Has the Chair received any amendments in relation to section 1?
Finance Bill, 1977: Committee Stage.
Question proposed: "That section 1 stand part of the Bill."
The first amendment I have is in relation to section 6.
There are other amendments on the way. They were tabled, in accordance with Standing Orders, immediately on the conclusion of Second Stage. I do not think they relate to section 1.
I can only tell the Deputy that the first amendment I have is in relation to section 6.
I hope the amendments are circulated before we reach the sections they relate to.
They have not come to me but I shall do my utmost to accommodate the Deputy. I have no idea of what is involved.
With regard to the word "services" in this section I should like to know if that is simply a repeat of another section?
It is the original income tax section. The effect of the section is automatically to adjust the income limit of dependent relatives according to the old age pension.
Is the wording the same?
Yes, or similar in effect. I do not want to be had up on some modification of the language but, as I understand it, it is similar.
It has come to my notice, on reading the section, that one of the amendments I have tabled relates to section 1.
I have no knowledge of those amendments.
I want to make it clear that I am not in any way suggesting any criticism of the Chair but it is an illustration of the kind of difficulty into which we are forced because of the guillotine motion. The amendments were tabled in accordance with Standing Orders immediately on the conclusion of Second Stage but it follows, because of what happened, that they have not yet come to the attention of the Chair or the Minister.
I move amendment No. 1:
In page 6, line 33, to delete "£95" and substitute "£105".
The section proposes to increase the income limit for qualification for the dependent relative allowance which is welcome but it does not do anything to increase the amount of the allowance which it is proposed will remain at £95. If we bear in mind that the allowances for a married man, a widow or a widower and a single person are all being increased under section 6 by approximately 9 per cent I suggest that the amount of the allowance for the dependent relative should be increased by the same per cent which I believe would give an allowance of £105.
This section secures that in future the income limit for purposes of the dependent relative allowance, under section 142 of the Income Tax Act, 1967, will be an amount equal to the maximum old age non-contributory pension, that is, the personal rate payable to persons of 80 years and upwards. For this year the limit will be £727 but any future increase in the pension will automatically raise the income limit by the amount of that increase.
The section is being given effect as from 6th April, 1976. Since old age pensions were increased in October, 1976, the existing income limit for 1976-77 must now be raised to the level of the pension for that year— £591. From now on, however, it will not be necessary to bring in a special Finance Bill section to raise the dependent relative income limit each time old age pensions are increased.
The basic provisions of section 142, of the 1967 Act, as now rewritten, secure that if, for any year a taxpayer maintains at his own expense a dependent relative having no income other than—
(i) a non-contributory old age pension, personal rate, including a pension carrying the supplement of £1 per week for pensioners over 80 living alone, or
(ii) an income of equivalent amount from any other source, he will be entitled to an income tax allowance of £95.
The £95 allowance will be reduced by a £1 for each £1 by which the dependent relative's income exceeds the maximum old age pension, at present £727. I want to emphasise that the threshold is £727, not £95. People might think that the effect of the section, as amended, would be that the actual allowance would be £95 and that is not so. The area of exemption is £727, not £95. That means that some part of the dependent relative allowance will be available to the taxpayer for 1977-78 unless the relative's income is £822 or more.
I am grateful to the Minister for outlining the provisions of the section but, as I pointed out, what is involved in the section is an increase in the income limit for the dependent relative allowance. The section does not propose to increase the actual allowance, whatever the income limit may be. The amendment is designed to increase the allowance in roughly the same proportion as it is proposed to increase in section 6 the allowances for single persons, married persons, widows and widowers.
I can understand the object of the Deputy's amendment. I suggest that by increasing the exemptions of the threshold that we are meeting the objective which the Legislature have always tried to meet of exempting such income as is related to old age pension. Therefore, while I naturally sympathise with all ambitions of the Opposition Members to relieve the tax burden—I have given proof of that in this Finance Bill by doing it rather than talking about it— I am afraid it is not possible to accede to the amendment at this stage.
What would it cost?
I have only just received it and I would not like to give any instant costings.
I should have thought that the Minister would have known all these figures to a "T".
I am very accurate most of the time but I always believe in checking.
Give us an estimate.
I prefer to err on the side of caution.
The Minister does not have a clue.
I have.
I think that would be a very accurate estimate of the position. Am I to take it that what the Minister is saying now is that he has finally got round to bringing in a Finance Bill which gives some reliefs, he feels he has done enough and cannot accept that in a case of this kind that the dependent relatives allowance should be increased in accordance with the increases he proposes for married persons, single persons, widows and widowers? If that is what he is saying, then I suppose there is use arguing further.
