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Dáil Éireann debate -
Thursday, 26 May 1983

Vol. 342 No. 12

Finance Bill, 1983: Committee Stage (Resumed).

Question again proposed: "That section 10 stand part of the Bill".

The Minister for Finance is in possession.

When we reported progress last night, I had made a brief number of responses to points raised by Deputy O'Kennedy. I want now to refer very briefly to a suggestion which he made last night in connection with this section, to the effect that since Deputy O'Kennedy expects that total tax revenue this year will be higher than forecast and that the current budget deficit this year will be lower than my forecast ——

I made the first part of that statement, but did not make the second part. Also, I did not say the total tax revenue. The Minister should not misquote me. I said from income tax and VAT. I do not want to be misquoted.

The Chair suggests that we do not have any interruptions today.

I am grateful to the Deputy for that greater precision in his thoughts. On the basis of what he is saying now, no particular conclusion can be drawn as to the amount of leeway which might or might not exist over and above the room which is there in terms of the budgetary targets which we have fixed. He is now saying that it is only a partial forecast and says nothing about the current deficit. That means that he is making a much more restrictive point than I had understood him to make yesterday.

The section with which we are dealing gives statutory effect to the announcement made in the Budget Statement that the overriding limits for interest relief allowable under section 496 of the Income Tax Act of 1967 will be reduced for 1983, 1984 and subsequent years of assessment from £4,800 to £4,000 for a married couple, from £3,500 to £2,900 for a widowed person and from £2,400 to £2,000 for a single person. These reduced limits cover a loan of approximately £30,000 in the case of a married couple at current interest rates, about £22,000 for a widowed person and about £15,000 for a single person. These are approximate figures and would vary with interest rates fluctuations. The yield from this measure is estimated at £2 million in 1983 and £3,500,000 in a full year. The number of people who will be affected by the section—they are the people whose interest payments are in excess of the reduced limits and who subsequently pay more tax—is estimated at about 32,000. On the other hand it is estimated that there are some 243,000 other persons who claim income tax relief on their interest payments and who will not be affected by the section because the total amount they claim is within the limit that would emerge from the operation of this section.

I would just make the point that the total cost of interest relief in 1983-1984 is estimated at £81 million. That will be after the effect of this section is taken into account. That means that were there no interest reliefs on the kinds of loans we are talking of, tax revenue to the State would be £81 million greater than it will be this year. In other words, because of the operation of this system, the State is foregoing the collection of £81 million and that, in any terms, is a substantial sum and, consequently, a substantial relief.

I did not follow that.

On the basis of the operation of this section the cost of interest relief this year will be £81 million. In other words, were there no interest reliefs of the kinds now allowed, the State would be collecting £81 million more in taxation.

What we are suggesting would mean only £2 million in 1983.

I am talking about the total amount. To put the Deputy's figure into context, it would represent 2½ per cent of the total amount of interest relief. The measures being taken here were begun last year. It might be useful to consider some of the background to the steps that have been taken so far in this direction. Interest reliefs have been criticised in a number of quarters on grounds of equity. It is suggested, for example, that they bring about a certain inequity in the tax system because the better-off taxpayers are able to take substantial advantage of available relief by being in a position to set their allowable interest against high marginal rates of tax. Clearly, an interest allowance of £4,000 is of far greater value to somebody paying tax at the 55 per cent rate rather than to somebody paying at the 35 per cent rate.

It has been suggested also that tax liabilities of non-borrowers are often higher than those of borrowers so that we can have situations in which two individuals of similar marital status and similar incomes would pay very different amounts of taxation because of the way they choose to dispose of their income and because partly of the liabilities they choose to take on.

Following from these considerations, major changes in interest reliefs were announced in the Budget Statement of January last year and were confirmed in the Budget Statement of March 1983. The proposals that were in mind then would have had the effect, first, of terminating income tax reliefs for personal borrowings and ensuring that relief would have been available only where the funds borrowed were for the purchase, repair or improvement of the borrower's principal private residence, that is, on mortgages and, secondly, the measures proposed at that time would have provided that mortgage interest relief would be allowed only at the 25 and 35 per cent rates and that a capital limit of £35,000 would apply to them. The point I am making is that in both the Budget Statements to which I have referred there was expressed a clear intention to reduce the scope of interest relief measures that are the subject of this section.

Those proposed changes were not proceeded with because they would have given rise to very substantial difficulties in the administration of the PAYE system. Indeed, it is an aspect of the proposals that I looked at again in the preparation of the budget this year. Without other substantial changes in the tax system I would conclude that it would be extremely difficult, for example, to limit the rate of relief to the 25 and the 35 per cent tax rates and that an attempt to do so would cause so much complication in the tax affairs of many individuals and families that while we might bring about some more apparent equity in the operation of the reliefs we would probably give rise also to a great deal of dissatisfaction and frustration on the part of people trying to claim those reliefs.

The conclusion I would draw from all that is that while the House made it clear on two occasions last year that it was of a mind to proceed in this general direction the method chosen then was neither appropriate nor practical. I am now proposing what I consider to be a more appropriate and more practical method of achieving the same objective. For that reason I urge the House to accept this section.

