When we adjourned I was referring to section 21 (3) and I was about to raise the question as to whether the provision of subsection (3) is really one that we should try to enact in this House. The section provides that where the inspector has made a determination and no objecttion has been made to that—I am paraphrasing the subsection—that determination shall not be called in question in any proceedings. The question I am raising is whether in the event of proceedings in court this provision would purport to preclude the court from finding that the determination by the inspector was wrong in law. If it would purport to do that, it would be a very bad principle to try to adopt, even if it were enforceable. If it does not purport to do that, I think some explanation for the wording of it is called for because on the face of it it would appear to do so.
Private Member's Business. - Finance Bill, 1975: Committee Stage (Resumed).
Mr. Ryan
I can understand the Deputy's misgivings about the particular wording used. The purpose of the subsection is to ensure that if a determination is made and the parties are notified of that determination, and if those parties fail to challenge the determination or object to it, they would not subsequently be in a position to prevent the determination being put into effect by challenging it thereafter. The situation could arise, such as I was talking about earlier, where there could be some unknown interested party who might wish to challenge such a determination. Such a person could challenge the determination without prejudice to the determination being put into effect while the matter was under-consideration. However, if in the event a decision was come to which showed the determination was an invalid one and that there was a refund due to some person or persons, then the Revenue Commissioners would make that refund. The purpose of writing it in this way is to prevent what often happened in the past. Some people have a marvellous skill in using every word and comma in financial legislation to avail of delays and difficulties. I do not think that is right. This will ensure that any person who is genuinely put at a disadvantage as a result of the determination which is ultimately found to be wrong can have that wrong put right but it prevents somebody using the procedures of challenge of court proceedings to delay the payment of tax which is due.
I would concur with the intention of the subsection and that apparently is, as was stated by the Minister, that persons who have been given notice of the intention of the inspector to make a determination are obliged if they wish to object to give notice of objection within 21 days and if they fail to do so they will be bound by the proceedings subject to something I have to say on a later subsection. I think that is not an unreasonable position.
However, when we come to the case of the person who may be affected and who has not been given notice, the case we adverted to on an earlier subsection, the Minister indicated the way in which that kind of case should be treated; in my view what he indicated is the correct way in which it should be treated. But what concerns me is that the wording of subsection (3) could well prevent it being treated in that way because it seems to me to say that if the inspector makes a determination, it shall not be called in question in any proceedings. That would appear on the face of it to bind somebody who was notified but who failed to give notice of objection or somebody who was not notified and, therefore, could not give notice of objection. If the determination by the inspector shall not be called in question in any proceedings, that seems to me to be much wider than the intention expressed by the Minister. I think it might be advisable to limit that to the sense that it shall be binding on any person so notified who failed to object. I think that the wording of the subsection goes further than the intention as expressed by the Minister.
Certainly the subsection here effectively closes the door to any machinations that people might want to engage in for delay or avoidance purposes. If the case should arise that where some wrong was done to a person by virtue of the tightness of this subsection the Revenue Commissioners would not deprive that person of whatever right he would be entitled to in natural justice. The courts would soon put the matter right.
Could the courts put the matter right in view of the terms "shall not be called in question in any proceedings"?
There will have to be substantive new proceedings for declaration.
I will look at the wording between now and the next Stage. I would not be disposed, as I am sure the House will appreciate and will support me in this attitude, to making an amendment which would facilitate avoidance or undue delay in making payment of taxation which would be due or to opening an avenue of opportunity for a third party, at the behest of the people involved, to lodge an objection which could call the determination into question. I am sure nobody in the House would want to have any of these avenues opened. If any wording can be used, which would meet the objections which have been raised, I would be only too happy to introduce them as long as they have not got any undesirable consequences.
I appreciate that but I would like to add that it seems to me that the purpose entailed in this subsection is to bind a person who is notified of the intention to make a determination and who has not indicated objection. I think the subsection could be worded to bind a person to those circumstances. Whatever administrative difficulties may be involved I do not think we should contemplate trying to bind a third party, be he trying to avoid liability for tax or not. To try to bind a third party, who has not got notice of the proceedings, seems to me to be going beyond the bounds of equity and is not something that this House should try to do. I am not at all sure if it could be successfully enforced but lest it could be and lest anybody be put to a great deal of trouble and expense in trying to prove it, I think we ought to try to ensure now that we are not trying to bind a third party who has not been notified of the proceedings. I have no doubt at all that when the matter is examined further it will be possible to draft this subsection in a way that will achieve the objective of binding a person who has been given notice and has not objected to the proposals but not binding somebody who has not been given notice. That I think is what we should be trying to do.
I do not disagree with the sentiments expressed by the Deputy and I am sure the Deputy would not disagree with the sentiments that I have expressed. We would not wish to have any scheme which would enable some person to assist a second party to engage in a tax avoidance or delaying device. I will have a look at it in the light of what has been said.
They will be paying interest anyway.
If they are liable for tax I suppose they will be paying interest. That is a question on a broader issue which will come up on a later amendment. I would refer the Minister now to subsection (5); it is brief so with your indulgence I will read it:
All persons to whom notices have been given under subsection (1) may take part in any proceedings under subsection (4) and in any appeal arising out of those proceedings and shall be bound by the determination made in the proceedings or on appeal, whether or not they have taken part in the proceedings, and their successors in title shall also be so bound.
I take it that again the intention here is to deal only with those to whom notices have been given. Admittedly, the point I am about to raise may be remote but the Minister will know from his experience in his legal practice that the kind of case I am about to mention can happen.
I am thinking of the binding of the successors in title. I understand why it is necessary to try to bind them but there are cases where a person who is entitled to take part in proceedings, be they determination by the inspector or the appeal, does not. It could be for a number of reasons, including physical or mental weakness, or there are other circumstances one could visualise. I would like the Minister to examine the possibility of a rewording in cases where there was a manifest injustice being done to the successor in title, so that he would not be bound. It may not be a usual situation but neither is it unknown that such a thing can happen. It would be worthwhile, in the interests of equity to try to ensure that in such a case the successor in title would not be so bound. Furthermore, I would like to refer to subsection (7) which reads:
An inspector may by notice in writing require any person to give, within the time specified in the notice, such information as appears to the inspector to be required for deciding whether to give a notice under subsection (1) to any person.
It is a small point but I suggest that the second line should read "within such a reasonable time as may be specified in the notice" to give some opportunity to the taxpayer not to be put in an impossible position. I appreciate that it would be most unusual for the inspector to put the person in an impossible position, but nevertheless such a situation can arise. If we can cover it here I think we should do so. I do not know if the Minister wishes to comment on what I have said so far. I have another point to make on this section which I am trying to locate at the moment.
Is this to be a personal notice to the person to whom the notice is directed? That does not appear clear from the section.
It deals with notice.
Section 21 (7) states:
An inspector may by notice in writing require any person to give, within the time specified....
Is it a personal note to that person?
I think there is a section later on where the Minister proposes to amend the existing provisions relating to notice, in general all notices under the Income Tax Acts.
I sometimes wonder if we are right in this modern day and age in spelling out so much in legislation at all. Indeed here is something which the courts would regard as being appropriate and inescapable. Successors are, of course, always bound by the same rules as apply to their predecessors. Successors step into the shoes of their predecessors. It could be argued fairly strongly that there is no need to cite in a Bill that successors are bound by obligations which lay upon their predecessors. They step into the shoes with the same rights and obligations. However, I understand the reason why the parliamentary draftsman considers it appropriate to use this language to ensure that the situation would not arise in which a company might pass on its interest to a related company which might then proceed to challenge the interpretation which had already been made. It is to ensure that we do not have a situation in which you have indefinite postponement by passing on interests to successors that the section is spelled out in this way.
As regards subsection (7) there is the legal principle that the executive is deemed to act in a reasonable way. If the executive were to act in an unreasonable way, if the time specified in the notice was unreasonably short, any person who was affected by such unreasonably short notice would have a very good case for obtaining from the court an order which would require longer notice. I cannot think of any case offhand but I stand in the presence of learned senior counsel who may be able to bring some cases to mind. There certainly have been cases where the courts have ruled that unreasonable time had been given to people both in the company law and in the tax law. I would say that the effect of section 7 would be that if insufficient notice was given, if unreasonable notice was given, it would be open to any offended party to go to court to have the notice quashed. I suggest that might be the best way to leave it. If we do not do it that way we have to spell out everything in the legislation. I believe in simplistic legislation rather than trying to produce legislation which covers any and every possibility.
Where there are time limits put in a section of an Act there is usually a section that allows for reasonable extension of time.
That was the next point I intended raising.
That is in the landlord and tenant code. It is in everything, in common law and in equity there is the reasonable time principle in vendor and purchaser. If there is a time limit for anything there should be a clause to extend the time and that should be specifically written in. It is a safeguard to the citizen. It is an ordinary equitable right which should be written into an Act.
The next point I was about to raise. It seems that what Deputy Esmonde says is correct and that there ought to be some provision for extension of time in reasonable circumstances, a provision analagous to those contained, for instance, in the rules of court where time limits are laid down for various steps but there is provision for an extension of time where there is a reasonable ground for getting that. The Minister is as familiar as anybody else in this House with grounds which are reasonable and which would in equity require an extension of time. The section as a whole ought to contain such a provision relating particularly to the time limit of 21 days referred to earlier and also to the time referred to in subsection (7).
I think a lot of this trouble emanates from the provisions under subsection (1). Subsection (2) gives a person a time limit in which to do something. The section could state that the right of the person to do something within 21 days should be spelt out clearly on the notice given under subsection (1). A lot of people do not read the small print and that would be an ease to the taxpayer and to the general situation. There should also be the reasonable time extension.
In fairness to the Revenue Commissioners I think, speaking off hand that they normally place the time limit involved in fairly large print on their notices.
There is quite a bit upon the notices.
There are other things also.
