Might I point out to the Minister that a more appropriate title for this Bill would be something on the lines of the death duty and gift duty Bill, 1975, as will emerge as we go further into the Bill? The Minister has chosen to give it a title which I think is misleading. I should like to take the opportunity on this section to point out to a number of people, including some political commentators apparently, that the party on this side of the House did not oppose this Bill on Second Reading.
Return to Writ: Mayo West. - Capital Acquisitions Tax Bill, 1975: Committee Stage.
Question proposed: "That section 1 stand part of the Bill."
I am sorry to interrupt the Deputy but I must ask for order.
We regard this Bill as being sound in principle. We disagree with some of the details but the requirement of substantial adjustment in death duties and the introduction of a gift tax is one we agree with. Therefore, we did not oppose this Bill on Second Reading and are not opposed to it in principle. We merely wanted to reiterate that and get it on the record.
Question put and agreed to.
SECTION 2.
Amendments Nos. 1 and 10 are related and may be discussed together if that is satisfactory.
Yes, Sir.
I move amendment No. 1:
In page 4, lines 22 to 34, to delete the definition of "child" and to substitute the following definition:
(a) a stepchild;
(b) a child adopted—
(i) under the Adoption Acts, 1952 to 1974; or
(ii) under an adoption law, other than the Adoption Acts, 1952 to 1974, being an adoption that has, in the place where the law applies, substantially the same effect in relation to property rights (including the law of succession) as an adoption under the Adoption Acts, 1952 to 1974, has in the State in relation to such rights;".
These amendments are necessary to ensure that a child adopted under Irish law is treated as a child for the purposes of the Act and to make it clear that all the consequences of recognising an adoption are to follow. Originally, we considered that a child adopted under Irish law was clearly a child of the adopter's for all the purposes and consequences of the Act but some doubts were expressed about this in the course of the Second Stage and elsewhere. The amendments are designed to remove any possible doubt and clarify the matter.
The position now is that an adopted child is a child of his adopted parents and, by way of the provisions of the new subsection (5), he is a brother of another child of the adopters and is a lineal descendant of the adopter's father and so on through other consequential relationships. Paragraph (b) of the new subsection (5) brings in a special provision that an illegitimate child and his mother are related as mother and child. If, however, the child has been adopted, this relationship ceases for the purposes of the Act, as it does under the law of succession. Section 26, subsection (1) of the Adoption Act of 1952 so provides. Of course, if the child has been legitimated by the subsequent marriage of his parents, the provision is not necessary. In such circumstances he would be the full child of his parents.
Certainly we agree with amendment No. 1. I would point out to the Minister that a similar amendment was introduced by him in other Capital Taxation Bills for the same reasons he has given now but that I raised this point on the other Bills and, indeed, on this one on Second Stage. At that time the Minister indicated his view—which he has just put before the House as a view which is held—that the effect on our Adoption Acts is to put the adopted child in exactly the same position as an ordinary, legitimate child for all purposes of our law. That was my own impression until I had a look at the Adoption Acts when, to my horror, I discovered that that was not so and it was necessary because of the wording of the Adoption Acts, to bring in this amendment and similar amendments in the other Bills. In this connection, I want to ask the Minister for Finance if he would request his colleague, the Minister for Justice, to examine the Adoption Acts to ensure that they do have the effect both he and I originally thought they had and then discovered they did not have.
It seems to me to be totally unsatisfactory that it should be necessary to introduce provisions of this kind in any Bill coming before the House and dealing with the rights of children because the intention of the House was, and would continue to be, that where a child is adopted, then all the rights of what I might call ordinary children would attach to the adopted child. It is clear from the necessity to introduce this amendment that this is not so. Indeed, a perusal of the Adoption Acts shows that that is not so. That is an unsatisfactory position. Therefore, I am asking the Minister for Finance if he would request his colleague, the Minister for Justice, who is, I think, the Minister directly concerned with the Adoption Acts, to introduce amendments to the Adoption Acts to ensure that that position is attained and that it will not be necessary to amend or make provisions in future Bills which come before the House to have the kind of provisions that are being introduced now by this amendment.
With regard to amendment No. 10, there are a few points I want to draw to the attention of the Minister. The first one may be regarded as a drafting point but there is probably some reason for it. If the Minister looks at the wording of paragraph (a) of subsection (5), provided for in amendment No. 10, and compares that with paragraph (b), why does paragraph (b) not provide similar wording and say, for instance: "An illegitimate child who has not been adopted in the manner referred to in paragraph (b) of the definition of `child'." Is there any significance in using a different wording and approach in paragraph (b)?
Secondly, I should like to know what would be the position in the case of an illegitimate child who could establish the identity of his father, as for instance, by way of an affiliation order having been obtained. Would that alter the position in regard to his rights or liabilities under this Bill? The amendment provides that, in the case of an illegitimate child who had not been legitimated or adopted, he shall be deemed to be the child of his mother with all the consequences that flow from that but one can visualise circumstances in which the identity of the father can be clearly established. In such circumstances it seems to me that certain consequences can flow from that under this Bill and that it ought to be clear as to what we want to happen in those circumstances.
Thirdly, I want to refer the Minister to the provisions of section 44 of the Finance Act, 1972 which deals with relief from certain duties in the case of illegitimate children. The earlier part of that section, since it relates to death duties, may not be necessary, since the legislation dealing with death duties has been suspended but the second portion of it deals with stamp duties and I am not quite sure that it is not necessary to make provision for it in this Bill. At any rate, I wish to draw the Minister's attention to the point involved and to seek his assurance that the matter will be adverted to between now and the next Stage.
I can certainly give the Deputy that assurance. I would also inform him that I will ask the Minister for Justice to look at the other matters he mentioned. The Deputy made a valid point in relation to cases where fatherhood is established. It has been said that motherhood is a matter of certainly and fatherhood a matter of speculation but one can certainly accept that there are cases where fatherhood is established in court and in such cases where such fact has been established, I can see it may be necessary to have a look at it in the way suggested by Deputy Colley. I will certainly undertake to do so.
There is the other point to which I referred. It may be a drafting point, or is there some significance in it—as to the reason for the different approaches in paragraphs (a) and (b) in amendment No. 10?
I can inform the Deputy that we are not aware of any significance in the difference. The effect we intend is achieved by the formulation which is used. I am not aware of why there was a slight variation of the style. I think that is all it is.
It is a different form of drafting but so far as the Minister is aware there is no significance in the difference?
No.
Amendment agreed to.
