When the debate adjourned the Minister was dealing with amendment No. 39.
Capital Gains Tax Bill, 1974: Report Stage (Resumed).
Before the Minister starts, might I inquire whether or not amendment No. 41, which was circulated this morning on behalf of the Minister, will need a recommital?
It will.
I move an amendment to amendment No. 39:
After subparagraph (7) of paragraph 11 to insert a new subparagraph (8) as follows:
"(8) Notwithstanding section 5 (2), where an amount of capital gains tax is assessed and charged pursuant to this paragraph, such amount shall be due and payable on the day next after the day on which the assessment is made."
I have given some consideration to the points raised in regard to difficulty for a purchaser who might be tardy in making payment to the Revenue Commissioners and I think the position might be met by making this small amendment which will provide that the tax will be payable once assessed, in which case the Revenue Commissioners can proceed to the immediate collection of the tax and, by reason of their collecting the tax, the vendor would then, of course, be in a position to recover whatever unpaid balance would be due to him.
Does the Minister visualise the assessment being made? We are dealing with a case where the purchaser withholds the payment he should make to the Revenue Commissioners.
The person is under an obligation to furnish information about any transaction. Remember, the purchaser alone may not be in possession of all the information necessary to make an assessment. The vendor will also have a contribution to make in relation to information, particularly as to the price he originally paid and so forth. Once the information is available to the inspector the inspector will make the assessment.
But, if the purchaser makes no return and does not give either information or money to the Revenue Commissioners, the Revenue Commissioners would presumably not then be in a position to make the assessment visualised in this amendment.
Of course they will. The vendor would have the information necessary to allow the assessment to be made and the vendor, being an interested party, would provide the information.
Is this the position the Minister visualises? The sale is closed and the purchaser deducts in accordance with sub-paragraph (2) the appropriate amount which, in almost every case, will exceed the amount of tax for which the vendor is liable; then the purchaser fails to make a return to the Revenue Commissioners and the vendor, in seeking his money, applies to the Revenue Commissioners for it and is told they have no account of it. The vendor then furnishes the Revenue Commissioners with such information as to enable them to make an assessment and, if they make that assessment, under this amendment to amendment No.39 the amount of the capital gains tax presumably the amount of the deduction under sub-paragraph (2) is what is intended by "an amount of capital gains tax assessed pursuant to this paragraph", is that the intention or would it be the actual tax payable?
It is the actual tax we want.
Let us pursue that for a moment. If the vendor furnishes the relevant information the Revenue Commissioners will make an assessment and the following day the tax would be due and payable. That is the intention.
That is right in a sense.
This then depends on the vendor furnishing the information to the Revenue Commissioners and the assessment they would make would be only in respect of the actual tax payable by the vendor and not in respect of the amount of the deduction made. That is as I understand the position. To illustrate this: if we take it the amount of the deduction was £30,000 and the amount of the actual tax was £15,000 it would seem to me that what would happen then would be that on the day following the assessment the Revenue Commissioners would proceed to try to collect £15,000 from the purchaser but there would be another £15,000 due to the vendor. The vendor's position would appear to be that he could not sue the Revenue Commissioners for it. That is clear. He would not have any legal right to do so and they would not have the money. Secondly, under subparagraph (2) he could not sue the purchaser because "the person making the deduction shall be acquitted and discharged of so much money as is represented by the deduction as if that sum had been actually paid". It seems to me that the vendor would in this way be deprived of any legal right to recover that £15,000 from the purchaser or from the Revenue Commissioners and that can hardly be a satisfactory position or, indeed, one to which we could subscribe. I am sure it is not what the Minister intended, but that appears to be the position arising. I know the Minister's amendment is intended to go in the right direction but, apart from the difficulty I have already pointed out, there may be another difficulty. It is this. The money may be due and payable the day after the assessment but it does not follow that it will be recovered on the day after assessment. As the Minister well knows, a very long time might elapse before it was actually recovered by the Revenue Commissioners.
During all that interval until it is so recovered by the Revenue Commissioners, the amount of the actual tax would be outstanding as far as the vendor is concerned. He would be out of his money and he would have no right to recover interest on it from the Revenue Commissioners or from the purchaser. Even if, up to the date of closing of the sale, he had a right of recovery of interest on the outstanding purchase money from the purchaser, I think that right would disappear on the closing of the sale, having regard to the wording of subparagraph (2). The vendor's position seems to me to be thoroughly unprotected. Whereas at best he only has a legal right to recover the amount of the tax, he may be out of that money for a very considerable time. He has no right to interest on it, and he has no legal right whatever to recover the difference between the amount of the deduction and the amount of the tax, which could be very substantial. While the Minister's additional amendment is intended to improve the position, I do not think it really gets us very far.
The Deputy has graciously acknowledged that it moves in the right direction, but we come back to what I said originally. There are many ways and means in which both parties can protect themselves through the ordinary processes of checking on certificates, on receipts, ensuring delivery to the Revenue Commissioners. One could also possibly visualise placing money on joint deposit. There are several ways in which, no doubt, prudent people will ensure that the obligations of the Act are met. If I tried to provide only one watertight way in which to do this, it would probably cause more inconvenience than by leaving it to the ingenuity of people to ensure that the obligations of the Act are fulfilled.
I would like to suggest to the Minister that he is looking at the wrong part of the transaction when he is thinking in terms of laying down the procedure that must be followed on the closing of the sale. I would agree with him that the more flexible that can be left the better. I do not think that that is where the problem arises. The problem arises because the Revenue Commissioners are placing a statutory obligation, under this amendment on the green sheet, on the purchaser to deduct a sum of money. It is with what happens to that money and where it goes, and what happens to the vendor's position when that happens, that we should concern ourselves.
While they would not be a total answer to the problem, I could make two suggestions to the Minister that would improve the position considerably. The first one is that the amount of tax to be assessed and charged in pursuance of the new subparagraph (8) should be an amount equivalent to the deduction, not the actual tax. In other words, the Revenue Commissioners should accept the responsibility of recovering the amount of the deduction, since the provision here is placing a statutory obligation on the purchaser to make such a deduction. If that were done, one could at least hope that eventually the Revenue Commissioners would recover the amount of the deduction, take from that the amount of tax due to them, and refund to the vendor the amount due to him.
The second suggestion is that, having regard to what is being done and why it is being done, the Revenue Commissioners should accept the responsibility from the date the deduction is made in accordance with the statutory requirement until the date of payment to the vendor of whatever money is due to him by the Revenue Commissioners, and pay him interest on the money due to him. That is not a total answer to the problem but at least it is going in the right direction and showing some regard for somebody who is being put in a position in which we are depriving him of any legal right to recover money lawfully due to him. I do not think it is the total answer at all but at least it is giving him some protection and recognising the fact that, if he is out of his money because of the provisions of the statute, the Revenue Commissioners doing this in order to recover the tax due, accept responsibility for the consequences and pay him interest on the money due to him. It is the least that can be done if he is to be deprived of the legal right to recover that money from anybody.
I would point out that under subparagraph (3) the amount of tax to be charged on the purchaser will be an amount equal to tax on one half the payment.
That is what I thought originally when I saw this amendment. I asked the Minister whether it was the actual tax or the amount of the deduction, and he said the actual tax.
(Dublin Central): One half of what payment? When do you assess it? Before you assess the tax, is it? One half of the tax? How would the Revenue Commissioners know that?
From the information given about the consideration on the transaction. If the purchaser fails to give the information, the information will nevertheless come to the Revenue Commissioners when the document relating to the transaction is presented for stamping. Even apart from what purchasers may or may not give, or vendors may or may not give, the Revenue Commissioners will still have available to them other sources of information from the documents which have to come to their notice in any event.
