Finance Bill, 1988: Committee Stage (Resumed).

As we are dealing this morning with sections 8 to 20 and as there are only two amendments tabled to those sections, it may be possible, with the agreement of the House, to get through them before 2.30 p.m. Perhaps we might then debate section 21 before Question Time but, of course, that will depend on the contributions made. I am sure the House will agree that we can, in general, discuss sections 8 to 20 together.

(Limerick East): The time motion will probably be too restrictive as there are eight hours allocated to the self-assessment chapter and only two amendments are involved. We may conclude the discussion earlier and I agree with the Minister's proposal that we should go on to discuss the next section when we finish.

That is clear. If we finish the sections concerned we will move on to the next section.


Question proposed: "That section 8 stand part of the Bill".

Sections 8 to 20 will probably be discussed in a global way and the contributions will probably cover all sections. I should like to give an introductory view of sections 8 to 20. Sections 8 to 20 give effect to the undertaking in the budget to phase in a system of self-assessment for those taxpayers who do not pay their taxes under the PAYE system. The provisions contained in the sections make extensive changes in the tax system which will apply to those taxpayers in the tax year 1988-89. They also lay the groundwork for further development of the system in future years.

Deputies do not need reminding that the existing tax system for the self-employed is unsatisfactory. It is in need of major overhaul. The Government are committed to carrying out that overhaul and have the full support of the Revenue Commissioners in that regard.

The existing tax system makes things too easy for the tax evader. The system, in effect, contains incentives which encourage taxpayers to delay the payment of tax or to fail to pay tax altogether. The tax evader could sit back and wait for the inspector of taxes to catch up with him in the knowledge that he did not have to make a tax return until requested by a formal notice and did not have to pay tax until he was directly assessed by the inspector. In general, penalties, interest and the surcharge only came into play from the time the evader was actually caught by the inspector. The tax evader who just sat tight in the hope that he might not be caught was taking no risk. The new procedures will radically alter this situation.

Standing obligations will be imposed on all tax liable persons who do not pay their taxes under the PAYE system to make returns and pay tax by set dates. Failure to do this will put the tax evader in an immediate interest and penalty position so that there will be no advantage in not coming forward and making a full disclosure. The longer he delays in putting his tax affairs in order, the greater will be the amount of the interest and penalty when he is eventually caught. The capacity which the new procedures will give the Revenue Commissioners to devote more resources to pursuing evaders should ensure that their chances of being caught are much greater.

The levels of estimated tax and nonexistent arrears generated by the present system are a justifiable cause for concern. While efforts were made to bring the problem under control, the complicated procedures which inspectors had to go through in order to make an estimate, made it difficult to solve the problem. A new initiative was required and self-assessment is seen as the appropriate initiative.

The new procedures contained in the Bill make major changes to the way in which tax assessments will be made in future. Initial estimates by inspectors will be directed at estimating tax only and in the legislation this tax is referred to as "preliminary tax". In practice these estimates will be made by reference to the latest available amount of agreed tax for a previous year. The ultimate objective will be to avoid, as far as possible, making these estimates and to require taxpayers to pay tax on the basis of their own estimates.

A formal tax assessment will usually be made only by reference to the taxpayer's own tax return. The basic tax charge will, therefore, be based initially on the taxpayer's own figures with no element of estimation by the inspector. A right to correct the assessment where the subsequent inquiries of the inspector indicate that it is incorrect is provided. Retrospective interest charges and penalties will be incurred if a taxpayer fraudulently or negligently gives an incorrect return on which to base his tax assessment.

It is anticipated that these procedures will greatly reduce the level of tax estimates. The tax appeal procedures have become notorious in recent years, both for the capacity which they provided to delay the payment of tax and the extent of the Revenue resources which had to be devoted to largely non-productive work, resources which would have been far better employed in pursuing tax defaulters. The taxpayer with a genuine requirement for an appeal hearing found it almost impossible to get a speedy hearing of his appeal.

The surcharge for late submission of returns introduced by the Finance Act, 1986, went a good part of the way to addressing the problem but the position is still far from satisfactory. New procedures are now being provided which it is expected will greatly reduce the number of appeals and will ensure that only genuine appeals on real matters of dispute will go before the Appeal Commissioners. All taxpayers should get an early hearing of their appeals.

Appeals will not be permitted against initial estimates of preliminary tax but taxpayers will be given the opportunity to displace the estimates by making and paying their own estimates. Appeals will not be permitted against assessments made on the basis of the taxpayer's own figures. The normal appeal provisions will apply to any changes or amendments made by the Inspector of Taxes. Before they can make an appeal taxpayers will be required to have made a return of income for tax purposes and to have paid at least the tax due on the basis of their own figures.

These new procedures in relation to returns, assessments and appeals, if approached in a constructive manner by all concerned, will greatly improve the efficiency of the tax system, will make life easier for the complying taxpayer and will free Revenue resources to devote more effort to pursuing the tax defaulter. Nevertheless, they are only the first step in a continuing process and further improvements must be made in the coming years, leading ultimately to full self-assessment. It cannot be claimed that the procedures are perfect at this stage. Experience will indicate the extent to which the provisions are effective and the extent to which they may need to be changed. However, they are a bold first step which deserve the support of all persons concerned to improve the tax system and to make it more effective.

I have given an overview of the provisions in sections 8 to 20, but I will be only too delighted to deal with any further questions that might be raised during the debate on those sections.

(Limerick East): I am glad of the procedure suggested by the Minister. It will be very helpful to take the entire chapter and get a general overview of it. There are only two amendments tabled, one in the name of the Minister and the other in my name. My amendment is not of major consequence or controversy but it will give us an opportunity to focus on one aspect. The Fine Gael Party agree with the move to self-assessment. When Deputy John Bruton was Minister for Finance he initiated the process. He invited in the IMF, in their capacity as international consultants, to advise on the matter. A report was prepared and circulated to all Deputies on the question of self-assessment and most of these sections were drafted on the advice of that report.

I am greatful to the Minister and his officials for circulating immediately after the budget the document entitled "New Arrangements on Tax Returns and Assessment, January 1988". That document will prove very helpful; it is very clear, well laid out and anybody who reads it will not have to come back to the House and raise a whole series of questions about how it will work. It removes an entire procedural area from the debate in an effective way. It also is quite comprehensible to any ordinary taxpayer. I must congratulate the officials involved for taking the jargon out of this and writing it in simple prose that anybody with a tax liability can understand. That is very helpful.

I agree with the Deputy, I should have said that earlier.

(Limerick East): Apart from welcoming this and agreeing with the general move, the first question we must ask is: will this work? It will work if it proves to be an effective method of tax collection. It will work if it relieves the bureaucratic burden which is on officers of the Revenue Commissioners and allows them more time for the process of collection rather than being involved in a multiplicity of form-filling exercises and lengthy correspondence with individuals.

The Minister has outlined in brief the way the system will work. The first step from the taxpayer's point of view is that he will receive a form some time in May which will oblige him to make a return. The Revenue Commissioners will still assess all self-employed people sometime in mid-summer, if I understand the procedure correctly, and those assessments will be based on the tax liability of the previous year. That is the first area of difficulty that arises. If the Revenue Commissioners must continue to issue assessments to all self-employed and farming taxpayers there does not appear to be any reduction in the burden of paper work imposed on the Revenue.

It seems to me that for some period two parallel systems will be running —

(1) the old system where the onus is on the Revenue to assess and collect and (2) a system where an individual taxpayer may opt out of the old process by self-assessment. When a taxpayer gets his assessment in August he has two choices. He can agree to the assessment and pay the amount involved under the old scheme on the dates required or, alternatively, by using the facility of this chapter he can be self-assessed by completing the appropriate form. In that event he has to pay 90 per cent of the amount that he considers he owes to the Revenue Commissioners during the month of October. As I understand it, the obligation arises from 1 October and the taxpayer has a month to settle. Unless it transpires that he has paid 90 per cent of his untimate liability, then penalties will arise on any residual amount which is greater than 10 per cent.

By running two parallel systems I wonder if the Minister's proposal will work or will we have assessments put on taxpayers by the Revenue Commissioners in mid-summer being more inaccurate than the assessments that were traditionally issued? The onus will be put on the taxpayer to opt out and the mechanism is there, without any appeal system, to opt out of the assessment the Revenue Commissioners put on him by assessing himself, and because of that I have a doubt about the accuracy of the assessments which will be issued.

The second difficulty which might arise is that there is an obligation on the taxpayer to make returns of income and, if somebody opts out of the Revenue assessment, assesses themselves and pays 90 per cent of what they think is due, there is still the obligation to make full returns of income. That will have to be done by December next. Obviously, the Revenue will have to examine those returns and there is a suggestion that a small sample will be subject to a detailed audit. What happens to the rest of the returns of income? Will the 95 per cent be accepted on face value and 5 per cent subject to a detailed audit or will the Revenue Commissioners have to look in detail at each return of income to see if it is in line with the trend of the previous year or if it is vastly out of line? Will they identify the returns that on face value look suspect and subject them to a detailed audit or will the detailed audit be at random?

If the procedure will be in line with my first suggestion there will be no saving on paperwork in the Office of the Revenue Commissioners. If it is in line with the second suggestion can the Minister assure the House that it is the intention of the Revenue Commissioners to select a sufficiently large sample for detail audit? I presume that there are ways of deciding what a sufficiently large sample is to ensure that those not in compliance are not freely evading for years.

Difficulties arise there. What is the percentage sample for the detailed audit? What are the obligations on the taxpayers? I presume everything the Revenue Commissioners request will have to be supplied. If there is no compliance on the part of the taxpayer and he proceeds to inhibit the audit by not co-operating with the legitimate requests of the Revenue Commissioners, what are the sanctions? In situations where the detailed audit takes place and people are found not to have fully assessed themselves and to have evaded their obligations, what are the penalties? Are they simply the penalties incorporated in law already or are some new penalties envisaged? It would be helpful if the Minister would enumerate the package of penalties envisaged? It would be helpful if the Minister would enumerate the package of penalties which would operate and comment on whether new penalties would be required to ensure compliance.

There is a serious risk of loss of revenue in any major movement in the manner in which tax is collected. The proposal seems to be that the sample, subject to a detailed audit, will be the check to ensure that everybody complies. If this is not done with efficiency, thoroughness and rigour and is not followed by the most draconian of penalties, I do not think it will work. There must not be any perception among taxpayers that this is some kind of soft option where anything written down on the self-assessment form will be accepted, that the chances of ever coming up in the sample will be fairly small and that even if this should happen it will be possible to gum up the works by having an accountant delay the process for years. If the Revenue Commissioners put a person in a position where he has to comply and the only penalty is the interest on the amount of tax unpaid, this will have little effect. Fines would be of no great consequence when balanced against years of successful evasion. If this is the way the self-assessment system operates it will not work. While I welcome the principle and I have no objection to the way the Chapter is drafted, I see a danger that a bad situation could be made worse if the new scheme is not implemented with absolute rigour.

The Minister might comment on some of the points I have made to ease fears that despite the best efforts of his officials and those in the Revenue Commission the system will not be taken seriously and will not work. It also seems to be envisaged that parallel systems will run, with no diminution in paper work. When does the Minister envisage that one system will be dropped in favour of the new system? What is the time-scale for the parallel systems?

I have been talking about the self-assessment of individual taxpayers. The procedures for corporate taxation seem to be similar. Anything I have said in the first instance applies also in the area of company taxation.

In my amendment I am suggesting that the obligation on returning the self-assessment 90 per cent of the amount to the Revenue Commissioners should be reduced to 85 per cent. I am putting this forward as a basis for discussion because this is the kind of Chapter which could in certain circumstances go through without adequate debate.

I presume the Deputy is referring to amendment No. 32 to section 17.

(Limerick East): Yes. Perhaps the Minister would comment on the figure of 90 per cent. I will be pressing the amendment but for the purposes of discussion I should like to focus on the 90 per cent figure.

It might be helpful if the Minister would reply to some of the points raised by Deputy Noonan because I should like to ask some of the same questions.

It is essential to have this information on the record not just for our own benefit but for the benefit of taxpayers generally and those such as accountants who will be operating the system.

The intention for the future is that as far as possible inspectors will not give estimated notices of preliminary tax. Instead taxpayers will be required to make and pay their own estimates. However, it will be appreciated that if a taxpayer failed to make and pay his own estimate the Collector General would have no tax to demand until the inspector became aware of the failure and made an estimate. If either wilfully or through ignorance of the new procedures any appreciable number of taxpayers were to fail to estimate and pay their own tax there would be a considerable cash flow loss to the Exchequer. To prevent this happening and to encourage taxpayers to make their own estimates, inspectors of taxes will make estimates of preliminary tax due for this year in all cases. These estimates will be related to tax only and will be considerably lower than previous estimates. A computer programme will search through each case for the best available agreed tax figure or range of agreed tax figures and will make a tax estimate by reference to those figures. The estimate will issue in September. A special facility will be provided to enable taxpayers to make and pay their own estimates or to indicate that they consider they will have no tax liability. If they do not avail of this facility the estimate made by the programme will go for collection. This will safeguard the flow of tax to the Exchequer.

Taxpayers who demonstrate an understanding of the new procedures and their willingness to comply with them may not receive inspectors estimates in future years.

