Finance Bill, 1983: Report Stage.

On a point of order, before the Chair calls Report Stage of the Finance Bill, last week Committee Stage was divided into sections for the purpose of getting it through the House quickly. The result was, among other things, that sections 16 to 46, inclusive, were taken together. Sections 17 to 46, inclusive, received no discussion. I had been anxious to say something brief on section 21 and I appear to be prevented from doing so because on Report Stage amendments only are taken.

That is right.

Would it be in order if I were to put down at this stage a short amendment to section 21, based on the lines that the necessity for the amendment arises out of the way in which Committee Stage was taken?

In view of the very limited time at our disposal, I feel that it is too late now to start considering an extra amendment. If that had been put to the Chair earlier in the day it might have been possible.

I am sorry.

I can only suggest that Deputy Kelly might get himself within the terms of the gentleman's agreement.

That Deputy Kelly might try.

We have no time for layabouts who do not do their business efficiently.

Order, please.

May I just repeat that this point arises because Government and Opposition Whips agreed on a certain mode of doing the business of the House last week? It necessarily precluded all Deputies from contributing individually on sections 17 to 46, inclusive, of an important Finance Bill.

The Chair does not wish to be unreasonable or to interrupt Deputy Kelly. However, he wants to point out two matters. Such orders as were made last week curtailing the procedure of the Bill were made unanimously——

I appreciate that.

——by the House. The second matter is that I have called Report Stage and any more talk now will deprive Members of the time at their disposal.

We are anxious to get on with the Bill.

I wish to get on with the Bill. Amendments Nos. 1, 2, 3, 4 and 5 in the names of Deputies Mac Giolla and De Rossa have been ruled out of order. Amendment No. 6——

Am I to understand that any amendment not moved on Committee Stage may not be moved on Report Stage? It is my understanding of the Chair's ruling that these amendments are out of order as they had not been moved on Committee Stage. If this is so, there is an amendment relating to corporation tax which also was not moved. I wish to take this opportunity to point out that there was a problem at the gate of Leinster House when the supervisor would not admit a delegation into my office. That created the problem here on Committee Stage in relation to the Bill. I want to make a protest in that regard, because other delegations at different times were allowed in without any problem. I clearly recall the publicans having a demonstration and about 500 of them came in here.

We cannot discuss that.

Is the ruling that any amendment which has not been put down on Report Stage cannot be put at this stage?

That is not correct. Deputies who put down amendments on Committee Stage and had an opportunity to move them and failed to exercise that right or opportunity are precluded from moving them on Report Stage.

I am sure the Ceann Comhairle appreciates that it was due to a problem at the gates that I was unable to move these amendments on Committee Stage.

The Chair sympathises with Deputy Mac Giolla but regrets very much that he has no way of getting over the difficulty. Amendments Nos. 6 and 7 have also been ruled out of order if that is any consolation to the Deputy.

Could I be given an opportunity to move these amendments on Report Stage, particularly amendment No. 5? I wonder if you could change your ruling on this?

It is embarrassing to the Chair to be asked to do so and so when his hands are tied by Standing Orders, and when he has not got the authority to do so. It makes the Chair appear to be depriving somebody of something over which the Chair has a discretion which he has not got.

I appreciate that your hands are tied in this matter, but perhaps the Minister could indicate whether in relation to No. 5——

The Deputy is going back into Committee Stage.

I am just asking the Minister——

Amendments No. 6 and 7 have been ruled out of order. Will Deputy Mac Giolla or Deputy De Rossa move amendment No. 8?

I move amendment No. 8:

In page 11, line 27, to delete "£286" and substitute "£351".

This allowance was introduced originally to assist people who were on the increased PRSI. This temporary measure was introduced in order to relieve them to some extent. That allowance should be increased this year as the take from the PAYE workers' pay packets has gone up considerably not only in relation to the increased levies which have been introduced but also in to the fact that additional PAYE is deducted without any increase in allowances. When the Minister is replying I should like him to refer to amendment No. 5 which has been ruled out of order which seeks to increase the exemption limits for persons over 65 years of age and over 75 years of age. I fail to understand why the exemption limits were not increased for these categories. I have cases of people of 85 years of age who are being brought into the tax net because of the increase in their pensions.

In accordance with the ruling of the Chair I have to decline the invitation extended by Deputy De Rossa to me to make some remarks on amendment No. 5. The purpose of amendment No. 8 is to increase from £286 to £351 the special allowance being made for 1983-1984 to individuals who contribute the higher rates of PRSI. The increase proposed in the amendment would cost an additional £13 million in 1983 and approximately £20 million in a full year. The cost of the allowance as proposed in the Bill at £286 is estimated at £55 million in 1983 and £84 million in a full year. Some 700,000 taxpayers will benefit from this allowance.

The reduction compared to the figure provided last year in the PRSI allowance is designed to save £5 million this year, a sum which will be used to fund a new family income supplement scheme to supplement the income of low income families in the active labour force. They are a group of people who do not benefit on the whole from tax reliefs, simply because their incomes are not at a level which would allow them to get any benefit from tax reliefs. They are a group of people with a particular kind of problem which cannot be addressed by our tax system as it is now, based as it is mainly on the procedure of giving tax reliefs. With that group in mind the Government decided this year to reduce the PRSI allowance in order to leave some room for funding a scheme of this kind.

As I said on Committee Stage, we had to consider what course we would take in relation to the special PRSI allowance and how the funds in question would be used. As I pointed out at that time, we took the view that this use of a portion of the funds in question would represent a more equitable use of the funds and would allow us to address a problem which cannot be dealt by the ordinary methods of income tax reliefs. The course we are following now will go some way towards answering criticisms made during the discussions on Committee Stage on section 6 of the Finance Bill, 1982, to the effect that the allowance as proposed at that stage would give a disproportionate benefit to the higher paid taxpayers. For those reasons we put forward the PRSI allowance in the form and in the amount proposed this year. Therefore I oppose the amendment.

Since the amount of £286 was left in as the allowance, obviously the Minister recognises the need for such an allowance and recognises that it is justified. On what basis was the reduction made of approximately £26? What mathematical calculation brought the Minister to £286? If the Minister had left the allowance at £312 there would still be a real reduction due to the fact that no allowance was made for inflation. Our proposal is to make allowance for inflation and allow the real figure to remain as it was last year. I am trying to find out how the Minister decided it should be reduced and on what basis the figure of £286 was arrived at.

What is the magic about £286? What percentage did the Minister use to reduce the figure? The argument for reducing it is that the Minister will save £5 million. I heard that argument throughout the Committee Stage of the Finance Bill. The main argument for putting in an unjustified alteration was that it would save £5 million or whatever the figure was. The argument should be whether or not the reduction is justified and whether the burden is a correct one to be put on people who will be affected by the various changes in the Finance Bill. I should like to hear the Minister's explanation of how the reduction came about.

I want to remind the Minister and Deputies that we are on Report Stage. On each amendment the Minister may intervene only once, except when he moves an amendment.

I presume Deputy Mac Giolla or Deputy De Rossa will have the right to reply to amendments in their names. I regret the fact that the Minister has already intervened. One or two points he made are significant. We do not accept them because we think a fallacy is involved. The Minister said the reason for the reduction in this allowance is to provide funds for the new family income supplement. This has to be a rhetorical question, but is the Minister suggesting that in respect of each provision of this kind he is obliged to earmark funds as having been provided from savings made elsewhere? If he is, that is a departure. From an administrative point of view it may be a matter for decision by the Minister, and that what he saves on the one hand he will provide on the other. There is nothing in the accounting procedures of the Department of Finance which says that money saved under A must be provided under B.

The fact of the matter is that we are saving——

The Minister has had his say. He relied on this on Committee Stage and we took issue with him on it.

An absolutely artifical line of argument.

The artificial line has been taken by the Minister, who if he cannot contain himself within the rules of order will no doubt be disciplined. I say that in jest but the Minister should familiarise himself with the rules and procedures in relation to Report and other Stages.

Like the Deputy the other night.

If that was the case, everything that was provided would be at the expense of something else. There is no precedent for that. It may be a political judgment on the part of the Minister, but it is not true. It is wrong for the Minister to say that his hands are tied.

The Minister's hands are still tied.

My amendment on Report Stage was ruled out of order. This is asking for a higher allowance than we asked on the Committee Stage. It is wrong for the Minister to say his hands are tied because the money is already earmarked. That is not the case.

I did not say that.

The £5 million saved by the Minister has been earmarked for the family income supplement.

Perfectly sane procedure.

The Minister might take off the ear tag and release the money for this or restore the allowances on PRSI as they were. We did not go as far as this motion. The Minister could meet the case being made by Deputies Mac Giolla and De Rossa by meeting the case we made. PRSI is seen by those who pay it as another element of taxation. They are in good company on that because the Commission on Taxation took more or less the same view and said it was time to look at taxation in a composite way and take account of each element of taxation in terms of the general levy on income. There is scope for a readiness on the part of the Minister to meet the case. He cannot answer the case by saying the money has already been committed to another fund.

I suggest to the Minister that much more has been spent to achieve much less in other areas of public expenditure. Take, for example, the National Development Corporation. Let the Minister give an incentive to the people to work and he will do more to develop initiative and economic recovery than he will by dreaming up a corporation to tell us how to overcome the problem.

What has been happening is strange. As PRSI and other levies have increased, allowances have decreased. The charge was 7½ per cent last year and the allowance was £312. It is 8½ per cent this year and the allowance is £286. It is like a see-saw. I take it it is the Minister's policy to phase out the PRSI allowance altogether.

The Minister cannot answer that.

In his heart he can.

I suggest that the Minister is dismantling the PRSI allowance altogether.

That is an outrageous suggestion.

Why is the Minister smiling?

The whole purpose of introducing this amendment and having the allowance was because last year it was felt that the burden of PRSI on PAYE workers was too heavy. The allowance was introduced as a once-off measure. We would rather see the allowance done away with completely and a proper restructuring of PRSI introduced which would include all the income earning sectors in the community and not just PAYE workers. The case was made last year that £351 was a fair figure to present as a relief. That figure should have been kept in line with inflation this year and that is why we put down our amendment seeking to have it increased. It would be better to have a whole restructuring of PRSI but in the absence of that the allowance should be maintained in line with inflation. We attempted to deal with the assistance which is required for the lower paid and those not in any tax net in amendment Nos. 1 to 5. It was regrettable that the Minister did not see his way to accepting them. We will press the amendment for an increase in the allowance.

Question: "That the figures proposed to be deleted stand part of the Bill" put and declared carried.
Amendment No. 9 ruled out of order.

Amendments Nos. 10 and 12 are consequential on amendment No. 13. By agreement amendments Nos. 10, 12 and 13 will be taken together.

I move amendment No. 10:

In page 12, line 47, after "‘£70'," to delete "and".

The purpose of these amendments is to give effect to the announcement I made on Committee Stage that section 8 would be amended to extend the £50 exemption limit provided by section 344 of the Income Tax Act, 1967, to interest on deposits with the Agricultural Credit Corporation Limited and to revise the list of qualifying commercial banks mentioned in that section to take account of amalgamations and name changes which have taken place since the relief was first enacted in 1956. Amendments Nos. 10 and 12 are technical ones to provide for the substantive amendment, No. 13, which inserts a new paragraph (c) into section 8 of the Bill. The purpose of the new subparagraph is to add into section 344 of the Income Tax Act a new definition of the commercial banks so as to include the ACC and make the necessary technical name changes.

The reason I propose to add in the ACC arises from the situation in which they find themselves. They can lend to the agricultural and fisheries sector only. Deputies will be aware that these sectors have been experiencing considerable difficulties in recent years which have had adverse repercussions on the institutions lending to them. The ACC have been badly affected. Unlike the other lending institutions, they do not have a broadly based portfolio. In addition the other lending institutions do not generally lend for periods in excess of seven years while the ACC regularly make loans for periods of ten years or more. That arises from the kind of business in which they are involved. It means that there is more room for restructuring bank loans over longer periods than there is in the case of the ACC. That has been a major consideration over the last number of years in dealing with the lending and deposit operations of the financial institutions. The ACC provide about one-third of agricultural credit and most of the remainder is provided by the associated banks which have the concession in relation to interest on deposits which I propose to extend to the ACC.

A feature of the ACC's operations in recent years has been the difficulty in maintaining an adequate funding base of small deposits with the result that they have had to get an increased proportion of funds from commercial sources. Clearly, these funds are expensive and leave the ACC less competitive and with reduced profitability. The extension of this concession to depositors in the corporation should help in some measure to redress the situation and to put them in a better position both in relation to attracting deposits and to moving in the direction of the kind of terms that can be offered on lendings by the other lending institutions.

We support the extension to the ACC of the provisions applying to other commercial banks. The purpose of these amendments is to ensure that the corporation's depositors will have the benefit of the tax-free allowance that applies in the case of the other banks referred to in the list.

While we support what the Minister is doing in this connection, I must remind him of something that he must have been hearing of in his constituency in recent weeks, that is, that the difficulties being experienced by the ACC in the present economic climate are being experienced also in a painful way by their customers who, like the customers of the commercial banks, are being pressed very strongly to meet commitments entered into in perhaps better times for the purposes of investment and development but which are now very difficult to meet because of the recession and the high interest rates. What the Minister is doing here is putting a very small twig in a very big gap. He will be aware that the run on the ACC as on other institutions in recent times has been unfortunate. His statements since the budget about the actions he was proposing to take to deal with investments and deposits in various institutions have created in the public mind a collective hysteria almost, with the result that the ACC have suffered and suffered much more perhaps than they will gain from what I regard as a very small and almost ineffective concession in the circumstances. What is being extended to them now is much less than what was available to the other financial institutions last year. We are talking in terms of about £500 on deposit. That is the sort of sum that will be tax free. I do not know whether during the week-end the Minister has been hearing from his constituents about the actions he has taken in the area of reducing the tax free allowance on deposits from £70 to £50. We have heard quite a lot about it even in the course of what was a very constrained week-end, for one reasons or another. If the concern being expressed by depositors in the banks is anything to go by in terms of extending the provisions to the ACC, the concession here will not be as significant as we would wish it to be. It is a very small inducement, if it is an inducement at all. Irish agriculture needs much more than this but it certainly needs to be able to have confidence. We cannot take this one measure in isolation from others. In section 17 which we will come to later there is some degree of recognition of the damage that has been done but all the various measures — a reduction in the interest free allowance, the attack on privacy and confidentiality and so on — have had their effect in the past two or three months. Unless there is anybody who has been living in a world of his own, everyone knows that there has been a run on deposits in our institutions and the ACC have been among those to suffer most. Consequently, Irish agriculture has suffered. Our farmers at this difficult time need further understanding and some concession in relation to their commitments to the corporation. Some of them are being pressed to the point of having to realise assets in order to meet their commitments. I know of such cases in the constituency which both the Leas-Cheann Comhairle and I represent.

I do not consider that a tax-free concession on deposits of £500 will solve the problems of the ACC much less those of the developing farmers who depend on that body for funding. We are not opposing the gesture but it is so minimal that it will not cope in any way with the problem. The other actions being taken by the Minister in the Bill will make this gesture much less effective than even he would have wished it to be.

As I said on Committee Stage, the Minister is talking here about very small money. On Committee Stage he told us that the number of depositors involved is 162,000 and he went on to say that 127,000 depositors will be affected by this section. What we have here is an insidious attack on small savers. The Minister told us also that the yield would be of the order of £1,500,000.

Does that arise on this section?

That kind of yield would seem to indicate a certain paranoia with pocket money.

That point does not relate to this section.

It is associated with it. I join with Deputy O'Kennedy in welcoming the extension to the ACC but I note that the Industrial Credit Corporation are not included in the list. Because of the present state of small business and of small industry, there is an even stronger case for including the ICC.

The Deputy might read a little more about the structure of the ICC.

There is provision only for one intervention at this stage of the debate.

The Minister cannot suppress his ebullient personality.

If I am correct in saying that the ICC are not included in the list, my understanding is that if I have with the corporation the type of deposit we are talking about, the interest on it must be returned. I am making a plea to the Minister to extend to the ICC the benefit being extended to the ACC.

On Committee Stage also the Minister told me that the reduction in the figure came about because he could not extend the provision across the board, that there was discrimination and that therefore he had to reduce the amount. I did not accept that argument then and I do not accept it now. If the Minister is saying that he cannot extend it to all the institutions, though he has just extended it a little, there must be an argument for not having it at all, but to reduce the amount on a continual basis does not make any sense. The reality is that the Minister suspects there are people involved in a multiplicity of accounts through the institutions and that he is hoping to attack that situation in this way. I made that suggestion before and I just want to repeat it now.

Deputy O'Kennedy has spoken about the difficulties being experienced by the ACC and their customers. We all know of this difficulty but I must point out to the Deputy that these difficulties did not start only this year or last year. They go back to 1979. Perhaps there is a little bit of nostalgia in some of the remarks the Deputy made since he missed an opportunity himself in 1979. The difficulties of the ACC customers and the fact that many of them are now being pressed for repayment of the loans they contracted is a problem which goes back some time. It is also a problem conditioned partly by the different part of the market in which ACC operate. I am sure that Deputies on all sides of the House would agree that ACC typically lend for a longer period than the commercial banks do. That means, when we look at the kind of problems we have now, that there is more leeway available to the commercial banks to restructure loans than there is available to the ACC. Obviously the ability of ACC to deal with that kind of problem will depend in part on their success in attracting deposits.

