We concluded section 4 the last day more or less.
Finance Bill, 1982 (Resumed). - Finance Bill, 1982: Committee Stage (Resumed).
Question again proposed: "That section 4 stand part of the Bill."
Yes. I want to query one provision in section 4. If a person claims that he is using a car to a very substantial extent—I think the section says to 90 per cent of the total usages— for job purposes, what method will there be of verifying that? I cannot find the relevant provision. I know it appears somewhere in the section. I would like to know how that will be worked out.
It is done on a mileage basis. For most of the people concerned the mileage is recorded and agreed between the Revenue Commissioners and themselves. Where there are doubts about the number of miles submitted by an individual the speedometer on the car can be checked if necessary. The Deputy will see section 4(5)(b)(ii):
Provided that, in the absence of sufficient evidence to the contrary, the business mileage for a year of assessment in relation to a person shall be determined by deducting 5,000 from the total number of miles travelled in that year by that person in a car or cars in respect of which this section has effect in relation to him.
Surely that is not section 4 (5) (ii).
It is section 4(5)(b), bottom of page 13.
Question put and agreed to.
SECTION 5.
Amendment No. 33a is in the name of Deputy Gregory-Independent. Amendments Nos. 33b and 34 are alternatives. Amendments Nos. 33a, 33b and 34 will be taken together for discussion by agreement. Is the House happy with that? It is agreed.
I move amendment No. 33a:
In page 17, subsection (2) (a), lines 31 and 32, to delete subparagraph (i) and substitute the following:—
"(i) at any time during the year of assessment he was of the age of 65 years or upwards or if under the age of 65 years he was at any time during the year of assessment in receipt of an income less than £7,000 per annum, and,".
In the debate last week on this Finance Bill many references on all sides of the House were made to the desirability of moving towards a more equitable system of taxation. There has, of course, been no agreement as to how this should be done. In these amendments I had hoped there would be general agreement.
One of the sections in our society most in need and most deserving of income tax relief in respect of the rent they pay are those people living in private rented dwellings. This seemed all the more desirable because the expenditure involved could be balanced by the consequent tax returns from the previously undeclared income of many of the landlords involved. This combined approach would be a significant step in a movement towards equity. In the context of the inadequate public financing of the local authority housing programme many thousands of families and single people are forced to accept private accommodation at exorbitant rents of £30, £40, £50 per week and more. Such rents are being paid for rooms and very substandard accommodation. People in poor circumstances who can least afford such rents have little alternative but to pay them. Surely they deserve income tax deductions in respect of these rents. Equally the landlords who exploit people in this way and evade tax on a widespread scale should be made to pay their fair share of taxation. There will never be a fair taxation system unless effective measures are taken against those who evade and refuse to pay their just share.
I believe that the amendments I have put down go a little way in the direction of greater social equity by subsidising those most in need and taxing those who in many instances are guilty of major tax evasion. The Finance Bill in section 5 already provides for tax deductions in respect of rent for tenants over the age of 65 years. However, it would be too simplistic and very costly to do what one of the amendments—not put down by myself but by the Labour group—would seek to do, which would be to delete this reference to an age group and give the deductions to all tenants irrespective of their means. This would assist both rich and poor and defeat the whole purpose of the exercise. A more equitable approach would be to attempt to define those tenants most in need of help. This, of course, is far more difficult to achieve and explains why I have put down two alternative amendments, neither of which, I must admit, I am completely satisfied with. The intention is to set an income ceiling of approximately £7,000 per annum which is just under the average industrial earnings. This would seem to direct the tax concession at those in poorer circumstances.
For discussion purposes I added an alternative amendment referring to taxable income, which may be a more equitable way of confining the benefits to needy tenants. There are difficulties in both of these amendments, but I believe that the principle is correct and should be accepted. Furthermore, section 138 (a) of the Income Tax Act refers only to married persons. I believe there is a need for an additional amendment bringing in widows and widowers, who constitute one of the most forgotten sections of the community and who very often are in extremely insecure circumstances. I suggest that a deduction of £500 is most inadequate in the case of widows and widowers and should be increased to £1,000. A further amendment seeks to increase the deduction of £500 to £750 for all other persons on the basis that rent is often charged on the size or number of rooms and not on the number of persons occupying them. In this context a deduction of £500 per annum is very small and should be increased.
