Finance Bill, 1981: Committee Stage (Resumed).

Question again proposed: "That section 9 stand part of the Bill."

Before the break we were discussing the averaging of farming profits and of people engaged in a trade or profession. I just want to say that the position is different in such cases from that of persons employed. Deputy Fitzpatrick pointed out activities in which spouses might be engaged in work. I repeat that the Revenue Commissioners have had discussions with the farming organisations to try to arrive at an acceptable solution and I believe it has been achieved. The 1974 Act has operated well and I should like to correct an impression the Deputy appeared to give to the House in regard to flexibility. I did not refer to flexibility outside the legislation but about the flexibility the legislation gives, for instance in relation to farmhouse holidays.

I would refer, for the benefit of Deputy Bruton, to the shop or store-owner who would be selling seeds, fertilisers and so forth. I referred earlier to the possibility of manipulation in regard to the transfer of profits or in regard to prices charged. The criteria laid down in the 1974 Act have been found satisfactory to date and I am satisfied they still meet this new situation in regard to income averaging.

The point still remains that there is unfair discrimination vis-àvis people in employment and those in a trade or profession. People in employment can earn as much as they like outside the farm and can still qualify for averaging, whereas in a trade or profession one could be earning a tiny amount but cannot qualify for averaging. That seems to me to be unfair and contrary to the intention of the averaging provision.

The Minister has not answered one point made by both Deputy Fitzpatrick and me. It refers to farmhouse holidays. I take it people engaged in that activity are regarded as being in a trade. It is not an employment and there is no contract of employment. Therefore it must be a trade or profession. If there is flexibility which allows people who are engaged in a trade or profession for two or three months of the year to avail of income averaging, in cases of people engaged in farmhouse holidays, the same concession should apply to others who work for only two or three months of the year. That would invalidate what the Minister said earlier when he said how difficult it would be to determine whether a person was working part-time, a certain number of hours per week.

The Minister is making a similar judgment here in saying that a person providing farmhouse holidays is only working part-time for two months a year. The Minister has to decide how many days of the year such people were open and how many guests they had to determine whether it was part or full-time trade. I would like to know what the position is. In a sense it is an important point to establish because it applies not only in this case of income averaging but also in determining whether a person is eligible to pay income tax if he is a farmer, because a person who is engaged in a trade or profession, with a valuation of less than £40, is required to pay income tax, whereas a person engaged in employment but with a valuation of less than £40 is not obliged to pay income tax on farming profits.

The same criteria apply in that case as in the case of eligibility for income averaging. What legal basis has the Minister for saying that people who provide farmhouse holidays would not lose income averaging, whereas people in other trades or professions would?

There is a distinct difference between a person in employment whose income is established and which can be assessed as taxable under normal income taxation and the person engaged in a trade or profession. The Deputy asked what legislation covers farmhouse holidays which he gave as an example and which I could not see extended to areas to which Deputy Fitzpatrick referred this morning. It is section 16 (1) (b) of the 1974 Finance Act, to which I referred this morning. I will read the section for him:

whose spouse, in a case where the individual is a married person, is, at any time in that year of assessment, also carrying on solely or in partnership another trade or profession, other than a trade consisting solely of the provision of accommodation in buildings on the farm land occupied by him, the provision of such accommodation being ancillary to the farming of that farm land,

What is the Minister quoting from?

From 16 (1) (b) of the Finance Act, 1974.

That is not in section 16 (1) (b).

It was introduced in 1975.

I have the Finance Act, 1974. It stops at "profession".

Obviously the Deputy has the copy which has not been amended.

I have the statutes here.

This section was amended by the 1975 Act. The Deputy cannot blame me for that because I was not in office at that time.

We are repeating the argument.

Question put and agreed to.
Section 10 agreed to.
Question proposed: "That section 11 stand part of the Bill."

I understand these are not the same payment dates that apply in the case of self-employed persons. Is that correct?

No, they are not the same dates.

In other words, farmers are asked to pay earlier.

They have two dates of payments.

Yes, but they are asked to pay their first instalment of tax earlier than self-employed people.

That is not correct. The self-employed are liable for all their tax on 1 October. Here the situation is that the two payment dates are still maintained for this year. The earliest will be 1 October and the later one 1 January of the following year.

Question put and agreed to.
Question proposed: "That section 12 stand part of the Bill."

I welcome section 12. It is a progressive step. Has the Minister discussed the provisions of this section with the farming organisations and are they fully satisfied with it? Are they satisfied with the provisions of that section?

It was one of the submissions made to me when I met the farming organisations before the budget. I think it was a wise decision by the Government because it relates to stock relief and is designed to offer the very necessary incentive — I am sure the Deputy agrees with me — to farmers to encourage expansion of the national herd. I have had subsequent discussions with farming organisations and they have welcomed it.

Question put and agreed to.
Question proposed: "That section 13 stand part of the Bill."

Section 13 is concerned with the abolition of the resource tax for future years. However, it is still being charged in respect of the last tax year, a year in which farmers suffered unprecedented losses. It is inappropriate that a resource tax should be charged, much of which remains to be collected, in respect of last year. This resource tax should not only cease in future years but the liability for it should be abolished and any moneys collected refunded to the farmers who paid it.

The Deputy is fully aware of the discussions, both here and elsewhere, on the budget and in other debates. He must appreciate that resource tax was charged on persons other than charities who occupied farm land with a rateable valuation of £70 or more. The rate of tax was £3.50 per £ of rateable valuation. The tax was intended as a top-up to the taxation of farming profits which had been regarded as inadequate. This section discontinues the resource tax and substantial progress has been made. The Deputy referred to the past year. I have no plans to amend the section as it is now before the House.

I do not agree that there was ever any need to "top up", to use the Minister's words, the amount collected from farmers in income tax in perhaps the worst year in recent times for farmers as far as losses in their businesses were concerned. To base the method of topping up on an archaic valuation system which bore and bears little relationship to the actual earning capacity of a particular farm and which has to be levied whether or not the farm made any income in that year, was a most crude and unfair system of taxation. It bring the whole concept of taxation into disrepute if taxes which have so little relationship to any standard of equity can be introduced and become the law of the land.

All of these points were made on this side of the House when the tax was being introduced. We argued it should never have been introduced. By abolishing it, the Minister now recognises that it should never have been introduced. The conditions last year, in which it was introduced, were not such as to provide any justification for its introduction. Therefore, the Minister should refund the money collected and say that no liability remains on farmers who have not yet paid this tax.

Question put and agreed to.
Question proposed: "That section 14 stand part of the Bill."

This section requires incorporated businesses to pay one and a half years' tax in the immediate year coming. It will not have any long-term effect with regard to improving the revenue position of the Government in that it will not raise the long-run yield of taxation from this or any other sector of the economy but it will cause serious liquidity problems for many businesses. The businesses that will be most affected will not be in the manufacturing area which is already subject to a 10 per cent rate of corporation tax and which has many means of reducing its tax liability through various concessions that have been made. The burden of one and a half years' tax in one year will fall mostly on the services sector of the economy, the sector that has been the most dynamic in recent years in employing more people, but the House and the Government appear to ignore the contribution that the services sector has made with regard to employment.

This measure will make the work of those engaged in the services sector even more difficult. Already they are paying the full rate of corporation tax and at that full rate they will have to pay one and a half year's tax in one year. This year the rate of inflation is very high, as is the rate of interest. As a consequence it is very costly to hold stocks as people who are self-employed and in business must do. This makes for serious liquidity problems and that situation is now aggravated by making them pay one and a half years' corporation tax in one year. It is false economy. It will not improve the revenue position of the State and is merely designed to get the sums right on paper for one year only without any lasting benefit. Indeed, in the following year less tax will be available because the extra amount collected this year will not be available next year. We will be crowding in more revenue in one year and widening the deficit in the following year. In my view this is not the kind of action the Government should take. It is not genuine and presents all the difficulties I have set out. It is my view that the Minister should not introduce this provision.

I want to put the record straight on a few points. This section amends section 6 of the Corporation Tax Act, 1976, in order to give effect to the decision announced in the budget, that the interval allowed to companies for payment of the second instalment of corporation tax would be shortened by three months but not so as to make the due date fall earlier than the due date for payment of the first instalment which is normally nine months from the end of the accounting period. This change will apply to the second instalment of tax in respect of accounting periods ending on or after 6 April 1980. For most companies affected in 1981, the revised due date will be 1 October 1981 instead of 1 January 1982, but with the existing two-months period of grace interest will not accrue if those companies pay their tax on or before 1 December 1981.

The proposed amendments do not increase either the rate of tax or the amount of tax payable by companies. What is involved is merely a three months advancement in the normal date of payment of the second instalment which at present can vary between nine months and 21 months after the end of a company's accounting period. I want to emphasise that it does not increase the rate of tax or the amount of tax payable by companies—

I did not say that.

It merely advances by three months the payment of corporation tax. Advancing the date of payment of each second instalment by a mere three months could only have a marginal effect on the cash flow of companies and after the first year in which they are affected companies will be in a position to accommodate themselves to the new pattern of payments. The present measure was foreshadowed in the second White Paper on company taxation and follows the change in dates of payment of tax for unincorporated traders which was effected last year. An additional point is whether it is fair to ask unincorporated traders to be in a less favourable position than incorporated traders. Companies will be in a more favourable position in that they will still pay their tax in two instalments whereas individuals in business have to pay the full tax for the year on 1 October in the year of assessment.

