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Dáil Éireann debate -
Wednesday, 23 May 1979

Vol. 314 No. 8

An Bille um an Seachtú Leasú ar an mBunreacht (Forais Árdoideachais do Thoghadh Comhaltaí de Sheanad Éireann), 1979: An Coiste agus na Céimeanna Deiridh. - Finance Bill, 1979: Committee Stage(Resumed).

Debate resumed on 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."
—(Deputy P. Barry.)

I have very little to add to what I said yesterday in regard to this amendment except to reiterate that registration for VAT purposes is hardly relevant to this section. In any event, registration for VAT purposes is no guarantee that evasion will be combatted. There was a notorious case reported in the newspapers a couple of months ago and if I quoted the heading of one of those newspapers Members would have an idea of what was involved. The heading read: "Unemployed man with 37 aliases got £55,600 in VAT con". Admittedly, any system is open to abuse.

Did that occur in this jurisdiction?

Yes. The point I am making is that registration for VAT is no guarantee that the purposes of the section will be achieved. However, in the course of the discussion on this matter Deputy Barry referred to his amendment No. 35a which relates to the Second Schedule and was designed to make clear that "qualifying work" includes insulation on its own, not merely as part of a general house improvement. As I indicated to the Deputy, that was the intention behind the provision and I believe that the Bill as drafted achieved that but it might be helpful to him if I indicated now that I propose accepting that amendment when we reach it.

I do not agree with the Minister in what he said concerning my amendment. This morning I came across a document issued by accountants concerning the Finance Bill and they state that as far as they can see the purpose of the section is not so much to give relief to taxpayers as to try to tax people who are evading tax. If a very rigid tax evasion system is to be operated by inspectors of taxes, then the benefit of this section will be lost. It is to try to introduce a new system whereby people can avoid having to fill up too many forms that I suggested this amendment. I considered it worth while because it would simplify the situation. I do not think, as some Members mentioned, that it goes far enough but it would be a help in the creating of more employment, the desired objective of section 6.

Amendment put and declared lost.
Question proposed: "That section 6 stand part of the Bill."

(Cavan-Monaghan): When I read about this allowance in the newspapers I thought it would be of some value to householders. However, when I looked at the section and studied the Second Schedule I came to the conclusion that both were much ado about nothing. On further consideration I have come to the conclusion that in one sense it is a cosmetic exercise by the Minister for Finance trying to outdo his colleague, the Minister for Health, who seems to be an expert in giving concessions and leading people to believe he is doing something for them, when it does not cost anything. Here the Minister for Finance has outscored the Minister for Health. While he gives the impression that the object of this section and the Second Schedule is to give relief from income tax it is a provision that will collect income. Also while he gives the impression that this is a section that will make it cheaper for householders to have house repairs carried out, in fact it will make it dearer. There is no doubt about that. The relief this section affords consists of the householder being able to charge the labour content of repairs carried out to his house, between £50 and £500, in other words, £450, against income tax. But in order that the householder may obtain such relief the man who is doing the work for him will have to become registered under this Bill and will have to get a form of registration. He will then become a registered person and a list of such registered persons will be exhibited some place or another, I think it is the inspector of taxes office, for all and sundry to see. In addition the householder claiming relief for the repairs must make an application to the Inspector of Taxes, must disclose the name of the registered person, that is, the man who is doing the repairs, when of course the Revenue Commissioners will get after him.

Furthermore under paragraph 3 (1) of the Second Schedule there is the provision that if a householder applies for relief from income tax for having repairs carried out to his house he must expose himself to a visit by an authorised officer of the Minister for Finance who will inspect his house, the repairs carried out and generally what is going on there. Indeed I do not know what use will be made of any information an authorised officer will get when he carries out such inspection. When I read that provision in the Schedule it prompted me to ask whether the same checking-up procedure is imposed on a businessman who repairs his house and who can claim the cost of such repairs against his income tax liability. Does such a businessman have a visit from one of the Minister's authorised officers to see what is going on? It is an outrageous invasion of the privacy of a man's dwellinghouse under the pretence of granting relief from income tax.

Furthermore the confidence usually vested in an inspector of taxes is deliberately breached in this Schedule by giving him the right to communicate with the Social Welfare people in regard to the activities of the registered officer. If the Minister for Finance and his officers have reason to believe that perhaps there are nixers going on then, as I see it under this Schedule, they have the right to investigate because the Table specifies:

Person to whom information to be given (1) Any officer of the Minister for Social Welfare authorised by him for the purpose of this paragraph.

One of the effects of this section and the Second Schedule, under which people are supposed to be granted some relief from income tax, will be the invasion of a person's private dwellinghouse to see what is going on there and to hand any registered person over to the Social Welfare authorities for prosecution. That is it in a nutshell. Does the Minister really believe that the effect of this provision will be to make it cheaper for people to have repairs carried out to their private dwellings? Does the Minister really believe that these men doing small jobs are going to register; does he really believe that? I do not think he does; I believe he is more sensible and down to earth than that. Surely the Minister does not believe that such men, who are not liable to income tax—some of them may be liable for small amounts; I do not know; —will register. Its effect will be that before I have a man paint my house I must ask him if he is registered; if he will get me a form on which I can claim income tax when I will never see him again; he will disappear. Then I will have to go and get a large contractor, a big man who is registered, who is maintaining an office with an accountant and so on to do the job, when he will charge me twice as much. I had a painting job done a few years ago. Beforehand I got two estimates, one for £450 and another for £275. I asked an architect friend of mine how much he thought the job should cost and he told me £600. I told him then of the two estimates I had received, when he told me that the man who had quoted me £275 would do a first-class job.