It is fairly easy to anticipate that the response of the Minister and perhaps even of the main Opposition party will be to say that this is a very laudable proposal but in the economic circumstances the money is not there. I understand that it is estimated to cost £15 million this year to implement these amendments. However, I do not accept that view because the whole basis of the amendment is that a claimant to prove entitlement must refer to the identity and address of the landlord who will then in turn be taxed on the rent he receives. This process will provide an effective register of landlords which all other efforts to date have failed to achieve. The cost of the amendment could thus be offset by the income accruing to the Exchequer from the previously undeclared income of many landlords. The end result of these amendments, if they are accepted, will be a real move towards social equity. I do not accept that there will by any significant cost involved for the reasons I have already outlined. I hope that the Minister when replying will refer specifically not just to the cost of providing the concessions but also to the amount which will be returned when the income of the landlord is taxed.
I propose to intervene more than once in the discussion on this amendment. I should like to make a few preliminary remarks. I very much support the principle of the amendments proposed by Deputy Gregory. As the House is aware, since June 1981 it has been the policy of my party to introduce a tax allowance for rent payments. We believe it is necessary to introduce a degree of fairness as between people who are buying their own houses and can claim interest as a deduction against income tax on the loan they take out for that purpose, and people who have chosen not to buy their own houses but to rent them and can get no tax allowance of any description for the rent payments they make.
This has led to a situation in which the number of units of rented accommodation has been reduced over the past 30 years to half its previous level, because people are not using this means of providing accommodation for themselves. This is unsatisfactory from a number of points of view. Obviously, rented accommodation is a more flexible type of accommodation. It can be changed more easily than accommodation which is bought and usually retained for the person's lifetime. As the family goes through the family cycle, accommodation needs vary. They start off as a married couple with relatively small accommodation needs. Then when all the children are at home they have very substantial accommodation needs. As the children get married and leave, their accommodation needs diminish.
Under the present owner occupancy system, they are forced to have a house large enough to provide for their peak accommodation needs and which is under-utilised when a smaller number of people are occupying it. This is not the best use of our housing stock. Any encouragement towards the use of rented accommodation as distinct from owner occupancy, or at least putting it on an equal footing in the terms of tax advantage, would lead to better utilisation of our housing stock. Unlimited funds are not available for the building of houses, as unlimited funds are not available for any other purpose. Therefore, we should ensure that our tax code does not encourage under-utilisation or the excessive use of housing accommodation which cannot be fully utilised for most of its life.
Deputy Gregory has made the social case for the amendments quite well. I want to add the economic case which, standing on its own, might sound somewhat heartless, but it still has validity in view of our limited resources. There is a strong economic case as well as a social case for encouraging the use of rented accommodation. Therefore I support what Deputy Gregory's amendments seek to achieve.
The Government of which I was a member were committed to the idea of extending the allowance to all people living in rented accommodation without any restriction as to age, income or otherwise. We took that view because we felt, as Deputy Gregory now feels, that substantial amounts of untapped income were going into the hands of landlords which this proposal would bring to light, and which would go a great distance towards paying for any costs the project would incur in terms of tax revenue lost. In Government we were advised that the Revenue Commissioners, whose estimates in these matters are always accurate and non-partisan, believed that the amount of revenue which would come in from tracking down evaders would not be as great as we on the outside thought it might be.
They said they had undertaken a very substantial campaign in previous years to track down tax evasion by landlords, a campaign which had been reasonably successful. Therefore, while the additional tax evasion which would be caught would be significant, it would not come near to offsetting the cost of the allowance. In view of the additional cost and the difficult budgetary situation we faced we decided, on an experimental basis, to see how it worked, to introduce it initially for people over the age of 65 years with a view ultimately to extending it gradually to everyone as finances permitted. We took a very significant first step in extending it to people of 65 years of age and over.
In his amendments Nos. 33a and 33b Deputy Gregory has put forward the logical next step, namely, to make the allowance available to people on low incomes in addition to those of 65 years of age and over. As this is the next step we would have taken as finances permitted, I cannot have any objection to this proposal in principle. My only concern is its cost this year, in what we all recognise as an almost disastrous financial situation. As between his two amendments, I have a very strong preference for amendment No. 33b as against amendment No. 33a and I should like to say why.
Amendment No. 33a simply gives this allowance to people with an income of £7,000 a year or less, regardless of whether they are single or married with five children. This is gross income, not taxable income. Obviously in the hands of a single person with no liabilities, £7,000 a year is worth a lot more than it is in the hands of somebody with a wife and five children to support. The amendment makes no distinction between family circumstances. Deputy Gregory recognised that, and I believe that is why he put down the second amendment which has not got that objection. It is concerned with taxable income, not with gross total income.
