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Dáil Éireann debate -
Thursday, 8 Jul 1982

Vol. 337 No. 7

Finance Bill, 1982: Report and Final Stages.

I know I may be out of order but if you will bear with me a point was raised on Committee Stage, which is not the subject of an amendment, which I understand is all we can discuss, which I would like to comment on. I was asked on Committee Stage to comment on an amendment to section 3 in the name of Deputy De Rossa. I undertook to do so on Report Stage but we have not an amendment. I would like, if you would allow me even though it may be out of order, to say a few words on this.

Does the House agree with that?

(Cavan-Monaghan): On a point of order, is it proposed to recommit the section? If that is done every Deputy would have an opportunity to contribute. If the Minister is just allowed to intervene he alone will be entitled to speak.

I said in my initial remarks that I was out of order and I asked for the permission of the Chair to make a comment. The Chair looked, I understand, for the permission of the House and I think Deputy Bruton nodded in agreement.

I do not know what the Minister is going to say but as we have a limited time I have to say I would be happy if the Minister says what he has to say and let us get on with the business.

I will do that with the permission of the House. In relation to section 3, Deputy De Rossa withdrew on Committee an amendment which would have the effect of extending to single parents, including widowed parents with dependants the married tax bands. I indicated that I would have to oppose this amendment on the grounds of cost and, in any event, it would, in my opinion, probably have been unconstitutional in the light of the Supreme Court judgment on the Murphy case.

Deputy De Rossa asked me to look again at the matter to see if the constitutional difficulty could be resolved. I must stand by my earlier viewpoint. On grounds of cost, as I have said already, I would have to oppose any such amendment at this time. In the short time available I have not had an opportunity of finding a solution to the constitutional difficulty but I will look at this matter further.

The Deputy drew my attention to the fact that single parents are treated on the same basis as married persons as regards allowances. This is true in the sense that while they have only the single personal allowance they also have a single parent allowance equal to the single personal allowance which adds up to the equivalent of the married allowance. I feel, however, that this arrangement cannot be adapted readily to give the same effect in relation to tax bands.

I will look again at the point raised by the Deputy in the context of next year's budget. If the difficulties, which I have raised, can be resolved I will be prepared to move along the lines which he proposes. I thank the Chair and the House for giving me the liberty to say that.

I hope the Minister will extend equivalent co-operation in respect of some of the amendments.

I move amendment No. 1:

In page 11, between lines 12 and 13, to insert the following:—

"4.—(1) Nothwithstanding anything in the Tax Acts, income derived by way of interest on savings to a bona fide group water scheme shall be exempt from tax for the year 1982-83 and subsequent years of assessment.

(2) For the purpose of this section—

a "bona fide group water scheme" shall mean only a scheme registered as a group water scheme within the meaning of the Industrial and Provident Societies Acts, 1893 to 1978;

"savings" shall mean only money invested for the sole purpose of completing a group water scheme or maintaining such a scheme.".

This is concerned with the problem, which I raised on Committee Stage, whereby group water schemes in rural areas, which are concerned with a very valuable social service and many would argue are undertaking responsibilities which, if they were not undertaken in a co-operative fashion by the people concerned in the schemes using some of their own money, would ultimately fall to be met entirely by the Exchequer in the form of State supported water schemes for rural areas. I believe all sides of the House agree that group water schemes are a good example of a positive aspect of development and self-help in the country. It was, therefore, with some shock that I learned earlier this year, after I ceased to be Minister for Finance, but in correspondence on behalf of a constituent with the Revenue Commissioners, that group water schemes, co-operatives registered in many cases under the Industrial and Provident Societies Acts, and, therefore, bodies incapable of making a profit in the conventional sense, have actually income tax levied on them in relation to group water schemes.

This income tax liability occurs in very specific circumstances. These circumstances are where the co-op have raised money from the members, who will avail of the proposed water supply, to pay the group share of the cost of the service. As we all know, there are bound to be delays from the time the money is originally collected to the time when the actual scheme goes ahead. These delays can occur for any number of reasons. They can occur as a result of delays in the Department of the Environment or lack of funds there. They can occur for technical reasons where it may transpire that more surveys in regard to the nature of the terrain over which the water is to be supplied are necessary than were anticipated at the time the money was being raised. There are inevitable delays and the money has to be lodged somewhere. The usual place to lodge the money is in a bank.

If the group get interest on that money in the bank under the present law they are liable to pay income tax on that interest, even though, as we all know, the rate of interest is actually less than the rate of inflation. Any interest the group are receiving is doing no more than maintaining the real value of the money raised in the first place. It is clearly anomalous and undesirable that income tax should be levied at all on interest received by these groups. Some might argue that it is possible that if we were to exempt income in the form of interest to group water schemes from income tax, this mechanism might be used as a means of evading tax by people who would abusively set up a so-called group water scheme as a tax dodge which would not, in fact, be a group water scheme in the normal sense.

I have very specifically drafted this amendment. The Minister will note that I have improved on the terms of the amendment from that which was considered on Committee Stage. I have made it clear that a bona fide group scheme means only a scheme registered as a group water scheme within the meaning of the Industrial and Provident Societies Acts, 1893 to 1978. Those Acts are administered by the Minister for Trade, Commerce and Tourism and he and the registrar of industrial and provident societies have a clear responsibility and mandate to ensure that any body which registers under those Acts is one which is engaged in bona fide co-operative purposes and this mechanism, therefore, should be capable of being prevented by means of the machinery available to the Minister for Trade, Commerce and Tourism from being used as a tax dodge.

I have added the words that "savings" may mean only money invested for the sole purpose of completing a group water scheme or maintaining such a scheme. If, for instance, the group water scheme collects more money than is necessary for the completion of the group water scheme, it shall not be exempt from income tax on interest on any money which is in excess of the amount that is necessary for the completion of the group water scheme. Deputy Brennan contributed to this debate on Committee Stage and made the point that more money than was necessary for the actual work would be collected and when the group scheme was finished it could be distributed and, in the meantime, no tax would have been paid on the interest. Clearly, that is not what I would wish to happen and therefore I have drafted the amendment specifically to exclude that possibility. I believe this is a valuable amendment in terms of recognition of the importance of the work of group water schemes and one which I hope the Minister will be able to accept.

This matter was discussed on Committee Stage and I indicated at that time that I could not accept the proposal to exempt from tax interest from savings arising to group water schemes. The reasons for the decision were also outlined but I will now re-state the position for the benefit of the House. We are all in agreement that the cost in terms of tax foregone of granting exemption on the lines suggested would be negligible. It is not the cost factor which precludes me from agreeing to this amendment but the consequences that would result from the granting of such an amendment. The granting of concessionary treatment in relation to investment income of group water schemes would, undoubtedly, prompt innumerable requests for similar treatment from bodies engaged in a wide range of worthwhile projects. It will be contended that group water schemes are a special case but a similar plea may be anticipated from many other groups who regard themselves as being engaged in worthwhile undertakings which are equally deserving of special tax treatments. Examples of such bodies are residents' associations, swimming pool committees, voluntary bodies caring for under-privileged citizens and so on. It would be very difficult to justify refusals in such cases if exceptional treatment was to be conceded in the present case. Furthermore, it is probable that concessionary treatment could be abused by the establishment of bodies which, while nominally being set up as group water schemes would, in reality, be vehicles for tax avoidance for the benefit of members.

The exemption enjoyed by agricultural and fishery societies was touched upon in the course of the Committee Stage debate. It was asked why should group water schemes be liable to tax on their deposits if agricultural co-operatives were exempt. Income and losses attributable to defined exempted transactions of agricultural and fishery co-operative societies are disregarded for tax purposes. The relevant legislation is contained in section 18 of and the Second Schedule to the Finance Act, 1978. Interest or investment income is not exempt in the case of such societies. To grant exemption in the case of the group water schemes would conflict with the treatment accorded to agricultural and fishery co-operatives and would lead once again to calls for its extension to cover those societies.

One further aspect of this question which should not be overlooked is that the granting of exemption on the lines proposed could give rise to avoidance possibilities. If group water schemes were exempted from tax in respect of interest on savings, it would be open to members of these societies to transfer their savings from their own savings accounts and reinvest them in those societies, thereby avoiding liability on the interest. Having carefully considered this whole question, I am convinced that to accede to the proposal would not be a wise course of action. In view of the problems to which I have already referred, I would prefer to see group water schemes investing any surplus funds in tax free securities.

I am naturally disappointed that the Minister has not been able to meet the proposal I made. He said that a similar plea might be made by other bodies such as residents' associations and voluntary bodies concerned with the under-privileged. I would not consider residents' associations to be in the same category as group water schemes. Residents' associations are primarily concerned with pressuring others to provide public services whereas group water schemes are actually engaged in providing public services.

I do not think the Deputy means that——

Thank you for advising me on what I should and should not say, but residents' associations are not analagous to group water schemes. I concede the point about voluntary bodies which are concerned with the care of the aged. If they are liable to income tax it is a travesty of the tax system.

I have already dealt adequately with the points made by the Minister in regard to avoidance possibilities. I believe that the amendment, as re-drafted by me between Committee and Report Stages, eliminates the possibility of avoidance to which he has referred. In view of the Minister's rejection of this amendment on the only valid ground he has adduced, that it will create a precedent where other equally worthy bodies might make a similar case, and in view of the fact that money is not plentiful at present, would he have a general look at the liability of what are purely charitable bodies to income tax and see if he could consider a more generous scheme to encourage voluntary organisations?

Is the amendment withdrawn?

Amendment put and declared lost.

I move amendment No. 2:

In page 12, between lines 40 and 41, to insert the following:—

"(v) by 10 per cent. per annum for each year of ownership of the car.".

I put the amendment on this subject on Committee Stage and the Minister pointed out that there was a lot more expense to it than I had intended: if it had been passed it would have eliminated almost entirely the revenue from the section, which was not my intention. My intention was simply to provide a small reduction on the value of a car as calculated for the purposes of deciding the extent of the benefit in kind each year so as to remove what I believe to be an artificial incentive in the present system not to retain cars and to keep buying new cars, because they are taxed on the benefit in kind derived from a car that is perhaps two years old on exactly the same basis as if that car was still a new car. So obviously if they are going to be taxed on the same basis as if it was a new car they might as well have a new car and get rid of the old one rather than keep it on. From a number of points of view this is undesirable. It is undesirable from the point of view of the balance of payments because the more new cars we import the worse is our balance of payments deficit. It is undesirable from an employment point of view because the longer cars are retained the more employment is given in the motor repair industry to Irish people, whereas the more older cars are dispensed with and replaced by new cars the more employment is given outside the country to manufacturers of new cars practically none of whom are in existence here. It is merely to remove what I believe to be a basically unintentional anomaly in the system that gives an artificial incentive to people to buy new cars rather than retaining cars that I am putting forward this amendment.

If I understand Deputy Bruton correctly his argument is really an argument for people keeping their cars much longer and by doing that they will get better tax benefits. That is a dubious argument in lots of ways because, while there are all sorts of people who would benefit if people keep their cars, there are also a lot of people who will lose out if cars are not changed more often. It is very much a balance sheet type of judgment and one which I would be very slow to make myself in any hard way.

The reduction sought by Deputy Bruton is 10 per cent on the 20 per cent every year which would be 18 per cent after one year, 2 per cent per annum approximately. Frankly, the rate at which motor car prices increase under all Governments over quite a period would mean that the sums involved would not be worthwhile. I know what is in Deputy Bruton's mind. He is obviously trying to take account of the depreciation of a car, assuming that is way below its original cost price. But at the rate at which prices tend to increase one could not say positively that the cost price or depreciated price would be that much different over the years. So there is no real point in making this change.

I have just one small point. While the first amendment was wrongly phrased, this is correctly phrased with the exception of one word in it, "ownership". The recipient of the benefit in kind is not the owner; it is a company car. It would refer to the use of the car rather than ownership of the car if it was possible to do it. Notwithstanding that, I have to say that the amendment proposes that the value for tax purposes of the cash equivalent of the benefit of the use of the car, as set out in section 4(3)(a), be reduced by 10 per cent for each year of ownership. As the cash equivalent is defined as 20 per cent of the original market value of the car, the amendment proposes in effect that the cash equivalent, as Deputy Brennan has said, will be reduced by 2 per cent of the original market value of the car for each year of ownership. The amendment is presumably designed to take account of the fact that if a car ages its current market value would be less than its original market value. The proposal is unnecessary because due to inflation in car prices the cash equivalent will reflect the fact that the car was purchased several years previously without any express provision to that effect. The purchase price of a particular make of car would have been considerably less three or four years ago than the purchase price of a car of the same make now and 20 per cent of its original purchase price would also be considerably less than 20 per cent of the price of a new car of the same make. Also, the price of cars is increasing by at least 15 per cent annually. This produces a strong bias towards retaining an old car. Deputy Bruton's amendment increases that bias by a mere two percentage points, but at the expense of loss of revenue amounting to £.5 million in 1982, £1 million in 1983 and £3 million in a full year. I could not accept it. The number of persons affected is estimated at about 50,000 in a full year.

I am very surprised at the very high cost that the Minister has put on this amendment. I had not thought it would cost that much at all. I saw it as a very modest allowance for the depreciation value of the car. In view of the substantial cost which the Minister has told me is involved I do not intend to press this amendment. But I do not accept the Minister's argument that the fact that cars are increasing by 15 per cent in value each year is sufficient incentive to people to retain older cars. It is the case that there is an undue tendency here to renew cars and the amendment that I put down here was not one which was put down off the top of my head. The amendment came as a result of consultations I had with people who are in one of the substantial accountancy firms in this city who are advising people on how to minimise their tax liability. They were of the the impression, from their intimate experience of the way in which this system works, that the proposals the Minister now has will create an undue bias in favour of the purchase of new cars. So, while I am withdrawing the amendment at this stage, I would say that the Minister or whoever is in his office in the next year or two should look very closely at this subject on a continuing basis. I am sure that in the event of an amendment being devised which was going to prevent an artificial encouragement of the sale of older cars, it could be done without any cost simply by raising the calculation rate in regard to new cars to a higher level and compensating for the extra costs by reducing it in respect of older ones. There is always a way around such a problem without any cost if there is a wish to solve that problem.