There is no doubt but that the effect of this measure is either purely cosmetic and valueless to the householder or, if he tries to avail of its provisions, it will cost him more to get his house done than if he never bothered claiming income tax relief. Further it will drive the small man, the small contractor who knows his job, a painter, carpenter or general tradesman, out of business because he will not register. Then the people who want repairs carried out will have to engage a large contractor who will have management staff and offices to maintain, when it will cost them far more.

I notice that under paragraph 5 (1) of the Second Schedule the person must be registered. I wonder whether the same procedure will apply as for the registration of sub-contractors because over the years it was practically impossible for a sub-contractor to become registered. A lot of my time was taken up making representations on behalf of people who wanted to be registered as sub-contractors but they would not be registered unless they had a residence or had established themselves as people of substance. On a fair reading of paragraph 5 I do not think that stringent procedure will be applied because, if a person is registered in the State, the inspector of taxes must register him. Certainly the registration procedure in regard to sub-contractors was a nightmare; a person could not be registered unless he had a workshop and management set-up.

I do not want to drag out this section or to be offensive to the Minister but I say to him: "Thank you for nothing" because it is no good. Of course, it may be good from the Minister's point of view. It may catch people who are evading tax but the Minister should say that. He should say that it will be an offence for people to engage in work unless the Revenue Commissioners are notified. It is less than candid to do this under the pretence of giving a benefit to householders.

When we were discussing an amendment yesterday the Minister and I were having a bit of a barney about the question of jobs. I was accepting for the purpose of the argument that this particular section will create some jobs and that all the jobs that it will create will not solely be in the Office of the Revenue Commissioners. The Minister challenged me on the degree to which I would find the job creation aspect of this proposal satisfactory. I then referred to the question of full employment. He replied very reasonably that nobody could expect this particular proposal to create full employment. Nobody expects that.

That remark was in relation to the Deputy saying that this section would not create enough jobs. I said enough in relation to what?

The Minister is drawing attention to my use of the word "enough". I would define "enough" in this context quite simply by saying that there is no way in which I can see this section will create enough jobs to justify all the ballyhoo that has gone into it and all the unnecessary effort that will be expended by the Revenue Commissioners and anybody else associated with the administration of the system which is being set up under this section. That is what I meant basically by enough jobs.

It seems to me to be a pathetic scratching of the surface of the unemployment problem. If it has any real effect in catching people who do nixers and who do not want to pay the tax on the nixers they do, that is all right. I believe that will be its major effect and its effect in the area of job creation will be marginal.

In relation to the scheme there are two points which need to be made. The first is that whatever the putative value of this scheme to the creation of employment its value to the householders who avail of it, if they can weave their way through the tangled web of complexities, is directly related to their marginal tax rate. We will have a situation in which the benefit to those with money and perseverance can be quite substantial. Unless I am wrong in my calculations the net benefit to somebody on the top marginal rate of 60 per cent in relation to the amount of money expended on labour between £50 and £500 of any authorised improvement works will be approximately £270. That is £270 he would have had to pay in income tax which he is not paying now because he is paying somebody £500 for labour. In other words, over half the cost of his expenditure on labour up to that £500 limit will be given back to him by the State.

This is generous indeed when we compare it to the average wages which most people get. I suggest it is generous out of proportion to the work force which it is hoped to bring about. I would like to contrast the generosity here with another scheme which is also under the control of the Minister for Finance and is not widely known but with which it is relevant to compare it. I refer to the scheme for giving relief to taxpayers in relation to allowing them to set off against their taxable income amounts paid by them for medical expenses. Under an earlier Finance Act it is permissible for a man with a family to set off certain medical expenses against his taxable income. The irony of the situation we are dealing with today under this section is that a man with a family has to lay out twice as much in actual hard cash before he pays a penny that he can set off against his taxable income than a well-off person who decided to employ a couple of people or a small contractor to build an extension for him.

Under this section a person who wants to build an extension will start getting tax relief when he has expended £51 on labour on his extension. If he were the father of a family outside the limit for eligibility for a medical card by a most miniscule amount, he would have to spend £100 of his own money before he starts paying any money that can be set against taxable income. If the Minister was to be reasonable and rational in this regard he should at the very least have extended the other concession upwards.

Sorry, Deputy, it would not be relevant. It is relevant to mention it in passing as a comparison but it would not be relevant to debate it on this section.

I am about to conclude. Is it more relevant for a man to be given twice the effective tax concession to build an extension to his house than to look after and pay for the health of his family?

The relief for certain expenditure on residential premises is only for labour costs. The Minister should extend this to materials. The cost of materials for renovating, reconstructing or improving a house are so substantial that they deter people from carrying out improvements to their houses. The Minister should consider bringing in an amendment to include materials. There is mention in the explanatory memorandum about insulation work and the Minister has included it in the schedule. We are going through an energy crisis so the Minister should give full relief for the cost of buying materials for insulation work.

Another point of importance relates to electrical fittings. I suggest that the Minister should consider giving relief in respect of expenditure incurred by householders in having their premises inspected with a view to ensuring that electrical fittings are up to standard. During very bad storms last winter a number of accidents occurred throughout the country because of faulty electrical fittings and the Minister would be well advised to consider allowing inspection costs against income tax.