The ACC are competing for deposits in the same kind of market as the associated banks. They are looking for small deposits. It is reasonable, having regard to the difficulties faced by ACC, to say that as far as possible we should put the ACC on the same footing as the commercial banks in their efforts to attract these deposits. That is why I am providing here for the same tax relief on deposit income received by depositors in the ACC as in the other banks. I have not heard anything from Deputies on the other side of the House that would go against that. I believe we all agree it is desirable that that kind of movement is made.

While Deputy O'Kennedy agrees with it, he wants to have his cake and eat it and criticise it as just being a small inducement. I am bound to say that this is the old Aunt Sally technique: you put up an argument that was never made by the other side and then you proceed to demolish it. I never made the claim, which Deputy O'Kennedy spent so much time huffing and puffing about, that this will solve the problems of the ACC, nor did I make the claim that this will solve any problems that might be experienced by depositors in the ACC. I am saying — and I think this is indisputable—that this will put the ACC on the same footing as the commercial banks, the associated banks and the others included in the list when it comes to attracting deposits. The measure being discussed here will affect 60,000 depositors, so that the scope of it will be rather large numerically.

I want to come to a point made by Deputy S. Brennan in relation to the ICC. I tried to caution Deputy Brennan that he should not go too far along the road he embarked on. In fact, the ICC are not in the market for the same kind of small deposits as the ACC. They get their funding from different sources. They are not out with a national branch network looking for small deposits as the ACC and the associated banks are. It is not specifically the case in this connection that we should treat the ICC in the same way as the ACC.

Deputy Brennan raised the point in connection with the reporting limit for deposit interest. I would like to point out to him that this section is not concerned with the reporting limit. It is concerned with the amount of interest allowed free of tax. The reporting limit is changed in a different section. The operation we are talking about now has nothing whatever to do with discovering who has how much in what account in how many banks. It is a completely different question. We will be coming to a few other points made by Deputy Brennan on other amendments, so in the interest of getting through the amendments methodically I will not go through that now.

Amendment agreed to.

Amendment No. 11 is out of order.

I move amendment No. 12:

In page 13, line 2 after "‘£70'," to insert "and".

Amendment agreed to.

I move amendment No. 13:

In page 13, after line 2, to insert the following:

"(c) by the substitution in subsection (4) of the following definition for the definition of ‘the commercial banks';

‘"the commercial banks" means Allied Irish Banks Limited, the Bank of Ireland, the Northern Bank Limited, the Ulster Bank Limited, Ansbacher & Company Limited, Barclays Commercial Bank Limited, Guinness & Mahon Limited, Chase Bank (Ireland) Limited and the Agricultural Credit Corporation, Limited;',".

Amendment agreed to.

I move amendment No. 14:

In page 17, to delete lines 53 to 59 and in page 18, to delete lines 1 to 12.

This amendment is designed, even at this late stage, to hopefully persuade the Minister to think again about the proposal to reduce the tax allowance on mortgage interest in particular from £4,800 to £4,000 in respect of a married couple, from £3,500 to £2,900 in respect of a widow or widower and from £2,400 to £2,000 in respect of a single person. There are many good reasons why we will press the Minister to accept this amendment. The first good reason is in respect of those who benefit from this concession, which has been for a long time part of our tax system. The figures involved should, if anything, be adjusted upwards if one accepts the principle that this is a good concession. Interest rates have increased very rapidly in recent times. I wonder when the Taoiseach will find out the reason they will not be reduced. We will have to wait another day for the Taoiseach's reply.

The Deputy need not worry about the Taoiseach's action. He is fully informed:

When the trend elsewhere is for reducing interest rates, ours are not reducing at the same rate. There are a number of factors for this, such as the decisions taken by the Government and the fact that our inflation rate is not reducing at the same rate as the inflation rate elsewhere. I know the Minister will point out that it is reducing, but in the 12 months from November 1981 to November 1982 the inflation rate was reduced from approximately 23½ per cent to 12 per cent, which by any standards was a remarkable achievement.

We gave the Deputy's Government a good start.

The Minister seems to think that his Government were in power during that period. This was the most dramatic decrease in inflation— obviously interest rates follow because one follows the other—experienced by any of the OECD countries in that period. Since then, despite the helpful international climate in terms of inflation and interest rates, we have seen that the trend here is not keeping pace—this is one area where we should try to keep pace, as distinct from unemployment and other areas—with the trend in the OECD countries generally. Our interest rates are much higher than our partner countries in the EEC. The gap between them has broadened since the Coalition Government came to power and inflation is not reducing at the same rate as that of our nearest neighbours across the water and elswhere in the EEC. Accordingly, the argument for the allowances for interest, which are part and parcel of this provision in the Income Tax Act, 1967, as amended by the Finance Act, 1980 still holds good. Just when inflation is running too high and interest rates even higher, the Minister is reducing the relief from £4,800 to £4,000 for a married couple, Until such time as we review the whole taxation system and all of the allowances which may fall to be considered to ensure that there is a firm base to our taxation code those principles hold good. Elements such as this, which are characteristics of this code and which act in ease particularly of young married couples —and we all know these are the people who benefit most from this provision, people setting about providing their own houses, taking the burden off the State of providing for—hold good. Despite that, the Minister proposes to reduce the allowance in respect of them from £4,800 to £4,000.

Let me say also that I have a personal concern in the reduction in respect of widows and widowers. In the Finance Bill I introduced in 1980 we distinguished between widows and widowers and single people which had not been done up to that time. That is the reason for category 2 widows and widowers being allowed £3,500 as distinct from £2,400 for single people. But the Minister is proposing to reduce the former to £2,900. That is a very limited amount for a widow or widower who has exactly the same commitments and obligations as they had before their spouse died. If anything, one might have expected that what I did in that Act of 1980 might have been extended, that is the extension of the provision applicable to married couples to widows and widowers. Remember, they have the same commitments in respect of mortgage interest, bank account and so on. The Minister might have shown a little degree of humanity in respect of them and not reduced the allowance to them also.

There is a third point I wanted to make, that is in respect of what it does in that area of our industry which provides private housing, namely, the building industry. Any little thing we can do now to help the building industry and those employed in it — and that is one of the reasons that provision is there — should not be changed quickly much less undermined. While I do not suggest that this alone would have a remarkable impact on the problems now confronting the building industry — I am afraid the Government would need to change a whole lot of their programmes and attitudes to economic development before the building industry could lift out of its present recession — nonetheless this allowance is a contributory, benign factor as far as the building industry is concerned. Unless the Minister is to be persuaded now, that has not rated as any significant argument with the Minister.

I would ask the Minister even at this late stage to reconsider the points I have made. If he cannot do so in respect of all categories he might find something in his heart to lift the amount of allowance for widows and widowers who at least would recognise this as a gesture of recognition of the problems they face in meeting mortgage charges and so on on the death of their spouse.

This constitutes another nail in the coffin of young married couples. Not alone have we had the narrowing of the tax band rates, the personal allowances not being index-linked, the PRSI allowance being reduced but now there is to be a reduction in the mortgage interest allowable. As anybody who has purchased a house or taken out loans for the purchase of furniture and so on well knows, the interest allowable heretofore was an absolute necessity to keep one's head above water. If the Minister does not take note of what Deputy O'Kennedy has said, soften his heart somewhat, and reinstate the old allowance, it will mean that many people will be selling out and leaving the country. Therefore I appeal to the Minister to reconsider this amendment.

There is clear discrimination here in the amount of interest being allowed by the Minister. That discrimination is levelled firmly against the single person and, as Deputy O'Kennedy has said, the widow and widower, but particularly against the single person. The Minister may refer me to Government decisions of other parties and so on. I am not too interested in that at this stage. I want to make the point simply that an allowance of £2,000 for a single person will cover a mortgage of approximately £14,000; it is dependent on the rate obtaining. A married couple with an allowance of £4,000 will be able to get a loan of approximately £28,000. I know that this is not so much a party political issue because it has been going on for years but a house is a house. If you are single you are allowed relief on £14,000 to buy a house, a £28,000 mortgage to buy perhaps the same house if you are married and, perhaps the most difficult, if you are widowed and have been in receipt of a full allowance in earlier years, the most one could borrow would be approximately £16,000.

In my view there is a clear discrimination there against the single person. I make a special plea to the Minister to examine that situation. He might not be able to do so this year, I accept that, but perhaps in the years ahead we might grapple with that type of discrimination. Whether one is married or single and one wants to buy a house — in one case one can borrow £14,000 and in the other, if married, £28,000. I know there are two people involved but it is still a house, it is still one house. Therefore there can be two houses side by side with different sized mortgages on them under this type of approach to the situation. The whole of that provision warrants a radical rethink. Even if the Minister cannot revise his thinking at this late stage perhaps he could do so, I was going to say in the years ahead but I am not so sure the Minister will be in office then; but in the year ahead perhaps the Minister would take a long, hard look at it.

I want to support this amendment in respect of which the main arguments have already been made. In replying I hope the Minister will advance some more cogent reasons for this reduction than simply that it will save so many millions of pounds. I do not recall whether this allowance had even been reduced before but certainly it is an area very hard hit by increasing prices, inflation and interest rates. It would seem that interest rates — in spite of reductions internationally — will go up again. Therefore this reduction appears to be totally unjustified. Deputy O'Kennedy referred to widows and widowers. In that bracket should be included also single parents, deserted wives or deserted husbands, who are also affected by this. There is also the consideration that it will place more people on the housing lists of local authorities, already severely overcrowded certainly in the city, in most urban areas and probably throughout the country. In the long run therefore it will not save the Exchequer anything but will cause severe problems both for families and for the construction industry generally.

I would appeal to the Minister also to look at this again and at least lessen the reductions. I hope he will also explain to us his reasoning, how many people he thinks would be affected by this reduction and what effect he thinks it will have on the construction industry.

We made a very strong case to the Minister last week to do something about this. I feel, at this juncture in the debate, my words are falling on deaf ears. References to the business community being under stress have been derided on the Government side during this debate. That is regrettable. I do not think any cognisance is taken of the fact that people are under severe stress and the Minister comes back once again to the stonewalling argument that money must be found. I gave information to the House last week that in five months the Minister had borrowed something in the order of £650 million. I made a mistake; the figure is actually over £1,000 million. If money must be found I appeal to the Minister to look inwards and to find the money from within the massive waste of public expenditure. All the wastage is not taking place in other areas. We are engaged in something akin to a "Star Wars" attack on business and private enterprise. I would nearly suggest that the Minister's Department should issue some kind of information manual to enable people to cope with the tax maze which has developed.

This measure will affect 35,000 young couples in the housing area. Apart from that there are people who are tied into heavy financing on the business side who will also be affected. This measure will also result in a direct loss of jobs. I appeal to the Minister to show a helping hand to people under stress. There can no longer be any question of rushing around to find taxation at every level. The building industry is under terrible assault. If people are to bear a continuing burden of taxation their only recourse will be to develop a new way of life where they will not bother to show any initiative, where they will rent everything, including accommodation, rather than take the plunge and show the guts to go forward. This Finance Bill penalises people for being successful and showing initiative. Why penalise success? Why not give assistance to those people who are taking the initiative?

Deputy O'Kennedy has been going on with his old song about the movement of interest rates. I can assure Deputy O'Kennedy that the Taoiseach is perfectly well informed. Probably what is bothering Deputy O'Kennedy is that he did not phrase his question properly in the first instance but far be it for me to suggest the question he should ask in order to get the answer he thinks he wants. Movements in interest rates here are affected by a number of different factors, not the least of which is the situation required here in order to get the kind of inflow of funds we require. Interest rates are responsive to movements in demand and supply. If Deputy O'Kennedy addressed his mind to that proposition he might find it easier to understand what is going on in relation to the overall level of interest rates.

I would remind Deputies opposite of something which figures in the Budget Statement of 27 January last year and also in the Budget Statement of 25 March 1982. There were proposals in both those statements which would have had the effect, firstly, of terminating income tax relief on personal borrowing and ensuring that interest relief would have been available only where funds were borrowed for house purchase or for improvement or repair of a house. Secondly, the proposals would have had the effect of providing mortgage interest relief only at the 25 per cent and 35 per cent tax rates and for a capital sum not in excess of £35,000. If Deputies on the other side of the House would think back to these proposals and the reasons they were made in January and sustained in March they would find the answers to many of the questions they have been putting this afternoon. In the event it did not prove possible to give legislative form to those proposals but I have no evidence to suggest that there had been a change of heart on the other side of the House regarding the measures or that there was any change of mind about the reasons underlying the proposals. The same considerations have been carried through to this year's Budget Statement and the Finance Bill.

We have all made out estimates as to what exactly the provisions of this Bill mean. Within a thousand or two, we are all agreed in terms of the kind of capital sum of a mortgage that would be covered by the reliefs. We squabble about the difference between £14,000 and £15,000 but the principle is clear. I would make the point that there is a very substantial difference between a single person borrowing £15,000 and a married couple borrowing £30,000.

It is the same house.

The same house but two incomes. That is the essential reason why so many married couples remain in the situation for as long as possible where they are both working.

It costs the same.

To suggest that we should automatically allow for a given income a person to borrow as much in the single state as that person, married to another income earner, would borrow in the married state does not seem to be a responsible way to advising people to handle their affairs.

One cannot buy much of a house for £14,000.

As far as taxation and tax reliefs are concerned, there are constitutional limitations on how far we can go in adjusting or providing for tax reliefs and I do not think the Deputy is making the case for leap-frogging whereby we would give the single person what a married couple now have and then find we have to double up for a married couple in order to be constitutional.

A single person needs a house and will not get much of a house for £14,000.

I appreciate that point. The problem exists in relation to a given house. The question I am asking, to which most people would give a sensible answer, is would a single person with one income buy the same kind of house if he or she were married and if there were a joint income? The sensible answer in most cases would be "no". Fortunately most of our people do not rush to get unnecessarily into debt. I do not think Deputies on the other side of the House are doing their case any great favour by arguing on that basis.

Deputy Mac Giolla suggested that this measure will result in putting many more people on the local authority housing lists. That is something about which Deputies should reflect more before they make a statement of that kind. For a married couple the provisions of this Bill would mean full interest relief on a mortgage of up to £30,000. Most of the people in my constituency — and I am sure the same applies in other constituencies — who are on the margin as between staying in a local authority rented house and buying a house would not buy a house that would cost up to £30,000 or more. Many local authority tenants today are thinking in terms of buying local authority houses, many of which they can buy for sums substantially less than £30,000. A choice between going on a local authority housing list and buying one's own house does not necessarily intervene only at the level of a price of £30,000.

Local authority houses cost more than £30,000.

They cost £30,000 to build in some cases but most of the people on the margin between looking for a local authority rented house and buying a house are not necessarily considering buying a house costing £30,000.

Deputy Ahern claims we are driving people out of the country, having said that there is no place for them to go. I am not too sure about the logic of his argument. The number of taxpayers who will be affected by this section is approximately 32,000, as I pointed out on Committee Stage. The number of people claiming tax, relief on their mortgage interest payments and who will not be affected by this measure comes to some 243,000. They will not be affected because their repayments are below the level affected by this provision. I do not see any great evidence there that the measure will drive people out of the country. I will not refer again to the Report on the Commission on Taxation because we went through that on Committee Stage. The situation remains unchanged since then.

Deputy Brady had some general remarks about incentives. The Deputy suggested that we look inward for savings. That is what we are doing here. He said a number of times that we should look more closely at the total amount of public spending. I think the Deputy has the public sector in mind in particular and I would not necessarily disagree with him. However, I ask the Deputy to consider the following proposition. We have a number of different measures designed in one way or another to help people either to provide their own housing or to be provided with houses. In the private housing area there are the tax relief measures; the £1,000 new house grant and the mortgage subsidy payable over a period of years. With regard to local authority housing, there are direct grants from the State to local authorities and there is the subsidisation of loans to them. In all of that it seems to be reasonable to suggest, as I think Deputy Brady is suggesting, that we should look at rationalising the total public input into housing to see if we cannot get better value for money. That is another day's work which I hope we can discuss at a future date. It is also an argument in favour of not continuing willy-nilly with the kinds of incentives that exist at the moment without taking a view as to how they co-ordinate one with the other.

As I pointed out on Committee Stage, the measure would reduce the revenue by about £2 million this year and £3,500,000 in a full year. In terms of the total effect on the amount of funding directly going to housing the measure is not large but in budgetary terms it is an important measure.

I wish to make a few general remarks in relation to interest rates and the capacity of the Minister or the Taoiseach to deal with them. Some time ago the Taoiseach said he would want to know the reason if interest rates did not come down. Interest rates have not come down. In this House I asked the Taoiseach to give an answer to a statement he had made but the Taoiseach decided to transfer that question to the Minister for Finance who had never made any such statement. I acknowledge that the Minister for Finance has enough problems these days without having to answer for every foolish statement of the Taoiseach.

The Deputy is scraping the bottom of the barrel now.

I am not. The Taoiseach said he would want to know the reason if interest rates did not come down but when I asked him a question on the matter he transferred it to a man who has enough problems already.

Will the Deputy please relate this to the amendment before the House?

The Minister brought in the matter when replying to me. I am concerned about the inordinately high interest rates. The Taoiseach has not been able to deliver on his own commitment. A number of Deputies, particularly Deputy Mac Giolla, referred to local authority housing. The Minister seemed to suggest that a local authority house is much cheaper than £30,000. I wonder where the Minister has been living. Deputy Mac Giolla, Deputy Molloy, who has raised this matter on many occasions in Private Members' time, and the other Deputies who have spoken here are living in the real world. The Minister must be living in a world of his own. In addition, he must not have read his Budget Statement or the capital programme. In the Principal Features of the Budget the average provision for a local authority house is £35,000.

