Dáil Éireann debate -
Thursday, 5 May 1983

Vol. 342 No. 3

Finance Bill, 1983: Second Stage.

Minister for Finance (Mr. Dukes)

I move: "That the Bill be now read a Second Time".

In this Bill I am providing statutory cover for the taxation changes which I announced in the budget statement of 9 February. I am also availing of this opportunity to introduce further substantial changes, which will correct anomalies and improve the tax code. The emphasis is especially directed towards countering evasion more effectively and improving collection. Some of the new items in the Bill involve important changes in our tax legislation and I will make specific reference to these later.

Before I discuss the details of the Finance Bill, however, I would like to remind Deputies of the objectives set out in the budget and to comment on recent developments. The policies which I announced on 9 February centred on achieving a reduction in borrowing, improving our competitiveness and minimising the ill effects of the recession on the less well-off members of our community. I said then, and I repeat today, that this is the only course which will assure us of economic growth and higher employment. While individual elements of the budget have been criticised, I think it is fair to say that there have been few dissenting voices on the overall strategy.

In the three months since the budget there has been a wide public debate in relation to taxation. The unavoidably high tax rates, which are necessary to support a high level of public expenditure, have focussed unprecedented attention on the issue of tax equity. This has been the subject of discussions already in the Oireachtas and I do not now wish to go over the same ground again in detail. I welcome the new awareness of the need for a better distribution of taxation because I believe there is scope for considerable improvement. The provisions in the Bill before the House are first-hand evidence of this and I plan to introduce further substantial changes later. What is regrettable is that the new-found interest in tax equity has led to widespread confusion and exaggeration about evasion and uncollected taxes. It has also led to some unreasonable demands for drastic changes which could not possibly be implemented in a short period without seriously damaging the economy and which in any event would lead to new inequities.

Greater tax equity was identified as a priority in our Programme for Government and we listed specific measures which would assist us in achieving this objective. We are on course in this respect and the Finance Bill bears witness to the considerable progress that is already being made. The changes in legislation will be supplemented by administrative improvements. The Finance Bill, however, cannot open the way for early reductions in the levels of taxation. As I have said, it is designed to provide the legislative basis for this year's budgetary strategy. We can at the same time achieve a substantially improved distribution of tax but this alone will not allow for any sizeable reductions in tax. I want to emphasise this because it is at the heart of the present debate about tax levels.

I said earlier that I welcome the new-found interest in tax equity. At the same time — and I expect all sides of the House to support me in this — I condemn outright the practice of withholding tax payments as a means of highlighting concern about tax levels. It is pointless and selfdefeating and will only aggravate divisions within the community on the issue of taxation. It is also pointless and destructive to engage in other forms of industrial action as a protest against taxation.

I would here like to acknowledge the positive approach which the Irish Congress of Trade Unions have taken to the present situation. Many of their proposals to deal with tax evasion have considerable merit. The Government had decided in any event that a significant proportion of these should be incorporated in the Finance Bill. Deputies will be aware that a significant number of the measures which have been under discussion between myself, my officials and the ICTU over a number of weeks past were already provided for in the budget statement of 9 February. Other measures which have been identified as being useful in the context of countering evasion will be carried out by administrative action. I welcome the statement issued by the Executive Council of Congress on Tuesday last that the response by Government to their representations about tax evasion and avoidance is encouraging. I would think that that statement itself, the Finance Bill and the budget statement of this year together underline the fact that this Government are determined to make major progress in the area of tax evasion this year. As I have said already in this House and elsewhere, this year's Finance Bill could be described as revolutionary in terms of the progress that it makes in this area.

This Bill breaks a great deal of new ground in curbing tax evasion. I will deal later with the individual sections, both those that are concerned with evasion and those that relate to other items. Before I describe individual elements, however, I would like to say a few words about the overall anti-evasion strategy. The Bill incorporates all the measures which I listed in the budget statement except those that can be implemented through administrative changes. In addition, it strengthens the powers of the tax inspector in investigating malpractices, it increases penalties beyond what was envisaged earlier and it provides that in future tax appeal hearings in the higher courts will be held in public.

I have repeatedly acknowledged that there is much that is wrong with our tax code and I have already made it clear that I will promote major improvements. Legislation alone will not achieve the levels of improvement that are required; there must also be administrative changes and changes in attitudes towards taxation.

I would like to comment on individual sections of the Bill. Rather than explain all sections on a consecutive basis, I will highlight the main changes which have not already been fully detailed in the budget statement. Detailed explanations of the individual sections are contained in the Explanatory Memorandum and I do not intend to duplicate them but mainly to highlight some of those sections which I regard as being particularly worthy of attention.

The first two sections provide for the changes in income tax exemption limits and rate bands as announced in the budget. I would like to draw special attention to sections 3 and 4. These have already received considerable favourable publicity following circulation of the Bill. The present law in relation to the treatment for income tax purposes of maintenance payments in the case of separated spouses is unfair to the couples concerned and there has been a succession of complaints about this. What is proposed here is to go as far as reasonably possible to provide the same arrangements for these couples as for married couples generally and to allow them the option of single or joint assessment. The effect of joint assessment will be that their combined after-tax income will be the same as if they were living together, and greater than it is now. The effect of the measures will be to reduce total taxation on the income of people who find themselves in those circumstances and bring it back to the level that applies to married persons.

The changes will apply in respect of new maintenance arrangements. They may also apply in respect of existing arrangements where both partners request them and I expect that many separated couples will be anxious to avail of this. When the Bill was published, I said that the Government regarded the present text as one option for change. It is the one which appears to me and to the Government as the most suitable at this point but if in the course of discussion of this Bill a better option emerges, I will be glad to take it on board.

I move on now to section 9 which makes significant changes in the tax appeal procedures. In future, applications for late appeals made later than 12 months after the date of the notice of assessment will not be considered for admission unless the tax charged in the assessment, together with any interest thereon, is paid and the necessary returns and accounts to enable the appeal to be determined have been submitted. Applications for rehearings of tax appeals in the Circuit Court are being used by some taxpayers to delay finalising their tax liability and I propose to restrict this right of a rehearing to genuine appeals. In future, where no returns or accounts are submitted, or the documentation submitted is inadequate to determine the appeal, the appeal commissioners, if an application for a further adjournment is refused, will dismiss the appeal. Where an appeal is dismissed, the original assessment will become final and conclusive. This section also provides that hearings by the High Court and by the Supreme Court of cases stated will no longer be held in camera. The effects of these provisions will be to remove the incentive that exists in the present system to use the full length of the appeals procedure simply to delay the payment of tax which, in many cases, is known to be properly due.

Chapter II of the Bill deals with the taxation of farming profits. The principal change is the extension of income tax liability to farmers who up to now have been excluded because of their low rateable valuations. This is something which arises directly from a court decision which held that we could no longer use rateable valuations for this purpose. Therefore, it was necessary at this point to introduce another means other than the rateable valuation basis, for deciding who would properly be in the tax net and who would not. At present approximately 35,000 farmers are liable for tax. An estimated additional 90,000 farmers will now come within the tax net. Of course, only a minority of these will actually pay tax, because most of the farmers concerned are on low incomes, and for this reason we should minimise the extra work involved both for the farmers themselves and the Revenue Commissioners.

Farmers who have not been liable for income tax up to now will be required to fill in details of their business and personal circumstances in a farm profile form with a view to the identification of those who would have a taxable income. The profile form will be a relatively simple document and its completion should present no undue difficulty for the farmers in question. I see no good reason why farmers should need professional advice in filling in the particulars required. In cases in which the completed farm profile form would suggest that a farmer may be liable for tax, he will then be required by the Revenue Commissioners to complete a tax return in accordance with existing requirements, which include the production of a simplified form of accounts.

We are working on examining a further simplification of income tax accounts for small businesses and farmers in order to relieve as far as we can the burden involved for small enterprises in producing the kind of information required, without reducing in any way the quality of the information and its usefulness in assessing tax liability. The position of the majority of farmers who will not be required this year to account for tax will remain subject to periodic reviews on a profile basis to identify those who might produce taxable incomes in future years. I consider that the profile fully meets the Government commitment to a system which will deal simply and fairly with the large number of small farmers newly liable for income tax.

I recently described the farm profile form as being like a radar screen where the profile itself would be the sweep, and in particular cases the sweep would identify cases where there might be a tax liability. Those cases would then be further examined by the tax inspectors.

Mr. Daly

A laser beam.

Mr. Dukes

If Deputy Daly sat down and thought about it he would realise that this system would have the advantage of relieving the burden both on the individual taxpayer and on the Revenue Commissioners so that we would be in a position——

Mr. Daly

On a point of order, it is peculiar that about ten minutes after this debate starts on this very important Finance Bill the Government parties seem to have deserted the House.

An Ceann Comhairle

Deputy Daly probably knows that is not a point of order.

Mr. Daly

The Government parties seem to have deserted the House.

Notice taken that 20 Members were not present, House counted, and 20 Members being present,

Mr. Dukes

As I was saying before Deputy Daly got agitated, I consider that the profile fully meets the Government commitment to a system which will deal simply and fairly with the large number of small farmers newly liable for income tax.

I have already referred to the current interest in defeating tax evasion and avoidance. Some of the Government's proposals for improvement are incorporated in Chapter IV. A number of these have already been announced in the budget but there are further changes. Up to now profits from illegal activities have not been liable for income tax or corporation tax and this situation is rectified in section 18. There is a significant new anti-evasion measure in section 19 which provides that, where the inspector of taxes is not satisfied with a taxpayer's income tax return, he may request a statement of assets. These new powers will be used selectively and only in circumstances where the inspector has good reason to believe that the taxpayer is not making proper returns. The other provisions in this chapter are budget items; I might draw attention again to the intention, expressed in section 21, to give effect to the proposal to publish particulars of those convicted of tax offences and of those with whom larger back-duty settlements, above a threshold of £10,000, are made.

In Chapter V there is a minor amendment in section 22 to the profit sharing legislation, which was introduced last year. I would like to draw attention to section 25 which gives effect to the announcement regarding the arrangements for 1983-84 in relation to the taxation of building society deposits. It provides that the deposit ceiling for the application of the composite rate will be restored to £15,000 from the level of £30,000 which applied temporarily for 1982-83. It also provides that the existing composite rate of 24.5 per cent will be continued for this year, except that in cases where a building society does not undertake to co-operate with the Revenue Commissioners in a survey to arrive at a true composite rate, an increased rate of 26.25 per cent will apply.

Sections 27 and 28 extend for a further period of three years, that is, from April 1984 to March 1987, the period in which expenditure incurred on the provision of rented residential accommodation can qualify for tax relief under sections 23 and 24 of the Finance Act, 1981. Some modifications in the scheme will apply during the extended period. The upper floor area limit for flats will be increased from 75 square metres to 90 square metres and qualifying expenditure may be written-off only against rental income from the property on which the expenditure was incurred rather than against rental income in general as at present. Where flats exceed 75 square metres, there will be a requirement that they must have a minimum of three bedrooms.

I now turn to the proposed new system whereby advance corporation tax or ACT will be payable by Irish resident companies. The system is designed to ensure that, where tax credits are available to shareholders, sufficient tax will have been paid by the company to ensure that no loss accrues to the Exchequer from the benefit accorded to the shareholders by the tax credits. I would draw the attention of the Deputies to the main provisions of this system.

Sections 33 and 34 provide for the imposition of liability for ACT and allow payments of ACT to be set off against normal corporation tax on a company's income. Section 36 provides that a company receiving distributions from another company which has paid ACT on them is entitled to deduct the tax credits in respect of those distributions from the tax credits in respect of its own distributions in calculating its ACT liability. The purpose of this deduction is to avoid a double charge to ACT.

Section 42 allows transitional treatment of distributions made under loans known as section 84 loans. It relieves from a charge to ACT, distributions under such loan contracts entered into before budget day or finalised within three months after budget day where negotiations were in progress on that day. This provision is designed to avoid disruption of settled and currently pending section 84 loans. ACT will apply to distributions under all such loans in future in the same way as to distributions generally.

Under section 43, dividends which had been declared or announced before budget day but paid on or after budget day will not be liable for ACT subject to certain conditions. This provision is designed as a matter of equity to meet cases where a company, in accordance with its normal practice, had decided on and declared its dividend, on the basis of the pre-budget legislative position, but with actual payment of the dividend not being made until after budget day.

Section 44 provides that ACT will fall due six months after the end of the accounting period in which the distribution is made. This is the same due date as that for payment of the first instalment of normal corporation tax. It ensures an early set-off of ACT against normal corporation tax in contrast to requiring advance payments of corporation tax during the accounting period with a lengthy interval before any set-off could be availed of.

Part II of the Bill, that is sections 47 to 65, confirms changes in a wide range of excise duties and in road tax. Most of these changes have already been implemented; a number of minor changes are being introduced in the Bill.

The Value-Added Tax provisions relate for the most part to the budget proposals. There are, however, two significant new items. The VAT rate on hotel and similar accommodation is being reduced from 23 per cent to 18 per cent. This is in recognition of the severe overseas competition for tourist business and the important contribution made by this industry to improving the balance of payments. The annual turnover threshold limits, above which VAT registration is mandatory, are being reduced. The reductions are intended to eliminate the advantage which legitimately unregistered traders would otherwise have had as a result of the increases in VAT rates since 1981. The Revenue Commissioners will continue to take all possible steps to curb the activities of illegally unregistered traders. I would like to welcome in this connection the increased co-operation being received from legitimate businesses in helping to locate such illegal outlets.