What I am saying, and have said it all the time, although it annoys some people, is that to relieve the tax burden on one group is to transfer the burden to somebody else.
Not necessarily.
While one can always make a good argument in isolation, one must try to strike a balance. I think we have achieved the right balance here by providing for an automatic adjuster in future rather than having an annual argument in this House over the right level.
Amendment put and declared lost.
Section agreed to.
NEW SECTIONS.
I move amendment No. 2:
In page 7, before section 2 to insert a new section as follows:
"2.—Section 119 of the Income Tax Act, 1967, is hereby amended by the substitution of `£6,500' for `£1,500' in each place where it occurs.
It will be appreciated that I, under the guillotine motion, like the Minister and other Members, find it rather difficult to deal with these matters in present circumstances. I have a little difficulty in locating my notes on these amendments.
The object of this amendment is to increase from £1,500 to £6,500, the sum which was laid down in 1958 as the test of what is a higher paid employee. I repeat this figure was fixed in 1958. Over the years it has been dropping but in the last few years because of inflation the figure has become unrealistic. To suggest that somebody earning £1,500 a year is "higher paid" is so ludicrous that I do not think anybody would attempt to argue the case. I have drawn the Minister's attention to this matter on a few occasions—on the budget debate and on the Second Stage of this Bill.
Section 2 relates to the method by which benefit in kind from the use of cars provided by employers is assessed. To suggest that somebody with an income of £1,500 is higher paid and, therefore, any benefit in kind he gets from a car provided by his employer is clearly a perk over and above his already high salary and should be treated accordingly for taxation purposes, is self-evidently a ridiculous proposition in today's terms. I hope the Minister will not have any difficulty in accepting, having regard to the enormous rate of inflation in recent years, that it is simply not justifiable in any circumstances to leave the figure at £1,500.
The suggestion in the amendment of increasing this figure to £6,500 is reasonable having regard to the fall in the value of money since that time. If the Minister wanted to haggle about the figure, I would not haggle too much with him, but I hope he will have no difficulty in accepting the proposition that the figure of £1,500 needs to be substantially increased.
As I said in relation to the last observations of the Deputy, every tax argument considered in isolation looks very convincing, but you have to try to strike a balance. If you were to correct each anomaly on its own isolated merits you would soon end up with the situation in which there would appear to be no revenue at all. I am sure the two former Finance Ministers present, Deputy Colley and Deputy Haughey, know what I mean. Even if you try to correct one anomaly, you would probably generate another one.
I would like to refer to the Seventh Report of the Commission on Income Taxation published in 1962. It said:
If we are to apply provisions in an even-handed manner to all taxpayers there should be no specific limit. We should not say that we will not look at benefits in kind if they are under a certain figure. Benefits in kind could be so inflated as to be of far greater value than the nominal income received by people. The proper thing to do is to look at the benefits in kind, to see what value they have and putting all those things together, to see if a person is within a certain tax bracket and to tax him accordingly
I should like to make a correction there; those words of wisdom were spoken by me last year and are not actually in the commission's report itself but——
They are much more impressive since they come——
From the Minister, yes.
This is the ultimate, the Minister quoting himself.
The merit of all argument is to be judged on the content of the argument not on the person by whom the views are advanced. Section 119 of the Income Tax Act, 1967, certainly provides for benefits in kind legislation to apply only to those employees whose emoluments amount to £1,500 or more. Certainly, frequent representations were made to Deputy Colley, as I know, and to Deputy Haughey also on the question of increasing this threshold and the threshold has been increased in an adjacent island but the question was very carefully considered by the Commission on Income Taxation in 1962 and they considered—I am sure very properly— that there should be no artificial limit, no limit selected out of the air as it were. We all know that if the Oireachtas ever attempt to strike what they consider to be at that time the right limit, that limit seldom remains the correct one for any significant period. The correct thing is to leave the matter in such a way as to enable the Revenue Commissioners in assessing a taxpayer's liability to take account of various movements that have taken place since the legislation was first passed. I would hesitate, from the point of view of general principle, in putting an artificial limit into the legislation. Deputy Colley may say that the £1,500 is itself an artificial limit.
That is precisely what I would say.
Yes, it is. He says it has now little relevance to present day requirements but it is closer to the objective set out in the Report on Income Taxation which said there should be no artificial limit. The best argument to be advanced in favour of setting a limit is that it is administratively convenient and therefore reduces the load of work which an inspector has to discharge. I do not regard that as unimportant because if you can reduce the administrative load it relieves the taxpayer just as much as it may relieve the burdens of the Revenue Commissioners. But the ideal is not to be building in artificial limits which will inevitably generate anomalies and vexations of some kind but to leave everybody's tax position to be assessed fairly and openly according to the particular circumstances of the person's trade or occupation.
