Leave a farm out of it. In addition to paying that gift tax, even though no money of any description passes, the father, on giving the gift, becomes liable for tax at 26 per cent on whatever the gain is from the time he acquired the asset or 5th April, 1974, up to the time he disposes of it and that applies irrespective of the size unless the gain is under £500. In addition, the son will pay stamp duty at 1 per cent which on a sizeable farm can be a very sizeable amount of money, which is often overlooked, and he has various other expenses in relation to a transfer of property which he has to meet. On top of all those, as if that was not enough, we now have the position that if, in those circumstances, the father or whoever the donor might be, does not pay the capital gains tax on a gain which he made only on paper—in fact, which he did not even make on paper a purely imaginary gain—the person who took the gift is now liable for that tax in addition to the other taxes. If the situation up to the present time could have been regarded by some people as complicated, it was only a fraction of the complication there will now be. No donee is going to know how he stands until at least two years have elapsed from the time he got the gift.
The one fortunate aspect of this particular tax is that it appears the tax is not a charge on the asset and therefore the donee could presumably deal with the property without proving payment of capital gains tax. I hope that is so because, if he could not, it means property like this is tied up for at least two years from the time of the gift. As Deputy Colley pointed out, the whole principle set out in relation to these capital taxes in the White Paper was that, on a gift, you paid gift tax but you did not pay capital gains tax. The two were mutually exclusive, and rightly so. That was fair enough. Whatever objection you might or might not have to the taxes themselves, in principle it was certainly vital that they were mutually exclusive because, if they were not, you could and would have a very unfair situation. Unfortunately, that was changed when the actual legislation was published a year, or thereabouts, after the White Paper. Gifts were made subject to capital gains tax. The ordinary members of the public do not realise that. If a farmer or anyone else gives a gift of some size to his son, or nephew, and it is a genuine outright gift, and no money at all passes on the transfer of that asset and you tell the donor he has to pay tax consisting of 26 per cent of what the Revenue Commissioners consider the asset increased in value either from the time he bought it, or acquired it, or from 5th April, 1974, to the date of disposal, he will look at you and say: "That is mad; you could not be expected to pay that". That is the attitude. I have patiently tried to explain to people that by making certain transfers they were making themselves potentially liable for capital gains tax even though they had no capital gain. This amendment not alone makes them liable for the capital gains tax but also makes the donee liable if the donor does not pay which will make donees think twice about whether or not they will accept particular gifts. The donees in the short term about whom I would be particularly concerned are those who acquired a gift either since 28th February, 1974, when the capital acquisitions tax comes into operation, or since 5th April, 1974, when the capital gains tax comes into operation. I am sure there are hundreds of donees who in all good faith accepted gifts from that date and, remember, they accepted them on the basis of what was set out in the White Paper. They were told specifically that they could be liable for only one tax or the other and could not be liable for both. Now look at the position they are in.
One of the arguments that the Minister put forward on earlier Stages of this Bill in relation to this point was that it was not really unfair to charge capital gains tax as well as gift tax because the donee paid the gift tax and the donor paid the capital gains tax. He now comes along with this last amendment of all to say that the donee shall be liable also for the capital gains tax. Can people believe anything emanating from this Government? One can well excuse them for believing that they cannot. They could not have been told more specifically in this famous White Paper, which took so long to get out and which was produced with such ceremony, that these two taxes were mutually exclusive. That was breached 12 months later. Now it is breached yet again. The same man is now made liable for both taxes. The joke of it all is in subparagraph (4) that the donee shall have the right to recover from the donor as a simple contract of comparable jurisdiction.
The Minister makes the point that the reason they are bringing this in is because the man might have given everything away. What good is sub-section (4) to the unfortunate donee who has taken the gift without ever seeing himself liable for this? The Minister wants to ensure that donors do not divest themselves of all their assets to the detriment of the Revenue. He comes along and puts the liability for the tax on the donee and he gives the donee a right to recover from the donor in circumstances in which, on his own admission, the donee has no hope of recovering anything. If there were ever double standards we have an example of them here. The whole thing is manipulated in such a way that the revenue can never lose. No matter what happens the Revenue will get their pound of flesh but the unfortunate donee who has taken a gift, take particularly post 28th February, 1974, in all good faith because of what he saw written in black and white in a Government White Paper, now finds himself in the impossible position of being liable for capital gains tax even though he was very specifically told he would not be. He has no way of recovering from the person primarily liable and the proof that he has no way of recovering is in the fact that the Minister uses, as his excuse or pretext for bringing in this amendment, the fact that the donor has nothing to pay or to gain.