A major revision of the penalty code for tax offences is contained in section 83. It provides for fines of up to £10,000 or, at the discretion of the court, a term of imprisonment of up to five years, or both fine and imprisonment. Directors and other officers of companies will be liable for the penalties where the offence is committed by the company with their consent or connivance or is attributable to their neglect. These provisions are of great importance in countering tax evasion. They have received considerable publicity in recent days and I am glad to note that they have been welcomed by many commentators.

Part VI of the Bill makes provision for the residential property tax announced in the Budget. The tax, essentially, will involve a charge of 1½ per cent on the excess of the market value of property over an exemption limit of £65,000 where the household income exceeds £20,000. Both the market value and the income exemption thresholds are to be indexed annually. Residential property rented at arm's length will be exempt, as will houses of historic or architectural value where reasonable access is allowed to the public. In view of their expressions of particular interest in the point when I raised it in my budget statement, Deputies may wish to note an alteration in the form of relief provided for families. This will now be provided as a 10 per cent reduction in the tax charge in respect of each dependent child.

The property tax will be on the basis of self-assessment. Those who have reason to believe that they are liable will be obliged to make a payment to the Revenue Commissioners by 1 October. The operation of a self-assessment system may be interpreted by some as a licence to understate the value of their properties. I would draw their attention to the substantial penalties which will be applied and would strongly advise them to co-operate with the Revenue authorities. In the budget I provided for a yield of £10 million from the property tax this year. The tax will not become payable until 1 October.

Before concluding, I would like to mention briefly a number of other taxation matters which are not immediately relevant to this Bill.

In the budget statement I served notice that the reporting arrangements for payments by Government Departments and public authorities were under review to ensure that the Revenue Commissioners receive adeqate information about such payments. Changes are being made to tighten up considerably on existing procedures. While these changes will be introduced on a piecemeal, administrative basis, the overall effect will, I expect, be quite significant.

I also announced briefly in the budget statement that the insurance levy is being continued and a minor amendment of a technical nature is incorporated in the Bill. I see the levy as a continuing feature of the tax code. I am aware that in its present application it imposes a particular burden on certain classes of life business and I would be happy to reshape the levy to remove this difficulty at a future date if the insurance industry can propose a suitable alternative approach which does not reduce overall revenue.

In the budget statement I also mentioned that a review of taxation measures for discretionary trusts was being undertaken. My concern at the time was to ensure that tax changes would not result in a penal imposition on trusts which are set up for genuine purposes. This review is continuing as part of a wider investigation of our capital taxation arrangements.

The Finance Bill is long and complex and it has had to be prepared at short notice. I am considering a number of amendments for introduction on Committee Stage. I have announced already that I will introduce provisions for access to information on dealings with financial institutions and a requirement that tax numbers be stated on receipts and invoices. There will also be a number of changes to correct some minor anomalies and I am looking at the possiblity of introducing some further anti-evasion measures.

Since its publication the Bill has been criticised in some quarters for not going far enough to promote greater tax equity. In reply to this I say categorically that the Bill goes considerably beyond any changes introduced in recent years to deal with tax evasion. I have gone as far as I could reasonably go in a short period of time and I am committed to further improvements. I repeat that our tax levels are high — and, of course, the Finance Bill does nothing to ease this situation — but high taxes are a separate problem which we must tackle in conjunction with public expenditure and it is wrong to equate it with the issue of tax equity.

I recommend the Bill to the House.

Mr. O'Kennedy

It is on the last page of the Minister's speech that one has the most revealing analysis of his approach to the question of taxation and his role as Minister for Finance as expressed in this Bill. He states:

...the Bill has been criticised in some quarters for not going far enough to promote greater tax equity. In reply to this I say categorically that the Bill goes considerably beyond any changes introduced in recent years to deal with tax evasion.

One immediately senses a fixation that the sole means of promoting tax equity is the imposition of penalties. I agree that there must be effective means to deal with tax evasion but to state that strong penalties, increased powers for the Revenue Commissioners and revolutionary changes, to quote the Minister's own words, in some procedures with the implication of collective dishonesty imply tax equity is going too far. In many cases it may have the opposite effect. In the last paragraph of his speech the Minister states:

I repeat that our tax levels are high — and, of course, the Finance Bill does nothing to ease this situation — but high taxes are a separate problem which we must tackle in conjunction with public expenditure and it is wrong to equate it with the issue of tax equity.

I believe it is wrong to disassociate it from tax equity. Every Minister for Finance is a trustee for the taxpayer and if he assumes that the imposition of taxation as associated with public expenditure is in no way related to tax equity he is ignoring some fundamental realities.

We have a revolutionary Bill but before going into the details I should like to give the background which has conditioned the circumstances in which we discuss this legislation. Incidentally, the Minister was rather anxious to avoid discussing that background in his speech. This Bill is a repeat of what was in the explanatory memorandum. I know it is a practice in the Department of Finance to repeat in greater detail what is in the explanatory memorandum, reminding us of the penalties and warning us that if we do not do what is required in the Bill penalties will follow. When all of this is stated in the explanatory memorandum and in the Bill there is no need to repeat it again. It would have been more helpful if the Minister had used the occasion to explain to the public the main thrust of the Bill, its target and direction, what it seeks to promote, avoid and punish. He should have tried to communicate to the people what taxation in this instance is about so that we might get some response and perhaps even promote the positive virtues of honesty as distinct from wielding the stick on the basis that there are many dishonest people who need to be dealt with. It might have been more reassuring, even for the PAYE sector, if that had been done and the Minister would have spent his time better if he had adopted that course.

The statement today from the Minister may not have been very interesting but yesterday there were three interesting statements from different sources. One was from the Minister and another was from a visiting banker with a particular interest and association in Ireland. He is the president of the Dutch-based Kredietbank, Mr. Wauters. I am not saying that one takes as gospel what bankers say but I will quote one statement this banker made. He urged more measures to strengthen the economy and he warned in particular against the high level of taxation in the Irish economy which could inhibit future expansion both in demand and output. He would not have to be the most enlightened commentator or the most informed banker to issue that warning. However, it was a most unusual warning from an international banker with a base here and one of which we should take note, particularly in that it could inhibit future expansion in demand and output. Obviously the Minister for Finance would not agree with that report about the high level of taxation. I will give some figures to show what has happened even in his short time in office and the impact that will be made on demand and output which will be more damaging than anything heretofore.

Yesterday in this House we had an interesting statement from one of the Minister's colleagues that 1,200 prisoners had to be released last year from our jails to make way for prisoners convicted of more serious offences.

This is the Minister, sitting in the House now, who ensured that there would not be sufficient capital allocation for our prison service buildings, by imposing a reduction of £6 million. With my experience in Government of how people try to achieve outside what they cannot achieve inside, the Minister for Justice was, to put it mildly, having a go at the Minister for Finance in this area, the very Minister for Finance who will, if necessary, increase the number of occupants in our gaols through the provisions of this Bill. We had to let go 1,200 offenders last year and now the Minister reduces the capital allocation by £6 million.

I am not one who believes in dealing with these matters only by punitive measures but, in so far as the Minister is introducing these measures, there is a great inconsistency in his position, not to speak of that of the Government. The Minister's comments in the House yesterday put the matter in focus. He said that "the indirect tax increases in the budget are expected to generate an extra £110 million". Even with the increases in indirect taxation to which I have just referred, the tax yield from income tax and income levies, taking the budget tables of current revenue for 1982 and 1983, have risen in those two years from 36½ per cent to almost 39½ per cent. What that demonstrates is that even with the huge increase in VAT, indirect taxes, and so on, as a consequence of this Minister's and this Government's decision, the actual proportion of total tax revenue attributable to income tax and income levies has risen in one year from 36½ per cent to almost 39½ per cent. Dr. Wauters must have been impressed at seeing that, or any other financier or promoter here at home or elsewhere. Even in the Book of Estimates, pre-budget — never mind what is coming through since — estimated tax revenue totals £4,730 million, by comparison with £3,135 million two years ago. That is an increase of well over 50 per cent, or close enough to 60 per cent in two years.

The Minister quite blandly tells us this morning that tax equity is a different matter from public expenditure and so on. When one sees an increase of that order and the income tax element within that, income tax levies increasing at the present rate, it is quite clear that this Finance Bill is not an instrument for the introduction of a greater level of tax equity and balance in the taxation system, but rather a Bill which points in one direction and takes the public mood which, in a sense, the Minister has whipped up. He says: "I know that you are concerned about the amount not paid by the others by comparison with that paid by you and I am going to damn well ensure that you will be convinced that I am going after the others". If that is tax equity, it is not my definition, it is the Minister's. I do not even believe that it will bring about understanding in the community, much less balance and equity.

If that is the Minister's presentation of tax equity, he has been the first in recent years who has failed to index the tax bands to take account of inflation — people who are protesting in respect of PAYE with perhaps understandable concern and justification.

Mr. Dukes

The second.

Mr. O'Kennedy

He is the one who imposed, for the first time, an additional 1 per cent levy without saying what it was for, except the maw of the Exchequer. Both of those measures in this year will probably mean an extra £190 million — I say this with some degree of authority — part from the Minister's own budget statement from the 1 per cent levy and the rest from calculations which one can make, to be verified in his own Department, or £300 million in a full year. That is the impact of those two measures alone and we are told that the level of taxation has not much to do with tax equity. Tell that to the PAYE sector, who are really affected, in particular, by that imposition.

There is a background to this Bill, apart from the budget. Normally the Bill is the instrument to give legislative effect in taxation particularly to the budget. The Minister said today that it goes beyond that. It does on occasion, I must admit. But what I find a little worrying is that no matter how far it has gone, and I am quoting the Minister, "I plan to introduce further substantial changes later". What is the Minister talking about? We already have, according to the Minister, revolutionary changes and what is he referring to, or withholding, when he talks about planning to introduce further substantial changes later? Is someone else doing the job of the Minister for Finance, someone whom he may have whipped up as a consequence of his statements? In the final analysis, it is the Minister for Finance and the Government and nobody else who are responsible for the introduction of tax legislation.

Mr. Dukes

That is why it is in the Finance Bill.

Mr. O'Kennedy

I do not suppose any Minister has ever had so much company in introducing a Finance Bill. Perhaps some of it might have been necessary, particularly as a consequence of some of his own statements. If this is a precedent which we will follow, every year we will wait longer, perhaps to the end, for even a more complex Finance Bill and when it comes, the Minister will say that there is more coming. Whatever the "more" will be, I do not know. We will wait with bated breath and some degree of apprehension. If there is such a thing as an honest taxpayer — I doubt if the Minister believes that there is — among the self-employed, he had better start worrying——

Mr. Dukes

Who is talking about whipping up, now? That is nonsense.

Mr. O'Kennedy

——a little bit more, because there may be some more ideas coming. I did not interrupt the Minister, so he might allow me the same facility. I was greatly impressed by one thing he said. "The operation of a self-assessment system may be interpreted by some as a licence to understate the value of their properties." There is an implication there already, before if even happens. He continued, "I would draw their attention to the substantial penalties which will be applied and would strongly advise them to co-operate with the Revenue authorities". That provision, delivered in a nice, calm tone has only one implication. Those who may, as our race tends to do, feel guilty for one reason or another, have been advised by the Minister in their own interest to co-operate. We understand the implication of that expression "in their own interest" when we hear it from a school teacher or anybody else.

We are all a little constrained in our approach to this discussion because, unfortunately, of the background over the last number of weeks and months. A very considerable amount of that constraint has been contributed to — I do not say deliberately, it just could not be deliberately — by the Minister himself. He might learn one thing first; he probably has by now: the Department of Finance do not see that they have any function to engage in the business of communication. They are not in the business of public communications, representation or understanding the public mood; they are in the business of orthodox fiscal control and direction. That was conveyed to me in my first days in the Department of Finance. That is right and proper from the point of view of the Department of Finance. But the Minister for Finance has a somewhat different function. He is the person who must ensure that what is right, proper, orthodox and sometimes even rigid is communicated to the public in a way that the public will not only understand but will respect. This is where the Minister has created the problem with which we are now concerned. Apart from his budget — that certainly is a means of communication of concern for tax equity and does not say very much for this Minister's or Government's awareness — let us look at what he actually said and the manner in which he said it because it may be factually true. On 24 March 1983, at column 872 of the Official Report, by way of written reply to Question No. 128 about outstanding tax the Minister said:

The total amount of tax outstanding in respect of all years up to and including 1980-1981 as shown in the Appropriation Accounts, 1981, published in July 1982, was £1,218.5 million. The amount outstanding for those years at the end of 1982 was £961.7 million,...

He goes on then in a rather vague way and we get the only qualification in this statement at the end of column 873 where he said:

The amounts now shown as outstanding will to a substantial degree be discharged as being in excess of the true liability in the ordinary course of the administration of the taxes.

Fair enough — in excess substantially of the amount which is likely to emerge as being the true amount due. That is an important qualification but it is not nearly enough.

Here we have figures which the Minister regrets even this morning have been bandied about, the first figures — over £1,200 million, over £1,400 million — these figures emerged from the Minister himself; he had no option but to present them because they are the factual figures. But at the end of the day, on 24 March 1983, the best he could do to tell the full story to the public was that it was substantially more than what was probably actually due. But what the substantial degree was nobody was told. Of course taxpayers who had been milked to the full in a budget a little while before that, the PAYE group particularly, understandably — when those figures emerged — not only expressed their protest and frustration in a very real way but then, because of the failure to communicate on a proper basis, we had the consequences of the tax protest we have already experienced. While I think of it, let it be said not just for the record but as a matter of utter obligation from this side of the House, as it would be from the Government side as well, I support the Minister in totally and utterly condemning any campaign to withhold taxes or contributions due by any taxpayer to the State. It has already been said very clearly: we cannot in any circumstances countenance that kind of activity no matter how hard pressed the taxpayer may feel he is.

