Dáil Éireann debate -
Tuesday, 25 Nov 1975

Vol. 286 No. 1

Private Members' Business. - Capital Acquisitions Tax Bill, 1975: Committee Stage (Resumed).

Question again proposed: "That section 10 stand part of the Bill."

Major de Valera

Before the debate was adjourned we were discussing the nature of the inheritance tax and Deputy Colley had asked the Minister what was the difference in principle between this and the death duties that were abolished. That led to the Minister for Lands saying that there was a difference in principle. In order to clear the air I think we should look at it this way. I am talking now on principle. I am not derogating from the benefits that are being conferred by this tax, and the Minister is not to take it that I want to minimise that situation. To the question raised by Deputy Colley, and partly answered before the adjournment of the debate by the Minister for Lands, I think the objective answer is this: from the point of view that both taxes arise out of and are payable on a death they are both death duties. Both inheritance tax and the old estate duty and the other duties that were lumped together as death duties are of the same genus in that they are occasioned by and are payable on a death. I think it is therefore legitimate to describe both the inheritance and legacy taxes and anything else under this part of this Bill, other than gifts inter vivos, as death duties equally with the old death duties. The Minister will recall that this was why we quarrelled with the marginal note in the Finance Act which spoke of the “abolition of death duties”. We regard that as a little trick to get political kudos, which I suppose is legitimate, but it seemed so unnecessary considering the very real benefits the Minister was giving under this Bill. In that sense, therefore, there is no difference in principle and death duties have not been abolished.

Coming to the point made by the Minister for Lands, which I think is a valid point, it is this: in effect the tax being imposed here is in the nature of the old legacy duty and is imposed, so to speak, on the gift that arises on death—to put it that way—whereas the old estate duty was appropriated to the estate itself. If I understood the Minister for Lands that is the distinction he made and I think it is valid. If that is a difference in principle, I concede it. If I misquoted the Minister, I should like to be corrected.

Minister for Finance (Mr. R. Ryan)

No, I think that is correct.

Major de Valera

The Minister for Lands, we understand, was deputising for the Minister. In that sense I concede a difference in principle here. But if I may exercise the privilege of the Opposition, which the Minister over here did not hesitate to exercise himself, I may criticise the representation—indeed the misrepresentation— that death duties are abolished. They are not; they are being modified or adjusted, and commendably adjusted.

In this section we are continuing taxes payable on death or continuing death duties in that sense on an adjusted scheme:

A capital acquisitions tax, to be called inheritance tax and to be computed as hereinafter provided, shall, subject to this Act and the regulations thereunder, be charged, levied and paid upon the taxable value of every taxable inheritance taken by a successor, where the date of the inheritance is on or after the 1st day of April, 1975.

In the next section it says: "on a death". Like section 4, this section is the kernel of the Bill which provides a new scheme in substitution, broadly speaking, for what was the death duty code. It does this by introducing two new taxes—if you like to put it this way—a new tax under section 4 which applies to gifts inter vivos.

The second tax imposed is death duty in a modified form, with a new scheme, under section 10. The two taxes together will be known to the law as capital acquisitions tax. This section, like section 4, embodies the fundamental taxing provision in the Bill. It is to be recognised as such and is, therefore, deserving of comment and recognition as to what it does. Thereafter, in that part of the Bill, Part II, we dealt with the details of the incidence of the gift tax imposed by section 4 and in this Part we will deal with the incidence of inheritance tax under section 10. We are, in principle, agreeing to that dichotomy.

Mr. R. Ryan

I should like to reply briefly to what the Deputy has said and the brevity is no indication of discourtesy. The essential difference between estate duty, which is loosely called, with legacy duty and succession duty, death duties, was that it was a tax which was related to the amount which had to be paid on the size of the deceased's estate. If it was distributed amongst the poorest of the poor the amount of estate duty was precisely the same, whereas under the Capital Acquisitions Tax Act, be it a gift tax or an inheritance tax, the tax paid depends upon the amount received by a person at that time or over a period of time and the relationship of that person to the donor. That is a very fundamental difference.

So far as death is an element here it is the timing of an event, the occasion which gives rise to the gift in relation to an inheritance tax but that has no relevance to the liability to tax. It has a relevance to the rate of charge because if the tax arises under inheritance it is greater than if it arises on a gift. If it arises on a gift it is at 75 per cent of what it would have otherwise been. That is the only relationship of death to the rate of tax.

Major de Valera

Inheritance tax does not arise at all until there is a death.

Mr. R. Ryan

I agree. We could have avoided some of this stick if we had not differentiated——

Major de Valera

If the Minister had not put the marginal note in the Finance Bill there would be no stick.

Mr. R. Ryan

In order to encourage people to dispose of property during their lifetime and not waiting until death, in order to encourage gifts inter vivos, we have a low rate of tax if the transfer of property takes place during the lifetime of the donor. It is a very dramatic change and an improvement to relate the tax to the amount received which is what matters. That determines the capacity to pay and it relates the tax to the benefit received rather than imposing it on the amount which is distributed irrespective of the manner in which it is distributed. I accept that legacy and succession duty had regard to that relationship but that was a different tax, it was really a topping-up operation on estate duty.

Major de Valera

The Minister is correct; there is a difference. The former one is attaching to the estate and the present one is attaching to the legacy that goes to the donee. We recongnise this but there would have been no stick if there was no marginal note in the Finance Bill. In either code death duties was a colloquial description of generality. I submit that the words "death duties" are as applicable as a colloquial description to this as they were to the other. In regard to the administration, the collection and a number of matters connected with this Bill, we will find procedurally and administratively, unfortunately, a greater similarity with the old code than any of us would like to see but that will be the subject of later debate.

Question put and agreed to.

SECTION 11.

Question proposed: "That section 11 stand part of the Bill."

Major de Valera

This section provides that the tax imposed by section 10 becomes effective on a death. I should like the Minister to explain the following portion of subsection (1):

... otherwise than for full consideration in money or money's worth paid by him, he shall be deemed to take an inheritance.

What is the purpose of that? Supposing somebody pays the estate and secures some property that is clearly, and for full consideration, a purchase from the estate. Presumably, the full consideration goes back into the estate. One would have thought that would be due administration such as the realisation of assets. How can a person be beneficially entitled on a death if he has already purchased it? This purchase as I see it is something after death. If it was a contingent purchase before death I could see difficulties arising.

For instance, take a testator or an intestate who has certain property and X pays for this property, before death, full consideration at the time and then the testator or the intestate dies, surely there is a Revenue problem there, especially in an inflationary situation? What "full consideration" would mean and at what time that "full consideration" would arise is a question.

On the other hand, if that intestate or testator, as the case may be, should die and the property in question is then disposed to a third person for full value, it seems to me to be a sale in the course of administration. So far as revenue is concerned, it would have to be in the course of administration and it would not seem to come in as an inheritance at all. Could the Minister enlighten me on this?

Mr. R. Ryan

I am not quite certain I completely understood the Deputy.

Major de Valera

Maybe I mis-understood the section. That is why I am asking the Minister to give an explanation.

Mr. R. Ryan

If I understand Deputy de Valera correctly, he has raised two cases, the first is where A leaves property to B but the property in question has been purchased by B before the death takes place?

Major de Valera

Yes.

Mr. R. Ryan

A would not have that property to leave to B at the time of death because he would not be the owner. He could leave B the proceeds of sale which he had collected from B if he wished, and that would be a gift, but he could not leave property which he did not own at the time of death, if he had already disposed of it, albeit to the person to whom he would have given the gift if the transaction had not been completed before the death took place.

In the second illustration, Deputy de Valera already answered himself, because he accepts that if A disposes of property to B for full value, all A is doing is indicating B as a would-be purchaser and the purchase takes place after the event, but B acquires it from the administrator or executor. There is no transfer at all because the estate gets the full value. B has paid full value. The phrase "paid by him" may be causing some difficulty and the question may arise as to why it is there. Consideration could be paid to some person other than the donor— admittedly usually it would be to the donor but not necessarily so. For instance, A could give his house worth £25,000 to B in consideration of B giving £10,000 to C. Then B could get a gift from A—the house worth £25,000—but the real value of the gift would be no more than £15,000.

Major de Valera

I hope the Minister appreciates that I am raising these points in a constructive way.

Mr. R. Ryan

I accept that.

Major de Valera

I would like to pursue the first point that struck me, although the Minister now brings a third case to mind. Let me start again. Supposing A, who dies either testate or intestate, before death sells a certain property to B for full value as at that time—if this happened in 1973 and the death occurred today there would be big changes in value if shares were involved—he need not part with the property. He could leave it in the possession of the original owner, A, and A would be in the position of being a bare trustee and an agent. Nevertheless, as far as law is concerned, he might possibly be linked in that the legal estate might remain in the vendor and practically the full trust estate in the purchaser. The change only occurs on death.

B becomes beneficially entitled on death. As I said, there are three cases. The outright sale before death, even if it remains in possession of the vendor, might escape altogether as not coming within the category of a person becoming beneficially entitled in possession on death for various reasons. I am interested in the case where a vendor could constructively in law be considered only to have become beneficially entitled on the occasion of the death of A. That case is all right. The only complication for the Revenue Commissioners is an inflationary one. I can conceive, if there was a loophole here for instance, that such a transaction could be used in an inflationary situation. If certain shares had been bought in the boom period and the section were to capture them in the depression, Revenue would suffer and I would see a complication there.

The second case seems to be clearly one of sale in the course of realisation of asset. Under section 10 assets are directly no longer subject to tax, the incidence of tax will occur when the assets are actually in the hands of the distributees. In that case the clause seems unnecessary.

