Vol. 472 No. 8
4 Mr. M. McDowell asked the Minister for Finance the representations, if any, which have been made to his Department calling for an amendment of the tax laws relating to large family trusts (details supplied) as recently reported in the newspapers; if so, the reason such representations were not referred to the Select Committee on Finance and General Affairs; and if he will make a statement on the Government's proposals in this regard. [24156/96]
6 Mr. Sargent asked the Minister for Finance whether accountants for a company (details supplied) were afforded a special pre-budget meeting in his Department, whilst other lobby groups had to be satisfied with meeting the Select Committee on Finance and General Affairs; and the criteria which exists for such a special pre-budget meeting. [24173/96]
10 Ms O'Donnell asked the Minister for Finance whether his Department has been approached on behalf of the beneficial owners of a company (details supplied) seeking changes in the law relating to this company's tax liability in respect of a discretionary trust on its dissolution; whether such approaches have been accepted or rejected; and if he will make a statement on the matter. [24158/96]
33 Miss Harney asked the Minister for Finance whether his Department has been approached on behalf of the beneficial owners of a company (details supplied) seeking changes in the law relating to this company's tax liability in respect of a discretionary trust on its dissolution; whether such approaches have been accepted or rejected; and if he will make a statement on the matter. [24157/96]
I propose to take Questions Nos. 4, 6, 10 and 33 together.
In relation to the representations made on behalf of the persons mentioned in the Deputies' questions, my colleague the Minister for Finance, Deputy Quinn, has already supplied details of these on 10 December, in reply to a parliamentary question from Deputy Bertie Ahern. On that occasion, the Minister stated that representations were received by his Department in February last from the persons mentioned by the Deputies for changes in the taxation legislation dealing with discretionary trusts. Two changes were proposed in the representations. One change proposed was the extension of the capital gains tax retirement relief to cover specified categories of disposals of business assets by trustees to specified categories of relatives of the person who set up the trust. The second change proposed was the crediting of discretionary trust tax paid against any capital acquisitions tax liability arising for the recipients of assets distributed from discretionary trusts. Discussions subsequently took place between officials and representatives of the persons concerned in regard to the proposals in view of their complex nature and the issues involved. It was made clear by officials that they had no mandate for negotiation and what they were doing was exploring the matter. In the event the proposals put forward by the representatives were not acceptable and this was made clear to the representatives in October.
The Minister for Finance sees no conflict with this case and the initiative agreed with the Select Committee on Finance and General Affairs to invite pre-budget submissions for 1997. The approaches were made last February and the issues involved were complex and required examination by officials. The committee's terms of reference as agreed by Order of the Dáil on 4 July 1996 provide that:
nothing contained herein shall prejudice the right of individuals to meet with the Minister for Finance with a view to making pre-budget submissions directly to him in accordance with longstanding practice.
As was said earlier, representations from the persons mentioned by the Deputies were made last February in the context of the 1996 Finance Bill. The advertisements by the Select Committee on Finance and General Affairs seeking submissions in writing to be sent to them were placed in the newspapers on 28 June with a deadline for receipt of 2 August 1996.
As mentioned in the reply to a priority question earlier today, the Minister has received, and continues to receive, submissions from persons who chose to write to him directly in relation to pre-budget matters. All these submissions are, of course, considered in the run up to the budget.
Will the Minister agree that if the proposed changes had a gross fiscal value of about £80 million they would radically affect the budget arithmetic for 1997? If that was the subject matter of negotiations between departmental officials and interested parties, the beneficiaries of the trust and their legal and accountancy representatives, the least the Select Committee on Finance and General Affairs was entitled to was a hint that while it was grubbing around with £500,000 here and there and considering relief in certain areas, other people were in negotiation for something that would sweep away the basis for making any tax concessions that committee contemplated recommending to the Minister.
The Deputy is right in that any variation of £80 million would affect the budgetary arithmetic for 1997. That is obvious and undeniable. There were no negotiations in the meeting with officials of the Department of Finance. They explored the proposals put to them but nothing was done in that regard. As regards the committee looking at the relevant dates, the events took place in February 1996 whereas the advertisements and arrangements in connection with the committee were not made until June — the events took place before the committee was up and running. If any proposal had been contemplated when the committee was in operation, the Minister for Finance would have considered whether it was appropriate to refer it to the committee. Such circumstances could arise, but in so far as this person is concerned, that was not an issue at the time.
