Finance Bill, 1981: Committee Stage.

Question proposed: "That section 1 stand part of the Bill."

I should have preferred to have seen incorporated in this Bill and particularly in this section provision for the automatic statutory indexation of basic personal allowances on the same basis as was done in Canada in 1973. The provision there is that allowances are adjusted upwards in line with an index of prices and this is done automatically without the necessity of introducing a Bill in Parliament. It is a fair system because it provides that the allowances will maintain their real value and the actual burden of taxation will not be increased simply because of inflation.

While I acept that in many budgets the increases in allowances that have been granted have exceeded the inflation rate in the previous year, this has not always been the case. In the past 20 years the increase in allowances has been well below the rate of inflation and the result has been an increase in the burden of taxation, in particular on people with middle to low incomes.

It would be desirable for the Minister for Finance to provide a statutory means whereby the allowances and the bands for tax would be automatically adjusted without making it appear to be a gift of the Minister. It is not a gift to compensate people retrospectively for the fact that the real value of their allowances has been diminished by inflation. That cannot be claimed by any Minister as largesse on his part. There should have been provision in this Bill for indexation of the allowances.

We live in a period when inflation is at a high level. This year it is reckoned our rate of inflation will be in excess of 18 per cent. The cruel logic of granting allowances that do not increase automatically with the rate of inflation is that over a period of time that benefit is eroded and before the end of the year the taxpayer finds he is back where he started. I have some amendments which provide for tying allowances and exemptions to the consumer price index and I ask the Minister to give serious consideration to this point.

At the moment inflation appears to be unchecked and it is important that we have a built-in safeguard to ensure that the real value of exemptions given to the taxpayer will be protected as much as possible. If we were in a situation where a real attempt was being made to hold the line against increasing inflation these steps would not be necessary but, unfortunately, it appears to be a mark of the general retreat of this Government from all serious issues on the economic front that the fight against inflation has been given up.

I put down some of my amendments more to show a difference of principle between us and the Government than for any other reason. I do not expect the Minister to come forward with any agreement on these matters. I should like to know what his attitude is. I should like to hear once more whether he adheres to the attitude previously expressed by Ministers that they did not see much point in this kind of inbuilt guarantee. The case is made for this kind of step by the current rate of inflation.

For the information of the House the section we are dealing with refers to the exemptions introduced for the first time here last year by my predecessor and increased in this year's budget. Last year's Finance Act introduced general income tax exemption limits and exemption limits for aged persons. This section increases these limits and extends the exemptions to somewhat larger incomes than were covered by last year's Act.

In the case of a single person, a widowed person or a married person who is assessed to tax as a single person, the general exemption limit is raised from £1,700 to £2,000, that is, over £38 per week. Where such a person is aged 65 years or over, but under 75 years, the exemption limit is increased from £2,000 to £2,300. Where he is 75 years or over, the limit is raised from £2,500 to £2,800. In the case of a married person, the general exemption limit is raised from £3,400 to £4,000. Where either spouse is 65 years or over, but under 75 years, the limit is increased from £4,000 to £4,600. Where either spouse is 75 years or over, the limit goes up from £5,000 to £5,600. In addition to that, marginal relief is available for those whose total income does not greatly exceed the appropriate exemption limit.

I want to be very specific. We are talking about the exemptions introduced for the first time last year and increases on those limits for the categories of people to which I have referred. Later we will have an opportunity of dealing with the indexation referred to in amendments which have been put down in some of the other sections. This novel provision exempting people at that level of income and with the age allowance, was well received. It was a major step forward last year and it is improved upon this year.

It is estimated that the increases in the limits affected by this section will result in 37,000 people, who otherwise would be liable to pay income tax for this year, being exempted from paying income tax. We cannot ignore that. It is a very significant number of people. In addition, 20,000 others qualify for marginal relief for 1981-82 who would not otherwise be entitled to it. This year the number qualifying for marginal relief will be doubled.

Question put and agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."

Section 138A of the Income Tax Act, 1967, is referred to in the table concerning an additional allowance for widows and others in respect of children. The allowance is granted in respect of a widow, or a widower, or a person who is not entitled to the deduction first mentioned in subsection (1) of section 138. Do I take it that means this allowance is also available to single parents who are single parents for reasons other than being widows?

Yes, that is the position. I want to set out what section 2 is concerned with. This section sets out in the usual tabular form the adjustments now being made in the personal reliefs. Part 1 of the First Schedule to the Bill makes the necessary textual amendments in the basic sections governing the grant of the allowances. Briefly what it means is that the PAYE allowance is being increased from £400 to £600. The one parent family allowance goes up from £500 to £650. The incapacitated child allowance is being raised from £390 to £500. The allowance for a housekeeper taking care of an incapacitated taxpayer or his incapacitated spouse is being increased from £330 to £500. The blind person's allowance goes up from £330 to £400 and, where both spouses are blind, from £660 to £1,000. Basically that is the position.

I realise that the blind allowance goes back over some time. I wonder why people with other handicaps which may be equally incapacitating cannot claim this, for instance, people who are deaf. I imagine they have the same problems working as people who are blind. I wonder whether such an allowance has been contemplated at any stage for such people. One could make a case for having a general allowance for people who are handicapped in specified ways rather than confining it to people who are blind. I am not in any sense trying to minimise the seriousness of the handicap of blindness, but there would seem to be something of an anomaly here.

I would never say that because this has been the tradition it should not be altered. I share the Deputy's concern on this point. Having examined it very deeply I realise it is basically an operational difficulty. In the case of blindness, it can be established. I would be the last person to say that people with other incapacities or disabilities have not got difficulties. Deciding on degrees and so on would make it impossible to extend this.

Surely the Minister cannot be serious. Is the Minister saying it is not possible to tell if people are deaf?

The Minister is never anything but serious in this House or in the administration of his Department. The Deputy will appreciate surely that there are varying degrees of deafness, or incapacity, or disability. This is the Year of the Disabled and I was the first Minister in modern times who recognised the necessity to introduce certain benefits and allowances for disabled people. Naturally I looked at the whole spectrum. I can assure the Deputy that, after detailed examination, what I say is absolutely serious and factual and is the reality of the situation.

We are not talking about social welfare benefits which are a separate issue from a special allowance for the blind. The Minister's argument is that it is more possible to establish blindness than it is to establish other handicaps. I do not accept that. It is equally possible to establish deafness. It is possible to establish mental or physical handicap. The Minister's colleague, the Minister for Social Welfare, accepts certificates from doctors to the effect that people are handicapped in one way or another. If these certificates and others are acceptable to the Minister for Finance to establish whether persons are blind, surely certificates from doctors would be acceptable to the Minister for Finance and the Revenue Commissioners to establish that people are deaf, mentally handicapped or physically handicapped or handicapped in some other way which makes work more difficult for them. I do not think there is any substance at all in the Minister's argument that one is justified in giving an allowance to blind people on the grounds that it is administratively more simple to administer blind allowances than, for example, a deaf allowance. The Minister has said that people are either blind or not whereas there are degrees of deafness but I am sure that the Minister, if he reflects for a moment, will realise that that is a misrepresentation.

There are degrees of sightedness. People can be completely blind and people can be partially blind just as they can be profoundly blind just as they can be profoundly deaf or partially deaf. The argument as to the degrees of handicap obtaining in one case but not in another is not an argument for retaining this discrimination as against other forms of handicap in favour of blindness. If the Minister had said that this was the tradition that existed for years and that he had not got around to changing it this year but would have something done about it in the future, I would not be making a song and dance about this matter. However, the Minister sought in some off-the-cuff way to defend that anomaly without even thinking about it and I am not inclined to accept that from him. The Minister should address himself to this subject and tell us what are the real reasons for maintaining a discrimination against other forms of handicap in favour of one particular form.

The Minister is not in the habit of making off-the-cuff defences of any situation. I have outlined the difficulties. I claim to have been the first Minister for Finance in recent times to consider the difficulty of disability not only under the social welfare system but in other areas. I can assure the Deputy that there are serious difficulties of the type I have outlined to him. Certainly, it is of concern to me to see how I can possibly extend the allowances the Deputy referred to, increase existing ones or extend them to other categories. In the case of blindness it happens to be easier to define and once one goes to other categories there are various degrees. For example, the Deputy referred to mental illness which brings us into a whole new area.

I referred to mentally handicapped and not illness. The latter is different from mentally handicapped.

This is a whole new area of assessment. I am sincere when I say that I will have an open mind on the points the Deputy makes in relation to this but there are serious difficulties involved.

The Minister has not told us what the difficulties are and he is asking us to accept that there are difficulties. I am surprised that he has not explained the situation. In order to give the Minister an opportunity to collect his papers on the subject I will defer pursuing this but I will be putting down an amendment for Report Stage with a view to achieving less of a discrimination in this matter.

I should now like to deal with some other points in relation to allowances. There is an allowance known as a housekeeper allowance. It originated in 1949 and it is granted in respect of a resident female relative taking charge of a child of a widow or widower or married man living apart from his wife or separated who is in full-time employment or business or a resident female relative taking charge of a brother or sister of an unmarried person. As far as I can see that allowance was introduced at £100 in 1949 and it now stands at £165. It should have been increased in line with inflation and inflation has risen by a lot more than 65 per cent since 1949. I am anxious therefore to see that the Minister increases it. I am also anxious to see that there is no discrimination in this housekeeper allowance. There is reference to a resident female relative being the only person who can claim and that seems to be contrary to the spirit of modern jurisprudence in the matter of discrimination in respect of the role that one or other sex may perform in the home. That allowance should be increased and any discrimination in the matter of it being confined to a female relative should be removed.

The dependent relative allowance should be substantially increased. That allowance is granted in respect of each relative incapacitated by old age or infirmity or widowed mother or mother-in-law maintained by the claimant. It is also claimable in respect of a son or daughter resident with and maintained by the claimant whose services the claimant is compelled to depend upon because of his old age or infirmity. That was introduced in 1956 by the late Gerard Sweetman as Minister for Finance; the housekeeper allowance was introduced by the late Paddy McGilligan. The two gentlemen concerned were Ministers for Finance and members of my party. The dependent relative allowance was £60 in 1956 when it was introduced and it was only increased to £95, barely a 50 per cent increase. There is no doubt that inflation since 1956 has been far more than 50 per cent. There is a strong case for increasing that allowance substantially to encourage people to ensure that their relatives who are incapacitated in one way or another stay at home with their own family rather than require care in a residential institution, whether it is operated by the State or otherwise. The increasing of that allowance radically would be a very desirable social step. I urge the Minister to make such an increase.