The Minister is trying to be ingenious but I do not think he is succeeding very well. If he thinks there should be no limit he should be providing for the abolition of the £1,500 limit. Clearly, he does not think that or he would have a section in the Bill deleting it. If, on the other hand, there should be a limit, as I believe there should be, then it should be adjusted substantially from the level fixed 20 years ago. It was fixed on the basis that somebody at that time earning £1,500 a year and having the use of a car provided by an employer was regarded as having an extra perquisite to his employment which was sufficiently valuable to justify taxing him. If he was regarded as being in the higher income bracket there was all the more reason, perhaps, for taking that course. The Minister has not attempted to suggest that there is now any justification for regarding somebody earning £1,500 a year as being in the higher income bracket but the fact is that many lower paid workers have a motor car which is essential to their business or occupation and they are being taxed artificially on this alleged benefit in kind. The Minister cannot justify what is happening at present.
It is fair for him to say that representations were made to me and probably to Deputy Haughey but I would point out that if the position was bad then—I assume it was—it is far worse now because since the present Minister became Minister for Finance the rate of inflation has gone out of hand. We have been suffering a rate of inflation in excess of 20 per cent for a few years. That makes an enormous difference and if the Minister cannot agree to do this he should say "I cannot afford it" or "I am not prepared to do it at the moment because I had not thought of it originally" but he should not try to tell us that it is a bad idea theoretically to increase it. If he wants to stand on theory let him abolish the limit altogether and try to justify that. I do not think he could. but at least that is more justifiable than saying that you should not have a limit but that he is going to have a limit of £1,500. It is quite unrealistic as it stands at present and cannot be defended, I suggest.
I am gratified to find the Minister at this late hour accepting the principle of discretion for the Revenue Commissioners which I have so often advocated here. Better late than never. This net is so wide in many ways and the resources of the Revenue Commissioners are so limited that what in fact is happening is gross inequity where some people get away with it and others on a more or less spot check basis are being nailed. This is a problem in regard to benefits in kind generally and particularly in regard to this type of benefit in kind. As Deputy Colley says, we are very constrained for time and there is not time for reasoned arguments but I would just make these three points which I have no time to support with arguments (1) the necessity for discretion; if you do not have it you will have evasion unless you have a very strong policing organisation which the Revenue Commissioners at the moment do not have: (2) in fact, the spreading of the net so widely has the effect I have mentioned: (3) it seems that on comparison Deputy Colley's figure is more realistic than the Minister's. The Minister stated that the £1,500 was nearer the intention but that argument escapes me. I presume the Minister, like the rest of us, does not feel he has time to elaborate.
While we are constrained for time I should like to pursue this argument further but it is very significant that the Commercial Travellers' Association who have made very strong representations in this regard themselves observed last year that when they circulated their own members only five per cent of them signed the petition seeking an adjustment of the benefits in kind tax legislation. Most people when asked to sign something that will confer benefits on them or will do them no harm are prone to sign instantly but that did not happen in this case. We have had a considerable amount of theoretical argument which has little basis in fact.
Does the Minister mean to say that because they did not sign there is no case?
No.
Would the Minister consider that people are very cagey about signing in case it comes to the notice of certain authorities? In the present situation there is such selectivity that nobody wants to lay his head on the block. Perhaps the Minister might consider it from that point of view. A closer look into the administration of the complex situation the Minister has brought about with his legislation might do no harm.
The Deputy has argued very favourably in the House in favour of full disclosure by taxpayers of their tax liability.
Of course.
There are two ways in which one can get precise payment of tax. One is by setting up such a huge policing system that the cost becomes prohibitive and the return is not worth the effort. The other course, which many administrations have adopted, is to pursue cases of suspected substantial under-return of income. Word soon gets abroad that it is unwise of people not to make adequate returns because the penalties are even greater than any "profits" that might be gained by making fraudulent returns. Frankly, I see nothing wrong with this system which puts the onus on people to be honest if that is going to mean lower adminstrative costs. Ultimately it means a relief to the taxpayer because he has not to get individually involved in complicated returns every year and it also means lower administrative costs. If there is the occasional case which comes to notice which causes the "victim" to make others aware of what befell him. I do not regard that as bad. It is probably a good thing if it means we have lowered administrative costs.
