Private Members' Business. - Wealth Tax Bill, 1975: Committee Stage (Resumed). – Dáil Éireann (20th Dáil) – Tuesday, 10 Jun 1975

Private Members' Business. - Wealth Tax Bill, 1975: Committee Stage (Resumed).

Question again proposed: "That section 2 stand part of the Bill."

Mr. Colley

Before progress was reported I was posing the question as to whether the imposition of a wealth tax is good or bad for our economy. There is nobody who can say that the imposition of a wealth tax in our economy will create one new productive job or will cause an increase in the export of any commodity, except capital. It will not contribute towards breaking the inflationary spiral which is the now acknowledged prime target of economic policy. I say "now acknowledged", because although we have been telling the Government for quite a long time, it is only in recent weeks that there has been any acknowledgement by the Government that this is so.

If one were to look at the state of our economy in early 1973 when Fianna Fáil handed it over to the present Government and tried to judge whether the imposition of a wealth tax at that time would have been a good thing, I think the conclusion one would have had to come to was that, despite the very great strides in the expansion of our economy which had been achieved, nevertheless, in comparison, say, with our EEC partners, our economy was still at a stage of development way behind that of our EEC partners. Yet some of the most wealthy countries either do not have a wealth tax at all or have one on such a limited scale that it does not compare with what is before us in this Bill. When we look at the situation today and try to consider the thinking behind this measure, it escapes my understanding as to what kind of thinking produces the imposition of a wealth tax in our circumstances today.

It is hardly necessary to recite the litany of woe in regard to our economy. The state of our economy is a monument to the incompetent economic management of the Government and an indictment of the Government and of the individual Members of the Government who claimed to have expertise of some sort in the management of our economy. It is not an excuse which carries any weight any longer to compare our situation with that of other countries. The level of our inflation now gives the lie to all the claims that were made in the past to justify the failure of the Government in regard to inflation. As a consequence of being at the top of the inflation league, we are not alone in the position where we are suffering unemployment at this time of the year in the region of 103,000 persons but we are also producing a situation in which more unemployment is going to be created as a direct result of that level of inflation with the consequential level of wage inflation.

We have this enormous problem of galloping inflation, worse than that of any other member of the EEC; we have a very serious and worsening situation in regard to unemployment; we have various business firms just teetering on the brink of bankruptcy —those who have not closed down. The Government choose this time to introduce a wealth tax. On Second Stage I invited any Members on the Government side, whether from the Fine Gael Party or the Labour Party, to indicate to the House some economic argument in favour of the imposition of this wealth tax. Nobody accepted my invitation. I repeat the invitation. I would be very pleased to hear some economic argument in favour of the wealth tax. Are there some arguments with some degree of credibility that would indicate that by passing this legislation charging a wealth tax, we would improve the economic performance of this country, some argument to show that by the imposition of a wealth tax, we would reduce unemployment or reduce inflation or increase our exports? Any one of these would give some degree of credibility from an economic point of view to the imposition of a wealth tax.

So far, nobody on the Government benches has attempted to argue any such thing. The arguments put forward are that it is in the interests of equity, that it will achieve a redistribution of wealth and that it will bring a more equitable distribution of wealth. These things are said glibly, particularly by people like Deputy Barry Desmond, but no attempt has been made to examine this and to see how true or false the argument is. On the admission of the Minister for Finance, there will be no redistribution of wealth as a result of the wealth tax. I say that because the Minister has admitted that, even taking the whole package together, not just the wealth tax but the wealth tax, the capital gains tax and the capital acquisitions tax, the total sum he expects to get into the Exchequer will equal the amount heretofore collected under death duties. Therefore, from the point of view of redistribution of wealth as commonly understood, that is, by the State taking from the rich and giving to the poor, there can be no change in the situation if the Minister's estimates have any basis in reality. But more than that, when pushed on this matter, the Minister for Finance said that redistribution would take place amongst members of wealthy families. In case you might think that this is an incredible statement, I am not making it up. The Minister said that.

Are we seriously to believe that the social argument, the argument in equity and justice for wealth tax, is to achieve a redistribution of wealth amongst members of wealthy families? Is this seriously put forward in this House? As I have indicated the question of redistribution of wealth as normally understood simply does not arise on the admissions of the Minister for Finance. The question of redistribution of wealth between members of the one family is too ludicrous to be put forward as an argument in favour of a wealth tax. So, what arguments are we left with in favour of the imposition of a wealth tax as proposed in this section? An argument which is based, as far as I can see, on an appeal to the politics of envy, an argument which begrudges the success of Irish people in business or in any enterprise, an argument which ignores the role of such people, not only their capital but their entrepreneurial skill in providing employment in this country. It has been a truism of economic policy in this country for many years that if we were ever to attain full employment— something, I admit, that sounds like a bad joke in present circumstances—it would have to be attained primarily through the development of industry. Of course the development of industry brings with it consequential creation of employment in the service industry but the primary effort had to be, still has to be and, at any time in the future, will have to be based on the development of manufacturing industry.

It is clear from some of the things we heard this morning, particularly from Deputy Barry Desmond, that there are Deputies on that side of the House who do not understand, or else do not want to understand, the role of those who invest their capital and those who invest their skill in the development, in particular of manufacturing industry in this country. There is some specious argument coming from the other side of the House that the wealth tax will not affect detrimentally industry in this country. I do not know how any rational men purport to put forward that argument. It is, of course, true to say that in the case of a trading company wealth tax will not be charged or levied. If anybody is foolish enough to think that therefore there is no charge levied which will offset the operations of a trading company all I can say is, God help this country if it is in the hands of people who think that.