For the year 1988-89 the intention is to base estimates on agreed tax liability. The estimate will usually be the amount of the agreed tax for 1987-88. If this was an unusually low amount of tax amounting to less than the average tax for the three years 1985-86, 1986-87 and 1987-88, the estimate would be the average tax for those three years. Exceptionally, if there is no agreed tax liability the tax actually assessed for 1987-88 will be used. If it is a case with no previous tax on record a specific estimate will be made by the inspector.

The question of cases for detailed examination was raised. At this stage it would be neither possible nor advisable to say how many cases will be selected for examination and the basis for that selection. The number of cases to be examined is a function of the Revenue resources to be applied to examining cases and the intensity of the examination. It will take some time for the Revenue Commissioners to free their resources from the present system and apply them to the new system. Only experience can indicate how detailed and thorough examinations must be in order to flush out tax evasion and fraud. Of necessity, a certain amount of secrecy must surround the factors which determine how a case is selected for examination and those factors must be subject to constant review and change. It is necessary to keep one step ahead of the tax evader. If the tax evader knows what the inspector is looking for, it makes it that much easier for him to mask his activities. The odds must be kept at a level where for all taxpayers there is a risk in trying to cheat the system.

Broadly, cases may be selected on the basis of a mixture of the following methods: (a) on a sample random basis so that all taxpayers face the possibility of their return being examined; (b) on a statistical basis by reference to certain telltale features in the return; or, (c) perhaps in the majority of cases because there is evidence that the taxpayer has defaulted in meeting other tax requirements. In general, it may be accepted that default in any area of the Revenue code is likely to draw the inspector's attention to the return of the defaulter.

The question of penalties was also raised. It may be contended that a movement towards the self-assessment system will have to be underpinned by an effective range of penalties to deter abuses of the new arrangements. The array of existing penalties which will be brought to bear on earned taxpayers is, in fact, very extensive. For example, failure to submit a return, or the submission of an incorrect return will render the taxpayer liable to the penalties provided for in sections 500, 501 and 503 of the Income Tax Act of 1967. In section 500 we provide for a penalty of £500 for failure to deliver a return. The penalty rises to £800 where the failure continues after the end of the following year of assessment. Section 501 provides penalties where a person fraudulently or negligently makes an incorrect return etc. The penalty is £100 plus the amount of the unpaid tax. In the case of fraud, the penalty is twice the amount of the unpaid tax. In section 503 we provide for higher penalties in the case of companies for the same offences.

Failure to deliver returns in time will render the taxpayer liable to the surcharge provided for in section 48 of the Finance Act of 1986 so that preliminary tax as well as tax charged in an assessment will be increased by 10 per cent. In addition to the foregoing, section 94 of the Finance Act of 1983 provides that on summary conviction for a revenue offence a defaulter may be liable to a fine not exceeding £1,000 and/or 12 months' imprisonment. On conviction on indictment, a fine of up to £10,000 and/or up to five years' imprisonment can be imposed. Delays in payment of tax under the new arrangement will result in interest being charged at the rate of 1¼ per cent per month for each month or part of a month for which the tax is outstanding. The period of grace within which tax must be paid if an interest charge is to be avoided is being cut from the existing two months to one month of the due date. New methods of collection are being introduced and existing methods will become more efficient.

Overall, therefore, I am satisfied that there are sufficient safeguards to meet and overcome any attempts by non-compliant taxpayers to frustrate the new arrangements now being set in place, to ensure that the matter is kept under review and that, if it proves necessary, further measures will be introduced to ensure that the Government's intention to tackle once and for all the question of tax arrears is not frustrated. That covers in general the points that were raised by Deputy Noonan and I am glad of the opportunity of putting all that on the record because it is important, bearing in mind the lack of information that flows out from the House in the normal media way, that we do have it on the record of the House for the information of the taxpayers, the accountants, etc.

I welcome the Minister's approach in trying to clarify the matter. I fully agree in principle with what is in Chapter II. I have long advocated that we move towards a system such as this. My only regret or reservation is that it is extraordinarily complicated, unfortunately. I wish that it were not. If there was any particular branch of revenue law or income tax law that should not try to be more complicated than normal, it should be this one. This is the one under which individuals will have to try to deal with their taxation affairs on their own initiative, rather than what has been the tradition here for as long as income tax has existed when the onus was, as it were, on the inspector. People felt that because that was so there was not a great need for them to become acquainted with the intricacies of income tax law. This chapter puts the onus on them. I have no brief for those who deliberately try to evade, but there inevitably will be a great many people, particularly in the first couple of years, who through no fault of their own will make errors in their self-assessment returns and I am afraid, will not be able to follow the procedures that are set out in this chapter.

It is interesting that while this chapter only occupies a relatively small part of the entire Finance Bill, it occupies a huge part of the explanatory memorandum, no less than eleven and a half pages of which relate to it. It is not easy to follow. I was interested in what the Minister had to day in regard to penalties. I cannot see in the chapter any specific penalties relating to this new system of self-assessment. It appears that the existing penalties, in general, apply under sections 500 to 503, inclusive, of the Income Tax Act of 1967. Those penalties are adequate. It is rare that there are criminal convictions as opposed to monetary penalties being imposed by way of surcharges, interest and so on. Presumably they are likely to become more common.

It is worth looking at other countries where the self-assessment system has been in operation for a very long time. In particular, the one that we would most readily look at is the United States. The penalties there, as the Minister knows, are very severe indeed. They have succeeded, certainly at federal level, in introducing a tax system based on self-assessment which is very efficient and is generally regarded as fair, except that the penalties are very onerous. Apparently, they feel that they cannot operate the system without onerous penalties. Attempts to impose such penalties here should be withheld until the system is better understood and is streamlined. While I would have no objection, in cases of deliberate fraud, to seeing people going to jail, to seek to impose prison sentences on people who are just unable to cope with the very new system would perhaps be unfair in the early years.

I hope that the Department of Finance and the Revenue Commissioners will be able to circulate as widely as possible relatively simple explanations of this system. Of its nature, it is not simple and it is not that easy satisfactorily to explain it in simple terms, but the underlying principles should be expressed in simple terms, and in particular, the sort of pitfalls that the compliant taxpayer should look out for and should be warned about should be brought to his attention.

We have waited a number of years for this system, and it is welcome that it has started. However, laudable and all as it is, it will suffer from a difficulty which our general tax assessment system in its different forms has up to now suffered from: that it seems to harass unduly many taxpayers who are within the net who have problems but completely ignores a large number of people who have not been got within the net at all. This chapter should try to bring into the net people who have not been in it all along. The feeling is abroad here that if one gets caught in at all one gets oneself into tremendous difficulties and can be accused of all sorts of improper practices, even though one is trying to comply; but if one stays away from the thing altogether one can get away with total non-compliance, although one cannot get away with partial non-compliance.

The country is so small that it should be possible to identify every liable taxpayer and to do it reasonably quickly. The resources of the Revenue have been entirely weighted towards dealing with those who are in the system. Perhaps this is due to the complexity of the system, which is not straightforward like the American system and which necessitates an enormous amount of manpower and work just to deal with the difficulties that arise in relation to the affairs of those who are within the system and who are seeking to comply but who frequently have perfectly legitimate and often complicated disputes about the amount of their liability. It is no wonder that disputes are complicated when we think of all the Finance Acts every year for the last 20 or 30 years. They are tremendously complicated; they are not separate from one another but are all cross-amending one another.

It is a major job for anybody, even with the best of professional advice, to ascertain exactly his liability or legal position in a whole variety of situations in which he may find himself. If we had a simpler system the people in the Revenue would be freer to devote themselves to a greater extent to something which in equity is now called for from them: dealing with people who have never been part of the taxation system here. The number of people in that position is extraordinary. Dealing with that situation would give a feeling of at least lessened injustice to those who feel persecuted within the system.

I was glad to hear what the Minister had to say in that he made no claim that what is set out here in Chapter 2 is perfect or anything like it. The Minister realistically accepts that this is a first time effort, that experience will highlight difficulties and that amendments will have to be made to this from time to time. That is the right approach, but I hope the amendments will not just be made in terms of trying to tighten loopholes. It is particularly important that the Revenue Commissioners, the Department of Finance and successive Minister for Finance would look at this in terms of amending it with a view to simplifying it. That is every bit as important as amending it with a view to trying to close the loopholes. When people get used to this and when the anomalies that inevitably must be in it are smoothed out, I am confident that within one to three years it will work smoothly for a very high proportion of people who either comply or who wish to comply. Their rights and problems have every bit as much right to be taken into account as the problems created by those who do not comply. The law in these matters should not all the time be approached from the point of view of making it more complicated in order to close loopholes and to get those who deliberately do not comply if it creates huge problems for those who do not wish to evade anything but who wish to have their affairs in order as rapidly as possible in the tax year.

Unfortunately, it has not been the tradition in tax legislation here to look at problems from the point of view of assisting those who want to comply. This has caused many genuine people to get into great difficulties because they simply cannot cope with the complexity of the law as it is. If that aspect could be dealt with — and I accept that it is very hard to do it in the first year — we could have a satisfactory and smooth running system. The Revenue Commissioners and the Department of Finance should bear in mind that it is in their interests and in the national interest to ensure that as high a cash flow as possible in terms of tax is generated voluntarily. If that can be achieved the national interest will be served, and it will be achieved better by a simpler and more understandable system than by an enormously complicated system that from day one sets out assuming that every taxpayer or potential taxpayer wants to evade his liabilities.

While this chapter is unfortunately rather longer and more complicated than one would wish, it is an important piece of legislation inasmuch as it is the first time that there is the beginnings of a system of self-assessment. It is one that will greatly benefit everybody in the long term, both the Exchequer and the taxpayers, although there will be problems in the first year or two. The difficulties of taxpayers should be borne in mind. After a number of years the system should, provided the Revenue Commissioners are sensible in their method of application, be worthwhile and begin a much-needed and long-waited new chapter in the vexed story of tax assessment and tax collection here. If we had a simpler and obviously fairer way of doing things than at present, if we did away with the underlying mentality that people do not pay tax unless it is squeezed out of them, the picture would be changed. It is different in other countries. There are all sorts of historical and sociological reasons why it is the way it is here; but would be in everyone's interest if it could be changed and I hope that this chapter will be a preliminary to a change of attitude in this respect.

Does the House now feel that we can dispose of this chapter?

I would like to make a few brief points. First of all, the introduction of a system of self-assessment was advocted by the unions and my party for several years and is now being introduced. We welcome this measure. It is however useless to adopt this measure and leave it at that. Special safeguards need to be introduced to ensure that the money is collected and in this respect The Workers' Party advocate that the Revenue Commissioners should have the power to examine bank accounts and that the assets of defaulters must be given to collectors.

It is an established practice in countries which already use self-assessment including the United States, that all taxpayers must supply their tax numbers to banks, building societies and so on and that the Revenue can request details of the relevant accounts when auditing the taxpayer. Automatic penalties must be applied where tax returns, especially PAYE, PRSI and VAT, are not made and the Revenue Commissioners' powers to waive interest must be examined. A separate division in the courts should be established to deal with Revenue cases so as to reduce delays through abuse of the appeals procedure. Personal guarantees and/or security must be required of directors who have gone into liquidation previously leaving tax debts unpaid and who wish to establish new business. An official receiver should be appointed to deal with liquidations which at present are not pursued due to the absence of funds in the company concerned and there must be public access to information regarding tax debts, particularly VAT, PAYE, and PRSI, of traders and so forth.

We are well aware that when some companies went into liquidation in the past they left their employees without any benefits as a result of not having paid PAYE and PRSI. Therefore, we welcome this measure. It was also recommended by the Commission on Taxation, who said that showing taxpayers the automatic penalties they would face for failure to submit a return and for understatement of income in returns would maintain a high level of compliance.

I would like to respond to some of the points which have been made. In respect of Deputy Noonan's amendment to section 17, I would like to say that what we are talking about here is reducing the percentage from 90 per cent to 85 per cent, which would involve a cash flow loss in 1988 of £6 million. This cannot be contemplated. In the first instance it was introduced in the 1976 Act at 80 per cent. It was increased to 85 per cent and in the 1986 Act it had been increased to 90 per cent. We are maintaining that percentage. We cannot contemplate a reduction as it would bring about a cash flow loss of £6 million.

I do not know how you are going to proceed, a Leas-Cheann Comhairle, but in case I forget to move amendment No. 31 to section 15, which is a technical amendment, I would like to say that it arises from a minor change in the wording of section 15 and is being made in order to put beyond doubt the date by which returns of income must be delivered if a surcharge under section 48 of the Finance Act, 1986, is to be avoided. The date in question is 31 December in the year of assessment. It had been suggested that the existing wording might result in the return date being put back to 30 June following the end of the year of assessment, which would be inappopriate in the context of the arrangements now being set in place.

Let me deal with a number of other points which have been raised by Deputy O'Malley and thank all those who have made contributions. I suppose we can say everything is simple to the person who understands it, but self-assessment works in jurisdictions with far more complicated tax systems than ours. In general the taxpayer whose income is large and complicated will have an accountant or some other professional tax consultant to advise him, and self-assessment will be no problem to that taxpayer. If anything, he is too well advised, as the growth in tax planning and tax avoidance shows. The area of difficulty which has been mentioned lies with the taxpayer who does not have and cannot afford a tax adviser. His affairs are usually simple and the vast bulk of the tax code has little relevance for him. What he needs perhaps is not a simpler tax code but assistance in understanding the limited part of the existing code which applies to him. Providing that assistance in the form of advice and simpler tax forms is one of the challenges in moving to self-assessment and it is one which I and the Revenue Commissioners recognise.