If there is any substance in the comments I made—the Minister said he might be misunderstanding me and I freely admit that I may be misunderstanding the section—I would like the Minister to give them his consideration. I am not urging anything on him except a desire to have unforeseen discrepancies provided for. I would be glad if the Minister would reiterate the reason for the words "paid by him". What would happen if those words were left out?

Mr. R. Ryan

Again I hope I understand the Deputy correctly, if not I have no doubt he will put me right. I think he made the case that A might sell the property to B for full value and B might appoint A as his trustee until A dies, whereupon B would become entitled in possession. Am I right?

Major de Valera

Yes.

Mr. R. Ryan

B would have to be entitled in possession before he could appoint A as his trustee. There would have to be complete transfer of property.

Major de Valera

The Minister is getting into capital gains tax now.

Mr. R. Ryan

No. I am dealing with the particular problem the Deputy——

Major de Valera

A lot would depend on the contract.

Mr. R. Ryan

It would, of course. If A is to hold the property for B, B would be the owner and A would be simply his agent to hold and occupy the property.

Major de Valera

May I interrupt to say that, in the problematical things I have said, I do not expect the Minister to give me a comprehensive answer to this. If I have raised something that should be considered, I am content to leave it with the Minister.

Mr. R. Ryan

I greatly appreciate the Deputy's understanding in that regard, because some of the problems he has posed are such as would give lawyers much food for thought and some of them, as a practising lawyer, I could see myself taking down to the Law Library before giving an answer to a client. Therefore, I appreciate the Deputy not pressing me for an instant reply.

Of course consideration does not normally arise under wills or intestacies. It can to some extent. Sometimes consideration is made a condition of receiving a gift. What we are concerned with primarily here are cases where transactions could arise where a gift is made within two years of death and may involve some element of consideration. We would have to look at that situation to see whether or not full consideration had been given for the particular gift received in order to ascertain whether there was some residue, as it were, which should be looked at for the purposes of the inheritance tax.

The other elements that have been considered by the Deputy I shall certainly look at between now and the next Stage and if we consider it is necessary to deal with them specifically needless to say we shall come forward with an amendment.

Major de Valera

Might I refer to subsection (2) which says:

The provisions of subsections (2), (4) and (5) of section 5 shall apply, with any necessary modifications, in relation to an inheritance as they apply in relation to a gift.

The Minister is satisfied that that is sufficiently explicit, I hope, because we have the old story here that by naming certain subsections there, you exclude what might be applied with necessary modifications elsewhere, and there is always a certain danger in that type of legislation, but I take it the Minister is quite happy about that.

Mr. R. Ryan

I am as happy as the Deputy can be in relation to language of that kind, but the Deputy will appreciate that it would be interpreted as meaning that where the word "gift" appears in section 5 it should read "inheritance". It is of that nature, to convert section 5 to a section which is applicable to inheritances, but we are satisfied it is the best way of dealing with it.

Major de Valera

You exclude subsection (3), section 5, by that. However, I will not argue about it.

Mr. R. Ryan

Subsection (3) refers to section 5 (2) (b).

Major de Valera

That is quite true but subsection (3) of section 5 is excluded as, indeed, is section 4 also. The old argument about a relative enters in here. Remember the argument we had on subsection (4) of section 5 on "relative" but because of the clear definitions here, particularly in regard to scales, such a provision is not necessary. Is that the position?

Mr. R. Ryan

Yes.

Question put and agreed to.

SECTION 12.

Question proposed: "That section 12 stand part of the Bill."

Major de Valera

Section 12 is the analogue of section 6.

Mr. R. Ryan

Yes.

Major de Valera

Where gift tax is concerned. There are differences in it. In subsection (2) there are the words "property which was to be appropriated to the inheritance" and "property out of which property was to be appropriated to the inheritance" shall not include any property which was not applicable to satisfy the inheritance. That phrase "applicable to satisfy the inheritance" is getting very near a technicality. Could the Minister interpret that phrase and give the authority for the interpretation? What precisely is the limitation implied in the words "applicable to satisfy the inheritance"?

Mr. R. Ryan

I am not certain that explanations will make the thing any clearer without detailed study. Perhaps I should start at the beginning, which is usually the better way of doing things.

Major de Valera

Section 12 (1) (b) (I) contains the phrase "which was to be appropriated to the inheritance" and (II) uses the phrase: "out of which property was to be appropriated to the inheritance". Then one comes to (b) (ii) which says: "a part of proportion of the property, out of which property was to be appropriated to the inheritance, was situate in the State,..." There is the contrast between the two phrases as well.

Mr. R. Ryan

Yes. I want to define subsection (1) (b) (i) (II), which deals with a share of residue or a pecuniary legacy payable out of the residue where the whole residue was Irish. For instance, £5,000 in any Irish bank account goes to B. In these cases the whole inheritance would be taxable. The situs of property is looked to as at the date of the inheritance which, of course, is normally the date of death. Paragraph (b) (ii) contains the words "a part". Say an English testator leaves all his securities to X. The securities are partly Irish, partly otherwise. The Irish securities are taxable. I come now to the words "or proportion". There is a pecuniary legacy under a foreigner's will which is payable out of the residue which is a quarter Irish and three-quarters foreign—a quarter of the legacy would be taxable.

As to subsection (2), paragraph (a), in deciding the amount taxable in the examples I have given, a specific legacy to a different legatee would be excluded in determining how much of the pecuniary legacy was Irish. Thus one would look only to the property available to meet the pecuniary legacies after excluding specific bequests or property given on trust to pay debts, costs or annuities.

As to paragraph (b) of subsection (2), for example, a foreigner owns Irish land and leaves it on trust for sale to foreign trustees and bequeaths legacies out of the proceeds of sales. The land is looked to as at the date of the inheritance—usually the date of death—and the legacies are treated as being payable out of Irish property. If this provision was not made each legatee would take a foreign, chose in action or a right against the foreign trustee for a sum of money.

Major de Valera

I thank the Minister for that explanation. As far as it is possible in circumstances such as these, he has made the position commendably clear. That is not quite the point worrying me here, whether the jurisdiction is foreign or local. What I am concerned about is the general import of the phrase "applicable to satisfy the inheritance". The Minister may think I am not doing him the courtesy of following up his argument. I admit freely that I have not sufficient knowledge at present. I accept everything he says. I get the impression that in the case of any inheritance the property from which it can be taken will depend on a number of factors, including the priority of charges. Does the Minister know what I mean?

Mr. R. Ryan

Yes.

Major de Valera

For instance, burial charges, revenue charges and so on. If one were to pursue that argument, one would have burial charges, tax charges encumbrances of various sorts, and a nett. I could understand generally that that might be what was meant by the phrase the property that was applicable to satisfy the inheritance.

I want to ask this from the point of view of the structure of the Bill. It will depend largely on the terms of a will. Something is going to be imported here that was not in the old code. Under the old code it was the estate which was taxed. Here the legacy will be taxed. There can be a case of priorities in the regard to the property. In other words, as prior claims are satisfied the property left to satisfy a particular inheritance becomes less and less. Am I then to understand that the meaning of that phrase "applicable to satisfy the inheritance" taken as a general phrase in the Bill means what nett property is left out of which the inheritance in question can be paid? Is that a fair interpretation of the phrase "applicable to satisfy the inheritance"?

Mr. R. Ryan

What we are primarily concerned with in this section is the situs of the property. I would agree generally with what the Deputy has said. Obviously if a specific legacy is diminished in value because there are prior charges on the estate what is taxed is only the amount actually received and not the amount left, because if it is left subject to prior charges those prior charges have to be disposed of and the value of the gift is only that which is actually received.

Major de Valera

This has not so much to do with this section as the administrative sections later—for instance, inland revenue affidavits, provisional assessments and so on where a question like that could arise.

Question put and agreed to.

SECTION 13.

Mr. R. Ryan

I move amendment No. 16:

In page 13, to delete subsection (3) and to substitute the following subsection:

"(3) Subsection (1) shall not have effect to the extent of the amount of any consideration in money or money's worth received for the disclaimer, renunciation, election or lapse or for the waiver of a claim; and the receipt of such consideration shall be deemed to be a gift or an inheritance, as the case may be, in respect of which no consideration was paid by the donee or successor and which was derived from the disponer who provided the property in relation to which the benefit, entitlement, claim or right, referred to in subsection (1), arose.".

Under subsection (3), as introduced, it could be argued that the gift or inheritance which was deemed to be taken was taken for a consideration, that an allowance should be made under section 18 for such considerations. That would defeat the purpose of the provision and the amendment is necessary to prevent that. The possible argument would have been on the grounds that the giving up of the right waived was the giving of consideration. For example, A is given lands worth £20,000 under the will of X Another person, B, who is the residuary legatee, has been living on the land and to avoid trouble A agrees to forego the devise of the lands on payment to him, out of the estate, of £10,000. Subsection (3) makes him liable to tax on £10,000 as an inheritance derived from X. B will be treated as getting the lands as residuary legatee. He takes legacies which are refused by others. But the £10,000 given to A will be deducted in arriving at the taxable value of what he receives. Were it not for the amendment, A could say that in order to get £10,000 he had to give up £20,000— that is, he had to give up full consideration in money or money's worth. The subsection is designed to identify the real benefit taken by each legatee and tax each accordingly.

Major de Valera

For neatness the Minister has restated the whole section but the important thing is the insertion of the phrase "in respect of which no consideration was paid by the donee or successor and which was derived from the disponer who provided the property in relation to which the benefit, entitlement, claim or right, referred to in subsection (1), arose."

Mr. R. Ryan

That is correct.

Amendment agreed to.

Question proposed: "That section 13, as amended, stand part of the Bill."

Major de Valera

On the question of disclaimer, it is a simple thing to disclaim a benefit though one does not normally disclaim a benefit except in relation to some kind of transfer.

