Deputy Connolly is in possession.
Finance Bill, 1985: Committee Stage (Resumed).
SECTION 3.
Debate resumed on amendment No. 26:
In page 7, subsection (1), in the Table, column (3), opposite "3,600" to delete "3,800" and substitute "4,000".
I was speaking yesterday about allowances and I pointed out that the alterations in relation to tax means that there is no gain to the PAYE worker. They receive more money in their wage packages but when one takes into account the increase in petrol, insurance, fuel and so on, the increase they receive is wiped out.
You said all this yesterday.
I am glad you allowed me to explain it in great detail. Since the budget, these allowances have been well and truly eroded.
The approach of the Minister and the Government to tax allowances clearly demonstrates an anti-family attitude which is evident in their failure to increase allowances to encourage income earners to take responsibility for their families. Instead of encouraging people to be self-reliant and to provide for their families, especially for dependent relatives, there is a determination on the part of the Government to allow no incentive or adjustment because of family obligations. There is no increase in the tax allowance for children and according to Building on Reality there will be a child benefit scheme instead. This means that the basic responsibility for the family will be referred to the State, which is quite the opposite of what we support and maintain. Instead of involving the State in greater expense through administration of a scheme, we believe that the established way of encouraging people to look after their families is much more effective and welcome to parents. It is not suprising that, in recent times, there has been a growth in organisations such as Family Solidarity. Among other things, they are very actively engaged in the question of income tax allowances. They say — and I agree with them — that the Minister's approach, far from strengthening family solidarity, is doing the opposite.
There is no increase in the dependent relative's allowance although, if they fall ill, there is a marginal increase in terms of the allowance for disabled persons. People should be encouraged to provide for their dependent relatives at home. I was appalled to see recently that the cost of a hospital bed in some institutions is £1,000 per week. In these hospitals, people are receiving no other treatment than being on a permanent drip because of chronic illness. Justice and social obligation argue that instead of allowing that situation to develop further we should increase the allowance of £112 per annum, which is a nonsensical amount. This would create a happier social environment and would reduce the cost to the State of hospitalising old people.
The Government seem to be totally sold on schemes of all kinds and can be described as the scheming Government. The cost of administering all these schemes has grown to such an extent that those who are meant to benefit from them are questioning their purpose. The taxpayer, in particular, is worried about the cost and, instead of expanding schemes it would be much more appropriate to increase the allowances for children and dependent relatives.
One of the great concerns of the bona fide taxpayers, the Minister and the officials in the Department of Finance and the Revenue Commissioners, is the growth of the black economy. The black economy is growing as a result of the penal levels of taxation. We will encourage a further growth in the black economy if we do not allow those who look after their families and parents a reasonable allowance. It is all very fine to say that money received under benefit schemes will be liable for taxation except that it adds another layer of administration, but what about those who do not make tax returns but yet will benefit from the scheme? In time we will find that another scheme introduced by this scheming Government will encourage this trend, which is already a matter of considerable concern.
I do not know if the Government propose to take over responsibility for the family from the family. If so perhaps they will tell us. Instead of encouraging people to provide for their dependent relatives and children in their own home the State is determined that it will look after them when they become ill. Many more people will become ill and go into the institutions on this basis at a great cost to the State. In many cases the cost is of the order of £150,000 per annum even though the necessary medical personnel are not provided in the hospitals because of the cutbacks. This is the kind of nonsense the Government promote. The Government apparently cannot extricate themselves from the consequences of their ill-thought out and ill-advised schemes. That is bad enough, but I am much more concerned with the fact that the community at large cannot extricate themselves from the cage in which the Government have locked them and the burden which the Government have imposed on them.
For some, this debate is presented as, and is, from time to time, rather technical. It goes on for hours on end. It is not very exciting stuff or very sexy or the kind of thing that would warrant a good row in the House.
Speak for yourself.
I did not say for the Minister. We go through each section of the Bill and it is not very exciting. However, each section is of vital importance, and the kind of arguments we make for amendments to the sections are based on our concern for what is happening in the economy, in our family units and the penalties being imposed on employers and employees by a Government who have only one concept of economic management — to bridge the deficit by increasing taxation. That is the real cause of our problems.
Rubbish.
Take the case of the personal allowance for widows. Out of their generosity the Government will increase the allowance by 4 per cent. Some of them cannot meet their normal day-to-day expenses in terms of food, clothing, accommodation and so on. As a result of that and because they cannot afford to engage someone to look after them they turn to the State, to the health boards and the institutions most of which are not developed to the point of providing adequate geriatric care, particularly in view of the health cutbacks. There is no increase in children's allowances.
The Minister will be generous towards widows. The allowance will be increased by 5.5 per cent in the year in which the bereavement is suffered. That is a major concession to a widow, an extra 1 per cent. That is the kind of generosity the Minister can provide out of the goodness of his rich heart. There is provision in respect of people employed to care for a taxpayer or their spouse either of whom is totally incapacitated. The allowance will be increased to £2,500. I should like the Minister to reflect on the kind of care and attention a totally incapacitated person needs. He should reflect on the cost to the State if such a person was transferred to hospital. He is doing the big thing, increasing the tax allowance from £2,000 to £2,500. Those facts speak for themselves.
Our amendments have proposed some adjustments. They are not nearly adequate, but they are at least a step in the right direction. It is time the Minister told us his views on children's allowances, dependent relative's allowances, care for the disable and widowed people who are dependent in a variety of ways and have to call on the social services, neighbours and friends. They should be entitled to call on the permanent assistance of paid employees. If the Minister's strange interpretation of fiscal rectitude is that he will increase taxation and reduce any possibility of tax allowances even if the consequences are that he has to pay out one thousand times more in State services, in institutions, in hospital beds of wherever and that he will penalise those at work and drive them into the black economy, then no arguments of mine will convince him that the facts speak for themselves. Those who are concerned for the general well being of the economy and for a healthy and responsible social environment would wish to see some beleated response from the Minister at this stage.
I am very confused after all that from Deputy O'Kennedy. Following his argument to its logical conclusion, it strikes me that he and Fianna Fáil are in favour of doing away altogether with children's allowances. He seems to be arguing that we should not have any schemes and that we should not have these layers of bureaucracy.
The Deputy is confused.
He seemed to be arguing that we should just let people get on with it and those who are provident enough to be able to rear their children should do the best they can. This is bleeding hearts morning. One minute he is for children and the next he is against them.
Did I say that?
One minute he is for the widows and the next minute he is against them. I cannot follow his line of argument.
The Deputy can do better than that.
Deputy O'Kennedy can become very irritating. He had 20 minutes of perfect silence for his contribution to the debate and the next speaker is not in for two minutes until he is — I will not use the expression.
The Fianna Fáil amendments are intended to increase the amount of the increases in the Bill. I did not hear Deputy O'Kennedy give any estimate of the cost of these amendments. Perhaps one of the other Deputies who stood in for him yesterday gave the cost. We would like to increase all the allowances by 100 per cent if we had that sort of money. We have not got that sort of money. It is unrealistic, naive and dare I say irresponsible for Deputy O'Kennedy to imply to the public that there is an endless amount of money to enable us to increase every allowance by 100 per cent, or by a bigger percentage than the percentage in the Bill. The thrust of the section is to increase the allowances.
There is no increase in the children's tax allowance.
I too would like to see more encouragement given to relatives to look after their sick dependants. Deputy O'Kennedy's argument would be more credible if he had put down an amendment on the dependent relative allowances. The whole aim of changing the children's allowances scheme to a child benefit scheme is to make the scheme more equitable and more administratively satisfactory.
Deputy O'Kennedy's arguments do not carry the weight he is trying to put behind them. He is trying to imply to the public that we are doing something underhand, that in some way we are getting rid of children's allowances. In fact, we are trying to tidy up the taxation system as it exists now. The people have been looking for a rationalising, a tidying up and a sorting out of the different tax systems. They want uniformity in the system. Of course it is valid to say we should increase the dependent relative allowance. We are not increasing it in this budget but we are increasing other allowances.
Deputy O'Kennedy made very little of the fact that the allowance in respect of a person employed to take care of a taxpayer of a spouse who is totally incapacitated is being increased by £500. That is a substantial increase, and people who might have ended up in an institution will now be able to stay at home. I accept that there is a great deal of cost involved in keeping people at home, but it would cost more if they were put into an institution. In many cases the State is already helping those in another way by the provision of medical cards, health services, nursing services, and so on. I should like to see an increase in community care. We should encourage relatives to maintain their dependents and look after them. The Minister for Health is working hard to increase community care.
Deputy O'Kennedy's arguments leave me cold, because he is trying to imply that the thrust of the section is to take something away when, in fact, we are increasing these allowances, granted not by an enormous amount except in the case of the allowance for somebody minding an incapacitated person. If we were to follow Deputy O'Kennedy's argument to its logical conclusion we would have a free for all and get rid of schemes. He referred to us as schemers and a scheming Government. We must have an administrative system for our taxation system. By the sound of it, if he ever becomes Minister for Finance again he will do away with everything and nobody will have to sign forms or send in documents. He seems to be arguing that we should not have children's allowances and that if people are good parents they will be able to provide for their children.
If Deputy Owen had been here yesterday she would have heard where the money would come from.
I said I might have missed that.
She is trying to twist Deputy O'Kennedy's argument. She is trying to imply something he did not say.
She was trying to straighten him out.
I have no doubt that if there is any shortage of staff in the handling department Deputy Owen will be in there for a position.
There were two conflicting points of view in what Deputy O'Kennedy was saying. On the one hand he claimed that it is wrong that there is no increase in the child tax allowance and that that is an anti-family measure. On the other hand, he criticised me for apparently wanting to transfer responsibility for giving assistance to provide for children from the family to the State. On the one hand he wants the State to do more and on the other hand he wants the State to do less.
The Minister misunderstood me.
If the Opposition would sort out which side of that argument they are on, we could have a discussion and perhaps Deputy O'Kennedy's interventions on the Finance Bill might be a little more sexy and the oratorical flourishes might have a little more scintillation than they have had up to now. I want to refer to the child benefit scheme in the context of its being an alternative to allowances we are discussing now. We intend to take the existing children's allowances, the child tax allowance and the other allowances for dependent children which are built into our social welfare code, and unify them in one system, and pay them in a way which will tailor the net amount going to each family to the family's circumstances.