I would recall also to the House the views of the Commission on Taxation in this connection. In their first report, the Commission said they were conscious of the important role played by the deduction for mortgage interest in helping people to acquire their own homes but they went on to say that the system was defective as constituted because it provided the greatest help to those in the higher income groups. The commission added, though, that the total abolition of the relief would disrupt the housing market and would be particularly severe on first-time house purchasers and that consequently there was a need for an alternative.

That confirms the line initiated in January of last year, carried through in the following March and now included in the Bill before us. The measures put forward in the budget were a little more comprehensive than those referred to by the Commission on Taxation. These measures proposed that no relief be allowed for 1983-1984 or for subsequent years of assessment ——

I know that the Minister is as concerned as I am regarding the opportunity to debate the Bill within the constraints laid down but I would suggest that if he is quoting from his Budget Statement he would give the reference. I say this in fairness both to him and to us. If the Minister proceeds to repeat everything that is in the budget we will not have the opportunity of discussing the Bill.

I am conscious of the Deputy's concern and I am anxious to facilitate him but at the same time I wish to be sure that we have all the issues on the table, so to speak. However, I will be as brief as possible. What we proposed was that relief would not be allowed for 1983-1984 or for subsequent years of assessment in respect of interest on loans taken out after budget day other than mortgages in respect of a borrower's private residence. In the case of non-mortgage loans taken out before budget day, or existing mortgages on second homes, no relief will be allowed after 5 April 1985. In respect of new and old loans, the overriding interest limit for allowable relief will be reduced with effect from the commencement of the 1983-84 tax year to the figures I have mentioned: £4,000 for a married couple, £2,900 for a widowed person, and £2,000 for a single person. That is the overall measure proposed and the background to it.

I want to make a brief point which applies to many of the amendments. The Minister suggests that the Opposition, or for that matter The Workers' Party—but he is applying it in particular to us—are making proposals to increase charges in revenue. The implication may be that he is the only one who is being responsible. I want to remind him of the order of the House and the constraints on the Opposition, The Workers' Party, or the Labour Party, if they were so minded, which I do not believe they are.

We are precluded from putting down amendments which involve an extra charge on revenue or a tax on the people. The Ceann Comhairle confirmed that to me in respect of a number of amendments I put down. Some of our proposals were out of order because only the Government can introduce proposals involving extra revenue. I repudiate the implication that the Minister is the only one concerned about revenue. The Ceann Comhairle quite properly adheres to the rules of the House and I have had to accept his ruling, as others have, that amendments I put down in this connection were out of order. The Minister alone has the authority to raise revenue and impose new tax charges. That is the reality.

The Minister has given us the figures. The cost now is £81 million. Additional costs would be £2 million. That puts in focus what we are trying to achieve. We are concerned about first-time house purchasers. The Commission on Taxation said we should have a composite tax system. They do not want to see the system replaced unless and until there is an alternative. They recognise the problems of first-time house purchasers. The Minister said we are talking about mortgages of up to £30,000 or something over that. I think it would be less. In my view the figure would be £28,000 or thereabouts. A young married couple could provide very little for themselves at that price at this stage.

Surely we should encourage rather than discourage them by an action of this sort to provide a house for themselves. The Minister may find that there may be greater cost to the State by way of the entitlement many of them have to local authority housing which, of course, is subsidised at a much higher rate and a greater cost to the Exchequer and the taxpayer generally. Therefore, this move by the State is damaging to their interests and that is a matter of great social and economic concern.

I mentioned the housing industry. This is another element in undermining the housing industry. Anything which discourages potential house purchasers or owners from acquiring property affects the building industry. This clearly does. I am not saying it is a major factor, but it is another factor in line with all the others in this Bill. This extra action is a further damaging blow to the building industry. Have we lost all concern for employment? Are we really going to take measures on every front which in this case will raise a net extra £1½ million this year? Are we determined to take those measures in the face of the reality of growing unemployment to the point where we have reached a chronic state in the building industry?

The Minister said last night we were presenting this as if the building industry were the motor of the economy. We are making no such case. We are saying it reflects the condition of unemployment in the economy. We all know the economy is fairly sick at the moment. The building industry is nearing its last gasp. If the Minister is disposed to accept any amendment we put down, this one which affects young married couples, employment and industry should be accepted by him, particularly as we are asking only for the maintenance of the status quo. Incidentally, it also applies to widows, and that is important. As Minister for Finance I introduced special exemptions for widows in this category. They too are being hit in this area. If that is to be the price of the Minister's action, let it be seen to be the price.

Deputy O'Kennedy presents me as being the most obdurate of men. What I am saying about this measure partly is that it is in line with and consistent with a measure which the Deputy's party initiated while in Government. They initiated it in a form which proved to be not capable of application. That is one point.

Secondly, I said the interest relief this year in total will be worth about £81 million. I have here the figures from the Public Capital Programme on other assistance through the State mechanisms for the building industry. For example, there is an allocation of £130 million this year for house purchase and improvement loans and supplementary grants.

For local authorities.

No, for house purchase and improvement loans. We have the Housing Finance Agency, other house purchase loans made by local authorities and there is a figure of £0.8 million for supplementary local authority housing grants. We will leave that aside for the moment. There is roughly £130 million altogether there. I have not got the figure to hand at the moment, but we have also the total amount of expenditure on the mortgage interest subsidy payments. When we take all of that together there is a very substantial amount of State assistance available for the housing industry for the provision of new housing.

