Section 2 states:
2. Subject to the provisions of this Act and any regulations thereunder, with effect on and from the 5th day of April, 1975, a tax, to be called wealth tax, shall be charged, levied and paid annually.
We are of the opinion that this wealth tax should not be charged, levied and paid annually as and from 5th April, 1975. We are basing our arguments mainly on the effect this has and will have on capital formation to be used for industrial development here. We are not talking about it in terms of the 1 per cent but in terms of a universal discourse being established backed up by stupid antiquated arguments from Deputies such as Deputy Barry Desmond about wealth and Fianna Fáil being the party of privilege.
We maintain that this tax will create an atmosphere of distrust among people who have capital which can be used for development here. That kind of person knows that 1 per cent in 1975 can, if we have the particularly vicious type of approach we got from some Government speakers, become 5 per cent within a few years. This is more our reason for opposing it. There is a schizophrenia on the Government side of the House about this—Labour Deputies claiming that it is a marvellous thing, Fine Gael Deputies playing it down and trying to convey the impression that it does not matter very much.
This indicates the lines of propaganda which suit either party. Wealthy men have been attracted to live here by many factors. Because a man has wealth it does not necessarily mean that he has exploited somebody to get it. This is part of the mythology of the Left. There has been exploitation in the past but because a man has amassed great wealth does not mean that he has exploited anybody to acquire it. I know a wealthy person who came to live here because he liked our way of life here. He did not come here to exploit. One of the things he claimed took him here was because it was the only country in which he could live without having an armed guard to protect his family lest they be kidnapped. He took his vast wealth here and that can be used for development. If people start looking at his wealth with envious eyes, if the tax people start getting itchy fingers, that man may find some other country to live in and some other community may be able to develop on the strength of his capital.
We have had on this section from Deputy Barry Desmond an economic comment in the jargon of yesteryear, in the jargon of the period when capital was too powerful. We have had an attempt by that Deputy to tie around the necks of Fianna Fáil the millstone that they are in favour of the wealthy and in favour of the exploitation of the weaker sections. It is time to rebut and reject this thesis. I challenge Deputy Barry Desmond to come to my constituency and, in his great wisdom as a social scientist, to assess the type of person who sends me, and the vast majority of the Fianna Fáil Party, to this House. He will then be disillusioned in his fond belief that we, in opposing the tax imposed by section 2, are supporting the people of privilege in our community. Far more of the fat cats of society in Dún Laoghaire-Rathdown support him than support me in my constituency. The trade unions, generally, are far more sophisticated in their approach than the maidenauntish approach of Deputy Barry Desmond and others like him. Industrial development needs technology, time and capital, and capital is very important. If capital is used now the fruits will not be available for a considerable time.
In our society the most powerful system ever devised is used to persuade people to consume. People are being assaulted day and night in all the media with pleas to consume. The average man puts a very small input into the capital that can be used for industrial development. He is seen primarily as a consumer and by consuming he keeps factories and industries going. A certain small percentage of his earnings would be saved by way of pension schemes and so on, but he is fulfilling his role in society by being a consumer, and judging by our few years of affluence he has fulfilled that role very willingly. As you know, consumer spending has been very high over the few years of affluence we had until this disastrous Administration put the economy on the wrong track, disastrous because I do not think they can make up their mind between right and left, between grabbing all the capital for the Exchequer and leaving something for industrial development, grabbing all the money in such a way that those who have money abroad are scared away and those who have money in this country are trying to get it out as quickly as they can.
Industries and companies in this country should not be scared of forming their own capital by reserving a substantial percentage of their profits for capital formation in their company. If the kind of taxation that is envisaged here and the other taxation we have been dealing with since Christmas is proceeded with, companies will have no incentive to do this and consequently development will suffer.
I made the point that the ordinary, average man will not supply a significant percentage of the money through his personal savings for development of industries and companies. It will have to be done within the company. That is the imperative of modern industrial and commercial development. However much we would like to think we encourage savings, the erosion caused by inflation is shaking people in this regard and, at its best, it is an insignificant percentage of the total money that must be available for the development of industry and commercial life.
I mentioned already the kind of maiden-aunt approach of Deputy Desmond: tut, tut, Fianna Fáil is the party of privilege. Tut, tut, Fianna Fáil are defending the rich. Tut, tut, they do not like the wealth tax because they have sold their souls to a few rich men. His mind boggles and his imagination boggles, and he was in a full state of bogglement for a long time about this side of the House. He knows damn well that sound economic sense is being talked from this side of the House.
We may regret that capital formation must be a matter for the corporations and the large companies. We may regret that man is cast in the role of the consumer. We do regret it philosophically. Theorists thought they would be able to handle it by developing a different philosophy. It does not seem to be on. We must take the economic facts as we see them, and if section 2 scares people from abroad away from this country where they want to invest, or scares people who came to this country for one reason or another, not to exploit, and who have a lot of money, if it scares them out of the country, then the taxation policy is wrong.
There is a different system in the controlled economies of the USSR and the countries in Eastern Europe, where capital formation also has to take place for development. It is done of course in toto by the State. It was done very severely for a long period. Consumer spending was curtailed drastically, and they insisted either centrally or at local factory or business level that a large percentage of profits should be retained for development. So severely was this doctrine applied at one stage that, as you know, in Eastern Europe there was seething unrest, and after the Stalinist period this had to be changed.
We had the Minister for Industry and Commerce, when he was in Opposition, claiming he had the solution to all the problems. He could develop in his own particular controlled way. Now the economic facts of life have been borne in on him since he assumed office. He knows now that he must be as wily as a serpent in order to have enough capital in order to develop mines, oil, gas or anything else. He has learned. An interview he gave to the Editor of the Irish Management Institute Journal indicates that, and it is a good thing that there is somebody in the Government learning as he goes along. I do not think he or the Government learned early enough.
