While giving the Minister and everybody else credit for good intentions an objective examination of the principle of this paragraph will go a long way towards substantiating what is implied in what Deputy O'Malley said—that the powers of investigation already existing under the Income Tax Acts are being enlarged. At this stage I think it is in the interests of the Minister and the House and the Revenue Commissioners that this matter should be analysed in detail. Before I embark on that I should like to make this comment: there are two things in this paragraph. First, there is the very natural desire to extend the existing mechanism to capital gains. That, perhaps, would be accepted by all as a justifiable aim although, if time permits, I shall suggest doing this in another way. However, there is something more. Whether designed or otherwise, there is a positive extension of power to capital gains not only in this Act but also in relation to the income tax code. Speaking objectively while giving credit for right intentions everywhere and realising the problems of tax evasion, it is objectionable to effect such an extension in the Schedule to an Act like this.
I should substantiate this assertion in detail. I would like to put on the record in toto subparagraph (3) of paragraph 3. It reads:
A notice under any of the said provisions of the Income Tax Acts, as applied by this paragraph, may require particulars of any assets acquired by the person on whom the notice was served (or if the notice relates to income or chargeable gains of some other person, of any assets acquired by that other person) in the period specified in the notice, being a period beginning not earlier than the 6th day of April, 1974, but excluding—
(a) any assets exempted by section 19 (exemption of specified securities) or section 24 (miscellaneous exemptions), or
(b) any assets acquired as trading stock.
The first point to notice in regard to this paragraph is that it refers to "a notice under any of the said provisions of the Income Tax Acts". The said provisions are not what might appear first—the provision of sections 500 to 503 referred to in subparagraph (2) of the paragraph in question. The provisions are those referred to in subparagraph (1) which reads:
The provisions of the Income Tax Acts relating to the making or delivery of any return, statement, declaration, list or other document, the furnishing of any particulars, the production of any document, the making of anything available for inspection, the delivery of any account or the making of any representation, shall, subject to any necessary modification, apply in relation to capital gains tax as they apply in relation to income tax.
In other words, all the provisions of the Income Tax Act relating to these matters are what are referred to in the word "revision" of the Income Tax Act in subsection (3).
Therefore, it is not confined to the three sections mentioned in the previous subparagraph (2). The objectionable part of this subsection is contained in parenthesis and reads:
(or if the notice relates to income or chargeable gains of some other person, of any assets acquired by that other person).
Surely that extends the powers of both Income Tax Acts and this Bill in two respects. It extends where assets are concerned, where property is concerned and where the person is concerned. The specific relation to income imports that extension into the whole income tax code, being the Income Tax Acts and the subsequent Finance Acts.
I am making this point purely in the legal sense. It is not intended to be a political or any other sort of argument but is presented as I would submit it in court for interpretation and I want it on the record as such.
The only exclusion to this extension of powers is in relation to paragraph 19 which deals with government securities in respect of which the information would be available anyway and, also, in relation to section 24 which is interesting because chargeable assets but not gains are referred to. From a legal point of view one must read section 24 carefully to see the limitation of the exception here. The exception does nothing more than exclude information already available directly. I have said that as well as extending to the person, the powers extended to assets. In this context I refer the Minister to section 7 which reads:
All forms of property shall be assets for the purposes of this Act whether situated in the State or not, including—
(a) options, debts and incorporeal property generally,
(b) any currency, other than Irish currency and sterling, and
(c) any form of property created by the person disposing of it, or otherwise becoming owned without being acquired.
In other words, paragraph 3 extends the existing powers to acquiring from any person in regard to any property a notice which relates to income or capital gains. That is the substance of the objection to that section.
Let us look now at the Income Tax Act. Section 176 of the Income Tax Act, 1967, was the section which became notorious as the one that compelled the agent of another person to disclose information, but the section is limited to "Every person who, in whatever capacity"—and that included lawyers, brokers and everyone else—"is in receipt of any money or value or of profits or gains arising from any of the sources mentioned in this Act, of or belonging to any other person who is chargeable in respect thereof, or who would be so chargeable if he were resident in the State and not an incapacitated person, shall, whenever required to do so by any general or particular notice"—given to him by an inspector—"prepare and deliver, within the period mentioned in such notice, a list in the prescribed from, signed by him, containing"— and then it specifies what should be contained in it and specifies for a declaration, and then there is a subsection which deals with a person acting jointly, but they are all persons who are specifically related to the transaction or the person chargeable. There is a specific relationship there, but this paragraph says "some other person" and "by that other person", "other person" being totally unqualified. There is no qualification on what that person is to be.
