It is so long since we were talking about this Bill that the continuity I had envisaged when I reported progress is hardly applicable tonight. I want to make two points in general before I go on to an analysis of the Bill. I have pointed out already on the other Bill, and by way of introduction I want to point out again, that the Minister and the Government have embarked upon a massive programme of taxation, capital and current, in the present year. This programme is designed to meet the demands of the State machine. Most of it will be applied to State housekeeping rather than capital purposes. This massive programme of taxation, of which this Bill is a part, is unsupported by either a programme or a project for the economic revival and development we, on this side of the House, believe is necessary for its support. Herein lies the fundamental difference between the Government and the Opposition in the approach to this Bill just as there was the same fundamental difference in our approach to the other items in the general chain of legislation comprising this massive programme of taxation.
It is relevant to point out here as a basis for this Bill, and as part of this taxation programme, that in the past social development and revenue buoyancy and the social value of taxation programmes depended on the level of productive economic activity. The essential difference now is that whereas, in the past, there were social provisions like the Social Welfare Act we discussed some time ago and provisions for getting more revenue for useful purposes through taxation, all that was supported by programmes of development, particularly in the 1960s when we had specific programmes for economic expansion which were the fundamental basis and sine aua non for supporting all the rest. This Government have no such programme, but they are still taking the money, and what we fear on this side is that the camel, so to speak, has embarked on a programme of living on its own hump. That is something that cannot go on indefinitely.
That is the first general point I want to make. It underlines the essential difference between the two sides of the House. If that is clearly understood, then our differences and our agreement on particular measures and particular sections of these measures can be put into perspective. It goes without saying that there is much in what the Minister is doing that would be both desirable and beneficial if properly supported by the economic activity to which I have referred and by programmes similar to the former programmes for economic expansion to which I have also referred.
I am afraid the situation is even a little worse than that. In the absence of such economic development and support, I fear that the impact of inflation will be such as to aggravate the problems of State housekeeping, to depress the living standards of citizens, to make the burden of taxation more onerous than it would otherwise be on the taxpayer and contribute to creating difficulties, of which local inflation and unemployment are symptoms, and to aggravate the deeper causes which are reflected in these symptoms. These are the fears that have to be expressed at the outset. Be that as it may, I do not see a great deal of point in labouring the matter further at this particular moment but I make the point to underline the essential difference between the two sides here and as something that must be kept in mind in fixing the perspective of our agruments on particular provisions.
As part of this massive taxation programme the Minister is putting through this year, we have proposals for capital taxation. Proposals for capital taxation in the modern context, properly geared to the realities of the economic situation, may well be justifiable and desirable but again the question must be asked whether the programme the Minister has undertaken is either justifiable or desirable and whether it will, in effect, bring the returns the Minister hopes to get from the more narrow fiscal point of view or whether, as some of us who are, perhaps, more pessimistic fear, it will only aggravate the problems of supporting the revenue the State needs—whether, instead of increasing revenue, the contribution made to inflation and to depressing buoyancy and collectibility of revenue may be such as to nullify the benefits the Minister hopes to get from this taxation.
Again, I must make a point—it is a point we had to make this morning —that the Minister has chosen to bring in this code piecemeal. He has brought in three separate Bills—the Capital Gains Tax Bill, the Wealth Tax Bill and this Capital Acquisitions Tax Bill and it is not possible to put them in separate compartments any more than it was possible this morning to discuss section 45 of the Finance Bill without referring to this Bill. I want to keep within the rules of order and I do not think I will be trespassing on them if I describe the scheme of capital taxation as follows: we had heretofore the system of death duties for the taxation of capital. There were other provisions like stamp duty and so on but these were ancillary. The Minister now claims to have abolished death duties. We had that argument only today and, again, I repeat that he did no such thing. If he will have his point, if he did abolish them, which he did not, with what has he replaced them? He has replaced them with a capital acquisitions tax, a tax on all appreciation of property, a tax which will cash in on, so to speak, and get a rake-off from inflation. There is a wealth tax, which is a capital tax pure and simple on the value of the property involved, and there is now this Bill which specifically not only deals with the area formerly covered by death duties but also deals with gifts inter vivos. If you take those three provisions and even this provision by itself I believe the statement I made this morning when I said the Minister has widened the net and narrowed the mesh is justified. Very good for generalities, now to specifics on this Bill.