Apart from the legal aspect of trying to sue a man who has nothing, look at it from the human and family point of view. Most donors are either fathers or uncles of the donees. If a father or an uncle gives a son or nephew some substantial gift of property for nothing and finds himself in the position that he is unable to pay capital gains tax, which he considers totally unjust because he did not get a brass farthing in return, and he is expected to pay perhaps thousands of pounds because he made a gift for which he got no consideration at all, and he cannot pay that tax and the son, or nephew, or whoever is the donee pays it, does the Minister seriously suggest that that son or nephew should go along and sue, as it is put, in a court of competent jurisdiction his father or his uncle? Does the Minister not realise what the reaction of a father or an uncle who has just been a very generous donor will be to that kind of situation? The first thing he will do is go in to his solicitor to see if he can break the gift and get back his property because he will regard the son, or nephew, or whoever it is, who sues him for this money as an ungrateful little so-and-so and he would be entitled to regard him as that.
The issues do not seem to strike the Minister. This lengthy amendment we are on now does not take account of the realities of human relationships. It is regrettable that we should have again here another example of this sort of double standard. As long as the Revenue end of things is fixed up, and the Revenue can have a go at anyone and everyone, the others do not matter: let them do the best they can for themselves, but we will do nothing to help them.
We had an example of it in the second last amendment we discussed here this evening, on the question of interest where the Revenue Commissioners, by virtue of the provisions of paragraph 11, as amended, of this Schedule, are entitled now to collect 13 per cent of the purchase price of certain properties, even though they may be aware that the capital gains tax, if any, involved may be only a fraction of that. They may hold that money, as we pointed out earlier, for quite a long time, perhaps six to 12 months and then repay the balance to the vendor concerned, but he gets no interest. On the other hand, if the money was due to the Revenue Commissioners, that man, as well as having to pay it, would have to pay 18 per cent per annum interest on it. Surely that is a double standard. Here we have it again in quite an extraordinary fashion. The principle of capital taxation in other countries, as I understand it, is that you cannot have double taxation of this kind and that gifts, as set out in the White Paper, very properly, are not subjected to capital gains tax for the very reason that there is no gain.
We discussed earlier in this Bill the question of illusory gains, paper gains, on sales as a result of inflation but at least, even if there was no real gain, there was cash there to pay the tax. The people of this country do not realise that, if you give a gift now to someone, you are liable to pay capital gains tax on it, even though you did not get one brass halfpenny for it. Above all, what they do not realise in relation to this amendment, which was circulated only today, is that the donee of the gift, as well as paying gift tax, is now liable for capital gains tax and, presumably, will have to pay it. In most cases of the sort of gifts that are involved here, when the gift is given, the donor divests himself to all intents and purposes of all his property. That is the usual practice in Ireland. He may retain a small house or something of that kind, but the usual practice is that to all intents and purposes he divests himself of all his property.
To charge tax on a gift is bad enough, but to charge the donee with it is indefensible, when he is already subjected to gift tax. We are told this today on 8th July, 1975, when on 28th February, 1974, with great ceremony the whole country was told most specifically that in no circumstances would these two taxes be payable at the same time on the same property. Perhaps the Minister for Defence was right after all when he came into this House with one of his usual blustering outbursts and informed the House and country that the White Paper, which he waved above his head, was not the Government's thinking at all; that it was something that was got out by civil servants; and that people were going around to Fianna Fáil cumann meetings telling the public that it had something to do with the Government when, in fact, everyone knew it had not, and that a crowd of civil servants got it up. Perhaps he was right after all.
One thinks he might be right because now, 16 months after the publication of that White Paper, we have things being done which totally fly in the face of the principles set out in that White Paper. In particular I have in mind, not the people who will make their gifts as and from tomorrow morning, if they become aware of the provisions of amendment No. 41, which they probably will not, anyway, for quite some time, but people who have made gifts and accepted gifts since 28th February, 1974, in all good faith, because something was set out in a Government White Paper in black and white.
Can the Minister or anyone else be seriously surprised that the word of this Government is doubted? Surely this is the experience which foreign industrialists have been suffering over the past year or two being translated to our own people. I am sure that people who are so unfairly caught as a result of all these changes of mind by the Government can only conclude that any future statements by the Government are as unworthy of belief as the statements contained in the White Paper of 28th February, 1974.
So far as the details of this very long paragraph are concerned, it strikes me that the word "securing" in the fourth last line of subparagraph (1) is wrong, and that it should be "accruing" rather than "securing" because I do not think it makes sense otherwise. In subparagraph (2) there seems to be an indication—it is not easy to follow the precise meaning of the subparagraph— that there could be a double charge on the donee's capital gains tax because it says that the donee may in addition to being assessed and charged under subparagraph (1) in respect of the new asset, be assessed and charged as if the chargeable gain on the disposal of the old asset were a chargeable gain on the disposal of a new asset, the capital gains tax in respect of which was not paid within 12 months from the date on which the tax had become payable.
That is ambiguous. It can be read either way. I do not necessarily say that there is a double charge but many people on first reading it, would regard it as a double charge. Also it is not subject to the proviso in subparagraph (1) that the assessment must be made on the donee within two years from the date on which the tax became payable. Why that is left out of subparagraph (2) even though it is in subparagraph (1), I am not clear. There may be an explanation for it. There are a number of other details I will come back to on the later sub-paragraphs. For the time being I will confine myself to those points.