Subject to there not being any fixed periods of time because when you have that and somebody errs on the time then the question arises as to whether or not it is reasonable to extend the time. I have always been interested in the capacity of the House to talk about matters which may never arise. Having regard to the fact that we do not know of any case of the avoidance practice which we are now preventing already having taken place I think in fact we are arguing about a situation which is never likely to arise. If it does arise it will be dealt with in a reasonable manner and the House may be assured of that. I am sure that if anybody is harshly treated he will not be long in drawing attention to his plight and suitable amending legislation can be introduced if necessary. As I have said, I think we are dealing with an unreal, unlikely and improbable situation.
It may be that such a case, as the Minister said, has never arisen so far but there are four sections in this Bill devoted to it. Therefore, the Minister must consider that the matter is of some importance. Assuming that to be true, I do not think it is sufficient to say that if such a matter arises it will be dealt with reasonably by the Revenue Commissioners. I do not think that, as the Bill is drafted, we are giving them power to deal with it in any way. In regard to the 21 days I doubt if, under this section, the Revenue Commissioners will have power to extend the time beyond 21 days if for some reason they would in the normal way give that extension.
That is the difficulty and that is what is worrying me. I do not think they have a general power as such.
Another subsection which said that in regard to any time limit imposed in the section the Revenue Commissioners could or should grant a reasonable extension of time in circumstances where it was reasonable to do so, would probably meet the case.
This would open up, I am sure, a whole horde of new applications for extensions in times.
Even if it did and if the Revenue Commissioners refused them in most cases and somebody wanted to contest that he would be succeeding in establishing that he would be given an extension of time to give notice of appeal. Nobody is going to go to that trouble and expense unless he thinks he has a case. The fellow who has no case and is using it to stall, if he applies to the Revenue Commissioners for an extension of time and does not get it and then has to consider going to court to establish that this was unreasonable— there is the odd case where it might be worth his while to pursue the matter as far as court—is unlikely to go as far as appealing to the court if he has not a good case.
I will look at it.
If the House agrees I suggest that we take the Second Schedule together with this section because they are related.
Would the Minister consider taking the section when we get to the Schedule, if that is possible, rather than take the Schedule now?
We would need to take the section now and also take the Schedule now and debate them and then vote separately on the Schedule.
My difficulty is that I may be holding the Minister up for a considerable time on it because I have a number of queries.
If the House agrees to pass the section as it stands without debate there could be a debate on it when we reach the Schedule.
That would suit me. I agree that the two have to be taken together and the points I want to raise refer to both but primarily to the Schedule. If I am free to raise it in regard to the section and the Schedule together I am quite happy.
Acting Chairman
If the section is passed the House can debate the section when we reach the Schedule.
This section ensures the farm buildings allowance granted under section 22 of the Finance Act, 1974, will apply for corporation profits tax purposes as well as for income tax purposes where the relevant expenditure is incurred by a company which is carrying out farming. The extension of the allowance to expenditure incurred on or after 6th April, 1971 and the new initial allowance of 20 per cent which is being provided in section 18 will also have effect for corporation profits tax purposes.
I do not think there can by any objection to that. I will fall out with the Deputy if he disagrees with that.
No, the objection might arise in regard to the provisions of last year's Finance Act in so far as they are too limited in recognising limited companies operating farms but that is a matter I am not free to raise on this.
Last year's Act was a first step in the right direction.
That is why we are amending it so much this year.
I move amendment No. 6:
Before section 24 to insert a new section as follows:
"24.—Corporation profits tax shall not be chargeable in respect of the period beginning on the 1st day of January, 1975, and ending on the 31st day of December, 1975."
The object of this amendment is to do what we had urged should be done before the budget and during the course of the budget debate also, that was, that in recognition of the grave difficulties in which industry and business generally finds itself, difficulties recognised by the Minister in other provisions in the Bill to which he referred earlier as costing the Exchequer £12 million, we ought, as an emergency measure, waive corporation profits tax this year.
The Minister did recognise the difficulties arising for industry and business generally, difficulties which have led to considerable loss of employment and which have caused a number of firms to go into liquidation and of many others to the verge of liquidation. These difficulties are usually referred to as "cash flow difficulties". In effect, what that means is that these firms simply do not have enough money to pay their way. The reasons for that are fairly numerous but they are tied in with a high rate of inflation, the high cost of raw materials, particularly imported raw materials, some of which had to be purchased to cover a fairly long period so that there was a high stock rate at a very high cost, combined with the drop in demand which meant that not alone were there smaller or no profits to finance business, but the strain on financial resources was even greater than it would be in normal times because these extra large stocks, at very high prices, had to be held for so much longer.
There are other factors which have operated to produce this situation. The fact that such a situation exists is not in dispute at all; it is recognised on all sides that this is so. The only question that arises is what can be done about it. The Minister may say that the provisions he has in his Bill to allow for certain relief in cases of this kind, because of inflation in the value of stock meet the situation. I do not think they meet the situation at all. In fact, according to the CII, the sum required last autumn was £63 million; the figure provided for the reliefs proposed by the Minister is £12 million. I do not necessarily agree with the CII figure. But whatever validity there was in the figure of £12 million being provided by the Minister, that has gone by the board by the action of the Government, subsequently, in increasing social welfare payments and imposing on business generally a bill approximately twice the amount of the £12 million relief that the Minister was purporting to give. While I believe there was a very strong case for waiving corporation profits tax this year— as we proposed before the budget— that case has been immeasurably strengthened as a result of the additional imposition on business arising out of the increased social welfare payments.
I believe the consequences of doing that would be not alone to enable most of the firms which are in danger to survive and to maintain employment, which is gravely in danger at the moment, but would also give them an opportunity to raise the level of their activities. This is something, as I said on an earlier section, which is vitally important to our whole economy. If we are to get growth in our economy these firms have to be got moving. At present most of them are simply trying to survive from day to day. I do not say that the waiving of corporation profits tax this year would, of itself, solve all the problems. Certainly I would not maintain that. But I do say it is a minimum step required if we are to save most of these firms, if we are to get them moving so as to stimulate growth in our economy, if we are to retain the employment which they are giving at the moment and, hopefully, produce jobs in some of these firms to replace those where staff have been made redundant.
Of course the Minister will say that it will cost so much. I do not know what figure he will put on it but I would roughly estimate in the region of £25 million, and ask where are we to find the money? We are trying to patch up the budget the Minister introduced which, in our view, was wrongly conceived. Admittedly, a patching-up job is never as satisfactory as one that is done from scratch. We did suggest, before the budget, how this whole thing might have been tackled. The whole budget framework that we suggested was not adopted by the Minister but part of that framework we suggested is what is involved in this amendment—the waiving of corporation profits tax this year. To try to graft that on to the budget framework produced by the Minister is far less satisfactory than if it had been done as part of the overall framework of the budget. Were it done in that way it would not have presented the same difficulties of finding the money. Nevertheless, the matter is of such grave importance—in fact it is very close to top priority in economic management of the country's affairs at this time— despite the cost, the measure has to be contemplated because failure to do so is not alone going to have the consequences I indicated of further loss of employment, more firms going out of business and no move towards growth in our economy, but is going to create the vicious spiral whereby, as these firms go out of business and their employees are thrown on to the unemployment heap, the demands on the Exchequer will increase and the wherewithal to meet these demands will get smaller because the economy is shrinking instead of growing.
Viewed from any point of view, if we are to get out of the economic difficulties in which we are today and if we are to attempt to combat inflation, we will have to get growth back into our economy.
Anybody who accepts the proposition that getting growth back into our economy is a top priority will admit that one of the first steps we have to take to do that is what we are proposing in this amendment. There is an onus on people who do not accept that to tell us how they think these firms are going to overcome the acknowledged difficulties in which they are. The case which existed for this before the budget has been strengthened enormously by the fact that the Government have imposed on business generally a bill for increased social welfare approximately twice the proposed relief the Minister intends to give under this Bill. So the position of those firms is worse after the alleged relief than it was before. In those circumstances there is no case in logic for resisting this amendment. I would suggest that we will almost certainly find that if the Minister is not going to accept the amendment, the case he will make will be based on inability to provide the money rather than any argument in logic that it is a bad idea or that it would not assist our economy.
I do not apologise for refusing to accept an amendment because it would mean a loss of money to the Exchequer when increasing demands have been made upon the Exchequer for more and more money for a multitude of services from the education of children to the catching of fish. The Exchequer has no source of money other than taxation or foreign borrowing and foreign borrowing has already reached its limits. We cannot compel the rest of the world to give money to Ireland to service Irish industry and Irish comforts. It is high time the old attitude that there was something wrong with the Minister for Finance because he said he had not got loads of old cash to hand out was abandoned. There is nothing disgraceful, in a time when the resources of the western world have shrunk, in a Minister for Finance saying that resources are not as plentiful as they used be.
(Dublin Central): Generate more resources. There are two ways of doing that.
We will come to the question of the generation of more resources in a minute. We are one of the few countries in western Europe that will have a growth rate of 1½ per cent this year. Most of them will not reach that——
I wish the Minister's forecast were right.
——with the exception of Germany and Holland. Several of them will have a decline, including Britain and the United States of America. Let us come to Deputy Colley's amendment and see how little thought out it has been. He has put down an amendment which would give the advantage to banks—and they are not in a loss-making situation; they have no difficulty in making profits even in these hard times—to insurance companies, to hire purchase companies, to those engaged in entertainment, to those engaged in various profitable services.
All these would get the benefit of this amendment, people who do not need it, people who are flush, people who have been making considerable profits far above what can be earned currently in the manfacture and construction industry who are the people to whom very properly we have given assistance this year. In addition to that, a number of foreign concerns here, concerns which operate in this economy and have very useful industries going here, would get the benefit of this exception as far as Irish taxation is concerned, but it would be of no assistance to them because any credit they would get under the Irish corporation tax system would be noted by their home-base in Britain or elsewhere and they would be taxed in Britain or elsewhere. What we would forego here in Irish revenue would then operate to the benefit of the Exchequer in the home country of the corporation concerned.
