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Dáil Éireann debate -
Wednesday, 7 Jul 1982

Vol. 337 No. 6

Finance Bill, 1982: Committee Stage (Resumed).

Question again proposed: "That section 17 stand part of the Bill".

We have not a great deal of time to discuss this Bill and there are some serious amendments to be dealt with, particularly in relation to the imposition of VAT at points of entry. I wish to refer to the concept of a resource tax on all holdings of £70 rateable valuation and over at a rate of £3.50 per £1 rateable valuation. I did not think that it was ever a good form of tax. Neither am I in favour of flat levies on income such as the youth employment levy. Taxation must be related to income.

While I am extremely critical of successive Governments from 1977 onwards, to his eternal credit Deputy Richie Ryan when Minister for Finance made a brave and tremendous effort to regularise farm taxation and there was considerable progress between 1974 and 1976. The Governments should have stuck with that form of tax for a number of years. I am opposed in principle to the refunding of taxation but nevertheless I will not press to a division my opposition to the section.

The Labour Party are opposed to the refunding of tax of this nature which was part of the annual budget. I was unhappy about it then, but so be it. The Deputies behind me who have spoken have equally stated their opposition to such refunding. The Labour Party were part of the Government which agreed to make the refund and I do not propose to go back on that. I am, however, entitled to make my opposition known. I hope that we can forget about agricultural levies and resource tax on the basis of rateable value because that as a criterion is wholly outdated and does not relate to actual farm income. I have always thought it inadequate as is the concept of youth employment levies, flat rate health services levies and bank levies. The income and profits of banks, of farm incomes and of other sectors should be taxed equally on an income tax account basis. That is the only way to do it. Otherwise, levy systems are abused and in general are not successful. They are all, as we know, just as the 1 per cent levy on farm incomes was, regretted.

I am unhappy about the provision in this section but do not wish to waste time. At this stage it is a relatively small amount of money and the whole section on resource tax is being wound down. I hope that this House, and particularly the main parties, will have the political courage to introduce a comprehensive income tax account system. I have no doubt that the Commission on Taxation would strongly recommend something along these lines. That report will vindicate strongly the views expressed by Deputies on this side of the House and in time, no doubt, an effective system will be introduced. From that system there should be about £60 million to £70 million a year in farm taxation as of now, instead of the messing which has gone on over the past six or seven years. That would bring equity into the question of farm taxation versus PAYE taxation. That equity is sadly lacking now in the overall taxation system. I sympathise with, fully understand and agree with the reaction of PAYE wage and salary earners when they see the discrepancies which exist at the moment. I quote from an interesting union magazine Liberty of February 1981, which sums up the position relative to farm taxation. It states:

...last year,

——that was 1980——

only one-third of all full-time farmers were liable to tax, no matter what their income was. This minority of full-time farmers, this one-third, only paid an average of £694 income tax while the PAYE workers paid an average of £1,345. Therefore the 120,000 full-time farmers paid only an average of £208 in 1980.

It went on:

The trade union movement wants all farmers to pay income tax in the same way as workers, if their incomes exceed the very low allowances.

I certainly share that view. The Commission on Taxation will vindicate a fair segment of all views which I have been expressing in this House since 1969. I look forward to reading the Commission's report.

In the interest of expediting the further 80-odd sections of this Bill — particularly as, since we have now lost one of our more distinguished Members, we are not likely to succeed in any vote in that context — I formally oppose the section, but do not want it to be put to a division.

I also do not want to waste the time of the House. A great deal of time has been spent discussing this issue, but I disagree with the previous speaker. It is a very important issue on which this House should have an opportunity to register its protest — certainly those members who have spoken against this section and asked for its deletion. I am one of those who put down this amendment and feel very strongly that there should be a division on it. I will give my reasons for this very briefly. It is incredible at a time like this that a Government should pay back a tax already legally collected when we are told that the country is in a major financial crisis and when all sections of the community are being urged to show restraint. We were told yesterday that there was not sufficient money to make income tax concessions to the most vulnerable section of our community: people in private rented dwellings. In that context it is amazing that any side of the House and any group of Deputies should countenance the handing back of legally collected tax.

There are two other points which I would like to make in support of deletion of this section. First, it has been suggested, particularly from Deputy Bruton's side of the House, that farmers in various ways pay a certain amount of taxation. That argument has been rejected by other speakers. I will not deal with it at any length, but certainly could not support that view. With what we all know is an inequitable tax system, weighing heavily on one section of the population and not weighing at all on the farming class, to hand back a legally collected tax just simply is not on. One point which has not been highlighted and should be is the whole anti-democratic nature of the opposition to the tax. When the Dáil approved the tax, the farmers refused to pay it. It was as a result of that rejection of the democratic process that the Government conceded and agreed not only to forget about it but to pay back the amount of tax which had already been collected. If for no other reason than that there should be a division on this issue and the Deputies who have maintained that they are opposed to the section should be given an opportunity to vote in that way.

Question put.

Will those Members opposing the section please rise in their places?

Deputies Gregory-Independent, Sherlock, De Rossa, Gallagher (Waterford) and Kemmy rose.

As there are fewer than ten Members opposing I declare the section carried and the names of those dissenting shall be recorded in the journal of the proceedings.

Cá bhfuil Pairtí na Lucht Oibre?

Question agreed to.

SECTION 18.

Question proposed: "That section 18 stand part of the Bill".

The purpose of this section is to exempt from income tax and corporation tax payment of the employers' employment contribution scheme which is established by the Employers Employment Contributions Scheme Act, 1981, and employment grants under section 2 of the Industrial Development (No. 2) Act, 1981. It is to regularise a procedure which existed already.

Is this section retroactive?

It is already in operation. We are legislating for it now.

The Minister cannot be serious. In other words, he is legalising something which was technically illegal when it was done.

It existed in the Deputy's time too.

Question put and agreed to.
SECTION 19.

Amendments Nos. 52 to 59 will be taken together by agreement.

I move amendment No. 52:

In page 28, subsection (1) (a), between lines 36 and 37, to insert the following definition:—

"‘heritage garden' means a garden to which subsection (4) applies;".

In this amendment we are seeking an extension of the section. It should not cost anything but it would be of considerable benefit to the country. The Minister is aware of the recommendations of An Taisce and the various points made by owners of heritage gardens. Many are of particular historical and botanical value and major scientific interest, and in a nation of Philistines their aesthetic value should be of benefit to the nation as a whole. As a member of a local authority looking around and seeing so many magnificient areas denuded of trees and gardens which were once the pride of our country, I suggest that there is no good reason why, if this tax benefit is given to historic buildings, it should not be extended to the gardens surrounding, and I recommend this to the Minister. I will be interested in his view. A finance Bill should encourage the owners of such properties and should give them tax relief. Finally, the care, maintenance and development of such gardens are labour-intensive and as such would be of benefit in the overall employment situation. With that case on our behalf I ask the Minister to consider the recommendations put to him here and I will be very interested in his response.

I support the amendment proposed by Deputy Desmond. It is reasonable to include heritage gardens also. The only concern I would have would be as to how you repair a heritage garden. I can see how you can repair a building, but then I suppose it is possible to maintain a garden and perhaps this is covered in the section.

I have two things to say in general terms about this measure. First of all, this proposal of introducing tax relief for heritage houses is one that my party supported in their election programme and I am very glad that the Minister is proceeding with it. I compliment him on that. It shows a degree of cross-party interest in our heritage, something on which we all congratulate ourselves. The other point I want to make perhaps would be more appropriate on the section, but I hope that the relief will not be confined solely to big houses. I would like to see a typical cross-section of all types of houses including the most humble cottages and agricultural outbuildings preserved, because we must see the totality of our heritage and not just its most flamboyant expressions.

Taking the last two points first, it does not matter about the size of a house so long as it is of suitable historical value and the public have access to it, and therefore it will be covered. The amendments Nos. 52 and 59, inclusive, propose in effect that tax relief be given for expenditure incurred on the repair, maintenance or restoration of a house or garden which is intrinsically of historical, botanical, scientific or aesthetic interest. It should be noted that the section as it stands is sufficiently wide to grant relief in respect of any buildings there may be in a garden even where there are not dwelling houses. The amendment could not be accepted in the form proposed because the definition is too loose and would leave the provision open to abuse. It is not clear what the intention of the word "heritage" is. Does Deputy Desmond wish his proposal to embrace only gardens or houses of historic interest? As Deputy Bruton said, the boundaries of such gardens would be difficult to define. Most gardens could be claimed to have some aesthetic or botanical if not historic or scientific interest. It is surely not contended that the wages of every gardener or other staff employed or alleged to be employed on a wholetime or part-time basis in tending such gardens should be subsidised in substantial part by the general taxpayer.

On the broader principles involved, it is considered that the proposal should not be accepted as it would widen the scope of the section far beyond the original intention which was that significant buildings which normally had several hundreds of years of lifespan would be preserved. It is questionable whether the issue of tax relief in respect of gardens is relevant at all in the context of this section. The proposed amendment is hardly necessary in view of the fact that residence-related relief is already available in respect of a garden attached to the dwelling. Under section 7 of the Finance Act, 1979, tax relief is granted in respect of the labour costs comprised in expenditure on the maintenance, repair, improvement etc. of residential premises the definition of which includes the garden or grounds of an ornamental nature. Section 7 of the Finance Act, 1979, is proposed to be continued for 1982-83 by section 12 of the present Bill which we have already dealt with this morning.