The reality of the situation, as Deputies opposite should well know, and as was pointed out earlier today, is that essentially trading companies consist of shareholders, and whether those shares are held through other companies or any other way, ultimately you will get back to individuals, individuals whose money is involved, individuals who make the decision whether to invest the money, whether to withdraw it or not. If those individuals are adversely affected, can anybody say that can happen without any adverse effect on the trading companies concerned? Quite apart from the current economic chaos, many companies in this country have been built up over the years in which no dividends and no directors' fees have been paid and the profits have been ploughed back into expanding those businesses. What is the position in the case of a company like that? The position is that the shareholders who are liable for wealth tax will have to pay a certain amount of wealth tax based on their personal position.

Mr. B. Desmond

Based on what?

Mr. Colley

Based on their personal position. I hope Deputy Barry Desmond will pay particular attention to what I am about to say now and we might avoid a great deal of the nonsense we have had from Deputy Desmond up to now.

Mr. B. Desmond

Based on their personal position. That is the really interesting key point.

Mr. Colley

Pay attention, please. Then we will see what the Deputy has to say.

Mr. B. Desmond

Fire ahead. Talk about Sir Keith Joseph—you have nothing on him.

Acting Chairman (Mr. M.E. Dockrell)

Deputy Desmond should let Deputy Colley make his speech.

Mr. Colley

When, in a case of that kind, a person who has invested his money in a company of that kind and received no dividends and no directors' fees, is called on to pay wealth tax——

Mr. B. Desmond

After how much?

Mr. Colley

——in relation to his shares in a particular company.

Mr. B. Desmond

After what threshold?

Acting Chairman

I would ask Deputy Desmond to keep quite and allow——

More than the Deputy ever created.

Acting Chairman

May I ask the Deputy to cease giving us the benefit of his opinion? He may speak later.

Mr. Colley

What I am suggesting, Sir, is that what is vitally relevant in the consideration of the wealth tax is not who is or is not to be affected in the sense of having to pay wealth tax. That is not what this is about. The question is what will this tax do to our economy? What will it do to our unemployment figures? That is the question which every Deputy in this House who contributes to this debate must face and give an honest answer to. I have tried to demonstrate in regard to different kinds of companies what the effect will be. The effect clearly will be not alone in some cases the taking away of existing employment but certainly I can safely say in all cases the reduction in the number of new jobs which would otherwise be created.

There are aspects of this Bill which have the effect of encouraging or favouring foreign investment as against Irish investment. There can be little doubt but that medium-sized Irish firms are the ones that will be hit most hard, especially family-owned, medium-sized Irish firms. Again I ask if this is good or bad for our economy? The answer is quite clear. Of course it is bad for our economy. But there is another and more serious aspect in many ways of this. Again I am relating this matter to the creation of employment, particularly in manufacturing industry. We have a body which have been very sensible in their efforts to create new jobs down through the years. I refer to the Industrial Development Authority. This Authority are, of course, subject to the Government of the day. One cannot, therefore, expect that they will come out with what I believe is the truth and that is, that their efforts at creating new jobs and attracting investment to this country are being seriously hampered by this wealth tax in particular, and by the Government's general stance. In substantiation of that I would like to read into the record a letter which I received this morning from Mr. Frank E. Reilly who is Chairman of the Mid-West Chapter of the Ireland-US Council for Trade and Industry, a body with which I had the honour of being associated when I was Minister for Industry and Commerce, a body consisting mainly, though not exclusively, of American investors who have plants in Ireland and which also includes others who had not plants in Ireland but in many cases after they became members and were brought here were induced to set up plants in Ireland. This is a body which had served very well the purposes of the IDA up to now. I am not reading the first sentence, which is personal. Mr. Reilly is also the Chairman of the Board of the Electrographic Corporation of 20 North Whacker Drive, Chicago, Illinois, and he says:

...Under normal circumstances I would hesitate to comment publicly on tax proposals now pending before your legislative body. But, as I view it, the damage that may result from the enactment of these measures justifies that I speak out. The Capital Gains Tax Bill, 1975 and the Wealth Tax Bill, 1975 to the extent that they affect shareholders who do not reside in Ireland are the latest in a series of economic measures which are inconsistent with the promises made by the Government to leaders of the Council to strengthen its policy of encouraging American companies to establish industrial facilities in Ireland. Among the factors which have encouraged American companies to make industrial investments in Ireland are the undertaking made on behalf of the Government that for specified periods profits from sales of industrial products outside Ireland would be tax free and that both profits and investments could be freely removed from Ireland without penalty or limitation. I am concerned that the current tide of legislation which goes counter to these undertakings would seriously undermine the effectiveness of the Council as a recruitor of American investors for Ireland. I suggest to you that the permanent damage to this recruiting programme would far out-weigh the benefit of any additional revenue which might be produced by these tax proposals as they relate to American industrial investors and their shareholders. The economy of the Republic of Ireland is under pressure from so many external forces over which it has no control it would be regrettable if it voluntarily added to the pressure. I close by stating that while this letter is written in my personal capacity as Chairman of the Board of an American Corporation which is a long time industrial investor in Ireland I am confident that members of Mid-West Chapter of the Council of which I am currently President would affirm the views that I have here expressed.

The letter is signed, Frank E. Reilly and dated, 6th June, 1975.

No amount of snide comments or talk about Fianna Fáil aligning itself with big business interests or anything else will get over the truth of this matter. If Deputy Barry Desmond or any of his colleagues of the Fine Gael or Labour benches will accept my invitation, issued on the Second Stage and re-issued tonight, to come in here and talk on the wealth tax proposals and demonstrate one economic argument in favour of it, I for one will be delighted. We have not had one so far.

Deputy Dockrell and I are very civilised——

Acting Chairman

Will Deputies allow the Deputy in possession to continue, please? Remarks across the floor of the House are very entertaining but they do not lead to expedition of the Bill.

