Vol. 290 No. 12
I move amendment No. 1:
In page 6, line 33, after "authorised by them", to insert "in writing".
It will be recalled that this point was raised on Committee Stage and I agreed to bring in this amendment. It means that persons who are authorised by the Revenue Commissioners for the purposes of section 3, that is, the power to require the production of books and accounts, must be authorised in writing by the Revenue Commissioners.
(Dublin Central): There is no time limit laid down as regards when the document should be delivered. Could there not be a reasonable time limit given? A letter tonight and the Revenue Commissioners could say they wanted the return the next morning.
I would not consider that to be reasonable, and I am satisfied the courts would not consider such notice reasonable either. I do not want to mention any particular case but there was a famous one recently affecting a State body, not the Revenue Commissioners, where the courts held that notice given to do a certain thing was not reasonable, although I think the notice was as much as seven days, and that seven days covered a Bank Holiday weekend. The Revenue Commissioners would not attempt to act upon the basis of such short notice.
(Dublin Central): Would it not be better to insert “not less than seven days” or “five days”? At least it would remove that ambiguity, that it could be by return of post, which would create a problem.
I would say that the aggrieved party in such a case would quickly challenge the Revenue Commissioners and if the person failed to comply with notice so shortly given, I feel certain no court would, in fact, hold that the person was in the wrong in failing to respond in that way. I do not think it would strengthen it in any way if you put in the words "shall give reasonable notice", because notice, if unreasonable, would not be tolerated.
I move amendment No. 2:
In pages 17 to 23, to delete from line 42 in page 17 to line 39 in page 23 and to substitute the following:
21.—In relation to any payment made on or after the 6th day of December, 1976, the Finance Act, 1970, is hereby amended by the substitution for section 17 of the following section:
‘17 (1)—In this section—
"certificate of authorisation" means a certificate issued under subsection (7);
"construction contract" means a contract (not being a contract of employment) whereby a person (in this section referred to as "the contractor") is liable to another person (in this section referred to as "the principal")—
(a) to carry out construction operations; or
(b) to be answerable for the carrying out of such operations by others, whether under a contract with him or under other arrangements made or to be made by him; or
(c) to furnish his own labour, or the labour of others, in the carrying out of such operations;
"construction operations" means operations of any of the following descriptions—
(a) the construction, alteration, repair, extension, demolition or dismantling of buildings or structures;
(b) the construction, alteration, repair, extension or demolition of any works forming, or to form, part of the land, including walls, road-works, power-lines, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage;
(c) the installation in any building or structure of systems of heating, lighting, air-conditioning, sound-proofing, ventilation, power supply, drainage, sanitation, water supply, burglar or fire protection;
(d) the external cleaning of buildings (other than cleaning of any part of a building in the course of normal maintenance); the internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, extension, repair or restoration;
(e) operations which form an integral part of, or are preparatory to, or are for rendering complete such operations as are described above, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site-restoration, landscaping and the provision of roadways and other access works;
(f) operations which form an integral part of, or are preparatory to, or are for rendering complete, the drilling for or extraction of minerals, oil, natural gas or the exploration or exploitation of natural resources;
(g) the haulage for hire of materials, machinery or plant for use, whether used or not, in any of the aforesaid construction operations;
"construction payments card" has the meaning assigned to it by subsection (8);
"construction tax deduction card" has the meaning assigned to it by subsection (5);
"proprietary director" and "proprietary employee" have the meanings assigned to them by section 226 of the Income Tax Act, 1967;
"qualifying period" means the period of three years, or such shorter period as the inspector may allow, ending on the 5th day of April in the year preceding the year of assessment in respect of which a certificate of authorisation is sought.