Pro tanto the Minister has my agreement but when you have penal laws that press very hard to the extent of really being bad laws they in themselves tend towards demoralisation and they bring about the situation which I have outlined. We cannot pursue this debate much further. In practice, because of the sudden and heavy burden imposed on a certain class particularly with regard to cars discrepancies have occurred in the last two years. It is widely known that it is difficult for the authorities to catch up with them and, although I agree completely with the Minister's principles, these principles can be completely destroyed in working practice by having the wrong legislation.
Most people have to pay for their private car out of after-tax income.
I am not denying that.
Some people are lucky enough to have a car made available to them which they can use for family and private business and sometimes they get all the running costs paid and this is done not out of after-tax income. It is a perk but that word does not appear in the legislation or in the fiscal code. What we have done recently is to provide an easier system of assessing the value of that perk and it is interesting that only 5 per cent have protested about the change. If the anxiety and opposition to it were as strong as some people have made it out to be, I believe there would have been a higher proportion of protesters. My experience as a public representative, —I am sure this is shared by many other Members—is that most people cannot resist putting their signature to any petition that is put before them. When only 5 per cent bothered to do it, I think they realise the legislation is fair and they have no genuine cause to protest about it.
There is another interpretation to that. There is evasion and I will leave it at that.
To the pure all things are pure.
The Minister is so pure he is away from reality.
Amendment put and declared lost.
I move amendment No. 3:
In page 7, before section 2 to insert a new section as follows:
"2.—Section 25 of the Finance Act, 1973 is hereby repealed with effect from the 6th day of April, 1977.".
This amendment does not deal with the full problem that is adverted to in it but I think it enables us at least to open up the problem which relates to the restriction on the expenses of business cars. In recent years the Minister has introduced the most Draconian measures in this regard and they have led to an enormous amount of frustration and inequity in many cases. On the winding up of the budget debate I asked him if it was intended to use this measure as a revenue raising provision or whether it was intended as a form of discrimination against a particular form of business or professional activity. By that I meant if there was any theoretical notion that this discrimination produces equity or something like that. The Minister is capable of that kind of argument so I have to put the question. I also asked if he could indicate the amount of revenue derived from it and the cost of administration. I have not got that information and perhaps the Minister would give it to the House now. He can be under no illusion that the provisions involved have led to enormous frustration and annoyance on the part of taxpayers and, I would imagine, on the part of officials in the Revenue Commissioners office. A great deal of time and energy have been devoted to arguing the liability of taxpayers under this provision. Before I pursue the matter I should like to give the Minister an opportunity of telling us something about the facts of the situation in so far as it relates to the amount of revenue and the cost of administration.
I am very happy to give the Deputy that information because he will quickly see how justified we were in bringing in this provision in the 1973 Finance Act. The figures reveal what was happening in relation to the provision of cars of a very high market price to people who were lucky enough to be the recipients. Deputy Colley said that the limit of £3,500 was causing frustration and he has suggested again today that it makes the administration of the income tax system much more difficult than it need be, with little or no benefit to the State. I am quoting from what the Deputy said.
As the Minister knows it is a combination of the £3,500 and the 15 per cent.
As regards the value of the limit of the £3,500 in terms of gain to the Exchequer the yield from the package of measures we introduced in 1976 was estimated then at £2 million. That is not a small amount of money in any circumstances. It is a fair indication of the value of the particular perks.
What did it come out at?
The current yield is of the order of £5 million a year. It is very considerable. I believe I am talking in pre-1977 Finance Act terms and obviously it will be somewhat less now that we have lowered the top rates of tax. That is the value in revenue terms of the benefits enjoyed in respect of very big cars.
Let us remove it for a moment from the Exchequer and revenue fields. It is of particular relevance in a Finance Bill but in another very progressive society we have seen recently where a newly elected popular president has proposed measures to discourage the use of large cars as a very necessary step towards energy conservation. We have a similar need. It is an even greater need than in the United States of America, which has a greater proportion of domestic sources of energy than we have. If a consequence of the Finance Bills which we introduced was to discourage the use of large cars I would consider that a very good thing. The reality is that there has been a marginal reduction in the use of large cars but there has been, from the figures I have quoted, a very substantial increase in revenue which certainly justifies from a revenue point of view——
I am tempted to say that the Minister will have us all in asses and carts the way he is going.
It was not all that far from the ass and cart that some people in the House were reared and they should not despise the people who still go about in an ass and cart if they have contentment of mind, great happiness and in many cases great honesty. I am not for one moment suggesting that that is the way in which our society should move.
I knew that was where the Minister was going.
