Cavan): Before we disposed of the amendments to section 6 and we were dealing with the section, which is the one which taxes private non-trading companies, it was accepted by the House that, generally speaking, private non-trading companies are devices for tax avoidance. I believe the House also accepted, again generally speaking, that it was proper to treat them, as they are being treated by section 6.
Wealth Tax Bill, 1975: Committee Stage (Resumed).
Question again proposed: "That section 6, as amended, stand part of the Bill."
That part was not agreed to.
(Cavan): Generally speaking it was.
Not the treatment.
(Cavan): I got the impression that that was generally accepted. This type of non-trading private company has mushroomed over the years. For example, before 1950 there were less than 200 such companies registered in the country and now the number has increased to approximately 2,500. It was, however, conceded in the course of the debate that there are some genuine bona fide non-trading private companies which are used by trading companies as holding companies and that sort of thing. I conceded that the section as drafted did not provide for them but was so embracing that it included them but the amendment which I moved, and which the House accepted, excludes from the provisions of the section private non-trading companies which are controlled, either directly or as part of a series, by bodies corporate which are trading companies.
I submit to the House that that excluded any problem that the section had created. In the course of the discussion Deputy Colley drew attention to the fact that a foreign person or persons might establish an industry here and hold shares in that industry, that such a person or persons might then form a private non-trading company to hold those shares and that in such an event the private non-trading company would be taxed as an entity and would not have any threshold. That was substantially the point made by Deputy Colley.
I do not believe this point has any practical effect because the vast majority of the foreign companies that are established here are established by foreign bodies corporate and the shares are held by these foreign bodies corporate and the question would not arise. I pointed out that in regard to the United States of America the publication of the Industrial Development Authority shows that out of approximately 120 companies established in this country by United States concerns practically all of them are held by United States companies and, therefore, the problem mentioned by Deputy Colley would not arise.
I am speaking of approximate figures but out of the 120 companies there is one about which there is some doubt as to whether it is a body corporate or an individual. That shows, as far as the United States is concerned, that there is no problem. If shares are held here by individuals the position has improved substantially in regard to them with the abolition of death duties.
In regard to European countries it may be that some companies or industries, which are established here by European interests, may be held by individuals but the problem there will cease to be a problem in most cases with the relief of double taxation. Deputy de Valera put forward the point that each of these private non-trading companies should be taken on its merits. Somebody put forward the point that non-trading companies owned by foreign individuals should be exempt. If we were to do that we would be rightly accused of discrimination against Irish interests and we could not, and would not, do that.
The answer is to exempt all production assets.
(Cavan): Deputy de Valera made the case that each private non-trading company should be looked at by the Revenue Commissioners on its merits and investigated and vetted with a view to seeing if it should be treated as an entity or if it should have certain exemptions and privileges which we are not too clear about. I put forward the case that that is simply not practical because it would entail a vast amount of work. These companies are mushrooming, as I have shown, and would be likely to continue to do so if they were encouraged in this way. The Revenue Commissioners would then have to deal with each one of them and there would be endless work and time involved and for the low rate of tax involved it would not be practical. That was the case put forward in ease of the individual, so to speak. Deputy Colley also put forward the case that it might lead to avoidance by people putting their wealth into a private non-trading company and then giving control of that private non-trading company to a trading company and in that way they would be exempt from wealth tax.
It would achieve the thresholds anyway.
(Cavan): The individuals would achieve the threshold. If they were very wealthy people it would not matter because they would already be paying the tax, but I do not think that that is likely, first of all, because they would be putting personal wealth into the trading company and would be putting it at risk. I do not think that is likely to happen in view of what I said earlier, that they could convert their trading company into a private non-trading company. There are more than two ways of doing this. My advisers have gone into it very fully and the method provided for in the section as amended seems to me to be the only workable and practical way of operating this wealth tax in regard to the private non-trading companies. I am quite satisfied that that is so.
Deputy Colley and others have a duty to look at it and come up with another view, with another suggestion, but I am satisfied that the method provided for in the section as amended is the only workable way. I concede, too, that as time goes on, there can be teething troubles, that some hardships may appear, some loopholes may appear, but there is at least one Finance Bill introduced every year and as has been the practice in the past, these hardships and loopholes in the measure can be corrected as required.
It is of some significance that the Minister again referred to the fact that the great bulk of the private non-trading companies affected by this generally are taken to be the ones that have been set up with the purpose of tax avoidance. He also said that the great bulk of investment in this country, industrial investment from the United States, was in the form he described "held by a trading company in the United States and therefore would not be affected". I think it significant for the reason that as Deputy de Valera said before we adjourned, because there is a tendency on the part of the Minister and on the part of the Minister for Finance also when dealing with this legislation and with the capital gains tax legislation to speak in this way, that if there are only a relatively small number of people adversely affected, that is too bad. I do not think that is good enough. I think there is an obligation on the Minister when he is introducing legislation of this kind to try to devise a method that will not adversely affect——
(Cavan): I did not concede that. I said that on the overall package if anybody was adversely affected, it would be more than offset taking into consideration the death duties relief, that nobody would be adversely affected.
I am coming to that. In fact, we propose to demonstrate that there are people who are adversely affected by this who should not be adversely affected. What I am saying is that in those circumstances there is an obligation on the Minister and on the Government to devise a method by which that adverse affect will not come about. It is not a sufficient answer to say: "Well, it is too bad, but we cannot do anything about it." There is an obligation on the Government to do something about it. There are different ways of approaching this; none may be absolutely perfect, but at least an effort should be made to do something positive.
I noted also that the Minister referred at one stage, when it suited him, to the benefits of double taxation agreements but he did not refer to the benefits of double taxation agreements when he was talking about the nonliability for death duties in future in the case of the kind of people we were discussing. In many of those cases, as a result of double taxation agreements, in fact, they were not going to be liable for death duties or if they were, it would be for a very small amount. Having paid tax in their own countries, they would then be claiming credit in this country, so that the practical effect for these people is as I have outlined. The fact is that there could be relief which would exceed the rate here, but even where there is not, the amount of death duties for which they would have been liable would certainly be smaller than is implied in the Minister's statement that there is now no liability for death duty.
However, the real issue involved in this section is different. Deputy de Valera put forward a very closely reasoned argument and I can go a long way with what he said, but I think he went on a little further than I would be prepared to go. I want to put it to the Minister that it is wrong in principle to tax private non-trading companies under wealth tax without a threshold. That approach is wrong. The right approach is to delete section 6 and to delete that portion of section 7 which refers to the shares in a private non-trading company. We would then have the position in which we would tax each individual on the basis of his or her wealth. There is only one possible good reason for not doing that—there are reasons for not doing it, but there is only one possible good reason for not doing it, that is, if it could be shown that to try to do that would enable people to manoeuvre their affairs in a private non-trading company so as to escape liability.
I want to put it to the Minister the death duty code now contains such provision which could be built into this as to prevent that being done. There is widespread power in that code for the Revenue Commissioners to assume certain values, to impute values to particular individuals and so on. We do not accept that it is not possible for the Revenue Commissioners to assess the value of each individual's shares in such a company, tax them accordingly, like any other individual, giving them the benefit of a threshold. I suggest that that is the right way to do this and if it is done, it obviates all of the difficulties which can otherwise arise.
I also want to suggest to the Minister that the original approach to the Bill was to tax all private non-trading companies and give them the benefits of no threshold. That was the original approach. Today we passed an amendment which qualifies that in certain limited circumstances, broadly those circumstances being where the private non-trading company is owned by a trading company. The passing of that amendment is an acknowledgment of the fact that there are some private non-trading companies which should get the relief now being extended to those owned and controlled by a trading company. I want to put it to the Minister that there are other private non-trading companies entitled to the relief which are not covered by the amendment. I have before me a copy of a letter addressed to the Parliamentary Secretary to the Taoiseach which sets out in considerable detail the position in regard to a particular private non-trading company. It is not necessary to go into all the details, but it is quite clear from this that neither was there any avoidance or evasion of tax nor any attempt to do so and that the operation of the private non-trading company was done and has been done for 20 years, or more, because it was the most convenient and efficient way of handling the property concerned on behalf of members of the family—I think six in number.
Under this section that private non-trading company is going to be taxed for wealth tax with no threshold. There has been a suggestion that it is easy enough to get over this by taking the property out of the private non-trading company. I do not purport to stand over the precise details stated in this letter in that regard but, for the purpose of indicating the problems foreseen in this area, I tell the Minister the writer of the letter says that to transfer the assets to each of the individual shareholders would mean the transfer of the property by deed of assignment which would entail about £13,000 in legal costs and stamp duties and to transfer the stock exchange security would, perhaps, cost another £500. Add to this the cost of liquidating the company and there is needless expenditure of approximately £14,000 plus at least one year's wealth tax of £2,500, or a total of £16,500 imposed on a family who, in justice and equity, should not have to pay anything at all. There is a further element in so far as the transfer of the stock exchange security at present would entail a capital loss of about £10,000. This loss could not be offset against capital gains which might be made by individual members of the family on a subsequent disposal of the same securities and, therefore, it will be seen that to divest the company of its assets is going to cost in the region of £25,000 to £26,000.
Strangely enough, the writer of this letter comes up with a suggestion not very dissimilar from that put forward by Deputy de Valera. What is suggested is as follows:
It should be possible to put in a clause to the effect that where the Revenue Commissioners are satisfied that the shareholding structure reflects the true beneficial ownership of the equity and that the object of the company is not to evade tax liability, that they (the Revenue Commissioners) may issue an exemption certificate to the company and the wealth tax be levied on the respective shareholders by reference to their aggregate wealth and their individual thresholds.