I should like to know whether the period in relation to these schemes of allowances will be continued after 5 April 1980, if they will be continued in future years. People are nervous about completing application forms in respect of loans, grants and so on because they fear that if they put dates on them they will be tied to those dates. That is why so many people come to public representatives and others for assistance in having such forms completed. I should like the Minister to let me know if this scheme will be continued after 1980 so that people will know next year if they will be entitled to benefit under the scheme. Perhaps the Leas-Cheann Comhairle will not agree with me——

Do not anticipate anything. Usually when the Deputy starts out in that way he is in trouble straight away. What he says must be relevant to the section.

Section 9 (1) of the Second Schedule states that any notice, certificate or form which is required to be given, served, sent or issued may be sent by post.

(Cavan-Monaghan): If you are lucky.

Since April, because of the postal dispute, people have been unable to communicate by post with the Revenue Commissioners and I should like to know what the Minister has in mind in this section. May such documents be delivered by hand? This is causing problems because when people visit the tax offices, or indeed any Government office, they find they will not be given notice forms by an inspector of taxes or other officials. How will applications made under this section be treated if the postal dispute drags on for a long time? The House is entitled to be told what the position is in regard to the delivery of notices, certificates and so on.

Many people who carry out grant-aided improvements to their homes should be given tax allowances in this respect even if they do the work themselves if they can satisfy the Revenue Commissioners that it has been carried out properly. Why must a householder employ a third party to do the work? I appreciate the Government's policy in relation to employment but I suggest that people should be allowed to do the work themselves provided they give prior notice to the Revenue Commissioners. Deputy Fitzpatrick pointed out the undesirability of having to bring in bigger contractors, apart from the fact that such people have very little interest in doing small jobs. This scheme is directed towards such contractors, leaving out the smaller people.

It is confined to registered contractors and there are many small builders who are not registered. Many small builders carry out reconstruction jobs and they may or may not be liable to income tax. They are being removed from the scheme. It means that the cost of such schemes will be higher.

On the point made by Deputy Fitzpatrick on the reference by the Revenue Commissioners to the Department of Social Welfare, he may be interested to learn that amendment No. 39 withdraws that paragraph because it is not considered to be appropriate to a Money Bill. If it had been considered appropriate I would not have had any hesitation in leaving it in, and I am surprised at the Deputy's complaint about it. What is the use of people talking about tax evaders if they object to what, I suggest, are reasonable measures to tackle evasion?

I do not think Deputy Fitzpatrick on reflection would want to be known as one who was trying to aid and abet people who are sponging. That is the only word you can use for people who are, in fact, working on the side and drawing social welfare. They are only one category of tax evaders. We are tackling all of them I hope. A number of steps have already been taken in this Bill, and amendments contain further measures for doing that. I do not think we should distinguish between tax evaders. All of them have to be tackled.

On the question of an inspector or an authorised officer inspecting the taxpayer's house where the work has been carried out, this is an enabling provision. I would visualise that it would happen very rarely. Contrary to what Deputy Fitzpatrick said, or at the very least implied, it happens also in the case of business people, not on a very frequent basis but on some occasions. I see no objection or difficulty about it. Deputy Fitzpatrick grossly exaggerated the alleged invasion of privacy. After all, when people apply for grants—and in many cases here they will be getting grants—there is an inspection system. Does Deputy Fitzpatrick regard that as a gross invasion of the privacy of the individual?

Why have two inspections? Would one not do?

I said this is an enabling provision. I do not anticipate that there will be an inspection on behalf of the Revenue Commissioners except in a very rare case. That will happen normally only where there is reason to believe some kind of an attempt at evasion is involved.

The principle of inspecting work done where a grant is being given or a tax allowance is being given does not seem to me to be unreasonable. If Deputy Fitzpatrick has been able to stomach it, as he was for a long time as a Deputy and as a member of Government, it is a bit late in the day for him now to start pleading that the possibility of an inspection of work done——

(Cavan-Monaghan): This is a different type of inspection. This is a Nosey Parker trying to see how much more tax he can extract.

That is a very interesting reaction from Deputy Fitzpatrick. I will not elaborate on it unless he wishes to elaborate on it. I regard the provision that in cases where the Revenue Commissioners consider it necessary—and only in such cases—an inspection can be carried out of work done in respect of which a tax allowance is claimed as a reasonable provision, and certainly as no invasion of privacy. If it is an invasion of privacy, so is an inspection by a local authority, or by the Department of the Environment in respect of a grant for such work.

It is true, as Deputy Horgan said, that the extent of the benefit under this section depends on one's marginal rate of tax. That is true of any allowance under the tax system. It is one of the difficulties we face. It is not easy to overcome it, but I would remind Deputy Horgan that in an earlier section where we tried to overcome it in regard to child allowances by reducing the child tax allowance and increasing the social welfare children's allowance—the cash value of that, so that people not liable for tax would get the full amount and people liable at a low marginal rate would get more than those liable at a high marginal rate—there were numerous complaints from Deputies in the Fine Gael and Labour Parties. I cannot recall whether Deputy Horgan complained. I do not think he did, but complaints were made about it on behalf of his party. I do not pretend that this is a matter easy of solution, but it is not good enough to be blowing hot and cold on the issue.