How does the Minister interpret subparagraph (3)? Does he interpret it as meaning that the amount being assessed and charged on foot of that subparagraph is the amount of tax due or the amount of the deduction?
Under paragraph (3) it will be the actual deduction made.
Is the Minister sure of that? It says: "...assess and charge that person to capital gains tax for the year of assessment in which payment was made on an amount equal to ..." That is capital gains tax on an amount equal to one half of the payment. I agree on the face of it that appears to be the amount of the deduction. That is the intention, is it?
That person in sub-paragraph (3) is the purchaser. That is the person who has made the deduction. The charge on the purchaser, in the absence of certificate from the vendor, will be the amount deducted from the purchase money.
Under the new amendment the Minister has brought in, there is reference to where an amount of capital gains tax is assessed and charged pursuant to this paragraph. I thought that was intended to be the amount of the deduction but the Minister said it was not.
I am sorry. We were not ad idem at that stage.
What is intended by that? The amount of the deduction?
The purchaser is charged with the amount deducted. The vendor is the person who is chargeable in respect of the gain on the disposal and he is referred to in subparagraph (5).
Does it depend on the person who is assessed and charged under subparagraph (8), then, as to what amount is involved?
Yes.
Is there not a conflict here between subparagraphs (2) and (3)? Subparagraph (2) states:
The amount of capital gains tax on one half of the said payment.
That is capital gains at the rate on half the payment. Subparagraph (3) states:
Capital gains tax for the year of assessment on which the payment was made on an amount equal to one half of the payment.
Does "at the rate specified" there mean at the rate of tax?
There is 26 per cent on one half or, if you like, 13 per cent on the total.
I accept that. Is it not a rather difficult way of arriving at this? Would it not be possible to make the vendor responsible for producing a certificate from the Revenue Commissioners?
The vendor is being given the opportunity of getting that to avoid this deduction being made.
It is only if he does not?
If he does not, then he could face some inconvenience or delay.
To get this certificate he must pay his tax before he receives his money—is that right?
Yes, assuming that he is liable to tax. But he can do it all in the one day. Innumerable payments would not infrequently have to be made on the one day. For instance, as Deputy Colley knows, there are many cases where mortgages have to be cleared.
(Dublin Central): Personally I do not agree at all with the principle to hold the purchaser responsible for another man's capital gains tax. I can see the Minister's point but fundamentally I believe it is wrong to place any such obligation on the purchaser. It should be the duty of the State to design a Bill whereby the vendor would pay the capital gains tax. I know that this section applies to a particular section of the community but even so, as Deputy Colley has been explaining, I doubt very much that a statutory regulation should be made whereby an obligation would be transferred to the purchaser to deduct a certain sum of money from the vendor. A man who sells his property may not be liable to this amount of capital gains tax at all when all the assessments are made.
It would not always be possible for the vendor to be in a financial position to pay the capital gains tax and get his certificates before transferring his property and getting the total amount of money from the purchaser. We know what takes place in a property purchase. The party goes to the solicitor's office on the final day and the transfer of money takes place then and the legal documents are signed. It is not always possible for the vendor to place his hands on a sufficient amount of money to get the certificate in time for the final transfer of the property. It should be possible for the Revenue Commissioners to devise some scheme whereby the purchaser would be exonerated. He is not liable to capital gains tax on this transaction at all. We are legislating here to catch the vendor in respect of the capital gain. I am not sure that it is right to transfer the statutory obligation and make it obligatory for the purchaser to go through this formality. Many people, if they thought they had to go through this formality, may not bother at all with it. The purchaser is placed in the very invidious situation of having to say to the vendor: "I am compelled to deduct so much from you and forward it to the Revenue Commissioners."
The Revenue Commissioners, where capital gains are concerned, should say to the vendor: "That property is not transferred," by some means or device. Whether by stamp duty—or some other means—I do not know how you do it. They should be in a position under this Bill to say to the vendor: "There is no legal transfer of that property until such time as we assess it and give you a certificate. It cannot be transferred."
I am not sure that some system could not be devised whereby he would have got his money in some way; the purchaser would definitely be in a position to hold the contract. There should be some gap whereby the vendor would be placed in the position to pass to the Revenue Commissioners the amount of capital gains tax due. That is not the case in this Bill. Here we are placing an obligation on the purchaser to say to him that he, the purchaser, has an obligation to deduct a certain sum from the total amount. I realise it is all in relation to the assessments. Even so, I do not like the principle. I am not going into the finer points of it. I do not like the principle of placing an obligation on a purchaser. If he goes to any auction, he is quite innocent of this transaction. He wants no part in it. He has his own capital gains tax to deal with on his property if he sells it.
I am not sure that it is a good Bill that places this obligation on a man who goes into an auction completely bona fide. He finds himself at the conclusion of the sale in this situation. Who will point it out to him? I do not know or at what stage or how he will know that the vendor has a liability to capital gains. There are many auctions where nobody has any idea as to who owns the property. If I go into an auction in the morning in Dublin, I do not know if it is owned by a national or not. If it is, well and good, it is protected here by the amendments. I am not sure whether I would be in a position to know whether the property is owned by a foreigner or not. I do not want any dealings with this type of thing if it is owned by a foreigner. I do not want to go through this type of procedure as regards deducting so much money and forwarding it to the Revenue Commissioners. That is where I disagree with this section, that the Revenue Commissioners should have designed it in such a way to go after the man who owns the money, in this case the vendor.
Now we have a situation that even when money is deducted and forwarded by the purchaser he may, after a long drawn-out dispute, not be liable to pay that amount at all. The Minister is making no effort to compensate him as regards paying interest on his money which they could hold for a considerable length of time. I do not know why the Minister omitted from this Bill any reference to interest on over-payments and various other matters. In other sections of income tax—of PAYE and various other matters—interest is payable. The Bill is cumbersome. It will certainly present many difficulties both to the legal profession and people purchasing property. I would have much preferred if the Revenue Commissioners could have designed provisions whereby the obligation would be placed where it should be— on the vendor without bringing in another group, the purchaser—and placing the statutory obligation on him to forward this money to the Revenue Commissioners. He should not be brought into this Bill. He is not benefiting by the sale, good, bad or indifferent, as regards capital gains. He is purchasing on market value.
With respect, I think Deputy Fitzpatrick misunderstands the position. The purpose of my amendment is to come to the relief of the purchaser who is no longer under an obligation to ascertain the residence position of the vendor. The vendor will be under an obligation either to pay his tax in advance of the sale or suffer this deduction which will be made by the purchaser and transferred by the purchaser to the Revenue Commissioners. A vendor who would want to avoid the delay and inconvenience of that has the option either of paying his tax prior to the closure of the sale——
(Dublin Central)): He cannot do that.
It has been done and still can be done by any people who have to pay death duties before administration of estates. They pay tax before they are in a position to pay it by reason of having access to the funds of the deceased person. To pay income tax in advance is not an unusual or unknown thing, but Deputy Fitzpatrick is right in thinking that a purchaser ought to get what one might call a clean title, to know that from the moment he goes into possession he is not carrying any liability of the vendor. This amendment to the Bill gives the purchaser that entitlement and allows it to happen without the sale being held up.
(Dublin Central): It places an obligation on him.
All he has to do is to provide the purchase money, let 74 per cent of it go to the vendor and 26 per cent of it go to the Revenue Commissioners. The vendor can collect it from the Revenue Commissioners later. It is wrong to contemplate only circumstances in which you would have fees or the amount of tax deducted which would be greater than the liability of the vendor. It is not possible to say whether there would be more or less tax paid by the vendor, but it can be said with confidence that there will be cases where the amount deducted will be less than the liability of the vendor. It will all depend upon the percentage of gain in the transaction. If the percentage of gain is considerable, then charging capital gains tax on only half of the consideration might mean the sum of money is much less than the tax which is liable to be payable.