I am not suggesting that for one moment and I do not think that anybody has said that about President Jimmy Carter of the United States either. If our people were to use modest cars and live modestly and not object to making their fair contribution to the tax burden of our society it would be a more just society. Everybody knows we have an increasing population. The larger proportion of those people will in the next decade be under 30 years of age and they need to be provided for. They will not be provided for if we promote a society allowing a few to have very large cars in respect of which they pay very little tax.
The Minister is making a case for a reduction in the standard of living all round.
The figure was £2,500 and the Minister increased it to £3,500.
It was increased to £3,500 to take account of increases in the price of cars. The greater proportion of those increases was attributable to circumstances outside our control because they were dictated by world circumstances as also was the price of energy which large cars use wastefully. They have been called "guzzlers" in the United States. We do not believe in encouraging the use of huge "guzzlers". What are those changes worth in revenue? They are worth £5 million. I believe we were justified in collecting that. I establish the justification for it by the fact that the revenue has been of that dimension.
Could the Minister be a little more precise? When he says £5 million from what measures does that revenue arise?
It is the package of measures of 1976 and the yield from the limit of £3,500 on company cars. That produces £5 million. We believe it is entirely justifiable. I would find it very hard on grounds of equity, which Deputy Colley despises, to make any modification in this field. I do not believe it is necessary. I believe we have proved our point by the revenue which this adjustment made. Deputy Colley asked me what the cost of the administration was. It is not possible to put a price on the cost of administration because this element is only a tiny fraction of the cost of assessing the tax liability of the beneficiaries of large company cars. It certainly is not possible to estimate what portion of an inspector's time is applied to assessing the value of a car and all perks relating to that and anything else. I feel satisfied it is quite small in relation to the revenue returned.
The Minister is talking about large company cars but is he not also talking about all cars? Is he not talking about the cars commercial travellers have? Is he not talking about the cars representatives have? Is he not in fact talking about the cars all employees have?
I am talking about the cars which people receive as distinct from the majority of those who have to buy their cars out of after-tax income.
Yes. I said to the Minister that there are so many involved in the category that all those people are caught. If one listens to the Minister's argument one would think that it is just a handful of people with very big cars paying a very big lump sum each who are involved but that is not the position. The £5 million is made up of a large number of elements spread over a large number of people. The employee who needs the car for his business is also caught. The people in that category are the hardest hit.
I have no way of judging how that revenue is made up. The Minister is in a position to give it. I repeat two things I said before. The first is that it is not surprising that very few signatures were received because people will not sign a document like that for fear of attracting particular attention in general, whether they are right or wrong. There is a healthy fear generated through the Minister of certain State activities. I think the Minister knows my attitude to one Department which he has put in an impossible position. The second thing is that notwithstanding his £5 million which he has got over this wide area there are still a lot of misses as well as hits, there are a lot of honest people making returns and I am sure that there is a certain amount of fiddling going on. The fiddlers know that the Revenue Commissioners are not able to get on top of it. This is all the result of ill-conceived, theoretical and bad legislation that could be dealt with otherwise.
I cannot, quite frankly, regard it as bad legislation to say that we have stopped a practice under which some well-heeled people were able to have cars given to them, worth £8,000 or £10,000, and had the value of those cars and the cost of running them set-off as a business expense and got all that without paying taxation on it. It is quite clearly a very substantial benefit.
Will the Minister tell me how much of that £5 million is in that category?
That is a good question.
I do not know exactly.
Is it 10 per cent?
It is much more than 10 per cent. It is of the order of 20 per cent to 25 per cent.
It is only 20 per cent or 25 per cent but 75 per cent are in the category I am talking about. Will the Minister even now be frank?
I am being frank as far as the information available to me allows me to answer these specific questions which are being put. I am concerned, as every Minister for Finance ought to be concerned, with endeavouring to make all people equal under the law. That means equal under the tax laws too. When one considers that the vast majority have to provide their cars out of after-tax income one must look to the situation in which some people have cars available without having to pay tax on them at all or as under our law now, paying a certain amount of tax in respect of the availability of their cars. Deputy de Valera makes the point that it is still open to people to act in a human way—I shall not say "fiddle"——
I said it.
——and to adjust the system to their own advantage in a way which legislatures are unable to avoid totally. At least we have produced a fairer package as between one group of taxpayers and another than that which existed previously. I make no apology for that although some people who previously enjoyed certain perks now find that they must pay something towards those perks.