This Bill does two things. It puts a tax, effectively for the first time, without going into small detail, on gifts inter vivos, that is gifts without consideration, transfers of property of any sort, real or chattel inter vivos. That is widening the net. It then puts on a tax which can very appropriately be described as a death duty, because that is what it is, on property which devolves on death. It makes changes in the procedures, if I understood the Minister's argument this morning, but leaves them essentially the same.
This Bill can be characterised as the Bill which put back on 1st April death duties which were removed by the Finance Bill on the same date. I said this morning there was not even one hour's hiatus. I say now there is continuity. First of all, this Bill has a very long interpretation section. Lest there be any doubt about its taxation relating to death it has a full section, section 3, defining the meaning of the phrase "on a death".
The first section is the short title and the next two sections are simply definition sections. That comprises Part I of the Bill. Part II deals with the gift tax. In plain language a tax that somebody is to pay is a tax, whatever you call it. Section 4 states:
A capital acquisitions tax, to be called gift tax and to be computed as hereinafter provided, shall, subject to this Act and the regulations thereunder, be charged, levied and paid upon the taxable value of every taxable gift taken by a donee, where the date of the gift is on or after the 28th day of February, 1974.
As far as gifts are concerned we go back to the 28th February, 1974 and every transaction inter vivos that is within the meaning of sections 4, 5 and 6 of the Act become liable to tax.
There are, understandably, sections to deal with joint ownership and so on. A detailed discussion on those would be more appropriate to Committee Stage. I am concerned that it will be realised that this is a new scheme of taxation that is being imposed. I am not disputing that there may be a case for this approach but let us be honest about it and say what we are doing. Let me again voice the essential difference between the two sides of the House. We feel those provisions need the support, primarily, of a proper economic development programme whereas the Government do not seem to see the need for this.
We now come to what must be, in effect, a continuation of the argument this morning. The Minister was very vehement that he had abolished death duties. I refer to the record of what transpired in the House this morning as to whether under the Finance Bill he did or did not. Perhaps I may be allowed to recall that I was able to point out—Deputy Colley and other Deputies also pointed it out—that substantively, procedurally, in contemplation of the law that was not the case. Even if it were the case, even if he abolished death duties on this, the last day of April, 1975, we are now on the same day discussing a Bill which brings back death duties under another guise, continuous with the ones we discussed this morning, without any hiatus.
Let me take Part III of the Capital Acquisition Tax Bill. Section 10 states:
A capital acquisitions tax, to be called inheritance tax and to be computed as hereinafter provided, shall, subject to this Act and the regulations thereunder, be charged, levied and paid upon the taxable value of every taxable inheritance taken by a successor, where the date of the inheritance is on or after the 1st day of April, 1975.
Then it goes on to say in the following section:
For the purposes of this Act, where, under or in consequence of any disposition, a person becomes beneficially entitled in possession on a death to any benefit (whether or not the person becoming so entitled already has any interest in the property in which he takes such benefit), otherwise than for full consideration in money or money's worth paid by him, he shall be deemed to take an inheritance.
Then you have the definition of taxable inheritance in the following section, which boils down to the fact that any property that devolves on the occasion of a death into the hands of another is a taxable inheritance. This raises two rather interesting points. What is the nature of the inheritance tax? Heretofore we had estate duty, legacy duty and succession duty. There were legal distinctions in the various sort of duties. This inheritance tax partakes of the nature of all of them. It is of the nature of estate duty in that it attaches, in the last analysis, to the property although the successor, the person receiving it by definition in this Act, is primarily the person to whom the Revenue Commissioners will look for payment.
