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Dáil Éireann debate -
Tuesday, 22 May 1979

Vol. 314 No. 7

An Bille um an Seachtú Leasú ar an mBunreacht (Forais Ardoideachais do Thoghadh Comhaltai de Sheanad Eireann), 1979: An Dara Céim. - Finance Bill 1979: Committee Stage (Resumed).

Debate resumed on amendment No. 11:
In page 8, subsection (1), line 38, before "labour" to insert "insulation materials and".
—(Deputy P. Barry.)

Amendment No. 12 is being discussed with amendment No. 11 and Deputy P. Barry was in possession.

Section 6 is a new provision introduced by the Minister in this year's Budget that allows people who have repairs done to their houses or gardens to claim the labour costs of those repairs, within certain limitations, against income tax. On the last day Deputy Bruton and I were arguing that because of the present critical situation in the energy field, for insulation purposes alone the Minister should include in the section the amendment that would allow materials as well as labour to be deducted. When we were concluding on Wednesday night last the Minister had made the point that it would not be appropriate to include the amendment under this Finance Bill as section 6 is of a purely experimental nature, and its provisions may need to be changed, modified or improved in some way by the time it runs out at the end of April of next year, or the relief may be totally withdrawn. The point the Minister made was that at the end of the period up to April 1980, we could look at the matter again and see if at that stage materials could be included. I put an amendment to section 1 of the schedule which makes my point. It is amendment No. 35 (a) which was circulated today. The amendment is:

In page 32, to delete lines 21 and 22, and insert:

"‘qualifying work' means any work of maintenance, repair, improvement or insulation of residential premises;".

Lines 21 and 22 of page 32 of the Bill say that:

"qualifying work" means any work of maintenance, repair or improvement (including insulation) of residential premises;

On Tuesday, 15 May the Minister for the Environment was asked a Question reported at column 537, Volume 314, of the Official Report as follows:

Mr. Quinn asked the Minister for the Environment if it is proposed to make special energy conservation grants to house owners in order that they can reduce the level of heat loss in their homes and, if so, if he will make a statement on the matter.

Mr. Barrett: I do not propose to introduce a special scheme or grants to assist in energy conservation measures in private housing. However, as I have already announced, the cost of work consisting of attic insulation, cylinder lagging and draught-stripping of doors and windows, undertaken as part of a general improvement project on a private house, may be reckoned in calculating the appropriate amount of the grant in such a case under the existing house improvements grants scheme.

I tried to find out whether the Department of the Environment consider insulation to be an "improvement" in this sense. It appears that they do not and the insulation must be part of the general improvement in the structure. As far as I know, specific encouragement is not given by any Department towards energy conservation. The Department of Industry, Commerce and Energy operate a scheme whereby a grant is available in respect of 50 per cent of the cost of engaging consultants to advise industry on energy conservation. This is part of a general improvement scheme but does not apply if the work is solely of an insulating nature. The amendment seeks to make tax deductible the cost of insulation.

The interview given by the Minister for Industry, Commerce and Energy last Sunday helped to underline the fact that we are facing a critical situation in the energy field. This is becoming evident to everybody. Next winter we will not have 100 per cent of our requirements of home heating oil, but how severe the cut-back will be it is not possible to say at present. We must use not more than 100 per cent of what we used in 1978 and probably much less than that.

I would ask the Minister to think again in terms of this year's Finance Bill instead of next year's one. I think the Minister feels it is a good idea to encourage energy conservation and the insulating of houses but that he should see how this section operates this year and possibly extend it next year. He has not said this but the implication is that next year he will consider improving the section dealing with insulation. The urgency of the situation seems to indicate that the Minister should live a little dangerously and include this provision in this year's Finance Bill.

We have no control over the production and transport of oil, and because such a falling proportion of our energy needs are refined in this country we have not full control over the refining capacity of our oil. We have, however, control over the amount of energy we waste. Every Government Department should encourage and cajole, and maybe at times go further than that and use a stick, to ensure that the energy we have is used efficiently and for the benefit of all the people. We should control the amount of energy we use by ensuring that our conservation measures have the effect of saving fuel. I am talking about individual houses and industry generally, but this section of the Bill relates specifically to individual householders. The list of possible conservation measures which could be taken by them is not extensive. It includes the lagging of roofs and water cylinders, the servicing of boilers and the sealing of doors and windows. The double-glazing of windows does not appear to be as effective a method of conservation as was once thought.