A person with five children could earn a larger gross sum because he would have a larger number of allowances than a single person and he would have a taxable income of less than £4,500. The single person would not have the same allowances and would have exhausted his taxable income of £4,500 at a lower gross income. The second amendment makes the distinction, which I believe is necessary, between the situation of a person who is married and has a number of dependants and a person who is single and has not got the same need for an allowance of this sort.
As I have said, I have no problem with the principle involved in Deputy Gregory's amendments. I prefer the amendment No. 32b scheme. My problem is with the cost of it. I would be glad if the Minister would give us an indication of the cost of the two amendments separately. In a sense, the cost of the second amendment would be of more interest and value as distinct from the first amendment. Could the Minister further let us know what would be the cost if section 33b were changed, say, to a taxable income of £2,000 or £1,000? Obviously the more one reduces the taxable income figure the more one confines the number of people who can claim it and the more one has a situation where it is only the really low paid who can benefit from it. Possibly £4,500 would cost too much and would bring in more people than we could afford to bring in to this tax allowance scheme at this stage.
If that is the case the Minister should not say that the whole idea should be thrown out altogether simply because it would cost too much but suggest a figure which he would be prepared to accept in cost terms, a lesser figure that would bring in a lesser number of people but would still be accepting the principle which is a good one of making this allowance available to the low paid. I hope that we can conduct this debate in that sense in trying to find in the House a proposal that is acceptable in terms of the principle which we all accept of helping low income people with their rents. There is no question but that the Minister also accept this because if he did not he would not have introduced the section which was in my budget as well. There is common cause between us that we should do something about the subject. The problem is how much we can afford this year to set aside for the purpose. The Minister might consider giving us information as to the different costings at different levels of income which might be used for this purpose. If he could give us that information it would be possible to reach agreement on an amendment which would be acceptable both from a social and a cost point of view.
The substance of this section highlights a very serious inequity in our taxation system, the basic unfairness that arises as a result of the positive discrimination which our taxation system as at present constituted accords in favour of houseowners as against house tenants. A person who is buying out his house or who has a house and is trading up in the market and raising a greater mortgage for the purpose of obtaining the tax concessions that would apply to that mortgage can claim that mortgage against his income tax. Let us consider the basic position where that person has no tax allowance and chooses to upgrade his house: he buys the house and pays his mortgage out of his taxed income. The income tax system then allows him to make deductions of his mortgage payments against his income tax. It was suggested in the budget statement that those allowances should be confined to the standard rate but that has been taken out of the present Bill to enable the person in that category to have the allowance at the full marginal rate of tax that that person pays. Therefore a very substantial subsidy is accorded in the taxation system to a house owner buying his own house and more often than not to a person who is trading up and buying a more expensive house.
That is a very substantial concession. Let us first consider who is paying for that concession which is accorded to that relatively well off section of the community. It is the general body of taxpayers who pay for that concession because if that concession was not made, the shortfall in the overall taxable income would not arise. So the general body of taxpayers have to make good that deficit in the tax they pay. Many of those, and probably most of those who comprise the general body of the taxpayers, are people who do not own houses at all. Yet they are in the position in this system of having, in their tax payments, to subsidise that tax concession which is made to people trading up and buying more expensive houses. I would go further. Many of those people might not even have the luxury of being the tenant of a house let alone own one. Young couples, possibly with children, unable to buy a house, unable in the present economic situation even to rent a house, unable to obtain a local authority house, perhaps living in overcrowded conditions in a parent's house or the house of parents-in-law, working and having PAYE contributions deducted from their wages are having part of that tax directed towards making up a shortfall in tax revenue which arises by reason of that concession granted to the house owner and even to the house owner who is trading up into a more expensive dwelling.
In this situation tax equity requires that at least the same concession should apply to a person who is renting a house as to a person who is buying one. It follows almost as axiomatic that the person buying the house is in a stronger financial position than the person who is renting one. So why give the concession at the full marginal rate to the person who has the house and who has even traded up, and deny the very same concession to the person who is not that well off and is compelled by reason of his circumstances to remain in rented accommodation? On that ground alone it is a matter of basic equity. There should be a basic principle of allowing rent in full to be claimed against income tax whether a person is under or over 65 years of age—and I cannot see the rationale of the distinction in age. That very valuable tax concession to house owners should be extended to tenants who pay rent. If one says that the country cannot afford that because it would be too costly I would say that that should be balanced by a pro rata reduction in the concession that is accorded at the other end of the economic scale, to those people who are that well off that they are buying houses or trading up to more expensive houses. At least let there be that measure of balance introduced between those two situations. But to draw a distinction that favours the well off as against the less well off is a glaring and basic inequity in the tax system.