Over the coming years a programme of redesigning tax forms must be carried out. This process has already been started with the redesigning of this year's self-employed tax return. The farm profile form and a special simple farm account form have given a lead in simpler accounts for small traders which must be developed into other areas. Advice, assistance and publicity must be given to taxpayers in relation to the new procedures. This is not a process which can be carried out overnight, but I want to assure the House that I am aware of the problems involved and steps will be taken to overcome them.

Some of the steps we are taking are the following. Firstly, the returns of income for 1988-89 will be issued shortly. The returns have been extensively redesigned to make them easier to complete and they will be accompanied by explanatory notes giving guidance on the completion of the returns. Details of the tax allowances and rate bands will be given in the returns or in the explanatory notes. Following the passing of the Act advertisements will be placed in the media outlining the new returns filing requirements and giving details on where to get the returns.

In July every taxpayer affected by the new provisions will receive an explanatory booklet outlining the new system and advising him of what to do. In September notices of preliminary tax will be issued and every notice will be accompanied by an explanatory leaflet giving instructions on the new preliminary tax procedures. In addition, advertisements will be placed in the media outlining the new tax payment requirements. From September to December a continuous advertisement campaign will be conducted regarding the need to lodge returns to avoid the surcharge. In addition, very close liaison will be maintained with professional organisations so as to ensure that their members are familiar with the new requirements.

In fairness to the Revenue Commissioners, it has to be said that every conceivable thing that they can think of has been done or is in the process of being done and we all want to see it work. In the event of any problems arising as the procedures come into operation, as I have already said and as the House has asked, this House, with the Revenue Commissioners and the Department of Finance, will set about correcting them.

(Limerick East): The Minister in his reply gave us very full information and referred to the estimates which will be issued. As I understand it, estimates will be sent out to the self-employed in the summer of this year and these estimates will not be exaggerated but based on the best possible information available to the Revenue Commissioners. The Minister said that that applies to this year only. What happens subsequently?

They make the returns themselves from then on.

(Limerick East): So it is a one year measure.

Yes. That is to ensure that everybody gets his assessment.

(Limerick East): Is it possible to be in and out of this system? If one complies this year, self-assesses himself and makes the return, sends on the cheque and subsequently forwards the return of income, does that tie him into self-assessment indefinitely or can he revert to the original system where the obligation is put on the Revenue Commissioners to send out an estimate?

No, it is the intention that one goes on to full self-assessment and stays on it.

(Limerick East): Therefore the issuing of assessments in mid-summer of this year is an ease on the taxpayer and will stop after this year.

Yes. He is on his own from then on, with the help of all this back-up information that I have just outlined.

(Limerick East): The sample audit is the concept on which this new system will either succeed or fail. The efficacy of the sample audit is crucial to this system. I appreciate the Minister's reasons for not giving in detail the grounds on which the Revenue Commissioners will select those taxpayers whose accounts they will fully audit. May I have an indication from the Minister that all returns of income will be given some form of preliminary examination, whether electronically or by the office of the Revenue Commissioners?

(Limerick East): My third point relates to penalties. The Minister, in his commitment to publicise this measure fully, to place advertisements, provide brochures and so on, should spell out the penalties very clearly and should not just refer to sections of Acts because that means nothing to the ordinary person. The actual penalties should be spelled out very clearly.

(Limerick East): The Minister might also consider, for self-assessment purposes, the imposition of interest. He said that tax unpaid by certain dates would be subject to the present penalty of paying 1¼ per cent interest per month. That is a low enough interest rate — I presume it is compounded — when you consider that you pay over 2 per cent a month on your credit card, amounting to 26.4 per cent per annum.

It was near being more.

(Limerick East): There are certain advantages in sending to your credit company the money that you owe to the Revenue Commissioners if there is going to be a difference of 11 per cent or 12 per cent annually. It is worth looking at this matter. As people look at the portfolio of their expenses within a domestic or a business situation, if on your Access, Visa or American Express cards credit costs you 26 per cent and the same type of credit from the Revenue costs 16 per cent, there is a gain there and therefore it is worth looking at again.

I appreciate the Minister's point about the requirement to return 90 per cent of the amount owed. I would have thought that in introducing the scheme it would be worth considering 80 per cent or 85 per cent which pertained some years ago. It might encourage people to come into the self-assessment regime if a higher tolerance were provided in the initial years. I can appreciate the Minister's point about a cash flow loss of £6 million but the cash flow loss would of course be made up subsequently. It would not be a Revenue loss; it would be a cash flow loss because the obligation to pay the 15 per cent when final returns had been agreed would be as obligatory as the obligation to pay the 10 per cent residual now. It is worth looking at this matter between now and Report Stage. Perhaps the Minister would consider an amendment for, say, the 1988-89 tax year while the measure is being phased in and give a figure of 80 per cent or 85 per cent as the compliance level. He could also write into the section that in subsequent tax years the figure would be 90 per cent. That suggestion is worth examining. It is in everybody's interest that the transition is made smoothly. We should make it relatively easy for people to move into self-assessment and, of course, once in that system they stay in it, as the Minister has said.

The final point I would like to raise concerns the wider area of the powers of Revenue and is related to the powers and the penalties which they might have in certain circumstances. There are many wealthy people around the world. I think the rule about getting wealthy is to be able to transfer income into assets. If people pay very high marginal rates of tax they will have very little residual income to transfer into assets. The flowing lawns, the long avenues, the large houses, the horses in the paddock and the yacht on the sea all come about as a result of people succeeding in transferring income into assets. If somebody succeeds in evading taxation under self-assessment, will the Revenue have power, for example, to examine their assets? Will they have power, as a result of the sample audit or in pursuance of the sample audit, to enter a house and see the antiques and the pictures on the walls or will, as is the case in America, the sample audit be so rigorous that not only will all returns of income have to be examined and vouched for but an explanation must be given for income which has been transferred to assets and there will be an audit of the assets as well as of the income of the individual. A sample audit of income will not reveal very much if the tax evaded has been transferred from income to assets. That is the way wealth is created and that is how the wealthy become wealthier.

Section 18 of the Finance Act, 1983, deals with information furnished by financial institutions and section 20 of the same Act deals with return of properties. Therefore that power already exists and we are just carrying it forward to self-assessment procedures.

(Limerick East): Have the Revenue the power to enter premises?

Yes, they have power to gain full access to the property, find out who owns it and so on.

(Limerick East): Have they the power to examine the assets in the property?

Yes, under section 34 of the Finance Act, 1976.

(Limerick East): I regret interrupting but we are very informal about this matter anyway. I presume that the Revenue are drawing up procedures which would apply to sample audit. Do the regulations and the modus operandi contain instructions about what I am talking about? In other words, will the powers be used?

If necessary I am sure all these powers that I have referred to will be used, whether with regard to financial institutions, audit or property or power to enter business premises and to examine or seize records etc.

(Limerick East): The sample audit would not be confined to income. It would be extended to the total assets, whether liquid or otherwise, of a taxpayer.

In suitable cases I am sure that would be the position.

(Limerick East): As the Revenue saw fit.

Yes, in normal circumstances. I have said yes or no to most of the questions as the Deputy was raising them. In concluding this section of the Bill, I can say that the compliant taxpayers have nothing to fear. They will get all the help they need, as we have outlined during the course of the debate. The evader will come more and more under the microscope as we free the resources in Revenue from assessment and so on. That is what everybody in this House wants to see.

The Deputy also mentioned the 1¼ per cent interest rate not being severe enough. I think it is rather severe because it is not tax deductible and, at the end of the year, it works out at a much higher rate. I know from the other provision announced in the budget and the incentive in this Bill, which we will come to later, many people found that because they had defaulted in paying their taxes, the interest had piled up. As they could not see the possibility of ever settling their account, they had made up their minds that they would continue to evade paying taxes. From some of the cases I have seen, I notice that half the amount owing was made up of interest. The amount owing very quickly doubles when the interest is taken into account.

(Limerick East): It is compounded?

Yes, it is severe enough. When discussing his amendment the Deputy asked if I would consider the possibility of substituting a rate of 80 per cent or 85 per cent for 90 per cent between now and Report Stage. I have to say at this stage that I honestly cannot, because it means dropping £6 million in revenue this year, and everybody in the House knows we cannot do that. In fact, on the Order of Business this morning, the Deputy asked about possible slippages.

Would the Minister explain the position of a person who is on PAYE and who is also a Schedule D taxpayer in relation to self-assessment? The new régime proposed will bring a strict level of accountability on taxpayers, particularly as it will be the subject of a random audit. If the audit is of the dimensions Deputy Noonan indicated, and which was confirmed by the Minister, quite clearly the accountability will be very strict indeed.

The penalties available to the Minister under the income tax code are extremely heavy. The Minister is taking a power of enforcement which is novel and draconian, that is, the power of attachment. What we are providing in this new assessment regime is the liability to pay taxes on it, subject to penalties for nonpayment. I presume it will also attract the power of attachment which is provided for later in the Bill. I urge the Minister to, in turn, urge the Revenue Commissioners when applying this novel regime to apply it with the utmost discretion.

I am sure the Minister representing the same sort of constitutency I represent will be well aware of the serious cash flow problems being encountered by the vast majority of businesses. Should there be any interference with the cash coming into those businesses by the application of a notice of attachment, and taking the cash which those businesses need for their very survival, an unreasonable or harsh use of the power of attachment would, in my opinion, have extremely serious commercial consequences for the businesses concerned. I am sure the Minister will agree that many Irish businesses are walking a very narrow gap between solvency and insolvency mainly due to poor cash flow. We should not be distracted by the good national statistics because they are misleading and do not represent the true nature of commercial life. Again, I ask the Minister to urge the Revenue Commissioners to apply this attachment with the utmost discretion.

There is a technical point on the power of attachment I would like to raise at this stage. There is an indemnity given in the power of attachment in that the relevant person cannot be sued in court by reason of his failure to make a disbursement on the basis that the money has been attached. I would like to consider the position of a person in my profession who has given an undertaking to a bank or other financial institution. Breaching that undertaking will not render him liable to be sued in court but, even worse, could render him liable to be struck off the roll for professional misconduct. There is no indemnity given to a person in that position in the attachment section.

I want to ask about access to bank accounts. When the debate on self-assessment started some years ago, one of the points made was that if we wanted this system to be applied here it would be difficult to avoid bringing in powers for Revenue to have access without any court order to bank, building society and other accounts of individuals. I do not see any reference to that in this chapter and I assume that power is not being taken. If the system can work without it, it is obviously to the overall benefit, but I would like the Minister to confirm that fact because there are misapprehensions about it arising from various references made not in this House but outside when the question of self-assessment first arose.

Lest my silence be taken as compliance, I utterly disagree with what Deputy Noonan said about the interest rates. They are absolutely penal. In view of the huge drop in interest rates generally in the last year or so, the opportunity should be taken in this Bill to reduce the extraordinarily penal level which the Revenue have the right to look for now. This rate was introduced at a time when interest rates generally were as much as double what they are today. It seems quite incongruous that the Government are able to borrow at 8 per cent and 8½ per cent but they are charging an effective annual rate of about 18 per cent to people who are in default.

The rate of interest is so excessively penal, and is seen by everybody to be so, that it is probably counterproductive from Revenue's point of view, because if somebody is in difficulties with arrears of tax, as the Minister says, frequently 50 per cent of that sum is made up of interest. I think there is some restriction which prevents the interest charge exceeding 100 per cent of the debt. Certainly that used to be the case in relation to the old death duties. I am not sure whether that still applies. If that restriction is not applicable, very rapidly there will be cases in which the element of interest will be three or four times greater than the original tax due. The result will be that the tax will never be paid because the people concerned will despair. If they own a company they will go into liquidation, go to England or do one of the various things people do when they simply cannot cope at all, and close down their business. A huge number of businesses are closing down in those circumstances.

Therefore it seems to me to be disappointing that, in conjunction with the introduction of self-assessment and contemporaneous with a very substantial drop in interest rates, there is not a corresponding drop in the interest rate on the arrears of tax due. If it were justified — and I place much emphasis on the word "if"— when interest rates generally were twice as high as they are today, then half of that rate only is justified today, which would mean it should be down from 1.5 per cent to 0.75 per cent, or less, per month, compound. I should like the Minister to examine that aspect also.

I should like to make one broad point in relation to the chapters here, particularly that relating to self-assessment. I am not as sanguine about the prospects of success as are the Minister for Finance and other spokespersons. There is a long established, ingrained, endemic tradition here that you pay nothing until you have to, you wait and keep waiting, until the taxman arrives. When he comes you give him something to keep him off your back. Then you pay the balance when you begin to be faced by penal interest.

I do not believe there will be any immediate transformation of that tradition. It is so ingrained, my belief is that people will not come forward that easily, filling in self-assessment forms on an advance basis. There is the requirement that taxpayers must furnish returns even if they do not receive demands to do so. Anybody who is familiar with the attitude of taxpayers on the self-employed side — and I have known them since 1957, right through the transitional arrangements leading to the introduction of PAYE — must know that, unless you receive some indication of a demand from the Revenue Commissioners, you will not furnish a return.