In face of that, I find it hard to disagree with Deputy O'Malley that there is not a very significant extension of power in this section under two heads. "Any person" is made even more objectionable, as he pointed out, by subparagraph (4), but subparagraph (3) in itself extends not only to any person but to any property. If I am wrong in that, will the Minister please give me the section? I want to take this as if we were in court and I invite the Minister as a lawyer to reply to me in kind. My submission to the House is that because of the fact that there is no qualification on the person who becomes liable to respond to a notice under this section, there is an extension of the powers conferred by the section because in the Income Tax Acts and the legislation to date the persons liable are in general in classified classes.
The second point is that as far as I can read it under the Income Tax Acts the information sought is restricted to certain types of property and under this Bill the definition in section 7 of assets is so wide as to extend the scope of the section as to what information must be provided as well as to what persons are to supply that information. That is my submission and I put it as objectively as I can. I say that for that reason this section is objectionable, and particularly objectionable in the way it appears in the Bill. Having regard to the nature of the rest of the legislation, it should not be buried away in a Schedule with the appearance of being just an extension of existing provisions of the income tax code to capital gains. I am not in any way commenting on intention when I say this. I am commenting on the legal effect, the legal consequences, the legal import of the wording of this section if it is passed into law. I pass then to subparagraph (4)—"The particulars required may include particulars of the person from whom the asset was acquired and the consideration for the acquisition". I am not in a position to judge, but it certainly does not restrict the objectionable features of subparagraph (3) as I have outlined them.
With regard to penalties subparagraph (6) applies Part 35 of the Income Tax Act which deals with penalties and assessments. They would apply without the Minister having taken the trouble to include subparagraph (2) which seems to me to show an undue anxiety in regard to this matter. The very fact that subparagraphs (1), (3), (4), (5) and (6) are in that paragraph under the heading "Returns and Information" is sufficient to capture everything so far as I can see in subparagraph (2) of this paragraph which appears to me to be unnecessary.
A very interesting point arises on the Minister's exclusion of section 176, and here I have two points. First, I have a question, and secondly, I have a very good illustration of what Deputy Colley and I meant when we pointed out not only the lack of necessity for including this tabulation but also the possible dangers, or should I say, the undesirability, of such explicit inclusion. The opening paragraph of subparagraph (1) of paragraph 3, coupled in particular with the rest of the provisions, is quite enough to capture the whole of the income tax code in this regard and I may very legitimately ask now on the amendment, to which we agreed, what was the purpose of going to the trouble of excluding section 176 by an explicit amendment, leaving the rest in? I wonder was it because it could have been interpreted on the income tax side as being in conflict with the extension affected by subparagraph 3.
If I turn to section 176 of the Income Tax Act of 1967, I find a much narrower provision. That section applies only to persons "who are in receipt of any money or profits or gains arising from any of the sources mentioned in the Act of or belonging to any other person who is chargeable in respect thereof or would be so chargeable if resident in the State and not an incapacitated person"and who shall whenever required to do so, and so on.
The persons liable to notice and to make a response to a notice are limited to a very specific class in a relationship to the person charged. The subject matter of the notice is also qualified and restricted. That is in direct contrast to the expanding provisions of this paragraph. I am not making and do not wish to make any imputations, but from a legal interpretative point of view it was a significance that that section should be omitted by specific amendment from the Bill while this provision is in. I would be permitted to use that as a yardstick for judging the legal intention of the section. I hope that in what I have said I have convinced the Minister that this section needs reconsideration from that point of view.
Here is a real extension of the powers of enquiry by notice both in regard to the person subject to the enquiry and the property the subject of the enquiry. I accept what the Minister says, that as far as capital gains is concerned, you want to extend the income tax provisions here. You do more than that. You extend powers under both headings that were not there; you import new powers. This section is objectionable because of the place it is placed in and the forms in which it appears. We could have missed it if it had not been for the alertness of Deputy Colley.
The Minister is wise to reconsider what he is doing in this. If it is his intention to widen the powers under both codes, let him say so and then we can debate it as such. I do not think we should allow this to pass unnoticed.