Amendment No. 2 in the name of the Minister. Amendments Nos. 2 and 3 are cognate and may be discussed together, if that is satisfactory.
Yes, that is satisfactory.
I take it we will be voting later on amendment No. 10, which was taken with amendment No. 1, or is that agreed as well?
We may have to vote on both I think but, apparently, the Chair cannot advert to that until we come to it.
That is all right. I move amendment No. 2:
In page 5, line 17, in the definition of "date of the gift", after "benefit" to insert ",and a reference to the time when a gift is taken shall be construed as a reference to the date of the gift."
These amendments are considered necessary to avoid any ambiguity in references to the time when a gift is taken. The terms "date of the gift" and "date of the inheritance" are defined in the draft Bill but in some sections reference is made to the taking of a gift in relation to a date. For example, in section 9 we speak of a gift taken on or after 28th February, 1974 and again inheritance taken after 1st April, 1975. It is felt that in order to avoid ambiguity such references need to be expressly tied to the terms as defined in the amendments. For example, in the case of a residuary estate the date of the inheritance is the date of the death and the inheritance is taken at that date, not at the date that the residue is attained for the legatee.
I may have an unduly simple mind in these matters but could the Minister say—if we take the phrase used in the amendment "a reference to the time when a gift is taken shall be construed as a reference to the date of the gift"—is there any other way of interpreting it?
In section 9, for instance, we refer to a gift being taken rather than to the date of the gift and in order to avoid any ambiguity and give clarity we consider these amendments are desirable because what we are saying is that a reference to the time when a gift is taken shall be construed as a reference to the date of the gift.
Can it be anything other than the date of the gift?
Yes. The arrangement to make the disposition could be made today but the disposition might not be taken by somebody until a later date.
But surely that is the date of the gift. I think I know what the Minister is trying to do.
We are trying to avoid any argument being made that they are different.
I would not raise any point on this but it seems that this is very clear on its face and, as the Minister knows, when you try to clarify something like this you may run into greater trouble. But I have no objection to these amendments.
Amendment agreed to.
I move amendment No. 3:
In page 5, after line 32, to insert: "and a reference to the time when an inheritance is taken shall be construed as a reference to the date of the inheritance;"
This amendment was discussed with amendment No. 2.
Amendment agreed to.
I move amendment No. 4:
In page 5, lines 40 to 55, to delete the definition of "disponer" and to substitute the following definition: " `disponer', in relation to a disposition, means the person who, for the purpose of the disposition, directly or indirectly provided the property comprised in the disposition, and in any case where more than one person provided the property each shall be deemed to be the disponer to the extent that he so provided the property; and for the purposes of this definition—
(a) the testator shall be the disponer in the case of a disposition referred to in paragraph (k) of the definition of `disposition';
(b) the intestate shall be the disponer in the case of a disposition referred to in paragraph (1) of that definition;
(c) the deceased person referred to in paragraph (m) of that definition shall be the disponer in the case of a disposition referred to in that paragraph; and
(d) a person who has made with any other person a reciprocal arrangement by which that other person provided property comprised in the disposition shall be deemed to have provided that property;".
Like the other amendments, its purpose is to avoid ambiguity which we consider may lie in the original definition. It is necessary to make it as clear as possible that the disponer is the person who is the financial source of the benefit. The original definition left some room for doubt and it has been rewritten to clear up the doubt. The provision at (d) meets a point which Deputy Colley made during the debate on the Second Stage when he suggested that a number of prospective donors could form a syndicate, each giving a smaller amount to each of their donees so that each donee would then get a number of smaller gifts from several different donors instead of a larger gift from one donor and, accordingly, might pay less tax or no tax as a result. In other words, paragraph (d) is a provision which will prevent an avoidance practice which Deputy Colley very properly brought to our attention.
I appreciate that the Minister has sought to close the loophole to which I drew attention and I should like to return to that point later. Before doing so, would the Minister indicate the precise difference between the drafting in the Bill and the drafting in the amendment and precisely where the change is intended to effect greater clarity? This is not clear to me on its face.
The Deputy will see that in the original draft in line 45, we say: " in any case where there is more than one disponer each disponer shall be deemed to be a disponer..." and we are using instead the words "in any case where more than one person provided the property each shall be deemed to be the disponer...".
Apart from that and paragraph (d) which is an addition, is that the substantial change?
Yes.
The phrase is used both in the original draft and now in the amendment, "the person who for the purpose of the disposition, directly or indirectly provided the property comprised in the disposition...". What does the Minister have in mind in using the word "provided"? Presumably that means more than the person who actually makes the disposition if we take it in its normal sense where A makes a gift to B. In the normal sense A is the person who provided the property comprised in the disposition but presumably this wording is intended to cover something wider than that. Otherwise I would have thought that the use of the word "provided" could lead to greater ambiguity. Could the Minister say what is intended to be covered by "provided"? Does it visualise that the property envisaged in the disposition came out of somebody else's property so that he was to that extent less well off when the disposition had been completed?
A settlor could provide the property and the trustee make the disposition of it.
This is what I am coming at. It is intended to be a wider application than would normally be understood?
Yes.
Is there any time limit applied in this as regards the provision of the property? Might the person who is deemed to be the disponer under this have provided the property many years ago and still, under this definition, be deemed to be the disponer? I take it this is a possibility?
Yes.
Could the Minister indicate why paragraphs (a), (b) and (c), which were in the original draft, are necessary? As the Minister is aware there are definitions in different cases, in the case of a will, in the case of an intestacy or, speaking from recollection, in the operation of the Succession Act. Is it really necessary to define them in this way under the heading of "disponer"?
Yes. Again it is to avoid any arguments that might be made that it is considered necessary to be specific as to what the testator is doing or a deceased person who dies intestate was doing, that that person shall be the disponer. We specifically state what a disponer is.
They seem to be covered under the definition of "disposition" and I am wondering if the Minister is gilding the lily a little by defining it again under "disponer"?
It is never any harm to gild the lily.
Sometimes it can get one into a position one does not expect. It is not a major issue but I would ask the Minister to illustrate the operation of paragraph (d) which is designed to meet the problem I adverted to on the last occasion of a syndicate getting together. On the wording it is not clear how this will operate to prevent this. How does one establish that there was a reciprocal arrangement of that kind?
Like many other cases that have to be made by the Revenue Commissioners they may have difficulty in establishing it but I would say that if a group of persons made a gift to an individual, or to a group of individuals, it would be a cause of inquiry as to whether or not the arrangement had been made for the purpose of avoiding capital acquisitions tax. I cannot say for certain that all such cases will be easily identified but the liability to pay tax will, nonetheless, lie on the persons who provide funds in this way for distribution.
