SEANAD RESUMES. - FINANCE BILL, 1924.

Question proposed—"That this Bill be read a Second Time."

I am sorry that this important Bill will have to be discussed in the absence of the Minister for Finance who, I understand, is indisposed. Although the Seanad has no specific power over finance, still it has a very important duty to discharge in criticising and reviewing, and, if necessary, recommending changes in matters of finance. Because in finance, reason is very powerful, and any wrong course pursued would undoubtedly bring its own penalties and those very swiftly. Now, I wish to take first this question of income tax which occupies a distinct section in the Bill, and which deals with a very important question. I do not propose to press the general question that we are taxed too highly. I think that is generally agreed. But the whole issue must be dominated by the fact that the Minister must balance his Budget, and it is far better to have our Budget balanced than to have low taxation; that is to say, the balancing of the Budget must predominate. Necessarily, reduction in the expenditure is the only other alternative to high taxation if we are to balance our Budget, and is the course we should prefer. On the question of income tax this country is unfortunately situated, owing to the fact that a large amount of money bearing income tax is invested outside the country, and is liable in the first instance to deductions for taxes in the country abroad, and is taxed in both countries. The result is that it is necessary to go through very complicated regulations in order to get relief. I am not saying that the Government have not done all they could to mitigate this hardship, but the hardships undoubtedly remain, and they have very prejudicially affected the taxpayers in this country. I go so far as to say, as to income tax regulations at present, it is not double taxation we have, but a treble tax. For investors, except in matters of the simplest character, will have to seek expert advice in order to secure any relief. That is an imposition on the taxpayer, who in many cases will have to seek bank accommodation to tide him over the period during which he is seeking to recover money overpaid already. For this accommodation he has to pay, because the banks do not lend money for nothing. In addition, there is the tax itself. I cannot help feeling that with goodwill on both sides—and I have no reason for saying that there is not goodwill on both sides—the matter can be very much simplified by establishing something in the nature of a clearing house or one office by which all these recoveries of income tax could be dealt with at the same time and adjustments made, and avoid having to go to two separate Departments in two separate countries to obtain this much-needed relief.

On the question of income tax generally, and of the possible change in income tax policy leading, perhaps, to the reduction of either income tax or super tax, it is very difficult to put forward any reasoned criticism on account of the absence of satisfactory figures. We have got items of income tax set out in the returns with no reference as to what years those receipts cover, what proportion of the receipts constitutes arrears, and what proportion arises out of the current investment for the year under review. In that respect I would call the attention of the Government to the delay in issuing the report of the Revenue Commissioners. It is a companion volume to the Appropriation Accounts. We have had the Appropriation Accounts for the year 1922-23 but we have not yet had any report from the Revenue Commissioners.

It is from the Revenue Commissioners' report that you get information in relation to income tax and certain data on which you can criticise income tax policy. I hope the Government will speed up the issuing of that report, which is very important at the present time. It will show what the tendency is with regard to investments. Some of us fear there is a very considerable migration of capital from this country, due largely to these vexatious income tax regulations.

Now, I pass to another matter. I will go into further detail in regard to it on the Committee Stage. It is a somewhat technical matter, and if the Seanad will allow me I would like to prepare the ground. Under the Bill, what was hitherto known as statutory allowance for repairs has been withdrawn, or very considerably modified. It is in Section 2 set out that where a tax is charged in respect of a house or building or parts of a house or building, no allowance or reduction shall be made under paragraph (b) of sub-rule (1) of rule 7 of No. 5 of Schedule A of the Income Tax Act, 1918. I only mention that to show you how complicated this is; yet this is the sort of thing that people anxious to recover income tax have to deal with. The phraseology is similar to this.