That takes me to what I perceive as the fundamental flaw in the totality of that tax arrangement, that is the absence of full disclosure mechanisms. I foresee great public controversy and opprobrium applying to any Minister for Finance who would dare bring in full disclosure. But, without full disclosure, self-assessment is like a very expensive £60,000 car with one component missing, the battery. Its value remains at that level until somebody buys the battery. The real battery of the taxation system is full disclosure. Anybody, knowing that they are faced with full disclosure, that there is no escape, no matter where they may be, unless they keep the money as was the custom in the past, under the bed or in their part of the room——

Their bed.

The box I knew as a child containing the sovereigns from America was carefully placed on their side of the bed. I contend that, unless there is the prospect of full disclosure, the concept of self-assessment will have grave difficulty in succeeding.

We know only too well from our experiences that, without total access by the Revenue Commissioners, I would even venture to say on a print-out basis, by an officer lifting the telephone and saying: "I want A to B on my desk, tomorrow morning from this or that bank manager, I want a print-out of the accounts it will not work or succeed; just as when any of us try to negotiate yet more money to remain in political life, our bank manager enters our account number, up it comes, term loan, overdraft and everything else, on to the screen. On the basis of automatic transfer of banking data, building society data, there is no reason in the wide world that data should not come up straight on to the screen of the tax inspector. I know there will be allegations thrown at me of advocating big brother and the State interfering in people's lives. But I contend that people will not pay full taxation on any kind of a general altruistic basis particularly with society becoming so selfish, so individualistic, with a whole profession now geared to tax avoidance, with all sorts of tax havens being screwed out of the politicians, be they the Custom House, business enterprise for marinas, that kind of practice, in which there is the Minister, on the one side, trying self-assessment and, on the other, a whole profession deciding to emasculate it, ensuring that very little is paid. Until there is full disclosure, I do not see any real prospect of success with regard to self-assessment.

There are fundamental reforms which can be effected. I recall the execration when we introduced the DIRT tax, now yielding £300 million, a solid lump of revenue. I remember, on the Fianna Fáil side, they spoke of the children's confirmation money, the few shillings they received from uncles and aunts which had been deposited in the Post Office Savings Bank, that this awful Coalition, this awful Minister for Finance had caused the little child of 12 and 13 years of age great trauma. But we fought it through and we introduced the DIRT tax, worth £300 million. The Minister for Finance today would be on his political uppers if he did not have that revenue yield, and he will receive more next year. There were huge arguments advanced then about it constituting yet another step toward total disclosure, total return. We fought that off. We reformed the tax system — because that constituted a fundamental reform.

I commend the Minister on the decisions taken relating to power of attachment. This is a very necessary, valuable power. It is not being done with any degree of collectivisation phobia or pre-occupation. It is simply that to have a decent taxation system there must be full disclosure. There can be no messing about with it. Whether it is the accounts of a small farmer, a large farmer, a small publican, a big publican, a small solicitor, a big solicitor or anybody else, total disclosure of what goes on should be available on a one to one basis to the inspector of taxes. That is a harsh measure and it may be very difficult to implement, but it is the only way. Until such time as we get that I would be very dubious about the prospect of self-assessment.

What about a Gulag to back it up?

There is quite a Gulag down in the Custom House Docks site and it is getting more Gulagish every day.

(Limerick East): An archipelago.

That is not provided for by this section, Deputy.

I pay the top rate of income tax at 58 per cent and if a business enterprise invest £1,000 they will get back £500 in tax relief.

The only bad thing about it is that the Deputy is getting publicity out of it.

There is one law for those who have the loot and another for those who have not got it. That is the reality. The only way the Revenue Commissioners can really run the show in a democratic way is if they have the power of total disclosure. I would say in response to my esteemed colleague, Deputy Cooney, that if he was a powerful wealthy attorney living in America the Revenue Commissioners there could at the flick of a switch of a computer in the local tax office — and I have seen this in operation — get all the tax data out of the local bank because they have total power of assessment and total power of immediate disclosure. America under the leadership of Ronald Reagan is not exactly known for Gulag obsession; the reverse is the case. We have to bring in total disclosure on that basis and I would hope to see it introduced during our life time on an all-party basis. It might even gestate out of an all-party committee because the party who bring in full disclosure will probably lose ten seats in the next election.

(Limerick East): Now you are talking.

My party do not have that much to lose in advocating this proposition so I cheerfully advocate it to the House.

I thought the Deputy was pure.

Is the Deputy advocating the virtue of being prepared to lose what he has not got?

I am on a term loan and have a large overdraft so I have very little to lose. Therefore, I can cheerfully advocate it and so can all Members who are covered by the top level review group, if I may make an oblique comment to the Minister and his underpaid colleagues in the bull pen. I ask that there be total disclosure so that there can be real self-assessment. I do not mind disclosing what I have not got.

I want to ask the Minister for some clarification on section 8. During the past 12 months I have met many small business people and small farmers who have the notion that they can only have their tax assessment done by an accountant. I know people who could not afford to pay accountants and consequently their assessments were not made and returned to the Revenue Commissioners. Problems built up between these people who want to keep their affairs in order. I have to say that then I approached the Revenue Commissioners and inspectors in respect of this matter they were very helpful. May I ask the Minister to clarify whether people have the right to make an appointment with their tax inspector and that he will accept from them the accounts which they have properly kept over a period of time so that the process whereby they have to deal with accountants whom they cannot afford to pay will be eliminated? In some instances people have paid accountants as much as £500 to prove that they have no liability for tax. That is a disgrace and I believe a system should be introduced whereby it would be easier for such people to put their tax affairs in order.

May I ask the Minister if it is his intention to have mobile units occasionally visit large towns to enable people to have easy access to the Revenue Commissioners? That would be a very worthwhile exercise.

(Limerick East): Because of the way our time is organised we may never have a full discussion on section 69. Deputy Cooney raised a number of points about the power of attachment and I would have no objection to the Minister taking the liberty of putting some of his views on the power of attachment on the record of the House for the benefit of the House and the people outside who will read the record, because I doubt if we will get the opportunity subsequently.

In relation to the point made by Deputy Cooney, the power of attachment does not arise under this section. We have made progress today but many people have joined us and some points are being raised which were already dealt with earlier this morning. The very efficient Revenue Commissioners who are here with me have given me an immediate answer to Deputy Sherlock's question. I could read it out to the Deputy but it consists of a page of instructions to all people who are working in tax offices and it is headed "Assistance to Taxpayers".

Taxpayers are entitled to receive from officers of the Department reasonable assistance and any information which can be given to them in regard to their rights as well as their obligations under the Tax Acts. There is no question about that. People are not under any obligation from the Revenue Commissioners or under any law enacted by this House to have an accountant or a tax consultant look after their affairs. They can look after their own affairs and there is nothing to stop them doing that. All callers should receive prompt attention. Interviews should be held with due regard to privacy and confidentiality. Discussions conducted at a counter are normally to be restricted to ascertaining the nature of a caller's inquiry. Deputy Sherlock can advise the people who have raised this query with him that they are entitled to have access to officials who will be able to deal with their problems in a confidential way.

Other points have been made in relation to full disclosure. This was referred to in one sense by Deputy O'Malley and the opposite argument was put by Deputy Desmond. The point raised by Deputy O'Malley is quite clear. I said that under section 18 of the Finance Act, 1983, they have access to financial institutions and, under section 20 of the same Act, to details or assets. These are operated only in very specific cases of default. The position remains the same. I do not accept what Deputy Desmond said about one needing full disclosure for the self-assessment system to work. If he was here during the course of the debate he would have heard that we are providing all the information that is necessary to make it work as effectively and efficiently as possible.

With regard to the question of interest rates, again two sides of the argument were put. As I said earlier interest rates are high enough; I do not think they should be any higher and I definitely do not think they should be reduced. What we are dealing with is default and evasion. Consistently, in every political party in this House and outside the House, every day we concern ourselves about the huge amount of tax paid by the PAYE sector, and rightly so. I said in reply to a query raised in Tuesday's debate that the figure is 81.2 per cent. In the main we are dealing here with people who pay the other 18.8 per cent tax. We also hear consistently in this House about the huge amount of arrears, and action should be taken on that. This is one of the deterrents which is there, as people know, and must be kept there. Even with interest rates dropping, as Deputy O'Malley said, it is a huge deterrent and should be so, because we must try to have some sort of equilibrium in the whole taxation code which we have not got at the moment. We are trying to get that under self-assessment and to reduce the amount of tax the PAYE sector are contributing. We hope that can be brought about.

The question of power of attachment was raised by Deputy Cooney and Deputy Desmond. It does not arise until a later section so we will deal with it when we come to it. However, Deputy Cooney raised a very important point and I will give the information I have on it. The Government in relation to PAYE and non-PAYE income tax payers have decided that the PAYE taxpayer should not be subject to the new procedures. However, PAYE taxpayers are not always a clearly identifiable group. Some persons whose income is largely PAYE income have small amounts of investment or other income. Other persons whose incomes are derived largely from self-employment have small amounts of PAYE income. In such circumstances some practical method must be used to determine when persons with PAYE income are subject to the new procedures. The method which has been adopted is to exclude from the new procedures persons whose non-PAYE income is small enough to be included in their tax free allowance certificates. Those persons do not receive formal tax assessments and accordingly it is appropriate that they be excluded from the new provisions. Persons whose non-PAYE incomes are not so included will get formal tax assessments and will be properly included in the new procedures. This is the only practical solution to a practical problem.

It has been suggested that persons will have difficulty in identifying their status under the new method. However, each year before the commencement of the tax year persons are issued with tax free allowance certificates. It will be obvious from the certificates whether their non-PAYE incomes have been included in the certificate. In addition, every person who is required to pay an amount in preliminary tax will receive either a notice of preliminary tax or a reminder that he is so required. No person will be in doubt as to his status under the new provisions.

I hope that has covered the last number of points raised and that we can bring this to a conclusion and get on to the other points.

I thank the Minister for the reply he gave to my question about the document and would be obliged if he would let me have a copy of the same.

I am sure the Minister will be glad to.

On the question of access to bank accounts and so on, the Minister referred to the powers in section 18 of the Finance Act, 1983, which gives the Revenue Commissioners that power, but he said it was exercised only in specified cases where it was believed there was default, fraud or whatever. I cannot recall the terms of that section. Does the section confine it to that or is it an administrative practice of the Revenue Commissioners to use it only in those circumstances?

The Deputy said he would go to jail before he would operate that section. Does he remember? He was over there.

As a solicitor he would not disclose——

It requires a High Court ruling, so it is used only in a limited way.

That is a totally different matter. That has always been there. In effect the power is not there.

The same powers that were there are still there, which require a High Court ruling. No changes are being made in it.

But they were amended in 1983 and we had holy hell here when it was opposed. Does the Deputy remember?

No, I do not.

Will I ever forget?

The Deputy said that as a solicitor he could never provide information about his clients.

As a solicitor, yes. That is a different matter.

And he would go to jail before he would provide it.

I would still take the same view and I am sure the Law Society would agree with me.


Let us move away from these personal recollections and exchanges. I will proceed to put section 8.

Question put and agreed to.
Sections 9 to 14, inclusive, agreed to.

I move amendment No. 31:

In page 23, line 6, to delete "include references" and substitute "were references".

Amendment agreed to.
Section 15, as amended, agreed to.
Section 16 agreed to.
Amendment No. 32 not moved.
Section 17 agreed to.
Sections 18 to 20, inclusive, agreed to.

We move on now to the second group.


I move amendment No. 33:

In page 28, before section 21, to insert the following new section:

"21.—For the purpose of removing doubt, it is hereby declared that any grant paid by way of grant under the Enterprise Allowance Scheme by the Department of Labour to any person shall not be regarded for the purposes of Income Tax or Corporation Tax as part of the receipts of any business or trade of that person.".

I am at a slight disadvantage in this in that I did not expect it to arise until 3.45 p.m. as originally ordered, but I will do the best I can.

Has the Deputy a copy of the Bill?


The other fellow is making an awful lot of more money elsewhere.

I am sure the Deputy appreciates that the anonymity attaching to "the other fellow" does not require me to ask him to explain further. Deputy O'Malley without further interruption.

These efforts to cast doubts on my colleagues are not fair. My amendment seeks to qualify the situation in regard to grants which are paid to people starting up a business under the enterprise allowance scheme by the Department of Labour and to provide that these allowances are not regarded as part of the receipts of a business for the purposes of income tax or corporation tax. At the moment a person on the dole can apply to the Department of Labour for a grant of £30 per week under the enterprise allowance scheme to tide him over while he becomes self-employed. Of late some inspectors of taxes, but I understand not all, are treating the amount received as a receipt of the business.

On the basis on which new businesses are taxed this has a rather grotesque result. In a recent case an unemployed individual who set up a business of his own received a sum of £1,680 under the enterprise allowance scheme at the rate of £30 per week. His business, I am happy to say, was at least moderately successful, but on the basis of assessment of new businesses for tax he has become liable now to pay the sum of £1,590 in income tax on the £1,680 which he received as a grant to get him started. Because the grant is treated as a receipt of his business rather than a personal grant separate from the business, effectively almost all of it is clawed back in income tax, which can hardly have been the intention of the Legislature or the Department of Labour in helping to get him established in a new business.