If one assumes it can be established that such a syndicate is operating what then is the precise effect of paragraph (d)?
I will give the Deputy an example. A has three nephews to whom he is giving £10,000 each. They would be tax free under Table III. B is in the same position. If A and B each wish to give more property to their own nephews they could then arrange that A will give £15,000 between B's three nephews and B the same amount between A's three nephews. Each donee can afford to take a £5,000 tax free gift from a stranger. The tax saving would be six times £540, or £3,240 in all. The effect of defining disponer in the way we do in paragraph (d) would be that we would levy the tax at that rate as if the gifts had been made by A directly to his nephews. In other words, the additional £5,000 would be paid by him direct to his own nephews rather than to the nephews of B.
I must confess I have not given a great deal of thought to the precise administrative arrangements necessary to combat this loophole to which I adverted on Second Stage but I am less than convinced that the answer to it lies in paragraph (d). It seems to me that in order to operate paragraph (d) in the way the Minister has outlined it is necessary for the Revenue Commissioners to establish that there is this reciprocal arrangement or this syndicate operating. I would assume that people who were engaging in this kind of operation would, on the surface, appear to be as far removed from each other as possible. I also assume that they would not be guilty of any offence if they do this. I may be wrong there; it may be that the effect of paragraph (d) is to impose on them an obligation—it is not clear on its face—but it seems that thought might be given by the Revenue Commissioners to a more effective way of combating this. It could lead to widespread avoidance of gift tax by very wealthy people unless a more effective method of preventing this operation is found than paragraph (d).
I am not sure that it is my duty or obligation to give a great deal of thought to this but rather to draw attention to it. I doubt if paragraph (d) will be very effective in dealing with the loophole and I urge the Minister to have the matter examined further to see if it will be possible to have a more effective administrative approach which would close the loophole.
It is difficult to ensure entire conformity with tax laws and tax obligations but at least this paragraph puts people in peril that if the device which they engage in is discovered they may be called upon to pay tax and to pay interest on unpaid tax. I suggest to the Deputy that if persons were to engage in such a syndicate for the purpose of avoiding the proper tax on gifts to their own relations or whoever else might be the intended donee it would be an exercise in evasion and not avoidance because it would be done for the purpose of evading tax on gifts which the donors intended to be received by specific persons. If they were to use a device which evaded that liability then it would be evasion and not avoidance.
Perhaps the Minister would clarify that because in the Bill as drafted, without this amendment, there is no question but that people could engage in this activity perfectly legitimately in accordance with law in which case it would be avoidance and not evasion. The introduction of paragraph (d) seems to mean that if the Revenue Commissioners establish that there is a reciprocal arrangement then the liability for tax can be correctly assessed but it is not clear that there is an obligation imposed by paragraph (d) on the persons concerned to disclose the position. That may be so but it is not very obvious. On the face of it, it seems to depend on the Revenue Commissioners discovering it.
If people fail to make a proper return they will be committing an offence. They are asked to make returns of gifts and if they do not give the correct particulars, including the intended beneficiaries, they will be committing an offence. They would be putting themselves in peril on that account as well as having to pay tax arrears on interest and, therefore, there is an element of sanction. It will not be a free and easy operation.
I hope it will work.
Amendment agreed to.
I move amendment No. 5:
In page 6, lines 12 to 21, to delete paragraph (h) and to substitute the following paragraph:
"(h) the release, forfeiture, surrender or abandonment of any debt or benefit, or the failure to exercise a right; and, for the purpose of this paragraph, a debt or benefit shall be deemed to have been released when it has become unenforceable by action through lapse of time (save to the extent that it is recovered subsequent to its becoming so unenforceable);".
Again, the object of rewriting this paragraph is to remove certain obscurities and ambiguities. I hope if Deputy Colley asks me to identify them that they will not be too obscure. Under paragraph (h) as originally introduced, the release of a debt is a disposition and so is the allowing of a debt to go statute barred. If a debt went statute barred tax would be payable on the amount of it as a gift, or on the value of it if its market value was less than its face value. This amendment seeks to give relief from this liability in the case where the debtor pays the debt after it becomes statute barred.
The simplification of the text arises from using the word "benefit" which itself is defined to cover a wide variety of property rights. The omission of references to powers is dealt with in section 27 (2) which provides for identifying the disposition and the disponer. Section 27 (1) deals with the general in tail in possession is dealt with through subsection (2) which expands the definition of general power to include such a tenant, and section 27 (1) also provides that the disposition is made by the tenant himself, and paragraph (d) of section 2 provides for the date of the disposition, for example, the date of death if the person dies without exercising the right to bar the in tail.
Did I understand the Minister right when he said that paragraph (h) as originally drafted provided that where a debt became statute barred, liability for tax still subsisted if it were paid after the date on which it became statute barred?
Yes.
Is the effect of this amendment to relieve that liability?
Yes.
Why?
Because if the debt is repaid after it becomes statute barred, then there has not been a gift at all. The element of gift which we are taxing was that a person allowed the right to recover the money to be removed by effluxion of time. If the debtor were to refund the money, the original donor would not have parted with anything because he would get the money back. Somebody would have had temporary use of it but there would be no property passing from the creditor to the debtor or, if it had passed, it would come back again, and, therefore, there would be no gift. It would be quite unfair to charge a tax if the money were refunded.
I have a feeling that there may be a loophole here. However, practice will show if this is so. Could the Minister indicate why the phrase at line 13 of the original draft "at law or in equity" has been omitted?
The words were not necessary.
The Minister will understand my concern to appreciate their significance. It seems to me that the inclusion of the phrase "at law or in equity" originally was unlikely to be fortuituous. Their omission now has presumably some significance.
In the first instance I think that the draftsman was writing with a flourish and on the second occasion he was economising with his words.
I think the Minister is taking a rather simplistic view of the draftsman's activities. I do not think whatever he does that one can take a simplistic view of his activities. There is usually a very good reason if he puts in or omits even a comma. However, if the Minister assures me that there is no significance in the omission of the phrase, I will accept it.
That is so.
Amendment agreed to.
I move amendment No. 6:
In page 7, lines 13 to 16, to delete the definition of "local authority" and to substitute the following definition:
" `local authority' has the meaning assigned to it by section 2 (2) of the Local Government Act, 1941, and includes a body established under the Local Government Services (Corporate Bodies) Act, 1971;".