Mr. R. Ryan

It is not unusual in the case of families. Members of a family do it for the protection of another member.

Major de Valera

That is so and the purpose of all this, if I may so describe it, heavy weather is to provide for this kind of thing.

Mr. R. Ryan

That is correct.

Mr. T.J. Fitzpatrick

(Dublin Central): Suppose A and B had equal shares and over a period A was prepared to transfer his share to B, would that transfer be exempt?

Mr. R. Ryan

If the amount paid represented the full value of the property, yes. Obviously one would have to look at the price paid and at the other terms of the contract to see whether or not full value had been paid.

Mr. T.J. Fitzpatrick

(Dublin Central): If an agreement is produced by a solicitor would that stand up with regard to the transfer of the property?

Mr. R. Ryan

The Deputy will excuse me laughing but the mere fact that an agreement was produced by a solicitor would not necessarily mean it was well drawn. Even if it were drawn in accordance with instructions that would not necessarily mean it would not give rise to a claim. It would depend upon whether or not full value was paid. Where there is a disclaimer the person who disclaims will not be taxed on a gift he has not taken. It also provides that if, as a result of his disclaimer, another person receives property from the donor, one must look at the property passing to the person who benefits by disclaimer. If we did not do that arrangements could easily be made to, as it were, break the connection between the donor and the donee.

Major de Valera

Subsection (1) provides that in certain cases "any liability to tax in respect of such benefit, entitlement, claim or right shall cease as if such benefit, entitlement, claim or right, as the case may be, had not existed." In the cases mentioned here you have an alleged intestacy where a will exists in respect of which a grant was issued. Is that a grant of probate or a grant of letters of administration? I suppose it is a grant of probate.

Mr. R. Ryan

It is.

Major de Valera

Could you legitimately say a grant of letters of administration was such a grant?

Mr. R. Ryan

It is certainly a grant of letters of administration.

Major de Valera

If that subsection were to stand alone it would operate as an exemption.

Mr. R. Ryan

Yes.

Major de Valera

It is here subsection (3) comes in and the Minister's amendment.

Mr. R. Ryan

Yes.

Question put and agreed to.

SECTION 14.

Question proposed: "That section 14 stand part of the Bill."

Major de Valera

Here we are back to the question I posed the other night: suppose you had two twins——

Mr. R. Ryan

Twins.

Major de Valera

I said it again. For the second time the Minister has had to correct me.

Mr. R. Ryan

It is not often I get the chance.

Major de Valera

I thank the Minister. Suppose you had twins who, on succession, would be entitled to substantial exemptions. I know the Minister will make an argument on that. They come from the same disponer and they are more or less in the same position. Does it not seem that some period should be put in there? It seems a bit rough to have one succeeding to the other. On the other hand I realise these exemptions are for each individual case.

Mr. R. Ryan

Yes.

Major de Valera

In other words, each twin will get the £150,000.

Mr. R. Ryan

Yes.

Major de Valera

It is an exemption of £300,000. The same thing goes for the remainder of Tables II, III and IV.

Mr. R. Ryan

Yes.

Major de Valera

These exemptions refer to individuals and will therefore be aggregated in the total amount of exemption from the revenue of the estate to the number of people in the category.

Mr. R. Ryan

Each donee within the particular relationship is entitled to the exemptions.

Major de Valera

Under Table III with the lower limit tax free every brother and sister could get £10,000.

Mr. R. Ryan

That is correct.

Major de Valera

A man who left a family of ten could dispose of £100,000 tax free and a man who left one child could dispose of £10,000 tax free.

Mr. R. Ryan

That is right.

Major de Valera

I have no further comment on the section.

Question put and agreed to.

SECTION 15.

Question proposed: "That section 15 stand part of the Bill."

Major de Valera

This section deals with the valuation of property. There are some other provisions in the Bill which seem to require comparison with the wealth tax. I should like to ask the Minister has he provided intentionally for any difference in the market value of property in this Bill as against section 8 of the Wealth Tax Act. There is a somewhat similar position in the Capital Gains Tax Act. I am very near my old argument of pari materia.

Mr. R. Ryan

The rules of valuation of property are similar in all three measures. Subsection (5), however, as the Deputy will see, relates to the transfer of property from one to another and therefore will not be found in the wealth tax as such because it is not appropriate to that. In all other respects the rules are similar.

Major de Valera

In other words, subsections (1) to (4) correspond to subsections (1) to (4) of the Wealth Tax Act. They appear to be the same. Subsections (5) and (6) are the two new ones. The Minister is satisfied there is no contradiction between any of the codes?

Mr. R. Ryan

Yes.

Major de Valera

Since we have argued these points on the other two Acts and there does not seem to be any logical reason why they should be different in the three measures I have nothing else to say.

Mr. T.J. Fitzpatrick

(Dublin Central): With regard to the valuation of property, families will be inheriting properties from their parents. There are family businesses in Dublin today which will never change hands. How will the Revenue Commissioners ascertain the value of such property? Sites are valued at a very high rate far in excess of what they are worth to the businessman. There are family properties which will probably never pass out of the hands of the family. What criteria will the Revenue Commissioners use to value property held in the family? Will it be valued on the business accounts or on the returns certified to the Revenue Commissioners or will they consider what it would make on the open market? If it is to be valued on the open market the type of family I am talking about will be victimised. Will the Revenue Commissioners use the business accounts to value property such as that?

Mr. R. Ryan

We are not, in fact, changing the rules for the valuation of property. I am familiar with the difficulties which can arise and the arguments which can take place about valuations of property. Obviously, the fairest rule is to apply the open market value. That is determined by what a willing purchaser would pay a willing seller. Obviously, there are situations where there is not an intention to dispose of the property, or there are people who have certain rights to property who would be opposed to a sale by a co-owner. In order to ensure that a fair valuation is made, one must consider that the parties are free to dispose of the property and that the best possible price will be paid. That is the old rule and it is the only fair rule which can apply.

Criticism has been offered from time to time that all these Bills fail to spell out specific rules in relation to the valuation of property. I am satisfied that legislative rules would probably cause as many injustices as they might help to cure and would generate innumerable anomalies. It is better to leave it to the ordinary forces of the market place to determine where value is and to allow, as we do allow, a right of appeal by any person who is dissatisfied with a valuation attached to a property by the Revenue Commissioners. This ensures that a third party is brought in to arbitrate.

Mr. T.J. Fitzpatrick

(Dublin Central): It can create an injustice for a person with no intention during his lifetime of disposing of his property if he is subject to a market valuation. I am talking about a particular type of case that could be victimised to some degree.

Mr. P. Belton

I might make the point that in Henry Street there is only one licensed premises now whereas there were about six there in the thirties. This is because no licensee could afford to pay the amount of money per square foot which, say, a draper could pay. There is the further point that if the Minister for Industry and Commerce should impose price control the position would be that the owner of a licensed premises would not be able to charge enough to render his business viable compared with other types of businesses on the same street. Why, then, should businesses be assessed on site value rather than on trading value? By way of explanation let us take a draper, for instance. He may sell a pair of shoes to a customer at a profit of £5 and after the customer has spent only a few minutes on the premises whereas the publican would be selling pints for a long time in order to make £5 profit on the one man although that man would be taking up space and spending a considerable time on the premises.

Mr. R. Ryan

The Deputy is asking me to pass comments on habits of consumption as well as on property valuation. That is beyond my scope and is not provided for in the Bill. The general rules of valuation of property would apply in the cases cited by the Deputy. These would be no different, so far as the Revenue Commissioners were concerned, than the rules which would apply in the ordinary market place between people interested in disposing of or acquiring property. If the Deputy's argument were a cause for an objection to any valuation, the matter could go forward to an arbitrator for a decision as to what would be a fair valuation.

Generally speaking, in respect of valuation relating to the interest disposed of—this might well be a public-house on a certain site and the valuation might tend to relate to that factor rather than to some potential the premises might have in the future if disposed of for another purpose—the question of whether the potential value would have a greater relevance than current use would be one to be determined on the merits of each case and is not something that one should set out in legislative rules.

Mr. P. Belton

Let us reverse the situation. A licensed premises in the suburbs would be valued at a much lower rate than the same type of premises in the city centre. There is no consistency in this approach. The properties should be valued either as premises or as sites.

Mr. R. Ryan

I can console the Deputy by telling him that everything will be taken into account.

Major de Valera

Literally, taken into account.

Mr. T.J. Fitzpatrick

(Dublin Central): Practically everybody now-a-days—farmers, business people and all the others—submit accounts. In these circumstances should the Revenue Commissioners not change their practice and ascertain what each business is worth, because that is all that is meant by the value of a property? If, say, an elderly farmer has 200 acres of land but by reason of his age is not able to work it to any great extent and if he has three sisters, the position in the event of his death would be that these three women would be granted an exemption between them of only £30,000 whereas the land might fetch £300,000 if it were put on the market. The £300,000 is arrived at because of the return being got from the land at present. We all know that a business can make 25 per cent more than it is worth on the market place. In such circumstances how can the valuation office decide on the market value? The real criteria for valuation, especially in terms of capital acquisitions tax, should be based on business accounts. If the accounts are available to the Revenue Commissioners they can be aware of the net profit of the business. The valuation of the property will be approximately ten times the net profit.

Mr. P. Belton

Five times.

Mr. T.J. Fitzpatrick

(Dublin Central): On that basis the Revenue Commissioners will have to take accounts into consideration with regard to valuation. There is no point in harping on the practice that obtained up to now because we are changing laws all the time. If the present practice of taking the market value into consideration is to be continued, certain sections of the community will be victimised because some properties would fetch much less on the market than the valuation put on them by the commissioners. There are a lot of properties which considered on face value would not appear to be worth very much but in respect of which the accounts might amaze one. Many of the properties that will be concerned will be the old-established businesses which remain in the hands of successive gen-erations and do not come on the market. A family owning a business in O'Connell Street, for instance, would not be likely to sell regardless of how much they were offered. People are like that where property is concerned. That is why I say that valuation on the basis of site value can lead to injustices. Therefore I ask the Minister to determine a new criteria for the future in regard to valuations.