I want to refer back to a problem rather similar to one raised yesterday by Deputy Haughey in relation to our income tax system and the administration thereof. Over the years we have brought in a series of different measures to assist people who are buying their houses. We have the SDA loan scheme. We have the Housing Finance Agency scheme. We have the mortgage interest subsidy scheme and we have these interest reliefs. Although we are not in a position to do anything concrete about it at the moment, I suggest there is a need to look at how all of these schemes operate together. The point I am making is that to concentrate in the discussion of this section on interest reliefs only runs the risk of distorting the discussion and putting it into an excessively narrow context.

The idea of providing housing subsidy through this kind of mechanism is not the best way to assist people to provide accommodation for themselves or to improve their accommodation. It is fairly well understood that as it operates at present it benefits those on higher incomes more than it benefits those on lower incomes. It brings in the whole question as to why we allow housing to be subject to the open market. Why is it that some people need assistance to pay interest rates on loans which they need to provide their own homes? There is also the question of land speculation and the fact that house prices are set by the market rather than by the actual value of the houses. If a system of subsidies has to be provided I would prefer a system of direct subsidies to people who need them rather than subsidies which operate through the tax system. However, the Minister is not offering any alternative to the present system and for that reason I would not agree to the reduction proposed. Presumably widowed persons have the same mortgage commitments as if they had a spouse and why is it that they do not get the same level of relief as a couple living together?

I am putting the question: "That section 10 stand part of the Bill."

Deputy De Rossa asked a question to which I would like to reply. As I said yesterday in the context of a different discussion, I can appreciate that a widowed person does not find that mortgage payments are reduced when a spouse dies. If we were to give the same relief to widowed persons in this connection we would create further anomalies that would discriminate against other people and we have not yet found a way of dealing with that problem.

Deputy R. Bruton rose.

The question has been put.

This is a matter for the Whips. It is certainly not a matter for the Chair.

You rose to put the question and as a special concession we listened to the Minister for two minutes and we insist that the question be now put. If it is not, I will move that it be put.

On Committee Stage a Deputy can speak as often as he wishes.

You stood up.

I concede that. Does Deputy Bruton persist in wishing to speak?

I would like to make one or two points.

I move that the question be now put.

I will not accept that. The Chair has discretion.

We have a very tight schedule for this Bill.

It is only a very short time since four or five Deputies offered on this very item and something has happened in the meantime. I would suggest that if we are to curtail speakers the Whips should meet and arrange it.

That is not the point. You rose to put the question and as a courtesy we allowed the Minister to reply. Now another Deputy has arrived.

I rose to put the question on the basis——

I am withdrawing from the business altogether.

I cannot help that.

On a point of order, I have foregone my right to speak, as I feel the Deputy should now do. To be absolutely consistent with what Deputy Haughey has said——

The Chair was putting the question in order to jolly the thing along and that is the traditional way of doing it.

You are being grossly unfair.

I resent that.

I do not care because you are being unfair in this matter.

If I might say a word or two, I wanted to reply to Deputy De Rossa——

I am calling Deputy Bruton, if he wishes to speak.

Arising out of Deputy De Rossa's point, there is some inequity in the levels that are struck. There is the problem that single people may have dependants also and they will be on the £2,000 level while the widow with dependants will be on the £2,900 level. I would suggest one possibility which would evade the difficulties brought about by the Murphy case. Such allowances could in future be based on the head of household and dependants because it is after all an attempt to reduce the cost of a head of household of providing a place for his family. I do not think it would be a breach of the principle established in the Supreme Court to base such a relief on the head of household and the number of adult and child dependants in that household.

In our tax system there is a continuing special position for owner occupation as opposed to renting. Rents are not tax allowable whereas mortgage outgoings are. In the previous budget there was an attempt to bring in an allowance against rent for older people and that principle should not be lost sight of. It probably is especially equitable to talk about bringing in allowances for rents when at the top end of the scale we are talking about residential property taxes for owner occupiers. We will have a consistent package if in a number of years' time we have a residential property tax and a tax credit covering both rents and mortgages. That is the most equitable way of dealing with housing subsidies and I would recommend it to the Minister in future budgets.

The first suggestion, that we should base allowances on the head of household and the number of adult and child dependants, is an interesting concept but we would need to consider it in some further detail. What would be the result in a case where the head of household did not have an adult dependant in that the spouse was not fully dependent on the head of household? I leave it to Deputy Bruton to sort out his own salvation in trying to decide who the head of household would be in those circumstances. There could be some difficulty in such a case and its comparison with the case of a single person. Would we, for example, give two allowances to a household where there were two income earners? I take the principle that the operation of the system at present does not take account of certain changes in circumstances with which people can be faced during the life of their mortgage.

I want to record my displeasure at the manner in which this section has been taken.

If that is meant as a reflection or criticism of the Chair I must ask Deputy Brady to withdraw it.

I have not said that.

I want to support Deputy Brady.

If either Deputy Brady or Deputy Haughey is criticising the Chair he will withdraw.

I said I was not——

Who is Deputy Brady criticising in that event?

I think the Minister is treating the entire Finance Bill with derision.

That is absolutely ridiculous.


Order, the Chair is standing. When the Chair stands everybody else should sit down.


The Minister will please sit down.

Question put.
The Dáil divided: Tá 75; Níl, 67.