The Minister has spent some time in answering points I did not raise. I did not say there was any increase in the rate of corporation tax; in fact, I said specifically there was not. If there was the Minister might have some grounds for saying it would improve the revenue position of the Government. I pointed out that because there was no increase in the rate the deficit will be reduced this year but will be widened next year. It is purely a timing issue so far as the dates are concerned. It will impose liquidity problems this year without making any long-term improvements in the finances of the Government. It does not make sense.

I made that point to establish the sound commonsense behind the decision. I think the Deputy overestimates the difficulties. I accept that there may be an uneven spread of cost to companies and corporation but I have no doubt that some companies will be able to meet this demand out of existing resources. I accept that in other cases in order to pay they may have to borrow for a short period — three months at the most — but the interest charged will be allowed for tax purposes.

Question put and agreed to.
Section 15 agreed to.

I wish to give notice that I propose to introduce on Report Stage an amendment to bring within the scope of the 10 per cent corporation tax scheme for manufacturing certain activities of a non-manufacturing nature. These activities are the repair of ships, mushroom cultivation, fish farming, Shannon services and work executed in non-EEC countries on design and planning services.

In view of the fact that the Minister is likely—

The Minister is merely giving notice of his intention to introduce an amendment later.

I understood that anything the Minister says on Committee Stage can be replied to.

It may be debated on Report Stage. If the Deputy wishes to make a remark on it he may do so but it is a little out of order. It need not have been done at all.

I want to keep in order.

The point I wish to make is that, if the Minister can apply the 10 per cent rate to mushroom cultivation and fish farming, he can apply it to farming.


Question proposed: "That section 16 stand part of the Bill."

The section refers to the Employers' Temporary Subvention Fund. The Minister is proposing to give a tax exemption to payments made from this fund. As this is a body which disburses quite substantial sums of money, I wish to inquire if the Employers' Temporary Subvention Fund was ever statutorily established.

I was in a different Department at the time, although I was deeply involved in its introduction. The Minister for Labour played an important part in it. I think the answer to that question is that it was not statutorily established. The Deputy is aware of the history of that scheme. In 1978 the Government introduced what was known as the Employment Maintenance Scheme to aid vulnerable industries. That scheme was allowed by Brussels or by the EEC at that time. Subsequently a date limit was set by the EEC when it would have to end because they claimed we were distorting competition as compared with the UK. As a result, when the Employment Guarantee Fund was set up under the first national understanding a sum of money was set aside jointly by the employers and the Government for that fund. Because of the difficulties being run into in the Government funded scheme in 1978 and 1979, arrangements were entered into by which a scheme acceptable to Brussels was instituted. That is the history of the Employers' Temporary Subvention Fund.

I am providing that payments made to employers in respect of employees out of that fund should be disregarded for tax purposes. It is fairly evident why one would feel that should be done. There is no doubt that those schemes helped to maintain a certain level of employment in vulnerable industries which might otherwise not have been maintained. That fund was established formally in 1980 and provided for payments covering the period from April 1980 to December 1980. The fund is administered by a committee representing both sides of industry. Under this scheme payments in arrears quarterly are made to employers in the clothing, footwear and textile industries in respect of insured employees. This section proposes to exempt the employers from income tax and corporation tax in respect of the payments he receives under the scheme.

I presume the money for this fund was collected from employers through the normal social insurance method.

I explained the funding of the scheme to the Deputy. It was contributed to jointly by the Government and the employers. The employers' portion was contributed through the social welfare scheme.

I am speaking not so much from the point of view of the policy involved as the parliamentary propriety. I am not happy that a fund should be set up and that money should be paid into that fund through the social insurance scheme, which is a statutory scheme with all the force of law behind it, and that the fund and its administration should not also be governed by statute. I feel very strongly that where money is collected — quasi-taxation as this money was in that it was compulsory and the employers had to subscribe — and expended the expenditure of that quasi-taxation, if such a term is appropriate, should not take place without statutory authority laying down quite clearly the criteria on which that money should be spent and the accountability necessary for that to be done.

I accept that it is sensible to exempt those payments from taxation in view of the purpose for which they are being made, but I do not accept that they should be made without due statutory authority. This provision is giving retrospective taxation clearance for payments made from the fund without the fund itself being statutorily established. This should not happen. These makeshift arrangements which are made outside this House without statutory authority set a very dangerous and damaging precedent regardless of how well-intentioned they may be.

It is not correct to say there was not statutory authority for the funding of the scheme. The Deputy should be aware that there had to be. The Employment Guarantee Fund was established in 1979 under the national understanding. It was contributed to jointly by the Government and the employers, with the employers' portion coming through the social insurance system. Statutory authority was taken in this House for that contribution. It had to be done that way. I explained the history of the need for this temporary subvention fund and the way it was organised through Brussels. That was a contribution from the Employment Guarantee Fund towards the subvention fund for specific application to the vulnerable industries I mentioned in the clothing, textile and footwear areas. This section provides the necessary tax concessions.

Will the expenditure of the fund be subject to audit by the Comptroller and Auditor General?

As I explained, the control of the fund was organised under the national understanding. A tripartite committee operated the Employment Guarantee Fund. The fund we speak about here is administered by a committee representative of the Congress of Trade Unions, the Federated Union of Employers and the Confederation of Irish Industry.

Will the expenditure of the fund be subject to audit by the Comptroller and Auditor General?

I do not know that that would be the case. I tried to explain to the Deputy how and why this fund was established and used. The information is available to the Deputy. I answered several questions about the fund in this House when I was Minister for Labour. It was set up for a very good purpose. I do not think the employers or the affected industries would welcome the Deputy's nitpicking. The contributions through the social welfare system had to be statutorily cleared through the House. This is another effort to help industry and ensure there is not an imposition of tax on them.

I am not in the least worried whether or not employers or anybody else welcome what I am saying. My concern is that if moneys are collected compulsorily under statute there should be a proper method of ensuring that they are spent in a regular fashion. The way to do that is to have an audit of the fund expenditure by the Comptroller and Auditor General and to have the fund itself statutorily established laying down the safeguards and criteria in regard to the expenditure of it.

I have allowed the Deputy to make his point, but this matter should be raised at another time and in another way. We are only dealing with tax exemption on the fund now.

Question put and agreed to.
Question proposed: "That section 17 stand part of the Bill."

I should like to ask the Minister the representations he received which led to this section being introduced.

It was not a question of representations. I should like to explain to the Deputy what is involved. Section 34 of the 1973 Act exempts from income tax and corporation tax income derived from certain patent royalties. The exemption is granted where the work in connection with the devising of relevant patented inventions is carried out in the State. The purpose of the provision was to encourage research and development here, a necessary thing. The section proposes to close a loophole in section 34 which could in certain circumstances enable inventions which were developed abroad to qualify for the exemption. If the Deputy wishes I can give him further information.

Question put and agreed to.
Sections 18 to 20 inclusive, agreed to.

Is it the situation that I must notify the Chair that I intend introducing an amendment to insert a new section here on Report Stage?

The Minister is entitled to introduce an amendment on Report Stage. If it arises out of a section that we are debating, the Minister can mention that point when dealing with the section.

My amendment means the replacing of this section.

The Minister is entitled to mention that he proposes to replace section 21 on Report Stage. At present Deputy O'Leary has an amendment to this section.

Does the Deputy wish to move his amendment at this stage?

Yes. I move amendment No. 7:

In page 22, subsection (7) (b), line 14, after "house" to delete "in qualifying period" and substitute "before the commencement of the qualifying period (but in the current year)".

This amendment relates to the allowable investment as provided for in subsection (7). In that subsection the Minister provided that:

Subject to paragraph (b), where expenditure is incurred in the qualifying period on the construction of a house and before that house is used it is sold, the person who buys the house shall be deemed for the purposes of this section to have incurred in the qualifying period expenditure on the construction of the house equal to the expenditure actually incurred on the construction thereof or the relevant price paid by him for it on the sale, whichever is the lower.

Presumably all this was intended to assist the construction industry. One may differ in the opinion as to whether it will be as helpful as was suggested in the section. My amendment suggests that, if the intent is to assist the building industry, an industry which is in need of some extra assistance at present — it is the largest employer in the country and has been feeling the draught of the recession in a severe way — the tax advantage given in the section should be extended to the beginning of the year rather than the date set down in the Bill. Some small firms in the building industry have a significant proportion of units on their hands at present and my amendment is intended to assist them in getting those units off their hands and into the market.

Is 29 January 1981 the date the Deputy has in mind?

Mr. O'Leary


I indicated in the course of the debate on Second Stage that the intention of the section was to stimulate new investment leading to new building activity and employment creation in the construction industry. To allow past construction work to qualify would clearly be inconsistent with the overriding objective because of the work already being carried out. New capital allowances have normally operated from a date not earlier than budget day with the result that earlier expenditure has not benefited from the allowances. Perhaps I will be going part of the way to meet the Deputy if I tell him that I propose to introduce an amendment to the section on Report Stage which will make it clear that any expenditure related to work done in the qualifying period will qualify for relief. Accordingly houses in the course of construction on budget day will attract a measure of relief under the section.

The Minister is saying, in other words, that as long as the house was in the course of construction on budget day the actual origins of the date of commencement is not at issue?

Let me tease this out first before I make a firm commitment.

Do I take it that a development that was in the course of construction on budget day and which commenced two years previously would be covered?

