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Dáil Éireann debate -
Thursday, 11 May 1989

Vol. 389 No. 9

Finance Bill, 1989: Committee Stage (Resumed).

Debate resumed on amendment No. 58.
In page 70, before section 76, but in Part VI, to insert the following new section:
"76.—(1) (a) In this section—
`the Acts' means—
(i) the Tax Acts,
(ii) the Capital Gains Tax Acts,
(iii) the Value-Added Tax Act, 1972, and the enactments amending or extending that Act,
(iv) the Capital Acquisitions Tax Act, 1976, and the enactments amending or extending that Act,
(v) Part VI of the Finance Act, 1983, and the enactments amending or extending that Part, and
(vi) the statutes relating to stamp duty,
and any instrument made thereunder;
`business' means any trade, profession or vocation;
`notice' means a notice of claim given by the Revenue Commissioners under the provisions of subsection (6);
`tax' means any tax, duty, levy or charge which, in accordance with the provisions of the Acts, is placed under the care and management of the Revenue Commissioners;
`tax advantage' means—
(i) a reduction, avoidance or deferral of any charge or assessment to tax, including any potential or prospective charge or assessment, or
(ii) a refund of or a payment of an amount of tax, or an increase in an amount of tax, refundable or otherwise payable to a person, including any potential or prospective amount so refundable or payable, arising out of, or by reason of, a transaction, including a transaction where another transaction would not have been undertaken or arranged to achieve the results, or any part of the results, achieved or intended to be achieved by the transaction;
`tax avoidance transaction' has the meaning assigned to it by subsection (2);
`tax consequences' means, in relation to a tax avoidance transaction, such adjustments and acts as may be made and done by the Revenue Commissioners pursuant to subsection (5) in order to withdraw or deny the tax advantage resulting from the tax avoidance transaction;
`transaction' means—
(i) any transaction, action, course of action, course of conduct, scheme, plan or proposal, and
(ii) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable or intended to be enforceable by legal proceedings, and
(iii) any series of or combination of the circumstances referred to in paragraphs (i) and (ii),
whether entered into or arranged by one person or by two or more persons—
(I) whether acting in consort or not, or
(II) whether or not entered into or arranged wholly or partly outside the State, or
(III) whether or not entered into or arranged as part of a larger transaction or in conjunction with any other transaction or transactions.
(2) For the purposes of this section and subject to subsection (3), a transaction is a `tax avoidance transaction' if, having regard to any one or more of the following, that is to say—
(a) the results of the transaction,
(b) its use as a means of achieving those results, and
(c) any other means by which the results or any part of the results could have been achieved,
it gives rise to, or, but for this section, would give rise to, a tax advantage, and
the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage.
(3) Without prejudice to the generality of subsection (2), a transaction shall not be regarded as a tax avoidance transaction if it appears that it was a bona fide undertaking or arranged other than for the primary purpose of giving rise to a tax advantage.
Provided that the fact that the primary purpose of the transaction could have been achieved by some other transaction which would have given rise to a greater liability to tax, shall not, by itself, be taken as sufficient grounds for holding that the transaction was a tax avoidance transaction.
(4) Where the Revenue Commissioners are of the opinion that a transaction is a tax avoidance transaction within the meaning of this section, it shall be lawful for them to serve on any person who in their opinion has obtained a tax advantage by virtue of the transaction a notice of claim (in this section referred to as `a notice') setting out their claim.
A notice served under this section shall also set out:
(a) the tax advantage which they consider arises, or which, but for this section, would arise, from the transaction,
(b) the tax consequences which they consider would arise in respect of the transaction if their opinion were to become final and conclusive in accordance with subsection (8), and
(c) the amount of any relief from double taxation which they would propose to give to any person in accordance with the provisions of this section.
The matters set out at (a), (b) and (c) above are referred to in this section as `consequential claims'.
(5) A notice served by the Revenue Commissioners under this section shall unless it is contested by the person upon whom it is served, be declared to be admitted by such person.
(6) Where a person is served with a notice under this section, he may by counter-notice in writing contest the claim any or all of the consequential claims set out in the said notice, such counter-notice to be served not later than 30 days after the service of the notice upon such person.
(7) Where a counter-notice is served pursuant to subsection (6) hereof, the notice and counter-notice shall be laid before the Appeal Commissioners for the determination of any issues arising thereon by the person serving the counter-notice.
(8) Where a notice is served and is deemed to be admitted pursuant to subsection (5) of this section, the matter set out in the notice including the claim and any consequential claims shall, as against the person upon whom the notice has been served be deemed to have been adjudicated against such person finally and conclusively.
(9) The Revenue Commissioners may, at any time, amend, add to or withdraw any matter specified or described in a notice by giving notice (hereafter in this subsection referred to as the `notice of amendment') in writing of the amendment, addition or withdrawal to each and every person affected thereby, in so far as the person is so affected, and the foregoing provisions of this section shall apply in all respects as if the notice of amendment were a notice and any matter specified or described in the notice of amendment were specified or described in a notice.
Provided that no such amendment, addition or withdrawal may be made so as to set aside or alter any matter which has become final and conclusive on the determination of an issue made with regard to that matter under subsection (8).
(10) The Appeal Commissioners shall hear and determine an issue laid before them under subsection (7) as if it were an appeal against an assessment to income tax and, subject to subsection (9), all the provisions of the Income Tax Act, 1967, relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.
(11) In determining any issue between the Revenue Commissioners and any person in relation to any matter arising on a notice or counter-notice, the Revenue Commissioners shall have regard to the provisions of this section but the onus shall be on the person who has served the counter-notice to satisfy the Appeal Commissioners that the claim or consequential claim set out in the notice served on him is wrong in any respect.
(12) In determining any issue laid before them pursuant to subsection (7) of this section, the Appeal Commissioners and where appropriate the Circuit Court and the High Court shall have regard to—
(I) the form of that transaction,
(II) the substance of that transaction,
(III) the substance of any other transaction or transactions which that transaction may reasonably be regarded as being directly or indirectly related to or connected with, and
(IV) the final outcome and result of that transaction and any combination of those other transactions which are so related or connected.
(13) Where pursuant to subsection (4), the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction and, pursuant to that opinion, notices are to be given under subsection (5) to two or more persons, any obligation on the Revenue Commissioners to maintain secrecy or any other restriction upon the disclosure of information by the Revenue Commissioners shall not apply with respect to the giving of the notices as aforesaid or to the performance of any acts or the discharge of any functions authorised by this section to be performed or discharged by them or to the performance of any act or the discharge of any functions, including any act or function in relation to a determination made under subsection (10), which is directly or indirectly related to the acts or functions so authorised.
(14) The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions, including the forming of an opinion, authorised by this section to be performed or discharged by the Revenue Commissioners and references in this section to the Revenue Commissioners shall, with any necessary modifications, be construed as including references to an officer so nominated.
(15) This section shall apply as respects any transaction where the whole or any part of the transaction is undertaken or arranged on or after the 25th day of January, 1989, and as respects any transaction undertaken or arranged wholly before that date in so far as it gives rise to, or would, but for this section, give rise to—
(a) a reduction, avoidance or deferral of any charge or assessment of tax, or part thereof, where the charge or assessment would otherwise first arise on a date, or
(b) a refund or a payment of an amount, or of an increase in an amount, of tax, or part thereof, refundable or otherwise payable to a person where that amount, or increase in the amount, would otherwise become first so refundable or otherwise payable to the person on a date,
which could not fall earlier than the said 25th day of January, 1989, as the case may be, but no notice shall be served in relation to any transaction which appears to have been undertaken or arranged earlier than 1st January, 1985.
(16) The liabilities of any person to pay tax as finally determined by the Appeal Commissioners or the Circuit Court pursuant to the provisions of these sections, or as deemed to have been so determined, shall for all purposes be deemed to be liabilities imposed by law and all remedies, penalties and liabilities for interest shall have application accordingly.".