That is perfectly legitimate, desirable and a socially equitable way of going about it. It is nonsense for Deputy O'Kennedy to try to present that as being anti-family. It is nonsense for him to present it as being another layer of bureaucracy, because we are reducing the bureaucracy. Above all, we will be targeting the expenditure more closely to people who need it most. I do not think Deputy O'Kennedy could argue against that. To the extent that there is any thinking about these things in the Fianna Fáil Party, they would generally tend to favour a concentration of benefits on the people who need them most, rather than, as Governments have done for many years past, taking what I call the scatter gun technique to the distribution of benefits with the result that everybody gets the same and you are not sure that the real needs of the people most in need are met. The increase we propose this year in the allowance for——
Children.
No — for the care of an incapacitated person — is the biggest increase since it was introduced. In 1984 the increase in this allowance was the biggest, so far as I remember, since the allowance was introduced. I am very conscious of the real need to assist, to the extent we can assist, people who want to care for their incapacitated spouse in the home. We are all agreed that that is a legitimate objective and that this allowance is a means of helping people to do just that. I heard a young lady say on a radio programme this morning that the Finance Bill debate seemed to be a point scoring contest. I am not particularly interested in that but I find it difficult not to refer to the view I hold that in using phrases such as, "anti-family", Deputy O'Kennedy is merely engaging in cant. He is using code words to which he thinks there will be a particular kind of reaction and then goes on to be inconsistent.
The high priest of cant would obviously recognise cant.
The Deputy is not a bad acolyte himself. What we have done here in relation to these allowances is to strike a balance in the system of tax reliefs for which we had room in the budget. We decided how much was available to relieve tax but on each occasion we had to decide where the balance should lie as between changes in allowances or bands with the changes in rates. This year we considered it was important to bring into effect the changes in rates that we have discussed on a previous section and then to consider what we could do in terms of allowances. The total effect is more than the effect of indexation and these allowances have their place in that total scheme.
The Minister spoke about the incapacitated and I should like a definition of that term. Does it include the geriatric cases referred to by Deputy O'Kennedy or has it another specific meaning which excludes those people? Deputy O'Kennedy made a good point. The philosophy of the Minister for Finance is to save public expenditure in so far as possible. It is well known and accepted generally among politicians that the allocation of a certain amount of money for the care of old people in the home would save the State substantial sums. Therefore, in that area there is an opportunity for the Minister to save money for the State.
My second point is that among people who are close to the citizens, people who conduct clinics, there is a belief that we cash in on the natural affection of Irish people for the old. There are people who argue that this approach to life and to the old is weakening. Many of us would be very disappointed if that were to happen but at times people are shocked to find that services may be available if a place can be found for an old person in a hospital but services that cost substantial sums of money per week while money can not be paid to an in-law, a daughter-in-law for example, for providing those services for an old person at home. I am talking mainly about the areas I am familiar with, about rural life particularly. The hardship that young women especially endure in this field is unknown. These women are usually rearing their children while trying to cope with old people who are becoming increasingly feeble and who may becoming a little testy. It is a serious weakness in our social legislation that by our rules and regulations, the State precludes old people from being looked after at home. I am not point scoring in this matter. Other Deputies, too, will have experienced many cases of the kind I am talking of in the context of rural Ireland.
The bank of goodwill we are drawing on is not inexhaustible, I trust that the dedication to looking after the old will last. There have been problems in parts of Ireland already in this regard and there have been very much accentuated problems in other countries, particularly in the US. The late Brendan Behan on being asked which country he would prefer to be in jail in, replied, "as an old man, There is a great deal of truth in what he said and it is something that can be applied to the point I am making here.
If the Deputy is suggesting the extension of the allowances to cover other categories, that would be more a matter for a social welfare Bill than for the Finance Bill which deals with adjustments in respect of existing categories.
That depends on the Minister's definition of "incapacitated" and I am calling for his definition in that regard.
I wish to reply to an aspect put forward by the Minister, that was, that he would expect all of us to agree that benefit should accrue to the most needy. Everybody would be in general agreement with that but there is an aspect of children's allowances to which the Minister has not admitted and to which Deputy Owen has not admitted either. We all know that children's allowance are paid to the mother in the home. I know of many households into which adequate money is going but where the women are not receiving an adequate proportion of that money. In such cases the children's allowances are as important to those mothers as they are to women who receive an adequate amount of money. I am sure the Minister would allow that I would know of such issues but it is a matter to which he has not adverted in his reply.
Deputy O'Kennedy suggested that children's allowances be abolished.
Professor Carey, you pain me. I should like to have a reply from the Minister on the point I have raised.
It is impossible to clear the minds of people like Deputy Carey. I do not wish particularly to associate Deputy Owen with him merely because she happens to be sitting beside him. Deputy Carey's remark that it is a great achievement for the Government to be able to pay the present levels of unemployment benefit to so many people while avoiding a revolution, speaks for itself. The Deputy seems to follow in that confused way by saying that I advocated the abolition of children's allowances. I have never suggested anything of that kind. My attitude is quite the opposite. While I do not wish to accuse the Minister of trying to abolish children's allowances, I would make the point that he has not increased them either this year or last year. If Deputy Carey had been here during the budget debate he would have heard me criticise the Minister in that respect.
Lest Deputies Carey or Owen, or the Minister for that matter, are still confused, what I have been arguing for here is an increase in the tax allowance in respect of children.
There is no amendment to that effect.
There will be on Report Stage.
We have selected our amendments in this case. Our whole approach is in favour of proper allowances, either by way of the tax system or in terms of children's allowances for parents so that matters will be less onerous for them. I repeat that the extent of the allowance for a dependent relative is shameful, being of the order of about £110. If Deputy Owen, Deputy Carey or the Minister suggest that this amount is adequate and that it promotes good social policy, let them say it. Deputy Owen and Deputy Carey confused what I said and misrepresented it. It is vitally important to encourage people to maintain dependent relatives, not necessarily incapacitated relatives in this instance, to the point where they will not suffer for want of care and proper attention and will not in time come into the institutional care of the State. By encouraging people through the taxation system or allowances to care for children or dependent relatives at home we will be doing a much better job and saving huge sums of taxpayers' money because the alternative institutional care is not socially desirable where it can be avoided and is grossly expensive.
The Chair feels that these amendments have been reasonably debated. May he put the amendments?
The system Deputy O'Rourke was talking about is not covered by the Bill.
I know that.
I therefore do not intend to go into detail about it.
It does not suit the Minister.
Deputy O'Rourke will have an opportunity later to speak about the question of incapacity. Regarding the definition of "incapacity" in respect of the allowance for a person employed to look after an incapacitated taxpayer or a taxpayer's spouse, the provision applies where the person is totally incapacitated by physical or mental infirmity. While the provision refers to "total incapacity" it does not require that the incapacity should be such as to prevent the incapacitated person from being able to maintain himself or herself. Where a doctor, a psychiatrist or a psychologist certifies that the individual is totally incapacitated or where the incapacity is evident, this relief will be granted. It is available in respect of the employment of a person to look after the incapacitated taxpayer or incapacitated spouse.
There are, of course, other means of assistance where people suffer from disabilities of various kinds. There is the social welfare prescribed relative allowance and a taxpayer getting the benefit of that allowance would have it taken into account in calculating the amount of this allowance. We also have the scheme of health board home helps. Occasionally the person being assisted is asked by the health board to make a contribution. Since that person is not the employer of the home help the provision of this section would not apply.
In spite of everything that has been said by the Opposition, I notice that they have not proposed any amendments in relation to the allowance for incapacitated children, a housekeeper taking care of an incapacitated person or the allowance for a blind person or spouse.
We thought we might persuade the Minister by our arguments. If the Minister takes that view we will put down an amendment on Report Stage.
Is amendment No. 26 being pressed?
Yes.
Question: "That the figure proposed to be deleted stand" put and declared carried.
Amendment declared lost.
I move amendment No. 27:
In page 7, subsection (1), in the Table, column (3), opposite "2,300" to delete "2,400" and substitute "2,500".
Question: "That the figure proposed to be deleted stand" put and declared carried.
Amendment declared lost.
I move amendment No. 28:
In page 7, subsection (1), in the Table, column (3), opposite "3,600" to delete "3,800" and substitute "4,000".
Question: "That the figure proposed to be deleted stand" put and declared carried.
Amendment declared lost.
I move amendment No. 29:
In page 7, subsection (1), in the Table, column (3), opposite "1,800" to delete "1,900" and substitute "2,000".
Question: "That the figure proposed to be deleted stand" put and declared carried.
Amendment declared lost.
I move amendment No. 30:
In page 7, subsection (1), in the Table, before the reference to section 141, to insert the following:
|
Section 138 B |
||
|
(employee allowance) |
600 |
1,000 |
This PAYE workers' allowance was first introduced in 1981-82. It does not apply to all income taxpayers and is a recognition of the special place of the PAYE worker in our financial and taxation system. It is an indication of the reliance of the Exchequer on the dependability of income from PAYE workers since it was seen that deductions were less costly, coming in regularly from these employees without delay. As soon as the money is earned, the tax is paid.
In other areas of income tax claims are constantly being pursued, with a consequent increase in the number employed in the Revenue Commissioners. There are special complaints tribunals and long drawn out processes for deciding how much should be paid. Of course there is a further delay before the money is actually paid. Every month and every year of the delay the person who owes the tax has the use of that money while the Minister is at a loss. I think it was in recognition of this factor that a special allowance of £600 was given to PAYE workers in 1981-82. If I am wrong in this assessment, perhaps the Minister would explain the reason. That allowance has remained static ever since, while every other allowance has been consistently increased. In this Finance Bill all other allowances have rightly been adjusted and increased in line with the cost of living, inflation etc.
However, this allowance of £600 has not been increased since 1981-82. When we were debating the Finance Bill last year we put down a similar amendment that the allowance be increased to £1,000 and the Minister's reply was the usual one that he gives whenever there is any amendment proposed to the Finance Bill, namely, the cost. He said the cost would be £84 million in 1984 and £140 million in a full year. I hope the Minister will be as particular about giving the cost of all the other adjustments and exemptions in taxation. I hope he will give us details of the cost of the various adjustments in relation to capital acquisition tax and so on in this budget.