Amendment, by leave, withdrawn.

I move amendment No. 3:

In page 17, to delete lines 31 and 32, and substitute the following:—

"(i) at any time during the year of assessment he was the age of 65 years or upwards or if under the age of 65 years he was at any time during the year of assessment in receipt of a taxable income (after deductions of normal allowances) of less than £600 per annum, and".

This is the last in the long-running saga of amendments designed to achieve an extension of rent relief in respect of income tax to people on low incomes. I had an amendment on Committee Stage which provided that if people had taxable income, after the deduction of normal allowances, of less than £1,000 per year they would qualify for the same tax relief in respect of rent that is available to people over the age of 65. I am advised that because the words which this and other amendments proposed to delete were resolved by this House to stand, the Ceann Comhairle ruled that the matter has been decided and cannot be the subject of an amendment on Report Stage. Therefore, although I would prefer to have a taxable allowance here of £1,000, I am forced by the rules of procedure to introduce a lesser figure of £600 which is not as generous as I would wish but which costs even less than the amendment I proposed on Committee Stage.

We have spent the whole day debating the merits of extending to people on low incomes the benefits of the rent relief which is being made available to those over the age of 65. I believe there is a strong case for such an extension because generally those who are living in rented accommodation are the least well-off section. Those who have resources of their own usually provide a house of their own but those who have no resources are forced to avail of rented accommodation. Generous tax allowances on mortgage interest are given to those who provide their own homes through the use of borrowed funds but no allowance whatever against income tax is given to those who pay each week substantial rents for housing accommodation.

The amendment proposing to extend relief to people in rented accommodation will help to identify many landlords who are not paying tax on the rent they receive. It will provide a mechanism whereby the identity of the person to whom a tenant is paying rent will come to the knowledge of the Revenue Commissioners. It is therefore, likely that significant sums will be raised in income tax on income which up to now has not been declared for tax. This significant gain will stand against the cost that will obviously flow from the implementation of this amendment.

The provision of income tax relief for rent payments has been an article of policy of my party since June 1981. It was our original intention to extend this allowance to all people in rented accommodation. We found, coming up to the January budget, that funds were not available on a sufficient scale to do this, so we decided to extend that allowance to people aged more than 65.

Deputy Gregory has put forward a formula in regard to taxable income which is capable of being adjusted to ensure that relief is given only to those who have a low income. That mechanism and the proposals made by Deputy Gregory have convinced most of us that there is a strong case for extending this relief to people with exceptionally low incomes. I am, therefore, putting forward this amendment. In fairness to the Minister, it must be said that he did not reject in principle any of the amendments put forward. He said that this proposal could not be afforded this year but that without commitment he would look at the matter between Committee Stage and Report Stage.

A reasonable argument put forward in regard to all the amendments was that there was no provision for marginal relief. This means that a person with a taxable income of, say, £1,000, might get relief worth £250 but a person earning £1,001 would get no relief whatever and because of earning £1 more would lose relief worth £250. This is the problem which arises when there is no provision for marginal relief, but I have provided a mechanism for it in amendment No. 4. I do not wish to go into detail as to how this marginal relief will work, beyond saying that the mechanism is derived from sections of previous Finance Acts enacted by this House with the best advice of the parliamentary draftsman designed to achieve this result in other areas. The Minister can be assured that the amendment is reasonably well drafted because it is drafted, indirectly at least, by his own advisers.

I think I have overcome the major objection raised by the Minister. I do not have available an actual costing of this amendment but I imagine that it would not cost any money this year, somewhere in the region of £2 million in 1983 and perhaps £3 million in a full year. I am sure the Minister will be able to give more accurate figures than those rough estimates. It is not a matter of significant cost. This amendment will help those who are worst off in terms of their social position. During the long hours spent discussing this subject we have all been concerned about doing something about the problem. My amendment represents a reasonable consensus of the views expressed here, although it is much less generous than some Members would wish and less than I would have wished, for procedural reasons which I have already explained. I hope that it is an amendment which the Minister can accept as a reasonable reflection of the wishes of this House, to which he, as are we all, is responsible.

There has been a lengthy debate on this section. This amendment is the last in a long line of what might be termed a dutch auction in reverse. We started with something over £4,000 and are now down to £600. Any relief which can be obtained for those in the hands of private landlords would be welcomed although, in my view, the relief received by the tenant, whether well off or poor, will eventually land in the pocket of the landlord, purely and simply because rents set are not controlled in any way except by the money which is available to pay them.

It goes without saying that after a few months landlords will raise their rents to suit the ability of their tenants to pay and if the tenant cannot pay the landlord will shift him or her out and find someone who can. This relief may bring about even greater harassment of tenants. In some cases landlords are now changing their tenants three times a year to avoid being reported to the tax office with regard to collection of rent. It is essential that this House, at an early stage, look at the whole question of control of rents of private accommodation, establish rent tribunals for all types of private rented dwellings and provide security of tenure. As regards local authority housing, the only ground on which a tenant can be evicted is non-payment of rent. There are no grounds at all on which eviction can be refused to a private landlord.

The only good point about the present amendment is that it might rope a few more landlords into the tax net, but given that the tenant is at the mercy of the landlord, any hint of the reporting of the landlord to the tax office will mean short shrift for the tenant and notice to quit. More often than not the landlord in this case will not bother going through the courts and the tenant on coming home from work some evening will find his baggage outside the door. This is quite illegal, but that does not prevent it from happening. For that reason we are not at all satisfied that this section will provide the relief which it ulitmately sets out to do.

Amendment No. 3 is in the same terms as a number of amendments put down on Committee Stage by Deputies Gregory, Desmond and Bruton except that the taxable income limits for persons under 65 years is reduced from the taxable income limits in those amendments which were £4,500, £2,000, £1,000 and are now down to £600. Amendment No. 4 aims at providing a form of marginal relief. The cost of the proposed relief is estimated at £1½million in 1983 and £2½ million in the full year. The number of persons who would benefit is estimated at 28,500. If the taxable income of £600 were to apply in the case of a married couple under 65 years old, it would be necessary, because of the Murphy decision, to fix a taxable income of £300 for single persons. In that instance the cost of the proposed relief is estimated at £0.8 million in 1983 and £1.3 million for a full year. The number of persons who would then benefit is estimated at 22,000.

The objections to the giving of relief subject to taxable income limits to persons under 65 years were explained on Committee Stage. Briefly, again, they are: (1) end of year reviews would be required in all cases under PAYE; (2) provisions would have to be made to take account of the implications of the Murphy case and, accordingly, an income limit of £300 for single persons would have to be provided for; (3) the reference to the level of taxable income at any time during the year of assessment appears to imply that if the taxable income in any one week were below the weekly equivalent of £600, or £1,100 in amendment No. 4, relief would require to be given even though the person's taxable income for the year of assessment might exceed the limit of £600. Such a system would be incapable of implementation.

Marginal relief provisions in accordance with amendment No. 4 are complex and open to various interpretations. Marginal relief should take the form of reducing the amount of allowance for rent by the excess of the taxable income over the taxable income limit of £600. In other words, in the case of a married person with a taxable income of £1,200, the rent allowance of £1,000 would be reduced by £600, that is to £400. The proposed amendment No. 4 would give no relief in such a case.

We discussed this not only for days but over a period of two weeks and Deputy De Rossa has described the way the case developed from what, even in the first instance, was put down by Deputy Gregory and was a principle against which I would not attempt to argue, the principle behind assistance for this category of person. There is no doubt about it, something will have to be done in that area and soon. We took on board exactly what was proposed by Deputy Bruton as Minister for Finance and his Government on 27 January. That is the start. As anybody around here with any experience knows, once a start is made in a case like this there will be pressures to move onwards, just as happened on the previous amendment today and earlier in relation to group water schemes — why not swimming pools, residents' associations, sports complexes, and community halls? The list can be endless.

However, the start has been made in relation to this provision for those over 65 years of age. That is a good start which is why I support it and it is now before us in the Bill. I could not argue, or attempt to argue, against the principle involved in the first amendment put down, in this case, by Deputy Gregory. I have no doubt that, as the months progress, very careful consideration will have to be given to the points made in relation to that principle. I hope that by the time the next budget comes around, there will be some possibility of going some way towards meeting the needs of the various individuals and families who have been talked about during discussion of this item. It is all right to do it for those aged over 65 years of age because then one is not involved with taxable income and so on. The other situation would create all these anomalies about which we have been talking in the past few weeks. Perhaps there is another way to do it. We all know there has been a lot of discussion about it and so I shall not go into any more details on the reason why I cannot accept the amendment as proposed.

We have spent a long time on this subject and on this section. I am not disappointed or annoyed about that because we have made a lot of progress, not in amending the Bill but in arriving at a general consensus that the whole question of rented accommodation and the difficulties arising therefrom is something which needs to be tackled by the House. I am delighted that the Minister has said we must do it as soon as possible. There is broad agreement that this question should be looked at in an overall way and not tucked into some Finance Bill by an amendment. The rights of tenants, duties of landlords, the quality of rented accommodation and so on should be the subject of examination, investigation, review and legislation by the Government. That is where we should be going as a result of this debate.

I agree with Deputy De Rossa that landlords will use this clause to increase rents further. That would be one of the likely results if we went ahead with this amendment. Since we have introduced it for persons over 65 years we can afford to wait and see if Deputy De Rossa's worst fears are realised. Let us see how they get on before we extend it any further. I am pleased that the result of this long debate has led to a consensus that as politicians we must tackle the problem of rented accommodation especially for those on very low incomes. To that extent the time spent on this has not been wasted even if an amendment has not been made.

Deputy Bruton's amendment is a modest one giving relief to 28,500 families and individuals with the lowest taxable income in the state. The total cost would be £1½ million in 1983 and over £2 million in 1984. The debate has been effective in that the financial dimensions of the amendments have been clearly outlined and we are acutely aware of the need for inter-action between landlord and tenant legislation and the Finance Bill. It pinpoints the fact that we must have rent control statutory procedures and criteria, otherwise relief of this nature will be an incentive to landlords to reap the benefit of it. However, that does not detract from the overall merit of the amendment. If one does not start somewhere the pressures will never come on in the other directions. I find a net balance of advantage in supporting an amendment of this nature. We have considered the whole question exhaustively and have also considered a wide variety of alternatives. Obviously the Minister cannot accept the amendment. By the third week of December all the innovations and the shape of the Finance Bill will be known and this is an area which the Minister may consider taking on board in the following year's budget. It is an area where productive parliamentary work can be done.

The Minister mentioned end of year reviews and the Murphy case. Both of these are technical difficulties which he could overcome if he wanted to. He should not offer them as an excuse. He could redraft the amendment if he is unhappy with it in view of the Murphy case.

It is a constitutional difficulty, not a technical one.

The Minister could draft it so that it would conform to the Constitution if he wanted to. As far as Deputy De Rossa's point about landlords benefitting from these proposals is concerned, I do not accept it. If he thinks about it, he will not accept it either. This relief is confined to those with low taxable incomes. One would not know until the end of the year if a person is qualified or not. A landlord looking at somebody asking for a flat will not know whether they are a type of person who will end up with taxable income of less than £6,000. The person concerned may not know either. The only way advantage could be taken of the situation was if a landlord knew that a person qualified for relief. There is a greater danger of landlords exploiting the situation in respect of people who are over 65 years of age because their position is known. It is known they will qualify for relief. In the case of my amendment there is no way of knowing simply by looking at a person whether they will qualify for the relief. The landlord will not be in a position to exploit them. The ability of a landlord to take advantage of the relief depends on supply and demand in the market. One cannot say that if a general relief was given to everyone in some cases the landlord would not benefit. However, if that stops one from giving relief one would not give relief in respect of any activity. Tax reliefs of all descriptions are passed on to people other than those to whom they were originally given.

Amendment put and declared lost.
Amendment No. 4 not moved.

I move amendment No. 5:

In page 18, between lines 36 and 37, to insert the following:—

"(5) (a) Any claim for relief under this section in respect of a payment on account of rent shall be accompanied by—

(i) a certificate and statement in a form (being a form prescribed by the Revenue Commissioners) signed by the claimant setting forth—

(A) the name, address and income tax reference number of the claimant,

(B) the name and address of the person or body of persons beneficially entitled to the rent under the tenancy under which the rent was paid,

(C) the postal address of the premises in respect of which the rent was paid, and

(D) full particulars of the tenancy under which the rent was paid,


(ii) in respect of each payment on account of rent in respect of which relief is claimed a receipt or acknowledgement given pursuant to the provisions of subsection (6).

(b) Failure to furnish any of the particulars mentioned in paragraph (a) (i) or failure to furnish a receipt or acknowledgement mentioned in paragraph (a) (i) shall be grounds for refusal of the claim:

Provided that—

(i) the inspector may waive the requirement at paragraph (a) (i) (B) on receipt of satisfactory proof that the claimant's inability to comply therewith is bona fide, and

(ii) the inspector may waive the requirement at paragraph (a) (ii) on receipt of satisfactory proof of the total rent paid in the relevant period and on being furnished with the name and address of the person or body of persons to whom it was paid.

(c) (i) Any person who is aggrieved by a decision of the inspector on any question arising under this subsection may, by notice in writing to that effect given to the inspector within thirty days from the date on which notice of the decision is given to him, make an application to have his claim for relief heard and determined by the Appeal Commissioners.

(ii) Where an application is made under subparagraph (i), the Appeal Commissioners shall hear and determine the claim in like manner as an appeal made to them against an assessment to tax and all the provisions of the Income Tax Acts relating to such an appeal (including the provisions relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law) shall apply accordingly with any necessary modifications.

(6) (a) Where at any time after the passing of this Act a payment is made on account of rent by a person (hereinafter in this subsection referred to as ‘the tenant') who is entitled to relief under this section or who has reason to believe that he may be so entitled and at the time of such payment the tenant requests a receipt or acknowledgement of the payment, the person or body of persons beneficially entitled to the rent shall, within seven days from the date of the payment, give to the tenant a receipt or acknowledgement of that payment and, thereafter, in respect of any subsequent payment on account of rent to which that person or body of persons is beneficially entitled and which is made by the tenant, the person or body of persons shall, within seven days from the date of the payment, give to the tenant a receipt or acknowledgement of the payment, whether requested to do so or not.