The point raised by Deputy Enright about including materials and insulation as well as labour in the allowance was dealt with in considerable detail on the amendments which have been disposed of and I do not propose to go back over them again. I want to reiterate that the purpose of this section, which is experimental, is to encourage the creation of employment. An allowance in respect of materials would be contrary to that purpose and would be open to abuse. The primary purpose is the creation of employment and that is why the allowance is in respect of labour only. It is introduced on an experimental basis and, therefore, I cannot guarantee that this provision will continue beyond 5 April 1980.

If it is successful, it will certainly be continued. The odds are, and experience would suggest, it is likely that even if it is not a clearly outstanding success it could be and would be argued that it has not had a fair chance and should be extended further. While I am not prepared to give an absolutely cast-iron guarantee that it will be extended beyond 5 April 1980, I can say all the indications are that it would be so continued.

Deputy Enright referred to the difficulties arising from the postal strike. As I will indicate in a moment, already a number of applications are in despite the postal strike. I for one am not prepared to assume that the postal strike will go on for ever. The difficulties Deputy Enright referred to will sort themselves out in due course. If they do not, the matter can be looked at again. I have no reason to assume these difficulties will not be overcome. In making the point about giving the allowance to those who carry out the work themselves, Deputy Enright adverted to the reason why that is not provided for, that is, that the purpose of the section is to help to create employment.

My reason was partly the creation of employment, but people on very small incomes might be able to carry out the work at home.

Of course, but the purpose of this section is not merely to give a tax allowance but to help to create employment by giving a tax allowance. We must not lose sight of the purpose of the section. I was somewhat mystified by Deputy Enright's statement that this would exclude small builders. In the main the kind of work covered by this section will be carried out by smaller contractors. The Deputy was correct in saying that many large contractors would not be interested in this kind of work. When he says they are not registered, he is jumping the gun a bit.

After all we are only discussing the section now. It is a new section, a new provision, and it is open to anybody engaging in this type of work to register in the future even if they are not registered now. I do not think there is any good reason for anticipating that such people will not register. If they are engaged in this type of work those who choose not to register are free to make that decision. That is no reason for saying we should alter the section and allow such people to engage in this kind of work in such a way that the householder can get the tax allowance while they, for reasons which must be suspect, refuse to register with the Revenue Commissioners.

On the point raised by Deputy Horgan about medical expenses relief, the position is that the relief is given in respect of medical expenses exceeding £50 for any one qualified person, or £100 where there is more than one qualified person. Criticisms have been made of the section to some extent but largely in relation to the amendments and concerning the complicated nature of the provisions, particularly in the Schedule.

There are two possible approaches which may be taken to a scheme of this kind. The first is to provide a simple, straightforward scheme which will enable the genuine householder and taxpaying contractor to get the benefit of the scheme without any trouble.

Unfortunately when this approach is taken the unscrupulous will immediately set out to abuse the scheme and secure the maximum tax relief whether or not any work is carried out and, at the same time, ensure that the contractor will not pay tax on his profits. When this happens and when the extent of the abuse eventually comes to light it then becomes necessary to tighten up the scheme and to bring in a number of safeguards to protect the Exchequer. This is what happened in the case of the sub-contractor's system which was introduced in 1970. It was based on a relatively straightforward system of certificates which were designed to enable genuine sub-contractors to receive their payments without deduction of tax. The system then became subject to abuse to an alarming degree, involving the use of photographic copies of certificates, the handing around of certificates from sub-contractor to sub-contractor and the production of forged certificates. The result was the loss of millions of pounds to the Exchequer and a more tightly drawn up scheme had to be introduced in 1976.

The second approach to the kind of problem we are faced with here is to acknowledge that unless safeguards are built into the scheme it will be abused and will have to be amended later. I suggest that the logical approach is to build in the safeguards at the beginning and protect the Exchequer from the unwarranted loss of revenue that will occur otherwise. This is the approach taken in this section in relation to the present scheme. In drawing up the scheme regard had to be had to previous experience in relation to sub-contractors. As I said yesterday, while it is true that the material in the Second Schedule presents a formidable appearance, probably three-quarters of it is designed to prevent evasion and will not affect the genuine householder claiming relief or the taxpaying contractor.

For example, paragraphs 7 to 11 which Deputy McGreevy particularly criticised relate first of all to the withdrawal of a certificate of registration of a contractor in a case where he was not entitled to it and, secondly, penalties for false statements and so on. These paragraphs will not be of any concern to the genuine contractor. Deputy Barry contrasted the procedure under the section with that which applies in relation to life insurance relief which he said was granted on foot of the taxpayer's claim. The Deputy may have overlooked the fact that when a person takes out an insurance policy the company supply the policy holder with a statement setting out particulars of the policy which the taxpayer forwards to the inspector of taxes to obtain relief. Generally the relief is continued from year to year without further verification. It must also be remembered that if the need arises to check any aspect of the policy, for example, whether it has been discontinued, the insurance company will supply any information required. This is unlikely to be the case where a check would be carried out in relation to relief claimed under this section if the proposed safeguards were omitted since the contractor who had done the work and who probably had given a receipt would not be available either to supply information or indeed, to have himself assessed in respect of tax.

