquisitions Tax? During the time of the Minister's predecessors I often had to press cases where manifest injustice, which will be cured by what the Minister is doing, was being caused to certain people. Not only are succession duties and death duties the tax net in this area but has the Minister not made the mesh finer and the net wider? I could even argue that point but it is a distasteful argument because I lack factual information. If the Minister came in and gave me figures to prove I am wrong, I assure him I would be happy to be proved wrong and I hope I would acknowledge that the Minister was right. I hope I would not only do that honestly and frankly but generously as well, because I appreciate the Minister's problems and what he is up against in all this stream of legislation.

I realise the Minister has taken on a colossal task. It is on the Second Stage we need information because we can deal better with the Committee Stage later. I hope the Minister can give the information I asked for. It would be helpful to have it also in relation to the Wealth Tax Bill and the Capital Gains Tax Bill. He would then get full help and co-operation from this side of the House because we are anxious to help him. We realise, as the Minister no doubt realises, that it is the ordinary citizen who will carry the burden of all that will happen. It is the taxpayer who will pay. We also realise that it is the Minister's Department, particularly the Revenue Commissioners, who will have all the headaches, and the odium in certain cases, of operating this tax.

Deputy Haughey mentioned today, as I mentioned on previous occasions, that legislation of this type helps the Revenue Commissioners do their work but it is also important that the ordinary citizen should understand this work and should get maximum co-operation. It is not good for any country to have its tax collection system regarded as a bogey or something to be defrauded. It is important that the ordinary people realise that this is one of the most important services in the working of the economy. One cannot get this type of co-operation with measures such as this Bill in the circumstances I have mentioned.

I hope the Minister will not take my remarks as directed in any way towards him personal, particularly the reference to his speech, but I still feel I should make that point strongly. As I said at the outset, I find difficulty because I cannot divorce this Bill from the other financial measures that have come in such quick succession before us.

To some extent the Minister is effecting a financial revolution but we cannot deal with one Bill in isolation. In his budget the Minister forecast this legislation. Responsible budgeting for the year ahead must take into account the financial returns from these capital taxation Bills. Before you can assess these Bills you have to take account of the budgetary background. This can be assembled, but it means a lot of work for a private Deputy and we got no help from the Minister.

Before Christmas the Minister brought in the motion dealing with petrol. That is taxation. That is revenue. That is money coming in. After Christmas he brought in his budget. That is more money. The Finance Bill also has some bearing on the profit and loss account of the State, if you like to put it that way, on revenue and expenditure. Then we had the Wealth Tax, the Capital Acquisitions Tax and the Capital Gains Tax Bills. They all affect revenue. Then for good measure we had the Social Welfare Bill and the Health Bill which affected the stamps.

I am certain the Minister and his Department have all this basic information. They could not have made any estimates until they saw the whole picture. Presumably the Minister has that whole picture but he is not giving it to the House. I would have been very happy with the Minister's approach if, having given the general information he gave in the budgets, he gave specific information to back up these Bills, but he has not done so.

The use of the word "gift" in this Bill is somewhat naïve. To the uninitiated it might seem that this Capital Acquisitions Tax Bill merely deals with gifts. The word "gift" is beautifully suggestive but in plain language it is so defined here that it is a transfer of property. This Bill is nothing more than a property tax, a tax on property. It goes a little further than was provided for by law heretofore. Before practically every sentence I utter I have to make a qualification but I make it openly for refutation by the Minister but I want factual refutation if I am refuted.

It seems to me on reading the Bill that there are classes of property now being captured for taxation which were never captured before. So far as the transfer of property on death is concerned, this is simply a continuation of death duty after a reformation of the system. It goes wider than that. "Gift" means transfers inter vivos. In a broad and general way you can say that the capital gains tax is a tax on the transfer of property where that property is, so to speak, bought and sold.

The Capital Acquisitions Tax Bill provides for taxing the transfer of property not covered by any other Bill. That seems to me to be the case. If it is, why not say so? There may be a very good case for it, but let us say so. It is completely misleading to pretend that this is only a tax on free gifts by wealthy people of money or land, realty or chattels, to other people with specific relief where close relations are involved. The scope of the measure is very much wider than that.

The details of this Bill can be dealt with on Committee Stage but the Schedules also attract attention. What is Part II of the Second Schedule other than a table of death duties? Is that not what it is in plain language? That is only part of the deal. The First Schedule is complicated and deals with valuation.

We must relate right back again then to section 6 which the Minister disposed of by a simple explanation of some of the clauses. He set out the differences. But this has to be related back to sections 4 and 5 and the whole thing added up. A taxable gift is, in loose terms, a voluntary transfer of property. Would it not, therefore, be more logical to have taken the Capital Gains Tax Bill and the Capital Acquisitions Tax Bill as a unit? Would it not have been made for tider legislation to have taken them as two parts of essentially the one code? I do not tie the Wealth Tax Bill in quite as neatly, but it too is also part of the one code.

Now I may have laboured the nature of the Bill, but one must remember that it is quite impossible for us to assess its true impact because of lack of information. From another point of view, is there not a duplication of definition here? There are recurring themes in these three Bills —market value, powers given to the Revenue Commissioners, interpretation. I have not examined them but I am sure that such an elementary drafting matter will not have escaped the vigilance of the Minister's advisers and I am equally sure every effort has been made to keep that side of things right. However, the Minister as a lawyer will appreciate that it might have been a great deal tidier to treat these measures as one enactment in parts, utilising the same definitions. If, for instance, there are variations in the definitions in these Bills, so tightly tied in a code, then the Minister knows very well this will simply make trouble later for the courts.

I do not know how far we can assess the cost involved in administration and the burden placed on the Revenue Commissioners. I have emphasised this on the other Bills. Deputy Haughey referred to it also today. There is no Government office for which I have a greater admiration or in which I have greater confidence than I have in the office of the Revenue Commissioners and I have put that on record here. However, I think we are going too far in abdicating, no matter how necessary that may be, legislative power in favour of the Revenue Commissioners. I wonder do the Revenue Commissioners themselves really want these powers. They have to face the reality. Where they need discreations such discretions are really necessary. From past experience I know that powers granted are not being abused. The powers are necessary, but is not legislation of this nature really an abuse of the democratic process and an abuse of the Revenue Commissioners' office?

Logically, I come now to the question of the structural approach of the House to this whole code of legislation. I have not yet touched upon the economic and constitutional environment in which this new tax code is being introduced. There is the question of the wholesale delegation of parliamentary authority and legislative function to State Departments. One must, of course, look at this objectively. The trouble is that in the past we have been all too prone to make these causes of complaint, seeking somebody to blame, rather than looking objectively at the problem. The trouble here is that there are in reality too many people trying to provide for the deficiencies of this House and of Governments in particular. From that point of view this Bill will cause still more difficulty. I have already adverted to this in the discussions on the other Bills.

Discussion of the major points I have raised would be futile at this stage, but there is one warning I would sound. I do so in no spirit of criticism or hostility. I feel constrained to draw attention again to this particular aspect of the Bill and I go so far as to say that, unless this House and the Government, correct the trend that is there, the days of parliamentary Government are numbered. That is a strong statement but it is a statement I am prepared to substantiate on this Bill. There is a lack of information. There is even a lack of power on the part of the House itself. The system has so evolved that Government Deputies are simply an automatic college of electors for the Government and then, the Government having been elected, they support the Government with their feet for the duration and the Opposition is reduced to futile pleading. The unfortunate permanent administration has to carry the whole load. That cannot continue forever.

Debate adjourned.