I just want to make a few points. Deputy Taylor has made some points which I would have referred to and he obviously knows the scene very well. The amendment is a good amendment because it specifies the income under which a person would benefit from the tax allowance. I would have thought that in this kind of situation granting allowances to people possibly occupying very expensive flats would not be the thing to do. But this is different because it specifies the taxable income. To qualify for the benefit a person would have to name the landlord and show the amount he was paying. This would be very interesting because for once the landlords would be identified and the amounts they were collecting would be certified. This would be an easy way for the Revenue Commissioners to get these people to pay.
Let us look at the local scene. There are three towns in the north Cork area where I come from. When people get married and look for accommodation, irrespective of what the landlords ask, they have to pay. In most cases for a kitchen and another room they pay £36 a week. In the same house, three or four young families could be living, all paying high rents. What are the Revenue Commissioners getting from that landlord? I believe the amount collected is infinitesimal because no record is kept.
It has been said that people who occupy such accommodation are being discriminated against because people repaying a loan to a local authority or financial institution will get full benefit in their assessment for medical services. People who apply for medical cards and state they are paying £40 a week rent, are lawfully entitled to have £33 of that amount taken into account when assessing their eligibility for medical cards, but because they cannot have that amount certified, they cannot get the benefits they should. If a tax allowance was granted to tenants of unscrupulous landlords it would be a further benefit to all because they would identify the landlords and specify the amounts of rent charged.
This amendment specifies the income under which a person would qualify. I do not think Deputy J. Bruton's argument was very convincing. He said he agreed with about 75 per cent of the amendment and felt that the income which would accrue to the Revenue Commissioners from collecting tax on rents paid to the landlord would balance against the cost. I disagree. I have not done any calculations but I imagine the amount would be very substantial. In my view, the amendment is a good one.
There is not an exact situation of discrimination from the tax point of view between people who are purchasing their houses and those who are renting accommodation. Deputy Taylor said people who are purchasing their houses are getting a full tax allowance. He should know that is not so. There is a restriction on the amount of interest which can be claimed — in any one year for a single person the amount is £2,400 and for a married couple £4,800.
That is a lot more than the amount proposed here for rent.
I am aware of that. I will make my case and then the Deputy can make his contribution. A person purchasing a house not only pays the interest on the loan but he must repay the capital. There is no tax allowance for the capital element of the repayment. What is being proposed here by Deputy Gregory-Independent is that the full amount of the repayments for a person renting accommodation should be allowed for tax purposes.
A person purchasing his own home will have more interest in keeping his house in good condition than a person renting. If we encourage more people to rent rather than purchase accommodation, the general condition of our housing stock will deteriorate. Deputy Gregory-Independent said his amendment would increase tax revenue by reducing the amount of taxation lost through evasion. With the passage of time the amount of tax lost through evasion in this area has diminished substantially. Deputy J. Bruton, as former Minister for Finance, should know the facts better than any backbencher. A few minutes ago he said he was surprised at the small amount of tax lost through evasion by landlords.
Deputy Taylor mentioned discrimination in favour of the relatively less well off who are purchasing their own houses. Many young home owners who are barely existing could hardly be described as "relatively well off". The arguments put forward by Fine Gael, and the fact that they are supporting this amendment, seem to be strangely at variance with the oft expressed sentiments of Deputy Kelly in favour of self-reliance.
Deputy Sherlock spoke about his constituents having to pay exorbitant rents. If this amendment is accepted, his constituents will have to pay even higher rents because the landlord will seek to add the element of tax he will have to pay to the rent in order to compensate for the fact that he is being taxed on the rent charged. The question of rent control and fair rents is a different question from rent allowances for tax purposes. In the absence of more substantial arguments from the Opposition I would be inclined to oppose the principle of this amendment.
A number of amendments are being taken together and amendment No. 34 is in my name. The main purpose of my amendment was to try to tease out the actual cost of global taxation relief so that I could see precisely the dimensions of any particular relief. In the short time I was in the Department of Finance I was unable to get a precise costing of giving relief across the board. Quite frankly, I was far more preoccupied at the time with mortgate interest relief which was a far bigger issue in terms of budget assessment.