(b) Any receipt or acknowledgement given pursuant to this subsection shall in writing and shall contain—

(i) the name and address of the tenant,

(ii) the name and address of the person or body of persons giving the receipt or acknowledgement, and

(iii) the amount of the payment and the period in respect of which it is paid.".

This amendment is designed to give effect in principle to amendment No. 34b put down on Committee Stage by Deputy Gregory-Independent. That amendment proposed that in order to prove entitlement to relief in respect of rent the tenant should disclose to the Revenue the name and address of his landlord and the names and addresses of the persons to whom he paid the rent. I indicated during the debate on the amendment that I would be prepared to consider the matter and bring forward a suitable amendment on Report Stage. The amendment now proposed is on the lines of the regulations which the Revenue Commissioners originally proposed to make under subsection (5) of the new section 142A of the Income Tax Act, 1967, inserted by section 5 of the Bill as soon as the Finance Bill became law.

The amendment proposes two additional subsections to the new section 142A. The first new subsection sets out the basic information which a tenant will be obliged to furnish on making a claim for relief under the section. The second new subsection places on a landlord the statutory obligation to give, when requested to do so, to a tenant of his who is entitled to relief under the section, or who has reason to believe that he may be so entitled, a receipt or acknowledgement in respect of rent paid by the tenant.

There are printing errors in the amendment. The first is on page 2, section 5 (5) (b) in the third line where (a) (i) should read (a) (ii). The second is on page 3 at subsection (6) (a) second line where, "hereinafter" should read "hereafter". Is it agreed that these amendments be made to amendment No. 5?

Amendment, as amended, agreed to.

I move amendment No. 5a:

In page 19, between lines 3 and 4, to insert the following:—

"(b) Landlords failing to comply with the provisions of subsection (5) (a) (iii) shall be guilty of an offence and be liable to a penalty of £1,000.".

This amendment is simply to ensure that landlords will keep specified types of records in relation to those tenants who are entitled to the relief. The intention here obviously is to tighten up and to ensure that as little evasion as possible takes place. As I said earlier, this is an area where a great deal of evasion occurred. One Deputy in the House put it as high as £200 million a year which landlords are failing to declare. There is a need to ensure that landlords are registered. Dublin Corporation have a system whereby landlords are bound to register for various purposes but only a tiny minority of those who are supposed to do this in fact do so. The reason the corporation give for not pursuing this registration is that they fear that it may reduce the amount of private rented accommodation available. For that reason the consensus which Deputy Brennan spoke about earlier in relation to private rented accommodation needs to be broadened to take a look at the whole area of housing, building, local authority housing, the provision of rented accommodation to married people with children, single persons, young workers and so forth. The amendment that I propose should be accepted as a start in trying to tie up some of the landlords at least in relation to the tax code.

The proposal contained in this amendment is acceptable, but it is not necessary to provide for this in the legislation as the proposal will be incorporated in the regulations which the Revenue Commissioners will be empowered to make under section 5 (5). The Revenue Commissioners will also explore the possibility of increasing the penalty and extending it to other areas such as the failure of landlords to furnish receipts for rent paid. I said "increasing" because under existing penalties it is about £800 but I am prepared to accept the £1,000 and we will look at the possibility of increasing that £800 to £1,000.

I query this amendment. It looks like a mandatory fine of £1,000 and I do not think that mandatory fines in this section would be appropriate. There may well be circumstances in which the offence would be technically committed but the degree of responsibility would be such that the fine of £1,000 would be grossly disproportionate. I know that the Minister has said that he accepts the principle. Does he accept the fine of £1,000?

Yes, I said that.

Is it a mandatory fine?

The £800 is what we are dealing with at the moment under the existing penalties, but in this instance I would be prepared to accept the £1,000 and look at the possibility of increasing the £800 in other cases such as I have outlined to £1,000.

If it is a standard fine which applies across the board in other cases I would not object to it in this instance, but I am worried about the possible interpretation that this is a mandatory fine, that the courts would be obliged to fine £1,000. No matter how much one objects to the concept of people being landlords, there are landlords in our system and they perform a function as long as we have a mixed economy. They may well technically break the law in some instances without the degree of culpability which would require a mandatory fine of £1,000. It is not clear to me whether it is a mandatory fine.

I said it is.

If it is, to impose a mandatory fine in all instances on someone who might quite innocently fail to comply with the requirements of the law through pure ignorance is going too far. It should be left to the judge who will hear all sides of the case to decide what fine to impose. The legislature should not lay down this fine in all cases. It is unusual that a mandatory fine is laid down. The normal procedure in cases where fines were set in legislation is that a maximum fine is laid down, not a mandatory one. I am very puzzled why a mandatory fine is being set in this instance by the Minister. I would like to know — if it were possible to cross-question him, which it is not — where the idea came from that this should be a mandatory fine.

With the permission of the House, I will give two replies to Deputy Bruton on the points he has raised. The Revenue Commissioners have power to mitigate, and all Revenue fines are mandatory.

I accept the Minister's assurance that he will include the principle of my amendment in the regulations in relation to the keeping of records. In regard to keeping any of the laws relating to private rented accommodation there is a need for better policing of the regulations and the laws. Probably very few people in this House have not had at least one experience of seeing houses which are broken down into single-room flats without fire escapes and possibly without a proper water supply or any thought given to how the people living in those houses will get out of them in case of fire. I know of two houses next door to each other where each room is a flat with a bottled gas heater and there is no fire escape in either house. It is a death trap and the sooner we show that we are prepared to pursue landlords who are making large amounts of money out of private rented accommodation and to enforce the law in relation to accommodation, the records they should keep, fire hazards and so on, the better.

Amendment, by leave, withdrawn.

I do not propose to move amendments Nos. 6, 7 and 8 which I put down in error. The Minister dealt with this point on Committee Stage.

Amendments Nos. 6, 7 and 8 not moved.

I move amendment No. 9:

In page 25, between lines 34 and 35, to insert as follows:—

"13.—(1) Section 2 of the Public Revenue and Consolidated Fund Charges Act, 1854 is hereby amended by the insertion after ‘the net produce of all permanent taxes' of ‘and the amount of revenue foregone (in each case) to the Exchequer by way of the income tax reliefs as specified in section 13 (2)* of the Finance Act, 1982'.

(2) The reliefs to which subsection (1) of this section applies are as follows:

(a) all income tax allowances (excluding those specified in section 2 of this Act);

(b) allowance for interest on loans, specifying the different categories of loans;

(c) allowance on health insurance premiums;

(d) allowance on insurance premiums;

(e) allowance for benefit-in-kind; and

(f) allowance for interest on savings in building societies, commercial banks, post office savings bank and other lending institutions;".

This amendment involves no cost. It merely requires the Minister to give certain information about the loss to the Exchequer from various tax reliefs given. In the course of this debate on the Finance Bill, we have had extensive discussions on the fact that people who are well enough off to be able to claim tax relief get a greater benefit the higher their tax rate and the higher their income. People on an income which is so low that they cannot claim any tax relief get no benefit from these tax reliefs however laudable their purpose.

I want to make a change in the financial accounts published each year. To do so it is necessary to amend section 2 of the Public Revenue and Consolidated Fund Charges Act, 1854, to require the Minister to give information to this House every year on the amount of revenue lost by virtue of the following types of allowances: allowances for interest on loans, specifying the different categories of loans; allowances for health insurance premiums; allowances for insurance premiums; allowances for benefits in kind of all sorts; and allowances for interest on savings in building societies, commercial banks, post office savings banks and other lending institutions.

All of these allowances can be availed of intrinsically by people who have a reasonably substantial income or, alternatively, a reasonable amount of savings. This amendment does not seek to withdraw any of these allowances. Transparently it seeks to have stated each year in the House, in a document which is available to the public, exactly how much these reliefs are costing the Exchequer in terms of revenue not collected by the virtue of the fact that these reliefs operate.

We have here, and I hope that in the future we will have to a greater and more effective extent, extensive discussions on Estimates of expenditure by the Exchequer. Revenue not collected by virtue of allowances is just as significant a cost, and is as much a matter which requires deliberate policy decisions, as Government expenditure. By requiring a comprehensive statement to be made each year of the cost to the Exchequer in terms of revenue lost because of all these tax allowances I am providing, I hope, a base for informed public discussion on the appropriate levels of these allowances and whether they are achieving their purpose.

Many of these allowances were introduced quite a long time ago to achieve a change in public behaviour at that time. When they were introduced probably they were eminently justifiable. Of course, the change in public behaviour, whether it be in regard to savings or house building, or whatever it was that was sought to be encouraged, has already occurred. Therefore, it is questionable whether the reliefs should continue indefinitely on the same basis, given that the conditions which justified their initial introduction may no longer exist. Because they are never consciously brought to our attention, and in particular because their cost is never consciously brought to our attention in any one place or in any one document, they are never considered in a comprehensive fashion.

I am seeking to put that right by introducing this amendment to the Public Revenue and Consolidated Fund Charges Act, 1854. This proposal is consistent with a proposal made by the previous Government in the White Paper entitled "A Better Way to Plan the Nation's Finances". I was glad to learn from the reply given by the Minister of State to a question today that broadly, but not in respect of this proposal, the Government are in agreement with that policy. I hope the Minister will be able to accept the amendment which will not cost a single penny, but will provide in a comprehensive form valuable public information to enable us to discuss the structure of our taxation system in an informed and reasonable way.

I support my colleague, Deputy Bruton, on this amendment. There is a great deal of parliamentary ignorance of the ramifications of individual tax allowances. I have been in the Dáil for some 14 years and it was in very recent years only that I managed to get some kind of a grip on how to get the information one needs if one is to have an informed opinion on taxation matters of this nature.

I should like to make a number of points. The first and most important is the enormous and inordinate apparent secrecy about information. This does not arise from any disposition on the part of the public service, the Revenue Commissioners or the staff of the Department of Finance to hide that information or to prevent politicians from having access to it. A large number of politicians do not know how to go about getting the information, asking the appropriate questions and setting in train the appropriate mechanisms to have the detailed information made available to them.

Successive Ministers for Finance adopted the view that, if they could win the argument based exclusively on the ignorance of the people on the opposite side, and get their Finance Bills and their budgets through on the basis that, because the people on the other side did not know they would not ask awkward questions, they were "away on a hack" in terms of achieving their political objectives.

The Revenue Commission staff, the staff of the Department of Finance and all other public servants associated with the collation of information of this nature are only too willing to assist politicians to the greatest possible extent, but the mechanism for having the information made available to the House and brought to the attention of the public at large does not exist. Over the past five or six years I have been trying to draft parliamentary questions and flooding in a series of questions in the hope that, when I got the replies, I could digest them and shift out the gems of fresh information. For these reasons I fully support Deputy Bruton's amendment.

It will ensure that a political climate will develop in which those who are in receipt of benefits will be known as such, and those who are not in receipt of allowances, but would dearly wish to have some prospect of having parity of allowance, will know they are foregoing such allowances. I ask the Minister to consider this point.

This House is hidebound by outdated conventions in terms of considering matters of this nature. We have a budget and Finance Bill every year and that is the end of the financial administration of this State. We need Dáil committees, budgetary committees, finance committees and Members making recommendations to the Government and having the courage of their convictions to uphold those recommendations at budget time. That would be a more constructive approach. The information outlined in Deputy Bruton's amendment should be provided. That procedure could be classified as a prospective parliamentary reform which is very urgently needed and it will be in the national interest for information of this kind to be made publicly available. We, the politicians, should inform our constituents of these allowances, their effects on income, poverty and deprivation and the lack of distribution of the general wealth of the country. From what I have seen in this area over the years, it is obvious that there is an urgent need for fundamental structural reform.

The desire behind this amendment is to have the necessary information at regular intervals in one place. I do not have any strong feelings against this amendment but I think a lot of this information is already available because successive Ministers have given such information in answer to Dáil questions and in published Government documents throughout the year.

If the amendment innocently seeks to have a lot of information provided, I cannot see any major reason why it should not be provided from time to time as requested but I bow to the Minister's knowledge in regard to whether this is the precise way to do it. I was pleased to hear the Minister of State say at Question Time that he would ask the Committee on Procedure and Privileges to undertake fairly urgently a review of the system of organising the financial debates and procedures of this House. This statement was welcomed by all sides of the House. I trust that committee will get down to work on this matter which has become very urgent. Since the foundation of the State there have been very few changes in our financial procedures, despite the fact that increasingly the role of the State in society and in the economy has expanded dramatically. The procedures need to be updated and I am glad the committee are going to look at it.

I made the point earlier that we should not be debating Estimates during the period the money is being spent. We should debate them as early as possible so that we can look forward to what we are about to spend rather than what has been spent. Discussions of the Estimates tend to be used as an excuse for a major debate on the Department. I am not sure that is what was originally intended. I imagine the original intention was to examine each item in the Vote and to have a more professional consistent analysis of each item in the Estimate and to look at it in a more professional way, as befits a modern Parliament.

As a number of Deputies have said, the Committee on Procedure and Privileges is made up of Members of all sides of this House. They should look at the procedures of the House, particularly financial procedures. Were this House a company which had been in existence as long as this House, they would have updated their accounting, analysis and decision-making procedures or they would not have survived in the commercial world.

I doubt if anybody would be voluntarily buying our products.

As I said, I am glad that the committee are looking at this whole area. I am not competent to say if Deputy Bruton's amendment is the way to do this, but obviously this information is freely available and will be made available whenever it is asked for.

This proposal is that details of the revenue foregone by virtue of various tax reliefs should be specified in the finance accounts. Section 2 of the Public Revenue and Consolidated Fund Charges Act requires that the finance accounts shall be laid before Dáil Éireann by 30 June. These accounts contain the detailed financial account of the Exchequer and give a breakdown of tax receipts paid into the Exchequer during the financial year in question.

There is no objection to publication of the costs of various reliefs as proposed by Deputy J. Bruton, but the most appropriate vehicle for publication would be the annual report of the Revenue Commissioners and not finance accounts. There is no necessity to provide any legislative requirement for publication of this information in the annual report. This can be arranged administratively and I will see that is done now the request has been made.