I should like to ask the Minister to give me an explanation in respect of section 3 of the Finance Act, 1969 which refers to an allowance which was at £165 in 1975-76, was later increased to £330 and is now being increased to £500. That allowance is claimable if the taxpayer or his wife is totally incapacitated throughout the year of assessment and employs a person to take care of himself or his wife. This is less generous than the dependent relative allowance because it is only confined to a claim in respect of one's spouse. One must prove that a person is totally incapacitated whereas the dependent relative allowance does not require that the person be totally incapacitated, it merely requires that the person is incapacitated by age or infirmity. Concentrating attention on increasing this much narrower allowance which is confined to the spouse and which requires total incapacity is a wrong policy. The Minister should return to increasing the dependent relative allowance which was introduced by the late Gerard Sweetman rather than this much narrower allowance which was introduced in 1969. I should like to ask the Minister to have a look at that matter between now and Report Stage.

I have a few points to make, the first on what Deputy Bruton said about getting my notes. I assure him that I have all my notes. He did say that he was putting down an amendment on Report Stage. I welcome that because I think he has created a record already by not having an amendment down for Committee Stage. I am not sure which of the two of us should be collecting his notes.

There is general uncertainty hanging over us.

Is that why the Deputy has created a record? At least I can say to Deputy O'Leary that he has played his part in not creating the same record as Deputy Bruton. I thank him for that. He did put down some amendments on Committee Stage.

Of course the Minister will be suffering in the end.

The Minister should answer the question he is being asked.

Deputy O'Keeffe's intervention is interesting at the moment. He has his problems. In response to what Deputy Bruton said regarding the various allowances, of course as Minister for Finance I always look at those and will do so in the future, but obviously not in the context of the present Bill. The Deputy raised some specific points. For example, he referred to the allowance for the incapacitated. I believe that it is right to provide this increased allowance to the incapacitated person, particularly in this Year of the Disabled when surely these people do deserve recognition that they had not been getting in the past. I, too, would dearly like to increase every single allowance, but there is a limit to what any Minister for Finance can do in any one year. However, I will certainly bear in mind in the future the points raised by the Deputy.

The Minister should answer the question that I asked him, which is why he is increasing the allowance which is confined to be claimed only in respect of the wife or husband, as the case may be, of the taxpayer where total incapacity must be proved, rather than increasing the dependent relative's allowance which is a more liberal one granted in respect of anyone incapacitated by age or infirmity who is dependent on the taxpayer.

There are two reasons, basically the specific consideration for the incapacitated person plus the fact that there is and has been to some extent an abuse of the dependent relative's allowance. In the case of the incapacitated person nobody would disagree with the need, and I hope that the Deputy is not saying that that increase should not have been given. I believe that that category of people deserve to be treated as generously as this country can treat them, particularly in this year. The dependent relative's allowance has been found to be abused to a large extent.

Simply because of claims by a person or persons for this allowance who may or may not be entitled to it. Surely the Deputy at constituency level must be aware of some of these abuses.

If you can prove total incapacity you can prove incapacity. What is the difference between the two allowances in so far as abuse is concerned?

Surely the Deputy will appreciate that in the case of an incapacitated person it is very easy to establish. It is not quite so easy in the case of a dependent relative.

The Minister is contradicting himself now.

The dependent relative's allowance means that the claimant should be maintaining that dependent relative. The Deputy must know that many times the taxpayer seeks to claim for the relative although the relative is not dependent on him.

I want to comment on the dependent relative's allowance. I am a bit surprised at the Minister's attitude that the allowance should not be increased because there may be some abuses of the system whereby people claim under this heading. Surely those who claim legitimately under this heading should not therefore suffer because these abuses are not eliminated. It seems an extraordinary proposition to suggest that because there is some abuse of a system those who claim legitimately under that system should suffer and be limited in the amount they can claim. The figure when originally introduced was £60 and is now £95 after a period of 25 years. It is obvious that the original intention of the late Minister, Deputy Sweetman, has been lost in the passage of time. In 1956 when this was introduced £60 was a considerable amount of money, whereas in the context of inflation the sum of £95 is becoming irrelevant.

I ask the Minister to look at this whole question of the dependent relative's allowance from a much broader point of view. From my experience down the country it seems that the cost of maintaining our old people in homes and hospitals, in homes in particular, can run up to £200 a week. All our efforts must be devoted towards trying to encourage as far as possible that such old people are maintained in the bosom of their families. This can be done in a number of ways, not all solely under the jurisdiction of the Minister and not all solely in the context of the Finance Bill.

The question of the dependent relative's allowance is purely one factor. There is the prescribed relative's allowance under the Department of Social Welfare which is very restrictive. There is the question of the home help allowance which can be obtained from the health boards. I suggest to the Minister in the context of this dependent relative's allowance that there should be an acceptance in principle by the State that every reasonable encouragement that can be given towards maintaining our old people within their family environment must be given. Once we have that general principle we can then put it into effect through the various procedures open through the social welfare system, the health boards and income tax allowances that are available. On this point I suggest very strongly that the Minister should consider a substantial increase in the dependent relative's allowance. From the point of view of cost to the State ultimately, it is my belief that if we can encourage an extra number of people to be maintained at home merely on the basis of their relatives being able to claim the dependent relative's allowance for so doing, in net terms it will be a saving to the State.

Finally, on that point I cannot accept the Minister's response that this allowance should not be increased because there may be some abuses of it. If there are abuses of it, let us go about eliminating those abuses, but let us not dilute the original principle established by the second Inter-Party Government by merely letting the figure be eaten away by inflation so that the general purport and intent of the provision will be totally lost. I encourage the Minister strongly to undertake to this House that the views presented here will be considered between now and Report Stage, and if he is not able to give an absolute commitment at this stage he may be able to provide an amendment then.

Does the Minister want to reply to Deputy O'Keeffe? No. 1 feel that if there is abuse the Minister should eliminate the abuse. If it is possible to have false claims in respect of incapacity it is equally possible to have false claims in respect of total incapacity. They are simple degrees of interpretation. The claim for increasing the allowance for total incapacity by leaving the one for incapacity static on the grounds of abuse does not stand up. I have made that point and I will be pursuing it if this House has an opportunity of debating this Bill on Report Stage.

I would like to turn now to section 3 of the Finance Act, 1969 relating to the allowance for a housekeeper taking care of an incapacitated person. This allowance is now being increased from £330 where it now stands to £500. The provisions of the 1969 Act are as follows:

3.—(1) Subject to the provisions of this section, an individual who, in the manner prescribed by the Income Tax Acts makes a claim in that behalf, makes a return in the prescribed form of his total income and proves—

(a) (i) that, throughout the year of assessment, he was totally incapacitated by physical or mental infirmity, or

(ii) that, being a married man, his wife was, throughout the year of assessment, totally incapacitated by physical or mental infirmity, and

(b) that for the year of assessment he has employed a person for the purpose of having the care of the person (being the individual or his wife) who is so incapacitated, shall, in computing the amount of his taxable income, be entitled to have a deduction of £100 made from his assessable income.

This was increased to £165 under the 1975 Finance Act, and is now to be increased to £500. The point I would like to make here is in respect of section 3 (a) (ii) of the Finance Act, 1969. It refers to a married man whose wife was, throughout the year of assessment, totally incapacitated by physical or mental infirmity. Can a married woman whose husband was, throughout the year of assessment, totally incapacitated by physical or mental infirmity claim the allowance? It seems to me that unless the section has been amended or unless there has been a Supreme Court judgment which says that in all cases a "married man" includes a married woman as the case may be, just as "he" means "she" as the case may be, it would seem that there is discrimination here in that a married man may claim an allowance in respect of a wife who is incapacitated whereas a married woman may not claim an allowance in respect of a husband who is incapacitated. There is no justification in modern circumstances for any such discrimination in view of the fact that so many married women are working now in contrast even to the situation that obtained in 1969.

On the point raised by Deputy Bruton regarding what he alleges is discrimination, the position is that this allowance refers to a housekeeper. But if the husband and wife are, as they can now be, on separate assessments, the wife can claim her portion of the allowance as tax relief.

As I understand it, whenever an allowance is being granted the Revenue Commissioners are required by standing practice to apply the strict interpretation of the law. They are not allowed, in the case of an allowance, to grant more of an allowance than is strictly allowed by the legislation. It seems that here the law strictly confines the claim for this allowance to a married man in the case of the wife being incapacitated. There is no mention of a married woman being able to claim for her husband. If the matter were contested and the Revenue Commissioners were not to allow such a thing, I would feel that the courts would have no option but to hold as far as the law itself goes, whatever about the Constitution, that this allowance may never be claimed by a married woman. Why should it be necessary for a husband and wife to go on separate assessment if the wife wants to claim whereas, if the husband is claiming, they do not have to go on separate assessment? I said already that I doubt that what the Minister said is correct in the light of the clear statement in the relevant legislation.

What I said is correct regarding separate assessments. If it is the husband who is incapacitated the wife can, of course, claim the full allowance just as the husband can in the case of the wife, so discrimination does not arise.

How can the Minister square that with section 3 of the Finance Act, 1969, which is quite clear in that it says that that allowance may be claimed by a married man but it does not say anything about it being claimable by a married woman? Will the Minister look at section 3?

I will do that but my information is that it operates in respect of a spouse. If the husband is the one who is incapacitated the wife can then claim.

What is the statutory authority for that?

I will check that point for the Deputy but he can have my assurance that there is no discrimination.

Question put and agreed to.
SECTION 3.

Amendments Nos. 1 and 2 are related and may be discussed together.

I move amendment No. 1:

In page 8, in the inserted Table Part I, to delete "The first £1,000...25 per cent." and substitute "The first £2,500...20 per cent".

The amendment suggests that we should reduce the rate of tax in regard to the single person from 25 per cent to 20 per cent and raise the tax-free portion of earnings from £1,000 to £2,500. What I am suggesting in this amendment is that half of what would be the average male wage in the country, £90 to £100 per week at present, would be free from tax. For married people we are suggesting that the threshold be raised to £5,000 and that the rate of tax be reduced from 25 per cent to 20 per cent.

