SEANAD IN COMMITTEE. - FINANCE BILL, 1924 (THIRD STAGE).

On Clause 1, I would like to ask for some information which I asked for on the Second Reading and which I do not think was given, and it is when may we expect the Annual Report of the Revenue Commissioners for 1922-23. This report should give certain valuable information to those who take an interest in finance and without it we are unable to give independent and proper criticism to the Government proposals. For instance, on this question of income tax we should know the amounts brought into assessment and whether they are increasing or decreasing, also the amount of arrears brought into the receipts.

I do not expect that any report will be issued for 1922-1923. The reason for that is that the Commissioners were really brought into being, if I might say so, with regard to their activities as Commissioners of Revenue somewhere about February or March, 1923. It will be in the recollection of the Seanad that a definite line was not drawn with regard to the Customs until April, 1923, and with regard to the other matters of income tax and so on, I do not think that it would be easily possible having regard to the fact that the Ministers in 1923 submitted a report in that connection, but I will undertake to speak to the Minister for Finance on the matter and see if he has any report before him on the subject. I should say that ordinarily we would start the year 1923 on the 1st April.

SECTION

Where tax under Schedule A is charged in respect of a house or building or part of a house or building the annual value of which is ascertained according to the respective surveys and valuations from time to time in force for the purposes of poor rates, no allowance or deduction shall be made under paragraph (b) of sub-rule (1) of Rule 7 of No. V. 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 (in so far as it is not vacant) is bona fide let by the landlord or immediate lessor and that he has undertaken to bear the whole cost of repairs thereof.

I move:—To delete Section 2. I have a recommendation under Section 2 dealing with allowance for repairs and I had hoped to a certain extent to prepare the Seanad by a statement I made on this subject on the Second Reading. The matter is somewhat technical and I hope the Seanad will excuse me if I examine it now in some detail. I understand that these allowances for repairs were a benefit won for the Irish taxpayers largely owing to the strategy of the national party. They then had the balance of voting power in the House of Commons and used it to secure this benefit for the Irish taxpayer. Now, in the matter of allowances for repairs, relief has come in two forms—first of all in the form of deductions from the poor law valuation, and it has also come in the form of repayment. I will deal with these two separately. Supposing a person owns a house of which the poor law valuation is £120, and if at present he lets the house for £120 he is assessed on £120 less one-sixth. That is to say, he is assessed on £100. Similarly the same applies if he occupies the house. Now, under this new proposal it is intended to differentiate between these two sets of circumstances.

If that house is let the deduction will be continued if it is let at the figure I stated, that is, at the amount of the poor law valuation, whereas if it is occupied the deduction is withdrawn. That is, I submit, inequitable. The Government argued—I hope I am not interpreting them incorrectly—that the rent is in excess of the poor law valuation in 99 cases out of a hundred, and that ordinarily when a house is let the rent being in excess of the poor law valuation no deduction is permissible. Therefore, it is not fair or equitable that merely because a person occupies his house he should not get the benefit which he would get if he let it. I challenge the basis of that contention. It is certainly not borne out by the facts in the case of country houses. Country houses are not in many cases valued above their letting figure. On the contrary, they are not value for the poor law valuation. Country houses are a drug on the market. In fact, they cannot be let at all. This has been illustrated in the compensation given in the courts lately.

In cases where the owners will not rebuild, the market value is taken as a basis for compensation and the sums allotted are almost nominal. I know of a case recently where it would take £24,000 to rebuild the premises and £2,400 was given in compensation. That was taken to be the market value. That is in support of my argument that country houses are not valued above their letting value, because they have not got any letting value at all in certain cases. Yet the Government proposes to deal with this in one way, a general rough-and-ready-manner, treating all property alike on the argument that in the majority of cases it will be fair enough. Now, that deals with the deduction from poor law valuation. So burdensome did the British Government consider this question of the upkeep of property that they went further and said: "Not only will we allow you to deduct one-sixth from the value or rent, as the case may be, of the assessment, but where you can show us by your accounts of five years average that you spent more than one-sixth, we will allow you repayment on the full amount of your expenditure up to a total of your valuation if you can prove it has been spent."