The Deputy should ask himself the price under the vesting schemes of local authorities.

The Deputy should be allowed to continue without interruption.

We had agreed to that. All the Minister is allowed to say is "Hear, hear"; otherwise he must keep silent, as I propose to do when he is talking.

The phrase "Hear, hear" could be provocative also.

If that is the situation, we have reached a sad state. In ignoring the arguments put forward the Minister is doing the opposite to what he provided for in the capital programme. In many cases in this city the cost of a local authority house would be closer to £40,000.

At what price are councils selling new houses?

They are selling new houses at cost price, less £1,000.

If the Minister wants to be educated, there are quite a few here who could do a good job for him. The very point made here — and all who spoke on this were of one mind — is that, to ensure that people would be encouraged to provide for themselves and to take them off the panel for local authority housing, the Minister should accept this amendment. In the first instance he should have listened to the amendment on the last day here. All in this House, apart from those on the Minister's own side who do not speak, are of one mind in this debate.

The reference to single parents is very relevant. The factor that one must consider is the cost of servicing the mortgage. We are talking particularly of the mortgage for young people. The Minister made the point that something of the order of 243,000 would not be affected by this, but of that 243,000 a vast percentage will be older people who took out their mortgages long ago. The people we are concerned about here are young married couples, the young widow or the young single parent. With today's level of inflation and interest rates, they are the ones who will suffer in this case. Those who were fortunate enough to have bought their houses 25 or 30 years ago will not need this concession one way or the other, but those going into the market place now to provide for themselves, as Deputy Brady has been saying in the course of this debate, are the ones we are concerned about. We want to encourage them to look after themselves and to ensure that they will not be a burden on the State, but the Minister is not prepared to listen to the argument. Unless some stroke of lightning changes the Minister's mind — and the amount of money involved, as he has indicated, is quite small — nothing that we will say will persuade him. Let it be clearly noted that nothing he has said answers any of the arguments that have been made in the House today. Indeed, nothing that he has said answers the argument that he made himself on the capital programme attached to the budget which he seems conveniently to forget. More people will be looking for local authority housing. Finally on this point, does the Minister know that about 40 per cent, perhaps more, of local authority tenants at this stage are on the unemployed register being subsidised by the taxpayer who has already been asked to subsidise too much?

Is the amendment being pressed?

Question "That the words proposed to be deleted stand" put and declared carried.

I move amendment No. 15:

In page 20, to delete lines 4 to 43.

I will be brief on this. The brevity will derive from the fact that the argument has already been made and also because the need for accepting this amendment speaks for itself. This is the amendment which proposes that the 1 per cent additional levy introduced in the budget be lifted by the Minister. Many Deputies in the House, including Deputies from the Labour Party who unfortunately are not free to vote according to the arguments they make, argued very strongly on Committee Stage against this 1 per cent levy.

I want to repeat the arguments briefly, but I hope that the brevity will not be taken as indicating a lack of urgency or determination. The PAYE sector will bear the major share of this burden. The deduction of the 1 per cent levy immediately at source under PAYE is an additional increase in the taxation burden of an already over-taxed area. The level of direct income tax has increased by about 9 per cent in just two years. It is an extraordinary jump. The world outside is remarking that in Ireland the level of taxation is becoming a disincentive in every direction. Although the original 1 per cent introduced by the Minister's predecessors in Government was earmarked for the youth employment programme, unfortunately it did not realise in any sense the purpose for which it was earmarked. The one success was that the 1 per cent was lifted from the income tax on the PAYE sector. Now we are going a stage further. Despite the failure to use that effectively on the last occasion, we are imposing a further 1 per cent for no particular purpose. The Minister in a previous argument in the House today was ready to earmark money saved from the PRSI allowance for what he called the family income supplement. This 1 per cent would be brought into the Exchequer to supplement the revenue which the Minister requires at this stage. The Minister's role, as has been pointed out from this side by numerous Deputies, is to ensure that not one penny of public expenditure is wasted. A look around now would give examples of the activities of some of the semi-State bodies involved, particularly under the Department of Labour with a huge jump in their Estimate from £45 million last year to £110 million this year. They can certainly spend money in advertising and re-advertising on radio and television programmes, retraining and interviewing, and at the end of the day are we seeing many permanent jobs? The amount of extra money being provided there this year in that budget for greater, bigger and heavier administrations is more than it would cost in revenue if the Minister were to drop this levy this year. He must know that rather than have this huge administrative mushroom growing in every direction, where people will find that the only security of employment is in State employment, he should reconsider this levy. It is for no particular purpose. It is to ensure that moneys flowing into the Revenue can be used in public expenditure and some of it is being used wastefully. It must be said that he is not responsible for all of it.

It is about time the Deputy found that out.

The growth in public expenditure is a matter of public concern. Even The Workers' Party and the Labour Party would acknowledge that they are not pushing for extra money that is to be wasted. If we are to see extra public expenditure let us ensure that it will be used. Here we are clawing in an extra £70 million or £800 million — perhaps more in a full year — from the PAYE classes particularly and from all eventually, just to satisfy the almost insatiable appetite of public expenditure. The Minister has a dual function and I suggest that by meeting our amendment now he can discharge one side of that function, that is, to lift the burden from the taxpayer.

This 1 per cent has all the flaws against which we have argued. A further flaw is that it is causing not just a degree of frustration outside this House, it is causing much more. It is causing the development of a very serious reaction in the PAYE sector that can lead to further serious reactions in the future. Anything the Minister can do to quell the development we have been seeing in recent months, where there seem to be divisions between the PAYE sector and other sectors, will be a major contribution to the cohesion we need in society at the moment. Lifting this 1 per cent would go a good way towards achieving that.

I strongly support the amendment because I regard the levy as perhaps the most unimaginative form of taxation that has ever been introduced here. Why did the Minister decide to introduce a levy of 1 per cent? Why not 10 per cent or .5 per cent? Why did the Minister pull a figure of 1 per cent out of the air? The levy is a crude, ill-conceived form of taxation which is being introduced without any thought. Why has it been considered necessary to apply it from the age of 16? Why not go back into the classroom and tax schoolchildren so as to make them accustomed to the concept of paying tax if they are lucky enough to get a job when they leave school? The Minister is imposing the levy on young people at an age which is below the average school-leaving age here.

The levy is being imposed right across the board without any consideration being given to any type of sliding scale or waiver and that is too much for the nation to be asked to bear. The Minister must realise that the many people earning an average of £5,000 per annum will be asked to pay £50 per annum under this levy. That is a huge burden on any person working within the strictures of an income of that size. A person fortunate enough to be earning ten times that sum of money will be asked to pay £500. Obviously, the burden on the person earning more money will be less than on the person earning less. In effect, the Minister is imposing a tight bind on those who can least afford it. Is there something magical about the figure of 1 per cent? I hope the Minister will tell the House how he arrived at it. This strikes me as another element of this creeping paralysis of the tax maze. What can we expect next?

The Minister should rationalise the situation rather than try to obtain one pyrrhic victory after another in the House. We all accept that the Minister will not give on this point and that is regrettable because it is not a form of taxation that will be forgotten easily. There is a great fear among people that like other forms of taxation, such as VAT which has been increasing all the time, this levy will be doubled in years to come. The Minister should accept Deputy O'Kennedy's amendment and show positive initiative. The levy is the worst element of the Finance Bill but it is not too late to do something about it.

I should like to add my voice to this protest. As I mentioned on Committee Stage it is a very dangerous form of taxation. The income tax code is quite complicated. For some people it is too complicated while for others it contains many loopholes. However, the idea of the various allowances, complicated though they may be, is to try to introduce some type of equity into the tax on income. It would be a very simple thing to say that everybody should pay 10 per cent tax on their income. There would be no complications about that; it would be cheaper for the Revenue Commissioners to operate it and it could be increased in each budget by a certain figure. The reason that system is not adopted is that it would be highly regressive. An income tax on a percentage basis on everybody's income would be very regressive and totally contrary to all concept of income tax when introduced. Nobody will escape the 1 per cent levy and it will apply to those working from the age of 16. It must also be remembered that children's allowances will be withdrawn from children aged 16 and over who are in apprenticeship but children of that age who are still pursuing second level education qualify for that allowance. Those in apprenticeship will be regarded from now on as not being in education because, presumably, they are paid a certain allowance during the course of that apprenticeship. I am not sure what that allowance amounts to but it is very miserable.

I cannot understand why the Minister in the budget imposed the levy on those who are working from the age of 16 and at the same time excluded those following an apprenticeship from the benefit of children's allowance from the age of 16. In general the budget is an anti-working class measure but to impose the levy from 16 is particularly bad. The levy will apply to all incomes irrespective of the circumstances of a family. It will not relate to the problems of a family or whether they can put any food on their table. I should like to know how the Minister proposes to make everybody pay the levy. It will be simple enough to collect it where there is already a deduction at source but it must be remembered that in other cases the Minister has not been successful in collecting the youth employment levy. Presumably, the reason the Minister decided to introduce this new levy was that it costs so little to collect. The PAYE sector accepted the youth employment levy without protest. In fact, that sector welcomed it because it was for a specific purpose which everybody cherished, the creation of employment for our youth, but the new levy is not being introduced for any purpose. The reaction within the PAYE sector is very dangerous. We are not witnessing just demonstrations but a revolt. The Minister should seriously consider what is happening in that sector because his new levy is adding further to the problems of those people.

Deductions at source have been accepted for 30 years and workers have not objected to this as a method of paying tax but the new levy does not come within the PAYE system or structure. Has the Minister any right to take money from people's pay packets before they get it? The PAYE system has always been accepted by trade unions and others but the introduction of the levy is a different matter. What right has the Minister for Finance to take £1 out of the £100 a person earns in a week before that person gets his pay packet and in addition to the other taxes that must be paid? This matter will be raised as soon as this tax comes into operation. Other sectors have used the courts to deal with constitutional questions and I repeat this 1 per cent levy will open the door to court proceedings on constitutional grounds as to what justification the Minister has to deduct this tax from a worker's pay packet.

Has the Minister any new proposal to ensure that this 1 per cent levy will be paid by the self-employed, the farmers and the professional people who do not have it deducted at source, or does he intend deducting this tax at source from as many sectors as possible? Deputies will recall that a couple of years ago a 2 per cent levy was imposed on farmers. They said they would pay it, and they did not. If they refuse to pay this 1 per cent levy, will the Minister accept that and agree that they will not have to pay it? Does the Minister propose to make further deductions at source in other areas? How does he propose to ensure that these people will pay this levy, when they do not pay the youth employment levy?

Will the Minister give an undertaking that this levy will not be repeated in future years? I do not expect to get that assurance but I asked in the hope of getting some information. No matter what levy is imposed on gross income, no account is taken of personal circumstances. This means there is a straight 3 per cent off the top, and no account taken of personal circumstances. As such, this is a very crude form of taxation. The three 1 per cent levies are equivalent to about 5 per cent net. That means a person paying 35 per cent tax is in effect paying 40 per cent or, if a person is paying 65 per cent tax, he is really paying 70 per cent. I suggest that the standard rate of taxation is not 35 per cent but 40 per cent.

Deputy O'Kennedy started by saying that the PAYE sector will bear a major share of this burden. It might be useful to point out that the income levy as defined here will apply to about 1,140,000 persons, the same people who pay the youth employment levy and health contributions. They include some 950,000 people from whom PAYE is collected or whose tax is paid through the PAYE system — a number of these people are not PAYE taxpayers. It will include also some 80,000 to 90,000 farmers and approximately 103,000 self-employed persons.

The question of whether the funds collected from this tax will be earmarked is one on which Deputy O'Kennedy spent some time. The total yield from the levy this year will be £47 million and about £80 million in a full year. That is extra revenue to the total taxation pool. I do not know if Deputy O'Kennedy thinks it worth his while to spend time on the question of earmarking these funds, having spent a fair amount of time on a previous amendment, talking about the £5 million allocated this year for the family income supplement, because in my view he has got the two discussions confused. The point I was making in relation to the family income supplement was that we had to consider making a decision about the PRSI allowances, and whether there was not a more equitable way of using the funds we had to devote to that allowance. We concluded that there was a more equitable way of using them in view of the way in which tax allowances operate, and in view of a number of the criticisms made last year about the operation of the PRSI allowances. That was a perfectly valid decision to make when we had to decide whether to continue with that allowance this year because when it was brought in last year, it was for one year only. Last year's Finance Bill specified that it was an allowance for that financial year only.

Now we come to the 1 per cent levy, a substantial amount of revenue which will go to the general pool of taxation. I do not think the question of earmarking arises to any extent in this case. I believe the question of whether to earmark this tax is one which normally should arise in a discussion at this stage.

Deputy O'Kennedy spoke about administrative mushrooms, growth in public expenditure and the increasing weight of public administration. If I were to pursue the lines set out by Deputy O'Kennedy I would be wandering far outside the confines of this section. In a sense Deputy O'Kennedy may get away scot-free with the admission he made, which is a very substantial conversion from the kind of policy he has been following for a number of years past. I am very glad to note that Fianna Fáil are concerned about the total weight of the public sector. Deputy O'Kennedy may be now trying to retract what he said, and I would be very sorry to hear it because I was somewhat encouraged by what he and Deputy O'Brady had to say. On Committee Stage they showed a very interesting concern with the overall level of public expenditure and the use being made of taxpayers' money. I would be inclined to encourage that concern which is a very welcome development.

Deputy Brady asked why 1 per cent, why not 2 per cent or ½ per cent.

That is for next year's budget.

The simple answer is that it is 1 per cent based on the overall pattern of total taxation required to support our present level of public expenditure, as decided by the Government this year, given the overall constraints that operate in relation to total borrowing and the size of the current deficit. That is where the figure comes from and where the requirement for the revenue comes from. That requirement for revenue comes in the framework of all their decisions included in the budget, both on expenditure and borrowing in the context of all those decisions.

Deputy Mac Giolla asked how we would ensure that everyone who was due to pay this levy would pay. Behind that question lie a number of other questions to which the Deputy has briefly referred. He referred to the experience in collecting the youth employment levy. There have been some difficulties in collecting this levy from some groups for different reasons. In relation to the farming community, the 1982 High Court decision invalidating the use of the poor law valuation as a basis of assessment obviously created a difficulty. Once that decision was made, we could no longer use that valuation as a basis of assessment and had to find a substitute. That is being done this year and it will apply to the levies as they operate this year. I am confident that very soon we will have satisfactory arrangements to ensure that we can collect all the sums for these levies which fall to be collected from that part of our taxpaying community.

In relation to the self-employed in general, we must take account of the fact that there are different systems and different timings for collecting tax from this group. I am, however, confident that we have the measures to ensure that contributions due to be made under this and other levies will, in fact, be made and that we will get the contribution from all sectors that should justly be made on the basis of their total income.

Deputy Brennan has looked for an assurance in relation to future years. This levy is a temporary one, but there are wider questions than that. It has to do with the overall level of taxation. This is something to which Deputies on the opposite side of the House have frequently referred. I would not like those Deputies to feel that once they had made their point about the overall level of taxation, that is the end of it. We can all, in the House, on public platform, or in the media, deplore the present level of taxation. It is much more difficult to do something which will have any prospect of moderating the incidence of taxation.

Like expenditure.

I am encouraged by the concern expressed by Deputies Brady and O'Kennedy about the overall level of public expenditure. That is a proper concern which Deputies on the other side of the House have seen reflected and expressed very clearly in this year's budgetary strategy — to which, I am bound to say, they have objected.

No incentives.

They have objected, in many cases simply because they do not like the particular measures being adopted. There are no two ways about it. If we are worried about the overall level of taxation — and we have a right to be worried — we must look at the other side of the coin to see what needs to be done in order to make it possible to reduce that overall level of taxation, if that is what we believe should be done. I believe that it should be done but the job of ensuring that that actually happens requires decisions in relation to the total level of expenditure, the direction of public expenditure and the types of public expenditure in which we should engage which, so far, Opposition Deputies do not seem to have been prepared to envisage. There have been precious few suggestions from that side of the House as to how we should follow up on their concern about the overall level of taxation.

Incentives for private enterprise.

Given that the size of the revenue from this measure is important, and important to the point that Deputies have made the comments on it that they have made, and given this year's budgetary restraints, we have no option but to proceed with this levy.

Deputy O'Kennedy to conclude.

I was going to refrain from exercising my right of reply, but the Minister cannot be convinced by our arguments.

Only half the Fianna Fáil programme has been written.

The Minister has spoken in terms of farmers particularly. We are very anxious to ensure that everyone pays his or her fair share so that the burden on the PAYE sector to which I referred will not be unduly heavy. The Minister may have to reply at another time but, because of what he says, there seems now to be a possibility that small farmers and mountain farmers, farmers in disadvantaged areas who would not be liable for tax may be liable to the 1 per cent income levy. Are people with no tax liability, whether farmers or workers, to pay this levy?

It applies to all the income defined under the 1967 Income Tax Act.

All incomes? Even those below the exemption level?

We went into that question in some detail on Committee Stage.

We are discovering something. People with pensions, people who are exempt from payment of tax may be involved. Each succeeding Minister for Finance claims a major innovation and extends the exemptions. Let the hill farmers and the farmers of the west of Ireland, the vast majority of whom will have no liability as regards income tax, take note that they will be included. How will the computer work out the 1 per cent of their incomes for the purpose of this levy? We will have no idea of their incomes when they are not liable for income tax. If one leaves the question hanging, many people will hang with it.