I should like to emphasise that my vehemence is provoked by shortage of time rather than anything else. One is somewhat constrained when one is talking against the clock, as it were. However, the Minister mentioned cars in the £8,500 to £10,000 range and he mentioned also a figure of 25 per cent. If he takes 25 per cent of £5 million and ascertains thereby how many cars are involved, he will realise how basic socially the problem is. Let him then take the remaining 75 per cent of the £5 million and he will realise that this is spread among the people who are hit badly by this provision. Deputies Haughey and Colley have amendments tabled in this regard. It was not the person who was paying tax of up to £1,000 on the value of his car who was victimised. I would agree with the Minister that such people could afford to pay but we are talking about the smaller man, the commercial traveller, for example, because we suspect that that is where 75 per cent of the £5 million came from.
It is not a contrast between paying no tax and now paying £4 million on the category of car the Deputy is talking about. There has always been a liability to pay tax in respect of the availability of a car but interminable arguments went on with the result that some people paid more to accountants than to the Revenue Commissioners in order to have their arguments processed. All that has happened is that we have brought to an end the argument that went on and I think that is why so few people, when asked to sign the petition, bothered to put their names to it. They realised that we have provided a very simple instrument for putting an end to much argument which required the keeping of the most appalling detailed accounts and which often left people in such a way that for several years after the year of trading, they were not aware of their tax liability. We have produced what is accepted by most people as being fair.
The Minister has the advantage in having the accurate information at his disposal but I still contend that the reason for many people not signing the document was that their mere name on it would pinpoint them for query, regardless of whether they deserved to be queried. I could instance many such cases that came to my notice as a Deputy.
Secondly, the Minister is right about benefits in kind in the past and about people paying accountants but these were people in the higher income bracket whereas those who have been captured by the Minister's legislation are the ones who never had to resort to accountants. To have signed that document would have been regarded as tantamount to giving notice to the police. Nobody wishes to draw attention to himself in that way particularly in so far as the Revenue Commissioners are concerned, knowing the wide ramifications that are involved. In addition, on the Minister's own admission, 75 per cent of the £5 million is in the area that up to now would not have been affected seriously by the benefit in kind for the simple reason that most of that expense is very justly attributable to the job and was more in the nature of a necessity than a perk. The Minister should not have confused the two categories.
I am sure the Deputy would wish me to put it on the record that, in the first place, the names of the persons who signed that petition were never made known to the Revenue Commissioners. The petition was referred to in a bulletin of the organisation in question in which it was recorded that only 5 per cent had signed but their names were not made available to the Revenue Commissioners. Consequently, nobody was put in peril as a result of signing. If such a protest had come to me I would have, as would have any Minister for Finance, respected such confidences and would not have revealed names to the Revenue Commissioners. Conversely the Revenue Commissioners do not reveal names to Ministers.
I am glad to hear that but the common impression outside is different.
We have come close to the truth, that is, that this set of measures affects in the main, not the well-off people with the big cars but those with small cars by today's standards who are deemed to have any use of these cars. The Minister introduced an artifical method of calculating the value of this use. He said it would save expense from the point of view of the Revenue Commissioners but it seems to me that the difficulties that have been created are a result of this artificial approach which is imposing a heavy tax on people who cannot afford to pay.
It is regrettable that the Minister cannot see his way to doing something about this. From what he has said it is clear that he is set on continuing on this very unsatisfactory course. However, in due course—not very long, though—it will be dealt with in another way.
Let us get the basics here. Everybody knows that the larger amount of revenue is collected from people in the lower income brackets, the reason being that there are more people on lower incomes than there are people on higher incomes. When you look at the cost——
We can change that.
——to the Revenue foregone in reducing the top rates of tax in 1977 to 60 per cent. the amount of revenue foregone is minimal, about £4 million out of £540 million in income tax, because most income tax is gathered from the masses of the people who are on lower incomes. The fact that 25 per cent of this additional revenue in respect of cars is collected from those at the upper income level is clearly established as a justification for the measures we took. It is a much higher proportion of the revenue collected than is collected from the same people at the income tax level. There was never a fairer law, and the basis of it is what I have said and what the Deputies opposite will not acknowledge: that most people have to pay for their cars after after-tax income. This puts them at a very serious disadvantage against people who have their cars supplied to them.
The Minister's ingenuity in debate provokes my admiration but I am sorry he has not given the true picture.
Amendment put and declared lost.
I move amendment No. 4:
In page 7, before section 2, to insert a new section as follows:
"2.—Notwithstanding anything contained in any other enactment the amount of any compulsory health contribution made by any taxpayer shall be allowed to be deducted in full from the total income of an individual for the year 1977-78 and subsequent years of assessment.".
As the Minister knows, people are allowed voluntary health insurance contributions and social welfare contributions as a deduction, but the self-employed, who are obliged compulsorily to make a contribution to the health services, are not allowed to deduct the money. Of course, if they could pay the money involved, which is now about £15 a year, to voluntary health insurance and get the tax allowance on it they could get much more value for their money. This amendment seeks to allow such contributions to be deducted in full.