A little while later, when we had a special statement on taxation — I notice Deputy Mac Giolla is in the House today and, in a sense, I understood what Deputy Mac Giolla was saying that day, after it had all been whipped up — what did we get from the Minister? He might then have avoided much of the apprehension created all over the place now causing divisions, dissensions and tensions. On 19 April 1983 it seemed necessary to have a special statement in the House in which I agreed to be involved. On that day, at columns 1230-1 of the Official Report the Minister breaks down the figures — I summarise it but I think it is a fair summary — and says that the figure of £961.7 million is being bandied about, and continues to say:

It is unfortunate that in spite of the detailed explanations contained in the official source documents

That is fine but they were not mentioned here in this House——

the figure of £1,000 million for uncollected

taxes has come to be accepted as fact in many quarters.

If it was, whose fault is that? The Minister then continued to say:

If this pattern were to continue in respect of the end-year figure, then the balance ultimately paid into the Exchequer would be no more than £90 to £100 million.

I am not saying whether we know these figures to be right or wrong; I cannot say that. However, if that kind of statement had been made the first day, with the details that was there, we would not have seen the reaction we did. We would not have seen the reaction from the people who felt that of a total tax revenue of approximately £4,730 million in 1983 — that is what the estimated tax revenue is — a quarter approximately of it is overdue from people who are not paying. It is no wonder people were up in arms, and particularly the PAYE sector, who are paying on the button every hour of every week of every month.

Then the Minister tells us this morning that the two matters are not really related to the general level of expenditure and tax equity. Now I regret that we find ourselves, in a sense, in a straitjacket in this discussion, all of us, in relation to the provisions on taxation. Even to advance some criticisms now, or make some suggestions on some proposals in this Bill may imply that we in this party are not in favour of equity, that because we are not going to support wholeheartedly some of the measures against evasion or raise questions in relation to some new taxes, this side of the House are not in favour of equity. That is not the climate in which the Finance Bill should be discussed. That is a climate for which the Minister himself is responsible.

While even in the normal course we do not have sufficient time in this House to discuss the Finance Bill — we all know the reality is that as often as not we might get to section 23 or 24 on Committee Stage — this year, on the Minister's own admission, the Bill is most complex, that perhaps there will be new sections added even before it comes in again. Then, right at the end, from sections 84 onwards, is the new residential property tax which, to say the least of it, carries some interesting innovations in terms of tax concepts, to which hopefully we will revert on Committee Stage. How in the name of heavens are we expected to discharge our responsibilities and discuss this, if we get that far, with the public entitled to know from us if we have only a few days now and a few days on Committee, and all the other elements to be developed? There is something to be said in regard to legislation — and that includes not just this Bill but every Finance Bill that will affect people in their tax dispositions, in their property dispositions, in their PAYE payments in a way that we cannot fully understand — for ensuring that we do not introduce new taxes in a Finance Bill. That has been the normal pattern, that you do not introduce completely new taxes in the Finance Bill, you introduce them in a separate Bill with separate discussion so that at least we are afforded an opportunity, on a separate Bill, of a separate discussion, whether it be in regard to a wealth tax or some other tax like that. Here we have a completely new tax. I hope we can work in the House on the basis that at least we will have an opportunity of discussing it; otherwise we will have a five-minute Committee Stage discussion on that.

Mr. Molony

What about the resource tax the Deputy's party introduced?

Mr. O'Kennedy

One thing Deputy Molony will recognise is that, whatever else about the resource tax, by comparison, this is a much more complex instrument, as he, being a solicitor, will soon find out, than was the resource tax. That is what I am talking about, our capacity to deal with it.

With the degree of default that the public perceived from those statements — 25 per cent of the total tax outstanding — something required to be done, some actions had to be taken, very firm actions, even with a soft voice, but firm actions nonetheless. In the Minister's own words, when introducing the Finance Bill — and I think this was the characteristic to which he drew journalists' attention on the day the Bill was published, as quoted in the newspapers — this was the most comprehensive set of measures to combat tax evasion ever introduced.

This is as a consequence of the mood about that tax evasion in every quarter is rampant. I want to say, as a former Minister for Finance, that it is far too widespread. The Minister will have our total support in doing something about it. A Finance Bill which simply introduces a litany of penalties and new powers for the Revenue Commissioners but does not actually outline procedures to identify any extra tax evasion in any effective way, as distinct from the penalties if people are caught, is not necessarily the most effective way of dealing with the matter. This Finance Bill is a litany of penal provisions as distinct from any effort at tax reform. Surely a Finance Bill should at least be consistent with the direction of tax reform. Had I known three years ago, when I asked the Commission on Taxation — a very representative group — to look at our overall tax system with a view to producing a comprehensive programme and guidelines for tax reform, that they would so deliberately be ignored in every sense by this Minister, I would have apologised in advance. Not only have they been ignored in the direction of this Bill, but it is probably fair to say that the Minister is moving in the other direction. It is also fair to say that, even in terms of courtesy, he is ignoring them also. Many people think that a lot of good work has gone into this; but tax reform, as the Commission on Taxation presented it, apparently is not in line with the Minister's view.

We have a litany of penal provisions as distinct from any efforts at tax reform. We will have imprisonment up to five years in some cases plus fines up to £10,000, yet we had to release 1,200 prisoners last year because this Minister and the House did not make adequate provision for the Minister for Justice to have sufficient prison building programmes. There is something very inconsistent there. The Minister said that these proposals represent the Government's main responses to the recent protest against the tax system by the trade unions. I do not believe that is what the trade unions are concerned about. They are concerned about evasion, but if proposals dealing with evasion represent the Government's main response to the protest from the unions, then the Minister has got it wrong. They are concerned about a programme of tax reform generally. If these are the main responses — we have to wait and see what will emerge from them — then the trade unions will be very unhappy. While some have said that they are happy with the actions being taken in relation to evasion they are really saying that the broader issue is the whole basis of the taxation system. What the Minister is doing could hardly be described by anybody, including the Minister, as the Government's main response to the recent protest.

It would be much better if we had government by positive conviction rather than government by response to protest. It would be much better if we had a Finance Bill by positive conviction rather than a Finance Bill by response to protest. It would be much better if we had a Minister for Finance unencumbered by such concerns coming before us here and being able to tell us that he is doing his job. The trade union representatives said recently that they have their functions and the Government have theirs. It would be much better if the Government were able to discharge their functions rather than seeing developments of the kind where one group seem to be far closer to the Minister in terms of discussion and where others are further away. In the final analysis this creates the very thing we need least of all: tensions, divisions and assertions, one group played off against another.

If any of us make a suggestion here, we are on the right side or we are on the wrong side. We now have clearly identified sides and the Minister and the Government in a very short time have certainly put the jersies on in a very identifiable way in relation to the sides in this battle. There is a battle not just between groups but apparently to create dissension within one sector. I am talking about farmers, which my colleague, Deputy Noonan (Limerick West) will deal with later on. As far as I can see, the farmers have always been united on one thing: sheltering behind that nice euphemism of paying their fair share. Now, for the first time, they are splintered. Surely the Minister should at least guarantee that if there are to be divisions between sectors in society at least we will not go further as a consequence of these proposals and create a splintering within the farm organisations as a consequence of the proposals for farm taxation.

Mr. Dukes

That is government by dissent rather than reaction by response. I am not sure which way the Deputy is going.

Mr. O'Kennedy

I am glad I prompted some response from the Minister. I would like to mention some general points. We are in a revolutionary situation and are adding enormously to the powers of the Revenue Commissioners. The motion is that we add enormously to the powers of the Revenue Commissioners and we say aontaithe, agreed, to that. The fact that there are still honest taxpayers about will not prevent those people from being subject to pretty harrowing and searching experiences because, as provided in this Bill, there are suspicions. The Minister stated this morning:

This is a significant new anti-evasion measure in section 19 which provides that, where the inspector of taxes is not satisfied with a taxpayer's income tax return, he may request a statement of assets. These new powers will be used selectively and only in circumstances where the inspector has good reason to believe that the taxpayer is not making proper returns.

There will be some interesting interpretation in the courts in relation to this one. What is a good reason? Who is the arbiter of what is good reason? Is it the inspector? What guides or principles of natural justice apply to him? I believe that inspectors are as good as the next but they are not built into the system of protecting the individual in the way they should be. That is where the courts come into it. The courts that will ensure that the inspector "has good reason to believe" are not being eased out instead of brought in particularly in a situation like this. This is a matter of some considerable concern. There may be the difficulty, if not the possibility in some cases, of proving honesty to the satisfaction of the Revenue Commissioners. If you cannot prove you have declared all your assets where do you go from there? We may find, uniquely, that the Revenue Commissioners will be prosecutor, judge and jury. They will be in a very special position. I do not want to raise any extra apprehensions as a consequence of this but the extra powers being conferred here are a matter of very serious concern especially in that the protection of the courts, which is of vital importance, is now being removed to a considerable extent.

The question remains whether the Bill does anything to eradicate the cause of evasion which could be said to be almost a consequence of heavy taxation. When the tax allowances do not seem adequate the incentive to evade arises. While this Bill is imposing the penalties there is little to promote the awareness of responsibility which every honest taxpayer should have, particularly those who make their own assessments. They should be assured that they will not be subjected to continual reassessments. Take the new income-related property tax. An honest taxpayer goes to a valuer and asks for a complete valuation of his house because he wants to pay his tax on that basis. He is given a figure and pays his tax. Under this Bill if three years later a neighbour sells a similar house for £20,000 more than the figure he was given, the Revenue Commissioners can say his figure was not the market value at the time and will force him to pay the difference, plus interest. The Minister and his advisers should look at that problem because there are honest, scrupulous taxpayers who do not want to have any problems with the Revenue Commissioners but who may not be able totally to satisfy the inspector, who may use his powers if he is not satisfied. However, the inspector does not exercise a judicial discretion and that is an important element which must be taken into account. It is important to encourage the positive virtues of honesty and civic responsibility and acknowledge that they exist.

In section 83 we have a reference to mere negligence. In the legal sense this is an important phrase which has now been elevated to the status of a crime and directors can be liable for the default and neglect of an officer of a company. Even the question of agency could arise as to whether you can be guilty of a crime. Where the crime is a statutory offence of neglect under section 83 then we are moving into new territory — and we should acknowledge it — in which the protection of the courts is being put aside and the reassuring attitude of the Minister put in its place. I do not start on the assumption that the inspector by definition is a malicious person but I would not give that power to the Minister, myself or anybody else. I do not see why an inspector should be obliged to assume that kind of responsibility.

The Bill is not just an instrument of taxation. I hope I have clearly expressed the concern I have about the climate in which it has been introduced. The Government have, to a great extent, been responsible for that climate and regrettably — although I am sure not deliberately — the Minister has also encouraged that climate. Normally the Finance Bill is an instrument of economic policy, whereby the Government promote incentive, initiative and encouragement to bring about balanced and continuing economic development. The public could be forgiven for supposing that this did not occur to this Minister, even as a passing thought, when he presented this Bill.

There is one characteristic about the budget which I am sure the Minister is now conscious of, and that is employment. What should have been a central priority did not feature in the budget as a priority in our development and therefore it does not feature in the Finance Bill. There is nothing in the Bill to promote incentive or investment, quite the opposite. The Minister seems to have one fixation at present — get at the workers. To keep the services going, you must have people who are promoting, activating, encouraging and investing. It must be very frustrating for those who want to make a contribution, as distinct from being concerned about whether or not they will satisfy the inspector of taxes, that their efforts, capacity and role are not being in any way promoted or supported in the Bill. If we wanted to reduce the budget deficit about which we are so concerned, one way would be to promote employment. That would help the Minister to reduce the figure he provided in his budget for unemployment, something in the region of £35 million. Of course, the taxpayer funds that deficit and it would help if there was something in the Bill in relation to incentive to employment.

The Minister seems to be preoccupied with restrictions, investigations and valuations. The Minister in this Bill seems to be preoccupied with everything negative and very little positive. I must admit that much of what the Minister is doing is right. He has a difficult task. Any Government would have a difficult task at this stage. However, there is a definite distinction between effectiveness and efficiency. The Minister may be effective in dealing with some aspects of evasion but will he be efficient in terms of developing the economy? He seems to be concerned only with one side of the equation and that is not enough. If we had rising inflation and rising imports this policy might be appropriate but that is not the case. Fortunately international trends are towards lower inflation and because of the way our economy has been dampened down we certainly have lower imports. This Minister is the first in almost a decade who has been given the breathing space of a self-correcting balance of payments deficit because of falling oil prices and the impact that has on bringing down inflation. All of the influences that are quite evident in the international economy are towards lower inflation. Nonetheless he does not see the scope and opportunity which is there to at least promote investment in this economy.