  • Allen, Bernard.
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Myra.
  • Barry, Peter.
  • Bruton, Richard.
  • Burke, Liam.
  • Carey, Donal.
  • Collins, Edward.
  • Conlon, John F.
  • Coogan, Fintan.
  • Cooney, Patrick Mark.
  • Cosgrave, Liam T.
  • Cosgrave, Michael Joe.
  • Coveney, Hugh.
  • Creed, Donal.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • 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.
  • Begley, Michael.
  • Bermingham, Joe.
  • Birmingham, George Martin.
  • Boland, John.
  • Bruton, John.
  • Kenny, Enda.
  • L'Estrange, Gerry.
  • McCartin, Joe.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • 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.
  • Yates, Ivan.


  • Ahern, Bertie.
  • Ahern, Michael.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Michael.
  • Barrett, Sylvester.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Brennan, Paudge.
  • Brennan, Séamus.
  • Browne, John.
  • Burke, Raphael P.
  • Byrne, Hugh.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Edward.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Cathal Seán.
  • Cowen, Bernard.
  • Daly, Brendan.
  • De Rossa, Proinsias.
  • Doherty, Seán.
  • Fahey, Francis.
  • Fahey, Jackie.
  • Faulkner, Pádraig.
  • O'Malley, Desmond J.
  • Ormonde, Donal.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Reynolds, Albert.
  • Treacy, Noel.
  • FitzGerald, Liam Joseph.
  • Fitzsimons, Jim.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Denis.
  • Gallagher, Pat Cope.
  • Geoghegan-Quinn, Máire.
  • Gregory-Independent, Tony.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hyland, Liam.
  • Kirk, Séamus.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McEllistrim, Tom.
  • MacSharry, Ray.
  • Molloy, Robert.
  • Morley, P.J.
  • Moynihan, Donal.
  • Noonan, Michael J. (Limerick West)
  • O'Dea, William.
  • O'Keeffe, Edmond.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • 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 V. Brady.
Question declared carried.

I move amendment No. 28:

In page 18, before section 11, but in Chapter 1, to insert the following new section:

11.—Section 5 of the Finance Act, 1982, is hereby amended by the insertion in subsection (2) (a) of the following paragraph:

(i) at any time during the year of assessment he was the age of 65 years or upwards or if under the age of 65 years he was at any time during the year of assessment in receipt of a taxable income (after deductions of normal allowances) of less than £2,500 per annum, and,'.".

The purpose of this amendment is to provide income tax concessions for tenants of private dwellings, who are on a low income, in respect of the rent they pay. There is already provision in last year's Finance Act for tax deductions in respect of rents for tenants over the age of 65. The intention of the amendment is to extend that provision to tenants under the age of 65; but not to all such tenants, only to those tenants with a taxable income of less than £2,500 per annum. In other words, the intention is to allow a tax deduction in the case of a very vulnerable section of the community, in the case of those people in very poor circumstances who cannot afford the ever-increasing rents imposed on them by unscrupulous landlords.

This is a clearly a desirable amendment, all the more so because the State expenditure involved could be recouped by the consequent returns from the previously undeclared incomes of many of the landlords involved. I was hoping this combined approach of subsidising tenants in poor circumstances and recouping from the landlords involved would, in fact, be a significant step and a significant move towards social equity. If we put this proposal in the context of the public financing of local authority housing, which is all the more relevant this year under the present Government when the housing lists of the various local authorities are growing and the amount of money allocated to such housing has been reduced with the result that the number of houses which will be built will be reduced, then the number of people forced into private rented accommodation will correspondingly be increased.

Quite substantial rents are being paid in this city and in other cities throughout the country for rooms in very substandard accommodation. People in very poor circumstances can least afford such rents but they have little alternative but to pay them and surely they deserve income tax reductions in respect of these rents. Equally, landlords who supply the needs of people in this way and evade tax on a widespread scale should be made pay their fair share of tax. There will never be a fair and equitable taxation system unless effective steps are taken against those who evade tax and refuse to pay their just share.

I believe this amendment, if accepted, will go a little way in the direction of greater social equity by subsidising those in need and taxing those who are guilty in many instances of tax evasion. The only possible objection to the amendment would be that of cost. If, however, this amendment were accepted it could be implemented on the basis that a claimant, in order to prove entitlement to a tax reduction, must refer to the identity and address of the landlord who would then be taxed on the rent he receives. This process will provide an effective register of landlords which all other efforts to date have failed to achieve. The cost of the amendment could thus be offset by the income accruing to the Exchequer from the previously undisclosed income of many landlords. I would hope when the Minister is replying to this suggestion that he will indicate not just the cost of implementing this amendment but the actual amounts that would accrue from landlords if such a register were compiled and if the landlords were taxed consequently on the rents they received.

I should point out that in last year's Finance Bill I moved a similar amendment though a more costly one, because it referred to a higher income bracket and would have taken in more tenants. At that time the principle was the same and the amendment was later amended by the Labour Party to precisely the same wording that I have now tabled for precisely the same income bracket. In the debate last year the Opposition spokesman on Finance, Deputy John Bruton, when speaking on the same amendment said that he very much supported the principle of the amendment. I quote from column 316, volume 337 of the Official Report of 30 June 1982:

As the House is aware, since June 1981 it has been the policy of my party to introduce a tax allowance for rent payments. We believe it is necessary to introduce a degree of fairness as between people who are buying their own houses and can claim interest as a deduction against income tax on the loan they take out for that purpose, and people who have chosen not to buy their own houses but to rent them and can get no tax allowance of any description for the rent payment they make.