The Minister will recognise that is not far from the solution suggested by Deputy de Valera. However, I do not go that far because I am not satisfied that the machinery available to the Revenue Commissioners is insufficient to handle the problem involved here. I believe the general approach in the section is producing problems in regard to cases where clearly relief should be given, but is not being given. I would go further and say that the mere fact that there is a private non-trading company, which was established inescapably for the purpose of avoidance of tax, is not of itself sufficient to justify the approach in this section which takes away all thresholds and taxes from the first £1 of value of the assets. I am suggesting that, for reasons of equity and for reasons of avoidance of anomalies, the right approach is to delete the section and the relevant portion of section 7 and treat private non-trading companies in the same way as trading companies: in other words, take each individual and assess him or her on the value of the respective assets and in that way you will avoid a great many of the anomalies that are now clear. I am quite certain that further anomalies will come to light in due course.
It is not very satisfactory to say we will see how it works and we will amend, if necessary, in due course. That may be sufficiently satisfactory from the point of view of the Minister and myself, because we are not directly and personally involved in this—at least the Minister said he was not personally concerned with wealth tax and I know I am not—but it is not sufficient for either of us to take this lofty attitude and say it can be fixed next year or the year after when the people concerned will be subjected to heavy losses. I have given an indication of a particular case where they anticipate a loss of £25,000 to £26,000 in one year. We cannot take a lofty attitude in regard to people like that who are, even on the Minister's own criteria, entitled to relief, and it is merely the structure of the section that prevents their getting it.
With regard to the question of the amendment which has been made to the section providing a loophole whereby people, whom the Minister did not intend to have the benefit of thresholds, get it, the Minister can argue, as he did, that this is unlikely to happen. My belief is that it is quite likely to happen. It does provide a very convenient way of getting the benefit of the thresholds without suffering the losses that might be involved in liquidating the private non-trading company. I want to make it clear that this whole situation should not arise if this matter were approached in the way I have indicated. But if the Minister is going to maintain the stance that he has on section 6, then I draw his attention to what I consider to be the creation of a loophole. If he is satisfied with the position so indicated, there is no more I can do. I am not unduly concerned, once I have drawn attention to it, and in any event it should not and would not arise if the right approach were taken to this section. I have outlined clearly enough to the Minister what I think the right approach is and why I think it is the right approach. I have no doubt that the matter could be handled and that the Bill would be far more satisfactory if section 6 were deleted and also section 7 subsection (i) (j).
(Cavan): It is not possible to legislate for every possible case that may arise. It was seen from the very time these proposals were considered that the private non-trading company would have to be treated as a special case and that was mentioned in the White Paper. I have made my case and Deputy Colley has made his, but Deputy Colley now really calls a spade a spade because he says the way to deal with it is to delete section 6 and amend section 7 and treat the shares in the private non-trading company as part of the assets of the owners.
That will not work and it would be utterly impossible to operate wealth tax if we were to do that. Instead of the 2,500 private non-trading companies we have now we would have infinitely more. It is conceded that it is impossible to identify them; it is impossible to police them; each family would have their wealth divided up into several non-trading companies. The result would be that the Revenue Commissioners would be chasing about in a mist trying to sort these things out.
Could I interrupt the Minister? Does he mean people would not be disclosing that they had these assets?
(Cavan): No. I mean they would vest them in different companies.
But they would still have to disclose them.
(Cavan): With different shareholders in different companies.
They can do that without a private non-trading company, can they not? They can divide up their property between the individuals concerned.
(Cavan): But they are absolutely divided up then. They can do that and, if they do it between a spouse and minor children, it is dealt with in the Bill as the Deputy knows. The reasons which lead to discretionary trusts being treated as an entity for the purpose of the tax apply equally to private non-trading companies. These are—we have spelled them out before—that the exclusions available for individuals could not be applied to companies. Special exclusions for individual companies would be availed of as a means of avoidance by setting up several companies.
That is true. We are not urging that.
(Cavan): They could not be aggregated inter se. Donor orientated aggregation would be inappropriate and besides would be vitiated by fictitious sales. I thought we had agreed all that at a very early stage in the Committee Stage discussion on this Bill. I thought we had agreed that private non-trading companies were much less meritorious than discretionary trusts, that they were much harder to deal with. I may have been wrong. I thought we had accepted that you could not reasonably operate a wealth tax if you were to recognise and give thresholds to private non-trading companies.
Yes I would agree on that but, to attribute the assets in a private non-trading company to the individual shareholders, is a different situation.
(Cavan): Then you would have to value each share in every private non-trading company every year.
You have to do that under this section.
(Cavan): No. Deputy Colley dealt with a letter which he said the Parliamentary Secretary to the Taoiseach received. Naturally, I will not identify that letter but it is true to say that an answer was sent to that letter and presumably the answer to that letter is in the hands of the person who gave Deputy Colley the letter. He attributes a loss. If there is any percentage of private non-trading companies which would inflict a hardship they can be put into liquidation without any trouble and without very much cost. A loss attributed in that letter to one year of £25,000 falls under the head of stamp duties. My advice is that there is no stamp duty payable on the transfer of assets from a company which goes into liquidation to the shareholders. There is at most a nominal stamp duty payable.
Legal costs were part of the items.
(Cavan): The big item was——
£13,000 in legal costs and stamp duties. That was the first item.
(Cavan): They must be going to some fashionable solicitors. The stamp duties are out and I am also told that part of the cost of the loss attributable there was due to the sale of securities. I am also told that it is not necessary to seal the securities. They can simply be transferred. I repeat that my advice and the best advice to me and the Government is that the proposal suggested by Deputy Colley simply will not work. While that may not have been agreed in so many words at the beginning of this debate on the definition section, it was not seriously disputed.
To make it quite clear, the Minister is mistaken in thinking there was any such agreement from this side of the House. Clearly, to me there is a major distinction from the point of view of the difficulties involved in dealing on the one hand with a discretionary trust and on the other with a private non-trading company. In the case of the discretionary trust you cannot pin down the assets to particular individuals. In the case of a private non-trading company you can. The shares are allotted. An ascertainable proportion of the total assets is credited to particular individuals. It is quite a different problem.
I do not accept that it is not possible to handle this problem. The first two or three reasons put forward by the Minister just do not apply to what we were suggesting. Of course, you cannot apply thresholds to the companies as such and we never suggested that. I do not accept that it is not possible to police and handle this situation on the lines I suggested. Even if one were to accept that argument from the Minister, there is still the possibility of the suggestion put forward by Deputy de Valera, and also the suggestion put forward in this letter to which I referred.
Just to refresh the Minister's memory it was to the effect that there be inserted a clause to the effect that, where the Revenue Commissioners are satisfied that the shareholding structure reflects the true beneficial ownership of the equity, and that the object of the company is not to evade tax liability they, the Revenue Commissioners, may issue an exemption certificate to the company and the wealth tax be levied on the respective shareholders by reference to their aggregate wealth and their individual thresholds. Deputy de Valera did not hear this one before but I am sure he is interested to hear the confirmation of his idea from quite another source.
I would suggest that the Minister should give very serious consideration to something on these lines if he is not prepared to adopt the suggestion I put forward. At least by the acceptance of something like this, he can insure that the genuine case which is not covered in the section can be covered and, since the whole thing is subject to the discretion and control of the Revenue Commissioners, there can be no question of evasion or avoidance involved in it. I would strongly urge him to consider the insertion of a provision on these lines in order to ensure that the cases he cannot cover in the section as drafted will have some possibility of getting equity and justice under the section.
I was completely unaware of this. Time did not permit me this morning to think of a suitable formula for insertion. The formula has been provided there and I would strongly support that plea. I would ask the Minister also to take into account in that suggestion the element of part—I used the phrase "in whole or in part" and what I have said is on the record. The Minister spoke about family and a single interest but there may also only be a part interest. Having regard to that, the last formula proposed by Deputy Colley seems to me to be unobjectionable and I would urge it on the Minister.
My final point is short. I take it that in subsection (3) the word "and" after paragraph (b) has the same effect as the word "or" and that when there is the word "and" all the other prior paragraphs are conjunctive. The Minister will remember that when I referred to the word "or" he said it meant that all the paragraphs were alternative. I take it that when the word "and" appears in a similar position all the paragraphs are conjunctive. I am referring to the last line of page 8 where
"company" means a body corporate (wherever incorporated).
The word "and" occurs at the end of (b), not at the end of (a). I take it that they are conjunctive in the same way as the word "or" is disjunctive or alternative.
(Cavan): I dealt fully with the point raised by Deputy Colley when I was replying after the resumption to the point made by Deputy de Valera. My advice is that it is unworkable, that this thing has been considered, we decided on this section and it was not put in lightly, the amendment was not put in lightly. It is significant—and I am not saying this in any critical form—that we did not have any amendment to this section from the Opposition.
There is a very simple answer.
(Cavan): I am not critical.
There is a simple answer to that, and this shows the merits of a debate. I freely concede what the Minister has stated. When I spoke about this before we adjourned these points had not occurred to me.
They had occurred to me. The simple answer is there is not enough time being given for adequate preparation and discussion of these Bills. That is the answer.
(Cavan): That is the political answer.
That is the true answer. A lot of this arose from the Minister's own amendment.
Question put.
The Committee divided: Tá, 72; Níl, 66.
Tá
- Barry, Peter.
- Barry, Richard.
- Begley, Michael.
- Belton, Luke.
- Belton, Paddy.
- Bermingham, Joseph.
- Bruton, John.
- Conlan, John F.
- Coogan, Fintan.
- Cooney, Patrick M.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan.
- Coughlan, Stephen.
- Creed, Donal.
- Crotty, Kieran.
- Cruise-O'Brien, Conor.
- Desmond, Barry.
- Desmond, Eileen.
- Dockrell, Henry P.
- Dockrell, Maurice.
- Donegan, Patrick S.
- Donnellan, John.
- Dunne, Thomas.
- Enright, Thomas.
- Esmonde, John G.
- Finn, Martin.
- FitzGerald, Garret.
- Fitzpatrick, Tom (Cavan).
- Flanagan, Oliver J.