I might illustrate more clearly the kind of problems that would arise if we approach the introduction of this scheme on the first basis I outlined; in other words, making it as straightforward as possible, waiting for the abuses to occur and then bringing in amendments to correct it. Basically that is what happened with the sub-contractor's scheme when it was introduced in 1970. The actual tax receipts which arose there averaged £1 million per year during the first four years. During the six years to 1976-1977, the yield averaged less than £3 million a year and the highest figure was £7 million in 1976-1977. Following the tightening up of the scheme in 1976, the tax received for the first full year of the operation of the tightened-up version of the scheme—1977-1978—was £16 million, more than double the receipt for 1976-1977 and more than five times the average in the previous six years. I hope these figures will give Deputies some idea of the likelihood of evasion in this general area and what is almost certain to happen unless adequate safeguards are built into the present system.

The House may be interested to know that up to the present 330 householders have made application for the relief and but for the postal dispute it is likely that the number would be increased by four or five times. Obviously the problem about forms concerning which Deputies were worried has not in any way inhibited these householders. Up to the present inquiries have been received from 33 persons wishing to be registered for the purposes of the section. They would be contractors. Again, but for the postal dispute it is clear that the number would be much higher.

In regard to the forms, there may have been some misunderstanding by Deputies. I do not blame them for it because the wording of the provisions can lead to this but I should like to explain briefly to the House how it is envisaged that the scheme would operate. Supplies of the printed form will be given to registered persons and to the National Manpower Agency. When a householder engages such a person he will be given the form by the registered person. It will be filled in and the registered person will complete the last part of it. This form, which details the work to be done, will be sent to the inspectors of taxes who will then forward a claim form to the householder on which he can claim his tax relief. Once the inspector sends the claim form to the householder, that is a protection for the householder because whatever happens afterwards between the Revenue and the contractor there will be no difficulty for the householder. When he completes the form to claim relief he will get it and no argument will arise because of some difficulty between the Revenue and the contractor. In other words, that will establish the householder's right to claim this relief provided the work is carried out and so on. Also it will ensure that the householder, before the work is commenced, has established that the person doing the work is a registered person and that the householder will not find himself, having had work carried out and perhaps having paid for it, being told by the Revenue Commissioners that he is not entitled to this relief because the contractor was not registered. It will avoid that difficulty and is a protection for the householder. When analysed, I suggest that the provisions are not as formidable as they may appear. I repeat that the main degree of formidable requirements in relation to this, the main sections of these are related to combating evasion and will present no problems for the genuine householder and genuine contractor for whom the operation of the scheme should, I believe, be relatively simple and straightforward.

Much of the arguments we have had on this section and the Schedule to it could have been avoided if the wording had been clearer, if what the Minister has said in the last few minutes had been said. I was certainly under a misapprehension as to how the claim could be made and how the householder could do it. If what the Minister has explained now was explained to everybody else I think ordinary householders might benefit from it. The Institute of Chartered Accountants, the Association of Certified Accountants, the Institute of Cost and Management Accountants sent a submission to the Minister on 8 May in which they said in relation to this matter that the relief would be extremely difficult to obtain and confusion would arise with taxpayers having work undertaken with a registered contractor who may not be in possession of a valid certificate at the time the work is carried out. They said that the legislation as written appeared to be more directed towards getting people within the tax net than with giving relief to taxpayers. It was suggested that an undue burden of proof was put on the taxpayer for the amount of relief involved. If the Minister's explanation in the past few minutes is correct and if the relief is to be got as the section says only through registered contractors and if the only obligation on a householder seeking relief is to get the necessary form which evidently the registered contractor will have in his possession as a permanent part of his bookkeeping arrangements, that simplifies the matter very much.

It is not at all clear from the section or the Schedule that this is so. Despite the fact that the Minister said, I think, that more than 300 had already applied, I believe that many people including the three bodies I have mentioned are under the impression that I was under, that the relief had to be claimed through the person doing the work, not through the person seeking the relief. There is a very large element of tax evasion provision in the Second Schedule, and I do not accept from the Minister that, because a very different scheme for different reasons in 1970 was drawn in such a way that many people sought to evade tax under the sub-contractors' scheme, this would necessarily happen now. If the Minister had accepted my amendment last night about people who were already registered for VAT—because they are registered they are known to and on file with the Revenue Commissioners—and issued the forms to those persons, much of the trouble might have been avoided. I cannot remember what the new level for VAT is but I think it is £1,800 in a two-month period; I cannot remember the limit above which one must be registered for VAT but it is reasonably low. The vast majority of contractors are already registered for VAT. If the Minister had accepted that amendment we would have saved a lot of trouble, given the explanation we got this morning.

The speeches made last night about the emphasis on catching tax evaders rather than creating jobs are justified when one considers the Schedule to section 6 and an amendment issued yesterday, amendment No. 31a, which puts in a whole new section six weeks after the Finance Bill was first published. This is two pages long and again it appears to be directed at tax evasion. Taking those things together I consider the speeches here this morning and last night on tax evasion are justified. We are now only on section 6 of the Finance Bill which is pretty long and involved and we have not very many hours left to debate it. I understand it must be finished next Tuesday night or that agreement has been reached to finish it on Tuesday night—is that correct?

I understand that is so.

The Chair is getting information now.

I have been so informed by the Whips. If the Minister had accepted my amendment we could have saved people a lot of trouble and shortened the debate in the House.

(Cavan-Monaghan): In my opinion this section and Schedule will not work in regard to the small contractor or tradesman. I know enough about human nature and people in general to know that these people simply will not register. Every contractor who will be involved in this scheme must register from now on. There is no such thing as some of them being registered as was the case in the past; all of them must register under this section. The Minister has told the House that he has had 35 inquiries from contractors who wish to be registered. I would not expect the Minister to give the names of these people but I feel that perhaps they are some of the fashionable contractors around the city whose boards we see outside houses advertising the fact that they are carrying on work there.