It is clear from a reply I got yesterday that the ratio of investment to total public expenditure and borrowing is once again dropping down to the order of about 25 or 26 per cent which was a characteristic of the mid-seventies and the last Coalition Government. That certainly will not be corrected by what is in this Finance Bill. The primary need of the economy at the moment is for an increase in investment to restart real growth and to bring the economy up to its fighting weight — and it is nowhere near that now — so that most of our work force could be productively employed and where those who are protesting because there are too few of them paying too much taxation will at least find themselves joined by more of their brothers and thereby sharing the overall level of taxation that has to be applied. Instead we have at least 100,000 more than we might have on the unemployed list costing us enormous benefits and we have seen the evidence of it in the Minister's budget when he cut back the capital programme — there will be a consequence to that — to make provision for increased unemployment. We had a contributory tax loss of about £200 million. The opportunity cost to the State of the whole lot might be of the order of about £400 million. It would be very helpful if we could offset that against the current budget deficit and the taxation that follows from it.

The short-term reactive thinking of the Government is evidenced in the decision to devalue within the EMS and even yesterday the Minister indicated the consequence of that in terms of the extra cost to the semi-State companies, something of the order of £80 million. That will have to be funded by the taxpayer, leaving aside the impact on inflation. The taxpayer cannot see in this Bill or in the actions taken by the Government in recent times any effort to lighten his load.

Why not offer in the Finance Bill a more enlightened package of aids for investment? The volume of investment activities had dropped in any event from 1980 to 1983 by approximately 9 per cent compared with a growth of 37 per cent between 1977 and 1979. We cannot afford to continue this drop in investment. In 1980 the residence related tax allowance was introduced to stimulate self employment. Surely that made some contribution? Why has it been dropped? Why not extend interest tax relief to cover individuals who would invest in productive companies? Why not introduce some relief to stimulate development — and this was promoted by the Minister's predecessor, Deputy Bruton — of a venture capital layer for which there is a great need at present? Deputy Molony nods his head. I think this would represent the view of many Deputies. There is nothing in this Bill to encourage that but quite the opposite. Many of the most successful companies in the United States, some of the very ones that we invite in here at a high cost to the taxpayer such as Apple and Digital, started from that base with that kind of venture capital. What are we doing? We are discouraging it.

In this Bill we are concerned with one aspect and that is to get at somebody to reassure somebody else. If we are concerned with evasion is it not high time to stop the scandal of the immorality of directors of limited liability companies pulling out of failed firms, leaving a mess in human misery behind them, and then going into other companies? Is it not time that that was tackled as a priority? The Government may be looking at it but it should be given priority. This is something the honest taxpayer would support and this side of the House will support it when it is brought in. I am pleading for it to be brought in as quickly as possible. We have seen too many examples of the limited liability company being used as a shelter. We have seen the Exchequer being deprived of what it is entitled to. This Bill will not correct the problem I am referring to. This is something that would help to reassure those who are concerned not just about avoidance but even criminal evasion in many cases.

At a time when we are trying to encourage a little initiative is there any sense in dropping the VAT threshold for small traders? We will get more of them in and give them headaches. I wonder does the Minister have these small traders come to his clinics and say: "I do not even know what it is about. Will you fill it up for me?". They come to me. God knows there is not much evasion involved in that area. Surely we should try to encourage the spirit of enterprise even at that level.

The Minister might think it is not too easy to listen to Deputy O'Kennedy, whose party have been in Government and who has himself got a bite of the cherry as Minister for Finance, when I have only been here for four months. That is a fair comment. This is not something that one could reasonably expect could be achieved in four months but what I want to emphasise is rather the total lack of movement in the right direction within that four months. In the sense that there may be any direction in which it is going then it is going in the wrong direction. One is entitled then to criticise this Bill for not moving in the right direction apart altogether from it not moving fast enough in the right direction. In fact this Bill seems to be going into reverse. Most people would agree that our taxation system should be logical and equitable. Commentary generally is that we are suffering here a series of illogical and inequitable steps. There are illogicalities, inequities and injustices in the property tax. We do not oppose this tax in principle and at the appropriate stage we will table amendments to correct the illogicalities, the inequities and the injustices. There is no distinction here between the person who has his house heavily mortgaged and the person who has a totally unencumbered property. We are not in principle against a tax related to wealth if property is an indication of that wealth.

Again, small savers will suffer a reduction in income. These people show some degree of prudence and initiative. These are actually the kind of people we want. But they are being singled out. Their interest allowance is being reduced from some £70 to £50. They are already suffering a reduction in capital because of inflation. Where then is there an incentive? Inflation will be somewhere around six points on the Minister's own figures: effectively two points, and then the budget impact, on the Minister's own admission, three and a half points, which amounts to five and a half to six points lower. Have these people a crock of gold somewhere, these small depositors? Again here the Minister is moving in the wrong direction. Taking action on one front should not result in ignoring other fronts.

There is yet another anomaly in regard to pensions. The very first definition of income includes pensions. The only income excluded are military service and old IRA pensions. I am glad these are ignored. There are not too many of them left now. But some of these are being deprived of their medical cards because of their IRA and military service pensions. If these are in receipt of IRA pensions awarded to them in the 1930s they will not get medical cards. If they want medical cards they must give up their military service pensions. I mention that anomaly in passing because there is specific reference to them here. This is the only income excluded from this definition. Old age pensions, contributory and non-contributory, come into the definition in the aggregation of income for the purpose of the new income-related property tax. There is an anomaly there. We shall table amendments on Committee Stage to ensure that injustice and inequity will not result. As things are, the last stage could be worse than the first.

The Minister and his advisers must know that it is vitally important to encourage the development of the building industry. Here he seems to be doing the opposite. Why curb or curtail that industry? The construction industry plays a very important role. It is in great difficulty today and what the Minister proposes will inevitably depress employment in our most important non-agricultural industry.

Where are the tax credits we heard about? Where is the housewife's allowance? Where is anything designed to promote any degree of incentive? Industry needs cash for investment purposes. The Minister will milk companies of their dividends. He explains why. It is because of tax evasion. Companies with heavy investment will not be able to get any benefit. Some of our major companies will be affected by this proposal and the investment climate will be further depressed. If we reach the stage where steps will be taken to prevent evasion irrespective of the impact that may have on some of our major companies we shall be ignoring the real purpose of the Finance Bill. Once more, we shall be introducing amendments on Committee Stage to lessen the impact on corporation tax.

I do not suppose the Minister takes the Commission's Report on Income Taxation with him for bed-time reading, or reading at any time, but Chapters II and III come over with a great degree of conviction as to the need to avoid invidious discrimination and divisions as a consequence of our taxation system. They are simple. I will not quote from them in detail. There is criticism of the taxation system, its lack of simplicity — a considerable time was spent on that — and equity, it being pointed out as a base for their proposals that the most important thing is that the taxpayer would be aware of the tax provisions and that those, where possible, should be visible and transparent. Instead even accountants now are acknowledging that with the new developments in this Bill it will be impossible for the citizen not only to be fully aware of his responsibilities but, even worse, to know when he has discharged his responsibilities. I have mentioned one or two examples. That runs counter to every principle that this commission were trying to promote in terms of simplicity, visibility and transparency, never mind equity. I do not suppose that the Minister will have them to dinner for some time but he might have them into morning coffee for an exchange of views as to what their role is to be from now on. Are they functus officio? Did they ever have responsibility as far as this Government are concerned? Are they wasting their time beyond presenting a nice document very well researched with very clear principles? I would like to know how this Government view their role and function now.

Instead of elements of divisiveness and discrimination being rooted out of our tax system, further elements are being added, even through the new taxation being devised here. Incidentally, I welcome some of the provisions. The provision in relation to separated couples in the early part of the Bill will get a very speedy passage from our side of the House (a) because we support it in its own right and (b) because we want to reach some of the more controversial areas in the Bill. The Minister will recall that in the Finance Bill I introduced we treated each person, married or otherwise, as a single person. We always wanted to ensure that there would be no discrimination in regard to a separated couple, or any other couple for that matter. We ensured that they would be treated in the same way whether the wife was working at home or working out of home. This new development is probably the penultimate stage in completing that circle and we support it.

In regard to the reduction in VAT on hotel charges, if the reduction is to reduce what the Minister imposed then one must welcome that. However, it does not go nearly far enough. If the Minister had time to listen to radio, even this very morning he would have heard about three companies associated with the tourist industry in the south going out of business. They point out that they too are engaged in the business of attracting tourism. I am talking about car hire and caravan companies. I believe those are three of what is at this stage quite a dreary flow. I would have thought that the Minister would have seen fit, at the cost of £3 million or less to apply that amount to hotel accommodation only. He should be able to stretch it a little further and take off what he himself imposed a few months ago on other aspects of the tourism trade. Ideally we should be able to go further than that and reduce out VAT levels to those applying around Europe. That probably would be our best guarantee of encouraging our tourism industry, but I am afraid that the trend in the Minister's budget and introduced in this Finance Bill is the other way. At least if we want the anomalies removed we should deal with all aspects of the tourist trade as distinct from just one aspect namely hotel accommodation, welcome though that may be.

Reference should be made to the question of privacy in dealing with tax matters. Governments elsewhere have been promoting legislation guaranteeing privacy among citizens, but we seem ready to move in the other direction. If we do that we will foster snooperism of a kind and even rather unhealthy interest in affairs and business that is no part of the legitimate interest in the affairs of a citizen. We can also terrorise taxpayers by the threat of having it all heard in public. Many people for personal reasons understandably do not want their affairs discussed or disclosed in public even if they have all the answers. Some of the most important, one might even say sacred, responsibilities arise because of the special relationship between solicitor and client, for instance. In many cases promoting the invasion of privacy, apart from affecting what people believe is their fundamental right to privacy, could also damage their business interests. It was not by accident that these cases were held in camera. That derives from a long-established tradition in the law in these islands and elsewhere. It will be in public from now on. It is one thing to publish the names at the end of the year, but what about the person who produces all the returns he can, gets all the accounts he can, and still cannot satisfy the inspector of taxes? He will be publicly pilloried and his name will be on the list at the end of the year anyway. Somebody has developed a rush of enthusiasm for these revolutionary changes that the Minister has adopted freely. While there must be ways of countering evasion effectively, that must not necessarily be done by asssuring that everything is done publicly. Why not consider spot checks and taking effective action on that basis? Then people will know that the person behaving honestly will have the reassurance that the inspector will use these powers only in appropriate cases, whatever that may mean. We must be very careful before we get rid of the whole right to privacy.

We should also begin to think in positive terms. We must not merely punish dishonesty which we appear to think is rampant. We might also encourage honesty and acknowledge that some honest people may find themselves under public review and scrutiny which will not do very much in the interests of promoting their business. By way of encouraging honesty one could promote the notion of self-asessment. We could have a look at that. It would be interesting to hear what the Minister is contemplating in this area. In relation to self-assessment of the new income-related property tax the Minister says people must be honest because Big Brother is watching.

Mr. Dukes

As in every other system.

Mr. O'Kennedy

I agree we must have this provision but it does not need to be stated as the Minister did this morning.

The Government have failed to introduce the overdue EEC directives on company disclosure, and have not fulfilled their promise to reform the abuses of limited liability. The Minister should concentrate more on that area than private individuals because a private individual does not have very much to disclose and he is responsible for his actions at all times. I would prefer to see the Government implementing these directives and if they do, they will have our full support. I do not like the idea of informers. We have seen headlines along these lines recently. Of course it is important to create an awareness in the public mind that a certain practice is not acceptable, but it is not necessary to imply that at all times someone is watching, checking, counter-checking and snooping. We do not want to promote that sort of behaviour in our society.

Unless this Bill is very strictly regulated, these administrative powers will be taken out of our hands. The thresholds for the property tax can be revised by ministerial order; they do not come back to this House. I want to caution the Minister about section 83. The Explanatory Memorandum reads:

Section 83 imposes more stringent penalties for serious tax offences, including imprisonment for some offences which up to now have attracted monetary sanctions only.

The penalties being introduced are —

The offences which are covered by the section include:

—refusal to make statutory returns;

—knowingly or negligently furnishing incorrect returns;

Negligence is now a crime punishable by imprisonment. This is a new development.

—making false claims;

Mr. Dukes

That is already there.

Mr. O'Kennedy

In this Bill a director is responsible for the actions of officers of his company. Is that already law? I do not think so.

Mr. Dukes

Negligence is already there.

Mr. O'Kennedy

Negligence may be included but I am talking about this extension of responsibility for the actions of others to directors. This is a new departure and we must be very careful about introducing penalties of the kind we have talked about. Unscrupulous people will not be influenced by threats. From what we know of their character, they will not be intimidated by the prospect of fines or imprisonment. It is the scrupulous people who will feel intimidated, apprehensive or concerned and will try to ensure that they are not entitled to sanction or penalties. Now, the hearings in the appeal court, the High Court and Supreme Court are no longer to be held in camera. That will penalise a genuine applicant who discloses confidential business information. There is no provision for privacy, turnover margins and so on, information which a small trader has a right not to have disclosed. I hope we will have another look at the priorities in those areas and see what the consequences of some of these proposals will be.

I want to comment on illegal trading. The principle of equity demands that every trader be taxed equally, but the Minister is attempting to reverse the Supreme Court decision of 1929 in the case of Hayes and Duggan, which declared that profits from the original Mater Hospital Sweepstakes were not taxable. Is the Minister trying to say that all hospital sweepstakes profits are taxable? If so, would he tell us?

Section 18 does not include VAT on illegal trades. I do not know why. Does the Minister say smuggling should be exempted from VAT? Are drug pushers to be exempted from VAT? If we are breaking into new territory, are we going to exclude one element of tax and not the other? Non-payment of VAT is one of the advantages smugglers have over the bona fide traders. This is especially true in the case of electrical and associated traders when they are compared with their counterparts north of the Border. What provision is being made for charitable lotteries and the proper definition of the law in respect of these lotteries? What will be legal and what will be illegal?