The beneficial effects of this amendment would be felt as early as next winter. If the Minister decides next year that this section of the Finance Bill is working well and that he can see his way to accepting an amendment, the benefit will not be realised until the winter of 1981. If the amendment is accepted now the benefit of the conservation measures will be felt next winter. I would ask the Minister to reconsider this, possibly between now and Report Stage.

I remind the House that amendments Nos. 11a and 12a are related and may be discussed with amendments Nos. 11 and 12.

I support part of the case made by Deputy Barry in relation to the cost of materials. I find it very difficult to accept that we should have a blanket inclusion of materials in a concession of this kind and I will have more to say about the concession when we deal with the section. It would be quite possible for a very wealthy person to build, for example, a totally reorganised kitchen abutting his original kitchen and instal a super de luxe split-level cooker built into the wall as part of the structure of the extension. There might be other examples. Some examples are, of course, very much more expensive than others.

While I have some sympathy with that amendment I should hesitate to extend it on a blanket basis to all materials. However, in the light of the energy crisis facing us, and which obviously will be confronting us for some indeterminate time in the future, the Minister should consider making a specific exemption in relation to materials adjudged by the Department of the Environment or by whichever body are responsible in this area, as being materials conducive to the better insulation of houses. If we fail to do this we may be putting ourselves in a situation in which the operation of this concession, even on an experimental basis, will be contributing to further energy losses and waste as, perhaps, there are made increasing numbers of inadequately designed and perhaps inadequately insulated extensions. I am aware that the labour involved in insulation costs may be allowable under this section up to certain limits but the conservation problem is such that we should be taking specific steps to deal with it. The scope of the section is much too wide. If the Minister were to introduce something on an experimental basis, as is the intention presumably, he should be thinking of confining its application exclusively to work and materials in the context of the vital and urgent question of conservation.

It will be obvious to Deputies that a Finance Bill is not a suitable vehicle for provisions in respect of grants for conservation or of grants for any other purpose. The furthest we can go in this section in the context of what we are talking of is in relation to tax allowances and insulation is provided for specifically in this section. The real question is whether the section should go further in the case of insulation and provide for relief in respect of materials, as well as for labour.

As I have said before, the primary purpose of the section is to assist in the creation of employment. For that reason it was drafted on the basis of giving relief in respect of labour but not in respect of materials. If materials of any kind are included, the provision would be open to some abuse. Deputy Horgan recognises that, I think. I indicated that the provision would be introduced on an experimental basis, but I can understand how Deputy Barry might have interpreted what I said as meaning that if there were to be changes they would not occur until next year. However, what I intended to convey was that the provision would be operated on an experimental basis. The question of what measures are necessary and advisable to assist in the area of the conservation of energy is one primarily for the Minister for Industry, Commerce and Energy and also for the Minister for the Environment. If either or both of these Ministers acting together decide on certain schemes to improve the conservation of energy and if it is considered advisable as part of these schemes to provide a tax concession on the lines of that provided for in this section in respect of materials used, it is not beyond the bounds of possibility that the provision here could be amended accordingly. It could be amended this year. That is what I intended to convey.

I have gone as far as I can go in relation to a Finance Bill having regard to my function in dealing with this matter. The question of other measures is being considered by the other Ministers concerned but it is not for me to make a decision in that regard or to frame the Finance Bill in relation to any such decisions, because clearly there are involved aspects other than tax allowances. However, I wish to make it clear that if it appears advisable to make further provision in respect of tax allowances in the area of insulation and the conservation of energy in homes generally which would be furthered by a change in this provision, I am not saying that such change would not be made or that it would not be made this year. I have gone as far as possible in trying to deal with the problem. The primary object in relation to this section is to encourage the creation of certain kinds of employment. The special case that can be made in regard to the conservation of energy is one that I have recognised by including specifically the word "insulation" but not beyond the provision of relief in respect of labour. To go further than that would be a matter that would have to be interrelated with proposals from my colleagues in regard to energy conservation generally.