Mr. Colley

I am suggesting that one of the most useful things that this debate could produce would be genuine economic, social and equitable arguments in favour of the wealth tax. I indicated earlier that now, at long last, the Government have acknowledged that the first target and aim of economic policy must be the reduction of inflation. We have been telling them this for a very long time but at long last they have come to acknowledge it. When I hear people talking about equity and about the redistribution of wealth, I must confess that my blood boils a little because I do not think the people on that side of the House have any moral right to tell us that this or any other Bill is going to achieve greater equity when they are responsible for the highest rate of inflation of any country in the EEC. I say that because it is too easily forgotten that if a Government were to set out to redistribute wealth in the wrong way, in other words to make the poor poorer, there is no more potent weapon they could have than inflation at 25 per cent, except inflation at more than 25 per cent per annum. I wonder do Deputies realise the enormous and growing inequity that is being produced by inflation? A simple illustration should bring this home, I think, to everybody.

Anybody who has any property— and I am not talking about people of property affected by the thresholds in this Bill—stands at least to hold his own if not to gain in an inflationary period but the man who has not property, who is depending on his weekly income just to pay for the necessities of life, who cannot own a house, who cannot own any property, what is happening to him as inflation rolls on?

Mr. Esmonde

On a point of order, I do not normally interrupt Deputy Colley but we are dealing with section 2 of the Wealth Tax Bill. We are not dealing with inflation or with people who have no property.

Mr. Colley

On section 2 which proposes to charge a wealth tax, I submit it is in order to consider the economic state of the country in the light of the proposed imposition of the wealth tax, what the effect of that imposition would be or what the effect of not imposing it would be. It is on that basis that I have been discussing the section.

Mr. G. Collins

And rightly so.

Acting Chairman

Perhaps the Deputy would confine himself rather more closely to the actual section. He could be misunderstood.

Mr. Colley

I appreciate that, but I think it will be agreed that the outstanding problem of our economy today is inflation and it is impossible to discuss the proposed imposition of a wealth tax without referring to inflation. If we are referring to an imposition of wealth tax as equitable to bring about a redistribution of wealth, I submit it is in order to point out that people who are concerned about this would make far more strenuous efforts to cut inflation than the Government have made. This is a Government which have allowed inflation to rip and said they could not do anything about it until other countries do something about it. Now, when other countries have done something about it, it is still getting worse here. Equity demands that inflation be tackled. What answer do we get? A wealth tax.

There is difficulty in ascertaining the cost of administration of this proposed wealth tax, certainly in ascertaining it with any degree of accuracy. However, it is quite clear that the cost of administration will be quite substantial and, if the estimates of the Minister for Finance as to the likely yield from the wealth tax have any basis in reality, it is highly possible that the cost of collection will exceed the yield. This is another reason for questioning the whole thinking behind this.

I suggest that at a time when we are facing the kind of inflation we are having, the kind of unemployment problem we are facing, the kind of lack of confidence, the kind of dip in production—there is actually a fall in national wealth rather than a growth —where the latest statistics indicate a substantial fall in the volume of retail sales, in these circumstances the imposition of a wealth tax can only be regarded as the action of a Government which are trying to engage in diversionary tactics to draw the attention of people away from the real problems of the country. These are the actions of a Government which just do not know what they are doing. How anybody could regard it as justifiable, not alone to introduce a wealth tax but to spend so much of the time of the Government, of the Minister for Finance, of the Department of Finance on such an irrelevant proposal, irrelevant in the context of the real problems of this country, passes my understanding.

I want to make it quite clear that as far as I am concerned, and as far as this party is concerned, our test in relation to a wealth tax is, will it help or will it hinder our economy? No snide remarks about people of wealth, or in any other context, can alter that. That is the real test and that is the test under which the people will operate in due course when they get the chance. They will ask this Government, when faced with such an enormous economic crisis, what did they do? When the Government reply that they introduced a wealth tax, they will be asked: "What did that do for our economy? What did that do for the man who is on the dole?". Unless members opposite can give a far more satisfactory answer to that, they will reap the just rewards for this, as I described it before and can only describe it again, fiddling while Rome burns.

Mr. T.J. Fitzpatrick

(Cavan): I am prompted to commence my remarks on this section somewhat differently from the manner in which I had intended. Deputy Colley has queried this side of the House as to what advantages there are in this measure from an economic point of view. He invited anybody here to spell out how in any way this measure could attract capital into the country, how it could help employment, how it might help to cure inflation. Deputy Colley has made a fair study of the Bill but I do not believe he completely understands it. In the course of his speech he was guilty of economic and national sabotage. He was guilty of that by reading out a letter from Mr. Frank Reilly, putting it on the record of this House and leading the House and the country to believe that that letter represented a genuine fear on the part of United States companies. If Deputy Colley understands the Bill, he should have replied to that letter immediately——

Mr. B. Desmond

Hear, hear.

Mr. T.J. Fitzpatrick

(Cavan):——informing Mr. Reilly that he need have no fear because the Wealth Tax Bill does not apply to Mr. Frank Reilly, to a German company, to a Dutch company or to English companies.

Mr. Colley

It affects shareholders who do not reside in Ireland. Does the Minister say that is wrong?

Acting Chairman

I asked other Deputies not to interrupt Deputy Colley and I must ask the same of Deputy Colley now.