I have referred to the arguments supporting these changes in this House previously. I believe that a good deal of the industrial unrest that we have witnessed in the last few years is due not so much to problems contained within industry itself but to the general discontent on the part of PAYE earners about what they perceive as their over-taxed condition. In making these suggestions I am attempting to reduce the pressure on the real wages of wage earners who are forced to seek compensation for their over-taxed condition in higher wage claims. Our population is predominantly youthful and the cost of housing bears very heavily on these young people among whom there is a very rapidly reducing marriage age. If we do not, in our budgetary policy, reduce their burden of taxation, more and more we are going to see people being forced to seek compensation in higher wage claims with the result that we will have a concomitant extension of industrial unrest. I know there is a commission sitting on income tax at present. I do not know whether there is an interim report expected. The amendments that I have put forward today are no different from previous amendments I have put forward in this matter. I put these figures forward in an effort to reduce the pressure on wages which is a prevalent feature of our bad industrial relations. The suggestion is that we would raise the threshold and the Minister, in his own suggestions in this part, has increased the tax-free portion of income. I suggest that the band should be reduced from 25 to 20 per cent. I should like to hear what the Minister has to say on these proposals.

The rates of tax were last restructured by section 8 of the Finance Act of 1980. Section 3 of this Bill proposes to alter those rates by increasing the standard rate — 35 per cent — band from £4,000 to £4,500 for single and widowed persons, and married persons assessed to tax as single persons, and from £8,000 to £9,000 for married couples when the assessment is based on their combined incomes. The cost of this increase is estimated at £9.7 million in 1981 and £15.4 million for the full year.

The Deputy's amendment proposes to reduce the rate of tax from 25 to 20 per cent and to increase the bands of income chargeable at that rate from £1,000 to £2,500 for single and widowed persons and married persons assessed for tax as single persons, and from £2,000 to £5,000 for married couples assessed on their combined incomes. I can give the Deputy the scales of rates as proposed by section 3 as it stands, but the cost to the Exchequer — which is the important point — of accepting the Deputy's proposal would be £100 million in 1981 and £154 million for a full year. This compares with the cost of the proposal in the section to which I referred earlier — £9.7 million in 1981 and £15.4 million for the full year — and the cost of the total income tax changes announced in the budget of £66 million in 1981 and £94.5 million for the full year. The cost, obviously, is prohibitive. I have often heard the Deputy mention in this House the lack of progress in this whole area, but very substantial progress has been made during the period of office of this Government. As he himself says, the Commission on Taxation is still sitting, not yet having reported back. As I said recently, I understand that they are working well and will be reporting later this year. I, too, am committed to an equitable tax system, which is a very important objective.

I want to mention some of the substantial increases in the main personal income tax allowances over the past few years. In 1975-1976 a single person got an allowance of £575 and this year that allowance is £1,115, or an increase in the period of 94 per cent.

What was the rate of inflation at that time?

I have not the figures, but the Deputy will remember the 1975 rate of inflation. The Deputy may have been away during the week when I mentioned that——

I just asked.

—— would the Deputy believe, our rate of inflation for the quarter ended May will be about 2½ per cent. I mention that for the information of the Deputy, in case he may not have heard about that fact.

I am glad to hear it.

The widowed person at that time had an allowance of £635 and today has £1,185. The married allowance at that time was £920 and today is £2,230, or an increase of 142 per cent. This has been positive progress.

The Deputy has, in the past, submitted amendments like his present one, but that is the reality of the situation before the House.

The Minister may have the figures of what this might cost but I could reply about other matters, perhaps of more doubtful social values, which have cost large amounts also, for even more doubtful rewards or benefits to the economy.

What would those be?

We are in the season for that kind of argument.

The Deputy is not saying what he would like to see happening.

No, I shall leave it to the Minister's own fertile imagination. I am sure that when the theatre shifts to the broader vistas——

I presume that the Deputy is talking about the food subsidies.

The abolition of ground rents would be very appropriate, where the Government did not spend the money.

Within the confines of this argument, reducing the burden of taxation on the lower paid, which is what my amendment is about, would cost X amount of money. If my argument is right, there is a direct connection between the amount of industrial unrest and the overtaxed condition of the majority of wage earners. There would be solid social benefits following on the industrial peace that would result if we could lessen this burden on our wage earners. There would also be the not inconsiderable byproduct of a reduction in our rate of inflation. There is no doubt that our industrial costs are increasing at an alarming rate and incomes are a proportion of those costs. If we could reduce the burden or pressure of the wage rates by reducing the rate of income tax, benefits would flow from this. I know the Minister's attitude on the matter and do not wish to take up the time of the House but I hope for a broader venue in the very near future to discuss this.

I wish to make one point on what the Deputy has said. He said that his amendment was directed to assist the lower paid. In fact, that contradicts the argument raised by the Opposition against the improvements in our tax structure in recent years. They have claimed that our helping of the lower paid, because it extends to the higher paid, is designed to help more the higher paid. That is exactly in line with Deputy O'Leary's amendment, so he cannot claim on this occasion that he is moving this amendment to assist the lower paid and at the same time charge us with introducing certain improvements in the tax structure which help only the higher paid. He cannot have it both ways.

If the Minister is happy with the situation——

Amendment, by leave, withdrawn.
Amendment No. 2 not moved.
Section 3 agreed to.
NEW SECTION.

I move amendment No. 3:

In page 8, before section 4, to insert a new section as follows:—

"—Notwithstanding anything in the Tax Acts, the amount of rent paid by an individual on a principal private residence, which exceeds £10 per week, shall be deducted from the total income of that individual for the year 1981-82 and any subsequent year of assessment.".

In other parts of this Bill there are deductions made which we will come to later. I am suggesting here that, in respect of those who pay rent, there is no section of this Bill which helps in the main young wage earners—we do not know the exact number—in the principal urban areas of the State who pay amounts of rent which are large in terms of their total proportion of weekly income and who cannot claim any tax allowance in relation to those payments. I am suggesting here that a sum for rent which exceeds £10 per week in respect of a principal residence — to ensure that a person who was in the way of owning a good deal of rented property could not benefit from this amendment — should be deducted from the total income of that individual for the year 1981-82 and subsequent years of assessment. This would have the twin advantages of again reducing the burden on wage earners, single for the most part but many married people of course, young married couples attempting to save for a house who must pay very high rents at present for which they get no return. Like other parts of our social policy, the house occupier is able to offset against his or her tax liability the amounts paid in interest on house mortgages. I am seeking a similar right for people who pay rent and who are attempting to build up capital in an effort to join those who own houses but who are being held back in their efforts by reason of the amount of rent they are paying coupled with the fact that they are not able to claim any tax concession in respect of those rents.

I am seeking to bring about a situation whereby the amounts of reliefs and allowable deductions on the total income of an individual for income tax purposes be increased by the percentage figure as represented by the CPI. As I mentioned earlier, we should try to move away from this situation of spurious claims that there have been real improvements. Allowances should be linked to the CPI. I shall be interested in hearing what is the Minister's attitude to my proposal in respect of income tax allowances for the payment of rent.

I support the amendment in respect of allowances for the payment of rent. There has been a substantial diminution in the availability of rented accommodation during the past 30 years. I saw figures recently which showed that the number of rented dwellings available has been reduced by approximately half during this period. Obviously the main reason for this is that in respect of an owner-occupied dwelling one is not able to claim tax allowances in regard to the interest paid on the loan for the purchase of the premises. Neither is there any allowance in respect of rent payments.

There is very strong economic argument for encouraging more use of rented accommodation. This would make for a more flexible form of housing and would alleviate the problems involved in moving house from one part of the country to another in the event of people moving because of the availability of jobs in areas other than the areas in which they are normally resident. From his experience in the Department of Labour the Minister will be well aware that there is a considerable shortage of skills in certain parts of the country in certain types of industry and that it has been found more easy to attract people back from England than to attract them to move from one part of the country to another in which their particular skill might be needed badly. I would argue that one of the main reasons for this reluctance to move to another part of the country is that people own their houses in the areas in which they were resident originally. The amount of tax that would be involved by way of stamp duty in selling a house and in buying another would be sufficiently great to offset any advantage in terms of the remuneration they might receive by moving to a job in another area. If they were living in rented accommodation they would not incur any of those costs.

Because of the obsolescence in various skills and jobs in modern society, we must face the fact that people will be moving from one part of the country to another in order to find employment. To help such mobility it is economically desirable that housing accommodation is available and that is why the provision of rented accommodation would make a valuable economic contribution. Therefore, I support Deputy O'Leary's proposal and I should like the Minister to indicate to us, when replying, what would be the approximate cost of implementing this proposal.

I wish to add my voice in support of this amendment. On the question of cost, I would ask the Minister not merely to throw out a figure to the House but to bear in mind the probability that the introduction of such an allowance would result in a considerable amount of tax intake by the State. I say this because the claiming of an income tax remission in respect of rent paid would result in many of those who are in receipt of those rents having to make returns.

From talking with country people who are living in the city I am aware of the substantial rents now being paid for accommodation here. There are bedsitters rented by two people at rents of £30 per week. In one case of which I became aware there were four people in what was no more than a big bedsitter for which they were paying £60 a week. I was shocked at those figures and the thought occurred to me as to whether the recipients of that kind of money were making their returns to the State.

An important side effect of Deputy O'Leary's proposal would be that the person paying the rent would be in a position to claim an income tax allowance for amounts in excess of £10 per week while the tax people would be in a position to make inquiries regarding the recipients of those rents. Subsequently, there would not be a substantial burden on the State as a result of the income tax allowances since the people in receipt of the high rents would be brought within the tax net. The net benefit to the State would go in large part towards providing for the cost of this provision. On that basis the proposal makes sense both in social and in economic terms and I strongly support it.

Even if this proposal were acceptable in principle there are a number of very practical grounds on which it could not be accepted. First, the implementation of the proposal would give an unjustified tax relief at the higher rate of tax to those who pay big rents for accommodation. In addition it is unlikely that a tax deduction in respect of rent paid would result in any benefit to any tenant because it would be passed on except in the case of rent-controlled dwellings. Undoubtedly many landlords would increase rents by amounts equivalent to the tax reliefs. They would be in a position to do this because, generally speaking, rented accommodation is in short supply. It is possible that there would be an upsurge in demand in the event of an income tax concession on rent and this would provide a further bonanza for those landlords.