I support Deputy Colley in this amendment. I indicated during the Second Stage debate that I would draw the attention of the House to this matter on Committee Stage. I have seen a letter which was issued from the Revenue Commissioners' office to a taxpayer endeavouring to indicate to him why this contribution under the Health Acts could not be allowed for income tax purposes. It was the most forced piece of logic I ever came across. It attempted to make a distinction between an application of income and some other word, but in any event the argument as set out by the Revenue Commissioners was totally academic and totally untenable. I regret that I have not the letter with me this evening. I did not expect that the Committee Stage of this Finance Bill would be coming up for some time, and like my colleague, Deputy Colley and others, I was taken unaware by having to debate these matters now in the very short time at our disposal. That persons are compelled by statute to make these contributions is a great injustice. They do not wish to make them but they have no option.
A lot of people would like to be in the category to make those contributions for the services they get and the small amount of money they pay.
The limited eligibility category?
Yes.
I do not think there is a single person in this country who would wish it.
The Deputy must have a different type of constituency from what I have.
I am not arguing about whether people would wish to pay them or not. They are compelled by statute to pay them. If one is a certain category of worker, one must by statute make these contributions. Whether one gets value for them or not is another matter. In my view one does not. The whole administration of this part of the health service is complicated and ridiculous, but that is not what we are debating here. We are debating that other persons in the community who make contributions of an exactly similar nature, sometimes in a voluntary capacity, are allowed to deduct these payments in full from their income for income tax purposes. These payments for limited eligibility under the Health contributions Act are not allowed by the Revenue Commissioners as a deduction. The case put forward by Deputy Colley in support of this amendment is unanswerable. The Minister should in all fairness accept that these contributions, because they are compulsory, should be allowable for income tax purposes.
This is something that will have to be looked at at some time or other, but immediately we have to consider that to give the reliefs sought here would cost £3 million. If it is going to cost £3 million that is £3 million which the Exchequer would forego, and therefore the Exchequer would have to collect that £3 million elsewhere. There is little point in giving this in order to bow towards the theoretical justification of the argument advanced here and then increasing the contributions so as to recover the £3 million foregone. That is what would have to be done then. If we arrive at the stage where very substantial reductions in taxation become possible because we have massive oil revenues like the OPEC states for instance, then we can consider quite a number of items in the tax code and adjust them in order to meet the individual arguments advanced.
In the meantime we must face realities and realise that, whatever be the anomalies that we may identify in the tax system we cannot relieve one anomaly at the cost of substantial revenue without transferring the burden to somebody else, or so adjusting the tax system that the burden has to be carried by those you pretend to be relieving. I can certainly meet the point straight away by providing that we would increase the contributions and allow them as a set-off for tax purposes, but the net position would be precisely the same. While that might end the debate here it would not end the sense of grievance, annoyance, frustration or disappointment which Deputy Colley says is felt——
That is Deputy Colley over there.
It is very interesting to hear Deputy Haughey making it perfectly clear that he is not Deputy Colley. I apologise to both.
We are progressing. It is a very interesting admission by the Minister for Finance that this is something that should be done and the only reason he is not doing it is the cost. In all sincerity I put to him that if that is the consideration which motivates him in this regard there are many considerations which he has given in this year's budget which are less desirable and less defensible than this one.
The Minister has lectured us from time to time, and again this evening, on equity and on his overwhelming desire to preserve equity between all section of the community. Does he think it is more equitable in this budget —and it is this year's budget we are talking about, not that of next year or the year after—to give substantial reductions in income tax at the higher income bracket than to give this concession which would be availed of largely by lower income people? The Minister has walked himself into a very difficult, tight corner if he admits that he would like to do this because it would be relieving an anomaly but the only reason he could not do it is that it would cost £3 million. He has given £50 million in income tax concessions of one sort or another to individuals in higher income brackets and to corporations in regard to corporation profits tax. These concessions might be more justifiable on the basis of giving incentives to different sections of the community, but certainly, on the grounds of equity, they would not compare with this concession to the category of people in which Deputy George Colley and I are interested.
This is a contribution which is levied on a wide section of the people who are very much in the lower income group. It is totally unfair and anomalous that this contribution should not be allowed for income tax purposes when similar contributions are allowed. If the cost is only £3 million in this year's budget, the Minister should not hesitate to grant this now, because the way Exchequer returns are going these days, I do not think the Minister will be within £1 million in accuracy in his forecast this year on either side of the budget. Therefore, to cavil at rectifying an anomaly and an injustice for the sake of £3 million in this budget is not logical.
