I am not sure whether the Minister enjoys, perhaps, having a certain amount of fun with the Opposition. My recollection of the debate last week was that, on the morning following the discussion about the meaning of subsection (2), I said the Minister was quoted in the press as saying that companies and investors abroad would not be taxed, and that I did not think this was correct. The Minister has just said there will be no thresholds for foreign investment.
Private Members' Business. - Wealth Tax Bill, 1975: Committee Stage (Resumed).
Question again proposed: "That section 3 stand part of the Bill."
(Cavan): I said that other countries which operate a wealth tax do not provide a threshold for foreigners.
In that case the Opposition are not going to misunderstand that point because it is perfectly obvious on any reading of subsection (2) that the assets of any person living abroad situated in this State would be taxable if they came above the threshold. I do not think the Minister's criticism of Deputy Colley is quite fair. The letter Deputy Colley read was the reaction of an individual living in the United States to the package deal of tax laws being introduced here. That is my recollection of the impression being created on a foreign resident.
The Minister, of course, can easily argue that the level of wealth tax would hardly be likely to influence any potential foreign investor. The question of the impression created on people is a fairly important one if one takes the general impression on reading the White Paper and the three new tax Bills going through the Oireachtas here together. It has generated a feeling amongst people, and the letter Deputy Colley read confirms this, that if you invest in Ireland you will get stung. I agree with the Minister's remarks in relation to the removal of death duties. This removes a burden from people— not its replacement by this Bill, but its replacement by the inheritance tax Bill which is a more significant one. I concede it does give an advantage to the owner of property with quite a high threshold.
Provided his property is not either held in a discretionary trust or a non-trading private company, as the Minister well knows, where it is taxed with no threshold from £1 upwards.
(Cavan): We will deal with those when we come to them.
But they are there and the Minister did not propose to deal with them when he was talking.
(Cavan): There are concessions and, in many cases, they are treated as assets of the beneficiary.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
I am struck by the Minister's continuous reiteration that no company will be taxed. It could give the impression that there are no taxes on companies. However, we all know that this particular Bill applies to tax on individuals and not on corporations or companies here or overseas. The amendment being put forward by Deputy Colley is a reasonable amendment. It is quite a narrow one; it applies only to a particular category of companies, of the share-holding in companies, which had an agreement prior to the 5th of April to secure a grant from the Industrial Development Authority.
As I see it, the basic argument in favour of this amendment is that it is not really realistic to apply capital tax to shareholders in any company in need of a grant of this nature in order to get it on the road. It seems to me that it highlights the illogicality of taxing a company, on the one hand, and spending pretty substantial amounts of taxpayers' money, on the other, looking for investment. The Industrial Development Authority is a pretty substantial corporation costing a great deal of money. It would look as if the Minister for Finance here is moving in one direction, taxing a company which is getting a grant from the Industrial Development Authority, while the Minister for Industry and Commerce is moving in another direction supporting such a company through the Industrial Development Authority, to get it going. The whole aim and purpose of the policy of all Irish Governments until recently had been to encourage enterprise. We have said before that the effect of taxes like this tends to discourage. In the case of companies which Deputy Colley's amendment intends to include, many of the people who have invested in companies of this kind have been encouraged to do so, to support development and progress here and also in their own interest. They have also been encouraged—and I take it that the date Deputy Colley selected, the 5th of April, 1975, is the date on which one could reasonably be expected to know that a tax like this was going to be introduced—to invest in development and enterprise of this kind in the belief that they would not be taxed. I am speaking now of companies which have been given certain tax incentives.
As I have said, the purpose of the amendment is to relieve investments in companies of this kind up to April, 1975. I believe that the correct policy at the present level in our economy is to encourage investment as much as possible.
That would be forever and a day. You would give exemptions to these companies forever.
No, you would not.
The Bill was published in February——
It is jobs that are needed here, not wealth tax.
But not discrimination.
We shall have an orderly debate. Deputy Brugha without interruption.