Quite clearly one has to reject this amendment as one which would confer immense tax benefit on people who did not need it and on people who would not generate one new job by virtue of getting the tax concession and by virtue of the fact that the Irish Exchequer would lose while foreign Exchequers could gain. The yield from corporation profits tax in 1975, before allowing for the stock relief of £12 million which we gave in the budget, would be £28 million. The stock relief which we are giving in 1975 amounts to £12 million and £7 million in 1976, a total of £19 million. Deputy Colley suggested that we should give total relief across the board of corporation profits tax to many people who do not need it, as I say, because they are making good profits and they will not generate new jobs if they get tax relief. Presumably he would also wish to give the relief which we have promised to unincorporated manufacturers, and vintners, and so on, who would get similar relief to that already given to companies.
Again, that would not be possible except in the way in which we have done it, without involving their whole personal tax position because, in such cases, in the case of individuals, you have to take account of their total personal tax position. I am sure the Deputy is not suggesting that these people should get total tax relief so, unless you associate tax relief for the purpose of generating liquidity in relation to stocks or for some other hard and calculable business purpose, you enter into a multitude of difficulties which would lead to unnecessary tax relief being given to people who, on receiving it, would not generate any additional employment by virtue of having it.
I do not want to be unfair to Deputy Colley. I know he intended well by putting down the amendment but I am sure he will see that it would not operate to the advantage of those sectors of the economy which are in difficulties because of inflation in the value of their stocks and general problems in relation to liquidity. It would operate instead to the advantage of the very sectors which have done best out of the present troubles.
The Minister is being very blasé in shooting down the arguments in favour of this amendment put down by Deputy Colley. He opened specifically by saying that as Minister for Finance he felt there was no need for him to apologise for refusing to accept a loss of money to the Exchequer. There is no getting away from the fact that there would appear to be a net loss to the Minister and the Exchequer arising from this amendment. One has to accept that, but in actual fact is that the position? The case in support of this amendment is the likelihood and the possibility that by excluding this corporation profits tax during the calendar year this would enable a number of firms to increase their liquidity and to generate further jobs.
The creation and maintenance of employment is the motivation behind the submission of this amendment. The Minister very conveniently picked out the particular institutions which are fair game in this respect, banks and insurance companies, to give the impression that Opposition spokesmen were trying to save the big fellow. I have had many discussions recently with people in various sectors of employment who are fearful for their continued employment. At present they are working on a three-day week and reduced employment. In all cases, the firms paid corporation profits tax last year and a number of them are seeking Government aid under one heading or another at present, mainly from Fóir Teoranta. If the Minister thinks that it is good economics to collect this money for the purpose of passing it on the ICC or to Fóir Teoranta in order that they will hand it out to keep institutions going that is a false economy. By that I mean that it undermines the confidence in a number of those institutions.
I personally have not been approached with a view to getting Fóir Teoranta to assist any of the banks or insurance companies. The Minister referred to them as multi-nationals. If we are to continue the maintenance of existing employment or generate new employment, then the companies on which we rely for this employment should not have to pay corporation profits tax this year. It would be a great boost to the propaganda of the IDA, who are trying to attract new industries into the country, if they could say that the Government in their wisdom have decided to forego corporation profits tax this year. I do not accept what the Minister says in regard to this amendment being intended to provide a relief for people who do not need it. When one endeavours to introduce a relief in any instance it is very easy to point the finger at some institution or group of institutions who would not appear to need this relief. Even taking the example of banks, which are not a popular institution to which to give a relief, the existence of additional moneys in the coffers of the banking institutions might make it easier for the general public and the small employer to continue in business and tide them over a rough period.
The Minister mentioned the distributive trade. The "distributive trade" is a very broad heading. I doubt if anyone in that trade is making a great deal of money at present.
We have the liquidity funds.
Who has them? The distributive trades? I think the Minister is not properly informed. Does he know the difficulties involved in the collection of money at the moment?
Certainly not at the retail level. It is the supermarkets, which can take in goods at one end of the day and hand them out at the other, which would get corporation profits tax relief under the Opposition proposal.
(Dublin Central): There is a liquidity fund in all sections of business today.
It would appear we are wasting our time in trying to get a message across to a Minister who has his eyes and ears shut to the existing situation.
When I mention the distributive trade the Minister thinks immediately in terms of supermarkets. I know there are very few others in the retail distributive trade from whom he will collect any appreciable amount of corporation profits tax because the situation is that the people at the retail distribution level in what was traditionally known as the family business, are worried about the delay on the part of the Department of Social Welfare in introducing some scheme of social welfare benefits for the self-employed which was promised but on which no progress has been made so far.
The difficulty is that the Minister pictures in his mind's eye in relation to this amendment and to the section as a whole a specific institution. He says: "I am not going to let them off the hook". That is what Deputy Colley's amendment is about. The Minister forgets that behind that picture he has of a particular individual who, as he put it, does not need the relief, there are a great many people who are giving worthwhile employment thereby enabling people to pay income tax, which I fully appreciate is required in order to keep the country going. The point I am endeavouring to make—obviously I am not getting it across to the Minister— might be best explained by reference to statements made on a programme recently on the motor assembly industry in which I participated. The trade unionists on that programme drew attention to the fact that an injection of £1 million from the Exchequer into that particular sector of the motor assembly industry would keep the workers in employment, enable them to pay their PAYE and help to keep the country going. That £1 million would recoup a large amount of the money whereas because of the non-injection of that sum 900 people would go on the unemployment list and would have to receive social welfare benefits and they would then gobble up, in a non-productive way, that £1 million. I am not suggesting that that is the ideal solution but it is an example of what I am endeavouring to illustrate as the motivation behind this amendment.
There is an old maxim that a stitch in time saves nine. We can talk about a figure of £25 million or £28 million but I believe, with the way business is going, it is one estimate which will not be exceeded in any case. The projection of figures which would have gone to the Minister for Finance in relation to the out turn of corporation profits tax will not be underscored this year. If the Minister maintains his attitude in this regard we will achieve the figure of £28 million about which he has been speaking. On the other hand I feel that by foregoing that figure of £28 million, or more likely £20 million, he could be generating more employment and this in its own way, through the PAYE and other channels, would bring in money. I am satisfied that if he gets £20 million, or £24 million as Deputy Colley says, when he does his sums eventually, he may find that the loss of revenue from income tax from the workers who will have been disemployed and the payment of unemployment benefit to the people who will be affected will more than exceed the amount of money he thinks he will get out of it.
I do not think that the objections I have raised have been adequately answered. There is a huge variety of companies which are not engaged in the manufacturing and construction industries, who have handsome profits and are not in need of tax relief but who would get tax relief under these proposed amendments. There is no justification for that. Deputy Lalor argued well saying they would hand it back but that is not the way people who make profits usually perform. They do not suddenly become benevolent and hand back all the extra profits they have made. It does not happen that way.
Maintaining the corporation profits tax on people who are making profit without hardship, difficulty or disemployment, means the State is in a position to provide assistance for industries which are in difficulties. We are providing this year more exceptional assistance for industry than has ever been provided before both on the capital side in making future investment and on the provision of the loans and other aids to help them over their current difficulties.
The State's capacity to render such help would be diminished if it were to relieve from tax people who do not require that relief. Do you give tax relief to people who do not need it, who are not in difficulties, who are generating considerable profits? I do not think you do. I do not think it would be right. I would have the greatest objection on moral, economic and social grounds to giving tax relief to people who did not need it or to giving tax relief to concerns which are not Irish-based. The consequence of giving Irish tax relief to them would be that they would lose the credit in respect of Irish corporations tax and would have to pay more tax to a foreign exchequer.
Will that need not apply to the reliefs the Minister is proposing to give, anyway?
No, but the amendments suggested here would have that consequence. I do not think that Deputies opposite seriously think that I should give that relief.
(Dublin Central): The Minister knows perfectly well what the amendment is all about.
It means the giving of blanket and indiscriminate relief without regard to the difficulties of concerns. We have given relief to people in manufacturing, construction and related companies; this would include people like builders' suppliers who may have considerable stocks. That would be one of the interests who will receive relief from our recommendation. There are two measures which are pertinent. First, the Confederation of Irish Industry agreed that relief under this heading should be selective and of benefit to the groups and sectors that were in trouble. We did that. Secondly, when we did that we were congratulated on the speed with which we had given it. It was in the newspapers the morning after the budget. As the Deputy will know, public comment the morning after any budget has little inclination to be generous. The papers congratulated us the morning after the budget on the relief which we had given to business in respect of profits and liquidity. That happens to be the remarks of those who are best in a position to judge, those people who are in the field, who have an intimate understanding of the problems.
(Dublin Central): Was that at the ard-fheis?
No.
I do not think the Minister would be quite so enthusiastic if the remarks were unfavourable.
I am like anybody else and the day that I am not enthusiastic I would see a reason to worry. I am sure the Deputy would not blame me for that. These are the realities. I would refer the Deputy to the business page of The Irish Times of 16th January last where we were commended for the speed with which we had provided this relief and the nature of the relief given. May I say, the commendation came from somebody who has an interest in banking circles.
It was recognised by him that relief had been given to the areas that needed it and further relief would not be warranted. If in the light of experience we find that further assistance is needed in different sectors that relief will be forthcoming. Fóir Teoranta have given relief on an unprecedented scale to a number of firms in difficulty this year. It may be necessary for them to give relief beyond that which had been anticipated in the budget and such relief will be given. That is the way to do it. You do not proceed to provide life-savers for everybody who goes for a swim in the ocean. You have a number of life-savers available to save anybody if he is drowning and that is what we are doing. We are providing an adequate number of life-savers and we are also providing enough money to train people to swim properly in the commercial and economic sea. We are providing the kind of support that is necessary without engaging in the irresponsible act of giving tax relief to those who are in a very strong position indeed to bear the tax which they are being asked to pay.