I thank the Minister for explaining what he meant in saying that there would be an experiment later. However, I consider the matter to be of such urgency as to be included in this section and if the Minister were to include it I do not expect that he would be antagonising anybody or that he would find resentment in other Departments.

As Deputy Horgan pointed out, there would be the questions of what materials should be included and of the extent to which the limit should apply and I do not think that my Department are competent to make those kinds of decisions.

That problem could be met by providing for materials designated by the IIRS as suitable for insulation. My amendment, No. 35a, defines qualifying work as any work of maintenance, repair, improvement or insulation of residential premises. My fear is that unless the words "including insulation" are taken out of the brackets in the section we may find ourselves with the same problem as the problem we have with the Department of the Environment in this regard. I do not know whether the amendment should be taken with this section or with the Schedule, but the reason for tabling it is that the reference to improvement, including insulation, could be interpreted as meaning that insulation by itself would not qualify. So far as the Department of the Environment are concerned insulation qualifies for a grant only when it is carried out as part of a general improvement. This provision could be interpreted in the same way because of the inclusion of the brackets around the words "including insulation". I am not making a big point of this now—the amendment will be reached later—but would merely underline the interpretation that can be given in Departments but which may not be in accordance with the intention of this House.

I can tell the Deputy that the interpretation that is intended is an interpretation in respect of which his amendment is not required. We can deal with it when we get to his amendment. The intention is that it be interpreted as the Deputy would wish it to be.

My amendment will make that absolutely clear. As regards the point made by the Minister that this section deals only with employment, I do not wish to detain the House, but it could be argued that, unless we get our energy situation as much under control as possible—and I would rate conservation very highly in that regard—the high cost of energy will be inflationary, and inflation is the No. 1 enemy of employment. Anything we can do to cut down on our energy imports bill will have the effect of countering, to some extent, inflation, which, in turn, would help employment, so my amendments in that regard are not too far fetched.

Amendment, by leave, withdrawn.

Amendments Nos. 11a, 12 and 12a, not moved.

I move amendment No. 13:

In page 9, after line 25, to add a new subsection as follows:

"(5) Notwithstanding the provisions of subsection (4) of this section, a person shall be a registered person for the purposes of this section, if, on the commencement of this section, he is registered for the purposes of value-added tax.".

If you turn to the second schedule of the Act you will see the reason for this amendment. It gives the description of a registered person and shows the trouble he has in making a claim.

"Where an individual wishes to claim a deduction under section 6....

——This is section 2 of the second schedule——

... in respect of the labour cost of qualifying work carried out on or to be carried out by a registered person he shall make an application on the prescribed form to the Revenue Commissioners for a form on which to claim the deduction in this paragraph referred to as a claim form bearing the name of the registered person...."

And so on. There is a long list. A registered person is defined as a person "... to whom a certificate of registration has been issued and who has not been required, pursuant to paragraph 7, to return the said certificate and whose certificate of registration has not been cancelled pursuant to this paragraph."

I cannot understand why so much trouble is involved in making a claim under section 6 of this Act. A person has to apply for a form to get a form, if you read section 2 (a). He makes an application on the prescribed form—he must get that first—to the Revenue Commissioners for a form on which to claim.

There are all sorts of claims made under various Tax Acts going back many years, for allowances which do not involve the amount of form-filling that is necessary under this section. The purpose of my amendment is that a person already registered with the Revenue Commissioners for value-added tax should be exempt from the form-filling. I think this is page 22 in the schedule. Suppose somebody is accepted as a registered person under the Act and he gets a form, fills it up and attempts to make a claim under this section and by the time the work is finished he has been de-registered by the Revenue Commissioners, what happens then? Is the claim no longer valid? Is he deprived of his tax benefit because the person from whom he wants to claim does not register, even though he, in good faith, has obtained a quotation from this person for the work necessary to be done? What happens in that case?