I see merit in amendment No. 33b put down by Deputy Gregory. My assessment of amendment 33a is that quite unintentionally it would give a net balance of advantage to single persons rather than to married persons or widowed persons. The giving of tax relief on income bands as distinct from taxable income bands is highly regressive. I find amendment No. 33a less preferable than amendment 33b.
Amendment No. 33b is in accord with amendments I tabled in relation to section 1 where we attempted to improve the basic tax exemption levels. Giving a rent concession to persons on low income who pay a relatively high rent is a progressive step and is socially equitable. We have to examine carefully the precise costings given by the Minister. I do not think that what is involved would be very expensive. If there was a total exemption across the board to everybody, irrespective of general income, as was proposed in my amendment No. 34, I think we might be talking about a sum ranging from £21 million to £25 million. I am just hitting a figure in terms of my own personal assessment and I accept that I may be wildly inaccurate because there were no tax tables available to consult on the matter.
With regard to amendment No. 33b, we might well be talking in terms of £4 million or £5 million where it is proposed to set the level at £4,500. At any rate, there is a wide range of imponderables in terms of assessing the cost. I do not accept entirely Deputy Bruton's view that the yield from landlords who are not giving their rent returns would be very low.
It would be insignificant and not enough to cover the cost.
I agree the yield would be far less than is popularly assumed. Some people think the Revenue could collect sums ranging from £80 million to £90 million but I think we might be talking of figures in the region of £10 to £12 million. However, that is quite a substantial amount. I share the view put forward by Deputy Sherlock. I have constituents in Dún Laoghaire who have to pay very high rents. In a four storey dwelling there could be five or six families paying rents ranging from £25 to £30 per week for one room and kitchen and sharing toilet and bathroom facilities. Many young married couples are paying such rents. Deputy Gregory drew the analogy of a housing officer demanding rent receipts. In Dún Laoghaire the corporation give points in respect of rent paid relative to income and we award additional points to tenants on the housing list but they must produce proof of payment. Dublin County Council do not award such points. In any event, there is an income ceiling requirement to qualify for a house. It is fair and reasonable that tax relief be given even while people are on the housing waiting list.
I do not accept the view put forward by Deputy O'Dea that a landlord automatically would put the cost on the rent. We tabled amendment No. 41 but unfortunately it was ruled out of order. We wanted the establishment of rent tribunals. I accept that this matter must be approached in an integrated way but I would point out that the Dáil did not introduce a system of rent tribunals despite lavish promises to do so. This was set out in the manifestos and programmes of various political parties. There was the notorious letter written by the Fianna Fáil Director of Elections, Senator Eoin Ryan, in the 1981 general election where, on official Fianna Fáil notepaper, there was an absolute assurance that rent tribunals would be established in the following session. Promises have been made, particularly to backbench Deputies behind me, that there will be a system of rent tribunals but the Dáil will go into recess on Friday week and we will not come back until the end of October. In the meantime there will be no rent tribunals.
Worse than that, we have compounded the problem because as from 25 July next 25,000 or 30,000 tenants in private rented dwellings will not have any protection although I accept they may get supplementary social welfare benefits as a contribution towards their new rents. I will give the House an example of what may happen. Without giving any names, in Blackrock there are six or seven houses privately owned that were covered by the regulations. The tenancies were protected. However, the landlord has informed the tenants that from 1 August they will have to pay between £140 and £180 per month. I cannot imagine that the Minister for Social Welfare will produce a massive subsidy for such tenants. Under the new regulations he may give a subsidy of £25 per month but I have no doubt that the tenants will be faced with a very heavy financial burden. Many thousands of people in protected tenancies will have to pay massive increases in rent but they will not get any tax relief on the increases. That will apply to 30,000 people. In this year's budget the State has provided approximately £6,500,000 to give an element of subsidy to such tenants but they will experience great hardship in meeting the enormous rents that will be demanded. People in that position, particularly those on low income, deserve a minimum of tax relief and that is why I favour it.
My colleague, Deputy Taylor, has drawn attention to the exceptionally favoured position of some people. I happen to be one of those who had the good fortune or foresight to buy their own dwellings. In 1964, I bought a four-bedroom dwelling for £3,600. Repayments are currently about £6 per week and I own the dwelling. The dwelling has appreciated over a period to £40,000. I have also received rates remission on it and mortgage interest relief. I am in an extraordinarily favoured position relative to people down the road from me who are renting a similar dwelling for £240 per month and getting no tax relief. There is an imbalance in favour of the private landlord and the introduction of tax relief is fair and reasonable. Amendment No. 33b is a reasonable amendment.