We had a great beating of drums and flourish of trumpets when the White Paper on Capital Taxation was announced, and from that time on there have been signs of modification. This section here, with its statement at the end, that 1 per cent would be the rate of taxation would be a hell of a lot different if it were not for the fact that people were forced to listen to other views, that people were forced to consider the damage they might do to the economy if they did not learn the economic facts of life.
In the west, as it has been developing, commercial companies, manufacturing companies and so on, under the free enterprise system form capital in a certain way. The taxman's job is to collect tax, but he must not be allowed to concentrate on the collection of tax without keeping an eye on the economy generally. This, I am afraid, is the kind of thinking that has been emanating from certain quarters of the Government parties and from the Government. As regards the system in the east—and I am not one who will say: "We have reds here, we have reds there and reds in the other place"—anybody with common sense would assess that system and its feasibility, would assess it as a system which would produce the best results economically for this country. I think everybody at student level or in his young days, or at any particular time, has done this.
Is it possible to have a fully formally controlled economy and to develop it in that way? I do not think it is possible to do it by this kind of legislation which tends to suggest that the panacea is more State control, more absorption of private industries, private concerns. It suggests that is the only way to run the economy. Where this has been done on the grounds of inefficiency, where there has been interference with individual freedom, the system has not been a success. I am not foolish enough to believe that an individual as a worker has any great freedom in the system we have but, properly controlled, properly watched, the free enterprise system we have, coupled with a strong trade union movement, can help the country to be developed and confidence can be reasonably placed in the economy and the people who are running it.
It seems to me that in this administration there is a schizophrenia and an ambivalence about basic things in the economy and the result can be only doubts in the minds of potential investors, fewer new jobs and consequent stagnation in the economy.
Section 2 lays it down that a wealth tax shall be charged, and the percentage is specified. If anything I would say here could do damage to the economy, I would not say, but I must say that the type of approach inherent in this legislation can create an atmosphere of doubt in the minds of foreign investors in the matter of investing their money here in property, capital goods, development and so on. Such investors should not have to look over their shoulders at the administration whose duty it is to promote industrial and economic welfare in the country.
The imperatives of industrialisation are whether in a controlled economy like Eastern Europe or in our type of open economy—what is called free enterprise economy—capital will be available. Of course the incentive to provide capital must be there. We provide it in a certain way and it is the duty of the administration to see that no legislation interferes with that system, with the process of enticing capital investment from abroad and encouraging individual commercial industrial firms at home to put substantial amounts of money aside for development.
The old tear-on-the-cheek approach of Deputy Desmond is out of date because in large companies, commercial concerns, the directors and shareholders have very limited powers. Management structures decide they will keep so many thousands of pounds for further development in capital funds and the directors do not have all that much influence in either stopping or encouraging them. Neither do the shareholders. Here is Deputy Desmond riding out against the wicked, wealthy, exploiting rich man and here we have Fianna Fáil, go bhfóraidh Dia orainn, the party of the wealthy.
As I have said, that approach is out of date and no serious person gives it any heed. The trade unions have their own power and I have a great belief in trade unions, in their far more sophisticated approach than the Labour Party's to a wealth tax and the economy generally. This is the kind of wisdom I always expected from the trade unions and they showed it when they supported us in the EEC campaign despite the fact that the socalled Labour economists advised them not to do so. Trade unions and the people with capital are locked into a system where technology is very important. They have their strengths and their weaknesses: management, investors, boards of directors, the lot, are all locked into a system, and it is incumbent on them to develop the system for the benefit of the economy.
A wealth tax like this is only a part of the make-up of that development and it is the duty of the Government to watch that system in the interests of workers, of investors, of the development of industry generally.
A speaker from the opposite side listed a plethora of countries and compared them with us. If he realised it at all, all those countries, some of them ex-imperial powers, had a huge start on us in capital formation, industrial development, right down from the industrial revolution. A former Taoiseach and Leader of this party, the late Seán Lemass, always watched the opportunity to attract capital here which could be used for development. He saw a trend here or there. He did not encourage hot, in-and-out money. He tried to create an atmosphere which would attract people and capital to the country for the country's betterment.
That is the very important duty of any administration. It is the duty of any administration to produce an atmosphere of confidence. It is difficult if a tail is wagging the dog for the dog to go in any particular direction, and the present administration will have to make up their minds fairly quickly or the people will make up their minds for them about what they want. The economy is in a parlous state at the moment. I submit that the reason for this is this type of legislation. It confuses people.
As I said earlier, I am not excluding the possibility of a totally controlled economy. In fact, I would back it 100 per cent if I thought it were feasible, efficient or that it would not interfere in any way with people's freedom. The administration will have to decide if that is what they want and go for it. This is a free enterprise society with a tendency in the Government to aid the less privileged, to watch the orchestra and make sure that each person in the orchestra plays the appropriate well attuned part.
No tax legislation should be tolerated which would shake the confidence in people who are using capital to develop industry or a commercial concern. No taxation or no atmosphere of going for the jugular vein of the person with money should discourage capital coming from abroad for investment and the purchase of factories, property, and so on. It is the taxman's duty to gather tax, but taxation is too important to leave to a man whose sole duty it is to gather tax. When he does that he is doing his job properly. There must be somebody watching the economy as a whole and the effect that taxation will have on the economy. That is why I submit that section 2, which states that wealth tax shall be charged, levied and paid, is damaging. As Deputy O'Kennedy said, at the moment we are in a period of serious economic troubles. This is no time to be talking about taxing wealth.