This has already been explained, if the Deputy was listening on Committee Stage.

Is the Deputy pressing the amendment?

I am more determined than ever now.

Question put: "That the words proposed to be deleted stand".
The Dáil divided Tá, 75; Níl, 70.

  • Allen, Bernard
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Myra.
  • Begley, Michael.
  • Bermingham, Joe.
  • Birmingham, George Martin.
  • Boland, John.
  • Bruton, 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.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Donnellan, John.
  • Dowling, Dick.
  • Naughten, Liam.
  • Nealon, Ted.
  • Noonan, Michael. (Limerick East)
  • O'Brien, Fergus.
  • O'Brien, Willie.
  • O'Donnell, Tom.
  • O'Keeffe, Jim.
  • O'Leary, Michael.
  • O'Sullivan, Toddy.
  • O'Toole, Paddy.
  • Doyle, Avril.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard J.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Glenn, Alice.
  • Harte, Patrick D.
  • Hegarty, Paddy.
  • Hussey, Gemma.
  • Kavanagh, Liam.
  • Keating, Michael.
  • Kelly, John.
  • Kenny, Enda.
  • L'Estrange, Gerry.
  • McCartin, Joe.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • McLoughlin, Frank.
  • Manning, Maurice.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Molony, David.
  • Moynihan, Michael.
  • Owen, Nora.
  • Pattison, Séamus.
  • Quinn, Ruairí.
  • Ryan, John.
  • Shatter, Alan.
  • Sheehan, Patrick Joseph.
  • Skelly, Liam.
  • Spring, Dick.
  • Taylor-Quinn, Madeline.
  • Timmins, Godfrey.
  • Treacy, Seán.


  • Ahern, Bertie.
  • Ahern, Michael.
  • Andrews, David.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Michael.
  • Barrett, Sylvester.
  • Blaney, Neil Terence.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Brennan, Paudge.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John.
  • Burke, Raphael P.
  • Byrne, Hugh.
  • Byrne, Seán.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Cathal Seán.
  • Cowen, Bernard.
  • De Rossa, Proinsias.
  • Fahey, Francis.
  • Fahey, Jackie.
  • Fitzgerald, Gene.
  • Fitzgerald, Liam Joseph.
  • Fitzsimons, Jim.
  • Flynn, Pádraig.
  • Gallagher, Denis.
  • Gallagher, Pat Cope.
  • Geoghegan-Quinn, Máire.
  • Gregory-Independent, Tony.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm.
  • Kirk, Séamus.
  • Kitt, Michael.
  • Lemass, Eileen.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McEllistrim, Tom.
  • Mac Giolla, Tomás.
  • 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.
  • Ormonde, Donal.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Reynolds, Albert.
  • Treacy, Noel.
  • Tunney, Jim.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Quinn; Níl, Deputies B. Ahern and Briscoe.
Question declared carried.
Amendment declared lost.

Amendment No. 16 in the name of Deputy O'Kennedy. Amendments Nos. 17, 18, 19 and 20 are related. Amendment No. 20 is consequential on amendment No. 17. Amendments Nos. 16, 17, 18, 19 and 20 will be taken together by agreement.

I move amendment No. 16:

In page 21, to delete lines 20 to 43, and in page 22, to delete lines 1 to 44.

I am not sure if the right of initiative is a particular privilege in the circumstances in which my colleagues in the Government back bench——

I could make the same remark.

The Deputy knows the Chair would wish Deputies of all parties and persuasions to remain quiet or leave the House.

I should like to invite them into the benches for once because they would like to hear what I have to say on this.

I could extend the same invitation to members of the Deputy's party.

I know I express the views they share deep down in their hearts. On Committee Stage when dealing with section 17 we proposed, after full consideration of the impact of that section, that it be deleted from the Bill. This Bill has enough unprecedented penal measures which will discourage investment here. What was proposed by the Minister in that section was an example of the most damaging and serious intrusion into the banking system and through that to the development of the economy. I am talking about the infinite notion that investors from outside the country who have deposits in our banks should be required to swear an affidavit which would be made available to the Revenue Commissioners that they were not resident in Ireland and were of a different nationality. That section is still before us and it is worth looking at. It states that the provisions of the section as it stands will not apply provided that:

(i) any such notice shall be accompanied by an affidavit, made by the person to whom the interest is paid or credited, stating his name and address and the country in which he was ordinarily resident when the interest was paid or credited,...

That is the part we want deleted because it requires a person from outside the country who has the confidence to invest in our banking system to swear on a formal written affidavit before the authorised notary public, in many cases in the US or Britain or wherever, that he has money in the bank here and that while he has, his income and so on derives from the fact that he lives elsewhere. If ever there was a proposal introduced into our legislation which was a most short-sighted, damaging and ill-conceived notion this is it.

When we eventually got the Finance Bill after all the consultations had taken place between the Minister and various people, we decided that, whatever interpretation would be put on it, we would fiercely oppose it. We did so by proposing that the section be deleted. Our decision to do this was subsequently vindicated by the reaction we received from people in the banking and other sectors. Their fears, concern and apprehension were evident. If we were just dealing with section 17 that would be bad enough but we have to take into account the effect of other proposals introduced in relation to bank accounts, the rate offered by building societies and everything that would enable the Revenue Commissioners to know everything about everybody including those living outside the State. That is what broke the camel's back.

Every banking system benefits to some extent from money earned elsewhere. It is true that some money earned here is deposited in banks outside this country. If other countries were to insist on what the Minister proposes we insist on there might have been something to be said in that we would all be doing the same thing together. That is not the case. We are the ones who want to ensure that any money coming from elsewhere, the US, Britain and so on will be penalised. Who are we penalising? Unfortunately the socio-economic history of the country has been that a considerable number of people emigrated. Fortunately, some of them have succeeded abroad in a way that was not open to them at home but many of them still retain, not only in an emotional way, a commitment to the development of this country and they express that commitment in many ways, particularly by placing in our banks considerable sums of money on behalf of themselves or of their families.

All of this money comes to a figure of the order of £1.4 billion. That is the kind of money we are talking about, but apparently without any regard for what was involved the Minister decided to be consistent in inquiring into and snooping into everything and in penalising initiative. In this instance he intended going the whole hog and insisting on sworn affidavits from people not even resident in this country. People, and particularly those who invest here from outside the economy, like to know that they can rely at least on the confidentiality of our system. We know of many countries whose whole economies are based on that sort of confidentiality — Switzerland, Jersey, The Bahamas and so on. We do not have anything of that nature; but in so far as we have some deposits from outside, we were going to ensure that they would be put at risk. Therefore, we proposed that this crazy notion be deleted from the Bill.

I expect that the Minister will have heard more from the banking institutions than even we have heard. We are only in Opposition — that is for the time being. But if what we have been hearing from bank clerks and from employees at every level in the banks in the past week or two is an indication of the concern that has been expressed to the Minister, he will realise how serious the situation is. He must have received a huge number of protests from the business sector, which depends on the banking system, just as he must have heard from the sort of people we have been talking about today, house buyers and so on. What the Minister proposed originally would have put our banking system at risk but that proposal has already done considerable damage. The flow of money from our banks had been under way from the time the proposal was announced in relation to the reduction in the tax-free amount of interest. The Minister was aiming to find out everything irrespective of the consequences, but the proposal we are talking of would have had the most damaging effect of all. It is not often given to Oppositions to be able to save something for the State in terms of the essential security of our economy. It is not often given to us to be able to achieve something to bring sense into the Government. But this is one instance in which, modestly, we can claim we have been able to play that role satisfactorily and very significantly.

Unfortunately, we did not reach this portion of the Bill during the debate on the Committee Stage but to the extent that we could indicate in the strongest terms possible our objections to the proposal, we have done so by way of public statements and in the media. I have given two public interviews on the matter. Our opposition to section 17 has been supported by almost every sector. It is one area in which there is a considerable degree of cohesion among workers, businessmen, farmers and so on. They all realise the damage that was being done to our banking system. I cannot even begin to imagine what it was that prompted the Minister to introduce this measure in the first place. We have dual taxation agreements with the two countries from which perhaps most deposits from outside the jurisdiction come. These are Britain and America. This dual system means that, ordinarily and necessarily, there will be a degree of co-operation between the Revenue Commissioners and the Inland Revenue in both these countries but that being so the very people who have money deposited in our banking system know about these agreements. They know that understandably there is a degree of consultation and co-operation between our Revenue Commissioners and their counterparts in those countries. The first reaction of these depositors would be that if they were to swear an affidavit in the countries in which they are resident, that would be available to the Irish Revenue and, consequently, in a very short time also to the authorities in these other countries so that they would be aware of moneys which may not have been disclosed elsewhere.

Although the Minister has gone some of the way in meeting the case — and the drafting of the amendment leaves much to be desired — we will never know how much has already gone as a consequence of this most foolish of all the provisions in the Bill. We shall never know how much the confidence in our banking system has been undermined as a result of people knowing that, if we are capable of proposing such a measure on this occasion, we could do something equally foolish and dangerous again. As in business, confidence is of the utmost importance in any banking system. Once that is undermined as a result of the computer telling us that we must find out as much as possible, that to find out what the computer wishes to know we must take a certain course of action, the cost could be very damaging to our entire economy. The flow may be stemmed now to some extent. In so far as we could do so, we informed all sources inquiring about the provision that we would do everything possible to bring some sense into the situation.

Confirmation of what I am saying can be obtained from staffs in our banking branches in Britain, America and elsewhere because in the past few weeks the level of inquiries at these branches has increased by about 80 per cent. Depositors resident outside the State are asking what is happening here. They are concerned about their deposits in our banks. Some of these people do not even wait for answers: they just ask for their money. Are we in a position of being able to generate sufficient growth and to provide for some degree of a lift in an economy that has already gone almost underground to be able to risk the role of our banking system? The Government backbenchers are not well represented today but those backbenchers share our concern in this matter.

They have told us so.

Therefore, one wonders if this Minister would consult his own colleagues. It is possible to feed anything into a Minister for Finance but the Minister must make the political judgment as to what the consequences of what is being proposed to him are. I do not know what was the source of this proposal. I do not know whether it came from the Revenue Commissioners or from officials of the Department or from some interested group, but the Minister must make the political judgment as to what is right and proper in the circumstances. I am afraid he either suspended whatever political judgment he has or else he made the most deplorable political judgment a Minister has made for some time.

I can at least argue the case that the Minister was not just going to spend our money but was going to throw it away. He was going to ensure that those who are now being pressed by the banks would be pressed further, that farmers and business men of all kinds who are now under pressure would be under greater pressure. He would equally ensure that, with the run on the banks through a range of actions such as this, whatever chance the interest rates would have of coming down within distant vision of the interest rates in other countries, they would have to be maintained at impossibly high levels here to correct the impact of actions like this.

So much for what the Minister proposed to do and so much for the reasons, we fiercely opposed it from the first day and regretted the fact we could not get to it during the debate in the House. If there was even provision in the order we arranged we would willingly have spent a day, two days or the whole Committee Stage on this in an effort to persuade the Minister to drop this crazy notion. We made our case as strongly as we could and we put down, from the first day, the amendment to delete this. At least, we have got the satisfaction of knowing, belated though it may be, that for once we achieved something.

Our amendments are the clean ones because they propose to get rid of all this nonsense. I am proposing the deletion of all words from line 28 on page 21 to line 44 on page 22, effectively deleting all this nonsense. The Minister is not proposing that. He proposes to change some words. I welcome the late recognition but I must deplore the fact that this was ever allowed to get into a Bill.

It appears from what the Minister is now proposing, in his belated attempt to correct the damage done, that the banks will have the decision to make, they being the persons on whom the notice is served. I understand that to be the banks in this case. In the Minister's amendment it states that if the bank is not satisfied that the person who served the notice, that is the customer, was ordinarily resident outside the State when the interest was paid or credited, there shall be given to the person on whom the notice is served, namely the banks, an affidavit made by the customer, stating his name and address and the country in which he was ordinarily resident when the interest was paid or credited. It will not be a blanket position but still it is not going nearly far enough. If the banks are not satisfied that the person was ordinarily resident outside the State the affidavit will still be required. We will still have a sworn statement. Apart from all the arguments which I still hold against affidavits and which I have made, this places an impossible burden on the banks. I do not know what their view on this is as I have not had time to consult them since this amendment came through. We got the amendment late last night and I saw it for the first time early this morning.

How are the banks supposed to judge they are satisfied that the person is ordinarily resident outside the State? How will they pick and choose between money deposited by people in America, Britain or anywhere else? What is to distinguish between the various categories of people the Minister has in mind to get at and the kind of people he now feels he has no business getting at? It appears that the banks will have to make the decision under the Minister's proposals and, when they do, they may require the person, about whom they are not satisfied, to swear an affidavit stating his name, address and the country in which he was resident when the interest was paid or credited. I do not know how that will work. I do not know what computer the banks have for determining this.

I can only imagine that if Paddy O'Brien, late of Tipperary, goes into a bank in New York, puts in a few pounds the bank in New York can credit it to his account in Ireland. How will the banks know if he is putting that in for himself in New York or for his mother back home in Ireland? The Minister expects the banks to have some way of knowing this and, because he does, somewhere along the line someone will have to swear affidavits.

It is time we got away altogether from the affidavit nonsense. It should never have been mentioned in the context of a banking system. While I have a very small degree of welcome for the fact that the Minister seems to be aware of the enormity of what he was originally proposing, the principle of an affidavit in relation to banking accounts is very serious and very damaging. Accordingly I press strongly at this stage that the amendments down in my name on behalf of our party are enthusiastically accepted by the House, particularly by the Minister's party and we should nearly do it by acclamation. If ever we were to stand up and applaud we should do it if that were passed. This would let the world outside know that when they put any money into our banks from now on that money will be welcomed, they will be appreciated for the contribution they have made, and our economy can benefit from that contribution. I urge the Minister to withdraw his itsy bitsy amendment and allow our clear, clean amendment to be passed with unanimous enthusiasm by the House.

Are we debating amendment No. 17 with amendment No. 16?

We are debating amendment Nos. 16, 17, 18, 19 and 20 together.

Deputy Michael O'Kennedy has argued our point of view extremely strongly in relation to this. He has, in no uncertain terms, put the enormous danger lurking in this section before the House. I would like to make a few comments to add to what Deputy O'Kennedy said. It is clear that the Minister has pulled back from the brink on this section. We welcome that. However, the damage done in going to the brink appears, from the reports reaching this side of the House — I wonder if the Minister's side of the House are getting the same reports — to have hurt. At the end of the day, as I said when we were talking about a similar section earlier, it is not legislation that moves money around in the banking system, it is the environment and the attitude of the people in power.

Irrespective of what finally emerges from this Bill in regard to this whole affidavit business, one thing is now clear: that there was a stab taken at it, an attempt to grab the money in the banking system in a rather crude way. I wonder at the end of the day, if so much damage has been done, whether we will even be thanked for backing off it at this stage. I am talking about amendment No. 17, which I want to discuss in a moment. I wonder has the Minister made any real change at all.

Deputy O'Kennedy spoke about a figure of £1.4 billion. I am aware that at least one of the major banks here has privately estimated that up to 50 per cent of that money was at risk in the event of this section not being amended. The rest of the Finance Bill is just mickey mouse stuff compared with the ramifications and implications of this section. In my view it was an exercise in national recklessness. We welcome the fact that the Minister has taken another look at it and pulled back from the brink. Again, the cost may have been too much. If it does nothing else it will certainly do this — and this is a mild way of putting it — it will reduce the attraction of Ireland for people living abroad. It will increase the amount of nervousness felt. No amount of assurances from this House today, no amount of applauding, to use Deputy O'Kennedy's words, will console or make people abroad feel any better about the fact that we said we would do it but we were really only joking and did not do it. I do not think it will make them feel one bit better.

I am trying to avoid any sort of political implications in making this case because surely both sides of this House are concerned about our banking system. I honestly feel that foreign residents will regard the stab taken at the non-resident funds in Irish banks, £1.4 billion, as a first attempt. They will regard it as a notice that it may be tried again in the next budget, perhaps at a different time, perhaps when we are less rushed in different circumstances. Our case is that we should be saying to the world at large, to our own workers in particular, that we are trying to foster in Ireland, even at this late stage, an atmosphere of enterprise and of saving. To be making this mad lurch at deposits in Irish banks in this way and then having to pull back from it at the last minute when the pressure builds up has done enormous damage. I stress that it is not that we want to make political points. This is not a matter of Fine Gael or Fianna Fáil. This is a national matter, an attempt being made to undermine the banking system here. I just hope that the pull back from it will have some effect. I appeal to the Minister, instead of just answering Deputy O'Kennedy, myself and whoever else may speak from this side of the House today, to speak to the broader audience——

Hear, hear.

——because it is not just we who are listening to the Minister today but the large volume of people, the owners of those £1.4 billion who would be affected — and the Minister's words today will get to them. What I want the Minister to say to them today from the floor of this House is that that money is not now and will not be at risk in the future. It is not sufficient to reply to what we have been saying here in a technical sense. I appeal to the Minister to say loudly and clearly that that is the last time that will be attempted by his or any other Government in this country, that there is nothing to fear by genuine people with accounts in this country. I appeal to the Minister to say so from the floor of the House today because there are many hundreds of thousands of people all over the world waiting to hear what he is going to say and it will get to them in the usual professional way.