(2) Subject to the provisions of this section, where in the performance of a construction contract, whether made before or after the commencement of this section, in the case of which the principal is—
(a) a person who, in respect of the whole or any part of the construction operations to which the contract relates, is himself the contractor under another construction contract, or
(b) a person carrying on a business which includes the erection of buildings, or
(c) a local authority, a public utility society within the meaning of section 2 of the Housing Act, 1966, or a body referred to in subparagraph (i) or (ii) of section 12 (2) (a) or section 19 or 45 of that Act, or
(d) a Minister of State, or
(e) any board established by or under statute, or
(f) a person who carries on any gas, water, electricity, hydraulic power, dock, canal or railway undertaking,
the principal makes a payment to another person (whether the contractor or not and hereinafter referred to as "the sub-contractor"), the principal shall deduct from the payment and pay to the Collector tax at the rate of 35 per cent, of the amount of such payment.
(3) In computing, for the purposes of Schedule D, the profits or gains arising or accruing to a sub-contractor who receives a payment from which tax has been deducted in accordance with subsection (2), the payment shall be treated as being of an amount equal to the aggregate of the net amount received after deduction of the tax and the amount of the tax deducted.
(4) In so far as a sub-contractor is chargeable to tax in respect of any profits or gains arising or accruing to him from a trade or vocation, he shall be treated as having paid on account of tax so chargeable any tax which was deducted from payments brought into account in the computation of those profits or gains and which has not been repaid or for which a set-off has not been given; and the Revenue Commissioners shall make regulations for giving effect to this subsection and those regulations shall in particular include provision—
(a) as to the manner in which, and the periods for which, tax deducted under this section is to be brought into account as a sum paid on account of the liability to tax of a sub-contractor,
(b) for repayment, on due claim made for a period (hereinafter referred to as the repayment period) commencing on the 6th day of April in a year of assessment and ending on the 5th day of the month following the date of the payment or, if the payment was made on or before the 5th day of a month, ending on the the 5th day of that month, of such portion of the tax deducted from payments received by a sub-contractor during the repayment period (reduced by any amount of such tax repaid or set-off) as appears to the Revenue Commissioners to exceed the proportionate part of the amount of tax for which he is liable, or is estimated to be liable, for that year of assessment, and
(c) for repayments in cases where the total of the tax deducted from payments received by a sub-contractor and not repaid to him exceeds the aggregate of—
(i) the amount of tax for which he is liable, and
(ii) any amount which he is liable to remit—
(A) Under the Value-Added Tax Act, 1972,
(B) under Chapter IV of Part V of the Income Tax Act, 1967, and
(C) in respect of pay-related contributions under the Social Welfare (Pay-Related Benefit) Act, 1973.
(5) The Revenue Commissioners shall make regulations with respect to the assessment (including estimated assessment), charge, collection and recovery of tax deductible under subsection (2) and the regulations may, in relation to such tax, include any matters which might be included in regulations under section 127 of the Income Tax Act, 1967, in relation to tax deductible under Chapter IV of Part V of the said Act and, without prejudice to the generality of the foregoing, regulations under this subsection may include provision for—
(a) the issue, recall or cancellation of certificates of authorisation and the surrender of the certificates;
(b) the keeping by principals of such records as may be specified in the regulations, the keeping by principals of construction payments cards and the entry thereon of such particulars as may be specified in the regulations, the keeping by principals of cards (in this section referred to as "construction tax deduction cards") in such form as may be prescribed by the regulations and containing particulars of any deductions under subsection (2) and the entry thereon of such other particulars as may be specified in the regulations, the making to the Revenue Commissioners of such returns relating to payments made by principals as may be specified in the regulations and the inspection of the said records (including the said cards);
(c) the keeping by sub-contractors of such records as may be specified in the regulations containing particulars of payments received by them, and the inspection of the said records;
(d) the completion by principals of certificates of tax deducted from payments made to sub-contractors:
(e) the sending to sub-contractors, in cases where tax was deducted under subsection (2) from payments made to them, of statements containing particulars of their liability (if any) to tax for a year of assessment.
(6) The provisions of every enactment and of the Income Tax (Construction Contracts) Regulations, 1971, which apply to the recovery of any amount of tax which a principal of the kind referred to in subsection (2) is liable under this section and the said Regulations to pay to the Collector shall apply to the recovery of any amount of interest payable on that tax as if the said amount of interest were a part of that tax.