The amendment is designed to ensure that he need only pay tax on it once and the proposed mechanism is to treat it as personal income and not as a business receipt. Because of the special rules for taxation on commencement of a business, receipts under the enterprise allowance scheme are included in three years' accounts successively. Therefore, somebody receiving a grant of this kind pays 35 per cent of the amount in each of three years and in the factual case in point, relating to a formerly unemployed person who set up a business, he is charged 35 per cent on £1,200, the amount he received during the first year, which amounts to £420 in tax. In the second year he is charged 35 per cent on £1,680 which amounts to £585 and in the third year he is again charged 35 per cent on £1,680, amounting to £585, which gives a total tax liability for the three years on the one grant of £1,590, which is almost the entirety of the grant. Considering that he is an unemployed person being helped to set up a small, new business and to get off the dole — happily, in the case I have in mind, it worked — it seems totally anomalous that the State give out that money with one hand and takes virtually all of it back with the other.

The reason the difficulty arises is that the basis of assessment for a new business is, in the first year, the actual profits from commencement to the following 5 April. In the second year the profits are based on the first 12 months with a right to claim a reduction to actual profits for the year up to 5 April and in the third year on the preceding year's profit, with a right to claim a reduction by the amount of any by which the total of the second and third years' assessment exceeded the profit of those two years.

This amendment would simply ensure — what one would imagine was always the intention — that a sum of money would not be subjected to tax three times over. It is only fair and reasonable that that should be so because it is anomalous, inequitable and unfair that out of a sum of £1,680 all, apart from £90, is reclaimed in income tax. It must have been the intention that you could not be charged tax on the same receipt in three successive years and this amendment would ensure that a person was only charged once on it. It would also ensure that it is regarded as a grant rather than an income of the business. It is a simple point and it could hardly have ever been intended that this would happen. My amendment puts it beyond doubt.

I thank the Deputies for raising this question. The tax treatment of payments under the enterprise allowance scheme — or the enterprise scheme as it is now known — has been under consideration following a ruling by the appeal commissioners. In the absence of a specific provision exempting such payments from tax, the weight of tax case law and the treatment given to similar type payments in the past suggested that the payments in question are taxable.

As a consequence of this, the Revenue Commissioners had been treating payments under the scheme as trading receipts. This treatment had consequences for the tax treatment of scheme payments because of the special commencement provisions in tax law for starting up a business. This aspect of the matter had caused particular concern and I had received a certain amount of correspondence in connection with it.

In considering the position following the appeal commissioners' ruling, I have had regard to the purpose for which the scheme was initiated, namely job creation. While I consider that there are arguments in favour of proceeding with an appeal to the High Court in the matter, I have come to the conclusion that payments under the scheme should be exempt from tax altogether. I propose, therefore, to circulate a Report Stage amendment to this effect to put the matter beyond doubt. The amendment will be retrospective, that is, it will apply to payments made under the scheme from the beginning.

How many people will be affected?

I could not put a national figure on it but we all have a number of cases in our own constituencies. I am told it could be as high as 20,000 from 1984 to 1988.

I am delighted to hear it.

Naturally, I am very pleased to hear that the Minister accepts the point I made and agrees that it is unfair. I am glad he will make these payments exempt from tax. Why will he not accept my amendment? Why leave it until Report Stage? Is there some defect in the amendment which Deputy McDowell and I tabled? It seems to fully meet the point.

The amendment cannot be accepted in its present form because, first, the provision indicates that the allowance will not be regarded for income tax or corporation tax purposes as part of the receipts of a business or trade. However, a residual charge to tax as a miscellaneous receipt might still arise under section 4 of Schedule D. Secondly, the provision may not be strong enough to provide for retrospection and, third, it may be technically inaccurate in its description of the payments. Originally the payments were made by the Minister for Labour through the National Manpower Service. Since January 1988 the payments have been made by FÁS which have a separate statutory existence from the Minister in accordance with the provisions of the Labour Services Act, 1987. These will require consultation with the parliamentary draftsman and this is taking place at present.

I will withdraw my amendment on the undertaking of the Minister to bring in an amendment to fully cover this point on Report Stage, which will be drafted slightly differently.

Amendment, by leave, withdrawn.

I move amendment No. 34:

In page 29, between lines 14 and 15, to insert the following:

"(3) Section 13 of the Finance Act, 1982 is hereby amended by the substitution, in subsection (2), of `110 per cent. (and, in the case of additional beef cattle, 125 per cent.)' for `eleven-tenths'.

(4) Notwithstanding the provisions of section 12 (4) of the Finance Act, 1976 and other enactments relating to relief in respect of increase in stock values, any such relief which has not been availed of in respect of an accounting period (as defined by the said enactments) may be availed of in any subsequent three accounting periods.

(5) Section 12 (5) of the Finance Act, 1976, as substituted by section 33 (3) of the Finance Act, 1984, is hereby amended by the insertion, in the proviso thereto, after `10 years' of `(or, in the case of beef cattle, 7 years)'.".

This amendment incorporates three different provisions. Clearly, there is a crisis in the beef industry because of the shortage of cattle. The figures speak for themselves. There has been a drop of 100,000 in the national cow herd over the last couple of years with projects of a drop of a further 200,000 heads over the next four years. Last week the Dáil unanimously accepted my motion urging the introduction and implementation of a comprehensive plan to cope with the crisis. I have produced, on behalf of the Fine Gael Party, a 20 point action plan designed to increase beef cow numbers by 300,000 over four years. The implementation of this programme will result in 1,000 additional jobs in the meat industry, extra beef exports of about £200 million per year, viability for 20,000 to 30,000 farm families and, as a consequence, substantial gains for the Exchequer.

I must emphasise that the proposed amendment to the Bill is but part of the entire package I have put forward, but acceptance of my amendment on stock relief will be of considerable importance on its own merits and will be seen as a first step towards the overall resolution of the crisis affecting the beef industry. My approach is that the stock relief provisions of the income tax code should be reviewed so as to provide a greater incentive for farmers to increase beef cow numbers. This will be of special relevance to dairy farmers, many of whom have income tax liabilities. My amendment incorporates a number of changes. Stock relief for additional beef cows should be increased from the present 110 per cent to 125 per cent. Stock relief cannot be used to create a loss and this means that some stock relief, or a portion of it, may not be of any benefit to taxpaying farmers since unused relief cannot be carried forward to following years. That problem could arise quite often on beef farms where the level of income is generally low relative to value of stock carried on the farm. It can be especially significant for a farmer building up a suckler herd since the purchase of the breeding stock could precede the resulting income flow by two to three years.

On the latter point my proposal is that unused stock relief be carried forward for up to three years. At present the clawback period for stock relief is ten years. That means that if within ten years a farmer has to reduce his stock level the relief granted during the build-up period will be clawed back. In a business as risky as beef production ten years is a very long time. With my colleague, Deputy Noonan, I propose that a more appropriate period of seven years be introduced.

The major national agricultural priority is to reverse the trend of dropping cow numbers. Policy instruments must give clear signals to indicate that this is the major national agricultural priority and a major overall national priority. The scale of the benefit to the national economy from the expansion of the beef cow herd and the losses which will be suffered if there is no or limited expansion — indeed, if there is a further reduction — make it imperative that decisions are taken urgently. For that reason I am pressing the Minister to accept my amendment to incorporate the tax incentive aspect of the overall plan of Fine Gael for securing a future for the beef industry.

I am opposing the amendment, not on the grounds of cost because it is not easy to determine the exact cost. The extending of stock relief will amount to about £300,000 in a full year. As I say, the amendment is not being opposed on grounds of cost but rather that it will add a further layer of legislation and resultant administrative procedures to an already complex situation and with no guarantee that the exercise will prove worthwhile. While it is desirable that the decline in the national herd should be halted and reversed, it is considered that further tax reliefs are not the way to achieve this objective.

Claims for improvements to the present very generous stock relief provisions must be viewed against (1) the likely reaction of non-farming sectors who have no entitlement whatsoever to stock relief; and (2) whether, having regard to the original purpose of stock relief, even the existing terms are justifiable or appropriate at a time of low inflation, compared to about 20 per cent inflation when stock relief was introduced in 1975.

Increased stock relief confers disproportionate benefit on the larger farmer vis-à-vis the small farmer. The latter would have little or no taxable profits and thus stock relief will offer him no incentive to keep herd numbers up.

As regards the proposal that unused stock relief should be permitted to be carried forward — presumably because there would be insufficient profits against which it could be set off — it must be stated that this would be totally inappropriate and only serves to highlight the fact that tax reliefs are only of value to people who actually pay tax. Stock relief was introduced in an attempt to remove from the ambit of the tax charge profits attributable to inflationary factors and which were in some respects no more than national profits. If profits are insufficient to absorb the available stock relief in a particular accounting period the underlying justification for stock relief is not present. The proposal that unused stock relief should be carried forward, which was never conceded since the introduction of stock relief in 1975, cannot now be accepted.

The proposals for special rates of relief and clawback measures for beef cattle would immensely complicate the stock relief regime which, many will argue, is already very complicated. A special rate for stocks of beef cattle would result in two classes of stock for stock relief purposes instead of the present single category — trading stocks. Three rates of relief would then replace the existing two rates — 100 per cent pre 1982-83 and 110 per cent thereafter — depending on the make-up of the individual farmer's stock.

Proposed changes in clawback would lead to even further difficulties if, and when, farmers found themselves in a clawback situation. Apart from the two rates of clawback and the ten-year time limit that already apply to other stock, the position as regards beef cattle would have to be separately determined by reference to three different rates 100 per cent, 110 per cent and 125 per cent and two separate time periods, up to seven years, full clawback and after seven years, no clawback. It gets more complicated as we go on.

The administrative considerations both for farmers and Revenue in attempting to implement and police such a complex relief must not be underestimated. Detailed herd break-downs to distinguish as between beef cattle and other stock would be called for both to compute the relief due and to operate the clawback measures proposed. The whole thrust of taxation in general is to move, if possible, in the direction of simplification and to avoid unnecessary further complication of an already complex tax code. The proposals now being made run counter to such a policy and would result in legislative measures of a kind that, for many farmers, involvement with the accountancy profession would be the inevitable outcome.

Calls for a shortening of the clawback period are not favoured as a short term cut-off point could lead to abuse; stocks could be dropped very quickly once the cut-off is reached and the process of building up stocks could start all over again with fresh entitlement to stock relief. A shortening of the clawback period could perhaps only be considered in the context of the abolition of stock relief. Furthermore, any dilution of clawback would have cost implications arising from the relief already given, and which would not then be clawed back, and from increased claims for stock relief by farmers on the basis of a new cycle of relief.

For all those reasons I cannot accept the Deputy's amendment. However, I agree with the statements by the Deputy, by the Minister for Agriculture and by people outside the House about the necessity to increase beef cow numbers. I am sure we will find ways to do so, but I do not think this is the way.

I am very disappointed with the Minister's response, especially since he represents a rural constituency and once held the Agriculture portfolio. Obviously, he must be well aware of the major crisis in the beef industry. He mentions that the cost is not a factor and that makes his reaction even worse. If my proposals were fully implemented farmers and the meat industry would gain, our exports would increase substantially and there would be a substantial benefit to the Exchequer as a consequence.

If tax reliefs are not the answer to the problem, what is? In my view we need a comprehensive plan covering a whole range of measures, including reorientation of grant incentives and a series of other measures to improve farm efficiency and profit margins. As part of the overall plan it is also necessary to change the system of tax incentives to put a much greater focus on those who take the risk of being involved in the production of additional beef cows.

My disappointment is compounded by the reaction of the Minister, not just in rejecting my amendment but in failing to produce any alternative. His colleague, the Minister for Agriculture, had a scheme in this area which has totally collapsed. That Minister is like the emperor without any clothes — he has no plan at all. I strongly urge the Minister to reconsider my amendment on Report Stage. It is a major priority of Fine Gael to ensure that the crisis in the beef industry be tackled immediately. In so far as reorientation of tax incentives can help in tackling that crisis, action must be taken now. On that basis I am pressing my amendment as being part of a solution to that crisis.

I referred to the fact that we were not opposing the proposal on grounds of cost. The main reason the cost is so low is that the proposal will be ineffective. It is not my job to propose an alternative to the amendment. The Minister for Agriculture had been pursuing this question with the interests involved and the Deputy will be fully aware of the EC implications of having any kind of identifiable national aid. That is not tolerated. The Minister had almost concluded when certain parties involved in the trade decided not to opt into the scheme proposed. I know the Minister is working diligently, prompted very efficiently and effectively by Deputy O'Keeffe.

It is estimated that about 50 per cent of farmers on tax records have availed of stock relief in the past or have been affected by claw back following decreases in stock levels. That suggests approximately 30,000 farmers. About 10 per cent of those are thought to be currently affected by the claw back. The farmers who would probably be anxious to increase beef cow numbers are more inclined to be small farmers not inside the tax net. I know there are some who, because of the restrictions now imposed by the superlevy, would keep on cows for beef purposes and they might get the advantage. As I explained, we would have all sorts of complications in deciding which should qualify and which should not. The amendment is an effort to deal with the problem, but I do not think this is the mechanism to achieve what the Deputy and the Government want, namely, an increase in beef cow numbers. We will have to look at other ways.

I thought we were getting close to a meeting of minds on one point. I see a major potential on the part of dairy farmers who are now restricted because of quotas. These are some of the people who can make a substantial contribution to increasing beef cow numbers. I strongly believe my proposals would encourage the exploitation of that potential.

The potential is there but I do not think this is the way to do it.

Amendment put.
The Committee divided: Tá, 41; Níl, 70.