This will not arise in the case of local authority tenants, but such tenants are already subsidised highly. The cost of implementing this proposal would be of the order of £50 million in a full year. Obviously, such cost would be of major concern at this time; and, if landlords were to take advantage of any such provision by increasing rents, the cost of the relief would be increased substantially. It could then be as high as £70 million.

The administration of a scheme of deduction for rent paid would be expensive for the State and troublesome for the taxpayer. It would be troublesome also for his or her employer.

In addition a large number of those cases would have to be reviewed annually and this would increase the number of amendments of certificates. The increase in documentation and the policing of the receipts procedure would be extremely difficult. There was a time when I believed that what is proposed was a direction in which we might move, but I am satisfied now that any such move would inflate the rented accommodation market and would work as much, if not more, to the benefit of the landlord and that it might or might not benefit the tenant. There are many reasons why any revenue which such a scheme might yield would be more than offset by the cost of the scheme. Progress is being made on the revenue intake front in respect of people renting out accommodation. Basically, if it were accepted in principle, the practical difficulties and the unlikely event of its being acceptable or helpful to anybody would make it an impractical suggestion.

At some stage there will be an amendment of this kind incorporated in the Finance Bill. All the Minister has said here today about its impracticability, the reasons it cannot be introduced, will be taken back at that stage by whichever Minister is standing over there. My belief that a provision along these lines will be incorporated is because of the growing numbers of young people in urban centres living in rented accommodation who, for reasons referred to by other Deputies, are paying rather high rents. I do not believe the figure of £50 million given by the Minister. I do not know on what basis that was calculated in the Department. I imagine there was a good deal of——

Padding.

——padding, fake, certainly with little scientific data at the back of it. I am sure the Minister and his officials know that this is very much unknown territory with very little related data. We do not know the extent of rented accommodation in the State. As other Deputies have said, I doubt if there are any satisfactory returns at all on the matter. We seem to deal in figures of £50 million at present in relation to anything, but I doubt that figure very much. The Minister may not think much of the idea now, but he has not been very long in that post. As a new Minister I would advise him to investigate this area seriously, because it is one in which change will inevitably occur in the future.

Neither am I convinced that the landlord will be the chief beneficiary. It is not beyond our wit to devise a scheme under which that will not happen. If we simply say that the very prosperous will benefit as a result as well as the single, young, wage earner, again that is an argument that could be addressed to many other schemes of social reform introduced in this House for the best of reasons. It was addressed to the question of food subsidies quite recently, but now the Government have seen fit to accept arguments from the Opposition on that matter. It is not beyond the collective wit of this House to devise legislation to ensure that the people whom we intend to benefit from this—namely, young people living in uncontrolled rented accommodation who cannot claim anything at all in relation to the rent payable—will do so. That is absolutely unfair when one considers that others in the housing market are entitled to claim allowances and deductions under our tax code. It is clear that demographic facts will dictate that we will introduce an amendment of this kind, because young people are in the majority in this country. In large urban centres it will simply be a matter of young people realising that this is a justifiable claim on their part, that they should seek and be entitled to the same kind of tax allowances as are others in the housing market. If there is to be real benefit to the person in rented accommodation — I agree with what the Minister says on this— then we should consider the possibility of having some controlled section in the rents area. Again, that indicates that there are ways of ensuring that the person in rented accommodation will be the chief beneficiary.

I am not satisfied with the Minister's response to this amendment.

The Minister pleaded four points in his defence. He advanced four reasons for rejecting this amendment. The first was on the basis that the introduction of such a provision would be of greater benefit to those on a higher rate of tax than those on the standard rate. Has the Minister not considered that the equivalent type of provision in regard to mortgage and interest payments similarly applies? I have taken those two because they relate very largely to the housing situation. If we accept a system for the moment—and possibly this should be investigated further — under which those paying a higher rate of income tax pay more because of the benefits in regard to mortgage and interest payments, then introducing that as a defence in rejecting Deputy O'Leary's amendment is not justifiable.

The second ground of defence advanced by the Minister was in relation to the fact that landlords could benefit rather than tenants. At first sight this would seem to be legitimate, because the natural reaction of any landlord if forced to make payments out of his rent—and in this case it would be payment to the Revenue—would be to jack up the rent. I see no reason whatever why the introduction of such a provision should not be coupled with the setting up of a rents tribunal, which in any event is probably necessary in regard to rented accommodation. One of the aims of that tribunal would be to ensure that any increases authorised would not be related to the fact that a landlord had to pay tax on his income from rented accommodation the same as everybody else. On that ground I feel the second line of defence used by the Minister is not sustainable.

The third ground advanced by the Minister was in relation to the question of cost. He pulled a figure of £50 million out of the air, but he has not dealt with the point made originally. That was the corresponding benefit to the State of having all these landlords making their contribution to the State out of their income from rented accommodation. I am sure the Minister knows very well that a very large proportion of them are not so doing at present. Probably it is impossible for the Revenue Commissioners to ensure that they do so.

I would hope the Deputy would draw my attention to any of those landlords of whom he is aware who are not. I would regard that as the duty of any Deputy who is aware of any people in that category who are not doing so.

The Minister is either living in cloud cuckoo land or preparing to take up residence on the Aran Islands or somewhere else——

Every Member of this House is under obligation to bring that type of person to the notice of the Revenue.

——if the Minister is so divorced from reality as not to accept the point I am making. I should imagine that if he has discussions with people of commonsense within his Department——

There are no other people in my Department.

Then obviously the Minister is the only exception. The Minister will see that the point I am making is a valid one, that the figure of £50 million or whatever it is would be offset very largely by the corresponding increase in revenue occasioned by the making of returns by those landlords. On that basis I believe that the third ground of defence in regard to the question of costs is not sustainable because it is not a true figure. The net cost to the State, I would suggest, would be much lower.

The Minister's last ground of defence was on the basis of the troublesome administration as far as the tenant was concerned. That must be rejected out of hand. If a tenant wants to claim income tax relief, let us not pamper him entirely. The very least such tenants can do is to ensure that they retain the appropriate receipts and have them available for production to their inspector of taxes. If they do not want to do that and do not want to claim, well and good. But I would be very surprised indeed if there would even be a single one who would not ensure that the necessary documentation was available to enable them to claim such relief. The rents some of them are paying are so high in relation to their incomes that I have no doubt there would be a rush to purchase receipt books immediately any such provision was introduced. Therefore that does not constitute an answer either. On the side of the Revenue Commissioners and inspectors of taxes, certainly they will have to inspect these receipts; but, of course, they have to seek the corroboration of virtually all claims under the income tax system. I have no doubt that a simple system could be devised to enable a person properly to claim this relief, to document it and have it inspected by his inspector of taxes. Therefore, the fourth ground in regard to problems of administering such a system is not a sustainable defence.

On all of those grounds I reiterate my support for Deputy O'Leary's amendment. It has many benefits and would contribute to the development not alone of our economy but our social development far beyond what appears at first sight. I strongly urge the Minister to indicate that he is prepared to give due consideration to the arguments raised.

Our excessive reliance on owner-occupied accommodation has built a serious rigidity into our economy which does not enable us to adapt as flexibly to changing circumstances as do other competing economies. The measure proposed by Deputy O'Leary would encourage rented accommodation and would be consistent with another measure contained in the budget which gives people tax allowances to build rented accommodation. That relief goes directly to the landlords. For the Minister who introduced such a measure to benefit the landlords to refuse to introduce this measure on the grounds that some of the benefit might go to the landlords rather than to the tenants conveys a certain inconsistency in his policy.

The Minister said that benefit would go to landlords because rented accommodation is scarce and any incentive to increase demand would lead to an increased price which would totally transfer the benefit of the incentive to the landlord. The same argument could be made about the increase in new house grants. If the Minister can claim that an increased allowance to encourage more demand for rented accommodation benefits the landlord he must claim that the allowance recently given by the Government in the form of increased grants for new houses will be solely enjoyed by the builders. The Minister would not make such a claim and therefore his argument is revealed as being spurious. It is much easier to increase the supply of rented accommodation than to increase the supply of new dwellings as existing houses can be converted relatively quickly whereas to build a house one must buy a site, get planning permission and so on and it would take from two to three years to build a new house. A stimulus to demand for rented accommodation can be responded to within four or five months but a stimulus to demand for new accommodation will not be responded to for two or three years. Consequently the period when a supplier would enjoy a supplier's market would be much less in the case of rented accommodation than in the case of new accommodation. I would argue that an allowance for rented accommodation is much less likely to be enjoyed by the supplier than an allowance for the purchase of new house accommodation. I would urge the Minister to have another look at the proposal.

The Minister gave a figure of £50 million and I would like to know the basis on which that was calculated?

In reply to Deputy O'Leary, future changes may well be needed in this whole area but not just at present for the reasons mentioned. The Minister for Finance may well look at the developments but he must first of all look at the present situation.

Deputy O'Keeffe may think that I was being jocose when I said that if he had any evidence of the type of people he mentioned, and I do not deny that they exist, I would welcome it and pass it on to the Revenue people concerned. During my time as Minister I have followed up what my predecessors were doing. I too am determined to encompass all the people referred to by the Deputies opposite within the tax net.

In relation to the section of the Bill which refers to moderate cost rented accommodation there is an advantage from the Minister's point of view in that those people will be known and it will be possible to trace them. The Revenue Commissioners are actively pursuing this whole area and are making substantial progress and I would encourage them to continue their progress. I am sure all sides of the House agree that this is one area where equity must be achieved.

In relation to Deputy O'Leary's point, something may have to be looked at in the future but a serious problem exists at present in relation to rents. The Rent Restrictions Act is being challenged in the courts and the outcome of that poses a difficulty for all of us. The Government are looking at that seriously to ensure that when a decision is made the situation can be controlled. Deputy O'Keeffe said that my arguments were invalid but I do not agree with him. I am satisfied that it would take a lot of policing and administration and in our present situation it could work to the detriment of the person whom we are trying to help. Deputy Bruton said that that argument was tantamount to saying that the benefits could be passed on to the builder in the housing subsidies. This is not so. The subsidy is designed in such a way that that cannot happen. Deputy O'Keeffe should know from his experience that there are limits on mortgage relief, £2,400 in the case of a single person, £3,500 in the case of a widow and £4,800 in the case of a married person. Deputy O'Keeffe should know that that limit prevents the giving of excessive benefit to those on higher taxation levels. These are the points I made on the amendment. I accept the case made by Deputy O'Leary.