All that we can provide and have provided is a reasonable assurance that in respect of non-resident vendors the Revenue Commissioners will get a sizable amount of the tax which will be paid by the vendor. We have gone a long way to meet the points that have been raised, and I appreciate the points. We have been able to improve the section, but I cannot see if it is, at this stage, possible to alter this in any further way which would not, I think, operate to the disadvantage of both vendor and purchaser, as Deputy Colley said. There are great advantages in having a flexible system rather than to put everybody in a strait-jacket which is bound to cause inconvenience to some. As long as we leave it flexible one can feel fairly confident that the ingenuity of the parties and their advisers will work out some arrangement whereby neither party will be put in peril by the operation of the paragraph.
I am sorry, I seem to have taken the wrong percentages. I overlooked that the 87 per cent of the consideration goes to the vendor and 13 per cent, pro tem, to the Revenue Commissioners.
The best I can say about this amendment is that it is considerably better than what it amends, but it is very far from satisfactory nonetheless. Paragraph 11, which is on page 74 of the Bill as amended on Committee was itself a fairly major amendment of the corresponding provisions that were in the Bill as originally introduced. This amendment in the Minister's name to which yet another amendment, or subamendment has been circulated, is the third attempt to get this matter right.
I suppose most of use here have someone who has some experience of what their difficulties will be in practice in trying to cope with the situation which is created by the provisions of paragraph 11. The delays for which solicitors have been blamed up to now will be greater and both longer and more frequent than they have been up to now. This, even in its amended form, is a most unusual and most onerous provision. The Minister speaks about the deduction by the purchaser of 13 per cent of the purchase money under circumstances which mean that the vendor has no further rights to that money.
When that situation arises, as I see it, a vendor will refuse to close a sale, and not unreasonably. He would be better off to agree with the purchaser to break a bargain and go away and try to make another bargain subsequently. He is put in a position that he is liable to be out of 13 per cent of his money, and for a lengthy period, and if the purchaser, who is compelled by statute to deduct the money, decides to do away with it there is nothing the vendor can do about it. While one could see the vendor would still, presumably, be liable to the Revenue Commissioners if they failed to recover it from the purchaser, this is grossly unfair. It is a situation in which a practical solicitor advising a vendor in this situation would have to tell him that more often than not, if he is able to get a certificate from the Revenue Commissioners before the closing of the sale, probably for his own selfprotection he would be better off not to close it.
This will create a difficulty that people have not foreseen and could not reasonably expect. For Friday and Saturday of this week, the Law Society have organised a seminar in either Dublin or Cork, having one in Dublin and one in Cork the following week, for the purpose of explaining the conveyancing consequences of the Capital Gains Tax Bill. They may be aware of what was in the original Bill or perhaps even in the Bill as amended in Committee, but they certainly are not aware of what is being discussed here now and they are unlikely to get a final copy of the Bill between now and Friday morning at 9 a.m. when the seminar begins.
The difficulties that will be created for solicitors, who are only a minor part of it but whose number of clients will be enormous, will be that there are many transactions that could otherwise be completed which I am afraid will not be completed. While I acknowledge what was said from this side of the House by Deputy Colley and others on the last two Stages of this Bill in relation to this particular provision has resulted in a considerable improvement in what was there, it is still extremely messy, to say the least of it, and to my mind it will give rise to a huge number of problems of which the ordinary public are not aware at all. The majority of people do not believe that, perhaps, the gains tax applies in this way to sales or gifts as is proposed here and, certainly, if they were aware of the provisions of this paragraph 11 which makes it obligatory on the purchaser to deduct 13 per cent of purchase money and hold it, many vendors who are not in a position to obtain that certificate which is referred to in subparagraph (6) will just not be willing to go on with the transaction. Contracts—and most contracts now are standard contracts drawn up by the Incorporated Law Society—will have to be considerably amended to meet this point. It will be very interesting to see whether or not the normal provision will be that the vendor, if he is stuck in this position, will be entitled to rescind. I think he will be because the contract is normally drawn by the vendor and from his point of view. Therefore, I would see that the standard form of contract will be one to the effect that if the vendor is unable, within a reasonable period, to get a certificate under subparagraph (6) of paragraph 11 that he will have the right to rescind and return the purchaser his deposit. Otherwise the vendor is put in an impossible position because he may have to close the sale on payment of 87 per cent of the purchase money to him, and will have no guarantee that he will ever get any more whether he is liable for capital gains tax or not. Thirteen per cent of the purchase money is equivalent to the tax on a gain which is equal to half the consideration. In practice, is the taxable gain going to be equal to half the consideration very often? Unless the inflation we have seen in the last two years is to continue—the signs are that it will—it would only be in a very rare case that the chargeable gain in any transaction would be equal to half the consideration. That is the amount that paragraph 11 is compelling the purchaser to withhold.
I would feel happier about this if the compulsion on the part of the purchaser was not simply just to withhold 13 per cent of the purchase money from the vendor but if it was to pay 87 per cent of the purchase money to the vendor and to pay the other 13 per cent to the Revenue Commissioners, and to give a right of recovery to the vendor against the Revenue Commissioners on the expiration of a period of, say, two months, the Revenue Commissioners paying interest at the going rate for the Revenue Commissioners of 18 per cent per annum on whatever part of the 13 per cent that was paid to them was found not to be capital gains tax properly chargeable.
Since I think this amendment we have here has been recommitted to a committee of the House, as opposed to being reported to the whole House, I should like to ask the Minister if there can be—I do not know if there can be—a Report Stage in respect of this recommitted amendment, if he would consider that. It is not making the Revenue any worse off. In fact, it is making the Revenue a good deal better off. They are getting the money straight in. I object to the principle of that anyway, but if we have to live with that principle what I object to is that some potentially chancy purchaser may hold on to 13 per cent of the purchase money in a transaction which he may never pay either to the vendor or to the Revenue Commissioners.
If that happens there is nothing, as Deputy Colley has pointed out, that a vendor can do about it, because at the end of page 5 of the green sheets, the end of subparagraph (2) says:
shall allow such deduction upon receipt of the residue of the payment and the person making the deduction, shall be acquitted and discharged of so much money as is represented by the deduction as if that sum had been actually paid.
I would say to the Minister, are not those words too sweeping, and do they not exonerate a purchaser who is given this privileged position of holding on to 13 per cent of the purchase money even though he is closing the sale? They appear to have the effect, so far as one can judge, of completely letting him off the hook, certainly vis-à-vis the vendor. I am not clear from this amendment whether the proposal is that if a purchaser in those circumstances did not pay up— there will probably be cases of this— the vendor is still liable. Will the Revenue go after him? If the purchaser absconds with the 13 per cent is capital gains tax in these circumstances going to be a charge on the property? There are a number of alternative ways of approaching the problem. I am not convinced that the way the Minister is approaching it now is the best way although I should like to say, in fairness, that as a result of all that was said on the last Stage, this new proposal is a great improvement on what was there before. Nonetheless, from what Deputy Colley, Deputy Fitzpatrick and I have said, it is very unsatisfactory. It is likely to give rise to a tremendous number of problems.
If it were found, for example, that out of the 13 per cent withheld by the purchaser the total capital gains tax properly payable amounts to only 1 per cent of the purchase money and even if that is paid over and there is a long interval when the vendor is trying to get back his other 12 per cent, and even if he gets it after, say a year or two, how does he stand with regard to interest? I can see no provision here with regard to interest. There is no provision here to compensate him in any way or to compel the purchaser to compensate him. He is put in a very awkward position.