Let us proceed with the Finance Bill and hope that order will be restored.

I wonder if the Minister for Finance always provokes such a rowdy reception. Before Question Time we were dealing with the history of this section and a number of points occurred to me during the lunch break. I do not want to prolong the debate on this section for too long, but I want to put on the record a number of my views on it.

First there are a number of features which, despite the Minister's amendments, still stick out as wrong with the section. For instance, the Minister told me earlier that the wording of section 76 (9) (a) (i) (I) would be amended but it will not. It will only be amended by removing the words "are satisfied". I think the words "that there are sufficient grounds for the Revenue Commissioners to form the opinion" in that subsection will still stand. I hope I am not wrong yet again, but I think I am right. The Minister has tabled a number of amendments to section 76 but the amendments which are tabled to lines 38 and 39 of section 76 (9) (a) (i) (I) will only make one change. I think the Minister will confirm that I am right.

What lines is the Deputy talking about?

I am talking about the two paragraphs at the bottom of page 75.

Amendment No. 58c proposes the deletion of the words "there are sufficient grounds for the Revenue Commissioners to form the opinion that" and to substitute the word "consider".

I am sorry, I am looking at amendment No. 58c. Is there another amendment of which I am not aware?

Amendment No. 58e.

Amendment No. 58e refers to lines 48 to 50. I think the Minister has lost an amendment in the process. Therefore, like an idiot, I was successfully contradicted by the Minister on no grounds at all.

Page 75, subsection (9) (a), to delete entirely lines 38 and 39.

Where is that?

Amendment No. 59b.

Amendment No. 59b?

No, amendment No. 58c, which reads:

In page 75, subsection (9) (a), to delete lines 38 and 39 and substitute "(I) consider".

I agree that does cover it.

Finally we are left with a section which started out as one which proposed to give the Revenue Commissioners determining powers and was modelled closely on the Canadian statute, which has gone through an evolution, and is still going through an evolution even now in this House. It evolves from one in which the Revenue Commissioners made a primary determination into one in which the Revenue Commissioners simply initiate a process but are required to form an opinion. If that were the beginning and end of it, nobody could have a huge objection because the Revenue Commissioners are entitled to form opinions and put matters before appeals tribunals. But, as Deputy Noonan said, there is here an appeal from an opinion which is a strange form of language. That really derives from the fact that there was originally an appeal from a determination but it was changed by the draftsman; wherever "determination" appeared, the word "opinion" was put in its place.

We now have a very different intention endeavouring to show its way through all the original foundations and brickwork of a very different scheme.

On balance the section now is very clumsily drafted. At the very beginning had they said there will be a claim made by the Revenue Commissioners, the person can contest the claim and, if he contests the claim, it is decided by a body, it would amount to a fairly simple basis on which to draft a section and put it before this House. Instead we have an appeal from something which should not be appealed at all, which is an "opinion". As Deputy Noonan said, one only appeals a "determination". The problem with this is that, appealing an "opinion" is, of its very nature, a contradiction in terms. This shows right through the section as it now remains.

For example, subsection (7) talks about people being aggrieved by an opinion. If one examines any case law on the meaning of the word "aggrieved"— it occurs in the trademark law and all the rest of it — one finds it is somebody who disagrees with it, is damnified by it, who is adversely affected by it. It cannot be just somebody who disagrees with it; first one has to disagree with it and second, show prejudice as a result of one's disagreement. The phrase "aggrieved by an opinion" does not mean anything at all. One cannot be aggrieved by somebody elses opinion, nor is one aggrieved by the fact that somebody sets in motion a process to determine an issue against one. One cannot be aggrieved by that. One can dispute a claim but one cannot be aggrieved by an opinion nor, legally speaking, can one be aggrieved by the fact that somebody starts a process against one. If I am caught for drunken driving and charged I cannot be described as aggrieved by the process. It does violence to language to attempt to suggest that this section, in its present form, is well drafted.