Last year in the British House of Lords the decision in a well known case declared that all artificial transactions arrived at for the purpose of avoiding taxation would be null and void. This principle has been recognised. The Minister could consider introducing this principle which is now a matter of law in the judicial interpretation in Britain in particular. If he really is sincere — and I assume he is — in his desire to deal with evasion he could incorporate that provision in this Bill, or at the first possible opportunity.

I should like to make a couple of general points. My colleagues will deal more specifically with areas appropriate to agriculture, to the advance corporation tax for industry and the lack of incentives arising from that. I made a passing reference to it already.

One of the principles of taxation is that, where possible, it should be seen to be for a particular purpose, and that applies to a new tax especially. That is enshrined in the recommendations of the Commission on Income Taxation. The citizen will then know what he is paying tax for. They try to get across the point that simplicity, transparency and visibility are vitally important. Even though I am not satisfied that it has been used effectively, we had that in the 1 per cent levy for youth employment. I raised publicly on a number of occasions the necessity to examine the criteria for judging the effectiveness of what those agencies are doing, and I will continue to do so. At least that 1 per cent was earmarked for youth employment.

The new levy introduced under section 16 is not earmarked for youth employment, or for anything. It is just an extra 1 per cent, an extra complexity in the tax system, an additional burden, and it is not for any particular purpose apart from feeding the Exchequer at a time of tight resources. That represents a bad approach to taxation. It is a new tax with no particular designation. The Commission on Income Taxation went to a great deal of trouble to point out the need for simplicity and transparency. Obviously that need has been overlooked by the Minister in this Bill. He has had many guests in his office over the past few weeks and he tells us he has more to come over the next couple of weeks.

Talking about complexities, we have a new PRSI allowance in section 5 which cancels our higher PRSI charges for some employees. We have the various anomalies, to which I have referred, in the income-related property tax. I do not want to go into that in any more detail at this stage, because we will be putting down a number of amendments.

There is one other matter to which I should like to refer. I want to quote from the decision of the Supreme Court in the Wexford farmers' case. It relates generally to the constitutionality of legislation and particularly to new provisions of this kind. I have never worn two hats. I will not talk as a constitutional lawyer, which I do not claim to be, but I have a certain knowledge of the principles of constitutional law. There are some principles we should take note of when we are introducing any new taxation provisions in legislation, such as we are doing now.

In recent times the courts have taken a very clear and consistent line, and rightly so, on taxation provisions and the principles they must satisfy. They will supervise our legislation and they will check for any defects, patent or latent, and possible abuses of functions to be delegated by us. They will be corrected. There is a great deal of delegation in this Bill, as I have said already. As we go through this Bill, we should check the temptation to delegate functions, lest the over-use of this device should lead to a further lessening of respect for the law and the institutions of the State.

I want to quote one example of the principles the courts are now applying in respect of taxation. It arises in the judgment of Mr. Justice Barrington who said the plaintiffs conceded that the Constitution provides for the collection of tax — the plaintiffs being the Wexford farmers — that the State has a wide range of taxes open to it, and can choose which form of taxation to adopt, but the citizen has the correlative right that the taxation system should have some form of rational basis. The present valuation system has no rational basis. We must be guided by the fact that it must have some form of rational basis. As has been recognised, we cannot guarantee identical treatment for everybody. One could not attempt to do that, and the courts will not insist on it. In some cases there will be a level of discrimination, provided it is not invidious discrimination, and that is referred to as well. Some of the new proposals we have here are in danger — and it is not for me to go beyond that — of falling foul of the rationality referred to in that judgment.

There is also the question as to whether the courts will be satisfied if we propose, as we do under section 9, to use the Oireachtas as a rubber stamp to cancel out the indexation provisions and to deny the Circuit Court any real jurisdiction in appeals to the appeal commissioners. Even the right to appeal is curtailed in certain circumstances. Are we satisfied that the courts will uphold absolutely these new restrictions which, in many ways, set at naught the role of the courts in ensuring the principles of justice and equity?

It seems to me that in this area, in the rush to come up with what appear to be — and I stress appear to be — effective actions against evasion by way of penalty as distinct from actions by way of discovery of evasions — and the emphasis is on the penalty and not the discovery — we may have overlooked some very fundamental principles. I do not want to go any further than that at this point.

We have affidavits required. We have sworn returns required. Sections 17, 21 and 93 are all going one way. To that extent the Bill may be revolutionary. The Minister said so. If it is to be revolutionary, let it be revolutionary within the law, and clearly so. I hope we have not gone just to the fringes but beyond the fringes in some of the individual sections and also in the general burden of the Finance Bill.

I want to quote from another document entitled "A Better Future", the Fine Gael 1981 election programme. This is what they had to say on taxation, and it seems very much at odds with what the Minister said this morning. They said tax reforms are urgently needed "to remove disincentives to initiative or effort or for reasons of equity". That is their public commitment. Is there anything in this Bill which goes any way in that direction? Is it not the case that every new measure goes the other way? The measures are directed against initiative and effort. Apparently justice and equity are demonstrated by the vigour and zeal directed against tax evasion. That document stated that preference should be given to a reduction in public expenditure as against tax increases, but since budget day there have been tax increases at an unprecedented rate. Income tax and levies now represent almost 3 or 4 per cent more in terms of total taxation than was the situation last year. The document stated: "We will fight against that, especially in view of the sharp increase in the burden of taxation in the present year".

I could not leave my contribution on a better note. I agree with the sentiments expressed in the document, but what we have witnessed in this Bill is going in exactly the opposite direction. I can forgive the Minister for not being able to achieve much in four months but I cannot forgive him for acting in a way quite opposite to the commitment given by his party. By the nature of the budget, by injudicious statements in the past three months and by incomplete statements in the Dáil they have created a straitjacket for all of us. Their preoccupation is totally against evasion. We support all actions necessary to deal with evasion but we would like to be able to say when this Bill is put through this House that we have supported equity and, above all else, that we have supported initiative. However, we will not be able to say that when this Bill is passed.

Mr. Molony

I think this Finance Bill represents government by positive conviction. I listened to Deputy O'Kennedy's long speech with particular interest. Much of what he said was appropriate to Committee Stage. He raised some interesting points but constantly I had to stop and think: what is the difference between the approach of Deputy O'Kennedy and that of the Minister for Finance? Is it that Deputy O'Kennedy would go for greater cuts in public expenditure? He has said this from time to time but nevertheless he has come in here and, in common with his colleagues on the front bench, has criticised any cuts that have taken place.

Mr. O'Kennedy

I have not done that.

Mr. Molony

Does he want to reduce the level of taxation and take a chance, as was done in 1977, that the economic pump will be primed and that we will take off, as they predicted we would do in 1977? Does he want merely to pay lip-service to the problems that exist? Is he genuine and serious about the state of the economy?

I wonder why he went back to the 1981 Fine Gael election programme? Why did he not quote from the election programmes in 1982? I wish our economic problems today were the same as those that existed in April 1981 as we headed into that general election. The truth is that they are much worse. This Minister for Finance and the Government are left in a position where their room for manoeuvre is so limited that it is not possible to respond to the demands to reduce the level of taxation, to give an extra incentive to invest or to enable people to enjoy more of their wages for their personal spending.

The fact is this Finance Bill is the most reforming Finance Bill for many years. It responds to a demand. I insist it is an example of government by positive conviction. This Government have decided that something must be done to reform our tax code, that something must be done to change a system where so many people feel they are being ripped off, that they are being exploited, that others are evading tax or are so able to order their affairs that they can avoid tax.

I am not surprised the Bill does not contain measures that would have the effect of reducing the burden of taxation. That choice is not there for this Government. Deputy O'Kennedy referred to the desirability of reducing the level of VAT to the average European rate. I agree with the Deputy. I should like to see that done.

Mr. O'Kennedy

I did not say that.

Mr. Molony

You did say that. You complained about the high level of taxation. You complained there was not sufficient capital allocation for prisons. You complained about the 1 per cent special levy——

An Ceann Comhairle

I ask the Deputy to address his remarks through the Chair.

Mr. Molony

Deputy O'Kennedy complained about every item of taxation with the exception of the special tax on residences. The Deputy is not facing reality. The reality is that this Government have no option but to try to govern at a time when a high level of taxation is absolutely inevitable. We can argue here about reducing public expenditure more than we have done and we can differ about £150 million and £250 million; but in the context of the overall budget that, quite frankly, is peanuts. Our approach to this is basically the same. It is a great pity we have to carry the can for the four or five years of appalling economic management by the Minister's predecessors. I think that six or seven Ministers for Finance have introduced budgets in the past six or seven years. We have had Deputy MacSharry, Deputy Bruton, Deputy Fitzgerald, Deputy O'Kennedy and Deputy Colley. In the early heady days of 1977 we were thrown platitudes of the great priming of the pump that was to take place. I remember the words of the then Senator Alexis FitzGerald Senior, in the Seanad. He said that the wine and roses that Fianna Fáil were offering would quickly turn to sermons and soda water. I regret to say that it turned out to be the case.

This Bill is unique in that it is reforming. So far as the income tax code is concerned it is reforming in that it deals with the problem of tax evasion. I sympathise with some of the points made by Deputy O'Kennedy. There is a danger of upsetting people to the extent that self-employed people — decent people who pay their taxes — may feel they are regarded as the exploiters. That simply is not the case. Deputy O'Kennedy knows that tax evasion is a very serious problem——

Mr. O'Kennedy

I do not want to interrupt the Deputy but I wish to excuse myself from the House as I have an engagement.

An Ceann Comhairle

It is not necessary for the Deputy to give any explanation.

Mr. O'Kennedy

I know it is not, but I wish to do so out of courtesy to Deputy Molony. He knows about the engagement.

Mr. Molony

I asked Deputy O'Kennedy to convey my apologies. I do not blame the Government for taking steps to deal with the problem of tax evasion. However, it would be quite wrong for the view to be conveyed, as has been done, that the majority of self-employed people, or at least a great number of them, are guilty of tax evasion. That simply is not the case.

This Government are tackling a particularly difficult problem about which there have been complaints for a number of years. The proposals in the main are welcome. I do not believe that people can genuinely complain about them, although I am concerned about one which I will mention later. I do not agree with Deputy O'Kennedy that this is a wrong approach. It is extremely necessary. Deputy O'Kennedy referred to the report of the Commission on Taxation and to the necessity for transparency, visibility and equity. It is absolutely essential, if the PAYE sector are to understand why they must carry a very high burden of taxation, that they equally understand that the self-employed also have to carry a high burden of taxation and that they are seen to carry it.

The vast majority of self-employed — farmers and the like — are decent, lawabiding people who pay their taxes. The problem is that there are some among them, as among the PAYE sector, who refuse to operate the system without cheating and without taking every chance to exploit it. It must be seen by the general body of taxpayers, PAYE or self-employed, that everyone pays his or her fair share. That is an important principle which comes forth from this Bill. The Bill contains the clear intention of this Government to deal with this problem and I welcome the view offered by the Irish Congress of Trade Unions that this Government are serious in dealing with the problem of tax evasion. However, I am not all that happy about some of the actions taken by trade unions in recent times. Politics and the imposition of taxation are matters for the Oireachtas, not for industry. It is wrong that unions should cause, or encourage, work stoppages to protest on a regular basis at the level of taxation or at our taxation system. Too many of our industries are operating on far too marginal a basis and under too perilous conditions to be capable of suffering the consequences of such industrial action.

I join with the Minister, with Deputy O'Kennedy and I believe, with everybody in this House, in saying that the recent action by some unions to interfere with the deduction of tax is appalling. The Oireachtas would not want to complain when people protest — they have a right to protest — but there must be a limit to the type of protest carried out and there must be justification. That scheme of attempting to encourage companies or management not to deduct tax which is properly due is not justifiable in any circumstances. Firstly, it is illegal; secondly, it attempts to usurp the functions of the Oireachtas; thirdly, it is morally unjustifiable in the sense that it seeks to deny the State access to taxation funds which enable the State to cushion those who are most disadvantaged in the community — those on social welfare benefits and the unemployed. It is totally unjustifiable in the sense that those unions and people who seek to use such protests to make their case use the system of evading tax themselves to complain about others doing so. This does no credit at all to the purposes of the tax protest campaign.

The reforms that are needed go well beyond reforming our taxation system. We have discussed in this House and are already undertaking a review of the procedures of the House. I will mention that again later. Deputy O'Kennedy made the point that we have not sufficient time to spend discussing the Finance Bill. In a general way, he is right. When the review of Dáil procedures takes place and the parties agree a new system, I hope that we will have an effective committee system.

We need reform of the public service, local government, in practically every area. We need to sift, examine and think out the changes which need to be made. In passing — and I have the greatest respect for trade unions and their leaders — it is an open secret that some of the recent protests took place more as a result of trade union politics, personality differences and political differences within the trade unions than any overall plan or campaign organised as part of the on-going tax protest campaign in existence for the last three or four years. The chronology of events in the different tax protests make it fairly clear that different unions were anxious to be seen as top dog or top cat in the tax protests. That should not be encouraged.

