Finance Bill, 1983: Committee Stage (Resumed).

Question proposed: "That section 7 stand part of the Bill."

I hope those points have been made and accepted. During the course of the short luncheon break we had discussions arising out of the amendments which came in this morning and last night. Now I find those discussions are out of date because of what was done while we were having those discussions. I have to protest not only on behalf of this party, but on behalf of the people outside who take the trouble to convey views to us, from their practical experience, on the damage which some of the Minister's proposals will do to industry, to the building societies, and so on. If this continues we will not be able to have a useful and effective discussion.

I have a far greater appreciation of the Deputy's ability to keep up with things than the Deputy seems to have.

I want to have recorded what the Minister said about having a better appreciation of my ability to keep up than I seem to have. That comment by the Minister will be noted.

Deputy O'Kennedy on section 7, without interruption.

The amendment the Minister has put down represents dramatically and graphically the difference between this Government's approach to what the economy needs at this stage and the approach of this party. At a time when it is clear that we need an incentive for investment, when it is quite obvious that the level of investment available is less than it might be, the Minister proceeds to penalise the income tax relief in respect of distributions and payments of interest on stocks and shares.

To me and to this party this action is the best example of the difference in approach between the Government and the Opposition. It is quite clear that actions geared only to extract further amounts from whatever source, and with no regard to the impact they will have on the development needs of the economy, are not appropriate or suitable. A 20 per cent income tax relief in respect of distributions and payments of interest on the holding of stocks, shares and securities in certain Irish companies should not be terminated unless it is replaced by at least an incentive to investors of equal value, or will the Minister tell me there is no need for an incentive for investment of this kind?

Even as it stands at the moment the income tax code could be said to discriminate against income earned through investment in productive assets. Shareholders who receive income from business investments are penalised by the income tax code to an extent which varies between 1.75p and 23.1p, of additional taxation it has to be noted, per £1 of income received compared with taxation on income from any other source.

The unfavourable climate for enterprise and the discrimination against the shareholder in income tax terms were major causes of the decline in industrial domestic investment in recent years. The unfavourable treatment of dividends and other distributions from companies in the productive sectors in the economy means that prudent investors understandably tend to place their funds in relatively risk free and unproductive assets. This does not provide increased employment. The Minister's colleague, with whose view one tends to sympathise more and more as the lone voice from that side of the House — and I refer to Deputy Bruton — recognises that it is a nonsense to recognise the need for venture capital while, at the same time, penalising shareholders in business and industry.

Some of the major companies in the United States, on whom we rely now for external investment, started with a very small amount of venture capital because of the favourable climate for such promotions in the United States at the time. This is a climate in which we now find ourselves, when the level of external investment in our economy is diminishing. Recently we heard from the Minister for Industry and Energy about the difficulties there are in attracting industry to Ireland. Those difficulties are recognised objectively by many people. If, in addition to that, the Minister by his actions is to discourage domestic investment in our own industrial activities he will ensure that, whatever the Minister for Industry and Energy might try to achieve, his task will be all the more difficult. It is a nonsense to recognise the need for venture capital while at the same time penalising shareholders in business and industry.

The development of indigenous Irish industry — and I said this in another debate on SFADCo — can take place only in an environment which recognises as this party do — and I want this to be clearly recorded as the difference between us at this time — the vital contribution of productive investment and the rewards to which investors are entitled accordingly, having regard to the risk they take by comparison with the safe, secure and in many cases better return they will get from investment in other non-productive activities. That is the issue we are concerned with here.

Income earned through investment in industry and productive assets generally is now taxed at a higher effective rate than income from any other source. Disincentives to investment in Ireland have already had major economic consequences, even before the Minister came in with this short-sighted action. With privately financed investment as a proportion of GNP falling by 50 per cent in less than three years — and we had a discussion in the House recently with regard to the ratio of investment and GNP — it is quite clear that, before the Minister's budget and before this Bill was introduced, it was a matter of concern that the level of investment had fallen to that extent. As a consequence of what the Minister is now proposing in his budget, and of this action here, it will drop back to the unprecedentedly low level of investment we found in the midseventies, a period which most of us would like to forget about quickly and conveniently. This year's budget will remove any remaining incentive to industrial investment. It eliminates up to one-third of the yield to a shareholder of investments made in the past.

This party are very clearly, strongly and openly in favour of private enterprise. We see it as being the only base for a recovery from the recession in which the world economy finds itself and, in particular, our economy as an open trading economy. Investment by a shareholder in a business is governed by the expected rate of return he would hope to receive. That is made up of the forecasted level of distributed profits less the burden of taxation at any given time. For that reason income earned is subject to double taxation. Therefore, we have the corporation tax on the profits, plus income tax on the dividends paid out of the profits — which incidentally have already been taxed. It is the combined effect of the two tax rates, less the dividend credit given, that determines the total level of taxation that must be paid. Who is it who owns the company? Basically it is the shareholders who own the company and it is a fiction to differentiate between the amount of tax paid by the company and that paid by the shareholders.

The Commission on Taxation, to which the Minister made reference this morning commenting on my reliance on their report on Second Stage, claimed to be acting in accordance with what they proposed in relation to, I think, section 5. The Commission on Taxation had something interesting to say on this. They examined the different tax liabilities arising for a manager, for instance, receiving a salary compared with a shareholder receiving a dividend and they concluded that clearly it was inequitable and inefficient that different tax liabilities arise as a result of the method chosen to distribute profits. Incidentally, they also demonstrated in their report that for any marginal income tax rate of a shareholder a higher effective rate of tax was paid on dividend income. They called for what they classed as a full imputation system. That is a system where the tax credits and dividends are sufficient to ensure that the shareholders had to pay the appropriate marginal rate of income tax only.

Tables have been drawn up by the Commission on Taxation and others which demonstrate that dividend income particularly is discriminated against in all cases, particularly with the extent of over-taxation varying from 1.75p to 23.1p extra for each pound of income. The significant thing is that the highest level of over-taxation arises where the shareholders should incur no tax liability at all. This would arise in the case of an individual who had not exhausted personal tax allowances or tax exemptions, say, from a pension fund. There is a person who, investing in the future of his country — by way of his small contribution — finds himself penalised to the maximum extent. Ironically, despite the proposals of the Commission on Taxation changes in corporation tax since the publication of their report have rendered matters worse in regard to over-taxation. If the Minister wants to quote the Commission on Taxation in ease of one proposal of his he might have regard to what they say in other directions as well and particularly to the fact that they do not want to see one aspect of their overall proposals being extracted as evidence, as did the Minister this morning, of their implementation.

Obviously there are clear advantages of a low level of corporation tax applying to shareholders in indigenous industry. But those advantages are dubious because the total tax burden borne by indigenous shareholders on income earned on their investment exceeds the tax rate on any other form of income although, frankly, it has to be said that the position is better than it would be if there was a higher rate of corporation tax. That is about the only aspect of it that diminishes the burden in the circumstances.

I might reiterate that at a time when the climate in external investment here is obviously not good — and I call in evidence here the Minister's colleague, the Minister for Industry and Energy — is no time to penalise, through the tax code, income earned from investment in any business venture. Even this very day during lunchtime I received a group of traders from my constituency who were wondering how they can in some way promote indigenous small industry, perhaps how they can get together and invest in development. While we are endeavouring to launch that idea there is this disincentive introduced in this Bill.

The notion of venture capital generally is related to investment in new ventures which, it is fair to say, carry a higher degree of risk than any other forms of business; of course they do. Any new venture, particularly in this economic climate, inevitably has a higher degree of risk attached to it than investment in some other safe, secure area which would give a steady return, at a higher rate for that matter. Because, by definition, it carries a greater risk on the other hand it must offer the potential of high growth and earnings, the satisfaction of employment generation and output. But they are being penalised and set back in the Minister's proposal here. Investors of that type would make such investment only if the expected rate of return, after all taxes are paid, are sufficiently attractive compared with other alternatives to compensate for the degree of risk involved. Clearly, even under the present tax code, they are not sufficiently attractive. Certainly after this Bill is enacted they will become less attractive, in fact distinctly unattractive.

The First Report of the Commission on Taxation, which is all we have had to date, dealt with general equity and efficiency. In that they pointed out the disincentive to investment arising out of the higher rate of tax on shareholders' income. I wonder did the Minister read that portion of their report when he selectively drew on one small item this morning. Now that his proposal is to be adopted and ours refused it will not have anything like the same impact on the investment climate in our economy. Did the Minister read that section of the commission's report? Incidentally, they also pointed out that the effective inflation created by artificial book profits on which companies and hence shareholders must pay was a very serious disincentive to investment.

We have an elaborate system of grants, incentives and allowances available for different purposes but the intention of any incentive is to attract additional investment. This can work only if the benefit of the incentive can somehow be passed to the investor; otherwise it is meaningless. Firstly, much of the depreciation in stock allowances is merely to offset the effects of inflation in generating artificial profits. Capital allowances against tax also provide an important incentive to investment. But the effect of allowances eliminating taxable profits by providing a tax credit on dividends allowed companies carrying out major capital investment is to provide a reduction in the tax rating on their shareholders. This, then, was a real and meaningful incentive. Shareholders were encouraged to make funds available or re-invest profits in major investment projects because, quite frankly, they were subjected to a reduced tax liability in return.