  • Allen, Bernard.
  • Barrett, Seán.
  • Begley, Michael.
  • Birmingham, George.
  • Bruton, John.
  • Bruton, Richard.
  • Carey, Donal.
  • Clohessy, Peadar.
  • Colley, Anne.
  • Connaughton, Paul.
  • Cooney, Patrick Mark.
  • Cosgrave, Michael Joe.
  • Cullen, Martin.
  • Deenihan, Jimmy.
  • Durkan, Bernard.
  • Enright, Thomas.
  • Fitzpatrick, Tom.
  • Flanagan, Charles.
  • Gibbons, Martin Patrick.
  • Harney, Mary.
  • Higgins, Jim.
  • Keating, Michael.
  • Kelly, John.
  • Kennedy, Geraldine.
  • Kenny, Enda.
  • Lowry, Michael.
  • McCoy, John S.
  • McGahon, Brendan
  • McGinley, Dinny.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Nealon, Ted.
  • Noonan, Michael (Limerick East).
  • O'Brien, Fergus.
  • O'Keeffe, Jim.
  • O'Malley, Desmond J.
  • O'Malley, Pat.
  • Quill, Máirín.
  • Sheehan, P. J.
  • Wyse, Pearse.
  • Yates, Ivan.


  • Abbott, Henry.
  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Matthew.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John.
  • Burke, Ray.
  • Byrne, Hugh.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Mary T.
  • Cowen, Brian.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • de Valera, Síle.
  • Doherty, Seán.
  • Ellis, John.
  • Fahey, Frank.
  • Fahey, Jackie.
  • Fitzgerald, Liam.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Denis.
  • Haughey, Charles J.
  • Hilliard, Colm Michael.
  • Jacob, Joe.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lynch, Michael.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • MacSharry, Ray.
  • Mooney, Mary.
  • Moynihan, Donal.
  • Nolan, M. J.
  • Noonan, Michael J. (Limerick West).
  • O'Dea, William Gerard.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Leary, John.
  • O'Rourke, Mary.
  • Reynolds, Albert.
  • Roche, Dick.
  • Staford, John.
  • Swift, Brian.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wright, G.V.
Tellers: Tá, Deputies F. O'Brien and Flanagan; Níl, Deputies V. Brady and Briscoe.
Amendment declared lost.

There is very little support in this House for the farmers.

Section 21 agreed to.
Amendment No. 35 not moved.
Question proposed: "That section 22 stand part of the Bill."

Deputy Michael Noonan. The House will please come to order.

(Limerick East): According to the Explanatory Memorandum, and I quote:

Section 22 raises from £4,000 to £6,000, the capital value used in determining—

(a) the capital allowances, and

(b) the deduction for running expenses,

to be granted for tax purposes in respect of motor cars used in the course of a trade, profession or employment. In the case of capital allowances, the increase applies to cars provided after 27 January, 1988 (other than cars that were contracted for before that date but provided within 12 months of that date), while in the case of running expenses, the increase applies to expenses incurred after that date.

I welcome this section which is a move in the right direction. Even though the move, on the face of it, looks quite small, it costs quite an amount of money. The Minister can confirm that it will cost approximately £7 million to achieve this change.

I circulated an amendment which arose from the treatment of company cars for benefit in kind purposes. I proposed in assessing benefit in kind that instead of taking the individual cost of the car into account, a table should be drawn up by the Revenue Commissioners, which would be based on the engine capacity of the vehicles. If this was used it could be organised in a manner by the Minister for Finance and his advisers so that there would be no loss of revenue to the State as a result. If this change were made some taxpayers who had the benefit of a car from their company for their private use would pay more tax and others would pay less. It could be organised so as to not have any adverse effect on the flow of revenue.

Because there would be a charge on some taxpayers it was not possible within the very restricted rules of the House for the amendment to be debated in the House. The amendment was proposed arising from this section, not in ease of the individual taxpayer but in ease of the motor trade. There is no particular benefit to all company car holders in the proposal because some would gain and some would lose but the motor trade would gain because the emphasis would switch to new cars rather than secondhand cars and that might stimulate an industry which has been in the doldrums now for quite a long time.

I know there are a variety of tax avoidance schemes by companies to facilitate their employees who have the use of company cars. I know also that it is the practice now for people on high incomes to acquire quite old cars at low market value and then soup them up and there are significant people on very high incomes in this city who have 1975, 1976 and 1977 cars with high engine capacities but because the original cost of the car was so low, they benefit from the provisions as they stand at the moment. That is a direct disincentive to the purchase of new cars. If we can get the Minister for Finance to agree to base the scale of allowances on the engine capacity of cars, that could be done without loss of revenue to the State and in a manner which would benefit the motor trade. It is essential that more new cars be sold if the motor trade is to survive in this country.

The question of the number of secondhand cars on the Irish market at the moment that is safe is a cause for concern. There is quite a significant level of importation of secondhand cars from the UK. The regulations in the UK regarding the safety of vehicles are more stringent and are more stringently applied than the regulations that apply here. I fear that UK secondhand cars which have failed to pass the safety tests in the UK are being brought in here and being put on the secondhand market. There is a second reason for this change and that is to ensure that vehicles which are put on the roads are safe. Obviously if a change in the direction I am proposing would stimulate the motor industry and if companies would exchange the cars they have now for new models, then over a period, a reasonably adequate supply of secondhand cars would be available through the trade to the majority of motorists who cannot afford a new car who of necessity purchase secondhand cars.

I would like the Minister's comments on this. On this side of the House our hands are tied. On the last Finance Bill Deputies McDowell and O'Malley proposed an amendment on similar lines and it was ruled out of order for the same reasons — because we are inhibited from moving an amendment even if there is no overall loss of revenue, if it proposes an increase of tax on any taxpayer, even if that would be compensated for by tax reductions for other taxpayers, leaving an overall revenue effect which would be neutral.

I am grateful for the tolerance of the Chair and the House which enabled me to speak at length about a matter which is not properly before the House. I strongly urge the Minister, as we discuss this section, to give an indication that he will have this examined between now and Report Stage with a view to moving the amendment in his name on Report Stage.

I would like to support the plea which Deputy Noonan has just made. What we think we save and what we actually do save by having these restrictions are two different things. As anyone in business in this city knows, there are ways and means of getting around this particular imposition and this brings our laws into disrepute. We have not made any significant moves in this area for a number of years and the proposal which Deputy Noonan has outlined is a very reasonable one. Of course, we recognise that there are problems and that we do not have considerable sums of money to give away at this stage, but this proposal will not result in extra expenditure or any loss in revenue on the part of the Exchequer. It is a sensible way of dealing with this problem.

A number of parties in this House are trying to achieve an atmosphere in this country where people will feel that they are expected to pay a reasonable amount of money in taxation. Whether we in this House like it or not there is a general feeling that everybody is being screwed by our tax system. We are being screwed by the high rates of PAYE and by the small limits between one band and the next. If one is supplied with a company car for business purposes they are caught for benefit in kind. There is a general feeling that the State is out to take everything from us. Therefore, we should show some movement either in the personal taxation area or in an area such as this so that at least a person can feel that they can go out and buy a new car and do not have to drive around in an old banger simply and solely because they have a feeling that the State is going to step in and rip them off, and in many cases they are quite right.

This proposal provides us with an opportunity to move forward. We have a car industry which is dying on its feet. In the past it employed large numbers of people, but all of us know of garages which are closing down, letting people go or taking on no apprentices. Not alone is the price of a new car too high because of the various duties and taxes, but because of this imposition there is no encouragement to go out and buy a new car. On top of this the amount of disposable income available to someone to change their car is extremely limited because of our high tax rates. I join with my colleague, Deputy Noonan, in appealing to the Minister to look at this problem and, on Report Stage, to bring in some amendment along the lines suggested by Deputy Noonan in order that some movement can take place.

I would like to support the principle behind what is being suggested here, but I am not certain whether the way in which it is drafted is the right way to go about it. I can see the difficulties, because I recall Deputy McDowell and I tabling an amendment to try to cope with this problem last year which was ruled out of order because theoretically it might increase the amount of tax payable by some individual taxpayer, even though clearly its intent was to reduce the burden of taxation on a very large number of taxpayers.

I am not being critical of this amendment, as I can see why it has to be expressed in a somewhat unusual way, but a weakness that I see in it is that it does not refer to amounts of money. The amount that is deductible as an expense of a business or a company cannot be worked out. At present it is worked out in the proportion which the allowed amount bears to the total cost and this would not be achieved under the amendment as drafted by Deputy Noonan. At the same time I fully support the principle behind it and it is an amendment which will have to be made by the Minister. It is only reasonable that he increase the proposed figure of £6,000 to something that approximates with the average cost of a car.

When this restriction was originally introduced in 1973 the figure was £2,500, which was at that time the average cost of a reasonably good car, but it has lost all meaning since. Even with the proposed slight increase this year, to £6,000 it still bears no relation to the average cost of a car. It impinges enormously on both individuals and companies. Because of the way allowances for vehicles are so extraordinarily restricted there have been instances where a company, which to my knowledge showed no profits on its audited accounts for a particular year, was charged substantial corporation tax by the Revenue because most of the travelling expenses which were properly incurred by the company were disallowed. It is ridiculous that a company which shows quite genuinely that it made no profit and was just able to tick over in a particular year should be assessed with a figure of £150,000 just because it has a fleet of between 30 and 40 cars on the road and therefore has to pay corporation tax at a rate of 50 per cent which would amount to £75,000. While this is slightly removed from the matter which we are discussing here, capital allowances, it is very much tied in with it because the two are related.

The position in regard to the motor trade is well known. They have made their case very clearly during the past few years in particular. I do not think anyone seriously disagrees with their statements on the appalling position in which they find themselves, and the ultimate proof of this is to look at the number of new car sales in the Republic as compared with the number of new car sales in each of the last two years in Northern Ireland. The population of Northern Ireland is now significantly less than half the population of the Republic. The population of Northern Ireland is 1.5 million as compared to a population in this country of 3.5 million, but the sale of new cars in Northern Ireland is well above the sale of new cars here.

There is a grave abnormality in that. It is not because the Northern Ireland economy is booming that everyone is buying a second car. The Northern Ireland economy is in dire trouble, but so far as motor cars are concerned the level of purchase is normal whereas down here the level of purchase of motor cars is abnormally and artificially low, despite our economy, while in severe difficulty, being no worse than the Northern Ireland economy. It is only because of this factor that the number of old cars on the roads here is relatively high. We have a fairly scattered population as compared to Northern Ireland, we have less public transport and more people in the normal way would use cars in this country; but the sales are totally inverted to what the norm would be. They are inverted for one reason only and that is taxation. If there is one thing the Department of Finance are completely hung up about it is this. They cannot understand why people should be allowed to drive cars which they do not own.

That is why we have high motor claims. It is part of what we were talking about yesterday.

It is an artificial distinction to draw to penalise in this grossly excessive way the provision of cars by a company to its own employees and not to penalise in any way the payment of a mileage allowance to employees. The result is, as Deputy Barrett has said, that all sorts of artificial ways of trying to get round this are created and it brings the law into contempt. One is entitled to ask why there is no taxation of any kind on high rates of mileage allowance, such as 75p, 85p and 90p, which must confer a substantial benefit in kind on those who are fortunate enough to be able to avail of them. At the same time there is a most excessive and penal level of taxation on those who are provided with cars by their companies. One is entitled to ponder the theoretical question that, if the Department of Finance and other Departments provided cars for their officials for use in the course of their duties and did not pay them mileage allowance for using their own cars, would the law be different? We are entitled to ponder that question and ask it because my strong feeling is that it would.

The way this system has been defended for years is irrational. It makes no sense and I do not see it repeated anywhere else. The figures of new car sales speak for themselves. If there is a reduction in the amount of tax that will be raised by increasing the capital allowance, that clearly will be offset by increased sales of cars. We have the highest rate of excise and VAT on vehicles in the European Community and possibly in the world. It is extraordinarily high. Therefore, any worthwhile increase in the sales of new cars will bring a very substantial benefit to the Revenue. It is not in any way irresponsible or profligate to suggest that these capital allowances should be increased and that people and companies should be treated more fairly in relation to them because with the high rates of excise and VAT, there will be a huge flood of revenue coming into the Exchequer as a result.

What we are doing is picking out one sector of the economy and saying that it does not matter, that for some kind of arbitrary bureaucratic reason we have to maintain this system and that it will be maintained through thick and thin. That makes no sense. It sums up one of the great dichotomies in the administration of this country; that there is a huge gulf or gap between what I call the real economy out there and those who administer it from inside the walls of Government Buildings, the Department of Finance or wherever else. There is a lack of understanding of how the system works and a belief that the commercial activity of this country can be run on bureaucratic or administrative standards when quite clearly that cannot be done. It has to operate in a different way.

I welcome the fact that there is a very minor concession in this section in regard to the capital allowance but it really is not significant. Some day some Minister for Finance will have to grasp this nettle. It will not be a very difficult one to grasp because he will not lose any revenue by doing so. If we were selling the same number of cars pro rata as Northern Ireland the inflow to the Revenue would be so huge that whatever losses would be incurred by allowing a reasonable capital allowance would be far exceeded. The Revenue would be not just as well off but probably substantially better off. The indirect effects throughout the economy as a whole would be enormously beneficial.