- Gilhawley, Eugene.
- Governey, Desmond.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Patrick.
- Hogan O'Higgins, Brigid.
- Burke, Dick.
- Burke, Joan T.
- Burke, Liam.
- Byrne, Hugh.
- Clinton, Mark A.
- Cluskey, Frank.
- Collins, Edward.
- Jones, Denis F.
- Kavanagh, Liam.
- Keating, Justin.
- Kelly, John.
- Kenny, Henry.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lynch, Gerard.
- McDonald, Charles B.
- McLaughlin, Joseph.
- McMahon, Larry.
- Malone, Patrick.
- Murphy, Michael P.
- O'Brien, Fergus.
- O'Connell, John.
- O'Donnell, Tom.
- O'Leary, Michael.
- O'Sullivan, John L.
- Pattison, Séamus.
- Reynolds, Patrick J.
- Ryan, John J.
- Ryan, Richie.
- Spring, Dan.
- Staunton, Myles.
- Taylor, Frank.
- Timmins, Godfrey.
- Toal, Brendan.
- Tully, James.
- White, James.
Níl
- Allen, Lorcan.
- Andrews, David.
- Barrett, Sylvester.
- Brady, Philip A.
- Brennan, Joseph.
- Breslin, Cormac.
- Briscoe, Ben.
- Brosnan, Seán.
- Browne, Seán.
- Brugha, Ruairí.
- Burke, Raphael P.
- Callanan, John.
- Calleary, Seán.
- Carter, Frank.
- Colley, George.
- Collins, Gerard.
- Connolly, Gerard.
- Crinion, Brendan.
- Cronin, Jerry.
- Crowley, Flor.
- Cunningham, Liam.
- Daly, Brendan.
- Davern, Noel.
- de Valera, Vivion.
- Dowling, Joe.
- Fahey, Jackie.
- Farrell, Joseph.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzpatrick, Tom (Dublin Central).
- French, Seán.
- Gallagher, Denis.
- Geoghegan-Quinn, Máire.
- Gibbons, Hugh.
- Gibbons, James.
- Gogan, Richard P.
- Haughey, Charles.
- Healy, Augustine A.
- Herbert, Michael.
- Hussey, Thomas.
- Kenneally, William.
- Kitt, Michael P.
- Lalor, Patrick J.
- Leonard, James.
- Loughnane, William.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim, Thomas.
- MacSherry, Ray.
- Meaney, Tom.
- Molloy, Robert.
- Moore, Seán.
- Murphy, Ciarán.
- Nolan, Thomas.
- Noonan, Michael.
- O'Connor, Timothy.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond.
- Power, Patrick.
- Smith, Patrick.
- Timmons, Eugene.
- Tunney, Jim.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Lalor and Browne.
Question declared carried.
SECTION 7.
I move amendment No. 9a.
In page 10, subsection (1), line 23, after "used" to insert "solely".
In the earlier part of the section exemption is given in respect of wealth tax in respect of a dwelling house and ancillary lands. The section goes on to provide as follows:
In the case of a dwelling house, or part of a dwelling house, part of which is used for the purposes of a trade, business, profession or vocation or is let, this paragraph shall not apply to the part used for those purposes or which is so let.
What I am proposing is that the exemption provided in the earlier part of the section should not apply to a dwelling house or part of a dwelling house unless the portion that is used for trade, business, profession or vocation or is let be solely used for that purpose. The reason that I am proposing this is that I think there are quite a number of places in which premises can be partly used for one purpose and partly used for the other. There could be a good deal of confusion and possibly even litigation in determining this. I am not quite sure what the income tax provisions in this regard are, that is where an allowance is given in respect of expenses where a portion of the dwelling house is used for the purpose of a business, trade or profession but if such allowance is given if it is used solely for this purpose then that would provide a clear-cut distinction. The main object I have here is to try, as far as possible, to have a clear-cut distinction, to clarify what is to be exempt and what is not. The insertion of the word "solely" would help to clarify that position and, if it would, I imagine the Minister should welcome it for that reason.
(Cavan): As Deputy Colley says, section 7 (1) exempts a dwelling house from taxable wealth. It provides that the value of the dwelling house shall not be taken into account in arriving at the taxable wealth of an individual. It goes on to say in the proviso that where part of a dwelling house is used for the purposes of trade, business, profession or vocation or is let, this paragraph shall not apply to the part used for those purposes or which is so let. In other words, the intention of the paragraph, as drafted, is to say that while the dwelling house shall not be reckonable for wealth tax purposes if portion of the dwelling house is let or is used for trade and so on that that part will be valued. Deputy Colley's amendment seeks to say that the part that is used for a trade, profession or business shall be exempt unless it is solely for these purposes. I am convinced that if I were to accept the amendment and put in that word I would render the section unworkable.. Take, for example, a room that is used as a doctor's surgery or as a solicitor's office for 365 days of the year. That would not be exempt under the section as it stands, but if I were to accept Deputy Colley's amendment it would be exempt if because the house was crowded during the holiday season a temporary bed was put up and some members of the family slept in it for a few nights. That is the situation that Deputy Colley's amendment would create. I do not think it is workable or reasonable.
We had a suggestion from Deputy de Valera earlier on that the Revenue Commissioners should have a discretion. This is the sort of field where they will have a discretion and will operate on a reasonable basis.
Take the reverse case of what the Minister said.
(Cavan): I do not want to seek to bind the Revenue Commissioners. I am not in a position to do so. But again in a doctor's house you have a surgery and as sometimes happens in the country anyway you could have a dining-room next to the surgery. The dining-room could quite frequently be used as a waiting-room. The Revenue Commissioners will have to make up their minds in regard to that position. The surgery certainly would not be exempt. It is a matter on the balance of probability whether the dining-room would be exempt or not.
In putting this section into the Bill we broke completely new ground and we did not follow any precedents from elsewhere because there were none. There is no exemption given in respect of the dwelling house in any other country. I am satisfied that if I were to accept the amendment with the word "solely" written in there, then in virtually every case all the house would be exempt although it might be quite unreasonable to exempt it.
There are two points arising from what the Minister said. The first one is that I fail to see how a discretion can be imported here if it were not for instance in the section we have just passed. I understand from what the Minister said that this is the first time, but I fail to see how a discretion is imported into it. If that were the answer I would be only too happy to say to the Minister: "That solves that."
The Minister has taken the example of a doctor. I can give perhaps two more pertinent examples of what is involved. What the Minister has in mind, I take it, is that there is, in effect, a letting or the use of part exclusively as an office or surgery or so on, there is a use——
(Cavan): If there is a letting there is no problem.
There is no problem if there is a letting. I used that word to describe the type of occupation. A doctor's surgery was a good example. I understand the Minister's point about evasion by a technical compliance with a residential requirement. But what about a barrister? I was a barrister myself at one time. His place of work is the Bar Library and, of course, a barrister goes every day to the Bar Library as the office, so to speak, or else he is out on circuit. Normally he holds his consultations in solicitors' offices or in the Library itself. Very frequently, particularly at night time—and in the old days it was much more common than it is now— legal consultations would be held in the barrister's house. It would be infrequent, as the Minister will know. As the Minister knows, the type of consultation that involves the client, the general consultation, will normally take place in the Library, in a solicitor's office or out on circuit. There have been what you might call professional consultations. It used to be very common that the solicitor or maybe brother barristers in the case —in a case of any size there is a junior and maybe two seniors—met in one of the counsel's studies. It could be said that that room was used for professional purposes.
Secondly, every barrister has his own library, it is the tools of his trade, which are along the walls of his study. He must have them to hand because often he will be contacted by telephone. I am pressing this point to show the lengths to which it can go. If this point were to be pressed further it could even apply to the local doctor or solicitor who has a telephone. I am sure the Minister has had the experience in his private capacity before he became a Minister, of urgent calls at night when he had to give a legal opinion, maybe arrange to draft a will or something like that.
I am concerned that here is a situation which could or could not be treated in a particular way under this section. I would be very happy to feel that the Revenue Commissioners had discretion. If the Minister's answer to that is sure and certain I am happy.
Before I finish on the point of taking the work of a barrister as an example, I want to take the point of a scholar. Let us take the typical academic person, a member of a university staff, who is interested in his subject, although this is becoming less frequent now owing to pressure of accommodation, and the cost of books and periodicals; a man in that category would have a private library and he would do a great deal of his own research in his own house. How does this come in? Incidentally, although I am wandering from the point at issue, at a later point in the section, in connection with books, I will come back to this.
There are two cases, I know this is the extreme opposite to the one the Minister made. We have the barrister and I am adding the question of the professional student, the academic person. There is a borderline between the two. I am sure that this must have occurred in the income tax code somewhere. The Minister seemed to be very confident when he mentioned the discretion. If this discretion is here it would go a good way to mollify us on the amendment. I am talking only for myself. I am not committing Deputy Colley. If it is not so, then a very practical difficulty arises for a number of people. It could even arise for members of the State service in particular applications. I should like to know the Minister's authority for saying that the discretion would be here when it was not in the other section.
(Cavan): I think a discretion is implied here because it says part of which is used for the purposes of trade, business or profession. That is not defined. If it is not defined it is something that the Revenue Commissioners will have to decide on the merits of each case. In regard to the point raised by Deputy de Valera about the barrister's study, some barristers' studies, which I have been in, could be properly regarded as not falling within the exemption, as quite properly being places used for a profession. The walls of the study are, as Deputy de Valera has said, surrounded by bookshelves and the walls are surrounded by bookcases. You have bewigged gentlemen in drawings on the walls and mantelpiece. Generally speaking, it is a room set apart for practically the exclusive use of the barrister.
You could have a position where some visitor would call on a social visit but somebody else was already in the drawing room, or whatever you like to call it. The person would say: "I am sorry, I must bring you into the study. There is somebody in the drawing room." There the study would be treated as a place which was not ordinarily used for social purposes or entertaining guests. On the other hand, there could be a situation where you could be apologising to your wife and family for holding a consultation in their part of the house. It is a matter of commonsense. That would be the approach that would be made to it.