This section raises another type of question. I will make two comments. The deletion of section 176 from the table that follows was an ineffective gesture in so far as it was a gesture but it might have done a great deal more; it might have imported something into the Bill much wider than section 176. Secondly, the penalties under Part 35—I am referring now to subparagraph (6) of paragraph 3— are all imported. Whether paragraph 2 subparagraph (2) is there or not, they are all imported to capture any person who is captured by the parentheses in subparagraph (3) of paragraph 3. This kind of thing raises a very wide issue which I will just touch on now.
We must not forget that we have a Constitution and that under our Constitution—there are citizens who are beginning to say fortunately—we have an independent Judiciary and under Article 34 justice shall be administered by the courts established by law and by judges and the High Court and particularly the Supreme Court are empowered under the Constitution to enforce the administration of justice by adjudging laws and the provisions of laws in accordance with the provisions of the Constitution. There are provisions in the Constitution such as Articles 40 and 43. I shall not expand further on it. There are provisions that would amply justify our courts embarking on the course that the American Federal Court was forced to embark on. If this House does not protect the individual citizen, eventually a situation will arise where the courts will take it upon themselves to declare just how far the Executive can trespass. We here, although the system is very similar to the British system, have a balanced system of executive, legislature and judiciary in a constitutional set-up that can in many ways be analogous to the set-up in the United States of America, and if this House fails in its duty—I have complained about this very often and this is not the occasion to expand on it—if the executive is going to roughshod through provisions for administrative convenience, even if it is done with a cry of tax evasion and all that, the courts will find themselves invited to intervene. This is where we are heading. This is not the time to expand on that theme, but the warning is here in this provision.
I am not attributing mala fides, nor am I attributing any ulterior intention. I am dealing with what this section will do. In these circumstances, therefore, I would strongly ask the Minister to reconsider this provision. If he wishes to extend powers, by all means let him extend them but it should be by way of a substantive section in the Bill. Then we can debate it as such. As this paragraph stands it is an invitation to a development that probably would not be altogether a happy solution.
The fault is in the failure of this House. Let no one make a scapegoat out of anyone in the administration. It is the executive who carry the responsibility for marching the majority of the sheep around the corner. Let us be frank about this. We are not blaming anyone else. It is the Minister and the Members of this House who share the responsibility. I disagree with placing the responsibility, as had been done on other occasions, on advisers or anyone else. It is our responsibility.
The Minister has rightly complained of the denigration of the administration, particularly that part that carries out the vital job of collecting the revenue that makes the State function, and that has to carry the unenviable burden of legislation like this. The least we can do to support them is to have legislation that is frank and forthcoming. If there is anything that lends itself to being a stick that beats the Revenue Commissioners it is a provision like this. It should not be there.
I have said it is objectionable. One of the greatest reasons it is objectionable is that the provisions of a section like this are buried away in a certain obscurity in a Schedule and an important extension is contained in a parenthesis. The psychological effect on anyone who studies it, whether a professional person or someone who reads the Official Report, will be unfortunate to say the least. I would strongly urge the Minister to take this paragraph out and if he wishes to extend the powers let him do so. If he does not, and if it has been done inadvertently or in an effort ex maiore cautelae, let us correct it.
In the presentation of this Bill and the extension to the Income Tax Acts a general mistake has been made. The Bill is a bulky one but the Income Tax Acts, particularly the Act of 1967, are even more bulky. It would probably have been better to confine oneself to a general provision as in paragraph 3 (1) and afterwards, instead of legislating by reference to the Income Tax Acts, to take the corresponding sections, to modify them, section by section as might be required for capital gains and include them in this Bill. That would give two benefits. First, it would mean the Bill was self-contained and that the nexus was a general one, ensuring there was one code, that there was mutual support and no contradiction. Secondly, it would remove ambiguity and would make the Bill easier to deal with for those who will have to administer it and those who will have to comply with it. It was a false economy to attempt to do what the Minister has done in this Schedule by making specific references.
Much of what is in the Table is unnecessary. The Minister may include paragraph 3 (1) if necessary and where specific extension of powers to capital gains and capital taxation are required he could take the corresponding sections of the Income Tax Acts, rewrite them with the necessary modifications as separate sections and include them in the Schedule. It may make the Bill more bulky but it will be a definite improvement.