Without pinning me to the specifics at this stage I am telling the Deputy that houses in the course of construction on budget day will attract a measure of relief under this section. I will bear in mind what the Deputy has said.

I suggest that the Minister talk to his construction experts when drafting the amendment for Report Stage. I go along in principle with the idea that assistance is needed for the construction industry. Earlier, when dealing with other sections, I put forward the view that assistance was needed by other sections of the community and there was not as much acceptability on the Minister's part, but in this case I am mainly concerned about employment. The construction industry is one of the largest employers in the country. There is a great amount of unemployment in that industry and it has suffered a great deal as a result of the recession. The intent is to ensure that builders with party constructed schemes on their hands can benefit from this allowance given under this section. The Minister indicated that if the schemes were in course of construction on budget day they would qualify. Therefore, I take it that the criterion to be adopted is that they were in course of construction on budget day.

In other words, I take it that the Deputy is not expecting relief on work done prior to that out in course of construction on budget day. It will attract a measure of relief under this section. I think I am going a long way to meet the Deputy in that respect.

Amendment, by leave, withdrawn.
Question proposed: "That section 21 stand part of the Bill."

Does the Minister wish to say something in connection with section 21?

I intend to introduce an amendment on Report Stage which will have the effect of replacing sections 21 and 22 of the Bill as circulated, by an improved from of these sections not involving fundamental changes in their content. I should mention, however, that the upper floor area limit for qualification for the allowance in the case of flats will be reduced in the new version to the order of 75 square metres in keeping with the moderate cost concept of this scheme, and the certificate of reasonable value will be required in cases of sales of new houses or flats by builders.

That can be debated on Report Stage. Is section 21 agreed for the moment?

It might be more desirable when we get the new section for Report Stage to debate it then.

It might be more desirable when we get the new section for Report Stage to debate it then.

I take it that we will be allowed to have a full Committee Stage debate.

It will probably be recommitted.

I am prepared to accept that, if the Chair allows it.

The Minister will have the right to recommit. If he is replacing sections that is the usual thing that is done on Report Stage, but that is a matter for the Minister.

If the Chair has no objection I am quite prepared to have a Committee Stage debate on those sections on Report Stage.

That will be a matter for the Minister. By raising it now he can probably avoid recommital.

I am fully aware of that, but I do not want to take advantage of that situation. The Deputies have my firm commitment to a Committee Stage debate.

I take it that the same liberality will apply if we are not satisfied and we can put amendments at this point.

We would have to have a look at that.

I have a point which may be of value to the Minister in his drafting of the revised section and that is the definition of "qualifying lease". The reference here is to a lease as defined in the Income Tax Act, Part IV, chapter VI which says:

"lease" includes an agreement for a lease and any tenancy, but does not include a mortgage,...

As the Minister is aware, probably the most common form of tenancy in this city in bedsitterland is what is known as a weekly agreement which is not in fact a lease at all, as far as I know, in the accepted sense of the term. There is no written agreement. It is purely an agreement to let the person use the place for a week at a time and it can be terminated at any stage. I would like to know if that form of agreement, which I am sure is rather unsatisfactory for the tenant in many cases, comes within the type of agreement which will be subject to the concession.

I will bear in mind what the Deputy has said.

I am asking a question rather than——

I know that, and I will bear what the Deputy has said in mind and we can debate it on Report Stage. Any tenancy should be covered.

I will say this much to the Minister. It is not a matter on which I am an expert and perhaps the Minister is not either.

I will always listen to anything said in this House.

Good, that is consoling. The point I wanted to make is that there is a case at least for saying that the type of agreement to which I have referred is unsatisfactory in that the tenant has practically no rights at all. I agree that if one goes too far in giving rights to tenants you will not have the leases at all. Giving too much protection can be counter-productive. If it is the view of the Minister for the Environment that this type of arrangement is not satisfactory at the moment, there might be a case for saying that this concession will be available only if certain rights are given to a tenant, rights regarding the standard of repair in which the building will be maintained, or a rent book being made available where the rent is entered in and the book publicly available to various people to inspect, including perhaps, the Revenue Commissioners. These points have been made very frequently by representatives of flat-dwellers, and there might be a case for saying that only if certain requirements are met in respect of such agreements will the concession be allowed. This would have the effect of improving the position of tenants on the one hand as well as giving a boost to the building industry which the Minister is seeking to do. I agree that if he goes too far in putting restrictions on the thing the entire scheme will abort, but if the Minister for the Environment and himself can come to an agreement as to what is the most important additional right the tenants need in the type of situation that I have described, if he could get that installed without jeopardising the scheme and at the same time make an improvement in the position of tenants, it is an opportunity which should not be lost.

I take the Deputy's point. He is referring to what is a delicate problem in trying to get a proper balance and full details of the scheme. Regarding subsection (9). I am quite prepared to debate this in committee form on Report Stage. The subsection says:

(9) A house shall not be a qualifying premises unless—

(a) it complies with such conditions, if any, as may be determined by the Minister for the Environment from time to time for the purposes of section 4 of the Housing (Miscellaneous Provisions) Act, 1979, in relation to standards of construction of houses and the provision of water, sewerage and other services therein, and

(b) it is open for inspection at all reasonable times by persons authorised by the said Minister.

That may well be going far enough at this stage rather than laying down within the Bill firm lines that may be difficult to implement or may be found afterwards to be not really the correct ones. I am not quite sure, but I draw the Deputy's attention to subsection (9), appreciating the validity of some of the points he is making.

Question put and agreed to.
Question proposed: "That section 22 stand part of the Bill."

On Report Stage I intend to introduce an amendment which will have the effect of replacing sections 21 and 22.

Question put and agreed to.
Question proposed: "That section 23 stand part of the Bill."

Has the Minister had any approaches from people interested in availing of this section already, or have representations from individuals who might be benefiting played any part in the drafting of this?

The answer is no. Nobody who might be benefiting from this has had any part in the drafting of the section. Secondly, yes, there have been some inquiries or expressions of interest. The section provides that the expenditure incurred after budget day but before 1 April 1984 on the construction of the car parks for use by the general public will qualify for the same scale of capital allowances as that available for factory-type industrial buildings constructed for leasing to industrialists, that is, an initial allowance of 50 per cent of expenditure and an annual writing-down allowance of 4 per cent. This special extension of capital allowances for buildings which must be constructed over the next three years and which will be wholly used for the purposes of providing off-street car parking will be an incentive to the private sector to participate in the provision of an essential amenity in our larger cities. The Department of the Environment has indicated that both Dublin and Cork Corporations are considering the provision in their areas of multi-storey car parks and interest has been expressed by developers in participating in such schemes provided that a generous depreciation allowance for tax purposes is available.

Question put and agreed to.
Question proposed: "That section 24 stand part of the Bill."

Section 24 would be the same as section 23 but would apply to roads and bridges.

The difference here is that it is not a capital allowance. The allowance in relation to multi-storey car parks is a capital allowance. This section provides for an incentive by way of relief from income tax and corporation tax for private sector investment in the provision of toll roads for or on behalf of local authorities. The term "toll road" is widely defined in the Local Government (Toll Roads) Act, 1979 and includes a bridge, viaduct, subway, fly-over and so on in respect of which a toll scheme is in force. The relief will consist of an allowance not exceeding 50 per cent of capital expenditure incurred by a person after budget day but before 1 April 1984 on the provision of a toll road by virtue of agreement made between that person and the road authority under section 9 of the toll road Act. The allowance may be set off against taxable income arising under such an agreement by the person who incurred the capital expenditure. That is the difference between the two.

Given the length of time it takes to build a road with all the formalities, including land purchase, that have to be gone through, does the Minister consider that the cut-off date of 1984 is not rather early?

As I am sure the Deputy will appreciate, I would hope that for the type of roads, bridges, viaducts and fly-overs we are speaking about in this and for the type of construction involved, a three year period would be adequate. The main thing is to get it started.

I would have thought that the Minister would have gone a bit further in terms of time because, while this is all right for schemes that are ready and for which CPOs have already been got by the local authority and in respect of which the local authority has a project ready to hand over to the private developer, a project which is only at the stage of being talked about or thought about will involve a lot of formalities which will take at least a year or two complete. Consequently the road building might not start for about two years and the likelihood of it being finished in the remaining 12 months is quite small. The Minister would have been better off to have had 1986 or 1987 as the cut-off date. The worst type of situation is where people do not know exactly where they stand as far as tax liability is concerned and they have to reply on the Minister giving an assurance and nods and winks of one sort or another and saying that if they do find they are running out of time the period will be extended. It would be better to extend the period at the outset rather than mess around and have to extend it by one year and then another year and take up time here. I would ask the Minister to consider making the date 1986 or 1987 and be done with it.

The reason for the 1984 date was to try to encourage these projects to get off the ground. If there is too long a period it might encourage procrastination. I take the point the Deputy has made and, without any commitment, I will have another look at that. But that is the difficulty.

I see that too.

One might ask which is the greater encouragement. That is the problem. I take note of what the Deputy has said and, without giving any commitment, I will have another look at it.

Question put and agreed to.
Question proposed: "That section 25 stand part of the Bill."

I intend to introduce by way of recommittal on Report Stage an amendment which will insert in the Bill certain new provisions designed to counter tax avoidance in the area of land dealing and development. The provision will close certain loopholes in the existing tax code so as to ensure that the appropriate amount of tax is paid on the profits in question. The provisions will apply to accounting periods ending on or after 6 April 1981.