It is a matter of the dwelling house.
(Cavan): It is a question of what the various parts of the dwelling house are usually used for. The man who owned the house would know that. I think the example given is a fairly good one. Ordinarily, somebody who called on a social visit would not be brought into the study if it was habitually used as one and was fitted out with books and decorated with photographs of judges and so on. On the other hand, clients, solicitors and other barrister colleagues would not normally be brought into the sitting room or drawing room portion of the house. That is the position. I think the Revenue Commissioners will make up their minds on the merits of each case. There is not a lot involved in this matter because it would be hard at any rate to value a couple of rooms in a house.
Could the Minister throw any light on the income tax position where an income tax allowance is claimed in respect of portion of the premises? Is that granted only where it is used solely for the purpose of the business, trade or profession or partly?
(Cavan): I can tell the Deputy of a case about which I know where a solicitor had his office, not in his house but adjacent to it and under rating but the larger portion of the building was used as a dwelling house. The case was made that because the office was so adjacent to the dwelling house, and perhaps a gate had to be left open, it was reasonable to apportion 50 per cent of the rates and rent to the professional portion of the premises and 50 per cent to the other half. That was agreed to.
That is unrelated to whether it is used solely or partly.
(Cavan): Exactly. The overall picture was taken into consideration.
What happens in the case of a country TD whose whole house practically becomes his place of business on a Sunday or weekend?
(Cavan): Let us say he asked for it and he got it.
What is he getting? Liability for wealth tax?
(Cavan): It is obvious that to write the word “solely” into it you would have an exemption in every case.
As often happens in an amendment of this kind it is to prompt the idea and to clarify it.
(Cavan): I will make a suggestion to the Opposition which I think will meet their demand. I will insert the word “mainly” instead of “solely”.
That would be a great improvement.
That would be a great improvement but I was really interested in the Minister's interpretation and discretion.
(Cavan): I am certain of the Minister's discretion there because here I am giving this over to the Revenue Commissioners and they will have to make up their minds about it. That is discretion.
(Dublin Central): This particular section applies to a business premises with living accommodation over it?
(Cavan): Yes. We confined ourselves exclusively to the professional classes——
(Dublin Central): They look after themselves.
(Cavan): I think it would be much clearer——
It would be clearer if there was an apportionment under the other Act.
If the Minister would put in "mainly", it would certainly improve the position.
(Cavan): I am agreeable to that.
(Dublin Central): It may be much clearer, but remember we are confining ourselves here to the one acre which would establish significance to the siting as regards a business house. Out-offices and such could be used in the course of a business and also be used for private purposes. There are many business houses throughout the country which are also private houses. Part of the out-offices are often used for storage and are quite often also used at the same time for private purposes.
I am thinking of the use of part of the private house as a car park. Quite often it is used as a playing facility for the children.
These are the types of complications that may arise and the Revenue Commissioners might decide that this acre was being completely used for a commercial purpose. I know it does not confine it to this particular section but it may happen later on. This could have an important bearing in a place like Dublin city where there is discussion about the valuation of a particular acre of land that would be left available, whether it was used for commercial purposes or whether it is used for the private use of the family in that particular house. I can visualise certain houses in this city where the acre attached—it would really be a half-acre—could very well be deemed by the Revenue Commissioners to be used for commercial purposes.
Could I ask the Minister how far the discretion would go here? If he is using the word "mainly", does that mean that the part of the property would be entirely included or entirely excluded because of the use of the word "mainly"?
(Cavan): This is the subsection which takes the exemption away and I would say the Revenue Commissioners would then have to say—we are getting back to the diningroom in the doctor's house —whether that is mainly used as a waiting room or mainly used as a dining room.
Is there no in-between?
(Cavan): How do you mean?
The Commissioners are going to interpret it and use their discretion.
(Cavan): It must be either in or out.
There is no apportionment?
(Cavan): No.
If they say it is mainly used as a private house——
(Cavan): Then it is exempt.
And if it is mainly used for the purpose of business, then it is subject to wealth tax.
(Cavan): Exactly.
(Dublin Central): I will put an example to the Minister. We have seen many times in this city where two or three rooms downstairs are used mainly for the purpose of living. They are used for living in all the year around and the rest of the house is let. How will the Revenue Commissioners define that type of house?
(Cavan): What is let would be taxable for the purposes; the downstairs part will not be taxable.
If the Commissioners are going to define "mainly" to me it becomes a business use, it means that it is this sort of in-between area that Deputy de Valera was talking about of the doctor. Take the dentist: I had the experience of attending a surgeon dentist who had a surgery and a waiting room. After a couple of years I happened to visit him socially and I found myself in the waiting room for the evening. Have the Commissioners no discretion? Does it have to be all business or no business?
"Mainly" gives them clearer discretion than they have.
I find myself in certain difficulty at the moment. We are ostensibly discussing amendment No. 9a, but as the Minister has said that he would be prepared to bring in the word "mainly" I think the discussion on "mainly" would have to take place when he brought it in, presumably on Report Stage.
We are agreed to do it now.
(Cavan): Yes.
Acting Chairman
You are agreed to do it now? The Chair was in some difficulty as to whether we were discussing an amendment or discussing a proposed amendment, getting a little further information for a proposed amendment. If we are now discussing that——
We have accepted the Minister's amendment on the floor of the House, so to speak.
Acting Chairman
Is amendment No. 9a, as amended, agreed?
(Cavan):“Mainly” will be the deciding factor. The Revenue Commissioners will decide whether it is mainly used for business and if it is mainly used for business, it is taxable. If it is mainly used as a private residence, it is not taxable. It is as clear as day.
I do not want to be unreasonable, but are there not many cases, in the professional areas particularly, where there is part use?
(Cavan): Yes, but this is in ease of the taxpayer and I think it will work out that way.
Acting Chairman
Is the amendment agreed?
If that is what it means, that we insert "mainly" instead of "solely", we agree.
Amendment put and agreed to.
I move amendment No. 9b:
In page 10, subsection (1) (b), to delete lines 32 to 34 inclusive and substitute:
"(b) furniture, household effects and personal chattels being the normal contents of a dwelling house, or part of a dwelling house, to which paragraph (a) applies having regard to the type and size of such dwelling house, or part of a dwelling house;".
The major reason why I put down this amendment is to see if we can get some further clarification on what is, I think, going to be an extremely difficult area of interpretation.
At present the Bill provides at paragraph (b) of subsection (1) that there shall be exempt from wealth tax "the value of furniture and household effects, being the normal contents of a dwelling house or part of a dwelling house, to which paragraph (a) applies". I observed on Second Stage that I thought this particular provision could well lead to many volumes of reports of decided cases in the courts and I asked the Minister for Finance if he could or would clarify his intention as enshrined in the phrase "normal contents of a dwelling house". There are two possible ways at least—there may be more—of looking at this. One is to say that the average standard dwelling house would have a certain amount and kind of normal content and anything over and above that is to be subject to wealth tax. Another way of approaching it is to say, having regard to the type of house it is and the life style of the occupants, a certain standard and quantity and quality of contents would be appropriate, and whatever is appropriate to that kind of house and life style should be exempt.
It was not at all clear to me which approach was intended, but I did put a question to the Minister on the Second Stage and he indicated that what he had in mind was that the normal contents would be judged by reference to the kind of house and life style of the occupants. Either way the whole concept is extremely difficult, and I do not think it is going to be possible to lay down in any legislation what is going to be covered. Nevertheless, in so far as we can even give a guideline in the legislation, we should seek to do so.
This amendment is designed to write into the Bill the intention which the Minister for Finance indicated in response to a question from me as to what he intended by this particular phrase. I am not particularly wedded to one approach as against the other. Either will present considerable difficulties but, in view of the fact that the Minister expressed an intention of approaching it in a certain way, I think the Bill ought to reflect that intention, and this amendment is designed to reflect the intention expressed by the Minister for Finance.
(Cavan): I think the paragraph, as drafted, is simple.
Deceptively simple.
(Cavan): And I do not think it will present any difficulty in interpretation. It simply says that what is to be exempted is furniture and household effects—the normal contents of a dwelling house or part of a dwelling house to which paragraph (a) applies and paragraph (a) says:
a dwelling house, or part of a dwelling house, to which, on the relevant valuation date, an individual is beneficially entitled in possession and which is occupied by him as his only or principal residence.
There you can have a house within paragraph (a) which could range from a stately mansion to a humble cottage and, of course, you would find different contents in each of them. If you came to a small three-bedroomed house and found it stacked with valuables to such an extent that it was abnormally furnished, that it was being used more as a store for furniture than a dwelling house, that would not be normal contents of a house. If, on the other hand, you go to a stately mansion, you could get many thousands of pounds worth of furniture which would be quite in keeping. It is not that I mean to make the case that, because it was a stately mansion, it would be proper to exempt thousands of pounds. The case I am making is that thousands of pounds worth of contents would be normal for such a house whereas, if you had a smaller house and had it used as a store for furniture or valuables, that could not possibly be said to be the normal contents of the house. That is the way I look at it. Those are not difficult terms to understand.
(Dublin Central): There is a big difference between the two.
(Cavan): There is. I am sure the Deputies opposite would not want me to do this. I am not saying it would be right to do it, but I could exclude all terms and put in a monetary consideration, a fixed sum, in respect of this. I am sure that would not be acceptable.
No.
Especially in the absence of provision for inflation it would certainly not be appropriate.
(Cavan): The suggested amendment, instead of solving the problems, creates problems. For example, we can, without much difficulty, define it in our minds. When we look at a house we have a good idea as to the furniture and effects. It is a different matter when we come to personal chattels. What is a personal chattel? That is what Deputy Colley wants to write into the Bill:
furniture, household effects and personal chattels being the normal contents of a dwelling house, or part of a dwelling house, to which paragraph (a) applies having regard to the type and size of such dwelling house, or part of a dwelling house;.