The cost has been challenged but I said that it was a tentative cost of £50 million, a cost that could be pushed higher by the activities of the landlord. Despite anything that may happen in the future it is not practicable to accept the Deputy's amendment even if we agreed with it in principle. Deputy Bruton wanted to know how the figure was arrived at but, as I said, it is necessarily tentative. The figure is based on the best information available to the Revenue Commissioners who have made considerable progress in recent times. I hope they will make further progress in ensuring a return of income from the type of people referred to by the Deputies opposite.

Will the Minister look at it on Report Stage?

No, but I appreciate the point made for future consideration.

Amendment, by leave, withdrawn.
NEW SECTION.

I move amendment No. 4:

In page 8, before section 4, to insert a new section as follows:—

"—For the year 1982-83 and any subsequent year of assessment the amount of reliefs and allowable deductions from the total income of an individual for income tax purposes, and the amounts specified in section 3 of this Act, shall be increased by the percentage figure as represented by the Consumer Price Index to mid-February of each year.".

This is an amendment which has been referred to in previous Finance Acts, that the deductions allowable, the amount of relief should be related directly to the CPI. I would like the Minister's response to this idea which is not new but has been referred to before now. This idea has been well ventilated by groups looking for fundamental reforms in the income tax code.

This amendment is framed to come into operation in 1982-83 and its purpose is to index on the basis of the consumer price index personal allowances allowed in that year and subsequent years. This proposal has major budgetary implications and will be considered in relation to next year's budget. It would not now be appropriate to pre-empt the decisions that will be made in 1982. The subject of indexation is being considered by the commission on taxation and any move to bring in indexation at this juncture would involve an anticipation of the commission's findings in advance. The question of indexation was discussed in the debate on last year's Finance Bill and was referred to again in the budget debate and in the debate following the budget this year. I will point out what had happened in recent years having outlined the reasons why we should not pre-empt what might happen in the 1982 budget and what might be recommended by the Commission on Taxation.

I want to draw attention to the real situation of the changes since 1978. The allowances given in income tax reliefs in the 1978 Budget up to 1981 totalled £500 million. If the full year cost under indexation were taken as a criterion for the period of those four budgets, the allowances would only have come to £324 million — a difference of £176 million. Should that not be borne in mind? It would obviously be impossible for me to pre-empt anything that might happen in the 1982 Budget. I do not believe it would be advisable for me to pre-empt any recommendation that might be made by the commission. I am sure the Deputy appreciates my reason.

I take it the Minister is not giving his agreement in principle to whatever the reform commission may advance in relation to this matter. It does not leave much to the imagination to know that the commission on the reform of income taxation will come forward with something on those lines.

We are not entitled to anticipate them.

Amendment, by leave, withdrawn.
NEW SECTION.

I move amendment No. 5:

In page 8, before section 4, to insert a new section as follows:—

"—Income derived from the payment of an old age pension to a person qualified under the Social Welfare (Consolidation) Act, 1981, shall not be assessed to tax for the year 1981-82 and any subsequent year of assessment.".

This amendment was referred to previously. The amendment proposes that the old age pension should not be assessed for income tax. The pensions of many elderly people are subject to tax and this causes a hardship. There are many elderly people who are living alone on their pensions. I would like to hear what the Minister has to say with regard to their position. He may say that since this is not subject to a means test it would benefit those the amendment is not intended to benefit. The answer to that is that the rest of the income of a person in that situation would be subject to income tax and this amendment would not be contrary to the concept of progressive taxation.

Last year, for the first time, we introduced exemptions, which I am sure the Deputy agrees was a very welcome move because it assisted people who had an income up to a specific figure but which could not be regarded as a high income. The Deputy's amendment does not refer to non-contributory old age pensions because they are subject to a means test. The amendment only refers to contributory old age pensions. There is no question of the non-contributory old age pension being taxed. If the old age pensioner has a very substantial income, is it a fair approach? I would prefer to follow the policy lines of the Government by including people on incomes, such as old age pensioners and others up to a certain level of income, for exemption from the tax net or marginal relief if they slightly exceed those incomes. If we were to accept the Deputy's amendment it could in effect mean the introduction of assistance for people who could have very high incomes such as investment incomes. That would not be a wise move at this time.

It seems to me that the contributory old age pension is included in income for tax purposes whereas the non-contributory old age pension is not. The difference between a contributory and non-contributory old age pension is very small and is not sufficient to compensate the people who contributed to the social insurance scheme throughout their working lives. They would be almost as well off if they had not been contributing. To add now to that discrimination by saying that the contributory old age pension will be included in the tax liability, while the non-contributory old age pension will not, seems to be compounding an existing injustice.

I would like the Minister to indicate the basis upon which the non-contributory old age pension and other allowances of that nature, such as disability and unemployment benefits, are excluded from consideration as being income for tax purposes. I have been looking through the relative passages of the 1967 Act and cannot find the provision which for instance, exempts non-contributory old age pension but does not exempt contributory old age pension. In my view the failure to allow the exemption of contributory old age pensions seems to constitute an injustice.

There are people who claim we should exempt all pensions, including contributory pensions outside the social welfare system, but they forget that people who contributed to a private pension scheme are allowed tax exemption in respect of their contributions while at work, and to allow them to be exempt from income tax on what they receive from the fund to which they contributed would be to allow them to benefit twice. That would not seem to be justifiable. The same argument does not apply in the case of social welfare pensions. I would be grateful if the Minister could assist me in this matter and consider favourably the amendment put forward by Deputy O'Leary.

The non-contributory pension is means tested. They are both chargeable to income tax but the non-contributory pensioner will not have to pay tax because when the means test is applied his pension will be reduced to nil before it exceeds the exemption limit.

The Government's policy has been to look at this whole area of exemption. A married couple, 66 years or over, with a contributory pension will get about £2,600 or £2,700. Their exemption limit, for income tax purposes is £4,600. This means they can have a further income of about £2,000 before they become liable for any taxation. The Deputy must realise that there is no reason why a contributory pensioner could not have an investment or other income which might bring his income into a higher bracket. In other words, the income limit of the contributory pension for a 66-year old couple is approximately £4,600 and they can earn an additional £2,200 before they come into the tax net. Primarily the principle suggested by the Deputy could be dangerous because there is nothing to prevent a contributory old age pensioner having an income of £20,000 a year. Would he be justified in being exempt from tax?

Social welfare benefit is exempt from inclusion as income for the purposes of determining a person's taxable income and it is not means tested. I cannot see how one can consistently say that unemployment benefit, which is a social welfare benefit, not means tested, could not be included in the sum when determining a person's taxable income while a contributory old age pension should be included. Can the Minister refer me to the section which exempts such things as unemployment benefit?

Section 109 of the 1967 Income Tax Act is the relevant provision. That is the charging provision and it does not include unemployment benefit. I have outlined the position to Deputy O'Leary. There are conditions governing the qualification of a person for relief. Old age pensioners may earn £2,000 more than the £2,700 exemption before they are chargeable to income tax. Even after that there are marginal reliefs. Is the Deputy suggesting that a pensioner who has an income of £20,000 should be exempt?

Is it not possible that a person could be on unemployment benefit for the first six months of a year but earn a large income during the second half of the same year? However, his unemployment benefit in the first half is exempt for calculation for income tax. It does not seem to be consistent to exempt unemployment benefit but to include contributory old age pensions for determining tax liability. As I have said, it is inconsistent.

There is a substantial difference between unemployment benefit and an old age pension because the former is an irregular type of income.

A person's income is what he receives for the whole year, the annual total sum, and though unemployment benefit may be irregular and small, the same goes for income from self-employed activity, which also is irregular. However, self-employed people pay income tax on the total sum earned by the end of the year. It is simply inconsistent to say that income received from unemployment benefit should not be counted for tax purposes whereas contributory old age pensions are counted. Both incomes are based on a title gained through contributions to the Social Insurance Fund. Would the Minister explain how he can be responsible for these two apparently discriminatory provisions?

I have covered the amendment already. Deputy Bruton did not put down an amendment and now he is trying to present an angle on Deputy O'Leary's amendment.

The amendment applies only to contributory old age pensions.

Amendment, by leave, withdrawn.
SECTION 4.
Question proposed: "That section 4 stand part of the Bill."

This relates to the failure of certain prosecutions because of failure to provide for penalties for breaking the regulation as distinct from breaches of the substantive provisions of the section.

It is basically a technical cleaning-up exercise. The main purpose is to amend section 128 of the 1967 Income Tax Act, which provided monetary penalties for non-compliance with the PAYE regulations. The purpose is to ensure that certificates will be admissible as prima facie evidence in all proceedings for the recovery of penalties under the section and not, as was held in the District Court, solely in proceedings involving failure to send returns, statements, notifications or certificates. The personal appearance of an officer at each court case of this nature would involve a heavy drain on staff resources and substantial expense.

It is to make the certificate admissible in court?

Question put and agreed to.
Section 5 agreed to.
NEW SECTION.

I move amendment No. 6:

In page 10, before section 6, to insert the following section:—

6.—(1) In this section—

`relevant payment' means any sum paid on or after the 6th day of April, 1981, by the Minister for the Environment to an individual under a scheme providing for the payment of a special mortgage subsidy to first-time owner-occupiers of certain houses;

`specified loan or loans' means a loan or loans in relation to which a relevant payment is made;

`relevant tax repayment', in relation to an individual, means, subject to subsection (3), the amount of tax which, apart from this section, would fall to be repaid to the individual under the provisions (hereafter in this section referred to as `the relevant provisions') of section 496 of the Income Tax Act, 1967, for a year of assessment on the amount of interest paid on a specified loan or loans by the individual in the year of assessment.

(2) Where, for any year of assessment, in the case of an individual, a relevant tax repayment would fall to be made, that relevant tax repayment shall be reduced by the amount determined by the formula set out in the Table to this subsection, and notwithstanding any other provisions of the Income Tax Acts, the amount of tax as so reduced, and no other amount of tax, shall be repaid under the relevant provisions to the individual on the amount of interest paid by him in the year of assessment on a specified loan or loans.