I do not like being arrogant — and I am not going to be — but I am going to say this. What I did last Monday in the space of three hours is more coherent, better worked — even with the warts and omissions that the Minister pointed out — than this section which has gone through a long gestation period and has emerged as a mutant of what was originally conceived. As it now stands, it is a very badly drafted section, one which could be improved very substantially. Indeed, it would not have been presented as an original piece of work in this form had a week been taken to scrutinise it. It started off as one thing, has turned into another, and is littered with the debris of its first character which gets in the way and obstructs it in its reformed state.

I would ask the Minister to seriously consider coming forward with a better section on Report Stage. I would urge him to sit down and say: I will get all the concepts that are here, which are not that difficult to work with and I can have the same definition of a tax avoidance transaction. At least he could put together machinery which the courts will not realise from the very beginning is a warped and distorted procedure, twisted around to try and save it from being held to be unconstitutional, which is what has been done to this section.

There are other things about it I do not like. Grabbed holus-bolus from the Canadian statute, in page 71, line 16, there is a new word I have never seen in any tax statute anywhere perhaps the Minister will tell me if there is some precedent for it, but I have never seen it. The phrase is "acting in consort". I have heard of people "acting in concert" but I have never heard anyone "acting in consort". It may be a North Americanism because I am told it does appear in the Canadian statute, but I have never heard that phrase used — to "act in consort" with somebody else. "Concerted action" is when two people get together to do something but I have never heard of "consorted action".

I have and I am not a barrister.

What about Prince Albert?

That is somebody who goes along with it in that sense. Loss of consortium is what husbands used to be able to see.

For instance, if one looks at lines 39 and 40 on page 71 — I take it the idea is to delete line 39 and substitute the words "the Revenue Commissioners form"— why is that there? The subsection (2) reads:

For the purposes of this section and subject to subsection (3), a transaction is a "tax avoidance transaction" if, having regard to any one or more of the following, that is to say —

(a) the results of the transaction,

(b) its use as a means of achieving those results, and

(c) any other means by which the results or any part of the results could have been achieved,

there are reasonable grounds for the Revenue Commissioners to form ...

which is the present text. The Minister suggests that should read: "The Revenue Commissioners form the opinion that — (i) it gives rise to, or, but for this section, would give rise to, a tax advantage ..." With the greatest respect, that is not the definition of a "tax avoidance transaction," that the Revenue Commissioners have formed an opinion about. Again, that is badly drafted. It is not the definition. It should be that there are reasonable grounds to believe that this and that is the case because the Revenue Commissioners are not given the function, under the statute, of defining what is or is not a "tax avoidance transaction". That is badly drafted also. Now, it will read: "For the purposes of this section, having regard to a certain number of matters, a transaction is deemed to be a `tax avoidance transaction' if the Revenue Commissioners form an opinion about it." That is badly drafted and is wrong.

The amendment No. 58a, is badly drafted, and ends up saying that a "tax avoidance transaction" is dependent on the Revenue Commissioners' view of it. I thought we were trying to substitute an objective test about what is and is not a tax avoidance transaction. If you try and marry the proposal contained in amendment No. 58a to the proposed amendment No. 58b they do not make sense because you can now appeal on the grounds that the transaction specified is not a tax avoidance transaction but the definition still hinges around the Revenue Commissioners opinion of it. With respect that was not well drafted and it shows the stitching and darning that has been done on this section to try to make it hang together. If the draftsmen look at it they will appreciate that the definition now offered to the House of a tax avoidance transaction depends on the Revenue Commissioners' view of it. That clearly conflicts with what the Minister is attempting to do in relation to subsection (7) (a).

I believe this section could easily be re-written between now and Tuesday to get rid of the "opinion" parts completely. The word "opinion" only appears as a substitute for "determination" and as a very threadbare substitute pasted in on "Tipp-ex" all over the text of this Bill. Between now and Tuesday this section could be re-written. Even if my efforts of last Monday morning are not considered to be proper the Parliamentary draftsman could, within three hours, produce a coherent constitutional and properly drafted section which would not suffer from all the defects, as in this case, and which would hang together and make sense and would not be vulnerable to a constitutional challenge.

Look at the definition of tax consequences. The tax consequences are defined to be such adjustments as may be made and done by the Revenue Commissioners pursuant to subsection (5). In the middle of subsection (5) we see again a highly Revenue Commissioner orientated view of what are the tax consequences of any particular stand. Again, the Revenue Commissioners are given powers to recharacterise, for tax purposes, the nature of any payment or other amount. That must be a judicial function. It is not an administrative function. In the case of Deegan and Hearne which is the leading case on an inspector's function it was held that it was not a judicial function, that it was entirely administrative. If somebody forms opinions which become final and conclusive and if somebody starts to recharacterise one transaction as another, if that is not judicial, it is legislative — it is certainly not administrative. On those grounds alone this is a very rickety section.

Would the Minister accept from me that all these criticisms are levelled against the section as proposed in the context of my accepting the principle of what he is talking about? I do not need to have pushed down my throat the wrongness of tax avoidance and the rightness of a general provision to invalidate tax avoidance transactions but I believe that in attempting to change the law, in a revolutionary manner such as this and in a well merited way, the Revenue Commissioners should not, through the Department of Finance, cobble together something, keep changing it and bring before this House a most inadequate section which is weak in its terms. The reason I object to this section is that it is so weak, so confused and diffuse and is littered with bits from a previous existence which no longer makes sense.

I appeal to the Minister to indicate to the House that he proposes to redraft his section so as to make it as coherent as possible so as to reflect — and this is the point I think is of primary importance — the fact that there is no function of primary determination or adjudication given to the Revenue Commissioners. All they are required to do is initiate a process or a claim and it is up to the taxpayer to dispute that. There may be a lot of semantics in all of this but there is a grain of truth that a court looking at it will see it littered with the debris of its former unconstitutional manifestation and will leap on any defect in it to strike it down on that account. Every statute which is passed by this House and by the Seanad has a presumption of constitutionality about it. On this occasion when we are looking at something which is so weak and so flimsy and which is being amended piecemeal to try to make it conform with the Constitution, when its basic concept was unconstitutional, surely it is within the power of the Minister to come up with a better section on Report Stage.