The definition of "local authority" has been reconsidered and it is desired to substitute the new amendment for the original section. The new definition is the same as that used in the capital gains tax which, I think, met with general approval.
The new definition proposes to include "a body established under the Local Government Services (Corporate Bodies) Act, 1971. Could the Minister give us an example of that kind of body?
(a) A council of a county, a corporation of a county or other borough, a council or an urban district, a public assistance authority, commissioners of a town, a port or sanitary authority; (b) a committee or joint committee or board or joint board, whether corporate or unincorporated, appointed by or under statute to perform the functions, or any of the functions, of any of the bodies mentioned in the immediately preceding paragraph from which I have just quoted; (c) a committee or joint committee or board or joint board, whether corporate or unincorporated, other than a vocational educational committee or a committee of agriculture of or appointed by one or more of the bodies I have just mentioned in (a), and bodies added under the Local Government Services (Corporate Bodies) Act, 1971, include the Road Safety Council and the Local Government Staff Negotiations Board.
Is the significance as far as this Bill is concerned that in the definition of "local authority" such bodies are exempted from liability for gift tax or inheritance tax?
Yes.
I take it that the Minister cannot visualise any circumstances in which a body established under the Local Government Services (Corporate Bodies) Act, 1971, should, in fact, be so liable?
No, I do not imagine so.
The reason I was asking about the kind of bodies established under that Act was that it seems to be going some distance from the ordinary concept of a local authority. One might find oneself coming into an area, though it had a strong connection with the local authority, where one would be dealing with a service engaged perhaps in commercial activities, in which case one might question whether there should be this exemption.
I have not got a copy of the Act but the purpose of the exemption is that the type of bodies are performing public functions or functions which confer benefit on the public. I would not visualise a case where such organisations would be engaged in activities generating private profit.
Amendment agreed to.
Amendments Nos. 7 and 9 are related and may be discussed together.
I move amendment No. 7:
In page 7, lines 34 to 37, to delete the definition of "share" and to substitute the following definition: " `share', in relation to a company, includes any interest whatsoever in the company which is analogous to a share in the company, and `shareholder' shall be construed accordingly;".
It was found necessary to exclude debentures from the definition of "share" because, of course, they are of a different nature. A debenture is not strictly a share nor is a debenture owned by a shareholder. A debenture is a loan, secured or unsecured, and the debenture holder is a creditor. It is considered that you should not treat a debenture holder as a shareholder. By reason of the definition of "private company" in section 16, if there were a large number of persons holding debentures, there might be more than 50 shareholders and the company would be outside the definition of section 16. The definition is now used in section 6 (4) of the Wealth Tax Act and it is considered to include stocks. Amendment No. 9 is consequential.
When studying these amendments I thought I understood what the Minister had in mind but having listened to him I am not so sure. In regard to amendment No. 7, the note I have made for myself was whether a debenture was obviously analogous to a share, and the Minister has said clearly that a debenture is different from a share and that a debenture holder is in a different position from a shareholder. Then I looked at amendment No. 9 and found that the Minister proposes to insert that "share" includes a debenture and loan stock and "shareholder" includes a debenture holder and a holder of loan stock, and I am even more confused. Perhaps the Minister can clear this matter up for me.
I am excluding debenture.
In amendment No. 7.
Yes.
But in amendment No. 9 the Minister is proposing to insert:
" ; and in this subsection, `share' includes a debenture and loan stock and `shareholder' includes a debenture holder and a holder of loan stock".
Am I misreading it?
The Deputy is right.
The Minister can see the cause of my difficulty.
We are dealing in amendment No. 9 with a disposition of something. A person could be disposing of a debenture, which is something of value, and that is why it is necessary to include debenture when we are dealing with a disposition.
I take it from what the Minister has said in relation to amendment No. 7 that he believes that if, we accept the definition of "share" as defined in amendment No. 7, a debenture will be excluded?
Yes.
On the other hand, in amendment No. 9 we find the word "share" being defined as including a debenture.
We define "share" on page 7, as now amended by amendment No. 7, and we are specifically taking out "debenture" for the reasons I have stated. We are dealing with all persons who have an interest in the company and we are dealing with the definition of disposition which here would include, and I will read the paragraph:
(3) For the purpose of the definition of "disposition" contained in subsection (1), the passing by a company of a resolution which, by the extinguishment or alteration of the rights attaching to any share of the company, results, directly or indirectly, in the estate of any shareholder of the company being increased in value at the expense of the estate of any other shareholder, shall be deemed to be a disposition made by that other shareholder if he could have prevented the passing of the resolution by voting against it or otherwise.
What we are dealing with are people concerned in the company and who by their decision can effect the transfer of the property, share or debenture.
I agree with the Minister that should be included, but that is not the point I am making. In amendment No. 7, where a debenture was included in the original draft of the Bill, the meaning has been changed. It is now being taken out of the Bill, which will read:
" `share', in relation to a company, includes any interest whatsoever in the company which is analogous to a share in the company, and `shareholder' shall be construed accordingly;".
If one takes that, standing alone, and ignores amendment No. 9 for the moment, it could be argued either that a debenture was included in that definition or that it was not, depending on how you argued it—that a debenture is analogous to a share or that it is not. It is not a clearcut situation. Then one goes on to look at the definition of "share" in amendment No. 9.
The definition of "share" would relate to the complete Bill and therefore could be introduced into section 16, which deals with private trading companies. If each holder of a debenture was to be deleted because of "share" definition in page 2, then it could defeat section 16.
I am not disagreeing with the purpose the Minister is trying to achieve but it seems to me that some ambiguity of conflict may arise because you provide in one portion of the section that "share" does not include a debenture and in the other portion it does include a debenture. It might be worth looking at this a little further so as to ensure that no ambiguity can arise. I am not quarrelling with the purpose that the Minister is trying to achieve but I suspect that the juxtaposition of these two may lead to confusion.
I will look at it.
Amendment agreed to.
Amendments Nos. 8 and 58 are cognate and may be discussed together.
I move amendment No. 8:
In page 7, line 41, in the definition of "tax", to delete "leviable" and to substitute "chargeable".
Both amendments are proposed to cover drafting points. Amendment No. 58 is designed to clear up a possible ambiguity. Section 41, subsection (1), provides that tax shall be due and payable on the valuation date. The reference in section 61, subsection (2) to tax payable on the death of the deceased might be construed as tax being payable on the date of the death of the deceased, and this would mean that the subsection would refer only to a tiny minority of cases. Therefore it was necessary to eliminate the word "payable" from subsection (2). The word "leviable" is being changed to "chargeable" for drafting reasons and in the interest of consistency.