In all situations there are people who do better than others. There are some groups in business who, in times of difficulty, can make exceptional profit and we have such groups at the present time. The amendments proposed by Deputy Colley would give relief to all these groups making unusual and exceptional profits by any standards, and certainly in comparison with profits at the moment. This relief is not warranted and if given would only diminish the capacity of the State to come to the assistance of those really in need. I accept that the amendment was tabled in good faith but I would ask the Deputies to see the pitfall into which they would have fallen had I not warned them of the dangers into which they were proposing to jump.
The basic case the Minister is making is that the amendment proposes to use an instrument which is a blunt instrument and is not sufficiently refined to help those who need it. That is the basis of what he is saying. It is very significant that he is not disputing the need for this assistance to some of those who pay corporation profits tax and what he is concentrating on are those whom he says do not need it. Let us have a look at this situation. Is the Minister saying that the bulk of those who pay corporation profits tax do not need relief, and are not in the difficulties which I described earlier? I doubt if he would attempt to assert that. In fact, he should know that the bulk of those who are liable for corporation profits tax are precisely the kind of people I have been describing. I will develop that a little more in a moment. I want to put it to the Minister that if this amendment is a blunt instrument and is going to give relief to those who do not need it, then to apply corporation profits tax is a very blunt instrument indeed and is going to try to collect corporation profits tax from the bulk of the taxpayers involved who do need relief.
If we are dealing with two blunt instruments, the one we are proposing is far less blunt than the one the Minister is proposing to apply, which is to apply corporation profits tax to people, the bulk of whom are in dire need of assistance, assistance, which they are not getting.
The budget provided the refined instrument to give relief where it was needed.
I am sorry. That is not so, first, because it is too restrictive as regards the sectors and, secondly, because having purported to give it, as the Minister well knows—we made this point before and he has not commented for good reasons—he then, having given it, comes along and takes twice as much back in the form of increased social welfare contributions. What is the position of those firms——
The Exchequer does not see that money.
(Dublin Central): The accounts of those businesses see it.
The reality of the situation is that if you are running a business and are suffering from liquidity problems and you will get some relief as a result of the budget—certain sectors will get it. Let us assume the relief in the case of your firm amounts to £10,000. If you find within a few weeks that added to your ordinary outgoings is an additional bill of £20,000, what is your situation then? Will you say, "Well, yes, I am getting relief anyway. I do not need anything under corporation profits tax. I am getting this nice, refined, selective, relief given in the budget"?
Does this bear any relation to reality? So far as those firms are concerned their position is now worse than it was when the Minister announced the introduction of these so-called refined reliefs. Is it not true that in the case of corporation profits tax the bulk of the people affected are those who need assistance, who have liquidity problems, people who have laid off employees or who are trying to hold on but will be forced into laying off employees if something is not done about this situation?
I do not think the Minister has really grasped either the enormity of the problem for those who are affected by it or the extent of it. I think this because, in the reliefs that he proposes in another section he is confining them to certain sectors, broadly speaking, industry, building, construction and there is a third sector, those who are engaged in related industries. They are the categories.
When Deputy Lalor was speaking the Minister intervened to suggest that people in the distributive sector are not affected. The fact is that wholesalers are at their wits end at the moment. One of their problems, as I am sure the Minister is aware because I am sure they have been making representations to him, arises out of the payment of VAT every two months and being forced by the present economic climate to extend credit for three, six and more months. The situation has got much worse as regards the period of credit that now has to be given as compared with what it was a few years ago. It is a reflection of the economic difficulty. These people are, therefore, in a far worse liquidity position than they ever were before and some of them are in an acute situation.
There are a number of people at the retail level who are in grave difficulties for the same reason. The whole downturn in the economy is causing this. It is displaying a failure to grasp the extent of the problem for the Minister to suggest that the sectors really concerned are those mentioned in the sections later on in the Bill where it is proposed to give some relief. The extent of the problem, I suspect, is not realised by the Minister. It extends throughout the whole economy.
There is another aspect of what the Minister said that disturbs me. When he talked about banks, insurance companies and others he was, as Deputy Lalor said, being selective in trying to pick out the big people and suggesting we were trying to get relief for them. There is more to it than that. I strongly suspect that the Minister has not realised the contribution which the service sector of our economy make to employment and to growth in the economy. It is very important that this should be understood.
Industry and manufacturing is very important but make no mistake about it the service sector is vitally important. If that is in difficulties that is reflected immediately in unemployment, in the contribution made to the Exchequer from taxes and in the overall absence of growth in our economy. It is important that it should be understood and it is vitally important that it should be understood by the Minister first, that the parts of the economy affected by liquidity crises are a major portion of our whole economy, spread throughout the whole spectrum and, secondly, that in many cases the problem is absolutely acute and the people are at their wits end to know how they can deal with this.
I said earlier that I did not think that this amendment would solve all the problem. The problem is far worse than that. It could not be solved just by this step. I believe, however, that this step would make a very considerable contribution towards solving it. The Minister has referred to the kinds of business which would not need relief. I accept that and I recognised it when I put down the amendment but I also recognised that the collection of corporation profits tax this year would do far more harm than would be done by giving relief to a small part of the body involved who do not need such assistance.
In so far as there is any validity in the case made by the Minister the reverse side of that argument operates against the Minister far more strongly than it operates against this amendment. The consequences of doing this and the consequences of not doing what we are proposing are worth considering a little more. If we do not apply this amendment the Minister can be as sure as he is sitting over there that more people will be thrown out of work. I cannot put a figure on it but there will be a substantial number more thrown out of work. A substantial number of businesses that are basically viable will be closed down and will never open up again.
This is an emergency situation and it requires emergency measures. I do not pretend that waiving corporation profits tax is the kind of thing that one could contemplate in a normal situation but we are not in a normal situation. We are in an emergency such as we have not experienced in this country certainly since the last Coalition were in office. It is a real emergency situation with 103,000 unemployed. The Minister has referred to a growth rate of 1½ per cent, but we will not see it unfortunately and to the extent that we will see any real growth in the economy this year it will largely come from recovery in agricultural exports. In the rest of our economy the situation is not heartening. It is anything but heartening and it is getting worse. That is why in this emergency situation emergency measures are needed. It is not sufficient to say if you do this some sectors that do not need relief will get it. By all means, if the Minister can devise a method that will prevent such people getting it, but will give the relief to the bulk of corporation profits taxpayers who need it, we will go along 100 per cent with that. The Minister should not try to tell us that his proposals further on in the Bill are doing this. They are not. They are too restrictive.
The real shot in the arm that is needed is the waiving of corporation profits tax. The Minister should not think small in this matter. If he cannot devise and if we cannot devise a more refined instrument for doing this is he going to throw away the benefit of it and the shot in the arm for the economy and the effect it can have on employment? Is he going to throw it away rather than allow some people to benefit who should not benefit?
The Minister cannot afford to be niggling. He has to take the broad view of the economy and get it moving. This is what is wrong. We are not doing anything to get our economy moving. We are tinkering with the situation and saying that this group or that group might get benefit when they are not entitled to it when the whole sector involved is at its wits end. We have to devise emergency measures to get the economy going. This amendment will not perform a miracle. We would not claim anything like that but it is the kind of action that is needed and the kind of action the Minister should be taking. I urge the Minister to realise the extent and acuteness of the problem, the grave urgency and necessity for emergency action—not tinkering and holding back because some small groups would gain when they should not. That is not what we can measure now. What we have to measure is can we get this economy going; can we get these firms on their feet again creating employment. That is what we have to measure it against.
The Minister spoke about the people who complimented him last September and December on the action he had taken but a number of firms have gone out of business since that period and unemployment figures have risen from around 77,000 in September to 103,000 today. He should not be complimenting himself; he should be taking action to get firms going. An acceptance of this amendment is one way he would be helping the firms to have the liquid resources to keep going. Firms who go to Fóir Teoranta are being told they have no money to help them.
We heard at Question Time today about a firm they were trying to rescue in Offaly. That firm had been to all the financial houses to try to keep going. Deputy Colley is to be complimented for bringing in an amendment like this to help firms in need. It will give them the resources to try to keep going. They cannot increase production because of the amount of money that is required. Any increase demands a big amount of capital and in most cases this is borrowed capital.
The Minister said he was giving relief under section 33 where they have not to pay tax on increased stocks for two years but he is still asking for the money. In many cases firms could be showing a good profit but it would be on stocks. When there is inflation at 25 per cent the normal stocks of a firm of about £100,000 have gone up £25,000 in the past year. That is a good margin of profit; it is the same amount of material that is there but the value is £25,000 extra. It is the same with a farmer who still has the same number of cattle on his land but their value is much higher at the end of the year. It looks grand on paper that he is worth a lot more and made a great profit but in terms of real profit it amounts to very little. He will need money to keep this extra value of stock going. Firms are finding it hard to get this extra money. We should be giving them a shot in the arm, encouragement and confidence. We should indicate to them that the Government do not want to tax everybody out of existence. A Government needs money to keep going but we must ensure that industries and businesses have sufficient money.
The Minister said that some businessess and industries would be making colossal profits and they would be getting away with murder. The civil service should be able to devise some way that the wealthy firms that are making big profits would pay the corporation profits tax at a certain level. He should make sure that the business is viable and that there is no great risk in taking this corporation profits tax. I am sure the Revenue Commissioners would be able to devise some amendment that would do that. The bulk of our industries need encouragement, incentive and help to keep going.