Let us suppose that Deputy Esmonde is right. This State has given tax free concessions on exports to many companies for limited periods. There is a special protocol with the EEC to enable that to be continued, up to 1980 or thereabouts. If the Industrial Development Authority has encouraged people to invest to support development and provide jobs, I do not see any breach. But this type of investment would not be taxable in the same way as other investments. I do not see it going on forever in the way Deputy Esmonde suggests, because this type of tax relates not to the company but to the investment. In that sense, I do not see it going on indefinitely because it would cease if the investor disposed of his interest. That is how I would read it anyway. In that sense, it is a reasonable amendment to give some relief to investors of this category. For that reason, I support it.
(Dublin Central): I should like to support this amendment also. When we look at the contents and the substance of this amendment, we find that it is taking into consideration contracts entered into—and this is the important thing— by men in industry who came to this country and looked at the package available from the IDA. Whether we like it or not, the point is that previous Governments gave this undertaking. Nobody in this House, in my opinion, can criticise the workings of the IDA since it was established. We must give credit and thanks for the economic expansion of this country to the efforts of the IDA, in America and in European countries. We undertook to exempt their profits from income tax for a certain number of years. That obtains today. We undertook to give their profits free movement in and out of the country. That too still obtains today. Having researched the whole tax formula, they knew exactly where they stood.
Individual investors?
(Dublin Central): Yes, individual investors too.
Could I put this point? Did they not also know that as individual investors in this country they were liable for a State duty in certain circumstances?
(Dublin Central): They did.
They could take steps to deal with that. This Bill taxes them on wealth tax of £1 up.
(Dublin Central): They are not that innocent as regards the death duty deficits.
(Cavan): Deputy Colley knows——
Now I know what the Deputy is talking about.
An investment company. Is it not there in the Bill?
Deputy T. J. Fitzpatrick (Dublin Central) without interruption, please.
(Dublin Central): What I am concerned about is losing confidence. Companies who entered into an agreement with the IDA and the previous Government took the financial structure and fiscal policies into consideration and undertook to establish industries here. Deputy Colley in this amendment is asking that contracts entered into up to the 5th April should be exempt from wealth tax, no more and no less. We, on this side of the House believe that once you make a contract you should keep it.
We are imposing a wealth tax on people who might not have come here if this Bill had been on the Statute Book. If they, after the 5th April, having read the capital taxation come to the IDA and are prepared from now on to enter into contracts and establish industries here I would say "So be it. You will see the tax before you. That is what you will have to pay—capital gains, wealth tax, capital acquisition. You know the income tax code. You know how it stands today." They can go back and research their Bills. They can take their investment into consideration and if they decide to come there and then that is all right. They cannot say we misled them. We showed them exactly what our taxation system was.
But the people we are talking about in this amendment were not aware of this legislation when they committed themselves to establish industries here. We gave them an undertaking about income tax. We gave them an undertaking about movement of their capital in and out of the country should they be disposed to do so. That part of the bargain still holds. I sincerely hope we do not go back on that. We object to the fact that this Bill is brought in now and these shareholders can justifiably say that the contract they entered into, be it five years ago or 15 years ago, has been breached by the Government.
What Deputy Colley is looking for here is not of very great significance. It will not make a lot of difference to the Bill. If we go by the Minister, three-quarters of them will be exempt already. The Minister gave a list this evening and practically exempted 95 per cent of the people here, if not more. If that is the case, why are we having this Bill?
And all the foreigners.
(Dublin Central): He has exempted threequarters of the manufacturers, with thresholds and all the other concessions which they can claim. Of course, we know perfectly well this is not true.
(Cavan): Explain the inaccuracy of anything I said in regard to the thresholds for farmers or in regard to this.
(Dublin Central) It is so detailed that we will get the Minister an unrevised script of the day's proceedings. I am not questioning the Minister's integrity in regard to that aspect. Even if the Minister is correct, and I am not sure that all of what the Minister said is accurate, it proves what I said earlier in the day, that we are directing this wealth tax at a small group of people. It is directed at people in the productive end of industry, people who are generating employment.
The Minister said they will be exempt, that it is only the shareholders who will be caught. We know perfectly well that in many companies, the managing director might own 51 per cent of the shares. The Minister knows that as well as I do. What is bad about the Bill is the philosophy behind it, the fact of having to pay tax yearly. People have spoken about death duties. They will speak about the capital acquisitions tax. This is an annual charge on the business. Anybody who is running a business today, if he is employing one man or 100 men, if he is over the threshold of £250,000 to £300,000, must take this into his costings. He must include it as part of his costings.