Deputy Bruton then went on to say that there was a strong economic case as well as a social case for encouraging the use of rented accommodation. He said:

Any encouragement towards the use of rented accommodation as distinct from owner occupancy, or at least putting it on an equal footing in the terms of tax advantage, would lead to better utilisation of our housing stock.

Spokespersons for the Labour Party equally on that occasion welcomed this amendment and supported it. Deputy Mervyn Taylor said, and I quote from the Official Report at column 320:

The substance of this section highlights a very serious inequity in our taxation system, the basic unfairness that arises as a result of the positive discrimination which our taxation system as at present constituted accords in favour of house owners as against house tenants.

Deputy Barry Desmond, speaking in the same debate said:

Giving a rent concession to persons on low income who pay a relatively high rent is a progressive step and is socially equitable.

He did not think, at the time, that what was involved would be very expensive. He went on to say that the Labour Party favoured the amendment on balance. He said:

The kind of amendment I would favour would be that anyone with a taxable income of £2,500 should get this relief... An amendment along the lines of £2,500 would be entirely reasonable and that is what I would table. Deputy Gregory and I would have common ground on that and we would not destroy the integrity of the budget.

Last year there was agreement from the Fine Gael and Labour Parties that this amendment was socially desirable and justifiable and that the cost involved did not take away from that fact. I hope the principle of the amendment will command their support today.

I would ask the Minister even if, as I suspect is inevitable, he is not prepared to accept this amendment at this stage, whether he intends in the long term to move forward in this direction and whether he can give any indication as to what his intentions are in that regard.

I see a great lot of merit in this amendment. It is an idea I put forward a number of years ago. However, things should be put in perspective and with respect to Deputy Gregory his entire case seems to be spearheaded against those who are providing accommodation to tenants. This is running contrary to the provision of alternative housing accommodation in the city which is very badly needed. There are landlords who are providing a tremendous housing service. There are people who are forced into a situation whereby they have to sublet part of their home to derive a certain amount of income from it to have maybe a lodger or tenant or two staying there. This can be deemed to be a great social service.

Rather than doing this in one fell swoop, because I do not think the economics can stand up to that, the Minister should take a look at this area. He should look at the forgotten mass of people who are living in flats in large cities, principally in Dublin, and are burdened with enormous rent increases. Recent legislation has done that to them too. Some relief should be given there. I do not think it can be introduced like this unfortunately, but if the Minister could give some assurance that he will move in that direction I personally would accept that in good faith. It would have the effect of encouraging people to even purchase flats. There is a complete change in the living accommodation pattern of people in Dublin at present. If they can afford the heavy crippling mortgages of homes, then a valid case can be made for the purchase of a flat. This is one way of encouraging people in that area. I would be very interested to hear the Minister's comments in reply. If the Minister has the statistics perhaps he could let us know how many tenants would be affected and what the cost to the Exchequer would be in line with the threshold put forward by Deputy Gregory. I should like to get information as to what the figure would be if the threshold was quartered so as to make it a realistic proposition. That would enable a start to be made in a smaller way. I agree there is a lot of merit in the amendment.

I support the amendment with the proviso that in introducing such a scheme the Minister would ensure that people in receipt of the relief would benefit by it and that it would not find its way to the landlords to whom they are paying the rent. Most Deputies in Dublin know that there are many flats in the city whose rents are increased nearly every other week. Such landlords do not do anything to improve the standard of accommodation. In some cases these flats are fire traps and the entire standard of the accommodation is unsatisfactory.

I suggest the Minister should seriously consider the setting up of rent tribunals with a view to bringing about security of tenure. It is not enough that the benefits of such relief would wind up in landlords' pockets. At the moment rents are governed by the market rather than any criterion of fairness and justice. Therefore, a tribunal should be set up to regulate the position.

The Government or Fine Gael have not changed our position since last year: in the sense that we are still aware of the problem and anxious to move in the direction the three Deputies have been speaking of. It is for that reason that the provision now in the Income Tax Act was inserted in the Finance Act last year. When that measure was being brought forward the point was made in January, and subsequently in March, that it was recognised that there is a need for a measure that would have wider application, but the budgetary circumstances did not allow that to happen.

I regret to say that is still the situation. Deputy Gregory asked if I would give details of the cost involved and the amounts that would accrue in tax receipts if a register was established. The cost would be about £6.5 million in 1983, rising to £10 million in a full year. He asked how much tax revenue would accrue to the Exchequer if all the property owners not now covered were to register. I cannot say, I have no idea. The only further light I can throw on it is that under the Housing (Private Rented Dwellings) Act, 1982, about 10,000 landlords registered. I do not know what the proportion of the total number who would be covered by this scheme would be in relation to the 10,000. It is clear that the operation of that Act and a number of other provisions to ensure we will get complete reporting by taxpayers of their incomes should move in the direction Deputy Gregory has in mind.