Mr. R. Ryan

What the Deputy says has a certain validity but it is only one of the factors which is taken into account and which will be taken into account in the future. The Deputy knows that if the accounts were the only issue to be considered the result would be the imposition of a heavier tax on those who work hardest and are most successful and a lighter tax on the inefficient. It would mean also that people could so arrange their accounts at a time of pending disposition of property that the business would be run down so that the profit records would be low at the time of disposition.

Mr. T.J. Fitzpatrick

(Dublin Central): I am not talking of one year's accounts but of a balance arrived at after taking the accounts for five years into consideration.

Mr. R. Ryan

The Deputy knows it is one of the factors that a person acquiring property may look at, but it is not the only issue that determines the value of the property. It would not be proper that we should have one rule for what I might call the market place and another artificial rule for tax purposes. The tax is related to the value actually received and that is all that matters.

Mr. T.J. Fitzpatrick

(Dublin Central): The value derived from the property.

Mr. P. Belton

Compared with the death duties, there is no change in the value.

Major de Valera

In certain situations this is a thinly disguised section which states that the Revenue Commissioners will assess the value of the property. It gives them a certain directive. I am not saying there is a better way of doing it, though subsection (1) puts certain recommendations and gives certain directions to the Revenue Commissioners. But subsection (3) completely opens the door and says that the market value shall be ascertained by the commissioners in such a manner and by such means as they think fit, and so on.

What that means is that the commissioners' valuation can only be exactly questioned in a very limited number of specific cases. One case is where there are shares in a public company or that one has invested in a State loan where the market value is clearly ascertainable through reference to the stock exchange. There one could challenge any action of the commissioners under subsection (1), but unless you have such a clear-cut norm, the effect of subsection (3) is to give a very wide discretion indeed to the Revenue Commissioners.

It is rather difficult if you are to give effect to taxing property other than that whose market value is clearly ascertainable, one might almost say mathematically ascertainable, how you can attach tax at all without giving this discretion and I for one have always argued on the history of the Revenue Commissioners that that discretion is warranted and desirable, but we are confronted here with certain difficulties that must cause anxiety to a number of Deputies.

The first is inflation. Inflation in itself makes it difficult for the commissioners to value, and they must try to get rules. The problem might be simpler if you could apply fixed inflationary rates. This could apply to taxation of private companies under the next section, but it could also arise in cases of private trading proprietors, such as Deputies Belton and Fitzpatrick spoke about. Here you could have a notional inflation of what one might call real property and a deflation of value arising out of costs. As both Deputies pointed out, it will be extremely difficult to arrive at an equitable basis for valuation here.

Let us take licensed premises. The sale of such premises will depend on its business, its location, its site value, on its licence. It is one of the things about which there is a considerable amount of uncertainty: if it is not up for sale, on which basis will it be valued for succession within the family? We are throwing the Revenue Commissioners back completely on their discretion and tying them to the notional market value. Attractive and all as it is, this notion of market values in such cases might become a shackle when it comes to cases outside ascertainable market value which should be clearly put into subsection (1). I am wondering whether it is not shackling the Revenue Commissioners to be talking about market value.

We have not put in an amendment here—a simple amendment would need a lot of thought—on the matter of whether the deletion of the word "market" in subsection (3) might not be considered. We are here giving discretion to the Revenue Commissioners but how will they ascertain the market value in the cases Deputies Belton and Fitzpatrick mentioned? If they are constrained to ascertain the notional market value, what notions can they have? It will vary from case to case.

I throw this out as a desperate remedy and I am open to the charge that we might as well reduce the Bill to one section and say that wherever there is a gift or a death the Revenue Commissioners may tax it as they think fit at such and such rates, and trust to their good judgment to ascertain the valuation. I know this is the implication of what I am saying. But on the one hand we are between the devil and the deep blue sea and on the other tying the Revenue Commissioners to a situation where they can beneficently exercise their discretion on the notional market value. This problem must certainly have arisen under the death duty code. I do not know what the solutions there were, but in the past one did not have the present shifting inflationary situation and furthermore, and I regret to say it, I feel this legislation with this new code may make the problem of the uniform if not the equitable administration of the code very difficult for the Revenue Commissioners and their officers because of the administrative complexities that are involved. Admittedly the computer will help. Because of these things it would be helpful to have some information regarding the norms that would operate in such cases.

Mr. Callanan

Having regard to inflation, I regard market value as completely unrealistic particularly for property that remains in the family. I know something about this matter as it affects farming and death duties and there have been many instances in my experience of the totally unrealistic value put on farms because of inflation. In many instances the people concerned were most surprised when they discovered the value put on their holdings and I should not like to see that practice followed in this measure. It may be all right in the case of a property which is put on the market but it is not right in the case of a property or farm that stays in the family. We are giving the Revenue Commissioners very little leeway if we tie them to market value. I have not the answer to the problem. Deputy de Valera spoke about leaving it to the discretion of the Revenue Commissioners to value the property but I do not know if that is fair. People can be very badly hit when market value is applied to their holdings. It applied with regard to death duties but I should not like to see it in this Bill.

Mr. R. Ryan

Section 19 is relevant to what Deputy Callanan has mentioned. It provides that agricultural value will be only half of the market value. For instance, a person could have agricultural land up to £200,000 and it would be valued at only £100,000.

Mr. T.J. Fitzpatrick

(Dublin Central): The Deputy was referring to the principle involved.

Mr. R. Ryan

That provision relieves some of the pressures with regard to agricultural holdings. With respect, a great deal of this debate has an air of unreality. These problems are not new; they have existed since property was first taxed.

Mr. T.J. Fitzpatrick

(Dublin Central): That is why we should change it.

Mr. R. Ryan

The fundamental laws of the market place remain much the same; they are the laws of supply and demand.

Ruairí Brugha

They are worse when one takes account of inflation.

Mr. R. Ryan

It depends on whether a person is buying or selling What is relevant is the value of the property on the date it is received and that can be determined fairly easily. It is probably true to say that there is nobody with a better access to property values than the Revenue Commissioners. They know the value of any property transferred by deed in any event and of other properties also. They may have a little more information in the future than they had in the past about some properties because many transactions will come under notice in future that were not known previously. However, they do not use that information unfairly, nor may they do so. It is well stated in law that the opinion of the Revenue Commissioners may not be an arbitrary one but must be based on the principle of a reasonable price in a hypothetical free and open market where a willing seller and purchaser are involved.

Mr. T.J. Fitzpatrick

(Dublin Central): There is no willing seller here.

Mr. R. Ryan

The value is based on the assumption that the parties are free to dispose of and to acquire an interest. That is the only fair way because if it were otherwise all kinds of controlled situations could be arranged, either to inflate or to deflate the value, depending on what suited the people involved.

Section 51, Part VIII, of the Bill, provides for appeal procedures where anyone who is dissatisfied with the assessment of the Revenue Commissioners may challenge it. In practice —I speak here with some humble experience as a practising lawyer in this field—if a person is dissatisfied with the valuation of the Revenue Commissioners he can negotiate with them, usually with the assistance of a valuer, an accountant or a lawyer. My experience is that in the vast majority of cases—well over 95 per cent of cases —a value acceptable to all parties is agreed. It is only a tiny fraction of cases that go to arbitration.

In the appeals procedure, which is 65 years old, only one or two cases went to court and this is a fair indication that the real situation is not as depicted by Deputies. I accept the bona fides of their comments, and I can understand their worries and the sense of caution and perhaps fear that people may have that the Revenue Commissioners may be unfair in their assessments. However, from my own practical experience I am satisfied the Revenue Commissioners are open to persuasion. If assessments are made that are out of line with what is fair value of the property, the Revenue Commissioners will listen to reasonable arguments asking for a reduction in the assessment and in most cases a satisfactory figure is negotiated. As there is ample machinery available when dissatisfaction still exists on the part of the taxpayer, I consider we have provided for every possible eventuality and I am confident that the fears expressed will not be justified. If I were to find that difficulties arise and that we had a large number of appeals I would be the first to move that some steps be taken to rectify a situation. However, in the 65 years experience of valuing properties that has not been the experience and I do not think we have any reason to anticipate that it will be the experience in future.

Major de Valera

I accept completely what the Minister has said about the Revenue Commissioners. There was no suggestion otherwise. My only point on that was that I wanted to make sure that they were not constrained. Unlike the common picture of them, the Revenue Commissioners have a legal conscience and, although they have discretion and exercise it admirably as the Minister said, they also have the conscience not to depart from the law. If the law gives them a direction they will be bound by it. In the past it has not been unknown for an inspector to be sympathetic and willing to do what he could but who found himself coming up against the statute. We must not forget that the inspector is the officer who has the responsibility of administering the statute. It is because of that consideration, in addition to the difficulties of fluctuation, that I made the point and why I was willing to give the Revenue Commissioners greater discretion.

I suppose when I refer to the Revenue Commissioners I am really talking about their inspectors who have to do the work and make decisions in the ordinary cases. I accept completely what the Minister has said about the benign and sympathetic approach of the commissioners—I endorse this fully from any experience I have had with them, professionally or otherwise —but it must be emphasised that they are officers of the State. They have the responsibility of carrying out legislation, they have a legal conscience and they are constrained by this. That should be recognised here. We should not be deluded by the fact that we are giving certain discretion when we prescribe.