Most of the benefit of the tax reductions in this year's budget go to people in the lower income group. They are receiving considerable benefit far in excess of what would be achieved if this resolution was to be accepted. However, I am prepared to accept that, like Rome, Ryan's taxation reform cannot be built in a day or even in one term of Government, but when we are back in office we will have a look at this and do the best we can.
I said when I moved the amendment that I hoped we would not have to argue about the justice of it and, as Deputy Haughey has pointed out, we have at least made that progress, that the Minister cannot defend the inequity of the situation. I do not intend to prolong the discussion by going back over what he said, except to point out that, faced with such an inequity and faced with, in the context of this year's budget, the relatively small sum involved, the Minister should accept this amendment. There are very many people affected by it, and it is for many of those people a very important matter. There is a principle of equity involved and I would urge the Minister to accept it.
When we return we will have a look at it.
Amendment put.
The Committee divided: Tá, 58; Níl, 70.
Tá
- Allen, Lorcan.
- Andrews, David.
- Barrett, Sylvester.
- Brady, Philip A.
- Brennan, Joseph.
- Briscoe, Ben.
- Brosnan, Seán.
- Browne, Seán.
- Brugha, Ruairí.
- Burke, Raphael P.
- Callanan, John.
- Calleary, Seán.
- Colley, George.
- Collins, Gerard.
- Connolly, Gerard.
- Cronin, Jerry.
- Crowley, Flor.
- Daly, Brendan.
- Davern, Noel.
- de Valera, Vivion.
- Dowling, Joe.
- Fahey, Jackie.
- Farrell, Joseph.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzpatrick, Tom (Dublin Central).
- Gallagher, Denis.
- Geoghegan-Quinn, Máire.
- Gibbons, James.
- Gogan, Richard P.
- Haughey, Charles.
- Healy, Augustine A.
- Herbert, Michael.
- Hussey, Thomas.
- Kenneally, William.
- Kitt, Michael P.
- Lalor, Patrick J.
- Leonard, James.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim, Thomas.
- MacSharry, Ray.
- Meaney, Tom.
- Molloy, Robert.
- Moore, Seán.
- Murphy, Ciarán.
- Nolan, Thomas.
- Noonan, Michael.
- O'Connor, Timothy.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond.
- Power, Patrick.
- Timmons, Eugene.
- Tunney, Jim.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Níl
- Barry, Peter.
- Barry, Richard.
- Begley, Michael.
- Belton, Luke.
- Belton, Paddy.
- Bermingham, Joseph.
- Bruton, John.
- Burke, Liam.
- Byrne, Hugh.
- Clinton, Mark A.
- Cluskey, Frank.
- Collins, Edward.
- Conlan, John F.
- Coogan, Fintan.
- Cooney, Patrick M.
- Corish, Brendan.
- Cosgrave, Liam.
- Coughlan, Stephen.
- Creed, Donal.
- Crotty, Kieran.
- Cruise-O'Brien, Conor.
- Desmond, Barry.
- Desmond, Eileen.
- Dockrell, Henry P.
- Dockrell, Maurice.
- Donegan, Patrick S.
- Donnellan, John.
- Dunne, Thomas.
- Enright, Thomas.
- Esmonde, John G.
- Ryan, Richie.
- Spring, Dan.
- Staunton, Myles.
- Taylor, Frank.
- Thornley, David.
- Finn, Martin.
- FitzGerald, Garret.
- Fitzpatrick, Tom (Cavan).
- Flanagan, Oliver J.
- Gilhawley, Eugene.
- Governey, Desmond.
- Griffin, Brendan.
- Halligan, Brendan.
- Harte, Patrick D.
- Hegarty, Patrick.
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kavanagh, Liam.
- Keating, Justin.
- Kelly, John.
- Kenny, Enda.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lynch, Gerard.
- McDonald, Charles B.
- McLaughlin, Joseph.
- McMahon, Larry.
- Malone, Patrick.
- Murphy, Michael P.
- O'Brien, Fergus.
- O'Donnell, Tom.
- O'Leary, Michael.
- O'Sullivan, John L.
- Pattison, Séamus.
- Reynolds, Patrick J.
- Ryan, John J.
- Timmins, Godfrey.
- Toal, Brendan.
- Tully, James.
- White, James.
Tellers: Tá Deputies Lalor and Browne; Níl, Deputies Begley and B. Desmond.
Amendment declared lost.
The Dáil adjourned at 8.40 p.m. until 10.30 a.m. on Wednesday, 25th May, 1977