This allowance was given for a specific reason and in recognition of a special position. The allowance of £600 that was given in 1981-82 was a considerable loss to the Exchequer but, at the same time, there was recognition that that loss from the PAYE sector was infinitesimal compared with the loss to the Exchequer from all other income taxpayers in terms of delay in payment and the processing of claims, in addition to the cost to the Exchequer of those who do not pay at all. It was a recognition that this was a small cost to pay in giving that allowance to employees who have no say in the matter. In fact, there is a question mark about the whole matter of the constitutionality of the PAYE system. People are questioning the constitutionality of everything these days and getting away with it. Most things are found to be unconstitutional because of their conflict with the section dealing with the right to private property as set out in the Constitution but as yet nobody has tested the constitutionality of the PAYE system. Nobody has questioned the constitutionality of a wage structure where the person who works and earns a particular wage never gets it into his hands, even though the only asset an employee has is the work he does. Part of this money is taken by the Minister for Finance before the employee is paid. The constitutionality of the PAYE system has not yet been tested in the courts but if it were a Minister for Finance and a Government could be in enormous difficulty and danger in the future.
In recognition of the fact that the PAYE workers are in a special position and are of such enormous importance to the Exchequer — they carry the burden, they are the permanent feature of the income of the State and are the backbone of the whole financial structure — the allowance of £600 was given in 1981-82 but there has been no increase in that amount since then.
This year we are again putting down an amendment that the allowance be increased. On the basis of the 1981 figure of £600 we calculate the appropriate amount in 1985 would be £1,000. If I am wrong in that, will the Minister please tell me what would be the equivalent of £600 in 1981 in present day terms. If the Minister will not accept this amendment, I ask him to give a more justifiable reason other than saying this would mean a loss of so much to the Exchequer. Every adjustment made means a loss or a gain to the Exchequer. If you lose one way you gain another way. We will be putting forward many ideas that could result in gains for the Exchequer. I ask the Minister to give some reason for not accepting this amendment other than saying it would represent a loss of £84 million or £90 million.
Our amendment, which was ruled out of order, also proposed that we would have a top tax rate of 70 per cent. The Minister cut the existing top rate of 65 per cent and this was at a loss to the Exchequer. However, he did not use that argument then. We advocated a 70 per cent rate. In this instance now we are asking that at the bottom of the scale the Minister should increase the allowance to £1,000. If the Minister does not accept that amendment, I hope he will at least examine the matter and suggest an increase he would consider reasonable.
The Deputy asked me to give the figure of the cost to the Exchequer as a result of acceptance of his amendment. It would cost £85.9 million this year and £143 million in a full year. Although the Deputy does not like to hear this, I would have to say that on grounds of cost alone I have to oppose the amendment.
The allowance in question was introduced in 1980 and it was then £400. It was introduced then to take account of the fact that the self-employed had a different system of taxation, specifically that they pay tax on the basis of the proceeding year. The allowance was increased to £600 in 1981. The total cost of the allowance at its present level of £600 is about £214 million for a full year.
One of the reasons for bringing in the allowance was the difference between the tax situation of the self-employed and the PAYE payer, particularly in respect of assessment on the preceding year. That can be held to produce an advantage for the self-employed, particularly in periods when inflation is fairly high. The advantage has been lessened substantially in the past few years because we have brought inflation down to a much more moderate level than we experienced during the earlier years of this decade. In addition, in the Finance Act of last year we increased the specified amount provided for in the taxation of the self-employed so that where an assessment of income tax is under appeal the taxpayer must make a payment on account equal to 85 per cent of the tax payable on termination of the appeal, rather than 75 per cent as was the case up until then.
Taking those two factors together, that is the reduction in the rate of inflation, which takes away some of the relative benefit of a preceding year basis of assessment and the fact that we have made changes to the level at which self-employed must pay specified amounts, would seem to me to change the balance somewhat by comparison with what it was when this allowance was first introduced. Incidentally the present day value of £600 in 1981 we calculate would be approximately £920 in May of this year. If we were to increase the allowance from £600 to that figure of £920 the 1985 cost would be approximately £63 million and, in a full year, £107 million.
For once I want to acknowledge that the Minister has given a very full explanation of the reasons which prompted me, as Minister for Finance, in 1980 to introduce this allowance. I thank him for his explanation.
Is the amendment being pressed?
Yes.
Amendment No. 30 in the names of Deputy Mac Giolla and De Rossa.
Amendment put and declared lost.
Is section 3 agreed?
No, votáil.
Question put: "That section 3 stand part of the Bill."
The Dáil divided: Tá, 73; Níl, 65.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Carey, Donal.
- Cluskey, Frank.
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Creed, Donal.
- Crotty, Kieran.
- Crowley, Frank.
- D'Arcy, Michael.
- Deasy, Martin Austin.
- Desmond, Barry.
- Desmond, Eileen.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Durkan, Bernard J.
- Farrelly, John V.
- Fennell, Nuala.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Kavanagh, Liam.
- Keating, Michael.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Leary, Michael.
- O'Sullivan, Toddy.
- O'Toole, Paddy.
- Owen, Nora.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Briscoe, Ben.
- Browne, John.
- Burke, Raphael P.
- Byrne, Hugh.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Flynn, Pádraig.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- Molloy, Robert.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- 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.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies V. Brady and Browne.
Question declared carried.
Section 4 agreed to.
SECTION 5.
I move amendment No. 31:
In page 9, line 46, to delete "£286" and substitute "£400".
This amendment relates to the allowance for employees paying the high rate of PRSI. Even if a person does not come within the income tax bracket he must still pay for insurance. In 1982 this allowance was £312 and it was reduced to £286 in 1983. We want this allowance raised to at least £400 for the lower paid workers, who are paying the highest rates of PRSI. The Minister will probably say that this will be a loss to the Exchequer, but I am thinking about the gain it would mean for those who cannot afford these deductions from their pay packets in PRSI, income tax, income levies and so on. A £400 allowance would be reasonable today and it is not much more than what was allowed in 1982, three years ago.
The allowance introduced in 1981 was £312 and it was reduced to the current figure of £286. In relation to the impact of the PRSI contribution generally, as the Commission on Taxation have pointed out, as far as every wage earner is concerned the only important issue is the net income after tax. Whether the tax is deductible through income tax, PAYE, an income levy or PRSI contributions is not a major consideration for the worker except — I must make the distinction — that in the PRSI contribution he is contributing to the pay-related scheme which in turn on social welfare benefit will accrue to his — or her — advantage. Nonetheless, it is fairly clear that the high marginal rates of tax, the imposition of the income levy and the level of PRSI contributions are having a disincentive effect on employees, particularly at the lower income level, as has been pointed out recently in many reports from objective economists.
The second point in connection with PRSI contribution is that, apart from the disincentive effect it has on employees, it has a major disincentive effect in terms of employment on employers. The rate of PRSI contribution on employers in this year will be 12.2 per cent by contrast with 12.1 per cent last year. From that I want to bring to the Minister's and the Government's attention the fact that when employment generation must be the major priority and when the incentive to work should be encouraged, these levels of PRSI levies in addition to the levels of taxation which we are dealing with are having the opposite effect. Especially as far as employers' contributions are concerned in labour-intensive industries, employers are constantly pointing out that the tax system is acting as a disincentive against employment. Moneys invested in equipment, from office equipment, wallpaper, chairs, tables, typewriters and computers to capital equipment generally, get very considerable tax breaks to the extent that the ratio between £100 invested in equipment and £100 that will have to be invested in extra employment is as 2:1 against investment in employment. That is a very serious distortion in our system which encourages investment in equipment against investment in employment when clearly the needs of the economy must focus above all else on generating employment particularly in the labour-intensive industries, and they are fairly obvious to all. Incidentally, most of those are the old, Irish based, domestic industries including the construction industry which has taken a very severe hammering from this Government.
I would like to try to persuade the Minister to review this approach. I have argued for that constantly in the House in the course of the budget debate and I have been making statements on it publicly over the last two and a half years. I saw the trends. Nonetheless, I see no response up to this point from the Minister to get rid of discrimination against labour costs in favour of equipment costs. That is vital to the State. Let me take in conjunction with it the legislation which was introduced about 1976 by a then Labour Minister — and I note that the Labour Deputies are still absent from this House. Is any one of them going to come in at any time to make a contribution on this legislation?
Are you still dealing with the section?
I am, on the section for the whole House.
(Interruptions.)
One man is here by obligation and perhaps also by conviction.
That is most disrespectful to the Chair.
It is ludicrous that a full party who state they are concerned about employment, PRSI contributions and all of that do not send in even one person to make one contribution over five days in this debate or to support with their voices what the Minister is doing and to say, "We are in favour of increased PRSI".
Perhaps the Deputy will make his own contribution.
Then when the bell rings they come in here. After saying outside that they are in favour of workers and the poor, they will walk in here like sheep and vote against workers and the poor.
Come back to the Bill.
I will, because we are discussing the Bill and apparently the Labour Party have no interest in discussing it in any event. I wish they had. What prompted me down that track — it will not happen again — was the fact that a former Labour Minister who is now a member of the Fine Gael Party introduced legislation about 1976 the intention of which was to promote and protect the interests of employees. I am talking about the unfair dismissals legislation and so on. When you take the present day impact of that legislation with the levels of PRSI contributions that employers have to pay, the consequence is that employers in every direction they turn take the view that taking on extra employment is (a) too costly and (b) too restrictive in terms of their rights at another stage, say in two years time, if they find that they need to take action to reduce their employment force and will not be allowed to do so. In some cases they may feel that even where there has been improper conduct they will not be in a position to do so unless they go through all of the procedures of the unfair dismissals tribunal. I am not arguing against that, but I am saying to the Minister that because of the impact of both of those factors I am sure that most Deputies in this House have been made aware by many employers who might consider expanding their total employment that they are not prepared to do it. They find that the labour cost as a proportion of what their total tax contribution would be under corporation tax for employers is now four times what it was about 1964 or 1965. Deputy Mac Giolla may have a reasonable point in saying that that total tax contribution is nothing like what it might be in comparison with PAYE. Our tax code, our PRSI code associated and allied with other matters is in the event being seen by employers as a clear signal against taking on extra employment. I would like the Minister to reflect seriously on this. In respect of the employers' contribution which I have been allowed to argue, this is not covered in this Bill. It is probably a matter for social welfare legislation, but the two are interlinked.
I have allowed you a passing reference.
I appreciate that, but I must sympathise with what Deputy Mac Giolla is arguing. I anticipate that the Minister would not be able to respond to the case in view of the cost involved. If the Minister cannot respond to the case being made by Deputy Mac Giolla, he might consider at least restoring the level of the PRSI allowance for PAYE taxpayers to what it was in 1981 which, in money terms, would be considerably less having regard to inflation.