Data on tax relief is accumulated on a tax year basis whereas the finance accounts are concerned with a financial year. Also the finance accounts detail money actually paid into the Exchequer and this will not correspond directly with the accounts of the Revenue Commissioners. Therefore publication of the information sought by the Deputy in the finance accounts would not give the picture he wants. What Deputy Bruton and others have been interested in is the cost figure for any particular tax year and this information can be got in the annual report of the Revenue Commissioners and I will undertake to ensure that this is done.

I thank the Minister for his assurance which has achieved the purpose of my amendment. Therefore there is no need to press the amendment.

Is the amendment withdrawn?

Amendment, by leave withdrawn.

I move amendment No. 9a:

In page 28, line 39, after "building", to insert "or on the maintenance or restoration of any land occupied or enjoyed with an approved building as part of its garden or grounds of an ornamental nature".

I have decided that the relief provided for in this section will be given also in respect of expenditure incurred in the upkeep of ornamental gardens or grounds attached to the buildings to which the section applies. This amendment should meet the requirements of Deputy Desmond in the amendments tabled by him on Committee Stage.

I am not speaking for Deputy Desmond but I welcome the response of the Minister to the case made by the Deputy and others in regard to heritage gardens. I believe the amendment proposed is reasonable.

Amendment agreed to.

I move amendment No. 10:

In page 29, between lines 26 and 27, to insert the following:—

"(b) (i) The Minister shall make regulations laying down, for the purposes of making a determination under paragraph (a) (i) of this subsection the specific detailed criteria by which a building may be considered to be one to which the said paragraph (a) (i) applies.

(ii) Every regulation made under this paragraph shall be laid before Dáil Éireann as soon as may after it is made, and if a resolution annulling the regulations is passed by Dáil Éireann within the next subsequent twenty-one days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder".

This amendment derives from a concern I have and I am glad Deputy Brennan is present because I know he has an interest in the matter. It concerns the decision that the Revenue Commissioners, as provided for in this Finance Bill, will be able to determine what is a building of scientific, historical, architectural or aesthetic importance and once it is defined as coming within one or other of those categories it will be capable of receiving tax relief in respect of costs incurred in maintaining that building.

What I am worried about is that the Revenue Commissioners will be set up, without any guidance from this House or in the form of regulations, as the arbiters of what is intrinsically of significant scientific, historical, architectural or aesthetic interest. Some guidelines must be given to the Revenue Commissioners in the form of regulations which would be available to anyone interested in applying for this benefit as to the basis on which decisions will be made. Some people will have a view that a certain item is of aesthetic value while others will hold that it has no aesthetic value whatever and the same can be said with regard to items of architectural significance. It is all a matter of subjective judgment. Yet, the Revenue Commissioners will have to make the decision about whether they will give a tax relief in one instance and not give it in another instance. I do not think it right that any public body should be able to make decisions affecting the tax liability of one person on something as nebulous as the wording in the Bill which uses the words "intrinsically of significant scientific, historical, architectural or aesthetic interest". In my view aesthetics are intrinsically subjective and are not capable of being expressed in legislative form without some guidelines as to the practice that will be adopted. I agree that probably there could be some objective agreement about what is of historical significance.

I am not proposing that we do away with the concession but I am asking that we give the Minister power to make regulations that will govern the way the Revenue Commissioners will use their powers under this section. Otherwise disputes will arise: people will claim the Revenue Commissioners are being boorish in not accepting a particular building as being of aesthetic importance while accepting that another building is of aesthetic importance. If there are regulations laid down by the Minister and approved by this House setting out the criteria on which the Revenue Commissioners will operate, there will be less basis for argument.

In the interest of the smooth administration of this valuable concession there is a need to make some general regulation so that it can be reasonably interpreted. I am not proposing we should make the regulations in this House. It would take too long and probably we would not reach a consensus in the time available. However, I believe the Minister should be given the power to make regulations in this respect, regulations that would be approved subsequently by the House, so that there will be an objective basis on which the Revenue Commissioners will make their decisions.

The determination of what constitutes a building which is intrinsically of significant scientific, historical, architectural or aesthetic interest involves a judgment of an essentially subjective character. The criteria which may be applied by experts in making such determination are not amenable to precise definitions. Each building or garden is unique and doubtless it will have its own intrinsic worth in the eyes of those on whom the Revenue Commissioners must rely for the making of such determinations.

Similar problems have to be contended with in relation to exemption for artists under section 2 of the Finance Act, 1969, which speaks of "an original and creative work having cultural or artistic merit". No attempt was or could be made to set down in relation to that section absolute criteria by means of regulations and any attempt to do so would probably be resisted by all persons involved in the cultural and artistic area. Accordingly, no purpose would be served by taking power to make regulations under the section as proposed in Deputy Bruton's amendment.

This is a departure and already we have proposed two pages of laws governing it. Considering that we have those two pages, it might be more prudent to see how we get on with them before we try to tighten up matters further. We may tighten up things so much that we outsmart ourselves and do not allow the section to do what it was intended to do. The section uses the words "significant scientific, historical, architectural or aesthetic interest". If we go beyond that and tie the hands of the Revenue Commissioners or those who will make the decision, it could have the opposite effect to what is intended. The guidelines and regulations might be so tight as to defeat the purpose of introducing the relief in the first place, which is to improve the condition of significant buildings in the country.

My comment on the amendment is not that it is wrong but it is somewhat premature. We should see how we get on with the present definition. To an extent we should give the Revenue Commissioners their head on this. If necessary next year or the following year if we find it necessary to do so, we could tighten up on the definition of "scientific, historical, architectural or aesthetic interest". In my view we should see how we get on with the section in the meantime.

I take the point made by Deputy Brennan. I agree there is a risk in trying to tie down things too much. I realise we may so regulate the concession that no one will avail of it. I was worried that there could be unnecessary disputes about this matter. I hope that in practice the Revenue Commissioners will issue some guidelines as to the way they will operate the provision, even if the guidelines are not ones that have legislative effect. Perhaps they could issue a brochure setting out in general terms the way in which they will interpret the provisions.

I will arrange the distribution of a leaflet to that effect.

That would satisfy me and would mean that people would know where they stand. It is what I wished to achieve. Consequently, in deference to the point made by the Minister and by Deputy Brennan that the making of formal regulations would be too cumbersome a process, I am withdrawing the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 11:

In page 29, line 24, before ", and" to insert "(including a cross-section of industrial buildings, farm buildings and small cottages)".

This amendment is to give force to a point I was making on Committee Stage. I am very anxious that this tax relief for heritage and other dwellings in which I very strongly believe, should not be confined to the mansions that have been regarded traditionally as being heritage homes from the conventional point of view of that subject. I am very anxious that a wide cross-section of all types of dwelling of the Irish people of the past be preserved and that must include the most modest dwellings, mudwall cottages, single-room or double-room cottages, outbuildings, industrial buildings and so on. Obviously, not all of these will be preserved but we should preserve a cross-section of the whole range of our material heritage. We must not preserve merely the examples of the type of life enjoyed by those who happened to be best off in the 16th, 17th and 18th centuries. To preserve only that segment, though it may have greater richness in terms of physical appearance, would be to give a jaundiced view of history to the younger generation of our people. That is why I believe this tax relief should be used to quite a large extent in helping to preserve also our small, modest houses. The amendment does not seek to restrict what is provided already but simply requires that included under the heading of buildings that may be preserved are industrial buildings, farm buildings and small cottages. I am not concerned greatly about the use of that wording. It may have some element of rural bias to the extent of the use of the term "cottages" but I would hope that the Minister would find it possible to accept the amendment. This would give a proper direction to the Revenue Commissioners to look in a broad sense at what is our heritage rather than approaching the situation in the rather narrow sense that might be dictated sometimes by what is purely artistic.

I wish to thank the Minister for the additional amendment he introduced a few minutes ago. I regret that I was not here at the time, having been called out on party business. The amendment meets the precise points we were making and will be a considerable addition to the Finance Bill.

Regarding amendment No. 11 which seeks to bring within the ambit of the relief industrial buildings, farm buildings and small cottages, the term "cross-section" is incapable of precise application to such buildings and represents a serious departure from the legislation as conceived. The original relief was intended to assist the preservation of buildings which have merit in themselves and were not really selective representatives of a larger body of buildings of similar type. Any encroachment into this area raises the difficulty of justifying to people owning buildings of a similar type why their buildings were being excluded from the relief. In the case of industrial buildings and of farm buildings in current use the normal expenses of maintenance, repair and restoration are allowable within the terms of the general income tax law. The section as framed would not exclude from relief a building of the type mentioned in the amendment which has of itself significant scientific, historic cultural or aesthetic interest.

Having heard the Minister, my worst fears were realised, that is, that the section will be used only to preserve big houses and will not be used to preserve dwellings of a broad cross-section of our forebears.

My last sentence covers that.

What the Minister is saying, then, is that one building must have intrinsic merits over and above those of all the others but if we take thatched cottages we find that none has intrinsic merits that override the merits of any other thatched cottage. Under this section they could all disappear. My interpretation of the Minister's reply is that it will mean that we will have a situation in which the only dwellings that will be preserved as a result of this relief will be the big houses. If this is the case I would be very concerned and would only express the hope of amending the section along the lines of my amendment if and when that opportunity is presented to me.

I would merely remind the Deputy of the three cottages that come to mind and which have been preserved. These are de Valera's cottage, Devoy's cottage and Pearse's cottage.

Amendment put and declared lost.

I move amendment No. 12.

In page 29, lines 35 and 36, to delete "one hundred" and substitute "thirty".

This amendment implements the undertaking given during Committee Stage that the main period of assess to the public of 100 days provided for in section 19, (4), (b), (ii) be reduced to 30 days.

Can we be assured that it is not a misprint?

I agreed yesterday to bring in an amendment on those lines.

My name is to the amendment, also.

Amendment agreed to.
Amendment No. 13, by leave, withdrawn.

I move amendment No. 14:

In page 35, between lines 7 and 8, to insert the following:—

"Provided that the provisions of paragraphs (a) and (b) of this subsection shall not apply in the case of a husband and wife who are separated.".

I am taking account of the valid point raised by Deputy Bruton during Committee Stage. The amendment is really a rewording.

Amendment agreed to.

Is Deputy John Kelly available to move his amendment? Would Deputy John Bruton move it on his behalf?

Well, I would be quite happy to do it but I do not think I could do so with the same flow of language.

I suppose we had better wait for the Minister now anyway.

I must apologise. My amendment was No. 15a. I looked at the board a couple of minutes ago and I saw that the House was at No. 11 only.

Amendment No. 14a, Deputy. We are making great progress.

I move amendment No. 14a:

In page 35, line 41, to delete "before the 6th day of April, 1985,".

I shall be brief about this. First of all, I should like to thank the Minister for his willingness at least to sit back and examine the points I was making here yesterday evening. I should like to thank him for making available to me officials of his Department with whom I discussed the matter briefly and with whose assistance — though naturally they did not commit him to anything — I put down the amendment. Its object, as I explained yesterday, is to free from the trap in which they feel they have been quite innocently caught probably a very small number of persons who, in reliance on the words of the budget statement, on the words of the document entitled Principal Features of the Budget which normally accompanies a budget statement and, after having made specific inquiries, in reliance on the statement which the Minister's own office put out, were led to suppose that a mortgage taken out before the end of the last financial year, notwithstanding that the purpose of the loan was for the purchase of a residence other than a principal residence in the case I mention, a holiday or retirement bungalow, would continue to be governed by the old regime in regard to mortgage interest relief.

I am not going to rehash what I said here yesterday, but it seems to me clearly to result from the words of the three documents to which I have referred. I cannot see that it was in any way unreasonable for somebody to act on those words. Anybody who, having done so and having, as my constituent did, entered into a mortgage obligation on 2 April, then opened the Finance Bill and found that mortgate interest relief was going to close down in 1985 would feel aggrieved. I must tell the Minister frankly that I do not know the number of years over which this constituent's repayment arrangements stretch. No doubt we are dealing with a category of people and not just one individual. That appears to be admitted by the Minister's Department by the fact that they very decently put out a supplementary explanation of their own on 31 March last and referred to the fact that they had received several inquiries. It may be that there is a small category of persons here and, if so, since the amount involved is small and since undoubtedly in the case of the person I mentioned he never would have taken the obligation on himself had he foreseen that the Finance Bill, notwithstanding all the previous material emanating from the Department, was going to be in the terms which subsequently transpired, has a fair case in asking this House through one of its Members for an appropriate amendment.

I do not want to spin this out. The Minister knows the case I am trying to make. I am grateful to himself and his Department for having accommodated me in giving me an opportunity to put down an amendment which I have been advised is the appropriate one in this case, though in a very complicated series of sections I have not had the amount of time I would have wished to satisfy myself that this is in fact the most appropriate and best way of doing it. I hope the Minister will admit that I have made a case in equity for the relief of this very small category and that he can see his way to removing the grievance with which I think they now justifiably feel afflicted.

This amendment is intended to secure that a loan which was taken out after 25 March 1982, budget day, but before 6 April 1982, should be a qualifying loan for tax relief if the loan was taken out for the purpose of purchasing or improving an individual's residence other than his sole or main residence, in other words, for a second house.

During the Committee Stage debate Deputy Kelly contended that an individual who took out a loan between those dates for the purchase of a second house had been misled by my Financial Statement of 25 March last into believing that interest on that loan would be eligible for tax relief for as long as the loan continued to exist. I might draw the attention of the Deputy to portion of what I said in my budget speech as follows:

I propose to implement the tax proposals put forward in January, subject to certain changes which I will shortly outline.

The January proposals to which I referred were those contained in Deputy John Bruton's budget of 27 January last, when he said, and I quote:

.... while there is a case for assisting the general house-purchaser, there is no case for saying that the better-off he is, the more he should be assisted, as in fact happens under present arrangements.

Owners of second residences would come into that category of the better-off. The intention was that only loans taken out for the purpose of purchase of improvement of a sole or main residence would not be subject to the new rules. It follows that all other loans, for whatever purpose, including the purchase of a second residence, would be subject to the new proposals. Accordingly I decided to phase out after a three-year period the existing relief for loans for second residences taken out before 6 April 1982. From 6 April 1985 such loans will qualify for interest relief subject to the specified capital limits of £5,000, £3,600 and £2,500.