The second schedule to this, which I am seeking to amend, is extraordinarily cumbersome, almost designed to make it difficult for somebody to make a claim under section 6. There is a whole list of things that have to be done and conditions that must be met before one is allowed to claim under this section. Those people who are already registered under value-added tax should benefit without having to fill up all these forms. It would simplify matters both from the point of view of the Revenue Commissioners and of the customers—if you can call them customers in that sense.

If I have an insurance policy and fill up my tax form, I do not think I should have to get a form to apply to the Revenue Commissioners to have a form to fill up to claim under that premium under the 1967 Finance Act, which I think covers it. I can understand the Minister's desire—and this is almost an instinct, or certainly it is a very high priority with the Revenue Commissioners, that they should, in any new provisions which the Government propose to make—which are tax provisions allowing people to make a claim against tax—to endeavour as much as possible to foresee possible loopholes. However, the machinery very often used to see that loopholes never come into existence is so cumbersome that it has the effect of deterring people from seeking to make claims and benefit by a section of the Finance Bill from which it is the Government's intention that they should benefit. This section is a case in point, where the Government have a priority of getting more people to work, increasing the amount of employment. They devise a scheme which allows people to claim for repairs or improvements to their homes or their gardens. They can claim the labour content of any improvements they make over £50 and under £450—I think these are the figures—as an allowance against their tax. However, when they set up the machinery to do this, it is so difficult for the ordinary person to make a claim that many people will not bother to make a claim and the benefits from the Government's point of view, may not be realised.

People see the amount of work they have to do in order to get the benefit. The average taxpayer on the 35 per cent band claiming 60 per cent of that is saving in tax £20 in the year. If he has to go to Dublin Castle to get forms, fill them up, get the person who is going to do the painting, building or digging to fill up and countersign these forms, if there is a possibility of an inspector walking in on the job two or three times to see that the work is being done—and once the form has been lodged the inspector can come to question him about the form and the details supplied in it—and then he earns only £20 out of all that, he will shrug his shoulders and say "I will put the painting job off until next year or I will do it myself". The benefit from the Government's point of view is, therefore, lost.

The Government may have in mind, although it is not written into the section or referred to anywhere or even hinted at, that they suspect that there are many people whom they regard as foxers who are maybe signing on at the labour exchange and then doing these relatively small or not so small jobs. The Minister is trying to flush these out in getting householders to see that these people be registered and put on the Government's books. If that is so the ordinary householder may consider that the game is not worth the candle. He may be full of sympathy with the Government's point of view regarding people working and at the same time drawing unemployment benefit, but he may feel that £20 in 18 months is not worth his time getting these forms and filling them up with the haggling and arguing that may ensue with the person he is employing.

My amendment probably does not go far enough, but it would be very much simpler if the Government would at least take the VAT people as not being involved in this. They are already registered and they would not be involved in tax evasion of this type whatever else they might be doing. It would be very much simpler if the Government would take the word of householders that they have had this work done, they have a receipt for it, the job cost, say, £180, the labour content is £60, and then allow the householders to claim that as an allowance against their tax without this long schedule, the forms that have to be filled and the work that has to be done to gain benefit under this section. I would prefer to see everybody being allowed do as they are allowed with their insurance policies in this regard. Failing that, the Government should at least exempt those who employ people who are already registered for VAT from the necessity to fill up forms under this new section.

I support the points put forward by Deputy Barry in relation to this section. On Second Stage I supported a considerable amount of what he said, particularly regarding the bureaucratic rigmarole through which a person would have to go in order to get any relief under this section. At the end of the year I will be interested to see the figures and those who benefit. The number of conditions which a person will have to fulfil as either (1) a taxpayer in order to benefit and (2) a person becoming a registered contractor, will make the whole section inoperable.

I sympathise with the viewpoint of the Revenue Commissioners in their drafting of this section, but the idea of the section is to create jobs, and it has been drafted more with the idea of trying to catch people doing this type of job and not paying tax. The idea behind the section is to give relief for expenditure on residential premises, but the real effect of the Second Schedule is to catch people who are not paying tax.