I do not think there is a great deal between us but the section, as drafted, is simpler and, for that reason, less likely to lead to confusion or controversy.
As I said, the amendment was designed to try to indicate in the Bill what the intention was and the Minister for Lands has repeated the intention expressed by the Minister for Finance. It is difficult to paraphrase, and I do not want to misrepresent the Minister in what he said but, roughly speaking, what he said was that what would be the normal contents of a stately mansion would clearly not be the normal contents of a small house and one should take this into account. The difficulty is that the section does not say that. It says:
furniture and household effects, being the normal contents of a dwelling house——
It does not say "the dwelling house".
——or part of a dwelling house to which paragraph (a) applies.
That is why there are two possible ways of approaching this and if the Revenue Commissioners have to decide, or the Appeals Commissioners, or the courts, it seems to me there are at least two broadly different ways they could approach the interpretation of it, one of them being outlined by the Minister, the other one being "the normal contents of a dwelling house". The normal contents of a dwelling house, in many people's view, might be far less than the normal contents of a stately home. If the courts or the Appeal Commissioners were to take the view that the meaning of this clause was the normal contents of a normal house, then they would not realise that the approach is the approach that the Minister has outlined.
(Cavan): It is what the normal contents of the house would be.
It does not say of the dwelling house, it says of a dwelling house.
(Cavan): It refers back to paragraph (a).
It refers to any dwelling house to which paragraph (a) applies, which can be virtually any house in the country.
(Cavan): I would not exclude finding very valuable contents in a small house. There is nothing wrong with that. I would not rule out and the section does not seek to rule out very valuable contents in a small house. Indeed, you might have the greater part of the person's wealth in the form of the contents of a small house, if he was a particular sort of cultured gentleman who simply lived for that.
People who went in for special antiques, for instance.
(Cavan): Yes.
I can tell you that there is going to be a great deal of law over this clause. I say that with absolute certainty and conviction.
And licking your chops.
One can very easily visualise a small house which is loaded to the gutters with valuable antiques—paintings, silver—and the owner will of course argue that they are the normal contents of his house. He will have to argue this one a long time. As I understand from what the Minister said, if he establishes that over a long period he has been interested in these things, and so on, he will succeed in establishing them as the normal contents. The Minister, of course, I know very well is not so naïve as not to know that many people have for years been accumulating things like this, not because of their interest in them, but as a form of investment and a hedge against inflation. I do not think there is any way we can spell out the answer to this. I freely concede that. I do not think it is possible at all. It seemed to me that the interpretation which I outlined was open and that the amendment would indicate that only the interpretation the Minister has given to it would be open. However, it is not a matter for which I would wish to go to the stake. If the Minister is satisfied that the interpretation he has given and the intention he has expressed—and as the Minister for Finance has expressedis clearly coming through in the wording of this clause, I have no particular wish to push it any further.
(Cavan): I am so satisfied.
Things are being opened here which could be ridiculous. For instance, certain people would not have visitors in the normal house before it was all finished.
(Cavan): If the taxpayer is putting forward a reasonable argument, he will not have to go past the Revenue Commissioners. If he is putting forward an absurd cause he will not be listened to in any case.
I hope not.
Amendment, by leave, withdrawn.
(Cavan): I move amendment No. 10:
In page 10, subsection (1) (e), lines 45 to 47, to delete subparagraph (ii) and to substitute the following subparagraph:
(ii) under any sponsored superannuation scheme within the meaning of section 235 (9) of the Income Tax Act, 1967, or under a trust scheme or part of a trust scheme approved by the Commissioners under section 235 or 235A of that Act.
The substitution of this new subparagraph widens the exemption of benefits and annuities receivable under the superannuation scheme. The original subparagraph exempted benefits or annuities which were payable under a superannuation scheme which was approved for the purposes of the Income Tax Acts. Schemes were so approved under section 32 of the Finance Act, 1921, section 34 of the Finance Act, 1958, and sections, 15 and 16 of the Finance Act, 1972.
Representations have been made that it is possible to take the view that an annuity which was payable under a scheme which was not formally approved could be liable to wealth tax. The fact that it was not so approved could be outside the control of the annuitant. For example, the annuity could be payable under the terms of a scheme which did not require formal approval, or which was excepted from the scope of the 1958 Finance Act, or with dependence on wheather the annuitant was the employee of a body corporate or otherwise. The number of individuals in receipt of such annuities who would come within the scope of the wealth tax is not known, but it is not likely to be large. It is considered desirable, however, to extend the scope of the exemption to cover such persons who, for historic or other reasons, were not members of an approved superannuation scheme.
I understand the problem the Minister is trying to deal with here but I am not quite clear how the amendment brings in schemes which have not been formally approved.
(Cavan): Under any sponsored superannuation scheme within the meaning of section 235 (9) of the Income Tax Act, 1967, or under a trust scheme, or part of a trust scheme approved by the Commissioners under section 235 or 235A of that Act.
Would the first part, that is, under any sponsored superannuation scheme within the meaning of section 235 (9), include all the schemes the Minister has in mind, even though not formally approved?
(Cavan): That is the intention and that is the purpose.
The second reference to part of a trust scheme approved by the Commissioners under section 235 or 235A of that Act—would that include any schemes approved under the most recent Finance Act which had provisions in this regard?
Does that not come under amendment No. 11? It is relevant.
(Cavan): I have a detailed note on it and it might be better to read it out. It is a highly technical field. As a result of representations received, we are satisfied that the subsection, as drafted, might not be wide enough to cover all the superannuation schemes it was intended to. The purpose of the amendment is to widen the base and to cover all these schemes. I have a detailed note but it is very very technical.
I am not asking the Minister, if he does not have to, to go into all the detailed technical aspects of it. I think the 1973 Finance Act—I am speaking from recollection—had a number of provisions in regard to amendment of pension schemes and the approval of the Revenue Commissioners. Are schemes coming within those provisions covered in the amendment?
(Cavan): Yes.
That is all I want to know.
The only reassurance I want on the amendment is this. The policy of these reliefs here generally speaking is to relieve superannuation payments. That is the policy; to relieve in respect of superannuation. The Minister has come across cases where the original draft was insufficiently wide and this is to widen it.
(Cavan): Exactly.
Amendment agreed to.
(Cavan): I move amendment No. 11:
In page 10, subsection (1) (e), after line 52, to insert the following subparagraph:
"(v) which is disregarded as income for the purposes of the Income Tax Acts under the provisions of section 19 of the Finance Act, 1973;".
It is considered desirable to exempt annuities which are payable in respect of children who suffer from the effects of preparations containing thalidomide. The payments made to them on an annual basis are exempt from income tax. Under the scheme of the Bill these payments would rank as annuities or periodic payments and, being unsecured annuities, the notional sum which if invested in the appropriate Government security would produce the amount of the payments in any particular year, would be regarded as taxable wealth under subsection (3) of the Bill. As the children involved are all minors, their wealth, including the sum required to produce the annuity, would aggregate with their parents wealth. The sum total of this amendment is to exempt annual payments payable to the unfortunate thalidomide children.
The principle is certainly agreed but I am trying to look at the actual wording of it.
While Deputy Colley is looking at the wording, it is not appropriate to raise this on the amendments, but the Minister has confirmed what I conceive to be the policy within this, the policy of relieving all genuine superannuation payments. In this case, this is a special relief applicable to thalidomide so that it is something in its own right. It is acceptable to all sides of the House, I presume.
If I could just draw the Minister's attention to this point in the amendment. Perhaps it is clear but I have just not got it right at the moment. As I read it, the intention is to add on the words in amendment No. 11 at the bottom of page 10 of the Bill to subsection (1) (e) (iv). Is that correct?
(Cavan): No, it is to add on (v)—a new paragraph.
That explains it.
Amendment agreed to.
(Cavan): I move amendment No. 12:
In page 11, subsection (1) (f), line 1, to delete "or funds".
Amendment agreed to.
(Cavan): I suggest we take amendments Nos. 13 and 14 together. I move amendment No. 13:
In page 11, subsection (1) (g), line 6, after "purposes" to insert "or for the purpose of holding property of a scheme referred to in subparagraph (i) or (ii) of paragraph (e) or property the subject of a trust created under a registered unit trust scheme within the meaning of the Unit Trusts Act, 1972".
Under the scheme in the Bill certain private non-trading companies are taxed as entities which means that the assets of these companies rather than the shares in the companies are liable to tax. Sometimes investment companies are set up to hold and invest the funds of superannuation schemes. These investment companies would be under the control of the trustees of the superannuation scheme. They would fall within the definition of a private non-trading company in section 6 and become taxable entities. It is not the intention to tax these entities and they have been excluded from liability by these amendments. Similarly, an investment company may hold part of the funds of a unit trust scheme and be a private non-trading company as it would be under the control of the manager or trustee of the unit trust scheme. The company would be taxed as an entity and a unit is liable in the hands of the holder thereof. The purpose is to exempt this company.
I do not object to what the Minister is doing in these amendments but there are one or two comments to be made. The first one is that this amendment illustrates once more the fact that the original approach in section 6 to which we referred is wrong. Here is another example of a private non-trading company which will deserve exemption and is now getting it. We already in an earlier amendment dealt with another kind of private non-trading company which deserved exemption and got it. It is virtually certain. In fact, we have illustrated some which are not getting exemption and I am quite certain others will come to light which should get exemption and are not getting it. That is the first comment I want to make on that.
In addition, am I to understand that the effect of this amendment will be to exempt completely from the liability wealth tax property comprised in either superannuation scheme funds or unit trusts which comply with the terms of the amendment? Will they be totally exempt from wealth tax?
(Cavan): Exactly. These are special funds which are held in a fiduciary capacity by trustees and it was never intended that they should be taxed.