In the light of these facts it is clear that ample notice of the Government's intentions regarding tax relief in respect of interest paid on loans and mortgages was given. As I said in the House yesterday, it must be borne in mind that all mortgages on second homes, including those taken out before 25 March, which may well have been in existence for many years, are subject to the new restrictions.

For those reasons I cannot accept Deputy Kelly's amendment.

Obviously the matter does not seem to have engaged the interest of any other Deputy or his constituents. Let me say that the point of view embodied in Deputy John Bruton's budget speech of 27 January last is one I entirely share. I have always thought that the mortgage relief arrangements were generous, if not overgenerous, and regressive in the sense that the better-off you were, the more solid your security, the greater the debt you could run up, the greater relief you could attract. Of course that relief meant a diminution of the State's revenue, the slack having to be made up by one's fellow citizens.

I could see no justification for that. The Minister and I are not at loggerheads about that and I was completely with Deputy Bruton on it. I can see that there is a social case for providing interest relief for somebody who is engaged in starting off life in their first home and so on, but I cannot see the social case for anything else. I know I am regarded as being so far on the right hand wing of my party that I am almost out of sight but, needless to say, that is a press myth. In that regard, and in connection with the wealth tax, I would be very much on the left of my party. The limits within which it is justifiable in a country such as ours to apply mortgage interest relief are very narrow. Having said that I believe people are entitled, just as everybody is entitled to the benefit of the taxation provisions which are in force at a certain time. They would be regarded as soft-witted, soft in the head and quixotic to the point where one might consider locking them up if they did not make use of them in the interest of themselves and their families. People are entitled to make use of the law as it stands and rely on what they hear from the Minister for Finance.

I do not wish to bring party politics into this, but the Minister and his party were returned to power in March after a campaign in which the side I had the honour of belonging to was denounced as being excessively rigid and going too far, too fast, although the principled approach which used to be heard here about governmental efforts being too little, too late was suddenly out of fashion. It was then too far, too fast. That was the way Deputy FitzGerald and Deputy Bruton were trying to travel and that, apparently was an even blacker sin than too little, too late, We were put out of office by the fellows who wanted to go a little less fast and less far and wanted to be a little easier on everybody. They produced their budget and citizens relied on the words in it — I am not speaking about the vague intimations, which were not specified. The Minister has just cited not his own budget speech but that of Deputy Bruton and citizens could not be expected to rely on that. What is the use in saying to my constituent: "By the way, my name is MacSharry and I am Minister for Finance but in order to understand my budget you have to read between the lines of it back to John Bruton's budget"? If that is what the Minister meant after the election it should have been specified before the election. Whatever the social justifications for wanting interest relief in respect of a second home — I have freely admitted that I never regarded that case as a strong one — it is quite unreasonable to be asked to accept what the Minister is asking.

I know the Deputy opposite is not a tyrant but it is action in an arbitrary manner to say: "I know I never said this to you and I know everything I said would lead you to suppose that I meant the opposite but nonetheless when I said ‘my budget' what I really meant was John Bruton's budget". Any citizen is entitled to experience a sense of grievance when he encounters that situation. He is entitled to experience a sense of grievance redoubled when he finds that the notes issued by the Minister for the convenience of the press with his budget, and for the convenience of the chaps from RTE who were reading onto the screens from little slips of paper handed out from the Chamber, are things he cannot rely on. Under the heading, relief for personal interest for mortgage taken out after 5 April 1982 one of the rules to apply is that there will be no change in the income tax relief provision in respect of existing mortgages. It was after that that several citizens rang up the Department of Finance asking what was meant by "existing mortgages". In order to clarify that, and in the interest of public relations, open Government, the goldfish bowl and all the rest, the Minister for Finance and his Department very decently used the resources of the GIS — instead of promoting the personality of Deputy Seán Doherty, the Minister for Justice, or anybody else—to put out a sheet of paper on 31 March explaining what they meant. They said in the course of that explanation that the Tánaiste wished to clarify the budget proposal in relation to income tax relief in respect of the new mortgage loans.

It was after that statement was put out that my constituent said he was definitely entitled to go ahead. He took legal advice before coming to the conclusion that that was what it meant. He left nothing undone, no stone unturned and no avenue unexplored in order to run the gambit of cliches apposite to the case, in order to establish exactly what was meant. He felt he was free, provided he could get under the tape by 5 April, to take out a mortgage, albeit one to raise a loan on his own principal residence to pay for the building of a second residence. It is not hard to understand how he felt when he found that the Finance Bill had dropped him in the soup.

I know the Minister or his officials did not intend this mess. Although I may often have spoken in heat in a way which suggested otherwise, I do not have anything but the highest regard for public servants in the Minister's Department and all other Departments. I consider the country to be lucky to have such public servants, but here there has been a definite breakdown in communications between the governing and the governed. The consequence of that is that a small number of people, including a constituent of mine, who are as much entitled to consideration as a constituent in the west of Ireland, although we often hear things in the House which suggest that he is not and that somehow a person living in Dublin South is a less deserving citizen than a person living in the far west ——

That is not true.

The Deputy and I know it is not true.

People come from the far west to live in Dublin South.

Such a person is as much entitled to consideration as the rest. He is a victim of a very severe failure on the part of Government to communicate what exactly they meant and what the citizen was to expect. I do not know enough about the man's financial situation to be able to measure the degree to which it will be a real millstone around his neck, but for all I know it may be a real millstone. It may be that if he is to try to get out of his obligations now, to try to sell off this second house—I am not sure how far he has progressed in the building or in the buying—he will be heavily out of pocket. The responsibility for that lies with Government. Although it may be a difficult thing to do justice to him, that man cries out for justice to be done to him and the others in the same category.

Yesterday the Minister treated me courteously, as did his officials this morning, and I do not wish to embitter our relations on this topic, whatever we may have to say to each other on other topics; but I appeal to him not to close the file on this category. If the Minister is still in office when a modification in the law is apposite I ask him, in the justice which is required of all of us towards one another, whatever about our party feelings, to keep his mind open about this case. I do not say that in a perfect world there would be such a case. I believe that in a perfect world there would be no such thing as mortgage interest relief on a second dwelling. Deputy Bruton is perfectly right about that, but there is a genuine grievance, a genuine injustice being done, albeit inadvertently. I hope the Minister will not leave that approach hanging over him and his Department and that he will keep his file open not with a marker saying "Faoi phráinn" but "Gan dearmad a dhéanamh air" so that when the next occasion arises for amendment of finance legislation some relief may be carried to the person who is aggrieved by the story I have told.

Is the Deputy withdrawing his amendment?

What else can I do with it?

Amendment, by leave, withdrawn.

I move amendment No. 15:

In page 39, between lines 24 and 25, to insert the following:—

"(2) Section 28 (3) of the Corporation Tax Act, 1976 (as amended by the Finance Act, 1978) is hereby amended as respects the financial year 1982 and each subsequent financial year, by the substitution of ‘£27,000' and ‘£39,000' for ‘£25,000' and ‘£35,000' respectively in each place where they occur."

The purpose of the amendment is to increase slightly the allowance for small companies. At present there is a lower rate of corporation profits tax which applies to companies. To encourage small companies there should be a slight increase in this allowance. I do not wish to make a big case of this but to draw attention to the fact that the lower rate band of corporation profits tax has remained the same since 1977. It has not been revised upwards. My amendment, which I am not going to press, proposes a small increase in the figure. Will the Minister consider this whole issue?

I do not believe that small Irish companies are very worried about taxation. They are all worried about survival, trying to keep their heads above water and staying in business for as long as they possibly can. I understand what is in Deputy Bruton's mind when he suggests putting the limit up from £25,000 to £27,000. That is really only an extra £2,000 and at a small company's rate of 40 per cent it is only worth £800 to such a company. I do not believe it is coming to grips with the assistance which small companies need. This change appears to be interested in the problems of small companies but it does not do very much for them. I doubt if it is worth making at all. It is spread around over many small companies and, therefore, is probably useless to most of them, a mere £800 in company terms.

This comes back to a discussion we had at Question Time. I am sure Deputy Bruton remembers the current deficit figure at the half-way stage and he will remember making some very strong points about that deficit. I doubt if this is the place in the Finance Bill to start deliberately to increase that deficit. It would be of so little benefit, a mere £800 at the bottom level, that I do not believe it would help any of them sufficiently to enable them to tackle their problems. The explanatory memorandum to the budget shows that we estimated we would get approximately 3 per cent of total State revenue from corporation tax. I commented during the Second Stage of this Bill that that is an extremely low figure not because I believe that a lot of mythical companies would make a fortune and dodge taxation so that we got only 3 per cent total revenue from corporation tax but that in the difficult times we are living in most companies are not making the kind of profits that would give the return to the State above the 3 per cent.

I do not see any great benefit in the amendment as it stands. Many manufacturing companies, particularly those under the IDA small industries scheme, are small companies and they are on the 10 per cent tax rate. This amendment would not apply to them. It would probably apply to service companies or other non-manufacturing companies.

Small construction companies.

Yes. There is £2,000 involved and 40 per cent on that means that it is worth £800 to the companies involved. As that is probably spread over a lot of companies I doubt if it would be of much benefit to any of them. It is unnecessary to do that and to alter our budgetary situation because of it. That is a basic tax policy decision which I am sure both sides of the House are aware of. The problem of small industries at the moment is sheer survival and I do not believe an extra £800 taxation on a company is of very great consideration. It is not worth altering the shape of the budget deficit to get that particular allowance.

As Deputy Bruton and Deputy Brennan have said, the figures proposed are not of great significance. Deputy Bruton asked me to have a look at it. I want to advise him that when the limits were last adjusted in section 21 of the Finance Act, 1978 the adjustment took effect from 1 January 1977. If an amendment as and from 1 January 1982 is considered desirable it could be made in next year's Finance Bill. I shall look at this question in connection with next year's budget and see whether and to what extent budgetary constraints would allow giving relief, which would be of more general benefit to small companies than that suggested by Deputy Bruton in this amendment.

What is the cost of the proposal?

About £250,000.

It is not very big.

It is not. About 300 companies would be involved. I will have a look at it between now and the next budget to see if something, which would be of more general benefit to those companies, could be provided.

Amendment, by leave, withdrawn.

Amendment No. 16 in the name of Deputy John Bruton is out of order.

I move amendment No. 17:

In page 51, line 19, after "£15,000" to add "or on the first £15,000 of any relevant disposal".

The Minister has provided, in relation to the new tax on development land, that an exemption will be given from this tax on the disposal of land up to £15,000. Many farmers, because of the current financial difficulties, are having to sell a site or a group of sites in order to help them to get back into financial equilibrium. Some relief should have been given in the Bill but there is no amendment to that effect to assist people as far as tax is concerned if the money is being used simply to pay off debts which have been incurred.

My amendment is in relation to the £15,000 exemption. It seems to me on the present reading of the section that if a disposal is £16,000 the full rigours of the tax apply to the full £16,000 whereas if the disposal is £14,000 the development land tax does not apply to any of it. There is no margin of relief. My amendment would give some marginal relief in this area where £15,000 would be deducted from all transactions and the tax would start at £15,000 rather than start at zero. There may be other ways of giving marginal relief but this is one way it can be done. I do not believe the Minister intends to have a situation where a person who sells his site for £16,000 pays tax on the entire disposal whereas a person who sells £14,000 worth of land does not have any tax on it. I believe that anomaly could be corrected by this amendment.

I feel the section as it stands is not entirely satisfactory from the points of view expressed by Deputy Bruton. I believe the Minister realises that there is a problem with this section and he has met it to some extent. It is important to ensure that the £15,000 is allowed as a full deduction. It is important that it is realised that there are people who are disposing of land at the moment particularly to meet repayments to financial institutions. I have come across quite a number of people who are faced with this problem. Some people sell sites or others sell a portion of their holding, not for development, but to repay a debt. In cases like that they may be liable for capital gains tax in some instances. There is a lot of merit in this section. When sites are being purchased or sold the Minister should grant exemption from capital gains. If this is not allowed it will cause a problem which the Minister is anxious to ensure does not arise. I know the Minister is interested in allowing this exemption on capital gains and this amendment will meet the case.

This amendment relates to section 37 of the Bill which was designed to exclude certain small disposals by individuals from the scope of the special rules for the taxation of development land gains.

Section 37, as it stands, grants reliefs where the total consideration received by an individual in any one year of assessment where all disposals of development land made by him does not exceed £15,000. In such a case the gains will be taxable as if they were gains on disposal of ordinary land. In the case of land held for over three years, the rate of tax will, therefore be 40 per cent instead of 50 per cent and the chargeable gains could be smaller because there would be no restriction on relief for indexation. In addition, roll-over relief would apply where the proceeds were reinvested in certain business assets. There is also the £4,000 per year exemption limits in that regard.

Deputy Bruton's amendment, as framed, would appear to require this favourable treatment to be accorded to the first £15,000 of each disposal of development land made by an individual. Accordingly, it would operate where an individual made a disposal for a very large amount or where an individual made numerous disposals of plots or sites in a single year, irrespective of the amount received by him on each disposal or of the total amount receivable on all the disposals. An extension on the lines proposed by Deputy Bruton would undermine the new tax arrangements which are designed to secure that gains and disposals of development land, other than in the case of relatively small disposals, are more heavily taxed than ordinary gains. The relief proposed in section 37 is quite generous and any further reduction of the tax base in this area would not be justified. The amendment, if accepted, could lead to widespread tax avoidance by the artificial splitting up of a transaction involving the disposal of development land for a very large amount, into several partial disposals, in order to claim the £15,000 relief for each such disposal. The relief suggested by the Deputy would also cause serious practical difficulties. It would be necessary to apportion the consideration in the case of every disposal for over £15,000. This would require the treatment of such a disposal as if it consisted of two separate disposals. One of these would be treated as an ordinary disposal and taxed according to the ordinary rules with the application of full indexation, a possible low rate of tax and roll-over relief, unrestricted loss relief, etc. The other deemed disposal would fall to be taxed under the special rules relating to disposals of development land. It can thus be seen that the Deputy's proposal would require extensive and complicated legislative provisions, including anti-avoidance provisions in place of the straightforward and reasonable provision in the section as it stands which is designed to remove disposals of one or two small sites or plots from the relative severity of the special tax on development land disposals.