Question put and agreed to.
Section 26 to 30, inclusive, agreed to.
Question proposed: "That section 31 stand part of the Bill."

I wish to oppose this section. This section is increasing substantially the price of petrol which is used by people going to work. It is also increasing the price of diesel oil which is going to substantially increase costs in industry. As the Minister and the House are aware these measures are most regressive and will discourage people from travelling to work, they will discourage mobility in our economy and encourage people to remain at home unemployed rather than travel a distance to work, particularly in view of the provisions of our PAYE tax code where people in the PAYE category are not allowed to claim the cost of travel to work because the definition of expenses applying to PAYE people is more narrow than the definition of expenses applying to self-employed people. Travel to work is not considered to be part of the work even though it is absolutely necessary to the work. The taxpayer therefore has to pay the full cost of travelling to work and the increases in the price of petrol introduced by the Government in this budget discourages people from travelling to work and taking up employment within our economy. This is something that has been greeted with very serious reservations by large sections of the public and perhaps it is the one element in the budget which attracted the greatest opprobium from practically everybody in Ireland. We all know the price of petrol has gone up enough as it is as a result of the increased prices imposed by the oil supplying countries. For our Government to come along and increase the prices even more strikes a very heavy below to the production sectors of our economy. When accompanied by very high rates of motor insurance, it is something which should not have been introduced. I argue strongly that this is an undesirable section and was an undesirable aspect of the budget.

The general effect of the section is to increase the rate of duty on petrol, the rate of excess duty on diesel oil and the rate of duty on liquid petroleum gas or LPG. The Deputy said that these increases were extensively criticised. I would not deny that there was some criticism, but that was the only area in the whole budget package which caused some concern. I want to make some valid points here. First of all, as I pointed out at budget time, the Minister was faced with raising a certain extra revenue to meet certain payments, the most important being the substantial increase in payments to the social welfare sector. He looked at the whole area of indirect taxation. The foregoing sections have covered the areas of increased taxation and this section does also. Basically, the reason behind the imposition of extra duty there was that money was needed to meet payments to a very considerable section of our community which has not the muscle, power or lobbying capacity of other sections and for which the Government have always shown a concern.

I have no doubt that the Minister and his colleagues were in the predicament he has described of considering the options before them and that this was one which they in the circumstances considered they had no choice but to take. However, the overall strategy of relying on increased indirect taxation has the unfortunate effect of increasing the consumer price index and therefore bringing greater pressure to bear, leading to increased demands and wage claims. All these follow when one is forced into this strategy in a budget.

The contribution of the increased price for petrol which is essential for getting people to work, has played its part in increasing the cost of living this year. There are many parts, not alone in rural Ireland but in Dublin city, where people going to work must provide their own transport. The housing complexes of the city were not planned to be adjacent to work places and people living on the north side who work on the south side and vice versa are forced to use their own transport. They cannot claim any allowance for this compulsory expenditure in getting to their place of work and this had led to a widespread feeling among wage earners that they are hard done by when it comes to the burden of taxation they are asked to shoulder. The position of the self-employed, when it comes to deduction of their tax, is easier, because there are more deductions which can legitimately be claimed under the code. Whatever the Minister may say, he should be in no doubt that this was one of the most unpopular features of the recent budget. It is appropriate that the House should mark its opposition to that rather mistaken policy. I understand how it has come about, that at the end of the day the Government's housekeeping arrangements are awry. They were forced in the circumstances to look for revenue in this very undesirable way, considering the effects that this measure has had on the economy.

I am disappointed with the Minister's reply. As I have pointed out, people have to travel long distances to work owing to the historic nature of the settlement of Ireland with people spread out over very substantial areas. In some of the poorest parts of Ireland, such as County Leitrim, the number of families with cars is proportionally larger than in many richer parts in town centres. They must have a car to live a normal life; and for these people, and those who must travel long distances to work, petrol is not a luxury.

For someone resident in the centre of New York, petrol is a luxury because he or she needs to use a car very infrequently. I have heard of someone living in New York who takes his car out once a month even though he is very well off because he can do everything he wants on public transport. That is not the case in Ireland. For Irish people petrol is essential in many cases, both to get to work and to live a normal life. The increased taxation imposed on petrol is a very severe burden on very many people.

Is the section agreed to?

Question put.
The Dáil Committee divided: Tá, 53; Níl, 36.

Ahern, Bertie.Ahern, Kit.Andrews, David.Andrews, Niall.Aylward, Liam.Brady, Gerard.Brady, Vincent.Browne, Seán.Burke, Raphael P.Callanan, John.Calleary, Seán.Cogan, Barry.Colley, George.Collins, Gerard.Conaghan, Hugh.Connolly, Gerard.Coughlan, Clement.Cowen, Bernard.Crinion, Brendan.Daly, Brendan.Doherty, Seán.Farrell, Joe.Filgate, Eddie.Fitzgerald, Gene.Fitzsimons, James N.Flynn, Pádraig.French, Seán.

Gallagher, Dennis.Haughey, Charles J.Herbert, Michael.Keegan, Seán.Kenneally, William.Killeen, Tim.Lawlor, Liam.Leonard, Jimmy.McCreevy, Charlie.McEllistrim, Thomas.Meaney, Tom.Molloy, Robert.Moore, Seán.Morley, P.J.Murphy, Ciarán P.Nolan, Tom.Noonan, Michael.O'Hanlon, Rory.O'Leary, John.O'Malley, Desmond.Power, Paddy.Reynolds, Albert.Smith, Michael.Walsh, Seán.Wilson, John P.Woods, Michael J.


Barry, Myra.Barry, Peter.Boland, John.Bruton, John.Byrne, Hugh.Cluskey, Frank.Collins, Edward.Conlan, John F.Corish, Brendan.Cosgrave, Liam.Crotty, Kieran.D'Arcy, Michael J.Deasy, Martin A.Donnellan, John F.Fitzpatrick, Tom. (Cavan-Monaghan).Flanagan, Oliver J.Gilhawley, Eugene.Griffin, Brendan.

Harte, Patrick D.Horgan, John.Keating, Michael.Kenny, Enda.Lipper, Mick.Mannion, John M.O'Brien, William.O'Keeffe, Jim.O'Leary, Michael.O'Toole, Paddy.Pattison, Séamus.Quinn, Ruairí.Ryan, John J.Taylor, Frank.Timmins, Godfrey.Treacy, Seán.Tully, James.White, James.

Tellers: Tá, Deputies Moore and Ahern; Níl, Deputies W. O'Brien and Horgan.
Amendment declared carried.
Question proposed: "That section 32 stand part of the Bill."

This is a most obscure section so far as trying to understand what it means is concerned. There is a reference to paragraph 5(1) of the Imposition of Duties (No. 236) (Excise Duties on Motor Vehicles, Televisions and Gramophone Records) Order 1979 and various other statutory instruments. I would like to know precisely what is the increase being levied on the excise duty on televisions, from what to what and how much revenue will be obtained as a result of that increase. I think £600,000 is the revenue but I should like to know something about the rate of duty.

I should explain to the Deputy and the House that the effect of this section is to raise the excise duty on televisions with effect from 29 January 1981, by between £10 and £2, depending on the size of the screen and whether the television is colour or monochrome. For example, in the case of a colour television with a screen size of between 17 and 24 inches — that is the most popular category — the increase in the excise duty is £8.

The Deputy asked about the effect on revenue. The resultant increase in excise revenue for the current financial year will amount to approximately £0.6 million, or in a full year to £0.7 million.

As I understand it this will bring the maximum State tax on televisions to £89 per television set. That is a lot of money to be collecting on a television. It is now well accepted that practically every household, even the least privileged in our community, has a television as a means of keeping in touch with the outside world. It has become accepted as part of living in the second half of the twentieth century; it is no longer a luxury. The State tax here of £89 per television, maximum — I know that in some cases the tax would be considerably less — is a very large impost on something considered by most people to be part of living in this era of our civilisation.

As the House will be aware I did not oppose the increased taxation on tobacco, beer, spirits or wines because I feel that those are commodities not at all essential, indeed in many cases they are highly undesirable. But televisions do not come within the same category at all and people need a television to keep in touch with what is happening in the world. I know from my experience — and I am sure the Minister does also from canvassing and visiting homes — that even the least privileged section of our community, feel they should have a television. I feel therefore that the increase in this duty does not constitute a progressive move. I feel the Minister should have found the money either by a further increase on taxation on tobacco, spirits and wines, but not in the way he is now proposing to find it.

(Cavan-Monaghan): Did I understand the Minister to say that the tax on the colour television set with a screen of 17 inches and not exceeding 24 inches would be £0.7 million, or was the figure £0.7 million for the entire revenue?

The example I gave in the case of the screen to which the Deputy referred was that the increase in the excise duty is £8.

(Cavan-Monaghan): Would the Minister tell us what is the increase on all of them. It is £8 on that; what is it on the others?

That is the most popular one in respect of which the increase ranges from £8 to £2.

Two pounds is for the monochrome small screen?

Mr. G. Fitzpatrick

Two pounds is the smallest. I will endeavour to give the Deputy the figures. In the case of television sets with the 17 to 24-inch screen it is an increase ranging from £10 in the case of the maximum size screen to £2 in the case of the——


Well, there is a screen under 17 inches in black and white. That is basically what is involved.