I would like to hear the Minister's response.
I understood Deputy Mac Giolla wished to make another intervention. The cost of the retention of the allowance at the present level, £286, provided for in the Bill would be roughly £55 million this year and £91 million in a full year, and we are already making provision for that in the Bill. Deputy Mac Giolla's amendment would add a further £15.6 million to the cost in 1985 and £26 million in a full year. Again on cost grounds alone I am afraid the amendment could not be accepted. The equivalent today of the £312 level in 1982 would be about £396. This means that Deputy Mac Giolla's proposals would amount to an updating of the allowance on that basis. However, I am not sure it is valid to argue about this allowance in that way.
Contrary to what many people and many Members of this House argue, social security contributions in Ireland are not high compared with other EC countries or the wider group of OECD countries. If we compare our total social security contributions to GDP, the 1982 figures would rank Ireland in seventeenth place out of 21. Our social security contributions would represent 5.95 per cent of GDP; the EC average is 11.88 per cent, almost double our level, and the OECD average is 9.18 per cent, but the OECD area includes countries which have more comprehensively developed systems than we have as well as countries with less developed systems. If we compare social security contributions to total revenue, again we rank seventeenth out of 21, with a percentage of just over 15 per cent compared to an average of 29 per cent for the EC as a whole. On that comparison, our social security contributions are only half as important in the context of total revenue as they are in the EC generally. As Deputy O'Kennedy recognised, our contributions to the operation of the social insurance system do not cover the full costs. Speaking from memory, I think the latest calculation made is that the contributions cover about 78 per cent of the cost and the Exchequer provides the remaining 22 per cent.
That is because of the unemployment level.
It is the result of a number of factors and Deputy O'Kennedy is just picking one of them. The fact remains that in comparison with many other countries with which we trade our level of social security contributions is not high; in fact it is rather low, and the contributions do not cover the full cost of the system. Bearing those factors in mind and the financial angle to which I referred a few moments ago, I cannot accept this amendment.
I agree with the Minister that our level of payments of social security are not high by European standards, and I am not advocating an overall reduction in benefits. We believe we should be looking for an increase in jobs and incomes which would result in an increase in contributions and an increase in benefits.
I do not accept the argument the Minister trots out every time about the cost to the Exchequer. He has not told us why the lowest income group should be penalised to save the Exchequer money when other income groups are not penalised to make up the deficit of £55 million, £95 million or £105 million. That is not an argument if he is allowing people with higher incomes to get away without paying the contributions which would bring in that money. He must base his argument on why he thinks it is right that the lowest income groups who do not have sufficient income for even the Minister for Finance, who grabs at everything, to suggest that they pay income tax. These people must pay the highest rates of PRSI despite the fact that their income is so low that they are not paying income tax.
The most recent report of the ESRI on this question recognised that the PRSI system still hits the poorest hardest while virtually sparing the rich. It goes on to say that revenue could be maintained while relieving the lower paid by abolishing the upper earning limits on which PRSI is levied and by exempting from PRSI those who are already exempt from income tax. These are specifically the people in the lower income groups that the Minister should bend his mind to and argue why he thinks the present system should exist rather than an alternative system where they would be paying very low rates or nothing at all while others pay higher rates. He should argue for one system as against another and not say we cannot do this because it will cost the Exchequer so much.
I would go along with Deputy O'Kennedy that at least the Minister should consider restoring the allowance to the £312 which existed three or four years ago, whatever the cost to the Exchequer. He should make whatever adjustments are necessary to make sure that the cost to the Exchequer does not occur, but we are arguing that the £386 allowance, which was a reduction from a previously existing allowance, should be increased. I ask the Minister to put his arguments for not doing that rather than using the argument about the cost to the Exchequer. The whole basis of the Finance Bill is in regard to income to the Exchequer and every allowance costs so much. That should not be part of the Minister's argument. Let him argue this system as against another one which would bring in the same amount.
I will not attempt to present the argument the Minister may want to present to Deputy Mac Giolla, but I may present some facts which the Minister might use against any suggestions from me or Deputy Mac Giolla. I was in government when this formula was introduced and the late Ceann Comhairle of this House, Deputy Joe Brennan, was then Minister for Social Welfare. He mentioned to his colleagues in Government that the fund was so buoyant that he had a surplus available which he could lend to other Departments on attractive terms. It was self-financing then and was intended to remain so. The level of unemployment was very low and a greater number of people were at work contributing towards the necessary benefits for those out of work either through unemployment or ill health. That was the position which obtained up to the late seventies. Because we had an adequate number at work we could keep down the level of the PRSI imposition on the lower paid.
I would endorse what Deputy Mac Giolla said about the ESRI report. The poorest are the hardest hit. The employers' contribution actively discourages employment. As unemployment continues to grow and the figures are of the order of 230,000, excluding 30,000 involved in various schemes—
The Deputy is wandering a lot. We are talking about PRSI.
I am explaining why the level of PRSI is as high as it is and why the Minister cannot make adjustments bringing back the level to what it was even three years ago. It is because unemployment is so high, and until that problem is tackled the revenue implications will be such that he will not be able to respond to the case made. The diminishing numbers at work are having to support a system where more and more people are out of work. It is not a self-financing scheme. The taxpayer is having to contribute to the financing of this fund to a greater extent with each passing year. The level of taxation is itself the problem. It is a disincentive to employment, leading to greater unemployment and a greater burden on those who are contributing. This vicious circle will continue until we tackle the problem of the level of taxation.
We are talking about the taxation aspects of the Finance Bill and specifically about the PRSI allowance. I would be exceeding my brief if I were to deal in more than a passing fashion with the generality of this scheme. To increase the allowance in the way proposed by Deputy Mac Giolla would not be of any assistance to those PRSI contributors who are not in the tax net. An increase in the allowance is of no value to somebody who does not have a tax liability. That same increase in the allowance would benefit people further up the income scale. The amendment is not well designed to meet the concern. Deputy Mac Giolla has expressed. He went on to suggest some changes in the structure of the social insurance contribution scheme. He suggested that we should exempt from contributions those who do not have a tax liability and that we should bring into liability for social insurance contributions those who have higher incomes. I would suggest that Deputy Mac Giolla might think it out a little further and look at the implications for the eligibility of contributors for benefits. While the scheme is not directly comparable to any other insurance policy, it still has the character of an insurance payment against a risk that might arise in the future. Deputy Mac Giolla has not thought out the logic of this suggestion. It is perfectly legitimate to point to the Exchequer implications of an amendment such as this because the contributions do not cover the total cost of the payments.
Will the Minister say how much the Exchequer will contribute this year and how much it contributed last year?
I will have to ask the Deputy to be a little patient on that matter. I do not have the figures with me but I will get them later on.
The Minister's officials must surely have the figures.
I will take responsibility for deciding what information I have to hand. I have told the Deputy that I will get the figures. I do not have them to hand at the moment. I will supply them to the Deputy.
For the last three years.
How many years would the Deputy like?
This year and the last three years.
Four years. That is perfectly in order. It is legitimate to refer to the Exchequer aspects, firstly because contributions do not cover the total cost of payments from the fund and, secondly, because we would have to judge the desirability of making a change against the desirability of making other changes in the tax code and fix an order of priorities. It is more important to make the kind of changes in rates, bands and allowances that we have made this year. It is a valid response to use all the leeway we have about changes in the structure of the system. It is legitimate to give priority to that over the kind of concern Deputy Mac Giolla has expressed.
Is the amendment being pressed?
Yes.
I am putting the question: "that the figure proposed to be deleted stand".
Vótáil.
Will those who are demanding a division please rise in their places?
Deputies Mac Giolla and De Rossa rose.
As fewer than ten Deputies have risen, in accordance with Standing Orders I declare the motion carried and the amendment lost. The names of those demanding a division will be entered in the Journal of the proceedings of the Dáil.
Section 5 agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill."
Silence, please. We cannot have conversations being carried on.
This section is a typically technical one which we pass each year without having the implications of the section properly teased out. Our tax law consists of having various headings and schedules of income which are treated in a different way for tax purposes whether in relation to the year in which the income falls to be taxed, on an actual basis or a preceding year basis and also in relation to the type of expenses allowed against the income in question.
The traditional position has been that under the Income Tax Acts and under case law the courts decide under what schedule income falls for tax purposes. This section brings about a radical and fundamental change. The net effect of the section is that the courts are being usurped and it is up to the inspectors of taxes to decide that income which the courts might decide would fall into one category should fall into a category designed by them.
Whatever the Minister's intention is in bringing in this section it tips the balance very much against the taxpayer and, to an unfair extent, in favour of the Revenue Commissioners.
I reject the inference in the Deputy's initial remark that there is in this case or in any other case an attempt to slip through sections of the Bill without discussion. The Deputy knows that I am at the disposal of the House in regard to any query there may be on any section of the Bill. It is up to the Deputy and his colleagues to raise queries they may have.
On a point of order——
The Deputy will have a chance to respond later.
I assure the House that I am completely at their disposal as regards any question any Deputy might wish to raise on any section of the Bill. If any Member of the House had a contrary impression it is erroneous.
This section deals with the position of people who have different portions of their income falling to be treated in different ways. The section of the Income Tax Act, 1967 which is to be amended by this section applies the PAYE system of tax deduction to all emoluments from an office or employment assessible to tax under Schedule E. It makes some specific exceptions to that. The accepted ones are ones in respect of which the Revenue Commissioners have notified the employer that they are emoluments to which it is impracticable to employ the PAYE provisions or that they are emoluments which are or which will be taken into account in computing the profits or gains of a profession. I propose to provide that from 1986-87 emoluments will be excluded from the operation of PAYE only where the operation of PAYE is impracticable having regard to the circumstances of the office or employment or to the amount of the emoluments. As from that year the inspector of taxes will have the statutory authority to decide whether emoluments should be so excluded from the operation of PAYE.
That amendment takes account of the reality of the present position where while the nominal authority is that of the Revenue Commissioners that authority, in practice, is exercised by the inspectors. I am also providing that emoluments excluded from the PAYE system by exclusion orders made in the past may be brought within the system if a change in circumstances would warrant a change in treatment.
I did not intend to cast any aspersion on the Minister or his predecessors. All I am saying is that the time available to us to debate the Finance Bill is insufficient to tease out all the technical implications of the various provisions. Perhaps it should be done in a different way. The Minister should not conclude from my remarks that I am attacking him personally. My original comments still stand. The categories into which income falls should not be a matter for the inspector or the Revenue Commissioners but the courts. They can adjudicate and balance the situation as between revenue on the one side and the taxpayer on the other.