Is there any marginal relief in the proposals?

No, and it was not intended that there should be.

The Minister mentioned yesterday that £15,000 would be exempt in any one year. Does that mean if £15,000 worth of sites were sold this year, the seller would be allowed £15,000 exemption in the following year also?

That is correct. There was no relief in Deputy Bruton's budget in relation to development land sales.

I did not get a chance to introduce the Finance Bill.

I want to ask ——

I am sorry, Deputy, you are not entitled to speak again.

I appreciate that ——

The fact that you appreciate it means you should not be asking the Chair to tolerate it. You may ask a question.

If property is sold at £28,000 or £30,000, do you get the allowance for a married couple or the £15,000 allowance?

It would be half each for a married couple if they are joint owners.

In other words, they would not be allowed this £15,000 relief?

If it is £15,000 it does not apply.

I believe that there is a need for marginal relief. I am not tied down to the amendment I proposed. It probably could have been improved upon but I believe it is wrong that somebody who sells a site for £14,999 can avoid this tax and somebody who sells a site for £15,001 has to pay tax in full on the entire amount whereas the other person does not pay it on any of the £14,999. There should be some scheme of marginal relief introduced to phase in to the higher rate of tax, rather than have people suddenly jumping into the high rate of tax simply by crossing this magic figure of £15,000. The Minister spoke about artificial transactions and artificial figures. This crude limit of £15,000 is going to mean that everyone will sell his site for £14,999 — at least officially. There are going to be all sorts of ways of getting below the £15,000 whereas if you had marginal relief it would be less easy to escape and would be fairer. Perhaps my amendment deserves more thought and time than I gave it and perhaps I should have put down a marginal relief type of amendment instead of the one I put down which probably gave a lot of unintended benefits beyond the necessary scope of marginal relief. I think the Minister is making a mistake in not accepting something along the lines we are trying to achieve and this will be seen in next year's Finance Bill.

Deputy Bruton has indicated he is not pressing this amendment.

Amendment, by leave, withdrawn.

Amendment No. 18 arises out of Committee proceedings. Amendments Nos. 18, 19, 20 and 21 are related and will be taken together by agreement.

I move amendment No. 18:

In page 58, line 45, to delete "100 per cent" and substitute "60 per cent.".

This amendment is concerned with profit sharing. It is encouraging employees to be given or to take a share in the ownership of their companies. This is a step in the right direction towards getting a situation where people have a real stake in the companies in which they work. If people feel a greater commitment towards the company they will work harder.

I am glad that this proposal, which was one that was in my January budget, has been carried forward into the detail of the Finance Bill by the present Minister. However, I feel that in so doing and indeed in imitating to an unduly slavish extent the British scheme — in fact the scheme here is done entirely from the British scheme as I understand it — he has built into this scheme the restrictions which ensured that the British scheme for profit-sharing was not the success that people hoped it would be when it was introduced.

My amendments here are designed to remove some of those restrictions. I do not want to delay the House unduly by elaborating them too much, but I will quickly indicate the changes I see a need to make. If a person gets a share in a company and sells within less than four years of the share being given to him, as may happen if he leaves the employment or wants to realise it for some reason of his own, he must pay tax on the entire income that was given to him in the form of a share because it says in subsection (8) (a) that if the event, that is the sale of the share, occurs before the fourth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) (i) does not apply, the appropriate percentage is 100 per cent. In respect of paragraph (b), if the event occurs on or after the fourth anniversary and before the fifth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) (i) does not apply, the appropriate percentage is 75 per cent of the benefit given to him.

I believe these figures should be reduced to 60 per cent in respect of profits to the shareholder/worker in the case of under four years and 50 per cent if between four and five years. I am making similar changes in respect of other percentages of the income which would be taxed further down in the section in regard to later dates of disposal. I believe that these are reasonable liberalisations of the scheme and, as I said on Second Stage, the fact that the British scheme has not really been a riproaring success suggests that the Treasury were unduly cautious in setting out the terms and we should learn from that error and be a little less cautious and a little more generous in the concessions we give.

In regard to the disposal, the concessions I am mentioning here are reasonable. This covers amendments Nos. 18, 19, 20 and 21. I am sorry we did not have a chance to discuss those on Committee Stage because if we had had that opportunity I am sure that my amendments for discussion now would have been more precisely framed and would have had fewer of the flaws that the Minister may say there are in them when he gets up to speak. But we need to err on the side of being liberal in the interests of encouraging people to initiate profit-sharing schemes for their employees. We should not be too restrictive about such schemes. We have to get over a lot of bad habits in industrial relations if we are to improve our economic performance. Profit sharing is one way of doing this and we should not be too cautious in pushing out the boat and starting a profit-sharing scheme on this the first occasion it has ever been done in the Finance Bill.

The main effect of the amendments would be that the charge to tax, if the participant disposes of his shares within seven years of their being appropriated to him, would be 60 per cent, 40 per cent, 20 per cent or 10 per cent of the locked-in value of the shares depending on the length of time he had held them instead of the figure of 100 per cent, 75 per cent, 50 per cent or 25 per cent as proposed by the Bill. Acceptance of this amendment would defeat the object of the legislation which is to encourage true profit-sharing schemes. An essential element of the legislation is that the tax relief would apply only where the employee holds his shares long enough to ensure that he participates in profits as a shareholder. If he were to sell his shares shortly after acquiring them, which this amendment would encourage, he would never participate in the profits and the scheme as a whole would fail. Creation of a scheme of tax relief for shares held for a very short time would also be invidious as far as the many public sector employees who cannot participate in profit-sharing schemes are concerned. The scheme would quickly become a device for giving low-tax remuneration to employees of big companies and would lead to unrest among those not in receipt of similar advantages. It would also make something of a sham of the scheme in that each year the company would be buying and issuing to employees the very shares the employees had sold that year. For those reasons I cannot accept the amendments.

I have a brief comment on the schemes. They should be more extended in scope. All companies, not just the public companies, should have the opportunity of participating in such schemes and they should be quite broadly based. They should be quite clearly circumscribed to prevent them becoming a tax avoidance or low-tax payment scheme for employees. In that context there should be a true retention period built into the granting of any such shares. But the current schemes as proposed are, in my view, excessively circumscribed in their general scope.

Profit-sharing schemes are very new. This is the first time we have had it in a Finance Bill and it is new ground for all of us. Deputy Bruton said that this has not been very successful in Britain. That is my information on the matter also. The whole area of profit-sharing schemes has been somewhat of a disaster. Deputy Bruton puts forward the reason that somehow the regulations are a bit restrictive. I have a feeling that the reason is much more fundamental than that. There still exists a very strong suspicion about intention between employer and employee, so much so that the average employee today very much prefers to have proper year to year facilities and wages and more immediate returns from his investment in the firm. There is somehow a suspicion that getting involved in the whole area of the sharing of profits is some sort of a management trick and something that they should not get involved in. It is much more fundamental than the argument put forward by Deputy Bruton that if we reduce the level of taxation it will interest more people in profit-sharing schemes. I doubt that. The reason is based on suspicion and lack of trust between employer and employee. Deputy Bruton is not drawing the correct conclusion in saying that it is the technicalities of the Bill which are keeping people away from these schemes.

We should encourage these schemes by breaking down the suspicions between employers and employees so that more of these schemes will come into operation. When both sides see that the schemes are worth while and can work to the benefit of all they will become more involved in profit-sharing. I am not convinced that changing the tax on the disposal of shares will tackle the problem, although it may help somewhat. The fundamental suspicion will still exist, and there is a broader industrial relations question.

I take the point the Minister has made, but he could be a little more generous. It is probably going a bit far to require people to maintain their shares for four years without any benefit and the Minister might modify that. However, I feel much more strongly about my next amendment in regard to profit-sharing, for which there is not quite so easy an answer.

Amendment, by leave, withdrawn.
Amendments Nos. 19, 20 and 21 not moved.

I move amendment No. 22:

In page 64, line 17, to delete "5 per cent" and substitute "50 per cent".

Under the Bill a company will be able to distribute in any year only the equivalent of 5 per cent of their profits to employees in the form of shares. That is far too restrictive and the scheme will make a very minimal contribution to the diffusion of property ownership and ownership of business. Section 58 (1) states inter alia:

Provided that no deduction shall be allowed under this section or under any other provision of the Tax Acts in respect of so much of any sum or the aggregate amount of any sums so expended in that accounting period as exceeds 5 per cent of the company's—

(i) trading income for that accounting period, in the case of a company to which paragraph (a) applies, or

(ii) income for that accounting period, in the case of a company to which paragraph (b) applies, after taking into account any sums which, apart from this section are to be deducted under section 15 (1) of the Corporation Tax Act, 1976, as expenses of management in computing the profits of the company for the purposes of corporation tax.

I see no justification for having any restriction on the proportion of their income that a company if they so wish can distribute as shares to their employees. Why should there be any restriction? Why should they not be free to give the entire profits to their employees if they wish? I cannot understand why it should be restricted to 5 per cent and I am suggesting the substitution of 50 per cent. This is a reasonable proposal.

The effect of the amendment would be to allow a company to apply up to 50 per cent of their profits each year to the purchase of shares, instead of up to 5 per cent as proposed in the Bill. Section 57 allows a company a deduction for tax purposes of any profits that apply to the scheme under the Bill up to 5 per cent of their profits in any year. The main purpose of the 5 per cent restriction is to protect the interests of existing shareholders and to prevent the dilution of their shares and the reduction of their value by the application of more than 5 per cent of the company's profits to the scheme. To allow up to 50 per cent of profits to be applied to the scheme would damage the interest of shareholders and might have the effect of the shareholders preventing the company from having a scheme under this Bill. There is a huge differential between 5 per cent and 50 per cent but we might go as far as 10 per cent or 20 per cent, although I have not put down an amendment. Would the Deputy agree?

20 per cent.

Done. I can see the Minister learned his trade very well in selling cattle.

(Dublin South-Central): Does the Deputy think the shareholders will be happy?

They will be a lot happier with 20 per cent than with 50 per cent.

I am surprised that Deputy Fitzpatrick should be worried about 20 per cent of profits in any year being given to employees. The shareholders elect a board of directors at the annual meeting and they have every opportunity, by not electing directors who will behave irresponsibly, of making sure that their interests are adequately protected. There is no need to have double protection by restricting the law unduly. I am very pleased that the Minister has accepted this reasonable compromise.

I move:

In amendment No. 22, to delete "50 per cent" and substitute "20 per cent.".

Amendment, as amended, agreed to.

I move amendment No. 23:

In page 68, line 35, after "years" to insert "or a person in receipt of an Old Age Pension".

This amendment relates to the tax of £3 on anybody who travels by any method of transportation out of this country, whether to visit relatives, attend a funeral or for any other reason. Our original proposal was to have a tax on package holidays, not on all journeys. This travel tax does not apply to people travelling in executive jets which carry fewer than 15 passengers but people who travel on the mail boat will have to pay it. It is a somewhat discriminatory tax.

The purpose of this amendment is to exempt old age pensioners from the travel tax. Use of internal transport facilities is free for people over the age of eligibility for old age pensions. I am not suggesting that such people should be able to travel abroad free of charge but we should not impose an additional tax when they visit members of their families in England or elsewhere. I admit that the tax is not very substantial but we should oppose the principle of applying it to old age pensioners travelling abroad. For ease of administration it might be preferable to exempt from the tax those who are holders of free travel passes. That would be a wider definition than that of people in receipt of an old age pension and for ease of administration it might be a better method to use. People in that age category should be exempt from this new tax. I am happy to move this amendment on behalf of Deputy Fennel and myself.

I support this amendment. Those over the age of 65 who use airlines for travelling are a relatively small segment of the population in any event, but perhaps there might be a specification as to the type of pensioner exempted. A person can have a substantial pension, but presumably we are talking here about people on social welfare pensions. Certainly, non-contributory pensioners should be given an exemption. By and large, I agree with the import of the amendment.

As has already been said, the effect of the amendment would be to relieve old age pensioners of the travel tax. It is not possible to cost the provision in the amendment, but it would be possibly of the order of £¼ million for a full year. Naturally it would be a lot less this year.

This matter was considered in the course of devising the tax but it was decided that only invalids would be entitled to exemption of this nature. What was proposed originally on 27 January and even what I suggested in March during the election campaign have been somewhat diluted and the amount of revenue is now very small, about £1 million this year. I am not prepared to contemplate any further exemptions. They were already considered and turned down.

This is a worthy amendment and I am surprised that the Minister is not accepting it. As Deputy Bruton has explained, old age pensioners have free travel in Ireland and free travel facilities should also be available to them when they travel abroad.

This matter has been discussed at some length, but I consider this proposal to be the best. The whole idea behind this tax is wrong. People leaving Ireland must pay this charge, whereas people entering Ireland will not have to pay it. Business people travelling on a very regular basis should be encouraged to purchase their tickets here, but with the extra £3 tax regular travellers will buy their tickets outside Ireland, with a consequent loss of revenue to the State and a gain to the Crown. The Minister may not have thought of this when the tax was devised. Aircraft with not more than 15 passengers have been mentioned——

I am sorry Deputy Enright, are we flying away from the amendment?

Small aircraft.

True to the Leas-Cheann Comhairle's form, he has me grounded.

Well said.

If I might add, I do not get any pleasure out of it, but I must, nevertheless, remind the Deputy.

It is no use saying that now. The harm is done.

I will not go beyond that.

With another contribution on behalf of the old age pensioners, we will be happy.

The Minister may not have envisaged this. I have spoken to a few people involved in the airline business who fear that the £3 this year will be upped next year and the year after that and the year after that again. The Minister should consider granting this amendment in ease of old pensioners.

Is the amendment withdrawn?

Certainly not. This amendment should have been accepted by the Minister. It is a reasonable amendment. It is not fair to get this tax from the old age pensioners. I intend to press this amendment.

Amendment put and declared lost.

Amendment No. 24 is in the name of Deputy Bruton.

I move amendment No. 24:

In page 79, to delete lines 10 to 19.