Up to the enactment, which provided for the pay-as-you-earn system there was really a free for all here in regard to income tax and capital taxation. Everybody more or less made his own arrangements. That may be an exaggeration but it is a fair enough picture. Very many people, who were earning good salaries or good wages, paid no tax. An income tax inspector never caught up with them and did not know about them. As from the date of the introduction of the pay-as-you-earn system of tax everybody earning £6 or £7 a week at that time had to pay the last penny of tax for which he was responsible, right across the board, whether he was a road worker with the county council, a forestry worker with the Department of Lands, a clerk in an office, a skilled tradesman, a professional man or teacher, every one of them had to pay the last penny of tax. In my opinion, as from then, it behoved the country to have a fair system of taxation in which everybody would contribute his fair share. The Fianna Fáil Government did nothing between 1959 and 1973, when they left office, to introduce a fair system of taxation.

Mr. Carter

They built up the economy. Let the Minister admit the truth.

Mr. T.J. Fitzpatrick

(Cavan): The Deputy has only just come in. If he had been here earlier he would have noticed that I listened with great patience to Deputy Colley and did not interrupt him when I was satisfied that what he was saying was not in accordance with the facts. I am saying now that the Fianna Fáil Government did nothing between 1959 and 1973 to rationalise the taxation system. During that period there was no capital gains tax. During that period, when values of property increased dramatically, a person could buy a house in 1968 for £3,500 and sell it six years later for £9,500 thereby gaining £1,000 a year free of tax. It was not regarded as an income but was regarded as a capital gain.

When I speak of a humble transaction like that I am only scratching on the surface of the incomes that were made in this country, thousands upon thousands of pounds by individuals, year after year. I will not describe anybody as a racketeer but many people quite legitimately and in accordance with the laws had incomes of tens of thousands of pounds per year free of tax while the forestry worker, the national teacher and the self-employed man in a humble way was paying tax on a fraction of these sums of money that went scot free. That was not fair. It was a disgrace. It was not just or equitable. It was indefensible.

Mr. T.J. Fitzpatrick

Mr. T.J. Fitzpatrick

(Cavan): The people know and realise what is happening. They realise that there is need for a fairer system of taxation, and really nothing could be more an advantage in any country than a system of taxation which is equitable, which is fair to all, which can be borne by all without damage or harm to anybody.

Mr. G. Collins

The Minister is not finished? He knows no more about it than a pig knows about a holiday.

Mr. Brennan

Section 2 of this Bill is the operative section, and in fact it is the section that sets out the whole principle of the Bill. Deputy Colley challenged the Minister to put forward somebody or anybody on the other side of the House to make some attempt at explaining in what way this Bill will help the economy. The Minister spoke for a good while and promised he would get to the subject but he sat down without even tackling it.

He did not give us one iota of reason or example as to how in any way this will benefit the economy, which is in appalling state at the present time. As a matter of fact, he made the ridiculous statement that it was attractive for a country to have an equitable system of taxation. What form of taxation is this replacing? The Evening Herald financial correspondent the other evening pointed out that we are the highest taxed country in Europe now. I did not see anybody making any effort to contradict that, but even if we were not, there is one thing certain in relation to the last two years, that we are the least developed country in Europe, with the highest unemployment rate and the highest rate of inflation.

It is ironical that this Bill should be introduced at the time when the Government, through the Taoiseach, have called in all the sectors of the economy, the farmers, the trade unions, the industrialists, saying, "Please help us; we are in a desperate state—we do not know what to do". What the Government are doing is adding more and more tax to the people they are purporting to help and if the calculated leaks that are being let out to the Press these days, particularly this morning, have any semblance of truth, they are going to have to eat many of the words spoken in this House on the two budgets and in all the economy debates that have taken place in the past two years.

Why are we giving incentives to industry? Why do we give industry a tax-free holiday to enable them to produce? Why do we seek to protect industry to enable it to produce, because we must export or die as far as this country's economy is concerned? We can only use a fraction of our own production, and the most elementary facts on the economy illustrate the need for us to export more and more; but we are going at the time when the industrialists are crying out for some rescue efforts for the lack of liquidity, when the cash flow has dried up and then competitiveness is being eroded—why, when we are faced with having to reduce VAT and other taxes that have crippled the country in the past couple of years and driven inflation higher and higher, do we at this particular time bring in new taxes? Nobody on the other side of the House, no economist or pseudoeconomist in this country, has attempted in any way to explain the madness of producing new taxes at the time when everybody is calling out for relief to enable them to exist.

I got a reply to a question in this House recently and the number of firms that went into liquidation in the first three months of this year are 127, if I remember it, not taking private individuals into the reckoning at all at all. We are going to make this country attractive by having wealth tax, capital gains tax, farmers' tax, capital acquisition tax, PAYE, VAT —tax on everything that one can possibly think of from dogs up to agricultural machinery. The Minister for Finance boasted in the House not long ago that, by heaven, this country was not going to be a haven for people coming in here to save tax. He was right. It is not going to be a place for anybody with capital who will be in any way encouraged to come in the years ahead or now.

We depend on investment from every source we can get to build this country up. It is as simple as that. Our own resources would never have done if it were not for the capital we attracted from outside and we are rapidly parting with the day when we could hope to keep on attracting that capital. If I may digress a little, getting away from the industrial side of it altogether, a fairly important aspect in my own country is that emigrants who found it useful to come back when they got their social security pensions, thousands upon thousands of whom were driven out of this country in the period of 1922 to 1932, were coming back to live on their security pensions because they found that they could live here more easily than they could in America, but that day is gone and that trend has changed. There is not the slightest hope of the old homestead being built up to allow the retired emigrants to come back to live on their security pensions, which they could live on at one time. The Explanatory Memorandum says:

In the case of persons domiciled and ordinarily resident in the State the taxable wealth is the global wealth.

They will be taxed on everything they own, no matter where it is, so long as they reside here. That is making perfectly sure that nobody will come here to retire. It is actually highlighted in the Explanatory Memorandum to the Bill. I do not know what the Government are thinking about.