Why must a person register for income tax purposes for this particular job while it is not universally obligatory on everybody to register for income tax? If I start up as a medical practitioner I do not have to register for income tax. If I start a small shop I do not have to register or if I start up as a dog trainer. I could go on with a multitude of examples; practically every trade, occupation or business you think of is free from registration. Why pick out this particular trade and impose registration?

The Minister has spoken about sub-contractors. That was an entirely different operation because there you were dealing with huge sub-contracts involving large sums of money. Here, we are only concerned with small jobs like painting, repairs and so on. This seems to be making an exception. I hold no brief for tax dodgers but I believe that if you are after one class of tax dodgers you should get after every one of them. If we are spending a lot of money going after the person who abuses the social welfare schemes and gets a few pounds he should not get and which he spends in the local shop, you should also go after the tax dodger on a large scale who perhaps is avoiding paying thousands of pounds which he does not spend in the local pub or village or even in this country.

I always thought that since the PAYE system of taxation was introduced it was morally necessary to have a fair system of taxation. Since one section are caught in a vice-like grip, it is essential that everybody should be. This is a Mickey-Mouse operation which will not work. The people who do these kind of jobs are small operators and local tradesmen. I would be interested to hear at the end of the year how many people who were not already on the books registered with the tax inspectors as a result of this operation. Surely the Minister is not concerned with people who are already making returns. The small businessman will get out of the business altogether. The Minister may or may not like that but it is a factual commonsense approach to this.

If section 6 and the Schedule were printed on the application forms and the attention of householders drawn to them, the number of forms that would be returned would be very few. If this was an operation to get after huge tax dodgers, that would be all right. But it is introduced as a scheme that will give employment and will benefit householders. In my opinion it will not give employment and it will make it more expensive for people to get their houses repaired if they want to avail of the scheme.

One of the questions I asked the Minister was the length of time this scheme would be in being. He said it is an experimental scheme that will last for a period of 12 months and, if successful, may continue. Two months have elapsed since this scheme was first mentioned. Only 330 people have applied. Surely there are more than that number of people improving their houses at present.

If people have started work to improve their houses or have work completed before they send in their application forms and obtained the registered forms for income tax allowances will they be granted the allowances on their income tax? Where I am living we have neither phones nor post. Some people pay their income tax to Athlone, more pay it to Kilkenny and still more to Dublin. They have no way of communicating with the inspector of taxes. Those people will not be able to work the scheme if they are held up until the postal dispute is over and the Department of Posts and Telegraphs go back to work. I presume such people will be allowed to complete the work where they are being hampered by the postal dispute. The scheme lasts for 52 weeks and approximately eight or ten weeks have elapsed. How long more will these people be prevented from applying for their allowances?

Some 330 people have applied for this benefit and are entitled to deduct any figure over £50 that shall not exceed £450. Why have only 330 people applied? A further effort will have to be made to ensure that people are aware of what is happening and can communicate with the relevant inspector of taxes in order to obtain their forms. I am sure the Minister realises that this scheme, with the employment potential he envisages, is being held up at present. Only 330 people have applied and perhaps all the others are millionaires——

The Chair would like to have the section passed. There should be no repetition.

The Minister gave a figure of 330 people who applied and approximately 33 contractors who asked to come in under this scheme. While the section may pass, it is not working to the extent that it should.

Question put and agreed to.

I move amendment No. 14:

In page 9, line 31, after "arrangement," to insert "approved by the Revenue Commissioners for the purposes of this section,"

The purpose of this amendment is to provide that a permanent health benefit scheme in order to qualify for tax relief under the section in respect of contributions made under it must be approved by the Revenue Commissioners. This is to prevent abuse of the relief which is being provided by the devising of tax avoidance schemes. Conditions of approval are not being set out in the section at this stage. Before doing so it would be advisable to have discussions with bona fide companies who operate this type of benefit scheme so that restrictions which might impinge on genuine policies would not be introduced. Time permits of this approach since the section will not come into effect until 6 April 1980.

Will the various schemes be written into next year's Finance Bill? Will we have a chance of looking at them or how will they come to the attention of the public?

Normally these kinds of provisions for approval of schemes by the Revenue Commissioners—as, for instance, that which applies in the case of pension schemes and so on which qualify for relief—if approved by the Revenue Commissioners do not come before the House. It is a technical matter. If there are problems arising in regard to the Revenue Commissioners disapproving of a scheme which people thought should be approved of I have no doubt that this would be brought to the attention of the Minister and the Opposition so that in that way it would be brought before the House.

This would probably work on the basis that these schemes would be approved by the Revenue Commissioners and they would choose between them then.

Amendment agreed to.

I move amendment No. 15:

In page 10, to delete subsection (4) and to substitute the following subsection:

"(4) (a) Any benefit received by a person under a permanent health benefit scheme, whether as of right or not, shall be deemed to be—

(i) profits or gains arising or accruing from an employment, and—

(ii) emoluments within the meaning of Chapter IV of Part V of the Income Tax Act, 1967.

(b) Tax under Schedule E shall be charged on every person, to whom any benefit referred to in paragraph (a) is paid, in respect of all such benefits paid to him and the tax so chargeable shall be computed under section 110 (1) of the said Income Tax Act, 1967.".