In response to Deputy McDowell I think we can establish a few things beyond any disagreement or shadow of doubt. First, he accepts the principle involved in the Bill. That is fine. Secondly, as he must accept, we had a Second Stage debate in which plenty of points were raised. I expressed my own views. Various cases were made in the discussion that took place. We have evolved into the sections and the amendments. The Deputy makes the case that the Bill is untidy, that it is badly drafted and that he would not choose some of the words which were chosen. I can say to him in response that the principles are there. We set out what we wanted to do, to make the changes we wanted to make. That job was given to a draftsman, it was vetted by the Attorney General's Office and this is what I have ended up with. Views have been expressed here today about bad draftsmanship, loose draftsmanship, etc. — that is no more than untidiness to say the least. I can look at the untidy aspects but I do not accept that I should take away the section and have it redrafted by Tuesday.

There are a few other points I would like to make. There is no question of the primary function of determination being given to the Revenue Commissioners. I want to repeat that in case there is any doubt still left in anybody's mind. The question of an opinion is there, it is a mechanism to trigger it off, to have it go through the Appeals Commissioners and on to the courts. They will look at the very same ground rules and the first principles on which the Revenue Commissioners formed their opinion on the first day. Subsection (1) (b) applies the same ground rules and brings them into subsections (2) and (3) which defines and also provides the comforts for business.

It is beyond argument at this stage that any primary function good, bad or indifferent be given to the Revenue Commissioners for determination. Clearly, it is the mechanism to trigger it off, to have it examined and the same first principles and ground rules under which it was examined by the Revenue Commissioners, in the first instance, would be looked at by the Appeals Commissioners, the Revenue Commissioners and finally the courts. How can anybody clearly assert that any determination function will be given to them in the first place? It is an opinion, the Deputy may disagree as to the choice of word. The choice of word was approved by the Attorney General's office and I could not undertake to provide a new section by Tuesday. However, I will look at some of the untidy aspects which the Deputy referred to.

(Limerick East): This will be a final intervention.

It strikes the Chair that in respect of this section we have dealt with it body and soul, bones and sinews, to the point where we might agree to putting some of the questions.

(Limerick East): I think we have also dealt with the principle of sections 77, 78 and 79.

One could have said the pedigree as well.

(Limerick East): I thank the Minister for his intervention. I am convinced by Deputy McDowell's arguments about his line of approach. I know his amendment is not perfect but by and large I think it is a better formulation than the Minister's amendment. We all agree that the Minister has drawn heavily on the Canadian legislation. Between now and next Tuesday, perhaps we should have another look at it. There are a couple of sections in it which would improve our understanding of this section, would make it easier and certainly provide more certainty. It seems that there will be no certainty in this section until the Circuit Court has heard and decided a number of cases. Effectively, we are buying a bit of a pig in a poke here. We know the general trend, the general run of it, but in the final analysis, until there is case law coming from the Circuit Court on this section, we will not know how wide this will spread or how narrow the focus will be.

In the Canadian legislation on the general anti-avoidance provision, first, it is stated:

Where a transaction is an avoidance transaction, the tax consequences to a person shall be determined as is reasonable in the circumstances in order to deny a tax benefit which, but for this section, would result directly or indirectly from the transaction, or from a series of transactions which includes that transaction.

It goes on to define an avoidance transaction in precise terms:

An avoidance transaction means any transaction that, but for this section, would result directly or indirectly in a tax benefit unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the tax benefit.

Another subsection which deals with one of my concerns states:

For greater certainty, subsection (2) does not apply to a transaction where it may reasonably be considered that the transaction would not result directly or indirectly in a misuse of the provision of this Act, or an abuse having regard to the provision of this Act other than this Section read as a whole.

The Minister has this material available to him, so I shall not continue. It is worth looking at the manner in which Canadian legislation defines an avoidance transaction and the manner in which it makes exceptions of genuine business transactions. It may be worth going over that ground again between now and Tuesday.

The House also appreciates that, in respect of amendment No. 58, acceptance of that amendment would mean the deletion of section 76.

I am asking you to put my amendment to a vote.

Amendment put.
The Committee divided: Tá, 44; Níl, 81.

  • Barnes, Monica.
  • Barrett, Seán.
  • Begley, Michael.
  • Birmingham, George.
  • Boylan, Andrew.
  • Bruton, John.
  • Bruton, Richard.
  • Carey, Donal.
  • Clohessy, Peadar.
  • Colley, Anne.
  • Connaughton, Paul.
  • Cosgrave, Michael Joe.
  • Deasy, Austin.
  • Doyle, Avril.
  • Dukes, Alan.
  • Durkan, Bernard.
  • Enright, Thomas.
  • Farrelly, John V.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Gibbons, Martin Patrick.
  • Griffin, Brendan.
  • Harney, Mary.
  • Hegarty, Paddy.
  • Higgins, Jim.
  • Keating, Michael.
  • Kelly, John.
  • Kennedy, Geraldine.
  • Kenny, Enda.
  • McCoy, John S.
  • McDowell, Michael.
  • McGahon, Brendan.
  • Mitchell, Jim.
  • Naughten, Liam.
  • Nealon, Ted.
  • Noonan, Michael,
  • (Limerick East).
  • O'Brien, Fergus.
  • O'Malley, Desmond J.
  • O'Malley, Pat.
  • Pattison, Séamus.