If this is passed in this form major changes will have to be made in the standard conditions of sale, one of them being the reserving of a right by the vendor to rescind the contract if within, say, three or four weeks of signing the contract he has been unable to get a certificate from the Revenue or from the Inspector of Taxes under subparagraph (6) of this paragraph. If that is so a lot of sales which would not otherwise fall through will fall through, and it is is not in anyone's interest that they should. The sale might suit both the vendor and the purchaser, but they are being put in the position that there is nothing they can do.
I am sure the Minister has plenty of experience of trying to get certificates of discharge from death duties, for example, from the Revenue Commissioners. When he was on this side of the House, he frequently put down Parliamentary Questions about the delays. The certificate referred to in subparagraph (6) is not dissimilar. If there are going to be delays in the obtaining of those certificates, which I suppose one could reasonably expect there will be, the length of time it currently takes to close a sale is going to be increased, perhaps significantly in some cases. The Minister must be aware of the frequent complaints there are nowadays—I suppose there always have been—about delays in legal transactions. Here is yet another enormous complication that is put on the parties to a sale and their solicitors. One had hoped that as a result of all this new taxation things were going to be simplified. In fact, one finds the very opposite is the case. If the general public realised the effect of an amendment like this basically being to create difficulties and delays where they do not already exist, they would not be pleased about it. As I already said, the only good thing I can see about this is that—as bad as it is—it is a great deal better than what it replaces.
My final appeal to the Minister would be that whether he does it now or does it on whatever form of Report Stage there is in respect of a recommitted amendment that he would consider at least doing this for the protection of vendors ensuring that the 13 per cent which is not paid over to the vendor shall be paid to the Revenue Commissioners and that they shall make up their minds within four or six weeks or whatever the case is, deduct the tax and refund the balance immediately to the vendor, paying him interest on whatever balance there is for him at the going rate.
Of course we are doing what Deputy O'Malley asks us to do, that is providing the Revenue Commissioners collect the money quickly from the purchaser. I am not lacking in faith in the ability of people to protect their own interests. I have the greatest respect for the legal profession and for their capacity to work out practical rules to protect both parties. If a vendor has any misgivings about the purchaser's readiness to hand over the money deducted by him he can always require the production of a receipt from the Revenue Commissioners before closing the sale.
The production of a receipt from the Revenue Commissioners that the purchaser would pay in advance?
Yes.
He cannot do that really. The purchaser cannot do it without the co-operation of the vendor certainly. In other words, the information necessary to assess the tax due.
The purchaser is not concerned with the vendor's affairs. All he is concerned with is to discharge the obligation of paying 13 per cent of the purchase money to the Revenue Commissioners. If the vendor does not want the purchaser to do that the vendor must discharge his obligation to pay tax beforehand and furnish a certificate that he has paid the tax.
Before he gets the money?
If he wants to do it that way or else he can leave it the other way and get his money back. He could also ensure at the closure that the purchaser is parting with money in favour of the Revenue Commissioners and produce a banker's order for the appropriate sum payable to the Revenue Commissioners. There are many different ways and means.
The Minister has touched on one that might get closer to the reality of the situation but I do not think that the amendment covers it, that is where the purchaser would say on the day of closing the sale: "pay over the 13 per cent to the Revenue Commissioners and get a receipt." The certificate referred to in paragraph (6) would not apply to that as it stands. All he would get is a receipt for a particular amount of money. It may be that the provision in this, which would envisage the purchaser doing just that and getting a certificate specifically relating to this transaction, would cover to some extent the difficulty that we see. I do not think the certificate under section 6 fits into this.
The certificate under subparagraph (6) which is produced by the vendor is given where the vendor is ordinarily resident in the State; in which case the purchaser does not make a deduction. The certificate is given where no amount of capital gains is payable in respect of the disposal—again no deduction—or where the capital gains tax chargeable for the year of assessment for which he is charged in respect of the disposal of the asset and the tax chargeable and so on has been paid, the inspector would issue a certificate.
Is the certificate normally issued under this to the person making the disposal?
That is correct.
That would not include the purchaser?
No. If the purchaser is discharging his obligation, if he has paid it, the vendor is then satisfied that the Revenue Commissioners have the money. You are overcoming the fear expressed by Deputy Colley earlier of dealing with a purchaser who having made a deduction is not going to hand it over to the Revenue Commissioners. If the vendor has evidence that the Revenue Commissioners are already in possession of the money he has not to worry about the purchaser in any event.
Agreed. I think that is getting much closer to the reality of the situation now. I am suggesting to the Minister that it might be necessary or at the very least advisable that there should be a subparagraph here which would specifically cover the situation in which the purchaser pays over to the Revenue Commissioners the 13 per cent and gets in return not merely a receipt for the amount of money but a certificate from the Revenue Commissioners that would incorporate a receipt, of course, but that at least would set out that it purported to be 13 per cent of the purchase money on a particular transaction. I am just troubled about the possibility where the purchaser might be paying the Revenue Commissioners money on account of something else and the mere production of a receipt for that amount would not be conclusive as far as the vendor is concerned.
Yes, I appreciate the significance of what Deputy Colley is saying but I think he is now getting down to matters of detail——
Very important detail.
——which are matters for administration by the Revenue Commissioners and not matters for a Bill as to what form a receipt should take. It is a matter for the parties themselves in any particular transaction to satisfy themselves that the obligations to the law are complied with or will be complied with. Once they are assured that they have been or will be complied with then they can complete their transaction with peace of mind. Doubtless the Revenue Commissioners will be in consultation with the relevant professional bodies to ensure the smooth operation of the Act and of all workings under it. It seems to me that what we are discussing here are matters of detail. I would anticipate that a receipt in respect of a payment, such as we are talking about here, would identify the purpose for which the payment is made. It might not just be a receipt for the sum of £X from Mr. Y but could designate the purpose for which the payment was made and for which it was received. This is a matter of getting the most appropriate form of receipt for issuing in cases of this kind.
Would it not be more satisfactory, both from the point of view of the Revenue Commissioners and of the vendor, that there should actually be a statutory obligation on the purchaser to pay the 13 per cent to the Revenue Commissioners and that, if possible, it should be so arranged that it would be paid at or before the time of the closing of the sale. I am most concerned about the provision in subparagraph (2) which gives a total acquittal and discharge to the purchaser in respect of the deduction made and thereby deprives the vendor of the legal right to recover the money even though it might not have been paid over to the Revenue Commissioners. I think that is a situation that we should try to avoid. I am suggesting that something on the lines of what the Minister was describing if incorporated in this would obviate it. At least it would provide the machinery whereby the vendor could insist that the money had actually been paid to the Revenue Commissioners before it was. That would be satisfactory from the point of view of the Revenue Commissioners. They would get their money faster instead of having to wait for an account to be submitted and so on. It would actually give a vested interest to the party to think the money was paid to the Revenue Commissioners rapidly. It would also ensure that the vendor had a foolproof statutory way of getting his money without being in the position I have described of finding the money was not paid to the Revenue Commissioners and that he was without any legal right of recovery against the purchaser or the Revenue Commissioners.
You come up against practical problems. Take the case of a person who has purchased a property and paid a 25 per cent deposit. The purchaser might not have another 13 per cent liquid cash on top of that to enable him to pay the Revenue Commissioners in advance that 13 per cent.
It is only by envisaging the actual date of the closing of the sale, when he has the purchase money.