I do not know whether the Minister has a heart when he sees the unemployment figure rising. He may say it is static but it is at 103,000. Every day more industries close down, and businesses are in difficulties. In every publication of Iris Oifigiúil two pages are devoted to firms going into voluntary liquidation or ordinary liquidation. In the Evening Herald this evening I read that 200 assembly workers would lose their jobs. This is common. This amendment would help industries.
Deputy Colley has put forward a very genuine amendment that would do something for the economy, for those firms and give them the encouragement to try to keep going, bringing down the present unemployment figures.
Perhaps this discussion which has now become wideranged might be more appropriate to section 31 where we provide the relief announced in the budget to concerns in difficulty, relief which would apply to Irish resident companies engaged wholly or mainly in manufacturing, construction or farming, or in the sale of machinery and plant, or goods to persons, companies or individuals for use by those persons for the purpose of trading activities falling wholly or mainly in these sectors of manufacturing, construction or farming. Those are the areas that require relief. It is instant relief, relief that became available to companies in January of this year and they have already taken it up. The amendment here would not provide relief for anybody until 1976.
We have had a lurid picture of collapses from the other side of the House attributed to lack of tax concessions in 1975. A tax concession is useful only to a person who has made a profit and is liable to tax. It is no use in a loss-making situation. What is of use to companies in a loss-making situation, about to be in a loss-making situation or which would be in a loss situation because of tax liability, is the kind of help that we gave on the 1st of January of this year and applicable to people who have to pay corporation profits tax during this year. The amendment here would apply to companies from 1975 onwards. That is of no use.
If the Minister wants to make it retrospective he knows we cannot move an amendment of that kind.
I am talking about the amendment before the House. I have given help where it was needed. We have been publicly commended for giving help where it is needed. We see no virtue in giving help where it is not needed, to companies that are making profits. Their accounts are available for anybody to read. Many of them are public companies, the kind of companies that Fianna Fáil would like us to assist. They have announced their profits; their full accounts are known. What is the use of giving relief to those companies that are making profits?
Are they the only ones paying corporation profits tax?
The kind of situation mentioned by Deputy Crinion—I do not want to mention the name of any firm or identify its locality—is the kind of situation which requires a cash injection. That means the Exchequer requires money to put a cash injection into companies which have not made a profit but have made losses. Let us look at this in a business like way rather than from the point of view of making political speeches which have little association with reality. We have given relief where relief is needed in the sectors where difficulties arose because of liquidity problems. We are not giving the relief where the relief is not needed because, were we to do so, foreign exchequers would benefit, companies that are making handsome profits in no difficulty would benefit and the Exchequer would have so much less to provide cash for the companies that are in difficulties. There are companies in difficulty because of the depressed world climate.
There is no use in our pretending here that we can take dramatic action to roll back the tide of world recession. In so far as we are members of the European Economic Community we have been pressing vigorously for reflationary action on the part of our European partners who are in a position to take it. As president of the Finance Council of Ministers I will be going to the United States of America shortly on a similar mission to encourage reflationary action and from there to other countries to encourage those who are in a surplus or healthy situation to take reflationary action. All of that may seem rather remote from a factory in the middle of the provinces that is meeting difficulties because it is unable now to engage in exports or to find a sufficient market at home but it is a lot more useful than giving away tax concessions to Irish companies that are in a generous profit-making situation, not affected by the world trend or giving tax concessions to British or American-resident companies which will be of no assistance to them because whatever credit they got at the expense of the Irish Exchequer would be taken away from them by the Exchequer of their home country. The reality of the situation, whatever may have been the intention of the Opposition, is that their amendment is of no assistance to the areas that need it. It would provide assistance in the areas that do not need it and it would provide it in 1976, by which time the world will be on an up-swing of economic growth and they will be less in need of it then than they are today.
To recapitulate, the bulk of the firms affected by this are firms that are in difficulty. The Minister has not denied that. He has tried to dwell on those which are not in difficulty but he knows these are a small minority. The relief he proposes in another part of the Bill is too little, is too restrictive and the Government have taken it all away again by imposing approximately twice the proposed reliefs in the form of increased social welfare payments. The requirements of an injection, and, indeed, an injection not just of cash but of confidence is the major requirement of our economy today. The Minister in what he has just said illustrated one of the major problems with which we are faced, with him and his colleagues in Government, that when faced with the real difficulties of a situation they tend to depend on international action.
International action is, of course, important and will affect us very considerably but there is action open to the Minister and to the Government within the bounds of this country and one of the actions open is provided in this amendment. He will not take it. He is now going to wait to see what the EEC and other people will do to get him out of the difficulties. That is not good enough. He has a responsibility, as the Minister charged with the economic management of this country, to take action himself where it is open to him. He is abdicating that responsibility. The point he is making about benefit accruing only next year is, of course, a technical point. He knows very well that we would not be in order in putting down an amendment applying earlier than this because it could involve repayments. But it is quite open to the Minister to do that and we would fully support him if he wanted to do it. He has made it clear he does not want to do it. If that is the way it is we will not waste the time of the House any further on it. It is important that it should be noted that when the Minister has a chance to benefit so many firms, the bulk of which are liable to corporation profits tax, he does not take it. He purports to benefit some of them in a restricted way under another section and then he takes the good away by imposing higher social welfare charges. He is talking about realities. The realities of the situation are, for any firm in difficulties, their position now and after they get these alleged reliefs is going to be considerably worse than it was before the budget.
(Dublin Central): Do companies that make substantial profits also benefit from the deferred £12 million corporation profits tax?
There could be some in the sectors of construction and manufacturing who could be making those profits.
Indeed, there could.
Tá
- Andrews, David.
- Barrett, Sylvester.
- Brady, Philip A.
- Brennan, Joseph.
- Breslin, Cormac.
- Brosnan, Seán.
- Browne, Seán.
- Burke, Raphael P.
- Callanan, John.
- Calleary, Seán.
- Farrell, Joseph.
- Fitzgerald, Gene.
- Fitzpatrick, Tom (Dublin Central).
- Gallagher, Denis.
- Geoghegan-Quinn, Máire.
- Gibbons, Hugh.
- Gibbons, James.
- Gogan, Richard P.
- Healy, Augustine A.
- Hussey, Thomas.
- Kenneally, William.
- Kitt, Michael P.
- Lalor, Patrick J.
- Lemass, Noel T.
- Leonard, James.
- Lynch, Celia.
- Carter, Frank.
- Colley, George.
- Collins, Gerard.
- Crinion, Brendan.
- Cronin, Jerry.
- Cunningham, Liam.
- Daly, Brendan.
- Davern, Noel.
- Dowling, Joe.
- Fahey, Jackie.
- Lynch, Jack.
- McEllistrim, Thomas.
- Meaney, Tom.
- Molloy, Robert.
- Moore, Seán.
- Murphy, Ciarán.
- Noonan, Michael.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond.
- Power, Patrick.
- Smith, Patrick.
- Timmons, Eugene.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Níl
- Barry, Peter.
- Barry, Richard.
- Belton, Paddy.
- Bermingham, Joseph.
- Bruton, John.
- Burke, Dick.
- Burke, Joan T.
- Burke, Liam.
- Clinton, Mark A.
- Collins, Edward.
- Conlan, John F.
- Coogan, Fintan.
- Cooney, Patrick M.
- Corish, Brendan.
- Cosgrave, Liam.
- Coughlan, Stephen.
- Crotty, Kieran.
- Cruise-O'Brien, Conor.
- Desmond, Barry.
- Desmond, Eileen.
- Dockrell, Henry P.
- Dockrell, Maurice.
- Donegan, Patrick S.
- Donnellan, John.
- Dunne, Thomas.
- Enright, Thomas.
- Esmonde, John G.
- Finn, Martin.
- Fitzpatrick, Tom (Cavan).
- Flanagan, Oliver J.
- Gilhawley, Eugene.
- Governey, Desmond.
- Hegarty, Patrick.
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Keating, Justin.
- Kenny, Henry.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lynch, Gerard.
- McLaughlin, Joseph.
- McMahon, Larry.
- Malone, Patrick.
- Murphy, Michael P.
- O'Brien, Fergus.
- O'Donnell, Tom.
- O'Leary, Michael.
- O'Sullivan, John L.
- Pattison, Seamus.
- Reynolds, Patrick J.
- Ryan, John J.
- Ryan, Richie.
- Spring, Dan.
- Taylor, Frank.
- Timmins, Godfrey.
- Toal, Brendan.
- Tully, James.
- White, James.
Section 24 continues for a further year the exemptions from corporation profits tax enjoyed by certain public utility companies, building societies and the Agricultural Credit Corporation. As the Minister knows, this is a temporary expedient which has been extended for a number of years. Could he give us any information as to what progress has been made that would enable us to do away with these temporary arrangements?
I hope the new company taxation legislation will be ready for 1976 and that will deal with certain aspects of the matter.
Could we take it that the corporations tax legislation will automatically do away with the necessity for this extension each year?
I do not want to be too precise, but that is the general intention at the moment.
And the Minister expects to have that next year?
Yes.
The purpose of this section is to enable notices and other documents relating to income taxation to be served on a company by leaving them at its registered office or place of business. It also makes specific provision for the service of such documents by post. The reason for this is that often the registered office is the part with which the company has least connection. Sometimes notices are served there and it is considered desirable that notices should be served at the place of business.
(Dublin Central): Do I take it this is registered post, which is very important? Do the Revenue Commissioners do this?
Notices issued by the Revenue Commissioners do not necessarily have to be sent by registered post but assessments are, as a matter of practice, issued by registered post. The registered office here is the registered office of a company which is on record in the Companies Office and quite often it can be the office of the solicitors or accountants who were originally associated with a company and I am sorry to say they are not always changed as frequently as people might change their accountants or solicitors. Sometimes the notices are received at the offices and are not sent on to the company as expeditiously as they might be.
(Dublin Central): I think it is desirable that these notifications, whether notifications of an appeal or not, should be sent by registered post. This would tighten up the procedure.
