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Dáil Éireann debate -
Tuesday, 29 May 1979

Vol. 314 No. 10

Finance Bill, 1979: Committee Stage (Resumed) and Final Stages.

Debate resumed on Amendment No. 31a:
In page 23, before section 27, but in Chapter VI, to insert the following section:
29.—(1) (a) In this section—
‘an authorised officer' means an inspector authorised by the Revenue Commissioners to exercise the powers conferred by this section;
‘business' means any trade, profession or business (other than banking business within the meaning of the Central Bank Act, 1971);
‘documents' includes books, accounts and records;
‘tax' means income tax or corporation tax.
(b) The persons who may be treated as ‘the taxpayer' under this section include a company which has ceased to exist and individual who has died; and, in relation to such an individual, the reference in subsection (2) to the spouse is then instead to the widow or widower (the circumstance that she or he may have re-married being immaterial for the purposes of that subsection).
(2) Where a person (in this section referred to as ‘the taxpayer') delivers to an inspector a statement of the income, profits or gains arising to him from—
(a) any business (past or present) carried on by him or his spouse, or
(b) any business (past or present) with whose management either of them was concerned at a material time,
and the inspector is not satisfied with the statement, the inspector may serve on the taxpayer a notice in writing stating—
(i) that he is not satisfied with the statement delivered to him, and
(ii) that he has requested an authorised officer to serve notice under this section on persons who, in relation to the taxpayer, are subject to this section.
(3) Where a notice under subsection (2) has been served on the tax-payer, an authorised officer may, for the purpose of enquiring into the tax liability of the taxpayer, by notice in writing served on any person who, in relation to the taxpayer, is subject to this section require him, within the period stated in the notice, or within such further period as the authorised officer may allow—
(a) to furnish him with particulars of any business transactions which that person had with the taxpayer during a stated period, and
(b) to deliver to him or, if the person to whom the notice is given so elects, to make available for inspection by an authorised officer such documents specified or described in the notice as are in his possession or power and as, in the first-mentioned officer's opinion, contain, or may contain, information relevant to any tax liability to which the taxpayer is or may be or may have been subject, or to the amount of any such tax liability.
(4) Nothing in this section shall be construed as requiring a person who is carrying on a profession, and on whom a notice under subsection (3) has been served, to furnish any particulars relating to a client to an authorised officer, or to deliver to, or make available for inspection by, an authorised officer any documents relating to a client, other than such particulars or documents—
(a) as pertain to the payment of fees or to other financial transactions, or
(b) as are otherwise material to the tax liability of the client,
and, in particular, he shall not be required to disclose any information or professional advice of a confidential nature given to a client.
(5) Where a person fails to comply with a requirement duly made on the person under subsection (3) within the period stated in the notice containing the requirement or such further period as may be allowed by the authorised officer concerned, the person shall be liable to a penalty of £500.
(6) The persons who, in relation to a taxpayer, are subject to this section are any person who is carrying on a business, or was doing so at a material time, and any company whether carrying on a business or not.
(7) For the purposes of subsection (2), every director of a company is to be taken as being concerned with the management of any business carried on by the company, and a material time is any time which, in the authorised officer's opinion, is, or may have been, material in the ascertainment of any past or present tax liability of the taxpayer.
(8) Where documents are to be delivered to an authorised officer pursuant to a requirement duly made under subsection (3), copies of such documents may be delivered instead of the originals; but—
(a) the copies must be photographic or otherwise by way of facsimile; and
(b) if so required by the authorised officer, the originals must be made available for inspection by an authorised officer, failure to comply with this provision being treated as failure to comply with the requirement.
(9) An authorised officer may examine any document furnished or made available for inspection under this section and may take copies of, or extracts from, them.
(10) When exercising any powers conferred by this section an authorised officer shall, if so requested by any person affected, produce to that person a certificate of the Revenue Commissioners authorising him to exercise the powers conferred by this section.".
—(Minister for Finance).
Amendment agreed to.
Section 27 agreed to.
SECTION 28.

I move amendment No. 32:

In page 24, lines 19 and 20, to delete "5 per cent." and substitute "10 per cent.".

This section deals with the convenant section, is this correct?

It has been improved in that the restriction shall not apply to children who are the victims of broken homes.

No, Deputy. This is an earlier one which would increase the amount of the disponer's income which may be convenanted from 5 per cent to 10 per cent.

The reason for this amendment is to make it more liberal than the original amendment of the Minister.

The effect of this amendment would be to increase from 5 per cent to 10 per cent the limit above which income paid by a disponer to a child over 21, or to a grandchild, under deed of covenant would be regarded not as the income of the child or grandchild but as the income of the disponer.

Accepting that the purpose of this section is to put an end to the tax avoidance device employed by a number of individuals liable to tax at the higher rates, it could be argued that even a 5 per cent concession as provided for in the section, ought not to be permitted, particularly since there is a total exclusion for covenants in favour of a child who is permanently incapacitated. It should be noted that this device is of particular value to those in the higher income ranges. The amendment would enable those taxpayers to use this device to a greater extent than permitted by the section. If the present provision does not prove effective in counteracting avoidance of tax payment the matter may have to be looked at again. I cannot, therefore, indicate any acceptance in relation to this amendment.

Amendment, by leave, withdrawn.

I move amendment No. 32a:

In a page 24, after line 39, to insert a new subsection as follows:

"(2) This section shall not apply to a disposition made for the benefit of a child arising out of a judicial separation or any separation deed, or for the benefit of a child whose spouse is deceased.".

This is the amendment I was talking about originally. The purpose of the amendment is to extend the section to allow it to cater for children of broken homes; to allow the existing relief to be given to the children of broken homes.

This may not be obvious, but it is very important in considering this, that when we speak of a child here we are speaking of somebody over the age of 21 years. As far as children who are minors are concerned, covenants in their favour are disregarded for tax purposes. It is difficult to see why the special exclusion should be sought for covenants to children of a disponer who are over the age of 21 years.

I should like to make it clear to the Deputy that the tax provisions in this section do not prevent any parent or grandparent from covenanting income in favour of a child or grandchild. The provisions ensure that, where such covenants are made, special tax relief is not obtained by the parent or grandparent, so as to reduce the tax chargeable on his income. This device of covenants has been used to reduce the tax bill of parents and grandparents liable to tax at a high rate. The present section proposes to counter this device, although it does not close the door altogether, since a covenant of up to 5 per cent of the disponer's income will be recognised for tax purposes and covenants in favour of permanently incapacitated children are being excluded completely from the proposed restriction. One has to consider the case for the two categories that Deputy Barry proposed to exclude against the background. I do not wish to delay the House unduly. If the Deputy wants to argue the case in detail, I shall go into more detail on the two particular cases. I must indicate, however, that I cannot accept the amendment. The effect of it would be simply to benefit people in the high tax bracket, in cases where the necessity for this provision is not at all clear when one recalls that we are talking about people over the age of 21 years being the beneficiaries of the covenant, and those paying the money into the covenant being primarily in the high income bracket. If they were not in this bracket, I do not think that this problem would arise for them.

Amendment, by leave, withdrawn.
Section agreed to.
Section 29 agreed to.
SECTION 30.
Question proposed: "That section 30 stand part of the Bill."

, (Cavan-Monaghan): I should like some more information. Section 25 of the Capital Gains Tax Act, 1975, relieves a person's main dwelling place from capital gains tax under certain circumstances. The purpose of this amendment is to extend the same relief to a second dwellinghouse owned by a person if this second dwellinghouse is or has been occupied by a dependent relative of the taxpayer. A dependent relative is defined. Under those circumstances, a second dwellinghouse will also be relieved of capital gains tax. Could the Minister say how many dwellings will be relieved under this subsection? Has there been much demand for the amendment which he is now making? Would the Minister reply with particular reference to the approximate number of second houses which will be relieved from capital gains tax under the amendment?

This section, by inserting a new subsection 9 (a) in section 25 of the Capital Gains Tax Act, 1975, provides for relief from capital gains tax in respect of a gain accuring to an individual on the disposal by him, on or after 6 April 1979, of a full or partial interest in a dwellinghouse which he had provided, gratituously, for an independent relative, including a dependent relative of his spouse. The relief will be available in addition to the existing relief provided for in section 25 in respect of a gain accuring to an individual on the disposal of his only or main residence and will likewise extend to a garden or grounds not exceeding one acre. The general rules governing the granting of the existing relief will apply also to the new relief. No more than one dwelling house may qualify at any one time for the new relief in the case of an individual or any married couple.

As the provision of a second residence for dependent relatives is rare in this country, it is anticipated that very little revenue will be lost as a result of the amendment, particularly in view of the indexation and tapering weight provisions of the Capital Gains Tax (Amendment) Act, 1978. I cannot say precisely how many cases are likely to arise but it does not seem they will be extensive. Some representations have been made seeking this but I would not wish to suggest to the House or to the Deputy that there has been any widespread clamour for it.

(Cavan-Monaghan): That is what I would have thought. Cases are so rare as to be almost identifiable.

There are some cases.

(Cavan-Monaghan): Has the Minister received many representations?

Some, but by no means a flood.

(Cavan-Monaghan): That makes it all the less desirable.

There is reference in line 15 of the section to "the widowed mother". Perhaps there should also be provision for the widowed father.

This definition covers the definition contained in the Income Tax Acts.

Does this include the father?

(Cavan-Monaghan): Perhaps the section should include reference to a widowed parent.

The definition here is the one used in the Income Tax Act. Basically this definition of a dependent relative conforms to the meaning given to a dependent relative for income tax purposes in section 142 of the Income Tax Act, 1967.

(Cavan-Monaghan): Is there a means test?

I do not think it is a means test; it is a test of dependence. This Bill provides for a reduction for income tax purposes for individuals who, at their own expense, maintain certain dependent relatives. This term covers a relative of the individual or of the spouse who is incapicated by old age or infirmity from maintaining himself and, secondly, the widowed mother, whether or not she is so incapacitated, of the individual or of the spouse. I am not arguing that Deputy Barry is wrong in saying that we should include the widowed father. We are following the definition used in the Income Tax Act.

Has the Minister any objection to extending this relief to the widowed father, whether incapacitated or not?

I have no objection in principle and I will see what can be done about it. There is a slight time constraint.

Question put and agreed to.
SECTION 31.
Question proposed: "That section 31 stand part of the Bill."

This extends the relief from capital gains tax to an illegitimate child. There is the very odd case of acknowledged parenthood of the illegitimate child by a man.

The Deputy will recall that we dealt with this point.

Question put and agreed to.
NEW SECTION.

I move amendment No. 33:

In page 26, before section 32, but in Part I, to insert the following section—

"32.—(1) It is hereby declared and enacted that, for the purposes of any assessment to capital gains tax made on or after the 11th day of May, 1979, subsection (4) of section 31 of the Capital Gains Tax Act, 1975, shall not have effect and shall be deemed never to have had effect as respects a unit trust to which the provisions of subsection (5A) (inserted by the Finance Act, 1977) of that section apply.

(2) The said section 31 is hereby amended by the insertion in subsection (5) after ‘the units in the unit trust shall' of ‘for that year' and the said subsection, as so amended, is set out in the Table to this section.