I suggest to the Minister that between now and Report Stage he might have another look at this amendment. Any such garden would have to be in the first instance submitted to the Commissioners of Public Works as is provided in relation to buildings in question. We are talking about relief from income tax and corporation tax. It would not be a widespread relief; it is that element of relief that would be given. We are also talking about gardens to which the public would have access. There are many gardens around the country — many Deputies can think of them in their own constitutencies — which have not historical buildings on the site, yet the owners may be considering letting them go to wrack and ruin because the income for the care and maintenance of them would be very minimal. I am very anxious that such gardens, particularly where, as I have indicated in our amendment, they are of botanical and scientific interest, while not usually very profitable, revenue-making types of garden, are of themselves a major national asset which people in the UK, France, Germany and all over the world would dearly love to visit and indeed in terms of professional work they often avail of facilities therein. Perhaps between now and Report Stage the Minister will have a look at this. Some leeway could be given and the relief from income tax and corporation tax would be very small, but it would do what was done effectively for artists. It would give to those who have a personal inheritance eligibility for that relief which should not be abused because the regulations determing that eligibility should be very tight. I will leave it with the Minister. We all recommend that that be done and it would be of major cultural significance if such relief was available.

I thank the Deputy for his views. One can be sympathetic to the intention here, but the difficulty is the definition of a garden and the dangers of abuse, as I have said. I am not going to repeat myself and delay the House but the Deputy has requested me to have a look at it and I will ask the officials concerned to look in detail at it between now and Report Stage to see if there is any way in which the intention here can be prescribed in legislation. However, from the information I have I understand that there are dangers vis-á-vis the definition and the possiblity of abuses.

Amendment, by leave, withdrawn.
Amendments Nos. 53 to 59, inclusive, not moved.
Question proposed: "That section 19 stand part of the Bill".

While I have the greatest sympathy with the Minister in seeking to draft legislation of this sort, I feel that the provisions of section 19 (4) (a) (i) are very vague. They say that the Commissioners of Public Works in Ireland may determine a building to be intrinsically of significant scientific, historical, architectural or aesthetic interest. That is so wide that you could almost justify including any building, including the most modern building, under that prescription.

On the grounds that it represented an innovation in architectural practice, a building built last week could be deemed to be of architectural significance. Perhaps it could be described as of scientific significance if a new form of material were used in the building even though it was built last week. On the question of aesthetic significance it is generally accepted that beauty is in the eye of the beholder. I am not sure that everyone would necessarily accept the aesthetic judgment of the Office of Public Works, any more than the Office of Public Works might accept my judgment or the Taoiseach's judgment or Deputy Desmond's judgment on a matter of aesthetics. There are definitely problems when one is trying to legislate what is or what is not of aesthetic significance.

I raise this point not because I am concerned to restrict the operation of the allowance. I realise that I could be criticised by others for raising it because perhaps it might have that effect. I raise it because I am afraid that the fact that one person might be deemed to have a building of aesthetic significance and another person deemed by the Office of Public Works not to have a building of aesthetic significance, could lead to a sense of injustice and, perhaps, even to litigation which would be to nobody's benefit.

I realise it will not be possible between now and tomorrow for the Minister to come up with a definition of "aesthetically significant" which would be acceptable to anyone except himself. I wonder should we not have in the section a regulation so that, at some time in the future, the Revenue Commissioners and/or the Office of Public Works could be empowered to make regulations which would have to be laid before this House and approved by it, rather than simple regulations which are introduced in the normal course and become law by default, giving a more precise definition of the terms involved here so that there will be a corpus of law, if you like, which will enable people to see a little more clearly whether or not they come within the intended ambit of the concession.

Otherwise I can see many problems arising with people feeling they should come within it, and the Office of Public Works telling them they do not, when it is one man's aesthetic judgment against that of another, which is not a very sound situation. It could end up with them taking the matter to court and then the aesthetic judgment of the Chief Justice would over-rule that of the Revenue Commissioners or the applicant. In a matter of aesthetics, the Chief Justice has no more standing than anyone else. If that happens, it will be because we in this House were not sufficiently precise in the legislation we enacted. To avoid having to spend all day arguing about it, perhaps the suggestion I have made to the Minister about a regulation making power, similar to the one he has included in earlier sections where we were introducing new provisions in regard to rent relief could be incorporated in this section to enable him to ensure that the type of problem I mentioned does not arise.

The second point I want to raise is the one I raised on the amendment, and I feel extremely strongly about it. As the House is aware, it is a subject in which I have taken some interest since I was elected. We do not want this section to be used solely to preserve what is known as the "big house". I have no objection to the people who built the big houses or whatever traditions they represent. Quite the opposite. We must be prepared to preserve a broad cross-section of all types of heritage items, down to the most humble thatched cow-shed, or thatched cottage. A broad cross-section of all aspects of our material history must be sought to be preserved.

I am afraid the Commissioners of Public Works may take a conventional view of what is an historic house and go on the basis that it must be a big house with "beautiful things" in it. I know the interpretation of beauty the cognoscenti have is not necessarily the same one as other people might have. We must instruct the Commissioners of Public Works to concern themselves with all aspects of our material history, including the material remains of the poorest of our forebears as well as the best off of our forebears. I hope the Minister will ensure that that is the attitude the Commissioners of Public Works will take and, if necessary, the legislation can be clarified to make sure that they take that view and do not confine themselves solely to the "big house".

I am sure the Commissioners of Public Works will be liberal in their views. While I would not argue against or disagree with the general points made by the Deputy, now that we have introduced this we should wait and gain some experience from its operation. The Deputy referred, rightly, to the Office of Public Works. We are also in the process of setting up a National Heritage Council and I am sure they will be asked for advice on these matters. Advice can be sought from various authoritative sources on particular buildings. We can look at the necessity to have regulations but this would arise only in the light of experience gained. I am sure the Office of Public Works will be liberal and open.

For the sake of clarity, I do not agree that simply taking the advice of many people will solve any problem which may be created if the legislation is not sufficiently precise. If the initial authority is vague, the advice given will be vague particularly on such a subjective matter as this. We should have a regulation making power to determine these terms more precisely, in the Minister's interests as much as that of anybody else. I do not want them to be liberal in the sense of giving the allowance to anybody. They should be sufficiently comprehensive in their view on what is historic in the sense that they will include items of material tradition which are not solely those of the "big house".

Is section 19 agreed?

I have taken note of the points made by Deputy Bruton.

Can the Minister give us even the vaguest idea of what he means by "reasonable access to the public"? Would one day a week suffice?

So long as there is public access. It will have to be of a general nature. Once a week is not specified.

Subsection (4) (b) (ii) refers to "subject to temporary closure necessary for the purposes of the repair, maintenance or restoration of the building, access is so afforded for not less than one hundred days in any year..." That is a little too restrictive. It is one-third of the year. We will not get many owners of historic houses to agree to that. People might be prepared to agree to have their places open on Sundays.

The hope is that these will be homes in which people are living. If a thatched cottage is opened to the public there will be no privacy left. If your house is sufficiently big, you might be happy to allow people to tramp all around one way of it for 100 days in every year, and thereby get the tax allowance for maintaining the whole of it. If we are talking about opening a three-roomed thatched cottage, which it is just as important to preserve, for 100 days out of 365, the invasion of your privacy will be so great, and the necessity to have somebody there with the key will be so great that the staff costs will far outweigh the benefit to the owner of opening the premises.

It must be remembered that in keeping the house open to the public it is not enough simply to say one will be there on a certain day. The owner has to stay for the day, has to open up the house and show the people around it. All of that will cost a significant amount and if they are not there themselves they will have to arrange for someone to be available. I suggest to the Minister that we delete the figure of 100 days and bring it down to, say, 30 days a year. That would be quite sufficient to meet the requirements.

I accept what the Deputy has said. We will leave it at 30 days.

Good. That is decisiveness.

It is understood that will be done by way of amendment on Report Stage.

Question put and agreed to.
SECTION 20.
Question proposed: "That section 20 stand part of the Bill."

This section gives effect to the proposal announced in the budget that entertainment expenses incurred after 25 March 1982 will not be allowed as a deduction for the purpose of income tax or corporation tax. Entertainment expenses include expenses incurred in the provision of accommodation, food, drink or any other form of hospitality. Hitherto, 50 per cent of entertainment expenses, to the extent that they were incurred wholly, exclusively and necessarily for the purpose of a trade or a profession, were deductible. The section also provides that capital allowances will not be granted in respect of assets used for entertainment with effect from 1982-83 for income tax purposes and for accounting periods ending on or after 6 April 1982 for corporation tax purposes.

Representations have been made by the Confederation of Irish Industry to the effect that the restriction could be relaxed in respect of entertainment of foreign customers. Frankly, I do not think it is possible to make that distinction.

I agree with the Deputy that it is not possible. For instance, in a party of 12 people six could be foreigners and other six nationals. It would not be possible to make the distinction. A similar case has been made in respect of bed nights in hotels in relation to VAT. As a former Minister for Finance, the Deputy will appreciate that it is not possible to police such situations.