At least one can say this much about the Minister: he is being consistent. In his budget speech — and this was a significant pointer to all of us and an indication of which road he was going to travel — he indicated that the availability of a reduced tax liability in return for investment is, to quote himself, a defect in corporation tax. He indicated then that the introduction of advance corporation tax — about which he has had some change of heart since he introduced it originally — would ensure that that could no longer arise. Consistent with that philosophy the only other incentive to manufacturing industry — the 20 per cent income tax relief on dividends to shareholders in certain publicly quoted companies, which was introduced in 1932 to promote the development of indigenous industry — is also being abolished. I mention 1932 because we are going through various stages of our economic development. It was quite clear then that with a view to developing indigenous industry, we had to have not only protection but also encouragement or inducement, as is evident from that provision for investment in aid of industry. That was the climate at that time, a climate in which there was a considerable response from native entrepreneurs who might not have had much capital but who had a degree of commitment and, could one be pardoned for saying, a degree of patriotism. We went through the bad period of the forties and fifties. Then we entered the second cycle, in which we attracted foreign capital, foreign expertise, a degree of technological development we did not have here before. We attracted all of these with one purpose in mind: with a view to generating capital at home, to generating know-how and expertise, in the hope that some of what came in would rub off on the indigenous sector, as indeed it did.

That was the story of the second stage. Now we are at the third stage where it has been recognised by all that the international climate is such that the possibility of maintaining the level of external investment is poor, to say the least. Just when we are at the beginning of that third stage when we need to encourage investment at home we have this short-sighted measure. I forgot to ask the Minister the amount he will save by this. If investment in industry is penalised by higher effective tax rates it may sometimes be offset by the effect of grant payments which raise the level of profitability. It can be seen, however, that the costs of production are now so high that rates of return on investment are completely inadequate before and after tax.

Does the Minister have shares in any Irish companies? If he has, what return is he getting? I have some shares in small indigenous industry in my home place and for the past few years they have not paid any dividend. The question is not whether shareholders like me get dividends but rather whether there is an incentive to invest.

The Minister does not rely on me for evidence of the climate in which we find ourselves. It has been pointed out by a number of objective observers. Professor Neary and Dr. Ruane have clearly shown that the rate of return on investment on the Dublin Stock Exchange in 1980 before and after tax was well exceeded by investment in a selection of relatively risk-free and non-productive assets. If the Minister is in contact in any way with the Dublin Stock Exchange he must know that it is a fairly heavy pitch. The play on that pitch is very sticky. If we are to get out of it and not only survive but succeed efforts such as the Minister is now penalising must be rewarded instead. Could the Minister tell us in response to our case how much he expects to save the Exchequer in this proposal, which I believe will take a lot from the development potential of this country over the next few years?

Having listened to Deputy O'Kennedy I would remark in response to his final question that if the situation were as dramatic as he says, one would expect the saving or extra revenue that would arise from this measure to be a very substantial figure, and if it were not a substantial figure one could conclude that the situation was not anything like as dramatic as the Deputy has painted it. It is expected that the additional revenue to the State from this measure this year will be virtually nil and will be about £0.5 million next year.

There is no return this year.

No, because of the structure of the tax system it will take until the following year for the effect to work its way through.

I understand that.

It will affect the distributions of 82 companies at present covered by the Act with a capital value now assessed in the region of £115 million. We are not talking about a major part of the Irish industrial sector.

Deputy O'Kennedy has entertained us, if that is the right word, with some of the fruits of his conversations over lunch and I would respond in kind by saying that during the break I had a discussion with two executives from a major banking corporation which has been involved with us in raising large amounts of funds on international markets in the very recent past.

These are foreign banks, not Irish banks.

I said they were from a corporation which was involved in raising large amounts of funds on international markets in the recent past.

Our own banks are not capable of doing it.

Our own banks are getting involved in international markets and the Deputy might say a word about it to the leader of his party. It will not be by the grace of any favours he has done.

The people were foreign bankers.

(Interruptions.)

The point was very forcibly made to me that the climate for raising credit and the climate for investment have been substantially improved in the eyes of those persons by the kinds of measures we are taking as a result of the budget, by the measures we are taking in terms of the overall budget deficit and by the general thrust of our taxation measures which is recognised to be difficult where care must be taken to avoid social complications. The general thrust of economic policy now is such as to raise the level of confidence of foreign investors and lenders in our economy. If we do not have that to begin, there is no point whatsoever in having a panoply of measures inside our economy to help venture capital because they would produce very little result.

On a point of order and purely for my own information——

Is it a point of order or a point of information?

A point of order, with your permission.

The Deputy is seeking clarification.

Is it in order to have Second Stage debates on every section of this Bill? Are we to talk on a given section or not? There is a state of the nation speech on very section.

The Deputy may not like it.

We are dealing with section 7 and the Minister is replying to comments by Deputy O'Kennedy. I would take that as being in order.

On a point of order, the comments I made related entirely to domestic investment in public companies here. That is what the section deals with. It in no way relates to the views of foreign bankers who are not covered in this section. The Minister can call, in spurious support of his position, all the evidence he likes from Argentina to Poland and Brazil. That has nothing to do with this section.

It is not spurious. It is there.

The Minister will refer to section 7.

I will be led by you. Deputy O'Kennedy was making a point in relation to the overall investment climate and the provisions of the section. I am entitled in my reply to refer to the overall investment climate and the place of this measure therein. That is exactly what I am doing, talking about the overall investment climate on the one hand and the scope of the measure on the other, to draw the conclusion that it is not going to have significant effects. That is the point. Though Deputies on the opposite benches may not like it, the conclusion is inescapable. As Deputy O'Kennedy pointed out, this dates back to 1932 and its history is very interesting. Deputy O'Kennedy this morning accused me of being like the devil who cites scripture for his own purpose and he said the Commission on Taxation would not support what I am doing here. I would like to remind him that in paragraph 11.44 of the First Report, which refers to relief to individual shareholders in certain Irish companies, the commission states:

This relief has served the purposes for which it was introduced and is now unnecessary. Today, the demand for investment opportunities in publiclyquoted Irish companies exceeds the market supplies. We recommend that the relief be abolished. This would improve both the equity and simplicity of the tax system.

That is singularly germane to this discussion.

The relief was instituted in 1932 and the conditions were fairly restricted. It applied to dividends and interest paid on stocks, shares and securities issued for public subscription in respect of which the certificate of the Minister for Finance provided that these moneys must be devoted to the establishment or extension of Irish industry and no part to be used to acquire an existing business or company for an existing debt and the relief applied only to individuals resident in the State. There was an amendment to that in 1935 imposing additional conditions concerning the nationality of shareholders and the nationality of those holding voting rights. In 1956 a further amendment was made. There was a further amendment in 1957 which changed the conditions again. There was a still further amendment in 1960 and the last amendment was in 1976. That shows the provision was modified over the years to fit in with the current climate of the day. During that period from 1932 until today, a period of 51 years, we have seen a very considerable development and expansion in the range of measures applied in order to encourage investment in one way or another. We have had a very substantial change in direct incentives and direct assistance for industrial development and very substantial changes by way of tax relief, accumulated capital allowances and all the other measures that are part of our system. It has now got to the point, as the figures I gave at the beginning illustrate, when all of these things have a far greater effect than the measure we are talking about now. I find it very difficult to improve on what the commission said about this measure. It is one which has served its purpose, outlived its usefulness and, in the context of the total picture surrounding investment, it is one we do not particularly need at this stage. It is for that reason I propose its repeal.

A number of the other points made by Deputy O'Kennedy gave me to wonder whether or not they were really relevant on this section. He made some points about differences in philosophy between his party and mine. I shall be guided by the Chair as to whether such differences are relevant on this section. Experience over the last few years where investors are concerned has not been particularly happy. I do not rejoice in that. Perhaps we have a different idea from Deputy O'Kennedy as to what industrial development and promotion mean. I know he will object to this but the policy of his party has landed us in the situation in which we have to increase the burden of taxation.

(Interruptions.)

I am replying to the point made by Deputy O'Kennedy in what he regards as the different philosophies. Perhaps they are not relevant but, since Deputy O'Kennedy was allowed to make them, I infer that I will be allowed the same latitude. Deputy O'Kennedy talked about disincentives. That party has used phrases like doom and gloom. In this debate we can have this kind of confrontation point of view but Deputy O'Kennedy is really exaggerating the effect of this measure and the more he talks about alleged disincentives to investment the more he runs the risk of people acutally believing there are disincentives which do not in fact exist. People have particular cases to make and they make them very sincerely and with a great deal of energy. I think they feel that if they do not go for overkill the problem will never be dealt with. I believe Deputy O'Kennedy had his tongue in his cheek in this discussion. As I said at the beginning this is limited in scope and, as the commission has said, it has outlived its usefulness and its abolition in the context of this Bill will give rise to none of the problems the Deputy claims it will.

According to the explanatory memorandum this section provides for the termination of the 20 per cent relief from tax accorded to resident individuals in respect of distributions and payments of interest on their holdings of stocks, shares and securities in certain Irish companies. This is a bit vague. I take it "resident" means a person born in the country and living in the country. What about the foreign company whose members come over here? Do they come under this section?

They did not have the benefit at that time.

They will not have the benefit. In my opinion this is a scare tactic.

It is the Deputy who is scared.

Deputy Mitchell seems to have something interesting to say.

This will discourage investment. Worst of all, the Minister has now told us he will not get any money out of it this year and that next year, all going well, he may get half a million. That is very little indeed. Foreign companies here with foreign finance — and they are very welcome — escape all this. It does not apply to them. I am convinced now that the Finance Bill should not have been tampered with in any way. The Commission on Taxation was set up to recommend but it was never intended that they should fill the role of legislators. That is our job. I resent their trying to legislate for us or anyone else trying to do it. There is an attitude on the part of people outside this House, I am not saying you, Sir, but commentators of all descriptions are trying to teach us and lecture us. I resent that. In view of the Minister's reply he should decide before the Report Stage to drop this provision.