When we do prescribe we cannot salve our consciences too easily by saying: "We do not really mean what we are saying". If we take that approach and say: "We will say this in the Bill and leave the Revenue Commissioners to wriggle a way out of it" we are imposing a complete contradiction on them. It is bad enough to have other people about whom the Minister has complained finding a wriggly way out without asking the Revenue Commissioners to do so voluntarily. This is why I made the point that Deputy Callanan seized on.

Apart from the inflationary situation, since we are discussing a taxation measure, it is no harm to see what the implications are of what we are doing. There is, I am sorry to say, a diminishing class but a very worthy class of people in our society commonly called the family businesses. The father has built up a business and the sons have been brought up to be interested and they have continued it on and the family in succession have made a job of this. It must not be forgotten that the success of that business has depended on the industry and the total absence of—shall I say?— restrictive practices on the part of the family concerned. In such a case the actual value of the real assets of the terms of its clientele, its value as business, the goodwill as assessed in shown in its books are all insufficient measures of valuation. Inflation will inflate the value of the assets, so much so that generally the Minister in his budget has recognised that it would stop relief. It is exactly the same type of problem.

As regards turnover, this is not something that stands on its own; you cannot in this case separate it from the people who are producing the turnover. When you have an employed labour force and management in another type of business you have a certain norm and you apply it to the accounts of that company and judge the value of the business as shown by the accounts. In the case of a family business—and indeed this will probably apply to some of the private companies we have been considering—you cannot separate in your assessment of the accounts the industry and contribution of the interested people who are carrying on the business. A father and two sons running a business of this kind may not only be equivalent to a greater number of hired help but their whole psychological approach is such that the value of the business cannot be judged on their accounts. The same applies to the goodwill of that business in a particular area. It is simple enough to see this in the case of the dwindling population of small shops. But there is another type of business which has grown and it is the family business operating as a unit of a larger chain. This has happened in regard to what one might call small supermarkets where the supermarket technique and its overall advantages are applied on a family basis. This is not unknown and may be on the increase. I have a licensed premises in mind where the personal activity of the proprietor made all the difference. It made such a difference that in the case of his personal temporary illness it was very evident.

This type of problem makes the concept of market value a very difficult one for the Revenue Commissioners and yet under this section they are completely tied to that concept. Without delaying the House I think the point is worthy of consideration particularly because there will be a bigger organisation here to deal with it over a wider area of activity, when you take the three Acts together. I regret that my remarks must be in the nature of comment and criticism rather than helping the Minister with constructive suggestions but I think we should appreciate what we are doing and if possible stimulate the Minister and his advisers to cope with the problem and, if remedies can be found, to come up with them.

Within the past 24 hours I came across the case of a business in a nebulous category where there is a very substantial volume of business being done and where for certain reasons it is foreseen that it will not be viable because of current economic conditions in the following year. The proprietors of this business are anxious to unload. But the unloading on prospective takers is just "not on" for other reasons. In all the conventional approaches to this problem of market value that business would be assessed at a considerable value from the points of view of the lives and succession of two individuals. On the other hand, to my certain knowledge, as I have been told the case, if the business were put on the market it would have no value; there would be no takers and it would fold up. Here is a case—I am now going away from the reality and giving a hypothetical case; what do you do in a case like this where A has a business which seems to be all right at present but actually has very little in prospect and would find no takers on a market value basis as the Revenue Commissioners could find out if they went into the facts. At the same time a substantial amount of business is being done; there is considerable present value of turnover and there are assets. What do you do if that proprietor dies just now? What is the market value of that business? Does it have to be put up for sale to ascertain the market value, or can the Revenue Commissioners say it has no market value? The Minister rightly said that this was not a new problem. What is new, and here we get at the kernel of the whole matter, is that our concept of money values from the point of view of transmission in time is collapsing around us. The concept of money as a store of value which is implicit in this legislation is breaking down and in that situation there is something to worry about in the assessment of values.

When the Minister introduced the Bill the thresholds and limits were generous and Deputy Colley went so far as to say they were too generous in comparison with certain other things. That situation is daily being eroded and I believe the time will come when the exemptions the Minister is giving will be considered inadequate in the categories the Minister is anxious to benefit and believes he is benefiting. It is considerations such as these that make me urge the Minister to consider the word "market" in line 10 in getting the Revenue Commissioners to evaluate the value of the property.

Mr. R. Ryan

One might generate more mischiefs than benefits by changing it and I would be somewhat worried about the introduction of artificial values of any kind which could generate more difficulty. As has been recognised, we are not dealing with a new problem; perhaps we are dealing with an old problem but the pace of change is more rapid to make valuations more difficult to make. I would accept that that could be true. Looking back on my own experience, I would not like to say compromises were made in which the Revenue Commissioners lost out, but I found that my clientele were, by and large, satisfied with the compromises made. If they were not, they, and others, would have appealed. In my own experience I cannot recall any case where there was an appeal to arbitration. Perhaps it was because would-be appellants feared they might do worse on an arbitration than on a settlement and that happens in all cases where the question of arbitration arises. The Revenue Commissioners will, no doubt, observe what has been said and, through the appeal procedures which are there, we need not anticipate that too many difficulties will arise.

Mr. T.J. Fitzpatrick

(Dublin Central): There should be some latitude left to the Revenue Commissioners apart form the market value. There should be other relevant factors because it is tying up the Revenue Commissioners.

Mr. R. Ryan

The rules determining market value do not relate purely and exclusively to what would happen at an auction because one does not know what will happen there. People assess properties according to different criteria; each person has his own set of criteria. Some people will look at the goodwill or the existing profit record of a business but others would have no interest whatsoever in that record because they might intend using the property for a different purpose. One could deal with a whole variety of criteria. The rules determining market value are a mixture and amalgam of all these.

Major de Valera

The Minister has stated that note will be taken of what has been said and I do not think we would be justified in delaying on the section further.

Question put and agreed to.

SECTION 16.

Question proposed: "That section 16 stand part of the Bill."

Mr. R. Ryan

The provisions are broadly similar and correspond to section 9 of the Wealth Tax Act, 1975 and section 20 of the Finance Act, 1965, as amended by section 36 of the Finance Act, 1971.

Major de Valera

In the definition of subsection (2), (a), (b) and (c) are connected by the word "and" even though that word is not used?

Mr. R. Ryan

Yes.

Major de Valera

The definition of control is one of those long attempts to define a control that could almost equally be well met by saying, if the Revenue Commissioners consider a person has control. Paragraph (b) (iii) of subsection (4) states:

he then had a right to receive, or the receipt of, more than one-half of the total amount of the dividends of the company, whether declared or not, and for the purposes of this subparagraph, "dividend" shall be deemed to include interest on any debentures of the company;

Are these alternatives paragraphs?

Mr. R. Ryan

Yes.

Major de Valera

In that case what is intended by the phrase, "dividends of the company, whether declared or not"? I want to see if the Minister and I coincide on this.

Mr. R. Ryan

It is not unusual, as the Deputy knows, for a control company not to declare a dividend and yet the ownership of the shares could be within the control of a particular person. Such control might or might not involve voting rights. Normally it would involve voting rights but one could have the class of shares where voting rights would not exist but nonetheless they would be eligible for dividends or interest if declared. It is in order to ensure that one cannot get out of the category of control by not declaring a dividend that we put in the words "dividend, whether declared or not".

Major de Valera

Company accounts are in a certain form. A person could be in receipt of, and entitled to receive, dividends and not be in control. At best, from the Minister's point of view, you could have a contradiction in this section because there are alternatives. Under this section you could find two people in control. For instance, suppose somebody was actually in voting and executive control of a company, say a father, who made himself a trustee as to more than half the proceeds of the company—I am using the word "proceeds" to cover dividends declared or not—and assuming that person was sui juris, is it not a case of a bare trust because the father is only trustee for an income and he is in control? In that case there are two people in control in that section. Is that right?

Mr. R. Ryan

It is relative.

Major de Valera

That is fair enough. Let me put it another way. We will look at the plausible case of the man and his mistress. They are not relatives. To bring in the point I am making now is a red herring on the main point. Could you set up a private trading company within the meaning of this section where there would be less than five people who were not related?

Mr. R. Ryan

Yes.

Major de Valera

A could have voting rights and control the company and B could be controlling the company also. Am I right that within the meaning of this section two people could be in control of the company?

Mr. R. Ryan

Yes.

Major de Valera

Then they would be both assessed as if they were in control. What would be the monetary consequences of that multiple control? The tax on that company would appear to be very heavy.

Mr. R. Ryan

The mere fact that two people are in control would not mean double the rate of taxation. Control is only one of the elements in the valuation of a share. Obviously if a person has full control his shareholding has a greater value than if he had diminished control. The more control is shared the less will be the value of any individual's control.

Major de Valera

The Minister is now bringing in the notion of joint control.

Mr. R. Ryan

Where joint control was equivalent to individual control I can see the validity of the Deputy's point, but it is very difficult to be specific about the way in which the value of a particular shareholding could be made. Control is one of the elements to be valued and that value will vary according to the degree of control exercised in an individual situation. Where a company has more than five controllers it would fall to be valued in accordance with section 15, but where the number is five or under it is treated under section 16.

Major de Valera

Subsection (1) does not seem to say precisely the basis on which shares in a private company are to be evaluated. It says that the market value of each share shall be ascertained for the purposes of tax as if it formed part of a group of shares sufficient in number to give the owner of the group control of the company. The rest of the section does not enlighten one very much. It seems to say that the Revenue Commissioners are still left with the unsolved problem we discussed on section 5—what is the value of the company? The rest of the section says where the liability will be placed. Is that correct?

Mr. R. Ryan

On section 5?