The section goes on to read: "of Schedule A of the Income Tax Act, 1918, or under Section 24 of the Finance Act, 1922, unless it is proved to the satisfaction of the Special Commissioners that the whole of the property in respect of which the tax is charged isbona fide let by the landlord or immediate lessor.” I only quote portions of the section to show you how involved it is. The Minister for Finance bases his argument for this change on the fact that the annual value, which is the basis of assessment in Ireland, bears no relation to the true value. I challenge that here and now and specifically. In the case of old valuations that may be true, but in the case of houses recently built it is not true. I had the misfortune to build a house recently and I claim my valuation is the full letting value, yet I am now to be deprived of the statutory allowance for repairs. That is one-sixth, and I would get that if I chose to let the house to a tenant. I say that is inequitable.

This goes further. There is the case of residents in the country who occupy houses—you might call them demesnes or big houses—where the expense of upkeep is very great, and where the attendant expenses outside are also very great. The expenses of living generally are very great, even though they may be of an exceedingly unselfish character. The owner has to support a large number of employees, partly because he considers it a public duty. The hardship of those country residents has been admitted for a long time. Mr. Lloyd George, in the days when his pet aversion was Dukes, went out of his way to admit that the country gentlemen were entitled to special sympathy in the matter of taxation. He went so far as to introduce a provision to the effect that all the money spent on repairs, and not merely the one-sixth statutory reduction, should be allowed as a set off against income tax. That is also in No. 5 of Schedule A, and in sub-section (1) of sub-rule (8) it is set out that if the owner of any land or house shows that the cost of maintenance, repairs, insurance and management, according to the average of the preceding five years, has exceeded in the case of land one-eighth or in the case of buildings one-sixth, he is entitled to a reduction of assessment.

Without any reference whatever to this in the Dáil, and under cover of an innocent and limited amendment, the whole of the benefits of rule 8 have been taken away. I speak for a shattered remnant. They are people who, I claim, have done their duty by remaining in the country when they might have spent their money elsewhere on their own personal amusement. They have had to bear very heavy charges in connection with the upkeep and attendant expenses of their houses. It seems cruel that those people, after all they have gone through, both under the Land Act and other kinds of legislation, are now without any word of explanation going to have the benefits, the liberal and almost radical benefits—the Chancellor for the Exchequer gave them—taken away. I do hope, before the Report Stage is reached, the Government will reconsider this matter and see whether they cannot by some form of words, at least allow those statutory deductions to continue to apply to the residents on big estates who are doing their duty under very great difficulties at the present moment. I would further add that the same class has been hit by another measure. Those who have had to shut up their houses, who have been unable to continue to live in them, have now, under the Rent Restriction Act, to pay rates on empty houses. Of course, the Government may say that these people are not much of an asset, that they do not produce much in the country, that all the tendency is for them to go away, and a little more or less now will not keep them from doing so. If that is their policy well and good; some of us claim that they are the greatest civilising influence—such as remain—in our country life to-day.

We notice in this Bill a departure from what I might call the traditional fiscal policy of Free Trade. Now, this is a very big question, and for my sins I have waded through, perhaps not too scrupulously, the debates on this matter in the other House. I assure you that I do not intend to follow a certain example that was set there of examining this matter in excessive detail. I would, however, point out that this policy of Protection, which the Government classes as an experiment, is not supported by the conclusions reached— I will not say the recommendations made, because they made none—by the experts the Government appointed to examine the problem. It is a very complex problem, and I have no doubt that there is room for honest doubt on both sides. However, I wish to make the case that this country is an exporting country, and that as trade is a matter of exchange the more we can sell the more we can buy, and the volume of this trade is the measure of our prosperity. The more costly our products the less the volume of commodities we can receive in exchange and also the lower standard of living in consequence of our lower national wealth. That is, roughly, the case. When you come to examine that from the point of view of agriculture, which is our main industry, what do you find? Anything that will increase the cost of production of agricultural produce will decrease the buying power of our agricultural exports, which are our main, almost our only exports, and as a result our volume of trade will shrink. We, agriculturists, allege that this policy of Protection is going to increase the cost of living. It has increased the cost of living already, and the cost of living affects the cost of our production.