From my information also I know we are not talking about a small number of large accounts; we are talking about a large number of small accounts. That makes it even more important and urgent that the Minister today says clearly that this stab will not be taken again. I want to say this, and I do not want to be misinterpreted in saying so. It is one thing to chase our own hot money as it were — and every Government has to do so — but it is an entirely different thing to be chasing what might be regarded as the hot money of some other country that might make its way into our country. That is an entirely different concept and is a matter for other countries to deal with themselves.

We are also endeavouring to build up in this country, and have been for some time, a national currency market. This type of effort damages any such attempt. It is also an admission that our exchange control regulations, the product of the effort and determination of all sides of the House, are not controlling this problem. That is a terrible admission. My opinion is this, and the Minister can correct me if I am technically incorrect, but I think I am right. You cannot lodge Irish pounds to a non-resident account in Ireland at present without some proof that that money came from abroad. It is my understanding that that is one of our exchange control regulations. That regulation could have dealt with this problem. I also understand that proof of residence is sought and required. If that is the case then this section was not needed because the exchange control regulations could have dealt with the problem. I understand also that the exchange control regulations apply to the opening and conduct of non-residency accounts in Ireland. If that is the case, again this section was unnecessary.

I want the Minister to give an assurance that the people in the ownership of that large sum of money when they look at "Ireland" on their letterhead next weekend can say: "All is well. We do not have to worry about that."

The Minister has put down his own amendment on section 17. It goes some of the way to meeting the problem we asked the Minister to deal with in that it leaves it up to the bank to decide whether the bank is satisfied or not to go ahead.

Is the Deputy sure of that?

That is what it seems to indicate by the terminology "if the person on whom the notice is served" which in my view would be the bank. But if the bank are not satisfied then they must go through a string of things, affidavits and so on. That places an enormous onus on the banks and, to an extent, is a dereliction of duty on the part of this House in that we are handing over to the banks. The Minister and/or his Department are washing their hands of it and saying to the banks: "Look, I made a lurch at this. It did not work out. I will leave it to you people in the banks. I got my fingers burned here. You make up your minds and I will not have any more to do with it." That is what it is. It is a cop-out to that extent. It is just passing it back to the banks.

If the people with these funds feel that the bank might take one decision in one case and another decision in another case, will not it still cause the same type of nervousness I am talking about among depositors? They may say to themselves: we are not all now under scrutiny but the bank has an option to jump on any one of us at any time. They might feel that the bank might respond to a request from the Revenue in regard to any particular account to jump on that account and examine it. People abroad might feel that, and in logic one could not blame them for looking at it in that way. Therefore, I am not sure that section will do any good whatsover.

In regard to the last paragraph of amendment No. 17 I have to say to the Minister that perhaps somewhere in my education I have not learned to read legislation properly. It is the greatest load of gobbledegook I have ever read in any Bill. For the benefit of those who may not be able to get through it I want to read it into the record because it is an amazing piece of drafting. Under the Minister's amendment subparagraph (ii) of subsection (2) would read:

if the person on whom the notice is served is satisfied that the person who served the notice was not ordinarily resident in the State when the interest was paid or credited and, if the latter person declares in the notice, or in a subsequent notice served on the person on whom the first-mentioned notice was served, that he was not beneficially entitled to the interest when it was paid or credited, he shall, if the person so entitled (hereafter referred to as the "beneficial owner") is ordinarily resident in the State, state in one of the notices aforesaid, or in a subsequent notice served on the person on whom the first-mentioned notice was served, the name and address of the beneficial owner.',".

If that is meant to be legislation it will take an army of tax people, accountants, lawyers, and God knows how many High Court cases to untangle. I spent some time trying to unravel it but came to the conclusion that it means absolutely nothing. Right in the middle of that gobbledegook is the phrase "if the latter person declares in the notice... that he was not beneficially entitled to the interest..." then there is no need to make any affidavits or returns whatsoever. This section is supposed to catch non-residents holding funds for residents. What madman living abroad who is not the beneficial owner will declare it? If he does declare it he will be in trouble, but if he does not then the section does not apply. Nobody living abroad will declare that he is not the beneficial owner.

This is an example of some of the thinking in this Bill. It is an open-ended attack on whatever capital this poor little country has left, an open assault on the formulation, accumulation and orderly use of capital in the banking system. If we want to get our hands on banking money and, as Deputy Kelly used to say, flatter the ideologists, there is a cheaper way to do so than by taking on £1.4 billion which this State badly needs. The Minister has done irreparable damage but I am delighted that he has listened to some extent to advice and backed off somewhat. I would ask him to say clearly that genuine foreign funds in the Irish banking system are not at risk from this or any other Irish Government.

What Deputy Brennan has just said sounds like gobbledegook.

The Deputy might explain the section.

It is something on which Fianna Fáil are extremely strong. This is the sort of thing they are made of — evasion, subterfuge, the blind eye, the back door.


Deputies should remember that this is a limited debate.

Deputy O'Kennedy was kind enough to describe me as a diligent and worthy contributor to this debate and I will continue in that fashion. The Minister has been trying to deal with tax evasion and doing so very successfully in some ways.

When I thought he was going a bit too far I was quite prepared to say so but I hope the Opposition will accept my bona fide when I express my belief that what the Minister is doing here is an attempt to close off a blatant avenue of tax evasion. The Minister is not out to cut across anybody who is investing in this country. He is out to catch people living here who earn or come by money in this country but open accounts in banks here giving addresses in Northern Ireland or England. It is alleged that this is common practice. That is what the section deals with. It is about people who go to a bank manager, ask to be facilitated by opening accounts with addresses outside the State and are given the name of a bank in, say, Main Street, Enniskillen. If anything is causing money to flow out of the country it is the attitude of Fianna Fáil Deputies. Perhaps the Minister will say what penalties there will be for bank officials who facilitate people contrary to the section.

It is time we responded with moral leadership to the problems in the area of tax evasion. I objected very strongly on moral or public interest grounds to some sections of this Bill and I am pleased that the Minister is bringing in certain amendments. I objected, not because it gave me joy as a Fine Gael backbencher to object to a Government measure but because on moral grounds I genuinely believed that the small investor would be badly affected by burearcracy. We have a duty to give honest, moral leadership and if there are people who are opening several bank accounts in their own names or different names in order to keep the interest limit under £70, or giving addresses outside the State, we have a right to say that this is dishonest and immoral and will not be tolerated. Only people such as these will be affected by this section. If anybody has any difficulties about this measure, let them take out their money and invest it in building societies without being taxed, provided their rate of tax is not above the standard rate. There are a number of different things people can do. There is good reason to believe that some people are being facilitated in opening fictitious bank accounts in their own names outside the State and if we have any guts we should all be prepared to stand up to say this practice is immoral.

There is a strong feeling within the community regarding tax evasion, some of it justified and some not. I was in a minority position last week in what I had to say on some sections and I suppose that others will be in a minority this week on this section. I strongly believe that this is an area of blatant tax evasion and the amendment the Minister is putting forward tones down the section to some extent but deals with the matter efficiently. I think it takes the "police state" element out of it, if the Minister does not find that comment offensive. It is certainly not meant to be.

Deputy Brennan said that we have a duty to foster enterprise, and I accept that. Nobody in this House could have stronger feelings in that regard. Competition and enterprise are the essence of a sound economy and will give people opportunities of which they are now deprived. We also have a duty to foster an atmosphere of equality and honesty which does not depend on subterfuge, evasion or sneaky backdoor ways which we seem to accept whether they are lawful or not. If Deputies opposite want a situation where anybody can open an account giving a fictitious address in Northern Ireland, let them introduce legislation which would make it lawful to do so. Let us not bring the law into disrepute by letting a situation continue where people can be facilitated in a number of banks to open fictitious accounts.

The Deputy is discrediting the bank managers.

The Deputy should make up his mind which side he is on.


The Minister's colleague said he was heading towards a police State.

The attempts by Deputies opposite to oppose every section were understandable on Committee Stage but on Report State it is unnecessary to continue in this way. They will not get thanks from the worker or from the man in the street. Probably the only people who will thank them will be those with funds to invest in political parties. The amended section, as proposed by the Minister, is acceptable and I support it.

I have not access to information regarding high finance. I have not access to the kind of information Deputy Brennan has put before us, of sums of money in the region of £1.4 billion or £1.6 billion.

It is in the report of the Central Bank.

If that kind of money is at risk it is because the people involved are probably at risk themselves because they are tax evaders. Tax evasion is a major issue. A major objection to the tax system is that sufficient taxes are not put on capital, wealth or property. Fianna Fáil were opposed to any extension of taxes on capital, wealth or property. They abolished the wealth tax and they opposed the property tax in this Bill. The other matter is the question of evasion and avoidance of tax. Fianna Fáil should reconsider why they opposed measures in this connection with this matter. Strong measures must be taken. We believe the measures proposed in this Bill are insufficient. They do not go far enough in the areas they tackle and they do not tackle many areas at all. However, this is the first Bill that has begun to tackle the problem.

It is vital for the Government and for the Dáil to be seen to tackle the problem of evasion and avoidance of tax and clearly to identify tax evaders as criminals. These people must be shown to be robbing the State, taking wealth from the Exchequer which is badly needed for health and educational services. They must be shown as taking from the old and the poor the health services to which they are entitled and taking food from the tables of the needy. Tax evasion should be seen as one of the worst criminal offences. To date it has not been seen in that light but various sections of this Bill will begin to put such a stamp on tax evasion. It must be seen as a criminal act. Up to now it has been regarded as the smart thing to do, something about which one could boast. That concept of tax evasion must be altered and this Bill is the first step in that process.

I see nothing wrong in seeking affidavits. There was considerable oratory here to the effect that signing an affidavit was a dreadful thing to do. It should not be seen in that light: rather, it should be regarded as the correct procedure. I do not know what effect it will have on this £1.6 billion that is lying around but presumably the Bill is trying to get at the people who are using the system. Any loopholes that can be closed should be closed. I do not see why there should be such objection to the signing of an affidavit if it will close a loophole in the system. People with money in banks use a kind of blackmail system. They say that if they are taxed they will take their money out of the country. There have been stories of suitcases of money being taken across the Border. I do not know what truth is in that story but presumably this kind of thing happens. That is a criminal act which should be prevented.

I think it undesirable if the Minister makes any further serious alterations in this section. The amendments he has put forward so far will weaken the original intention in the Finance Bill with regard to evasion and avoidance of taxation. If the Minister concedes any more, this section will become nonsensical and meaningless and it will be seen as such by the people who are protesting and rebelling against the inequitable tax system. We should be seen here as endeavouring to tackle the problem, not as weakening measures against tax evasion.

The purpose of the amendment put forward by Deputy O'Kennedy is to delete from section 17 the full provisions regarding the lodgment of affidavits in support of a declaration of non-residence. This section is an anti-evasion section to deal with the problem that has been identified and has been known for some time. It is a problem of evasion arising from the spreading of deposits through different accounts and the making of false declarations of non-residence.

Since the Bill was published, the case has been made that the provision as it was in the Bill would have a disincentive effect in relation to non-residents opening up deposits in our banks, the very people who would not have a difficulty in relation to this. However, in recognition of the importance of the psychology of the market and in recognition of things said from the Opposition benches here and in the banking community, I have given some further reflection to the provisions of the Bill. That will not result in leading me to accept Deputy O'Kennedy's amendment because I think it goes much too far in that it would take away any possibility of dealing with the real abuse that arises and which there is no reason to allow to continue. If the real problem to which Deputies have referred is the way the genuine non-resident depositor would see these rules, then we can take measures to deal with that. However, that does not require us to continue with a situation where an Irish resident can make a false declaration of non-residence and get an additional advantage illegally from our tax system by doing so.

I wish to point out that we put down our amendments before the Minister's amendment came before the House. The Minister may take it that our amendments will not now be moved.

I appreciate that point. I wish to make the point that these were the terms on which the discussion was started on the other side of the House, that we do not need to go that far to deal with the problem, which Deputies on the other side and others have mentioned. It is to deal with that problem that I put down amendments Nos. 17 to 20. The effect of those amendments will be to bring about a situation where the affidavit procedure would be modified in such a way as not to impede foreign depositors while retaining the essential anti-evasion nature of the section as originally conceived. The effect of the amendment is to ensure that a non-resident depositor will not normally be required to produce an affidavit in support of a declaration of non-residence. This is covered in amendment No. 17 which gives effect to this decision by providing a revised version of the proviso of section 344(4) of the original Act.

Paragraph (i) of the revised proviso that is then provided for in amendment No. 17 covers a situation where the bank or financial institution is not satisfied that the declaration of non-residence is correct and in that event an affidavit will be required. It is legitimate to ask the institution — which after all is the one that must make the return if a return has to be made under our laws — to satisfy itself first of all that it is in a position to know whether there is a requirement to be met and whether it — that institution itself — is in a position to meet the requirement laid on it by our own legislation. Paragraph (ii) of the section to which reference has been made covers the situation where the institution is satisfied that the declaration is correct but where the depositor indicates that he is not beneficially entitled to the interest. In that event the declaration will, if the person so entitled is ordinarily resident in the State, indicate the person's name and address.

Amendments Nos. 18 and 19 are technical amendments consequential on the text of amendment No. 17 and amendment No. 20 equally is a further consequential technical amendment.

The question has been raised as to how a financial institution is to make up its mind whether it is going to accept the declaration of non-residence. This in a sense is the centre of the problem. The case is very clear. If I were to go to the branch where I normally do my personal business and say that I want to open a deposit account and that my address is somewhere in Northern Ireland, Liverpool or somewhere like that, in that case it would be clear to the bank manager that he could not be satisfied that my declaration of non-residence was genuine and could then require an affidavit which is a sworn statement and which would then bind me in terms of the application of other provisions in both this Bill and other Acts that provide for the proper administration of our system. That is the abuse which we are aiming to deal with. That is at the centre of our concern and, therefore, I have put down these amendments.

I do not know if at this stage I need to say a great deal more about it. I made it very clear that the main intention and aim of this section is to deal with the situation where we have a false declaration of non-residence by an Irish resident. Listening to Deputies on the other side making their case——

Let me clarify something. Perhaps it does not need clarification, but in view of what the Minister just said, when he sits down now he will not be speaking again on this group of amendments. He will not have the right to speak again on this.

I am in your hands, Sir, on this. We have a kind of mixed situation in that we are discussing an amendment proposed by Deputy O'Kennedy and a series of amendments proposed by me, grouped. Do I take it that if I have to conclude my remarks now Deputy O'Kennedy has also concluded his remarks?

No, Deputy O'Kennedy has the right to conclude because his amendment goes first and the Minister's amendments are taken with it.

I bow to your ruling on that. It is well to be clear on it. Deputies on the other side of the House were trying to point out that the measure as originally conceived would have a deleterious effect on foreign investment in this country. As I have said, I recognise that there is a psychology in the market which we must take into account here, but I would reject a suggestion implicit in much of what was said on the other side that our tax arrangements here, or indeed the tax arrangements in any country, are the only factors that influence the flow of funds into that country. It is not the case that all of the foreign funds on deposit here, being used here, invested here, have come here only because we have a different tax treatment of deposits in this country. It is certainly not the case that funds come into this country only for those tax advantages. It might be mischievous to go into the detail of that question and make comparisons, but I am quite sure that Deputies on the other side of the House are as much aware of that as I am. There are reasons other than the tax advantages that funds come into this country and that funds coming into this country find a home temporarily in particular kinds of deposits. As Deputies on the other side of the House know, volumes of funds coming into this country are temporarily put on deposit while waiting to go into their final destination in this country whether in one form of investment or another, and the tax benefit that they derive from the non-resident status of the depositor while the funds are on deposit here is an extra that is picked up along the way. It is not the essential reason why the funds came in in the first place. Therefore, to make the point that such a large volume of funds was, in the words of Deputies opposite, at risk is, to say the very least, an exaggeration of the effect that this measure would have had on the flow of funds into this country. I am quite prepared to accept that people would make the case in those terms but as to deciding whether we should believe that that is the totality of the case being made and that that is the only factor we should take into account, I would not go anything like as far as that in attributing such a huge importance to the influence of taxation factors on the flows of funds involved.

Deputy Mitchell asked what the position of a bank official would be who, in the Deputy's words, aided and abetted in the making of a false declaration. The position there would be that the penalties provided for in our tax legislation and modified in some respects in this Bill would apply, but it would seem to me that that is the case that would arise least frequently in this connection because the original intention and the intention as it still is is to ensure that the person who would be prevented from getting this advantage would be the resident depositor who makes a false declaration of non-residence. That is the main intention and the main thrust of the provisions in this.

The other questions raised on this matter by Deputy Brennan had to do with the question as to whether the fact that this kind of abuse could take place was not an admission that our exchange control rules were not working. The main abuse that we want to deal with here is the making of a false declarations of non-residence. However, that is an area where it is very difficult to be sure that exchange control regulations have any direct application because there is not a flow of funds. As Deputy Brennan said, the funds being lodged originate in this country in the first place so that they normally would not come within the ambit of exchange-controlled operations.

The question of the overall confidence in the banking system, and how it would be affected by this measure, is one on which Deputies opposite have placed a great deal of emphasis. The tax advantages to be derived by non-residents in making deposits here are not by any means the only explanations for the level of deposits of foreign funds here. The level of confidence in our banking system as a whole has to do with a lot more than any of the rules we have as to confidentiality, a word that was used — I believe mistakingly — by Deputies opposite. It has a great deal more to do with the general situation in our economy, the general level of return on investment and the level of confidence investors can have here. That is a subject on which I could say a great deal but I would be ruled out of order because it is not relevant to the provisions of the section. The point I am anxious to make is that those other considerations are more important in terms of confidence in our banking system than any of the measures we have been talking about in the context of this section.