Will the normal appeal procedures apply in the case of a decision by the tax inspector?
No. This is a provision to decide under which system payments will be taxed. It is only within the provisions of whichever system is applied to the income that the question of an appeal will arise.
Question put and agreed to.
Sections 7 to 9, inclusive, agreed to.
SECTION 10.
Question proposed: "That section 10 stand part of the Bill".
I welcome this provision, which proposes to grant relief from income tax in respect of certain income derived from the leasing of agricultural land. My party have been trying to encourage greater mobility in land tenure to ensure maximum productivity. I can see why there are certain limitations imposed on the people who qualify. The income is derived for a period of not less than seven years, but to qualify for the exemption the lessor must be aged 55 years or more or be permanently incapacitated by mental or physical infirmity from carrying on farming.
Perhaps the Minister might consider the age limitation. What we all want to ensure is that agricultural land will be in the hands of those best equipped to get maximum productivity from it and encourage those who are not equipped either through age, infirmity or lack of ability to farm, to lease their land.
I do not intend to oppose this section. The Minister should give serious consideration to the age limit of 55 years and over. Many farmers younger than 55 years are not able to get an adequate income from their farm holding. In some instances they may have reasonably substantial farm holdings. The Minister must have some experience of this in his constituency as I have in mine.
Not everyone who inherits land can get the maximum return from farming. We should encourage mobility of land and the transfer of land from those who are not getting the maximum return. I do not see why we should exclude above 55 years of age. Many single people could benefit greatly if they transferred their land because they have not got the capacity as farmers to get the maximum return from their land. What the Minister is proposing is a step in the right direction. We all support this kind of development. Any age limit has to be arbitrary. I know that we can make a measured judgment and decide that at 55 years of age a person's physical capacity to work is reducing somewhat. The same could apply at 50 or 45 years of age. In some cases it could apply at 40 years or less. The intention is to encourage people to transfer land to others who could make better use of it. Why does the Minister see a need to introduce an age limit?
Subject to that I support this proposal. It is very much in line with the thinking of all parties for some time. Now that the Land Commission are being abolished it will be very important. I will not get into a debate on the Land Commission. I have strong views about that. It is very important to encourage much greater mobility of land tenure than we have at the moment. Perhaps the Minister would let me have his observations on my comments.
Like Deputy O'Kennedy I welcome section 10. I welcome any concession. I have been speaking to members of various farming organisations in my constituency about this matter over the weekend. A great deal of disappointment was expressed by them about the restrictions under which the concession given in section 10 will have to operate. First, there is the fact that the lease must cover a period of seven years. It was pointed out to me by both farming organisations in my constituency that, in the present state of uncertainty, people are most unwilling to have their land tied up for seven years. That is too long. A three year period was recommended by the County Limerick IFA. That would be far more appropriate in the present uncertain economic circumstances, particularly in the farming sector.
The question of the ceiling of £2,000 was also brought to my attention. In my part of the country and in Deputy O'Kennedy's part of the country, £2,000 would represent the letting of 18 acres of farm land for a full year. As the Minister knows, in the vast majority of cases where people let their farm, their entire holding, which is what the Minister envisages, they are letting an amount of land substantially in excess of 18 acres.
The age limit of 55 years or over is also a severe handicap to the proper operation of this legislation. The reality is that many people wish to get out of farming even on a temporary basis for various reasons: social reasons, psychological reasons or financial reasons, for example, where a cattle herd has been affected by disease or due to some other financial constraint. In those circumstances it seems ludicrous that relief should be confined to people aged 55 years and over.
The only people under 55 years who can qualify for the relief are those so permanently incapacitated by mental or physical disability that they are totally unable to carry on farming again. That restriction is far too severe. If the Minister is serious, he will look at this again with a view to easing it. If I understand the intention behind the section, it is that land should be handed over to more productive farmers. We are leaving out of account the international position. Due to the failure of the Minister for Agriculture in Brussels the market for the produce of more productive farmers is narrowing. If the Minister feels this section will result in massive transfers of land from non-productive farmers to more productive farmers, I am afraid he is doomed to disappointment.
This is typical of the sort of measures introduced by the Minister for Finance, the Minister for Justice and other members of the Government over the past two and a half years. They get a good idea from someone, sell themselves as implementing the idea, and hedge it in with so many restrictions that, in effect, it is quite useless and unworkable.
From what Deputy O'Kennedy and Deputy O'Dea have said it appears that they agree that the purpose of the section is not simply to give an across-the-board tax relief for lessors of farm land. That is not the intention. It has a much more specific aim, that is, to assist in mobilising land which is not being fully used.
Deputies will agree that the greater part of under-utilised land is held by older people. In most cases—and this is true in my own constituency, in Deputy O'Kennedy's and in part of Deputy O'Dea's—where you find under-utilised land, you tend to find that the owner is a fairly elderly person, or possibly a fairly elderly married couple who for a variety of reasons no longer have the capacity or the interest to really develop the land. For that reason I pitched an age limit on it. I agree that 55 years is an arbitrary limit. That would cover the majority of cases where there is serious under-utilisation of land. It does not cover them all. I am perfectly prepared to agree with that. I do not intend to make this section an across-the-board relief for income derived from the letting of land.
On the question of incapacity the notion of incapacity will be interpreted very widely. I do not intend that it will be limited to simple physical incapacity. For example, a widow with family commitments who is not able to run the farm would be defined as coming within the terms of incapacity. A child under 18 years of age would equally be considered to come within the concept of incapacity.
The Minister had better amend the section. That is not clear in the section.
That is how I intend that this will be operated.
Why not write it in?
Because I have a feeling that we could end up with a three page section if we were to try to cover all those cases. I would far perfer to be able to use judgmentº and flexibility in deciding on cases of incapacity.
As far as the leasing period is concerned, I appreciate the concern of Deputies on the other side of the House. From one point of view we can say that seven years is rather a long period. I am quite sure Deputies opposite are familar with the kind of case where the owner of land aged 65, 66 or 70 years may be reluctant to enter into a lease for a period as long as seven years. When we get to that age many of us do not bank on too many things being within our control for a full period of seven years into the future.
On the other hand we must have regard to the position of the person who is leasing the land. It is accepted generally that our aim is to mobilise land into the hands of younger trained farmers who would be able to develop it. We all know that there are substantial costs involved in developing land. Land that has been under-utilised for a period requires a fair amount of work usually to put it into full production potential. One would have difficulty in conceiving of a situation in which the person taking the land would consider himself in a position to enter into the kinds of commitments that would be required to develop the land properly if the period was as short as three years. Perhaps even a period of five years would present difficulties in that respect. Therefore, I consider a period of seven years to be the minimum for which the lessee would need to have some kind of guarantee of control of the land before he would be prepared to undertake any significant amount of development.
In a sense there is a conflict of interests here. One could argue from the point of view of the lessor that the shorter the period the more attractive the idea of letting the land, while from the point of view of the lessee the shorter the period the less attractive the leasing becomes. With those kinds of considerations in mind we have fixed the figure at seven years.
The exemption is a separate relief of up to £2,000 in respect of letting income. It is conceivable that for the kinds of people who would be letting land, that relief would be available in addition to other reliefs, for example, reliefs in respect of age exemptions. These could apply in a number of the cases we discussed yesterday. Other reliefs, too, that are already in the tax system could apply to the income, so in any case we are not talking simply about a relief of £2,000. Therefore, the total picture is not nearly as restrictive as Deputy O'Dea seems to think it is.
To return to the question of the length of the lease, it would be useful if Deputies opposite would consider the other side of the coin, the person who is leasing the land. He should be in a position to develop the land and think about the period of the lease from that angle also.
Arising from what the Minister has said in endeavouring to explain and justify the provisions, I would point out that first he would require to amend the legislation. I say this because in paragraph (a) of subsection (1) of section 10, the provision is confined clearly to people aged 55 or upwards or to people who are permanently incapacitated by reason of mental or physical infirmity and who are consequently not capable of carrying on the trade of farming.
The Minister has said that he will ensure the provision will apply to widows who are too busy looking after their children to be able to carry on farming, but the Minister cannot apply the provision to widows as the Bill stands. No court could possibly interpret the section as applying to widows in the circumstances I have outlined. It would be open to anyone to bring a declaration of proceedings before the courts to ensure that the provisions as passed by the Oireachtas are being implemented. I appreciate that to achieve the intention is not always in legal terminology as it might appear but to meet the intentions of the Minister as indicated in respect of widows with young families the legislation would have to be changed. Therefore, the Minister should consult again in that connection with his officials and with the parliamentary draftsmen.
The Minister has analysed the case we have made but has not answered it conclusively. I wish to make it clear that we are in support of this general principle. Deputy O'Dea has honed in more precisely than I have done on some of the limitations which by definition, when beginning something, must be arbitrary.
However, I have not been convinced by the case the Minister is making as to the selection of these limitations.
I assure him that we would not propose either that there be total exemption from all moneys derived under the provision, because clearly that would have a built-in inequity in respect of a person who was in full health and so on and who was letting land but who had another source of income. But as Deputy O'Dea has pointed out, we are talking about the letting value of perhaps 18 acres of land. That is too low. The Minister for Agriculture must be getting the same feedback as we are getting from the farming organisations—though that is not to say that whatever they advocate is to become either the position of the Minister or of this party—but in conjunction with them and with the advisory services the direction being proposed was higher than the limit of £2,000. I am not suggesting what the limit should be, but I would have thought that for a start £3,000 would have been more reasonable.
So far as the period of seven years is concerned, I accept that one must take account also of the lessee. However, the lessee will have his rights within the terms of the lease in any event. He will be protected by those rights, so I would have thought that a five year lease would have been reasonable, even having regard to the cycle of production in farming and to the necessary development in terms of fertilising, drainage and so on. But I cannot claim to be an expert in this area other than in terms of what I have observed from representing a rural constituency for more than 20 years and living in it for somewhat longer. I would consider the seven year period to be somewhat arbitrary.