They have this distinction in Britain for the purpose of foreign orders but my advice from the people sitting beside the Minister was that the distinction was not really working in Britain.

How effective is the provision and the policing of this matter? I have heard of a major building group whose account for a suite in a Dublin hotel was in the region of £20,000 per month. They may not have paid for the last few months but I know their expenditure was in that range.

Is this the group that disappeared?

They are alive and well but are allegedly penniless. There is a great deal of entertainment done in boardrooms. The days are gone when business clients are taken to fancy restaurants. However, within the confines of the modern new office blocks there are boardrooms with kitchens attached and I defy any inspector of taxes to put an estimate on the amount of largesse dispensed in that area. Business entertainment in its conventional sense has changed dramatically. I should like to know how successful are the Revenue Commissioners in making assessments with regard to this matter. I am in favour of this section in the Bill. It is significant there has been a major downturn in the trade of many expensive and middle-priced restaurants and this must be an indication that the benefit in kind was of considerable proportions. I have often wondered about boardroom entertainment. It must require tremendous powers of detection on the part of the inspectors of taxes if they are to get on top of that problem.

Has the Minister any figures on the cost to the Exchequer?

Is the Deputy inquiring about the yield to the State? The answer is none in 1981 but for a full year it is estimated in the order of £3 million.

How many people benefitted? There must have been some people who did nothing else but eat and drink all day.

It shows the abuse that existed.

It was not really abuse.

In reply to Deputy Desmond, subsection (4) defines business entertainment for the purpose of the section and broadens its meaning. Whereas the definition in existing law describes business entertainment as entertainment, including hospitality of any kind, provided by a person or a member of his staff in connection with a trade carried on by that person, the term as now defined will cover such entertainment, including the provision of accommodation, food and drink or any other form of hospitality in any circumstances whatever, provided directly or indirectly, in connection with a trade by (a) the trader himself; (b) anyone who is a member of his staff; or (c) anyone providing or performing any service for the trader in the course of which entertainment is provided. This provision is intended to cover, for example, the situation where an advertising agency or public relations firm organises a trade promotion in the course of which entertainment is provided for potential customers and includes the cost of entertainment in the overall agency charges. The entertainment element of such charges will be disallowed and the inspector of taxes will be empowered in subsection (8) to apportion payment so as to exclude the entertainment element.

I am not aware that there were abuses of the system. I accept that £3 million is a very considerable amount but against that, as Deputy Desmond pointed out, it is noticeable that there has been a remarkable falling off in the amount of public entertainment in restaurants and hotels. The sum of £3 million lost to the Exchequer is one thing but the loss to hotels and restaurants may be in excess of that figure. Business entertainment creates employment for hotels and restaurants.

Last year it was reduced by 50 per cent and evidence shows that there was no reduction or deterioration in business in restaurants as a result and that is accepted by the trade also. If a concession is removed from a person's business there will obviously be criticism. This was excessively used — maybe that is what I should have said rather than saying it was abused — but the 50 per cent reduction did not reduce that trade.

I am sure Deputy Markey is not surprised to hear I do not agree with him on this matter having introduced this provision. This provision could lead to a reduction in prices in some of the more expensive restaurants because there are some restaurants which have been living on tax-subsidised custom. The ordinary diner who is not getting a tax subsidy cannot afford the prices now being charged. Some of these restaurants will now find that in order to keep business they will have to bring down their prices to something that people who are paying their own money can afford. In the interest of social solidarity — and we must have much more social solidarity than previously if we are to overcome our problems — the conspicuous consumption that is represented by some of the prices in some of our more expensive restaurants is not helping us to pull together as a community. Although this will raise only £3 million, it will ensure that we are all treated the same.

In that regard may we hope to see a table for two tax inspectors? When people report publicly that in allegedly middle range restaurants they pay £40 or £50 for a routine dinner, which is the equivalent of the total payment to a widow with two childen for a week's social welfare, eyebrows rise at the very point that Deputy Bruton has made, namely social solidarity. It is an interesting phrase. I suppose it is Swedish. I welcome the section and the information provided by the Minister has underlined the need for the abolition of that privilege.

Question put and agreed to.
SECTION 21

Amendments Nos. 60 and 62 are related and may be discussed together.

I move amendment No. 60:

In page 33, subsection (2), lines 11 and 12, to delete "subsection (8)" and to substitute "subsection (9)".

Amendment No. 60 replaces an incorrect reference to subsection (8) with the correct reference "subsection (9)".

Amendment agreed to.

Mr. Bruton

I move amendment No. 61:

In page 34, subsection (5) (a), line 44, after "purchaser" to insert "save where a couple to whom this paragraph would apply are legally separated or in the course of being legally separated,".

This is concerned with an anomaly in regard to the restriction that is being introduced here. It has been represented to me that a problem can arise with regard to the position of a couple who are separating. It says here that, notwithstanding anything in this section, a loan shall not be a qualifying loan in relation to an individual if it is used for the purpose of defraying money applied in the purchase of residential premises or any interest therein from a person who is the spouse of the purchaser. I realise that buying a house from your spouse, if relations are normal, would probably be an artificial transaction which would not need to be engaged in. However, it has been represented to me that where spouses are separated and one of them has remained in the original home of the couple and if the other spouse owns the house or a half share in it, the remaining spouse will have to buy the other spouse out. That is a transaction which has to be engaged in just as inevitably as the fact that someone has to provide a house in the first place when a marriage is established. It was represented to me that to introduce a restriction here in regard to the right to claim in the very specific circumstances of separation would be unfair. I hope that my fears in this matter are groundless, but I feel I should raise the matter nonetheless.

I accept the Deputy's intention but I could not accept the wording of the amendment. I will suggest another form of words to the Deputy and to the House but it will not cover the Deputy's amendment "in the course of being legally separated". You or I could be in that situation for evermore. I was going to suggest in page 35 subsection (5), after line 7, to insert the following proviso—"provided that the provisions of this subsection shall not apply in the case of a husband and wife who are separated". I will bring in an appropriate amendment to that on Report Stage.

The Minister's proposal is more precise than mine.

Amendment No. 61, by leave, withdrawn.

I move amendment No. 62:

In page 34, subsection (5) (b), line 46, to delete "at any time, after the operative date" and to substitute "at any time after the operative date,".

This amendment merely alters the position of a comma.

Amendment agreed to.

Amendment No. 63 has been ruled out of order.

Question proposed: "That section 21, as amended, stand part of the Bill"

While I did not submit an amendment, I would like to draw the Minister's attention to a situation that has arisen for a number of persons. I do not know how many but I have had a clear representation from one constituent of mine who has found himself in a position of extreme difficulty in consequence of the wording of section 21. He feels, not because of anyone's intent but because of the words used successively in the budget statement, in the Principal Features of the Budget officially issued and in a statement which the Minister's office issued on 31 March last, that he has been led into a financial trap which will be very difficult and embarrassing for him and from which there is no escape. I hope I can explain it well to the House. This constituent was anxious to make plans to acquire a holiday bungalow. Under the law as it stands and until the passage of this Finance Bill, he would have been able to set off a mortgage interest incurred in raising the loan to pay for this home, albeit a second home, a holiday bungalow, against income tax up to the familiar limits.

That possibility would have been open to him, he believed, under the Minister's budget statement because that statement did not contain any reference that would lead him to suppose a distinction was about to be drawn in regard to the purpose for which a mortgage was being raised between houses used as main or principal residences and houses used as holiday homes. Of course a distinction arose as he saw it — I understand there are others in the same category but I cannot tell the Minister how many— because the reference in the Minister's statement of 31 March to a principal home was to the house on which the mortgage was raised and not a reference to the use to which a house in the process of being acquired might be put.

The provisions of the March budget in so far as mortgage interest relief is concerned were identical with those of the January budget. The Minister issued an abbreviated set of guidelines for the public and the press to show the principal budget features. The statement in regard to mortgage loans set out that in so far as mortgages taken out after 5 April were concerned certain rules would apply. Income tax would be allowed in respect of the borrower's main residence and relief would be allowed only at the 25 per cent or 35 per cent rate, as appropriate, and the capital limit for relief would be £35,000. The next paragraph stated:

There will be no change in the income tax relief provisions in respect of existing mortgages.

That clearly indicated the chronological watershed to be 5 April. It clearly indicated what the regime would be in relation to mortgages taken out after 5 April — I did not notice this at the time; I would not be adverting to it now if it had not been brought to my attention by my constituent — that if that man could arrange a mortgage between the date of the budget and 5 April he would avoid the subsequent less lenient regime according to which mortgage relief in respect of anything but a principal dwelling would come to an end in 1985. I understand that other people are in the same position who had been planning to build or to buy small second houses for use in retirement and so on. They began to press the Department of Finance for a clear indication of what was meant by taking out a mortgage, what stage of the mortgage transaction must one have reached in order to have it taken out by 5 April. Accordingly, on 31 March, the Department issued a statement and I will read the central part of it:

Several inquiries in relation to the operative date for the new rules have been received from persons who are in the process of arranging such loans. These rules will apply to loans taken out after 5 April 1982. A loan will be deemed to be taken out on the date on which a written commitment is given to the persons concerned by a building society or other lending agency to advance a loan of a specified amount in respect of a specified residence being the only or main residence of that person.