Deputy Brady asked how many people would be affected. The amendment would provide relief for 49,000 persons approximately. It is difficult to be precise about any of these figures, considering the nature of the problem. The intention of the proposed amendment is to extend the scope of the relief that exists following the amendment of the Income Tax Act which gives relief to persons with taxable incomes of £2,500. It is intended that this relief would apply to persons of under 65 years of age whose practical income is less than £2,500.

The terms of the scheme proposed in the amendment would create a number of difficulties in relation to the PAYE system. A scheme would have to be worked out to assess a person's eligibility depending on how his income moved during a year and there would be a number of problems in that respect.

I oppose the amendment for reasons basically of the cost involved at this time, but partly because of the problems created by the form of the amendment. The intention of the amendment is something I should like to see progressing further in future years because we are dealing with a group of people who are in a difficult situation. I would point out that some of the people who would be expected to benefit under a scheme of this kind would be those who will benefit from the family income supplement scheme later in the year. Though we cannot implement this amendment now, we would be anxious to move in this direction, and in the meantime some measure of assistance will be offered to the people affected.

When he is examining this matter in the future will the Minister make it mandatory on all landlords to be registered, as well as tenants, so that there will be a correlation of information available. That would provide the groundwork for an improvement in next year's budget.

Even before the provisions in this Finance Bill came about, anyone who has an income from sources other than employment is requested to return all such income. What the Deputy is suggesting is very realistic and departs somewhat from the tenor of the remarks that have been made here over the last day or two from that side of the House. He is suggesting that there are some people who do not make that return. Some of the provisions in this Bill are of a nature that would put a greater degree of pressure on people to disclose other sources of income, perhaps including sources of income which would be covered by this section.

With respect, I was not speaking along those lines. I was making things easier for the Minister. Dublin Corporation, the largest local authority have no register of landlords. It may be said that this information should be submitted to the Department but a strong case can be made for a register to be compiled as a separate entity.

I am with the Deputy in spirit. What I am saying is that there is already provision in our tax law requiring people to disclose that kind of income. We have established that some people do not disclose this information and we have to find more effective ways of making them do so. There are several ways of doing that: some have to do with tax and others will come under different legislation.

Amendment put and declared lost.

Sections 11, 12, 13, 14 and 16 will be debated together. Is that agreed?


Question proposed: "That section 11 stand part of the Bill".

Section 11 is intended to extend the charge to income tax on farming profits to those farmers who up to now were excluded because the valuations of their holdings were below the exemption threshold of £40 poor law valuation. This measure is affected by this section by substituting a revised version of section 15 of the Finance Act, 1974, the effect of which would be to treat all farming in the State as a single trade, the profits or gains from which will be chargeable to tax under Case 1 of Schedule D. The exemption threshold is therefore abolished for 1983-84 and all subsequent years of assessment, and farmers for those years will be chargeable to income tax on the basis of their actual profits.

It is estimated that an additional 90,000 farmers will be brought within the scope of the tax charge consequent on the abolition of the threshold of £40 rateable valuation. It is difficult to give an estimate of the actual yield of taxation from this measure because we do not have that kind of information about the incomes of farmers who will be brought into the tax charges as a result of this. As I said in my Budget Statement, we have a tentative estimate that the removal of the threshold will increase the yield from farm taxation by approximately £2½ million and that, together with other factors, would bring the total yield from farm taxation up to £47 million.

I do not know if at this stage Deputies wish to have a detailed examination of each subsection, but perhaps not. There are some points to which I would like to draw attention. In bringing a large number of farmers within the tax net for the first time we have to find an effective and convenient system for dealing with these extra people, about 90,000. It is clear that a substantial proportion of those people will not have a taxable income but some will. It becomes necessary—and this applies for a number of different reasons — to find a way of indentifying those farmers who would have a taxable income which would not put those people or the Revenue Commissioners to a great deal of obair in aisce. For that reason, I have made provision for a new procedure for assessing, in the first instance, who is likely to have a taxable income.

We have drawn up what is called a farm profile form which will be sent to farmers who come into the tax net for the first time and which would allow the tax inspector to get an idea whether the person sending in the profile form would be likely to have a taxable income. The farm profile form is a fairly simple, straightforward document and should be capable of being filled in by the farmer without requiring him to engage the services of an accountant or consultant. This is particularly important because I have a great deal of sympathy for people who object to paying several hundred pounds to prove they do not have a taxable income. I must say in passing that that situation is not peculiar to the farming sector. There are a great many companies who are required to produce audited accounts which may show at the end of the day that they do not have a tax liability. There is a particular difficulty in that regard in relation to many people in the farming community. That is why we have introduced this form.

The information on that form is designed to assist the local tax inspector in forming an idea whether the farmer in question is likely to have a tax liability. In the event that the inspector decides the farmer is not likely to have a tax liability in that year, there will be no further communication with him but the inspector would obviously come back to review that case at intervals depending on how the situation was evolving in the farming sector. In the event that the inspector feels that there might be a tax liability a form of declaration will be required of the farmer and he would be required to produce a return based on the simplified form of farm accounts. We found that the simplified form of farm accounts works well and that it would be an appropriate means for dealing with people coming into the tax charge for the first time in this new system. There is no point in going into every detail because the outline of the scheme is the most important part of it.