TABLE

(5) If throughout a year of assessment all the assets of a unit trust are such that they are not chargeable assets or are assets in respect of which a gain would not be a chargeable gain, the units in the unit trust shall for that year be deemed not to be chargeable assets for the purposes of this Act.".

This amendment provides for the insertion in Chapter VII of the Bill of an additional section. Subsection (1) of the new section is designed to prevent an unintended exemption from capital gains tax being availed of by certain unit trusts and subsection (2) corrects a minor drafting flaw in section 31 (5) of the Capital Gains Tax Act, 1975.

Amendment agreed to.
Section 32 agreed to.
Section 33 to 38, inclusive, agreed to.
SECTION 39.
Question proposed: "That section 39 stand part of the Bill."

This section repeals section 15 of the 1934 Finance Act and in consequence removes the exemption from VAT on the importation of antiques. An antique was defined as something more than 100 years old and was not liable for importation duties or VAT. This will no longer be the case. Is there a reason for this? It seems unnecessary. Surely we should make it easier for people who have money and wish to dispose of it in this way to bring genuine antiques into the country.

Section 15 of the Value-Added Tax Act, 1972 amended by section 14 of the Value-Added Tax (Amendment) Act, 1978 applied general customs provisions to VAT payable on goods at importation as if VAT were a duty at customs. Hence section 15 of the Finance Act, 1934, afforded antiques imported by non-registered persons exemption from VAT. This created what I consider to be justifiable concern among home traders liable to VAT since VAT at the rate of 10 per cent must be paid on sales of all antiques in the State whether imported or not and of course it involved a loss of tax. This repeal will remove the discrimination against Irish antique dealers. The total value at importation of antiques in 1978 was estimated at about £2.5 million. Importations by registered persons would amount to about one tenth of this sum and VAT on that would yield about £25,000.

Does this mean that those people who import antiques for resale will be liable for VAT?

That is on importation. If they sell them here, whether they were liable for VAT on importation or not, would they not have to pay VAT anyway if they were registered dealers?

I may have misled the Deputy. Under this provision they would become liable for VAT on importation. Even if they did not sell them afterwards they would be liable for VAT on importation.

But if they did not sell them afterwards they would not be interfering with traders inside the country, which is, I gather, the point of the section in the Act.

I am not sure that the Deputy is right in saying that they would not interfere with ordinary dealers in antiques here. In so far as they were selling these imported antiques they would be selling them without having been liable for VAT whereas the dealers who would be selling would be liable for VAT.

But when they sell them they would be liable for VAT if they are registered whether they paid VAT on importation or not.

Does the Deputy mean that a dealer would be liable?

Yes. Both sets of dealers are liable for VAT—(a) who imports an antique does not pay VAT on importation under the existing system but if he is registered and sells the antique he must pay VAT on the amount he receives for that antique; trader (b) buys an antique from a registered dealer on which he pays VAT, he sells it charging VAT and he submits to the State the difference between the VAT he charged and the VAT he paid, so the State ends up with the same amount of money. But one does not pay VAT on importation and the other has to pay, when he resells, the amount of VAT minus what he paid when he bought the article.

We may be at cross purposes here. What the Deputy says in regard to dealers is correct but we are dealing here with non-registered persons who could import free of VAT and could sell free of VAT.

But he could not if he is registered.

But if they are not registered they are competing to some extent with people who are trading in antiques who are liable for VAT on all sales they make within the State.

Not if they are not registered.

If they are not registered——

The Minister is not comparing like with like.

It is true to say that somebody who is not a dealer and therefore is not registered who imports an antique and then sells it within the State without being liable for VAT is competing with a dealer who is selling an antique within the State, whether imported or not.

But this does not apply if he is registered and neither of them is paying VAT. I am making very heavy weather out of this and I am sure it is quite a minor point but I cannot see why, after 45 years, it should become a problem for the State.

It is not so much a problem for the State as it is a problem for registered dealers who are registered for VAT with the competition they are suffering from people who are not dealers but are in fact competing with them without having to pay VAT on imported antiques.

I think we are probably spending too long on this point but if (a) is registered for VAT and he is an antique dealer and imports goods, at present he does not pay any VAT on the importation of that antique. If, for example, he buys the antique for £100 at the point of entry and there is 10 per cent VAT to be paid, he sells it for £110 plus his profit and he submits £10 to the State. If this section is repealed he now buys the article in England for £90; he pays £9 VAT; he sells it for £110 and submits to the State £10 minus the £9 he has already paid. The State gets £10. If he is registered that is the position but if he is unregistered he only pays VAT at the point of entry. Is that correct?

A difficulty may arise in so far as one does not have to visualise a sale onwards within the State. Somebody buying an antique here could buy from a registered dealer in which event the sale would be subject to 10 per cent VAT. Alternatively he could buy from a foreign dealer and import it and as things stand at the moment there would be no VAT payable. In that way the Irish dealer is at a disadvantage. The consequences of this amendment would be to put them on the same footing.

An antique in this sense only applies to things over 100 years old?

That is correct.

These are not shirts or steam-rollers and they are not exactly the same thing on each side of the sea. It is an individual thing. In any event, if the Minister is satisfied that there is a need for this section because of complaints or representations he has had, I accept that and agree to the section.

Section put and agreed to.
NEW SECTION.

I move amendment No. a33a:

In page 27, before section 40 to insert the following section:

"(1) It is hereby declared that the exportation from the State of produce that is subject, upon such exportation, to payment of a duty imposed by the Imposition of Duties (No. 239) (Agricultural Produce) (Cattle and Milk) Order, 1979 (S.I. No. 152 of 1979), or by Imposition of Duties (No. 240) (Agricultural Produce) (Cereals and Sugar Beet) Order, 1979 (S.I. No. 153 of 1979), shall be prohibited unless, before such exportation, the amount of the duty is paid to the Revenue Commissioners or security that is, in the opinion of the Revenue Commissioners, adequate for its payment is given to the Revenue Commissioners.

(2) It is hereby declared that section 15 (2) (a) of the Finance Act, 1966, shall in relation to the duty imposed by that section or any duty to which that section is applied by virtue of section 1 (h) of the Imposition of Duties Act, 1957, be construed as enabling, and as always having enabled, the Revenue Commissioners to provide by regulations for the withholding or recovery, from such persons as may be specified in the regulations, by persons specified in the regulations, of an amount equal to the amount of such duty of excise, in the manner and subject to the conditions so specified.".

The provisions of this section relate to aspects of the recently imposed excise duties in the form of the 2 per cent levy on fresh milk, live cattle, cereals and sugar beet.

The levy on fresh milk and cattle was applied from 1 May 1979 and that on cereals and sugar beet will take effect from 1 August 1979. The levies were imposed by two Statutory Orders made by the Government under the Imposition of Duties Act, 1957, as amended, that is, the Imposition of Duties (No. 239) (Agricultural Produce) (Cattle and Milk) Order, 1979 and the Imposition of Duties (No. 240) (Agricultural Produce) (Cereals and Sugar Beet) Order, 1979). Both Orders will cease to have effect on 31 December 1979.

Supplementary Statutory Regulations, setting out measures for securing and collecting the levies, have been made by the Revenue Commissioners in respect of cattle and milk under the Agricultural Produce (Cattle and Milk) Regulations, 1979.

The powers conferred by the Imposition of Duties Act, 1957, are sufficient to enable the levies to be imposed and to provide for most necessary supporting measures but they are not adequate to cope with the items contained in this section. Consequently these items could not have been included in the Statutory Orders.

Would the Minister explain more fully exactly what powers are being conferred by this section which do not exist at the moment?

Perhaps if I deal with subsections (1) and (2) that would answer the Deputy's question.

Subsection (1) provides that the Revenue Commissioners may refuse to allow the exportation of produce to which the excise duties apply if an exporter does not pay the required duty. Accordingly it prohibits exportation unless the duty has been paid in advance or Satisfactory arrangements have been made with the commissioners for its payment. A similar control exists in respect of collection of EEC agricultural levies—section 29, Finance Act, 1978—and is also provided for in the Bovine Diseases (Levies) Bill. Without prohibition, exports cannot be impounded and it might not be possible to prosecute non-resident exporters failing to pay the levy due.

With regard to the Levy Order made under the Imposition of Duties Act, 1957, it could not be used to enact provisions whereby a purchaser of produce who is accountable for payment of the excise duty could withhold from the seller an amount equal to the excise duty payable; nor, where the person accountable for the duty is not the owner of the produce, could it be used to provide for recovery from the owner of an amount equal to the excise duty payable.

We were advised that such provisions could be included in regulations made by the Revenue Commissioners on the basis that the validity of the provisions in the regulations could be confirmed by a suitable insertion in the Finance Bill—in other words, to remove any doubts that might exist. Regulation 8 of the Agricultural Produce (Cattle and Milk) Regulations, 1979, made by the commissioners contains the desired provisions about entitlement to withhold or recover the amount of the levy and this subsection is being included in the Finance Bill accordingly. This confirmation will cover the regulations which took effect from 1 May 1979.

I should say that entitlement to deduct does not preclude butchers from foregoing this entitlement where sales at marts are conducted on a net of levy basis; exporters and meat factories who are in the same position as the butchers are already operating the marts' arrangements.

I should like to ask the Minister to confirm that Regulation 8 of the Agricultural Produce (Cattle and Milk) Regulations, 1979, which relates to the withholding of money was invalid at the time it was made in the sense that it provided by order for the withholding of moneys although no power existed at that time when the order was promulgated for the making by order of such a requirement. Such power did not and will not exist until such time as sub-section (2) of the amendment before the House is passed.

The Deputy is not correct in his assumption. As I indicated, we have been advised by the Attorney General that the provisions could be included in the Regulations made by the Revenue Commissioners but the confirmation that will be contained in the Finance Bill is to remove any doubts that may have existed or have been alleged to have existed. It would not be true to say that Regulation 8 of the Agricultural Produce (Cattle and Milk) Regulations, 1979, made by the Revenue Commissioners was made, to use the Deputy's phrase, invalidly.

Will the Minister explain why it is necessary to have this amendment if it was possible to withhold the moneys under the order without it? The amendment is either necessary or not. If it is necessary then the insertion of the provision in relation to the withholding of moneys in an order made on 30 April 1979 was invalid because no power existed at that time to insert in such an order the power to withhold moneys. If, on the other hand, it is not necessary to have the amendment I cannot see why the time of the House is being taken up with this because it would have been possible to do what the Minister seeks to do by order.

The position is that this provision confirms the validity of the provisions in the regulation. That does not mean that there was no validity in the provisions of the regulations; it confirms their validity and makes it clear that this confirmation applies as of now and from the commencement of the regulations of 1 May.

I submit that what the Minister has stated is incorrect. This does not confirm anything. If one looks at the wording of the proposed section one will see that it is clearly not confirmatory, it is an enabling measure and there is a major distinction between a confirming and enabling provision. The proposed new section states:

(2) It is hereby declared that section 15 (2) (a) of the Finance Act, 1966, shall, in relation to the duty imposed by that section or any duty to which that section is applied by virtue of section 1 (h) of the Imposition of Duties Act, 1957, be construed as enabling, and as always having enabled, the Revenue Commissioners to provide by regulations for the withholding or recovery, from such persons as may be specified in the regulations, by persons specified in the regulations, of an amount equal to the amount of such duty of excise, in the manner and subject to the conditions so specified.".