I would not like to reflect on the post office, but the fact that something is sent by registered post does not necessarily mean that it is delivered either. I agree there may be some record of a document being initialled and received, but on the present system the mere fact that a document would be received at a registered office of a company might not in practice mean that the document would come to the notice of, say, the secretary of the company, who might be far removed from the professional office listed as being the registered office. What we are doing here will be of more practical assistance than operating the old system. The only case where registered post is used is where there is reason to doubt that the document may be received.
I should like to ask the Minister what this amendment does and in what way does it change the situation. As a Deputy in a rural area I often come across the situation of a self-employed farmer or somebody who has never paid income tax, the character that very often the Minister for Finance is endeavouring to get after. Basically he will not pay any income tax because he never feels he has made enough money to make any return. Never having paid income tax, the situation is that when he gets an assessment from he ignores it and eventually he gets the sheriff's notice. At that stage he gets alarmed and goes to the local Deputy, who is not an accountant and the Deputy looks into the matter, which involves writing to the sheriff and then taking it up with the inspector of taxes. People move around more freely in a city and it may be more difficult to trace them. If a person neglects his business and if it deteriorates he has the option of appealing and substantiating the fact that he is not liable for the £100 income tax which has been demanded. Subsection (2) (a) states that any notice, form or other document may be delivered to the person or left at the person's usual or last known place of abode or place of business. The explanatory memorandum says that section 25 amends the provision relating to the service of notice and other documents relating to income taxation. I would like the Minister to tell me in what way does this change.
At present the notices served on a person may only be served at his last known abode. A notice may be served at the person's abode or place of business. If the Revenue Commissioners have any reason to be worried that a person is at either or both addresses they would take precautions to serve it at both. Many people dislike receiving notifications from the Revenue Commissioners at home and they prefer to receive them at their place of business. A company only receives notices at its registered office, the office which is recorded as the company's official office. Even though the company may have a huge plant and office in some well-known street hitherto the Revenue Commissioners could not serve a notice at the offices where the company carried out their work. In future they may do it there or at the officially registered office. It extends the places at which notices may be served, and to the extent that it is in the taxpayer's interest that he should be notified what the Revenue Commissioners intend to do, this should operate for the benefit of the taxpayer.
Are they served in both now?
If the Revenue Commissioners have constant correspondence at a particular address that would remain the address but if they have not frequent correspondence or do not get an answer from one address then they serve the notice at the other. If the person had been communicating with the Revenue Commissioners from his place of business and the Revenue Commissioners were not getting a reply from there, they could then send it to the home address. It is a matter which is best left to the Revenue Commissioners who, like anybody else in the ordinary course of correspondence, want to reach the person at the other end, and they will deal with this in a pragmatic fashion.
That means that Deputies could get their demands here and at home?
I do not think this is quite a place of business.
I was putting that on record because there are people who believe we do not pay income tax.
Following Deputy Lalor's remarks about where people do not reply to communications and the sheriff comes along, I wonder if it would be possible to have some stereotype letter attached to indicate that a person had not replied to the previous communication. If a reply is not received the next procedure is the sheriff. This applies in particular to people who are new to an area. Deputies have experience of constituents coming to them who are worried that they may get a notice from the sheriff. This is because they have not replied to any communication. It would be a help to put a slip into the letters being sent to people who have not replied to the previous demand. It could save the Minister and those people a good deal of worry. When it goes to the sheriff it is quite difficult to get an agreement. In a number of cases they would require the money to be paid and after that an agreement would have to be made with the Revenue Commissioners as to the correct amount of tax. Then there would be a refund. This can prove difficult, particularly in the self-employed category, where only the normal rates of pay obtain. I know of a family of 13 children whose father was self-employed and we can imagine how he felt when he heard the sheriff was coming. That is why I am dwelling on this point. A person could see from the file if there was a reply to the last demand.
Something like that is done, and the colour of the ink changes from black to red. When people see red they should see a danger signal and at that stage treat it seriously.
The red ink is in very small print at the bottom of the demand note.
It may go even further than that sometimes and have it all in red. I take the Deputy's point. The Revenue Commissioners, I am glad to say, have agreed to refine the tone of their original applications for payment.
(Dublin Central): It is very good.
Originally they were all demands, and now the first steps are requests. When the requests disappear and they become rather peremptory in tone as well as the colour of the ink changing then it is time to take them seriously. I am sure if any further form of alerting people can be used the Revenue Commissioners, in this changing mood, will be only too happy to adopt the Deputy's suggestion.
The Minister should be sure to say the sheriff will call.
They should have a picture of the sheriff as well. Some people do not read the print but they might understand the picture.
(Dublin Central): I do not want to delay this particular section, but as I mentioned already assessments are sent out by registered post. Notifications as regards appeals are not sent out by registered post. Quite often in many business houses a lot of post is mislaid. Anyone making up VAT will realise the number of invoices which are mislaid and the terrible problem this causes. Any businessman will automatically be handed a registered letter, but the appeals sent out——
It is sometimes not opened if they know it is from the Revenue Commissioners.
(Dublin Central): They will always be put aside for the private person. I do not think it would cost a terrible lot if the same applied in the case of notification of appeals. I do not understand why the notice of assessment is sent out in a registered envelope and the other one is not. The same practice should be followed where a notice of appeal is pending.
I will take notice of what the Deputy has said.
I think by the time the sheriff calls the average person is perfectly well aware of what is involved. Whether it is in red or black or anything else, be it a businessman or a farmer, and if the neighbours see the sheriff calling they are quite right not to give any credit. I would be sorry to see them do anything else.
Could I, first of all, support the suggestion made by Deputy Crinion for examination by the Revenue Commissioners. I know that the returns when the case actually goes to the sheriff may not be as satisfactory as would be desired. I think Deputy Crinion has touched on a very interesting psychological point when he says that a defaulting taxpayer when warned that the next move is the sheriff will think about his position before the neighbours. This will operate very effectively in the interests of the Revenue Commissioners. If it has reached the stage of the sheriff going in he has not all that much to lose.
Further to the point made by Deputy Fitzpatrick, I was going to ask the Minister what is the practice where notices are served by ordinary post and the matter proceeds on that basis? In the case in which the taxpayer contends that he did not receive the notice, what is the practice in such case?
There is a prima facie presumption that the addressee has received the document. However, if he is in a position to establish that he has not received it then, if the matter has reached court stage, it is up to the court to decide whether he had or not. In the ordinary course of events, as far as the Revenue Commissioners are concerned, if they are satisfied that the notice has not been received they will treat it as a case in which that factor has happened. Such claims are very rare indeed. We know in the ordinary course of business that letters are issued and receipt is a very important matter. Sometimes if receipt cannot be proved quite substantial loss can ensue or gain may fall to somebody else. The position is no different in tax law. It is no different to the ordinary laws of posting.
If you sent a registered letter, and more than one, before the sheriff came——
(Dublin Central): No. In the case of a notification of appeal, the Revenue Commissioners do not register the letter.
There are one or two points I want to raise. I am not quite sure that it is correct to state that there is a prima facie presumption that the letter was recived. I am looking at section 542 of the 1967 Act which says in subsection (v):
Prima facie evidence of any notice given under this Act by the Revenue Commissioners or an Inspector or other Officer of the Revenue Commissioners may be given in any proceedings by production of a document purporting to be a copy of the notice.
I think that means evidence of the notice itself, not evidence of its service. That is why I raised the question as to what happens in practice. However, the Minister says that such cases do not normally arise, but I would remind him that in the ordinary course of business, it is true as he says that letters can go astray but most people, if the letter is important and substantial business depends on its delivery, will make certain to be in a position to prove delivery of the letter, either by registered post or by hand, with somebody prepared to swear to that. However, if it is not a problem that arises I do not want to raise too much fuss about it.
I think the Minister might elaborate a little more on the reply he gave to Deputy Lalor as to what new provision is being provided. On the perusal of the new provision compared with the old it seems to me that the former relates to service on companies. There is no specific reference to companies in the two subsections proposed to be deleted in the 1967 Act. There is a reference to regulations by the Revenue Commissioners which may cover companies. Under the 1967 Act, an individual may be served by a notice, either delivered to him or left at his usual or last known place of abode:
Provided that any notice or other document to be given, served, sent or delivered to or on an employed person may be served by post at his place of employment.
That does not appear to be a new provision. The new part appears to be the part relating to companies. I wonder could the Minister elaborate a little more on what the difference is between the two?
It appears there was a void in respect of companies. Although the Revenue Commissioners had power to make regulations to deal with these matters, no regulations were ever made dealing with the company situation although the practice was to serve documents only at the registered office.
The substantial difference between the old subsections and the proposed new ones is in relation to companies. Is that right?
Yes and the place of business as far as the person is concerned.
No, that is provided for in the case of an employee, at least, place of employment in the case of an employed person.
But not a person who himself was an employer, which is a very odd situation. What we are doing is tidying up the matter by extending the areas in which notices may be served.
It is the opposite.
We are being practical.
Could the Minister indicate what the effect of paragraph (c) is and the reference to section 379 of the Companies Act, 1963?
Paragraph (c) which is without prejudice to paragraphs (a) and (b) secures that a notice or other document relating to income taxation may, in the case of a company, be served on the company by registering it at the Companies registration office where the company has failed to notify the Registrar of Companies of the situation of its registered office. Paragraph (c) also secures that notwithstanding that the situation of the company's registered office may have been changed any notice or other document left at or sent by post to the last recorded situation of the registered office of the company is to be deemed to have been left at or sent by post to the registered office of the company. This deals with those situations with which we are not unfamiliar where registered companies seem to disappear.
Can we take it from paragraph (c) that the provisions of section 379 of the Companies Act, 1963, would not cover notices in relation to income tax unless it were included in this?
Put it this way: they could or they could not; there was some doubt about it. We are clearing up the doubt; another tidying up operation.