I have discussed the farm profile with the main farming organisations. There has been mostly agreement on the whole but there is a subsisting amount of disagreement. To the extent that there is disagreement, it appears to be based on the proposition that the farm profile should be used to determine tax liabilities. I do not find that that would be an appropriate method of dealing with the problem because what that would amount to would be the introduction of a new notional system with all the disadvantages that that would have, directly in terms of the taxation of the farming community and indirectly in the context of the view of taxpayers in general of our tax system.

As far as the farming community are concerned the operation of a notional system of that kind would result in a situation where people whose incomes are below the average would be systematically overtaxed and people whose incomes were above the average would be systematically undertaxed. There are not many people who would wish to see a system with that effect brought into operation. Those who are now opposing the farm profile approach seem to be taking a very short-sighted view of the problem and to be running the risk of creating unnecessary divisions not only in the farming community but between the farming community and other groups. The system proposed there should not be an excessive burden on the people concerned; it allows us to get a fairer result in terms of the application of our tax system to the farming community and it allows the amount of leeway required to take account of the circumstances of the farming community just as we take account of the circumstances of other kinds of productive enterprise in applying the tax system to them. Those are the main points in relation to these sections.

Section 12 deals with the treatment and the consequences of the optional basis of assessment in previous years for farmers brought into a charge of tax on their profits for the first time this year. It provides that farmers who wish to elect for the treatment that is provided for in this section may do so by notifying the inspector of taxes to that effect within 30 days after the date of the notice of the assessment. The primary purpose of the option being given is to make provision for farmers who are being brought into a charge for tax for the first time this year and who have not been keeping accounts up to now.

Section 13 makes provision relating to relief in respect of increases in stock values. It continues the existing provision and puts it into a form where we will not have to make a specific provision in the Finance Bill every year provided that this will continue for as long as stock relief provisions are applicable in other years.

Section 14 deals with the question of relief for losses under section 307 of the Income Tax Act, 1967. The effect of this section would be that relief for losses under section 307 of the Income Tax Act, 1967, would continue not to be available in respect of a farm loss in any case where the individual who sustained the loss is not chargeable to tax in respect of his farming profits for the year of assessment in which the loss was sustained because of the operation of the exemption limit based on rateable valuation.

Section 15 amends the provisions of section 22 of the Finance Act, 1974, in relation to farm buildings. Essentially it would prevent the carrying forward of the allowance for set-off against the profits or gains chargeable for any subsequent year of assessment.

The sections all together are designed to make the first step which I described as far as section 11 is concerned and then to make consequential provisions on that, plus the provision in relation to capital allowances, so that these four sections will make the proper provision for those who will be coming into the tax net for the first time this year. Our intention has been to do it in a way that will mean that we will have effective application of the tax and a system of application that will be efficient without being excessively onerous on the taxpayers concerned or on the tax collection system.

(Limerick West): The Minister has said that this is the best system to avoid divisions among the farming organisations and between the farming sector and other sectors. The reverse is the situation and the Minister's approach is dishonest. The Minister has criticised part of the Fine Gael-Labour Policy for Government. I will refer to Fine Gael policy as outlined in their programme for economic recovery. The Minister rightly pointed out that the poor law valuation system as a basis for assessing farmers for income tax and for other purposes is not constitutional or is being waived at present.

The Fine Gael policy document goes on to say:

We propose that it be replaced by a system based on standard results per enterprise and per region taken from the Farm Management Surveys carried out by An Foras Talúntais. We propose also that farmers should have the option of having their liability and eligibility assessed either on this basis or on the basis of factual assessment.

If that was right when that document was published surely it is right now so far as Fine Gael are concerned. I cannot see why they have changed their minds. This is the dishonest aspect that I see not alone in relation to that document but also in relation to the Programme for Government published in December where that principle was repeated. Fine Gael went to the people and looked for farming votes on a certain proposition which the electorate thought they would implement if returned to office. Now they have made a completely reverse decision. They have not implemented the commitment they made. This is gross dishonesty. Far from obviating division, the Government have added to the division among farming organisations and between the farming sector and other sectors.

The Minister has referred to a simplified form of accounts for farmers who are assessed by the local inspector of taxes as having taxable income. Will such simplified form of accounts be accepted by the Revenue Commissioners for tax assessment purposes without the farmers having to employ an accountant? I would ask the Minister to reply to that question when he is replying to the debate.

The Minister has mentioned that there will be approximately 90,000 farmers brought into the tax net for the first time on this occasion and has suggested that the yield from income tax will be £2½ million. I hope that the production of that yield will not cost the farming community an amount far in excess of that, in other words that the farming community will not be put in the situation that they have to prove that they have not, in fact, a taxable income where such is the case.

With regard to the sections of the Finance Bill which affect the farming community I would point out that there is no incentive for increased production. The proposals now being implemented would tend to decrease production. There should be a system of taxation of farmers that will create an incentive for increased production. This is what the country needs. I am not saying that the farming community should not pay their fair share of income tax. I do say that there should be built into the system an incentive for increased production, in other words that the producer will not be penalised by the taxation system for an increase in production. I would ask the Minister to consider that aspect seriously. These are the two points I would emphasise, that farmers should not be penalised for increasing production and should not have to prove, at their own expense, that they have not in fact, taxable income.

I would ask if the Minister would give the legal definition of "simplified accounts", if there is such a legal definition. Would the Minister be prepared to produce a sample set of accounts that would be acceptable to the Revenue Commissioners? This would be important.