This is not a confirmatory matter because there would be no necessity to give powers to enable things to be done if one was merely confirming something that was always validly done. We are being asked to enable the Minister retrospectively to do something that he did originally without power to do so. This amendment reveals that this 2 per cent agricultural levy was introduced, and provisions made for its collection from 1 May, without the power by law to do so.

The amendment will not be law until 7 June and, therefore, the enabling power contained in it will not exist until then. However, levies have been collected since 1 May under a power which between 1 May and 7 June does not and will not exist. In my view that is bordering on unconstitutional behaviour. I do not believe it is possible to introduce retrospective legislation that has a penal effect. By providing that it is declared that section 15 (2) of the Finance Act, 1966, shall be construed as enabling is in order but it refers to the past and is retrospective legislation.

What the Minister is saying is that it will be right as from 7 June for people to have collected and withheld money from people between 1 May and 7 June. In other words, the power to collect that money does not exist now, will not exist on 7 June, but will be validated from 7 June. It is questionable whether this is constitutional behaviour at all. It further underlines the unfair manner in which this entire episode of the 2 per cent levy has been dealt with by the Government. The Government have had to resort to grotesquely artificial contrivances to bring this levy into being by means of orders specifically chosen so as to avoid a division in the matter in the House where Fianna Fáil Deputies might find some embarrassment.

The Deputy knows that that is not true.

If so, why was this not introduced by legislation instead of being introduced by order?

We have already explained that at some length.

Why did the Government choose to introduce a levy on agricultural produce under the provisions of section 15 (2) (a) of the Finance Act, 1966, when the Minister knows that that section relates solely to wine? The Minister chose to use that power relating solely to wine to collect a levy on agricultural produce. He had to use the global power in section 1 (h) of the Imposition of Duties Act, 1957, to render it possible to use the wine power to introduce a levy on other products in a manner which was never envisaged when either section 15 of the Finance Act, 1966, or section 1 (h) of the Imposition of Duties Act, 1957, were introduced. No Deputies, when they approved either of these Acts, envisaged or could have been expected to envisage the powers being given in relation to the collection of duties on wine being used to collect a levy from farmers in relation to cattle, milk and so on. I am sure that if Deputies in the House in 1966 or in 1957 knew that a Government would use these provisions in this way they would not have agreed to them.

This is a serious matter. The law is being twisted to an unreasonable degree to collect an unnecessary levy. The Government could have obtained exactly the same amount of money and would have avoided the inconvenience and difficulties if they had chosen, rather than to introduce the levy, not to refund the value-added tax. The introduction of the levy was just to preserve face. The Government said they would introduce it if the farmers did not arrive in sackcloth and ashes to accept what the Government had laid down for them in the matter of taxation. Farmers were required to make this public confession in order that the levy would not be introduced. They were not being asked to agree to pay more taxation but to publicly accept that what the Government was doing was right. If they did that the same amount of money would have been collected by not refunding the VAT. Because farmers did not make this public confession, the Government decided to collect the same amount of money by introducing a 2 per cent levy instead of by not refunding VAT. All of the difficulties would have been avoided had the Government not refunded VAT and we would have avoided the necessity to resort to possibly illegal means to collect the money. There would have been none of the disruptions of trade and none of the possibilities of increases in consumer prices which are being brought about by the levy. The Government simply wanted the farmers to go down on their knees and accept what the Government had done and, for no other reason than that they would not, the Government decided to introduce this levy instead of not to refund VAT.

This is a very bad decision by the Government. It does no one any good. The Government would have benefited as much if they had chosen not to refund the VAT. The farming community would have been prepared to accept that because they had no particular expectation in relation to VAT, although admittedly the Government in their election manifesto promised that they would refund VAT. They did not say that they would refund VAT and introduce a 2 per cent levy at the same time.

We are now in this situation and the Government have had to resort to these means, which are at best quasi-legal, in order to raise this money. Are the Government satisfied that, if they have to prosecute somebody for failing to collect the levy between 1 May and 7 June, the prosecution will stick, in view of the fact that the power to withhold the money did not exist when the levy was introduced and was not on the Statute Book until 7 June?

This amendment was published this morning and nobody had cited this amendment until today. How was anybody supposed to know from looking at the law of the land between 1 and 29 May whether or not they were entitled to withhold these moneys? The law as it presently stands, and as it could reasonably be anticipated to stand until such time as this amendment was circulated, is that no power to withhold the money exists because any power taken in subsection (8) of the order was not validly taken since no provision existed whereby such a power could be taken. One cannot make a law by making an order. Anybody looking at the law as it stood yesterday is asking himself if he can or cannot collect the levy and must come to the conclusion that he does not have any legal power to collect the levy. Yet, this morning this amendment is published and the Minister presumably will tell us that if he did not collect the money yesterday he will now be prosecuted even though the law as it stood yesterday did not enable him to collect it. That seems to be contrary to natural justice.

The Supreme Court have always seen fit to interpret laws which are contrary to natural justice to be unconstitutional, and I question whether the collection of the levy and the withholding of money in respect of the levy are legal at all. I question whether it is in accordance with natural justice to prosecute farmers who have withheld the levy or butchers who have failed to collect it, taking for granted that the law as it stood at the time of the making of the order did not provide for a power in respect of withholding the money.

Obviously the Minister's answer will be that the power in respect of withholding the money exists in the Agricultural Produce (Cattle and Milk) Order, 1979, paragraph 8. We have already discovered that power does not exist in law for the putting of that matter into the order. Therefore, as of yesterday that part of the order was not valid because power did not exist to make an order containing such a provision. Therefore, in my view, persons should not be prosecuted for having failed to collect the money. This will not be law until 7 June next and therefore nobody should be prosecuted for failing to collect the money.

This seems to me to be an example of bungling on the part of the Government. I hesitate to say that it is bungling on a scale we have not seen before, because we have seen more bungling on the part of the Government since 1 January this year than ever before and this is just a mere instance of that bungling at its worst. This is a bad piece of retrospective legislation and I am sure that if the House were to be given a free vote most Deputies would see it my way rather than the Minister's.

I am tempted to follow Deputy Bruton along the road he has been travelling. However, if I do I have no doubt we will end up with Deputy Barry accusing me of a filibuster to prevent the remaining provisions of the Bill and the amendments being dealt with because of the time constraint. I am trying to resist that temptation. Deputy Bruton knows that the reason this levy was proposed by order is that there was no possibility of the Finance Bill being enacted before 1 May. That is the reason, he knows it, nevertheless he choose for political purposes to pretend otherwise.

I am advised that the power to enable the deduction of the levy to be made existed. The section confirms that power and confirms that the power always has been there. This is not retrospective validation. It confirms that the power had been there. It is not retrospective legislation. The phrase is used, "shall be construed as enabling and as always having enabled".

What the section is doing is clarifying and confirming the position. To listen to Deputy Bruton one would think that provisions of this nature had never appeared before. I am quite certain Deputy Bruton knows provisions of this kind appear quite frequently in Bills, for good reasons, and the fact that such a provision appears here does not mean that powers do not exist. I hope people will not be misled by what Deputy Bruton has said and, as a result, find themselves in difficulties. I am advised the power was there, this proposed section confirms it and I hope that people will not be misled by anything the Deputy has said and as a result of which they might suffer.

Where does the power exist?

I have already told the Deputy.

Cite the section.

Was the Deputy listening or was he so intent on making his case that he could not be bothered? Does the Deputy want me to go back and give him the explanation again?

I hope Deputy Barry does not blame me if we run out of time. I am trying to co-operate.

If any Deputy is not satisfied, it is in the interests of the House that he should probe matters until he is satisfied. I am not trying to muzzle anybody.

I am willing to go along with that, but do not blame me if time is running out. The levy order was made pursuant to the Imposition of Duties Act, 1957. The powers conferred by that Act are sufficient to enable the levy to be imposed and to provide for most of the necessary supporting measures. The power I dealt with in subsection (1) of the amendment is not given but that mentioned in subsection (2) is.

Would the Minister read the relevant passage from the Imposition of Duties Act?

I think it is section 15.

(Cavan-Monaghan): The Minister should not be so impatient with Deputy Bruton.

I gave Deputy Bruton the reference. It is section 15 (2) (a). He now wants the precise wording of the section and I am trying to get it for him.

If we have not the wording we will not know whether the Minister is telling the truth.

Paragraph 11 of the Imposition of Duties (No. 239) (Agricultural Produce) (Cattle and Milk) Order, 1979 (S.I.No. 152 of 1979) applies the provisions of section 15 (2) (a) of the Finance Act, 1966 with suitable modifications to the duties imposed by that order. Accordingly, for the purposes of the excise duties on cattle and milk, section 15 (2) (a) of the Finance Act, 1966 is to be read as follows:

The Revenue Commissioners may make regulations—

(a) for securing and collecting the excise duty imposed by paragraphs 4 and 5 of the Imposition of Duties, No. 239) (Agricultural Produce) (Cattle and Milk) Order, 1979;

That is for securing and collecting. There is nothing about withholding.

It is part of the process of securing and collecting.

If the Revenue Commissioners had the power to do what they are supposed to have been given the power to do in subsection (2) of this amendment, why is it necessary to have subsection (2)?

The Deputy contended there was not power to make this order. Can I now take it that he accepts that the statement was not correct?

I did not introduce the amendment. It is for the Minister to answer questions about his amendment.

The Deputy is now changing his feet. He should make up his mind where he stands.

I asked these questions——

I have already answered them on a number of occasions. If the Deputy wants to take a stand on this let him make up his mind which side he is standing on. He is trying to hop from one to the other. He makes allegations that there is no basis for the power in this, and when I give him the reference he is not satisfied. I give him then the precise wording and he is now switching around. Will he indicate what case precisely he is trying to make?

Deputy Bruton on the amendment.

If the power already existed to make regulations for the withholding or recovery, from such persons as may be specified in the regulations, of an amount equal to the amount of such duty of excise, in a manner and subject to conditions so specified, as the Minister now contends——

Not "now". I have contended from the beginning.

——it seems strange that it should be necessary to introduce the amendment at all. The amendment says that the relevant section can be construed as enabling and as always having enabled such a power to be exercised. The very fact that the second part of this amendment is introduced at all suggests that there is grave doubt on the part of the Minister and the Revenue Commissioners as to whether the acts already undertaken in relation to collection of these moneys have been valid at all. If the power already existed this section would not have been introduced at all. It seems that there is at best serious doubt on the part of the Minister and his advisers as to whether they had power to do what they did. If they had power, why should they select this part of the order to confirm it—to use the Minister's word—by statute? Why not confirm the entire order by statute? They have chosen one part in relation to the withholding of moneys and they have chosen to confirm that. That suggests that there is serious doubt on the part of the Minister and his advisers that they ever had power to make the provision for section 8 of the Imposition of Duties (No. 239) (Agricultural Produce) (Cattle and Milk) Order, 1979.