This section is designed to give relief subject to a maximum of £450 on improvement to residential premises. The kind of contractor who would be doing that type of work is the small, one-man show or maybe there are two people employed. You are not going to get the big builders going around doing insulation and improvement jobs on houses.

It is £450 wages content.

That is right. In any event, it is the small sub-contractor who is going to do this type of work. Deputy Barry's amendment is not adequate but at least it is a step in the right direction. No one will be appointed a registered contractor of the type envisaged and the section will not fulfil the purpose for which it is intended. There are various matters here which can be discussed on the section, but at this stage I tell the Minister that this section is not going to work if this bureaucratic thing has to be complied with before a person can qualify. In the first place he is going to have to apply for a form in order to get another form.

Section 2 (b) of the Second Schedule suggests that the Revenue Commissioners may not issue the second form if they think it should not be issued. It is beyond my comprehension how they are going to be satisfied on this. It states:

Where an individual wishes to claim a deduction under section 6 in respect of the labour cost of qualifying work carried out or to be carried out by a registered person, he shall— ...

(b) complete the claim form (which shall be issued to him by the Revenue Commissioners if they are satisfied that the form ought to be issued to the said individual),

I do not know what the idea of the form is. If he gets this other famous form he will then complete it, send it back and he may get his tax relief, but he may not get the second form if they are not satisfied that it should be issued to him. Where are we going? What is the basis for that section 2 (b)?

There are various points to which I drew attention on Second Stage and to which I shall return. I understand the basis of all this drafting of the Second Schedule. It is a problem that has come about as a result of sub-contractors' certificates of authorisation and how the Revenue Commissioners were left short by sections of the Finance Act, 1970, which set up the section on sub-contractors' certificates. After a couple of years the situation was that 7,000 certificates were issued in the Dublin area and less than 10 per cent were returned to the annual account. Consequently, as a result of the Finance Act, 1973, and the Finance Act, 1976, we now have a system regarding the issue of these sub-contractors' certificates which makes it fairly foolproof. The Revenue Commissioners are trying to apply this system to the idea of a registered contractor. Now we are going to have sub-contractors' certificates of authorisation and registered contractors' certificates. We are going to have so many certificates banging around the place that the ordinary builder or handyman will not know what he is.

The Second Schedule states:

"registered person" means a person to whom a certificate of registration has been issued and who has not been required pursuant to paragraph 7 to return the said certificate or whose certificate of registration has not been cancelled pursuant to that paragraph;

How a person becomes a registered sub-contractor is outlined in the Second Schedule. There are pages in the Schedule devoted to telling how a person can have registration withdrawn from him. Yet under section 5 of the Schedule it appears simple for a person to become a registered contractor. Section 5 (1) states that he must be resident in the State. That is a very simple thing. A person either is resident in the State or he is not. Consequently, I see no need for sections 6, 7, 8 or 9 of the Second Schedule. If a person is resident in the State that is a simple fact. Section 5 states:

5. (1) The Revenue Commissioners shall on application to them in that behalf on the prescribed form by a person issue to the person a certificate (referred to in section 6 and in this Schedule as "a certificate of registration") if they are satisfied that the person or, in the case of a partnership each partner, is resident in the State.

What could be more simple?

The most alarming matter in this section is that there is no right of appeal for a person who applies to become a registered person. The greatest thing wrong with the contractors' certificate of authorisation is that there is no right of appeal against the inspector of taxes. That is causing grave distress. I am not saying that inspectors of taxes are not doing their jobs but in this section there is no right of appeal if a certificate of registration is refused. If a person applying to become a registered contractor is not successful in his application he has no right of appeal. There should be provision for appeal.

Registered sub-contractors and those registered for VAT at the commencement of the operation of the Bill should automatically become registered contractors. It will have to be decided whether the section was designed to create jobs or to bring all those not now paying tax into the tax net. I support the idea that this bureaucratic nonsense should be taken out of the Second Schedule.

There is rare unanimity on all sides of the House on this problem. Listening to Deputy McCreevy is an education in itself.