The purpose of this section and of the amendment is to encourage the purchase of more new cars. Everyone who has spoken has said what a marvellous thing that would be. The statistics in relation to the purchase of new cars show us up in a very bad light compared with Northern Ireland. They bear no relation to the number of cars purchased because there are no figures for the purchase of secondhand cars or third, fourth or fifthhand cars. The car that I traded in five years ago, a Vauxhall Chevette — it was six years old at the time — is still on the road in Cavan.

When Deputy John Bruton was Minister for Finance he had a totally different theory from that of Deputy Noonan. His theory was that, as far as jobs were concerned, we would be better off if more people bought secondhand cars, that there were more jobs in the servicing of secondhand cars. He said there was no reason why we should encourage the purchase of new cars. That is a theory well worth discussing. The purchase of new cars is of great benefit to a small number of traders who have concessions for particular brands of cars and they make a fine living from selling them. There is no proof that there are any jobs created by the sale of new cars. If we were to purchase new cars, keep them for one or two years, trade them in for other new cars and then sell all the secondhand cars to, say, a Third World Country, where would the jobs be created? Nobody here has given us any indication of the great benefit of new cars to the country as compared with secondhand cars. I do not know whether or not Deputy Bruton has changed his mind in that regard. He is not spokesman on Finance any more and I do not know whether or not Fine Gael have any policy on that matter. There is no proof whatsoever that the purchase of new cars is a good thing for the economy.

Reference has been made to the danger of having so many second-hand cars on the road. That is a matter for the Government and the Minister for the Environment. They should ensure that cars and trucks on the road are safe. It is not a matter for the Minister for Finance. It does not matter whether your car is 20 years old or 40 years old if it is safe; but, if it is not, it is up to the Minister for the Environment to impose the necessary penalties.

Let us look at the cost of new cars. If the price was cheaper more people would buy them. That is obvious when cars were assembled here — some people may not even recall that time but car assembly here only ended in 1982 — and when over 4,000 people were engaged in their assembly and many more thousands were engaged in supplying the materials for the car assembly industry, we were being continually told that this was the reason cars cost so much. We were told we were subsidising the car assembly industry and that this was wrong. There were many tears shed about that. Deputy O'Malley is now talking about the jobs that are being lost and he said that the car industry is in a disastrous state. I did not hear him crying any tears, crocodile or otherwise, when the car assembly industry was simply shut down and everybody in that industry was put out of business. Workers are still on the dole from the car assembly industry being shut down and they are now being told that they are not looking for work.

These people fought against the terms of the EC in order to hold their jobs. They got longer than a ten year stay of execution because of their fight, but they are out of work now and on the dole. The same applies to many workers around the country who were supplying raw materials to these people. We were told the price of cars was high because they were being assembled here and when our car assembly plants closed down, we all expected cheap cars at last. However, car prices did not go down by £1. They continued to escalate. Our prices are still the highest in Europe, and possibly in the world. What is the explanation for that?

We are told the answer is taxes and duties. I believe it is just a rip off. Merchants import cars and sell them for whatever price they care to put on them. If taxes are the cause of the high price of cars, is it not ridiculous to take taxes from everyone by way of duty on the purchase of the car, duty on car parts, VAT and then taxing the car, and handing back some of that money in reliefs to a chosen few? That is the purpose of this type of tax relief for company cars.

Why not reduce the taxation so that cars would be cheaper and more people would purchase them? Instead of giving the tax incentive to companies which purchase cars for company business, why not give the tax relief to people who need cars to get to work? Why not give them tax relief for the capital purchase of their cars and for their travelling expenses? Why not assist them in that way? If they get the tax relief, they will have the incentive to purchase cars and far more cars will be purchased, that is if the Minister wants more cars on the road.

This is a question the Minister for Finance should think about. This is the question Deputy Bruton had in mind when he was Minister for Finance: can we afford more cars on the road? We do not have a road system to take more cars. Have we the money to provide that road system? Our roads are deterioration at such a rate that cars are not being made for them. That has been proved by Swedish cars which were not made for our roads. Our roads are deteriorating much faster than the roads in any other country in Europe. Cars are not built for our brutal road system. Do we want more cars on the road? More cars mean more, not less expenditure on roads, and it means greater and bigger roads as well as a more packed city. At the moment we cannot maintain the small number of cars we are told are in this city. Do we want more cars? These are the type of decisions a Government have to think about.

Here is a Government talking about cuts in public expenditure, but if they put more cars on the roads will we not need more public expenditure, to provide the necessary infrastructure? Would it not be better to put the money they are losing on the taxation system into a public transport system which this Government wrote off totally when they wrote off the DART system which would be by far the most efficient public transport system for this city?

When the Minister is talking about reliefs of this kind, is he just thinking about the people who need company cars, that if they get these reliefs, they will buy more cars? How many people is the Minister thinking about? When talking about the import and sale of cars is the Minister thinking about money and jobs, because there is nothing else involved but importing the cars, putting them into showrooms and then selling them, whereas the secondhand car business provides jobs.

People by secondhand cars because they are cheap. Deputies should realise that although the Minister is giving a relief of £6,000, there are excellent cars on the roads costing £5,000. Sales of these cars are increasing very rapidly, particularly among the farming community who recognise the strength of these cars. I am speaking of the Lada, particularly the Lada Riva. They are available for £5,000 and the Minister is giving an allowance of £6,000. The cheapest decent European car is about £8,000 new. Very few people are able to pay that sort of money for new cars. The cost of cars, and the taxation of cars, should be taken into consideration before giving tax relief to a handful of people. The question of whether we want more new cars on the roads should also be considered.

I am opposing the amendments. The section is updating the figure of £2,500 to £6,000. I have no real objection to that, but what I want to know is if the Minister, through his Government, has a policy on car ownership for increasing or reducing the number of cars on the roads. At least Deputy Bruton had a policy in mind when he was Minister for Finance. He took into account a number of considerations in regard to the infrastructure and jobs. Has this Minister any policy and what benefit does he see arising from this section?

I agree with a lot of what Deputy Mac Giolla said in relation to benefit in kind, how it should be calculated and so on. There is no doubt we are dealing with people who are getting a company car. In this section we are going as far as we can this year — I will come back to that later.

Although the amendment has been ruled out of order we are discussing it. Nevertheless, as some points were raised, I will answer them. At the moment the benefit in kind is worth £31 million in a full year to the Exchequer. That is a sizeable amount of money and cannot just be ignored or diluted to any great extent. With regard to the proposal in the amendment which was disallowed, for a benefit in kind charge based on engine capacity, recent consideration of the matter indicated that under a four rate structure based on engine capacity the following benefit in kind assessments would be necessary to maintain the yield: up to 1012cc, £1,500; up to 1512cc, £1,850; up to 2012cc, £2,200 and above 2012cc, £2,675. The scheme was calculated by reference to the prices of basic models. While there is some scope for variation within categories, the rates quoted are the minimum necessary to maintain the current yield and would need to be increased to compensate for the element of high price cars being provided for employees.

Obviously like any other scheme which we are changing, we will have to look at it from an Exchequer point of view in relation to its equity, cost implications to the Exchequer and administrative difficulties. In so far as equity is concerned the fairer and more objective criterion is market value rather than engine size in establishing benefit to the employee. The existing charge attempts to tax income in kind on the same basis as cash income. As is the case with cash income, the more valuable the payment in kind, the higher is the tax charge under current arrangements. This would not be the case with a scheme based on engine capacity, which is not an accurate yardstick for measuring a benefit of this kind. For example, a Ford Sierra 2,000, with an engine capacity of 1,993 c.c. costs considerably less than a Saab 900 which has an almost identical engine, with a capacity of 1,985 c.c. Therefore, it is difficult to reconcile that kind of position in one's mind when one is talking about tax relief. Under a scheme based on engine capacity the real value of the tax charge would tend to fall from year to year whereas under the present system, based on market value, the real value of the charge is automatically maintained as new car prices rise. The problem of falling yields could be overcome only by increasing the rates of charge annually by way of legislation which would be bound to give rise to controversy. The proposal in the amendment would greatly increase the administrative complexity of handling these benefit in kind cases.

There is a lot that has to be said about this benefit in kind scheme. I was Minister for Finance at the time it was introduced in 1982. One of the bigger problems we must examine — and Deputy Mac Giolla put his finger on this when he spoke of the totality of car owners rather than those who just happen to have a company car or a car supplied — is that of the duty content. The huge excise duty of 21.7 per cent plus VAT of 20 per cent on cars up to 2,012 c.c., which amounts to a total of 41.7 per cent, and on those over an engine capacity of 2,012 c.c. in respect of which the excise duty and VAT is as high as 44.7 per cent constitutes an enormous cost. That accounts for the main difference between what Deputy O'Malley spoke of — those people in the North of Ireland having so many more cars per capita than we do because the cost of the actual commodity is so much less. There is no doubt that that has a major influence on the market. Let us hope that we can begin to move toward that position. How we will make up for the Exchequer loss remains to be seen but this is the kind of process we must examine carefully between now and 1992, with the creation of the internal market.

When we talk about giving incentives for the purchase of cars, dear and all as they are, it is as well to remember that this impinges on the balance of payments; as Deputy Mac Giolla rightly said, we do not have any car assembly plants here now. Deputy Mac Giolla asked me about my policy in that regard. I should say that there has been quite an effort on the part of the Industrial Development Authority, accompanied by quite an amount of success in attracting huge numbers of manufacturers of car components here, and our policy will continue to promote that kind of activity. We will make every endeavour to get back into the assembly business if we can at all.

Just to give the House an example, I should say that the value of imports in 1987 of cars and vans — if you like, cars and commercial cars — was £230 million. That figure does not include import taxes, VAT, excise duty, dealers' profits or whatever. The number of those cars and vans was 63,354. In a poor economy in grave difficulty, an expenditure of £230 million — plus 42 per cent, when one takes into account excise duties and VAT, amounting to another £100 million, making a total of £330 million spent on new cars — is a lot of money, particularly in difficult times. We went as far as we could in our budgetary proposals. So that people will realise the impact of the budgetary provisions, I should say that in the first quarter of 1987 new car registrations amounted to 17,376 whereas, in the first quarter of this year, the corresponding figure was 19,808, an increase of 14 per cent. Small and all as have been the concessions and the criticism levelled at them — although I must say that, in fairness, some people did welcome them — they must be having a significant impact when there has been a 14 per cent increase in new car registrations in the first quarter of this year. Let us hope that trend will continue so that we can replace what is a very old stock of cars at present — I think everybody travelling our roads would accept that fact — and, second, boost Exchequer resources.

A question was raised in regard to the measure proposed in section 22. I should say that its cost is estimated at £600,000 in 1988, rising sharply to £6.6 million in 1989 and to £14 million in 1990; the two latter figures representing the full year costs. Of course, the final cost will depend on the rate at which new cars qualifying for the increased allowance are purchased. I do not expect there would have been many such cars purchased in 1988 between budget day and 5 April to affect tax payments in that year. Consequently, the cost shown is minimal and relates basically to running expenses in respect of existing cars rather than to the capital allowance element of new cars. The cost is expected to increase considerably in 1989 and reach its peak in 1990.

It becomes almost an annual ritual, and a matter of considerable regret to me, to say that the Minister for Finance does not seem to be any more enlightened about this matter than were his predecessors. He makes play of the fact that we spent £230 million on cars last year. It should be remembered that, out of total imports of approximately £12 million or £13 million, the remarkable thing about that figure is that it is so low; it is extraordinarily low; there is nothing large about it. The only thing abnormal about it is that it is so low, the lowest in Europe. The Minister spoke about the fact that, in the first three months of this year, there had been an increase of 14 per cent in new car registrations. It should be remembered that that is a 14 per cent increase on an incredibly low base, one that bears no relation to what it would be if things were allowed to operate normally in our economy. For example, even if there were to be a 100 per cent increase this year, we would still not be back to normal. Frankly, a 14 per cent increase does not make any difference.

There is no effort to face up to reality in the provisions of this section. I am not talking about the amendment because I understand it is not being moved but, in the section generally, there has been no attempt to face up to reality.

We have heard the usual old stuff from Deputy Mac Giolla and people like him, about the capital allowance being increased to £6,000, and constituting a big tax concession or incentive, as it were, to people to buy cars. Of course, he does not understand what it is about. This is not a tax concession at all. This is a tax penalty, by confining the capital allowance to that amount rather than as it is in most places, to the value of the car.

That is ignoring the benefit in kind.

If it were not a car, its cost — if it were required by a business — would be allowed in full. If a car is essential for the purpose of a company's business then, prima facie at least, its cost should be allowed because it is allowed in respect of all other expenditure. Therefore, this is not a tax concession but rather an artificial penalisation of the purchaser of a car——

A benefit in kind.

It is done apparently for the purpose of trying to suggest that there is a huge benefit in kind which constitutes will over half the value or use of the car. That is entirely questionable. If it is necessary to tax benefit in kind so heavily where motor cars are concerned, why is there no taxation of the 80p or 90p per mile that is allowed to users of cars who are operating under the other system? I do not think they can have it both ways. It cannot be a benefit in kind one way and not the other way. I want to repeat my view that if the State provided cars for its own employees or officials the law might be different from the way it is at present and from the way it is proposed to continue it.