This measure, while it was in existence, provided additional relief for Irish shareholders. It was an addition to the other tax reliefs that now exist on distributions which are dealt with in section 26 of the Bill. The withdrawal of this relief from those shareholders is a small measure and one which will have no great effect. It does not affect one way or the other foreign shareholders or foreign companies because they never had the benefit of this relief in the first place. It is not something that can have any scare effect in relation to foreign investment nor, given the size of what is involved, is it something that can have a scare effect in relation to domestic investment.

On a point of clarification, will it not affect Irish investment?

Of course, it will.

Yes or no?

As I have spent some time explaining it is limited to 83 Irish companies with a capital value now estimated at £115 million, not therefore a major part of our industrial structure, it effects an estimated 10,000 shareholders. That puts it in its context.

How many employees?

The question of foreign companies is totally irrelevant.

The Minister has made the best possible case for not having this section in the Bill. He speaks in what appears to be an offhand manner about total assets in 82 companies of the order of £115 million, when companies in this country are falling like nine pins at the moment. It involves 10,000 shareholders who have the confidence to invest in these companies. This is another example of this philosophy of countering the incentive motive within our company structure. The Minister speaks in terms of "only" half a million pounds being involved. In fact, I think these figures are pulled out of the air and cannot be substantiated.

Approximately. Next year.

The Deputy himself said that £5 million is a small sum.

I would very much appreciate if the Minister would seriously listen to what I am saying. It is important and it is something we cannot just treat in an offhand manner. At the moment private initiative is under siege. The Minister should understand that. He seems to be living in a cocoon of bureaucracy without any understanding of what the real life out there is like, with companies struggling. Workers within these companies may have invested in the companies to give them confidence during the economic blitz we are experiencing at present. The Minister should show some positive concern for private investment. All the measures in this Finance Bill are spearheaded against private investment.

I know the Minister has a very difficult task. I know that as a nation we have been living beyond our means and our borrowings et cetera have left us in a very difficult situation. That is just one side of the coin but on the other side we have to recharge our economy at every possible opportunity and in this Finance Bill the Minister has a duty to give private investment some ray of hope. No initiative and no incentive is being given in these sections as they tumble through. Here the Minister speaks of “only” half a million pounds. This is a small part of the fiscal budget. Why not make that gesture now? Why not agree that the 20 per cent should not be rubbed away? Why not do that now as a gesture to give us some hope for the future?

This is the first Finance Bill to which I have had the doubtful privilege of contributing and the more the debate goes on the more confused I become. I thought I might learn something about how to participate and how to table amendments that would be accepted, but as it goes on it becomes more difficult. The Minister, presumably, has been preparing the Bill since the budget four months ago but he is introducing amendments every couple of hours. That makes it very difficult to deal with the Bill in a logical way. Surely he could have completed his business by now. I do not know if Deputy Haughey's intervention earlier meant that he is reconsidering the agreement between the Whips in regard to time. Certainly if the introduction of amendments by the Minister continues, that agreement should be reconsidered.

This section represents a parting of the ways between The Workers' Party and Fianna Fáil. Though not agreeing with some of the amendments Fianna Fáil tabled, because we could not get our amendments accepted we supported the Fianna Fáil proposals as the best of a bad lot. At least they were endeavouring to do something for the PAYE workers which we have been trying to do for some months.

If you are endeavouring to ease the PAYE burden you must be prepared to put the burden somewhere else. Now we have an indication that Fianna Fáil, though talking about easing the burden on PAYE workers, do not want any tax whatever put on the owners of wealth or property. I do not think they can sustain that position because if they want to ease the burden on one sector they must put in on somewhere else.

At the beginning, this section was very confusing to me because of the reference to some companies. It seemed to me that some small area was being eliminated, and that still appears to be the case. It amazes me that Fianna Fáil put up such a long and bitter fight on this section which apparently covers 82 companies, the names of which we still have not got. I suggest that the Minister tell us the names of those companies. There are only 10,000 shareholders involved and the provision would bring in only £500,000 in a full year. It would seem there is some anomaly, that those companies had some special privilege in regard to this 20 per cent relief which other companies did not have. Only these 10,000 shareholders had this. This section is eliminating that and putting them on a par with every other company and shareholder. In other words it is not putting any new taxes on shareholders. It is not doing anything drastic.

There is no question of there being any difference between the philosophies of Fianna Fáil and Fine Gael in this area. After listening for one-and-a-half hours, that seems to me to be the position, that there is some anomaly being removed but the section is not imposing any new taxes. If this is to be a move to eliminate relief and to put new taxes on businesses or shareholders or later on property, and if that is to be opposed, how is the burden on the PAYE workers to be eased? It is up to Deputy O'Kennedy to explain that. How does he propose to do that? Yesterday Fianna Fáil supported the proposed change in the tax bands and holding on to the £312 rather than reducing it to £286. That would have helped the PAYE worker. The Minister pointed out that the change in bands would cost the Exchequer £87 million.

That accounts for my opening remarks, but I am still confused as to why some amendments have been thrown out because they would cost the Exchequer money, while others that will cost the Exchequer money, like this one which will cost £500,000 in a full year, are allowed. I will be raising that issue again when some of our amendments come up. I should like to get an explanation as to why some amendments have been thrown out and others have been accepted. Nobody I have spoken to understands this. I want to make it quite clear that I will be opposing the amendment and supporting the section, but I hope the Minister will explain who these companies are and why they have this privilege over all other companies.

Deputy Mac Giolla expressed the feeling that a number of special companies were picked out, as well as a number of shareholders. That is not the case. This provision was introduced in 1932. It has been modified down through the years and we have arrived at a position when there are 82 companies that conform with the conditions set out in the provision.

They are companies publicly quoted on the Stock Exchange.

Ten thousand people have shares in those companies. I do not have the identities of the companies and if I had it would not be proper for me to divulge them.

I should like to explain for Deputy Mac Giolla why we are opposing the section so strongly, and I will illustrate the town from which we both come. There is one such company which was launched by shareholders around the town of Nenagh which is now giving employment to 200 people. It has been doing that for about 50 years. Many of those involved are very small shareholders who get little or no dividend. Simply because they are publicly quoted on the Stock Exchange they have the benefit, if one could call it that, of this provision.

As I have said, this represents no benefit at all. Those shareholders are penalised by anything from 1.7p to 3.1p on their dividends. Deputy Mac Giolla can be assured that at present they will not make any killing in any circumstances. They would be much better off investing, as some of them will probably be tempted to do, in non-productive assets. It is a commitment to their own trades, to employment, that encourage them to do this. There are 82 companies involved with capital of approximately £115 million. We are not talking about just those that are there now. A bigger issue arises of the disincentive to invest from now on. They would be better putting their money into the Post Office or anywhere else. As the Minister properly said, this does not apply to named companies but to companies that comply with the provisions of that Act.

I hope the Deputy will forgive me for intervening but I should like to be as helpful as possible to him and to Deputy Mac Giolla. This is not the only or even a very important part of the total package of measures available to those companies, even to the company in Nenagh to which the Deputy referred.

I was aware of that. In the course of my contribution I specifically stated, in case the Minister was not listening, that we have corporation profits tax, and so on. I accept that. I am not saying that is the only point, and I never did.

I realise Deputy Mac Giolla is very concerned about employment and we are all concerned that there is a risk of this acting as a disincentive to employment. The Minister mentioned 82 companies. With an average employment of 50, and probably over 100 in most cases, we are talking of roughly 8,000 jobs. We have to be very careful before we put at risk that number of jobs in our present economic climate. The risk is there and the Minister has suggested — I use my words carefully — that I am raising scares that are unwarranted, that I have dreamed up myself and that can do damage. If the Minister has been listening to the views I expressed today and the views Irish industrialists have been expressing for some time, he will have found they are not the views of foreign bankers, such as those he was consulting at lunch time who were telling him about the climate for domestic investment in Ireland. If one were interested in getting a view on the climate for domestic investment in Ireland, the last people one would go to would be foreign bankers. The people whose views I listened to are Irish industrialists and shareholders. I am surprised if these people have not already conveyed those views to the Minister because it would be very unusual for them to convey them only to the Opposition spokesman on Finance. I presume the Minister has heard from them.

At length.

The Minister acknowledges he has heard from them. I take it he withdraws his suggestion that I am raising the scare when the industrialists who have been in touch with me have expressed the same views to him. At least we have elicited that much.

I made a comment about that.

I did not hear it. The Minister charged me with raising scares that have no relevance yet he heard those views expressed by the people who are concerned about providing employment.

They said other things to me as well.

I am concentrating on this issue. We are all concerned about the level of taxation. That has been the central theme of this debate. The deletion of this section would have no impact on increasing the burden on the PAYE sector. The Minister said that this year there will be virtually no cost involved and over any future year the figure involved would be approximately £500,000. If more companies are put at risk, fewer people will be at work and those at work will have to pay more. That is the issue. The Minister tells us what he is doing will have no significant effect on revenue. If so, I cannot understand why he is doing this. I can understand his concern to collect extra taxation but to do it this way is another matter.

This has great relevance for shareholders and the 8,000 employees involved. It is important that we encourage investment in Irish industry, which we have been doing since 1932, a landmark in terms of self-reliance. Now we are turning the other way. Instead of having lunchtime discussions with foreign bankers the Minister should be discussing the situation with our own industrialists.