Deputy Bruton is making very heavy weather of a small point for his own purposes. That is his business, but you, Sir, will have noticed the way he has been toning down his statement in the last few moments from what he was saying earlier. The expression relied on is "securing and collecting the duty". It is clear that that is an open-ended kind of phrase and because of that it is deemed advisable to confirm explicitly that "deduction" comes within the scope of the expression "securing and collecting". The fact that it is being specifically and explicitly confirmed does not, as Deputy Bruton appears to think, imply that there was no power for it and that this is a device to obtain the power retrospectively. I suspect that Deputy Bruton knows that it is not so and that he is familiar with numerous similar cases that have arisen under other Bills before the House and that in no case does that kind of expression imply that the power to do a thing was not there. In reality it is a small technical problem and nothing else, and Deputy Bruton is exaggerating it out of all proportion.

(Cavan-Monaghan): The normal way of implementing budget proposals for taxation or for duties is to implement them by the Finance Bill which is usually introduced shortly after the budget. There was general surprise when it appeared that it was not proposed to deal with the 2 per cent levy in the budget but that it was proposed to deal with it under the Imposition of Duties Act, 1957. The short history of this levy has been that of one major bungle and that bungle has had disastrous consequences for the country. It has, in effect, driven farmers and urban dwellers apart. It is quite obvious from the history of this levy that the Government, particularly the Minister for Finance, introduced it without realising its consequences or that it was a type of levy that could not be stood over. It was unjust in its application to the farming community because it took no regard of the ability of the farmers to pay, of whether a farmer was making a profit or loss, whether he was a big or small farmer or whether he was or would ordinarily be liable for income tax. What I am saying is borne out clearly by the fact that days after the introduction of this levy the Minister for Finance at the Fianna Fáil Árd Fheis abandoned about half or more than half of it.

The Deputy should not confuse himself as to tax.

(Cavan-Monaghan): Just listen and be quite.

The Chair would suggest that we keep to the amendment. It seems we are going to have a debate on the levy. We are debating an amendment which is doing something legal.

(Cavan-Monaghan): This amendment is about levies and the collection of levies. It is all about the levy and the collection of the levy. The Minister did not understand the implication of it and this is evidenced by the fact that he ran away from it at the Fianna Fáil Árd Fheis and later, in the face of mounting opposition from the farming community, he agreed to abandon it altogether in exchange for another arrangement. The result of that was to bring 150,000 people on to the streets of Dublin in protest against this levy—which is going to be copper-fastened by this amendment—with its appalling consequences for the economy of this country. I leave this part of it at that.

It is obvious that not alone did the Government and the Minister not understand the effect of this but they did not know how they were going to impose it. They did not want to impose it by a budget resolution introduced on budget day because their own backbenchers would have rebelled. Then, of course, the device of this 1957 Act and the 1966 Act was thought of in order to avoid a division in the House on budget day, in order to avoid the humiliation caused by Fianna Fáil backbenchers like Deputy Leonard of Monaghan who would not even wait in the House to hear the Minister announce it but got up and left. When the Taoiseach was asked if this was a unique method of introducing this he said, "Not at all" and quoted precedents which were not precedents. The Taoiseach said then that there was no trouble about it. Now we have this levy in operation since 2 May with people being expected to pay it, other people being expected to collect it, and not until the dying two hours of the Finance Bill in the Dáil are we going to have the matter regularised. That is an appalling situation. If it created offences, as I believe it does, then it is wrong to do so retrospectively, as we are doing here, and I think it would be unconstitutional. There is far too much bungling by this Government, far too much retrospective legislation to validate bungles. We will have another episode of that in this House tomorrow when the Oireachtas will be asked to validate bungling since 20 January 1978.

The Deputy should wait for it; he will not welcome that debate when it comes.

Deputy Fitzpatrick must keep to the amendment before the House. We will have plenty of opportunities to deal with other matters and other Bills.

(Cavan-Monaghan): I am making the argument against retrospective legislation when it involves criminal matters, when it seeks the right to impose and collect levies and revenue retrospectively. It is an appalling state of affairs. From the very beginning this levy was rushed or was introduced without consultation by people who did not understand what they were doing or how they should do it.

I do not accept what the Minister has said about the validity of actions taken before part (2) of this amendment was introduced because, if they were valid, part (2) would not have been introduced in the first place. I shall leave that to one side; it is a matter that can be fought out elsewhere. I should like to ask in relation to part (1), when the prohibition contained therein will come into effect and if exports taking place now or before part (1) is enacted are in order?

Is the Deputy referring to subsection (1)?

Yes, subsection (1).

I have not got the point of the Deputy's question.

Subsection (1) says:

It is hereby declared that the exportation from the State of produce that is subject....

to the levy

... shall be prohibited unless, before such exportation, the amount of the duty is paid to the Revenue Commissioners or security that is, in the opinion of the Revenue Commissioners, adequate for its payment is given to the Revenue Commissioners.

Might I ask the Minister when this prohibition on such exports will come into effect and how, in the absence of such a provision in relation to the prohibition on exports, the levy is being collected on exports at present?

The levy is being collected on exports on foot of the regulations made. The purpose of this is to deal primarily with exporters who are resident abroad. As I explained earlier, I am not sure if the Deputy has in mind something about smuggling across the Border; perhaps that is not what he has in mind——

The amendment does not deal solely with the giving of security. It provides also for a blanket prohibition on exports unless the levy is paid.

That is correct, yes.

Therefore, that suggests that it does not apply solely to people resident outside the State.

But people who are resident within the State can be pursued by the Revenue Commissioners on foot of the regulations made. People who are resident outside the State might be outside the scope of the Revenue Commissioners if they did not pay the levy. This enables the Revenue Commissioners, if they wish in such cases, to ensure that exports will not take place without payment of the levy or an arrangement that will satisfy the Revenue Commissioners that the levy will be paid.

In regard to the Deputy's query as to when subsection (1) operates, it would be from the date of enactment of the Bill.

So anybody who was exporting without giving security up to then is free to do so?

Yes, of the kind I have described. But I want to make it clear to the Deputy that persons who are resident within the State are liable to and can be pursued by the Revenue Commissioners for the levy without subsection (1) existing at all.

But there is no prohibition on exports in existence at present?

Yes, but persons who export are liable to the levy. This is a mechanism to enable the Revenue Commissioners to deal with the kind of case I have mentioned.

Amendment put and agreed to.
Section 40 agreed to.
Sections 41 and 42 agreed to.
SECTION 43.

I move amendment No. 33a:

In page 28, line 28, after "on" to insert "the transfer of shares to charities, or on".

This section exempts from stamp duty conveyances, transfers, or the lease of land or houses for charitable purpose in Ireland. We accept that that is a good thing. But I want to include in it the transfer of shares given to charities as well.

The effect of the section is as Deputy Barry said. The transfers of immovable property and of securities can, for the purpose of stamp duty, be distinguished on several grounds. Firstly, the duty is chargeable on immovable property at graduated scales rising to 6 per cent where the value of the property is over £50,000. On the other hand, securities are liable at 1 per cent or 2 per cent depending on whether the security is Irish or foreign. There is, therefore, less possibility of difficulty in paying the duty in the case of securities. Where the security is a Government security, the question of duty does not arise, as stamp duty is not payable on the transfer of Government stocks. Thirdly, as far as the Revenue Commissioners are aware, there has been no demand, certainly not of any significance, that transfers of securities to charities should be exempt. Fourthly, in the case of United Kingdom securities, the gain to a charity of an exemption here would be minimal since the charity would still have to pay stamp duty in the United Kingdom on the transfer. However, where a transfer is stamped here the payment of stamp duty is not required in the United Kingdom.

In the light of these facts the decision was taken to confine the exemption to transfers and to leases of lands. Further consideration of the matter in the light of Deputy Barry's amendment has not produced evidence which would appear to justify extending the exemption. I should point out to the House also that a question of chattels or of cash being given to charity does not arise here because, of course, such transfers are not of themselves liable to stamp duty.

Amendment, by leave, withdrawn.
Section 43 agreed to.
SECTION 44.
Question proposed: "That section 44 stand part of the Bill."

(Cavan-Monaghan): Am I correct in thinking that Government stocks are not subject to stamp duty on transfer?

That is correct.

(Cavan-Monaghan): Are land bonds, as a matter of interest?

I do not think so but perhaps I may check; yes, land bonds are subject to stamp duty.

(Cavan-Monaghan): I see that the explanatory memorandum says that the section provides that the nominal value of securities shall be the minimum value for the purposes of stamp suty. If that means that land bonds are to be subject to stamp duty on their nominal value on transfer, it is most unfair. As we know, many issues of land bonds are standing certainly as low as £40, and the nominal value would be £100.

I wonder is the Deputy on the right section?

We are dealing with section 44.

That deals with the stamp duty chargeable mainly on the formation of a company or increasing its capital.

(Cavan-Monaghan): I was dealing with the explanatory memorandum which says that section 44 provides that the nominal value of securities shall be the minimum value for the purposes of the duty. This is not dealing with stamp duty. Is that right?

Question put and agreed to.
Sections 45 to 49, inclusive, agreed to.
NEW SECTION.

I move amendment No. 33b:

In page 30, before section 50, to insert a new section as follows:

"50—(1) The Income Tax Act, 1967, is hereby amended—

(a) by the addition of the following subsection to section 61:

"(2) Where a person carrying on a trade or profession incurs expenses in attending courses or otherwise in furthering his knowledge in connection with that trade or profession and which is for the benefit of the community generally, the expenditure so incurred shall be deducted as an expense in computing the profits or gains to be charged to tax."; and

(b) by the insertion in Rule 3 of Schedule 2 of the following before "there may be deducted":

"or if a person incurs expenses in attending courses or otherwise in furthering his knowledge in connection with the office or employment and which is for the benefit of the community generally".

(2) This section shall apply as respects the year 1979-80 and subsequent years of assessment.".

It is desirable that professional people, particularly doctors, should attend courses and contribute to publications and magazines. This would benefit the community generally and the advancement of the doctors' careers. They should be allowed those expenses as deductible expenses for tax purposes under PAYE, under section 50 (1) of the Income Tax Act, 1967. I would like this to be included on behalf of the doctors. I am sure everybody agrees that it is necessary that they should continuously keep up to date and attend courses to make sure that the most modern techniques, knowledge and research are available to them. No matter in what part of the world these are available they should be encouraged to go to those countries and make sure that this country has available to it a team of doctors and professional people who are absolutely up to date with their subjects. They should be encouraged to contribute to any magazine which would help them in this regard. There are so many changes taking place in all the professions that we should do everything we can to encourage those people to keep up to date.

First of all, the amendment as drafted is in very wide terms and I am afraid it is sufficiently imprecise to be unworkable in practice. It would lead to thousands of appeals. I am not criticising Deputy Barry when I say that, because it is not his job to draft sections of the Finance Bill. I am simply saying it in relation to the amendment before us.

Perhaps what is more at issue here is the question of the approach one should have to this. In regard to the position mentioned by Deputy Barry about doctors the amendment as drafted disregards the fundamental principle of the tax code which lays down in quite strict terms the expenses which may be deducted in computing income or profits for tax purposes. In the case of a profession or a trade only such expenses as are wholly and exclusively laid out or expended for the purposes of the trade or profession may be deducted in the computation of the profits or income. Therefore, so far as any expenditure incurred in attending courses or furthering knowledge in connection with a trade or profession can be shown to be laid out for the purposes of the trade or profession that expenditure can be deducted under existing law. That would apply to the kind of example Deputy Barry gave. If it cannot be so shown then it is not incurred for the purposes of the trade or profession and is not, therefore, a legitimate deduction in the computation of the profits. I do not think it should be made so.