(Cavan-Monaghan): Certainly in this budget the Minister hit people whether they remain at home or go out. If they go out to the lounge bar he hit them with a mallet but, if they decide to stay at home and watch television, he is also hitting them there. It was particularly mean to increase the tax on the black and white sets which I imagine are the cheapest types of televisions——

Hear, hear.

(Cavan-Monaghan):——used by the very poorest people in the community. The Minister was not satisfied with taxing the large screen of between 17 and 24 inches, but he taxes the black and white sets also when the screen exceeds 17 inches. That was a particularly mean and grasping operation. It was like taking grants away from houses over people's heads. Certainly it is an attempt to tax people whether they go out to the lounge bar or remain at home, whether they buy the more expensive type of television set or the cheapest type available.

The reasons for the increase in indirect taxation in this budget were, of course, to provide the revenue for the benefits of the budget, a budget that I believe was probably one of the most popular ever presented to the people of this country.

(Cavan-Monaghan): The Minister is codding.

Obviously Deputies opposite are somewhat jealous of the substantial increases given to social welfare recipients.

(Cavan-Monaghan): They have long since been eaten up.

As I said earlier in this debate, referring to other items, the reasons for the increase in indirect taxation — and nobody likes to have to impose any taxation — is and was that revenue was needed to meet the benefits given in the budget, especially those to social welfare recipients. Therefore, I do not think the arguments from the other side are serious or valid.

Would the Minister tell me what percentage of the retail price the various rates of duty would usually represent? I am not as familiar with the various prices of televisions but it would appear to me that the £89 duty on a screen with a maximum dimension which exceeds 24 inches would be somewhere in the region of 10 to 12 per cent of the price. I should be grateful if the Minister would indicate to me, if that is so, if a similar percentage would apply in respect of the rates of duty on other types of televisions? What is the position in regard to secondhand televisions sold through retail avenues where such a market exists.

It would be impossible to give full details of the increases on all of the various makes and sizes of sets. The duty imposed in 1981, which was an increase of about 12 per cent on the previous level, no more than kept pace with the increase in the cost of living and the overall increase of the level of duty since its introduction, 28 per cent, compares more than favourably with the CPI increase over that period.

Deputy Fitzpatrick referred to the £2 on the up to 17-inch screens of monochrome sets and that is a very small duty impact. The £10 on the maximum colour set is not much for people who buy these sets. In reply to the Deputy's last query there is no excise duty on secondhand sets.

There is no excise duty on video recorders. It is inequitable that there is an excise duty on a black and white television set and there is no excise duty on a video recorder which is likely to be bought by a reasonably well off person whereas the black and white television set is the minimum of communication.

(Cavan-Monaghan): The Minister referred to the £2 increase for the black and white television set. The position now is that an elderly person wishing to purchase a black and white television set must pay £28 in tax to the State and in respect of another set £18. The Minister might have left these sets alone as many elderly people living in rural Ireland have only a television for comfort or entertainment, although it is not always amusing for them to hear of the increased cost of living on these sets.

They also see the good news that this Government produce.

We will stay with the section.

(Cavan-Monaghan): They could amuse themselves by trying to work out the policies the Government are trying to pursue. That would be a pastime they could take on instead of crosswords or other types of entertainment. To tax black and white television sets purchased by the lowest income people is inexcusable. Most of the people who would buy these sets are not liable to income tax, so they can thank the Minister for nothing. They are not getting any relief from the direct taxation and they are being subject to this mean type of tax. The Minister should be ashamed of himself.

Question put and agreed to.

I move amendment No. 8:

In page 28, subsection (1), lines 9 to 31 to delete paragraph (a) and to substitute the following paragraph:

"(a) by the substitution for subparagraph (2) of the following subparagraph:

`(2) In addition to any other duty which may be chargeable, there shall be charged, levied and paid upon table waters made in the State which are sent out, on or for sale or otherwise, from the premises of the manufacturer or sold for consumption on the premises of the manufacturer, and on table waters imported into the State, a duty of excise at the rate of £0.372 per gallon.',".

(Cavan-Monaghan): Will the Minister tell us what it is about?

Section 33(1) of the Bill would bring squashes and cordials within the scope of tablewaters duty at the general rate of £0.372 per gallon. It is intended in clause (2)(b) of section 33(1)(a) to provide a second and higher rate of duty, £0.744 per gallon, on such concentrates exceeding three-and-a-half to one. Various trade interests whose products border on or slightly exceed this limit have now represented that this charge could have a serious effect on their business since competing products, including imported products, which have a dilution rate of three-and-a-half to one or less would qualify for the basic rate of £0.372. The amendment is to ensure that the normal run of squashes and cordials will become liable to the ordinary tablewaters duty. Basically this amendment is trying to get a fair balance between the three areas of tablewaters, squashes and cordials, concentrates and the post-mix dispenses.

(Cavan-Monaghan): Were it not for this amendment what would have been the tax per gallon?

It would have been £0.744. Tablewater duty is at the rate of £0.372 and it was intended to provide second and higher rate of duty on concentrates. We have found the balance between these areas and this amendment meets the situation.

(Cavan-Monaghan): It is no wonder that the Minister tried to move this amendment with a nod of his head and to get it through without a word.

I did that because I thought the Deputy was not interested in the Finance Bill today but the Deputy's late arrival has obviously stirred it up a bit.

(Cavan-Monaghan): I was at another funeral since.


(Cavan-Monaghan): The effect of this section as it originally stood was to approximately double the tax on mineral waters.

(Cavan-Monaghan): The Minister said that, were it not for this amendment, squashes and all the rest of it would have been brought from a category which is subject to a charge of £0.372 to a category where the charge is £0.744. If that is right it is as near as does not matter to doubling the tax and it certainly was another shoddy performance coming immediately on top of the effort to tax black and white television sets. I am glad that, even before the Bill becomes law, the Minister has been shamed.

When we are talking about excessive drinking by young people nothing is more calculated to drive young people to drinking alcoholic drinks than to tax the non-alcoholic drinks very heavily. That has been the tendency for some time past. Up to recently this was the type of tax which slipped through without any adverse comment. In the interests of moderate drinking and in the interests of young people in general I am glad the Minister has introduced this amendment to ease the tax on non-alcoholic drinks. It is a pity he did not reduce the tax instead of leaving it static as it was last year.

I was trying to achieve a balance between the original section and the desirability of extending the excise duty on table waters to squashes and cordials and improve the rebate scheme to assist small manufacturers. I mentioned this on budget day. The proposals in this section are designed principally to achieve those purposes by extending the present definition of table waters to include syrups or other liquors intended to be consumed wholly in a diluted form and by increasing both the rates of rebate and the quantities entitled to rebate. As I explained, the reason for the amendment is because of the balance that has to be found.

The reason I shook my head when the Deputy was speaking was not a question of at any stage doubling or increasing the duty on table waters. Because of the duty that had been imposed on table waters, this was an effort to find a balance and to ensure that concentrates, squashes and so forth were not gaining significantly at the expense of table waters. You had to balance whether you related it to a diluted squash, a cordial or a concentrate. The original figure of £0.744, as the Deputy said, was double the duty on table waters. It did not apply to the table waters but to squashes and cordials. I am bringing in an amendment to the section because of the difficulty, which then became apparent, of ensuring that £0.372 is the applicable rate for the table waters and for the squashes and cordials.

(Cavan-Monaghan): What is the financial result of the amendment?

The net result is that the table waters and mineral waters will be exactly the same as they were up to now.

(Cavan-Monaghan): What would it be if the Minister had not brought in the amendment?

There would have been an extra charge from the table waters point of view.

(Cavan-Monaghan): What would the extra charge be on?

On the squashes and cordials.

(Cavan-Monaghan): They would have been doubled?

(Cavan-Monaghan): What would have happened?

It is a very complicated matter. The squash, cordial and juice can all be of different concentrates, three-and-a-half to one and less than three-and-a-half to one. Squashes and cordials were not included until this year's budget. The table waters were, and there was an unfair balance. The trade were concerned about this. The section was introduced to redress that balance, but the duty figure that I have now amended created other problems.

(Cavan-Monaghan): What will this amendment cost the Exchequer?

The effect on the Exchequer is minimal. Even the imposition of the section made very little change in the revenue situation. It was endeavouring to get a balance between the different manufacturers.

Amendment agreed to.
Question "That section 33, as amended, stand part of the Bill", put and declared carried.
Question proposed: "That section 34 stand part of the Bill".

Is this increasing the refreshment house licence?

No, it is reducing it. There were two licences involved. A refreshment house licence required a £250 licence. Guesthouse owners and restaurant operators who wish to serve wine with meals must hold both a refreshment house licence and a wine licence even though the premises may be situated in places where the population is less than 10,000. I am reducing the rate of duty on refreshment house licences from £50 to £10. It is now £50 for the licence plus £10 rather than £50 plus £50.

Question put and agreed to.
Question proposed: "That section 35 stand part of the Bill".

I welcome this section. It is a matter of concern to the brewing industry that so much is manufactured by one particular concern. I am sure the Minister would be very interested in seeing that the small brewers, particularly those in his own area, are given a reasonable opportunity. It is obviously a very difficult market in which to make progress when one brand name is so well established. Everything which can be done should be done to encourage competition.

Question put and agreed to.
Question proposed: "That section 36 stand part of the Bill".

(Cavan-Monaghan): What is involved in this section?