Incidentally, that qualification did not figure in the explanatory material accompanying the budget statement.

My constituent was anxious not to put a foot wrong in this matter and he brought this statement to his legal adviser who said that in so far as he could understand it the expression "in respect of a specified residence" referred to the residence on which the mortgage was being raised, otherwise, the residence that would be encumbered by the mortgage to secure the repayment of a particular loan and had no reference to the use to which the object was being put and in order to purchase which the loan is being raised. It is not clear to an unpredjudiced observer even now that that construction could possibly be put on the Department's 31 March statement, and the Minister did not make it clear.

Relying on the statement the Department had put out specifically, in specific response to specific inquiries, my constituent concluded a mortgage deal on his principal residence on 2 April and sat back secure in the knowledge that he had conformed with everything he understood the Minister had told him to do before 5 April in such a way that the mortgage interest relief would be available to him until his loan had been paid off. Imagine his chagrin when the Finance Bill emerged with an explanatory memorandum which for the first time in express terms introduced this provision in respect of pre-5 April mortgages, differentiating as to use of the house to purchase which the loan was being raised.

I appreciate this Stage of the Finance Bill must be finished by 7 o'clock and I am not asking the Minister to sort out this matter here, though this seems to me to be an extremely solid point. I can guarantee to the Minister that it has left this person, and for all I know many other people, in a very severe personal jam, although those people did everything that could possibly be expected of them, including making inquiries to the Department and taking legal advice. They now feel that the rug has been pulled from under them and that they are in serious difficulties through no fault of their own. I do not mean to assign blame and I do not ask the Minister to reply now off the top of his head.

I am asking him possibly to introduce an amendment between now and Report Stage in order to take account of what must be a limited number of people who were able to get under the mortgage tape in the matter of those few days. I am alive to the point that many people would make that the State through the taxpayers should not subsidise people for anything other than their main residences. Indeed I made that point both in and out of Government. I do not think the second residence ought to qualify for relief, but if the State proposes to amend the law in that respect it should give unambiguous warning to people so that they will not leave themselves in that position.

I think the Deputy for the manner in which he has raised the point. Largely what he has said vis-á-vis 21 March and 2 June publication is true, but if the Deputy goes back to 27 January he will find that what was intended was a 35 per cent income tax band and £35,000 capital, and I doubt very much if anybody would be qualifying for a second or holiday home under those criteria. Various administrative problems would have arisen, as I explained on Second Stage. The individual the Deputy mentioned will still qualify for relief during the next three years, until 1985, in regard to the normal interest limits. Thereafter, according to the following sections, he would be able to use up to £5,000 if he is a married man for interest relief purpose.

I do not know any more of the individual concerned other than the details the Deputy has given, but taking into account the position on 27 January and 25 March, if it was possible to implement those provisions it is very doubtful if there would be anybody who would be considering a second home and who would be in the 35 per cent income tax band.

The point is that the transaction was entered into after the March budget at which stage the Minister had abandoned the provisions in regard to the 35p rate.

It was not with the publication of the Bill that we abandoned them but on 2 June.

This is the point, because when the Finance Bill shows deviation from something contained in the budget statement it usually is, although not perhaps always, as a consequence of a public fuss about the rigours of the budget and it usually shows amelioration from the taxpayers' point of view. Here is an instance of the opposite happening. I say it uncontentiously. The Minister's own accompanying statement handed out to the press and public on budget day was that there would be no change in the income tax relief provisions in respect of existing mortgages and existing mortgages cannot be interpreted, looking at this statement, in any other sense than mortgages up to the date when the law was going to change, which would be 5 April. Just to avoid all doubt my constituent and others asked what exactly this meant: what is meant by "an existing mortgage" and what is meant by "taken out." To clarify and remove doubts the Minister's own Department issued a statement on 31 March which did not make clear what has only now become clear with the publication of the Finance Bill and what was open to the absolutely honest construction I have just explained to the House.

I know that every Minister's anxiety is to get out and be finished and get clear. But before the Minister commits himself to something from which he may find it hard to climb down, would he please undertake to look at this to assess the size of the problem which might be involved in changing his Bill in ease of what I believe must be a relatively small number of people in such a way that the relief will operate not with a dead end stop in 1985 but in the way in which it would have operated without this Finance Bill at all. It is no use to say this individual will have income tax relief for the next three years. The situation of a man who is pushing on in life, who is even over the halfway mark, with regard to mortgages and the length of time he is going to be in a high earning position to repay them becomes, with every passing day, one of diminishing flexibility and mobility. It is no use telling a man who has passed the middle part of life and can now see winking at him through the leaves the sunshine of his retirement years that he will have this until 1985. He has made these plans in which he has become heavily involved financially on the basis that the relief, whether rightly or wrongly, available up to then would continue to be available to him in the same way as before. I appeal to the Minister not to close the door on this case but to consider it overnight or whatever length of time will elapse before the Report Stage to see if what I can absolutely tell the Minister is a 100 per cent genuine case and any other case like it can be facilitated.

I accept fully what the Deputy has said. As he himself suggested, we do not want to get into an argument on the details across the House. I have already explained the position and I am not going to repeat that. But the same situation can apply, apart from the period 25 March to 2 June, to many more people. I am sure there are many more than within that period who made particular arrangements for buying a second home over the last five, six or seven years with mortgages to run for ten, 15 or 20 years and they are all in the same situation. That is the reality. It is not just those caught between 25 March and 2 June. This applies to anybody who had a mortgage for a second house at any time until the mortgage runs out, if it runs out at a later date than 1985. But the Deputy has asked me to have a look at it and I will do that. Perhaps the Deputy might give me some particulars of the individual case.

It cannot be a name but I will reveal the other details.

Question put and agreed to.
SECTION 22.

Amendment No. 64 in the names of Deputies Sherlock, Gallagher (Waterford) and De Rossa is ruled out of order. Amendment No. 65 in the name of Deputy B. Desmond is also out of order.

Question proposed: "That section 22 stand part of the Bill."

Before we move on from section 22 of the Bill, the amendment we had down was intended to try to provide for people who are working, paying tax and get tax relief on their mortgage, but who are made redundant or for some reason have to go on social welfare benefit through illness or whatever. In this situation they are no longer paying tax and are therefore not entitled to tax relief. We are anxious that some consideration be given to a system whereby the PAYE worker or the person in receipt of tax relief would be able to opt for a direct subsidy equal to the 35p rate which would be payable directly to the loan agency so that he would not have to fall into arrears in mortgage repayments because of unemployment or sickness. I wonder would the Minister consider that?

I am sorry. I did not hear the question.

The reason we put down this amendment was to enable people to opt for a direct subsidy instead of tax relief so that people who become redundant or were sick or unemployed could have their subsidy paid directly to the loan agency and avoid falling behind in mortgage repayments because of having no tax relief.

The point the Deputy is making is whether a subsidy should be provided in those cases. This is not relevant to the tax allowances or tax concessions we are talking about. But the Deputy has raised a point and I or the appropriate member of the Government can consider it.

The granting of mortgage interest relief in a full year costs the Exchequer some £50 million. I am very strongly of the view that the granting of interest relief should not under any circumstances be at more than the standard rate. I have always had that view because of the marginal benefit it is to those on higher incomes. The Minister has seen fit to change that. The amendments we put down are out of order because they impose a charge on the taxpayer. Again this is an anachronistic situation. But the giving of relief in relation to overdrafts, mortgages and other circumstances should be at the standard rate. It is manifestly unjust that people who want to spend because they have a high income and want to trade up their dwellings should be getting more relief. The nett effect, as was indicated by An Foras Forbartha, is that in 1975-76 70 per cent of dwellings were three-bedroomed dwellings whereas in 1982 70 per cent of the dwellings are four and five-bedroomed dwellings. There has not been a population explosion in the meantime. Demographic trends show that the size of families has fallen. People are using mortgage interest relief to trade up and get bigger houses and they all finish up with all their family married and the husband and wife together, if they have not been divorced or separated in that period, in a five-bedroomed house and presumably they are sleeping in one bedroom if they are still happily married, and we have the situation where scarce taxation resources are being segregated into the construction sector while at the same time there are 35,000 families with no homes. Everybody else is getting mortgage interest relief at the marginal rate.

When discussing income tax with people I ask them what their income is, what their outgoings are and tell them to trade up their dwelling. They may as well go to live in the more exclusive area of Foxrock and save income tax. The Finance Bill and the taxation relief measures are an enormous incentive for people to buy more expensive dwellings. This is socially unjust and crazy. The former Deputy Richie Ryan was an unfortunate man who was much maligned in many ways but he had the conscience to say that this cannot continue. In next year's Finance Bill the Minister should rectify this position and give £15 million to those who have not homes. Such people are being exploited and are paying up to £30 per week for a room which may be only 12 feet by ten feet while they share a toilet.

A person earning perhaps £18,000 who is married with only one child can buy a house in Foxrock, Cornelscourt or the top end of Killiney and he has an asset which is appreciating at a minimum of 10 per cent per annum. Even if he is paying 15 per cent on his mortgage his asset is rapidly appreciating while inflation runs at 21 per cent. I implore the Minister to take action in next year's budget, otherwise we will not have a socially just structure in terms of housing. Young people wish to marry in their early twenties and have a house. At present they are marrying around the age of 25 and are living in miserable flats costing up to £30 per week. These marriages are destroyed after five or six years and they cannot save a deposit for a house because we have a taxation structure which is manifestly unjust and inequitable.