Consistent with what?
Having used the word once we wanted to use it twice lest people read some sinister significance into the use of different words which are intended to have the same meaning.
Amendment agreed to.
Amendments Nos. 9 and 10 have been discussed already.
I move amendment No. 9:
In page 8, subsection (3), line 14, after "otherwise", to insert "; and in this subsection, `share' includes a debenture and loan stock and `shareholder' includes a debenture holder and a holder of loan stock".
Amendment agreed to.
I move amendment No. 10:
In page 8, after line 24, to insert the following subsection:
"(5) For the purposes of this Act—
(a) the relationship between a child, adopted in the manner referred to in paragraph (b) of the definition of `child' contained in subsection (1), and any other person, or between other persons, that would exist if such child had been born to the adopter or adopters in lawful wedlock, shall be deemed to exist between such child and that other person or between those other persons, and the relationship of any such child and any person that existed prior to his being so adopted shall be deemed to have ceased; and
(b) an illegitimate child who has not been—
(i) legitimated; or
(ii) adopted under—
(I) the Adoption Acts, 1952 to 1974; or
(II) an adoption law other than the Adoption Acts, 1952 to 1974, having the effect referred to in paragraph (b) (ii) of the definition of `child' contained in subsection (1),
shall be the child of his mother.".
Amendment agreed to.
Question proposed: "That section 2, as amended, stand part of the Bill".
There are some points I wish to raise on the section. First, may I refer the Minister to page 5, paragraph (d), line 6 which reads:
in the case of a disposition which consists of the failure to exercise a right or a power....
Can the Minister give an example of what is envisaged here? Also, I would ask him the same question in relation to paragraph (e).
In relation to paragraph (d) there could be a power of revocation in relation to the receipt of the gift which would diminish the value. If the power of revocation were not exercised the disposition would take effect from the date on which the right to exercise revocation had lapsed.
In the type of case the Minister envisages, that is, a gift made with the power of revocation, there are two stages. One is that of the gift being made with the power of revocation and the second is the failure to revoke. In the first instance, although the value may be diminished there is some value, presumably, in the gift, subject to the power of revocation, and that diminished value would be taxable subject to the other provisions of the Bill. In that case would there be an additional liability arising when it was established that the date for revocation had passed but that there had been no revocation? Would that gift be given a new value and, in effect, be treated as a new gift?
Section 30 is relevant here. It reads:
Where, under any disposition, a person becomes beneficially entitled in possession to any benefit and, under the terms of the disposition, the disponer has reserved to himself the power to revoke the benefit, such person shall, for the purposes of this Act, be deemed not to be beneficially entitled in possession to the benefit unless and until the power of revocation is released by the disponer, or otherwise ceases to be exercisable.
Therefore, the disposition would not take place until the revocation had been abandoned.
I think there is an interesting loophole there.
It is simply a matter of time. If, for instance, a person reserves the right to revoke a gift during the donor's lifetime, the donor will pass on ultimately and the gift will then take place, albeit at a higher rate than if it had been done inter vivos.
I imagine it could be possible to arrange the gift in such a way that the powers of revocation could be vested in a number of people or in a continuing group so that the time for revocation might never arise. Perhaps the Minister would think about this?
Section 31 goes on to say that although a person might not receive the gift he could be taxed on the benefit accruing from it.
I should have thought so.
The accumulative effect of that might be similar.
So that what he was being taxed on might be of less value than if the power of revocation had not been exercised?
When the revocation would take place, the donee would not get credit in respect of any previous tax liability.
If, say, the gift which was made absolute, was worth £X and that its value subject to the power of revocation was one half of £X, I take it that under section 31 a person would be liable to tax on half of £X, as being the value of the benefit he got. However, if the power of revocation had ceased to be exercised he would be getting the other half of £X but surely he would be taxed only on the one half of £X?
What would be involved would not be the capital value of the gift subject to revocation but the benefit which is described in this way in section 31:
A person shall be deemed to take a gift in each relevant period during the whole or part of which, not being beneficially entitled in possession thereto, he is allowed to have the use, occupation or enjoyment of any property otherwise than for full consideration in money or money's worth.
We will come to the section later and we can then pursue the matter further. Could the Minister give me an example of paragraph (e)?
Mr. Ryan
Suppose A's son is getting married and A promises to give him a house, later on a formal contract is drawn up under which A binds himself in consideration of the marriage to assign a particular house to his son and, later again, a formal assignment of the house is executed by the disponer A in favour of the son, under paragraph (e) the date of the disposition is the date of the signing of the contract.
I do not know if the Minister intended it but, when he described that transaction, if I may call it so, he referred to three stages: (1) A agrees to give a house to his son; (2) he enters into a contract and (3) he executes an assignment. I take it the reason the Minister said it is the date of the contract is because there is nothing binding until it is, in fact, in writing?
Yes. It is only when he binds himself to so provide and the promise is committed to writing.
In the following paragraph, line 15, defining the "date of the gift" there is a reference to "the date of the event upon which the donee, or any person in right of the donee or on his behalf, becomes beneficially entitled in possession to the benefit". The kind of thing I could visualise there would be the committee of the estate in the case of a lunatic. Are there other kinds of things envisaged in that phrase?
No—trustees and people with that status holding property for another.
May I refer the Minister now to paragraph (c), line 29, which reads:
in any other case, the date of the latest death which had to occur for the successor, or any person in right of the successor or on his behalf, to become beneficially entitled in possession to the benefit;
Is it possible for the Minister to illustrate or give an example to show to whom that paragraph would apply?
There could be a gift from A to B for life, to C for life, to D for life, and then to E, but E would not get it until the last death took place.
And no liability would arise in such a case until then, no liability on a person who was becoming absolutely entitled?
No.
The following paragraph is the description of "discretionary trust". Is that definition the same as the definition in other legislation or is it specifically for the purpose of this Bill?
Similar to the long debated Wealth Tax Bill.
Is it exactly the same?
So I am assured. To be precise, perhaps I should say more or less.
There is no substantial difference, is there?
I am not aware of any significant difference, but I shall check on it.
With regard to paragraph (a) at the bottom of page 5—
"disposition" includes—
(a) any act or omission by a person as a result of which the value of his estate immediately after such act or omission is less than it would be but for such act or omission;
Would the omission envisaged here include such things as the failure to defend proceedings which might be taken in disputes about title to a particular property? Could that be an omission within the meaning of that definition?