TABLE

(R+S)—P

where—

R is the relevant tax repayment,

S is the aggregate amount of any relevant payments made to the individual in the year of assessment or the amount of any relevant payment made to the individual where only one such payment was made in the year of assessment, and

P is——

(a) an amount equal to (R+S), or

(b) the amount of any payment, or the aggregate amount of any payments where more than one payment was made, made by the individual in the year of assessment by way of repayment of the principal of any specified loan or loans or by way of payment of interest on any specified loan or loans.

whichever is the less,

(3) For the purposes of this section, in the case of an individual who, in the year of assessment, in addition to interest on a specified loan or loans, has paid other interest, the amount of the relevant tax repayment shall be the amount determined by the formula—

A—B

where—

A is the amount of tax which, apart from this section, would fall to be repaid to the individual for the year of assessment under the relevant provisions on all interest paid by him in the year of assessment, and

B is the amount of tax which would fall to be repaid to the individual for the year of assessment under the relevant provisions if no interest on a specified loan or loans had been paid by him in the rear of assessment.

(4) Where a relevant payment is made in respect of any period, that relevant payment shall be deemed for the purposes of this section to be made in the year of assessment into which the period falls:

Provided that where the period falls partly into one year of assessment and partly into another year of assessment, the amount of the relevant payment made in respect of that period shall be apportioned to each year of assessment in the proportion which the part of the period falling into each year of assessment bears to the whole of the period and the amount so apportioned to a year of assessment shall be deemed, for the purposes of this section, to be paid in that year of assessment.

The purpose of the proposed amendment is to implement paragraph (iv) of the special mortgage subsidy scheme for first time owner-occupiers of grant size houses announced by the Minister for the Environment on 16 April 1981. That paragraph states that the subsidy, plus income tax relief, would not exceed the amount of the annual loan repayments and that, subject to this, income tax relief would be allowable in the normal way—that statutory tax relief limits would apply.

The proposed new section will ensure that in any case where the subsidy plus the income tax relief in respect of the interest paid on loans coming within the ambit of the scheme exceed the total loan repayments the income tax relief will be reduced by the amount of the excess. In no case will any reduction be made in the subsidy payment by virtue of the provision in the proposed section. Section 496 of the Income Tax Act provides for the giving of relief by way of repayment of interest paid subject to certain restrictions on the amount of the interest which may qualify for relief. These restrictions are not being changed.

It has been customary in the case of persons liable to tax under PAYE to provide relief for interest under section 496 of the Income Tax Act, 1967, not by way of repayment but by an appropriate increase in the tax free allowances. This practice will continue unaltered and any reduction in tax relief under the present section will be effected by review of the taxpayer's liability after the end of the year of assessment to which the subsidy payments relate. The review for 1981-82 will take place some time after the end of that year. Before the review takes place the full amount of subsidy for that year will have to have been received by the taxpayer from the Department of the Environment and any reduction in tax relief for that year of assessment will be effected by an appropriate reduction in the tax free allowance for 1982-83.

I take it this is referring to the new scheme which is being introduced, to ensure that people do not get more of a subsidy——

That seems reasonable.

Amendment agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the bill."

I would like the Minister to say something about this section.

It amends the legislation contained in section 17 of the Finance Act, 1970, relating to subcontractors in the construction industry. That subsection provided that principal contractors must deduct tax at 35 per cent from payments made to subcontractors and remit that tax to the Revenue Commissioners. Such a deduction does not arise where the subcontractor holds a certificate issued by the Revenue Commissioners authorising him to be paid in full and where certain other conditions are fulfilled. This amendment is rendered necessary because it has been claimed that the obligation to deduct tax does not apply to a principal contractor such as a manufacturer of building materials because he is not a builder. As regards payments made to subcontractors on or after the date of passing of this Act the amendment ensures that the subcontractors legislation will apply where those payments are made by a person whose business includes the manufacture, treatment or extraction of construction materials. Payments made by a person connected with a company engaged in the production of such materials or with a building company are also brought within the scope of the subcontractors' legislation.

As Deputies, we are all familiar with small builders looking for the tax number so that they will be able to receive the money themselves and deduct their own tax rather than have the tax deducted from them at source by the person employing them if they are subcontractors. Is that correct?

The section provides that the requirement to deduct at source is extended not just to include main contractors who are builders but main contractors who are builders' suppliers, and other such people, which seems to be a perfectly reasonable proposal. I would like to raise a more general question which you, Sir, may wish to rule out of order——

I am a generous fellow.

I will start by assuming the Minister is generous. In deciding to refuse certificates to people, the Revenue Commissioners usually apply two criteria, whether a person has his own place of business and whether or not he supplies his own material for use on site. If he neither has his own place of business nor supplies his own material, he is considered to be, in effect, an employee of the main contractor and not a subcontractor. Hence he does not benefit from the privilege of collecting his own tax. The tax is collected from him by the main contractor.

The provision in regard to the provision of one's own material as a restriction is sensible. I am not too clear why this restriction applies in regard to having one's own place of business. Many people operate from their own homes. It is not unreasonable that they should do so. It is probably more economical. I should like to inquire how the Revenue Commissioners apply this provision as far as having one's own place of business is concerned. I also think it would be useful if a guide was published explaining more fully the basis upon which one can claim such a certificate. I have had great difficulty in trying to find out the reasons for refusing certificates. I received a standard letter from the Revenue Commissioners simply saying they were not going to grant a certificate in a certain case. It is very hard for a TD to explain that to anyone. There should be clearer guidelines as to when a certificate will or will not be granted and the exact conditions that need to be complied with to receive such a certificate. I would like the Minister to comment on this.

First, I will try to explain why it is necessary that there should be a fixed place of business. As the Deputy is aware, the scheme for taxing subcontractors was enacted to cope with widespread tax evasion which was taking place arising from a situation where large numbers of workers engaged in the construction industry were changing status from employees under PAYE to subcontractors under Schedule D. In the main, these operatives provided neither significant materials nor plant but were engaged on a labour only basis. The old lumping arrangement was a great example. For this reason they were extremely mobile and experience showed that it was virtually impossible to bring them into the tax net. That, basically, is why the concept of the fixed place of business was designed to permit the issue of certificates.

I share the Deputy's problems at constituency level. I am not so sure that the constituent who comes to me — I will not comment on the Deputy's constituency — is always as honest as he should be, which is another problem. I will ask the Office of the Revenue Commissioners if they will consider having some simple presentation for Members of the House and the public to show what is involved in trying to get a subcontractor's certificate.

I appreciate that. If the Minister succeeds in doing that it will make our work a lot easier. In regard to subcontractors coming from Northern Ireland and working here as subcontractors, it has been suggested, particularly in my part of the country, that southern subcontractors are having difficulty in getting work because they cannot compete with subcontractors from the North. Although there are, supposedly, fairly close connections between the two authorities to avoid tax evasion by people who are resident in the North receiving income in the South, it is easier for people resident in the North and working in the South to avoid paying their Northern tax than it is for people living and working in the South to avoid paying their Southern tax. This has meant that people in the building industry, particularly in my part of the country which is relatively near to the North, have found themselves losing out by virtue of heavy competition from people coming across the Border who, it is suspected, are not complying with all the relevant requirements of the Northern tax authorities. It is suspected that in some cases they are claiming unemployment benefit in the North while working in the South. I took that up with the Minister in the last few days. He wrote back saying that if I had any cases to prove this I should get in touch with him. I think the Minister was being a little native in saying that because I do not have that kind of information. Nobody has that information. One cannot prove, with the sort of information which is available, that people from the North are claiming unemployment benefit. One cannot prove they are not paying their full tax. There is some suggestion they may have certain advantages over domestic people in the building trade. I would ask the Minister to look at that and see if, in conjunction with the authorities in Northern Ireland, anything could be done to prevent any artificial advantage being given to subcontractors from Northern Ireland in competition with bona fide subcontractors from the South who are paying their full tax liability.

I have sympathy with the point raised by the Deputy. I have had correspondence on the matter from him and other Members. The Deputy will appreciate that one of the difficulties is to establish whether a complaint is real or otherwise. I would be very concerned if the people referred to by the Deputy were getting an unfair advantage. I appreciate the Deputy represents a county much nearer to Northern Ireland than my constituency. When such complaints have been made to me I have asked for some solid evidence that could be pursued. However, I will discuss the matter with the Revenue Commissioners. As the Deputy is aware, it is often the case that allegations are made but when investigated are shown to be without foundation. Any concrete proof with regard to this matter would be appreciated. Unfortunately the allegations and complaints made are of a very vague nature.

Will the Minister say if there is any requirement on main contractors in the South to give to the Revenue Commissioners here the names and addresses of people in Northern Ireland who receive payment for them as subcontractors? If that is so, is that information automatically transmitted to the tax authorities in the North?

I think the Deputy is referring to the subcontractor who is getting some unfair concession by deliberately breaking some system. As I have pointed out to the Deputy, I have no concrete proof that that is the situation. There is no problem where the genuine subcontractor is concerned.

I accept that. However, I am anxious to find out if there is sufficiently close co-operation between the revenue authorities in the North and the South to ensure that such cases are detected.

We appear to have broadened the scope of the debate considerably.

(Cavan-Monaghan): In dealing with this section my difficulty is to ascertain when a small contractor is entitled to be registered and when he is to be regarded as an unregistered subcontractor and have tax deducted from his contract price at the full rate. It is very difficult to find out the criteria that operate and to know when a person is entitled to be registered. This is brought home to Deputies very forcefully when they are doing constituency work. I understood the Minister to say that the objective of this section is to ensure that if a person merely changes his title and his status from that of employee to subcontractor he should not get away with it. I agree with that.

(Cavan-Monaghan): I understood the Minister to say that.

I think the Deputy came into the House when Deputy Bruton had asked to raise a point which he said was outside the scope of the section. I said if I could help him I would do so.

(Cavan-Monaghan): I was here before that.

Obviously the Deputy was not listening. I was merely giving Deputy Bruton information he had requested.

