Dáil Éireann debate -
Tuesday, 3 Feb 1976

Vol. 287 No. 6

Corporation Tax Bill, 1975: Second Stage.

Minister for Finance (Mr. R. Ryan)

I move:

"That the Bill be now read a Second Time".

This Bill is part of the programme of tax reform and is designed to bring the company tax code into line with modern requirements without either endangering tax revenue or infringing the basic principle of spreading taxation fairly over the community.

As Deputies are aware, the ground for the reform of the structure of company taxation has been well ploughed in the in-depth studies which led to the publication of the 1972 and 1974 White Papers on the subject. The purpose of the present Bill is to give legislative effect to the proposals for a corporation tax contained in the 1974 White Paper. Accordingly, the Bill mainly provides for changes in the form of the existing system of company taxation but not in the substance or in the general incidence of tax. The Bill also provides for some concessional arrangements which have been sought by the business community.

As the Bill is rather technical and is accompanied by a lengthy and detailed explanatory memorandum, I do not propose to delay the House by going into each of the provisions of the Bill at this stage. That, I feel, would be appropriate in Committee. However, for the convenience of the House, I will outline briefly the principal features of the provisions proposed in the Bill.

From the end of the current year of assessment in each case the trading and other profits of resident companies and those of most nonresident companies operating here will be subject to a single tax structure instead of the present triple structure comprising income tax, corporation profits tax and capital gains tax. The corporation profits tax code, which dates from 1920, will be abolished but the general rules and principles of the income tax and capital gains tax codes will apply for the purposes of the new corporation tax. Subject to special relief for certain categories of companies and profits, which is being provided mainly in Parts III and VII of the Bill, the ordinary rate of corporation tax on company profits is being fixed in the Bill at 50 per cent, which is the equivalent of the maximum combined rate of the existing income tax and corporation profits tax, but an effective tax charge of 26 per cent will continue to apply to companies' chargeable capital gains.

I should like to make it clear at once that the generous scheme of capital allowances provided under the existing income tax code and the special taxation reliefs to encourage industrial development are being incorporated in the new corporation tax system so that there will be continuity in the basis and value of those allowances and reliefs.

Where a distribution of profits is made by a company on or after 6th April, 1976, part of the new corporation tax—corresponding to income tax at the standard rate of 35 per cent on the aggregate of the distribution and the tax credit in respect of it—will be imputed to shareholders in respect of that distribution. Accordingly, the shareholder will in effect be left in the same position under the new system as under the existing system.

Parts I and II of the Bill provide for the introduction of corporation tax, the general structure of the tax, the computation of income and chargeable gains and the granting of allowances and reliefs.

Parts III and VII deal with the position of special classes of companies and with certain special exemptions. The special classes of companies are small companies, those carrying on mutual business or not carrying on any business, industrial and provident societies, building societies, companies involved in partnerships and life assurance companies. As regards small companies, provision is being made for a reduced rate of corporation tax of 40 per cent on a company's income where their total profits for an accounting period of 12 months do not exceed £5,000 and for marginal relief where the profits exceed £5,000 but do not exceed £10,000. As regards the other special classes of companies, the provisions being made broadly match those being applied under the existing system of company taxation.

I might perhaps mention one or two points which may be of special interest. A new relief is being provided by section 31 under which the actual amount of dividends or interest paid or credited to an individual by a building society will be available to cover charges, for example, annuities payable by him. Section 46 ensures that, pending the renegotiation of agreements with other countries for the avoidance of double taxation, an overseas life assurance company investing in an Irish company will be provided with a tax credit in respect of the distributions they receive from that company. This relief will help to maintain the attractiveness of investing in Irish companies.

As regards the special exemptions —in Part VII—to which I have referred, these are in relation to the Agricultural Credit Corporation Limited, the Voluntary Health Insurance Board, certain public utilities, the income of a company precluded from distributing any part of their profits to their members and certain income of companies established for charitable purposes.

Parts IV, V, VI and VIII contain new provisions, suitably framed for the purposes of corporation tax, to replace corresponding provisions in existing tax legislation governing export sales relief and relief for certain profits from trading operations carried on at Shannon Airport and those dealing with distributions out of exempted mining profits.

Part IX establishes a special Schedule, Schedule F, under which all company distributions covered by the Bill will be charged to income tax and lays down rules for the giving of a tax credit in respect of those distributions.