As I said at the outset, I certainly would not disagree with what the Minister is proposing to do but I would point out that there seems to be a certain lack of logic if one, on the one hand totally exempts from wealth tax such funds and on the other applies wealth tax to productive assets, which is being done throughout the Bill. I am not objecting at all —I want to make it clear—to the exemption being provided under this amendment, but if such should be amended surely from the point of view of the economy in general it is at least as important to exempt productive assets generally?
(Cavan): The Deputy knows that there is an amendment in his name, a very wide sweeping amendment——
It is designed to do that.
(Cavan): It would entail the deletion of section 2.
It is designed to take wealth tax off the back of the productive assets of this country.
Amendment agreed to.
(Cavan): I move amendment No. 14:
In page 11, subsection (1) (g), line 8, after "purposes" to insert "or that purpose".
Amendment agreed to.
(Cavan): I move amendment No. 15:
In page 11, subsection (1) (h), line 19, after "State" to insert "and includes units of a unit trust scheme within the meaning of section 60 of the Finance Act, 1973, and any stock or other form of security to which section 92 of that Act applies".
Paragraph (h) exempts from wealth tax securities which were issued subject to the condition that they would be exempt from taxation when held by persons who are neither domiciled or ordinarily resident in the State. The term "security" is so defined in the paragraph and the proposed amendment extends the meaning of the definition to cover certain unit trust schemes which hold exclusively the security and to ensure that security issued by certain European bodies would be exempt. The exemption from wealth tax will apply only where the units of the unit trust or the European securities in question are in a beneficial ownership of persons who are neither domiciled nor ordinarily resident in the State.
If this amendment were not moved, would the kind of security mentioned by the Minister be held by persons who are neither resident nor ordinarily domiciled in the State—would they be liable to wealth tax in the absence of this amendment?
(Cavan): Yes, I believe so. The position is that individuals are covered by the Bill already but this type of unit trusts was not covered and this extends the exemption to such unit trusts.
That is what I thought originally but from the last sentence or two of what the Minister said he gave me a different impression. He referred to people not being either resident or domiciled in the country.
(Cavan): I understand that in so far as the Deputy is referring to European securities the Deputy is correct, that these would have been taxed were it not for the amendment.
If held by individuals who are neither resident nor domiciled here—could the Minister indicate broadly what kind of European securities would be involved?
(Cavan): I have the details here and I will give them to the Deputy. Certain unit trust schemes were set up, notably by the Bank of Ireland to deal exclusively in Government securities and securities of certain semi-State bodies. If these securities were in the beneficial ownership of persons who were neither domiciled nor ordinarily resident in the State they would be exempt from taxation here. If such foreign persons owned the units they would not be beneficially entitled to the securities as such and would not therefore be eligible for exemption. To encourage foreign investment in this type of security, section 60 of the Finance Act, 1973, exempted the units of this type of scheme from death duties. The units would not be liable to capital gains tax under the proposed Capital Gains Tax Bill. It is, therefore, proposed to exempt these units from wealth tax also. The proposed amendment does this by extending the meaning of “security” in paragraph (h) of subsection (1) to include a unit of a unit trust to which section 60 of the Finance Act, 1973, applies.
Only when in the beneficial ownership of a person who is neither resident nor ordinarily domiciled here—is that not the effect of it?
(Cavan): Yes. Under section 16 “unit trust scheme” means a unit trust scheme registered in a register established by the Unit Trust Act, 1972, whose deed expressing the trusts of the scheme restricts the property subject to those trusts to securities, and “securities” means securities issued with the condition that they be exempt from taxation when in the beneficial ownership of persons neither domiciled nor ordinarily resident in the State. As regards securities of certain European bodies, section 92 of the Finance Act, 1973, applies to any stock or other form of security issued in the State by the European Coal and Steel Community, the European Atomic Energy Community and the European Investment Bank. That section gave these securities the same status from a taxation point of view as securities issued in the State under the authority of the Minister for Finance. The proposed amendment grants exemption from wealth tax in respect of these European securities when in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the State.
So in both cases, that is, the units or the unit trust or the European securities, the exemption being provided is only when they are in the beneficial ownership of persons neither domiciled nor ordinarily resident here?
(Cavan): Yes.
Amendment agreed to.
(Cavan): I move amendment No. 16:
In page 11, subsection (1), after line 31, to insert the following paragraph:
"(j) gardens situate in the State—
(i) which, on a claim being made to the Commissioners, appear to them to be of national, scientific, historic or artistic interest, and
(ii) in respect of which reasonable facilities for viewing are allowed to members of the public or to recognised bodies or to associations of persons;".
The amendment provides for the exemption of gardens which are of national, scientific, historic or artistic interest. To qualify for exemption the gardens must be situate in the State and must be open to the public or to recognised bodies or associations of persons. The conditions for exemption are similar to those which apply in the case of artistic objects. In order to qualify for exemption the gardens do not necessarily have to be ancillary to a house or residence. The gardens in question are comparatively few in number but they attract tourists, provide amenities for the public and are used by students and others interested in horticulture. Some have been built up over generations and do not provide profits for their owners. They are usually attached to private residences but are too large to be covered by the exemption of one acre attached to a private dwelling-house.
Deputy Colley to move his amendment to the Minister's amendment.
I do not quite know what is the correct procedure here. Should I move my own amendment and discuss the Minister's at the same time? Would that be in order?
That is quite in order.
I move my amendment to amendment No. 16:
After "(j)" to insert "houses or".
I would like to say in regard to the Minister's amendment that it is perfectly acceptable to this side of the House. In fact, we urged it on Second Stage for the reasons the Minister has outlined: there are not many gardens answering this description in the country but in many cases a great deal of time, effort and money over many years, as the Minister said in some cases over generations, has been invested in them and they have no value in terms of money comparable with their value in terms of amenities to the public. It is quite right to exempt them and it would be quite wrong to include them.
Having said that, I am concerned that there are also some houses in the State, and again not very many, which would answer to a large extent the description that I have given and that the Minister has given in regard to the gardens proposed to be exempted. I do not know how such houses would be valued on the open market. I do not want to mention specific houses but we can all think of some which are of great historic, or in some cases, architectural interest, which are open to the public on a regular basis. The cost of their maintenance, especially if they have been purchased in recent times, plus the cost of the money invested in them exceeds by a long way any receipts from the admittance of the public. As the Minister will understand, I am speaking of cases where they are not the principal residence or dwelling house of an individual. In the few cases that I am thinking of they are not the residence or principal residence of individuals. They have, I believe, a very considerable merit, but to impose wealth tax on their market value, whatever that may be, could well be the last straw that will cause the owners who are already losing money in simply keeping them there, to give up and demolish them. Such a development would be most unfortunate from every point of view. I would strongly urge the Minister to apply to such houses the same exemption as is proposed to be applied in the Minister's amendment relative to gardens, subject of course to the fairly rigorous conditions being laid down in the Minister's own amendment in relation to gardens.
(Cavan): In amendment No. 16 I propose to exempt gardens in the State which fulfil two conditions, which briefly are that they are of national, scientific, historic or artistic interest, and that reasonable facilities for viewing are available to the public. The amendment proposes to exempt houses which also meet these conditions. It is not proposed to extend the exemption to houses for the following reason, and that means I do not propose to accept the Deputy's amendment for these reasons. The exemption would be academic in the vast majority of cases where the houses are inhabited because the principal private residence exemption would apply, and the Deputy appreciates that and has said so.
Of those that are not inhabited the majority must be vacant precisely because they are not habitable. In such circumstances, the market value would be negligible and as a result so would be tax. The exemption would be difficult to administer. For example, a house could be of historic interest merely because some person was born there or lived in it. Would exemption be granted for that reason alone, even if the house were let in flats or was an office block or had been turned into something else? If residence were insisted on as a qualification it would be an unnecessary factor in view of the existing private residence exemption. If, however, residence were not to be a factor, the exemption would extend to castles operating for profit, office blocks which restore or retain, say, Georgian buildings. In so far as the principal residence exemption would not cover all cases that we are talking about or inhabited houses which are not principal residences or uninhabited houses which are habitable but vacant, there cannot be very many such houses.
I am sympathetic to the proposal but I consider it would be inadvisable at this early stage of the tax to embark on a wide exemption that would cause considerable and arguably unnecessary administrative problems and possibly avoidance, in the absence of full knowledge of the extent to which exemption would apply or the necessity for it. It is a question that could be kept in view and considered in a couple of years, by which time relevant facts and figures should be available.
It occurs to me that if there are such houses that are habitable but vacant if we leave the section as it is people might be encouraged to take up residence in them. That would be a good thing. I think my amendment, coupled with exemption for the principal residence, goes as far as it is reasonable to go at this stage.
May I ask the Minister to put away his brief for a minute and just listen to me? He is much better without his brief.
The Minister should be briefing.
I want to put this to the Minister. First of all, as he agrees, in view of the exemption on the residence basis we are dealing with only a handful of cases. The suggestion that of that handful of cases we could find included places which had been let in flats or turned into office blocks and which could at the same time meet the conditions that are laid down here in respect of reasonable facilities for viewing being allowed to the members of the public or to recognised bodies or to associations of persons must seem to the Minister a kind of peculiar thing, difficult to visualise.
(Cavan): Viewed from the outside—here is where so and so was born or lived for so many years.
If the Minister wants to add in a provision that in the case of houses they have to be let in and throughout the premises, I would be happy with that. I do not know the facts of this and I did not want to mention any particular place but I think I had better in order to illustrate what I am at. Perhaps somebody will tell me that it is somebody's private residence but I am not aware of it. Is Castletown House somebody's private residence? If it is not, it is certainly open to the public for all sorts of functions that are held there. If it were to be demolished simply because wealth tax was imposed as an annual outgoing based on its market value, I think it would be a very sad thing to happen. It should not happen for any of the reasons that were in the Minister's brief.