I agree with the proposition put forward by Deputy Desmond that reliefs of this sort should be at the standard rate of tax, not at the marginal rate. This was a provision in my budget. The same argument applies in favour of tax credits as against tax allowances is because the benefit of tax allowances is given disproportionately to those who are best off and have the largest incomes. Likewise the benefit of relief of this sort is greatest in the case of those who have the highest incomes. A person paying income tax at the rate of 60p in the £ benefits most from tax relief while the person who is not earning enough to pay tax does not benefit in any way. Interest reliefs generally are a form of subsidisation of the better off by the less well off.

It has also led to the building of more housing than we need for people in the high income bracket while we are not building enough houses for those in the lower income bracket who really need them. Many of the latter are being forced on to the local authority housing list but if the cost of housing were not increased by trading up they could afford to buy or build their own homes. The proposal which has been made here is reasonable. I am sorry the Minister was not able to implement it for what he called "technical" reasons. I have no doubt that there are technical difficulties in this as in any new proposal but I do not believe technical reasons should ever be given by a Minister for not doing what he believes to be just.

I should like to introduce an amendment on Report Stage to this and other sections which contain tax reliefs of this sort, requiring the Minister each year to lay before the House simultaneously with the Finance Bill the cost in revenue lost from the tax subsidies implicit in sections of this sort. In the Government White Paper A Better Way to Plan the Nation's Finances it was proposed that each year a statement of tax expenditures, tax subsidies such as this, should be made. Revenue lost by means of tax allowances is just as real as revenue spent by way of expenditure Estimates which we go through in detail each year after the money has been expended. Tax expenditure of this sort should also be the subject of an annual debate and I should like to introduce an amendment to achieve that. Possibly in conjunction with the Finance Bill, the Minister would publish each year a report of the cost in terms of revenue lost from each of the tax allowances given from the basic rate to particular categories. The list would be quite long and we would discover that hundreds of millions of pounds are deliberately not being collected. I am not saying that we should abandon all these tax reliefs but we should see transparently what those reliefs are costing us. I will be proposing an amendment on Report Stage in respect of relief in this and other sections. The Minister might find that this statement would help him because it would show more clearly that the Revenue Commissioners and the Minister for Finance are not as ungenerous as they appear in the extent of the reliefs already being given.

These points have been raised on a few occasions and it is only right that I should give the advice available to me from the experts in the Revenue Commissioners who administer the system. Insurmountable difficulties would have arisen in giving effect to this scheme for 1982-83. One problem which would have arisen in the PAYE area is incapable of satisfactory solution within the existing system. This stems from the proposal to give relief at the maximum rate of 35 per cent. In the case of a PAYE taxpayer who is estimated before the start of the tax year to be marginally liable at rates in excess of 35 per cent, the interest allowable would in the first instance have to be converted into tax free allowance. This would involve the marginal rates of each taxpayer paying interest. If the marginal rate were 60 per cent, tax free allowance on £1,000 interest would be £600. This would have to be reduced to £350 and accordingly the tax free allowance would be £583 which, at 60 per cent, equals £350. Some payments of interest might have a number of marginal rates. Even with a satisfactory computer programme, which has not been devised, errors on a large scale would be inevitable because of difficulty in predicting marginal rates. There would be delays in giving the correct tax relief to many taxpayers. Approximately 230,000 taxpayers are eligible for interest relief.

Correct relief could be given only by large scale reviews at the end of the tax year. It would not be possible to undertake this operation without the recruitment and training of a large number of extra staff. In view of the lateness of the decision to introduce the 35 per cent limit and in view of all the other operating difficulties which would have to be overcome at the same time, there was no possibility that it could have been operated for 1982-83. If suitable computer programmes could be developed some, but not all, of this additional work would be eliminated. For instance, the problems inherent in predicting the relevant marginal rate would still remain. It is likely that some considerable time would elapse before any such programme could become operational. That is the main technical reason that I have given on a few occasions. I do not expect the Deputies to fully understand all that I have just read out, but that is the advice that I have been given by the experts who operate this method.

Taking the point of the 35 per cent capital limit on loans, under existing interest provisions a simple certificate of interest paid shows the amount to be input to the computer which will automatically reject an amount which exceeds the maximum interest allowable. There is no information in the computer or in the taxpayer's file which would enable existing cases in which interest is allowable to be put on the basis proposed in the January and March budgets. Agreement of banks and other lending institutions would have to be obtained for the submission of a more detailed certificate of interest paid which would give, inter alia, the following information: the maximum amount of the loan; the rates chargeable during the period covered by the certificate; the purpose for which the loan was granted; whether it is secured by a mortgage; the date the loan was taken out. The additional work involved for the banks in supplying the requirements listed would obviously be considerable and would probably result in special arrangements having to be made with bank staffs, including monetary compensation. Those two are basically the main reasons why it was not possible to implement the 27 January budget.

There may be one way of getting around this problem. I must say that this entirely new explanation has surprised me somewhat. I presume it was also new to the Minister because he incorporated this measure in his March budget, as I did in mine. Indeed, it is a proposal which has been knocking around for quite some time and did not arise out of the blue in December. I am surprised that these difficulties were not foreseen before the matter was incorporated in the budget. However, would the Minister consider the possibility of converting this into a tax credit, in other words, instead of having an allowance which would affect marginal rates depending on whether one moved up or down, getting a lesser or a larger relief, there should be a fixed tax credit for interest which you either got or did not get. It would not be affected one way or another by what rate of tax you are at. Would this be a way of achieving equity as between taxpayers?

I am advised that one would still be in the position, whether it was a credit or an allowance, of predicting the rate of marginal tax.

Why is that the case? The credit is not affected by marginal rates of tax.

One would have to convert the credit into a tax-free allowance, the same as one would have to do for PAYE. I had no objection at all, as the Deputy knows, on 25 March to going along with what Deputy Bruton had proposed in relation to this section. I have given the reasons why it was not possible to implement.

I am not pressing the matter.

The Deputy is raising a wider question vis-á-vis tax credits versus allowances. That is a question for budgetary consideration at some other time.

To be quite fair to myself would the Minister——

Yes, I do not mind the Deputy asking for information at all.

The position is that this explanation has been presented to me now for the first time that there were serious problems.

The Deputy would not believe me when I told him that there were technical problems, so I wanted to give these problems.

And I am glad that the Minister has done so. On the other hand, he cannot expect me to say "Good man, I trust you. I have no opinion of my own."

I would not expect that.

However, that might be implicit in what the Minister says when he says "I have said it and that is it".

No, I am advised that that is the position, which is what I said.

All right, the Minister is the boss, not his advisers. Would it not be productive to look at the possibility of a tax-free system a little more closely than would seem to have been done as a way of achieving this equality between taxpayers in regard to this matter? I do not on the face of it accept that if one instituted it as a credit it would be necessary to convert it into an allowance, as the Minister says it is. I would have thought that the appropriate method might be to collect tax in the normal way during the year as if there was no allowance for this purpose and at the end of the year, or at a particular point in the year, a refund could be made, either on a six-monthly or a yearly basis, in the form of a tax credit. By not making the adjustment every week but by making it every year, admittedly people would be out of money for a while as they would be paying more tax, but they would get it all back at the end of the year. That should make the job a little easier for the computer. Would the Minister have a look at that?

The Deputy will appreciate that if one gets into the situation of interim reviews, no matter at what intervals, I am talking about 230,000 cases and the Deputy will see the difficulties which would be created there——

Through the Chair——

Please let me finish, Deputy. One can obviously, when requested as the Deputy has done, have a look at it and I will do so, it is hoped, between now and Report Stage. I will look at the point which Deputy Bruton has raised.

Are we not talking about £3 million to £4 million?

For which?

For the differential What is the differential between the standard and the marginal rate in the giving of such relief?

The Deputy means the difference between getting it at 35 per cent and at 60 per cent?

Yes. What would be the gain to the Exchequer?

It would be substantial, but the figures are not available at the moment. If the figures can be found, Deputy——

Are they single or double figures?

Probably single figures.

Is it around £4 million? That is what I would like to clear up.

I will have the matter investigated and will give the Deputy the information later. It is not readily available at the moment.

Question put and agreed to.
Sections 23 and 24 agreed to.
SECTION 25.

Amendment No. 66 in the name of Deputy B. Desmond has been ruled out of order and Amendment No. 67 in the names of Deputies Sherlock, Gallagher and De Rossa has been ruled out of order.

I move amendment No. 68:

In page 38, before section 25, to insert a new section as follows:

"26.—Notwithstanding anything in the Tax Acts, interest paid on deposit accounts with a credit union shall qualify for relief as if it were an interest accruing from the Post Office Savings Bank.".

The intention of this amendment is to extend the tax relief available to those saving in post offices and in the Dublin Savings Bank to credit unions, which at present do not have that relief. Considering the services which the credit unions provide it would be an important advantage to them to have this relief.

What would be the cost of implementing this amendment?