(Cavan-Monaghan): I was discharging another very important constituency chore — I was at a funeral. Otherwise I would have been in the House. I suggest to the Minister that many small contractors are suffering hardship because they cannot get registered and, for example, when they do a job for a local authority tax is deducted from them at the rate of 35 per cent. I suggest to the Minister that he or the Revenue Commissioners should issue clear rules about when a person is entitled to be registered and when he is not so entitled. I know small contractors who have a place of business, who supply materials and who are genuine, but yet they cannot get registered. As a result, they are deprived of their money for a long time and are suffering hardship. I want the Minister to spell out clearly what is the position. I want the Revenue Commissioners to issue rules and regulations that will enable the legal profession and Deputies to know when a person is regarded as a PAYE taxpayer and when he is regarded as an independent contractor who should have his profits assessed and taxed in the ordinary way. That is not the position at the moment.

The rules are clear. I appreciate the point raised by Deputy Bruton. I do not know what role the legal profession have to play in this matter and whether they should be made a special category. I have said it may be necessary for me to talk to the Revenue Commissioners about making data available to Members of this House and to others about what is required. There is no question of lack of clarity with regard to the rules. I know from my constituency work that some of the people who approach me with regard to this matter are genuine but others deliberately fudge the rules. This is a problem. I accept the point raised by Deputy Bruton, but I am not quite sure about the additional point raised by Deputy Fitzpatrick.

Question put and agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."

Perhaps the Minister will tell the House why this section is renewed one year at a time? Why is it not a permanent feature?

I can answer for this year and tell the Deputy that the same situation applied last year. Last year it was extended for a further year and the same thing has happened this year. Basically that is the answer.

That is not the answer. I asked the Minister why the section is renewed each year.

In other words, the Deputy is asking why the decision was taken. That is a different question. If the Deputy had asked me that question originally I would have answered him.

Why is it renewed one year at a time?

The Deputy asked why the necessity for the section and I answered him. As the Deputy is aware, the scheme was introduced on a temporary basis in 1979 and it was continued last year. Part of the reason why it was continued last year was that it was felt that the scheme had not been long enough in operation and perhaps it had not been given adequate opportunity to get off the ground.

The question arises as to why it was decided to extend it this year. As the scheme progressed, it seemed to arouse greater usage or interest. I was faced with a decision as to what was the right thing to do. While not completely satisfied that it should continue indefinitely, I was satisfied on the evidence before me, particularly the evidence of the latter part of 1980, that it should continue for another year in order to monitor its progress and to give me an opportunity at budget time next year to decide whether it should go ahead on a permanent basis.

This is a good scheme and it has many merits. That is why we were arguing on Deputy O'Leary's amendment that it would be a desirable activity and would catch tax evasion. I would ask the Minister to consider favourably the idea of making it a permanent feature.

It seemed to take quite some time before it became known. At the end of March 1980 the number of claims received was 910. At the end of March 1981 that figure had gone up to 5,600. Before March 1980 it was used less and less. It has become better known, or the interest in it increased over that period.

I have heard people saying that when they go to a registered contractor, with whom they can claim the tax allowance, they are charged a price which is higher than the price they would be charged by an unregistered contractor to the extent of the relief, if the Minister follows me. In fact, the taxpayer gets no benefit because of the higher price being charged by the registered contractor. I do not know how we could eliminate that anomaly. If the scheme were to become permanent we would need to find some way of preventing registered contractors from taking an artificial advantage of the situation. I suppose the best way to do that would be to catch the unregistered people.

I have not heard that complaint. I would be seriously concerned if the benefits were being passed on not to the person who should benefit but to the registered contractor. If the Deputy has any information on these people I would be glad to get it.

I know one case where there were two quotations.

(Cavan-Monaghan): Would the Minister not agree that the explanation is that many of the smaller contractors are not registered, and they are not inclined to take on these jobs in case they would have to register and thereby draw the attention of the Revenue Commissioners to them? Would the Minister not also agree that it is the bigger firms who are registered and obviously they make higher charges because they have to pay management and they have other expenses which the smaller man has not got to meet?

It was introduced in 1979 and apparently in the first year it did not take off very well. It has now gone up to 5,000. If I want a painting job done on my house or some minor repairs to the tune of a few hundred pounds, and I ask a small contractor to do the job for me, if I tell him I must get a certificate from him which I can submit to the Revenue Commissioners, he will not take the job. That does not apply to all of them, but it applies to a great many of them. He will disappear and that is the last I will see of him.

If I go to the large building contractor in the town who builds churches, schools and IDA factories, he will do the job for me. But because his overhead expenses are bigger and because he is involved in management and other expenses which the smaller man is not involved in, he will charge me considerably more. As Deputy Bruton said, what I win on the swings I lose on the roundabout. The net result is that it would be better for me to give the job to the smaller man and forget about the tax allowance.

I do not know what the Deputy is really getting at—giving it to the smaller man depending on who the small man is and what rules he is breaking. I would advise any Deputy to be very careful of what kind of small man he is talking about.

Interest in the scheme has increased among contractors. It was slow in getting off the ground in 1979 in that area as well. At the end of March this year the number of registered contractors had gone over 2,000 for the first time in the lifetime of a scheme. Deputy Fitzpatrick is asking whether you go to a small man or to a registered contractor. The emphasis in the introduction of this scheme was on creating employment opportunities. I want to encourage employment opportunities with registered subcontractors who are paying trade union wages, who are paying their social welfare insurance and all the other contributions.

(Cavan-Monaghan): By a small contractor I mean a contractor who may be employing nobody but himself, or a contractor who is employing one or two people. These people find it difficult to get registered. The Minister seemed to suggest there was some sort of an onus on the householder to see to it that the man was paying income tax. I do not think he has any such obligation. He employs somebody to do the job. He pays the person for doing the job and that is that. There is no doubt that many people are not availing of this section for the reasons stated. If they go to a small man he will do the job cheaper than the large contractor to such an extent that the allowance against his income tax will not be sufficient for him to pay the large contractor instead of the small contractor.

Question put and agreed to.
Section 8 agreed to.
SECTION 9.
Question proposed: "That section 9 stand part of the Bill."

This section is concerned with the new provisions for income averaging for full-time farmers. It refers to income averaging for farmers over three years. Because of the fluctuating nature of agricultural incomes from one year to the next it is more appropriate to take farm incomes over a period of three years than one year. The farmer may be pushed up into the 60 per cent band in year one. He may not have taxable income in year two, and he may go back into the 60 per cent band in year three. The result is he is paying more tax than he would be if he achieved all that income on the same average basis over the three years, taking the bad year into account with the two good ones. That is a very reasonable proposal and is something that has been promised for some time.

Income-averaging will apply only where the individual elects for it. It will not be available to any farmer who, or whose spouse, is also engaged in another trade or profession. While it is fair enough not to allow it to a taxpayer himself or herself if he or she is engaged in another profession, it seems unfair to deprive the taxpayer of the right to claim this if it is simply a case, for example, of a male farmer whose wife has a job as a part-time nurse or a teacher or a job which is less regular. I cannot quite understand why the averaging should not be available in that situation. If, for instance, the work of the spouse was such as to earn a very substantial income I could see the point, because the need for it would not be very great, but the case I feel badly about is where a wife takes up part-time employment outside the farm. I do not think the fact that she has part-time employment should stop a husband claiming the provisions for income-averaging. I should like to get more information on how this is going to work.

Would the Minister like me to repeat the question?

The Deputy should put the point he has made again briefly.

According to the explanatory memorandum, if the spouse of a farmer is engaged in another trade or profession the farmer may not claim income-averaging. If the spouse is earning a substantial income from a full-time job, I can see the point because the need would not be as great in that case as it would in the case where the sole income coming into the house was from the farm. However, if this has the unintended effect of stopping wives from doing part-time work outside the farm, people who have been doing such work in the past, simply by virtue of the fact that if she continues her husband will not be able to claim income-averaging, it would seem to be unfair. Does the concept of the spouse engaging in another trade or profession include part-time work in such trade or profession by the spouse?

The Deputy accepts the point where full-time employment is concerned and the danger of manipulation there. The position of other temporary employment is covered in the arrangements that have been made. For that reason I should like to give some background on this whole question of income-averaging. Lengthy discussions were held between the farming organisations and the Revenue Commissioners regarding the introduction of a suitable and acceptable scheme, because there were many areas of difficulty. I am pleased that the farming organisations accepted this scheme as being a reasonable scheme of income-averaging which they can operate. In fact, they were most complimentary of the approach of the Revenue Commissioners.

Where in the section is the provision which excludes from income-averaging the case where a spouse has another trade or profession? Is it included in line 28 where there is a reference to an individual to whom section 16 applies?

A farmer who is excluded from income-averaging is one whose spouse, in the case where the individual is a married person, is at any time during that year of assessment a director of a company carrying on a trade or profession and who is either the beneficial owner of or able, directly or through the medium of other companies or by any other means, to control more than 25 per cent of the ordinary share capital of the company. It refers to the Finance Act, 1974. A farmer whose spouse is in that situation is the only one excluded from income-averaging.

That is not what is in the explanatory memorandum. The explanatory memorandum does not confine the exclusion to people who are directors of companies. It states: "Any farmer who, or whose spouse, is also engaged in another trade or profession". It does not say whether that trade or profession need be carried out only on a part-time basis for the exclusion to apply.

Earlier I said that other people were excluded, but the Deputy is now talking about part-time employment.

Perhaps the best thing to do is to refer the Minister to the explanatory memorandum which, in relation to section 9, states:

Income-averaging will apply only where the individual farmer elects for it but it will not be available to any farmer who, or whose spouse, is also engaged in another trade or profession.

I said I accepted that that was a reasonable restriction where that trade or profession was engaged in by the farmer, or his spouse, on a full-time basis; but I am concerned that it would prevent part-time work by the spouse in a trade or profession. Perhaps the appropriate method would be to say that income-averaging only can be availed of where the work by the spouse or the farmer outside the farm is not above a certain figure, say £2,000 per year. To have a blanket statement that all work by the spouse outside the farm, regardless of how little is earned from it, will remove one from the entitlement to claim income-averaging would seem to be going too far. Will the Minister refer me to the section in the Bill which amplifies what is contained in the explanatory memorandum in order to see how the matter is defined in the section?

(Cavan-Monaghan): Will the Minister tell us who is excluded?

It is the people who are engaged in another trade or profession outside of farming. The Deputy seems to be worried about the part-time category. Part-time employment is not excluded.

(Cavan-Monaghan): The directors?

A part-time employee would not be excluded but if they are engaged in a trade or profession outside farming——

On a part-time basis?