We had reached the happy stage at one time—and it is not many years ago—when we saw that capital taxation would have to be studied. We were far from the day, even then, when we could speak about making it a reality. We were milking the people of all the money we could possibly take from them, and we had to have regard to crossing the danger line when it would cease to be worth anybody's while to go to the trouble of investing money and giving employment to others. Remember that in private enterprise the profit motive is the prime motive, and if they find that profit is not there, unless they are fools, they are not going to invest. A number of people have declined to come in here in recent months because of the scare about all this taxation that is being discussed at a time when the economy is literally on its knees. It is no wonder people have declined to come here. Nobody can say the number of people who might have come had we not created the situation which gave this country the reputation of being the highest taxed country in Europe. I cannot see where this is getting us.

As I said on the Second Stage, you will not help the poor by destroying the rich. I said that this was a time to withhold this legislation until we reached the stage where people could generate wealth. Then we could speak about taxing them. All this talk about the threshold sickens me. It is like the farmers with the £100 valuation having to pay tax. The tax is here and it is here to stay and the threshold will be altered every time the Revenue people are pressed to find a new means of making extra money. There is provision in the Bill to have the rate increased at any time, without reference to this House. In regard to section 30, the explanatory memorandum says——

Mr. T.J. Fitzpatrick

(Cavan): It is obvious that Deputy Brennan has not even seen the Bill——

Mr. Brennan

Section 30 of the Bill enables the rate of the tax to be changed by financial resolution of Dáil Éireann and places on the Revenue Commissioners the same responsibility to account for the tax as is already imposed on them in relation to other duties. Is that wrong?

Mr. G. Collins

Do not get annoyed. Let Deputy Brennan make his contribution.

Mr. Brennan

We will turn over to section 30 if the Minister thinks the memorandum is wrong. The Minister must hold himself responsible for the explanatory memorandum which is supposed to set out in plain language——

Mr. T.J. Fitzpatrick

(Cavan): Deputy Brennan said it could be done by order, without coming into this House, and that is what is wrong. It cannot be done by order; it must be done by financial resolution.

Mr. G. Collins

Take it easy; the Minister is not doing a bad job standing in.

Mr. Brennan

We know that the resolution on the Order Paper means that when something is brought before the House the majority is going to ensure that it is bulldozed through if there is going to be any question of opposition to it. This Bill is unique in that it actually gave notice to the people concerned to get ready to pay their tax before the Bill came before the House at all. It was payable from April last. This was surely a prostitution of democracy, assuming that the Bill would go through. The instructions went out to the people concerned to make provision in their accounts this year for the payment of tax from April, before the Bill even got a mention in the House. This was an assumption that the House was not relevant; only the motions had to be gone through of putting the Bill before the House, that once it was printed that was notice to those concerned that they would have to pay, and pay they will have to do, because the members of the Coalition will go into the lobby—even Deputy Maurice Dockrell who is not in agreement with the Bill—and vote for it because he belongs to a set-up that will do anything except face the country.

If the Government have doubts, about it they should do as has been done in another important country at the present time, have an election and put it to the people whether they want the Bill or not.

Mr. B. Desmond

Certainly we will go to the country on the wealth tax. Fianna Fáil will be hammered.

Mr. Brennan

If they go to the country with the arguments they put before this House as to what it is going to do for the economy, then they will have a very poor case on which to face the country. At the present time the people are witnessing over 100,000 people unemployed and the Taoiseach is crying out to those on the top echelon of the economy to advise him on what is the best thing to do to avoid ruination, and the answer that Deputy Barry Desmond has is: "Tax the employer more. By that means you will create a better situation". As Deputy Colley said, nobody has attempted to say in what way that could be done, and in what way it will help people. Everybody knows that this new tax is an added impost; it is another blow against private enterprise. It hastens the day when it will be easier to say that private enterprise does not work and we will have to introduce more nationalisation, more socialism. There is no gainsaying that. It is a step towards making it easy to bring about that situation and for that reason certain people will probably like it. I do not like it and I want to speak the truth about it.

It appears that what was in the White Paper on Taxation was mandatory on the Government. We had White Papers on many things and that is the last we heard of them. The Government need not be guided by anything in the White Paper on Taxation. They need not have acted on it at all. When they assume that this Bill is going to be bulldozed through the House, they should keep in mind that legislation such as the Mergers and Monopolies Bill, which reached the Second Reading Stage has been relegated to the dusty shelves in the Department and we have not heard of it for months. There is not even a mention of it. Why could the same thing not happen this Bill? At a time when it is essential to shelve it, would this not be one way of restoring a little confidence in the economy at a time when it is so badly needed, if we are going by the very simple elementary rules which must be followed, if we are going to conquer inflation, and if we are going to get the economy back to the state it was in when this Government took over? The people of Donegal town wrote me three letters in which they pointed out that this Bill meant ruination in so far as investment in industry is concerned.

It is a serious matter at a serious time. The Minister need not be too sure: the message might not have got through to Cavan in a rather big way. One of these days he may discover that.

We are told that very few people will be affected and it is not worth while talking about it. The thresholds are so generous and so on. But the Minister made no attempt whatever to show that this Bill is of any assistance to the economy. He spoke of great thresholds and the extensions that have been given. In the end I thought he was giving new grants all round to the people concerned, that he was bestowing some benefits on them. It only needs the shifting of a few commas, the moving of the parentheses in order to change the number of people affected at any given time and to raise the rate that they will be charged just like the other taxes that were brought in recently. You cannot actually discuss one of these without thinking of the other. It is a demonstration of weakness for the Government to bring this Bill before the House at this time. The whole country knows that this is not the time to bring in a new tax. Every child in the country knows that.