The amendment proposes the extension to interest paid on deposit accounts registered with credit unions of the tax exemption of £150 or £300 in the case of married couples accorded in respect of interest on ordinary deposits with the Post Office Savings Bank and Trustee Savings Banks. The problem about extending the exemption enjoyed by the various saving banks under section 344 of the Income Tax Act, 1967, to deposit interest paid by registered credit unions is that it would be difficult to justify merely extending the exemption to them. Many financial institutions which are excluded from the exemption have since its introduction sought extension of the relief to them. If the relief was extended to credit unions it would be difficult to continue to deny it to other institutions. Such as extension could result in a disimprovement of the competitive position of those financial institutions which currently qualify for the relief. There could be a shift of savings away from the Post Office Savings Bank and Trustee Saving Banks which are significant sources of Exchequer finances. The cost of extending it to credit unions would be £1 million in 1982 and £1½ million in a full year. Deputy Bruton asked me the cost in relation to a building society. It will be £3 million in 1983.

Was that provided for in the budget?

It does not arise until 1983.

The Minister does not mind adding £3 million to next year's budget.

That is a decision by the Government.

The Minister objected when I was making proposals of that kind.

Which amounted to £180 million. Is the Deputy objecting to mortgage holders having a reduction in interest as a result?

I should like to know where the money is coming from for it. Does the Minister consider that in general there is a confusing plethora of reliefs in respect of tax regarding interest received by people from a variety of institutions? There is one relief for the first £70 of interest which is invested in a bank. There is another system of relief in respect of a building society. They only deduct 25 per cent in the pound. Then there is what applies to post offices and now Deputy De Rossa is seeking to extend it to credit unions, which is not unreasonable in the circumstances. Who benefits from all these reliefs? I am not so sure that it is the savers but rather the institutions. One institution competes with another.

Representations were made to me by the ACC who felt that savings with them did not get the same tax benefits that savings in a bank or a building society got. They wondered why they should not get it. If we continue on like that with one relief leading to demands for other reliefs based on anomaly it would not be a good process. What is the total cost to the Exchequer of reliefs of this kind? Do they encourage savings at all?

I do not have the cost in relation to the totality of reliefs before me but if it is available I will get it.

On savings.

Yes. I will get the cost for the Deputy.

Could the house assist the Chair and indicate what is happening to amendment No. 68?

It has been moved and I have responded.

We are discussing it at present. As regards the point the Minister made concerning the fact that other financial institutions have claimed they should also get this relief, the credit union movement cannot be compared directly with merchant banks and so on.

I did not mention merchant banks. I mentioned the ACC.

The credit union movement is a movement which assists small savers in the main. There are few tax dodgers saving with credit unions mainly because the interest available is very small. People usually use it when saving for holidays, household items and so on. When one considers that the commercial banks and building societies have this relief, the credit union movement have a very good case for having the same relief at least as the commercial banks.

We put down amendment No. 67 which sought to ensure that the tax relief available to those saving up to £70 and £140 in the commercial banks and the relief available in building societies would not be used by people who simply wanted to avoid paying tax. Unfortunately this has been ruled out of order. However, I ask the Minister to consider it and take it into account if ever he is producing another budget.

As a socialist I believe that all income should be subject to taxation. If we start on that premise there is no excuse for giving relief on a sectoral basis to groups of people. That is why I put down my amendment that interest paid on deposits held by all banks in the State shall have tax at the standard rate deducted at source and any excess of tax paid may be claimed by affected taxpayers. That is a basic principle from which we tend to depart. If I was a businessman and wanted to put away a few bob without paying tax, all I would have to do is open a few post office accounts and claim relief. Is that fair or equitable? It is not. There are substantial sums of money held on deposit in banks which are not subject to tax. We must put a stop to that. It is an obvious source of tax avoidance and evasion. Either we run the country with fairness, equity and justice or we indulge in escape routes and open up the £70 interest reliefs, £90 next year, £150 the following year and so on. If we continue along that road we will come to the situation where the Government are bereft of revenue sources, as they are at present.

Credit unions fulfil a magnificent socially desirable function in the community. If they enjoyed tax relief there are people who to avoid paying tax at a high rate would invest the odd £500 with them because they do not ask their depositors if they have X amount of income before they deposit something. All one would have to do is go around various institutions, Post Office Savings Bank, the ACC, credit unions, Trustee Savings Bank and so on and invest money like a person putting down money who had obtained prior knowledge of Lady Diana's son's name, William, sure and certain of picking it up at the going rate.

My amendment has been ruled out of order. In relation to the section, all money deposited in banking institutions or held by banks in the State should have tax paid at the standard rate and deducted at source. Massive evasion is going on at the moment which I estimate is to the tune of about £240 million per annum and these moneys are urgently needed by the State to run the country. God only knows what is kept in deposit boxes in banks by people who are also indulging in straightforward deposits without even bothering to collect their interest on the moneys, foolish people as they are because of the various devices which they can get away with.

I would favour giving assistance to credit unions along different lines. I would give substantial moneys to the League of Credit Unions on an annual basis to promote the credit union system here and I would give special facilities in relation to giving certain segments of very low income persons an incentive to avail of credit unions. There is a great need to convince young people particularly that they ought to save some money. Very many young people here have incomes of £100 or £150 per week and they save no money at all, and particularly those in urban areas and do not have to pay rent because they live at home spend freely. One of the great arguments in favour of having VAT on clothes — although it is a past argument now — was that most clothes are bought by young people who have the highest percentage to spend. Very many young people who should save do not save. Particularly they should save in order to buy their first home and I would encourage the credit unions to get into that area of saving. One finds that the credit unions are used frequently by normally thrifty people who want to save, as Deputy De Rossa quite rightly pointed out, for a wedding coming up in the family or to go on a holiday or they put aside £600 or £700, as many an elderly person has said to me, for burial. All that is done by a highly responsible segment of our saving population.

I would give money to credit unions in a direction other than the interest-free direction because it is always the sharkie who has money to deposit and before you know where you are that person has an account in the credit union tax free, an account in the savings bank tax free and the daughter has another account in the Post Office Savings Bank tax free. It is like the money sent home from America and deposited with the ACC, who do not declare the names and addresses of their depositors even to the Revenue Commissioners, and that is tax free. So what do you do? When your uncle goes back to America will you give him £1,000 to send home to put into deposit at the ACC? I defy the Revenue Commissioners to get you into tax on that one. That is another loophole. I could go on and on. Anybody with a reasonable degree of ingenuity could finish up probably paying no tax at all.

Consult Deputy Desmond. He will tell you how it is done.

He would not require a great deal of political advice in that regard. Therefore, I am inherently opposed to the concept of this amendment. I accept Deputy De Rossa's credentials for putting it forward, but it is open to abuse and unfortunately it is not the people who should be availing of credit union savings who will come in on it. If we closed off the current loopholes in bank deposits we could bring in revenue of about £200 million a year.

(Dublin South-Central): In referring to Deputy De Rossa's amendment I would like to comment on what Deputy Desmond has said. He mentioned £240 million. What we really want today is to encourage savings by thousands and thousands of young people. I have often tried to conceive some way of encouraging them to save but the proposals which Deputy Desmond put forward indicated a negative approach. The encouragement given by the various building societies, the Post Office Savings Bank and so on appeal to the lower paid section of the community. We are not talking about the big depositors. We are talking about schemes such as that in the Post Office for persons over 55 which gives special concessions as regards income tax. Such concessions to such people are socially desirable. Young people of 17, 18 and 20 years of age can earn substantial incomes now of £100 or £120 a week. Some compulsory savings scheme should be introduced for people of that age group, although it would be better if they could be encouraged to save voluntarily, because it seems that a large volume of the money spent on luxury goods and so on is spent by that segment of our community. A young man can go into a job at 18 or 20 years of age and get an income equal to that of somebody who is buying a house and rearing four children. Many such young people spend money in a way that could damage their whole career and we should try to devise a scheme whereby a certain proprtion of that income would be deducted by their employers who would put it into a savings scheme for those young employees.

Savings should be encouraged and the small concessions given by the various societies are an encouragement to do this but, as Deputy Desmond has said, this is a charge on the Exchequer whereas money could be accruing to the Exchequer and under Deputy De Rossa's amendment it will accrue at some future date to the Exchequer.

We are concerned here with trying to keep the budget deficit down. The Minister has stated that the implementation of this amendment would cost between £1 million and £1.5 million. We can look at this as our economy expands. I know many of the credit unions throughout Dublin and they have done an excellent job. I would encourage the movement because I have met several people who have succeeded in buying houses and getting bridging loans through the credit union system. The people who organise the credit union movement on a voluntary basis are making a major contribution to society.

Regarding all the amendments here, every Deputy in this House should take into consideration the financial state of the country and the additional charge that would be put on the Exchequer now. I would not apply the same principles as Deputy Desmond would apply as regards a flat rate of income tax on after the big from deposits. I would go after the big depositor if that is what Deputy Desmond is talking about, but we were speaking about the small depositor. Take for instance a single man and his girl friend who are trying to save a deposit for a house. I see nothing wrong in encouraging them to save £2,000 or £3,000 for a deposit. Indeed I would encourage them to save beyond that and thereby perhaps avoid being forced into a bridging loan through which many young people are being robbed by some of the lending societies. Such people need encouragement, and the relief which they get on income tax is an incentive. I encourage savings. Savings are of vital importance. We know the benefit of Post Office savings to the Exchequer. This is something we must encourage.