Major de Valera

Section 16 (1) says in the marginal note "Market value of certain shares in private trading companies". Subsection (1) reads:

The market value of each share in a private trading company which (after the taking of the gift or of the inheritance) is, on the date of the gift or on the date of the inheritance, a company controlled by the donee or the successor, shall be ascertained by the Commissioners, for the purposes of tax, as if it formed part of a group of shares sufficient in number to give the owner of the group control of the company.

That seems to mean that every member could be deemed to be in control and be taxed accordingly.

Mr. R. Ryan

What we are really doing is taking the true value of the shares on a minority holding. If we did not import this element of control, it could be alleged by a minority shareholder that the value of his shares were diminished because he was in a minority. But in a controlled company situation where special arrangements exist, very frequently on a family basis, that is not a true assessment of the value of a minority holding.

Major de Valera

In other words the Minister wants to put the minority holder on a level with other holders.

Mr. R. Ryan

In a controlled company, yes.

Major de Valera

He is a minority holder but is only in that position if he has a control. Is that right? However, this is on all fours with the other legislation. Does the entitlement to receive a dividend depend on the state of the profit and loss account? In other words, if there is nothing in the profit and loss account there is no entitlement to receive a dividend.

Mr. R. Ryan

The entitlement to receive a dividend arises out of the ownership of a share.

Major de Valera

You have already provided for the ownership of a share. I agree with the Minister on this but if that is done it seems to some extent to be tautology, because if you are going on the voting power of an owner's share it is perfectly simple. You do not take that paragraph. If you are talking about the receipt of dividends whether declared or not, I can see that capturing any cases where there is something in the profit and loss account, but if there is nothing in the profit and loss account it will not be captured.

Mr. R. Ryan

The company could have value even if profit was not being made.

Major de Valera

Yes, but if there is nothing in a profit and loss account that paragraph could not operate if you interpret it in that particular way. However, I do not want to keep propounding legal conundrums on the section but there are some legal points which might arise on this.

Mr. R. Ryan

You could have a situation in which over a long period the profit could be put to reserve and not available actually for distribution.

Major de Valera

The section is confined to private companies as defined in subsection (2). It and the definitions in it are confined to private companies.

Mr. R. Ryan

Yes.

Question put and agreed to.

SECTION 17.

An Leas-Cheann Comhairle

Amendments Nos. 17 and 18 are related and may be taken together.

Mr. R. Ryan

I move amendment No. 17:

In page 16, subsection (2), after line 3, to insert the following definition:

"‘investment income', in relation to a private company, means income which, if the company were an individual, would not be earned income within the meaning of section 2 of the Income Tax Act, 1967;".

These amendments are necessary to give a more precise definition to a private non-trading company. The definition as originally introduced was thought to deal unfairly with a company which was in fact a trading company but showed a loss on trade in the previous year and whose only income in the year was from some small investment. I think the amendment was one that was already discussed on the Wealth Tax Bill.

Major de Valera

It was the company, more or less on the same basis as an individual.

Mr. R. Ryan

We cannot declare them to be non-trading simply because they have not made a trading profit.

Mr. R. Ryan

I move amendment No. 18:

In page 16, subsection (2), lines 6 to 13, to delete the definition of "private non-trading company" and to substitute the following definition: "‘private non-trading company' means a private company—

(a) whose income (if any) in the twelve months preceding the date at which a share therein is to be valued consisted wholly or mainly of investment income; and

(b) whose property, on the date referred to in paragraph (a), consisted wholly or mainly of property from which investment income is derived.".

Amendment agred to.

Question proposed: "That section 17, as amended, stand part of the Bill."

Major de Valera

That is very much like what was in the other Bill.

Mr. R. Ryan

It is.

Question put and agreed to.

SECTION 18.

Mr. R. Ryan

I move amendment No. 19:

In page 17, line 29, in the proviso to subsection (5) (a), after "made;" to insert "and such adjustment shall be made on the basis that the donee or successor had taken an interest in possession in the amount which falls to be deducted for the liability, for a period certain which was equal to the actual duration of the postponement of the payment of the liability;".

This amendment is necessary to establish a consistent method of dealing between section 20, which refers to an interest defeasible by the happening of a contingency, and section 18, (5) (a), which refers to a liability which becomes payable on the happening of a contingency. On this amendment being made, the position in both cases will be that in the first instance tax will be paid without allowance for the possibility of the contingency happening, and if the contingency does happen the tax will be reassessed on the basis that the donee took the amount for a period certain—Table B, First Schedule refers—and any excess tax that was paid will be refunded with interest from the date of payment.

Major de Valera

Why does the Minister wish to move this amendment? Was it that he feared the donee would get out?

Mr. R. Ryan

We are introducing it in order to ensure consistency between the modus operandi of the two sections, 18 and 20. As I say, if there has been an excess tax we shall be making a refund and the refund will be paid with interest. Maybe I could give an illustration that might be of assistance. A business worth £50,000 is given by will to the disponer's grandson B, subject to his paying £5,000 to his brother C. If and when C, who is 12 years of age, is aged 21—that would be of course in nine years time unless C dies before he attains the age of 21— B is taxed on the basis of a taxable value of £50,000 without the allowance of the £5,000. Until he has to pay the £5,000, B enjoys the whole business. He may never have to pay the £5,000. If and when C attains 21, B will be allowed relief on the £5,000 which he will then have to pay to C as follows: tax will be assessed on the £50,000 less £5,000, that is, on £45,000, but B will also be treated on the same lines as in section 20 as having enjoyed £5,000 for the nine years up to the payment date, and under Table B, First Schedule, £5,000 for nine years certain equals £2,278.

The new adjusted taxable value will be £45,000 plus £2,278, that is, £47,278 instead of £50,000, and tax will be refunded with interest from the date of payment on the excess payment.

Major de Valera

Essentially, as the Minister says, this is to bring the two sections into line?

Mr. R. Ryan

Yes.

Amendment agreed to.

Mr. R. Ryan

I move amendment No. 20:

In page 17, subsection (5) (d), line 38, after "inheritance" to insert " , or of the costs, expenses or interest incurred in raising or paying the same".

The costs and expenses of raising and paying the tax after it has been ascertained and assessed are excluded from the costs and expenses allowable as a deduction in arriving at the taxable value. The method used by the donee or successor to raise the money required will vary from case to case. One may have ready cash; another may have to sell part of the property taken as a gift or an inheritance; another may raise a mortgage on the property and so on. Some of these methods can involve the donee in costs and expenses, but such costs and expenses arise out of the method of raising the money which is chosen by him. This amendment is essential so that finality can be reached in respect of assessment. If, after £X have been assessed to tax on the taxable value of £Y, the donee were allowed to send back the assessment to reduce the taxable value and the tax assessed by the costs and expenses incurred after the assessment was made—claiming that such costs and expenses would be a deduction under subsection (1) of section 18—no assessment could ever be stated to be definitive until the tax was actually paid. The amendment in no way precludes allowance in subsection (1) for valuation fees, solicitors' costs and so on incurred in ascertaining the taxable value.

Major de Valera

I would be inclined to ask the Minister whether he was not being a little sweeping in this. Paragraph (d) of subsection (5) says that no deduction shall be made in respect of tax, interest or penalties chargeable under the Act in respect of the gift or inheritance. That is fair enough. One does not deduct tax and then tax what is left after that deduction. One could go on with that premise until there was nothing to pay, which would be very unreasonable. On the other hand, is it not a bit sweeping of the Minister to say that because there are so many ways of waving the wand to avoid paying the taxman one simply excludes all? For instance, there might be a situation like this: there may be an assessment for tax due—and remember that nowadays there is the factor of interest where tax due is concerned— and it may be necessary to sell part of the property to minimise one's own losses. If I am on the wrong track please stop me. I do not want to waste the time of the House or of the Minister. One goes to the bank, gets a loan and pays the tax. One can make that quite definite. It can be made definite either for a reasonable period or until the property is sold.

I take the point the Minister made about finality. On the other hand, some relief could be given here; it could be confined to certain ways. But it is going a little too far to add the tax to the taxation the State is enforcing, or to enforce taxation for the benefit of the bank. Does the Minister get the point I am endeavouring to make?

Mr. R. Ryan

I do, yes.

Major de Valera

I take the Minister's point completely about finality. I also recognise the intent in paragraph (d) as it stands. Therefore, what I am seeking is a compromise. Could the Minister not settle for something less omnibus than he has in this amendment? I agree there are so many ways one could not legislate for them all but one could recognise one or two common ways. One might even solve the problem by remitting interest for the period concerned. But surely there could be some little way found here to establish equity. Does the Minister see the point I am making?

Mr. R. Ryan

I do.

Major de Valera

Either one selects something like raising the actual cash by a recognised lending procedure for a definite rate of interest for a period specified—that is definite—or one takes the alternative, which is to hold in abeyance the interest payable on the tax, which would defer the payment of the tax. Possibly there is a middle road here the Minister might consider because it is a little wrong to have to pay the tax and then to have an enforced tax on one's temporary lack of liquidity. Perhaps the Minister would consider that point.

Mr. R. Ryan

I know, as a matter of practice, under the estate duty code, one got no allowance for the cost of raising the money to pay the tax. Therefore, in this amendment we are simply providing that no allowance be given for the cost of getting the money to pay capital acquisitions tax. Nor do I think it right that we should grant such an allowance. For instance, the person who may have cash immediately available and who uses it to pay tax would be deemed to be at a loss by so doing. The point I want to make is this: one cannot assume that that person is not at a loss by using cash available to him for the payment of tax because that cash could probably be invested and that loss suffered by him might be comparable to the cost that somebody else might have to meet. One could have a whole range of property holdings under which a person might decide to leave assets which were easily cashable in their existing form and take out a loan, because of the natural inclination which exists to pay the money to anybody except the tax man. I know that Deputy de Valera does not disagree with a lot of what I am saying.

Major de Valera

I do not.