When we look at the genesis of this idea and we look at its incorporation into the draft legislation before us, we can see a classic example of an idea that looks like a good one until somebody looked at it more closely. It probably sprang fully armed from the head of the Minister for Economic Planning and Development. If it did, and if it then went from there to the Cabinet and from there to the Revenue Commissioners, I subject that the Revenue Commissioners got into a state when they saw, as they would naturally see, the possibility for abuse that would exist in this system. They decided they would have to do something about it and what they have done about it is contained in this section which Deputy P. Barry is seeking to simplify and make more reasonable.

The Minister has said that the purpose of this section is to create jobs. He frequently talks about creating jobs and frequently berates us for not talking about the need to create jobs. I will give him momentary comfort when I tell him that I think this section will create jobs, but that it will create an infinitesimal number of jobs.

Except in the Revenue Commissioners.

Perhaps more in the Revenue Commissioners than anywhere else. The creation of whatever job it does create will be surrounded by administrative rubrics, problems, forms and the like, such as have been mentioned by Deputy McCreevy. It will sink beneath the waves of its own weight. With all the good will in the world—and I am prepared to approach this matter openly—this is a classic example of a simplistic way of Government thinking. They think that by giving somebody concessions in relation to tax enough jobs will be created. Even if we accept that it will create jobs, it will not create enough jobs. It will be part of a string of half-hearted attempts——

Enough jobs for what?

I will settle for the Government's target for full employment which was five years hence two years ago and now appears to be five years hence from this year.

The Chair will settle for the amendment. Many other matters which would be more appropriate to the section and later to the schedule, are being debated.

Deputy McCreevy is accurate when he says that, whatever the genesis of this idea, it has now turned into a section designed to catch people who evade paying income tax. This is the reason for the intense complication of the measures which are proposed for registration in that part of the section which Deputy Barry is trying to amend.

I yield to nobody in my desire to catch people who are not paying their appropriate share of income tax and I salute the efforts of the Revenue Commissioners in this regard. The system which Deputy Barry is trying to amend —and perhaps his amendment does not go far enough—is not one which will do more than scratch the surface of the problem. The problem is a difficult one and I do not pretend to have an easy solution to it either, but I feel that I can somewhat sorrowfully guarantee the Minister that whatever scheme he sets up under this section, there will be people who will find a way out of touching ground on the tax debt which he is trying to establish for them. The section is self-defeating in its laudable purpose.

Whatever about the question of creating enough jobs under this section, when asked what he meant by "enough jobs" Deputy Horgan went off at a tangent. Nobody has ever suggested that, as a result of this section, the Government's employment targets are going to be realised. The section is intended as a contribution towards the achievement of those targets. Although Deputy Barry's amendment may be plausible, it has no relevance to the problem. The fact that somebody is registered for VAT has little or no bearing on whether or not they are a registered contractor for the purpose of section 6.

I must remind the House of something I said when replying to the debate on Second Stage. There are only two conditions being laid down for the granting of the certificate by the Revenue Commissioners. They are that an application is to be made in the prescribed from and that the applicant is resident in the State. It is true that the second schedule is formidable. However, I suggest that there will be no problem for the bona fide contractor. It is a question of completing the prescribed form and being resident in the State.

It is true that there are a number of formidable-looking provisions relating to this matter in the second schedule. In particular, Deputy McCreevy referred to paragraphs 7, 8 and 9. As is obvious to anybody who looks at them, they are precautionary paragraphs. The system provided for is open to abuse if people want to abuse it. It is true to say although this is not contingent on the subcontractor system or is not an adjunct to it—that the experience of the Revenue Commissioners in dealing with the subcontractor problem shows through in the drafting of the schedule. Nevertheless, I agree that we ought to concentrate on the bona fide contractor. In his case the problem will, I hope, be of minimal proportions.

The amendment is not relevant to the problem nor would it be helpful in overcoming the problem. I have already indicated to the House on Second Stage that I shall be watching the operation of this section to see if the machinery is too bureaucratic and is hindering people from availing of the relief contained in the section. I shall be having another look at the second schedule to see if it can be simplified. Unless we take precautions, this scheme, intended to assist in the creation of employment, could end up as a method of legitimately and legally enabling people not to pay tax for which they would be liable.

Progress reported; Committee to sit again.