(6A) Where an amount of tax which a person who is or is deemed to be a principal of the kind referred to in subsection (2) is liable under this section and any regulations under subsection (5) to pay to the Collector is not so paid, simple interest on the amount shall be paid by the person to the Collector and such interest shall be calculated from the date on which the amount became due for payment and at a rate of one per cent for each month or part of a month during which the amount remains unpaid.
(6B) Subsection (6A) shall apply to tax recoverable from a person by virtue of a notice under Regulation 12 (1) of the Income Tax (Construction Contracts) Regulations, 1971, as if the tax were tax which the person was liable under the said Regulations to remit for the last income tax month (within the meaning of the said Regulations) of the year, or, as appropriate, of the months ending in the accounting period, to which the notice relates.
(7) (a) The Revenue Commissioners shall, on application to them in that behalf by a person, issue to the person a certificate (referred to in this section as "a certificate of authorisation") if they are satisfied—
(i) that the person is or is about to become a sub-contractor engaged in the business of carrying out construction contracts,
(ii) that the business is or will be carried on from a fixed place of business established in a permanent building and has or will have such equipment, stock and other facilities as, in the opinion of the Revenue Commissioners, are required for the purposes of the business,
(iii) that, in connection with the business, records to which section 6 (2) of the Finance Act, 1968, refers are being or will be kept, and any other records normally kept in connection with such a business are being or will be kept and are being or will be kept properly and accurately,
(iv) that—
(A) the person, any partnership in which he is or was a partner and any company (within the meaning of the Companies Act, 1963) of which he is or was a proprietary director or proprietary employee,
(B) in a case where the person is a partnership, each partner, and
(C) in a case where the person is a company, each director of the company and any person who is either the beneficial owner of, or able, directly or indirectly to control more than 15 per cent. of the ordinary share capital of the company,
has throughout the qualifying period complied with all the obligations imposed on him by the Tax Acts, or the Acts relating to corporation profits tax in relation to—
(I) the payment or remittance of the taxes required to be paid or remitted under those Acts, (II) the delivery of returns, and
(III) requests to supply to an inspector accounts of, or other information about, any business carried on by the said individual, partnership or company, as the case may be,
(v) that there is good reason to expect that the said person, partnership or company will comply with the obligations referred to in subparagraph (iii) in relation to periods ending after the date of termination of the qualifying period.
(b) A person in respect of whom the Revenue Commissioners are not satisfied in relation to any one or more of the matters specified in subparagraphs (i) to (iv) of paragraph (a) shall nevertheless, for the purposes of the issue of a certificate of authorisation, be treated as a person in respect of whom they are so satisfied if the Revenue Commissioners are of the opinion that, in all the circumstances, his failure ought to be disregarded for those purposes.
(c) In this subsection "the Acts relating to corporation profits tax" means Part V of the Finance Act, 1920, and the enactments amending or extending that Part.
(8) (a) Where a sub-contractor to whom a certificate of authorisation has been issued produces it to a principal, the principal shall apply to the Revenue Commissioners for a card (in this section referred to as "a construction payments card") in respect of the sub-contractor.
(b) If, on such application, the Revenue Commissioners are satisfied that a construction payments card in respect of the sub-contractor aforesaid ought to be issued, to the principal aforesaid, they shall issue such a card to such principal who, upon receiving the card, shall, subject to the provisions of subsection (9), be entitled during the income tax year (or the unexpired portion thereof) to which the sub-contractor's certificate of authorisation relates to make payments to the sub-contractor named in the card without deduction of tax.
(9) (a) Where it appears to the Revenue Commissioners that—
(i) a certificate of authorisation was issued on the basis of false or misleading information,
(ii) a certificate of authorisation would not have been issued if information, obtained subsequent to its issue, had been available at the date of its issue,
(iii) a person to whom a certificate of authorisation was issued has permitted it to be misused,
(iv) a person to whom a certificate of authorisation was issued has failed to comply with any of the obligations imposed on him by the Tax Acts or by any regulations made thereunder, or
(v) the business of carrying out construction contracts in relation to which the certificate of authorisation was issued has ceased to be carried on by the person to whom the certificate was issued,
they may, at any time, cancel the certificate and give notice in writing to that effect to any principal.