I suppose what the Deputy has in mind is somebody coming in and occupying property and claiming squatter's rights.
That kind of thing, yes. Would that come within this definition?
Yes.
Are there any other kinds of omissions envisaged?
That is a very large question.
Let me reframe it. Would the Minister have conveniently available to him examples of any other kinds of things that might be envisaged under this?
It must be obvious they are not conveniently available. The Deputy will accept one could diminish one's property and confer a benefit on others by deliberate act or by deliberate omission—by allowing others, as it were, to take property and make no effort to recover it. The placing of £1,000 on a table and letting someone else remove it could be such a disposition. If this section were not there it could be said that the property was not given to the other person but the other person took it.
I imagine there is more envisaged than that. I shall not pursue the matter. I want to refer the Minister now to the definition on page 6 of "entitled in possession". I have a little difficulty here. It is not a major one. Towards the end of the definition it is provided:
... he shall not be deemed to be entitled in possession to an interest in expectancy until an event happens whereby this interest ceases to be an interest in expectancy;
Now, "interest in expectancy" is defined as including an estate in remainder or reversion and every other future interest, whether vested or contingent, but it does not include a reversion expectant on the determination of a lease. May I take it what is intended to be achieved here is that in future an interest in expectancy on reversion of a lease will form the basis for an assessment of a liability under this Bill until it becomes a present right and the taxpayer involved becomes entitled in possession to that present right? Is this what the intention is?
Yes.
Assuming the intention is being achieved—and I am not absolutely sure that it is—I want to refer to what the Minister will probably regard as an old chestnut but I cannot let it pass without adverting to it, that is, the definition of a minor child set out in this section on page 7:
"minor child" means a child who has not attained the age of 21 years;
As the Minister knows, in the previous capital taxation measures I sought to have such a definition altered to provide that a minor child means a child who has not attained the age of 18 years. Indeed, I sought to do so by way of amendment. I have not put down any amendment to this effect on this Bill because it is clear that it has no hope whatever of being carried, due to the attitude of the Minister on this point. Nevertheless, I do not think I should let the matter go without adverting to the fact that we should not enact legislation today which defines a minor child as somebody who has not attained the age of 21 years. It is completely out of date. It is not in keeping with practice in society. It is not in keeping with the provision of votes at 18, a decision made by the people in a referendum and not merely by this House.
The only reason the Minister has given for not making this change is that it has implications which go beyond the Bill we are dealing with and would therefore need to be studied in some depth. I do not dispute that contention. But unless we make a start somewhere, it will never happen. I believe if the Minister had made the start in these capital taxation measures, it would have speeded up the necessary alterations in other branches of the law and would not have produced any insurmountable complications.
I do not want to dwell on this at great length but I cannot afford to allow this matter to pass without pointing out to the Minister once again the inappropriateness of providing in legislation in 1975 that young men and young women aged 19, 20 and almost 21 years are minor children. It just does not conform with the realities of the situation and it should not be done. The time has come for us to amend the law wherever this arises. We had a convenient opportunity to amend the law in relation to these capital taxation measures. It is regrettable that the Minister should provide, as he is doing here, the old definition of a minor child as someone who has not attained the age of 21 years.
I did not set a trap, but I am afraid Deputy Colley has fallen into a trap. The effect of yielding to Deputy Colley here would be to deny a concession, a relief, which is available to a child between 18 and 21 years of age. The only relevance of "minor child" in this Bill is to Table I on page 50, that is, Table I of the Second Schedule, which sets out what the rate of tax is to be and provides that the tax will be nil where the donee or successor is the spouse, child, or minor child of a deceased child, of the disponer. I am sure Deputy Colley will accept, therefore, that it would be advantageous to a person to be deemed to be a minor child between the ages of 18 and 21 years. I will not pursue the other issue which we have debated at great length. I am on record in this House and elsewhere as being in favour of having the age of majority 18 years and not 21 years.
The Minister may be on record as being in favour of the age of majority being 18 years and not 21 years but when he had the opportunity to do something about it he did not do anything.
Does the Deputy think I should not provide this concession for people between 18 and 21 years of age?
I do. The Minister is quite mistaken in his assessment of my approach in this matter. I am not seeking to get concessions for people as such. In a matter like this, one ought to decide what is the right age. I am suggesting—and the Minister's last remarks show that he agrees— that the right age now for assessing when a young man or a young woman ceases to be a minor child is 18 years. The Minister agrees with that. We must accept the consequences that flow from it.
However, I should say that if it were to be changed in this Bill it should be changed in the Wealth Tax Act and the Capital Gains Tax Act. If it were done across the board, whether there would be a balance of advantage or disadvantage I am not sure. We would certainly have a different position from the position at the moment. Whatever the result, whether it be advantageous or disadvantageous, I do not really think that is the point. The point is whether this House in 1975 should enact legislation which provides that young men and women of 18, 19 or 20 years of age are minor children. Whatever consequences flow from taking a decision on this matter of making the age of majority 18 years should be accepted.
Is the section as amended agreed to?
There are one or two other points I want to make. Perhaps I could refer the Minister to page 7 where "special power of appointment" is defined as meaning a power of appointment which is not a general power of appointment. If the Minister refers back to the definition of a "general power of appointment" at the bottom of page 6 he will see that certain powers of appointment are excluded from that general power of appointment. It states: "... exclusive of any power exercisable solely a fiduciary capacity under a disposition not made by himself, or exercisable by a tenant for life under the Settled Land Act, 1882, or as mortgagee..." These are exclusions. May we take it that the special power of appointment, as defined, in effect means the exclusions from the general power of appointment? Perhaps I might say that again. It is not terribly clear.
The general power of appointment is defined. Excluded from that are three particular classes of power of appointment. They are not deemed to be a general power of appointment. Then a "special power of appointment" is defined as meaning a power of appointment which is not a general power of appointment. May we take it, therefore, that the "special power of appointment" in effect means the three kinds of powers of appointment excluded in the definition of "general power of appointment"?
The exclusion there is exclusion of a number of activities but their exclusion does not make them powers of appointment of any particular kind. The "general power of appointment" may not be a full definition; it simply includes certain activities and responsibilities which are described there. But the mere exclusion of the other ones does not make the other ones special.
It does not make them special powers of appointment?
No.
Does the Minister see any difficulty arising here if one takes the two definitions together, particularly the definition of "special power of appointment", which seems very wide? It says: "special power of appointment" means a power of appointment which is not a "general power of appointment." That seems to be very wide. It would seem to mean that any power of appointment which does not come within the definition of "general power of appointment" is a "special power of appointment".
