Finance Bill, 1992: Report Stage (Resumed).

Debate resumed on amendment No. 24:
In page 23, to delete lines 7 to 31.
—(Deputy Garland).

If doctors receive fees from bodies such as health boards and they do not return details of these fees the remedy is clear. The health boards should return to the Revenue Commissioners details of the amounts paid each year to each doctor. These could then be compared with the income tax returns of the doctors. I do not know whether this was the practice prior to 1987 and, if not, it should have been.

I wonder if the Minister, and his predecessor, took into account the fact that we now have a self-assessment system and a system of payments on account of current tax. The withholding tax system is totally unnecessary now because professional people already pay tax on a current year basis and pay money up front on 1 November. There is a duplication and unnecessary complication in professional people estimating their payment on account for the current year and estimating the amount of withholding tax they will have to pay. This issue has to be looked at. I do not think there can be any possible gain to the Revenue Commissioners from this tax. If there is some gain, it is because it is being withheld from the gross income of professional people, particularly doctors who have to incur substantial expenses, for example, travelling expenses.

Doctors in rural and working class areas receive the bulk of their income from medical card holders which, in turn, comes from health boards. These doctors have been overpaying tax. A doctor who earns £40,000 a year, with £10,000 legitimate allowable expenses, will receive a net income of £30,000. However, as £35,000 of his income may come from the health board tax has to be deducted at the standard rate. At the end of the year these doctors have to pay more than the full amount of tax due. As a result, they have to go through the rigmarole of seeking a refund. From representations made to me, I know there can be considerable delays in making refunds. A doctor with a practice in a fashionable area such as Fitzwilliam Square who receives the bulk of his income from private patients makes a better living than a doctor working in a rural or working class area and does not have to pay as much in withholding tax. Perhaps it is too late to ask the Minister this question on Report Stage of this year's Finance Bill but, as a new Minister for Finance who may or may not be around this time next year, would he not agree that the whole measure is absolutely ridiculous?

I put down an amendment on this matter on Committee Stage but I was not in a position to move it. I queried the inclusion of a large number of companies in the Second Schedule because I wonder why companies, considered by the State to be commercial enterprises and encouraged to operate in the market on commercial terms, should be used as an instrument for the collection of retention tax. Perhaps the Minister would explain that. For example, if we want ACC to perform and compete in the same way as other banks, to make them an instrument of tax collection in this way seems to be contrary to that spirit. The purpose of the deletions I proposed on Committee Stage, which I have not re-entered because it is not necessary, was to make that point. Is there not a contradiction in thinking in the Department of Finance in terms of companies owned by the State which are more or less being told to perform commercially while at the same time using them as instruments of tax collection?

On this amendment Deputy Garland has reminded us that he is one of three chartered accountants in the House. Of course, they are as entitled to be represented in the House as the rest of us, ach mar a deir an seanfhocal, briseann an dúchas tré shuilibh an chait. With all due respect to Deputy Garland, that is what has happened in the case of this amendment. If there is one section of the population upon which the imposition of tax causes me to shed no tears, it is the professional classes. It seems it is a marvellous little economy that manages to carry the great extent of professional classes that exist. If we could find more manufacturing enterprises to create wealth in order to carry some of those classes I would be much happier. This is a necessary measure, although I do not believe that it puts an end to tax avoidance or even tax evasion, which, I am absolutely satisfied, is prevalent among the professional classes who have facilities that are not open to the rest of us. Therefore, I have no sympathy for the amendment moved by Deputy Garland.

As Deputy Garland has said, the purpose of the amendment is to delete the entire section. Section 11, which is being taken with section 10, deals with withholding tax. It amends section 13 of the Finance Act, 1987, by substituting the new definition of relevant payments. The scope of the new definition of relevant payments is similar to that of the previous definition but for technical reasons the wording had to be changed to take account of the extension of the list of accountable persons to include commercial State bodies.

Section 10 deals with the scheme of withholding tax introduced in 1987 whereby accountable persons are obliged to deduct tax at the standard rate when making payments for professional services. The list of accountable persons, which has not been updated since 1988, covers Government departments and most of the major non-commercial State bodies, local authorities, authorised health insurers and the VHI. The list is being extended from 6 June to include all commercial State bodies, including Irish resident subsidiaries, as well as a number of other non-commercial State bodies. The present refund provision operate satisfactorily. The Revenue Commissioners have informed me that claims for interim refunds of withholding tax by professional people are given priority in tax districts dealing with the tax affairs of professional persons, and the extension to the commercial State sector is pragmatic. It means that the tax will not apply to all public sector bodies, thereby ensuring uniformity in the system.

I understand Deputy Garland's point in regard to delays in refunds but it is unlikely that anyone has been unfairly treated. I could talk at length about my experience in this area. In my days in the Mater Hospital a consultant who had returned from America was working there for about two years before it came to light in terms of taxation. That happened within the PAYE system.

If that person had a vote in the Minister's constituency he would have picked him out before then.

(Limerick East): Someone in the office did not send in their returns.

The introduction of withholding tax has ensured some order in the system. It is not necessary to go into detail on this matter, but if people who are earning substantial incomes are not prepared to comply with the system and get their refunds in the normal way, credibility will be lost. I can understand some of the points that have been made throughout this debate and I believe that you learn from listening to the arguments. One thing that strikes me when looking at these issues is that this House must protect the PAYE sector because they have no choice in so far as their tax is deducted at 27 or 48 per cent. Deputy Micheál Martin has been mentioned on radio and television, in the papers and by Deputy Rabbitte in the House today by virtue of the fact that he was honest enough to say that he did not realise that these things were happening. I could be equally honest in saying that although I believed that they were happening I did not realise that a person earning £150,000 a year could pay only 1 per cent tax. However, we are all a little wiser now.

The principle of these two sections is to make sure we move away from that position. I am not convinced that this Finance Bill will close all the loopholes but it will certainly close many of them. There may be arguments about unfairness in other areas and I will continue to look at those. Generally this is a protection measure for the PAYE sector, to make sure that they are not the only people carrying the huge burden. The people who often avoid or evade tax are the most vociferous when they require public services such as education, hospitals, roads and infrastructure. In many cases the people paying 27p in the pound, or those who are not working, do not shout as loud. Therefore, withholding tax, and other such measures, are absolutely necessary.

Once again I am most disappointed with the Minister's response. Deputy Rabbitte referred to the PAYE workers, as did the Minister. Of course, we want to ensure that these people are in no way disadvantaged as against people in professions. We all admit that there is a degree of tax evasion among the professional classes.

I do not want to give the impression that it is the professional classes alone who evade tax. Much of what I have discovered in the past six months relates to people other than professional people.

Business and employees would also seek to evade tax if they could. We are all human and there will always be a percentage of people in every walk of life who will wish to have an advantage over others by evading tax. I would remind Deputies that the PAYE net is very wide and takes in people such as Michael Smurfit. He is in the PAYE net in so far as he receives a salary from Smurfits, although he may make other arrangements. There are many well-off PAYE workers such as the average company director.

Debate adjourned.
The Dáil adjourned at 4 p.m. until 2.30 p.m. on Tuesday, 19 May 1992.