Amendment No. 1 is in the name of the Minister for Industry, Trade, Commerce and Tourism.
Designated Investment Funds Bill, 1985: Committee and Final Stages.
Sections 1 to 4, inclusive agreed to.
SECTION 5.
I move amendment No. 1:
In page 5, lines 11 and 12, after "a particular participant", to insert "(who need not be named)".
This amendment, basically, is technical. The provision requires that a statement be included in the prospectus to the effect that the registered owner of shares issued to a fund acts as a nominee for the participants. This clarifies that the participants need not be named in the prospectus, as those names would not be known at the time the prospectus is being prepared.
Amendment agreed to.
Question proposed: "That section 5 as amended, stand part of the Bill".
In subsection (4) (iv) a period of five years is mentioned. Would the Minister consider adjusting that to three years?
This provision is in the Finance Bill.
I know it is.
We are repeating the provision. It would not be appropriate to change the period here. This is consequential legislation, in a sense. I might have some sympathy with the Deputy's point, but I think we shall have to try to persuade the Minister for Finance on this.
My other observation deals with the raising of £25,000 to £40,000. I understand both of these points can be dealt with only under a Finance Bill. I am restating the point here, so that it would not go unnoticed and that the Minister, in the best interests of this designated fund, would give it all the help it needs. It has been hidebound up to now, but the door has been opened a little. We expect that the Minister will encourage his colleague in Government to give the fund every chance it needs to be a success.
As I have said, I have sympathy with the Deputy on this. I said that we should get in touch with the Minister for Finance about it, but on reflection I am not so sure that it would be a good idea to reduce the period from five to three years. As the Deputy will appreciate — and I thank him for his support — what we are trying to do is to get equity into companies on a reasonably solid basis so that people running those companies will know that they have a certain financial backing based on this tax concession. If you were to say that once one has got into one of the companies one would qualify for the tax relief as quickly as three years there would be many "quick buck" merchants getting in for three years and getting out again. The company would not be able to pursue any rational development plan on the basis of such support. With all due respect to the Deputy, he might reconsider his attitude on this. It is better to leave it at five years. However, this is a matter primarily for another debate.
Section 5 would seem to be the only section on which there is room to talk. I am not too happy, as I have said, about tax relief not being given from the time one invests money in the funds. One must wait until the money is invested in a venture. That would be a disincentive to the small investor who might not be able to finance the waiting period, which could be months. It could well mean that the small investor would be unable to make the investment. This may be part of a Finance Act rather than the present Bill, but I still make the point that the possibility will have to be considered that investors in unquoted securities would be eligible for tax relief immediately on investment in the designated fund recognised under the Act.
I understand. As the Deputy is aware, this is also a Finance Bill matter. The problem is that there would be a great incentive to people running the funds to hold the cash, because those who put the money in would get their tax relief straight away. You could have people sitting on the money for quite a while, waiting for an ideal investment to come up, rather than turning the money over and recycling it in the productive sector. The investor would not be particularly worried once he knew that his money was safe. He would have got his tax relief from the moment the money went into the fund, even though nothing productive would have been invested in and might not be invested in for some time. I do not think that would be desirable.
While I agree with the Deputy that it is desirable to get the tax relief to people as soon as possible — and some may have liquidity problems and feel that they are not able to wait — on the other hand this money will be put in only by people with money to spare. If they have money to spare to put into these tax relief funds, then they have sufficient money to wait the relatively short time which should apply between the time the money goes in and the investment in productive activity takes place. I fear that the Deputy's approach — and this may be going a little far — could facilitate, at least in the short term, the scheme being used for a species of tax evasion rather than for the purpose for which we both wish it to be used.
Do I take it that there is some reason why an individual investor should not be given an amended certificate of tax-free allowance as soon as possible after he furnishes evidence of investment in a designated fund? I am talking particularly of people in the PAYE sector, not the large investor. The small investor is treated a little unfairly here. Could the Minister talk to his colleague?
Apart from the reasons I have already given, it is desirable that the investor should be getting after the funds manager to get him put the money into something productive fairly soon. If an investor can get tax relief from the moment he puts his money forward and if the manager has not invested it in anything productive there will not be pressure from the investor, if we accept the proposal of the Deputy. I am sure Deputy Lyons would be the first to point out to me that there is need for urgency with regard to dealing with the unemployment problem. It is our intention to get any money that avails of this generous tax relief recycled quickly into productive activity rather than to have it lying around in a quasi-bank account. That is why I do not think that much can be said for the Deputy's proposal, although I acknowledge it has been put forward with the intention of trying to improve the scheme. As I have said already, I thank the Deputy for his approach in the matter but I do not think this suggestion is good.