The Minister may work himself into a political panic on the basis that the Finance Bill might be amended. So what? It may cost £6 or £7 million in terms of the State having set aside that amount for tenants of private rented dwellings. But the Minister should have set aside about £14 million because, when all the judgments come down from the courts, there is going to be a terrible crucifixion of tenants in private rented dwellings. If the Minister accepts a particular amendment, so be it. That is the wish of the House and I do not think it will essentially destroy the integrity of the budget, provided Deputies behave in a responsible manner in terms of introducing amendments and provided that we do not regard the Finance Bill as a Dutch auction. I am sure no Deputy thinks that, if the Minister accepted one amendment, many more could be tabled. That would be quite untenable and the very antithesis of attempting to get a Finance Bill through the House. The Labour Party favours 33b on balance. We have not heard from the Minister as to the relative costs and I would be glad to have that information.
I listened very carefully to Deputy O'Dea's comments on amendment No. 34 in reply to previous speakers. I suppose it is only natural that Deputy O'Dea, being a landlord, has considerable experience of letting accommodation and that he would make the case for landlords. My amendment was intended to relieve hardship in cases of distress in rented accommodation. There is an obvious need for a rents tribunal because too often tenants are at the mercy of market rents. The whole question of market rents has gathered strength but the concept of a fair rent has not been underlined to the same degree. Of course there is much tax evasion in this area by landlords. I have experience of this tax evasion in Limerick because there has been a big influx of students into the city with the setting up of NIHE. Deputy O'Dea must be aware of that because his previous employment was in that institution. The city was not geared to provide accommodation for all these people. There was also an influx of workers with the setting up of the Alumina project on the Shannon Estuary and it was an El Dorado for speculators. It is common to see houses being turned into flats and sitting tenants dumped out on the street in a cruel and callous way to provide accommodation for flats. Sometimes there are as many as nine or ten flats in a house which had previously been occupied by one family. The amount of income from such a house is very high and the amount of tax paid by the landlord is small. That is going on a big scale in Limerick.
It is very hard to do something about these abuses, but on the other hand you cannot throw your hands in the air in horror and say you cannot control it. There must be efforts made to go after landlords and make them pay their fair share of tax. The situation is very difficult for newly-married couples who are looking for accommodation. A number of students can share the same flat but that is not so in the case of a married couple. In Limerick there are 1,000 people not on the list who are looking for houses and there is a terrible scramble at the very bottom by people looking for accommodation while they wait to be housed. The human factor must also be taken into account. Landlords have rights, but so have tenants. I think the rights of landlords in private property are regarded as superior to the rights of people to decent housing and accommodation. We have attempted to counterbalance this in our amendment. Deputy Gregory's second amendment could also be difficult because it is hard to enforce a means test and that is what he is seeking.
There is also abuse with regard to fire regulations which are often totally ignored. I have looked at Deputy Gregory's amendment and listened very carefully to him and I am willing to support his second amendment as being a step forward. I am not fully happy with it, but his views are preferable to those of Deputy O'Dea.
The general principle of providing subsidies through the tax code is not one which we favour but there is an obvious need for some steps to be taken to provide relief for people who have to place themselves at the mercy of private landlords. The provision of these reliefs, both to those who have mortgages and to those who rent accommodation, adds to the number of loopholes that already exist in the tax code for those who successfully evade paying their fair share of tax. Possibly there are three grounds for extending these reliefs to the private rented sector, giving them parity with people who have mortgages. It would be intended to provide at least some assistance to those now paying high rents. Also it would constitute a method of endeavouring to ensure that landlords register so the tenant would qualify for the relief.
We have put down an amendment, I think No. 42, seeking that whatever regulations are implemented under this section will have teeth and that landlords who fail to comply with the registration requirements be fined £1,000. Unless some such provision is implemented the effect of this amendment will be practically entirely increased rents payable by those at present paying such rents.
It has been suggested that there is not a lot of evasion taking place in this sector. A number of Deputies have cited examples of situations of which they are aware. I might give one example of two houses in the Rathmines area owned by the one person. He has broken these houses up into single-room flats, has installed bottle gas heaters in each room and is charging £30 per week for each single room to unfortunate single persons and married couples provided, of course, they do not have any children. Therefore his net take from those two houses amounts to £400 per week. There is no way that that is justifiable. Any relief this amendment might afford would be beneficial. The Revenue Commissioners must be given some teeth, or some ability to chase such landlords, to ensure that the rents they reap from such people are taxed in a fair way.