(b) Where a principal receives a notice under paragraph (a), he shall—
(i) deduct tax, in accordance with the provisions of subsection (2), from any payments made to the person to whom the notice relates on or after the date of receipt of the notice, and
(ii) return to the Revenue Commissioners any construction payments cards issued to him in relation to the person aforesaid and any construction tax deduction card kept by him in relation to such person.
(c) The Revenue Commissioners shall advise a person in relation to whom a notice under paragraph (a) was issued of the issue of such notice and shall require him to return to them forthwith the certificate of authorisation issued to him.
(10) (a) Where any person—
(i) for the purpose of obtaining a certificate of authorisation makes any false statement or furnishes any document which is false in a material particular,
(ii) disposes of a certificate of authorisation otherwise than by the return of the said certificate to the Revenue Commissioners,
(iii) fails to return a certificate of authorisation to the Revenue Commissioners when required to do so pursuant to subsection (9) (c),
(iv) is in possession of a certificate of authorisation that was not issued to him by the Revenue Commissioners, or
(v) produces to a principal a certificate of authorisation after he has been advised by the Revenue Commissioners of the issue of a notice under subsection (9) (c),
he shall be guilty of an offence and shall be liable, on summary conviction, to a fine of £500 or, at the discretion of the court, to imprisonment for a term not exceeding 6 months or to both the fine and the imprisonment.
(b) Any person who aids, abets, counsels or procures—
(i) the obtaining of a certificate of authorisation by means of a false statement,
(ii) the use by any person, other than the person to whom it was issued by the Revenue Commissioners, of a certificate of authorisation, or
(iii) the production to a principal of a document that is not a certificate of authorisation but purports to be such a certificate,
shall be guilty of an offence and shall be liable, on summary conviction, to a fine of £500 or, at the discretion of the court, to imprisonment for a term not exceeding 6 months or to both the fine and the imprisonment.
(c) Any person—
(i) who fails to enter on a construction payment card or construction tax deduction card such particulars as are required to be entered thereon by virtue of this section and any regulations made thereunder,
(ii) who fails to return to the Revenue Commissioners the said construction payments card or construction tax deduction card pursuant to subsection (9) (b),
(iii) who returns to the Revenue Commissioners any such card on which are entered particulars which are incorrect in any material particular, or
(iv) who fails to comply with any provision of regulations made under this section requiring him to keep or produce any records or documents,
shall be guilty of an offence and shall be liable, on summary conviction, to a fine of £500.
(11) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next twenty-one days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.
(12) A person carrying on a business shall not be deemed to be a person of a kind specified in subsection (2) (b) by reason only of the fact that, in the course of that business, he erects buildings for the use or occupation of himself or employees of his.
(13) In relation to a case where a sub-contractor is chargeable to corporation tax, unless the context otherwise requires, references in this section to tax shall include references to corporation tax and references to a year of assessment shall include references to an accounting period.".
As indicated on Committee Stage this amendment substitutes a consolidated version of section 17 of the Finance Act, 1970, for that section as now amended by section 21 of the Bill. As a result, all the legislation governing payments to sub-contractors as from the 6th December, 1976, is being made available in readily accessible form. The consolidated version of section 17 differs in a number of very minor respects from the section as amended on Committee Stage. These are drafting amendments only.
In subsection (2) the reference to 7s. Od., which is obsolete, has also been deleted. In subsection (5) (b) a reference to "construction payment cards" has been amended to "construction payments cards" to conform with the definition in subsection (1). In subsection (6) what was formerly subsection (6) has been deleted and replaced by the former subsection (6) (c). The old subsection (6) gave the Revenue priority in relation to sub-contractors tax in cases of bankruptcy. This right is now provided for in section 14 of the Bill and the old subsection (6) is now unnecessary. It will be noted that although, in general, the subsections are numbered consecutively, two subsections retain their former numbers—(6A) and (6B). This is because there are references to these subsections and to subsection (7) in other Finance Acts, section 35 of the Finance Act, 1973, and section 28 of the Finance Act, 1975, and retention of these numbers is required. The succeeding subsections which were formerly numbered subsections (7A) to (11), inclusive, are now renumbered (8) to (13).