Because we are concerned about the matter we are giving every support to this Bill. We are aware that only two funds were set up last year. We know that the restrictive nature of the fund has been the reason for such little involvement. I assure the Minister that my concern is as great as his. We are supporting this Bill because we hope it will open the door for people to invest money to create employment. The Minister will get our full co-operation in that objective.
I thank the Deputy.
Question put and agreed to.
SECTION 6.
I move amendment No. 2:
In page 8, subsection (4) (b), between lines 29 and 30, to insert the following:
"(i) the resolution shall not be capable of being amended or revoked,".
This is technical amendment which has been included for clarification following consultation with the parliamentary draftsman. If the resolution approving of agreement with the trustee of a designated investment fund to register the transfer of shares was capable of being amended or revoked, such a resolution would be meaningless.
Amendment agreed to.
I move amendment No. 3:
In page 8, subsection (5), lines 44 and 45, to delete "clause II of subsection (4) (a) (i)" and substitute "subsection (4) (a) (ii)".
This is a technical amendment necessitated by the incorrect cross-reference that was inadvertently included in the circulated text.
Amendment agreed to.
Section 6, as amended, agreed to.
Sections 7 to 10, inclusive, agreed to.
Title agreed to.
Bill reported without amendment.
Question proposed: "That the Bill do now pass."
I wish to thank the Opposition for their co-operation in this matter.
As I indicated on Second Stage and again tonight, we have agreed to this Bill because of our concern regarding this matter. Some two years ago we said that because of the limitations of the scheme it would not be a success and we are pleased that the Minister has adopted the stance we indicated some time ago. All of us hope that this Bill will have the desired effect, namely, that it will encourage the investment of funds which we know are available. We hope that this easing of restrictions will encourage that investment and that more than two funds will be set up in the coming year. We welcome the liberalisation measures now proposed and we regret that the Minister has not gone further in this regard.
If the scheme is to be successful it must be good for investors and for business. I am glad to see that the Minister for Finance has arrived in the House. I contend that his approach is too restrictive——
We are confined to discussing what is in the Bill——
We have plenty of time.
The Deputy may discuss only what is in the Bill. If that is what he is doing he is in order but if he departs from that he will not be in order.
My presence may have provoked the Deputy.
One Minister is often bad enough, but God spare me from two of them.
Perhaps I may escape the censure of the Chair by making a passing reference to the Department of Finance. I had intended to say that the Minister for Finance is too restrictive with regard to the terms of the scheme. I urge him to broaden his horizons so that the scheme will be availed of more widely. I have heard of mental telepathy: it is quite extraordinary that as I was coming to that sentence the Minister for Finance came into the House. I am glad he is in the House to hear me say this.
The key to all of this is section 2, which takes the scheme out of the unit trust restrictions. Designated funds for investment purposes were subject to the Unit Trust Act, 1972, and the restrictions under that Act and so long as that continued no progress was made in the past 18 months. Now that there is a new category of designated funds, I hope it will set the ball rolling. It is vital that the political will and the administrative arrangements that may be made as a result of that political will exist to ensure that this development is facilitated. It is a logical, sensible development and one that can lead to the translation of funds into venture investment areas. That is what is required. We hope that the political will and the resultant administrative capacity will be such as to utilise this new mechanism. Obviously what was in the Finance Bill was failing by reason of the restrictions under the unit trust legislation. I hope the new mechanism will ensure that the matter will work properly.
The Minister for Finance has shown himself to be very ready, as have all of my other colleagues in Government, to make amendments to this tax relief scheme in the Finance Bill this year in the light of experience in the last 12 months.
The purpose of this Bill is to allow a situation where people could advertise for investment in specific funds which are to be used for tax relief. Without this Bill one would have had to invest either directly as an individual in an individual company or in a fund which you heard about but which could not advertise for your investment. Obviously there was no limit on the amount of availability of individual investment in individual companies but the absence of the availability of funds to advertise did mean that the fund aspect of the scheme, as distinct from the individual aspect of the scheme, could not really work. I am very glad we have been able to get this Bill through the House before the Summer Recess so that it can get to work right through the summer. The implied criticisms by the Deputies opposite of what may have gone before are not really relevant. The fact is that this is a new scheme introduced by this Government. It will work well and it will work well partly because it is a good scheme and partly also because of the support it has received from the party opposite for which I express my appreciation.
Question put and agreed to.