It clearly is of the nature of legacy duty and the remainder of the provisions of the Act that they would provide that there is no escaping residue just as the succession duty or any residuary duties provided. I submit I am in order in stating that in Part III of this Bill death duties are being put back into operation. When I asked some questions in relation to this matter this morning the Minister was quick to point out that it was on this Bill that the matter arises. For this reason I am glad to be able to avail of the opportunity to put those questions. In order to understand the procedure of the Act we have to see what the procedure is at present. On a death where property of the deceased is left—and this is of the essence in this Bill and in the old law if the Minister's contention is right that he has abolished it—someone is entitled to it and that person has to move to secure the title. What usually happens with property of any reasonable size is that the personal representative or some interested party moves and an inland revenue affidavit is furnished in pursuance of which, if I understand the situation correctly, the Revenue Commissioners issue a provisional grant assessment. On that with the appropriate receipt which constitutes the primary documents an application can be made to the probate office of the court and a grant of probate issues if there is a will and letters of administration if it is an intestacy. On the provisional assessment duty is payable and paid.
Not only is duty payable but I believe the receipt is regarded as a primary document before the grant will issue. There is then the final cleaning up of the estate, the furnishing of a corrective affidavit, if necessary, and the provisional assessment is superseded by the final assessment. The balance of estate duty is paid, legacy duty is paid where appropriate, subject to provisions relating to near relations or to charities. Succession duty comes after specific requests. When the matters are cleared up the Revenue Commissioners will issue a certificate of discharge. When I raised this matter this morning the Minister said that under this Bill the Revenue Commissioners would not collect until a later stage than at present. On that occasion I submitted, and it was not contradicted, that it would appear that the rest of the procedure would be exactly as it is at present. In the interests of clarity I should like to analyse this situation in the light of this Bill.
The first thing to notice is that although in the first instance this inheritance tax is another name for death duties it is attached to the actual legacy. It is still a charge on the property so that to make a distinction between legacy duty and estate duty on that ground would be a distinction without a difference; the two are rolled up together. Having regard to that we have substantively the same situation as we had yesterday afternoon. With regard to procedure, section 35 defines accountable persons and it distinguishes between the donee or successor—we are talking about inheritance. It defines primarily accountable persons as the accountable persons which includes every trustee, guardian, committee, personal representative, agent or other person in whose care any property comprised in the gift or the income therefrom is placed at the date of the gift or at any time thereafter and every person in whom the property is vested after that date, other than a bona fide purchaser, or mortgagee for consideration in money or money's worth.
In the same section, subsection (6) states that the tax shall be recoverable from any one or more of the accountable persons and the personal representatives of any accountable persons who are dead. Accountable persons in subsection (6) obviously refer to accountable persons as defined in subsection (1) and subsection (2). Substantatively death duties remain and by virtue of section 35 the liabilities of agents and personal representatives essentially remain. Then we come to the procedure for recovery of tax.
I now come to section 38. In section 38 provision is made for retaining the Inland Revenue affadavit, which is referred to in inverted commas. Subsection (2) goes on to say:
The Inland Revenue Affadavit required for an application for probate or letters of administration shall extend to the verification of a statement of the following particulars...
and a number of things are set out there. It seems to me, that being so, whatever rules of court or other legislation is there unrepealed which provides for the primary documents being necessary to ground the application and granting of a grant, whether probate or letters of administration, that that procedure substantially remains and there is nothing in this Bill or in anything we did this morning that changes that. That is reinforced. I want to pursue what I was pursuing with the Minister this morning but, in order to fill in the picture I want to say that on this point it is to be noted that the same section 38 provides for a correcting affadavit. The Bill provides for receipts and certificates of relief and discharge. That is in section 48. Unless I am greatly mistaken, not only does this Bill continue death duties in an attempted disguised form but it also continues the procedures.