High labour costs, high cost of the farmer's own personal living, high costs of his own raw material, including boots—very much an item of the farmer's raw material—will all go to increase the farmer's cost of production, and the farmer will do either of two things. He will either get less in exchange for what he produces, because it will cost more, or else he will cut down his working expenses, produce less, and turn his land back to grass, throwing his labour on to the unemployed market. Therefore we say that on the balance of advantages this policy of Protection, although it may be only the thin edge of the wedge, is wrong. I know that it is argued that if we get an industrial population within our shores we can sell our food to them. We say that during the time you are trying to set up these industries within our shores you are increasing the cost of living and prejudicing our main industry, which is agriculture. That is, crudely, so far as I can put it, more or less the pure and theoretical argument; but there is another, perhaps a more important argument, and that is the human or Party argument.

If you are going to have tariffs at all, and you can make out, no doubt, a theortical case for tariffs, it is essentially a scientific matter. It is an endless problem, and if it can be dealt with at all, even to a limited extent, it should be dealt with scientifically by people divorced altogether from the hurly-burly of party politics and of various things that operate between parties, and I submit that this policy of Protection is rendered doubly difficult by these public discussions on the hustings, and even in what we call a democratic assembly. You open the door to all kinds of party bargaining, pull, and influence of every sort and kind, log-rolling and vote manipulation of every conceivable kind, whereas if you stand firmly on this doctrine of Free Trade you know where you are. You at least cut out all that, and you have your duties for your revenue purposes only, although I know some people who will argue as to what are revenue purposes. It is pretty hard to define them. Still, broadly speaking, it is generally agreed what revenue duties are and what protective duties are. I cannot see what the present inhibitions really are on the development of industries within our State. I see that Arthur Guinness and Sons, in the face of open competition of the world, with big competitive interests on the other side, have built up a very satisfactory business, and they never wanted Protection. I see that Jacob and Co. have done likewise. They have to import certain of their raw materials. They seem to be in a very satisfactory and flourishing condition. For the life of me I cannot see, if these two businesses have prospered, why other people cannot do the same. It is due rather to what the Minister for Agriculture referred to the other day as the feeling of insecurity, which is something intangible, something that cannot be exactly described. There is a hesitation on the part of people to start business in Ireland, and I do not think they are going to get over the hesitation by what I might call even artificial stimulants. You will get over it by low taxation, by reducing your income tax by two or three shillings, as we fondly hoped we would have been able to do in our new State. Also you must, if you are going to get industry to return, have a solicitous regard for the rights of property different from that seen in legislation since the creation of the State.

I support this Bill for precisely the reasons that Senator Sir John Keane finds fault with it. He has told us that this country must rely on its predominant industry, agriculture. It so happened, unfortunately, that owing to the illness of a relative of mine I had to go to Cheshire about 20 or 25 times last year, and I was convinced in my views by the destruction of cattle owing to foot and mouth disease. I would ask Senator Sir John Keane to consider what the effect of such a visitation on this country would be. If there were anything at all comparable to the destruction in Cheshire this country must almost inevitably have gone bankrupt. Agriculture is a very great and important industry, and I have no doubt it will continue so, but if we should be so one-legged as to advocate a policy which will make us dependent on an industry which is subject to such a visitation as that to which I referred, it is, to my mind, a very grave matter.