This section is concerned with the change in motor vehicle registration announced in the budget. It provides for an increase from £10 to £20 in the annual registration fee for private cars not exceeding 16 horse power and in relation to the first registration charge for most other vehicles. The change applied from 1 March 1981.

It is motor tax on the way back.

No, it is an annual registration fee.

(Cavan-Monaghan): The reason I asked the Minister to tell me what is involved in this is that when this was provided for in the budget the Minister and his party went to great lengths to say it was not a tax on cars, that it was a registration fee. I cannot help noticing that the marginal note reads “increase of excise duties on licences for mechanically propelled vehicles”. If that is not a tax on motor vehicles I do not know what is. This is another part of the budget the Minister should be thoroughly ashamed of.

I do not want to make a long speech at this juncture but the one thing that can be said about the 1977 manifesto is that it appeared to be simple. It said there would not be any tax on motor cars. That was the short formula for canvassing. Immediately Fianna Fáil got into power they imposed a tax of £5 on motor cars in the category as mentioned. That £5 has now rocketted to £20 and this year petrol was increased by 20p a gallon and last year by 15p a gallon. There can be no doubt that the motorist now — leaving out insurance and repairs needed because of the deplorable state of the roads and confining our attention to the tax on cars and petrol — is infinitely worse off in real terms than he was before the 1977 budget. How the Minister can tell us that the budget he introduced a few months ago was one of the most popular ever is beyond me. He must think the people have extremely short memories. This is perhaps an opportune time to remind them of what happened to the motorist with a 16 hp car this year. His tax was doubled from £10 to £20 and an additional tax of 20p a gallon was put on petrol, on top of the 15p a gallon imposed last year. The Minister should be ashamed of himself. The cost of keeping a car on the road has jumped by leaps and bounds because our roads are not in a fit condition to carry cars.

Recently I wrote to a local authority on behalf of a young man who had been let go before Christmas on the understanding that he would be re-employed to work on the roads this year. I got a letter from the local authority saying, in plain language, that due to lack of funds they could not re-employ that man. That may not be directly the concern of the budget but it is an indirect concern. The fact that that young man cannot be re-employed means our roads are worsening, the potholes are getting bigger, the damage to cars is increasing and the cost of repairing cars is increasing. Under those circumstances, the Minister should not increase the tax on cars from £10 to £20, in defiance of the manifesto promise, and he should not increase the price of petrol by 20p a gallon. These points are very relevant to this shameful proposal.

This is an increase in registration fees and for the purposes of this Bill excise duties cover both registration fees and motor vehicle duties. There is no question of restoring road tax. If road tax was still in force on the same basis which applied at the time it was removed, and at the same rate——

(Cavan-Monaghan): I know inflation has jumped in the intervening period. There is no doubt about that.

I did not say anything about inflation.

(Cavan-Monaghan): The Minister was coming to it.

The Deputy did not listen to me. At the rates on vehicles that existed in 1977 the total income would be £30 million. The total income of the small increase in registration fees, plus the registration fee, is only £13.5 million in present-day money.

(Cavan-Monaghan): How much would 35p on a gallon of petrol bring in?

The other points made by the Deputy were relevant to this section.

(Cavan-Monaghan): How much will 35p on the gallon of petrol bring in?

The present increase was 15p, not 20p.

(Cavan-Monaghan): I want to know how much 35p on a gallon of petrol will bring in.

That was covered under another section with which we have dealt.

(Cavan-Monaghan): It is relevant here but the Minister is ashamed to tell us.

I am not ashamed but——

(Cavan-Monaghan): I do not blame the Minister. It is great to have a hard neck.

The Deputy was at the funeral when we passed that section and I have no intention of going back on it.

The attempt by the Minister to describe this excise duty as a fee and not motor tax is deceptive in the extreme. The normal practice is to describe money collected by the State as a fee rather than as a tax when the amount collected covers the cost of the service provided. The service provided in this case is that of ensuring that cars on the road are properly insured and are registered as being entitled to travel on our roads.

The position here is that the cost of administering this service, namely motor vehicle registration, comes to less than £2 million. The money being collected in fees to cover that is £13.5 million, leaving approximately £11 million profit. Profits of that nature — something in the region of 600 per cent — qualify to be described as a tax, and not as a fee. If it was a fee the revenue would cover only the cost of administering motor vehicle registration. It does far more than that and therefore this is a motor tax and nothing else.

(Cavan-Monaghan): From the Minister's last intervention it appears that the £20 tax on motor cars will being in £13 million, about one-third the amount lost by the alleged abolition of motor tax in 1977. It is relevant under this section that we find out if this is justified. We want to know how much 35p on a gallon of petrol will bring in. I am surprised the Minister is not prepared to give us that information, because it is relevant in order to help us come to a balanced decision whether the increase in car taxation from £10 to £20, in defiance of the manifesto promise, was justified. The Minister has the figure in his file or within arm's length and I invite him to tell us the amount in current terms that 35p per gallon on petrol will bring in.

The Deputy should be aware already of the revenue from petrol. We had sections already today dealing with hydrocarbon oils, but the Deputy was not here. If he had been and if he had expressed interest, I would have given him the figures without hesitation. It is not relevant to this section.

(Cavan-Monaghan): Obviously the Minister is obstructing the House and delaying the passage of the Bill.

That is reversing the position. I did not like to charge the Deputy with it.

(Cavan-Monaghan): The section proposes to increase the car tax — the Minister prefers to call it registration fee — from £10 to £20. My purpose is to demonstrate that this increase is not justified and for that purpose I want to find out what motorists have been asked to contribute in petrol duty this year and last. That is relevant to this section, which proposes to put an extra burden on the motorists who are paying more than their fair share.

The increase this year is £50 million.

(Cavan-Monaghan): The Minister is not prepared to give it to me. A hard neck is useful when one has not a case to defend and when one is putting a proposition to the House of which he should be ashamed. Acting the clown a bit can be a help too, but it is not good enough. I leave it to the House to interpret the Minister's reluctance to tell me if the increased revenue from petrol will be £50 million this year.

The increased revenue from petrol will be £50 million this year.

(Cavan-Monaghan): If it is £50 million extra this year it must be £100 million extra in the two years. The extra car tax will yield a further £13 million, according to the Minister. Between last year and this year I would put the extra revenue from petrol at £120 million. That, on top of the extra car tax, will mean £133 million of an extra impost on motorists, far above the £30 or £40 million given in the Fianna Fáil manifesto.

The Deputy has the neck to come in here and charge the Minister with delaying the Bill when it is obvious to everybody who is delaying it. I did not give the figures to the Deputy because they are not relevant to this section. After his time in the House he should know that 10p per gallon on petrol is estimated to bring in £28 million or £29 million.

(Cavan-Monaghan): We can now take it in round figures that the motorist will be at least £100 million worse off than before he read the manifesto.

Question put.
The Committee divided: Tá, 55; Níl, 36.

  • Ahern, Bertie.
  • Ahern, Kit.
  • Andrews, David.
  • Andrews, Niall.
  • Aylward, Liam.
  • Brady, Gerard.
  • Brady, Vincent.
  • Browne, Seán.
  • Burke, Raphael P.
  • Callanan, John.
  • Calleary, Seán.
  • Cogan, Barry.
  • Colley, George.
  • Collins, Gerald.
  • Conaghan, Hugh.
  • Connolly, Gerard.
  • Cowen, Bernard.
  • Crinion, Brendan.
  • Daly, Brendan.
  • de Valera, Vivion.
  • Doherty, Seán.
  • Farrell, Joe.
  • Filgate, Eddie.
  • Fitzgerald, Gene.
  • Fitzsimons, James N.
  • Flynn, Pádraig.
  • Fox, Christopher J.
  • French, Seán.
  • Gallagher, Dennis.
  • Haughey, Charles J.
  • Herbert, Michael.
  • Keegan, Seán.
  • Kenneally, William.
  • Killeen, Tim.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • McCreevy, Charlie.
  • McEllistrim, Thomas.
  • Meaney, Tom.
  • Molloy, Robert.
  • Moore, Seán.
  • Morley, P.J.
  • Murphy, Ciarán P.
  • Nolan, Tom.
  • Noonan, Michael.
  • O'Donoghue, Martin.
  • O'Hanlon, Rory.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Power, Paddy.
  • Smith, Michael.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael J.


  • Barry, Myra.
  • Barry, Peter.
  • Barry, Richard.
  • Belton, Luke.
  • Bermingham, Joseph.
  • Boland, John.
  • Bruton, John.
  • Byrne, Hugh.
  • Cluskey, Frank.
  • Collins, Edward.
  • Conlan, John F.
  • Corish, Brendan.
  • Lipper, Mick.
  • McMahon, Larry.
  • Mannion, John M.
  • O'Brien, William.
  • O'Keeffe, Jim.
  • O'Leary, Michael.
  • O'Toole, Paddy.
  • Cosgrave, Liam.
  • Crotty, Kieran.
  • D'Arcy, Michael J.
  • Deasy, Martin A.
  • Donnellan, John F.
  • Fitzpatrick, Tom. (Cavan-Monaghan).
  • Flanagan, Oliver J.
  • Gilhawley, Eugene.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Kenny, Enda.
  • Pattison, Séamus.
  • Quinn, Ruairi.
  • Ryan, John J.
  • Taylor, Frank.
  • Treacy, Seán.
  • Tully, James.
Tellers: Tá, Deputies Moore and Aherne; Níl, Deputies Pattison and W. O'Brien.
Question declared carried.
Question proposed: "That section 37 stand part of the Bill."

