I move amendment No. 14:
In page 11, between lines 19 and 20, to insert the following:
"(g) the right to receive any benefit or any annuity or periodic payment which, when added to any such right, if any, under any of the schemes, provisions or arrangements referred to in any of the subparagraphs of paragraph (e), other than subparagraph (iii), would yield an entitlement equivalent to the superannuation entitlement of a Civil Servant having a similar income and contribution record.
(h) the property of any scheme or arrangement assuring or supporting the right to receive any benefit, annuity or periodic payment referred to in paragraph (g)".
These two amendments are designed to deal with the situation we discussed at some length on Committee Stage, the situation in which, in our view, there is effectively discrimination under this Bill against the self-employed person or the person employed in the private sector in relation to superannuation provisions. The Minister for Lands, who was dealing with this matter on the Committee Stage, deputising for the Minister for Finance, said there was no discrimination and that all such pension schemes, whether they related to the public service or the private sector, were being exempt. That is not accurate because, in the first place, non-statutory pension schemes are only exempt, as far as I can see, to the extent that they qualify for income tax relief. In order to qualify for income tax relief they have to conform to the regulations laid down by the Revenue Commissioners. Those regulations include an upper limit of £1,500 a year contribution and also a prohibition on any provision in the pension scheme for adjustment for inflation above 5 per cent. There are, of course, other conditions. I am just mentioning these two as an example. Apart from that, in the case of a self-employed man in many cases his provision for retirement is either the goodwill of his business or practice, if he is a professional man, or in the case of an owner of a small factory the sale of his factory and its assets is his provision on which he is depending to provide for his retirement. As was indicated by Deputy Brugha in discussion on this matter on the Committee Stage, such a person may not be in a position at all to make any contributions or certainly to make the contributions up to the extent of £1,500 a year which are permitted under the Revenue Commissioners' regulations.
I said, when we were discussing this matter on the Committee Stage, that I was not suggesting for one moment that it was easy to find a solution to this problem, because it is not. I did, however, suggest that given the will to find a solution to it, it would not be impossible for the Minister to produce provisions which, while they might not precisely equate the position of somebody in the public sector with that of somebody in the private sector, could roughly do so and certainly could go a long way to removing the anomaly which now exists under the Bill. However, no such effort was made by the Minister in the drafting of the Bill nor in any amendments he has introduced. Therefore I was obliged to make an effort to do so. I do not want to suggest for one moment that this amendment and the subsequent amendment which we are discussing with it are perfect. In fact, I can probably see some difficulties involved that may not even be obvious to the Minister. Certainly I had considerable difficulty in drafting them and I am aware of difficulties that arise. Nevertheless, I think that these two amendments, taken together, show the general lines on which it would be possible to achieve reasonable parity between the treatment of those in the public sector and those in the private sector in regard to pension arrangements.
I think there was some suggestion from the Government side when we were discussing this matter on the Committee Stage that really there was no great problem here and no great concern about this. I am aware of the fact that the Minister and the Taoiseach received what I might describe as strong representations on this matter because I received copies of some of them, not all of them I believe, but some of them, and they were certainly couched in strong language. There should not be any doubt at all but that the point we are dealing with here represents a serious problem about which some people are very much concerned. I say that because not alone do I think that in principle an effort ought to be made in this Bill as far as possible to achieve equity between the public and the private sector but also because some people individually are incensed at what they regard, in my view rightly, as discrimination in this Bill between the public and the private sector. This amendment and the following one represent an attempt to tackle that serious problem. I repeat that I do not regard it as the last word in tackling it, that I am aware of difficulties that arise from the manner in which these amendments are drafted of some areas of uncertainty, but I do not really think it is a function of a Member of this House to try to do the Parliamentary Draftsman's job to the extent of producing a perfectly worded amendment. I do say, however, that the two amendments together represent not only an attempt to tackle this problem but also indicate the way in which it can be tackled.