It is either general or special but it does not mean that a person exercising a power in a fiduciary capacity is exercising a power of appointment.
If he is not why is he being excluded from the definition of a general power of appointment?
Because it may not, in fact, be a power of appointment at all.
I agree but, if it is not, why need it be excluded?
I do not know; perhaps we should exclude other things too.
There may not be any great significance in it. I draw the Minister's attention to it and he can consider whether or not it is necessary to do anything about it.
The provision is a protection and, by excluding it, we are preventing doubts arising as to whether or not the exercise of a power in a fiduciary capacity is a power of appointment.
I hope that is what it is doing and not creating doubts as to whether in fact something which is not a power of appointment now may be deemed to be such. I am not making an issue of it. I am merely drawing the Minister's attention to it. There is one other matter to which I want to refer and that is the end of subsection (3) on page 8. Did we amend this?
We did, yes; amendment No. 9.
It is the phrase that comes just before the amendment to which I want to refer the Minister. It says:
... shall be deemed to be a disposition made by that other shareholder if he could have prevented the passing of the resolution by voting against it or otherwise.
What is envisaged there—shooting the people who were bringing in the motion or what? What kind of thing could he do besides voting against it to prevent its passage?
He could canvass other people to vote against it as well.
He might but surely that is not a matter in which the Revenue Commissioners are going to involve themselves and determine a liability to taxation on the basis of whether the man canvassed adequately or otherwise. A lot of us might have difficulty in establishing whether we did a completely thorough canvass in all elections in which we were involved.
We could have left out the words "if he could have prevented the passing of the resolution by voting against it or otherwise", just as if he could have prevented the disposition taking place.
I am sorry; I did not get that.
One could simply have provided and said "if he could have prevented the disposition taking place" without specifying that voting might be one of the ways of doing it.
We ought to be reasonably clear on what we have in mind here. Even to say "if he could have prevented the passing of the resolution" full stop, may be better than what is in the Bill at present. It is still a little ambiguous and we ought to be clear on what kind of thing we have in mind because what is involved here can determine whether or not there is a liability to either gift tax or inheritance tax. We ought not to have that situation being left to the assessment of whether some kind of activity might have been indulged in and was not if we do not know in this House what kind of activity we are envisaging. To provide that he might have prevented the passing of the resolution by voting against it is quite clear and unambiguous. But if it is envisaged that some other activities in which he might have engaged and did not could determine the liability, then we ought to know exactly what is involved before we enact this kind of legislation. I do not imagine the Minister would disagree with me in principle on that.
What we are looking at here, and what the Revenue Commissioners will be looking at, are the intentions of the parties. One of the valid tests would be to study the behaviour of the people involved. Obviously if they had a right to vote against a resolution then if they did not exercise that right it would be reasonable to assume that they were in agreement with the resolution.
I would agree with that. That is a clear-cut test one can apply. But, as the Minister knows, the subsection says a good deal more than that. That is what I am questioning. What other form of action or inaction is envisaged besides voting or not voting?
Well, there might be a resolution which would never get to a vote because its validity might be challenged, or it could have been challenged as being ultra vires or something of that kind.
Surely if that were to happen the question to be determined would be whether or not it was ultra vires and, if it was, that is the end of the resolution. Presumably it would not have operated. If not, then the question of whether or not the person involved voted against it would fall to be determined. Each of these can be clearly determined by the Revenue Commissioners with no ambiguity or argument. However, I am not happy at leaving a phrase there which could cover anything or nothing depending on the interpretation of the officer of the Revenue Commissioners dealing with the case. We ought to be clear on what we have in mind in passing this legislation.
Of course, it could be challenged, like any other exercise of power, by the Revenue Commissioners, if they were unreasonable——
That is not really the point at issue.
I know one does not want to force a person unnecessarily to that extremity. It is not likely to arise.
Could the Minister indicate from his brief whether there is anything else envisaged, or is this merely a blanket phrase in case there is something left out?
Just in case somebody devises some very clever way of defeating the object of the section.
That is not good enough. There should be some way of determining unambiguously the liability or non-liability involved. Would the Minister not agree with me in principle on this?
Yes, it is undesirable to leave extensive powers there if they are not necessary. I would feel it safer to provide that, if a person fails to take the necessary steps available to him, to prevent a certain thing happening, then he must face the consequences of his failure. That is really what this section is saying.
I would agree entirely with that proposition, but where I tend to part company with the Minister is where he says "any activity or lack of activity on the part of the person concerned". That leaves a very wide discretion as to what could be involved. It is not merely a question of the Revenue Commissioners acting reasonably or unreasonably; it is a question of establishing as far as possible some degree of certainty so that a person who takes a particular attitude—let us say in a particular situation he is opposed to the carrying out of a certain operation by a company—and if, as is envisaged here he cannot vote against it, if he could take some other step to prevent the transaction being carried out, then I think you are getting into a very nebulous area which might end up with the Revenue Commissioners having to discuss with all those present at the meeting what attitude was taken about this or about that, almost reducing it to: "Did he seem to be cross?" or "Did he seem to be happy at the result?" I know that may be a little extreme but I am unhappy at the phrase being as loose as it is. I think the Minister agrees in principle with me on that and I suggest that he might have it further examined and, unless certain specific steps can be envisaged, that the phrase "or otherwise" be deleted. If certain specific steps other than voting are envisaged they should be introduced into the subsection and spelled out. I would agree that if they can be envisaged they should be dealt with but not the phrase "or otherwise".
As a lawyer the Deputy knows how memoranda and articles of association can be drawn up to meet many different situations and to confine power in certain hands in certain areas even without votes. I think it would not be possible to illustrate in an Act all the devices that could be used to achieve a certain result. I can understand the Deputy's concern about too extensive a power but it is not a power that will affect people who act in a normal way. In order to capture the extraordinary devices that may be used I think we need a phrase as wide as "or otherwise".
Perhaps what the Minister said would provide some line of approach to this. For instance, it might be possible to advert to powers envisaged in the memorandum and articles of association of a company, whatever way is laid down there for their exercise or non-exercise and to refer to that. I can see some difficulty there but it is a possible line of approach. I do not expect the Minister to agree across the floor of the House with what I am putting forward but I would urge him to have it examined further. I doubt if the object he is trying to achieve, with which I fully agree, requires the phrase "or otherwise". I doubt also if the object cannot be achieved with some other wording that would be less imprecise and I urge him to have it examined further with a view to achieving greater precision and certainty if possible.