Yes. Indeed, it might have to be done out of money which might be advanced on foot of a mortgage of the property and, therefore, it might have to be done simultaneously. Part of the money might have to be in the form of a bankers' order, in favour of the Revenue Commissioners. I sincerely believe that it is better to leave it in the way in which we now have it and to allow people to provide their own arrangements to ensure that the obligations of the Act are fulfilled.
Surely the Minister is concerned about the fact that subparagraph (2) is taking away a vendor's legal right to recover the money?
No. First of all, if you are imposing this obligation on the purchaser—and I accept there is an obligation on the purchaser; it is an obligation he will exercise in his own interests—it is not a very onerous one anyway, no worse than the obligation that appears to lie on payers of ground rents to pay the Schedule A tax, which was the landlord's tax. This would happen only on rare occasions on which a person was making a capital purchase. If we impose that obligation, it is important that the purchaser gets it discharged. Once the transaction is complete the purchaser should not be under any further obligation in relation to the vendor's tax. We would not have half this trouble if we made the property subject to capital gains tax if it were outstanding but we have deliberately sheered off that and I think rightly so. We do not want to impose that cumbersome lien on properties, or the difficulties of doing so would certainly generate. We, therefore, must give an acquittal to the person who makes the deduction.
Should he not get that acquittal when he actually pays it to the Revenue Commissioners? Should he not only get the full acquittal vis-à-vis the vendor when he pays the money to the Revenue Commissioners not just when he deducts? That is where the real problem is arising, I think. I know the problems. I can see some of them.
We are clearly imposing an obligation on the purchaser to pay the money so deducted.
Where are we imposing that, now?
In the amendment, because once it becomes assessable it is a definite charge; such amount would be payable. Once that takes place the purchaser will not be able to avoid making the payment.
He can recover it.
Can the Deputy see any difficulty in relation to a vendor satisfying himself that the Revenue Commissioners have been or will be paid? Take the production of a bankers' order to pay the Revenue Commissioners the appropriate sum. Surely that in itself is an undertaking from a solicitor to pay that over?
It can go wrong, as the Minister knows. In rare cases it can go wrong. There could be some cases under this section which might not have solicitors involved at all but even where there are solicitors involved it can go wrong. What worries me is that where it does go wrong, under this provision, we are putting a vendor in a position where we have deprived him of his legal right to recover the money. If the Minister thinks about this for a moment— admittedly, it is when things go wrong this happens—but if it happens that it does go wrong and the vendor finds himself having 13 per cent of the purchase money deducted, not paid to the Revenue Commissioners, perhaps dissipated or taken abroad or something like that, and he has no legal right of recovery because of the Statute which we are passing here, I do not think that is a satisfactory position. There must be a better way of doing it than that.
To meet the Deputy's point—I am thinking out loud for the moment—I would certainly want to look at the specific words. In subparagraph (2), third last line, to say:
...and the person making the deduction and delivering the same to the Revenue Commissioners shall be acquitted and discharged of so much money as is represented by the deduction.
That is what I had in mind. That would mean at least that the vendor is not deprived of his legal right to recover unless the money is paid to the Revenue Commissioners, in which case he could fight it out with them.
If you leave that point with me, I will process this as quickly as possible.
Would the Minister not agree—I am glad he has now agreed with that point which we made—as a corollary of that, a necessary one, that in respect of any money that is deducted which is not or has not to be paid to the Revenue Commissioners, provision should be made specifically in the paragraph for its return to the vendor? I take it that by the amendment which the Minister is now agreeing to, the whole 13 per cent is going to be paid over to the Revenue Commissioners; that that would be a condition?
That is the only amount that the purchaser would be paying over—13 per cent.
The question of refunding the vendor then, where appropriate, would become one for the Revenue Commissioners. Would the Minister not agree, as a corollary of the amendment which he has just now accepted, that there should be some form of obligation on the Revenue Commissioners to repay any balance duly payable, or found duly payable to the vendor within a period of, say, four weeks or six weeks?
I would rather leave it as it is where they would be under an obligation to repay it as soon as possible, which would be a lot less, I would hope, than four or six weeks.
I do not want to be accused by the Minister of running down the Revenue Commissioners and I fully appreciate their problems but I know of cases where people wait 12 months for the refund of tax of one kind or another which they have overpaid and they get no interest on it. That applies to income tax and to death duties. They get no interest on it, even though if they owe the Revenue Commissioners anything, as the Minister well knows under his recent dispensations, they will pay 18 per cent interest to the Revenue Commissioners. Would the Minister consider a provision whereby if repayment to the vendor was not made within four weeks, interest would then run at 18 per cent?
We could not contemplate such and we do not anticipate that such a situation will arise. Special arrangements will be made to ensure the speedy operation of the capital gains tax in relation to transactions under paragraph 11.
With due deference to the Minister and to the Revenue Commissioners, I want to tell him that in all good faith when I was in his position I gave an assurance to this House that special arrangements were being made—and they were made—for the refund of tax within—I forget the precise time, but I announced it in the House in connection with the legislation which I introduced aimed at lumping and which provided for large scale deductions and then the assessment of tax by the Revenue Commissioners and the refund of the difference. I have recently come across at least one case and earlier I came across others, where that time limit was far exceeded. The undertaking was given in good faith by me and the Revenue Commissioners advised me of it in good faith. I accept that fully and I accept that the Minister is acting in good faith when he says what he has just said but practical experience shows us that this cannot be relied on ultimately. As pressures of one sort or another build up as far as the Revenue Commissioners are concerned, they cannot ensure that repayments will be made speedily or within a particular time.
Here we are dealing with a case where the money belonging to the vendor is compulsorily deducted and paid over. The vendor must wait then until the Revenue Commissioners have assessed the tax due and then they make a refund. In almost every case there will be a refund due to the vendor. It is difficult to visualise a case in which there would not be a repayment.
That is a bit broad.
Almost—unless he has arrears in respect of other items but in respect of the particular transaction——
Sale price and cost decide the gain.
Yes, but as Deputy O'Malley pointed out, to have a gain of that kind arising in most cases will require a continuation of inflation at the rate it is going at present.
Where there is a refund due and where it arises because the money was compulsorily deducted and paid to the Revenue Commissioners, is it not reasonable to provide that there should be a time limit within which it should be refunded and that in the absence of such a time limit being complied with at that stage interest should be payable? In principle, interest should be payable on it anyway but I would be at least partially mollified in my concern if there was a reasonable time limit laid down and thereafter, if it were not complied with by the Revenue Commissioners, interest would be paid. Surely, the Minister cannot regard that as an unreasonable argument?
I would point out to the Minister in support of what Deputy Colley says that in fact the amount that will be deducted in each case will be the tax that would be payable where the chargeable capital gain is equal to 100 per cent. In other words, 13 per cent of the consideration equals the tax on a chargeable gain that arises when something is sold for double what it cost and the whole gain is chargeable. Twenty-six per cent of the consideration is equal to 13 per cent of half of it. In other words, it is equal to the tax on the whole lot. It is not just the gain alone; it is the chargeable gain, which could be a very different matter. Therefore, it must at least be 100 per cent. Unless inflation becomes worse—I said earlier it would have to remain at its present level— the number of times when that part of a chargeable gain will arise will be very few. I am not talking about a case where a man bought something for £1,000 in 1940 and is selling it for £10,000 now because the chargeable gain in that case is not £9,000. I am talking about a case where the chargeable gain is such that it is a 100 per cent gain on the base figure. Then the amount which the Minister is proposing under this section to compel the purchaser to deduct and now, happily, to pay over to the Revenue Commissioners, will surely—95 times out of 100—not just be more than the chargeable tax but will be substantially more in most cases.