Níl

  • Abbott, Henry.
  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Andrews, David.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Matthew.
  • Brennan, Séamus.
  • Browne, John.
  • Burke, Ray.
  • Byrne, Hugh.
  • Calleary, Seán.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Mary T.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • De Rossa, Proinsias.
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fitzgerald, Liam.
  • Fitzpatrick, Dermott.
  • Flood, Chris.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Denis.
  • Gallagher, Pat the Cope.
  • Gregory, Tony.
  • Haughey, Charles J.
  • Roche, Dick.
  • Sherlock, Joe.
  • Spring, Dick.
  • Stafford, John.
  • Stagg, Emmet.
  • Swift, Brian.
  • Hilliard, Colm Michael.
  • Howlin, Brendan.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kemmy, Jim.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCartan, Pat.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • Mac Giolla, Tomás.
  • Mooney, Mary.
  • Morley, P.J.
  • 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'Kennedy, Michael.
  • O'Leary, John.
  • O'Rourke, Mary.
  • O'Sullivan, Toddy.
  • Pattison, Séamus.
  • Power, Paddy.
  • Quinn, Ruairí.
  • Reynolds, Albert.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Walsh, Seán.
  • Wilson, John P.
  • Wright, G.V.
Tellers: Tá, Deputies P.O'Malley and Colley; Níl, Deputies V. Brady and D. Ahern.
Amendment declared lost.
SECTION 76.

I move amendment No. 58a:

In page 71, subsection (2), to delete line 39, and substitute "the Revenue Commissioners form".

The House already agreed to take all these amendments together for discussion and it is presumed that they have been discussed already. Nevertheless, if there is any point the Minister wishes to make, I am sure the House will accept it.

(Limerick East): If the Minister wants to put some points of clarification on the record, that would be a good idea.

Concern was expressed that an impossible burden of proof was being placed on taxpayers by section 76. That is not the case. In the spirit of reassuring taxpayers and making it clear that the section is aimed only at tax avoiders, the approach to appealing against the Revenue Commissioners' opinion has been changed from one of "reasonableness", about which doubts were raised, to one of "correctness". The Appeal Commissioners and the courts will uphold an opinion of the Revenue Commissioners only if they consider it to be correct. Because the references to "reasonableness" and "sufficient grounds" have been removed it is being provided that the Appeal Commissioners and the courts should have to consider that a transaction is a tax avoidance transaction.

It is believed that this represents a fair test, having regard to the nature of tax avoidance and the need to strike a balance between the interests of the general body of taxpayers who wish to see tax avoidance stamped out and the individual taxpayer indulging in tax planning. To provide that the Appeal Commissioners and the courts must be satisfied might impose on the Appeal Commissioners and the courts an impossible task in areas where the refusal to co-operate in supplying information is part of the practice being adopted by tax avoiders.

This is a technical amendment to subsection 13 (a) of section 76 to put beyond doubt that the section will apply only to tax avoidance transactions completed before budget day where the tax which the tax avoider is seeking to avoid arose as a result of activities which took place wholly after budget day. That is the scope of the application of the specific anti-avoidance provision. While it is considered that the previous wording had the same effect, it is accepted that its rather general nature, springing from the general nature of the section itself, may have given a different impression. It is not considered that any amendment of paragraph (b) is necessary as a repayment is not dependent on the making of a charge or an assessment. If the elements entitling a person to a repayment are present before budget day, the repayment will be made even though the actual mechanics of making the repayment are not put into effect until after budget day.

Amendment agreed to.

I move amendment No. 58b:

In page 74, subsection (7), lines 50 to 52, and in page 75, lines 1 and 2, to delete paragraph (a), and substitute the following:

"(a) the transaction specified or described in the notice of opinion is not a tax avoidance transaction, or".

Amendment agreed to.

I move amendment No. 58c:

In page 75, subsection (9) (a), to delete lines 38 and 39, and substitute "(I) consider".

Amendment agreed to.

I move amendment No. 58d:

In page 75, subsection (9) (a), line 45, to delete "are satisfied" and substitute "consider".

Amendment agreed to.

I move amendment No. 58e:

In page 75, subsection (9) (a), lines 48 to 50, to delete ", there are sufficient grounds for the Revenue Commissioners to form the opinion that".

Amendment agreed to.

I move amendment No. 58f:

In page 76, subsection (9) (a), line 7, to delete "are not so satisfied" and substitute "do not so consider".

Amendment agreed to.
Amendment No. 59 not moved.

I move amendment No. 59a:

In page 77, subsection (13) (a), line 28, to delete "would otherwise first arise on" and substitute "arises by virtue of any other transaction carried out wholly on or after".

Amendment agreed to.
Question: "That section 76, as amended, stand part of the Bill" put and agreed to.
Section 78 agreed to.
NEW SECTION.

I move amendment No. 59b:

In page 81, before section 79, to insert the following new section:

"79.—(1) Section 433 of the Income Tax Act, 1967, is hereby amended, as respects any yearly interest of money, annuity or other annual payment paid on or after the 9th day of May, 1989, by the deletion in subsection (1) of the words `no assessment shall be made upon the person entitled to such interest, annuity, or annual payment, but' and the said subsection (1), as so amended, is set out in the Table to this subsection.

TABLE

(1) Where any yearly interest of money, annuity, or any other annual payment (whether payable within or outside the State, either as a charge on any property of the person paying the same by virtue of any deed or will or otherwise, or as a reservation thereout, or as a personal debt or obligation by virtue of any contract, or whether payable half-yearly or at any shorter or more distant periods), is payable wholly out of profits or gains brought into charge to tax, the whole of those profits or gains shall be assessed and charged with tax on the person liable to the interest, annuity, or annual payment, without distinguishing the same, and the person liable to make such payment, whether out of the profits or gains charged with tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled, on making such payment, to deduct and retain thereout a sum representing the amount of the tax thereon at the rate or rates of tax in force during the period through which the said payment was accruing due. The person to whom such payment is made shall allow such deduction upon the receipt of the residue of the same, and the person making such deduction shall be acquitted and discharged of so much money as is represented by the deduction, as if that sum had been actually paid.

(2) (a) Any payment to which this subsection applies—

(i) shall be made without deduction of income tax,

(ii) shall not be allowed as a deduction in computing the income or total income of the person by whom it is made, and

(iii) shall not be a charge on income for the purposes of corporation tax.

(b) This subsection applies to any payment made after the 9th day of May, 1989, which is—

(i) an annuity or other annual payment charged with tax under Case III of Schedule D, other than—

(I) interest,

(II) an annuity granted in the ordinary course of a business of granting annuities, or

(III) a payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest,

and

(ii) made under a liability incurred for consideration in money or money's worth, where all or any part of such consideration is not required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person making the payment.".