The Deputy may be sure there will be an ongoing examination of all provisions and of everything said in the House.
Question put and agreed to.
SECTION 3.
I move amendment No. 11:
In page 9, subsection (2) (d), line 13, to delete "to the property" and to substitute "to property".
It will be noted that in subsection (2) (d) the word "property" is not referred to before it appears in the last line and therefore the definite article is not appropriate and that is the only reason why it is being taken out.
Amendment agreed to.
Question proposed: That section 3, as amended, stand part of the Bill.
Paragraph (a) says "on the death of a person or at a time ascertainable only by reference to the death of a person". I was about to suggest an example but perhaps the Minister could——
Come on; I will not fault you if you are wrong.
No. Perhaps the Minister could give an example or explain what is envisaged by the second part, "at a time ascertainable only by reference to the death of a person".
First, there is the obvious case where a donee or successor becomes beneficially entitled to possession immediately on the occurrence of the death of a person. For instance, A, by will bequeaths a legacy of £1,000 to B absolutely and A by deed settles property on himself for life with remainder to B absolutely. In each case B takes on the death of A. The position is the same if the donee or successor takes at a time ascertainable only by reference to the death of a person—for example, if the limitations to B in the foregoing examples were to be "one year after the death of A." A person also becomes entitled on a death if the disposition under which he takes is the will or intestacy of the disponer. Thus, if A, by will, leaves property on trust for a certain purpose until some date in the future, and on that date to B absolutely, then B is treated as taking an inheritance, not a gift. When the benefit would otherwise be a gift but is taken under a disposition made within two years before the death of the disponer it is liable to inheritance tax and, to achieve this it is artificially labelled as it were, as being taken on a death.
Would the Minister explain the reasoning behind the provision whereby a gift taken within two years of the death is deemed to be or treated as an inheritance? I understand the mechanics of how it is achieved but why is this being done?
I suppose there is an arbitrary element in fixing any period but it is not unusual for people to make gifts in contemplation or anticipation of death. Where they have that element I think it is appropriate that they should be treated as inheritances. That is the thinking behind it. Under the death duty code we had a longer period which covered gifts.
I am trying to get the reasoning behind the period of two years.
Rather than making it five? Sometimes it is five years and in England it is seven years and those periods could be a bit harsh. Two years is a more reasonable period. Not everyone gets two years warning but it is a fair period.
There is the question of five years contained in a subsequent section and the Minister has an amendment to delete that. Has it any relevance to this?
What five years is the Deputy talking about?
The interval between 1969 and 1974 is treated in a particular way but the Minister has an amendment deleting that. I do not wish to make an issue of this unless it has some relevance to the Minister's provision.
It is only the proviso that is being deleted in section 9. In the White Paper the issue of gifts made in contemplation of death was dealt with in paragraph 104 (c):
It is considered that there should be two scales of rates applicable to each class—one referable to all acquisitions received by a beneficiary during the lifetime of the donor, the other to the inheritances acquired on the donor's death. With a view to encouraging dispositions by a donor in his lifetime, it is proposed to set the rate applicable to gifts at a level 25 per cent below that for inheritances. This approach would require safeguards to prevent avoidance of tax by donors making death-bed gifts to avail of the lower rate. This problem might be met by introducing a gift-period of two years which would have the effect of treating all inter vivos gifts made during that time as inheritances and thus liable to tax at the appropriate points in the inheritance scales.
As far as I can recall no representations were made on that observation in the White Paper and that leads one to suggest that it was regarded as being acceptable.
We have established that what is envisaged here is gift in contemplation of death. If that is what it is and the two-year period was not related to any provision in the death duty code and is a new provision, I suggest to the Minister that two years is a long time for someone to be in contemplation of death; it is a long time to be on one's deathbed. If it is not an effort to carry in a provision that was not there before, would the Minister not consider reducing the two-year period, especially having regard to the desirability—as he adverted to in his quotation from the White Paper—of encouraging people to dispose of their property by way of gift during life rather than on death and the encouragement that is built into the rates to do that? Having regard to all these facts, would the Minister not consider reducing the two-year period to one year without any great disadvantage?
Whether it is an advantage or a disadvantage depends on whether one is looking at the position of the taxpayer or the Exchequer. The situation is not as black and white as it was under the estate duty code where there was total avoidance if the gift was made inter vivos. We are dealing with a situation here where the most that could be avoided by a gift made in anticipation of death would be 25 per cent of the tax. It is proper that there should be some period before death in which the gifts would be captured for the higher rate of tax.
I agree there has to be such a period.
To make it unduly long would be unfair as the Deputy has suggested. I have not enough information medically to know whether two years is an unusually long span and I do not think there are any vital statistics which give any information about the duration of fatal illnesses. In my view two years is a fair enough period.
I am sure the Minister realises that once it is introduced, whatever may happen to it in the future, it is unlikely to be reduced. It is now or never. I am not asking the Minister to make any commitment but to consider the position between now and Report Stage. He may consider that there is justification for reducing the period a little.
Paragraph (d) states:
on the happening, after the cesser of an intervening life interest, of any such event as is referred to in subsection (2).
I should like to know if the reference to the cesser of an intervening life interest is the death envisaged? One has to interpret that in relation to subsection (2) which sets out the events referred to in that paragraph. The first is the determination or failure of any charge, estate, interest or trust. Since we are dealing with a definition of the phrase, "on a death", I am assuming that the death involved is the cesser of the intervening life interest and then going on to deal with the termination of an estate. Could the Minister give an example of the determination or failure of a charge, estate, interest or trust after the cesser of an intervening life interest? We have the same thing happening in paragraph (c) of subsection (2).
If we combine subsection (1) (d) and subsection (2) we see that they are designed to take an inheritance of the benefit taken by B, for example, when property is settled by inter vivos disposition on A for life with the remainder on certain trusts for the period which does not terminate on a death, the event being absolute.
I do not know if that explains what I asked the Minister.
It could go like this: property could be settled on A for life and then to B for a number of years with the remainder to C. There would be no death on the intervening period. C would get it in circumstances which did not involve a death except in so far as the death of A caused the property to move.
In those circumstances what is the effect of this provision?
It is deemed to be an inheritance because it began with A's death and, therefore, C takes on an inheritance.
In the case the Minister outlined the date of that inheritance would be when——
When C enters into possession.
——and would it be at the higher rate of tax because it is an inheritance tax?
Yes. You look to the source of the gift, the initial instrument to grant the gift, and part of that instrument is the original death. There would be a will in this case.
Progress reported; Committee to sit again.