Now that, particularly, the Irish Congress of Trade Unions have recognised that the Government intend to deal with the problem of tax evasion, I hope that they will say "We have made our protest; we have had a response. Here we have a Government concerned about the problem who are setting out to do something to deal with it. We will give that Government a chance, let them conduct their affairs over the next 12 or 18 months or whatever and see what they will do". It is a matter of concern that industrial action should be taking place on a regular basis of protests at the level of taxation and at the taxation system. I hope that trade unions will say that the point has been made, that the Government have recognised that point and are taking action to deal with it, and that they will await the results.

Many people on the self-employed side — farmers, small business people and professionals — feel grievously upset by the allegations being made. One would feel that the majority of the self-employed were guilty of exploiting the system and were tax evaders and spongers. This simply is not the case. We can argue, as many have argued here in the past few weeks, about the level of tax outstanding; but if one reads the small print it is clear that the amount of tax outstanding is relatively small, contrary to what some people thought. Notwithstanding the fact that the truth is now known and that the self-employed and the farming sector are not guilty of the horrendous crimes that some would have had us believe up to a short while ago, there are leading figures in the tax protest campaign, trade unionists and others, who still, for their own reasons, throw out figures which they know to be inaccurate. Perhaps they want to usurp the entire political system. If that is their intention, they are contributing to a breakdown in our system by making such claims. If they want to be truthful and honest they will need to assess very quickly the views and position that they have taken.

Tax evasion takes place. Of that there is no doubt. However, it takes place among a minority of people. This Bill will tackle that problem and at this stage it is important that everybody in the community recognises that there is a problem and that the Government are trying to deal with it. It should be borne in mind that the self-employed person who takes his or her tax obligations seriously, as the vast majority of them do, has the very same burden of taxation as the PAYE sector. It is the case that at the same level of income the PAYE taxpayer will enjoy a larger net income than the self-employed because of the PAYE person having the benefit of the special PAYE tax allowance.

The system of tax collection is certainly of advantage to the self-employed. The appeals procedure is such that persons could delay making tax payments. There simply has not been sufficient manpower in the Revenue Commissioners' office to deal with the enormous work-load, and that has been of benefit to the self-employed who do not pay their taxes regularly and on time. Again, I must point out that the great majority do. Let me say also that the great majority do at present when many of them are living in extremely difficult circumstances. There are very many people in the self-employed sector, of whom claims might be made that they are exploiters of the system, who find it very difficult to manage at present. Around the country there are thousands of small business people, thousands of farmers who operate virtually on a marginal basis, those people who owe the banks thousands of pounds, people who perhaps find it difficult to feed and look after their families. Those people have had good times in the past; the nature of their business is that they will have good times, but they will have bad times.

It is unfortunate that it is at this time of grave economic difficulty and financial crisis for many people in a small way of business that the tax protest should take place in the way it has done. I make this point simply because, given the trend of the debate, given the headlines in the newspapers in recent months, one would be led to believe that all the gravy was on one side and all the problems on the other side. I know nobody in this House would suggest seriously that that is the case but we need to say it. As a Deputy representing a rural constituency, I protest at the allegations made against farmers. I protest loudly at the allegations made that farmers do not pay their fair share of taxation. I would have to acknowledge, of course, that amongst all of the farmers there will be tax evaders, the same as there will be amongst self-employed people who are in business, the same as amongst the PAYE sector, there will be people who will exploit the system, who will not pay their fair share of taxation. But the vast bulk of farmers do pay their fair share of taxation.

I acknowledge that there are small farmers with rateable valuations of £40 or less who up to now were not liable to pay tax. This year the Finance Bill allows for the extension of the income tax system to all farmers who have any income at all from farming. The truth is that farmers, who are producers in this country, who contribute in a most important way to our balance of payments, who contribute in a most important way to the fabric of our society, have been wrongly castigated, farmers who in the past were not liable to pay tax by law and who, when they subsequently became liable to pay tax by law, became the butt of jibes from anybody who has any form of complaint to make about the tax system. The truth and reality is that the people who make these claims either do not know the truth, do not want to know the truth or want to misrepresent what is the truth. I want to protest on behalf of farmers, on behalf of decent self-employed people who pay their fair share, who carry their burden and who do so at an extremely difficult time.

I am a solicitor — although obviously not now practising — involved in a practice that employs people. I understand that those people who work in the office and who have to make the PAYE contributions would find it difficult to accept the very heavy burden of taxation. The fact is that the owners of that practice have to pay the very same rates of tax. Indeed the fact is that for every £ in PRSI paid by each of the employees in my office or elsewhere, the employer must pay £2. Therefore it is wrong to say, as people suggest, that PRSI applies only to those in the employment of somebody else. Employers and small business people throughout the country, as well as large business people, have to pay £2 PRSI contribution as opposed to every £1 the employee must pay.

I complain, as does everybody else at present, about the heavy burden of taxation. We all feel under pressure because of that, but I do not complain that employers have to make social welfare contributions. It is proper that that be the case. Perhaps there are arguments to be advanced that it is an employment tax, a disincentive to employment. Deputy O'Kennedy would certainly take the view that any tax in any way is a disincentive. That may be the case but, at the end of the day, it does not really matter, it comes from the employer and employee together. I make the point that very many people have had to suffer the jibes and be the butt of remarks by those people who properly complain about a tax system that is not fair, about a tax system that imposes too great a burden on them. But there is another side to the story and it is important that we recognise that fact in this House. Let me say this, that there is nobody who pays their fair share concerned about the measures in this Bill to overcome tax evasion. Of course the problem arises for those people who have been cheating the system, those people who have been exploiting it, but they are in a minority.

In passing I want to raise one point in relation to this whole difficulty of the great gathering of momentum about tax protest. There have been constant requests for more capital taxation. Certainly it is an area that warrants greater examination. But as a public representative and as a practising solicitor I have seen difficulties being presented to people because of our system of capital taxation. I have seen the most enormous, frightening liabilities imposed on people. I have seen those liabilities cause people to sell their property. I have seen the agony and difficulties that capital taxation has caused some people. I make this point purely because there is another side to it. There are those people who pay perhaps more than their fair share; there are certainly those people who should contribute a lot more on the capital taxation side. That is something we must examine. But I would ask people to bear in mind that capital taxes, even as now structured, and producing very little money, which they do, actually apply unfairly to some people. I shall not go into that now because it would seem inappropriate given the nature of the discussion. However, I shall do so in the course of our Committee Stage discussion. I have discussed it with the Minister for Finance already. I shall discuss with him again particular problems that will arise and in respect of which I hope he will consider amendments before Committee Stage.

I agree with Deputy O'Kennedy in one other thing he said, that is the necessity to simplify our tax system. I want to assure Deputy O'Kennedy, who has now left the House, that the Fine Gael Party are committed to reform of our tax system. We are committed to introduce a simplified form of tax for those people in a small way of business. We are committed to doing so because we recognise the fact that the sheer bureaucracy, red tape and complexity of the existing system act as a disincentive to people who might want to start up in business themselves. Whether it be VAT, PAYE, PRSI, income tax or whatever, the sheer burden of the administrative difficulties small business people have in making these returns acts as a disincentive. It is something that requires to be tackled as soon as possible.

I recognise that the Minister has had four months only at a very difficult time to deal with these points. But we would not, in any circumstances, leave ourselves — once this Bill is passed — with the view that we have done our job and solved the problems. The problems relate not only to tax evasion but to the whole system of taxation obtaining. Deputy O'Kennedy complained that we did not implement suggestions or principles of the Report of the Commission on Taxation. I was astonished to hear Deputy O'Kennedy say that because the commission themselves made the point, one could not simply change the income tax code to their way without first considering changes in the capital tax side. As Deputy O'Kennedy must know, that commission are still working on this. It would be very wrong of us to rush in and change our system overnight while the commission are currently examining the capital tax side. That is something to be done in the future. What the Government have done this year is recognise that a problem exists in relation to tax evasion. They have gone out, dealt with that problem, shown that they are serious. To go further than that at present would be a mistake. The whole question of the type of tax system we have, capital and current, is something to which we shall have to give an awful lot more consideration in the future. It is something that should not be left until next year's Finance Bill. It is something we need to tackle urgently. I look forward to the prospect of a new committee system here that would provide a vehicle for members of this House to examine the problem of taxation, deal with it and make suggestions to the Government.

Deputy O'Kennedy saw problems with the specifics of the tax evasion proposals. Particularly he foresaw difficulties in requesting people, the holders of foreign residence accounts, to furnish affidavits. I do not accept his criticism as being valid at all. We are all aware that this is a particular form of abuse that has been rampant. There are hundreds of thousands of pounds, if not millions or tens of millions invested in this country in the names of foreign residents. The fact is that this money belongs to Irish residents. It has been a very simple area of abuse and is one in which the banks and other financial institutions have co-operated. This problem had to be tackled. I hope the proposals contained in the Bill will deal with it. Some people have complained that money will now leave the country but I do not believe that will happen. You will always have what some people call the suitcase merchants who will run away with their money. I believe most people now realise that the day of evading tax is coming to an end. I hope we will not have to rely on what Deputy O'Kennedy called snooperism or the like. I believe we can change the consciousness of the people to a positive approach and to recognising that tax evasion is a crime like theft, arson, murder and other such crimes and is something that cannot be tolerated any more. I believe, if we can move away from the emotional atmosphere of protest and shouting and can have a constructive discussion and debate on changing the tax system, ensuring it is fair and that it applies equally all round, we can bring people with us and encourage those who have engaged in tax evasion in the past to change their ways.

I want, particularly, to compliment the Minister on making liable to tax gains and profits from illegal activities. This is there since 1929 following a Supreme Court decision. I am delighted it has changed not only because all income should be subject to tax but, more particularly, because I believe the weapon the Revenue Commissioners will now have will prove to be of great benefit to us in clearing up some of the big criminal operators we have and we hear so much about in this city and elsewhere. I am astonished to hear from Dublin colleagues week after week that there are people who live at an obscene level, who are buying and selling luxurious houses, spending money which is known to come from illegal activities but from whom the Revenue Commissioners have been unable to seek tax payments and whom the Garda authorities are unable to name for criminal activities. Al Capone was finally caught for tax evasion by the inland revenue rather than for his criminal activities. I hope this measure will have that effect. I know that such people, who are at the grandiose level of the godfathers spoken about in Dublin, are known. I wish the Revenue Commissioners every success in drawing money from them and in putting them out of business altogether.

I agree with the proposal to publish lists of tax evaders and the proposal to increase penalties. It is important, as part of our campaign, to get people who have been engaged in tax evasion back into the regular economy and out of the black economy, that we make provisions like this and that the Government are seen as being most serious about their intentions in this regard. I am a bit concerned about some of the tax cases being held in public. When some person has cheated the system and is convicted it is right that that person's name should be published. It is right when somebody is charged with the crime of tax evasion that the trial is held in public. When you are talking about legal points whether a certain liability arises or a certain scheme is legal, I doubt the equity of making that sort of information available to everybody and opening up the affairs of a family or the affairs of a business. Perhaps the Minister will be able to assure me that problems like that will not arise. We should examine this very carefully before we pursue it and before we pass the Bill.

One of the really great problems we have in relation to our tax system is our collection system. There are far too few people working in the Revenue Commissioners' tax offices throughout the country. They are over burdened with work. I can say from first-hand knowledge that some of the office accommodation in which they work is scandalous. I cannot understand why the tax system has not ground to a halt years ago. When you go to the tax office in Thurles you see a prefabricated building with files all over the corridors and the floors and people packed into tiny offices in an uncomfortable atmosphere which is inevitably caused by working in any prefabricated structure I cannot understand how the system works.

We must review the collection system and provide more manpower and, to take a point made by the Minister for Energy on the discussion on taxation a few weeks ago, it is time that we reviewed our whole system of income taxation. Perhaps a system of self-assessment would be a better system. Some people have made the point that it would enable tax evaders to have a field day. I do not believe that is the case. It is wrong that out tax inspectors should spend as much as they do checking routine returns and routine files in circumstances that leave them with no time to get after the tax evaders and no time to carry out investigations in relation to different schemes used by different businesses to avoid tax rather that evade it. I believe a system of self-assessment would give them that option. Spot checks could be carried out in a very disciplined way. The Revenue Commissioners would have to police this system very diligently. I believe it is worth examining because it would give us the opportunity to use our revenue personnel far more efficiently than we do.

We need to bring about a change of attitude and an understanding that we are going through a very difficult time. A political journalist last night expressed frustration and despair about the state of Irish politics. His view was coloured by the recent exchanges in the Dáil on the amendment to the Constitution and the whole discussion in relation to the proposal but it was also in relation to our economic difficulties. He said there was no sense of direction or leadership coming from the House. He was not specifically talking about the Government but about politicians. He is probably right. I do not share his despair or his desperation about the situation. I share his frustration. This is where, as Members of the Oireachtas, we all have a part to play. There is no great difference between the people on this side of the House and the people on the other side of the House about how we deal with our problems. I am sure Deputy Mac Giolla would differ substantially from our views, but overall the vast majority of Members of this House recognise that we have economic difficulties of an unprecedented nature. We have drifted rather than directed operations in the Houses of the Oireachtas for the past decade or two and it is time we examined our function and the part we all have to play in this. I have referred to proposals to reform the Dáil and it is something which needs to be done very quickly.

An Ceann Comhairle

The Deputy should relate his speech to the Bill. Dáil reform does not cover taxation.

Mr. Molony

I am making the point that to solve our economic problems we must provide leadership in this House. Under our present system it has not been possible to provide that leadership and for that reason we need to change it. I had an experience recently with my colleague, Deputy Manning, in calling for an inquiry on the cost of oil——

An Ceann Comhairle

I must again say to the Deputy that the Bill is about taxation; this is not a budget debate.