No matter what figures any Minister for Finance brought in here, it would always be open to the Opposition spokesman to say that they were incorrect. However, I hope in this case that we have argued convincingly that the Minister's figures here are too limited. The age limit is particularly arbitrary. Deputy O'Dea has put his finger on something quite important, because I know of a number of farmers in their late thirties or forties who want to get out of farming. Are we not anxious to encourage these? It is a very good means of livelihood for those who are both interested and able. There may be very many at present who cannot get employment in our towns and cities and would be very happy to turn with a new drive and purpose to farming. Equally, there are some in farming—and not such a small number—who are not suited to the whole farm activity and they are not all over 55 years of age, either. Regrettably, I know quite a number of such.
I recall visiting the ACOT offices in my town of Nenagh some time back and having discussions about the level of productivity in agriculture. Without wanting to quote the figures, I must say that I was appalled at their measure of the low productivity generally, in terms of the percentage breakdown in the farm population. There are many under 55 years of age who are not capable of generating sufficient income for themselves, much less for their families, even sometimes on 50 or 60 acres of adjusted land. It is a fact that the more their commitments to the bank from investing, particularly in machinery, for the purpose of increasing their productivity the greater a burden the greater acreage becomes. It is not always a measure just of how much land they have. Quite frankly, it is a measure of their capacity to farm whatever land they have in as intensive a way as possible.
In the light of that, we should encourage the advisory and educational services in the agricultural field to make every farmer as modern, well equipped and in tune with the needs and potential of today as anyone engaged in any other activity. The farmer is managing a very important enterprise which has a capacity for productivity, provided we create the market outlets—and I shall be tabling an amendment later in that regard. However, we are not doing that. I welcome this move, which is in the right direction and is more than a small step. However, we might have taken a bigger step, and I hope that the Minister, on reflection, could consider an amendment on Report Stage, after consultation with his colleagues, the Minister for Agriculture, when that Minister comes home—and I am not making any comment on his absence because that job has to be done, also— and with the other representative organisations to see if he can make some further adjustment.
This is the first year. I hope that the Minister or his successor—and we shall not take any bets at this stage—on the next Finance Bill will have at least an open mind as to extending the range of this section, if the Minister cannot extend it on this occasion.
I wish to make a few comments on this section, which are in relation to the qualifying lessor. As the Minister and everybody else connected with farming is, no doubt, aware, many farmers are wiped out by the effects of brucellosis and TB outbreaks. Some of these have to take outside jobs. I have known such cases of people who have done so to build up their farm stock again and who have let their land in the meantime. In a particular case of hardship, would the Minister consider it possible to include such people within this section?
First, I am quite confident that it will not be my successor who will bring in the Finance Bill next year.
Having regard to the Minister's earlier forecasts on a range of other matters, if he is as far out on his present forecast as he was on the others—
I have every intention of bringing in the 1986 Bill, I can assure the Deputy. On the points which were raised, coming back to the income situation, the exemption of £2,000 must be considered in the light of some cases. Take at the moment a farmer who may or may not be in the tax net as a farmer. If he or she decides, following this provision, to let the whole farm and has no other profession but has the income from the letting of the land, that person would fall to be taxed on the total of that income, which would be the only income. That person would then be entitled to the operation of, for example, the normal exemption limit in that case. For a married person under 65 years of age there is an exemption of £5,300, which we discussed recently. One can add the new exemption of £2,000, so that with a total of £7,300 that person, as a result of the operation of this provision, would be outside the tax net. In the case of older people, there would be a different age exemption limit to be added on. In most cases we are not talking about a simple amount of £2,000. We could be talking about quite a bit more, and, therefore, not talking about the 18 fertile acres in North Tipperary but quite a bit more. Taking that into account, this is quite a generous relief which will certainly constitute an encouragement for the kind of activity we have in mind.
In relation to the definition of the qualifying lessor, at the top of page 13 of the text of the Bill, subparagraph 1 specifies that a qualifying lessor is an individual who is of the age of 55 years or upwards or who is permanently incapacitated by reason of mental or physical infirmity from carrying on a trade of farming. I can assure Deputy O'Kennedy that the kind of interpretation I want to give to that incapacity is perfectly capable of being comprehended—this mental or physical infirmity can simply be that the person concerned is not capable of doing the work which is required to carry out the business of farming. It is with that in mind that we will be implementing this section.
As to the period of release, we have exchanged all considerations on that. I have been considering this for some time and have a relatively open mind as to the period of the lease. However, I am concerned to make sure that the person who takes the land will be assured of having it for a period long enough to make it worthwhile to engage in development. We are all agreed that a period of three years would not suit. I would think a period of five years would also be a little short, particularly when talking of somebody who is, for example, building up a dairy herd or a beef operation.
There are not many doing that, with the imposition of the levy.
Yes. Deputy O'Kennedy is just as aware as I am of the origins and history of the levy and——
I am not talking about that.
——various roles played by various people in different places in that history.
The Minister's Government ensured that it would not get through the Commission. The Minister can take that as final—and he was Minister for Agriculture.
That is another day's work.
It did not get through the Commission.
We could have a long and entertaining discussion on that, even though it is a very serious matter. There are numbers of enterprises that take a few years to develop and we would need to be conscious of that. However, it is a matter I will think about between now and Report Stage and I hope we will fix a date for Report Stage. Perhaps we can then come back to the matter and round off our discussion on this point.
With regard to the question raised in relation to cases of hardship, I do not think this is an appropriate context in which to deal with those cases of hardship. If in a particular case the person who has that serious problem falls within the definitions given here, then the use of the section will be open to him. I do not think I would tailor the section to suit people who might have a case of hardship, because that is not the intention of the section.
I know the Minister will leave a note on his desk for his successor who will be able to take up the points the Minister will not be able to deal with.
He will not be here until 1988.
The Minister has said that he will look at the matter between now and Report Stage, and that I accept. I would say to him that what he said with regard to the legal interpretation of a person incapacitated by reason of mental or physical infirmity from carrying on a trade in farming cannot be correct. There is no court that could extend that interpretation to a widow who is busy looking after her young family. That is not included in the definition of mental or physical infirmity. It would be attaching a new disability to widows that has never been determined by any court. If it is the Minister's intention to include such people, there must be some way the parliamentary draftsman can find a provision to include it. I ask the Minister to consider that matter between now and Report Stage.
I know the Minister's intention in the matter but I have heard judges say many times that what is said in the Dáil is not of any consequence to them. They say that their role is to interpret. They do not look for a copy of the Official Report. They say that their role is to apply the law as passed by the Oireachtas and if the intentions are not expressed properly in the law that is too bad.
I wish to support what Deputy O'Kennedy has said. It is a long established principle in the courts that so far as questions of interpretation of law are concerned this House has no relevance. If the Minister wants to ensure that the widow be mentioned is brought within the section, I ask him to consider this matter very carefully between now and Report Stage. He cannot ensure what the courts will do. The use of the word "infirmity" really ties it down. The word "infirm" has a commonly accepted meaning. Perhaps if the word "infirmity" were replaced by the word "disability" he might get nearer to achieving what he wishes.
Question put and agreed to.
SECTION 11.
I move amendment No. 32:
In page 14, lines 33 and 34, to delete "5th day of April, 1986" and substitute "1st day of July, 1985".
Here we are back to the famous temporary income levy which the Minister introduced in his first budget in 1983. Obviously it has become a little more than temporary; it has become a permanent feature of our income tax legislation. This was an extra measure that was dreamed up to raise extra money for the Exchequer. The levy was not stated to be for any specific purpose. We already have the youth employment levy of 1 per cent. Last night and the previous night we had a debate here on the effectiveness of that kind of operation and the work of the various agencies who are tripping over each other but who are not producing permanent employment at the end of the day. However, the youth employment levy at least had a purpose which does not apply in this case. This is just an income levy to raise more money for the revenue and, as such, we have always been opposed and will always oppose it. We can demonstrate to the Minister that it is having a very undesirable effect.
Employers have so many extra costs to meet that they are not encouraged to take on extra labour. This extra 1 per cent is not just the straw that broke the camel's back. By this time the camel's back is already broken but what the Minister is doing will ensure that the old camel will never get on his feet again, even supposing his back were to be healed in some miraculous way. I appeal to the Minister to review his position with regard to this levy. I know the answer will be that because of the revenue implications the Minister cannot accept the amendment.
This levy is projected to bring in £77 million this year.
When a Minister brings in some measure here and tells us it will be temporary, he should tell us how temporary it will be. Otherwise let him say it will be a permanent feature of our tax and then everyone will know where they stand. We were told this levy would be temporary, that it was introduced to cope with difficult problems the Minister encountered in 1983, but now is the time for him to come clean with the House and the public and to tell us just how temporary is that levy. In any event we are opposed to it in principle.
There are some worrying features in relation to this temporary levy. The outturn for 1984 was £78.2 million and the post-budget estimate for 1985 is £77 million, namely, £1.2 million less than 1984. Does not that clearly argue that instead of increased income which one normally gets from any levy or tax, what we are seeing here is that we have reached the stage of diminishing returns because of the extent of the various levies. I realise we may be told that certain people will be exempt but that is a feature of every Finance Bill; in fact, the exemptions have often been far more generous than what the Minister has conceded this year. When the projections for next year even in money terms show that there will be £1.2 million less—in real terms that is at least £10 million less than last year— the question must be asked why that is the case. The obvious answer has to be that there are fewer people gainfully employed, that there are fewer people self-employed, who can contribute to this income levy. There are fewer people generating income on which the levy can be imposed. One of the reasons there are fewer is that the levy itself is penalising them, this plus the tax levels, and preventing them from generating income either by way of employees or employers. As it was in the beginning with us, is now and always will be, we are opposed to this. We said it then and our case has been proved. If the trend continues and the Minister maintains the 1 per cent it will be a little bit like the PRSI, he will get less again in 1986. Please God, his successor will be able to do the right thing in 1987, when all of these levies introduced for tax purposes hopefully will be abolished.
My amendment does not propose the abolition of the levy for all of this year. We must take into account what has already been yielded, and that must amount to a fair bit in this tax year. The tax forms have already been issued. It would take some time to send out new forms taking into account the elimination of this levy. It is for that reason that I propose that we substitute the first day of July 1985 so that the levy could continue to be collected on a monthly basis up to the end of June 1985 and cease thereafter. In that way at least the Minister would have something to add to the revenue coffers, perhaps approximately one third of the whole figure he projects for 1985. Ideally we would seek its abolition but we are moving to a position of acknowledging that at this stage of the year that is not feasible. It is for that reason I propose that it would terminate with effect from 1 July next.