It is sad that we should be discussing this section with such a degree of futility just after we have heard the tragic news of the passing of Senator Daly who strove for many years in his career in the Seanad to change this situation. It is sad that on the very day of his death, which we all regret so much, that this iniquitous system should be perpetuated for some further time. It will eventually change but it is unnecessary and pointless. It gains nothing to the Exchequer because the amount of taxation in excise and VAT which would be got, by getting us back to a normal level of car sales, would be so great that the Exchequer would not lose. It knows it will not lose and this is only a begrudging attitude to perpetuate this system. That is wrong and I do not think law and, in particular, revenue law, should be based on a begrudging attitude where there is no fiscal justification for what is being done. If we were to get back to normal — and it would only be normal — we would have to double our car sales this year. If we were to encourage them it would more than double them.

The Standing Order of the House does not provide for an interruption of business but in the circumstance where Deputy O'Malley has referred to the late Senator Jack Daly, I think it is appropriate that I, interpreting the mood of the House, should say it is regrettable, to say the least, that a Member of the Oireachtas who was here this morning is no longer with us. It goes without saying that the late Senator Jack Daly was one of the most lovable Members of the Oireachtas. I am sure we all would wish to extend to his family our deepest sympathy on their great loss. Ar dheis Dé go raibh a anam.

(Limerick East): I should like to be associated with the Leas-Cheann Comhairle's words of sympathy to the family of the late Senator Jack Daly. He was a most popular Member of Seanad Éireann. It is ironically coincidental that, at the time of his death, we should be discussing an item about which he had such concern.

I, too, would like to be associated with those remarks. It is ironic that we are discussing this part of the Finance Bill because the late Senator Jack Daly was the champion of the motor trade. There is no doubt about that.

I join with my colleagues in extending my sympathy to the family of the late Senator Daly. He was a close friend of all Members of the Houses of the Oireachtas, across all party divides. He was held in great regard and was a great friend of all of us. His death has come as a shock because he had been planning his retirement, so to speak. I join with my colleagues in their expression of sympathy.

I am not going to dispute what Deputy O'Malley said in relation to what the late Senator Jack Daly would have said but I do know he welcomed the provisions of this Bill, notwithstanding the fact that they might not go as far as we would have wished.

I would like to respond to Deputy O'Malley's latter remarks about the situation vis-á-vis the number of cars. I wonder where Deputy O'Malley has been for a number of years. There were exceptional numbers of cars registered in 1980 and 1981; 90,000 and 104,000 for both of those years. From 1982 up to the present time the norm has been more like 55,000 to 65,000.

That is since this benefit in kind was brought in.

The Deputy can change his ground any way he likes——

I am not changing it at all.

——and talk about getting back to the norm but the fact of the matter is that if we get the same sort of trends this year as we had last year, taking roughly three times the figures for the first quarter, there will be up to 60,000 new car registrations. This will be as high as the number in any of the past five years and will be an enormous difference. I do not accept that we have to have a certain norm of number of cars and that it has to be 80,000, 90,000 or 100,000. If the new car registrations for this year work out at the order of 60,000, which they can do, this will be an extremely good result.

Can I ask the Minister if he has available the cost of the change in 1989 and 1990? The change is very minimal this year in terms of cost, £600,000, but I imagine the Minister will have to provide £6 million, £7 million or £8 million next year and £14 million in 1990. The concession will be costly and will have to be provided for next year.

I do not agree with the Minister that the level of new car purchases will be up this year. The motor vehicle duty returns up to 30 April this year is £49 million and it was £50.27 million for the same period last year. The extent of the drop off in the purchase of new cars is noticeable. Only last week I spoke to the late Senator Daly and he told me that he had sold an annual average of 300 to 400 new cars — and he was a dealer for a particular make of car — but he expected that his sales for 1988 would be about 120 new cars, so severe has been the drop in new car purchases in his part of the country. The increase from 4,000 to 6,000 is very substantial and I would be interested to know the cost of the concession given by the Minister on this occasion.

Perhaps the Deputy was not here when I gave the figures. It was £600,000 in 1988, £6.6 million in 1989 and £14 million in 1990. Also I gave figures when the Deputy was not here of an increase of 17,376 new car registrations for the first quarter of 1987 and it is up to 19,808 for the first quarter of 1988, so there is an increase of 2,500 new car registrations.

Maybe more smaller cars are being bought.

Maybe. I do not know the answer to the question the Deputy raised in relation to the income but these are factual figures.

Question put and agreed to.

I move amendment No. 36:

In page 29, before section 23, to insert the following new section:

23.—Section 44 of the Finance Act, 1986, is hereby amended by the deletion from the definition of `qualifying owner-occupied dwelling' in section (1) (a) of `other than the Custom House Docks Area',".

At present the owner occupier allowance provided by section 44 of the Finance Act, 1986, applies to designated areas for the purposes of the urban renewal scheme with the exception of the Custom House Dock area in Dublin. This amendment introduces a new section 23 into the Bill to extend the owner occupier allowance to the Custom House Dock area. The allowance consists of relief at the rate of 5 per cent per annum for ten years given to the first owner occupier in respect of the cost of a newly constructed or refurbished dwellinghouse which is his sole or main residence. The cost of providing the owner occupier allowance for the Custom House Dock area will depend on the take up of the allowance. There will be no cost in 1988.

(Limerick East): This is the fifth or sixth extra incentive provided for the Custom House Dock area in this Finance Bill. I have no objection to the amendment but I would like to speak on the section. I will wait for the section and make my remarks on it then.

Unfortunately, I did not hear some of what the Minister said. My understanding was that this relief, incentive or whatever one would call it applied already to the dwelling element in the Custom House Dock area.

It does everywhere else but not there.

In urban areas?

In section 23.

This is extending section 44 of the Finance Act, 1986, not section 23.

(Limerick East): The packages were different in different areas and that did not apply to the Custom House Dock.

Other areas had not the advantages. Now they have advantages that the Custom House Dock had not and now we are giving those advantages to the Custom House Dock area.

If the Minister took himself down to the Custom House Dock they would probably give him a free house and a few thousand a year to live in it. That seems to me the way it is going.

You would have to do more than that.

It must be the most promoted bit of real estate on this planet.

Would the Deputy like it to succeed?

Let us hope it will. I would like it to succeed. It certainly has got assistance to succeed and it will not be for want of legislative or fiscal incentives.

Amendment agreed to.
Question proposed: "That section 23 stand part of the Bill."

(Limerick East): I believe the mix of benefits in the designated areas is now weighted towards development of commercial property to the detriment of domestic property, and that is a pity. When originally conceived it was envisaged that there would be a mixture of dwellinghouses of various value which would allow a mix of people to live in these areas and that there would be both small industrial property and commercial property development. The balance now has gone away from the dwellinghouse side. The Minister should consider restoring the £5,000 grant which applied to the country as a whole but which was removed by him and his Government last year. I am not advocating that it be restored nationally, but when the scheme was abolished the Minister for the Environment, who has responsibility in the area, exempted by administrative Act the Gaeltacht areas. I understand that in a Gaeltacht area anywhere in the country if a tenant hands back a local authority house to the local authority the tenant is entitled to the £5,000 grant for the purchase of a new dwelling. I advocate strongly that the Minister also by order apply the £5,000 grant scheme to the inner city designated areas.

In many cases in my city, Limerick, developers had taken land. They were working on the basis that those who had been dislocated from centre city areas by urban decay and had gone as local authority tenants to the margins of the city would be anxious to come back and live in the area in which they were born and reared. Certainly they would have come and many planned to do so if the £5,000 grant had not been abolished. I understand the economic reasons and some of the social reasons for the abolition of the scheme, but the inner city urban areas, the designated areas, should be exempt. There is little point or purpose in developing our inner city areas if they are to be concrete graveyards at night. I do not think that type of development where activity ceases at 5.30 p.m., when offices shut and everybody departs for the suburbs, is what the inner city should be. If we are to develop the inner city we must develop a living inner city where families, as in the past, live and bring up their children.

Much of the infrastructure is in place. The churches in the inner city now, through lack of population among other reasons, are half empty for Mass and services. The schools in the inner cities have now vacant classrooms through lack of population. At the same time continuing demands are being made on all Departments of State to duplicate these facilities in urban areas because the movement is to the fringe of our cities. We have a kind of doughnut development where a large hole rapidly increases in the centre and the ring outside gets wider.

It makes neither economic nor social sense and the Minister, in a manner by which he could easily quantify the cost, could decide by order of the Minister for the Environment to reintroduce the £5,000 grant for inner city areas.

As a result of this Finance Bill the old section 23 for apartments, flats and maisonettes will be reintroduced and, of course, the benefit of that accrues to the purchaser of the apartment or small dwelling but only if he has tenants who can pay significant rents. The type of development which is now feasible for tax avoidance purposes in the inner city area in regard to domestic property will be geared towards the highly paid and the young professionals — if any of them want to live there — while the indigenous population of the inner city have been dislocated to the far flung suburbs and will not be in a position to go back there to live. That is bad social and economic policy and I should like the Minister to look at the position.

I do not accept the general thrust of the Deputy's remarks about the weight in favour of commercial interests as against domestic. Perhaps he has a limited point in regard to the reintroduction of the £5,000 local authority grant in some other form. However, while it was taken up fairly substantially by local authority tenants, there is no doubt that there are problems in its wake. I could bring the Deputy to several estates in the country from which excellent people moved out and now community relations are difficult because those who moved out were the leaders. There is not much pressure to have this matter reconsidered. I was in favour of the measure until we saw its consequences.

This section extends the time limit applying to qualifying expenditure in the designated areas in the original five county boroughs, Dublin, Cork, Limerick, Waterford and Galway. I would have thought that everybody would be jumping for joy as a result. We will have more time to cover some of these points in sections 24 to 26 where there is an extensive reintroduction of refurbishment and reconstruction grants for domestic dwellings.

I agree with the point made by the Minister in relation to the £5,000 grant, especially in relation to the Custom House Docks area, where it could have the reverse effect to that intended by Deputy Noonan. Perhaps it would be successful if it was confined to the Custom House Docks area, but the whole point of a living city is to ensure that people who already live in the area are kept there and given new housing. I do not know whether this section is the appropriate one to discuss this, but as it refers to housing it is reasonable to assume it is.

The Custom House Docks area comes under this section and it seems to extend about half way across the river. I do not know what the purpose of that is, or if one could bring houses half way across the river, but it certainly takes up the whole roadway as well as part of the river. I have never been able to understand what this means or what power it gives to the people in the area in regard to encroachment or construction on the river. Perhaps the Minister will clarify that.

Unfortunately, the level of construction in designated urban areas is not as rapid as I would have hoped for and which I thought, a year or so ago, was likely to happen. I know Limerick best and I concur with what Deputy Noonan said about the complete absence of dwelling accommodation. Although there were considerable plans, none has been provided in the designated urban area. The extensive plans for several hundred units have all been dropped, which is particularly disappointing, because if there is commercial development the centre of Limerick city, and of others, will remain empty at night. That is, socially and otherwise, unhealthy.

The rate at which commercial developments have gone ahead is, unfortunately, very slow. There have been a whole series of postponements in Limerick and we are now told that it is hoped to start some of the long postponed projects within the next few weeks. I certainly hope that happens because the number of postponements has been extremely disappointing. They are mainly due to tax changes of one kind or another which have complicated the situation. One of the most important things that could and should be done in all the inner urban areas outside Dublin is, of course, the Government decentralisation programme. I am glad that announcements have been made in relation to a number of smaller places; but nothing has gone ahead in relation to Limerick or Cork and, I think I am right in saying, in relation to Waterford.

There was an excellent site in Limerick some years ago which, unfortunately, has been partly built on and is not available. In recent months I urged the Minister to try to ensure that a site would be available for the proposals in regard to Limerick and I should like the Minister to give the present position in regard to the decentralisation of a large section of the Revenue Commissioners, about 900 officials. That would do more for the regeneration of Limerick and its derelict central areas than almost any of the various incentives. It would make a huge difference, it would be invaluable and very important. Indeed, it should have happened in 1981 or 1982 but it was cancelled at that time. I would particularly like to hear the Minister comment on that point.

Deputy Mac Giolla spoke about the scope of the Custom House Docks area going out as far as the river. The reason for that is to have the full incentives available out as far as the river for landscaping and so on, perhaps even for marinas, who knows? Before I comment on decentralisation, I want to give figures which I did not have on section 22. Deputy Desmond said that revenue was down in relation to excise duty on cars. In January to March 1987 the duty amounted to £34.78 million and for the same period in 1988 it amounted to £42.57 million. In January to April 1987, it amounted to £48.6 million and for the same period in 1988 it amounted to £60.6 million, which confirms the figures I gave about the 14 per cent increase.

I do not want to make an issue of this but those figures are at variance with those in Iris Oifigiúil of 3 May 1988.

The figures I gave are correct.

It is quite something to say that the figures in Iris Oifigiúil are wrong.

The Deputy made that point but he did not say from what he was quoting. I am giving the correct figures supplied by the Revenue Commissioners. In relation to decentralisation, there has been no hold up in pursuing, as actively as possible, the detailed provision of offices for that purpose. At present seven of the 12 are under way or awaiting tenders. It is expected that within the next month or six weeks we will have at least another three of the five that are left. I hope that will include the city named by the Deputy, Limerick. There is no difficulty that I am aware of and I agree fully with the Deputy in regard to the contribution decentralisation will make to the designated towns and cities. I also agree with what he said in regard to any delays or holdups that there have been in starting work in the designated areas.

Question put and agreed to.
Progress reported; Committee to sit again.