The Minister stated that contact was made in February last, but the decision was not made clear until October of this year. Is it not reasonable to conclude, therefore, that the matter was under examination and no clear decision was made until the autumn of this year? Does it not follow that this was a live issue in the Department of Finance at a time when the committee advertised for submissions from the public and conducted inquiries into other budget submissions?
I cannot outline the exact progression of dates as between February and October. In October it was conveyed to the representatives of the people who made the submission that nothing would be done about it and their proposal was not acceptable. I cannot say when precisely that decision was reached or whether the matter was seriously contemplated. The representation was a non-event. It was not the Minister for Finance who met the people involved but Department officials, who simply listened to them. Nothing was done about the matter. The relevant activity took place before the committee procedure was in operation.
Were the initial representations made to the Minister for Finance or the Department of Finance?
Representations were made on behalf of the persons mentioned to my colleague, the Minister for Finance.
Were they written or oral representations, or both?
I do not have that information, but I imagine on a matter as complex as this, a written submission would have been made in the first instance and, at the meetings with officials following that, it would have been backed up with oral representations along the same lines.
I would like the Minister to clarify the matter because my experience is that it is difficult to meet officials in the Department of Finance to propose tax changes. Changes usually result from representations made directly to the Minister and sometimes the secretary but more often than not representations are initially made to the Revenue Commissioners who, in briefing the Minister for Finance, advise him that in the context of the budget he should consider representations made by a certain person or body. There is nothing wrong with people making representations to the Revenue Commissioners, the Minister for Finance or the Select Committee on Finance and General Affairs on tax changes. That is the essence of the democratic process. I would like clarification on how the representations were made in this case.
Does the Deputy want to know to whom the written representations were addressed?
It would not be the first time representations were made to the Minister for Finance or the Revenue Commissioners on changes in tax law which would affect a particular group of people. I can think of some areas where Ministers for Finance have changed legislation down the years. Eight times out of ten the initial representation is made by the Revenue Commissioners who would be aware of the matter in the first instance. In this case, because of its high profile and media coverage of the event, I would like to know how the representations were made and what was the chain of events.
Does the Deputy wish to know whether the representations were addressed in the first instance to the Minister or the Revenue Commissioners and whether the initial approach was made in writing or verbally?
Yes. There is nothing sinister in my querying the matter, but it is important that it is clarified as soon as possible.
Were the views of the Revenue Commissioners sought on these proposals? Although the initial contact was made in February 1996, may I take it that nothing happened between March and September, or was there ongoing contact on and exploration of the issue? Will the Minister also indicate in relation to these matters whether the magnitude of the tax changes sought would have required a separate Government decision? Will he indicate also whether, up to the month of October 1996, any indication was given to the people seeking these tax changes that their proposal was unlikely to be accepted?
I have no information in the brief as to what exactly was said at any particular meeting. There meetings were held to explore the proposals, two of which took place in July with the final meeting being held in October, which presumably was when they were told nothing would be done about it. It seems from reading the brief that the representations never got off the ground.
Does it follow then that all the meeting took place after the Select Committee on Finance and General Affairs had advertised for public representations? Is it fair to draw an inference from the Minister's reply that the approach was made in February and that officials agreed in July to meet the proponents of this change on two occasions to explore the financial implications of what they were proposing? What happened between those two meetings in October when a negative decision was imparted to these people?
I can only assume that the proposals made, their detail having been explored at the meetings in July, were considered in the Department of Finance to determine whether they warranted advancing or further consideration in any way. It seems that by October they came to the conclusion they were not. They were, accordingly, told that and nothing was done about them.
In case the Minister may inadvertently mislead the House, I doubt that a decision of that magnitude would be made by officials down the line in the Department of Finance. That is not my experience of the matter, and I realise the Minister is not the Minister concerned. I imagine decisions such as that would have to be made at a higher level. I suggest they would at least have to be put to the Secretary of the Department or the Minister who has ultimate responsibility for these matters. Perhaps in a subsequent Question Time the Minister might inform us further on the matter.
It is safe to say that the Minister for Finance has responsibility for decisions of this nature that are made in his Department. There is no question about that.
I asked earlier whether the gross value of the changes being sought was of the order of £80 million.
Deputy McDowell will appreciate that the Minister for Finance is not at liberty to disclose tax details which relate to particular taxpayers since these matters are confidential.