Is that to deal with cases such as Elgar Investments?

Yes, the operation in Molesworth Street.

Amendment agreed to.
Sections 79 and 80 agreed to.

We are dealing with amendment No. 59c in the name of the Minister. Amendment No. 1 to amendment No. 59c is related. Amendment No. 59d is an alternative. It is proposed therefore that we take together for discussion purposes amendments Nos. 59c, amendment No. 1 to amendment No. 59c and amendment No. 59d. Is that agreed? Agreed.

I move amendment No. 59c:

NEW SECTION.

In page 85, before section 81, to insert the following new section:

81.—(1) Notwithstanding anything to the contrary contained in any enactment, the Minister for Finance may, after consultation with the Minister for Health and the Minister for the Environment, make regulations providing for—

(a) the repayment of excise duty and value-added tax and the remission of road tax in respect of a motor vehicle used by, and

(b) the repayment of excise duty relating to mineral hydrocarbon light oil used in vehicles, to be specified in the regulations, by,

a severely and permanently disabled person—

(i) as a driver, where the disablement is of such a nature that the person concerned could not drive any vehicle unless it is specially constructed or adapted to take account of that disablement, or

(ii) as a passenger, where the vehicle has been specially constructed or adapted to take account of the passenger's disablement, and where the vehicle is adapted, the cost of such adaptation consists of not less than 30 per cent. of the value of the vehicle excluding tax and excise duty, or such lesser percentage in respect of certain cases as may be specified by regulations in respect of the repayment of any tax relating to adaptation costs only.

(2) Regulations under this section shall provide for—

(a) the criteria for eligibility for the remission of the taxes specified in subsection (1), including such further medical criteria in relation to disabilities as may be considered necessary,

(b) subject to subsection (3) (b), the procedures to be used in relation to the primary medical certification of a disabled person and to appeals against such certification,

(c) the procedures in relation to the certification of vehicles to which the regulations relate,

(d) the amount of value-added tax and excise duty repayable in respect of a vehicle to which the regulations relate,

(e) the maximum engine size to which the regulations relate,

(f) the limits on the frequency of renewal of a vehicle, for the purposes of obtaining a refund of tax or excise duty, and

(g) in the case of the driver concerned, evidence that the vehicle is for his personal use and evidence of his driving capacity,

and the regulations may provide for such other matters as the Minister for Finance considers necessary or expedient for the purposes of giving effect to this section.

(3) (a) Upon the first coming into operation of regulations under this section, section 43 (1) of the Finance Act, 1968, shall cease to have effect.

(b) Any person who, at the passing of this Act, was the registered owner of a motor vehicle, being a motor vehicle in respect of which such person was entitled to and had received a refund of tax or excise duty by reference to section 43 (1) of the Finance Act, 1968, shall be deemed to be a person who possesses a primary medical certificate which, subject to compliance with the non-medical requirements set out in the regulations, entitles him to a similar repayment of tax or excise duty by reference to this section.

(4) Regulations made under this section shall be laid before Dáil Éireann as soon as may be after they are made, and if a resolution annulling the regulations is passed by Dáil Éireann within the next subsequent 21 days on which Dáil Éireann has sat after the regulations have been so laid, the regulations shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

(5) In this section—

`medical practitioner' means a medical practitioner registered under the Medical Practitioners Act, 1978;

`primary medical certification' means medical certification by a medical practitioner who is the holder of a post in a health board, being the post commonly known as the post of Director of Community Care and Medical Officer of Health, in the area in which the person to whom the certification relates ordinarily resides and `primary medical certificate' shall be construed accordingly.".

This amendment represents the outcome of a renewed effort to improve the tax rebate schemes for disabled drivers and passengers. As arranged during the Second Stage debate, I have had useful and constructive talks with Opposition spokesmen on this sensitive issue and the amendment has been prepared in the light of those discussions.

The existing scheme based on section 43 of the Finance Act, 1968, has proved to be unsatisfactory in a number of respects. There is no doubt that the present medical criterion "wholly or almost wholly without the use of each of one's legs" excludes otherwise deserving cases of disabled drivers. There is also a need from an administrative point of view to bring together the different elements of the existing scheme so that standardised and fairer conditions and procedures will henceforth apply. The amendment before the House seeks to make good these deficiencies. It would enable the Minister for Finance to make regulations for remissions of road tax, refunds of VAT and excise duty on vehicles and a refund of excise duty on petrol.

The general criterion of disability will be that a person must be severely and permanently disabled with the result that he or she would be unable to drive a car unless it was specially constructed or adapted. The scheme will also apply to disabled persons as passengers where significant car adaptation is needed. It would be my intention to specify as necessary in more detail what medical conditions might be covered by this. This will be done in the regulations. This definition is intended to cover a wider range of disability than that in use at present.

The whole point is to broaden eligibility to cover cases at present excluded. For example, I envisage that persons of small stature who have mobility problems will be included, as will amputees of foot or leg and amputees of both hands. In addition to this important broadening of the scope of eligibility, it is proposed that in future all medical certification will be provided by the director of community care in the health board in whose area the applicant normally resides. There will be provision for appeal against a decision not to allow eligibility.

The regulations will also specify a number of controls and limits, the chief of which will relate to the maximum size of vehicle to be assisted, 2,000 cc, and to the total amount of VAT and excise duty to be refunded, £7,500 in respect of a car, and this will be indexed to the increase in car prices.

Finally, let me assure all those who are at present in receipt of a remission of a refund of tax under the existing scheme, that they will not have to undergo any further process of medical certification to retain eligibility for the particular from of tax refund they enjoy at present.

I trust that the new scheme will provide a much more satisfactory basis for this important form of assistance designed to improve the mobility of the disabled. I commend the amendment to the House.

(Limerick East): First I would like to thank the Minister for his explanation. I would also like to thank him for arranging to bring the finance spokespersons from the different parties together. It facilitated us greatly and allowed us to have an input into the drafting of this section which is a procedure which is unusual enough in this House. I would like to put it on record that my party appreciate very much what the Minister has done.