The Minister was so hard put to sell ideas about this Bill that he resorted to talking about death duties. Before we have discussed all the sections of this Bill we will find that the death duties are worse now than ever they were before and the people will be paying more and more. The Minister may laugh but there will come a time when posterity will not thank him for standing in for the Minister for Finance as if there was an urgency about getting this Bill into operation.

When all the sections of the economy meet one of these days to see in what ways they can rescue the country from the disaster into which it has been plunged would not one of the easiest ways be to hold back two or three of the new taxation Bills until the country has time to build up confidence and get back on its feet again? When we are moving ahead and making progress again, when the economy is expanding and the rate of unemployment is dropping, then you might think of bringing in one or other of these new taxes. What is the use in the Congress of Trade Unions having to call on their members to forego part of the national wage agreement? What is the use in the Government having to backtrack from their increases in VAT? What is the use in having to retract some of the taxes imposed in the recent budget? It would be much easier to withhold this tax and restore confidence in that way in the country.

The Government are blind: they are not getting this message from this side of the House alone: they are being told by every economist in the country that this is distasteful legislation introduced against a sombre background of desolation, gloom and despair, at a time when every worthwhile company in the country is on the brink of bankruptcy and when many of them have already gone into liquidation.

I do not want to delay the House all night on this section. I would appeal to the Minister to have second thoughts and even when the Committee Stage is over to hold back the Report Stage for a year to see if the country will get back on its feet, if confidence can be restored and see if there will be wealth in the country. We can see if some of the people who generate wealth so that we can distribute it, will be again generating wealth. Then we could ask them to give a little more to the national economy by way of redistribution of what they are earning. If we are going to adhere to private enterprise and the profit motive in industry and development we must ensure that the people who invest money get a fair return on the money they invest. Above all, do not tax them on the things they own. Wars were fought over a long period in this country over ownership of property. It is the most sacred thing to an Irishman to own what he has and to feel that he is breathing fresh air in the liberty of a free country where at least what he owns is not being taxed, where the pictures on his wall will not be counted or the machinery in his yard considered and where he will not have to make returns to see if he is free, to see if he comes up to the threshold or does not. Do not leave out people who have such a love for private ownership. Do not put them in a position where the State is going to tax everything they own. The Government have taken the first definite step towards this now at a time when the country can ill afford it. I would appeal to the Minister to think seriously at this time when there are so many things to be done to restore confidence and to bring the country back on its feet before he imposes new burdens on the people who count.

Mr. B. Desmond

This is a very important section of the Bill. The Minister is right in saying that this debate has become another Second Stage exercise and that in fact what we are discussing in section 2 is the principle of the Bill and the rate of tax which the Government propose to impose. Deputies Colley, Brennan and Fitzpatrick have challenged us to produce genuine economic and social arguments in favour of a wealth tax. There are a number of entirely genuine, rational and objective reasons and also reasons of the utmost social validity for this tax. The first is the general weight of what I would call responsible economic advice to the Government in terms of reforming the taxation structure and I challenge Fianna Fáil, the new friends of the tiny minority of extremely wealthy people of this country who will be liable for this tax——

Mr. T.J. Fitzpatrick

There are such people. A few of them live in my constituency with bloody big farms— excuse the language—outside Dún Laoghaire-Rathdown and the Deputy would be amazed what they can do. Up to now we ignored it but it is time that they contributed their fair share in this country. The introduction of this tax means that a couple of hundred very wealthy individuals will have to disclose their wealth.

The Minister for Finance, to my personal pride, is the most radical Minister for Finance in this country— perhaps that is a bit of a backhand compliment because the rest of them have not been very hot anyway, but Deputy Ryan undoubtedly is the best and has a genuine social conscience. Deputy Colley was a previous Minister for Finance, as was Deputy Lynch —although one almost forgets that fact —and also Deputy Haughey who is a raving conservative at the moment with regard to taxation matters. He has got terrible in old age, apart from making a few provisions for artists and so on. In retrospect he has not been very good and the prospect is not very hopeful. Therefore, the second reason I give is that it certainly reduces tax avoidance quite substantially.

The third reason I would give is that the current classification which we have in Ireland will now broaden with capital gains tax and capital acquisitions tax. The traditional classification of earned income, investment income and a narrowing down of tax based on these two criteria will certainly be broadened, and that is necessary in terms of ensuring that those who have wealth in our community pay their fair and just share and no more. It ill becomes Fianna Fáil coming into this House saying that we of the National Coalition expect sacrifices from wage and salary earners, from public service employees and from private sector employees. They have the gall to come into this House and put forward a perverse theory that those with wealth should pay nothing. I would not mind if they said a wealth tax at 1/2 per cent. We are only charging 1 per cent of assessable wealth in this country, but they demand total exemption. They had the hell of a nerve to speak of the 750,000 insured workers earning a weekly salary, who will not have to pay wealth tax, who do not suffer particularly from envy—I do not envy anybody because it is not worth it, I discovered that long ago. Therefore, to suggest that we on the Coalition side are merely going through an exercise in the politics of envy is a sign of the political immaturity of the Fianna Fáil Party in this regard.

The fourth reason I give, and it is a reason which is so traditional now that it boggles the imagination that Fianna Fáil cannot appreciate the point, is that wealth tax ensures that in the Republic of Ireland the resources of this country will be used productively and efficiently. I quote as my source for that the most respected and revered individual in Irish fiscal policy, the governor of the Central Bank of Ireland, a man who is not wont to make extravagant, socialist, Marxian, radical, heretical claims about taxation, has time and again said the taxation system of this country should ensure that there is no, what he calls, "idle money" knocking about; the wealth tax will ensure that.