The Minister, for example, should bear in mind a point which he may not have adverted to in relation to this matter, that subparagraph (6) refers to the capital gains tax chargeable for the year of assessment for which he is chargeable and the tax chargeable on any gain accruing in any earlier years. That takes into account chargeable losses or allowable losses on other capital transactions which the vendor may have had in that particular year. For example, the vendor might sell two properties, on one of which he is making a good capital gain but on the other he is making a capital loss. The property which he sells subject to a capital loss is allowable against the gain, even though there might be a reasonable capital gain on the property sold at a gain there might be no tax chargeable. You still have a situation that 13 per cent of the purchase money is withheld. We have made this much progress, that it is now being withheld by the Revenue Commissioners and not by the purchaser where, from the vendor's point of view the money was at some risk. Nonetheless, it can be effectually withheld by the Revenue Commissioners and there is no provision for repayment within a reasonable time. It could take, as we know too well, a very long time. Even when the Revenue Commissioners repay, there is no provision for repayment with interest. The amount involved could be a very large one and affect a man's whole business. He might want the money for reinvestment but it is not available to him. If he goes to a bank and borrows it on a short-term basis he may pay 18 or 19 per cent interest, if he is able to get it. The Minister's proposals suffer very seriously from this defect as well as all the other defects we pointed out. They fail to take into account the overall liability in the year of assessment of the vendor for capital gains tax.
If he has accrued to him a series of losses in that year and if, for example, he sold a lot of shares within the past 12 months at a very heavy capital loss, as most people who sold shares would have incurred——
He might gain.
There were some gains in the case of those who were lucky enough to buy them a year ago at a lower price but we will leave the details out of the argument. Assume that at some future time there is a slump compared with what we have seen in the past year and that a particular person has to sell a lot of shares at a heavy capital loss. He has accruing to his credit capital losses which may be carried forward and set off either in that year or in some future year against capital gains. Assume that the only capital gain that he made around that period, is a substantial gain on a farm or whatever he sells—he is clearly not liable for tax because he is carrying forward capital losses. Why should he have to suffer the deduction of 13 per cent if the Minister says he can apply for a certificate? In those circumstances it is not just the straightforward certificate that he is ordinarily resident in the State. Surely the Minister knows this and it is not good enough to come in and say that the man will get it straightaway. The Minister knows the man will have to wait months. As things stand, it appears that the inspector of taxes, rather than the people in the old death duty office who will deal with these certificates. The Minister knows the extent to which they are snowed under with work. They are talking about strike action because they are completely overburdened with work, and every time some change is made in legislation it creates an enormous number of difficulties for them. The Minister must know, irrespective of what he publicly says here, that there are considerable delays because of understaffing of the offices of Inspectors of Taxes throughout the country. They will have all this additional work put on them now and there must be delays in getting these certificates. The Minister should take account, therefore, of the situation in which a man is faced with the 13 per cent of the purchase money to which he is entitled, which is withheld from him over a lengthy period, and he will get no compensation for that withholding. He might not be liable for any tax at all, but he might not be able to show a purchaser he is not liable because he has accumulated capital losses greater than the capital gain he makes on the particular sale; yet, he is caught for the whole 13 per cent. Could the Minister not try to make the matter more flexible even if it were only to the extent of giving the Revenue Commissioners some discretion about these things?
I cannot for the life of me see why, if tax in arreas will be charged by the Revenue Commissioners at 18 per cent, in a position like this where they will get in large sums of money over and above the tax that will ultimately be found due, they should add on 18 per cent for the use of it. If they have it for some time, I would say: "Fair enough. Leave it to them for a couple of weeks and, if they repay it, then forget about the interest." But, if it goes more than a few weeks, there is no reason in justice and equity why they should not pay for it if it is worth that much to them.
The Minister should also consider whether the deduction of 13 per cent of the purchase money referred to here is not, in fact, too great. As I pointed out earlier, 13 per cent of the purchase money represents the full tax at 26 per cent on a chargeable gain of 100 per cent. You will not often have a chargeable gain of 100 per cent. Perhaps, if, in five years' time, inflation continues at 25 to 30 per cent, you will be getting it then; but, as of now, the number of chargeable gains of 100 per cent, except in short-term transactions like mining shares and so on which are not covered by this anyway, is negligible. There is no land worth 100 per cent more today than it was worth on 5th April, 1974, except maybe in some very isolated instance where some special factor arises to increase its value very greatly. The figure of 13 per cent, because it represents the full tax on a chargeable gain of 100 per cent, is unnecessarily high. The Revenue would be at no risk if that figure were half or even less than is provided for here.
Deputy O'Malley should be congratulated on making a very good case in support of the argument that this Capital Gains Tax Bill is a very lenient one. I would like to thank him for his strong arguments in support of what he has been asserting and I am delighted that even at this late hour he sees the tax is, in fact, a very modest one.
(Dublin Central): It is, but not for the speculator
I do not want to get into any arguments with the Minister, but would he deal with what we are talking about instead of treating us to this snide, patronising nonsense?
I do not intend to be snide or patronising. The Deputy has delivered himself of an argument in which I assumed he believed. It was to the effect that the tax charged here was in normal cases very small and, because he believed that, he considered it wrong to have a deduction of 13 per cent in respect of the special position that arises where sales have been made by nonresidents.
We are not dealing here with the normal run of disposals. We are not dealing with the majority of sales. We are dealing only with sales by non-residents where the consideration exceeds £50,000. Some of Deputy O'Malley's colleagues have accepted that there is a need to protect the Revenue by ensuring that the proceeds of a sale in such cases, or a sufficient proportion thereof as is necessary, remain in the country to ensure that liability to capital gains tax is met. I cannot accept that any lower figure would be reasonable. We have struck a balance here to ensure that, while there will be no undue loss to the Revenue, at the same time we are not imposing too severe a restriction upon vendors. As I have said repeatedly, it is open to a vendor who wants to avoid this deduction to secure a certificate beforehand by furnishing appropriate information. I accept that this may not be possible in all cases if a taxpayer is contemplating acquisition and disposal of other assets. When, however, you come to consider the number of non-residents who may have several different holdings of property and contemplate actual disposals within a particular year, you find you are dealing with a very limited number of people and I am reasonably content that the Revenue Commissioners will be able to deal fairly expeditiously with such cases.
The vast majority of cases which will come under paragraph 11 will be cases that will be capable of being dealt with instantly and have appropriate certificates issued instantly. If a liability to tax arises, if they are residents the matter will not be dealt with under paragraph 11 but rather under section 5.
I am arranging to have copied an amendment to subparagraph (2) which we were discussing earlier on the lines I have already indicated, but strengthening it for the benefit of the vendor as well as the purchaser. It will provide that the person making the deduction shall, on proof of payment to the Revenue Commissioners of the amount so deducted, be acquitted and discharged of so much money as is represented by the deduction as if that sum had been actually paid to the person making the disposal. That will adequately cover the position, and I hope Deputy Colley will accept that it will.
(Dublin Central): Just for clarification as regards the purchaser making this deduction, is this in operation from April, 1974? Is the obligation on the purchaser from April, 1974?
No.
(Dublin Central): When is the obligation placed on the purchaser?
It will operate from the passing of the Act.
That may be the Minister's intention, but is there a provision for that in the Bill?
(Dublin Central): It is not in the section anyway.
May I refer the Deputies to subparagraph (9): "This paragraph shall apply only in relation to disposals and acquisitions occurring after the passing of the Act."
What has the Minister to say about a situation where there is a 95 per cent mortgage?
It should be easy in such cases for the vendor to furnish information to the Revenue Commissioners to enable a certificate under subparagraph (6) to be furnished.
But the vendor may take the view that he does not want to facilitate some building society. The Minister must be aware of the extraordinary requirements at times of building society solicitors who will make hay out of a paragraph like this.