Amendment No. 14 which is designed to cover the case where a person in the private sector we will say —when I say private sector this can extend to perhaps some semi-State bodies and certainly to some bodies which are in receipt of Government subvention but are not part of the civil service or, of course, in what is commonly called the private sector— takes out his own insurance or enters into a scheme to provide a pension for himself aimed to give him something similar to what would be available to somebody in the civil service at approximately the same level as himself. It is designed to cover the case where he does this in addition to a pension scheme which he already has and which comes under the section as drafted and is exempted from wealth tax because it qualifies as one which rates income tax relief. It also is designed to cover the case where he has no such pension scheme but enters into an arrangement which would not come within the terms of the section but is designed to give him approximately the same superannuation rights as a comparable person in the civil service would have.
I have indicated in the past in discussion on this just how serious the discrepancy can be. To put the matter in perspective, first of all, one of the representations made to the Minister and to the Taoiseach put the matter this way: the Bill provides that a self-employed or non-pensionable married man is entitled to have up to £100,000 before he reaches the tax threshold level of 1 per cent. The same Bill appears to provide that a married man with pension or superannuation rights is entitled to a threshold level of £100,000 plus the capitalised value of his pension. That statement could, I think, be qualified in regard to one or two aspects, but basically it represents the position as it is under the Bill. This problem of course is extremely serious for people, say, who are in their 50s or 60s.
From the point of view of the self-employed, the person who has no existing pension scheme, this is the major difficulty and it is sought to be covered in amendment No. 15. His is the most stark case involved here because no relief is provided in his case. He is self-employed and he puts his savings which, of course, have been subjected to income tax, into stocks, shares or property of various kinds in order to produce a pension for his retirement. In his position, he is not alone paying income tax on the profits or income he accumulates but, having put this money into stocks or shares or property, in order to provide for his retirement he is, if he is over the limit, subject to wealth tax on that accumulation whereas a person in the civil service may have accumulated money of various kinds and different kinds of property but if he is below the limit of £100,000 he can, in addition, have a pension with a very substantial capitalised value and not be liable to wealth tax. That is the starkest contrast and starkest case which can be made here. That is not to say that the case is less real or valuable where somebody has an existing pension scheme but because it cannot compare with that available in the civil service he, in an effort to supplement it, is being subjected to wealth tax in a way that somebody entitled to a pension under the civil service scheme is not.
I indicated some figures in this regard and it is worth bearing them in mind because many people tend to forget what is happening with inflation at the moment and how in a very short time people who think they will never be liable for wealth tax can find themselves liable for it. I indicated, on the basis of figures which I obtained from a qualified actuary, that if we take the secretary of a Department at present in receipt of a salary in the region of £11,000 per annum and if we assume he is aged 55 and, therefore, has another ten years to run in his office and assume an average rate of inflation of 15 per cent per annum for the next ten years, on his retirement he would have a salary of approximately £44,500 per annum, assuming that civil service salaries kept reasonable pace with inflation as they have done in recent years. It is important to realise that having that salary of £44,500 per annum would not mean that such a man was in any way better off than he is today. There would be no improvement in his standard of living with that salary. On that basis, on his retirement in ten years' time, he would be entitled to a pension of £22,250 per annum apart from a lump sum of 1½ times his retiring salary.
On his retirement that pension would have a capital value of £321,000 and built into it is a guarantee that it will keep pace with inflation. That is something that you cannot buy today commercially no matter how much wealth you have. That capitalised sum is calculated on the assumption that it could be invested to produce a yield equal to the rate of inflation of 15 per cent per annum. If, in fact, it could not be so invested so that it would produce, say, a maximum yield of 13 per cent per annum, leaving a 2 per cent shortfall, the capital sum required would be £370,000, and so on, depending on the yield that can be got on this capital sum. These figures are based on an actuarial calculation by a qualified actuary based on the life expectancy of a person in normal health at the age of 65 at his retirement.