It is here that there may be a point of difference and this is what I want the Minister to elucidate: this morning the Minister informed me that not alone would there be a provisional grant assessment and a payment on foot thereof and as far as I could ascertain—I have not as yet had an opportunity of reading the record— if I understood the Minister aright, no duty would be payable or required by the Revenue Commissioners until the perfection of the transaction by the fact that the gift has vested in possession in the successor. If I have misinterpreted the Minister in that I would like to be corrected but if that is the Minister's intention I would like to question whether that is going to be the effect of the Bill because there are two provisions in this Bill that we must have regard to in that connection—sections 41 and 21.
Let me make my point clear. I am asking the question: at what point is the tax payable? That is a very relevant question from two points of view because, first of all, the point at which it is payable is of much interest to the Revenue Commissioners who are very concerned about delay in tax collection and we have heard a great deal about it. If there were to be a change from the present system to delay any collection to the end of the perfection of the transaction I can see quite a period elapsing in which the Revenue Commissioners are out of their money. That is the Revenue Commissioners' side but in fact that could happen.
We must be on the alert as to what is happening because the Minister provides a very stiff interest provision and interest will be payable from a date very close to the date at which the tax is payable. Let us pursue this a little more deeply. Section 41 says that the tax shall be due and payable on the valuation date. Subsection (2) of the section says:
Simple interest at the rate of one and one-half per cent, per month or part of a month, without deduction of income tax, shall be payable upon the tax from the valuation date to the date of payment of the tax and shall be chargeable and recoverable in the same manner as if it were part of the tax.
So, it is very relevant indeed to inquire when was the valuation date. We must therefore refer to section 21, which says:
Subject to the provisions of subsection (7), the valuation date of a taxable gift shall be the date of the gift.
Subsection (4) says:
The valuation date of a taxable inheritance, other than a taxable inheritance referred to in subsection (2) or (3), shall be the earliest date of the following—
(a) The earliest date on which a personal representative or trustee or the successor or any other person is entitled to retain the subject matter of the inheritance for the benefit of the successor or of any person in right of the successor or on his behalf;
(b) the date on which the subject matter of the inheritance is so retained; or
(c) the date of delivery, payment or other satisfaction or discharge of the subject matter of the inheritance to the successor or for his benefit or to or for the benefit of any person in right of the successor or on his behalf.
Take (a)—
The earliest date on which a personal representative or trustee or successor or any other person is entitled to retain the subject matter of the inheritance.
It is from that date that the tax is payable and interest thereon when accrued is payable as part of the tax. Therefore, the Minister will appreciate why I am pursuing this matter to find out when this tax is payable.
Again, what happens in the case of a death? Somebody is involved, some person, and remember the words used there—"personal representative," or "trustee," or "successor" or any other person. Therefore, any person who is either entitled to, or in possession of the property concerned, fixes the valuation date by virtue of being in that category. What happens? When a person dies, somebody, somebody has to move. Presumably, as soon as that person moves they have an interest of that nature. It seems to me that an agent, a personal representative, a successor—that is, a person entitled within the meaning of the Act—anybody in that category, immediately they become involved in the transaction at all, fixes the valuation date. Therefore, would I be wrong—I ask the Minister—in supposing that the very moment any person moves to furnish an Inland Revenue affidavit, that that is the valuation date under section 21? If that is the valuation date, then there is no alteration in the procedure at all. The tax would become payable and it would behove him, in view of the interest provisions, to pay it, and pay it voluntarily. That is just another aspect of one of the objectionable features of a lot of this legislation, namely, that the Revenue Commissioners will be relieved of all duties of assessment, in the first instance, the onus will be placed on the taxpayer to pay up and let the Revenue Commissioners revise at their leisure.
In view of what I have said, I should like to ask the Minister again whether he is accurate in what he said this morning—whether, in view of the procedures I have outlined, which appear to be identical in effect, with minor variations, with the current procedures that the tax is not payable before the grant; whether it is not open to the Revenue Commissioners to so construe the provisions; whether, indeed—in view of the very limited terms of section 45 which we passed this morning—any change whatsoever has been made in court procedures; whether the probate registrar, or whoever is responsible, will accept the primary documents without the receipt for something. Therefore, the provisional assessment remains, although a significant change may be made that that provisional assessment is, so to speak, made by the taxpayer himself rather than by the Revenue Commissioners. That is a point that needs clarification. I freely admit I may be completely in error. But I was precluded from following it up this morning by the Minister's objection and I should like to have it clarified.