Part X deals with closely controlled companies and contains a wide range of measures to counter tax avoidance by them. Parts XI and XII indicate how special situations involving groups of companies will be treated for corporation tax purposes and I will return to these provisions in a moment. Parts XIII to XVI, inclusive, deal with the application and adaptation of specific income tax and capital gains tax provisions, the administration of the new corporation tax system set out in the Bill and the supplemental and transitional arrangements necessary to provide for the smooth changeover from the present system of company taxation.

The most significant innovations now being provided in our system of company taxation are those which concern groups of companies and I am confident that the group relief being provided will adequately meet the needs of the corporate sector which has pressed for such relief.

Part XI of the Bill specifies the conditions under which trading losses, unused capital allowances and unrelieved expenses of management and charges on income of one member of a group of companies will be allowed against the profits of another member of that group. A similar form of relief will be available to companies which are members of a consortium. Provisions are incorporated to prevent abuse of these reliefs.

As Deputies may be aware, it was not feasible in the past to frame legislation to give group relief because of the different basis of assessment for income tax and corporation profits tax.

Likewise, it would be even less feasible to frame legislative provisions to provide group relief for accounting periods, or parts of accounting periods, falling before 6th April, 1976, since income tax and corporation profits tax as well as corporation tax would have to be comprehended. Nevertheless, I can tell the House that the Revenue Commissioners have assured me that they will consider sympathetically any particular cases which might be put to them for the grant of group relief in respect of accounting periods, or parts of accounting periods, falling before 6th April, 1976. Such an administrative solution would not, of course, mean a departure from what is set out in Part XI of the Bill as regards either qualification for group relief or the nature of the relief allowable. Obviously, it would be necessary to have any such claims supported by all the relevant facts in relation to the companies concerned.

As I promised on the Committee Stage of the Capital Gains Tax Bill, 1974, in this House on 29th January, 1975, the Bill makes provision—in Part XII—for the treatment of chargeable gains and allowable losses in special situations involving groups of companies, for example as regards certain transfers of assets in connection with company reconstruction or amalgamation, or between members of a group of companies or between members of the group and outsiders. In such circumstances, the charge to tax in respect of the capital gain will be deferred until the asset leaves the reconstructed or amalgamated company or the group. Similarly, the provision in the Capital Gains Tax Act, 1975, for "roll-over relief," that is, deferment of tax on capital gains realised from the sale of business assets if the proceeds are used to acquire new assets for exclusive use in the business, will be applied to a group of companies as if all trades carried on by its members were a single trade. Provisions are incorporated to prevent abuse of these reliefs. Furthermore, it is necessary to secure the tax which does arise for payment in such complex cases and the Bill accordingly provides for the recovery by the Revenue of unpaid tax in respect of capital gains arising to any company in the group from the group as a whole or from specified members or associates thereof by reference to their interest in the asset involved. The person so assessed will, of course, have the right to pursue the defaulting company. The Bill's provisions in relation to companies' capital gains are a logical counterpart to its provisions for the treatment of groups of companies where losses, and so on, in normal trading are shared among the members of the group.

In summary, therefore, the Bill is designed to bring our system of company taxation into line with modern requirements, particularly by providing special favourable tax treatment for company rationalisation and restructuring so as to improve competitiveness in an ever difficult market situation. I am hopeful that the simplification of our company tax system will in time reduce compliance costs for companies, mainly because of the fact that, in future, only one computation of profits and one tax return will be required for any accounting period for corporation tax purposes, instead of at least two for the purposes of income tax and corporation profits tax as at present.

I am sure that Deputies will agree with the view that, while it is vital to ensure that the tax code be brought into line with modern requirements and be continually reviewed so as to provide encouragement for continued industrial expansion, it is equally necessary to safeguard tax revenue to ensure that scarce resources are channelled into the most worthy avenues. That is why it is necessary to make specific provision in the Bill, as was intimated in the 1974 White Paper, to prevent abuse of the very valuable reliefs being provided for companies.

The Bill contains additional provisions designed to counter tax avoidance devices in other areas also, such as the extraction of income from companies in a form which in the hands of the recipient is not assessable to income tax under existing law and the non-distribution of income by closely controlled companies so as to avoid the income tax at the appropriate personal tax rate which would apply if the income had been distributed to the shareholders in the normal way. The undistributed after corporation tax trading income of closely controlled companies will not, however, be affected by these anti-avoidance provisions. Deputies can rest assured of my determination to ensure that this relieving Bill will not be abused in its application.