Mr. Molony

I merely tried to make the point that, whether we are reviewing taxation or anything else, we have a part to play as Members of the Oireachtas and that the system does not give us the opportunity to play that part. We have had recent experience of trying to get information and bring about changes being frustrated, not by the intention of anyone to frustrate us, but by the system against which one has to fight so much that one almost loses the sense of what one is trying to do. There is opportunity, personnel and ability in this House to do a great deal.

I want to make a suggestion as to how we could provide personnel to assist the Revenue Commissioners in dealing with the problem of evasion of taxation. The estimates meetings of county councils which are taking place all around the country at present are providing difficulties for councillors who have to make unpopular and difficult decisions but I was struck by the fact——

An Ceann Comhairle

The Deputy is now talking about expenditure and I am advised that a discussion on expenditure is not in order.

Mr. Molony

I want to discuss the manner in which we collect taxation.

An Ceann Comhairle

A passing reference is in order but we cannot have an in depth discussion on the collection of taxes. This is about the imposition of taxation.

Mr. Molony

In North Tipperary, for example, to collect £442,543 in rates this year we will have to spend £282,145, which indicates that our system of taxation at local and national levels is crazy. I would have been disappointed if I did not get the opportunity to make the point that this debate on tax evasion has been focusing too much on PAYE and income tax generally. The whole system of taxation requires urgent examination and review. If we miss the opportunity to have that review now, we will regret it in the future.

I should like to refer to the fact that the Minister has not provided for pay in the public sector either in the budget or in this Bill.

An Ceann Comhairle

The Deputy is not in order now and I must ask him not to develop that subject, please.

Mr. Molony

I am sorry I cannot go into it because it is a very important matter. When we deal with the problem of tax evasion we overcome one problem but it does not cover the real problem, which is the burden of taxation. That burden can only be lifted when we reduce our public expenditure. We have an obligation to recognise and highlight that fact. I have complained about the way farmers and self-employed people have been treated. However, those people who suggest that we can have our present level of public expenditure and at the same time call for a reduction in taxation are talking nonsense and are not facing reality. If we are to deal with our economic difficulties we must make decisions about public expenditure, how much we can afford to pay ourselves and what type of services we can afford. I accept the Ceann Comhairle's ruling that I am not entitled to go into that but it would be wrong if this debate took place in a void that only discussed the difficulties of our tax system without recognising that to get over those difficulties we must look at the other side. This House has failed to do that down through the years, especially since 1976. We must recognise that if we want to reduce the burden of taxation we must control public expenditure. I am sure the Ceann Comhairle will have difficulty in controlling the speeches of some Deputies on this Bill because it is very hard to talk about one without mentioning the other.

Mr. Briscoe

As Deputy Molony said, it is very difficult to speak on this measure and relate it specifically to tax. One of the most noteworthy measures in the Bill is that, for the first time, the oldest profession in the world will be taxed. One might say that the State will now be living off the immoral earnings of a section of the community and I understand that is an offence. However, I welcome these changes in the Bill which will bring under some control the major criminals in our society, the drug pushers, the receivers of stolen goods and the organisers of crime. Our legal system is so inadequate that we have to introduce measures like this in order to deal with the criminal elements. This method was very successful in America in the twenties and it is probably successful there today. For that reason I welcome it as a necessary measure and I hope that the Judiciary, for their part, will be firm in their interpretation and implementation of the law in this regard.

The Minister has conceded to the tourist industry only in so far as the VAT increase which was imposed on hotel rooms for tourists coming into the country is being reduced by 5 per cent back down to 18 per cent. I do not think the public at large are aware that this reduction will not affect them. So far as I know it will only affect people from abroad. This is short-sighted because we are trying to encourage Irish people to holiday at home. This will come as a surprise to many guesthouse owners. Is the Minister saying I am not correct?

Minister of State at the Department of Agriculture (Mr. Hegarty)

I am not in a position to say. I will try to get that information for the Deputy.

Mr. Briscoe

If what I am saying is correct perhaps we could amend it on Committee Stage. This reduction in VAT does not include food in restaurants. The restaurant business is a very important part of our tourist business. It has been very badly affected by the 23 per cent VAT. Hotels are very dependent on their restaurant business. Our tourist industry needs a strong boost. We have much to offer tourists from abroad but it seems the only tourists who will be able to come here will be what are known as up-market tourists, the wealthier people. The bluecollar workers from England who came to us for many years will find that this country is too expensive for them. It will take us a very long time to win back that kind of business once it has been lost. I would like to pay tribute to Bord Fáilte for the fantastic job they are doing in spite of all the handicaps. However, they can only do so much. We have a responsibility. The employment content in the tourist business is very considerable and whatever gains the Exchequer might make by increasing the rate of VAT will be more than offset by what has to be paid out to people who have to go on the dole.

The abuses of the dole are still widespread and I am not satisfied that the Government are seriously tackling this problem. A manufacturer of furniture recently told me that he reported 10 people to the Department of Social Welfare, the local labour exchange, who, he knew, were collecting the dole and were working for his competitors. Six weeks afterwards these people were still working and still collecting the dole. He feels they do not care. I would be delighted to give details to the Minister or to any investigative journalist who wants to talk to this person. Naturally, he would not wish his name to be published. Open abuses are going on. People are taxed to the hilt. The cord around the necks of the middle income people is being drawn so tightly that they cannot breathe. The entrepreneur is gradually being driven away. There is no longer any profit in having initiative, in going out and trying to create wealth. The creators of wealth, under our system, are gradually being choked to death. We have to give some incentives. I do not see why it is a disgrace for people to do well. People should be encouraged to do well, to invest their money, to increase their business and to increase employment but more and more it is becoming a dirty word.

I should like now to move to the residential property tax on the £65,000 house. That house 10 years ago probably cost in the region of £20,000 to £25,000. A man can be living in a £65,000 house today for which he paid £11,000 or £12,000 in the 1960s. The joint incomes of say a man and woman who are teachers would come to over £20,000. The salaries of a member of the Garda Síochána and his wife who would be working might exceed £20,000. In many instances the reason why both of them are working is to pay the mortgage on their house. No allowance is being made for mortgage repayments. It is based on the gross income. The allowance of £10 for each child is laughable. People are already finding it difficult to meet the payments on their houses. Houses which at the moment are worth £35,000 or £40,000 in five year's time may well have reached the value of £65,000. The Bill allows for indexation of the value of the house each year. That means that houses will go into the £65,000 bracket while others will go beyond the £70,000 to £75,000 bracket in accordance with the value in the particular year. There is no question of the income of £20,000 being increased to £25,000 or £30,000 in line with inflation to remedy the erosion in the value of money. When the Minister replies I hope he will clear up that point.

I am glad the Minister has increased the dog licence from £1 to £5. There is a dreadful problem with stray dogs in both the country and the city. With the increased licence it may be worthwhile appointing dog wardens to implement the law. We cannot waste the time of the Garda checking up on unlicensed dogs and perhaps the Minister and his colleague, the Minister for the Environment, could advise local authorities to engage dog wardens and recoup the authorities from the licence fees collected. Personally I would not object to the licence going up to £10 a year. God forbid there should ever be an outbreak of rabies but, if there were, it would be very difficult to keep dogs under control. So far we have been very lucky. The Department of Agriculture and those responsible at points of entry to the country deserve great credit for the diligent way in which they have carried out their functions in this regard. However, we should take a serious look now at the situation and I hope the law will be fully implemented and enforced.

There has been a great deal of talk about cross-Border traffic brought about by the increases in VAT and the excise duty on drink, television sets, radios and so on. Employment has been very considerably depleted as a result of this cross-Border traffic. Every weekend buses are plying to these cross-Border towns. I do not blame those who go on these shopping expeditions. We are to blame as legislators for creating a situation in which a great deal of our money is going out of the State. That situation must be brought under control. I do not know how business people in Border counties are managing to survive. Many of them are not surviving. I refer to those who have invested in petrol stations, public houses, hotels and so on. It has been suggested that reducing the rates in these counties would help these people but that cannot be done because there would be a chain reaction. If rates were reduced there would inevitably be an influx into these counties. What we should do is bring our prices into line with those charged across the Border. I am surprised the Revenue Commissioners have not looked into the haemorrhage. A great deal of revenue is being lost to the State. It would be interesting to know what the figure is in Irish pounds coming back to the Central Bank. Perhaps if I tabled a question the Minister would get the figures.

Motor taxation has hit everyone. I remember years ago telling Deputy Colley — he was Minister for Finance — that the best way to deal a body blow to inflation was to lower the cost of transport. Virtually everything we get is carried by transport and so the cost of transport is one of the major factors in the rate of inflation. The cost is carried right down into the cost of the product. Motoring has now become a luxury almost. Very few new cars are coming on the roads. A couple of years ago one was very conscious of the number of new cars. Today it is unusual to see a new car. Sales are down.

Value-added-tax on maintenance is crippling the industry. Motor mechanics are finding it very difficult. Back street garages are being set up where very often no VAT is paid. Sometimes people have their cars serviced by mechanics who do not have the equipment to check cars properly. It is a very dangerous situation. From the point of view of safety the Government should have a hard look at VAT on car maintenance and find out how much the Exchequer receives from VAT for car maintenance and equate that with the number of accidents on our roads. It is one of these small items which may well not be worth the cost in life and limb to the State that is created by an excessive rate of VAT.

Section 51 deals with gaming licences. I would dearly love to see legislation introduced in this House which would stop the spread of gaming machines in urban areas. I can understand that in seaside resorts, OK, it is part and parcel of the picture whether in Tramore, Bray, Bundoran or any other major holiday resort, although I have never liked the one-armed bandits. I cannot understand why the licence is being increased from £200 to only £300 a year. Surely the Revenue Commissioners could get one of these machines and put it in some place where they could find out what the take is. The take in some of these machines runs into thousands of pounds. They should know what these machines cost. People who buy such machines pay thousands of pounds for them and they get their money back within about six months or at any rate in a very short period. They make thousands of pounds from these machines. The Government could have hit them for £1,000 per machine and these people would not even blink. Perhaps it would halt the increase in the numbers of machines.

Section 52 provides for an increase in excise duty on gaming licences from £150 to £250 a year and £160 for the weekend licence. What does that mean? Does it operate only at the weekend or does it include the weekend? They are charging £250 for the year-round licence. Again it seems that the £250 could have been doubled quite easily.

I started off by talking about living off the immoral earnings of criminals. Perhaps the State could take something in from the weaknesses of the people who, unfortunately, play these machines and who are in many cases weak people. It is a terrible tragedy and we are doing nothing to stop it. Deputy Molony spoke about the lack of leadership in this House. We all do our best in this House, sometimes we succeed and sometimes we do not. Personally I would like to see an amendment coming in on sections 51 and 52 to increase the price of licences.

The tax evasion measures taken in this Bill are to be welcomed generally, but the Revenue Commissioners will have to be very careful, when dealing with firms whose directors have been guilty of tax evasion, to recover the money in a way that will not close down the factory and throw people out of work. We have seen many firms closing down. We read about 500 people likely to lose their jobs in Telectron or wherever it is, but we forget about the suppliers. The public does not immediately recognise that suppliers to these companies are also threatened by the closure of the firms and there is always a chain reaction. My experience with the Revenue Commissioners calls to mind a case many years ago when they increased the turnover tax, as it was called then, by 1 per cent in order that it would be based on the firm's turnover and that company would not have to close down. The Revenue Commissioners do not want to close off sources of revenue. I tell them that they should go after the evader vigorously by all means. This is what everybody wants. But at the same time one must keep in mind always that many innocent people are doing their best to earn a living working for some of these companies and we do not want to close them down. We must get the money from them out of their returns. I know that these firms are taking money which belongs to the Government; it is not their money and they must hand it back.

I will make one quick reference to the small farmers. It is not usual for a Dublin Deputy to talk about small farmers. There are not many small farmers in Deputy Mac Giolla's constituency or Deputy Mitchell's constituency or in mine.

Mr. R. Bruton

I am the only one.

Mr. Briscoe

We will not talk about that farm.

Mr. R. Bruton

What farm?

Mr. Briscoe

I thought you said you were the only farmer. When one starts to tax the farmer who is a full time farmer with under £40 valuation — I do not know how anybody could live on a 40-acre farm and be full time — such farmers will be required to employ accountants to keep their books and they may well find themselves in tremendous difficulty. I accept wholeheartedly the principle that everybody should be liable to tax depending on income, but the Revenue Commissioners should give assistance to these people in showing them how to keep accounts and receipts. Many of them would not have a clue as to how to go about it. Some of them would just lie down and die rather than compete with the system. We are talking about genuinely poor people. We must always be cognisant of them whether they be small farmers or small business people. Here I will deal briefly with the reduction of the amount which a small businessman now must register for VAT and which has been reduced from £30,000 to £25,000. Allowing for inflation, the £30,000 when set was reasonable and to reduce it to £25,000 is very unfair to, for example, the small grocer, the small businessman trying to survive. The small self-employed person is never a burden on the State. He does not cost the State one penny. He pays his taxes. If we drive such people out we are narrowing the tax base and one of these days somebody on getting the bill for the public service will ask "How are we going to pay the wages this week of the public service, let alone the TDs?" I would guess that TDs would be first to face the reduction in the temporary loans which we will be giving to the Government under those circumstances.