That is not the case in Switzerland.

There is a completely different set of rules there and they are in no way comparable to what we are talking about here.

I am anxious to make it clear that speakers on this side never suggested that people going to a bank here and giving a false residence abroad should get the protection of privacy or confidentiality to enable them to avoid their obligations or get the benefit of evasion or avoidance. We never suggested at any stage during the course of the debate on the Bill that such people should be protected in any way. The Minister has acknowledged that the amendment he has introduced is designed exclusively to deal with people who give false addresses in their banks at home and we support him on that basis because we are as anxious as anybody to ensure that our system is not used to encourage avoidance or evasion. On the basis of the Minister's assurance that they are the cases he is talking about, and in respect of which instructions will be given to the Revenue Commissioners and the banks, there is no problem. However, that does not take from the case we made initially, that damage has been done. I take it from what the Minister has said that no person who is resident outside, or any person who puts money into a branch in America, London or elsewhere, will be called upon to make an affidavit. If that happens it will have a damaging and serious affect.

It is covered in the amendment.

The Minister has outlined to us how it will be done but that is not clear in the amendment which leaves the matter to the banks. As long as we are talking about the case the Minister dealt with, an Irishman here giving a false address outside — a matter which is not clear in the amendment — not only will we not question it but will support it. I must stress that damage has been done. We have not said anything that would give the impression that we were trying to help evaders. From the day the Bill was introduced we have opposed certain provisions because of the damage they would do. I dealt with that when introducing my amendment and I hope the damage done is not irreparable. I hope the confidence in our banking system has not been undermined by this the most unprecedented and foolish provision ever included in a Finance Bill.

Is the amendment withdrawn?

Yes, on the basis of what the Minister is doing.

Amendment, by leave, withdrawn.

I move amendment No. 17:

In page 21, to delete lines 28 to 38 and substitute the following:

"(i) if the person on whom the notice is served is not satisfied that the person who served the notice was ordinarily resident outside the State when the interest was paid or credited—

(A) there shall be given to the person on whom the notice is served an affidavit, made by the person who served the notice, stating his name and address and the country in which he was ordinarily resident when the interest was paid or credited, and

(B) if the person who served the notice was not beneficially entitled to that interest when it was paid or credited, the affidavit shall state, in addition to the particulars specified in paragraph (A), the name and address of the person who was so entitled and the country in which he was ordinarily resident when the interest was paid or credited, and

(ii) if the person on whom the notice is served is satisfied that the person who served the notice was not ordinarily resident in the State when the interest was paid or credited and, if the latter person declares in the notice, or in a subsequent notice served on the person on whom the first-mentioned notice was served, that he was not beneficially entitled to the interest when it was paid or credited, he shall, if the person so entitled (hereafter referred to as the "beneficial owner") is ordinarily resident in the State, state in one of the notices aforesaid, or in a subsequent notice served on the person on whom the first-mentioned notice was served, the name and address of the beneficial owner.'.".

Question put and agreed to.

I move amendment No. 18:

In page 22, line 2, to delete "or affidavits".

Question put and agreed to.

I move amendment No. 19:

In page 22, line 17, to delete "or affidavits".

Question put and agreed to.

I move amendment No. 20:

In page 22, to delete lines 36 to 44 and to substitute the following:

"(i) If the person on whom the notice is served is not satisfied that the person who served the notice was ordinarily resident outside the State when the interest was paid or credited—

(A) there shall be given to the person on whom the notice is served an affidavit, made by the person who served the notice, stating his name and address and the country in which he was ordinarily resident when the interest was paid or credited, and

(B) if the person who served the notice was not beneficially entitled to that interest when it was paid or credited, the affidavit shall state, in addition to the particulars specified in paragraph (A), the name and address of the person who was so entitled and the country in which he was ordinarily resident when the interest was paid or credited, and

(ii) if the person on whom the notice is served is satisfied that the person who served the notice was not ordinarily resident in the State when the interest was paid or credited and, if the latter person declares in the notice, or in a subsequent notice served on the person on whom the first-mentioned notice was served, that he was not beneficially entitled to the interest when it was paid or credited, he shall, if the person so entitled (hereafter referred to as the ‘beneficial owner') is ordinarily resident in the State, state in one of the notices aforesaid, or in a subsequent notice served on the person on whom the first-mentioned notice was served, the name and address of the beneficial owner.".

Question put and agreed to.

I move amendment No. 21:

In page 29, to delete lines 9 to 20.

This amendment deals with cases where the Revenue Commissioners have agreed with the taxpayer that they would in pursuance of payment refrain from initiating proceedings for the recovery of any fine or penalty and, instead of initiating such proceedings, would accept, or undertake to accept, a specified sum of money in settlement of any claim by them in respect of any specified liability of the person under any of the Acts. If the Revenue Commissioners agree to accept a sum in discharge of liability, if they agree to refrain from further proceedings because the sum accepted meets their demand, if they are satisfied — and that satisfaction is registered in an agreement — we cannot see any basis for having the case of such a taxpayer included in the list to be published of defaulters, evaders and so on. There is every reason to distinguish between that person in respect of whom an agreement is made and the person who is evading his responsibility and does not meet his commitments. To that extent such a person has not met his commitments to his fellow taxpayers because the more he evades the more they pay. Unless the Minister can assure us on this matter he should accept the amendment. I do not believe the Minister wants to discourage people from paying their liabilities to the Revenue Commissioners or to discourage the Revenue Commissioners from reaching agreement with people on the basis of information supplied to them.

I should like to support the amendment. There is a great deal of reason in it and I should like to emphasise Deputy O'Kennedy's last point, that if the amendment is accepted it will facilitate agreements and settlements. That is desirable. We all agree that the Revenue process is a bit clogged up and if we can get more settlements and agreements all the better, provided they are settlements with which the Revenue are satisfied. Non-publication of genuine settlements agreed between the taxpayer and the Revenue would help the process of having such settlements made.

I am conscious of the points made by Deputies Haughey and O'Kennedy but I should like to direct their attention to subsection (4) which excludes from publication cases where there has been full co-operation in the provision of all the necessary information before the investigation has taken place. I am just as anxious as Deputies on the other side of the House to ensure that settlements can be made where they are of a nature and of an amount that is satisfactory to the Revenue Commissioners. Obviously, the more settlements we can have on the basis of full disclosure the better. Subsection (4) excludes from the publication provision settlements which are made as a result of full disclosure before investigation. That should deal with the point the Deputies have in mind.

I should like to make one point arising from the amendment. If the Minister does not propose to accept the amendment I should like to know whether he would consider the use of the word "refrained" in paragraph (c) and ask himself what exactly will constitute the act of refraining from initiating proceedings. In a sense it could be said that an infinite number of moments pass between the time when the Revenue Commissioners start to scratch their heads over a return and the moment when they decide to initiate proceedings when, if they take some different course, they could be said to be refraining from proceedings.

I would like the Minister to consider whether it might not be wise for him, if he is going to retain this paragraph, to define a little more adequately the moment of renunciation, the moment when the Revenue Commissioners decide and note on their file that they are renouncing proceedings. If he does not do that, it seems the commissioners are being allowed to wander at large, over a long period of time with a long exchange of correspondence. They are not allowed to behave arbitrarily, but perhaps in a mode which is not transparent from the taxpayers' angle, they may decide to make use of the powers of this section knowing that the taxpayer will not be able to point to a particular moment at which this renunciation has been chosen as a course.

I very much regret that the Minister could not and does not accept this amendment. It is only the time constraint which prevents us arguing with greater force. I see no justification for publishing in the same list as people who have been fined, imprisoned or something else, a person who has reached a settlement with the Revenue Commissioners.

They have not co-operated in providing all the information required.

There may have been a delay up to a certain point, but it is an incentive for settlement and, if the Minister has the authority to act on this, the Revenue Commissioners will tell him that this will expedite settlement.

It is an incentive to co-operate and provide the information.

It is before any investigation ever started.

Let us look at the words. The Minister uses the words "in respect of whom no investigation or inquiry has commenced." That covers everybody. Thank you very much for ensuring that our names will not be published in a list. Is that what the Minister is seriously suggesting? Even after an investigation has started into the affairs of a person who has been dilatory in bringing forward his accounts but then agrees with the Revenue Commissioners and they decide to finalise the matter, will the Minister persist in publishing that name on a list which will have on it the names of criminals? I cannot understand it. We could argue this for hours but the time factor is against us. It is regrettable that the Minister has not met our case and that he has not the authority or judgment to accept it. If he does not accept my amendment we will have to put it to the vote.

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

Only time prevents us from calling a vote and I want the record to show that.

Amendment put and declared lost.

I move amendment No. 22:

In page 30, between lines 7 and 8, to insert the following:

"23.—Notwithstanding any obligation as to secrecy imposed on them by the Acts or the Official Secrets Act, 1963, the Revenue Commissioners shall publish annually a list of all organisations enjoying charitable tax status.".

This amendment relates to the general public concern, whether justified or otherwise, that there is a great deal of tax evasion. I do not intend commenting on whether this is true because it has been commented on at length how much or at what level this tax evasion exists, but I am certain of one thing and that is that it is not helpful if there is an air of secrecy about any aspect of the work of the Revenue Commissioners. A short time ago I put down a question to the Minister for Finance asking for details of all the organisations enjoying tax-free status as charities. I put it down as a written question because I thought that as a Deputy I would get this information. I had always thought that if we could do nothing else as individual Deputies at least we could get information on matters which were of concern to ourselves, our constituents or the public at large. The gist of the reply was that there was no list of organisations enjoying tax-free status under the provisions of the Finance Acts. I fail to understand that reply. There must be records of such organisations and they must be, or should be, available. Having discussed the matter further it appeared that the only way to get this information, or similar information, from the Revenue Commissioners is to table an amendment to the Finance Bill; then the Revenue Commissioners would be instructed to make this information available.

That is the background to this amendment. It contributes greatly to public disquiet when this information is not available even in Dáil Éireann. Expressions of concern have been voiced during this debate, and if the Minister is concerned about allaying fears of tax evasion, saying they are grossly exaggerated, he should respond in any way possible by providing any information a Deputy requires. If the only way to get this information is by accepting this amendment, then I ask the Minister to accept it. I am interested in hearing his reply.

When replying would the Minister deal with the situation under section 294 which provides that where a person or firm provides a service that would otherwise have to be provided by a Minister that it is tax free? Is that section operative? If so, are there many cases in which it is availed of?

Arising out of Deputy Gregory's amendment, there is a distinction between a requirement such as he envisages, that the Revenue Commissioners should publish lists which carry no implications as to the guilty behaviour of people, on the one hand, and lists which expressly are intended to disclose, with an added degree of publicity, guilty behaviour which has been established by a court. I hope I shall not be too many inches outside the frontiers of order if I say, in regard to Deputy Gregory's idea, that I could see no strong objection, certainly of a legal kind — there might be objections of other kinds — to the Revenue Commissioners publishing such information. However, if they did, it would be hard to see what barrier would prevent their disclosing details of every taxpayer's arrangements, whether individual taxpayers or corporation taxpayers, with regard to their tax-free allowance. I could see a very strong legal objection to what the Minister is proposing in the existing section 23 — that the Revenue Commissioners, without the interposition of any court, should apply a provision which is effectively and professedly penal. It is intended to step up the punishment incidental to having been fined or penalised, or even having been made the subject of a composition with the Revenue Commissioners of a revenue offence. If it is a penal provision, it ought to be one which permits an area of discretion between one type of offender and another. Deputy Gregory might not accept that there is such an distinction, but in human cases, even ones which might affect his constituents, I suspect that he would run across fairly marked shadings of guilt. A penal provision should admit gradings of this kind and confer a discretion as to whether the penalty should be intensified in this way. If it does, it should be conferred, not on the Revenue Commissioners but on a court. If it is not, it is constitutionally infirm.

An Leas Cheann Comhairle

I feel that the Deputy is still dealing with section 21.

The Chair's feeling is absolutely correct.

I would prefer that the Deputy would move on to section 22.

Let me say, in courtesy to the Chair, that the reason why I wittingly strayed outside the boundaries of this section was that Deputy Gregory's amendment seemed related to it and I was prevented from making this very simple point last week by reason of the fact that this section was not taken at all on Committee Stage.

Is the amendment withdrawn?

In reply to Deputy Gregory, the question as to whether an organisation is to be regarded as a charity has to do with some wider considerations than simple tax law. The determination as to whether it is a charity is not dependent only on its taxation arrangements. For that reason, without having any stronger opinion than that, I wonder whether the Revenue Commissioners would be the appropriate body to publish lists of organisations of this kind. When Deputy Gregory put the question to which he has referred, I was somewhat surprised to learn that there was no list of the kind that he had in mind, particularly given that there are cases where a particular tax status is granted. Since the matter does not relate only to tax law——

The amendment deals only with the tax-free status.

I know that. However, the question concerns the publication of a list of all organisations enjoying charitable tax status. Since part of that status — the charitable part — may be determined by considerations other than tax law, the question is whether or not the Revenue Commissioners would be the appropriate people to publish the list.

Deputy Gregory's amendment deals only with people whom the Revenue Commissioners have decided are tax-free because they are charities. Is that not the case?

For that very reason, when Deputy Gregory put the question and I found there was no such list, I said I was surprised at that. It would seem that some decision must have been made at some point in order to determine that tax status.

However, because there are wider connotations, I would rather not accept the amendment as it is now, but investigate the question in more depth to see what would be an appropriate approach to the matter in the future, without making an amendment in this Bill today.

Fair enough.

Could I press the Minister further in that regard? As Deputy Haughey was suggesting, I stated specifically that I am concerned only with details of those organisations enjoying tax-free status under this aspect of the Finance Bill. The Revenue Commissioners are the only people who would have those details, which is why it seemed appropriate to ask that they publish the list. Could the Minister explain what he means by saying that the Revenue Commissioners may not be the appropriate body to publish these details? They are the only body with the details. They are not prepared, as the Minister himself found, to make the information available by way of a Parliamentary Question.

There is not a list.

That is extraordinary. I hope that the Minister would not back away from that type of attitude.

I told the Deputy that I was surprised that there is not a list, so, by apparent definition, a decision must have been made in each case.

The Minister has an opportunity to do something about it now, simply by accepting my amendment.

On the basis of the situation——

No interventions.

I omitted to say anything about Deputy Haughey's question, also.

I regret to interrupt the Minister, but we are at the stage of one intervention only. Is the amendment withdrawn?

With all respect, could I ask the Minister——

With all due respect to the Deputy, the Minister can intervene only once.

I am pressing the amendment.

Question put: "That the amendment be made".
Amendment declared lost.

I move amendment No. 23:

In page 34, to delete lines 11 to 34.

This amendment deals with the composite rate of building societies. Basically, our proposal is to delete section 27. That section goes to distinguish between building societies which in the words of this section will "co-operate fully with the said commissioners"— that is, the Revenue Commissioners — and those who do not.

In the brief period available, I stress that this is a most important section. Our brevity should not be taken as indicating that we do not attach major importance to it. I have some points to adduce in support of our position. What exactly does the Minister mean by a society giving to the Revenue Commissioners an undertaking in writing that they will co-operate fully with the Revenue Commissioners? I have never seen such a loose expression as that, even in a Bill as bad as this one is in much of its drafting. Who will be capable of defining or determining, if it does come to an issue between the building societies and the Revenue Commissioners, whether or not they have co-operated fully or intend to do so? Co-operation in itself is difficult enough to define, although we know what we mean in loose terms, but co-operating fully with the Revenue Commissioners on a matter of this nature is impossible to define. One must remember that the difference between composite rate can depend on whether or not one will "co-operate fully". I do not know on what basis the Minister could introduce such a loose and vague interpretation, even for building societies, who would need to know what obligations are being imposed on them by this legislation.

We object to this because it will distinguish between building societies who co-operate fully and those who do not, and also between the investors and the actual people with mortgages with the building societies. If we are to have a composite rate reduced by 70 per cent of the standard rate, building society A who did not co-operate fully, whatever that means——

Take the Revenue Commissioners out to lunch.

——will have to pass on the charges. They have already gone public and indicated that that is exactly what they propose to do — to pass on the charges to their clients and customers. A building society may decide to co-operate fully, whatever that means. Their investors and their customers will find themselves in a different position. This is introducing an unnecessarily complex element into funding for building operations. The building societies have a fairly well established role in our society. This kind of messing about creating unnecessary distinctions which will affect customers and investors is very damaging.

If there is a reason for a composite rate then there is a reason for a composite rate. If the Minister felt that the composite rate was too easy, he would have a stateable case if he were talking about all the building societies. If he felt he wanted to encourage them by allowing them a greater exemption from tax liability, one could understand it. I cannot understand the difference he is trying to define here. We all know what he means in general terms about co-operating fully. We know what we would like it to mean. That is a very different story from defining precisely what it will mean. It is a very different story from ensuring that this can be effective. I cannot see that it will be effective. I press the Minister to accept our amendment. Unfortunately we did not have an opportunity to deal with this on Committee Stage. We have approximately three or four minutes to discuss this very important matter on Report Stage. I hope the Minister will accept the amendment.

I will not detain the House. This is the wrong reason for bringing in a composite rate of tax. Apparently the reason is that, instead of getting information on each individual account, we are offering this option to the building societies of going for the composite rate. Because you do not get information in another direction you up the tax rate. That is the wrong reason.