This section is a result of Financial Resolution No. 11, passed on budget day. It amends section 9 of the Finance Act, 1968, so as to ensure that in cases where it is necessary to serve formal notices of estimates of PAYE tax due from an employer at the end of an income tax year interest will become payable with effect from nine days after the end of the year in question. This is achieved by treating the amount found to be underpaid as if it were tax due for the final month of the year, that is, the month ending on 5th April. The new provision applies to notices issued after 15th January, 1975, which was budget day.
In the case of notices relating to underpayments for the current income tax year, these will not issue until after 14th April, 1975, the date by which the return for the final month of the year is required. The provision applies only to PAYE underpayments, which are the subject of a formal notice under section 9 of the Finance Act, 1968. In a case where an underpayment is ascertained and agreed in the normal course without recourse to the section, interest is payable with effect from the end of the respective months to which the underpayment relates. The effect of the new section would be to bring those cases which are the subject of formal estimates more closely in line with the normal treatment so far as the payment of interest is concerned.
Does this apply only to PAYE arrears?
That is all.
(Dublin Central): Is this to shorten the time in which you must pay? I do not understand the Minister.
It is not; it is dealing with the case of arrears of PAYE and of the interest which will run, provided interest will run, from the dates mentioned in the section, from the end of the year in which the PAYE arose. There are not many of these cases, but they occur from time to time.
Did I hear the Minister correctly when he said it is only nine days? Would it not be more appropriate to give a month?
In the ordinary way PAYE payments have to be forwarded by an employer within nine days of the end of the month in which the deduction is made. These deductions are not the employer's money; it is the employees' tax liability which the employer withholds and he is then under an obligation to forward the money to the Revenue Commissioners. It is not an intricate process. In normal cases an employer will have a weekly record of payments made and of tax deducted. At the end of the month it is merely a matter of the addition of the amount of tax deducted, filling it in on a free cheque book which is issued by the Revenue Commissioners to the employers and forwarding the amount. Nine days is an adequate period and I do not think this is an undue imposition.
Like many sections of this Finance Bill, it is difficult to understand. The explanatory memorandum says this section provides that where notice is served on an employer after 15th January, 1975 specifying the amount of PAYE tax which is estimated to have been unpaid in respect of an income tax year, interest on the unpaid amount will run from the last income tax month of that year. I should like to know whether it can be said in relation to this section that it has retrospective effect. If not, does it mean that it becomes applicable only from this month, because this is the first tax month after the last tax month of the income tax year? How does this relate to notice served after 15th January? As I see it, it is interest on unpaid amounts from the last income tax month of that year. I assume, when we talk of "that year" we mean the year of assessment, the tax year, which is the last month of the tax year—March. I cannot understand this reference to notices served on 15th January, unless it is for retrospective purposes.
There could be tax due in respect of the year 1973-74. If the notice was sent out after 15th January, 1975, in respect of PAYE tax which was overdue from that period then the interest would run from nine days after the end of the 1973-74 year. But if the notice had gone out before the 15th January, 1975, then this provision would not apply. Perhaps I should explain further what the 1968 Finance Act provides. Section 8 of the Finance Act, 1968, provides for the serving on employers of notice in respect of amounts of PAYE tax due from them when it is estimated they failed to pay for a particular income tax year whatever was the appropirate tax. It also makes provision for an appeal against such estimates. Section 9 of the Finance Act, 1968, applies to tax recoverable under such estimates, the interest provisions contained in section 129 of the Income Tax Act, 1967, but provides that such interest will apply only with effect from the end of the income tax month during which the period of 14 days after the service of the relevant notice expires or, if an appeal is lodged, from the end of the income tax month in which the period of 14 days after the termination of the appeal expires. Section 26 of the present Bill provides that, regardless of when a notice issues, or whether an appeal is lodged, interest will apply as if the tax, found to be underpaid for any income tax year, was tax due for the final month of that year. It is a reasonable provision because, unless we make this, it means that a person can withhold PAYE tax for prolonged periods and get exemption from interest until such time as notice is served. If a person withholds PAYE, I think the person knowingly does so. The purpose of this section is to encourage people, who have PAYE tax which is not belonging to them, to pay over the tax and to pay it over rapidly or, if they fail to do so, run the risk of having to pay interest on it.
(Dublin Central): The Revenue Commissioners do not have to serve notice that PAYE is due before they assess them for interest on it. That has no bearing on it. You do not have to be notified that PAYE is due before you are subject to interest on it.
No.
(Dublin Central): Has this any bearing on it then?
No. The present position is that the liability to paying over one's PAYE tax exists and at the end of a nine day period, the expiration of the appropriate accounting period, then tax runs.
Is it not true that if a notice under this section was served on, say 16th January this year in relation to 1973-74 or an earlier year, say even 1972-73—I am sure there is plenty of tax still due from 1972-73— the interest on it at this penal rate which it is proposed in a later section to impose on arrears, would become payable from April of 1973 up to the present time. Indeed, potentially, there might be people who for one reason or another owe tax back to 1969 or thereabouts. There is nothing to stop them now being asked for six years' arrears of interest at 18 per cent per annum which appears now to be the going rate in the eyes of the Revenue Commissioners even though nobody else in the world is able to get that kind of interest. A person could be asked to pay six years' interest at 18 per cent per annum. In my calculations that would amount to more than the original tax itself. As a matter of principle, is that not wrong? There is nothing here which appears to limit how far back the Revenue Commissioners can go.
We are dealing here with the cases of people not making any PAYE return as a consequence of which tax which is properly payable is withheld. That is not a situation which should be encouraged. Unless we have some provision in the law of discouraging it, it leads to a situation in which the withholders of tax get a benefit denied to people who promptly and properly pay their tax. That is not something the Legislature should countenance.
Is the Minister confirming that Deputy O'Malley's contention was correct?
Yes.
Oh, my God; that is very serious.
That is not what I understood.
If a person was honest and civic minded enough in 1972-73 to pay his tax, he paid it. They have lost the use of the money in the meantime. Somebody else has——
Even if they had the use of the money the best they could get on it would be about 10 per cent at the outside.
Somebody else has improperly used the money.
Why should the Revenue Commissioners get 18 per cent if everybody else can get 10 or 11 only?
(Dublin Central): It is being back-dated, though, is it not?
No.
It is. It can go back to the year of dot at 18 per cent.
I can console Deputies. The Revenue Commissioners will not get the increased interest until the operation of this year's Finance Bill.
As and from then?
It seems to me to be an awful pity because I cannot see why anybody should have got away with it.
They will not get the 18 per cent until this Bill is passed? Is that correct?
No.
Will they get it retrospectively then?
No. The old rates will apply before then.
That is what I thought was the position. I was a bit horrified to——
To be honest with the Deputy I was not tuned in on the question of the amount of the interest. I did say interest would be chargeable from previous years but I had not applied my mind to the question of charges.
What was the old rate. Was it 9?
1 per cent per month.
12 per cent per annum?
The State had to borrow at 15 or 17 per cent in the meantime.
Section 35 of the Finance Act, 1973 provides, firstly, that income tax is not to be deducted from interest payable in respect of unpaid stamp duty, PAYE tax or VAT and, secondly, that the interest is not to be deductible in computing income or profits for tax purposes. These provisions are now being applied by the present section to interest on overdue payments of income tax deducted by principal contractors from payments to subcontractors. The provisions will apply in respect of such interest payable on or after 12th February, 1975.
The explanatory memorandum on this mentions that the section is concerned with the treatment, for tax purposes, of interest on overdue remittances by contractors in respect of income tax deductible by them from payments to subcontractors. It goes on to say:
The section provides that income tax is not to be deductible from such interest and the interest is not to be allowable as a deduction in computing profits for tax purposes. Similar provisions apply in relation to interest on overdue payments of income tax....
I am wondering if this section affects in any way the great difficulties local authorities have in procuring small contractors to undertake small contracts such as repairs to houses and the erection of individual isolated cottages. These small contractors have had terrible difficulty in procuring contractors' certificates from the inspectors of taxes. I find the phraseology of the section is difficult from the layman's point of view. But the phraseology of the explanatory memorandum is not much less difficult. I want to read it again.
The section provides that income tax is not to be deductible from such interest and the interest is not to be allowable...
Does this purport to be a protection for the contractor against the Revenue Commissioners?
Whatever it is, it is not that. Instead of crucifying him the right way up they are crucifying him upside down.
There is no question of crucifixion here at all. If a person has to pay interest on overdue payments he cannot claim that as a business expense any more than a person can claim as a business expense a parking fine.
(Dublin Central): What is the difference in the amendment?
We like to make sure.
(Dublin Central): Was it ever allowed?
I do not think it has ever been claimed. We are just making sure that nobody would.
It was not allowed in regard to various other kinds of tax but perhaps there was not a provision in regard to this particular one which is related to the sub-contractors' situation.
I am following the good example of my predecessors who made a similar provision in respect of unpaid stamp duty, PAYE and VAT.
I move amendment No. 7:
In page 15, subsection (1), to delete paragraph (d) and to substitute the following paragraphs:
"(d) section 17 (6A) of the Finance Act, 1970,
(e) sections 20 (2) and 50 (2) of the Finance Act, 1971, and".
The net effect of this amendment is to insert in section 28 references to sections 20 (2) and 50 (2) of the Finance Act, 1971, which should have been included. Section 20 of the Finance Act, 1971, imposes an interest charge in back duty cases where there has been fraud or neglect in the case of income tax and surtax. Section 50 imposes a similar charge in the case of corporation profits tax. The rate of interest specified in sections 20 and 50 is 0.75 per cent. This should, of course, now be raised to 1.5 per cent in conformity with the increases made under section 28 in the other rates. The amendment provides for this by including references to sections 20 and 50 in section 28 of the Bill. Financial Resolution No. 8 which dealt with the increases of rates provided under section 28 has been revised to cover the amendment.