I move amendment No. 3:
In page 33, after line 49, to insert the following:
"(6) Where—
(a) the amount of tax referred to in subsection (5) (b) falls to be computed and the income in respect of which the tax is chargeable consists of or includes income from any source or sources which is to be computed on the basis of the actual amounts receivable in the year of assessment, or where any deductions allowable on account of any annual sums paid out of profits or gains of a person are to be allowed as deductions in respect of the year in which they are payable, and
(b) the appeal is made before the end of the year of assessment to which the assessment relates,
the said amount shall, if the person assessed so elects at the time of determination of the appeal, be computed as if—
(i) the amount of the income from each of the said sources were equivalent to the amount of the income received from that source in the year immediately preceding the year of assessment, and
(ii) the amount of deductions so allowable were an amount equivalent to the amount of those deductions in the year immediately preceding the year of assessment.
(7) Section 416 (1) of the Income Tax Act, 1967, shall have effect as if for ‘twenty-one days' there were substituted ‘thirty days'.".
This amendment inserts two new subsections in section 30 which take account of two points raised by the accountancy bodies in relation to the new arrangements for payments on account in appeal cases, and it will be recalled that I referred to these on Committee Stage. The cases are: (1) that it may not be possible for a taxpayer to estimate with any degree of accuracy what 80 per cent of the tax ultimately found to be due is likely to be, in cases where a substantial part of his income is taxed income, the amount of which will not be known until after the end of the year in question; and (2) the time limit of 21 days for appeals is too short, now that the taxpayer has to estimate the tax ultimately payable and will be depending on his tax agent for advice. The amendment meets these points, first, by giving taxpayers the option of taking the taxed income and charges of the preceding year instead of those of the current year for purposes of the 80 per cent calculation; and, secondly, extending to 30 days the period within which the appeal may be made.
The new subsection (6) will facilitate taxpayers with taxed income who appeal against an assessment and who then have to calculate the amount which will be not less than 80 per cent of their ultimate liability.
Income tax appeals are normally against assessments under Schedule D where the basis of assessment is the income of the preceding year. Where that is the only income involved, it is possible for the taxpayer to estimate reasonably accurately the total tax liability which will be chargeable on determination of the appeal. By ensuring that the specified amount will be at least 80 per cent of that final liability and by complying with the other requirements the taxpayer can avoid the interest charge on late payment of the tax.
Since 1974, under the unified system of personal taxation, taxed income, which is chargeable to tax on an actual basis, is charged to tax under Case IV of Schedule D for purposes of the higher rates of income tax and credit is given for the tax suffered by deduction. A taxpayer whose income consists of or includes taxed income the amount of which may not be known until after or shortly before the end of the year of assessment may be in a difficult position in calculating—at the time he receives notice of assessment—80 per cent of his final liability, which he has to do to avoid the charge to interest on late payments.
The amendment puts such a taxpayer on the same footing as other taxpayers in that he may elect at the time of determination of the appeal that the charge to interest will not apply if the specified amount is not less than 80 per cent of the tax which would be chargeable if the taxed income to be included in the assessment was in the same amount as the taxed income of the preceding year. The net result is that the taxpayer with taxed income will be in as favourable a position for specifying a sufficient amount at the time of his appeal as the taxpayer whose assessment is based solely on income of the preceding year. The new subsection (7) extends from 21 to 30 days the period within which a person must give notice of appeal against an assessment.
Does that apply in any case?
Yes.
This amendment goes some of the way to meet some of the objections raised on this section. The Minister should not imagine that it meets all the legitimate points raised. It is an improvement on the section as originally drafted. One has only to consider the situation in which in a contracting economic world an individual taxpayer or a trading company finds that their profits are considerably reduced from the previous year in order to see that the option of calculating the 80 per cent necessary on the basis of the previous year's income is not a real option. If your choice is either to pay 80 per cent based on the previous year's income or, knowing that your income is considerably reduced in the current year but not knowing precisely how much it is because of the dates on which you do this and the ending of the financial year of accounting, choosing to pay what is clearly too much or engaging in what I describe as the Russian roulette required under this section, that is not a real option. While this amendment is an improvement it does not meet anything like all the legitimate complaints made about the section as drafted.