If I am wrong about this the Minister can correct me. This section is very complicated. The amount of money stopped from each £1 paid out to depositors of building societies, before this legislation, was 24.5 per cent. That is, 24½ pence in every £1 was stopped by building societies before they paid out. After this section the rate will be 26.25 per cent. They are my calculations. Will the Minister confirm them?

There is an arrangement with the building societies, illustrated by Deputy Brennan, under which a composite rate of tax is charged on the interest building societies pay to their depositors. That arrangement was made for a number of reasons, not the least of which was the convenience of the building societies and their depositors. Inevitably some depositors probably pay a little more tax on the interest they receive than they should, and some pay less than they should.

The special arrangement was set up under section 31 of the Corporation Tax Act, 1976. One of the objectives of that arrangement was to ensure that, in the operation of the special arrangement, the Revenue Commissioners would try to secure that the same net amount of tax would be collected via this arrangement in respect of building society dividends and interest, as would be the case if that special arrangement did not operate globally. The Revenue Commissioners have an obligation under the section to satisfy themselves that the correct amount of tax is being paid.

In 1977, 1978, 1980 and 1982 the Finance Acts provided for a derogation from the terms of that arrangement, for a derogation from the obligation on the Revenue Commissioners to satisfy themselves that the appropriate amount of tax was being paid. The method by which the Revenue would be satisfied that the appropriate amount of tax was paid was to carry out a survey of a sample of building society depositors to determine how much tax was payable on those deposits and then to gross up from that sample what the appropriate composite rate was, in order to arrive at the type of situation provided for in the special arrangement under which the net amount of tax would be roughly the same under the special arrangement as it would be if that arrangement did not exist. That requirement on the Revenue Commissioners to satisfy themselves as to the appropriateness or adequacy of the composite rate is at the back of this measure.

On the wording of the section and the question of co-operating fully, I refer Deputies to lines 23 to 26 of section 27 (a) of the Bill which provides ".... and in particular that it will furnish the said Commissioners with such returns, information and other particulars as the Commissioners consider necessary for the purposes of such determination..."

Full details on every depositor.

It is not full details on every depositor. As I said a few moments ago, it is a question of a sample survey so that we will have the information that will allow us to gross up and to decide whether the composite rate is achieving the objective set out for it when the arrangement was first made.

It does not say that.

"... furnish the said Commissioners with such returns, information and other particulars..." On a number of occasions I said that what was in question was a sample survey. That is what is provided for here.

The Minister knows that it is not what he says here but what is in the Bill that matters. The Bill provides for full information which the Revenue Commissioners want.

Such particulars as the Revenue Commissioners may request.

That is it.

The fact that it is a sample survey has been made very clear by me in public and in discussions with the building societies.

That has no effect.

We have provided a choice this year under which we can either carry out a survey to determine the adequacy of the composite rate or we can change it by increasing it from 70 per cent of the standard rate to 75 per cent. I have provided that the building societies will have until September of this year to make up their minds as to which of these options they want.

Up goes mortgage interest.

I must remind the Minister what is in the legislation he introduced. The Minister's observations and assurances as to how things will be done administratively and how the Revenue Commissioners will act do not matter at all. It must be said quite frankly to the Minister who barks out those words that they are of no consequence whatever. Our job is to ensure that the law is clear. The fact that the Minister spoke in terms of a sample survey and tried to assure us that he said it somewhere else before and that is the legal reality demonstrates his lack of awareness of the limitations on his authority. It is what is passed here that will count. There will be no reference to sample surveys and if people want to test this or any other area——

This is another case where the Deputy is exaggerating. The inflows to the building societies for the first few months of this year are clear evidence of this.

If the Minister had been in the House for longer he would know that the most important responsibility we have is to ensure that what goes through is clear and precise. When I practised in court I heard the court say many times that the Dáil debates have no relevance in the court. It is the law that is presented that counts. Assurances about administrative practices and sample surveys do not matter at all.

To take an example from the arguments the Minister made to show how little those assurances count, the Minister gave an example of co-operating fully as: "furnish the said Commissioners with such returns, information and other particulars as the Commissioners consider necessary". If the Minister is able to read legislation he will see that is not how this section will be read. The section states they will give "an undertaking in writing that it will co-operate fully with the said Commissioners in any scheme of theirs for determining.... and, in particular, that it will furnish the said Commissioners with such returns, information ...". The two things are additional. The "co-operating fully" is not quite the same as "furnishing".

One defines the other.

The Minister might say I am being difficult but our job is to be difficult so as to ensure that vague generalities of the kind the Minister has uttered are not allowed to stand. Time prevents us from making a stronger argument.

The Deputy has somebody writing notes for him.

I am just telling the Deputy we are running out of time.

I have been in the House for four days and the Deputy will notice I was left to discharge my responsibility and am still doing the same thing. I accept that I do not have time to argue the cogent case I could make.

Question put and declared carried.

I move amendment No. 24:

In page 35, to delete lines 21 to 29.

We put down this amendment on Committee Stage to ensure that the income from the income allowance in respect of rental income would not just attach to the property but could be claimed as credit in respect of other developments for rental accommodation. What we are trying to do is encourage developments of this kind rather than penalise and discourage them which has been the characteristic of every thing in the Bill. If this was worth introducing the first day it was for the purpose of encouraging low cost rental accommodation. It succeeded in doing that and in giving an impetus to the building industry, which they badly needed. Now the Minister is proposing this limitation.

We welcome the extension of the floor space but the Minister has defeated the purpose which he might have achieved by providing that it can only be claimed in respect of a maisonette containing three or more bedrooms. That is as defined by the Minister and I am sure there will be some argument about what constitutes three bedrooms and whether one can convert and so on. Having gone a little of the way to meet the needs of those who require low cost accommodation the Minister introduced this extraordinary limitation. He is undermining the very thing he proposed to achieve. I press him to accept our amendment.

I support Deputy O'Kennedy on this. The House knows from previous debates that the construction industry is in a state of crisis. Its future is not at all bright because of the measures which the Government introduced.

Section 23 of the 1981 Finance Act gives a good example of the kind of measures Governments can take which are an incentive to investment in the construction industry. There was a wonderful response from the industry to that incentive. It resulted in the construction of approximately 2,000 dwelling units in the period since then, giving approximately 10,000 jobs. That was a great boost to an industry in dire trouble. Unfortunately because of the changes which this Government have made, much of this incentive has been negatived and wiped out. If the Minister does not accept that he is not in touch with the situation.

The construction industry sought an increase from 75 square metres to 90 square metres. It was indicated to them that this would be done but they were not told it would be on the condition that it would only apply to a three bedroomed dwelling. The demand is not for three bedroomed apartments but for two or one bedroomed. The industry is not geared to construct three bedroomed apartments and have not been seeking planning permission for this kind of development. This change means that there is no longer an incentive for development in the building industry.

The Minister is also making a change in regard to the relief on income from other rented properties. That was a retrograde step. The Minister proposes to confine the set-off against tax to rental from the dwelling which is being built under this section and excludes rental income from any other properties. This section, as I said, resulted in an inflow of investment into the industry which created 2,000 units and 10,000 jobs. If the Minister persists in the amended version of section 23 as published in this Bill, it is estimated that there will be a loss in the next 18 months of 7,000 jobs in the construction industry. These figures have been arrived at by a sub-committee of the Construction Industry Federation who have spent an amount of time studying the legislation. They have made representations to the Minister but have failed to obtain a meeting with the Minister for the Environment who for some strange reason has refused to meet them. This is having a demoralising effect on those who are looking to the construction industry for their continued employment. Already, more than 40,000 people have lost their jobs in this industry which is faced with a very severe crisis. Measures such as this will drive money away from the industry rather than act as an incentive to investment in it.

Undoubtedly, there is an almost insatiable demand for dwelling units. Earlier we discussed the cost of constructing a local authority house. Seemingly, the Minister was not aware that the cost in this respect is £35,000 but that is the figure that appears in the Budget 1983 booklet published by the Minister. All the Estimates for expenditure on local authority housing for this year are based on this £35,000 figure. By way of capital injection into the industry, there will be quite an amount of cost to the Exchequer if we are to rely on the State to provide homes. It seems to us a very short-sighted policy to be removing incentives which were attracting money into the building industry and thereby providing homes for people specially in need of them.

Despite the efforts of my colleagues on this side of the House in arguing cogently in favour of worthwhile amendments continuously in the past ten days or so, the Minister is refusing to see any logic in these arguments. He should accept this amendment in the light of the facts I have put before him. If he fails to do so he is setting out deliberately to take money away from construction and to take 7,000 jobs out of that sector, there by adding to the long list of unemployed. This will only create other problems regarding unemployment payments and so on. It is difficult for any rational person to understand why the Government should persist in this line of policy. There is not much more time remaining for debate on this Stage but in conclusion I would impress on the Minister the disastrous effect that the section will have if it is allowed to go through in its present form. I appeal to him to accept our amendment to remove the requirement that only three or more bedroomed dwellings will qualify for the enlarged floor space. The Minister's proposal would negative the advantage that was there.

It would be as well to point out what is going on. The original section 23 to which we are referring provided for a scheme for the three years 1981-82, 1982-83, and 1983-84 in order to encourage the provision of low-cost rented accommodation. As Deputy Molloy has said, that scheme had certain success. We all know from talking with representatives of the construction industry, not only in the past couple of months but during a much longer period, what the volume of activity has been as a result of that scheme. The provision was to end next year. Some time ago representatives of the industry asked me, and quite reasonably, if they might know what was to happen after the termination date. They pointed out that they would like to know in advance what the situation would be after the original scheme had come to an end. In considering what should be done on the termination of that limited life scheme, the Government had regard to what had happened under the scheme, the kind of accommodation that was being made available and the kind of incentive that was built into the operation of the scheme. To listen to Deputies on the other side of the House, one would think that the scheme was being brought to an end whereas it is being continued for a further period and with an addition in the sense that we are including a kind of accommodation that is not included now as well as increasing the total size of the dwelling units that would be provided.

There is a major change in the sense of the tax offset.

The second point, the tax offset, about which Deputy Molloy is becoming so excited——

One is not supposed to become excited in dealing with the Minister.

——applies at the moment to any rented income from whatever source arising in the State whether the premises in respect of which the rental income is derived were built with the aid of the scheme, were built before the scheme came into operation, were built separately from it, have been in the family for generations or were built only the year before. Therefore, the very fact of building one of the units in question gave rise to an offset against rental income for reasons that had nothing to do with the scheme.

If our intention is to try to direct resources so as to encourage people to provide extra dwelling units, we should say to anyone who is interested that if he wishes to gain a tax advantage as a result of the provision of these extra dwellings, we will relate that advantage directly to the provision of those extra dwellings. What we are concerned with from the social, the housing and the building industry point of view is concentrating the incentive on the provision of extra living accommodation. Is that not very reasonable?

A provision for the increase in the floor area has been the subject of much discussion. The present limit is 75 square metres and the Bill provides that as of 1 April next year the overall limit be 90 square metres but that in a case where the unit in question was between 75 and 90 square metres it would have to contain three bedrooms in order to attract the benefit. That is to ensure that we allow for this encouragement to provide a type of accommodation that is not covered by the existing regulations but for which there is a need. To increase the size of the qualifying unit as outlined without making that kind of change would mean most likely that a number of units would be built with the benefit of the scheme but would not be the kind that were in mind when the scheme was introduced in 1981 as being of assistance to the provision of moderate cost rented accommodation. That is why we have put in this qualification that there be a third bedroom in units of between 75 and 90 square metres in floor space.

Remarks have been made about the definition of "bedroom". Deputies in the Opposition see this provision as a God-given opportunity for making a smart remark. The fact remains that the definition of the floor space which qualifies, as Deputies on the other side will know — Deputy Molloy will particularly know this — is a matter for specification by the Minister for the Environment. I am quite sure that Deputy Molloy and others on the other side know that in the past there have been the most detailed, almost theological, discussions about how much of the actual floor area of a building unit is assessable as usable as a floor area, how much has to be deducted for skirting boards, ducting, piping and so on. The question of defining a bedroom in that framework is very much a matter for the Department of the Environment. In any case, the granting of a certificate of reasonable value requires certification by the Department of the Environment that the unit being provided is a qualifying premises, as defined in the 1981 Act, section 23 (1), which set up the scheme in the first place. I would like to point out to Deputies opposite that far from restricting the scope of the scheme we are actually adding three years on to the life of the scheme. We are adding a new category of dwelling unit on to the scope of the scheme. I cannot, for the life of me, see how the Deputies can pretend that we are restricting its operation.

There is not much time for us to take the Minister's argument apart. Our case has been well made. Unfortunately, we have other business to do and the Minister is trying to make implications which do not hold up. Time obliges us to move from this. We press the Minister to accept our amendment and we press it to a vote.

Question: "That the words proposed to be deleted stand" put and declared carried.
Amendment declared lost.

Before we move on to the next amendment our Whips have been in consultation and, by agreement, if we can by 8.45, we will allow the Final Stage to be taken so that we can make our statements on it. That will really mean that the next half hour will be confined to the next amendment.

I have to wait for confirmation from the Government Chief Whip about this.

I move amendment No. 25:

In page 39, between lines 11 and 12 to insert:

"(2) The amount of Advance Corporation Tax payable by virtue of subsection (1) of this section shall be reduced by the amount of the tax credit attributable to a national distribution equal to the aggregate of the deductions allowed to the company by virtue of section 14 of the Corporation Tax Act, 1976 up to the date on which the distribution was made and for the purposes of this subsection a company's entitlement to the said deductions shall be deemed to include the entitlement of all of its 75 per cent subsidiaries within the meaning of section 107 of the Corporation Tax Act, 1976.

(3) The provisions of subsection (2) of this section shall not apply in the case of a company making a distribution to another company where both companies are entitled to make an election under the provisions of section 39 of this Act but do not so elect.".

The purpose of this amendment is in line with all the other amendments we have put down throughout the Bill to encourage investment incentive and initiative and anything that will encourage the private sector to bring us through this very difficult period. I can give all the other examples of amendments we proposed to try to encourage investment but in each case the Minister has chosen to ignore our points. I know, from the very moment the Minister announced his intention to introduce an advanced corporation tax he heard from the widest spread of industry in the country advising him, in the name of the interests they are attempting to serve in these difficult times, to withdraw this proposal. They objected in very strong terms to the Minister's statement in the Dáil on 9 February last. Their objections related not only to the adverse effect caused by the introduction of advanced corporation tax on a company but the further disincentive to investment in productive enterprises. It is the most productive who will be penalised by the introduction of the advance corporation tax. The very companies who have invested most will be the ones who will be penalised most by this extraordinary decision.

We believe, as our amendment suggests, that this proposal should be withdrawn. The Minister has gone a small way by postponing the implementation of it for the accounting year 1983-84 to a half year's payment in advance. On the basis that it is at least something, a half year's payment in advance, when, if anything, people need a moratorium on payments, one hopes, if the Minister will not listen to all our arguments this evening, that he will indicate that he proposes to do the same thing next year and any succeeding year. These industries are starved for investment just when they need it and the Minister will require an advance payment of corporation tax. We believe this should be withdrawn or, at least, that the Minister should recognise the special role of manufacturing industry and those others who should be exempted from this new system. I hope the arguments we can make in the time available to us may succeed in persuading the Minister to give second thoughts to this. We have at least succeeded in getting an amendment from him. That is some degree of success on our part but not enough.

This is probably the most important amendment we have put down to this Bill. We want to press it very strongly and urge it equally strongly on the Minister. This is a very complicated business we are dealing with. We believe this amendment is important because it is related to employment. This amendment is directly related to the provision of employment. We believe the Minister should accept it at this very difficult time when unemployment is at such a high level, when many factories and industries are closing down. In that context, this particular amendment is of very great significance.

I will try to explain, as briefly and as simply as I can, exactly what is involved here and what we are trying to achieve by the amendment. The amendment deals with advance corporation tax. The Minister in this Bill has brought in a new provision called advance corporation tax which I can fairly simply describe as a process whereby, if a company pay a dividend they now have to pay the equivalent of that dividend direct to the Revenue Commissioners in the form of advance corporation tax. They can set off that advance corporation tax, which they would otherwise pay. It is neutral on the face of it and does not have any particular effect on companies. We readily admit that it does not have any effect on a lot of companies but it has a totally disastrous effect on another set of companies. Strangely enough, the set of companies it does not have any effect on are the most useful set of companies from the point of view of employment. The Minister's proposal in regard to advance corporation tax has a very direct bearing on investment by companies and therefore, on unemployment. In effect, a company who have been investing heavily in recent years and, by reason of that capital investment, have accumulated a significant amount of capital allowances brought forward against corporation tax will be heavily penalised by what the Minister is doing here. Unfortunately the time at my disposal is very limited and I know some of my colleagues are very anxious to come in on this and support what I am saying so I will be as brief as possible. The situation will be that because a company have been investing heavily, a good company, who have been building up their productive capacity by investment, as a result of that investment will have capital allowances, depreciation allowances, which they can set off against their corporation tax. They are the very company, because they will not be liable to pay any corporation tax, who will not have corporation tax to set their advanced corporation tax off against, and therefore will be directly and immediately penalised to the extent of the advance corporation tax that company pay.

On the other hand, the company which has not been investing and has no capital tax allowances brought forward will be paying its corporation tax, will set its advance corporation tax off against its normal corporation tax and will not be at any loss. It is complicated and difficult but, to try to put it in simple terms, that is exactly what has been happening here: companies which have been investing, good companies in our situation, and creating employment are going to have their whole financial structure distorted by this.