This amendment is concerned with the advance payment of value-added tax. This was the somewhat rickety cornerstone upon which the Minister's budget strategy for 1982 was built, a cornerstone which will be there this year, but not next year. A house built on a temporary cornerstone will not long endure. This is a wholly artificial transaction. Money that should be paid in the normal course some time in January 1983 is now, by the wonderful workings of the Revenue Commissioners, going to be collected in December 1982. By virtue of this magic transaction, we will find ourselves with a slightly smaller budget deficit this year than would otherwise have been the case. This artificial depresion of the budget deficit for this year will not continue in subsequent years, whereas the expenditure cuts and taxation increases which we are incuring this year, which this is going to replace would have brought in revenue next year, the year after and the year after that. This measure will bring money in this year only and no additional revenue to match the extra revenue which would have been gained in subsequent years from the alternative proposals. In other words, we will have a gain for one year to counteract a loss for that year, but in subsequent years there will be no gain to counteract the loss. As a result, the underlying current budget deficit situation for 1983, 1984 and 1985 will be seriously worsened.

What is of more concern is that people will have been led to believe that the situation was made better by this artificial measure. As we all know, what is necessary to bring down the current budget deficit in a real sense is a wide public understanding of the problem. This temporary and illusory deduction in this year's budget deficit will create in the public mind an impression that things are better than they are in fact. Its artificiality is a damaging feature of this proposal, from the economic management point of view.

This proposal will have a serious effect on our working capital requirements for industry. Many of our industries import goods for further processing. Many of them use services and goods provided by other industries which, themselves, do not re-export those goods. This proposal will increase our cost of living because it will mean that anyone selling anything here which was imported, or which contained ingredients which were imported, will have to charge a higher price in order to meet the additional interest costs they will have to bear to enable them to pay VAT in advance to comply with the requirements of the section.

The resources of firms—I am not talking about rich businessmen but firms which employ people—which should be used to give workers reasonable pay increases and so on will now have to be used to finance borrowings undertaken because the Government are not prepared to borrow the money or to take a decision to reduce their borrowing requirement in order that such measures do not have to be resorted to. The Government will use the business sector as a means of raising money. This is extremely damaging. It will cause substantial job losses. Anyone who had discussions with business people in their constituencies in recent weeks will be aware of the concern of those involved in the distribution field and the great fears they have which have been generated by this proposal.

It will delay importation procedures because each port of entry will now require a separate guarantee by the importer regarding availability of funds to pay VAT in advance. Goods often have to be diverted from one port to another due to industrial action. Firms will now have to maintain guarantees at a series of ports in case the one they normally use is closed because of strike action. The cost of doing this will be considerable. The necessity to collect this money will require that the Border will have to be permanently guarded day and night by customs officials. The Border is manned during the day but not at night. Now that VAT is to be collected on all goods coming in at point of entry, customs officials will have to maintain a presence on the Border. That will mean substantial staff costs in the Office of the Revenue Commissioners. I presume that is what the Minister intends to do with the staff of 60 he employed for the £9.60 who will not now be used for that purpose.

This is a wholly artificial transaction. Staff necessary to collect the money will be there in 30 years time even though the money will be collected this year and never again. There will be a permanent increase in the number of staff employed because of this change. That will do more harm in the long term to the public finances, as it will be an unnecessary addition to the public sector pay-roll, than any benefit derived from bringing forward the collection date of the tax.

There will be a problem regarding split containers. Containers containing a variety of goods for more than one importer will be held up if a person receiving a particular consignment has not paid VAT in advance. Importers do not have control over whatever consignments are in a container they happen to be using. This will cause serious administrative problems. The Irish Hardware Association has suggested to me and to the Minister an alternative method of collecting the revenue. Their proposal is that importers and agents should be accountable for VAT at port of entry on the same basis as they are accountable at present for VAT on sales, that is, VAT on imports for September-October 1982 should be payable no later than 19 November 1982. The accountable person will be entitled to a credit of the VAT paid on imports against the VAT liability on sales for September-October 1982. This would ensure that the importer or agent has incurred VAT only on the added-value and not at the point of entry. It is a balancing transaction made in advance so that liability is only on the net figure rather than the gross figure. It would lead to an early payment of revenue by traders without involving them in major administrative problems in collecting the revenue.

I do not have to remind the House of the number of firms in the distribution business which are in trouble at present. We know of the difficulties in Ardee. There are a number of other firms in Drogheda in serious difficulty which are involved in this kind of business. One of the largest companies involved in the distribution and do-it-yourself implements is in severe trouble, as the Minister knows. This additional charge will force many companies already at the brink financially over the brink into bankruptcy. If the Minister and his party succeed in carrying this proposal they will not be thanked by their constituents or the many workers who will be out of jobs this year. It is a wholly artificial proposal in that it will just bring forward money from this year into next year without any underlying structural improvement in the balance of revenue as against expenditure. It is in substitution for measures which did precisely that. It is a reckless and unnecessary proposal and one which should be rejected in the interests of the protection of jobs and of sane discussion of public finances as distinct from obfuscation of the real issues.

I support Deputy Bruton on this amendment. There was a difference of approach between us in relation to this matter on Committee Stage. Deputy Bruton had an amendment down deleting the whole provision—in effect, the whole £140 million. Our amendment, seeing that the damage was done, tried to undo a substantial portion of it by indicating that in our opinion raw materials or component parts of capital goods being imported for manufacturing industry should be exempted. That would have been £80 million and we were prepared to give way on the other £60 million. It is ironic that Fianna Fáil have tried to gloss over the serious impact of this major provision. When the Taoiseach was interviewed on television by Brian Farrell last Friday week he indicated in his amazing way that raw materials only constituted a small proportion of imports and blandly, with that magnificent capacity of his, waved the problem away. The problem is there. It was a central strategy of Fianna Fáil's alternative budget. To a degree, I exempt Deputy MacSharry and lay the blame fairly and squarely on the other erstwhile economic guru of the party, Minister for Education Deputy O'Donoghue, because it was he who originally came up with this proposition in the famous alternative Fianna Fáil budget. He advanced a number of reasons for indicating that there should be a decelerated payment of VAT at point of entry which he proposed would yield £45 million in 1982. Needless to remark, when the thought impinged on the prospect of revenue for the Taoiseach, it went from £45 million in the pre-election alternative budget of Fianna Fáil to £140 million immediately afterwards because everything was to be caught at point of entry. Deputy O'Donoghue, I remember vividly at the time, indicated that the reason he wanted VAT on imports at point of entry was to avoid evasion and he advanced a figure on a radio interview of £10 million. That would cut out evasion. It has now transpired on the best Finance estimates that out of the £140 million which is now being accelerated in, the most that one would capture by way of evasion would be about £5 million or £6 million. Therefore, that argument does not stand up.

Leaving aside all that, this provision will have a fundamental impact on the liquidity of Irish industry. Particularly towards the end of each financial year, in the months of November and December, the liquidity position of most companies tends to deteriorate. To have a refund system operating for some sectors of industry, particularly those in the export field, and to ensure that they would get their refunds from the Christmas postman within 30 days is just out of the question. I estimate that they would be lucky to see any sign of a refund within seven or eight weeks, and that would be doing well on the part of the Revenue Commissioners.

Sector by sector of Irish industry have opposed this imposition of VAT, and I will give two examples. One is the textile industry. I hope that when the Ministers go down to the west they will explain to the workers there—in Galway for example—the impact that this provision will have on that industry. The Irish Textile Federation representative of man-made fibres, stable fibres, continuous filament yarns for weaving and knitting, household and apparel woven fabrics and the carpet industry, have been extremely concerned about the proposal to levy VAT on imports of raw materials. They have pointed out correctly that the industry comprises about 8 per cent of total national manufacturing employment, which is the second highest proportionately in Europe. The gravity of the implications of this tax on such a sizeable industry is highlighted by the fact that the exports represent about two-thirds of the industry's total output. The Irish textiles industry will be caught on raw materials at point of entry and the refund will be cripplingly late. Inevitably the liquidity of those firms, many of whom are already facing considerable difficulties in the international market and for the most part are highly dependent on exports, will be substantially affected by this imposition.

We have received representations from the electronics industry. This is a growing, major industry here which with associated industries employs over 15,000 people in this country and last year they exported £600 million worth of high technology products. They will be caught with VAT on imported raw materials which are incorporated into the exported products. I could go on and on and name many other industries who will face serious liabilities in this regard. I do not regard this as the best way of assuring increased Exchequer revenue and inevitably it will cause considerable additional workloads on the Revenue Commissioners at point of entry with the introduction of those complex procedures which have already been announced in advance information given by the Revenue Commissioners.

The proposed arrangement for payment of VAT on imports and for refunds are very complex. The CII in their newsletter said, and I have no reason to disagree with them: "Exporting industry would then suffer an increase in working capital of over £1 million for each day payment of VAT refund is delayed". That could quite easily happen. Therefore, I urge the Minister to reconsider this whole question. The proposal was ill-conceived by my constituency colleague, Deputy O'Donoghue, as a temporary expedient to try to get hold of £45 million to make up the famous alternative budget. When the Fianna Fáil Party came in and decided to abolish VAT on clothing at point of retail sale and restore £46 million in food subsidies, they had to make up the money elsewhere and they picked the worst possible way of making it up. If I were to become Minister for Finance tomorrow morning I would prefer to have VAT on clothing at point of retail sale rather than crucify every clothing textile manufacturer in this country trying to export out of Ireland. I would prefer to see those people in Ireland who-have a high propensity for consumer expenditure — particularly young people because there is a tremendous correlation between disposable income and expenditure on clothing — under that type of imposition rather than to see employment and exports affected or major cumbersome import arrangements made by the Revenue Commissioners to obtain money on that basis.

I am aware that other Deputies wish to contribute on this section. It is a major section. There is fundamental opposition from the Labour Party to this provision. In Government we thought of many ways of raising money in the Exchequer approach to the end of last year, but this was one way we did not consider appropriate because of its dramatic effect on the liquidity position of manufacturing industry throughout the country in terms of both exported goods and imported commodities. Above all, as Deputy Bruton said, it will lead to massive efforts at evasion, particularly on cross-Border points of entry. For these reasons we are opposed to the proposal.

I hope that the Minister will accept this amendment. It will be interesting to see how many other Deputies from the other political parties will support our opposition in this regard. Some people have a very simplistic view of life and they will say, "Well, they are only employers, they are only manufacturers and they are caught for it. The ordinary workers will not be caught". As we all know, we live in a mixed economy and 65,000 Irish workers depend on exports exclusively for their jobs. I hope the many workers in those jobs and their trade unions appreciate what this imposition is doing to them in affecting the basic capital liquidity requirement of their firms, and I hope they will respond accordingly.

This measure is quite regressive, it is unnecessary in terms of revenue raising and in the long run it will be of no great benefit, because it is a deceleration of 1983 VAT into 1982 on a once-off basis at the worst possible time. To do that at the peak of a recession is ill-advised and quite unnecessary, and the country can ill afford it, as we enter a winter of unemployment with major difficulties facing manufacturing industry in maintaining and protecting employment in an extremely difficult international situation.

I would be interested to know if the Government have any proposals in relation to assistance to firms to pay this VAT have been an appalling number flying around that the ICC are to borrow £200 million abroad to lend money to manufacturing firms to pay VAT. This will not show up in the Exchequer requirements. That type of rumour should be scotched by the Minister. If that is the position we are going from one mad expedient to the next to raise revenue.

I oppose any amendment to this section, a section which is correct and proper. Listening to Deputy Desmond I was surprised at his remarks on the clothing and textile industries. I do not know what practical experience he has of the workings of the VAT regulations. He may have the theory. In practical terms he should be aware that the component parts of the textile manufacturing industries and the shoe industry, which are probably the more vulnerable of the industries mentioned, are exempted and zero rated as the regulations stand. Therefore, these two industries will not be affected in any way.

To my certain knowledge the only components which would be affected and which are subject to the imposition of VAT are zip fasteners and very expensive furs. We need not concern ourselves too much with very expensive furs. We are talking about the basic textile and footwear industries. Their component parts are totally exempt from VAT. Therefore, they will not be affected adversely under this section. Deputy Desmond's argument does not stand up.

I come from a constituency which is very close to the Border and I am well aware of the abuses of the VAT system as constituted at present. Down through the years since the imposition of this form of taxation, Governments have been defrauded of hundreds of millions of pounds by people who are importing taxable items and not paying the tax due. By producing fraudulent numbers and by other methods, they avoid meeting their rightful obligation to pay tax. Many traders and retailers are also neglecting their duty to pay this tax by substituting categories of goods in the returns they make to the Department. It is common knowledge that builders providers in particular put incorrect descriptions on invoices to enable people to claim and reclaim from the Revenue Commissioners taxes in excess of what they are entitled to, thereby defrauding the State of sources of revenue.

The imposition of the correct rate of VAT on components and articles attracting the appropriate rate at the point of entry will eliminate any temptation to defraud the Revenue Commissioners because people who do that will be the losers. The value-added tax regulations need considerable tightening up to ensure that the amount of revenue which should accrue to the Exchequer is received by it. This is an area of gross abuse. I fully support the proposal that the tax should be collected at the point of entry.

No doubt this will pose problems for certain industries. There is no use in denying that. Those industries should examine their own affairs and put their own house in order. A document from the Confederation of Irish Industries has been quoted. Another document produced by that body, the monthly report, could also have been quoted. It is shown constantly in that document that many companies are grossly overstocked. This creates cash flow problems for themselves. I am not suggesting that some assistance may not be desirable or necessary.

This change in the regulations has been sought for many years by our native manufacturing companies. By and large, they will welcome this proposal as a mechanism to eliminate any unfair advantage imported articles may have. If it creates difficulty on a cash-flow basis for some companies, it may also be very welcome having regard to the general health of our economy if it eliminates many unnecessary imports people are bringing in in vaster quantities than they require for their own use or the use of the community. Their only motive is to make excessive profits for themselves.

I welcome the proposal to collect this tax at the point of entry. I reject the suggestion made that it would be detrimental in any way to the textile and footwear industries. That suggestion needs to be refuted. There has been quite an amount of deliberate misrepresentation on this section to try to make people afraid of the outcome of its imposition. I welcome the section as it stands.