It is true enough to say, as the Minister said at the end, that it is possible that if the amendment is left as it is it will induce people to go to live in it. I agree it is a possibility. Unfortunately there is also the possibility, which is perhaps more likely, considering the disadvantages of living in a place like that, that such places will be demolished.
We are talking about a very few cases. They have to meet quite stringent conditions under this amendment. First of all, they have to satisfy the Revenue Commissioners that they are of national, scientific, historic or artistic interest, and secondly reasonable facilities for viewing have to be allowed to members of the public or to recognised bodies or associations of persons. I want to suggest to the Minister that chances of abuse in this field are very remote, whereas the prospects of irreparable damage being done if wealth tax was applied to such premises are considerable. The suggestion that some of them are vacant because they are uninhabitable may be true, but cases of that kind are hardly ones that will figure for wealth tax. If they are uninhabitable and, therefore, vacant we can take it that they are rotting away. They are not going to be valuable as such whatever about the land on which they stand. I would strongly urge the Minister to accept this amendment. He is not going to lose anything but he might save something that can never be saved again. To amend it next year might be too late if the effect of this is to cause such places to be demolished.
(Cavan): Two things strike me about the Deputy's amendment. The Deputy is obviously put to the pin of his collar to think of a residence that would come into the category he has in mind. He mentions Castletown House. I am not in a position to discuss it with him because——
Neither am I.
(Cavan): I do not know how it is run but from reading about it I imagine it would not fall into the category the Deputy has in mind. I do not know on what sort of basis it is operated and I would rather not discuss it. There is another one I can think of that is run on a commercial basis as a commercial proposition. If we were to accept the Deputy's amendment we would exempt it if it is in private hands.
Another thing that struck me about it is that the Minister has not received any representations in regard to buildings of this sort.
I am surprised, because I did.
(Cavan): The Minister has not. As the Deputy appreciates, the Minister has received many representations about a variety of things. I suggest that we leave the section as amended by my amendment for the time being and if there is a demand for it we can think about it again.
Would the Minister have special inquiries made on this topic between now and Report Stage rather than wait until representations were made because the house would be demolished or something like that.
(Cavan): I will not undertake to make inquiries but I will give consideration to any views I get or any representations made.
In view of the fact that the Minister did not receive representations on this, would it be wise to say that anybody who has an interest in seeing such houses preserved ought to make representations immediately to the Minister?
(Cavan): The Deputy has said so.
I ask the Minister not to close his mind to the possibility of accepting this between now and Report Stage.
(Cavan): I should, in case I left the House under any misapprehension, state that there were representations made before the private residence exemption was granted.
Yes.
Amendment to amendment No. 16, by leave, withdrawn.
Amendment No. 16 agreed to.
(Cavan): I move amendment No. 17:
In page 11, subsection (1), after line 31, to add the following paragraph:
"(k) trees or underwood growing on land in the State and in the same beneficial ownership as the land;".
There may have been many representations concerning growing timber. A plantation takes from 30 to 50 years to mature and during the early years there is no possibility of it showing a profit. Unlike most other businesses, which can become more productive by changes in production, methods, management, marketing policies et cetera, the forest industry has not many options open to it. The special problems of plantations are recognised in this amendment which exempts growing timber. The exemption applies only to plantations in the State. Both the trees and the land on which they are growing must be in the same ownership. Normally, of course, this is the position. To prevent avoidance of tax by means of the exemption the exemption is confined to cases where the timber is owned by the owner of the land. The woodland itself remains liable to tax. Apart from the growing timber, its market value is not usually very great and it is entitled to a reduction of 50 per cent over £100,000 whichever is the lesser or 20 per cent under section 10 on the same footing as agricultural property. There were many representations made in regard to this and deputations received. I feel that the amendment proposed meets the requests made.
I suggested on Second Stage an exemption of this kind. For the various reasons mentioned by the Minister there is a good case for the amendment. I would, however, appreciate if the Minister would expand a little more on the kind of tax avoidance or evasion which might occur if there was not the restriction that there is in this amendment, that both the land and the timber have to be in the same beneficial ownership. I wonder about that restriction in the case of, say, some property which is subject to a life interest. Is there any possibility that the beneficial ownership of the land might be found in the hands of a trustee? Of course, that would not be beneficial ownership. It might not be in the hands of the life tenant. In the first instance, the question I am asking the Minister is in what way would there be avoidance or evasion if he did not have this restriction that both the land and the timber must be in the same beneficial ownership?
(Cavan): The idea here is to try to ensure that only the owner of the land and the forest, thereby ensuring that the man who planted the trees, or his successors in title, gets the benefit. That may not be absolutely possible to ensure but we are saying that, in order to qualify for exemption, the taxpayer must own the land and the forest. Otherwise, a person could buy a forest, put all his money into it and leave it there for a couple of years without buying the land at all. He would be purely a speculator and he could get exemption from a large amount of wealth tax, in so far as there was any large amount payable, over several years. It is to try to prevent that sort of thing that we have worded the amendment as it is.
Could I just add another matter? At a recent EEC subcommittee meeting in this House we discussed the question of a proposed directive from the EEC which will be making money available for the private sector in relation to afforestation. It would be relevant that the ownership of the land and the forestry be vested in the person who will avail of the EEC money. I regard the wording of this proposed amendment as being in line and very much compatible with the proposed suggestions under the EEC directive. Admittedly it is very much in the embryo stage at present but from my own reading of certain drafts of the directives and the various recommendations made in respect of it I believe this amendment would make quite certain that the EEC money went into the hands of people who are afforesting their own land and looking after it. This is the intention of the directive.
Would the Deputy say what the purpose of the money is and to what use will it be put?
It is to encourage afforestation. The real difficulty, as I understand it, is that 95 per cent of the planting is done by the Department of Lands, Forestry Division and of the land planted, 90 per cent is held by them. The picture which has emerged is that any private planting done has been basically done by people who hold the remnants of old estates, old forests and woodlands. Much of it has been done away with rather like these old gardens we were discussing. The old saying is that you plants trees for your children and grandchildren so it is really a labour of love and pride.
It is a very long term investment.
It is and should rightly be exempt from tax. I think that the attitude, even under the notorious death duty legislation, was to allow exemptions in respect of afforestation. I understand that the definition here, the category which has been described here, is in line with the description given in section 9 of the Finance Act, 1912. The amendment is in line with general thinking and even with modern thinking with which we will be falling into line. It is in the best interests of all that it should be left as it is worded because it covers all situations.
I wish the same principles could be applied to Nítrigin Éireann Teoranta.
Could I ask the Minister or Deputy Esmonde if in their experience outside the House they have come across many cases of growing timber either transferred by way of gift inter vivos or by will to somebody as distinct from the land on which it grows.
(Cavan): I have never come across it.
I hope I will not be quoted but I am one of those unfortunate legal animals that had the number 13 when I was at school. I used to get peculiar problems. This is one of the problems that was put up to me in relation to large woodlands in the south of this country. I managed to avoid having to draw up the scheme but there was something rather on the lines of what could have been a taxation avoidance scheme. I managed to avoid having to draft it. I did not look forward to it so I managed to persuade people to think of other methods.
We may take it that a genuine transaction of that kind is most uncommon.
It is uncommon but I mean a "needs must when the devil drives" sort of thing. If a person wants to avoid something, he will.
Amendment agreed to.
I move amendment No. 17a:
In page 11, subsection (1), after line 37, to add the following paragraph:
"(k) property in the State which is agricultural property or is used directly in the provision of employment in the State and stocks and shares of a trading company trading in the State".
(Dublin Central): This is a most important amendment.
That is an under-statement.
(Dublin Central): The Minister on section 2 of this Bill went out of his way to point out to us with regard to foreign shareholders in this country that they were exempt. We on this side of the House welcome this section. I had taken a different interpretation from it at the very start, but the Minister in no uncertain fashion pointed out to us that foreign shareholders of a company in this country would be exempt, which I believe is very right. We must not tax if we want to encourage capital into this country, and if it had been otherwise, I certainly would have criticised it for inhibiting the inflow of capital, which is so important for the development of our economy today. The Minister did make provision for that, or at least that is his interpretation of section 3. We welcome that. When we come to Deputy Colley's amendment on this section, we are hoping that the Minister will give the same concessions as he so very rightly gave in section 3 and apply the same concessions to productive assets in this country.
It would seem unreasonable to me——
(Cavan): I do not want to interrupt the Deputy but he made reference to something we did in section 3.
(Dublin Central): We exempted the foreign investment into this country as regards wealth tax, with their productive assets here.
(Cavan): Trading companies.
(Dublin Central): Yes—trading companies in this country as regards their productive assets. We are looking for the same concessions for Irish people who have property in this country, shareholders in companies. Will they get the same kind of concessions, the same as those for trading companies in this country for foreigners? I believe that we will be discriminating against the average Irish businessman here, but if this amendment is conceded businessmen can compete in even competition with each other and there will be no distinction as regards wealth tax where productive assets are concerned. If a foreigner is exempt—let it be a factory, a business or a hotel—I believe so also should an Irish shareholder or an individual who has productive assets in this country, that we should not make a distinction as regards these two investments.
If the Minister would concede the fact that everybody is equal as regards running a business and their capabilities, it will in my opinion take away the disadvantage for an Irish businessman against a foreign businessman. We know that in many types of business the volume of profits is very narrow and in my opinion, it is intolerable to think that in the case of factories which are competing against one another, one because it is owned by a foreign company should be exempt and the other that is totally owned perhaps by an individual or a shareholder in that particular company should be subject to wealth tax. We are looking for this concession from the Minister for productive assets such as agriculture and other productive assets. I think that the Minister having conceded it to the foreign company with the trading company in this country, which he has very rightly done, should also concede it here now to the average Irish businessman. It would be unfair that we will be exempting foreigners—we discussed it here yesterday as regards semi-State bodies. Many of these will be trading companies in their own right and also will semi-State bodies.