There remain two important and related matters, arising in connection with our adoption of the imputation system of company taxation outlined in the present Bill, which call for mention at this juncture, namely, the need to renegotiate all our existing agreements with other countries for the avoidance of double taxation and recent EEC proposals for company tax harmonisation.

The imputation system of company taxation—which imputes, or credits, an appropriate proportion of the company tax to the shareholders—has been adopted by many countries, including three EEC member states, namely, Belgium, France and Britain, and is favoured by the EEC Commission as the basis for harmonising company tax systems in the EEC. A draft directive on company tax harmonisation was sent by the EEC Commission to the Council in August last and is at present before the European Parliament and the Economic and Social Council. I understand that the draft directive has also been the subject of consideration by our committee on EEC secondary legislation.

The proposals in the draft directive are complex and far-reaching and, accordingly, very careful examination will be required to ensure that the Irish position on them will be fully enunciated in the appropriate fora in due course. That is all I wish to say about it at the moment.

It may be mentioned that, in the negotiation of double taxation agreements with some countries in the past, some difficulty has been encountered because of our dual system involving income tax and corporation profits tax.

Our adoption of the proposed system of a single corporation tax should help in this matter by clearly separating the taxation of companies from the taxation of their shareholders. This improvement may strengthen the Irish position in seeking to secure acceptable new double taxation arrangements which would be not less favourable in relation to Irish tax incentive reliefs than the existing arrangements. Those new agreements will come before the House for approval in due course.

I recommend the Bill to the House.

Mr. Colley

I should make clear that the principle of this Bill is quite acceptable to this side of the House. Indeed, work has been going on for some years on the preparation of a measure which would modernise our company taxation system and would accordingly introduce certain changes such as the imputation system. I think a White Paper was issued in November, 1972 when I was Minister for Finance and arising out of representations received on foot of it a further White Paper was issued by the present Minister for Finance and this Bill, which is a very formidable measure even to look at, is the result of that work over many years and of representations from various quarters.

I think that the change to the imputation system is not only in accord with EEC thinking and will not alone be a positive step on the road to harmonisation which is necessary I believe within the Community but will also have a number of practical advantages—perhaps some disadvantages—but by and large a number of practical advantages so far as our taxpayers are concerned.

Another aspect of this matter is that it is intended as an anti-avoidance measure and some of the provisions in that direction are quite welcome and satisfactory but there are some reservations that we have in regard to certain provisions. It is clear from a brief perusal of the Bill that it is largely a Committee Stage measure and informal agreement has been reached between both sides to refer the Bill to a special committee for the Committee Stage discussion. The bulk of the discussion will be on that Stage but there are some matters to which I think I should refer now. Broadly speaking, the reservations I have in regard to the Bill relate to what I consider to be the excessive breadth of some of its provisions, the administrative difficulties which I think will arise and the actual drafting of the Bill itself which I think leaves something to be desired.

As regards the breadth of the Bill as drafted, it seems to be much too blunt an instrument for the purpose of the objective it sets out to achieve——

Mr. Dowling

I should like to raise the following matter on the Adjournment: the purchase by the Department of Defence of foreign manufactured goods.

An Leas-Cheann Comhairle

The Chair will communicate with the Deputy.

Mr. Colley

By and large, it seems the provisions of the Bill run very much against the taxpayer and give what appear to be excessive powers to the Revenue Commissioners. One of the features of the Bill is the imposition of a surcharge on the earnings of service companies as defined in the Bill. The object of the surcharge appears to be to impose personal rates of tax in such cases so that somebody who can so manage his affairs as to have them conducted through the medium of a service company will not thereby escape liability for tax. That objective is laudable and has our support but I think that in achieving it, it is necessary to take into account the distinction between retentions and distributions, the extent of working progress and the recovering of debt. We can and will go into these matters in greater detail on Committee Stage but I think I should advert to them now if only to give notice to the Minister and his advisers of the matters with which we are concerned in this regard.