Certainly, having regard to the impact of sections such as section 47 and others, the definitive section 10; having regard also to section 35, defining accountable persons and their liability; to section 41, which defines when the tax is due and payable and provides for interest; finally, having regard to section 21, which provides a definition of the valuation date of a taxable inheritance, I wonder if the Minister's contention this morning is an accurate interpretation of the Bill before us. I wonder is it an interpretation that will satisfy the Revenue Commissioners. With those preliminaries I should like to see the remainder of the matter worked out as we go through Committee Stage of this Bill.
It is difficult to see how the Minister can have claimed to have abolished death duties unless one tries to escape the technicality that death duties mean only, in a narrow sense, estate legacy and succession duties, as defined by previous statutes. I am not aware that "death duties" is a statutorily defined term. I think it was a useful term when referring in general to the specifics I have mentioned. Unless one tries to interpret the words "death duties" in that narrow sense I do not see how on earth the Minister can pretend he has abolished them. Death duties remain. As we said this morning, even the old law remains. Although the old duties will not be leviable, the law remains and the duties subsist in contemplation of law and in actual practical application to every death before the 1st April, 1975. Those death duties, with modifications and adjustments, both in substance and procedure, continue under this Bill. But they are essentially death duties and the procedures essentially the same. That is the point I want to hammer home. I think it will clear the air for a constructive discussion of what the Minister is doing in this Bill. The more detailed arguments can be followed up on Committee Stage. There is, for example, section 36 relating to the delivery of returns. There are distinctions there between the primary accountable people and otherwise. In any event, agents and everybody else—personal representatives and so on—are captured within the terms of these sections and the matter will entail a certain amount of detailed analysis.
What I cannot say at the moment —it would take an expert in tax law to say—is whether the changes, such as they are, are in any way in aid of the taxpayer, or whether they are simply further provisions in aid of the Administration and of the Revenue Commissioners in the collection of these taxes. Again, it is unnecessary to refer to the overburden that is upon them; they have indeed been overburdened. I, for one, would not like to stand in the way of any bona fide assistance we can give them in performing their duty under this Act. I am concerned that we are overloading them with duties.
There are parts of the Bill that are commendable. I do not want to deny the Minister credit for his approach and for the reliefs he has given but, in order to put the whole matter in perspective, I must advert to the point made by Deputy O'Malley on the Finance Bill. It is perfectly correct to provide the exemptions that are set out in the Second Schedule having regard to the current rate of inflation, but Deputy O'Malley pointed out certain consequences that may not have been in the Minister's mind. Even though his argument may not be a popular one, it is worth the attention of the Dáil.
The Minister spoke at length about the abolition of death duties but there is one aspect that has been completely forgotten. One of the arguments for removing death duties was that if these duties were minimised it would be possible to attract capital. This was a major argument but it has been completely submerged in the argument of personal hardship which the Minister, to his credit, has met. In fact, there is no abolition of death duties and the whole capital taxation scheme works in the opposite direction. The net has been widened and the mesh narrowed. However, that is a consideration I am not going to press on the Minister and I mention it merely to stress that death duties have not been abolished.
What the Minister has done is to revise the provision for death duties as part of a wider capital taxation scheme. He is imposing new taxation, in the course of which he is giving some exemptions. I do not want to take from the value of these exemptions to a wide range of people. I have been critical of the Minister in some instances but I should like to express appreciation where it is due.
The remainder of this Bill is largely a matter for Committee Stage. However, perhaps the Minister could clarify the following points. Section 53 (1) states:
The first £250 of the total taxable value of all taxable gifts taken by a donee from any one disponer in any relevant period shall be exempt from tax and shall not be taken into account in computing tax.
I thought that at the moment the sum allowed was £500. Perhaps the Minister could clarify that?