Did the Minister say the amendment contains references to section 28 of the Bill? He said that the adjustment was being made from 0.5 to 1.5. Just after that did he say that this involves adjustments in section 28 which are incorporated in the amendment?
We are deleting paragraph (d) and then putting it back again together with a new paragraph (e). When it is ultimately arranged it will be (a), (b), (c), (d), (e) and (f), but we are advised that the appropriate way is to delete the full (d) which, as it stands, has the connecting "and" at the end of it. The "and" is going out of paragraph (d) there, and there is a new paragraph (e) going in. It reads "sections 20 (2) and 50 (2) of the Finance Act, 1971...." That is putting that into section 28. Then we have to put the "and" at the end of that line and the old paragraph (e) then becomes paragraph (f). One does not in drafting amendments put in items of that nature which are consequential and are put in afterwards.
I appreciate that but can I ask the Minister to refer back to his brief which he dealt with a little earlier where he referred to a rate of 0.75 being adjusted to 1.5 per cent and shortly after that I thought he said that this entitled certain——
That is right. The amendment provides for this by including references to sections 20 and 50 of the Finance Act, 1971.
I thought the Minister said of the Bill.
No, I related to it without specifying it but it is sections 20 and 50 of the Finance Act, 1971.
(Dublin Central): The increase in the interest rate will apply?
It is related to section 28.
Did the Minister say that there was a new financial resolution as a result of this amendment?
No. Financial Resolution No. 8 has already been passed.
It was clear that if anything happened it was not pre-determined. I thought Deputy Colley had that clear when it was being threshed out yesterday.
There is no significance as far as the debate is concerned in the fact that Financial Resolution No 4 has been passed.
I move amendment No. 8:
In page 15, subsection (2), line 49, after "commencing" to insert "on or".
This is a drafting amendment. The increased interest rates are intended to apply in respect of any month or part of a month commencing on or after 6th April, 1975, as was indicated in my budget speech and in the explanatory memorandum to the Bill. That is like my reference to the financial resolution. I am not saying that it is binding on the House. I am just saying I drew attention to this before. Due to an oversight the words "on or" were omitted from the section. The words are, however, included in the relevant financial resolution which was passed yesterday.
What we are covering here is the remainder of the month of April after the 6th. Is that right?
Yes, on or after the 6th.
When you get into May it does not arise. Am I right?
Yes. That is right.
I move amendment No. 9:
In page 15, line 52, to delete "1.5" and substitute "1".
This amendment is designed to fix the rate of interest chargeable by the Revenue Commissioners on unpaid tax at, in effect, 12 per cent per annum, as against the 18 per cent per annum proposed by the Minister. If I may just briefly refer to another amendment I put down to this section, the total effect would be to provide that all tax which is liable to interest would be liable to interest at the rate of 12 per cent per annum but that would be the rate payable by the taxpayer on unpaid tax and that would be the rate payable by the Revenue Commissioners on over-paid tax.
Is the Deputy referring to No. 10?
I am sorry. I understand this is out of order because it might impose a charge on the Exchequer. However, the point involved in that amendment will, in any event, be argued on the section. On the question of the rate of interest which should be chargeable on a tax, I do not think that the Minister can avoid the charge of attempting to be extortionate and usurious in trying to charge 18 per cent per annum interest since there is, in particular, a downward move in interest rates. I do not accept that interest chargeable on unpaid tax should be in the nature of a penalty akin to a fine resulting from a prosecution. I do not accept that, because there are remedies open to the Revenue Commissioners, apart from the interest, which they are entitled to use. I believe that the rate of interest should be so fixed as to make it unprofitable for a taxpayer to withhold his tax but it should not be so fixed as to operate as a purely penal rate, a rate that is unconscionable. I do not think there is any other fair way of describing a rate of 18 per cent per annum.
In a previous discussion on this topic the Minister said something to the effect that he did not see why the State should act as a banker to taxpayers. That, I think, is a misunderstanding of the position if only for the reason that, if somebody borrows from his bank, first of all, it is most unlikely that he will be paying a rate as high as 18 per cent and, secondly, he will, subject to certain limitations, be entitled to charge that interest against his income tax liability, but there is a specific provision to prevent him charging any interest payable to the Revenue Commissioners against his income tax liability. In practice, therefore, a rate of 12 per cent per annum is considerably higher than he would be paying if he were borrowing from a bank or some normal source. It is quite misleading to try and compare these two things and to speak as though the effect of this proposal would be to put the State in the same position as a banker. It is in no such position. I repeat that the rate of interest should be such as to make it unprofitable for the taxpayer to withhold his tax. I think that 12 per cent per annum, non-deductible for income tax purposes, is such a rate; 18 per cent per annum non-deductible for income tax purposes is far in excess of such a rate and is a rate which is merely a substitute for the other methods and weapons open to the Revenue Commissioners to recover tax. I do not think that it should be applied in this way. Engaging in this kind of extortionate extraction of interest on money overdue is a very bad headline for the State to be setting. In cases where there is a clear and indefensible default by a taxpayer, apart from paying interest at 12 per cent non-deductible for income tax purposes, there are other remedies open to the Revenue Commissioners, and they should use them in such cases.
In the ordinary case of tax outstanding—remember, we are not dealing only with income tax here—a common difficulty arises in regard to value-added tax and it can arise sometimes in quite good faith. I tried to indicate in an earlier discussion the difficulties that are arising for quite a number of people in regard to value-added tax at the moment because of the credit they themselves have to extend. I do not know if the Minister is aware of this, but there are people who have been prosecuted and threatened with prosecution by the Revenue Commissioners for non-payment of value-added tax, people who were owed more by the State and State companies than they owed the Revenue Commissioners. They were liable to value-added tax on this money. In such cases the Revenue Commissioners also demanded interest. I must say, in all fairness, in one particular case I concerned myself with, the Revenue Commissioners waived the interest, rightly in my view. Nevertheless, it is proposed here to increase the rate of interest involved to an absolutely penal rate. If the Minister will stand back and look at this for a moment he will realise that this is really an indefensible provision and he should accept this amendment to provide for a 12 per cent per annum rate of interest on overdue tax non-deductible for income tax purposes. In the bad cases which, no doubt, he will want to talk about, there are other remedies open to the Revenue Commissioners and they can use them. I would strongly urge the Minister to accept this amendment bearing in mind that what is involved here is not merely income tax but other forms of tax— corporation profits tax, value-added tax and so on. In some cases we are dealing with people who, because of the economic climate at the moment, simply do not have the money to pay. To add to their liquidity difficulties by imposing an extortionate rate of interest is bad economics. I do not think it is true, as far as the Minister is concerned, to say that if this rate is not charged it will cost the State money in the sense that money is borrowed by the State; if he does his sums he will find that it does not work out quite like that.
I am sorry to say that the amount of tax arrears is now about 30 times greater than it was ten years ago. If Deputy Colley's arguments are valid now they were equally valid in 1960 when his party introduced the interest charge of 1 per cent on PAYE tax which was overdue. That was 1 per cent per month equivalent to 12 per cent per annum, when the overdraft charge was 5.75. The penal element in the interest charged was first introduced by Deputy Colley's Administration and it was 6.25. Today the overdraft charge to an ordinary borrower is not less than 13½ per cent and in certain cases it can rise, if it is on term loan, to 15½ per cent. That is on the basis of bank lending rates from the 8th of April, 1975. On any calculation then our element of penalty for non-payment of income tax is no more than 4.5. On the basis of what lending rates they could get it is a great deal less, and it is significantly less than it was in 1960 when the charge was first introduced. Of course no Minister for Finance relishes imposing a penal element at all, but what I said about the State not being a lender of money applies.
Deputy Colley suggested that if people could get in certain circumstances a set-off in respect of their borrowings from the bank for tax purposes they would not be tempted to use money due to the State, but that is not the full picture. Up to now they could borrow money from the State at 12 per cent by not paying their taxes and they could use that money by lending it to various financial institutions, some of good reputation and some of doubtful reputation, and it could certainly earn anything from 6 to 8 per cent. That is precisely what has happened. We know this; the information is available. People have withheld money from the Revenue Commissioners properly due to them and that means the State had then to go and borrow money at 15 to 17 per cent.
Why not send in the sheriff we were talking about earlier?
The Deputy knows well, from his experience, and his colleague beside him knows from considerable experience, just how long legal processes can take.
Not with the Revenue Commissioners. They do not even go to court. They send in the sheriff. They sign their name to a thing and put the sheriff in on top of you. There is no legal process at all. That is the whole point.
But as soon as they do that, or even attempt to do it, the people are down to their solicitors' offices and there are a thousand and one ways and means of obstructing that particular process, and the Deputies know that well.
(Dublin Central): I doubt very much if it would pay you to reinvest money due to the State.
Of course, it would. The point was made here that people could borrow from a bank and get the interest set off against income tax. They could do that at one time without any limitation whatsoever, but since January, 1974, I closed that loophole simply to bar the personal borrowings which involved interest of not more than £2,000. That particular facility was closed off to several people and some withheld money from the Revenue in order to make profits elsewhere. It has been proven that there was a very great increase in arrears properly due to the State.
The Minister said it was 30 times higher. How did the revenue compare for the same period?
I have not got that figure.
When the Minister went to the trouble of looking up how much more interest on arrears there was could the Minister not tell us how much more tax was payable? I am sure he could not help finding that out.
The amount of interest is now three-and-a-half times greater than it was sometime ago. I will check on that before we resume. The fact is that this abuse has been growing. If it was proper when this process was first introduced to charge a penalyt of 6.25 per cent, I do not think it is inappropriate that in this day of very high interest rates and dear money there should be some limit by way of penalty on interest rates on arrears of tax particularly when, unlike 1959, people can now get very rewarding rates of interest on money which they withhold from the Revenue Commissioners.