The Bill appears to provide that the secretary of a company is the person who is primarily liable and to exclude the directors. I think that provision needs further justification by the Minister. The provisions whereby unrealised profits may be taxed also need further justification. This kind of provision, especially at a time of inflation, can produce considerable hardship. There is a general difficulty in relation to all taxation measures and we have adverted to it on both sides of the House in dealing with recent taxation and that is the extent to which discretion should be given to the Revenue Commissioners and one is also faced with it in this Bill. I do not want to go back over all that ground again. I am aware, as also is the Minister, that there are arguments both ways in this regard. Nevertheless it has to be borne in mind that tax legislation will and must be interpreted strictly by the courts and, therefore, to give too wide a discretion to the Revenue Commissioners could not alone have the effect of making the particular provision less clear in its meaning but also, in effect, of transferring the interpretation of that provision from this House and the other House of the Oireachtas to the Revenue Commissioners, unless the matter is brought to Court, in which event if the provision is particularly wide and if very great discretion is given to the Revenue Commissioners, the courts may find themselves unable, in fact, to act in that matter because of the particular wording. There is danger of this in some of the provisions of the Bill.

If the Minister wishes in particular cases to give discretion to the Revenue Commissioners because he sees it is the only practicable way of dealing with a particular problem, I do not object to that in principle but in such a case I want to see that the legislation should make it clear that that is what is happening, that the Minister should say so here and that the intention should be clearly expressed and endorsed in this House, that in those particular circumstances that is what would happen and that the matter would not be intended to be decided on the interpretation applied by the courts. The difficulty is that, ostensibly, every provision of this Bill is open to interpretation by the courts. In practice some aspects of it may not be open to interpretation by the courts, but if that is the intention and if it is the intention that in such cases the interpretation would be a matter for the Revenue Commissioners one can make a case for such a situation in certain circumstances. If that is what is to happen, I would wish to ensure that such a case would be made. However, if on the other hand, it is intended that all the provisions of the Bill should be a matter for interpretation by the courts, some of the drafting is not appropriate because it is too wide in its scope.

We must remember that in matters of this kind individual rights are concerned. There is a temptation, particularly for a Minister for Finance but for other Deputies also, in dealing with the question of tax liability to think in terms of the public interest, of the safety of the revenue as being the predominant matter, so predominant as to override virtually all other requirements. This is understandable, but it is dangerous. The rights of the individual should not be ridden over roughshod in such circumstances. I suggest there is a danger of that in so far as some of the provisions of the Bill are concerned. I suggest also that some of the Bill's provisions may not be intended to be operated and are included simply in terrorem or for the purpose of frightening taxpayers who are either potential evaders or avoiders. It is difficult to justify legislation that is drafted on the basis of being simply in terrorem.

In keeping with the criticism I have made of the Bill being a blunt instrument for achieving the purposes it is designed to achieve, it would appear that an example of that—small but, perhaps, significant—is the approach in the matter of penalties, where similar penalties appear to be laid down to apply to dissimilar offences—for instance, the failure to report the date of the commencement of business seems to carry the same penalty as the furnishing to the Revenue Commissioners of inaccurate information. On the face of it, these offences do not appear to be of equal gravity. Furthermore there does not appear to be any statute bar to claims by the Revenue Commissioners against the taxpayer. I understand that in other countries the approach is different. For example, in Germany the approach is to provide a period of five years plus ten more if there is what is described as criminal evasion; in France it is four years plus six more in the case of fraud; in the US it is three years plus six more in the case of fraud and in Britain, it is six years plus six more in the case of fraud or of wilful neglect. Unless such provisions are incorporated in this Bill by implication or by reference, a somewhat similar approach should be adopted. Even if they are incorporated by reference, consideration should be given to their incorporation specifically. If they are not incorporated either specifically or by reference there would be a serious defect in the Bill.

The Minister has told us that one of the purposes of the Bill is the simplifying of the tax system. Unfortunately it would appear that some of the administrative aspects of the Bill may involve greater complexity than that which is involved now. One of the administrative problems that will arise is in connection with the phasing in of the legislation, that is, the requirement to make reports of payments which are deemed distributions before six months after the end of an accounting period. In the light of present auditing practice I understand that this period is too short and may well involve some virtually intolerable pressure not only on taxpayers and their professional advisers but on the Revenue Commissioners also.