I do not want Deputy Bellew to think I am speaking now because he is my opposite number in the constituency we both represent. To me this is the wrong tax, in the wrong place, at the wrong time. When it was first mooted by the Government I thought it was a piece of kite flying and that they would forget about it and move on to other available sources of finance when documentary evidence was submitted to them from everybody concerned. Unfortunately the Government seem to have committed themselves to obtaining revenue from so many other sources that they are hung up on this proposal to have VAT at the point of entry.

That it is the wrong tax at the wrong time goes without saying, and no representative body of importers, manufacturers or distributors has said anything to the contrary. To impose it at the point of entry is foolish because it presents two problems. It presents the problem of cash liquidity for the importer of raw materials which are so necessary for his business. It affects the liquidity of an importing distributor of finished goods which are not available or manufactured here. On the last point, that of supplying alternative goods which are produced and manufactured here, we will have to do a big job on import substitution. It will take more than words or promises to achieve the necessary result.

Apart from the cash liquidity problem it will present, there is one aspect which might not have been touched upon. There are cases where necessary raw materials or finished products have to be obtained in many instances through the goodwill of foreign suppliers. We have a small market and to build up our goodwill with these foreign manufacturers over a number of years, we must prove that we can meet our debts by paying our bills when they fall due.

This value-added tax at point of entry will create bureaucratic knots which importers will find very hard to untie. It will lead to delays in the importer finding funds to pay the amount specified in the invoices when the goods arrive. This could lead suppliers to say, as they have in the past, that it is not worthwhile cultivating the Irish market. If there are delays at the point of entry and in the payment of invoices, they may come to that conclusion and that is something we must avoid.

This point has been discussed a lot and I wanted to add my voice. This is a part of the Finance Bill I never thought would see the light of day; I thought it was kite flying which the Government would have omitted, but unfortunately they have not. This measure must be opposed. Not only is every responsible manufacturing body opposing this, but anybody with business experience knows it will create problems all along the line.

Some of the Deputies who have spoken on this amendment said it was likely to give rise to a problem of liquidity. That is not the way I would put it. I see this proposal giving rise to a problem not of liquidity but of liquidation. This is the kind of problem it will cause for many of our manufacturing firms already operating on a borderline situation — between being in a position to carry on and maintain employment and going under, so causing redundancies when the firms go into liquidation.

Over the last few years we have seen the rape of the manufacturing capacities of firms and factories big and small from Fieldcrest to small backyard firms. The number of firms going into liquidation is increasing apace, causing increased unemployment figures every time we get four monthly returns. I thought budgetary planning would have been directed towards reversing that situation, but we find the reverse here. Here we have a budgetary proposal which on any objective examination will have the direct effect of increasing unemployment. There are many firms which are in a last straw to break the camel's back situation and any further burden will push them into liquidation and render workers redundant. That is the kind of situation this measure must inevitably bring about.

This measure was cobbled up at speed to provide a so-called alternative budget without regard to the economy or to the needs of the country. Clearly it was not adequately considered nor were its consequences thought through. It was not considered from the viewpoint of whether it was a plus for the economy or a millstone around the neck of our declining manufacturing capacity. That was not its purpose.

Consideration has been given to what the pulling power in terms of revenue will be of this measure. Apparently it is estimated that £140 million will be contributed by manufacturing industry in 1982. Deputy Bellew, by some stretch of the imagination which for the life of me I cannot fathom, has said industry will welcome this measure. I suppose one would welcome a tax imposition of that nature like one would welcome a belt around the ears by somebody already stunned swimming against the stream.

Maybe this measure will produce £140 million on the plus side, but has any thought been given to what it will cost the Exchequer on the minus side? Has any consideration been given to what it will cost the State in redundancy payments for the workers when their firms go into liquidation? Has any consideration been given to what the weekly social welfare payments will be for those workers who will be on the dole because their companies had to close as a result of this measure? Has any consideration been given to the question of the lost production of goods by those factories and firms? That loss will have to be replaced by the importation of goods thereby increasing the strain on our balance of payments situation and providing employment for workers in other countries.

This is a classic example of an ill-thought out fiscal measure, thought in terms of how much the tax will produce so that we can give an apparent sop to the public to abolish an unpopular tax. That is an incorrect basis on which to plan a budget which should be directed towards the provision of employment, because we have 150,000 unemployed and that figure is rising all the time. The Minister should seriously reconsider the situation.

It has been very interesting to hear the contributions on this amendment which seeks to abolish the imposition of VAT at the point of entry. This measure is expected to bring in £140 million this year. There is no way I could accept this amendment, but I would like to respond to a few points made and I will have only one opportunity to do so.

I am sorry Deputy FitzGerald left the House because I had something to say about an idea he had a few years ago. Deputy Desmond said the scheme was ill-conceived. That brings me to what I wanted to say in relation to Deputy FitzGerald's contribution in the Dáil on 21 October 1980 on a motion on the Government's Economic Policy. At column 381 of the Official Report for that day he said:

Why do home manufacturers apparently have to face the burden of VAT sooner than importers, giving an advantage to the latter?

Obviously he understands the situation better than anybody speaking on behalf of this amendment now.

At column 389 he said:

At the same time the Government should look again at the manner in which VAT is levied on imports.

Later in the debate the Deputy said:

I urge on the Taoiseach to re-examine this issue in response to the urgent demands of hard-pressed Irish firms competing with a flood of imports....

That was said two years ago by the present leader of Fine Gael, the party who put forward this amendment.

The Minister should ask the same hard-pressed firms and they would have a different view.

I am just quoting what the Deputy's leader said.

(Cavan-Monaghan): Unemployment is at an all-time high and is rising rapidly.

The Deputy did not contribute very much to the debate on the Finance Bill in the past three weeks other than by interruption.

(Cavan-Monaghan): The Minister does not want to face a vote.

I know the Deputy does not like the facts. It is strange to have Labour Deputies supporting this amendment. Although I did not have time to read them I know that in the papers today there was a report that the trade union movement were calling for a ban on imports. All we are doing is bringing forward a charge that will be levied on imported goods. We are levying that charge earlier than would normally be the case. That is all that is being done but it is being opposed by Labour Deputies. At the same time, the responsible organisation of the trade union movement is calling for a ban on imports. I find it difficult to reconcile the two attitudes.

I do not agree with the ban on imports.

(Dublin South-Central): Ask John Carroll.

He is not in Dáil Éireann.

Deputy Desmond asked about the rumour that the ICC would borrow £200 million abroad to lend to the industry to pay VAT on imports. There is absolutely no substance in that rumour.

I am glad to hear it.

I intend to look at the possibility of the ICC making money available for VAT on imports to companies which find difficulties in financing it otherwise. I have said that on at least 15 occasions inside and outside the house since 25 March. However, I do not envisage that any such scheme will apply to all companies. I envisage that only a limited number will look for such assistance. Already discussions have taken place with officials in my Department and the ICC to formulate a scheme to have ready for operation by 1 September. Apart from VAT on imports, consideration is being given to the ICC borrowing money abroad to provide loans to industry. In this context a figure of £200 million was mentioned but I stress that this is not related to VAT on imports.

It is no harm to put the record straight. This proposal was part of an election programme put to the people by Fianna Fáil in February of this year as an alternative to proposals put forward by the Coalition parties providing for VAT on footwear and clothing, the abolition of food subsidies and taxation of social welfare benefits.

It is not an alternative.

It was the alternative we presented to the people and which they accepted.

Fianna Fáil conveniently did not tell them until three days before polling.

It was made quite clear—VAT at point of entry. What many people have tried to do since then was to dilute it in several ways.

The question is whether Fianna Fáil won that election.

The provision in this Bill is exactly as was outlined in our programme, which was put before the people and accepted by them.

(Cavan-Monaghan): The people of Dublin West passed judgment.

I know Deputies opposite have tried in the past three weeks to bring about a situation to precipitate a general election or cause political embarrassment but, again, they picked the wrong issue. I am surprised at the attitude of the Labour Party in this matter. I quoted what Deputy FitzGerald said. He knows the importance of what we are doing and knew it two years ago. Many industries will benefit enormously as a result of our proposal, unlike what Deputy Taylor outlined.

There is no way this amendment could be accepted and it is disappointing that Fine Gael put it forward. Half-way through the year we have an amendment from the party of financial rectitude, the infallible party in relation to all financial matters. This party have put down an amendment which, if carried, would cost the Exchequer £140 million this year. We are not talking about the situation in the past few weeks where Deputy Bruton and others claimed that implementation of their amendments would cost only a few million pounds. We are talking about an amendment that would cost the Exchequer £140 million. Yet, Fine Gael are the party who told the people they were concerned about budget deficits and the level of borrowing. This proves beyond doubt the reality that exists in Fine Gael and which is only now becoming clear to the public. I have no doubt that the House will reject the amendment.

I regard this tax as one that is purely artificial because it is simply bringing forward money from next year to this year. I would point out to the Minister that the Confederation of Irish Industry have expressed grave opposition to this proposal. Their worry is based on the impact this proposal will have not on importers but on the Irish export industry. As we know, the IDA launched a campaign in the past 20 years to attract industry based on the further processing, with the aid of skilled Irish labour and technology, of imported raw materials. We are adding value to imported goods and we are gaining immense employment as a result. The voice of industry involved in this kind of activity through the CII has come out in the strongest possible terms against this proposal. It has pointed out that exporting industries will suffer an increase in working capital requirements of more than £1 million for each day the refund of VAT is delayed, as it will be under this proposal.

Furthermore, there are serious doubts about whether the banks will make the money available to finance these types of artificial transactions. We know that the banks are already in difficulty in maintaining their borrowing programmes within the restrictions laid down by the Central Bank. We know, too, that they are extremely angry at the extent of the arbitrary levies that have been imposed on them. There is every reason to suspect that they will not wish to finance this artificial transaction which is giving purely a temporary short-term and nonrecurring boost to the Government finances. The banks will not facilitate this artificial mismanagement of the nation's finances and it may well be that they will refuse to firms the working capital they will need to finance the additional borrowing that will be necessary to pay VAT in advance.

It is in order to protect jobs, to protect financial honesty, and having regard to the fact that this is not a real revenue-raising proposal but something that is purely artificial, and in order to ensure that the modern industrial base we have built up is not destroyed by the arbitrary action of the Government, we are proposing this amendment.

Question put: "That the words proposed to be deleted stand".
The Dáil Divided: Tá, 75; Níl, 66

  • Ahern, Bertie.
  • Ahern, Michael.
  • Allen, Lorcan.
  • Andrews, David.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Michael.
  • Barrett, Sylvester.
  • Bellew, Tom.
  • Brady, Gerard.
  • (Dublin South-East).
  • Brady, Gerry.
  • (Kildare).
  • Brady, Vincent.
  • Brennan, Matty.
  • Brennan, Ned.
  • Brennan, Seamus.
  • Briscoe, Ben.
  • Browne, Seán.
  • Byrne, Hugh.
  • Byrne, Seán.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Clement.
  • Cowen, Bernard.
  • Daly, Brendan.
  • De Rossa, Proinsias.
  • Molloy, Robert.
  • Morley, P.J.
  • Murphy, Ciarán P.
  • Noonan, Michael J. (Limerick West).
  • O'Dea, William G.
  • O'Donoghue, Martin.
  • O'Hanlon, Rory.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Doherty, Seán.
  • Ellis, John.
  • Fahey, Francis.
  • Faulkner, Pádraig.
  • Filgate, Eddie.
  • Fitzgerald, Gene.
  • Fitzpatrick, Tom. (Dublin South-Central).
  • Flynn, Pádraig.
  • Foley, Denis.
  • French, Seán.
  • Gallagher, Denis.
  • Gallagher, Paddy.
  • Gallagher, Pat Cope.
  • Geoghegan-Quinn, Máire.
  • Gregory-Independent, Tony.
  • Harney, Mary.
  • Haughey, Charles.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Keegan, Seán.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Loughnane, Bill.
  • Lynch, Michael.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McEllistrim, Tom.
  • MacSharry, Ray.
  • Meaney, Tom.
  • Power, Paddy.
  • Reynolds, Albert.
  • Sherlock, Joe.
  • Tunney, Jim.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.


  • Allen, Bernard.
  • Barrett, Seán.
  • Barry, Myra.
  • Barry, Peter.
  • Bermingham, Joe.
  • Birmingham, George.
  • Boland, John.
  • Bruton, John.
  • Bruton, Richard.
  • Burke, Liam.
  • Carey, Donal.
  • Collins, Edward.
  • Conlon, John F.
  • Cooney, Patrick M.
  • Corr, James.
  • Cosgrave, Liam T.
  • Cosgrave, Michael J.
  • Creed, Donal.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • Deasy, Martin A.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Donnellan, John.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • FitzGerald, Alexis.
  • FitzGerald, Garret.
  • Fitzpatrick, Tom. (Cavan-Monaghan).
  • Flaherty, Mary.
  • Flanagan, Oliver J.
  • Fleming, Brian.
  • Governey, Des.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hegarty, Paddy.
  • Higgins, Michael D.
  • Hussey, Gemma.
  • Keating, Michael.
  • Kelly, John.
  • Kemmy, Jim.
  • Kenny, Enda.
  • L'Estrange, Gerry.
  • McGinley, Denis.
  • McMahon, Larry.
  • Manning, Maurice.
  • Markey, Bernard.
  • Molony, David.
  • Moynihan, Michael.
  • Naughten, Liam.
  • Noonan, Michael.
  • (Limerick East).
  • O'Donnell, Tom.
  • O'Keeffe, Jim.
  • O'Sullivan, Toddy.
  • O'Toole, Paddy.
  • Owen, Nora.
  • Quinn, Ruairí.
  • Ryan, John.
  • Shatter, Alan.
  • Sheehan, Patrick J.
  • Skelly, Liam.
  • Taylor, Mervyn.
  • Timmins, Godfrey.
  • Treacy, Seán.
  • Yates, Ivan.
Tellers: Tá, Deputies B. Ahern and Briscoe; Níl, Deputies Barrett(Dún Laoghaire) and Taylor.
Question declared carried.
Amendment declared lost.

On a point of order, my amendment No. 25 was not reached because time did not permit. I should be most grateful through you, Sir, if the Minister would communicate his views on that amendment to me.

I will do that.

In accordance with the Resolution of July 6 I am putting the question: "That the Fourth Stage of the Finance Bill, 1982, is hereby completed and that the Bill is hereby passed."

Question put and agreed to.

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