I am sorry to interrupt Deputy Fitzpatrick. I accept that ordinarly his contribution would be perfectly relevant. But if we are to branch into the philosophy of thrift and savings——

We have 40 minutes left.

We are one-quarter way through that large area which I talked about earlier on.

(Dublin South-Central): Thank you, a Leas-Cheann Comhairle, for directing my attention to that. I have never heard a Finance Bill discussed fully. We are now on section 26. If anyone is to blame, it is probably Deputy Bruton and people like him. There are sections in the Bill which should be discussed. I will conclude my remarks so that we can discuss some of the sections we have not reached already.

I accept the criticism of my proposed amendment No. 67. We put down the two amendments to close off the loophole used by people who control large amounts of money to avoid having to pay tax. That is not only the case with the banks. The building societies have fairly large investors hidden away also because of the standard rate of tax the building societies levy on investments with them rather than the higher rate to which the person investing openly would be liable. Amendment No. 67 was ruled out of order and I will not press amendment No. 68. Has the Minister any views on both those amendments?

Amendment No. 67 is out of order.

I understand that. I wondered whether the Minister would express a view on whether it is advisable to close off this loophole for tax evasion.

I am very anxious to ensure that any loophole for tax evasion is closed as quickly as possible. The Commission of Taxation were asked specifically to look at the taxation arrangements for financial institutions. I am sure they will have a great deal to say in that regard. But for the fact that I have been involved here all day I would have had an opportunity to look through their first report which was presented to me today. I will be having a very careful look at their suggestion vis-á-via the whole question of the taxation of financial institutions and I will be submitting them to the Government at the earliest possible date. I hope for early publication after that.

I hope the Minister will publish the report soon.

That is my intention. I will be putting the report to the Government fairly speedily and they will decide.

The Minister should not wait until he has made the decisions before publishing it.

We will see what happens.

Amendment, by leave, withdrawn.
Section 25 agreed to.
SECTION 26.
Question proposed: "That section 26 stand part of the Bill."

The threshold for the lower rate of corporation tax has remained at £25,000, since it was introduced in 1977. I would be glad if, in the interests of helping small companies — and by definition they probably have the smallest profits — the Minister would consider raising the threshold. Perhaps the appropriate time to do it is now when the overall rate of tax is being increased. We should try to encourage small companies and, raising the threshold might be a way of doing that.

Basically this is a budgetary matter, as the Deputy knows. I do not intend to do it now. I will consider the point raised by the Deputy in the budgetary discussions in the months ahead.

What would be the cost of raising the threshold from £25,000 to £50,000?

I cannot give an accurate figure on that off the cuff.

Would it be of the order of magnitude of £1 million, £10 million or £40 million?

I will come back to that later. If I get any information on it I will gladly give it to the Deputy.

What overall revenue will be raised by the additional rate in section 26?

The proposed changes in the rates of corporation tax will have very little effect on the yield from corporation tax in 1982 because only a small part of the corporation tax which will fall to be assessed at the new higher rate will be payable this year. It is expected that the yield in 1983 will be £7 million greater than it would have been had the rates remained at their 1981 levels. The extra yield in a full year will be about £10 million.

Question put and agreed to.
SECTION 27.

I move amendment No. 69:

In page 39, to delete lines 27 to 29, and in page 40, to delete lines 1 to 30.

We have rehearsed the arguments many times about the advanced payment of corporation tax which I regard as an artificial transaction. Given the lack of time I do not intend to press this amendment.

We have rehearsed this argument time and again. I agree with Deputy Bruton and the Minister does not agree with us.

At present the date of payment is nine months after the end of an accounting period in the case of a first instalment and in the case of a second instalment the due date may vary from company to company from as early as nine months to as late as 18 months after the end of the accounting period. It is proposed in this section to reduce this interval by three months. If the Deputy's amendment were accepted the benefit to the Exchequer of the advancement by three months of the dates for payment of corporation tax would be lost. This loss would amount to about £33 million in the financial year 1982 and would represent the postponement of the receipt of tax into the Exchequer in subsequent years. On that basis I could not accept this amendment. It is not realistic for Deputies to argue that we should not bring forward the payment dates for corporation profits tax, bearing in mind that the PAYE taxpayer on Friday night or Thursday night, or whenever his pay day is, loses his tax there and then. We are still talking about concessions of six to nine months after the financial year ends and I do not think this is probibitive.

I have no objection to bringing forward the payment of corporation profits tax. I object to what I regard as fraudulently reducing the current budget deficit by that means when there is no real reduction in the long term and no revenue being raised to match the extra expenditure. However, I do not want to pursue this argument.

Of course there is. That argument suggests that the same thing would not be done in the following year.

The failure to increase tax which this measure was supposed to cover will recur next year, whereas the once off gain in this year from bringing the revenue forward from next year will not recur next year. We will still be left with the same level of corporation profits tax in a normal year but there will be a larger expenditure next year by virtue of the fact that we abandoned aspects of the January budget and are paying for it in this way. The long term situation will be worse. We are comparing a once-off gain with a continuing loss.

We are moving away from the amendment.

Will you put the question?

I am putting the question: "That the words proposed be deleted stand."

Question put and agreed to.
Amendment declared lost.
Section 27 agreed to.
SECTION 28.
Question proposed: "That section 28 stand part of the Bill."

As noted in the list of amendments, Deputy Sherlock, Deputy Gallagher and I are opposed to this section on the basis that it is an undesirable precedent where a person enters into an agreement with a bank to borrow money and then finds he is unable to pay, and the Government step in and pay the bank interest or give some form of interest relief simply because the banks are not prepared to stand the loss.

I believe the commercial banks were to a large degree responsible for the extraordinary high prices charged for agricultural land in the past few years. It is extraordinary to expect the farmers to produce sufficient from the land to pay the interest, never mind the principal, on the money borrowed. It was a very foolish and shortsighted policy of the banks to allow themselves to be used, or to use the farmers, to get deeper into the farming community. It is a mistake at this point that the State should be stepping in to relieve the banks of their responsibilities and losses when one considers their profits run into hundreds of millions of pounds each year. Therefore it is not unreasonable to expect that they would accept the losses which occur on their deals.

I will be very brief for the benefit of Deputy De Rossa, who may be under some misapprehension as to the intention of this measure, for which I claim paternity in some degree. It has very little to do with the level of land prices. This measure is aimed at not only land prices or the amount of money farmers paid for land; it has to do more with the very simple fact that when one starts a development plan borrowing at 10 per cent and the interest rate increases to 21 per cent, there is no profit left. Whatever the situation, there is very little possibility that one will be able to earn enough money out of the investment to remunerate in full the 21 per cent interest rate. What has been happening is that people had to pay interest on interest outstanding as well as paying interest on the original sum.

It is not true to say that this measure bails out the banks for their mistakes. As the scheme has been set up, the cost of giving this interest reduction to the borrowers is shared between the banks and the State. I wish the banks had contributed more but part of the reason it took so long to get the scheme into operation was that we were looking for more from the banks. As the scheme stands, there is participation by the banks in the cost of operating the scheme.

The benefit of the measure in question plus the banks' contribution goes directly to the people who borrowed from the bank in the form of a reduction in the interest rate payable on that amount of their borrowing which qualifies under the scheme. This is an enabling measure to allow the banks to operate the scheme as it was agreed.

Apart from the form of the scheme, there is no new principle involved in substance. We all wish the State did not find itself in a position of having to deal with this problem but, because of economic factors, an important sector of the economy is experiencing very serious difficulties. In my view, it is perfectly normal that the State should step in to protect employment and productive capacity in this sector, as in other sectors, by providing relief as is done in this measure.

I agree with Deputy Dukes. Everybody wishes it was not necessary to make this provision but because of very harsh conditions experienced by the agricultural sector this measure is necessary and therefore is most welcome.

Some time ago a number of farmers bought land and got into financial difficulties but it should be understood that the majority of farmers in severe financial difficulties did not buy land. First, there are farmers who improved and modernised their farms — building improvements, milking parlours, silage pits and so on; second, others suffered losses because of brucellosis in their milking herds; and a third group suffered losses because of the failure of the bovine tubercullosis eradication scheme. It will be a long time before many of these farmers are free from these debts. All these problems were compounded by the exorbitantly high interest rates they had to pay. The banks could have gone further——

Looking at Deputy De Rossa, the Chair anticipates that we are getting into round two of the struggle we had earlier of penury versus plenty as far as the agricultural community is concerned. Could Deputies confine themselves to what is specifically in this section without straying too far? We have 20 minutes remaining and over 70 sections to be discussed.

Far be it from me to enter into contentious discussions with the Chair or Deputy De Rossa, but I wish to make these points in my own way and I will be brief, bearing in mind the number of sections yet to be covered. The scheme providing for reduced interest rates for farmers in severe financial difficulty is too restrictive but I accept it has been of benefit to them.