If the Minister cannot accept my views I suggest we put it to the vote.

There are many jobs involved, but there is no revenue worth talking about involved this year, and only approximately £500,000 next year. I ask the Minister to delete this section.

This relief is commonly known as the Part XX relief. What the Minister says is true. This relief has probably outlived its usefulness because it has been superseded by other reliefs down the years, such as export sales relief and so on. I do not consider that the removal of this relief will have a very damaging effect on investors. There is a very small number of companies involved. The Minister said there would be no revenue implications this year. Am I correct in saying the relief will no longer apply to dividends paid after 9 February 1983?

Question put.
The Committee divided: Tá, 77; Níl, 65.

  • Allen, Bernard.
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Myra.
  • Begley, Michael.
  • Bermingham, Joe.
  • Birmingham, George Martin.
  • Boland, John.
  • Bruton, Richard.
  • Burke, Liam.
  • Carey, Donal.
  • Collins, Edward.
  • Conlon, John F.
  • Connaughton, Paul.
  • Coogan, Fintan.
  • Cooney, Patrick Mark.
  • Cosgrave, Liam T.
  • Cosgrave, Michael Joe.
  • Coveney, Hugh.
  • Creed, Donal.
  • Hussey, Gemma.
  • Kavanagh, Liam.
  • Kelly, John.
  • Kenny, Enda.
  • L'Estrange, Gerry.
  • McCartin, Joe.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • Mac Giolla, Tomás.
  • McLoughlin, Frank.
  • Manning, Maurice.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Molony, David.
  • Moynihan, Michael.
  • Naughten, Liam.
  • Nealon, Ted.
  • O'Brien, Fergus.
  • Crotty, Kieran.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • De Rossa, Proinsias.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Donnellan, John.
  • Dowling, Dick.
  • Doyle, Avril.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard J.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Oliver J.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hegarty, Paddy.
  • O'Brien, Willie.
  • O'Donnell, Tom.
  • O'Sullivan, Toddy.
  • O'Toole, Paddy.
  • Owen, Nora.
  • Pattison, Séamus.
  • Prendergast, Frank.
  • Quinn, Ruairí.
  • Ryan, John.
  • Shatter, Alan.
  • Sheehan, Patrick Joseph.
  • Skelly, Liam.
  • Spring, Dick.
  • Taylor, Mervyn.
  • Taylor-Quinn, Madeline.
  • Timmins, Godfrey.
  • Treacy, Seán.
  • Yates, Ivan.

Níl

  • Ahern, Bertie.
  • Ahern, Michael.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Michael.
  • Barrett, Sylvester.
  • Blaney, Neil Terence.
  • Brady, Gerard.
  • Brennan, Mattie.
  • Brennan, Paudge.
  • Brennan, Séamus.
  • Browne, John.
  • Burke, Raphael P.
  • Byrne, Hugh.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Cathal Seán.
  • Cowen, Bernard.
  • Daly, Brendan.
  • Doherty, Seán.
  • Fahey, Francis.
  • Fahey, Jackie.
  • Faulkner, Pádraig.
  • Fitzgerald, Gene.
  • Fitzgerald, Liam Joseph.
  • Fitzsimons, Jim.
  • Foley, Denis.
  • Gallagher, Denis.
  • Gallagher, Pat Cope.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Kirk, Séamus.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • McEllistrim, Tom.
  • MacSharry, Ray.
  • Morley, P.J.
  • Moynihan, Donal.
  • Nolan, M.J.
  • Noonan, Michael J. (Limerick West)
  • O'Dea, William.
  • O'Hanlon, Rory.
  • O'Keeffe, Edmond.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • Ormonde, Donal.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Treacy, Noel.
  • Tunney, Jim.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies B. Ahern and Fitzsimons.
Question declared carried.
NEW SECTION.

I move amendment No. 14:

In page 12, before section 8, to insert a new section as follows:

8.—Section 344 of the Income Tax Act, 1967, is hereby amended, as respects the year 1983-84 and subsequent years of assessment—

(a) by the substitution in subsection (1) (inserted by the Finance Act, 1980) of `£100' for `£70' in each place where it occurs, and

(b) by the substitution in subsection (2) (inserted by the Finance Act, 1980) of `£100' for `£70'.

This is the section which deals with the reduction in the allowances for bank interest, proposing to reduce the figure from £70 to £50. At this time it is our opinion that the Minister should be moving in the opposite direction. We say this because of the need to encourage saving and investment in all of our financial institutions. The arguments against what the Minister is proposing are so well known that it is hardly necessary for me to elaborate on them here. The Minister must have received numerous letters from small investors regarding this proposal. It is not my intention to become involved in any lengthy discussion by way of attempting to persuade him to change his mind. He knows all the arguments already. The present level of the allowance is an encouragement to people to save, but the Minister's proposal can only be damaging in the area either of saving or of investment and, taken in conjunction with all the other proposals that we will be discussing later in respect of our financial institutions, the Minister is not helping in this regard. For that reason we are asking him to reconsider the proposal.

The Chair would remind Deputies that it is unbecoming to have conversations in the lobbies while a Deputy is making a speech.

The change the Minister is proposing is both inappropriate and undesirable at this point in time.

This section proposes to reduce the tax free amount of interest on deposits from £150 to £120 in the case of the Trustee Savings Banks and the Post Office and from £70 to £50 in the case of the commercial banks. The interest rate paid on deposits of less than £5,000 has not increased beyond 11½ per cent in recent years. The present rate is 9 per cent but I understand that it is to be reduced shortly. During the same period inflation has been running at the rate of more than 20 per cent, the present level being between 11 and 12 per cent. At all times in recent years there has been a loss on savings for the small saver. The after-tax real loss suffered by savers with deposits of up to £5,000, be they small savers, redundant workers or retired people who have invested lump sums, has been severe. Indeed, this is a national scandal.

During this time people who have invested large sums of money have been earning substantial returns by way of various legal, semi-legal or illegal devices. For example, capital tax free gains of up to 40 per cent have been earned on Government stocks in the past year. The dividend stripping on Government stocks is a common practice in the interest of avoiding income tax. The provisions of section 23 of the 1981 Finance Act, whereby rental income up to the capital cost of a flat is free from tax, has been availed of widely by wealthy people. Unit funds operated by insurance companies have produced tax free rates of returns which are consistently far in excess of the rates of interest payable on small bank deposits. The capital gains legislation whereby the value of an investment is maintained at a rate in line with inflation after which there is a tax free capital gain of £2,000, or of £4,000 in the case of a married couple, highlights the position of people with relatively small savings and who under this section are taxed on income which does not even maintain the value of their savings.

The revenue that will accrue to the State if this measure is passed will be minimal. I appeal to the Minister to consider leaving the rates at their present level so as to encourage small savers to save. In addition, this could go some way towards redressing the tax position of the small saver vis-à-vis the small investor.

I will be brief on this section. The proposal if accepted will have a severe effect on those with small savings in financial institutions. If we take the area that I come from, the Midlands, this change will have an effect on workers in the ESB, Bord na Móna, CIE and other companies who provide pensions and lump sums. In the case, for instance, of a man retiring at 65, the State pension for himself and his wife would be about £74 per week and in the case of a person retiring from a State body, such as Bord na Móna, a pension of £100 per month. Such people are brought into this tax bracket. The savings will be at the expense of people who have given a lifetime of service to the State. They are now at the end of their day and from now on will be taxed in this manner. When Fianna Fáil were in Government I strongly advocated raising this amount, but the Ministers did not see their way to acceding to my request. The people I refer to like to keep a certain amount by for funeral arrangements and so on. I am not speaking in favour of the banks and financial institutions; I am speaking on behalf of small depositors who make up the vast sums of money in the financial institutions.

A person building a new house must get a bridging loan from his bank and the banks get the money from the depositors to pay out for productive purposes. Many people have asked me what this is all about. Some people are not aware that money deposited in a bank is subject to tax if it goes over a certain amount. They only find this out when an assessment comes in the post. I do not understand why this provision has been brought in. The Minister in his budget speech said that there was a spread of deposits. In the present financial climate I do not see how anyone could spread money around. I am not aware of a spread of deposits in order to avoid having to pay interest. Small depositors generally bank in their own area where they can get money on demand. Even allowing for a spread of deposits, this money was being made available to borrowers especially in the housing construction industry. The bank deposit ratio and the lending ratio must go hand in hand. If the banks do not have the money from depositors they cannot lend money. This provision will affect the level of savings and I have been led to believe that there has been some withdrawal of money from the banks. That is a worry. The Minister might say that there is a tax exemption of £4,800 but even so the people I refer to will be caught here. The law as it stood was a little help but the lowering of the amount will have a detrimental effect.

The explanatory memorandum in relation to section 8 says:

Section 8 amends, with effect for 1983-84 and subsequent years, section 344 of the Income Tax Act, 1967, so as to reduce the amount of interest on deposits with certain financial institutions which is exempt from tax in the hands of individuals. The amount of interest on deposits with the Trustee Savings Banks and the Post Office Savings Bank which is exempted is being reduced from £150 to £120.

This is a retrograde step for several reasons. People involved with the Post Office Savings Bank are mostly rural families who would have put their money there before the bank's campaign in recent years to attract more and more ordinary people. The number of rural families who have had this kind of relationship with the old Post Office savings system is amazing, and also the number of workers on small incomes who have their own modest investments in the Post Office Savings Bank. The workers have already paid tax on the money they put into the Post Office Savings Bank. It was a retrograde step to reduce the amount of interest which could be of benefit to them from £150 to £120.