I want to emphasise again that there is no way in which a private individual whether self-employed, say, as a professional man or the owner of a business, can make provision of that kind for himself. No matter how much money he has he just cannot make that kind of provision. Furthermore, the capital sum that I have mentioned and the assumptions on which it is based as regards yield assume that the capital sum involved would earn a gross rate of interest. Again, in the case of the private individual that is impossible because he is taxed on the yield from the investment, taxed to income tax that is. The maximum sum which is allowable for income tax contributions to superannuation schemes for somebody in the private sector is £1,500 per annum. That sum, which is the maximum and which might be invested by a self-employed person if he has a very high income, could not produce anything like the level of pension available, say, to the secretary of a Department on the lines I outlined.
It seems to me there is a built-in advantage under the existing scheme of superannuation for those in the Civil Service. I want to make clear, as I did on the last occasion, that far from disapproving of that, I wholly approve of the provisions made for retirement in the Civil Service. I had something to do with part of the present arrangements and I would like to see everybody in the country enabled to benefit under that kind of pension or superannuation scheme. I do not want any misunderstanding of this sort. I have no wish to take from the benefits available to members of the Civil Service in regard to superannuation. The scheme they have is a good one, is one that is necessary particularly at times of high inflation as at the present. That is not what I want to do. What I want to do is to try to ensure, as far as possible, that those who are not able to benefit from such a superannuation scheme will get equivalent consideration under the Wealth Tax Bill in regard to the capitalised value of either pensions which they effect or the capital which they accumulate in order to provide for their retirement.
There are very many people who think they are people of little or no property, when in fact they have an entitlement to a capital sum under a pension scheme, such as operates in the civil service, which makes them far wealthier than many people in the private sector whom they would regard as being much wealthier than they are. Too many of us are inclined to forget the value of such a provision. Another thing which I said before but which I would like to repeat is that when I refer to provisions in pension schemes which help to keep pace with inflation I am not referring solely to the civil service although perhaps their's is the most commonly known scheme. I am also referring to pension schemes which operate in relation to Members of this House and of the Seanad and to former members of the Government. Again I do not want any misunderstanding as to my attitude in this regard. I am not suggesting for a moment that such schemes should not exist. What I am suggesting is that under the wealth tax legislation those who have not got the benefit of such schemes should as far as possible be treated equally. Therefore I have produced amendment No. 14 and the following amendment.
Amendment No. 15 is designed to cover a case where there is a self-employed man with no provision for a pension scheme who wants to use, say, the value of his business when he retires by selling it, or the goodwill of his practice if he is a professional man, as the source from which he will obtain his pension on his retirement and it is endeavouring to equate the two. I have already pointed out that such a person in order to accumulate capital in terms of money or property is subjected to income tax in doing so. Under the terms of the Bill he will be subjected to wealth tax also if he accumulates such money or property as would yield a comparable or anything like a comparable pension as would be available to him in the public service.
It is also worth noting that a self-employed person with a business, or a professional man relying on the goodwill of his practice, would be liable to wealth tax as long as he holds on to the property or the goodwill or whatever it is, but on the sale of it, in order to produce a pension, it could well be subject to capital gains tax.
I would suggest that there is every case for this amendment and the following amendment, which we are discussing with it, every case for accepting the principle that as far as it can be done we ought to try to give equal consideration to those who have the benefit of what, in outline terms I am calling the civil service scheme of superannuation and to those who have not got it. These two amendments are designed to tackle that problem and to suggest a way in which it could be done.
As I said at the outset, I am not suggesting that either of the amendments covers all the possible difficulties that arise. I am aware of some of them myself which would arise from this but it is an attempt to tackle the problem and it is illustrating the way in which it could be done. I want to urge very strongly on the Minister that he should, if he cannot accept the amendment itself, accept the principle that is involved in it which I regard as very important and ensure that the Bill is amended to cover this principle. Any practical difficulties which would arise for the Minister in the sense of procedure in this House I can assure him can be overcome and he will get the fullest co-operation from this side of the House if that is the only problem with which he is faced dealing with this amendment.