I have said that the extension of powers is objectionable in the present context but I accept that an extension of powers is needed. If there is this type of extension of powers which is imported by means of a phrase in parentheses, preferably it should be a substantive enactment in this Bill and I suggest it might be imported into the Income Tax Acts through the Finance Bill. The Income Tax Acts can wait until next year and it could be put into next year's Finance Bill if necessary. If that were done there would be greater understanding of these matters by the House, the public and the courts. The Minister will not give occasion to people to cast imputations on the Minister's advisers or on the Revenue Commissioners. It is not too late for the Minister to consider such a programme in regard to this Schedule.
It is only when one starts to analyse the Schedules that one understands the import of section 51 of the Bill. Subsection (1) of section 51 states:
Schedule 1 (computation), Schedule 2 (companies and shareholders), Schedule 3 (leases), Schedule 4 (specified securities) and Schedule 5 (administration) shall have effect for the purposes of this Act.
I should like to ask the Minister a question on this. That, of course, can only mean an assurance that the provisions in the Schedules were positive enactments on all-fours with every other provision in the Bill. I do not think I am unreasonable in asking the Minister, if he is going to extend powers of this nature, powers that have traditionally been contained in explicit sections in the Income Tax Acts, why would he not do the same in this Bill and import them into the law by means of a specific section in the Bill? It would be neater, franker and in every way a more desirable procedure.
I do not know whether the Minister would like to comment on what I have said. I want him to take my comments in a completely legalistic spirit. I should like him to accept them, so to speak, as pleading in court and not as making either a political case or a popular case. Indeed, I am rather disturbed about the popular impressions arising from this in that they may not be what one would like them to be.
I have mentioned penalties. We come now to the further tax provisions applied to capital gains tax. Having regard to the Income Tax Act, 1967, and to the deletion of paragraph 176 and having regard to the fact that that deletion does nothing except in so far as it does not potentially introduce a contradiction of the extension imported by the phrase in parentheses in subparagraph (3), if that is unnecessary, and the Minister himself has deleted it, why not drop the whole Table as we have suggested it should be dropped? It is confusing. It is incomplete and, being incomplete, it is misleading. The whole of the provisions of the Income Tax Act relating to returns are imported in by the first subparagraph of paragraph 3. Why pick out certain ones here—I nearly said "ones that suit"—especially when paragraph 176 has been dropped? That is something the Minister should consider.
We have the Finance (Miscellaneous Provisions) Act, 1968, in this Table also: "This Act may be cited and shall be construed together with the Income Tax Act". The Finance Act, 1971 and the rest of the Finance Acts also provide for citation and construction with the Income Tax Acts. There does not seem to be any reason therefore for explicitly mentioning them either. I am referring to section 29 of the Finance (Miscellaneous Provisions) Act, 1968, referred to in paragraph 5 of this Table and that is the citation section. It is also cited in the Finance Act, 1973, and it is part of the same code. It is to be construed with section 98 as similar to section 98 of the 1973 Act. On that argument it appears to me that it is not only incomplete but misleading to include this Table at all. It seems to be totally unnecessary.
In summary, then, the case I have tried to make is that the first subparagraph of paragraph 3, under the heading "Returns and Information" which we are discussing imports the provisions of the Income Tax Acts relating to returns and information. Consequently subparagraph (2) is unnecessary particularly in regard to subparagraph (3). Then, because of that general importation of the provisions of the Income Tax Acts into subparagraph (3) and because of the phrase in parenthesis extending the scope to notice and responsibility both in regard to the persons captured and the property captured, this is a positive extension of powers under both these codes and it should not appear in this way.
If the Minister wishes to do this he should do it in another way and give his reasons for doing it; that in subparagraph (a) relates purely to property of the nature of Government securities where the information is already available; that paragraph (4) is also an extension of power and it is a further expansion and extension of the power contained in the parenthesis in subparagraph (3); finally, that the penalties under Part 35 of the Income Tax Act are extended to capture the extended class of persons provided for in subparagraph (3) and that, for all these reasons, the Minister should make up his mind as to whether he wants this extension of power. If he does, it should not be where it is; it should be a substantive section in the Bill. If he does not, then a drafting amendment is necessary. Furthermore, I made a suggestion that a proper way to import the Income Tax Acts here by re-enactment would increase the volume of the Bill but it would make both codes tidier and interlink them more effectively. The partial tables should be omitted. That will pretty well summarise the submissions I have made. I hope the Minister will take it that I have attempted to do so in a coldly legal manner, including the constitutional point, and not in any emotive way.