Having said that, unless also rents tribunals are established, even the taxation of landlords will result in these unfortunate tenants having to pay even more rent. Experience has shown that where the building industry or landlords are given concessions, those concessions are not passed on to tenants. Two examples spring to mind. One is the £1,000 grant to first-time buyers of houses, the net result of which was that, within three months, the cost of houses rose by £1,000. Also the elimination of rent on private dwellings—which passed also to private landlords—did not result in any reduction in rent for the tenants of houses or flats. In fact it is fairly common now, and seems to be becoming an established practice, for landlords to evict tenants on a regular basis in order to prevent such tenants either reporting them to the Revenue Commissioners for tax purposes or so that they can raise the rent. Again I can think of one specific example of a landlord who changed the tenants of his house three times in the past 12 months and, on each occasion, raised the rent. In that case a rent which commenced 12 months ago at £20 per week per room is now £35 per week per room. There is clearly widespread exploitation of people who cannot afford to buy their own homes. Neither is it a question of foresight, as Deputy Desmond maintained. There is very little chance for any young person or married couple who must pay out £35 per week for a room to put together a deposit for a house and or the costs of a solicitor and so on.
A practice has developed in the Dublin area of landlords whose married tenants, when they have a child, are put out on the street. In the past month or so Dublin Corporation have had a list of 21 families in one week who were put out on the street as a result of private evictions. Under the law obtaining a local authority is bound to make an offer of accommodation to such families. In effect, therefore, private landlords are using the law and the obligation on local authorities to rehouse homeless families to gain additional rent for themselves and avoid a situation in which they have families with children living in their flats.
To summarise, I should say the idea of extending the tax relief to tenants could be of immediate benefit but, in the long-term, the net result will be higher rents. Indeed even the advantage of having landlords register may result in higher rents unless this House gets down to tackling the whole issue of fixity of tenure for tenants, security and a fair rent. The only way of doing so is to provide rents tribunals. This House dealt some months ago with rent restricted tenants. There is a firm commitment given to the House that the Minister for the Environment will introduce rents tribunals in place of district courts in that area. There is, certainly in the Dublin area, something in the region of 100.000 private flatdwellers. These people are literally being crucified by private landlords. I emphasise that the responsibility rests with this House to introduce legislation to prevent that practice being continued. The benefit I see in this amendment is that, to some extent at least, it will ensure that the private landlord must register in order that the tenant may benefit from the tax relief.
I want to reiterate that my principal concern in putting forward these amendments was to assist those people most in need. I am concerned with that specific principle, not necessarily with the actual detail of particular amendments. I welcome the support of various Deputies of the Workers' Party, Deputy Kemmy, the Labour and Fine Gael Parties for the principle inherent in these amendments. I also suspect that my amendment, No. 33b may perhaps be the better of the two because it should discriminate more in favour of larger families, widows with children and so on, rather than the blanket income limit imposed in amendment No. 33a.
When replying I would ask that the Minister give as detailed information as possible on two aspects brought to light so far. The first is the whole question raised initially by Deputy John Bruton in his reference to the reports he had in the past from the Revenue Commissioners that there was a vigorous campaign perpetrated against landlords that was largely successful, that the amount of income accruing to landlords not now being taxed was fairly small and that, consequently, if this were now taxed it would not amount to a great deal. I find it extremely difficult to accept that view. Can the Minister indicate to us specifically what information he has available to him in regard to the amount of money currently coming into the Exchequer as a result of taxation of landlords and what would be the projections of his officials if my amendments were agreed and if landlords, who have previously undeclared income, were taxed?
I believe strongly that a large number of landlords still have undeclared income, still evade tax on a significant scale. I accept what Deputy Desmond said that it may not be enormous, in the region of £80 million to £90 million, but it would be something significant. He suggested that it may be in the region of £10 million. If that amount could be made available I consider that a very significant sum. It would be a major step towards a more equitable taxation system if the guilty landlords were forced to pay this. That is why I have emphasised in further amendments the process by which that income can be taxed.
I would like to reiterate what Deputy J. Bruton said in relation to the second question. If for reasons of cost amendment No 33a is not acceptable to the Minister, would he indicate if any taxable income is acceptable to him as a level which would provide at least the first stage towards achieving the equity so many speakers have said they are concerned should be achieved?