Of course, anything that adds to the cost of production is a disadvantage in trade. For that reason every tax of any kind or sort is bound, to some extent, to limit the effectiveness of the producer in the foreign market. In my recollection we have always had taxes on tea, sugar and other articles which we do not or cannot produce. Inasmuch as these taxes are on articles which we do not produce and cannot produce, that taxation increases the cost of the article which we produce here. In this measure an attempt has been made to put a tax on the articles which are capable of being produced here, and inasmuch as we produce the articles here we retain in the country the wages paid in the production of these articles even though the cost of them may be a little more than we would have to pay for them to a person outside. Let us look at the alternative. There are men employed here on the articles which are taxed, but if we repeal these taxes these men must become idle, and then they get what, I think, is commonly called, but, in my opinion, incorrectly called, the dole. Is not that, I ask, a tax on production? It is the most vicious form of a tax on production, because it is a tax for paying men who are willing to work and paying men to do nothing. I would ask the Seanad to consider these proposals from that point of view and to look at the circumstances in that light. I have the pleasure of knowing the Committee of Experts appointed by the Government to enquire into this matter. As Senator Sir John Keane remarked, this Committee of experts made no recommendation, but they certainly came to some conclusions and gave some arguments and pointers for their faith in what has been described as the traditional Free Trade policy. It so happens that the one industry that they suggested might be protected with advantage happened to be the industry in which one of the members of the Committee was engaged in at one time himself.

It is extraordinary the wisdom that comes from a little practical experience. The condition of affairs, apart from the suggestions which the Committee made, that obtains in the country to-day is the outcome of the great war which devastated Europe in men, money and material. It was that, that for a number of years recently brought about the extraordinary condition of affairs all over Europe that we have had experience of. In many areas you had large potential machinery for production, while in other areas you had a large demand but no machinery to supply that demand. I am addressing myself now to the conditions that obtained in England and in Germany. In England you had an enormous supply of raw material and an enormous variety of plant for the manufacture of articles for which there was a great demand in Germany. Owing to causes, which I certainly could not understand, currency and exchange went to such an abnormal pitch that there was no basis of relation to the exchange between the supply in England and the demand in Germany. I have taken England and Germany as an illustration, but the same condition of affairs would be true to a great extent of every other country, including Ireland.

During the war I exported produce to France, while, in the ordinary course a few years ago, I bought from France. In the same way I exported to Canada, while for many years before I bought from Canada. The whole condition of economic affairs was abnormal all over the world, and if we are to continue to attach ourselves pedantically to what has been described as the traditional Free State policy, I think we would be doing wrong. This, at all events, is an interesting experiment which, I think, might be very carefully and widely increased. I support the Bill as far as this experiment is concerned. I regret the extra high taxation which cripples production, and in as much as it cripples production, it cripples you in the market, where you have to compete with foreigners. We know that very regrettable things have occured which make that position for the present, at all events, inevitable; but it is desirable to balance the Budget, and it is that that accounts for the present high taxation. As far as we can maintain the promotion of industry and wages in this country by the protective suggestions in this Bill, I think the measure is one that is deserving of support.

I have no pretentions to be an economist or to have any experience in industrial affairs, but I do think that the introduction of the principle of protection in this Bill is so important, and I feel so interested in it, that I feel bound to say something about it. The great fact to be remembered is that this country is now a predominantly agricultural country, and there are many reasons why, in my opinion, it will always remain so. One of these reasons is that it is perhaps the finest cattle-producing country in the world. It has great natural advantages in that direction, but it has not natural advantages as an industrial country; rather, it has very marked disadvantages. Everyone in the country gets his living from agriculture in some form or another.

If I thought that a measure of Protection in this country were likely to cause certain industries to arise here, and that it would be sufficiently healthy and full of vitality to enable a really flourishing export trade in manufactured articles to be created, I would say that there was a great deal to be said for this Protection, but I do not think that that is at all likely to happen. What is likely to happen, and what is already happening on a small scale, is this, that the more Protection we have and the more we see of it, the more the great majority of the inhabitants of this country are going to pay for many of the necessaries of life. I have one qualification to make on this subject. During my life I have changed my mind many times on the question of the relative merits of Protection or Free Trade. Now that I have got a little older and perhaps wiser, I feel certain that in the case of Ireland the interests of the nation as a whole will not be served by Protection, but that they will be served by Free Trade. The great fact we have got to remember is this, that our big export trade is in cattle, and these cattle are sold in a country outside of our control.