I see the point the Deputy is making. He is trying to say that if they are engaged in a trade or profession outside farming on a part-time basis there should be a limit.

I am not looking for a limit. I am suggesting a limit to help the Minister with the problem.

Mr. G. Fitzpatrick

Yes, I appreciate that that is the point the Deputy is making.

The first thing I want to know is what exactly the provision is here. What are we saying?

It is very difficult. If a person is engaged in a trade or profession, particularly in the case of a farmer or his wife, could you define if it is part-time?

That is why I suggested the income limit.

They could work four or two hours a day and have a very substantial income. They may work 50 hours of the week and have only a very small income.

Exactly, that is the point. That is why I said the appropriate way of dealing with it would be to say that if the spouse or the farmer himself is working outside the home they will be able to claim income-averaging as long as their earnings from the work outside the farm do not exceed £2,000. That would in a sense put a monetary limit on the amount they could claim from it and would effectively achieve what I want to achieve, which is to allow the wife, usually, to do a bit of part-time work. To take an example that could be very useful, she might be doing home help for a neighbour who is sick.

There is no problem there.

Why not?

Because she is not engaged in a trade or profession.

Is nursing not a profession? Suppose she is a nurse and doing this work as a nurse on a part-time basis for a neighbour.

Part-time employment is not excluded.

Unfortunately, what the Minister says here in the House is not the law of the land any more than what I say in the House is the law of the land. If the Minister says that that is the case I ask him to refer me to the relevant provision in the section which excludes part-time work. Until he can do that I am afraid that I must assume the worst.

At the moment there is no problem under section 16 or in the interpretation of the 1974 Act. I will read out again for the Deputy what I have read already. It is on page 803 of The Taxes Acts, volume II.

Unfortunately in my index it goes up only to page 73. The library copy needs to be revised.

I will read it out again:

... whose spouse, in a case where the individual is a married person, is at any time in that year of assessment, a director of a company carrying on a trade or profession and who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other means, to control more than 25 per cent. of the ordinary share capital of the company.

They are the people who are excluded from income-averaging.

The explanatory memorandum says "people who are engaged in another trade or profession". One can be engaged in a trade or profession without being a director of a company concerned with that trade or profession. Not every nurse who does work in a hospital is a director of the hospital.

(Cavan-Monaghan): I would like the Minister from his brief to spell out the category of people who are excluded from the benefit of this section. Nurses have been talked about. Many farmers' wives are nurses and many of them do only a little part-time work such as holiday work for a few months in the year. Are they excluded? I would like the Minister first of all to tell us the category of farmers who are excluded from this section and I will query then the one person, that is the farmer's wife who might do three months' holiday work in the year. Is that farmer excluded?

No, he is not excluded.

(Cavan-Monaghan): Why?

I am referring here to the persons whose spouses are in self-employment in a trade or profession, not the employee.

(Cavan-Monaghan): This nurse, instead of working for the health board does temporary private nursing for a few months of the year to make holiday money for herself. She takes up private nursing in people's homes but would not work for six months of the year. Is that farmer excluded?

(Cavan-Monaghan): Why?

If the wife is employed or is an employee that farmer is entitled to opt for income-averaging but if his wife is self-employed in certain categories then he is prevented from doing it.

(Cavan-Monaghan): If she is in a trade or profession?

In a trade or profession. In other words, once it is a contract of employment in which he is specifically an employee he is not prevented from income-averaging.

(Cavan-Monaghan): If his wife is not a nurse but a dressmaker and carries on dressmaking in her home is she out of this?

I think she is because she is in a trade or profession.

(Cavan-Monaghan): Is Deputy Bruton's method not the simple method of dealing with it? That is to put an income limit on it, and there are several precedents for this in the grants system that we have now. A man is not deemed to be a farmer if his outside earnings are — it used to be between £3,000 and £4,000 — now £4,500. Here you have a case of a farmer's wife who is a dressmaker making dresses for the ladies in the neighbourhood, or she is a hairdresser, as very often happens, and she is doing a spot of hairdressing in her house for the neighbours. Under the Minister's ruling that farmer would be excluded. That is hardly reasonable. We want to get at the lady doctor or lady solicitor who is practising her profession, but in the language that the Minister has used he is going to exclude the dressmaker, the hairdresser, and if I had time I could think up several other categories of people who are doing this sort of work to augment the family income. The husband, even if he has a substantial farm, is going to be excluded here if he and his wife are honest or if the inspector of taxes gets to know about it through the anonymous letter from the neighbour with whom they have had a bit of a row. The obvious thing to do is to accept Deputy Bruton's suggestion and say that the benefit of averaging shall not apply if the spouse is earning over — I would not think £2,000 a year sufficient; I would take the figure prescribed for the farm modernisation scheme which was £3,500 and now is something like £4,750.

Section 16 goes back to 1974. No problems have been experienced under that section. Now the same criteria are being used for income-averaging. The Deputy will appreciate that the danger in adopting or introducing an income limit at all is a danger of manipulation between the trade or profession operated by the spouse and the farming income. It could be very difficult to control. Furthermore, in discussions that farming leaders have had with the revenue people, which have been extensive and prolonged, the farm leaders have accepted the criteria laid down and are happy with the situation regarding income-averaging.

Take, for example, a wife operating farm holidays, as is done in some of our constituencies for part of the year; her farming husband would not be excluded.

How does the Minister say that?

(Cavan-Monaghan): Is it because it is not a trade or profession?

I think it would be regarded as a part-time operation obviously, not to be excluded. In other words it is a flexible approach. It is something that has been the position since——

The Minister is dealing with the law of the land. He cannot talk about flexibility.

We could go on and on. The Deputy is trying to tell me what I should do about introducing an income limit. I am telling him that it would be manipulated and interfered with and impossible to control. A section exists in the 1974 Act and no problems have been experienced. Why introduce problems now? Prolonged discussions have taken place, and in my presence the farming leaders expressed their appreciation of the approach of the Revenue Commissioners and they have now accepted it. Why interfere with what we all know to be an extremely difficult and delicate area? I would be absolutely afraid that the £2,000 limit or £4,000 limit or £10,000 limit or whatever it is would be manipulated by some people and it would be impossible to control.

I do not think there is much point in dragging this out. But what I feel is a bit unfair is that the whole idea of introducing income-averaging is to ensure that people will not lose out because incomes fluctuate in farming. The case for saying that if people have another income as well as their farming income they should not get the benefit of the special averaging provision is that their income from the other source is likely to offset the fluctuations in the farming income and that therefore there is not likely to be all that much of a fluctuation in the total income. That is fair enough so far. But then to come along and say that if the income from the other source is from self-employment rather than from employment they will lose the averaging claim seems to be inconsistent. The Minister says he is concerned with the elimination of fluctuation. But there is more likely to be fluctuation in income from self-employment by the spouse than from employment by the spouse. Consequently I feel that the Minister is being inconsistent, and maybe in a sense over-generous, in saying what he has said. If I was employed by a company and earning £20,000 a year I would be allowed to claim averaging. But if I was earning £1,000 a year from doing some part-time work for someone in a professional capacity, in other words, if I was self-employed, I would not be able to claim averaging. That seems to be unfair discrimination in favour of employed people as against self-employed people so far as claiming this is concerned. It is particularly anomalous in view of the fact that it is fluctuation we are trying to eliminate and fluctuation is more likely to occur in self-employment than in employment. That is the way it is, I suppose.

Let me make one point. First of all, this criterion has been in operation and the main difference here between the self-employed person and the employed person is that the earnings of the employed person are absolute and are known and cannot be manipulated whereas the earnings of the self-employed person are not. There is a distinct difference and this is accepted by the organisations concerned. If this discrimination were removed we would be introducing an element that would make it impossible to control. There have been no problems and I would ask the Deputy to accept that.

(Cavan-Monaghan): I agree with Deputy Bruton on the principle of this. It is no use enacting a law in this House and saying that the inspector of taxes and the Revenue Commissioners are going to turn a blind eye to it and that it is not going to be enforced the way it is in the Act but is going to be enforced in a flexible way that will exclude this, that and the other. That is bad in principle. That is not what we are doing here. We have no control over an Act once it leaves this House. It means what it says and it is not going to be enacted in some friendly, kindly sort of way. Things do not work that way. The Minister says that this provision has been in operation since 1974——

I said this criterion.

(Cavan-Monaghan):——and it has not given any problems. I have a feeling that there are many sleeping dogs in the files of the Revenue Commissioners all over the country because the Office of the Inspector of Taxes is under-staffed and cannot get around to doing the work. But when some bright, young inspector of taxes takes up a file and finds out that there is a liability on him if we send this Bill out of this House as it is, there is nothing to prevent this young inspector of taxes from spending a day or two on the file and raising this hare and chasing her to a successful conclusion. If we mean that the farmer will not be deprived of the benefit of the averaging provision, then we should spell that out in the Bill. If the Minister says that an income limit will not work, what he is saying is that the people will not tell the truth and will not disclose the amount of the income, that they will dodge and that it is not workable. If it is not workable, it is not workable and it should not be put into the thing at all.

It is the Deputy who is introducing that.

(Cavan-Monaghan): We are pointing out that if the Bill is strictly enforced as it stands, certain people will be excluded. On the other hand, the Minister is saying that the inspector of taxes will turn a blind eye to certain things.

I never said that. I think the Deputy overstates it.

(Cavan-Monaghan): Keep your hair on.

I never said that. The Deputy should not put words in my mouth.

(Cavan-Monaghan): The Minister said it would be flexible, that it would be operated in a flexible way.

I did not say that either.

(Cavan-Monaghan): The record will show that.

The record will show that the Deputy has manipulated words.

If the Minister says he did not say something, that is accepted. Deputy Fitzpatrick on the section.

(Cavan-Monaghan): The record will show what the Minister said. If the Minister says he did not say it I will accept it, subject to having a look at the record. If the Minister did not say that, then the farmer with the hairdresser wife, the farmer with the dressmaker wife is going to be excluded from this and, as Deputy Bruton says, it is quite unreasonable because a hairdresser wife is employed in a profession or trade and a dressmaker wife is employed in a profession or trade. The Minister is either going to exclude such people or he is not and he should say in black and white whether the section will exclude them or not. I invite him to do just that now. There is no necessity for heat about this. We are on Committee Stage of a Bill and we want to find out what it means and we want to find out what the effect of what we are enacting here will be.

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