I would like to support what my party colleague has said. Farmers are the backbone of our community and are the backbone of the economy. Lifestock production is essential if the country is to survive and to get out of its present crisis. Agriculture is our largest industry and accounts for 19 per cent of the national income. Over 20 per cent of the country's workforce are employed on the land. There are 50,000 employed in the agricultural industry and all this employment is outside the city of Dublin. This year there are 90,000 more farmers being brought into the tax net for the first time. Many of these farmers have not even got pocket money. It is hard to believe that the Government would have brought this number of farmers within the tax net.

It is the farmers who did that.

I come from a different type of constituency than that represented by the Minister. If the Minister lived in my constituency he would realise that livestock is the backbone of our economy and is the only way forward for the country. Schedule B is an impossible system of assessment of farmers in livestock production. It is impossible to compare one section of agriculture with another. I think the Minister spent his early working days working in a very influential farming organisation. He has made a lot of progress. How, for instance, could one compare a dairy farmer with a grain farmer? We all know what farming is like. We farmers have had to get out of our beds in the small hours of the night and early hours of the morning to help a cow to calve. If we failed to do that, we knew the risks involved. Many young farmers have to call on their children at the tender age of seven to help. It is completely unjust to put farmers in livestock production into that category. I appeal to the Minister not to allow the Shergar owners and other stallion owners to influence him in changing taxation on farmers.

If you want to make an accusation make it.

Livestock farmers must be compensated.


The incentives must be there to work and that is the way forward for us. A farmer has a seven-day week job. He works a nine-hour day, seven days a week on average. His wife, who is part of the family farm, will possibly do three to four hours' work a day, hard work, in a farmyard in the spring. His children will do some work before going to school, possibly two hours per day in the early morning and then they have to face the road to school.

How can a farmer be assessed on Schedule B? Does the Minister understand what livestock production is all about? This type of assessment is completely irrelevant.

Your party have no proposal.

I strongly appeal to the Minister to let the livestock producers expand. Our dairy farmers are only too ready and willing to work.

The Minister's party gave a commitment. Their programme in connection with jobs in the eighties stated, under the heading of measures that can be taken at national level:

The Poor Law Valuation (PLV) system currently used as a basis for assessing many farmers' eligibility for certain benefits and liability for certain contributions must be replaced. It will be replaced by a system based on standard results per enterprise and per region taken from the Farm Management surveys carried out by An Foras Talúntais. These gross results would be adjusted to take account of capital depreciation, interest payments and other factors, in order to calculate taxable income.

An Foras Talúntais are an independent body for whom I have the greatest admiration and who have done an excellent job in improving the standards of farming and of farm incomes. The joint programme continues:

We propose also that farmers should have the option ——

and the programme does use the word "option".

—— of having their liability assessed either on this basis or on the basis of factual assessment.

Have the Government gone back on that commitment? Has the Minister fooled his party supporters and the farmers? Has he led them astray with his election promises?

They will not be fooled by you, either.

(Limerick West): On a point of order, the Minister should refer to the speaker as Deputy O'Keeffe.

I beg the Deputy's pardon.

I had noticed that as well. If we are serious about keeping people on our land, we must give them an incentive to stay on the land. We can look at our EEC partners and see that the Dutch who have a system similar to what is now proposed by the Minister, have lost many thousands of farmers from the land in the last 25 years because of that system. We can look at our French counterparts who have an alternative system. I would be afraid of what would happen if the French expanded their agriculture because theirs is a vast country with vast farming resources. They have a separate assessment and their agriculture is thriving. This is because of the incentives given to them. We have seen one sector of our community from whom the incentive to work has been taken. I refer to the PAYE sector where a man's overtime is taxed as if he were working an ordinary day. That is where the incentive to work has been killed. I appeal to the Minister not to let himself be carried away by an accounts system. As a man who looks forward, he should think again about Schedule B and give the Irish farmers a separate system of assessment.

I have listened with interest to the Minister outlining this new farm profile form which will be sent out to the 90,000 farmers who are coming into the tax net. I wonder were the members on the Opposition benches talking to different groups of farmers from those to whom I was talking over the last few months since this system has been proposed. The major farm organisations and a large percentage of farmers involved agree with the system proposed here of the form being sent out to these people.

This system could be extended to apply to farmers of up to £80 valuation rather than be limited to the 90,000 who are coming into the net. These people over the last number of years have had to engage accountants to let the Revenue Commissioners know that they are not liable to tax on their incomes. We have built pyramids for accountants throughout the length and breadth of the country. These farmers have up to now had to pay up to £400 or £500 each year to show their non-liability for tax. The Revenue Commissioners should accept the simplified form in their case as in the case of the 90,000 farmers. These people would then not have to be contacted again, as the Minister has stated, if their income is not taxable.

I do not agree with some Opposition bench speakers. I do not know what sort of farming Deputy O'Keeffe carries on, but when I was working on my farm I used to spend about 15 hours a day looking after it. We must accept a system of taxation on the basis of income, if that income is taxable. In this year of 1983 no-one will disagree that if one has a taxable income one should pay a fair share of tax, in fairness to our working class. It is only right that farmers and small businessmen should be on the same basis of taxation as workers. That is a step in the right direction and is making the entire system more equitable. It will bridge a gap that existed for years.

Progress reported; Committee to sit again.