I support the Government in their attempts to keep the wage demands down as much as possible. One reason why we are in so much trouble at the moment is not the recruitment into the public service upon which we embarked in the late seventies so much as the size of the national wage agreements which made prohibitive the cost of keeping that service going. I would far rather have people working in jobs and paying tax than out collecting the dole and not paying anything back, not to mention the soul-destroying feature of well-educated — or not even well-educated — young people who cannot get employment, people with brains who have been trained and now allowed to fester because there is nothing for them.

We have to be moderate. The trade unions are aware of this. I would like more of their responsible members to speak out and call a halt to some of the statements being made by certain irresponsible trade union members who reckon it is not their problem to come up with the money to pay these claims. They believe their problem is to get as much as they can from the economy, irrespective of what it will cost in jobs. Everybody knows that. We have heard threats from people in secure employment. I do not want to get into this area but lately we have had the example of the ESB. Men with very well paid and secure jobs are threatening 24-hour blackouts. Who will be affected? The small people, many without jobs. If that is the kind of society these people want they may end this democratic system quicker than they expect. We all accept that there has to be a sense of realism.

One of the Government's decisions is to increase the rate of excise duty on people travelling abroad from £3 to £5, and this includes those travelling by small aircraft. I would not think there is any problem there, but we should try to exclude people going on pilgrimages because many poor people go on pilgrimages. I make a special plea that these people will be exempt from this duty or that it will be kept at a very low level.

There is no incentive for people to holiday in Ireland. The cost of package holidays abroad is very much cheaper than Irish holidays. Recently I was in London for a day, my first visit for five years, and in Madrid for a day — at a conference not paid for by this House or the taxpayer — and was very surprised at the sudden increase in value of the money in my pocket when I saw how cheap it was to eat out and the price of commodities in the shops. Dublin seemed much more expensive than either of those cities, even allowing for the exchange rates. In my view people operating big travel agencies should put more back into this country instead of taking it out.

This morning Deputy Woods mentioned the cutting back of the prison capital programme. I know we are short of money but the State is haemorrhaging very heavily from malicious damages paid to people on the receiving end of a crime wave. Many of the people let out of jail early commit further crimes. Instead of investing in building detention centres for these people we are cutting back. If one was to equate the number of malicious damage claims paid in a year with the cutbacks in the prison capital programme, one would find the money paid in malicious damages claims was way in excess of the cost of building prisons, and the figures would be even more impressive if they were taken over a four or five year period. In my view we have our priorities wrong.

During the last election our policy was that we would not increase taxation because people were paying enough tax. We were criticised because we said we would phase out the deficit over five years instead of four years. The then Opposition argued that would cost a great deal more in foreign borrowing. Because of this Government's policies people are being taxed out of existence. The recession may be easing in other parts of the world but it will not ease here as long as we follow policies like this. We have to call a halt. When one door closes as a source of revenue there is no use opening another door and saying we will tax another section of the community. Everyone is paying a great deal of tax either through direct or indirect taxation. The bill some people have to face is horrendous. The base for collecting taxes is getting so narrow that it is becoming very difficult for people to survive.

I look forward to participating in the Committee Stage debate and hope some of our amendments will be accepted by the Government because we are trying to keep this country as a going concern. At the moment we appear to be stopped. We want to go forward, not backwards; but if we follow this Government's philosophy we will slide even further backwards. We must take a new look at the tax situation and get our priorities right. We have a responsibility to take that gamble and to wait and see what the results will be.

Mr. Prendergast

The two main tasks facing this Government are taxation and unemployment. The first priority has to be unemployment, because it is the cause of nearly all our other social problems. I welcome very warmly the intention of the Government to introduce effective reforms of the taxation system. I was heartened to see the approval of that commitment by the Government in the statement yesterday morning from the Irish Congress of Trade Unions.

In the past Coalition Governments have made outstanding contributions to the life of this nation, in the building and supplying of quality housing in the public sector, in the extent and quality of social welfare legislation, in the reform of industrial legislation. More effective industrial legislation was introduced by the previous Coalition Government favouring the workers than was introduced since the foundation of the State 60 years ago.

If the Government reform the taxation system that will be the hallmark by which this Dáil will be remembered. To some degree the extent to which we can correct the unemployment problem is governed by external factors, given that there is an international recession which affects all countries and social systems. The socialist systems are caught up in the recession just as much as the western democracies. It may not be popular to admit that, but it is factual.

We import inflation. There is not much we can do about it. There is no such excuse for not correcting the savagely unfair taxation system. I was criticised for my stand on the Social Welfare Bill, but I took that stand because of my conviction, having discussed the situation with senior Ministers, that an honest effort would be made by the Government to reform the unfair and unjust taxation system. My position has been vindicated vicariously by the statement from the Irish Congress of Trade Unions yesterday.

The measures proposed are very welcome and I commend the Minister on his honesty of intention, but very much will still remain to be done. The remedy for our taxation problems is in our own hands. They could be corrected in a relatively short time because the Government have the political will do so. If they fail to do so, they cannot expect to harness the goodwill and energy of our industrial work force who, year by year, are increasing output and exports in real terms and, at the same time are being crucified by being asked to carry the major share of the taxation burden.

Our dependency ratio is the highest in Europe. The system will not last much longer unless effective measures are taken to reform it. This House can no longer ignore the real and justified anger of the workers who see other sectors of the community evading their responsibilities in this area. The trade union movement are not protesting at the idea of high taxation. Far from it.

I do not want to attack farmers. I want to make that quite clear. I want to talk about all sectors of the economy. We should face up to the fact that one farmers' organisation have refused to enter into the system as laid down by the Minister. There is a division of opinion between the two major farming organisations. There is also wholesale abuse of the bovine TB and brucellosis eradication schemes. These schemes have cost hundreds of millions of pounds and have achieved nothing. This is an abuse of workers' taxes. It is the workers who pay the taxes which fund those schemes and not the farmers or, at any rate, not to anything like the extent as the workers fund them.

I want to ask the Minister or somebody: to what extent is there a correlation between the increasing incidence in recent times of TB in human beings and the cheating going on in the farming sector in relation to the TB eradication scheme? There must be something significant in that. There is also cheating going on in the switching of tags on cattle. Recently I met somebody who was fined £120 for selling diseased cattle as good cattle because he switched the tags. I said to him: "Are you not a foolish man to do that?" He said: "Why should I not? Everybody else is doing it". Apart from cheating on the money side, they are endangering the health of the population. That is the attitude.

Workers are aware of what is happening and they are being driven mad. They are aware, for example, that in the milling industry, which is under such stress at the moment, wheat was being sold to the mills by farmers and, under a guaranteed price structure, was being bought back by them. It was only when the Department's inspectors saw the disparity between the amount of money being paid out and the actual acreage in the area, that they realised cheating was going on. The only way this could be combated was to dye the wheat to prevent cheating. Workers are watching all this and saying: "It is our taxes which are being abused. We are carrying the burden. Other people who do not pay taxes are getting away with this kind of thing". Quite frankly this is driving them mad. It is incensing them that, while they have to carry the burden of taxation, others who do not pay their taxes are abusing the workers' money.

I am not advocating anything illegal. All my life as a trade union official I have taken a responsible and official attitude. I expressly condemn the withholding of PRSI and PAYE payments. That is not the way to solve this problem in a social democracy. At the same time, is not the anger of the workers fairly understandable when the law can be threatened so quickly against this type of action and far worse abuses are allowed to go unpunished for years on end?

The professional people are milking the system with tax avoidance and tax evasion. Clients' money, for years in some cases, is lying in solicitors' offices. Nothing is being done about that. About eight weeks ago a woman in my constituency rang me and said: "Can you do anything about this? About 20 minutes ago a doctor visited me and looked at my child for a minute and a half. I asked him what I owed him and he said £9. I told him all I had in my purse was £8 and he said that would do him". She had not got enough money left to buy a bottle of milk or a loaf of bread for the child. Her husband is paying taxes. Will that doctor pay tax on that money? It is well known that there is a duplicate system under which if you pay by cheque you are charged one price, and if you pay cash you pay less. Everyone knows this is the case. I suggest to the Minister that a receipt system be introduced in such cases. This would give more effective accountability for the moneys being earned.

There are two main principles of taxation: equity and yield. Equity is the most important. It has to be brought into the system and if this is done the yield will follow. If we want services such as school buses and medical cards we have to pay for them ourselves. No one else will do it for us.

There is an argument that the figures due in outstanding taxes are grossly exaggerated, that the real figure is somewhere in the region of £300 million instead of £960 million and that even if this were collected we will not solve our cash problem. However, that is to miss the whole point of the argument which speaks in favour of equity. It is not a question of bashing farmers or professional people. The Irish Congress of Trade Unions have recognised that there are abuses in the PAYE-PRSI sector but Congress are saying that those who can afford to pay, whether self-employed, farmer, or worker, should pay. I have spoken on many platforms on the need for reform of taxation. Congress have always made the point that only those farmers and self-employed who are liable to pay taxes are expected to pay them. If they are not liable they do not have to pay and that should go right across the system.

Congress referred to the black economy. As we read in the newspapers yesterday, they have given details to the Minister of companies and individuals who are engaged in the black economy. It is a major problem and it must be tackled. It seems to be a much bigger problem in Ireland than we thought. For historical reasons our culture tends to elevate the brigand: we think it is a great thing to fool the Government. Probably that is the case in other countries also but our historical background and our theology makes it far less offensive to work in the black economy. I remember 20 years ago doing a course in social science and the subject under discussion was taxation. We were advised that the evasion or avoidance of taxation was not in itself a major sin. It was reasoned that by the time the money in question had filtered down and had been divided among every member of the population it was just a fraction of a penny and was not worth while talking about. It was called "a distributive sin". I do not know if that kind of theology has been corrected but it was a contributory factor in our culture where we regarded it as fine to cheat the State.

We fail to realise we are robbing ourselves and that the black economy is nothing short of a subtle form of mugging. Recently I was in the company of a Minister when someone came to him and gave an example of an outrageous abuse of the dole system. The Minister asked this person what he was doing about the matter and whether he had reported the individual involved. The reply was, "No, I would not do that". The Minister asked him if that person came to his house every week and stole seven pounds would he take action. People do not realise that ultimately the workers have to pay.

I will quote from the submission of the ICTU Working Party on Taxation to the Government. It states:

Congress is satisfied both as regards the known position in Ireland, and from the information available in other countries, that tax evasion is widespread in its extent and the amounts of tax involved are very substantial. Governments have been too complacent and have lacked the political will to enforce the law. The patience of PAYE taxpayers is exhausted and they rightly demand prompt, effective and firm action against tax evasion by the self-employed and by any other section of the community that may be involved.

The modest package on evasion and avoidance announced in the budget statement are expected by the Minister for Finance to yield not less than £20 million. This sum reflects the visible tip of a much larger iceberg of tax evasion. The Minister admitted that evasion practices were widespread and that many of the problems of taxation would be overcome if evasion and avoidance were brought under control. On tax avoidance the Minister agreed that it has become a veritable industry in its own right and that there is "a considerable loss of revenue" from artificial transactions designed to avoid tax.

The extent of tax evasion has certainly grown in recent years notwithstanding the efforts of the Revenue Commissioners to contain it. The extension of the black economy, especially in the services sector, has created opportunities for non-declaration of income and therefore tax evasion. In this category we include moonlighting or double jobbing. There is evidence that this has increased considerably in recent years. There is, of course, no reliable statistical information available on the black economy. In Britain, the Chairman of the Inland Revenue Board estimated last year that the black economy was probably worth between 6 and 8 percent of GNP. The equivalent percentage of Irish GNP in 1983 would represent about £930 million. Direct tax payable on this sum would likely be of the order of £250 million.

That is the preamble to the ICTU submission on taxation. The present tide of public anger at the unfair taxation has ugly and obvious precedents. It changed political systems and brought down Governments throughout history. It is the same problem we are dealing with in this Bill. There is talk of our system of parliamentary democracy here being threatened by the resort to street marches and other protests by angry workers who see themselves as being exploited. We have the best educated and most articulate work force in our history. By and large they are responsible and moderate people but they will not tolerate the present injustice indefinitely. If the Parliament of the country fails to recognise the cause of the problem and act in time, it may be too late afterwards to talk about its effects. The legitimate and fair demands of the ICTU must be listened to. I will outline those demands which are listed in the submission:

1. The penalties for tax evasion must be increased substantially and steps taken to ensure that the Revenue Commissioners and the courts implement the law dealing with penalties so that there is an effective deterrent to tax evasion.

2. In particular, terms of imprisonment should be laid down for offenders in cases of serious crimes of tax evasion. The prosecution of these offences should be such as to leave the courts in no doubt as to the seriousness with which the State regards such crimes.

3. There should be minimum mandatory penalties in such cases as failure to make returns when requested by the Revenue authorities; non-completion of statutory returns by employers and self-employed; non-payment of PAYE and PRSI deductions made by employers.

4. Where there is provision for interest to be charged on unpaid taxes, there should be no period of grace before interest is charged and the Collector General should not have discretion as to the charging of interest.

5. There should be provision for penalties to be imposed on the directors of companies which fail to return PAYE and PRSI deductions in time.

Under the heading of extension of deduction of tax at source, the Congress claim that since wages and salaries are subject to deduction of tax at source, there should be an extension of this practice to other areas of payment such as these.

Debate adjourned.

Mr. Yates

With the permission of the Chair, I wish to raise on the Adjournment the future of the Home Economics Colleges.

An Ceann Comhairle

The Chair will communicate with the Deputy.