Not much can be said on this levy except what has already been said, that it is a most inequitable form of taxation, representing a percentage taxation on gross income. While there are exemption limits in operation, these apply to gross income and, as far as the general public are concerned, it is take home pay that counts. Even taking these exemption limits into account the Minister will still be taking a 1 per cent levy from people who will be exempt from income tax. Its deduction is not at all based on any question of income tax allowances etc. There might be some justification were it based on people's ability to pay, as is income tax. Rather one pays on one's gross income before PRSI or any other taxation allowances are taken into account. For that reason it constitutes a tax that no Minister for Finance can justify as being a fair or just method of taxation. Rather it is a simple method of bringing in an extra £70 million or £80 million to the Exchequer.
When I suggested last year that it was a simple matter for a Minister, in grave need of money, to impose a 2 per cent levy the following year and double his take on that without any cognisance of whether it was equitable, the Minister became very annoyed. I continued to say then that if there was a 10 per cent levy proposed no Minister for Finance could justify that. It is justified because it is 1 per cent only, in the hope that people will not notice it; that is the concept of this taxation system. People accepted this youth employment levy; there was no outcry against it. People were generous, seeing the need to do something for young people, for their children and their future. They were prepared to give some of their income to this purpose, not that it has been very successful as far as youth employment is concerned.
Following its success then the Minister for Finance saw the possibility—without giving any thought to it or its complications—of imposing another levy to yield money to the Exchequer. People resent this so-called temporary income levy much more than the youth employment levy. It constitutes a gross burden on people already over-burdened with personal taxation. The fact that its deduction is on gross income renders it more inequitable. I know the Minister would contend that its abolition would mean so much loss to the Exchequer. Nevertheless, if the Minister has any concept of equity or fairness in the taxation system he would abolish this extra 1 per cent income tax. No Commission on Taxation, no Minister for Finance can justify it as being equitable or fair. He can justify it only in terms of its yielding so much money to the Exchequer.
All of this argument has been advanced before, when it was first introduced, but we discover that the temporary levy is extended. Last year the Minister for Finance made the point: well, it has to be brought in each year and that will afford Deputies an opportunity of making the same points next year. This is precisely what we are doing. There is the one argument only to be made against it, that it constitutes a totally inequitable system of taxation, grossly unjust and, for that reason, we oppose it.
I agree with the remarks of Deputies O'Kennedy and Mac Giolla, that this income levy constitutes a very crude instrument of taxation. There have been various references on all sides of the House to the Report of the Commission on Taxation. We all agree with most of the basic propositions advanced in that report. One of the most fundamental principles referred to by the commission, and agreed by all of us, is that there should be equity in the tax system. A levy of this type is of its very nature inequitable and unjust. It is rendered even more so by the fact that it is not deductible from a person's gross income for tax purposes. Take the average PAYE taxpayer's gross income; there is imposed thereon a 1 per cent levy, leaving him with 99 per cent. However, PAYE and PRSI are imposed on the full 100 per cent. In other words, that person is being taxed two ways under the PAYE and PRSI system on income which he does not receive at all. God knows the rates of PAYE and PRSI are sufficiently high on a person's actual income not to talk about taxing him on income which he does not receive.
Deputy O'Kennedy referred to the fact that this income levy was supposed to be a temporary measure. Nevertheless we see the spectacle every year of the Minister for Finance inserting a section into the Finance Bill to continue its imposition for another year. I would ask the Minister to come clean and tell us whether this income levy will be a permanent feature or, if it is to be temporary, to give us some indication—more importantly the hard pressed public—when it will end; how temporary or how permanent will it be. We should have the answer to that in the public interest. The public are asking us and we are here only as agents of the public. Will this be the last year of its imposition or can we expect it imposed again next year?
There are a few specific questions relating to this on which I should like the Minister to comment. It is proposed in the Government document Building on Reality to introduce a land tax for farmers. It is also envisaged that farmers to whom the land tax would apply would not be liable to income tax. How is it proposed that the income of these farmers will be measured for the purposes of the imposition of the levy? Are these farmers to be expected to employ an accountant to measure their taxable income for the purposes of knowing on how much they will pay the 1 per cent levy?
In relation to the technical provisions for the levy, apparently the situation is that if a person's income is £102 a week or less he is not liable but if his income is in excess of that, for instance if his income is £103 a week, he is liable to the 1 per cent levy on the total sum. What would be the situation where an employer wants to pay an employee £6,000 per annum which is just under £120 a week, can be get around the levy to some extent by paying him £102 a week for 50 weeks and £450 a week for the last two weeks? If that is done the income levy to be paid will be £9 whereas in the normal way if the person was being paid £120 a week, the levy would be £60. More importantly, how temporary is this levy? Is it to be a permanent feature of our income tax system?
Everybody knows that we have had full time temporary postmen for the past 40 years. This temporary income levy if falling into the same category as the full time temporary postman. Deputies O'Dea, Mac Giolla and O'Kennedy have stressed that the Government have been telling the people over the last number of years that this was temporary. Once it goes into the income tax law, as far as I can see, it will not be removed. I am interested to hear the Minister's reply in relation to this measure.
This is an inequitable levy. It affects everybody whether or not people are liable to income tax once their income is over £102 a week. This is a strange provision coming from a Government who profess to be concerned about equity in the taxation system. Farmers who prepare accounts are liable to the levies on their profits before capital allowances. Other businesses under schedule D are allowed to deduct capital allowances and are liable to the levies on their income after that. Why has the Minister made a distinction between farmers and others? This is a cruel system of taxation, a way of getting badly needed money as I am sure the Minister will acknowledge in his reply.
In relation to Deputy O'Kennedy's point about revenue from the levy, as he pointed out reading from my budget statement and the connected tables, the provisional outturn for 1984 is £78 million and the forecast yield for 1985 is £77 million. Deputy O'Kennedy then rushed on to draw the conclusion that that meant that we were into a situation of diminishing returns, a subject about which he talks without really understanding the concept. The £78 million for 1984 included a carry over of £4 million from 1983 so that the clear revenue for 1984 was £74 million which we would then compare with the forecast of £77 million for 1985. The amendment before us will abolish the levy with effect from 1 July next, involving a cost of £28 million in 1985 and £63 million in a full year. That will have to be compensated for in some other way.
Following the discussions we had here last year on the same question I have been looking at the kind of things that Deputies opposite might be inclined to propose if we were to replace that income by some other means. We could, for example put a surcharge of 3.6 per cent on all the present rates of income tax or we could reduce the allowances by £280 for a married couple of £140 for a single person. I do not believe these measures would commend themselves to Deputies opposite. In the absence of any specific proposals as to how we would replace the revenue there is not as strong a case for their amendment as they seem to think.
I am providing for a continuation of the levy for 1985-86 but with an increase in the level of exemptions for those on low incomes. For those paid weekly the exemption goes from £96 to £102—
That is less than inflation.
——and correspondingly, forthnightly or monthly payments for those paid annually, that is where income is not solely from employment, the exemption goes up to £5,300 from £5,000 which it was for 1984-85. Unless I am very much mistaken an increase from £5,000 to £5,300 is a 6 per cent increase, which is the same as the projected inflation rate.
We will just stand still.
I am glad the Deputy agrees with me, as he seemed to be indicating that it is less than inflation. The expected inflation over the period in question is likely to be less than 6 per cent.
Deputies O'Dea, Mac Giolla and in fact all Deputies asked "if this levy is temporary, when will it come to an end?" That is a fair question. This will be the third year of the operation of the levy. In the second year of the operation of the levy I exempted people at the lower end of the scale. I improved that exemption this year, so that for substantial numbers of people I have terminated the operation of the levy.
Extra people will not be exempted this year.
We pointed out in paragraph 6.8 of the plan Building on Reality that our intention is to phase it out as soon as resources permit. I will not be more specific at the moment, nor can I be more specific. The levy will come up for re-consideration every year in the preparation of the budget.
Deputy O'Dea asked how it is pro- posed to apply the levy to farmers once the farm tax system comes into operation. I do not know; it is not an issue that has yet been considered. The Deputy also asked in the case of somebody whose income is around £ 6,000 per annum, could his employer get around the levy? I am sure that Deputy O'Dea does not expect me to suggest in the House a means of getting around anything.
I am just asking the Minister to comment on it.
I make no comment beyond saying that it appears that Deputy O'Dea has the glimmer of an idea. Deputy Ahern claims that nothing goes away once it gets into tax law. I think I have quoted him correctly. That is not true. Quite a few provisions of previously existing tax law have been abolished over the last couple of years. Deputies on the other side of the House have agreed with some of them and not agreed with others, but tax law is not as immutable as the Deputy seems to think. As I have said, the Government intend to remove the levy as soon as resources permit.
Apart from being reassured by the Minister that the Government intend, as laid out in that famous document Building on Reality 1985-1987, to phase it out as soon as resources permit, if he thinks that is a reassurance to anybody he is fooling himself. The Government's interpretation of phasing out things has taken on a new meaning. Remember they were going to phase out the current budget deficit, and they phased that out by increasing it.
Is the Deputy wandering again?
Not at all, but the Minister has referred to an interpretation. You phase out a budget deficit by increasing it, you reduce taxation by increasing it and you reduce unemployment by increasing it. Those are the kind of things that are in that document. The Minister must have had an input into that document. He uses the same phrase when he says that they are going to phase it out as soon as resources permit. I am afraid that next year — they will probably stick around as long as that — we are more than likely to find an increase in the income levy as distinct from a reduction. I am not reassured by the Minister telling us that he will phase it out as soon as resources permit. He should give an indication of when the Government intend to abolish it, not to phase it out, in the jargon they use in such a contradictory way. From what we have heard so far the Government intend for as long as they survive — it will not be too long — to keep it and perhaps to add to it. Secondly, in relation to costs, I have talked about the diminishing returns. I gather that in my absence the Minister mentioned that the reason for this was a carry over from 1983 into 1984. Is the Minister suggesting that there will not be a carry over from 1984 to 1985? Clearly, the carry over applies in each year, and what carries over from 1982 to 1983 or 1983 to 1984 we get all the time. That is not the explanation. The only explanation is the one I gave, that because of the diminishing number of people in employment and the diminishing number of people earning income, even less is accruing to the revenue in nominal terms, never mind real terms, than accrued last year. If we were to maintain the same revenue as last year for this 1 per cent in real terms we are talking about £78 million plus £6 million or £84 million. However, we are not going to get £84 million; we are going to get £77 million, and that illustrates the fact that it is having the effect that we have argued here for some time, namely that of reducing employment and as a consequence reducing the number of those who contribute to this ridiculous and unfair income levy. I do not know if the Minister gave the figure for how much it would cost to accept our amendment in this year.