(Dublin Central): I should like to reiterate what Deputy Colley said. This is an improvement but I cannot see any reason why this section was ever introduced. As I stated on Committee Stage, the payment of accounts as regulated between the Revenue Commissioners and the client worked satisfactorily. The Minister is now looking for 80 per cent of last year's profits. It can happen in public and private businesses that profits have declined by 55 per cent and 60 per cent. We have seen a company make a profit of £500,000 in one year and the next year it is reduced to zero. A company may not have its accounts finalised and will not be able to put the case to the commissioners that profits have declined by 50 to 60 per cent. In that case would the commissioners still be justified in saying: “This was your profit last year and we are taking 80 per cent of your profits.” In such a situation that could create a problem.
I readily acknowledge that this is not a perfect solution which will cover all eventualities. I do not think we could devise such a provision but we are giving a number of options. If the performance of a company is so dramatically worsened as described by Deputy Colley and Deputy Fitzpatrick, I am sure the taxpayer will take that into account when making a reasonable calculation. They are being given 20 per cent to play around with as a margin of error.
We obviously had to stop the system which people were abusing to get extended credit for themselves without paying interest. On Committee Stage, in relation to other sections, there appeared to be no serious disagreement on that point. It is simply a question of what machinery should be provided to prevent a person being unfairly charged to interest. However we must bear in mind that there are two sides to every coin. On the other side, if a person is assessed at too high a figure and appeals against it he will get a refund of the excess plus interest at 18 per cent, not subject to tax. That is not a bad investment.
I move amendment No. 4:
In page 70, Fifth Schedule, Part II, to delete "other than under" and to substitute "otherwise than under".
Part II of the Fifth Schedule specifies certain repeals affecting the Value-Added Tax Act, 1972, as from the 1st March, 1976.
This is a technical amendment which brings up a technical point. As I may not be able to get in within the time, I want to get in now. I have just been presented with the Finance Bill as amended in Committee. I congratulate the Minister on the speed with which he had it printed. Look at the size of that document. We got as far as section 62 in Committee. To have that document printed so speedily, so soon after the Committee Stage, is a wonderful achievement. In my view this is a gross insult to this House. It makes us simply a rubber stamp. It is assumed we have done all our business and passed it. I know the Minister has the boots behind him to put this Bill through, but here we have a printed copy of the Finance Bill as amended in Committee, when the Committee Stage was not completed until 4 o'clock.
Twenty minutes ago.
This is a wonderful job of printing and getting the job done, but as I said, it is an insult to this House.
With respect——
It was not passed when it was printed.
As I said to Deputy de Valera yesterday or this morning, I will give him a reward for eloquence, whatever about giving him one for practicality. We produced this, as a courtesy to the House, in a very short time——
I understand that.
——the House having agreed to take the Report Stage at 4 o'clock today. To produce this and incorporate amendments which the House had to consider involved a very large number of dedicated public servants and quite a large number of very dedicated and skilled people in the printers. I know that Deputy de Valera is not denigrating their efforts——
Or their intention.
I know he appreciates to the full that this could not be available unless there was a certain amount of reasonable anticipation and it was proper and helpful that we had that reasonable anticipation. Certainly all of us would prefer if our sittings and affairs could be better arranged so that we could have a break of a week between one Stage and another. However, having regard to the pressure of business and the days on which the Dáil sits—we are sitting longer now than we used—as well as the legal constraints that are on us to pass this Bill before a certain date I think a really magnificent job has been done. While I acknowledge the Deputy's right to speak as he did I do not think an outburst of that kind contributes to the sensible working of this House. It has to involve a certain amount of give and take and an understanding of the tremendous pressures that exist. I should like to use this occasion—I am sure Deputy de Valera will endorse what I say—to thank those who performed this miracle even if it involved a certain amount of anticipation as to what this House might or might not do.
I endorse what the Minister has said but I also say it emphasises that this House has been reduced to a futility, to a rubber stamp.