It is very hard to reply in detail to the points which have been raised, some of which have been accepted in principle. It is very easy to accept something in principle. I would like to deal with amendments Nos. 33a and 33b first. If the intention behind those amendments were accepted it must be appreciated that a very complex system for accounting for his income and rent by the taxpayer would be required to enable the scheme to operate at all. Some system of marginal relief would be required, where a taxable income is just in excess of £4,500 or £7,000 income or, in the case of weekly payments £87 and £135 a week, for the purpose of phasing out the relief.
With the existing PAYE system the relief could only be given by a refund of tax at the end of the year of assessment because it would not be possible to forcast in advance if the taxpayer's taxable income would exceed £4,500 in the one case and, in the other, £7,000 income, if in a particular week or weeks his taxable income would fall below £87 or £135 or if marginal relief should be accorded to the taxpayer because his taxable income would be somewhat over £4,500 or £7,000. It would not be possible to have a workable arrangement whereby the employer would adjust the employee's tax deduction in particular weeks without reference to the tax office. It would be impossible to adjust the PAYE system to provide for intervention by the tax office on a week by week basis. In the case of self-employed it would be impossible to allocate their income on a week by week basis. I should also say that if a single person with £7,000 or £4,500 taxable income is entitled to relief a very strong and plausible case could be made on the basis of the Murphy decision that a married couple should be entitled to relief if their combined income did not exceed £14,000 or their taxable income was £9,000.
I would like to refer in general to the section which deals with this matter and to quote from the budget speech of 27 January when Deputy Bruton said:
The Government programme proposes a tax allowance for private tenancies up to a maximum of £1,000 rent. The full implementation of this would, it is estimated, cost in the region of £15 million to £20 million in a full year, in tax foregone. In present Exchequer circumstances this could not be afforded. In order to focus first on the area of greatest need, the allowance will be made available to taxpayers aged 65 and upwards who live in private rented accommodation.
The Government have accepted the view that a tax relief for all private tenancies would not be feasible in the present economic circumstances. The allowance has been retained specifically in order to provide relief for the elderly, who, as we all know, are a specially deserving section of the community. That was the information in January. On the basis of up to date information, to extend it right across the board would cost in the region of £30 million in a full year or £20 million in 1983. Amendment No. 33b would cost £16 million in 1983 and £25 million in a full year and amendment No. 33a would cost £16 million in 1983 or £24 million, £1 million less, in a full year. There has been a lot of talk about the balancing of the scale.
(Waterford): On a point of order, would the Minister please repeat the costings in relation to amendments Nos. 33a and 33b?
Certainly. The costing in relation to amendment No. 33b is £16 million in 1983 or £25 million in a full year and the costing in relation to amendment No. 33a is £16 million in 1983 or £24 million in a full year. The cost of the full allowance would be £20 million in 1983 and £30 million in a full year. This is amendment No. 34. There has been a lot of discussion about the balancing that would take place because of the fact that landlords would now be obliged to pay tax since the tenants would not get this benefit unless they named, and the Revenue Commissioners got to know about, the landlords. A lot of landlords are already in the tax net and we cannot at this stage estimate what extra revenue would accrue from the operation of this new proposal.
Deputy Gregory asked me to give the information vis-à-vis the existing amount of money taken in from landlords. I cannot give that information because it is buried in the overall taxation system. I believe for Dublin there is one section in Dublin Castle dealing with landlords but that is not the case throughout the rest of the country. It comes in with all the taxation and not specifically from landlords. I would also like to say—I am sure Deputy Bruton appreciates this—that it will take a lot of time before this new system finds its way down to the landlords. It becomes operative next year. The Revenue Commissioners will have to check; all the landlords will not come in and say that as a result of these proposals they are liable for tax. The Revenue Commissioners will work hard to make sure that everyone of them do, but it will take time. It will be some significant time before a large amount of money is forthcoming to the Exchequer from those new proposals.
I cannot accept the amendments, primarily on the grounds of cost and, secondly, on the grounds of the difficulties which would arise under PAYE and which could be resolved only by resort to repayments necessitating a very large number of end of the year reviews. Deputy Bruton and his party in their programme for Government outlined the wish to do something in this general area. But, as he said on 27 January, because of the cost, which is now much more than was expected at that time—£20 million to £30 million or £16 million to £25 million, whichever way you want to look at the amendments — it was only possible to do it for the over 65-year-olds. That is the position. One can accept that the principle has already been established. This is relief that has been introduced for the over 65s. I have given the reaction to the amendments. I am sure Deputies will appreciate that I could not anticipate what might be in any future budget in relation to the extension of this benefit.
Progress reported; Committee to sit again.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.