I propose that the Minister should make the interest from all savings in the Post Office Savings Bank completely tax free. Ultimately this would be of tremendous advantage to the State. Quite apart from the injustice which I contend is being done to savers in the Post Office, it would have merits on another scale. It would have the effect of attracting wholesale investment. Perhaps it would attract moneys invested at present in the commercial banks sector. That would be a tremendous boost to the State.

It would provide far more money for social use, especially since the Post Office will be going into the semi-State sphere. It is hoped that the savings bank activities of the Post Office will be brought up to an efficient and viable commercial level. I understand that at the moment—and I have this from a bank official—the banks are very concerned at the outflow of very significant amounts of money——

Hear, hear.

——to places such as the Isle of Man. I do not know whether investors are doing this on the advice of the banks. The Minister should look at that aspect very closely and take whatever steps may be necessary to stop the outflow and keep that money in our own economy. I do not know what arrangements the commercial banks here have with their foreign outlets in Britain and in other places for an accommodation of that kind. I am not making any allegations. I am merely asking the question: are they facilitating their customers to the determent of our economy and our balance of payments? The Minister should look at this very closely.

The Lord have mercy on the late and great Seán Casey who was a member of my own party and Lord Mayor of Cork in the sixties. I understand that on one occasion in the early sixties the Cork Savings Bank made an offer of £1 million to Cork Corporation at a nominal interest rate of 2 per cent to build houses for newly weds. This was killed at source by commercial banks who moved in to stop it. I have given the source of that information. He is dead now. It may or may not be true, but it was told to me in good faith.

The commercial banks are not fulfilling a wide social role. I suppose in fairness to them they never professed to be obliged to do so. In the present climate we should do everything in our power to attract public money into the State sector, notably through the Post Office Savings Bank, so that it can be used for wider social purposes. I ask the Minister to look very seriously at that whole concept. Unquestionably the country as a whole would benefit from that approach.

This is a very mean and negative measure in the Finance Bill. I ask the Minister to reconsider it. I thought the Minister, as a bright young man coming into the Department of Finance with a very distinguished career behind him, might show some imagination in this area. This measure has remained unchanged since 1967. It is about time somebody improved the position. In his budget statement the Minister said:

While our own ability to borrow is, so far, unimpaired, the international climate of uncertainty underlines the need to reduce our dependence on foreign funds.

We must, therefore, rely increasingly on our own resources. Saving is an aspect of that self-reliance and it is a habit which must be encouraged.

It is not particularly encouraging to savers to reduce the amount of interest which can be earned from £70 to £50. At today's interest rate, £50 can be earned on a capital sum of £600 which, as Deputy Connolly said, is hardly enough for the funeral expenses of an old age pensioner. It is going a bit too far to penalise these people further. In the vast majority of cases they have paid more than their fair share of tax on their incomes. To hound them further by going after them into the financial institutions is particularly mean.

I should like to refer the Minister to the first report of the Commission on Taxation of July 1982 at page 159. It states:

We consider that the overall balance of the income tax system in Ireland is heavily weighted towards borrowing and against saving. This arises because, in determining income for income tax purposes, little or no account is taken of the effect of inflation on the underlying asset... or liability... . We recommend that this be rectified. This would reduce the discrimination against saving in the income tax code.

In the same report the point was made that, since the rate of inflation is higher than the rate of interest, the taxpayer has received a negative real rate of interest on his deposit.

On page 162 of the same report we read:

We recommend that the income from all interest-bearing deposits should be charged to tax to the extent only that the rate at which it accrues exceeds the rate of inflation during the period of accrual.

I ask the Minister to take that recommendation into account. Taxpayers are sufficiently taxed on their incomes already without going after their savings. I agree with my colleague, Deputy Connolly, that young people who are trying to save to build their own houses and older people who have a relatively small amount of money set aside for a particular purpose are scared that there will be further taxation and a lowering of this limit. In the case of non-contributory old age pensioners there is the additional penalisation that very often their pension is reduced apart from the additional tax. I hope the Minister will have another look at this and increase the figure to at least £100. At 10 per cent the capital sum involved would be £1,000 which is not a great deal of money today.

I share the concern of a number of speakers about the various reductions in the case of savings and particularly small savings. Basically I am concerned about the small savers. I am sure the Minister had good and significant reasons for resorting to this action. We are all conscious of the difficult economic circumstances prevailing. There has been a fair amount of evasion in this respect and not necessarily by small people who will be most severely hit and about whom I am concerned. There has been mention of the old age pensioner. I reckon that £50 would be the interest that would accrue on a £500 investment which would be scarcely sufficient nowadays even to provide for a person's burial.

If the Deputy was up here it would cost him a lot more.

The Opposition might like to see significant increases here. I might point out they did very little in this respect over the years. We are all concerned about and would welcome any measure which would attract investment. While I disagree with the proposal from the point of view of these small investors, nonetheless there are compensations introduced by the Minister in his budget. I am certain that perhaps next year or the year after the Minister will be in a position to examine this situation again and possibly take account of the various points that have been made on both sides of the House. But there is no point in the Opposition shedding crocodile tears for small investors because their commitment in this respect was significantly wanting in the past. Neither would I like to think that they consider they have all the answers now.

I support the submission of the Minister. However, I would ask that, when formulating his next budget he would devise some way of compensating the small investor because every effort must be made on their behalf. I am concerned like everybody else that while money is taxed at source people who save are further taxed at the investment stage. That will create in the minds of people a disincentive or feeling that there is no point in saving. It is the objective of all of us to ensure that as much money as possible is saved in this way and it must be remembered at the end of the day that small accounts make up the large ones. There has been significant evasion — because people are able to circumvent the law by holding a number of small accounts — and presumably that is what was at the back of the Minister's mind when he saw reason to reduce this. I should like to hear what the Minister has to say in respect of the reduction from £70 to £50 and from the £150 to £120.

Funds invested in the Post Office Savings Bank or Trustee Savings Bank generate the necessary finance to enable social reforms to take place. Equally the commercial savings banks provided a necessary level of finance and service over a long time. I am not so sure that the distinction between the two should be of the order it is in this Bill. I am anxious to know the Minister's reason for so doing.

The overall budgetary provisions have been particularly severe in many respects but it is absolutely necessary at this time. Let nobody in this House or outside be under any misapprehension in that regard. In fact it is possible it will not provide the wherewithal to improve our general financial state.

The Deputy should adhere to the section before the House.

People contend that, because of this provision, money will be moved from one savings institution to another. That may be so but, in the long term, it will level itself out. I would ask the Minister to review the situation under which a small saver can be compensated because of having made a significant effort to put something aside for the rainy day.

Like other Deputies, I have had scores of elderly people come to me about this measure, generally confused, frustrated and upset. I should like to hear what are the Minister's reasons for this proposal because its effects on those people have been particularly severe. Therefore the Minister would need to have very good reason. If his reason is that he feels there are some smart people in our society who are evading, doubling-up or making extra use of this facility, then he should devise some other way of tackling this rather than penalising the thousands of very small investors, many of whom are elderly. As has been pointed out by others, generally these are people with very small savings, for example, like the old folk, for funerals or expenses in connection with impending death. Even the figure of £1,000 advanced by our spokesman at present would just about cover funeral expenses in Dublin unless it is desired that people go for cremation which would cost something less. I calculate that savings of, say, £1,000, at 9 per cent would reap about £90 and that would be covered by the figure of £100 advanced by our spokesman. We really need to know what is the Minister's intention in this respect. Indeed his reason for so doing needs to be very good. I do not really believe he understands the impact of this on ordinary people who feel very hurt by his proposal. It may have sounded like a smart measure to somebody: that we will catch somebody else while we are trying to catch everybody out. But we need to be careful lest, in trying to catch a few, we badly hurt very many others, particularly the old folk. Here I must disagree with Deputy Dowling. I believe that under the provisions of this latest budget they did not do well; they still have not got their old age pensions and will not until the end of June or beginning of July. In fact they have done very badly. They have been asked to accept a bad situation with this additional provision now being imposed.

I would ask the Minister to tell us clearly what are his reasons and how much he expects to save as a result of this measure. I would ask him to say also what plans he has to protect these elderly people who have given so much to our society and deserve better treatment than this will afford them.

I hold very busy constituency clinics. Not only have I not had scores of people calling on me or writing to me but I have not had even one person call or write to me about this section. There are 111 sections to this Bill and, if we are to spend as much time as we have to date on the first seven, we shall not get through some very important ones later this evening or tomorrow. Indeed very important parts of it may well be nodded through when people are very tired.

A lot has been said about people who have put away £1,000 for the rainy day or for burial purposes being caught for tax. But it should be remembered that, under the Minister's proposal, they will be caught for tax on the difference between £50 and £70 if the account is in one name only. If they are paying tax at 25 per cent then they will be caught for something in the region of £4 per year. If they pay tax at the standard rate they will be caught for something in the region of £6 per year. There is an awful lot of fuss being made about this £4 and £6. I do not know what £4 annually amounts to on a weekly basis but it must be something very small. The point has been made that perhaps it should not be imposed on certain categories of people, but they do have other options open to them, particularly if they are elderly people. For instance, they can invest in index-linked bonds with the post office — which is a very attractive form of investment — or divert their small holdings from banks to building societies where they need not pay tax unless it exceeds the standard rate and where the money they invest can be used for very productive purposes. A lot of the emotive things that have been said——

Yes, but they like to have the money on call, that is the difference.