What is the reason for section 37?

It is arises as a consequence of the increase in registration fees from £10 to £20. Section 1(2)(b) of the Finance (Excise Duties) (Vehicles) Act, 1952, as amended by the Finance Act, 1980, provides that only licences costing more than £10 per annum can be taken out for a period of three months, six months or 12 months. Thus the registration fee of £10 on cars of 16 h.p. or under was payable on an annual basis.

It is a tax on cars.

No. We discussed the question of the registration fee in the Deputy's absence.

The form a person must fill up states it is motor vehicle taxation.

In order to continue that arrangement in respect of the new £20 rate it is necessary to provide that only duties greater than £20 per annum qualify for quarterly or half-yearly payment. Because of the considerable administrative costs involved, it would not be justified to provide for the payment of a registration fee of £20 per annum on a quarterly or half-yearly basis. In any case, an annual payment of £20 could hardly be regarded as unreasonable in 1981.

Question put and agreed to.
Section 38 agreed to.
Question proposed: "That section 39 stand part of the Bill."

I wish to give notice that I intend to raise on Report Stage a question in regard to the collection of value-added tax on imports. The present method of collection of VAT on imports gives an unfair advantage to imported products over domestically produced products. In the furniture industry VAT is not collected on imported furniture until it is sold to the consumer and that may be 18 months or more after it is first displayed in the shop. On the other hand, in the case of domestically produced furniture VAT must be paid by the retailer as soon as he buys it from the manufacturer or wholesaler. This means there can be a difference of up to 18 months in the payment date between imported furniture and domestically produced furniture. Having regard to the high rate of interest prevailing, this gives a distinct incentive to retailers to stock imported furniture.

This does not apply only to furniture but to any major item that is likely to be in stock for a considerable time. Obviously large items such as furniture tend to have a relatively slow turnover. The way VAT is collected creates this artificial discrimination against Irish goods in favour of imported goods. It is my opinion that a change should be made in this area. I put forward the case with particular force in view of circumstances in my constituency where we rely heavily on the furniture and furnishings industry as a means of livelihood for people in Navan and other parts of County Meath.

I shall put forward an amendment on Report Stage to change the method of collection of VAT on imports to ensure that the tax is collected when the goods are imported, whether it be off the ship or in a lorry coming across the Border, to ensure that the same method of collection will apply as in the case of domestically produced furniture and other items.

(Cavan-Monaghan): My constituency is also affected in the way set out by Deputy Bruton. I believe that Counties Meath, Cavan and Monaghan produce most of the home-manufactured furniture. Because of the method of collection of VAT in respect of imported furniture, the importers are at a decided advantage over the home manufacturers. If the Minister is serious about preserving jobs and creating more employment he will make the necessary change. This, is not the first time this matter has been raised with the Minister and his predecessor. I have raised the matter with them in written representations and by way of statements in this House. It is an intolerable imposition on Irish furniture manufacturers. They are doing a very good job but we are discriminating against them. I should like to seek the guidance of the Chair on whether I am in order in dealing with VAT on services under this section.

This section deals with VAT on prefabricated buildings.

I do not agree with the points made by Deputies Bruton and Fitzpatrick. Deputy Bruton has said he will raise the matter on Report Stage and I will discuss it with him then. Before the House goes on to discuss all kinds of other matters, perhaps I should inform the House what the section proposes. It is a relieving provision. It extends to certain structures of the prefabricated type the benefit of the 3 per cent effective rate which applies to ordinary building work. The section is intended to removed doubts as to whether some structures constructed on land are within the meaning of building work as normally understood and is, accordingly, giving retrospective effect to the commencement of VAT on 1 November 1972. The provision confirms what has largely been the existing practice since 1972. Therefore, it will not involve any appreciable cost to the Exchequer.

I have received strong representations to the effect that agricultural contractors should be allowed to use the lower rate of VAT which is applicable to the building trade, namely, 3 per cent rather than the 10 per cent which applies generally. Would the Minister consider the position in regard to machinery services and land drainage? Certainly land drainage is analogous to construction work. Would he consider applying the 3 per cent rate in those cases?

I receive representations from all groups for a reduction in VAT. There must be revenue to the State. Revenue must be collected through various taxes. What we are trying to do here is to remove a doubt. This is a relieving provision. What we are now confirming has been largely the practice since 1972. For that reason it is completely different from any other sector or group. We are removing a doubt as to whether there is a difference between prefabricated buildings and ordinary straightforward buildings work. I do not think I would be justified in bringing any other group under this section.

(Cavan-Monaghan): I want to give notice of my intention to raise another matter on Report Stage. This is the correct time to do that. Part III deals with value-added tax. In section 38 “the Principal Act” is defined as the Value-Added Tax Act, 1972. I take it that is the Act which deals entirely with value-added tax.

As the Minister knows another small but rather important group are in trouble with value-added tax. A number of traditional Irish circus families who have been operating here for generations now find themselves under severe pressure from foreign circuses who come here and operate on terms which are unfavourable to our native circuses. A number of Irish circus families provide a very valuable, attractive and healthy form of recreation for young and not so young people. I had occasion to go to a circus a few Sundays ago. It is the first one I was at for many years. I enjoyed myself and I participated—

Between funerals and circuses—

(Cavan-Monaghan): I have the benefit of other circuses from time to time but I am now speaking about the traditional type of circus and I am speaking on behalf of those people.

We will be having a road show very soon.

(Cavan-Monaghan): Foreign circuses come here for a short season. We have no effective way of collecting VAT from them. They leave without paying VAT. Therefore they can operate on much more favourable terms than Irish circuses. If these people are coming here for a short time they should have to deposit a certain amount of money as security for the payment of VAT before they leave. If they leave without paying VAT, there is no way in which we can follow them across the water and collect it from them because foreign courts will not assist other countries to collect their revenue.

I see no reason why we cannot change the law to make sure that people who have no fixed abode here and who come here for a short time and incur a liability for tax are obliged to give security for the payment of VAT. I will be seeking to draft such an amendment for Report Stage. The Minister seems to be in quite a good humour today. He would facilitate me very much if he would have such an amendment drafted and bring it in himself on Report Stage.

Is there not discrimination against the Irish manufacturer in the collection of VAT as outlined by Deputy Bruton? The Irish manufacturer, because of his input locally, pays VAT as he buys in his raw material as against the importer who is zero-rated. We have all had representations from the groups operating Irish circuses. They made a very good case as to how they are being discriminated against. There is an anomaly which the Minister might look at to see if it can be rectified. Foreign circuses come here during the peak period and they operate to the detriment of the Irish circus families. I would ask the Minister to see if it is possible to rectify that anomaly on Report Stage.

The Irish operators are at a great disadvantage. They are zero-rated on the essentials which they cannot purchase locally. That is somewhat contradictory to the point we are trying to make. There is a list of essential imported items on which it is to our advantage to have a zero-rating as against items which are imported but can be supplied locally. The Minister might look at that aspect which has been the source of very constructive lobbying of Members on all sides of the House.

The scope of the Bill is being widened. When Deputy Bruton made a point about furniture I undertook to discuss it with him if he puts down an amendment on Report Stage. Deputies will appreciate that we are straying far from the section. I will also be prepared to discuss Deputy Lawlor's point with him on Report Stage. I do not think the VAT system favours the situation to which he refers. I would be inclined to think the position would be the reverse. Deputy Fitzpatrick said the Minister was in good humour. As he knows, the Minister is always in good humour. That is par for the course.

(Cavan-Monaghan): That is part of the strategy. When he has a bad case he is a nice fellow.

My case today has never been so good and this is proved by the reluctance of the Deputy's party to put down one amendment on Committee Stage. I must have created a record as Minister for Finance to have produced a Finance Bill completely acceptable to Fine Gael.

(Cavan-Monaghan): The Minister's party codded us because we thought the Dáil would be dissolved.

The various aspects of the problem of the business of running a circus have been raised from time to time. In fact, the Taoiseach answered parliamentary questions on that matter and he told the House that representation were being examined by the appropriate Departments — a number of issues are involved — and a reply would issue shortly. I am aware the Deputy is referring to aspects in the Bill but they cover a wide range of things.

(Cavan-Monaghan): That was one of the specific points raised.

Question put and agreed to.
Sections 40 and 41 agreed to.
Question proposed: "That section 42 stand part of the Bill."

I should like to draw attention to the House to a printing error. The print at the end of line 34 in section 42 is blurred and should read: "prior to the first day of...". It is pretty obvious but I thought it better to draw the attention of the House to it.

This section seeks to treat grandchildren as children in respect of certain marriage settlements. There is nothing objectionable about the proposal, but what is objectionable is that the Government have not made any move this year to revise upwards the thresholds or the bands for capital acquisition tax. There is no doubt that if the assurance given by the previous Government that every three years the bands and the thresholds for this tax would be revised upwards in line with inflation had been honoured in full by the Government we would have had fewer problems with this tax than we have. The Minister may say that the number of farmers who pay this tax — I am speaking about farmers who are worried about this matter — is not significant in terms of the total number of farmers in the country but I should like to point out that a substantial number of cases have not been settled. It takes a long time for those cases to be settled as far as determining the value of the estate, the Schedule under which the payment should be made and so forth.