As I pointed out earlier, there is nothing to stop me if I have £500,000 buying a couple of tons of gold; I could take up the floor boards in my home and bury the gold under them and sit on my wealth. If, however, there is a wealth tax, that is an incentive to me to make use of my wealth productively. That is part of the main reason why we have an efficient use of resources and wealth is used more productively when it is liable to being assessed for taxation.

I would advance as one of four principal arguments that a wealth tax is a very useful and essential tax for discouraging wasteful investment. I am quite certain some of the empty office blocks one sees in London and in the greater Dublin area are there because people just sit on their wealth and are not anxious to derive any income from it. Why should they worry about an income when the property is appreciating all the time? They are paying no tax. Why bother about this problem of income? Therefore, they sit on valuable national resources and the introduction of a wealth tax ensures there is substantial discouragement of wasteful investment.

He cannot speak French.

Mr. Connolly

Or Italy?

Mr. B. Desmond

He goes to the Netherlands and finds a threshold level there of £6,800 for persons under 35 or £9,000 for a married or single person over 35 and he gets a mere £2,500 for each child. If the person is aged 65 and over after all that travelling he gets a mere threshold in the Netherlands of £6,000. The threshold level in relation to the wealth tax has boggled the minds of many tax experts and some of them found it to be so generous I confidently expect from the Netherlands, Denmark, Germany and Sweden and Norway to see a substantial capital inflow into this country. For example, in Norway, a country of vastly greater wealth, the taxation threshold level for the wealth tax is a mere £5,700. In Sweden it is a mere £19,000. There is the argument in relation to the Fianna Fáil Party.

I make the point to Deputy Colley and Fianna Fáil that they read An Annual Wealth Tax by Sandford, Willis and Ironside, the 1975 edition. The arguments for and against the wealth tax are given in it and the threshold levels for various countries are also given in it. I shall quote the threshold levels in respect of quoted stocks and shares. May I, for example, give the level in respect of real property? Deputies opposite should listen to this rather enlightened reaction in relation to Denmark:

Four-yearly valuations generally a little below market value. Flats are assessed on capitalised rental value.

That would be a right one for here if people were caught under it and they are not. In Germany:

Irregular valuations. Current figures based on 1964 values, increased by 40 per cent.

In the Netherlands the wealth tax is based on:

Open market value—but occupied houses (whether by owner or tenant) valued at two-thirds open market.

Similarly, farms are reduced, not 50 per cent but valued at two-thirds. The Netherland farmer has a heavier penalty as against the Irish farmer, provided, of course, he has a farm worth about £450,000 to find himself liable for wealth tax here. He would want to be nearly half a millionaire before he would pay £1,000 a year in wealth tax. In Norway it is in principle open market value, but values fixed by local tax boards. In Sweden it is quinquennial valuation at 75 per cent of market value. That is in relation to property. In Ireland, of course, we have exempted agricultural land up to £200,000 assessed at 50 per cent of the market value, any excess at 100 per cent of market value, for "genuine" farmers. That is the situation.

I should like to quote to Deputy Brugha, who has an obsession with the value of shareholding. What we are suggesting here is conventional. For example, in Denmark it is a stock exchange value at 1st January; in Germany, stock exchange value at 31st December; Netherlands, stock exchange value at 1st January; Norway, stock exchange value at 1st January; Sweden, stock exchange value at 31st December and in the Republic of Ireland the open market value at valuation date. In England they propose to have the stock exchange value at valuation date. Mr. Healey, the British Chancellor, has not yet fixed it but I have no doubt he will not be half as generous as what we expect. In relation to France d'Estaing and his colleagues have been introducing legislation of a fiscal and monetary reform nature at virtually one Bill per day.

There has been a phenomenal change in taxation attitudes in France. My socialist colleagues, who are now very strong in France and the European Parliament, have assured me that country for country there will be very few Frenchmen complaining about the Irish wealth tax by the time they get what is in the pipeline in France in terms of the overall package. Therefore, to ask: "What about France?" and plead special exemption is something I do not expect. Fianna Fáil have not yet discovered that the model of Germany was modelled in Prussia in 1893. At this stage I expect Fianna Fáil to propose a Bill calling for the abolition of income tax, calling for the abolition of social insurance and of value-added tax. Their opposition to this Bill is spurious.

I can assure Deputy Colley that my appeal is not to the politics of envy but it is to the politics of social justice and social realism in relation to taxation reform here; the politics of social justice and equality of distribution of wealth, whether it is the wealth of the humblest farmer or industrial worker or of the most wealthy industrialist or agriculturalist. I hold no special envy in my approach. I hold the envy of reform and I do not accept the arguments put forward by Fianna Fáil that the wealth tax will destroy entrepreneurial initiative here. I know of no evidence of it and I have not met it, apart from hearing a letter read out from Chicago tonight.

When it comes to the IDA it may be that Fianna Fáil have a few friends left in the IDA and that they are being fed a little propaganda by a few people who are finding the going rough.

To the best of my knowledge when the IDA have explained to visiting industrialists from Germany or any of the sophisticated European countries, they know the taxation levels and they are not conned by party propaganda from either side. They are careful men. They do their sums. They come in to the Irish Congress of Trade Unions and ask us what the rate is for a skilled fitter in Tarbert, County Kerry; what they would have to pay if they opened up a new factory in Newcastle West, or in Limerick city. They want and get those figures. They are not taxation ignoramuses, as implied by Fianna Fáil.