I am not to be taken as supporting Deputy O'Malley's views as to the requirements of building societies' solicitors. I am sure they look after the interests of their own clients.
I do not think the Minister is to be taken as dissenting unduly from the view all the same.
I am not expressing any view on the matter at all. I am not to be taken as endorsing it. I cannot see how this section could create any problems in relation to the existence of mortgages.
If the purchaser is obliged to deduct 13 per cent and pay the Revenue Commissioners, but he is only able to raise 10 per cent of the total consideration in cash and presumably would, in the normal way, have paid that 10 per cent as a deposit at the start of the transaction, how is he going to get another 13 per cent which will amount to 23 per cent in cash if he is, in fact, borrowing 90 or maybe 95 per cent?
It is not beyond the ingenuity of solicitors to make the necessary arrangements on the closing of a sale to ensure that all outgoings are met and that the proceeds of sale will be apportioned as agreed between the parties. This will not be the only case in the future where purchase money will have to be apportioned. It has happened in the past, is still happening and will happen again from time to time. This is just a new apportionment which would arise only in the case of the absence of a certificate.
Does the Minister agree, therefore, that a certificate is essential in any mortgage case such as that because, in practice, they will be impossible to close otherwise?
It would be necessary and, in its absence, a deduction would have to be made. I am not to be taken as assenting to the view that transactions could not be completed because paragraph (2) gives the purchaser the necessary acquittal and discharge. He would make good title to the property on paying portion of the money to the Revenue Commissioners.
I do not want to delay this matter unduly but I want to ask the Minister again is it reasonable to say that if the refund of money which is due to the vendor from the Revenue Commissioners is not made within a certain time, the Revenue Commissioners should not pay interest on that refund? Is it not an unreasonable attitude to adopt, to say that no matter how long they take to refund it, no interest is to be paid on it? That is what the Minister is saying at the moment.
No. I do not anticipate that such circumstances would arise.
If the Minister is wrong?
We cannot discuss a hypothetical situation on the Committee Stage of the Bill.
(Dublin Central): Surely a long time can elapse before the refund takes place. I can visualise a sale where the purchaser has to deduct 13 per cent of my money. I want to purchase another property. I have to get an overdraft to purchase the property and put down a deposit on which I pay 15 per cent or 18 per cent. according to the Minister, I would be paying 18 per cent. There are reasonable banks who charge a lower rate than 18 per cent which the Revenue Commissioners would charge me if I owed them income tax.
It is quite possible that a person can be in a position where he has purchased another property and he requires this money. It is quite possible he may not be liable at all to the 13 per cent which has been deducted. When the assessments have gone through and the final researches have taken place, there might be no capital gains tax due. I have purchased another property and I have to borrow money, although the Revenue Commissioners have some money belonging to me. I have to pay the bank or the financial institution. I will certainly have to pay 15 per cent or 16 per cent.
The Revenue Commissioners hold a certain amount of money belonging to me which, in the final analysis, I do not owe them at all. It is only reasonable in a situation like that that the Revenue Commissioners should pay interest. I do not think that is an unreasonable demand from any vendor on the Revenue Commissioners. We all know the amount of work the Revenue Commissioners have on hand at the moment. When they get the three Bills before the House now, the Capital Acquisition Tax Bill, the Wealth Tax Bill and the Capital Gains Tax Bill, I can visualise what it will be like in the first few years before they are properly staffed to deal effectively with this type of legislation. There must be considerable delay. If there is a refund—and this will happen in the majority of cases—it will not amount to 13 per cent capital gains on that figure. An ordinary business man who purchased another property would have to go to his bank or an institution for money and pay 15 per cent on money that he would not have to raise if he had the money the Revenue Commissioners hold belonging to him.
That is a straightforward case which can arise. It is not unreasonable in a situation like that to expect the Revenue Commissioners to pay at least 10 per cent or 12 per cent. They would have to pay 18 per cent going by their own charges. It would not be unreasonable to ask them to pay at least what I would be paying for the same lending rates on money which they hold belonging to me. It is a straightforward demand, any business man would view it in that light. As Deputy Colley and other speakers have said, in this day and age when money is so costly the Revenue Commissioners should not hold money for 24 hours longer than necessary. We all know what servicing a loan costs today. We all know the Minister had to put in 18 per cent here to get his money in as quickly and as effectively as possible.
If I found myself in that situation I would be at the door of the Revenue Commissioners very quickly to get my money back. The businessman has to be a foreigner but we all think the same about this type of transaction. This can run to maybe £10,000 or £20,000, or £100,000, but in the final analysis I might owe only £10,000. Over a period of two or three months £10,000 or £20,000 held by the Revenue Commissioners can be quite substantial if you have to borrow from another institution and service it at 14 per cent or 15 per cent or, indeed, 18 per cent in some institutions. This is the kind of situation business people will find themselves in if the Minister does not compensate them for money held.
I can comfort the Deputy with the information that it need not worry him.
(Dublin Central): I am not talking about myself.
The Deputy was using the first person.
It can cover Irish residents too.
If the vendor is under a liability to pay tax the least he can do if he is interested in his own welfare is to apply for a certificate granting him exemption from this deduction.
I made a case on the section before this semi-technical debate had arisen about doing the fair and equitable thing. Taking up the point made, is it fair and equitable that the State should have money belonging to somebody else, even if it is, so to speak, as a security for moneys owing to them, and then having hung on to the money as a precaution not to pay interest on the part that is not due to them? Is this not doing a little bit of the big bully on the part of the State, whether you are resident or non-resident?
I have listened for more than an hour to the aspects of the debate and have heard the Minister talk about the efficiency which lawyers have, no doubt. But when all is said and done it is a question of fairness and equity here. If we are going to do this, let us say publicly what we are going to do. We are going to take money from non-residents as a precaution and, as Deputy O'Malley and others have pointed out, the boomerang may easily reach the residents here. I understand the Minister's motivation because what the Minister is afraid of is that the money will not be paid at all and that somebody will get scot free and there will be no sanction and, as I pointed out before lunch, it applies where the assets are within the jurisdiction.
I am now raising the point that even if it is a non-resident—it could be a foreigner, a citizen of another country —is it equitable to take money in that way and then, if there has been an overpayment, not to repay what is compulsorily withheld with interest? Deputy Fitzpatrick has gone a good deal of the road by suggesting that the interest should be at the going rate, whatever it is, and that is fair enough. At an earlier stage in the debate Deputy Colley, Deputy O'Malley and others suggested that what is sauce for the goose should be sauce for the gander and that the 18 per cent should apply in reverse. That principle was completely rejected by the Minister on the reasonable enough grounds, perhaps, on specific cases anyway, that it would turn the whole thing around, that it would be a way of raising money. The Minister's own reverse arguments might be worth reexamining now in light of this case. Here, to try to make a specific case, you are going to have 50 per cent of the consideration taxable and the capital gains in the last analysis may be a lot less. Is it asking too much, therefore, either to provide what Deputy Fitzpatrick says, a refund with a reasonable rate of interest, or a reasonable assessment that would enable a more realistic sum to be withheld? After all, we have another Bill in which there was not a death duties code, there were provisional assessments and so on. That is the way I would put the matter to the Minister in the last analysis. Is it fair to a noncitizen? Is it not going just a little bit far with administrative convenience? When all is said and done, is there so much involved for the State that the State cannot share the rest with the other parties by going some of the road as has been suggested by various Deputies on this side of the House.