As we go through this Bill which I have not delved into yet, there are other bodies which I believe will be exempt such as trade unions. It boils down to that the people whom we are directing this wealth tax at are people who have lived in this country all their lives, who have given their efforts and their time and invested their money, but simply because they happen to be domiciled in this country, they will certainly get the full lash of whatever wealth tax is levied on them. I believe it is unfair. We should not discriminate against any particular type of person or factory. I can see the psychological effect this will have when a man can say "I am exempt from wealth tax because I am a foreign company trading here", and another person who has a business in this country which is individuallyowned will be liable to wealth tax. Before I go any further, I would like to know if the Minister concedes that this is the position as this Bill stands, that foreigners will be exempt and that Irish people——
(Cavan): There is no difference.
(Dublin Central): Of course there is. Irish shareholders in a company here are not exempt.
(Cavan): And American individuals are not exempt either.
(Dublin Central): American individuals with a company in America having a trading company here and its shareholders are equal.
(Cavan): I will answer the Deputy when he makes his case.
(Dublin Central): My view is that the Irish investor with a company in America, and having a trading company here, is exempt from wealth tax. Furthermore, an individual who has property here is subject to wealth tax. I believe that this is a wrong principle and Deputy Colley's amendment which would exempt productive assets, should be accepted. Everyone should be treated equally irrespective of what part of the world he lives in. We should not have the position that, companies in other parts of the world which have trading companies here are exempt while wealth tax is imposed on the shareholders here by virtue of the fact that they reside here. If Deputy Colley's amendment is accepted we will be exempting productive assets here.
(Cavan): Again, to quote the amendment put down in the name of Deputy Colley, the amendment is designed to exempt “property in the State which is agricultural property or is used directly in the provision of employment in the State and stocks and shares of a trading company trading in the State”. The effect of this amendment would be to delete section 2 of the Bill. Section 2 of the Bill is the section which charges a wealth tax. I do not accept Deputy Fitzpatrick's argument that section 3 of the Bill, or any section, discriminates as between Irish people and foreigners. There are only three categories taxed under this Bill —the individual, the discretionary trust and the private non-trading company. The trading company is not taxed. The trading company, whether the shareholders are foreign shareholders or Irish shareholders is exempt.
(Dublin Central): That is the company.
(Cavan): Yes. The trading company is completely exempt. It is true that the shareholders are subject to wealth tax on their shares if their holding, together with their other assets, exceeds the thresholds of £70,000, £90,000 and £100,000 provided. I was reading the other evening of a company which has assets of something like £11 million and has 3,500 shareholders. Unless all those shareholders are very wealthy people the shares they have in this particular public company would not attract any wealth tax. I repeat that the trading companies, which are what Deputy Fitzpatrick is speaking about, are exempt. He says there is discrimination. There is no more discrimination now than there was when death duties were payable. An Irish shareholder in an Irish trading company, if he died, paid Irish death duties on the value of his shares if his estate was liable. An American shareholder, who held shares in an American trading company which owned an Irish trading company, and who died, paid no death duties. It is the very same thing.
(Dublin Central): The Minister was putting forward a different case when he was talking about IDA publishing their new document.
(Cavan): I was putting forward the very same case. I said then and I say now that the individual foreign shareholder was in the pre-April day liable to death duties and he is not liable now and, as far as the foreign individual shareholder is concerned, there is no discouragement to him from coming here and that was the context in which I made that argument.
(Dublin Central): It is a different section of the Bill.
(Cavan): No. It is a completely different argument dealing with a completely different situation. I say there is no more discrimination now against Irish people than there was when death duties were payable. I repeat an Irish shareholder was liable to death duties on his shares, whereas the American shareholder in an American corporation which owned a trading company here was not liable. That is still the case.
Furthermore, we have, and it has been recognised in this Bill and has been the law for a long time, that foreigners who invested money in certain securities here or placed money on deposit here were exempt and continued to be exempt from income tax and other taxes while Irish people were liable to tax. There is no difference. There is no discrimination.
I want to deal now with one or two other things in this amendment. The amendment deals with agricultural land, the special position of agricultural land. The low return from the big investment has been recognised in the Bill by exempting completely 50 per cent of the value of the agricultural land or £100,000, whichever is the lesser, by exempting every hoof and all livestock on the land and, when it was over the upper threshold, by continuing to give 20 per cent for productive assets. The special position of agriculture is taken account of and has been adequately provided for. I would like to avail of this opportunity to correct something I said when dealing with this Bill here before when I said that the IFA were completely satisfied with the Bill. I did go too far. I acknowledge that they are still against it in principle. I followed a precedent or bad example when I spoke after Deputy Crowley, who seemed to be highly indignant that Irish farmers were not marching on the city of Dublin and blocking the roads of Ireland. He seemed to be attacking the farming community and the farming organisations for not being militant. I did, I admit, say that the IFA were not doing that because they were satisfied with the Bill, that they did concede that the Government went a long way towards meeting representations made.
The amendment goes on to say that agricultural property should be totally exempt. As I say, all livestock is exempt, 50 per cent of the value of the land or the first £100,000 value is exempt. The amendment goes on to say that all property used in the provision of employment in the State and shares in trading companies in the State should be exempt. That would simply do away with the tax altogether. Would Deputy Fitzpatrick go further and say that shares in Irish trading companies should be exempt from income tax? Because, as Deputies know, they are not exempt. Would he go further and say that they should always have been exempt from death duties, because they were not? They were subject to death duty, estate duty, succession duty and legacy duty.
This is a political amendment put down for a political purpose. I do not blame the Opposition for putting it down. I would expect them to put it down, but it is my duty to expose it as something that is not sincerely believed in by them and, indeed, has not seriously been put down. I could well believe that if we were not operating under a timetable at the present time, we would have all the troops who never read the Bill, who did not know what the Bill was about, again brought in to argue this particular amendment, to make political propaganda, to mislead the public and to terrify the investing public.
Is the Minister trying to provoke a situation?
(Cavan): That is one of the reasons why it was necessary to impose a timetable to get this measure through. It will then be seen for what it is, a measure that will do something to bring equity into taxation, but which will not severely affect or injure anybody or impose any undue hardship on anybody.
I do not think it is necessary to argue against this amendment because to do so would entail embarking on a Second Reading speech again. The mover of the amendment will agree that if the amendment were to be accepted it would completely negative the proposals in the Bill. The amendment goes to the very root and foundation of the Bill and rejects the principle of the Bill, which has already been accepted both on Second Stage and in the long and tortuous discussion which we had on section 2.
The Minister is trailing his coat now and I do not propose to step on it. If ever there was an incitement to disorder——
We are difficult to incite.
The Minister is being somewhat unfair in suggesting that this is not a serious amendment. It is serious for this reason. I thought the purpose of this Bill was, as far as taxation is concerned, to tax unproductive wealth, to tax the accumulated, unproductive wealth, wealth that might be broadly described as luxurious wealth, as wealth disproportionately in the hands of certain people. That is from the taxation point of view. From the social point of view, the Minister and his colleagues made a great point about the distribution of wealth and, as I understood it, the idea was to effect a broader and a more equitable distribution of wealth. In both of these things we are ad idem.
Where we have taken a different view from the Minister on this Bill— and we felt the timing of the whole code possibly was wrong—is that we feel that moving towards taxing productive wealth is economically and socially undesirable at present. There is the kernel of the difference between the Minister and ourselves. What I am objecting to is the Minister's allegation that we are not serious. We are serious. There is a fundamental distinction here. There is agreement about the distribution of wealth.
The Minister said we were not sincere.
I do not want to be provoked into getting away from the serious business in hand. Perhaps the Minister does not want us to continue discussing seriously other parts of this Bill or other legislation. I object to the allegation that we are not serious, because there is a fundamental point of principle here. Attach a wealth tax by all means to accumulated, non-productive wealth, which is serving no useful social or economic purpose, but when it comes to productive wealth, wealth employed for productive purposes, in the current economic situation, it is wrong to tax that.
The essence of this amendment is that in the present economic situation all wealth should be canalised into productive channels. Obviously there is this difference in approach between ourselves and the Minister. The amendment refers to property in the State which is agricultural property or is used directly in the provision of employment in the State. At a time when the unemployment situation is so serious, when there is an urgent need to stimulate economic activity, I do not know why the Minister cavils at the first two lines of the amendment. Agriculture is the mainstay of our whole economy. The whole nation depends on it. The Revenue Commissioners derive resources from it.
When we have the unemployment problem we have, I simply cannot understand why pro tanto, if the Minister will listen to me, we cannot exempt property in the State which is agricultural property or which is used directly in the provision of employment.
If the amendment were to stop there I cannot see why the Minister will not accept it, in the present economic circumstances, having had the question of wage agreement, having had to take away certain advantages from certain people and taxed more and so on. In the case of a problematical new tax like this we cannot go that far anyway. When you come to the second line and stocks and shares of a trading company trading in the State, you are in a more secondary position than in the first two lines.
I trust the Minister will understand that I am trying to make a reasonable and objective analysis of this. The essential difference in principle between our view and his view hinges on the word "productive". Following that, in the case of the amendment and making it directly relevant to the amendment before the House and not diverging into a Second Reading speech, if one were to stop at the word "State" in the second line, I cannot see why the Minister should cavil at accepting that.
In the same reasonable attitude, I hope, I then concede that we are going into another line of country when we add "and stocks and shares of a trading company trading in the State". It is coming very near the time to the adjournment of the debate and as I have dissected the section, we will come back. I can understand the Minister focusing on those latter lines and maybe if we approach the Bill in the spirit we have been approaching it, and if the Minister could, for a moment, get away from the political approach he started on, we might be able to get between us a solution of this problem just as we got a solution on other sections. I would ask the Minister, therefore——
The Minister might take a certain course.
The Parliamentary Secretary was not here to understand the pleasantries.
Progress reported: Committee to sit again.