Mr. R. Ryan

In practice I cannot see how one could have—as he calls it—a middle road which would not entail many difficulties and anomalies. Obviously, if the tax is payable, then that is the appropriate tax to be paid. Were we to entertain the idea of allowing people to set off the cost of paying tax against the tax liability, it would apply not merely to capital taxation but to income tax as well.

Major de Valera

Not necessarily.

Mr. R. Ryan

But I can see that that might arise.

Major de Valera

With respect I reject what the Minister says, that this would apply to income tax. Income tax is a totally different thing. We are dealing with assets. The case I am making is on legal assets, like real property—particularly real property where there was a difficulty about title—where there would be some time lag in converting that into cash and where the only remedy was to go to the bank or some other lending agency and raise the money at the cost of interest. In a case as definite as that a solution on the lines I suggested might be found. The amount raised is certain, the rate of interest is certain and so is the period for which it is raised. In the past, where such situations arose interest was not chargeable. Interest on tax is a relatively recent concept. I think I am right in that. I do not know what it was under the estate duty code. Please correct me if I am wrong. In those circumstances I am suggesting to the Minister that he look at this amendment. That is totally different from saying: I have cash in hand; I did not pay it over.

If I have cash in hand, I am foregoing a benefit. Admittedly, I am using income, but I am buying the asset and the income, so to speak, goes with the cash. In this sense I have to raise cash and pay money for it. There is a very essential distinction there for which the Minister, I think, failed to give me credit.

With regard then to the administrative difficulties, with the inland revenue affidavits, as they will be— goodness gracious, the present ones, and I have four in my hand, are searching enough —there should be no difficulty. As I conceive the administration of this Bill and the information that will come in to the Revenue Commissioners, as the Minister himself said on an earlier section, there should be no difficulty in prescribing a limited course which would obviate the necessity in such clearcut cases for what I might call "double taxation"—taxation by the State and taxation by the land agency—because that is what it would amount to. The person concerned would be doubly taxed. This might not be important between fathers and sons but when you come along to Table III, brothers and sisters, and to strangers under Table IV, the incidence of tax might be quite substantial. It is only in the case of spouses and children as a matter of fact that the reliefs are really substantial under present conditions. If that is so I think some limited, specific, middle course could still be found to answer this problem and the combination of the Revenue Commissioners' knowledge, the returns they will get under this legislation, their experience in the past, the possibility of being certain, all these add up substantially to support the plea I am making to the Minister to give this a second thought on the basis I suggest.

Mr. R. Ryan

It is not always easy to arrange loans with all the certainties the Deputy suggests because one could easily visualise a term loan providing for fixed interest over a fixed period which could nonetheless be repaid the day after it had been obtained for the purpose of paying tax and it seems to me that it would be wrong to give preferential treatment to the person who is able to arrange a fixed period loan to avoid liability to tax and treat him more favourably than someone who was not able to get terms as explicit and certain as that. The difficulties are multitudinous.

Major de Valera

I appreciate that. Could the Revenue Commissioners, now they have gone into this business of usury and charging interest themselves, not expand that area of their business and give some discounts, so to speak? After all, they are expanding now into, as I say, usury and charging interest. I should not say "the Revenue Commissioners"—the state. Why not have the State do it through the agency of the Revenue Commissioners?

Mr. R. Ryan

I have said on many occasions already that the State and the Revenue Commissioners have no ambition to be moneylenders.

Major de Valera

I know that but, on the other hand, there is a certain equity here where a certain compensation could be afforded since they are collecting interest. I would not make this point if the Revenue Commissioners were not charging interest after a certain date on tax that is owing. I apologise for saying "the Revenue Commissioners" because they are simply an agency. It is the Minister and ourselves who are to blame and not the Revenue Commissioners. The point is, if we are charging interest and thereby forcing people to incur further costs—I repeat deliberately that we are imposing a double tax, the tax to the State and then the tax paid to the money lending agency —in those circumstances some solution should be found to balance this. The Minister and I could argue all night on this. I appreciate the Minister's stand on administrative difficulty and so on but would he, I wonder, for once appreciate my stand on what one might call fair play?

Mr. R. Ryan

I have put on record my appreciation of the points the Deputy makes.

Mr. T.J. Fitzpatrick

(Dublin Central): Evidently income will not be an allowable deduction. Is that what we are talking about?

Mr. R. Ryan

No. What we are talking about here is the interest a person might pay on a loan raised from some third source for the purpose of paying taxes?

Mr. T.J. Fitzpatrick

(Dublin Central): For paying income tax.

Mr. R. Ryan

No, capital acquisitions tax.

Amendment agreed to.

Mr. R. Ryan

I move amendment No. 21:

In page 17, after line 58, to add the following paragraph:

"(g) for any tax in respect of which a credit is allowed under the provisions of section 66 or 67.".

Section 67, as introduced, is being withdrawn and a new section is being introduced to give unilateral double taxation relief even where this country has no double taxation arrangement with the other country. The amendment is designed to retain the real content in section 67 (2).

Amendment agreed to.

Mr. R. Ryan

I move amendment No. 22:

In page 18, to delete subsection (7) and to substitute the following subsection:

"(7) A deduction shall not be made under the provisions of this section—

(a) more than once for the same liability, costs, expenses or consideration, in respect of all gifts and inheritances taken by the donee or successor from the disponer; or

(b) for any liability, costs, expenses or consideration, a proportion of which falls to be allowed under the provisions of section 19 (2) (ii) or (iii) in respect of a gift or inheritance taken by the donee or successor from the disponer.".

This subsection is being recast so as to take into account three amendments. It is for clarity purposes. The whole of the former subsection is being replaced. The amendments to be made are: (1) costs and expenses, mentioned in line nine, as well as liability; secondly, similar mention of costs and expenses is made in line 12; thirdly, lines 13 and 14 are amended by changing (b) or (c) to small Roman ii and iii to correct the reference to section 19 (2) which has been redrafted. This is purely an amendment consequential on the new format of section 19 which is also introduced as an amendment at the Committee Stage. The only significant change is the mention of costs and expenses. It was originally considered the word "liabilities" would be interpreted as including costs and expenses. However, as the expression "liabilities, costs and expenses" is used in the section on a number of occasions, it is a possibility the court might interpret it in a narrow sense as not including costs and expenses thus enabling a donee to claim more than once against separate gifts for the same costs and expenses.

Major de Valera

What about (b)? Apart from the liability for costs and expenses there is a reference to the provisions under section 19 (2) and (3). That depends on the amendment to section 24?

Mr. R. Ryan

Section 19.

Major de Valera

Very good.

Amendment agreed to.

Mr. R. Ryan

I move amendment No. 23:

In page 18, to delete subsection (10) and to substitute the following subsection:

"Where—

(a) bona fide consideration in money or money's worth has been paid by a person for the granting to him, by a disposition, of an interest in expectancy in property; and

(b) at the coming into possession of the interest in expectancy, that person takes a gift or an inheritance of that property under that disposition,

the deduction to be made under subsection (2) or (4) (b) for consideration paid by that person shall be a sum equal to the same proportion of the taxable value of the taxable gift or taxable inheritance (as if no deduction had been made for such consideration) as the amount of the consideration so paid bore to the market value of the interest in expectancy at the date of the payment of the consideration.".

This is an amendment which widens the area of application afforded in subsection (10) as initiated. The subsection provides for a deduction of partial consideration where a successor has given some consideration for the granting to him of a future interest. Briefly, he will be treated as having paid for the same proportion of the property which he eventually inherits as the proportion that the price he paid bore to the actuarial value of the future interest when he paid the partial consideration. No actuarial tables are provided in the Bill for valuing such a future interest. Normal actuarial principles, age and health of the life tenant, the nature and income of the property, and so on, will apply.

Major de Valera

It will also catch the type of case I spoke about earlier in another connection. Supposing a person acquired a property from a donee before death in such a way that it only vested on death for a consideration which might have been valid at the time and then inflation affects it, it will work for the State as well. In other words, if value is given for the gift before the death of the testator, this brings in an interesting distinction between gift tax and succession. It is tied to being an inheritance tax. I do not want to repeat the hypothetical cicrumstances under which A and B could be linked. Under the section the point now is that, if an arrangement were made between two people by which an inheritance was paid for at current prices, if the donor died no tax would be paid but, if inflation continues, the donor's gift will be valued at the date of death and there will be tax on the difference accruing to the Revenue. Will that not be one of the effects of it? There is another side to the relief.

Mr. R. Ryan

The tax only becomes payable when the property is in possession. It would not be in possession until death.

Major de Valera

I gave a hypothetical situation on an earlier section. I do not want to delay the House by spelling it out again. Every time the Minister gets up expansively in his capacity as tax master and says he is giving a relief or a concession, I am reminded of the old saying: "Fear the Greeks when they bring gifts", because there always seems to be another side to the Minister's gifts.

Mr. T.J. Fitzpatrick

(Dublin Central): You would want to look at the following section.

Amendment agreed to.

Section 18, as amended, agreed to.

An Leas-Cheann Comhairle

Amendment No. 65 is consequential on Amendment No. 24 and they may be taken together by agreement.

NEW SECTION.

Mr. R. Ryan

I move amendment No. 24:

In page 18 before section 19 to insert a new section as follows:

"19. —(1) In this section—

‘agricultural property' means agricultural land, pasture and woodland situate in the State and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with the lands occupied therewith) as are of a character appropriate to the property;

‘agricultural value' means the market value of agricultural property reduced by 50 per cent of that value, or by a sum of £100,000, whichever is the lesser;

‘farmer', in relation to a donee or successor, means an individual who is domiciled and ordinarily resident in the State and in respect of whom not less than 75 per cent of the market value of the property to which he is beneficially entitled in possession is represented by the market value of property in the State which consists of agricultural property, livestock, bloodstock and farm machinery, and, for the purposes of this definition, no deduction shall be made from the market value of property for any debts or incumbrances.