It is not true to say that the economic policy of the National Coalition Government is acting as a disincentive to the development of manufacturing industry. In no way are we acting in such a disincentive manner. We fully understand and appreciate the role of those who are investing their savings, personal incomes and wealth and we appreciate it in terms of investment into the Irish economy, whether it is money into a building society or into a small family-owned concern—and there would have to be a fair bit of money in the family or in the concern, say, yourself and your father, one or two brothers and a wife. By the time they all get their exemption, the threshold exemptions and so on, by the time you have many exclusions, you would want to be a fair-sized farmer before your individual liability would amount to even 1 per cent.

Therefore, I suggest to Fianna Fáil that the arguments we put forward represent the reality of the situation. I do not accept the arguments put forward by Deputy Colley. I refute them. I think they are dangerous in this country because the more the spotlight focuses on the inequalities of real wealth in this country, the more we talk about this Bill, the more we explain to the people, the more indeed will the people ask: "What are Fianna Fáil really talking about?" I have spoken to Fianna Fáil men who are staunch party supporters and there will always be Fianna Fáil, fair dues to them, they have every right to be, who have spoken to me about the obstruction of the Fianna Fáil Party in relation to capital gains tax. They came into this House, two or three of them, and Deputy de Valera, with the shadow of republican financial spokes-manship sought to be shifted on to his shoulders, spent 70 hours—with two or three Deputies on the Fianna Fáil side and one Minister on this side— on the Committee Stage of the Capital Gains Tax Bill and all Fianna Fáil could threaten was the kind of browbeating which Deputy O'Malley went on with when he said that as a trueblue republican, he would never disclose the financial affairs of a client, not even to the Revenue Commissioners, even if he was legally liable to do so.

That is the kind of obstruction we get from Fianna Fáil. That is the kind of national concern Fianna Fáil have. That is the kind of sense of social responsibility which that party have displayed. Frankly I would be ashamed to be known as a republican with such narrow introverted special ideological hang-ups as the Fianna Fáil Party have in relation to the wealth tax. My advice to them is: listen to the plain people of Ireland. They will tell you what they know about the wealth tax. Do not listen to those who are either trying to evade tax or who have made a living out of advising those who are trying to evade tax.

Do not listen to them because they are not what I call the ordinary people of Ireland who are paying their taxes and earning their living, working as businessmen in the ordinary practice of this country, building up our exports. They have nothing to fear about wealth tax or from capital gains tax. They know the score, and indeed I think that some of the accountants and some of the solicitors who yet have to make returns to the Revenue Commissioners—I am glad the Revenue Commissioners will have an opportunity of examining some of those returns because it is about time that some of the more shady, more obscure aspects of wealth in Ireland were examined and not, I would suggest, the genuine creation of productive assets in this country which the governor of the Central Bank so rightly loves. I share those views as well as the views of Deputy Ryan, because there is no man in this country —even though he may be a solicitor and so on—who has shown a greater sense of responsibility, a greater sense of being not just unhappy but determined to root out idle money in this country, easy speculative money and make sure that the people pay their fair taxes.

Ruairí Brugha

Before I deal with the subject matter of section 2 which is the most important aspect of this Bill, I would like to take the Minister up on a reference he made earlier to Deputy Colley. He said that Deputy Colley was guilty of economic sabotage and he insisted that foreigners are not liable to this tax under this Bill. Section 3 (2) reads:

I am sorry Deputy Desmond has left the House. His first reason was the responsible economic advice, as far as I could follow it, of economists and he referred to Trinity College. That is not a reason; it is merely the opinion of an unnamed economist. One reason, which I wrote down, that he attached to the first one was that is would be no benefit to Fianna Fáil to take up opposition against the Bill, and I would agree with the Deputy that it cannot be of much value to Fianna Fáil if the only measuring rod involved in this debate is the measuring rod of envy. The basic reason why Fianna Fáil are opposing this Bill at this stage in our economic development is the state of our economic development and I will go into the comparison later on.

(Cavan): That is all right. The Deputy can look after himself. Nobody tried——

Mr. G. Collins

The Minister was very touchy when he was interrupted.

Mr. Davern

It is a touchy subject.

Ruairí Brugha

I regret that the efforts made by various Ministers for Industry and Commerce and Ministers for Finance, such as Deputy Sweetman, by outstanding Ministers such as the late Deputy Seán Lemass, and the benefits from their efforts which we have been achieving in our economy should be endangered at this stage in our economic development.

The Minister may have something there, but he is aware of the very significant increase in the level of exports in 1973 and 1974. Both sides of the House are very pleased with this. There is a natural concern, and it is not because we are in Opposition, about the effect of the inflationary rate on our export prospects, because Irish employment is involved.

As I said the other night some businessmen I have been meeting in the past three months believe that a bunch of schoolboys have got hold of the economy and do not know what to do with it or in what direction to point it. The type of businessmen I am talking about are those who have not any political affinity with this side of the House. I can assure the Minister that during the past three or four months, I have met very many of them who have that viewpoint of the performance of the Government in the economic sphere.

It is for that reason that we are mainly concerned about this particular tax. I do not see any strong objections to the gift and inheritance taxes. I was sensible enough to realise that when the Minister's Government promised to remove death duties they would have to be replaced by some other kind of tax, and the inheritance and gift tax is a replacement for the death duties on which the Coalition Government based a part of their campaign more than two years ago.

I am in favour of a level of capital gains tax. I am sorry that Deputy Desmond has left the House, because I should like to ask him the question that Deputy Colley put to him earlier: why did he vote against the Fianna Fáil proposal of a 50 per cent level of capital gains in the first year? The object of that was, despite what Deputy Desmond may have to say about Fianna Fáil, that we are in favour of as high a level of taxation as possible on speculative development, on easy money, and on the kind of thing that Deputy Desmond and his friends talk about, but upon which, apparently, they are not prepared to act.

Progress reported; Committee to sit again.

Dáil Éireann debate - Tuesday, 10 Jun 1975