We had an example of this kind of intolerable pressure in relation to the wealth tax in December, 1975. Therefore, further thought should be given to the implications of this kind of time limit. In March, 1974, explanatory and practical notes in relation to these provisions were produced and were issued subsequently in relation to the superannuation provisions for the benefit of insurance companies and insurance brokers. To the best of my knowledge nothing was issued in relation to the other provisions and sections of the Bill. This Bill was published only relatively recently but my information is that it was printed approximately six months before it was published. The point I am making is that there was time for the preparation of the explanatory and practical notes that were produced. I draw attention to the non-furnishing of these notes and I urge the Minister to ensure that they are furnished as soon as possible to all those concerned.

There are certain extra statutory concessions granted by the Revenue Commissioners. The Minister referred to one aspect of this matter in introducing this Stage of the Bill. I suggest there is a strong case for the publication of details of extra statutory concessions granted by the Revenue Commissioners. I am not aware of any valid argument against doing so but I am aware of a number of valid arguments as to why this should be done.

One aspect of this Bill seems to be quite peculiar, although no doubt there is some rational explanation. It is the omission of definitions of the various technical terms used. The Minister will be aware that major tax legislation enacted in the past, such as the 1918 Consolidated Tax Act and the 1967 Income Tax Act, contained very detailed and wide-ranging definitions, in one case at the beginning of the Act and in the other at the end. This Bill does not seem to contain any. The existing definitions can be imported, but, having regard not only to the size of the Bill—I think the Minister would agree on reflection that, if only from the point of view of practical working—these interpretations and definitions should be contained in the Bill as it stands. I think that the absence of such definitions hampers the operation of this Bill as to its workability and usefulness as a consolidation measure. The Minister did not refer to it as a consolidation measure, because in the technical sense it is not. However in the practical sense, in so far as it deals with taxation of companies it is fair enough to call it a consolidation measure.

There are various aspects of the drafting of the Bill which I will endeavour to deal with on Committee Stage. I have received representations on one matter to which I would like to refer. This is the surcharge provision and the fact that this surcharge is to be applied to undistributed profit. The point made is that for example in the case of an investment company where there is a liability for wealth tax, it would appear that the surcharge is being applied to the retained or undistributed income which, of course, has to include the provision for wealth tax. As far as the provision for payment of wealth tax is concerned, this is not something which is being retained. In the ordinarily understood sense it is something for which provision must be made and that relief should be given in respect of the income retained for payment of wealth tax.

As the Minister said, there is provision in the Bill for the application of capital gains tax to companies. At this stage I do not wish to go back over the arguments that we had in this House in regard to the capital gains tax provision. However, I think it is necessary that I should once again put on record the objection we on this side of the House have to the principle on which capital gains tax is being levied under the existing legislation and is now being incorporated in this Bill. That is the principle whereby the same rate of capital gains tax is applied to a gain, whether it consists of a "quick killing" or results from years of hard work and skill in building up a business.

We made alternative proposals in this House. They were rejected by the Government but, nevertheless, I want to make it clear again that as far as this side of the House is concerned we object to the principle whereby the same rate of capital gains tax is applied to a "quick killing" on the one hand or a gain built up over many long years of hard work. That provision of the same rate is being imported now in this Bill to the taxation of companies. As we objected to it under the capital gains tax legislation we object to it under this legislation.

With regard to the grouping provisions, provisions relating to groups of companies, it would appear that corporation tax can be chargeable before the grouping relief proposed in the Bill comes into play. If that is so, it is going to lead to difficulties, anomalies and unfairness. I hope that the Minister will be able to show us that that interpretation of the provisions is wrong.

It would also appear that interest payable to a person who is not resident in the State will not be allowable for the purpose of relief against the liability for the tax. If that is so, I hope that the Minister will be able to justify that provision. It seems on the face of it to be one that is going to produce inequities also.

Mr. R. Ryan

That is in relation to grouping relief that you are talking about?

Mr. Colley

Yes. There is also a change proposed in the way that fee depreciation is to be given and it seems that the change can involve a severe cash flow problem for some companies. I assume that the Minister's attitude in this regard is that he would not wish the introduction of this Bill to create new cash flow problems for companies and that if we can demonstrate to him that this is so he will be prepared to amend the provisions of the Bill to avoid such a result.

Another matter arises in regard to the surcharge provision on the income of non-trading companies. It seems that if the net non-trading income of a closed company is later distributed, no credit will be given in respect of the surcharge which has already been borne. If that is so, it would seem that it can give rise to a tax rate of something like 86 per cent in certain cases. Again, I assume that that is not the result the Minister is aiming at, and that he will be prepared to amend the provisions of the Bill to avoid such a manifestly unjust result.