In the case of a doctor who is employed the Schedule E expenses rule provides that a deduction may be allowed only in respect of money spent "wholly, exclusively and necessarily in the performance of the duties of the office or employment". If an employer considers it necessary for an employee in the course of his employment to attend a course or to further his knowledge of his employment then the employer will pay the appropriate cost for him which, of course, he will claim as a deduction in the computation of the profits of his trade. The allowance for tax purposes of expenditure which a trader, professional person or an employee occurs in attending courses or acquiring knowledge which has some connection with his current activities and which is likely to be of use to him in his trade, profession or occupation is at issue here. In the ordinary course of events the acquisition of further knowledge and skills is likely to generate additional profits or income in the case of a person carrying on a trade or profession and in the case of an employee is likely to lead to promotion or the securing of a better job. While those objectives are desirable in themselves and may be for the benefit of the community in the long run they are for the personal benefit of the persons themselves and to allow special tax relief for such expenditure raises the question of whether the general body of taxpayers should be asked to subsidise such expenditure. I am afraid I must take the view that the answer to that question is in the negative. Therefore, I am afraid I cannot accept Deputy Barry's amendment.

Amendment, by leave, withdrawn.
NEW SECTION.

I move amendment No. 33c:

In page 30, before section 50, to insert a new section as follows:

"(i) The Second Schedule to the Capital Acquisitions Tax Act, 1976, is hereby amended, as respects taxable gifts and taxable inheritances taken on or after the 1st day of April, 1979, by the substitution of the following Part for Part II of that Schedule:

"PART II.

TABLE I.

Applicable where the donee or successor is the spouse, child, or minor child of a deceased child, of the disponer.

Portion of Value

Rate of Tax

Lower Limit

Upper Limit

Per cent.

£

£

0

300,000

Nil.

300,000

400,000

25

400,000

500,000

30

500,000

600,000

35

600,000

700,000

40

700,000

800,000

45

800,000

50

TABLE II.

Applicable where the donee or successor is a lineal ancestor or a lineal descendant (other than a child, or a minor child of a deceased child) or the disponer.

Portion of Value

Rate of Tax

Lower Limit

Upper Limit

Per cent.

£

£

0

30,000

Nil.

30,000

36,000

5

36,000

46,000

7

46,000

66,000

10

66,000

86,000

13

86,000

106,000

16

106,000

126,000

19

126,000

146,000

22

146,000

176,000

25

176,000

206,000

28

206,000

236,000

31

236,000

296,000

34

296,000

326,000

37

326,000

356,000

40

356,000

386,000

43

386,000

416,000

46

416,000

446,000

49

446,000

and above

50

TABLE III.

Applicable where the donee or successor is a brother or a sister, or a child of a brother or of a sister, of the disponer.

Portion of Value

Rate of Tax

Lower Limit

Upper Limit

Per cent.

£

£

0

20,000

Nil

20,000

26,000

10

26,000

36,000

12

36,000

56,000

15

56,000

76,000

19

76,000

96,000

23

96,000

116,000

27

116,000

166,000

31

166,000

196,000

35

196,000

223,000

40

223,000

253,000

45

253,000

50

TABLE IV.

Applicable where the donee or successor does not stand to the disponer in a relationship referred to in Table I, II or III of this Part of this Schedule.

Portion of Value

Rate of Tax

Lower Limit

Upper Limit

Per cent.

£

£

0

10,000

Nil

10,000

16,000

20

16,000

26,000

22

26,000

46,000

25

46,000

66,000

30

66,000

86,000

35

86,000

106,000

40

106,000

126,000

45

126,000

156,000

50

156,000

186,000

55

186,000

60

(2) (a) The figures referred to in the tables to subsection (1) shall be increased annually so that the amount to be used for any future taxation year is an amount equal to the product obtained by multiplying the amount that would have been applicable for the taxation year if no adjustment had been made under this section with respect to that year, by the ratio that the Consumer Price Index for the twelve month period ended on the 30th day of September next before that year bears to the Consumer Price Index for the twelve month period that ended on the 30th day of September, 1978, and

(b) the adjustments referred to in paragraph (a) shall be made by the Revenue Commissioners and published in Iris Oifigiúil not later than the 1st day of December, in the year preceding that to which they are to apply.”.

When the capital acquisitions tax was introduced in 1975 an assurance was given that the thresholds at which it would begin to apply and the bands on which one would move from a lower to a higher rate of capital acquisitions tax would be revised in line with inflation every three years. This should have been done last year. In that year the Minister revised the thresholds in respect of transfers to nephews, brothers and relations further out but did not revise the thresholds in respect of transfers from father to son, husband to wife, mother to son, mother to daughter—that is the transfers within the immediate family. The thresholds within the immediate family are exactly the same as they were when the tax was introduced in 1975 despite the fact that there has been massive inflation in the value of property since that date. The value of such property does not necessarily improve the income of the person concerned. The increases in value in some cases reflect the fact that land, as Mark Twain said, is a commodity that they have stopped making and, therefore has a certain intrinsic scarcity value. This has put up the price of land. It also meant in 1975 that for a transfer of land from a father to a son on death to be liable to capital acquisition tax, at average land values of about £800 an acre, a farmer would have had to have about 220 acres. In other words, he would have to have a very substantial farm. Now, because of inflation, because the thresholds have not been revised, except in the cases I mentioned for transfers to more distant relatives, because land is valued at £3,000 an acre, and assuming present average stocking rates, a farmer would be liable to capital acquisition tax if he had a farm of 70 acres or over. This means that this tax is applying to small-and medium-sized farmers where hitherto it applied only to large farmers. That is not the result of any enactment by the Oireachtas extending the tax, it is simply the result of inflation.

To my mind extending the scope of any tax, whether it be capital or income tax, by means of inflation is unjust and is a bad form of taxation. It was for that reason we introduced this amendment which not only proposes to raise the limits for the tax and to widen the bands, but requires in future that the figures constituting the initial thresholds and the bands be revised every year in line with the consumer price index. This provision is contained in subsection (2) of the amendment and is based on the provisions of the Canadian legislation in relation to the indexation of income tax. The terms of the Canadian legislation are introduced in this amendment with certain modifications to make it relative to Irish conditions.

I would like to illustrate the impact of the capital acquisition tax on two types of farm—one of 100 acres and the other of 200 acres. In the case of a farm of 100 acres, one assumes that the normal stock would be worth £20,000, machinery would be worth £10,000 and the farm would be worth about £3,000 an acre. If that 100-acre farm were transferred from father to son on death the amount of capital acquisition tax which would have to be paid would be £22,500. On average that farm would yield an income of about half that figure in a year. This means that the entire income from the farm for two years would be required to pay the tax. He would have no money to live on and he would not be able to meet any expenses incurred on the farm. Of course if inflation continues the amount of tax will be even greater.

The situation is more extreme in the case of the 200-acre farm. In that case the amount of capital acquisition tax would have to be paid is £165,000. I am using farm management survey figures of the average income which would have to be derived from a farm of that size. A sum of £165,000 represents the entire income for eight years' work on the farm. In other words, eight years' work would have to be devoted to pay the tax. If a man with a 200-acre farm dies today, his son would have to work on the farm for the next eight years to pay that tax. That is not an acceptable situation.

It appears that this tax is being used to force such farmers to sell their land. Forced sales of that sort are tantamount to an attack on the principle that the farmer's son should have the land. If as a result of the sale the land was bought by another full-time farmer the situation might not be so bad. It would be simply a case of one farmer transferring by sale to another farmer. What is happening is that more than half the land being put on the open market is not being bought by farmers, but by speculators who have other incomes apart from agriculture. The figures I am quoting were produced by the National Economic and Social Council and show that this type of person is buying the land.

Far from it being a dispersion of wealth, the capital acquisition tax may be operating to concentrate wealth in the hands of people who have incomes outside agriculture and who can afford to buy the land at sales which are likely to be forced as a result of this tax. To my mind that is not what any Minister envisaged as being the purpose of a capital acquisition tax. In fact, it is the reverse. I ask the Minister to look closely at these provisions and if he cannot agree with the revision of the thresholds being proposed, perhaps he would agree to the second part of the amendment which provides for the indexation of the allowances and bands in future so that this situation cannot arise by stealth. If it does happen it will be because of a conscious act of the Oireachtas rather than by stealth as a result of inflation.

This amendment seeks to double the threshold for the various tables, to extend the ranges and to apply indexation to all four tables. I will leave table 1 for the moment and will come back to it. In the case of tables, 2, 3 and 4, the House will be aware that I doubled the thresholds under those tables last year. The application of increases at the same time to the ranges raises a number of problems. It would appear from the statements made in the White Paper issued by the previous Government in relation to capital taxation that they did not envisage adjustments other than in the thresholds. It is my understanding that in other countries also where changes are made, it is in the thresholds not in the ranges, because you can produce fairly grave distortions if you change the ranges as well and produce anomalies.

I am just telling the Deputy that this is so. I could go into detail on it but we would save time if he takes my word for it. That is why it is not done in other countries and probably why it was not envisaged by the previous Government.

Could the Minister write to me about it?

Yes. The fact is that if one wants to change the ranges as well one must engage in a total review of the whole operation of the tax. Almost certainly, because of the substantially reduced revenue from the tax by increasing the thresholds and ranges, one would be faced with the situation that one would have to increase the rate of tax if one were to aim at getting similar revenue from the tax not to mention any increase in it.

In regard to table 1, as I said before, I took the view when that Bill was going through the House and when I was in the opposite benches that the threshold under table 1 was too high. I quote what I said at that time from the Official Report Volume 286, column 1739:

First, it is my contention that the upper limit whereby no tax is payable on a gift or inheritance by a child from a parent on a sum of up to £150,000—and where the same can apply to a number of members of the family, each receiving £150,000—is going too far, even allowing for the difficulties that arose under the death duty code.

That is the reason why I did not increase the threshold for table 1 when I doubled the threshold for the other tables last year. It seemed to me that the threshold was too high particularly when one recalls that, if the property concerned is agricultural property and if we are dealing with a farmer, the threshold automatically becomes £¼ million. That applies to each of the children of the disponer and to the spouse. It will be seen that we are talking about very big money. Further exemption in that case does not seem to me to be justified at the moment. The limits involved are way above anything available in other countries on any comparable tax. As far as we are concerned, even by the standards of the admittedly greatly increased value of agricultural land, the limits involved are still very high. There is a case for saying that, until the yield from the tax increases fairly substantially, the evidence suggests that the threshold, particularly in table 1, is too high.

The contention that the threshold at £150,000 or, in the case of agricultural land, £250,000, was pitched too high is borne out by the statistics which are available. Of the gifts and inheritances totalling 2,460 on which tax has been paid up to 31 December 1978, only 38 cases or 1.54 per cent of the total fall within table 1. Of these, only one was a case where the beneficiary was a farmer. It is not surprising when the beneficiary concerned——

Is there a time lag between the date that the transfer takes place and when the duty is paid? What year are we talking about?