In case anybody is thinking that in putting this forward we are concerned about individuals who are going to get dividends out of companies, we are not at all. What we are concerned about here is the internal financial structure of companies. These companies have raised money mainly from institution — perhaps sometimes from private investors — on the basis of certain dividend records. This proposal by the Minister will totally disrupt that dividend-paying record of those companies. They will be completely at a loss to the extent of this advance corporation tax simply because they have been investing and have these capital allowances brought forward.

The Minister has done two things already. First of all — and probably rightly so, though one could argue the fairness of his proposal — he has exempted multi-national companies operating here from the scope of this advance corporation tax. He could perhaps justify that on the grounds of encouraging investment in this country by multi-nationals. But what it means is that a multinational is exempt from this new advance corporation tax whereas a good progressive Irish company, which has been investing, is not so exempt. The Minister has also made a slight concession right across the board in so far as he has provided that in this particular year he has reduced the amount of advance corporation tax payable by half. But, again, he has made that concession right across the board. He has made that concession for companies which are not investing, companies which would, in effect, have nothing to lose by the initiation of this advance corporation tax.

I suggest to the Minister that what we are endeavouring to do in this amendment is right, appropriate and directed exactly at what we are trying to achieve. We framed our amendment in such a way — and I think it achieves the purpose — that this advance corporation tax will not be payable by a company which has substantial capital allowances brought forward. In other words, we are trying to protect from the Minister's new imposition those companies which have been performing well, which have been investing very heavily and, because they have been investing heavily, have these capital allowances brought forward. Our amendment is framed to exempt only that type of company from these new provisions of advance corporation tax.

I suggest to the Minister that he should accept this amendment for two reasons really, first of all, so as not to cause havoc among a number of our best companies — I do not want to name them here but I think everybody in the House would know the type of company I mean: good, progressive companies, companies which have been investing in recent years — because the Minister will cause havoc to the financial structure of those companies by the way he is bringing in this advance corporation tax. Secondly, the Minister will seriously inhibit investment in those types of companies in the future because the provisions that were there in regard to capital allowances against corporation tax arising out of investment were very valuable and useful incentives and inducements for investment.

For those two reasons I want to press very strongly for the acceptance of this amendment. We have framed it very carefully. We have taken expert advice on it. We know that it achieves what we seek to achieve, namely, that companies which have been doing well, investing heavily and have capital allowances brought forward, will in fact be exempt from advance corporation profits tax because they would not be paying any corporation tax.

I trust I have made our position clear. But I have very clever, skilled and professional colleagues here who will elaborate and make clear to the Minister anything that I have omitted. I want to reiterate to the Minister that what we are dealing with here are good companies which invest and create employment. If he does not accept our amendment he will be striking a very savage blow at their financial structure and future prospects.

I should like to support very strongly what Deputy Haughey has just said. This is a matter of great urgency to our economy generally.

There is no question of anybody avoiding tax if our amendment is accepted. I do not see that there is any real loss to the Exchequer. But damage is being done by this new tax, which tax of course we have not debated at all on Committee State, and the way it is being implemented is out of all proportion to whatever minor benefit might accrue to the Exchequer at some time in the future — and certainly minor benefit it will be, entirely disproportionate to the damage to the better type of company Deputy Haughey has described. It is immaterial to a lot of companies who have made no investments and who have no capital allowances whether or not this goes through.

The Minister cannot claim that he has done any good by his two amendments, one of which is to postpone this payment for half a year, or to have the payment in the first year, which is of no use whatsoever to any company. The other is the extraordinarily discriminatory one, on the face of it, of exempting multinational companies and subjecting Irish companies, and in particular the best of Irish companies, to this new form of taxation. I wonder does the Minister realise that in the present year the net cost to one of the best Irish companies which has invested enormously heavily is £5.9 million. And it is not just a question of taking £5.9 million out of that company's coffers, as it were; it is also a question of their bankers at home and abroad having to rethink the whole of their lending packages put together laboriously over the last number of years. In addition, loans that are not due to be called in in the normal way for relatively long periods may now begin to be called in because there has been a fundamental change in so far as the company's financing is concerned. Whatever about existing loans being called in, what chance has a company like that of negotiating finance? These are very complicated packages that have to be negotiated for any future development. They have no chance at all. It is very much bound up with what will be the rate of return, what level of dividend payment they will be in a position to guarantee and if they cannot do that the money simply will not be lent.

I regard this as more than just an argument about one specific tax, or about £5 million, £10 million or £20 million in any one year. I myself for more than four years — and there are others here who did the same — spent a high proportion of my time abroad trying to attract industry to this country, giving assurances, that I gave in all good faith to companies abroad and at home, to come in here, make investments, assuring them that this sort of thing does not happen in Ireland. I was able to assure them that, over the 25 years from the time we started to encourage external investment here, with the passage of that Act in 1958, only once was there the merest hiccup in terms of our incentives. That was when the Coalition Government made a change in relation to the mining tax in 1974. At least that was a specific area and I was able to give assurances, as my predecessor did, that there was no question that any such thing would ever apply to manufacturing industry. Our tax structure for manufacturing is one of our incentives and, contrary to popular belief, it is far more important than IDA grants because it attracts the best of companies, not the ones who want the grants but those who want to make profit and want to ensure what they can do with their profit. I gave those assurances in good faith to companies all over the world and they were accepted in good faith. How do those people feel now? What is the IDA's position in trying to give assurances about any incentives in the future?

It is not that this is something which is crying out to be done or that there was any pressure for it from any source. It was considered as far back as 1974 when the then Minister for Finance, the man who fairly or unfairly was given the nickname "Red Richie" because of certain financial policies he pursued, published a White Paper on corporation tax. The possibility of this tax was discussed and rejected out of hand because of the serious effect it would have on investment. They are the Government's own words, the words of a Fine Gael Minister for Finance placed before this House. They were right to reject it in 1974 because, as the then Minister said, it would have a serious effect on the investment. How is it that things are now the other way around? How is it that it will not have a serious effect on investment in 1983? None of the other circumstances has changed.

I am aware of one company which decided, having thought about it for a couple of years and following a lot of persuasion and pressure from me, to invest £127 million in one project, the biggest single investment ever made in this country by a private Irish firm. How do the company feel today? On a more personal level, how do I feel today, having persuaded and pressured them to do what they did for the benefit of the country? How does any former Coalition Minister for Industry and Commerce feel who did the same as I did with many other companies? Is there not a major institutional breach of faith by this country, not by any individuals but by Ireland? Ireland has let down those whom it sought to invite and inveigle to come here and let them down in a way which will leave a residual doubt, a question mark, hanging over our incentives, no matter what is done now.

The IDA will be put in an untenable position because the reality is that it is the tax incentives which are most important. They are the incentives which have landed the best of the companies here, contrary to popular belief. For the sake of a paltry £5 million or £15 million our credibility is being destroyed. The Minister has one last chance to rectify that tonight on Report Stage. If he fails to grasp it he will have done untold and continuing damage to our economy, our industrial development and our employment creation for many years to come.

At the eleventh hour of this Finance Bill the message which is ringing through is "Investors, stay away, you are not wanted". It is a bit like the shop assistant who is so busy re-arranging the shelves and doing the books that the customer who is the lifeblood of the business is regarded as a nuisance. The Minister's Department and the country depend for their cash flow on investment. Why has no incentive been given in the entire Bill? The strangulation of Irish companies has reached crisis point.

Deputy Haughey raised the matter of employment and I would make a plea on behalf of the thousands of school leavers. Their future depends directly upon incentives and investment but the Minister has been consistent throughout the Bill in not giving incentives to Irish Industry. Advance corporation tax could spell the death knell of many Irish companies and I urge the Minister in the national interest to show at least that there will not be the total railroading inflexibility which we have consistently seen throughout the Bill. The Minister has an opportunity now to show good faith by supporting our amendment.

I support the case put by my colleagues. There are forces in this country who are doing all in their power to dismantle the State and I am sorry that the Minister and the Government have given in to those forces. That is what they have done in this case. They have bowed to pressure and it is not for the good of the country. Those who will be badly hit by this section are the workers in companies which will collapse. Anybody who has dealings with firms knows that they are experiencing cash flow problems and payment of advance corporation tax will increase their troubles and consequently increase unemployment. The companies which will be hit are those which have invested over the years and built up capital allowance which have been set off against their profits. They have been improving their businesses and providing employment. This measure will create a disincentive to investment and cause the run down of companies, thereby hitting employment. I am sorry to see a Fine Gael Minister giving in to pressure from groups who are not operating for the good of the country.

I support in the strongest possible way the points already made by Deputies Haughey, O'Malley, Brady and Ahern in relation to the disastrous effects of the introduction of advance corporation tax. The position from which the Minister started out worries me. He gave no thought whatsoever to the implications and repercussions of his original stance. Having felt the first cold breeze in his face he felt there must be something wrong and adjusted it somewhat by exempting foreign companies. I appreciate that approximately 800 foreign companies have been set up in Ireland. These companies have been given an exemption, but has the Minister given any thought to the discriminatory aspect in relation to Irish companies? When an analysis of the Telesis report came out regarding industrial strategy for the future, it was said there would be a switch of emphasis to the building-up of strong, indigenous Irish industry. What does this proposal by the Government do to their whole philosophy on this matter?

I should like to hear what the Minister for Industry and Energy has to say about this. Like Deputy O'Malley, I was abroad also and I know the high sales pitch about a constant taxation structure here in relation to industry. I know how effective that is abroad. In the past two months the Minister for Industry and Energy has been abroad and I am sure he made this point when he was in Europe and America. What will this measure do to his credibility and to the credibility of the country? It was very important that we could say to industrialists we had a constant run in relation to policy and taxation irrespective of what Government were in office. This Government have dented that confidence. They have raised suspicions and no longer will industrialists trust us.

However, what they are proposing here is in common with the theme of the Finance Bill and the budget. It is totally anti-incentive and anti-investment. It is implied that the person who puts his money in investment and takes the risk is a thief and a bandit. When we talk about jobs we must first talk about investment and the right environment for that investment. If we have not investment and confidence, jobs will not flow. We should not put the cart before the horse. I ask the Government to realise their mistake even at this late hour. The House got little time to discuss this matter. We are asking the Government to stand back before they make a fatal mistake and will damage Irish investment and industry in the future. I know the Minister is a tall man: he can be a big man tonight for Irish industry if he adopts the course we are suggesting.

The amendment seeks to reduce substantially, if not to eliminate entirely, the amount of ACT which a company that has built up capital allowances would pay. In this connection we have to look at a problem in our system, one that perhaps has been built up because of the amount of allowances and the way they have been built up during the years of operation of the system. What we have is a situation in which in respect of distributions made by companies a tax credit can be allowed or actually paid by the Revenue Commissioners to shareholders and those in receipt of dividends where no tax is ever paid. We have a situation where a tax credit attaching to a distribution gives rise to an entitlement on the part of the shareholders, a tax credit which is supposed to be offset by the payment of tax but where no tax is paid.

That situation is anomalous and it makes in some respects a nonsense of the idea of giving a tax credit in the first place. As I have said, it arises to some extent from the fact that we have accumulated capital allowances over a number of years. It is that situation I wish to address because it seems to me that there cannot be a case for including in a tax system a provision which says that if you pay or are liable to pay a certain amount of tax on a distribution we will offset part of it as a credit to the people receiving the distribution whether or not you pay the tax. That is the situation we have under our present tax law and which advance corporation tax is intended to avoid. It will provide for the payment of a sufficient amount of tax on profits by a company to offset the amount of tax credit attaching to the distribution.

Listening to points made by Deputies on the other side, one gets the feeling that the very process of investment meant that a company would not make profits. What we have, however, is a situation where the process of investment means that a company has no taxable profits. I am not arguing that it is wrong or undesirable to give tax incentives and capital reliefs in order to promote investment, but to do it in a way that gives a tax credit against which no tax is ever paid does not seem a logical way of going about the matter. It is not necessarily one that ensures that the investment goes in the direction it is intended to go. We should look at that aspect in the context of our overall incentives. The exemption to which a number of Deputies referred in relation to multi-nationals is a different question. In many cases multi-nationals would not receive a tax credit if they are not making distribution to Irish residents because they are the only ones to which the tax would apply.

The reason I reviewed the provision in the Bill was because of the effect it was said the full implementation of advance corporation tax would have on a number of companies. It was in view of that that I decided we would not operate it at its full level during this year but that we would moderate its effect. We have provided for it to operate at half the level originally proposed. During that year the number of companies that will fall to pay ACT will be small. I would want to look at the way this aspect of the taxation system is used as an incentive for companies. If we can find a better way of making the incentive work I will be quite happy. If we can find a better way of making the incentive work without creating the situation where a tax credit is paid over without any tax being remitted, we will be making a more effective contribution to the encouragement we want to see in relation to investment.

Deputy O'Malley referred to the history of advance corporation tax. One of the points he brought up needs more examination. Quite rightly, he pointed out that the matter was considered in 1974 and said the imposition of ACT at that stage was ruled out as not being appropriate. He said "None of the other circumstances has changed since". That is simply not true. Since then we have had a major change in the corporation tax system where we have gone from a situation where some companies had complete exemption from profits on exports and other companies paid the full rate of tax to a situation where we have the 10 per cent tax rate widely applying with agreement from other sides.

That does not affect it.

There has been a substantial change in the other circumstances since then.

Because of the time constraint I do not intend to reply to the Minister now beyond saying that he is being consistent. The persuasive arguments that have been made have not got a response, but that is nothing new on this Bill. Accordingly, I want just to indicate that we are pressing our amendment. I hope that after this we will have an opportunity, as agreed, of saying a few words on the Bill on the Final Stage.

Is the Minister definitely turning this down?

Question: "That the amendment be made" put and declared lost.

We had agreed that at this point we would have a few minutes on the Final Stage and all the amendments can be put together at this point.

I move amendment No. 26:

In page 46, line 9, before "force of law", to insert "the".

Amendment agreed to.

I move amendment No. 27:

In page 46, line 26, after "the said section 47,'", to insert ", and the said subsection (1), as so amended, is set out in the Table to this subsection".

Amendment agreed to.

I move amendment No. 28:

In page 46, line 39, after "section 84 (2)", to insert "(d)".

Amendment agreed to.

I move amendment No. 29:

In page 61, line 32, to delete "section" and substitute "subsection".

Amendments Nos. 29 to 36, inclusive, are on points made in the debate on Committee Stage and we welcome them.

Amendment agreed to.

I move amendment No. 29a:

In page 70, line 13, after "1978)", to insert "of the Principal Act".

Amendment agreed to.

I move amendment No. 30:

In page 77, line 13, to delete "negligently" and substitute "wilfully".

Amendment agreed to.

I move amendment No. 31:

In page 77, line 14, to delete "negligently" and substitute "wilfully".

Amendment agreed to.
Amendment No. 32 not moved.

I move amendment No. 33:

In page 77, line 17, to delete "negligently" and substitute "wilfully".

Amendment agreed to.

I move amendment No. 34:

In page 77, line 23, to delete "negligently" and substitute "wilfully".

Amendment agreed to.

I move amendment No. 35:

In page 77, line 26, before "fails", to insert "knowingly or wilfully".

Amendment agreed to.

I move amendment No. 36:

In page 77, line 44, to delete "delays".

Amendment agreed to.

I move amendment No. 37:

In page 78, to delete lines 1 to 9, and substitute the following:

"(3) A person guilty of an offence under this section shall be liable—

(a) on summary conviction, to a fine of not less than £1,000, or at the discretion of the court, to imprisonment for a term of not less than 12 months or to both the fine and the imprisonment, except in the circumstances provided for in subsection (3) (c) of this section, or

(b) on conviction on indictment, to a fine of not less than £2,000, or at the discretion of the court, to imprisonment for a term of not less than 2 years or to both the fine and the imprisonment, except in the circumstances provided for in subsection (3) (c) of this section, or

(c) on conviction in a case where the amount of tax owed to the Revenue Commissioners exceeds £10,000, to imprisonment for a term of not less than 3 years and, at the discretion, of the court, to a fine of not less than £5,000.".

Question: "That the words proposed to be deleted stand" put and declared carried.

Amendment No. 38 is in the name of the Minister and Deputy O'Kennedy.

I move amendment No. 38:

In page 78, lines 19 and 20, to delete ", or to have been attributable to neglect on the part of,".

Amendment agreed to.

I move amendment No. 39:

In page 80, to delete lines 8 to 11.

Amendment agreed to.

I move amendment No. 40:

In page 80, line 37, after "land" to insert "(other than a garden such as is specified in section 39 (1) of the Finance Act, 1978)".

Amendment agreed to.

I move amendment No. 41.

In page 82, lines 49 and 50, to delete ", other than a person who is not ordinarily resident in the State on the valuation date," and substitute "who is domiciled in the State on the valuation date".

Amendment agreed to.

I move amendment No. 42:

In page 83, line 2, to delete "ordinarily resident" and substitute "domiciled".

Amendment agreed to.

Amendments Nos. 43 and 44 are ruled out of order.

I move amendment No. 45:

In page 83, line 31, after "person", to insert "suitably qualified for that purpose".

Amendment agreed to.

I move amendment No. 46:

In page 88, line 18, to delete "section 109 or 110" and substitute "section 108 or 109".

Amendment agreed to.
Bill, as amended, received for final consideration.
Agreed to take Fifth Stage today.