——really do not stand up to factual examination. Given the state of public finances it is no wonder this House is being derided so much when so much time is being spent on a section which will have the effect of taxing some people at the rate of £4 per year. It will have no effect on others and many will not even notice the difference. Therefore, I feel a lot of this is much ado about nothing. I do not really want to see people have their exemption limits reduced but, given our current economic circumstances, the Minister is in difficulty and we must accept that funds must be raised in some area. I should like to know how much will be raised by this section and whether there are economic objectives in introducing this reduction. Is it intended to reduce it further over a number of years?

The Minister in section 8 is simply chasing confirmation money and it will go back under the mattress as a result. I want to ask a number of questions. If the Minister's stated reason for chasing this interest is to prevent people having a large number of accounts——

That has nothing to do with it.

It has been put forward on a number of occasions as one of the reasons. There has been a suspicion that some people have a number of accounts in various places and they are able to split the interest over those accounts.

No, that is a completely different section.

If that is what is in the Minister's head, then it is illogical to keep it at all.

It is not in my head.

That is fair enough. Is the Minister in a position to tell us what percentage of the total accounts in post offices, Trustee Savings Banks and commercial banks is represented by this group? That is another way of asking how much money is involved. I would be interested to know how many accounts are involved.

We will be opposing the amendment put down by Deputy O'Kennedy but I would begin by trying to get some explanation why some amendments are deemed to be out of order while others are deemed to be in order. We put down two amendments to this section and we are informed that both of them are out of order. I still do not understand the reasons for this and I would appreciate it if it could be explained to me now. In amendment No. 15 we were asking that tax on interest paid on deposits in commercial banks, merchant banks, Trustee Savings Banks and the Post Office Savings Bank should be deducted at source since tax on PAYE workers is deducted at source. It is one of the major items of controversy in the current tax protest that PAYE workers have no choice but to pay tax. Many others decide not to pay tax and get away with it. This question of deduction at source is a major point of controversy and it seems to us that in any areas where it is possible to deduct at source this should be done. We thought the Minister would be glad to look at this matter. In the case of interest paid on deposits it would be a simple matter to deduct at source. The banks would pay over interest to depositors less tax and forward the tax to the Minister, just as every employer has to do. The Ceann Comhairle declared this amendment out of order.

On the question of amendments being in order or out of order, I wrote a personal letter to each Deputy who had an amendment ruled out of order explaining why it was ruled out of order. There were quite a number of them. If Deputy Mac Giolla would like to come to my office we could have a friendly chat about it. The vast majority have been ruled out of order because they would be a potential charge on the people or a potential charge on the Exchequer.

That is what I understood and this is why I refer to amendments Nos. 15 and 16.

I am sorry, but I will not discuss it now.

Amendment No. 16 was to include building societies after commercial banks. I will accept your invitation because I would very much like an explanation as to how that would add a charge to the Exchequer.

I would make the same remarks on this section as I made on the previous section. If we are to do anything to relieve the burden on PAYE workers, which everybody including the Minister has accepted must be done because the burden is much too heavy and has removed the incentive to work, then taxes must be imposed elsewhere. That will remove the incentive to something else. It will remove the incentive to invest or to entrepreneurial activity. Every tax presumably removes the incentive for something and increases the incentive to evade it if loopholes are left. The Minister has said that in this case he is not particularly after the people who are availing of these loopholes.

A case was brought to my attention where a total of £800,000 was invested in sums of £5,000 in 160 different accounts using a list of names taken from the telephone directory. When one hears of that type of thing one wonders about the crocodile tears shed for the small investor who has a few hundred pounds put aside for funeral expenses. That does not come into this. The people who are really scared about this small change are the large investors, those who have all sorts of methods of evading tax using every loophole in the tax system.

Someone referred to people who receive redundancy payments which they invest in banks. I do not think many of them invest that money in commercial banks. Many will invest in the Post Office or in Trustee Savings Banks. It is the bigger investors who are worried.

I would ask the Minister to look at the question of deducting tax at source, even though our amendment is not being accepted. The idea should be examined by the Minister and there should be deduction at source where possible in all areas of tax collection. We deduct that from the worker's pay packet without considering whether or not at the end of the year he would have had to pay any tax at all. One works for five or six months. Tax is deducted at the end of that period and at the end of the year it is discovered no tax should have been paid at all. Why then should tax not be deducted from the farmer's creamery cheque or the depositor's interest? That is the system that should obtain.

I am amazed at this section but it is quite obvious to me why the Minister will not concede the point. No allowance is being made for the effect of inflation. Compare the value of £50 in 1967 and its value today. Possibly £5. The minimum increase should be £100. Here the Minister is turning the clock back. I am talking now about the size of the national cake to be put away in the savings cupboard. The way we are going at the moment not only will there be no national cake but the Minister will have difficulty in finding flour to bake a cake.

There is a nationwide savings campaign designed to inculcate a savings habit. But if people save the Minister will penalise them. That is what he intends to do. It was interesting to hear a Labour Deputy promulgating the idea of no tax at all being paid on savings. I would love to see that happening. Since the suggestion emanates from the Labour Party the Minister should take it to heart as he has taken so many other suggestions. I am not sure whether they were suggestions or gun-to-the-head propositions put forward by the Labour Party.

He should remember too that many members of his own party are totally against the philosophy in this Finance Bill. There is no doubt about that. We should endeavour to be constructive and our amendment is designed to offset to some extent the erosion caused by inflation. Our young people must not be exploited in this celluloid society of credit cards. They must be encouraged to save. That is what the Minister wants, but in this section he is running counter to that idea. There would be no loss of face were the Minister to accept the amendment. It would be just another encouragement instead of hammering people all the time. I would be interested to know how many savers would be involved in this. It may be difficult to produce the figure but I believe Post Office savings form a great proportion of savings generally. In good faith I appeal to the Minister to accept the amendment.

Section 8 provides for the substitution of £120 for £150 and of £50 for £70 in each place where it occurs. This is a sad reflection on the Government particularly where Post Office savings are concerned. We are talking about small depositors, people who are determined to save something for their funerals or their retirement. Many claim this budget is an economist's budget in which certain figures were set down and every effort then made to achieve those figures at any cost. It is a typical example of a total lack of consideration. Deputy Mitchell talked about much ado about nothing. This is an indication of the uncaring and unfeeling attitude of the Government where small depositors are concerned.

There is a fundamental principle the Minister and his Government have missed. A person who saves is one with a sense of responsibility and hope for the future. This section will penalise totally that person. What incentive is there to save now first with inflation and then taxation? These militate totally against savings. Instead of taxing interest on savings we should be giving tax incentives to those willing to save. The level of personal savings is a measure of stability of the community. When it is high the citizen is in effect lending to the State and investing in the community's business life and so on. When we prevent people from saving by applying, as we are doing here, penal taxation we are effectively stopping them from saving for the future and throwing them on the mercies of the State instead of allowing them to provide for themselves. The same tax incentives which apply to insurance should and could be applied to savings. Will the Minister reconsider this and drop this section from the Bill?

I want to raise the situation in regard to group water schemes. The trustees of these schemes have received big tax demands because they have savings in deposit accounts. In starting these schemes the first step is to put some money in a local finance institution. In one case the demand received has been for £3,000. That money is there for maintaining, servicing and repairing schemes. I am concerned that the Minister is reducing the limit while at the same time the demands will become greater. If the Minister will not accept our amendment then he should inform the trustees that they should transfer their money into tax free securities. He should also allow late appeals which have been sent to the Revenue Commissioners by the trustees upon whom these demands are being made. It is easy for the Minister to say that the group schemes should invest in tax-free securities but I am still concerned about the fact that these bills are outstanding. I would ask the Minister to ensure that these appeals are accepted and dealt with immediately so that these non-profit making committees who are providing a social service that the local authorities should provide in rural areas will be helped by him and by the Revenue Commissioners.

I do not propose to reply in detail to Deputy Kitt. I answered the question that he put down some time ago but the rest of what he is saying, with respect, does not arise on this section. The relief would not apply to group water schemes anyway because it is available only to individuals.

The reason for this section is a very specific one. I shall quote what I said in my budget speech:

Interest on deposits with certain financial institutions is exempt from income tax up to certain specified limits. This exemption has led to considerable friction: in particular, those institutions which enjoy no concession argue that it is discriminatory. As a first step towards putting the tax arrangements on a more equal basis, I propose to reduce this exemption.

Therefore, the first reason for this is to even out the imbalance between the various financial institutions. In doing that, taking Deputy Brennan's second question, the difficulty is that if we were to bring everybody up to the same level a very substantial cost would be involved. The Deputy knows, as well as I do, that this is not the year when we can incur extra costs of that nature except for reasons of very high priority. However, I intend to bring forward an amendment on Report Stage to extend the £50 exemption limit that is now provided for in the Bill to depositors with the Agricultural Credit Corporation. I am doing this for the ACC because it was set up to cater specifically for farmers and to provide them with loans specially designed to meet their particular needs. For this reason the ACC is less competitive than the other institutions and is much more restricted in its lending opportunities. I hope that the application of this measure to the ACC will reduce this imbalance, strengthen the ACC's deposit taking position and, therefore, benefit the farming section generally. So it is a question of reducing the disparities that exist between the financial institutions.

On Report Stage I will be taking the opportunity of proposing some technical changes in the definitions of commercial banks in section 344 of the Income Tax Act, 1967. The list of qualifying banks needs to be amended to take account of some amalgamations and name changes that have taken place since the passing of that Act.