I am speaking about cases in which it was paid prior to or up to 31 December 1978. There is normally no great delay because there is substantial interest running on the claims outstanding. That encourages people to pay the duty very quickly. Only one of the cases up to 31 December 1978 was a farmer. Having regard to the fact that the threshold in a farmer's case is £250,000, it is not too surprising.

For all practical purposes this means that the beneficiaries in class 1 are exempted from capital acquisition tax so far. It is not unreasonable to say that the beneficiaries in class 1 can be and should be exempted to make a greater contribution. Holding the threshold as it is at present should help in that objective. I have no desire to have the capital acquisitions tax operate in any case, and particularly in the case of class 1 beneficiaries, farmers or otherwise, so as to produce hardship. I must point out that the figure of £150,000, and £250,000 in the case of agricultural property, relates only to a single beneficiary and that less than 5 per cent of farmers have only one child. Where there is more than one child it goes up in the case of agricultural land by £250,000 for each child. I should also like to point out that less than 5 per cent of farmers own more than 200 acres.

That is if he divides up the land among his children which most farmers would not do.

Yes, but less than 5 per cent of farmers own more than 200 acres and less than 15 per cent own more than 100 acres. The result is that up to now the number of cases where there was any liability in the case of farmers is infinitesimal. Whatever view one may take of it, the statistics do not bear out that capital acquisitions tax in the case of farmers coming in under table 1 is operating in any way to create hardship. There is no evidence whatever to support this. In fact the evidence suggests that it is not really operating at all in the case of farmers under table 1. In these circumstances I cannot accept the case made in support of the amendment.

Would the Minister consider between now and next year the possibility of introducing indexation of these allowances on a yearly basis in line with the consumer price index? Will he add something about indexation?

I do not want to digress too much but as the Deputy knows I introduced indexation in the case of capital gains tax because in that case one could, without indexation, be taxed on what was called a gain when in fact it was a loss. That principle does not apply—speaking off the top of my head—to any other form of tax. It does not apply in the case of capital acquisitions tax because whatever inflation there may be in the value of a property which one inherits or gets by way of a gift, its value is its market value. The tax is based on that. It is not based on an artificial value which is really a loss.

There is a problem in that the tables must be fixed on a long-term basis. A tax that is calculated by reference to lifetime acquisitions cannot have frequent changes in the tables and certainly not on an annual basis. If we had such changes built in automatically with indexation the administrative problems for Revenue and the taxpayer alike would be substantial. Any amendment of values for previous years would involve reassessment for subsequent years. A more serious side effect would be the postponement of gifts and the proliferation of avoidance mechanisms such as revocable trusts and discretionary trusts to take advantage of anticipated future table changes.

The stated merit of an acquisitions tax is the fact that it has regard to the circumstances of and the ability of the tax-payer to pay. If regular indexation were introduced it would be necessary to index all previous benefits that are aggregated with current benefits to determine the value for tax. The rates were reviewed last year and I suggest that the result of that review is that the current effective rates of tax are such that no adjustment is called for at the present time in line with indexation.

I cannot undertake to the Deputy that I would introduce indexation next year. I can undertake to consider it, as he requested me precisely, but in saying that I can undertake to do that I do not wish to mislead him in any way. The odds are that having considered it I will still say no to indexation, but I am prepared to say that I will give consideration to it.

(Cavan-Monaghan): I think it unreasonable not to honour an undertaking given in 1975 when this tax was introduced that the thresholds would be increased to have regard to inflation. We know that before this tax was introduced, or at least up to 1973, there were very severe death duties payable on the death of a parent when property passed to a child. The death duties were abolished and that was a great relief. It removed a considerable amount of worry from parents who did not know what would happen to their property on their death. Deputy Bruton made a very strong case when he pointed out that, having regard to inflation, a modest farm of 70 acres attracts capital acquisitions tax. The tendency is to regard 60 or 70 acres as necessary to form a viable unit and when farms of 70 to 100 acres are attracting large demands for capital acquisitions tax the Minister should look at the matter. The Minister pointed to a case where a person might be transferring lots of property to several children. That might be a situation the Minister could deal with. It could be a different kind of situation.

I do not follow the Deputy. What does he mean?

(Cavan-Monaghan): I mean that there is much more property passing and one is dealing with a much wealthier individual. I am dealing with a person with 70 acres of land, or the equivalent in other properties, and I am saying that such a person is not very wealthy according to present standards. On that property passing to a spouse or a child, it is unreasonable that it should attract capital acquisitions tax. I appeal to the Minister to increase the thresholds. Deputy Bruton has put forward a very strong and well-researched case.

There are two points I wish to make. In response to what Deputy Fitzpatrick has said, I think it would be very difficult to convince most people that somebody getting a gift or inheritance worth more than £250,000 was receiving a modest gift or inheritance. In the case of agricultural land there is no capital acquisitions tax paid up to that figure.

Secondly, in regard to the point made by the Deputy about an undertaking given by the Government of which he was a member to review the thresholds, I think what he was referring to was a statement contained in a White Paper on Capital Taxation laid before the Houses of the Oireachtas by the previous Government in February 1974. Paragraph 122 stated:

The Government recognise that in times of inflation capital taxes may over time be taking a bite of capital which represents an increase in nominal values as distinct from a real increase in asset values. To cope with this problem the thresholds set for the new capital taxes would need to be reviewed at regular intervals. Such a review would, however, be less necessary in the case of the threshold for liability to capital acquisitions tax by the immediate family in view of the high exemption figure proposed.

I reviewed the thresholds last year. Speaking from recollection, I think it true to say that the thresholds were not reviewed after the introduction of capital acquisitions tax until last year. I doubled the thresholds except in the case of Table 1, but it is significant that the White Paper issued by the previous Government said that the likelihood was that a review in that case would be less necessary because of the high exemption figure proposed. As I have pointed out, when the Bill was going through I said I thought the thresholds for Table 1 were too high. I doubled the other thresholds and, as I have already indicated to the House, I still think that the thresholds for Table 1 at £150,000 or £250,000 in the case of agricultural property do not merit review or adjustment upwards at this time.

(Cavan-Monaghan): The Minister will find that statements were made in the House when the Bill was going through in regard to revision of the thresholds. The Minister cannot make the case for all property on the basis of the special treatment for agricultural land.

I am not doing that.

(Cavan-Monaghan): A public house that is not very big will go £150,000.

This raises the whole question as to whether somebody who gets a gift or inheritance of property worth £150,000 should have to pay no tax on it. I doubt if many people would accept the proposition that such a person should not pay tax. I am not denying that there may have been certain statements when the Bill was going through the House but it is true to say that any undertakings given have been honoured so far as this Government are concerned in that we have reviewed the thresholds.

Amendment put and declared lost.
NEW SECTION.

I move amendment No. 34:

In page 30, Part V, before section 50, to insert a new section as follows:

"(1) The powers conferred by section 15 of the Finance Act, 1966, to collect an excise duty on Irish wine shall not be used to collect a levy or duty on any agricultural product other than wine.

(2) The Agricultural Produce (Cattle and Milk) Regulations, 1979, made under section 15 of the Finance Act, 1966, are hereby annulled.".

The purpose of the amendment is to annul the 2 per cent levy. As a number of other Deputies wish to contribute to the discussion on this amendment I do not propose to speak at length. I just want to point out that first, the levy was unnecessary because the same revenue could have been raised without any of the aggravation if the Minister had chosen not to restore the refund in relation to value-added tax. None of the hardship would have been caused and the same amount of money would have been collected. So, we are not arguing about whether agriculture should pay its share but merely how a given sum of money should be raised. By choosing to raise it by means of a levy the Minister has brought about a number of consequences. One is, as I think will be demonstrated later in the debate in respect of certain lines of agricultural production, that the profit already very marginal will be almost entirely eliminated. Examples of this are summer fattening and winter fattening of beef. Profit margins here are very low and the level of capitalisation or borrowing required to sustain them is quite high. The danger of discouraging beef production by the levy is that the factories which rely for the creation of employment on the slaughtering of beef will not have an adequate supply of cattle. Already our slaughtering plants are working at about half capacity. The effect of the levy could easily be further to jeopardise employment in the meat industry. We already know this is under threat even without the levy. I do not claim that redundancies which take place in the meat industry are solely due to anticipation of the levy but it certainly aggravates the situation by making beef production less profitable and thereby reducing the input to these factories.

Secondly, levy is unfair because it is proposed to raise it whether farmers are making a profit or not. For instance, if cattle prices fall over the summer a farmer who buys cattle in the spring and sells in the autumn is selling cattle at the end of the season, having grazed them and provided them with feed and so on, at a lower price than that for which he bought them and therefore obviously making a loss. But he will still pay the 2 per cent levy having made a loss. That is not a fair form of taxation for anybody. Taxation should be based on taking a share of a real profit, not taking something from people who have already had a loss. That situation is a possibility within the terms of the levy.

My third and final point is that the levy in the case of meat can, and I believe will have the effect at some times of the year of increasing the cost of living for the consumer. It was certainly not intended to do this; it was introduced as a tax on farmers. The farmers and those who represent them may argue that it was an unfair way of taxing them but nobody disputes that it was intended to be paid by farmers, not consumers. In the case of meat it is possible at some times, depending on the supply and demand situation, that it will be paid by consumers not farmers. If demand for meat exceeds supply and there is pressure to obtain meat the Department have no way of preventing the cost of the levy being passed on to the consumer. In that situation the consumers' demand for meat exceeds the suppliers' desire to sell and in that sort of fluid situation clearly the levy would be passed on.

The only way in which one could prevent that would be by fixing consumer prices. That is possible in the case of milk. We already have a maximum price order for milk and milk products which makes it possible to prevent the levy being passed on to the consumer in the case of milk and any other products subject to a maximum price order at retail level. That is not possible with meat because there is no maximum retail price order for meat and it would be impossible to introduce one even if the Minister wanted to do so in order to prevent the levy being paid by the consumer because there are so many different types of cuts of meat and different qualities that one could not fix fair prices. If one fixed an across-the-board price per pound for meat it would be obviously unfair because certain parts of an animal are worth more than others. Rump steak, for instance, is obviously worth more than meat from the front legs of an animal. A uniform price per pound, therefore, would not apply fairly to both good and bad cuts. Even for rump steak, say, there can be such variety in the quality of the meat, depending on how well it has been hung, that one could not fix a uniform price for it. I believe it is impossible to fix a retail price for meat because of these difficulties. I know this because the possibility was brought before me when I was Parliamentary Secretary to the Minister for Industry and Commerce and it was ruled out for that reason. It was impossible although it might have been desirable.

If, therefore, a situation arises where demand for meat exceeds supply there is no way by which the Government can prevent the 2 per cent levy being passed on to the consumer. There will be times in the year when that will happen; it may not happen all the time. Certainly, it will not happen with a glut of cattle on the market. At such a time the farmer will be paying the levy but where there is a scarcity—and there seems to be a prospect of a scarcity—the levy will undoubtedly, by operation of a normal law of supply and demand, be paid by the consumer, not the farmer. That is not what was intended but the fact that it is likely to happen indicates how ill-conceived this taxation was. It proves the case that some other means should have been found to tax the farming community if they were to be taxed.

I have already recorded my views on how farmers should be taxed. I do not think I should go into it in depth now but I have done so and I am quite prepared to do so again. I certainly do not believe that this 2 per cent levy is a fair or just means of taxing farmers or anybody else.