It is a very tempting invitation, but I do not propose to accept it, to enter on the controversy of Free Trade and Protection in the course of our discussions on the Finance Bill. The question is a very big one, but the Seanad in its present numbers does not seem to be disposed to discuss a question so complicated and so abstruse. This is the first Budget which we have had which gives us any indication as to what may perhaps be the future fiscal policy of this country, and therefore we cannot allow it to pass without saying something about it.

I notice, by the way, that the English Chancellor of the Exchequer, the day before yesterday I think it was, at a meeting of the Cobden Club, had some very hard things to say about Protectionists generally. I was surprised that the English Chancellor of the Exchequer should say such unkind things about anybody. However, I shall leave our tariff reformers in this country to deal with him, and probably they will give him a Roland for his Oliver. The only remark I would like to offer on this Bill is that it gives us a rather interesting indication of the lines upon which the fiscal policy of this country may proceed in the future, and I am not at all sure that the lines upon which the fiscal policy will proceed are those which are accepted by the people who superficially investigated this Budget. We are certainly in the experimental stage in all these matters. Most of us have not made up our minds, and certainly the country has not considered the question at all. It is very interesting, and I think very useful, that certain experiments should be made from time to time, and the Finance Minister is the person to do so, so that we may discover in which direction lies the real fiscal interests of the country. I do not think we need frighten ourselves with bugbears about the effect that a certain amount of protection of Irish industries may have upon Irish industries as a whole, or Irish employment, or upon the Irish financial position. We are beginning quite newly to discuss our own problems from our own point of view and the only way we can arrive at the proper solution of these various questions is by experimenting upon them, and so long as the experiments are not very drastic and do not go deeper than is necessary, I think we should welcome these experiments as to what we as a nation want, born of our own experience. What is called Protection in the scheme of the Budget is consistent, I think, and extremely well devised.

The only other matter I would like to refer to is the question of income tax. Most people have come to the conclusion that this income tax question is an unmitigated nuisance, and I am certain that the Finance Minister is strongly of that opinion. We must expect in the beginning of our work of national self-government inconvenience and troubles of this sort, but it comes to this, that this question is a matter of regulation between the two Governments. It is not a question on which the outside public can do very much, except to grumble at the incidence of this taxation, but I do say that it is time both of these Governments came to some rational arrangement, and to the inevitable amendment of the law in relation to this matter on both sides of the Channel. After all, it is very hard lines on people who have money invested in British securities or other securities that they should have to pay 4s. 6d. to the English and 2s. 9d. to the Irish Exchequer, that is, something over 7s. out of the £, and most people in Ireland are not millionaires. When they are told the income tax will eventually come back they will not thank you for the information. All I want to say is the sooner the two Governments can arrive at an arrangement on this matter, and the sooner the two Governments can agree to amend the law in relation to the incidence of income tax, the better for them both, and certainly the better for the unfortunate citizens who have to pay income tax.

The Sitting was suspended at 1.30 p.m.

On resuming at 2.30:

AN CATHAOIRLEACH

I propose to ask the Seanad, after we have disposed of the Bills under discussion this evening, to dispose of the Lausanne Treaty, and probably after that it will be time to call upon Senator McLoughlin to move his motion on the adjournment, of which he gave notice. But before that, and preliminary to it, I would like to go through the Bills down for Second Reading, because the majority of them, I think, will be noncontroversial, and at any rate I think we ought to advance them a stage so as to be able to take them in Committee next week. If that course is adopted I do not think there would remain sufficient on our agenda to form a working day to-morrow, and I suggest to the House that the more reasonable thing to do would be to adjourn to-day until Wednesday next at 11 o'clock. I do not see any reason for losing half a day on Wednesday, because we will have at least two days' very heavy work next week. I shall now go through the Bills down to Second Reading Stage, and if no Senator wishes to discuss any of these on Second Reading, or if there is no desire expressed for discussion on any of them I shall put the Second Reading Stages through.