I take the point that a number of Deputies have made about the importance of developing small savings. One of the difficulties we have is that we do not save at a level that would support the level of investment we feel is desirable. It is for that reason that we find ourselves obliged to engage in fairly large-scale foreign borrowing. I would remind Deputies of a number of measures which I announced in my budget speech specifically designed to encourage small savings. I refer particularly to what we have done in relation to index-linked bonds where the maximum amount that a person aged 55 or over may hold is increased from £5,000 to £10,000 and the maximum amount which a person may invest in national instalment savings is increased from £100 to £150 a month with a reduction from two years to one year in the deposit period required to earn an index-linked return on amounts saved under the scheme. In those two areas I have taken very clear straightforward steps to favour small savings.

I accept that there are difficulties facing savers today. Deputy Doyle mentioned the difficulty that arises from the comparison between the interest rate on deposits and the inflation rate. I think that by far the most effective way of dealing with that problem is to take the kind of action we need to take in order to bring down inflation rates. Interest rates are not by any means entirely within our control. They are influenced very largely by events outside our own borders so there is a limited amount that we can do to influence the level of interest rates. Curiously enough, as long as we have the need to import capital in order to support the level of investment we need, we are going to have a situation where, other things being equal, interest rates will be rather higher here than they are elsewhere. Otherwise the funds would not flow in.

That is a fait accompli.

Not at all. It is something that we have to take into account and as long as we have that situation and if we can be successful in keeping down our inflation rate then we will be creating the conditions under which it is possible and profitable and attractive to save.

Not all of the people who hold the accounts we are talking about are small savers. I appreciate that there are people in the situations mentioned by a number of Deputies and, of course, Deputies always pick the most emotive examples. The old age pensioner saving for a funeral is the one that most often comes to mind. A number of Deputies asked how many people are involved. This is information I have got rapidly and it may not be completely up to date, but the total number of depositors with banks, the Post Office Savings Bank and Trustee Savings Banks is in the region of 162,000. The total number of people who would be affected by this measure would be approximately 127,000. There are about 35,000 who will be unaffected. They are the small savers who do not earn £50 interest on their deposits. I do not know why Deputy O'Kennedy is so amused by that. It is a fact.

Not all of the remaining 127,000 people are in the circumstances stated by Deputies. We are talking about a portion of the interest earned on a deposit that is regarded as being not liable to tax, like tax free allowance. The remainder, to the extent that there is a remainder, is declared in the normal way and is assessed under the general rules of taxation. If a depositor's total income, including the balance of interest automatically regarded as tax free, falls below the exemption limit or does not exceed his total tax free allowance, he will not pay income tax on that part of it. In order that this measure will have effect, the depositor must have a taxable income.

What is the expected revenue return in this year and in a full year?

I am coming to that.

I did not think the Minister would and I want to get him back on the line.

I appreciate that Deputies opposite are thirsty for information. I could rush through it at a much faster pace but I do not propose to do so.

I know the Minister will not.

If the Deputy wants to complain about the clarity of the exposition, on his own head be it. I do not intend to rush. I will take the points as they come and if the Deputy wishes me to do anything else, would he please let me know? I thought Deputies would be interested in having a proper discussion on each of these issues.

I want to let the Minister know formally that if we are to be given very long replies, all irrelevant, we will have to reconsider the agreement.

If Deputy O'Kennedy does not wish me to answer the questions that have been put then I will not give him any satisfaction because I have a greater regard for Deputies who ask questions and who expect to get answers than Deputy O'Kennedy seems to have. I am sorry if the Deputy feels annoyed because so many of his colleagues have come in on the discussion and prevented him from making——

The Minister is being sarcastic.

I will answer the questions I have been asked. I am not being sarcastic. Deputy Mitchell put the whole business in its proper context by looking at the effect of this on individuals. Income in the form of interest on deposits is income like any other income and therefore falls to be considered in the amount to be assessed. One other point that is relevant is that if there was a greater demand for borrowing from banks I do not think the banks would have any great difficulty in meeting a higher level of demands from borrowers. I understand they are holding various forms of Government paper substantially in excess of their liquidity requirements. Therefore, the measures we are talking about are relevant. Deputies opposite spoke of the effects of this on the level of bank deposits. There is no solid evidence on this point. Deputy Woods asked if the reason for this was to get around evasion. That is not the reason and that is dealt with in another section.

The total estimated yield from this provision in 1983 is expected to be £1 million. The total cost of the current exemption limit in 1982-1983 is estimated to have been £5 million: that was the total amount of revenue foregone by the operation of the tax concession. I hope I have replied to the questions that Deputies wanted to get replies to, notwithstanding Deputy O'Kennedy's impatience.

We have heard a lot of reasons given from various parts of the House, from the Minister's party, the Labour Party and from members of my party. as to why the Minister will not support the amendment. The Minister has now given his reasons for opposing it. Before we divide I will go back on some of the reasons he has given. He has told us this is not to deal with evasion. It is not only in this House that it is considered to be a device to deal with evasion. It is also considered to be so by bank depositors, not necessarily the small savers we have been talking about. Many others apparently have a degree of apprehension about the purpose of this and other sections. The Minister expects us and them to be naive because he told us it has nothing to do with evasion. Obviously I do not wish to question the Minister's bona fides. When he tells us that the reason for this is simply to introduce the same scheme and the same treatment here as for others, we would regard that as being fair enough if he was not at the same time, as he has just now told us for the first time, about to give the same facility to the ACC, who have been very short on liquidity in recent times. Their customers, the farmers, know that, because so many of them are being pressed for repayments. Indeed, it is unprecedented.

I welcome what the Minister is doing in respect of the ACC. He has also indicated what he is doing in respect of index-linked bonds and national savings bonds. He has almost covered the disparity that he says he wants to correct in reducing the level of interest free deposits. If it was the main anomaly, it is now being corrected. That being so, the need for this action is not as urgent as the Minister has suggested. One can recall the comments that have been made by Deputies, by Deputy Dowling, Deputy Prendergast and Deputies from this side, all reflecting views that have been expressed to them by constituents.

When I proposed this amendment I spoke very briefly because I suggested the Minister was fully aware of the situation, brought out in correspondence which he himself must have had — all of us have had such correspondence. Therefore, I think the only argument the Minister has given does not hold up, particularly in regard to the actions which he proposes to take. From time to time there have been different treatments for different institutions to serve different purposes. The banks, particularly, and the Trustee Savings Banks fulfil a very special role in respect of service to customers who draw on their facilities in terms of normal current facilities as distinct from the ACC with whom one cannot have the same current facilities — you get loan facilities of a different nature.

The same would be true of some of the other banks to which he referred. There is, there has been, and there always will be a good reason for giving a special interest allowance in respect of the banks and the trustee savings banks. While we welcome what has been done for the ACC, there is still a difference between them and the other banks. The Minister cannot be unaware of what is being widely spoken about, and I do not think it is all rumour. Bank managers and customers talk to Deputies. They say there have been significant withdrawals from banks and I am sure the Minister can confirm that. That is a matter of very serious consequence and runs counter to what the Minister said in his Budget Statement when he referred to the incentive to promote savings at home. All these arguments are in favour of at least retaining what we have and even increasing it marginally, which is what we propose in our amendment. The yield would be of the order of £1 million in 1983. This is not a significant sum having regard to what the deposit base means to our banks and the trustee savings banks.

I listened very carefully to what the Minister had to say. Out of a total of 162,000 depositors, all but 127,000 are unaffected. It has been said that we are talking about young people who save their confirmation money and who will be caught in the future. I do not know if they will be, but I am concerned about the majority of the 127,000 people. They are making a substantial contribution not just to their own security — it is important for them to provide this independence and to know they have provided for their old age and burial expenses — but they make a very considerable contribution to the economy.

A short while ago the Minister mentioned "tongue-in-check" but he has his tongue in his cheek because Deputy Brennan touched on the real reason for this measure. The Minister is not concerned about this £1 million or the equal treatment of the ACC and the other banks. In my time in Finance that was mentioned but it was never of such concern to the officials in the Department of Finance or the Revenue Commissioners to take action like this. The Minister proposes to introduce later very stringent new powers that will get at people who are hiding money in the banks. No matter what arguments we put up, he will probably give these powers to the Revenue Commissioners. This is something I regret. He does not need to utilise this instrument to penalise small savers. If the Minister cannot accept our amendment he should leave matters as they are. We are talking about very little money and for the Minister to argue that his intention is to have equality of treatment for the ACC and the other banks, that does not hold up. This will have a considerable impact on the small depositors, the banks and the trustee savings banks. The Minister produced very empty arguments and if he is not in favour of our proposals let us put it to a vote.

If the Minister says he is not doing this to catch the multiplicity of accounts, I accept that. He says one of his main reasons for taking this action is that there is discrimination between institutions and he would have to extend it. There is another option: he can leave it alone. The real reason emerges, which is to collect £1 million from 127,000 savers. This is a very small amount and I doubt if the administration involved would warrant the time and effort being put into it.

Taken in conjunction with section 17, this adds up to a massive onslaught on Irish banks and accounts held there. The Minister must be aware that one of the most mobile commodities has to be deposits, savings and wealth — one is almost afraid to use that word for fear of having a picket put on — and that is at present under siege. This section, section 17 and a host of other sections get to the heart of the Irish banking system. I wonder if we are killing the golden goose. I think we are.

I ask the Minister to think about correcting the impression that this onslaught is taking place. Last night one of my constituents who has a few pounds in the bank said one would want to get the money out of Irish banks because that fellow Dukes is after us all. While that is comical in one way, it is also frightening. The Minister knows it is not always the detail of legislation that affects the movement of money, the price of a share, or whether one buys or sells stocks, but it is very often the impression, the rumour, the atmosphere, which moves large sums of money around. This country needs large sums of money and investments now. If the Minister cannot change the legislation, at least change the atmosphere or there will be no money left in this country.