I think the House generally accepts that the reason why the Exchequer charges interest on arrears of tax is not to collect a profit but to discourage people from withholding tax. The State would much prefer the payment of tax promptly than to have to collect interest on anything at all. It would be a great day for Ireland if no interest was collected, because it would mean that all tax would be promptly paid. In respect of the arguments we are now having, and I am not making a strong point of this, I emphasise that we are going dangerously near to discussing an amendment which was ruled out of order because it could involve a charge. In case this argument goes too far I will rely upon that.
Is the Minister saying: "I am prepared to amend it in this way"?
I will make the comment in passing that if the absence of the opportunity to gain interest on over-paid tax acts as an encouragement to people to furnish the information which is necessary to allow the Revenue Commissioners to make a proper assessment and charge, then it is working in precisely the same way as the imposition of interest on arrears of income tax is intended to operate and that is to encourage people to discharge their obligations and requiring the potential taxpayer to furnish the information necessary to allow the proper assessment to be made, and if a refund is due the refund will be made. Therefore, it is better in the interest of the taxpayer at a certain stage not to provide in this case what the Deputies are seeking because that will operate, or could operate, to let people leave in abeyance the furnishing of the correct information to enable the assessment to be accurately made.
(Dublin Central): There is bound to be a time lag. We cannot find what the consideration is until the day of the auction and it is from there on we must start getting the assessments. There must be a delay.
If there is to be a day it is to be the date of the signing of the contract and that tends to be anything from a month to two months in the ordinary course of the sales, during which time persons will furnish the necessary information to the Revenue Commissioners and allow the assessment to be made. If they have not done it by that time, it would be a reasonable time thereafter, but I cannot visualise there would be any delay where people furnish the necessary information.
The Minister is quite right when he refers to tax due, barring, of course, the rate of interest he is imposing on tax that is due. If that is the argument he is putting on the other side, it can be turned slightly the other way. It might be, if interest were to be due by the Commissioners to the vendor, that if such a tax to be refunded were at such a high rate as 18 per cent, the vendor might be quite happy to leave it there for a while. The rate being charged on arrears is a bit punitive. In those circumstances, could the Minister not compromise to some degree and agree that where a vendor has applied for a refund of tax, the Minister could set a time limit of, say, two weeks or a month after which interest would be chargeable on the Revenue Commissioners?
It could be an inducement to the Revenue Commissioners to speed up as well as to the taxpayers to speed up.
It could be justice to the taxpayer. If there is not to be delay, then nothing will occur, so why not agree to comply?
I have been deeply concerned about this aspect of the Bill. Deputy Colley mentioned sauce for the goose. An 18 per cent interest rate might be a little encouragement but the fact that they are going to get no interest is not right. Everybody knows the high cost of borrowing money at the present moment. It does not seem fair. Many people have been looking at this Bill and I have been approached by people who told me that the Revenue Commissioners should pay some interest anyway, perhaps not an 18 per cent rate of interest.
When a person has money paid over and above what is due to the Revenue Commissioners the Revenue Commissioners may be a bit slow in sending it back. If they had to pay interest on it, as Deputy Brugha said, the assessment would be done quickly and the money would be sent back quickly and it would appear fairer to the public.
I doubt very much if Deputy Callanan has been approached by non-residents. This paragraph deals only with non-residents.
No, that is not right.
Oh, yes, it does. The question of payment of interest by the Revenue Commissioners to anybody here could only arise in respect of non-residents.
Surely to residents who have not got a certificate under the subsection.
If he will not lift his little finger to help himself he does not deserve to be earning interest because of his own laziness.
Let us keep this debate in the good humoured vein we had. I hope the Minister will take it in good part if I say we are not now in 86 St. Stephen's Green, as it used to be.
I do not know what the Members of the Opposition have against the L. and H. but I shall have to draw the attention of the L. and H. to the several disparaging remarks that have been made against it.
Like the Minister I am very proud to be a former Auditor. The point is that this debate has more serious consequences than the debates we had in that place. The Minister made a point about charging. I demur when he says it only applies to non-residents because the circumstance can arise when it can apply to a resident and the circumstance can arise where a certificate is not immediately available. I do not want to appear to disagree with my friend Deputy Callanan or any other Deputy but I believe that the Revenue Commissioners delay only for two reasons. One is that they have not the information, that they are not in a position to discharge and that they cannot finalise something. The other is that they can become so over-burdened with work, and I fear this has happened, that they cannot reach it. If we can overcome the latter I am still prepared to give the complete discretion and if the Minister—and I took his point—says that the suggestion about interest is a charge that is all right.
Would the Minister then consider instead—I am not abandoning either my colleagues or my point but I do think, within the rules of order, if the Minister wishes to be technical he may plead that case—within the terms of subparagraph (4) introduce a discretion here, subparagraph (4) really deals with a case where there is a failure of a certain sort. While giving the inspector the power to meet the appropriate case would the Minister not also consider introducing a discretionary power so that where it is quite clear that the vendor was in an equitable position the inspector could exercise a discretion in his favour by issuing a certificate or in some other way, preventing the deduction? I am back to my point about giving the inspector enough time. Could a complementary power of relief not be included and the necessary discretion to exercise it?
If through lack of staff the Revenue Commissioners are not able to do the assessment, why should the man suffer?
We are all visualising a doomsday situation. You would think that the machine had collapsed or there was reason to believe it would collapse. The number of transactions involved here is going to be comparatively few. It must be a consideration of over £50,000. That is the first requirement before this comes into operation at all. Then when that is in operation the vast majority will be able to obtain, on application, certificates as ordinarily resident. The number of cases where actual assessment will have to be made will be very few. Inspectors of taxes will be instructed to give priority to cases of this kind. There could be significant sums involved here and it could be inequitable that there should be any delay in making these assessments. I do not tolerate any delay or say that any delay is sufferable but there could be very substantial sums involved here, sums which as often as not are reinvested in the acquisition of some other property. It would be unfair to put a taxpayer in the position of having to borrow from some other party because the State was holding on to portion of the proceeds of the disposal of an asset which had been disposed of. I do not anticipate that these occasions are going to arise.
I believe the majority of non-residents will dischage their tax before completion of the transaction. The majority of such persons are not people of limited means. I do not want to make any sweeping generalisations, but I think I am making a reasonable assessment of the situation when I say that the kind of people it would really concern are non-resident companies disposing of properties. They are people with the sophistication and means of making the necessary financial arrangements to discharge their tax liability and to obtain 100 per cent of the purchase money on the disposal of an asset. If any difficulties come to light you can be sure that the Revenue Commissioners will do everything in their power to overcome them and if they require a Ministerial intervention by reason of the need to amend the law, I am certain there will be Members of this House only too anxious to ensure that the law be amended and if necessary that the relief be given retrospectively.
When the Minister has gone that far why not do it now?
I am against, from the very beginning, and Deputy de Valera has been with me on this, trying to draft legislation to deal with any and every eventuality.
Agreed.
You put everybody into a kind of greyhound box, a starter box and say: "You shall run in that direction and no other".
What we are asking the Minister to do is to enlarge the box he is talking about. This is a greyhound box.
(Dublin Central): We want a horse box.
In fact, it is a box with the door locked.
Some people want me to put the dog in the box and let him out the back way while everybody else runs off down the field the right way. They want me to put somebody at a disadvantage. I am very sincere about this. We have here a reasonable provision now which secures the protection of the revenue without imposing hardship or disadvantage on anybody.
Before we conclude could I ask the Minister if he could indicate whether he proposes to proceed with this amendment which we have just received and also with the amendment that he had circulated earlier, the additional amendment No. 42a? Does he propose to proceed with both?
Yes. Might I mention, in relation to the latest amendment circulated, the sequence of the words "actually been" in the last line is wrong. It should have been "actually paid" instead of had "actually been". That is wrong.
Just an inversion of the words.
Yes.
Debate adjourned.