I support the amendment the case for which was so ably made by Deputy Bruton. I cannot understand why the Minister took this particular course. Today the Minister has shown, whether it was to impress PAYE workers or not I do not know, that he is prepared to bring down a big stick on the farmers and make them pay the 2 per cent levy which aggravated not only the farmers but practically every section in the community. The Minister had available the means and the way; by withholding VAT, he would receive approximately the same amount of money. I would see some sense in it, if it were a permanent fixture, but the Minister stated today that it will carry on until 31 December, 1979.

The Minister has revenue commissioners in the airports, he has them on the bogs, he has them in the butchers' shops, he has them in the meat factories. Why should he go to such trouble for a temporary measure to obtain money, when a simple alternative was available. All his revenue commissioners had to do was to deduct VAT. I cannot understand why he did not do this. I am prepared to accept that the Minister, in some of his statements said to the PAYE people "I shall make the farmers pay". I do not know what benefit the Minister will receive from this type of attitude.

The introduction of this 2 per cent levy must be described as the most irresponsible piece of legislation ever put through the House to extract money from any sector of the Community. Firstly, it bears no relation whatsoever to the farmer's ability to pay; secondly, it will undermine the confidence of those engaged in agriculture; thirdly, and most importantly, it strikes at the very core of our economy. It is a penalising tax.

The worst feature of the 2 per cent levy is that it is seeking to extract money from 55 per cent of our farmers who have under 50 acres of land. Practically 90 per cent of those holdings are uneconomic, but, nevertheless, owners will be asked to pay somewhere in the region of £5 to £8 a week, depending on the lines of production. I have one estate in my constituency, the Macamore Estate, with 40,000 acres, at a value of over £1 an acre for certain sections of it, and these people will have to pay somewhere in the region of £500 to £600 rates as well. Furthermore, these taxes are chargeable irrespective of the family circumstances. Many small farmers will have to pay the tax that a PAYE man with a family, with comparable income would not pay, if PAYE were under the same conditions.

This levy must be described as an attack on the intensive producer. Though it is a short-term measure, it will, in the long-term, damage our national economy. During the Minister's speech at the Fianna Fáil Ard-Fheis he took the levy off pigs and off sheep—he had no other option. He would have wiped these people out overnight, and knew that perfectly well.

With regard to milk production, the 2 per cent levy represents approximately 6 per cent of the profit on this. The value of the increased milk production is highlighted by the fact that an average gallon of milk extra going into processed cheese can result in 20 to 25 extra jobs, and this does not include haulage or packaging. Our cow herds are of extreme importance. It should be the good intention of any Government to try to increase these. These people work a seven-day week—and we hear people talking in terms of a 45-hour week, while the majority of those people work a 75 hour week, on family farms in particular—and the Minister wants 6 per cent of their profit. They may also have to pay a co-responsibility levy introduced by EEC, at what level we do not know. This levy has weakened the hands of our Minister for Agriculture when he goes to the tables of Europe to negotiate prices for the Irish farmers, as far as milk is concerned. How can he argue around those tables that a further levy, which is known as the co-responsibility levy to clear off surpluses, will not be enforced as well? There is no doubt about it, this levy has a damaging effect on milk production.

Now we come to the area where I believe the levy will do greatest damage, that is, in beef production. I went to great trouble to try to get accurate figures. It is not easy to get accurate figures on beef production because there are different systems, but I am prepared to put on the records of this House that the levy will account for from 12 per cent to 20 per cent of the actual profit on beef production.

I would draw the Minister's attention to an article last week in The Farmers Journal by, I presume, an experienced man by the name of John Shirley. He wrote that 2 per cent for cattle sold since 1 May represents 100 per cent of the actual profit. I went carefully into the figures and am not prepared to accept that, even last year, when people did not make provision for the 2 per cent levy, it would cost them up to 100 per cent. I am prepared to state that it will take 12 per cent to 20 per cent of the profit from beef production.

We have heard the Minister for Agriculture speak, at length, on the need to increase beef production. If the Minister for Finance believes that 12 per cent of the profit on beef should go to the Exchequer, irrespective of a man's income, then he is really on the wrong track. The Minister has stated on numerous occasions that the butchers have to pay this 2 per cent levy. I understand he has asked the Revenue Commissioners to have this properly documented and they have failed. There is no way, that I can see, whereby the Revenue Commissioners can make farmers pay this 2 per cent levy, as far as the butchers are concerned. The majority of butchers, particularly in the provincial towns, own land; they buy in store heifers and finish them off. Are they going to pay the 2 per cent? They are, in my eye. They will charge this to consumers. The Revenue Commissioners simply cannot police this scheme to guarantee that the farmers pay it. There is no doubt in my mind that the consumers will pay.

I understand that the Revenue Commissioners have already been with some of those small people who kill privately for freezers. That is not right. They have been ordered to collect the 2 per cent levy. People who kill a small number of beasts on behalf of freezer owners have been put in a difficult position and have been told to collect the 2 per cent levy. They do not buy the cattle but kill them on behalf of, say, nine or ten people. Many people in the city have freezers and arrange to have an animal killed for them. It would be impossible for the Revenue Commissioners to collect the revenue in that situation.

The Minister wants to collect £10 on a beast sold in the mart for £500. Before it can be sold there must be a 30-day test costing approximately £4 and the charges for commission and haulage come to £6. It now costs £20 in all to sell a fat beast in any mart and of that amount the Government are responsible for approximately £14.

Both the previous Minister for Agriculture and the present Minister have tried to encourage the growing of cereals because it is necessary when there is a shortage to import them. A cereal, perhaps barley, is sold to the merchant who charges 2 per cent; it is compounded and sold back to the farmer and a further 2 per cent is charged. Milk is produced for manufacturing purposes and there is a further 2 per cent; the milk is processed into milk powder and is used to feed calves and another 2 per cent is charged.

In June, 1974, as reported in Volume 274, columns 558-9 of the Official Report, the Minister stated:

Farmers who are not allowed to use the notional basis for this or for any other reason will be in the same position as ordinary businessmen and, therefore, have a strong case to make to be given some allowance because a large proportion of their output is exported. If they are to be treated in the same way as businessmen and industry generally some method will have to be found for actually treating them the same way, having regard to the considerable value of the export tax reliefs relating to industry.

The Minister made that statement only five years ago and today he is making all kinds of arrangements to damage seriously our agricultural exports. How could a man change his views so radically in such a short period? Any Government must seriously consider our agricultural exports, now worth approximately £1,000 million. Whatever policies or systems are devised must increase that output. Every 1 per cent increase in agricultural output, almost all of which will be exported, means an increase of £16 million in value of exports. With the proper policies agricultural output could be increased by between 5 per cent and 7 per cent. I accuse the Minister of short-term action which has damaged our agricultural exports and broken the confidence of farmers.

We have heard Deputies Bruton and D'Arcy on the subject of the levy. I notice that members of the Fine Gael Party such as Deputy Mitchell have carefully stayed away from the debate on the Finance Bill. I understand this, having regard to the case regularly being made by Fine Gael——

They do not stay away for the same reason that the Minister for Agriculture stayed away from the debate on the Health (Family Planning) Bill.

No, I would not have thought it was for the same reason. I would have thought that in the case of the Minister for Agriculture it was clearly a question of his conscience. In the case of Deputy Mitchell and others it is a question of self-preservation and trying to distance themselves from the utterance we have been hearing.

(Cavan-Monaghan): Where are Deputies Davern and Leonard?

Is the Deputy worried?

We have had no interruptions until now.

The Imposition of Duties Act of 1957 does not provide for the making of the regulations in respect of any duties imposed by order under that Act. However, section 1 (h) of the Act permits the Government by order to

apply (with or without modification) to or in respect of any duty imposed or varied under this section any statutory provision regulating the collection of or imposing penalties in relation to duties of the class to which the duty belongs;

Accordingly paragraph 11 of the Imposition of Duties (No. 239) (Agricultural Produce) (Cattle and Milk) Order, 1979, applied the provisions of section 15 (2) (a) of the Finance Act, 1966, suitably modified, to the duties imposed by that order and thereby authorised the Revenue Commissioners to make regulations for securing and collecting the duty. The commissioners, by virtue of that authority, have made the Agricultural Produce (Cattle and Milk) Regulations, 1979. Subsection (1) of this proposed new section would, if passed, deprive the commissioners of the power to make regulations under section 15 (2) (a) of the Finance Act, 1966, in respect of cereals and sugar beet, where the levy does not apply until 1 August 1979 and, while not technically invalidating existing regulations in respect of cattle and milk, would seriously prejudice their implementation. Similar power to make regulations does not seem to be available under excise law otherwise. If subsection (2) were passed it would not only throw doubt on the validity of anything done under the regulations prior to the passing of the Finance Bill but would also make the collection of the duty virtually impossible since the entire mechanics of collection and accounting are embodied in the regulation and the bulk of the first payments would not be due until the last day of June. For that reason the amendment is unacceptable.

Apart from the technical aspects, a few points have been raised on which I should like to comment. One of the basic difficulties faced by Deputies Bruton and D'Arcy in dealing with this matter was that they were trying to make two cases at the one time and they made them with some degree of conviction. Unfortunately the cases are to a great extent contradictory because the House will recall the efforts they made to tell us how much the imposition of the levy would be passed on to the consumer.

At some times of the year in respect of meat only.

They said there was no way the farmer would pay it in respect of meat and in particular that the butcher would not pay it and, therefore, the consumer would have to pay. Deputy Bruton qualified this and said it would happen in times of scarcity in supply anyway, whatever about in times of plentiful supply of meat. Then they both went on to tell us how unfair this levy was to the farmers. Indeed Deputy D'Arcy went on to quote figures —which he did not explain—to the effect that it would operate as taking between 12 and 20 per cent from a farmer's profits on cattle. He has explained how the profits are calculated. I do not know whether he is imputing a wage for the farmer in calculating the profit. If he is, is he implying that that wage should not be taxed?

In any event how can Deputy D'Arcy accuse me of taking up to 20 per cent of the farmer's profit on his cattle and, at the same time, tell us that this levy is being paid by the consumer and is not being paid by the butcher or the farmer? He cannot have it both ways. The fact is that if the farmer is not paying the levy on cattle, then I am afraid it is because the butchers in some cases have allowed themselves to be bamboozled a little.

The fact is that exporters and meat factories are operating side by side with butchers in cattle marts. In some cases they are competing with butchers for the same animals and the levy is being paid in respect of their transactions. If the levy is not being paid, or at least if butchers say they cannot operate this while competing with people who are operating it and in respect of whom the levy is being collected, then some explanation is required as to why, of two people bidding against each other for the same animal in the mart, we should find that one of them can operate the levy and the other cannot.

The truth of the matter is that there is a very grave scarcity of animals which is causing difficulty of supply and of course an increase in the price under the normal law of supply and demand. But that scarcity applies whether one is bidding on behalf of a meat factory or an exporter or a butcher. The same problem arises. The reasons for the scarcity are reasonably well known. Partly they relate to the weather earlier this year and partly they relate back some years to what happened and was allowed to happen to our national herd. But I will not go into that. The fact is that there is a scarcity of animals at the moment, that that scarcity is having a certain economic effect which applies to everybody who is trying to purchase. To suggest on the one hand that I am crucifying farmers who are selling cattle and, at the same time, that they are not paying the levy just does not stand up. The Deputies opposite had better make up their minds as to which particular line they want to take because whichever one they are going to take can be pursued, but if they are going to take both they are only destroying any degree of credibility they might have. Nobody could take seriously that kind of argument.