As I said at the outset, I do not wish to go into too much detail on this Bill which is largely a Committee Stage Bill. I have simply outlined some of the areas in which I have reservations on the provisions of the Bill as I read them at present.

I reiterate that, so far as the principle of the Bill is concerned, we not alone have no objection to it but we support it, arising as it does from work carried out under previous Fianna Fáil Governments over a long number of years, and in pursuance of the major changes outlined in the White Paper we issued on this matter in 1972. We have no objection to this Stage of the Bill. We are not opposing it. We intend to concentrate our main discussion on Committee Stage.

Ruairí Brugha

As Deputy Colley said, this is a rather frightening Bill running to 257 pages and five Schedules. The explanatory memorandum runs to 35 pages. Although I have gone through as much of the Bill as I could, so far I have not been able to find what I wanted to find to relieve any anxiety I might have.

The idea of introducing a single tax to take the place of income tax and corporation tax, the rates of both of which have tended to fluctuate over the years, is to be commended. As Deputy Colley said, the Bill calls for really intensive Committee Stage debate. I am glad the two sides of the House have agreed to take it in committee. Deputy Colley remarked on the capital gains aspect. I agree with the comments he made. When the Capital Gains Tax Bill was before the House, we expressed our belief that there is an in-built injustice in applying the same rate to a capital gain irrespective of whether it was made by an individual or a company who engaged in that kind of activity for the sake of making a quick kill, or a gain made by a large number of companies and individuals who devoted a lifetime to creating wealth and providing employment.

The Minister referred to this aspect. I take it from what he said that there is no question that, if a firm transfers its site and its factory premises, unless the cost of the sale of the assets exceeds the new cost, there will not be any capital charge. That is the sensible thing to do. I have not been able to find reference to—and I should like to hear from the Minister —what the effect of this tax will be on the fairly large number of foreign registered companies here. Heretofore foreign registered companies were subject to ordinary corporation tax and not to ordinary income tax. I understand from inquiries I made some years ago that there are very good reasons for this. I should like to know from the Minister how such companies will be affected. Will the full rate of corporation tax now be applied to them, or will the preference they have had of being registered abroad still stand for such companies?

I should also be interested to hear from the Minister how the tax-free incentives on exports which apply to a number of public companies established in the past 20 years will be dealt with in the matter of dividends to investors. That seems to me to be an aspect which will be affected by this comprehensive legislation. Like Deputy Colley, I welcome the up-dating of the taxable provisions on companies and the provision of a simpler system which will be easier to grasp by business people and people in industry.

Mr. Esmonde

I welcome this Bill. I was glad to note the constructive approach of the two Opposition speakers. I want to deal with one matter to which the Minister referred very carefully, that is, the harmonisation of corporation tax with company taxation in the EEC. The Minister quite rightly said that the proposed draft directive has been before the Joint Committee on Secondary Legislation of the EEC. I am a member of that committee. It was part of our function to consider draft regulations. I am glad this Corporation Tax Bill provides for an exemption in relation to export reliefs and also to the Shannon free area.

As a member of that committee and as a Member of this House I am not at all happy with the proposed draft directive in view of the fact that, although verbal assurances were given by some officials of the EEC, they did not spell out specifically what our position is in relation to these two areas of relief which are so vitally important for native Irish industry. We must bear in mind the fact that we have a sort of chronic shortage of capital here. We have this as a result of foreign occupation over the years. It has been a hard job to build up native industry. That is not the end of the story.

If we are a partner in the EEC I would imagine that, if there is to be a harmonisation of taxation, it must be harmonisation in the sense that it is relative to companies standing on an equal footing, or in an equal environment and in equal economic circumstances. I cannot see that being the case so far as this country is concerned at the moment in relation to its development, its wealth, and particularly its capital wealth, and in relation to its corporate life so far as companies are concerned. This has been added to and aggravated by the failure of our partners in the EEC to realise the real necessity for proper regional fund allocations to this country. I understood, and I think every Member of the House understands the case to be that the regional fund was for the purpose of improving the infrastructure of this country to bring us up to some comparability with our EEC partners. Any talk of a harmonisation of corporation tax in relation to our EEC partners and ourselves must make allowance for this very great disparity in relation to our wealth when compared with that of our partners in the EEC. We can be compared on an area basis or on a per capita basis, and on both bases it is obvious that we lack the necessary wealth to bring us within the category where any harmonisation of corporation tax could have any real relevance or, for that matter, justice.