There is an amendment down in the name of Deputy Yates, the Fine Gael spokesman on Health. It is an alternative to the Minister's amendment but it was put down before we had the details of the Minister's amendment. There is no intention whatsoever to press it as an alternative. We allowed it to remain on the Order Paper simply for the purposes of discussion.

I welcome what the Minister has said today. It seems to me that the enabling section which the Minister is putting into this Bill to allow him to subsequently come in with appropriate regulations will allow him to hang regulations on this section which are sufficient to meet all the reasonable requests that have been made.

I would like the Minister to continue the discussion process and, before he places the regulations before the House, perhaps he would again call a very short meeting of the spokespersons on Finance so that we can agree the regulations before they come into the House. I would not envisage any great difficulty in that respect, but it can get very awkward if there is disagreement about regulations once they are placed before the House, especially if the Minister is adopting the negative procedure of endorsement, with which I agree, rather than a positive endorsement which would allow for a greater level of debate.

There are two or three minor points which the Minister may take on board. Section 1(b) refers to the repayment of excise duty relating to mineral hydrocarbon light oil used in vehicles. That seems to me to confine it to petrol. I do not see why the option of diesel should not be allowed because I think hydrocarbon light oil would be petrol.

I know that the economics of a diesel car is that one would need to be driving more than 15,000 miles to justify the initial expense, and that is a lot of miles for a disabled person. On the other hand, the excise rebate goes up to a maximum of 600 gallons of petrol on one aspect of the scheme, so if we are talking in terms of 30 miles to the gallon there is an excise rebate up to 18,000 miles built into the scheme anyway. It is a minor point but perhaps the Minister might take it on board and include diesel as well especially in circumstances where I understand it is now the Minister's intent to apply this to cars up to 2,000 cc which would have power steering and automatic gear change to facilitate disabled drivers. In these circumstances there may be a greater range of automatic cars with power steering if the diesel option is allowed in. I think it is worth looking at.

The section on the second page of what I have is 1 (b) (ii) and refers to a passenger where the vehicle has been specially constructed or adapted to take account of the passenger's disablement. I presume that the remainder of that, about 30 per cent etc., applies to modifications required by a passenger and does not tip back and affect the modifications required by a driver. I take it it is tied in to passengers?

(Limerick East): In regard to the maximum engine size to which the regulations relate, again I am pressing for 2,000 cc because it is very hard to get cars with power steering, which would be required by disabled people, at low engine capacity. There may be a range of automatic cars, but certainly not automatics with power steering, in the lower ranges of engine capacity.

I have one final point in regard to subsection (5) where the definition of a medical practitioner means a medical practitioner registered under the Medical Practitioners Act 1987. It goes on to say that primary medical certification means medical certification by a medical practitioner who is the holder of a post in a health board being the post commonly known as director of community care. That ties it in quite a lot and it might make it administratively difficult. I would like to make a suggestion which the Minister may consider either as a modification of this or subsequently in the regulations. I can understand why the certification could not be done by a disabled person's private doctor because the kind of relationship that builds up between the doctor and the patient in the course of an ongoing illness is such a close relationship that it would put the doctor in an extremely difficult situation if he were asked to certify. We need third party medical evidence, but to tie it into the director of community care who can be a rather remote figure in certain communities might lead to problems. I wonder is it the intention that the director of community care would set up a panel of doctors who would actually do the medical examination, and the director of community care would simply certify on foot of medical evidence provided by other doctors, or is it the intention that the director of community care would do it himself? If it is the latter, there is a certain amount of work being put on a man who is fairly busy already. A panel of doctors appointed by the director of community care, the health board, or the Minister for Health, to whom a disabled person could go who would provide certification through the director of community care who would then endorse it might be a better way of proceeding. I would like the Minister to clarify that.

I welcome what the Minister has done. He has approached this in a very considerate and open way and has taken on board all reasonable opinions that have been expressed to him. I would like him to take these points on board also. Perhaps he would accept my suggestion that at some stage when the regulations are drafted we could have a quick look at them in private before they become public.

I would like to associate myself with the general remarks made by Deputy Noonan. The approach of the Minister to this has been a very pleasant surprise and it works to the benefit of everybody because it means that nobody is exposed to undue pressure on an issue like this and a consensus can emerge privately much more easily than in a public debate on the issue. It is perhaps a model for other difficult issues and I want to thank the Minister for taking the initiative of bringing that process about.

I am operating off a piece of paper the Minister gave me the other day so I do not know whether I am missing anything; I want to be careful, after my experience earlier today, not to get it wrong.

Looking at the section I do not see the Minister giving himself the power to revoke or amend the regulations. It may be in it, but I do not see it and it should be there if the Minister intends to do it. If the Minister does intend to do it, I think it should be an amending power rather than a revoking power because it would be a bit strange if we gave the Minister the right to scrap the whole system completely whenever the thought came into his head. It is usual to say that a Minister can make regulations and revoke and amend accordingly. It may be implicit in it anyway.

It is implicit in it.

Maybe between now and Report Stage it could be made explicit. I have examined the matters that can be dealt with in regulations. Paragraph (e) refers to the maximum engine size to which the regulations relate. The Minister should give himself a little more flexibility in that regard and perhaps he would do that on Report Stage. He should make the wording plural to read the maximum engine sizes for classes of vehicles. He may find that for some vehicles he can fix a lower engine size than for others. I am thinking in terms of cars that require to be automatic or require power steering. These may require a larger engine size than others and the Minister may find himself spancelled if he has to fix one engine size for all cars, so a little flexibility in that area would do no harm.

I was surprised but pleased also that present beneficiaries of the scheme are en bloc transferred past the first hurdle in this scheme. In view of the fact that there had been allegations of abuse and over-generous determination by doctors under the existing scheme, it was both generous and wise of the Minister to avoid the business of actually removing people from the scope of the new scheme. In retrospect it would have been a mistake to do that. It is a point that had not occurred to me.