We do not realise how much fear has been engendered amongst the farming community about the financial consequences of transferring their property, in life or in death, to their offspring as is usually the case. The fact that this tax exists in the way it does without the thresholds being revised upwards in line with inflation in full is progressively discouraging the transfer of lands to younger members of the families by older members. The Minister should have made substantial increases in the thresholds and bands.

(Cavan-Monaghan): I agree with what Deputy Bruton has said about the need to increase the thresholds. When this measure was introduced an assurance was given by the then Minister for Finance, Deputy Ryan, and by myself when I stood in for him on a number of occasions, that the threshold would be revised every three years to have regard to inflation. The threshold for a child was fixed at either £125,000 or £150,000. The Government since the revision was due in 1978 have refused point blank to increase the threshold in so far as a child is concerned. As a result transactions are now being made subject to capital acquisitions tax which was never intended to attract that tax. There can be no doubt about that. If the Minister revised the threshold in 1978, and again this year, to take account of inflation it would be over £300,000. The Government have adopted a very unfair attitude. They changed the capital gains tax because experience showed it was working harshly a bit and it is likely that that was done because of pressure from some of the friends of the Government.

The Government have refused point blank to interfere with this tax and I am calling on them to honour the undertaking given that the threshold would be revised upwards to ensure fair play. There is an oversight in the original provision which works out as an absurdity. If a parent transferred property to a child there was a generous threshold if it had been revised upwards — it was certainly more than £100,000. If, as sometimes happens, that child dies while the parent is still alive and the property passes back to the parent there is some miserable threshold which means that the parent must pay huge capital acquisitions tax. That was never intended but I am sure those who drafted the Bill did not anticipate that a child would be transferring very valuable property to a parent. I am aware of at least one case where the parent transferred to the child, the child died at about 40 years of age while the parent was still alive and that child did not make a will. The property went back to the parent but the parent was saddled with a very substantial capital acquisitions tax. I checked that and I am satisfied it is the position.

The Deputy is broadening the scope of the debate.

He is away in a canter.

(Cavan-Monaghan): If the Minister agrees with me I urge him to amend it this year. He will have an opportunity on Report Stage. I also urge him to revise the threshold in accordance with the undertakings given.

Early this afternoon Deputy Fitzpatrick was charging me with having a hard neck. I hope never to have a neck half as hard as Deputy Fitzpatrick who can stand up there and almost give an impression of concern for people and what was done during the period of the previous Government. He knows full well that since the change of Government much more has been done to help in these various areas to which he has referred. For example, in 1978 bands in three of the classes were doubled.

The bands were not touched.

Please permit the Minister to make his statement.

Since 1979 the price of land has fallen. The threshold for farmers increased last year with the increase in agricultural relief. The farmer's sons' threshold is now £300,000. Only 20 farmers have been liable to the tax since 1975. Wealth tax was abolished. There is a genuine necessity to introduce a relief in respect of certain marriage settlements where anomalies were found to be the case, and this is the reason for this amendment. It has been pressed for some time because of the difficulties that were found, particularly in some areas of the country. For Deputy Fitzpatrick to stand up on that relieving section and make the points he did is carrying it very far.

The position is that settlements made in some parts of the country meant that the eventual grandchild or the issue of a particular marriage was, one could say, discriminated against because of the type of will that has been made. This section is merely a simple one intended to end that anomaly and to let that issue have the same entitlement as if the asset had been passed down through the normal channels, through direct line of descent.

(Cavan-Monaghan): Could the Minister tell us what the threshold for a child was when the Act was passed and what the threshold is now?

It is unchanged at £150,000.

(Cavan-Monaghan): I knew that.

Let me finish. It is unchanged at £150,000. There is no threshold like it anywhere else, nor does it appear to be causing any problems at present.

(Cavan-Monaghan): If the Minister thinks it is not causing any problem he should have a chat with the IFA and the farmers' organisations, because this is giving grave concern. The last time the Minister stood up I understood him to say that the threshold for a child was now £200,000. I knew that that was not so and that threshold had never been changed in spite of an undertaking given by Deputy Ryan and by me. If the Minister wants to talk about all the things that were done for farmers he could talk about resource tax, about the agricultural relief grant being reduced in respect of those farmers and about several other things, but they are not relevant on this. I would like also to have the Minister'a views on the tax payable when there is an involuntary transfer from child to parent, where the child, having got the property, is killed or dies and the property goes back to the parent. The parent has to pay huge tax that never was intended. It is a mistake, an oversight in the drafting of the Act, and I would like to have the Minister's views on the matter.

The Deputy will get facts rather than views. It is obvious that over the last hour-and-a-half in this House we have strayed from the Finance Bill. The performance of the Opposition today showed absolute lack of interest in the bones of this year's Finance Bill simply because their interests were guided in another direction. The last hour-and-a -half are absolute proof that all Deputy Fitzpatrick is interested in is trying to make points that are not at all relevant to the Bill. Let me put the record straight and give him some of the facts. I referred to the White Paper Capital Taxation 1974 issued during his time in Government. I will read the relevant paragraph: his memory might be short but that of the people is not. The paragraph says:

Review of thresholds.

122. The Government recognise that, in time 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 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. As regards the proposed capital gains tax it should be noted that allowances is already being made for the inflation factor...

That is factual, but what Deputy Fitzpatrick is trying to get across in this House this evening is that there was a Government who did something. I say to him that the Irish people's memory is much longer than his.

(Cavan-Monaghan): There is no doubt that the Minister is now quoting from the White Paper. The White Paper was introduced as a White Paper, a discussion paper, not like the multi-coloured papers that have been introduced by this Government. A White Paper is a discussion paper and that was introduced before the Bill was introduced. I am talking about the discussion in this House while the Bill was going through and I am talking about the response to the debate from the other side of the House in regard to recommendations made by farming organisations and others and solemn assurances given in this House that the threshold would be increased in respect of children in order to have regard to inflation. The Minister will not even make good the error that crept into the Bill under which the parent is liable for huge taxes. What the Minister was reading was a discussion paper and it is not relevant.

Question put and agreed to.
Sections 43 and 44 agreed to.
Question proposed: "That section 45 stand part of the Bill."

What is the revenue which will be derived from the increase in the stamp duty on cheques? In the interest of security there should be greater encouragement for people to use cheques rather than cash as a means of payment. Therefore any increase in the duty on cheques is not desirable from that point of view. We should try to reduce the number of cash transactions in our community and substitute non-cash transactions for them. An increase in the stamp duty on cheques is therefore a retrograde step and I would ask the Minister if he would consult with the Commissioner of the Garda Síochána on this matter because I am sure that the commissioner will bear out what I am saying about the desirability of moving towards non-cash money transactions.

This increase has been in operation since May 1980. The Deputy has asked some questions. I will give him the history of the rates of duty on bills and notes. I agree with the points he makes about the necessity for or desirability of payment by cheque and so forth. The increase was from 1p to 3p. Let me give the Deputy the history and significance here. When this was first imposed in 1891 it was one old penny; in 1918 it was 2d; in 1961 it was 3d. When decimalisation was introduced in 1971 it was 1p or 2.5d. When one looks at this in 1971 as against 3p today, it is indeed defensible. It is in operation since May of last year.

The Deputy also asked me about receipts and the net receipts of stamp duty under the head of bills of exchange or promissory notes, which comprises in the main duty on cheques for the year 1980 at about £2.20 million.

How does this apply to transactions using Pass cards and also the various Diner's cards and that sort of thing? Are they subject to duty?

No. They are not subject to duty.

Again, at the risk of leaving myself open to the charge of inviting the Minister to find new ways of raising money, which I would not wish to do, I must say that there would appear to be some anomaly in that these can substitute as a method of payment. People can use these Diner's cards — I do not know what the generic term for them is — instead of paying by cheque. I think everybody knows what I mean when I refer to Diner's cards. To have one method bearing a revenue-generating stamp duty and the other not would seem to be anomalous.

The main problem there is that a cheque is a legal document and there may be practical problems. But I will bear in mind what the Deputy says in the future and perhaps there may be something done about it. There are practical difficulties.

Question put and agreed to.
Sections 46 and 47 agreed to.
Question proposed: "That section 48 stand part of the Bill."

This is a welcome provision. We are all pleased to see that the ombudsman is now coming into operation and will be able to help the citizen in matters including those concerning the Revenue Commissioners. It is essential that the documents be made available to the ombudsman for this purpose.

I would just like to take this opportunity to raise a somewhat related matter, the making available of documents by the Government, the idea of open Government, where in certain circumstances Government files would be available to the press or to members of the public.

What has that to do with the Finance Bill? There is some limit to what can be raised here.

What we are dealing with here in relation to the ombudsman is for tax purposes.

It is concerned with the disclosure of documents, but I will not pursue the matter.

I do not object to the Deputy raising it, but we must be fair to any other Minister in the House.

Question put and agreed to.
Sections 49 and 50 agreed to.
First to Fifth Schedules, inclusive, agreed to.
Title agreed to.
Bill reported with amendments.

When is it proposed to take the next Stage?

On Tuesday next, subject to the agreement of the Whips. I take the opportunity of thanking Deputy Bruton and the other Deputies in the House for their co-operation during the day.

I will defer my thanks until I see the Minister accepting my amendments on Report Stage.

Report Stage ordered for Tuesday, 12 May 1981, subject to the agreement of the Whips.
Sitting suspended at 6.45 p.m. and resumed at 7 p.m.