£28 million in 1985.
In net terms that would be something of the order of £18 million.
No.
It would be a very welcome step for that amount of money, and the Minister will acknowledge that we have been very restrained and responsible in the amendments we put down here. We have not gone for the top in many ways. When the Minister's colleague, the Minister for Foreign Affairs, was sitting here and I sat over there he did not seem to be very interested in doing sums on proposed amendments then which would have cost something like £500 million or £600 million. We know the difficult situation at the moment, therefore we have deliberately confined it. For that figure the Minister should acknowledge that the case we make is reasonable, but whether we win the argument or not we are unlikely to win the vote.
I want to deal with only one point in the Minister's reply. The basis of the argument against this levy by all Deputies has been its inequity. The Minister did not justify it on grounds of equity. The Minister should tell us if he agrees with what we have been saying, that there is no justification for this type of taxation on equity grounds. Tax equity is one of the major factors referred to in the Commission on Taxation. No matter how heavy the burden is, people should be able to see that it is equitable.
The Minister quoted from what he said last year, that if he was to do away with this he would either have to add the extra surcharge on the existing rates or reduce tax free allowances, etc. When he thinks of his alternatives he thinks only of alternatives in the personal income area. There is a wide range of other alternatives in the capital taxation area and in wealth and property taxes etc. Which he has not referred to as possible alternatives to the income levy. There are other alternatives.
Secondly, on grounds of equity would it not be better to amalgamate it into the income tax system in which there is some basis of equity and in which we endeavour to have some basis of equity? What is the Minister's argument for holding on to this levy on gross incomes, which is grossly inequitable, rather than putting it into the income tax system? If he wants more money, let him put it on the basis of the system which he has, which needs adjustment and is not on an equitable basis yet but at least it has the basis of being an equitable system. The Commission on Taxation have made recommendations in regard to that. Why does the Minister insist on holding on to the separate income levy?
Will the Minister comment on what I spoke of regarding the method by which farmers are levied, that is profits before capital allowances as against other self-employed people whose levies are based on profits after capital allowances?
I am afraid the Deputy is under a misapprehension. There is no category of taxpayers who get the benefit of capital allowances before this levy is calculated. That is an answer to the Deputy's question. If he wants to follow it up I will listen.
I disagree with the Minister.
I am sorry if the Deputy and I are going to disagree, but there is no allowance for capital allowances in the calculation of liability for the levy for any group of taxpayers.
Deputy Mac Giolla wants to know my opinion about the equity or otherwise of the levy and why I would not incorporate it into the income tax system. This year that was one of the things that I considered when we came to look at the way we would put together the budget proposals on taxation, and I concluded that the changes we made in the structure of taxation and in the hands and allowances were in themselves a sufficiently coherent body of measures and were more important than the reduction of this levy. A reduction of the levy beyond the further relief I have introduced did not seem as important as the other measures we have taken in relation to the total income tax system. That might not always be the case and, as I said, it is our intention to phase out the levy as soon as resources permit, and I hope that would be at a fairly early date.
Sooner rather than later.
It is difficult to forecast these things. It could well be that in a year when the resources were there to abolish the levy there might be another modification of the tax system which would appear to be more important than the abolition of the levy, which was the case this year.
The Minister will have a very strong case to make when we change places. He can tell us that resources permit——
I do not think I could wait that long. I am tempted to expose the flank to an extent and offer Deputy Mac Giolla and the Deputies opposite the reflection that it would be better for the case they are making that this levy would not be rolled up into the income tax system because as it is at present, it is obviously a fairly prominent target.
Would the Minister inform himself of the true situation regarding people under schedule D and how their levies are calculated — on their income before their personal allowances, after capital allowances have been taken off their gross profit. This does not apply to farmers. I would like to know why the Minister does not extend the same concessions to farmers.
Perhaps we can go into this in more detail later. The difficulty in relation to the farming community has to do with depreciation.
And capital allowances.
It seems the Deputy was right and the Minister was wrong.
That is a slightly different point.
(Interruptions.)
Capital allowance is a straight reduction and a depreciation allowance is over a period.
Depreciation is added——
In relation to the calculation of the farming levies, the point has been made that they are treated differently from other sectors. They are not because the charge is made on gross income with a very limited number of deductions allowed, and from that point of view farmers are treated in exactly the same way as any other taxpayer.
As Deputy Connolly might say, one could not expect the Minister to understand something as complex as this.
Deputy Ahern has made a very good point and I think he has caught the Minister out. He has exposed a gross anomaly in the system as it applies to farmers as against other self-employed. In all fairness the Minister should concede that he was wrong in his original reply to Deputy Ahern. He should try to explain why the system operates differently as it applies to farmers.
I have here Statutory Instrument No. 84 of 1982 which gives the definition used for reckonability, and it is the same for every category of taxpayer.
Amendment put.
The Committee divided: Tá, 71; Nil, 62.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Carey, Donal.
- Cluskey, Frank.
- 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.
- Deasy, Martin Austin.
- Desmond, Barry.
- Desmond, Eileen.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Farrelly, John V.
- Fennell, Nuala.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Kavanagh, Liam.
- Keating, Michael.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Jim.
- Nealon, Ted.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Sullivan, Toddy.
- O'Toole, Paddy.
- Owen, Nora.
- Pattison, Séamus.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Barrett, Michael.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Browne, John.
- Burke, Raphael P.
- Byrne, Hugh.
- Byrne, Seán.
- Calleary, Seán.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- Ormonde, Donal.
- Fitzgerald, Liam Joseph.
- Flynn, Pádraig.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- Molloy, Robert.
- Morley, P.J.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Tunney, Jim.
- Wallance, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies V. Brady and Barrett (Dublin North-West).
Question declared carried.
Question: "That section 11 stand part of the Bill" put and declared carried.
NEW SECTION.
Amendments Nos. 32a and 32b are related and may be taken together by agreement.
I move amendment No. 32a:
In page 14, before section 12, to insert a new section as follows:
"12.—
That a marketing representative who is based abroad of an Irish resident employer shall have his Irish tax payable reduced by reference to the following formula:
T - (T × f/a)
where
T is total Irish liability to tax in respect of the employment
F is total number of days abroad on employers business
A is 365 days.
provided:
(a) No relief shall be granted unless in excess of 60 days are spent abroad on the instructions of the employer and such days are spent exclusively in the business of marketing the products of the employer, in the income tax year.
(b) No relief shall be granted to any person who is a participator, or an associate of a participator, of the employer
(c) No relief shall be granted unless a marketing programme is submitted to and agreed with Córas Tráchtála in advance of the tax year for which relief is claimed.
(d) Provided all the foregoing conditions are met, relief shall be given by way of repayment of tax paid on production to the Revenue Commissioners of verification by the employer and employee of days spent abroad in a form prescribed by the Commissioners.".
These amendments are not quite related as they deal with very different matters. However, I will deal with this amendment in the first instance. I have for some considerable time been pointing out that the weakness of our marketing strategy is a matter of very serious concern. I am glad that I am joined in this by a whole variety of independent economic analysts. It is very clear that the capacity, particularly in indigenous manufacturing industry, is limited by the fact that we do not have marketing personnel who are sufficiently aware of the market, who do not spend a sufficiently long time in the marketplace outside the country or who are not sufficiently attuned to the realities of that marketplace. The result is that we are not exploiting the market to any effective extent. A variety of comments in recent weeks underline what I have been saying for the past two years inside andº outside the House, that you can use a taxation system for incentive as well as to penalise. My proposal is to provide an incentive for marketing personnel.
Marketing personnel who are resident abroad for a considerable part of the year are taxed on exactly the same basis as those who live at home and work in their normal place of business. Clearly, the disincentive effect of that is very serious. If a person spends 100 days in the year away from home in Frankfurt, Bonn, Lagos or South America, it is inequitable and damaging to the economy that his income is taxed as if he resided in Dublin, Tipperary or Donegal. We obviously need to provide incentives for marketing and to get many more executives into this field and the Government must take action in this regard. The revenue implications of this can only be estimated at this stage as nobody can put a precise figure on it. Indeed, my estimate would be as good as that of the Minister. We will certainly not be talking about a figure in the region of £1 million in total revenue loss, it will probably be somewhere in the region of £500,000.
We cannot expect Córas Tráchtála to do the job for each and every manufacturing industry who are exporting. Indeed, Córas Tráchtála have acknowledged that, due to cutbacks, they cannot service indigenous industries, particularly small and medium size firms, in terms of expanding the market. That is why I propose this amendment which builds in an adjustment related to the length of time that the marketing personnel spend outside the country. We are trying to encourage the right people into marketing and to operate an incentive when such people are abroad for the general good of the Irish economy. We should grant a tax deduction to an Irish marketing representative who spends in excess of 60 days abroad. That is not a short period so I am thinking in terms of people spending a considerable time abroad in an income tax year on behalf of their employer to market the employers' products.
In addition, I have put in three other qualifications. The period of 60 days must be spent abroad on the instructions of the employer and exclusively in the business of marketing the employer's products in the income tax year. It would not apply to someone going out on his own behalf. The relief can apply only to a person employed and not to anyone who is a participator, namely, a promotor or an associate of the participator or employer. It is clearly limited to personnel engaged at executive or lower level in marketing the products of the employer. I am conscious that this might be abused so I thought it appropriate to put in the proposal that no relief shall be granted to any person unless a marketing programme is submitted to and agreed with Córas Tráchtála in advance of the tax year for which relief is claimed. The bona fides of the marketing enterprise can be established.
I am conscious that someone has to make an adjudication and, if I were sitting where the Minister is now — I will be sitting there again sooner rather than later — I would probably put in the provision as set out in (d) of the amendment which is simple and effective. The formula can be explained simply. If you take T as a total liability for tax in respect of the employment, subtract the total liability multiplied by the number of days abroad on an employers business and divide it by the number days in the year that would have the effect of reducing his taxable income. If, for example, an employee spends 73 days abroad on his employer's business and his tax liability in terms of marketing in respect of the employment is £2,000, the formula will work as follows:
£2,000 - £2,000 × 73/65
gives £400 and, therefore, it would be £2,000 minus £400 which yields the figure of £1,600. I would not regard the tax relief in that situation as enormous, it would be a sum of only £400.
Progress reported; Committee to sit again.