I would also endorse what Deputy Noonan said about the desirability of some consultative process in relation to the regulations, that they could be circulated in draft form. I appreciate that the Minister received advice about the phraseology in relation to the annulment of regulations. Small matters will have to be changed from time to time and it probably would be too much to bring before the Dáil. On reflection, I think the Minister is right and I was wrong in that regard. With those words, I indicate support for the change.

I also want to thank the Minister for meeting the spokespersons of the different parties in drafting the regulations. I would say to Deputy McDowell that it is an example of how we can work together if we act in consort.

It is not a "consortorium".

Following the meeting, I sent a brief note to the Minister in which I referred to a few of the matters that had been raised. One of the matters I was happy with was the lower cc's of vehicles. It was brought to my attention that power steering is probably not available in cars of less than 2000 cc's. I mentioned in the note to the Minister that power steering is essential in some cases of handicap. I take it that the size of the vehicle is not really the worry but rather the expense. Some vehicles, even of lower cc's, can be very expensive. The type of vehicle that is required for the handicapped person is the main issue. Some people might want a bigger vehicle, some might want power steering and so on. I suggested that we should include in the provision current provisional licence in addition to current driver's licence. There was a suggestion of the renewal period being three years but when I examined the position I found that cars lose their value very rapidly in the third year and it would be much better to renew them after one or two years. It might be unfair to stipulate a three-year renewal period.

The reason I put down the amendment is that I understood from the meeting that the draft regulations before us would be put in the affirmative rather than in the negative and I wanted to draw attention to that. Deputy Noonan made a suggestion of a possible consultation before the regulations are issued — it was basically on the regulations that we had the discussion — and I would certainly go along with that. I would not push the amendment if there was some consultative process before the regulations were actually issued. I do not think there will be any difficulty about them because they are all fairly straightforward and I think there is general agreement on them but we would like to see them before they are issued.

I am sure Deputy Mac Giolla would not mind if I asked whether he includes the Chair in this "consortorium".

I will come back to that issue on Report Stage with a dictionary in my hand.

I would like to be associated with previous Opposition speakers in thanking the Minister for his open attitude on this matter. I think it is now generally agreed that there was an urgent need for law reform in this area because a few cases came to light including the most highlighted one of Mr. Gerry O'Brien, who has no arms, one normal leg and a prosthesis in his other leg. He was considered to be an able driver and therefore he was not entitled to the refund of excise duty. I have to say that he still has not got that refund.

There are a number of features of the matter which I am glad have been extended. The amendment in my name, 59 (d) — and Deputy Noonan has already referred to this — sought to deal with the position of people who are in wheelchairs. It proposes to remove the very unfair position whereby both legs have to be disabled. In fairness to the Taoiseach who was Minister for Finance in 1968, it was never intended that it would be interpreted in such a way that both legs would have to be disabled. That was the first aim of my amendment. Secondly, it has come to my attention that where persons are so severely disabled that they cannot be drivers but are passengers, there is some lack of uniformity across the country in the interpretations. It can be very expensive to modify a car, and the 30 per cent condition applied in those cases. I proposed to delete the words "as driver" so as to make the provision watertight. Since then the provision has been expanded to deal with other cases that have come to light such as persons of small stature or dwarfs, hand amputees and people who have difficulties with or have no upper limbs. I very much favour the definition "a severely and permanently disabled person". It is preferable to the one I put forward.

There are a few small aspects that I would like to take up with the Minister. First, in relation to the regulations, the health boards could not cope in the adjudication of cases because there would be waiting lists in existence and the position would vary from board to board. To set up a panel of doctors on a fee per item basis, which would only be a once a year occurrence, for a small number of people, would be a better way of dealing with the matter. There is need for a doctor other than the person's GP to be involved and I would very much favour that. I would also favour a limitation of the engine size to 2,000 cc's because if there is abuse — and I have doubts about this abuse — that would be the best way to deal with it. I would prefer that the UK definition would have been accepted because it works there and in Northern Ireland. Finally, I have been advised that under section 12 of Statutory Instrument No. 57 of 1979 the Minister has power to grant an excise duty refund in certain cases. Perhaps he would communicate with me on that matter. In conclusion, I would ask him to give Mr. Gerry O'Brien his refund.

The UK definition could not possibly be accepted. If it was applied here pro rata as it is applied in the UK it would cost the Exchequer £80 million. It is a wide definition which spans a big area and we discussed it at the meeting between Finance Ministers. What we have here today is a compassionate response in relation to this area from a collective effort.

I will quickly refer to a few points that have been raised. I will include diesel in the provision. The reason I was in favour of the 2,000 cc's is that there is only one make of car under that size — at 1,800 cc's — which has power steering and I understand power steering is important for many disabled drivers. On the question just raised by Deputy Yates about the health boards not being in a position to handle it, the figure in question is about 500 a year and about seven health boards. Surely they can handle it. However, I will look at the practicalities of the suggestion made by Deputy Noonan and there will be consultation before the regulations are drafted. I opted for the two year replacement period on the basis that it could be very expensive if we let it go to three years because of depreciation. In relation to the question of Mr. O'Brien's situation, as soon as the Bill is enacted, we will make immediate arrangements to have his refund put in place. We are tied by legislation at the moment.

I thank all the spokesmen for their co-operation. There will be a consultative process before this comes in and I will look at any of the other points raised, between now and Report Stage.

As it is now 5 o'clock I am required to put the following question in accordance with the Order of the Dáil of 9 May: "That the amendmends set down by the Minister for Finance for Committee Stage and not disposed of are hereby made to the Bill; in respect of each of the sections undisposed of, that the section or as appropriate, the section as amended, is hereby agreed to in Committee; that the First, Second, Third, Fourth, Fifth, Sixth and Seventh Schedules and the Title are hereby agreed to in Committee and that the Bill, as amended, is hereby reported to the House". Is that agreed?

No, it is not agreed.

Question put and declared carried.

When is it proposed to take Report Stage?

On Tuesday next, with the agreement of the Whips.

Report Stage ordered for Tuesday, 16 May 1989.
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