The Minister's reason for taking this action is very lame. He says it is to reduce friction between the financial institutions, even the rates and reduce disparities. After the budget the tax-free allowance on deposits in the associated banks and some of the nonassociated banks was reduced from £70 to £50; for the building societies the situation was amended, and now the Minister has decided to put down an amendment to change the situation for the ACC from nil to £50. What about the Industrial Credit Corporation? Will there be another anomaly between the ACC and the ICC? The amount in the Post Office Savings Bank has been reduced from £150 to £120, and the trustee savings banks from £150 to £120. In other words, the situation is in total disarray and there is no improvement whatsoever. This further penalisation of those who save will have a very deleterious effect. What system do the Government propose to use to penalise those who save with credit unions?

I have two points to make. I do not want to delay on this section because there are many sections and many who want to contribute. Everyone decries the reduction of this allowance from £70 to £50. We should, however, be asking, has this allowance justified itself recently? For instance, some wealthy person with £10,000 on deposit can get the first £70 of his interest free if he is with one of the established banks, or if it is a joint account, he will get the first £140 free. That 65 per cent to him is worth a lot more than it is to a person paying 25 per cent tax and this is just one more disincentive. We should be asking should this allowance have been let continue at all. We as legislators have adopted a defensive attitude on everything and instead of legislating on the basis of policy, we are looking to see what pressure groups will cry most.

If Fianna Fáil were really sincere, they would have increased this allowance when they were in Government only some months ago. They have not increased this allowance on any occasion when they were in Government. Now that they are in Opposition and have no hope of doing so, they are asking that it be done. Nobody on the Opposition benches has justified this amendment, in economic or reasonably cogent terms, particularly given the very difficult circumstances in which the Minister finds himself and given this Government's economic policy. No speaker has put a reasonable case for this section being unacceptable. Presuming that somebody on 25 per cent tax is benefiting from the full £70 interest allowance he or she will be caught for £4 a week. This is the difference between £50 and £70 at that rate of tax. We have spent something like an hour on this section, which is nonsensical. No wonder people look with contempt at this House. So much time has been spent on this section purely to get the names of the Members into the paper tomorrow to circulate among their constituents.

The case has been well made by the Minister and by the people who spoke on the lack of reason for this change. The real reason behind this section is, as Deputy Brennan pointed out. anti-tax evasion. The Minister has attempted to stand logic on its head by saying that there are other reasons. He has said that this is dealt with in another section and the section to which he refers is section 17. The first action of section 17 is to make retrospective the disclosure requirements of a reduction from £70 to £50 from 9 February 1982, the date on which the Minister made the budget announcement of the reduction. The effect of section 17 is that the banks will have to make a retrospective declaration of interest and those whose interest exceeded £50 and £70, who thought that they were safe, will be caught.

The real reason is not the amount of money in question, as referred to by Deputy Mitchell. That amount does not warrant the length of time spent on it. The proposal put forward by our spokesman to increase the limit to £100 should have been done many years ago. That would have gone a little way towards encouraging people to save more. The real reason is not to bring about equity between the financial institutions; it is just another anti-tax evasion device. If we were serious about encouraging small savers, we would not agree to the amendment put down by this side of the House.

Is amendment No. 14 being pressed?

Could there not be a compromise on it?

I am putting the question "That the new section be there inserted".

The Committee divided: Tá, 67; Níl, 78.

  • Ahern, Bertie.
  • Ahern, Michael.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Michael.
  • Barrett, Sylvester.
  • Brady, Gerard.
  • Brennan, Mattie.
  • Brennan, Paudge.
  • Brennan, Séamus.
  • Browne, John.
  • Burke, Raphael P.
  • Byrne, Hugh.
  • Byrne, Seán.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Cathal Seán.
  • Cowen, Bernard.
  • Daly, Brendan.
  • Doherty, Seán.
  • Fahey, Francis.
  • Fahey, Jackie.
  • Faulkner, Pádraig.
  • Fitzgerald, Gene.
  • Fitzgerald, Liam Joseph.
  • Fitzsimons, Jim.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Denis.
  • Gallagher, Pat Cope.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm.
  • Kirk, Séamus.
  • Kitt, Michael.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • McEllistrim, Tom.
  • MacSharry, Ray.
  • Molloy, Robert.
  • Morley, P. J.
  • Moynihan, Donal.
  • Nolan, M. J.
  • Noonan, Michael J. (Limerick West)
  • O'Dea, William.
  • O'Hanlon, Rory.
  • O'Keeffe, Edmond.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • Ormonde, Donal.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Treacy, Noel.
  • Tunney, Jim.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.

Níl

  • Allen, Bernard.
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Myra.
  • Barry, Peter.
  • Begley, Michael.
  • Bermingham, Joe.
  • Birmingham, George Martin.
  • Boland, John.
  • Bruton, Richard.
  • Burke, Liam.
  • Carey, Donal.
  • Collins, Edward.
  • Conlon, John F.
  • Connaughton, Paul.
  • Coogan, Fintan.
  • Cooney, Patrick Mark.
  • Cosgrave, Liam T.
  • Cosgrave, Michael Joe.
  • Coveney, Hugh.
  • Creed, Donal.
  • Crotty, Kieran.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • De Rossa, Proinsias.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Donnellan, John.
  • Dowling, Dick.
  • Doyle, Avril.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard J.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Oliver J.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hegarty, Paddy.
  • Hussey, Gemma.
  • Kavanagh, Liam.
  • Kelly, John.
  • Kenny, Enda.
  • L'Estrange, Gerry.
  • McCartin, Joe.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • MacGiolla, Tomás.
  • McLoughlin, Frank.
  • Manning, Maurice.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Molony, David.
  • Naughten, Liam.
  • Nealon, Ted.
  • Noonan, Michael. (Limerick East).
  • O'Brien, Fergus.
  • O'Brien, Willie.
  • O'Donnell, Tom.
  • O'Sullivan, Toddy.
  • O'Toole, Paddy.
  • Owen, Nora.
  • Pattison, Séamus.
  • Prendergast, Frank.
  • Quinn, Ruairí.
  • Ryan, John.
  • Shatter, Alan.
  • Sheehan, Patrick Joseph.
  • Skelly, Liam.
  • Spring, Dick.
  • Taylor, Mervyn.
  • Taylor-Quinn, Madeline.
  • Timmins, Godfrey.
  • Treacy, Seán.
  • Treacy, Seán.
  • Yates, Ivan.
Tellers: Tá, Deputy B. Ahern, and Deputy Fitzsimons; Níl, Deputy Barrett,(Dún Laoghaire) and Deputy Taylor.
Amendment declared lost.

Amendments Nos. 15 and 16 have been ruled out of order.

Section 8 agreed to.
SECTION 9.

We have a number of amendments to section 9 which deals with appeals procedures and with the agreement of the House we could deal with them together.

We will take amendments Nos. 17 to 26 together, with the agreement of the House.

I move amendment No. 17:

In page 14, line 20, to delete "earlier" and substitute "later".

These amendments are to ensure that the right of appeal which the Minister proposes to severely limit will be protected having regard to the needs of the Revenue Commissioners and to the rights of taxpayers. We recognise that existing appeals procedures have been abused to delay payment of a tax liability. We do not suggest that there is not a need to streamline the procedure to avoid abuses. However, the Minister in moving to correct these anomalies has gone too far. The purpose of our amendments is to ensure that where discretion should arise it will be used fairly and objectively as between the taxpayer and the Revenue Commissioners.

On page 14, line 20 we propose to substitute the word "later" rather than "earlier" in relation to the appeal procedures. It says here:

Where on the hearing of an appeal against an assessment—

(i) no application is or has been made to the Appeal Commissioners before or during the hearing of the appeal by or on behalf of the appellant for an adjournment of the proceedings on the appeal or such an application is or has been made and is or was refused (but such an application shall not be refused before the expiration of a period of nine months from the end of the year of assessment to which the assessment appealed against relates or from the date on which the notice of the assessment was given to the appellant, whichever if the earlier).

This new restriction should be operated very carefully, as circumstances could arise where there would be genuine grounds for failure to submit the appeal on time. For instance, the appellant could be ill and it may not be possible for him to submit his appeal on time. Cognisance should be taken of such circumstances. Given the option between the earlier or later date we feel it reasonable to opt for the later date.

The next amendment deals with the kinds of evidence that the appellant has to provide before he can escape from the restriction on his right to appeal. On page 14 line 28 it says:

such a return has been made but all the statements of profits and gains, schedules and other evidence relating to such return have not been furnished by or on behalf of the appellant.

We feel it is already strong enough when it says "statements of profits and gains, schedules". The words "and other evidence" in the context of the restriction of this right is far too vague and general. It would be hard for any appellant to prove reasonably, much less conclusively, that he had satisfied the terms of this and had produced such other evidence as might be required. The section will be effective enough without the inclusion of such vague and general terms.

In line 33 the Bill says:

the Appeal Commissioners shall make an order dismissing the appeal against the assessment and thereupon the assessment shall have the same force and effect as if it were an assessment in respect of which no notice of appeal had been given.

In certain circumstances there could have been bona fide reasons for not making the return of the appeal in time. There are many such reasons, medical reasons and others, perhaps even an attempt to accumulate a whole range of evidence which it is not always easy to present at short notice. At least the appeals commissioner should be the person dealing with it, and should be given the discretion to make a judgment rather than being bound by the terms of legislation we pass here.

Progress reported; Committee to sit again.
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