This is merely a technical amendment which rewrites subsection (4) in a more satisfactory way.

Amendment agreed to.

I move amendment No. 16:

In page 10, subsection (5), after line 23, to insert the following:

"Provided that subsection (4) of this section shall not apply to a benefit payable on the commencement of this section under a permanent health benefit scheme where the contributions made to the scheme in respect of which the benefit was secured, were not allowed as deductions for the purpose of subsection (2) of this section.".

This amendment is to provide for the situation that will arise next year. I am trying to cater for the position where someone who is at present paying a premium, which he cannot charge against tax, gets sick later on in the year and draws the benefits of the premiums he has been paying this year and in previous years. From 6 April next year, if this Bill passes as it stands, this person will have to pay tax on the benefits even though he has not had the benefit of a tax relief on the premiums. I am trying to ensure that anybody who is drawing benefit on 6 April next year will not be taxed on it.

The effect of this amendment would be to disregard for tax purposes benefits paid on or after 6 April 1980, the date on which the section is to have effect, if the premiums paid to secure those benefits have been paid prior to that date.

The amendment is not worded tightly enough. I am referring to somebody who is actually drawing the benefits when this comes into effect. On the last week of March next year he will be in receipt of a benefit which is not taxable and the following week he will have to pay tax on the benefit when the Bill is enforced.

Yes, but since the amendment provides that this exemption from tax would arise in respect of benefits where the contributions made to the scheme in respect of which benefit was secured were not allowed as deductions for the purposes of subsection (2)——

It says "payable on the commencement of this section".

The Deputy therefore seems to be referring to benefits accruing on or after 5 April next in respect of which there was a policy in operation under which contributions were made which were not allowed for tax purposes.

Maybe the amendment is not drafted clearly enough. It says:

Provided that subsection (4) of this section shall not apply to a benefit payable on the commencement of this section...

I mean somebody who is actually in receipt of benefit——

That would be on 5 April 1980?

Yes—in pursuance of a policy on which he paid premiums which he could not claim against tax. I am trying to cater for somebody who would be getting benefit in the overlapping period between the non-tax benefit and the tax benefit so that the person who is actually drawing benefit at that stage will not have to pay tax after the section comes into operation.

There are variations on this which render the decision on the right way to do this rather difficult. For example, a benefit which first became payable on 5 April 1980 would be exempt from tax on the grounds that the contributions made to the scheme had not been allowed for tax purposes. However, if we assume that the benefit continued for some months, would it then be the position that the benefit became chargeable on the grounds that in respect of the later period contributions to the scheme were allowable? If it is argued that in these circumstances the benefit should continue to be exempt, how can one justify to another beneficiary whose benefit commenced in June or July 1980 that his benefit must be taxed since his 1980 contributions to the scheme were allowed as deductions?

The only way these anomalies could be removed would be to provide that no benefit would be taxed unless it became payable under contract entered into after the commencement of the section. As a corollary there should then be no relief in respect of deductions except in cases where a person entered the scheme after 6 April 1980. This would deprive existing contributors of the proposed relief and would be unjustifiable. The only fair and practical means of the dealing with the matter is the one provided in the section, which is that as from the commencement of the next tax year contributions would be allowable as deductions and benefits would be chargeable. I do not pretend that this is a perfect solution, but of the various possible solutions it is the fairest and most practical.

I see the problem about the man who starts drawing benefit in June or July of next year. That is obviously an anomaly which it is difficult to cater for. I am talking of the person who has insured himself for two-thirds of his salary of about £100 a week who is now drawing £66 in benefit having paid premiums for ten or 15 years. If he gets sick at the end of this year he goes into benefit at two-thirds of his salary. If his marginal taxable income on 5 April next year is 35 per cent, that £66 being two-thirds of what he would consider his normal wage will now be down by a further 35 per cent, so that where he thought he had insured himself and was willing to sacrifice the tax benefit for two-thirds of his salary, he will now be receiving less than half his normal wages from 5 April next. As far as I am aware, during the duration of a long-term illness one does not pay premiums. I am trying to cater for a person in that category.

I would not know what to do about the man who is theoretically in the same position, who has paid his premium this year, has not been allowed to charge it against tax and who gets sick in July or August of next year. We have to take that situation as it is. At least he knows about the situation and may be able to adjust his policy to cater for it. When this Bill becomes law it will probably be brought to his attention by the insurance company and he will probably be able to adjust his policy. But the person who becomes sick in the reasonably near future and will still be sick on 5 April next could find himself receiving less than half his salary although he believed he had been insured for two-thirds of his salary.

I can see the difficulty the Deputy outlines. It seems that, no matter which way one approaches this, certain difficulties will arise; but what is provided in the section is probably the only fair and practical means of dealing with it. However, I will undertake between now and next week to have a look at the particular problem to which the Deputy has referred. He is primarily concerned about someone who is in receipt of benefit at the commencement of the next tax year and has not been allowed a tax deduction in respect of contributions which would have been paid in this tax year and——

Or in previous tax years.

Yes. He would continue on after 5 April in receipt of the benefit but would under this section automatically have a reduction because of tax being deducted on the benefit payable. I am not quite sure that I can find a solution but I will look at the situation.

Amendment, by leave, withdrawn.
Section 7, as amended, agreed to.

I move amendment No. 17:

In page 10, line 26, to delete "£2,400" and substitute "£4,000".