This is important because it will affect our employment position and our immediate economic future. If we have to bear unreal burdens which we have not got the wealth to bear, then the matter becomes serious. But at least I am heartened on this aspect of the matter, that before that directive can become effective and before harmonisation can be applied to this country under Rule 100 of the Treaty of Rome, there has to be unanimity. Therefore I am very pleased to see that the Minister has these reliefs for our native industry and particularly for our exporting industries incorporated for and provided for in this Bill.

There are many other matters which I would like to refer to here but, as the two previous speakers have quite rightly said, this is principally a Committee Stage Bill. I understand there will be a special committee to deal with this matter and there will be a lot of technicalities to be dealt with. I just want to put on record a point in respect of Deputy Colley's reference to definitions. Deputy Colley is a lawyer like myself, and I hate definitions if ordinary language can be given its meaning. In Part XV of the Bill there are quite a number of definitions dealing with technical phraseology giving a special meaning, and I think they also appear in other parts of the Bill where they are necessary. It may appear necessary on Committee Stage to provide these definitions.

Let me, however, put the clock back a little. In old legislation—I am talking about Acts at the beginning of the century—the habit of draftsmen used to be to put the definitions at the end of the Bill instead of in the front of the Bill. Where you are dealing with a technical Bill like this it might be a good idea to bear that in mind in case we do run into any difficulties on Committee Stage. They are likely to arise on a technical Bill of this sort, although it is virtually the reorganisation of existing taxes to be brought under the same umbrella both as to imposition and as to time and date of accounting and imposition, which will be a considerable help to the commercial world instead of dealing with, in some cases, three or four computation dates for the one year, which companies had to struggle with so far. At least we will get that out of the way and it will be of some assistance to the accountancy profession and to those responsible for business in this country.

Another matter Deputy Colley referred to is the statute of limitations. I think ten years is the period on that; I am not certain, as I have not got verse and scripture with me. Of course there is one exception; for anything that is fraud, there is no statute running in those circumstances.

Minister for Finance (Mr. R. Ryan)

I am grateful for the manner in which the House accepted the recommendation that the Second Stage of this Bill pass. As has very properly been recognised, it is primarily a Committee Stage Bill. Indeed, I suspect that were I to endeavour to answer expansively the several questions put to me, the explanations might be even more confusing than the text of the Bill and the explanatory memorandum that went with it. If we are able to handle specific queries at the special committee, I believe far more progress will be made and the explanations will be more intelligible. However, I would like to deal with a few general issues.

This Bill was circulated on 27th November and since that date very few representations have been received. That is significant when one bears in mind that the people who are primarily concerned with this Bill are professional lawyers and accountants. The fact that there have been so few representations, is, I think, the direct result of the very full discussions which took place, the very full examination which was made of all the issues involved since 1971 or so, and the consultations going over a period of years with the professional and business organisations concerned. Because of the fewness of the representations made since the publication of the Bill, it may be not unreasonably assumed that there is a substantial body of opinion in support of the Bill, and any particular issues which may be raised by way of representations or by Deputies themselves will, of course, receive our very earnest consideration, because our anxiety is to produce a Bill which will stand up without amendment, if possible, for a long time to come.

I accept the point which has been made that we have had a considerable body of taxation legislation in recent times which increases the burden on the people who are obliged to operate the system both in the private and public sectors. It is our anxiety to reduce the workload involved in the operation of taxation measures. This Bill is certainly frightening in its dimensions. As Deputy Brugha said, it has 188 sections, 257 pages, five Schedules, and refers to no fewer than 42 statutes which are already on the books. But to the practitioner it is not so frightening because a great deal of what is referred to is already well known to them. The reason why the Bill has not got such extensive definition sections as the legislation to which Deputy Colley referred is that there is no need for many of the definitions that are included in other legislation because they are carried automatically into this Bill without having to be specifically referred to. However, where identification is required, such identification is specifically given. I would refer in particular to section 1 (5) and to section 115 itself which deals very extensively with over three pages of interpretations. The other provisions relating to income tax, law and capital gains will apply without having to be introduced word by word into this legislation.