He will not be allowed to charge it.
(Dublin Central): We know he will not be allowed to charge it against income tax. What he is supposed to do is to deduct it from his net income or else sell part of his factory.
(Cavan): We specifically excluded trading companies.
Does the Minister think factories exist on their own?
They are in a vacuum.
(Dublin Central): I do not want to hold up the House on this amendment but I must repeat what Deputy Colley has stated, that we are certainly undermining confidence. We must honour contracts and we must not undermine confidence which is at a very low ebb today. Money will not buy character. If you lose it, it is very difficult to restore it. If the Minister wishes to draft Deputy Colley's amendment in some other way, he should seriously consider doing so.
I am becoming very concerned about Deputy Colley's amendment.
I am glad the Deputy is.
I did not take it so seriously until Deputy Colley made a remark just now when he was talking about discretionary trusts and non-trading companies in association with a taxation avoidance structure. Are we listening here to people who have been sent in to make a case for people who could afford to do taxation farming?
Explain it.
Tax farming was the phrase used. It is a very current phrase around the city. It meant that before a man made a business decision in this country—it always took a bit of time to consider the pros and the cons and the available finance—it often took weeks and months until the particular investor had set up a special taxation avoidance structure before he put one single £ into an Irish trading company.
I understand.
I am talking from knowledge I have gleaned outside this House in the business of the professional world. I do not see why we should have an industrial structure based on that type of bamboo structure, which is all it was.
Is the Deputy seriously suggesting that all discretionary trusts and private non-trading companies were tax avoidance measures?
Not all.
Let us get that clear anyway.
The majority appear to have been so. It appears that when we were talking about trading companies and shareholders in trading companies, Deputy Colley was thinking of these people with that type of structure. I am glad to tell Deputy Colley that, as a result of a section that he introduced in the Finance Act, he caused utter chaos among these said gentlemen. That should have been fair warning to these said gentlemen—and maybe some ladies too—that that glorious era was coming to an end, this false structure in Irish business and society, a monopoly situation being created by certain people who could afford to indulge in these luxuries in the financial and legal accountancy work. Many of these people formed these structures. After Deputy Colley's amendment to a previous Finance Act these unfortunate gilded people found themselves back to where they started.
Not retrospectively.
——as in the days when you parted with your assets to these funereal sort of companies in Jersey, Guernsey, the Cayman Islands, and elsewhere; and you had to live for five years before it became effective to avoid estate duty. Deputy Colley introduced a little amendment in a Finance Act and racked all his friends he is now arguing for. Why belated salt tears at this stage when we are dealing with a very mild taxation provision?
My concern is with jobs.
I cannot understand this. I have labelled opposite the Deputy's amendment just one word "foreigners". That is all we are discussing in this amendment.
It is not. Look at the amendment.
Look at the section. We can only talk on the amendment put to the section. I do not think the Deputy has read the section or he would see that he is relating the amendment to foreigners. He is discriminating against Irish investors and shareholders. The Deputy is giving preferential treatment to people in other countries. As it stands at the moment, with wealth tax and every other tax, this is the most attractive country in Europe in which to invest from a taxation point of view. Deputy Colley and the other Deputies on the opposite side of the House are well aware of that fact.
The Deputy is against discrimination between Irish and foreigners in this Bill, is that right?
The Deputy is creating the discrimination.
(Interruptions.)
Order, please. Deputy Esmonde without interruption.
Look at the section.
We will talk about that later.
Read subsection (1).
The Deputy, like all good Deputies, tries to be relevant to the subject matter before him, despite the minor little distractions he is receiving from the floor. This is one of the few countries with an attraction for profits earned from exports introduced by the late Deputy Sweetman. This is now acknowledged by everybody. This was the measure that got Irish industry on its feet and we are now all reaping the benefit of that. This debate is now getting to the stage where Deputies on the other side of the House are objecting to taking the little hundreds and thousands off the Christmas cake.
The Deputy does not believe that.
That is what it looks like.
Progress reported; Committee to sit again.
The Dáil adjourned at 10.30 p.m. until 10.30 a.m. on Wednesday, 18th June.