The purpose of this amendment is to increase from £2,400 proposed by the Minister to £4,000 the amount which can be allowed. Under the Capital Gains Tax (Amendment) Act the principle of indexation was allowed and should be allowed in this case also.

There are people in certain jobs who are given allowances for moving house and can borrow money at preferential rates of interest. Bank officials are an example.

That arises in another section and not on this section.

There is a section dealing specifically with preferential rates of interest.

This deals with relief in respect of certain interest.

This matter would be appropriate to another section.

Interest amounting to £2,400 as proposed in this section services borrowings of £16,500 at 14½ per cent and if we take this amount as being a loan of 90 per cent, which may be generous, it represents a purchase price of about £18,500 or taking into account the £1,000 grant for first-time buyers, a purchase price of £19,500. Income tax relief on £2,400 to a taxpayer in the 45 per cent tax bracket amounts to £1,080. This amount of relief, together with the savings resulting from the abolition of rates, represents a substantial subsidisation of home buyers out of public funds. I regard the figure of £2,400 as reasonable. It is also consistent with the policy that building societies should require applicants for mortgages not exceeding £16,000 to furnish certificates of reasonable value and should limit mortgages exceeding £16,000 to 20 per cent of available mortgage funds. There is a consistency about this approach. Having regard to the figures I have quoted, the £2,400 is a reasonable figure for the ordinary taxpayer and householder.

Amendment, by leave, withdrawn.
Section 8 agreed to.

I move amendment No. 18:

In page 10, before section 9, to insert a new section as follows:

"9.—For the year of assessment 1979-80 and any subsequent year of assessment, relief shall be given in respect of any payment of rent by an individual of an amount not exceeding £4,000 for any year of assessment.".

I want for people in rented accommodation the same benefits which are available to home owners. A person purchasing his house by means of a mortgage, bank loan or local authority housing loan can claim relief on interest to the extent of £2,400. I should like to see the same facility afforded to people renting houses. I do not disagree with the Government's policy of having as many people as possible living in and owning their own houses, but there are many people who for various reasons will never own their own homes.

There are thousands of civil servants in Dublin who are paying extraordinarily high rents for very inadequate accommodation. They do not envisage being in this accommodation all their lives and regard it as a transient phase through which they must pass while they attempt to amass the money to build or buy their own homes in Dublin or elsewhere. This applies to civil servants, bank clerks, gardaí and many others. If they had the capital and the inclination to buy or build their own homes at the age of 18 they would immediately be able to claim against the interest they would pay. Many of us do not think in terms of acquiring a home until we envisage getting married. Many of the young people to whom I refer are heavily taxed and have benefited least from the tax measures introduced in the past few years. If they were given the same tax concession as people buying their own homes it would help them to save money and more quickly acquire their own properties. It would help them to put aside more money and to reach more quickly the stage where they could own property.

In such circumstances there might be a much greater tendency to build houses rather than office blocks as an investment. I am not sure whether there is provision for income tax remission in the case of office blocks. Going back 50 years and even longer terraces of houses were built as investments but there were social as well as fiscal reasons for changes in that pattern. It might not be a bad idea to get back again to that position. If people were building the houses by way of investment properties we could be assured that the quality would be good and that the environment in which the houses were built would be maintained.

One way in which we could encourage the building of houses for reasons of investment would be by encouraging people to rent accommodation. I do not think that the proportion of home owners on the Continent, for instance, where most of the accommodation is rented, is nearly as high as it is here. The reason for that may be that it is profitable on the Continent to build houses for renting. I expect that the lowest price at which a three-bedroomed semi-detached could be bought today would be £18,000 and that an economic rent for such a property would be in the region of £60 per week. Very few young couples, whether they be employed in the civil service or in the Garda or anywhere else could afford that level of rent. Last week the Minister told us that the average industrial wage is only about £84 per week. Therefore, unless a young couple could benefit by way of a tax remission on their rent they could not afford the level of rents that would be asked for.

If there were available a pool of potential renters of houses perhaps it would help to increase the numbers of houses being built. I do not think any Government up to now have considered the possibility of tax remissions in respect of rent on houses. My amendment would relate only to rents in respect of main residences. It would not apply to the renting of a second house or to a seaside residence, for instance. It would apply to people who for one reason or another find it necessary to rent. Such a concession would help also in regard to young people being able to put aside enough money with which to build their own houses in the future.

I urge the Minister to consider this amendment. There are many people who must avail of rented accommodation. In many cases, too, people are transferred from one area to another in the course of their employment and they usually have to pay substantial rents for accommodation. The relief being sought in the amendment would be of much help to a big number of people.

In the past there were many companies involved in the area of property who provided houses on a rental basis. In this city houses were built on areas comprising acres and they were built to good standards. They provided accommodation for people who were not in a position to purchase houses. If we could encourage those people involved in property to build houses for renting, we would be helping to alleviate the housing shortage. I should prefer to see houses rather than flats being built for renting. Obviously, the capital involved in any such scheme would be sizeable but the rents would be substantial and the situation would be alleviated for the tenants if there were a provision for substantial income tax relief. There are far too many people who are in the area of building and speculation for the quick turnover, whereas if developers were building houses on the basis of letting them there would be a long-term project involved. I expect that there would be a ready market available if people were to form public companies and invite subscriptions for investment from private individuals. There arises the question of why people would not invest moneys in other types of institutions.

Progress reported; Committee to sit again.
Business suspended at 1.30 p.m. and resumed at 2.30 p.m.