I am glad to hear Deputy Enright and Deputy Dukes express their support in this matter as they did when in Government. The majority of people realise that farmers are going through a difficult time. The unfortunate thing regarding the farmers who will benefit under this interest subsidy is that they were the ones who contributed most to increased output. They developed as they were advised to do and subsequently found themselves in difficulty. Deputy Dukes, as former Minister for Agriculture, and I worked both nationally and at EEC level to devise some system to help and two or three such systems were supported by both sides of the House. This is giving legislative effect to one such system and it should be supported bearing in mind the difficulties of farmers who gave the lead since 1975 but who then found themselves in financial difficulties. As Deputy Enright said, it would have been lovely to do more but that was not possible. However, what has been done will be of some help.

The point has been made that what is happening here is that a subsidy is being paid to the banks for part of the interest due by farmers. The fact that the banks are carrying part of that burden does not lead me to jump with joy given that they are the people who entered into agreements with the farmers. Presumably if any of us enters into an agreement with the bank that institution will come after us for payments due but it will be pointless for us to go to the Minister for Finance or to anybody else looking for interest relief. Because of the lending policies of the banks they sucked in hundreds of farmers who got large loans and now they are trying to get out. I wish to put on record that we oppose the section but I do not intend to drag the House through a division on it. As Fine Gael, the Labour Party and Fianna Fáil failed to support us on the resource tax, I would not expect to get any support from them on this issue either.

Leaving aside that rather gratuitous remark, I would like to say that the banks have a lot to answer for in the matter of the lending policies they have pursued. They have no comprehensive early warning system about crises in any industry. They do not gather together in any data bank upcoming trends in particular industries, whether it be agriculture or manufacturing. The result is that those who should know best because they have the information are not using it to lend wisely to people and prevent them from getting into difficulty. One area of productive reform in the banking system would be to get them to use that information more intelligently than they do at the moment.

Question put and agreed to.

Deputy Bruton asked a question some time ago in relation to section 26 and I should like to give him the answer now. If companies with profits of £50,000 were to be classified as small companies the cost to the Exchequer would be £2 million.

SECTION 29.

Question proposed: "That section 29 stand part of the Bill".

I am concerned regarding the provisions in this section and also in sections 30 and 31. When the Capital Gains Tax Act was introduced in 1975 the normal rate of capital gains tax was 26 per cent. Subsequent legislation in 1978 provided for an increase to 30 per cent but now the basic rate has been increased to 40 per cent.

There is a serious cause of social unrest in that a number of people appear to have made millions without paying any tax. I will give the House one example. There were banner headlines in the Irish Independent when Patrick Gallagher spent £750,000 on a racehorse or when he made £3 million or £4 million on some other deal. It is a cause of social unrest when individuals or families are seen to make much money without paying a proper rate of tax and it is necessary to have capital gains and other taxes to ensure that people do not cream off profits without paying their fair share. However, unless there is a commonsense approach to capital gains there is the real possibility that considerable harm will be caused to the property market and to property valuse throughout the country.

I should like the Minister to state if he will give any allowances to farmers where they have to sell sites to meet bank repayments. Many farmers, because of pressure from the banks or financial institutions, are being forced to sell sites to meet their debts. The present exemption limit of £2,000 for a married couple is not nearly enough. I ask the Minister to give some proper allowances to people who have to sell land to repay their debts. I frequently meet farmers who have to sell three or four sites for prices ranging from £3,000 to £5,000 per site but they find that nearly one-third of the sale price goes in capital gains tax. I ask the Minister to tell the House his views on this matter and to state if he proposes to grant any exemptions. I am speaking for quite a number of people in the farming community who are faced with this situation——

Could the Deputy say what he is looking for exemption from?

What allowances are going to be made to farmers forced to sell sites to pay off bank loans and so on?

As contained in the Bill, £15,000 will be allowed in any one year.

When a person decides to meet a commitment to the bank of £30,000 or £40,000 he should be exempt from capital gains tax. Some farmers at present have debts of £50,000 to £100,000 on their holdings. This is happening all too frequently. They are faced with selling their farms, or alternatively, selling sites and portions of their land. That is why I think this limit should be raised for the benefit of people who are engaged full time in farming.

These matters will be the subject of amendments which Deputy Dukes has put down and which I hope will be taken on Report Stage if we do not reach them now. We should be very careful about the increase in the rate of capital gains tax. I know this is not a fashionable view but I am afraid that the new high rate of capital gains tax may lead to a situation where investment will be choked off. I know people say if you make the gain you should pay 60 per cent on it. The reality is that for every person who makes a gain, there are a number of people who make a loss. Up to now, the fact that capital gains tax was less than income tax took some account of the fact that there was a bigger risk element involved in capital investments as against ordinary income. I am worried about the impact generally of this higher rate of capital gains tax on investment activity in our economy. The Minister should watch it very carefully to make sure that this enthusiastic increase which he introduced does not choke off a source of jobs in our economy.

I agree that there is merit in part of Deputy Bruton's argument in so far as we have been oscillating in the past five or six years in relation to rates of capital gains tax. By virtue of the fact that we do not have an established, continued regime of capital taxation, investors are perturbed at the way politicians — not the Revenue Commissioners or the Department of Finance — have changed the rates of taxation in response to all sorts of pressures and for devious purposes. In relation to capital taxation they have done what they succeeded in doing in relation to farm taxation, where we have gone from one extreme to the other and back again with levies, resource tax and so on. Nevertheless, having done all, that there are still substantial loopholes — for example, guaranteed income bonds. If one goes to an insurance company and takes out a single premium fixed term insurance policy of three, five or seven years, the insurance company, by availing of the loopholes that exist, will guarantee a return of at present 16 per cent. Of that 16 per cent only about 2 per cent would be liable for income tax, which is deducted at source at 35 per cent but liable to surcharge in the hands of higher marginal recipients. The remaining 14 per cent is deemed to be tax free capital and at the end of the term the original sums are returned intact. I would also like to draw the attention of the Minister to similar tax loopholes in relation to grow bonds and other insurance related to tax avoidance bonds.

In terms of equity, we need an examination into these matters. I hope the report of the Commission on Taxation has dealt with it as I know the people who have been advising the Minister are more than capable of giving that information. Perhaps it would have been better if we had told the Revenue Commissioners to forget about capital taxation because we drive the Revenue Commissioners out of their minds trying to interpret what the politicians want them to do for a return of 0.5 per cent from capital taxation. If we are not prepared to have a regime of capital taxation broadly based, properly related, then we should forget about it. I am in favour of having such a regime but so far in this country we do not have it.

This increase in capital gains tax will have a detrimental effect on businesses and farms changing hands. I have been involved in a small way in business transactions and I know the harm it will do. It has done enough harm already but it will be catastrophic for business people and farmers in the future.

It will congeal inefficiency.

I must comment on what the last two speakers said. They have overstated the case and in doing so have distorted the whole picture in relation to the sale of land. To listen to them one would think that land was sold purely for the purpose of farmers paying back their debts. That is not so. That constitutes only a very small section of land sales. Most land here is sold to make money. Some people have made windfall profits from such sales and have paid very little taxation. I know some farmers are in debt but you cannot ignore the whole picture. If there are concessions for some farmers who are in debt, the rest of them will take advantage of those concessions as they have done over the years. The Minister should attempt to reconcile the rights of private property with the rights of an increasing population to housing. The rights of people to housing are paramount in our society. We must not be constantly considering a minority of farmers who, through foolishness or greed, have put themselves in debt. If I could borrow £100,000 tomorrow I would be very pleased. It says a lot for our society that those people had the money ladled out to them over the years, sometimes for foolish investment. In order to have housing for our people an effort must be made to control the price of building land and to bring the two into some kind of line. I have had enough of this béal bocht as far as the farmers are concerned.

I will not reply to that provocation. There are two specific prefiguring matters I want to refer to which apparently we will now have to bring up on Report Stage. Both have to do with section 28 of the Principal Act and I had two amendments down in that respect. I will explain their purpose briefly to the Minister. One was designed, as far as we could do it, to ensure that when a gain on a capital asset on the sale of farmland is realised and the gain is used to liquidate part or all of an existing debt, the provisions of section 28 of the Principal Act would apply to that capital gain on the sale of that portion of the asset. The second amendment would cover the sale of a capital asset, the asset being a farm of land. If a similar asset is bought for a smaller amount of money and development work is carried out on the land of an amount equal to the difference between the two, we were seeking to bring about a situation when the rollover relief would apply to the development. The essential purpose of the two was to bring within the spirit of the section of the Principal Act a wider range of activity which would still have to do with the maintenance of the same type of production from the same kind of assets.

The Chair is now putting the question: "That all amendments set down by the Minister in charge of the Bill for Committee Stage and not disposed of are hereby made to the Bill; and the Bill, as amended, is hereby agreed to; and, as amended, is reported to the House".

I wish to give notice that I intend to introduce an amendment to change Item No. 15 to Item No. 2 in page 66, section 52, line 31——

As far as I am aware there is no provision whereby you can put such a proposition after the question has been put. I have put the question and I ask iad sin atá ar thaobh an tairiscint abraidis "Tá", agus iad sin atá in a aghaidh abraidis "Níl."

Are we not allowed to debate the question?

You may not. You have been debating it all day and all day yesterday.

In regard to section 71——

I must now move on to Private Members' Business.

I feel I should be allowed to table an amendment to section 71——

The Deputy may notify his intention to the office.

Question put and agreed to.
Progress reported; Committee to sit again.
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