Deputy Esmonde was correct in saying that the ordinary provisions in relation to the collection of arrears mean that the Revenue Commissioners may go back ten years, except in cases of fraud, where there is no limitation other than the foundation of the State.

I am not going to pursue this theological question of the discretion of the Revenue Commissioners, the manner in which they exercise it and the appropriateness of their being invested with this discretion. I always greatly appreciate the contributions made by Deputy de Valera, but I was glad he was not here today lest the utterances of Deputy Colley might have set him off on an oration which, while it would certainly contribute to our thinking, would not help the expeditious passing of this legislation, and it is important to have this legislation through.

As I mentioned, we circulated the Bill on 27th November, but in order to afford every Member of the House and the public in general an adequate opportunity of studying the Bill before the debate began, we did not seek to have a debate on it before now. There has been that nine to ten weeks since the publication of the Bill for people to study it and reflect upon it. I am looking forward to the co-operation of the Members of the House in getting the Bill through the special committee, and the later Stages through this House, as soon as possible. It has to be in operation before the commencement of the next tax year. This urgency, I should like to emphasise, is in response to public demand. There has been a certain expression of regret about the fact that the legislation has not already been finalised because people are anxious to have available to them the relief measures which are being provided in this legislation. There is also a general welcome for the reform which the Bill contains.

In addition, as the House will appreciate, a great deal of the financial and commercial operations which operate here are affected by British legislation and by the double taxation agreements between Ireland and Great Britain. The present arrangements are due to expire on 5th April of this year and it is most desirable, therefore, that we should not create a vacuum between the termination of existing arrangements and the introduction of new ones. There will be a need for alterations in the legislative provisions in Britain and it is, therefore, highly desirable that our own intentions would be declared before the preparation of the British Finance Bill, which will, subject to agreement, contain the necessary sections to reflect what we are doing.

This is something that is much desired by the business community and I am sure the House will be at one with me in being anxious to ensure that there is a smooth operation in the introduction of this new legislation and the special arrangements which have traditionally existed between ourselves and our nearest neighbour. Needless to say, I am not suggesting that we should treat this Bill casually and not give it a thorough examination. I am sure Members will endeavour to apply their own expertise, and the advice which may be given to them by others, to a study of this Bill and to its improvement. I assure the House that everything I can do to accommodate Members in any request they may make regarding the improvement of the Bill will be done. The urgency of the matter is obvious because of the short time between now and the commencement of the next financial year. Not only have we to get it through this House but we also desire that we would benefit by the good advice of our brethren in the other House.

I doubt very much if some of the anxieties expressed about cash flow problems will arise. To some extent the Bill is neutral in its impact. It is not making very material changes in the overall impact of tax; it is simply providing a better way for its collection. Deputy Colley expressed some reservations about making secretaries of companies primarily liable for the payment of tax and for rendering the necessary accounts. We have had this debate in relation to the capital taxation measures but there cannot be any serious argument against making the secretary of a company primarily liable. That is not to say that he has not got his rights over against other people who may have a liability but it will clearly create an unworkable system if we were to omit to make the chief officer of a company the person primarily responsible for the furnishing of information, the payment of the tax and the discharge of such legal obligations as apply to corporations.

I agree with Deputy Esmonde on the point he made regarding our acceptance of EEC obligations. This obligation which the EEC are proposing to impose on all countries, to adopt a common system of company taxation, like many other proposals of the Commission, imposes on the Community an obligation to facilitate countries like us that are less well off when compared with many of our neighbours. It imposes an obligation to assist us financially in the manner in which we were led to believe we would be assisted when we joined the Community. Deputy Esmonde is correct in expressing his disappointment at the failure of the Community to discharge that obligation towards the less favoured members of the Community. If the obligations which the Community are seeking to impose are to be equal there is a clear obligation on the Community to provide equal means whereby those obligations can be discharged. We are strengthened in our determination to bring this about, as far as the Government are concerned, by the unanimity of opinion in this House, as is so frequently expressed, and by the unanimity in the Joint Committee on the Secondary Legislation of the European Communities which do very valuable work for the House and the country in studying the various draft directives which the Commission put before the Council from time to time. I suggest that the House pass this Stage and refer the Bill to a special committee. Subject to a discussion between the Whips we propose to bring forward immediately the necessary resolution which will fix the date of the first meeting of the special committee.

Question put and agreed to.

An Leas-Cheann Comhairle

The Order for Committee Stage will be made at a later date.