(2) In so far as any gift or inheritance consists of agricultural property—

(a) at the date of the gift or at the date of the inheritance; and

(b) at the valuation date,

and is taken by a donee or successor who is, on the valuation date and after taking the gift or inheritance, a farmer, the provisions of section 18 (other than subsection 7 (b) thereof) shall apply in relation to agricultural property as they apply in relation to other property subject to the following modifications—

(i) in subsection (1) of that section, the reference to market value shall be construed as a reference to agricultural value;

(ii) where a deduction is to be made for any liability, costs or expenses, in accordance with subsection (1) of that section, only a proportion of such liability, costs or expenses shall be deducted and that proportion shall be the proportion that the agricultural value of the agricultural property bears to the market value of that property; and

(iii) where a deduction is to be made for any consideration under subsection (2) or (4) (b) of that section, only a proportion of such consideration shall be deducted and that proportion shall be the proportion that the agricultural value of the agricultural property bears to the market value of that property.

(3) Where a taxable gift or a taxable inheritance is taken by a donee or successor subject to the condition that the whole or part thereof will be invested in agricultural property and such condition is complied with within two years after the date of the gift or the date of the inheritance, then the gift or inheritance shall be deemed, for the purposes of this section, to have consisted—

(a) at the date of the gift or at the date of the inheritance; and

(b) at the valuation date.

of agricultural property to the extent to which the gift or inheritance is subject to such condition and has been so invested.

(4) In relation to the deduction, in respect of agricultural property of 50 per cent of its market value, or £100,000, whichever is the lesser, the total amount deductible in ascertaining the agricultural value shall not exceed £100,000, in respect of the aggregate of—

(a) all taxable gifts taken on or after the 28th day of February, 1969; and

(b) all taxable inheritances taken on or after the 1st day of April, 1975.

which consist in whole or in part of agricultural property, taken by the same person, as donee or successor, from the same disponer.

(5) (a) The agricultural value shall cease to be applicable to real property which is agricultural property if and to the extent that the property—

(i) is sold or compulsorily acquired within the period of six years after the date of the gift or the date of the inheritance; and

(ii) is not replaced, within a year of the sale or compulsory acquisition, by other agricultural property,

and tax shall be chargeable in respect of the gift or inheritance as if the property were not agricultural property;

Provided that this paragraph shall not have effect where the donee or successor dies before the property is sold or compulsorily acquired.

(b) If an arrangement is made, in the administration of property subject to a disposition, for the appropriation of property in or towards the satisfaction of a benefit under the disposition, such arrangement shall be deemed not to be a sale or a compulsory acquisition for the purposes of paragraph (a).

(6) For the purposes of subsection (2), if, in the administration of property subject to a disposition, property is appropriated in or towards the satisfaction of a benefit in respect of which a person is deemed to take a gift or an inheritance under the disposition, the property so appropriated, if it was subject to the disposition at the date of the gift or at the date of the inheritance, shall be deemed to have been comprised in that gift or inheritance at the date of the gift or at the date of the inheritance.

(7) In this section, other than in subsection (4), any reference to a donee or successor shall include a reference to the transferee referred to in section 23 (1).".

This is deleting the existing section 19 and putting in a new one. The decision to simplify the test for a "genuine farmer" in both the Wealth Tax and Capital Acquisition Tax meant considerable rewriting of section 19. It was on that account that we decided to put in a new draft. The section now provides special rules for the valuation of agricultural property, as I mentioned earlier to Deputy Callanan, where the agricultural property is taken by a farmer as donee or successor by permitting the deduction of 50 per cent of its market value or £100,000, whichever is the lesser, from its market value in order to arrive at its agricultural value. The section incorporates the provisions of section 18 into this section but with certain modifications. "Agricultural value", as defined in the section, is substituted for "market value" and a proportion only of the debts and liabilities, and of the consideration, is deductible, being the same proportion that the agricultural value bears to the market value of the agricultural property.

The section also provides rules as to where the agricultural value can, in certain other circumstances, be availed of and where, in certain cases, it will cease to apply. A limit of £100,000 is set for the special agricultural deduction in respect of all gifts or inheritances taken by one donee or successor from the one disponer. The purpose of the section is to afford a measure of relief—the Greeks once again—from tax to agricultural property where at least 75 per cent of the gross value of property in the beneficial ownership in possession of the donee or successor consists of such agricultural property and farm stock.

Ruairí Brugha

This would mean that property valued at £250,000 would not be subject to any tax. Am I correct?

Mr. R. Ryan

You take £100,000 from it and, therefore, if the relationship were father and son there would not be any liability to tax. Not bad from a Greek.

Ruairí Brugha

Not bad.

Mr. T.J. Fitzpatrick

(Dublin Central): The Minister is drawing a distinction as between agricultural value and market value. Evidently the Minister is able to set certain criteria for agricultural value.

Mr. R. Ryan

It is the market value.

Mr. T.J. Fitzpatrick

(Dublin Central): It is the agricultural value.

Mr. R. Ryan

Reduced by a certain percentage of the market value.

Mr. T.J. Fitzpatrick

(Dublin Central): But the Minister uses the “agricultural” value.

Mr. R. Ryan

Yes, but we define it.

Mr. T.J. Fitzpatrick

(Dublin Central): Why not define it for other properties? The Minister specifically mentions agricultural value. Some type of criteria could be found for other businesses. If a formula could be found in this section, I do not see why one could not be found for other businesses in cities and towns. A family business could be valued at a very high rate for industrial development. A drapery or a grocery business, for instance, might have a very low value in so far as profits were concerned but a very high market value in the context of commercial development. The Minister does not appear to be able to find any formula for this type of valuation.

The concession in regard to agriculture is welcome. While I am not thoroughly conversant with activity in this sphere, I come from a part of the country in which agriculture is very important and I am aware that the return on investment in agriculture may be only two or three per cent. Return on capital is dictated by the amount of capital available. I can see why the Minister is allowing the reduction in respect of agriculture but there is a case to be made for allowances in respect of other types of business, too. However, the brothers and sisters of deceased holders of land will find that they are being dealt with harshly in this Bill. The Minister had no choice but to grant the concession in respect of agriculture because people in this industry are very dissatisfied with their lot. Their return on capital, compared with other forms of business is relatively low, perhaps 50 per cent lower than the return from other types of property.

Major de Valera

Is a formal motion required in order to delete section 19? The practice in this respect varies. In this case we are told that acceptance of the amendment deletes the section whereas in the Broadcasting Authority Bill the phrase used is "amended by the substitution of the following section for the section".

An Leas-Cheann Comhairle

Acceptance of this amendment involves the deletion of the section.

Mr. T.J. Fitzpatrick

(Dublin Central): Can the Minister say whether a farmer must be domiciled in the State before being eligible for the provisions of this section?

Mr. R. Ryan

The land must be situate in the State and the donee likewise.

Mr. T.J. Fitzpatrick

(Dublin Central): This question arises, too, in relation to wealth tax. If a man is wealthy enough to be able to establish himself abroad and to live there— many such people have left the State already—it looks as if he will be exempt from this tax. There was this exemptiton in regard to wealth tax, too.

Mr. R. Ryan

The donee must be resident in the State. The benefit here is in respect of Irish land.

Mr. T.J. Fitzpatrick

(Dublin Central): I am talking of people resident outside the State and who will be exempt from this Bill. I objected to this type of provision in relation to wealth tax, too.

Mr. R. Ryan

People not domiciled here will not get the exemption on their Irish assets. They could become liable to tax if they receive Irish property.

Mr. Callanan

How could that arise?

Mr. R. Ryan

It would arise in respect of the Irish gifts they receive.

Mr. T.J. Fitzpatrick

(Dublin Central): They would be allowed only the same limits?

Mr. R. Ryan

They would not get the concessions in respect of agricultural property.

Amendment agreed to.

Mr. R. Ryan

I move amendment No. 25:

SECTION 20.

25. In page 20, lines 17 and 18, to delete "without any deduction in respect of the contingency" and to substitute "as if no part of the entitlement were so to cease".

This amendment is necessary for two reasons: an absolute interest not liable to be defeated on the happenings of a contingency is intended to be valued as an absolute interest in part. On the previous wording of the section it could be said that such an interest was limited because there would be less than absolute interest. On the original wording the normal rules for the valuation of a limited interest which is subject to a contingency could be said not to apply so that only rule 8 in the First Schedule would apply. The amendment makes quite clear the intention of the section.

Amendment agreed to.

Question proposed: "That section 20, as amended, stand part of the Bill."

Major de Valera

What the Minister is doing here is taxing something that was held for a time and which is then defeated by a contingency.

Mr. R. Ryan

Yes.

Major de Valera

In one sense he is doing this to make sure he is not constrained to a limited interest. It is limited in the sense that the assets are limited but as usual the State is taking the benefit. The credit will be given only at the end.

Mr. R. Ryan

That is right. The benefit would be enjoyed while the tax was payable.

Major de Valera

But the whole tax is payable.

Mr. R. Ryan

That is so but the contingency might never happen.

Major de Valera

I see the difficulty the Minister had here but whatever little tilly there will be will go to the State. I suppose, though, that we are becoming more used to this situation. I often wonder who will pay in the end.

Mr. R. Ryan

"Them that has it" is the golden rule.

Mr. T.J. Fitzpatrick

(Dublin Central): There are very few of those left.

Major de Valera

Is the phrase "this section shall prejudice..." a standard and recognised phrase? In other words, is it technical and brought in for interpretative purposes?

Progress reported: Committee to sit again.

The Dáil adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 26th November, 1975.