I also want to make it clear that the effect of this amendment, as I have indicated, would be in practice to annul the levy, certainly as regards the operation in relation to 1 August, and to create very grave difficulty in respect of the levy operating from 1 May last. Let us have no doubts about this. If that were to happen the consequences would be simply to leave the rest of the taxpayers paying the money that should be paid under the levy. I do not know if that if what Fine Gael are advocating. If it is, they should make it clear. If they are not advocating that and if they are suggesting that in effect the levy should be abolished and that the money should be collected in another way then they should make that clear.

We did. We suggested a value-added tax refund.

The Deputy said I could have got the money that way. Am I now to take it that he is advocating that?

If the Minister has a case to make, let him make it and we will answer it afterwards.

(Interruptions.)

Deputy D'Arcy finds it not in the least discomfiting to have it pointed out that he is arguing two contradictory cases that cannot stand up. Either the farmer is paying the levy or the consumer is paying it, but they cannot both be paying it.

The Minister said that before.

I did. Deputy D'Arcy is now trying to intervene again.

What percentage of cattle is sold to the butchers? The Minister is only fooling himself. He is just killing time.

(Interruptions.)

No. I have been very co-operative. I know that Deputy Donegan tried to get in when I got in but he will forgive me if I say he has not been here during most of the debate and I did not want to see myself cut out without an opportunity of answering but I can assure him I will give him an opportunity to come in on this before I finish.

(Interruptions.)

I want to say that so far as the consumer is concerned he should not be in the position of having to pay the levy, and if the price of meat is going up I think Deputies opposite know at least as well as I do the factors that are causing it to go up and they have nothing to do with the levy. I also want to say that the question was put to me why it was that I insisted on putting on the levy when I could have got the money through the value-added tax system. I want to remind Deputies opposite that I and the Government made the position very clear in regard to what was happening. The option was available whereby the levy would not have gone on and it was not accepted. I also want to remind Deputies opposite that we had public intimidatory statements from some leaders of farming organisations saying that the levy would never go on, that there was no way they were going to allow it to go on. I am sure Deputies remember that.

They are not in this House.

We were told from all sides, including that side of the House, that the Government were being dictated to and that we had caved in and climbed down. I want to make it clear that we said what was going to happen; an option was given and it was not exercised and what we said would happen happened. In my view, if we had not imposed the levy from 1 May in the circumstances that arose, then the Government would justifiably have been accused of climbing down, of caving in, of surrendering. But the fact is that we did not and I want Deputies opposite not to gloss over what actually happened when they talk glibly about collecting the money through the value added tax system.

Considerably more became involved in this matter than the actual amount of money, important though that was. That was not so obvious to some people earlier but it is obvious to them now. It was not possible and would not have been credible to abandon the levy from 1 May and continue with the value-added tax arrangement for the reason I set out earlier. It is one of considerable importance as far as any Government here is concerned and I do not think the Deputies opposite are wise to support even by implication the kind of threats that were being made at that time. I know that was not their intention but to say that instead of putting on the levy we should have used the value-added tax system is saying, by implication, that we should surrender to those who said that under no circumstances would the levy be imposed.

No. I laid down the Fine Gael line about that long before any farming organisation spoke. The Minister should not try to hang that one around our necks.

The Deputy has not been listening to what I have been saying.

I listened very carefully.

The Deputy should listen more carefully.

The Minister should not try to hang around our necks that we were supporting people who were threatening, because we were not.

The Deputy should listen carefully while I repeat my statement. I spoke about the situation, the one which Deputies Bruton and D'Arcy raised, of the levy going on 1 May. That situation was different from when it was announced in the budget in a number of ways but, in particular, in the sense that at that stage the various threats had been made that the Government, in effect, would not be allowed put on the levy. That is what I am talking about and if the Deputies opposite are saying that I should not have put it on 1 May and should instead have used the value-added tax system, they are, by implication though not intentionally, supporting that.

Unless one wants to read that into it. It was not our intention to support that line and the Minister knows that.

I accept that it was not intentional, but by implication that is what it is doing.

I wish to make it clear that that was not intended and the Minister knows that.

The Minister is deliberately taking up the time allotted for debate.

That is very unfair.

The Minister is entitled to make his contribution and Members are entitled to speak after him, without interruption.

They will not have time.

The Minister has said the same thing about ten times.

The Minister is deliberately doing that.

If the Deputy was listening he would have heard how I have been interrupted but I did not interrupt anybody from the Opposition. Does Deputy Donegan remember the occasion when he was in Government and came here with a guillotine motion which his colleagues and my opposite number, Deputy Richie Ryan, as Minister for Finance, deliberately talked out? Is that the standard he is applying? Is that why he thinks he is not going to get a chance? If the Deputy and his friends had stayed quiet I would have sat down five minutes ago and he would have been able to get in. He should not judge me by the standards adopted by the Coalition when in Government.

That type of anger does not fool anybody; the Minister is stalling so that we cannot have a vote.

Does the Deputy want a vote? He should call it now.

We want to vote but we want time to say something first.

The Deputy does not want to call a vote.

The Minister is taking up our time.

The Minister should be allowed to continue without interruption.

The Deputy is not challenging a vote; more of the bluff. The amendment is unacceptable for the reasons I gave. It calls, in effect, for making completely unworkable the 2 per cent levy and it does not propose how it should be replaced. The arguments put for it did not have any regard to the circumstances in which it was imposed. The levy is operating as it was intended to operate and for the reasons which were outlined at the time. I do not believe it is reasonable for people to say that the levy is damaging agriculture. Any tax can be described as a disincentive but the basic fact is that this is a contribution this year only by the agricultural community to a small part of the cost of the educational, advisory and research services which cost approximately £31,500,000. That is the amount that will be paid by the general taxpayer this year while the agricultural contribution will amount to about £12,000,000 towards that cost. I do not think that is unreasonable and, as the House is aware, it will come to an end at the end of this year when a more acceptable system is substituted.

I will be brief because it is necessary for us to have a vote on this issue. I want to put a simple question to the Minister. A farmer who is also a businessman and spends £30,000 on capital expenditure on his farm must now pay the 2 per cent levy. He must also repay the £30,000 to the Agricultural Credit Corporation. I should like to know why he is in the disadvantageous position in relation to his business because if he spent £30,000 on his business he could charge it against tax in the succeeding six years but, as far as his farming situation is concerned, he can charge 30 per cent, or roughly £10,000. That is an unfair situation for the farming community and it cannot be defended by anybody. Such a farmer must repay the principal and interest, the 2 per cent levy, income tax and rates. This is wrong and should not be allowed to proceed. We must register our disapproval about this.

This is reminiscent of the worst days of landlordism when a person who erected two piers to hang a gate on had his rent increased by the landlord. It reminds me of a period in the 1930s when we had the economic war and the small farmers were reduced to paupers. In my county 70 per cent of the farming population have holdings under £20 valuation and they are now being dragged into a tax net. Many of them will have to pay income tax and a 2 per cent levy on their milk sales. In one co-op in my county that will amount to £600,000. We should add to that the levy which will be put on cattle at marts, a reduction of about £10 per beast. In my county more than £1 million will be taken out of the farmers' pockets. It cannot be said that we should light bonfires welcoming this measure, this unjust, cumulative tax. The resource and brucellosis taxes are being put on the dairy farmer. Dairy farmers in my county go in for mixed farming and they must now carry an unbearable load. I am surprised that the Minister for Agriculture has not come here with the same vigour he did on the Bill dealing with family planning. I would love if the Taoiseach would give him and some of the Deputies who are farmers in rural Ireland absolution to vote against this measure. However, I do not expect that we will have the same type of spiritual guidance in this connection. We do not welcome this and must oppose it. I am disappointed that some of those who were very vocal when we introduced a tax on farmers are now silent and slumbering. The same vigour is not there.

Amendment put.
The Committee divided: Tá, 23; Níl, 57.

  • Barry, Peter.
  • Belton, Luke.
  • Boland, John.
  • Bruton, John.
  • Cluskey, Frank.
  • Cosgrave, Liam.
  • Creed, Donal.
  • D'Arcy, Michael J.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Donegan, Patrick S.
  • Fitzpatrick, Tom (Cavan-Monaghan).
  • Harte, Patrick D.
  • Horgan, John.
  • McMahon, Larry.
  • Mitchell, Jim.
  • O'Brien, Fergus.
  • O'Leary, Michael.
  • Quinn, Ruairi.
  • Taylor, Frank.
  • Timmins, Godfrey.
  • Tully, James.
  • White, James.

Níl

  • Ahern, Bertie.
  • Ahern, Kit.
  • Allen, Lorcan.
  • Andrews, David.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Sylvester.
  • Brady, Gerard.
  • Brady, Vincent.
  • Briscoe, Ben.
  • Browne, Seán.
  • Burke, Raphael P.
  • Callanan, John.
  • Calleary, Seán.
  • Cogan, Barry.
  • Colley, George.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Lalor, Patrick J.
  • Lawlor, Liam.
  • Lemass, Eileen.
  • Lenihan, Brian.
  • Leonard, Tom.
  • Leyden, Terry.
  • MacSharry, Ray.
  • Meaney, Tom.
  • Molloy, Robert.
  • Moore, Seán.
  • Morley, P.J.
  • Daly, Brendan.
  • de Valera, Vivion.
  • Farrell, Joe.
  • Faulkner, Pádraig.
  • Filgate, Eddie.
  • Fitzgerald, Gene.
  • Fitzpatrick, Tom (Dublin South-Central).
  • Fitzsimons, James N.
  • Flynn, Pádraig.
  • Fox, Christopher J.
  • Gallagher, Dennis.
  • Geoghegan-Quinn, Máire.
  • Gibbons, Jim.
  • Haughey, Charles J.
  • Hussey, Thomas.
  • Kenneally, William.
  • Killeen, Tim.
  • Murphy, Ciarán P.
  • Noonan, Michael.
  • O'Donoghue, Martin.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Reynolds, Albert.
  • Smith, Michael.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael J.
Tellers: Tá, Deputies Creed and B. Desmond; Níl, Deputies P. Lalor and Briscoe.
Amendment declared lost.

Before going on to the next part of the business I should point out that there were two printing errors in the principal list of amendments circulated on 16 May 1979: in page 6, amendment No. 30, in the second last line, "the" should have been inserted before "offence"; and in page 7, amendment No. 31, in paragraph (a), section 28 (3B), "submitted" should have read "substituted". These amendments have been inserted in the Bill, and with the permission of the House I propose to have the corrections made in the next print of the Bill.

The time limit in the order made by the House this morning has now expired and I am putting the question: "That all amendments set down by the Minister for Finance and not disposed of, and amendment No. 35 (a), are hereby made to the Bill; the Bill, as amended, is hereby agreed to and, as amended, is reported to the House".

Question put and agreed to.

I now put the question: "That the Fourth Stage is hereby completed and that the Bill is hereby passed".

Question put and agreed to.

This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.

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