All that is automatically taken away by that proposal. It is not at all an uncommon thing in the cases of the owners of houses or house property to find that they spend twenty-five per cent. in repairs. All round the cost of the upkeep of property is far more than the average person who has no experience of the matter, thinks. I know that in the case of one English estate, that of the Duke of Bedford, where there was a law suit, he showed that forty per cent. of his income went in repairs, and it is for that reason that this concession, allowing a repayment of the total amount spent in upkeep was given. It seems most inequitable that by this apparently simple amendment all those benefits should be withdrawn.

There is a further matter, a rather interesting point. It is only one word, but it throws an interesting light on this amendment. The House will notice that the word "whole" is introduced before "the cost of repairs." That is a new form of words. Hitherto the relief was given where the owner undertook to bear the cost of repairs. The absolute term is now introduced. That means that where an agreement has taken place between a landlord and tenant, under which the landlord would undertake to do outside repairs, and the tenant would undertake to do certain of the internal decorations, the benefits of the deduction were allowed to the landlord. I do not know that the case was ever taken to the courts on that point, but as a matter of administrative practice, where the landlord did the bulk of the repairs, the benefits of the Act were given him, and the wording made that clear. Now the wording being made positive and absolute, that would be withdrawn, and the Commissioners would be saying: "You are not doing the whole of the repairs. You are only doing 75 or 80 per cent. by your agreement. Therefore you will not get any of the value of this deduction." That seems hard, especially in the case of people who made an agreement in the light that this deduction was present, and who fixed the rent in view of the fact that this deduction habitually operated.

Moreover, there is no definition of repairs. I have never seen a definition of repairs. I may be wrong, but I feel as the amendment will not operate you might strain it to make even what was more on the border of wear and tear— you might even stretch that to mean repairs. The reasons I ask the House to accept this recommendation and recommend the deletion of this clause are that it is a rough-and-ready and inequitable manner of dealing with the problem. The right method of dealing with the problem is provided in the Act by revaluation. Those powers are already covered by the Income Tax Act, and the Government can re-value any property they think has the present value below its true letting value. Now, that will take time, but that is the right method of doing it, and I do not think it will prejudice present owners. Furthermore, the owners of all property, and especially house property, are taxed almost to the limit of endurance. The tax is a great handicap on the development of industry and on general progress of every kind. Very little revenue is going to come out of this, it is generally admitted, but it is argued that it is going to be a great administrative convenience. It is going to do away with a great number of claims for revisions of assessment where owners bought out their houses. I ask the Seanad not to accept that as a sufficient reason for doing away in a rough-and-ready manner with the advantages which house owners, a very much to be encouraged class, have enjoyed for years.

I should like to support what Senator Sir John Keane said, and to urge the House to accept those recommendations. I suppose this was originally framed to meet the owners of house property in towns. There are, as he says, a large class of persons who own property in the country. I would like to remind the Government that that does not apply to one class of persons only. There are other persons besides those generally supposed to hold large property in the country. These people have been trying for some time to make ends meet, and even in the very best of times it was practically impossible to make 5 per cent. on their money. For the last two years they have been working at an absolute loss, and, therefore, I consider this arrangement a very serious hardship, indeed, on that class of persons, and it makes one more straw on the camel's back.

I, too, wish to support Sir John Keane. I am aware of a great many houses of various ratings that are untenanted, and the first thing to be taken into account is the incidence of rating. It is a great pity that those should remain unoccupied and deteriorate so much in value. As a rule it is the land adjoining the houses that is valued, and the house is taken as thrown in.

I would also like to support this. I shall not say much on it, as I do not want to repeat what has already been said.

I also support the motion. Even granting that it would be administratively easier to carry it out as it is now, this is a most inopportune time to introduce an amendment of the kind that is provided in this Section of the Bill, because it is a discouragement to the taking up and using of the older houses. For national and other reasons every kind of facility should be given to the taking up of those larger houses, many of which are at present unoccupied. Senator Sir John Keane laid emphasis on the words —"whole cost of repairs." I should like to lay emphasis on the reference to the letting of the whole of the property. Many of the large houses can be taken, and separated, or partially let, or divided between two persons, and I think it is a mistake to discourage that by the provision which is in the section if I understand it correctly. Unless an owner has let the whole of the property, and undertaken to bear the repairs of the whole of the property, he can get no allowance. It seems to me if one-half were taken, and he bore the repairs on that one-half, he should be entitled to an allowance, but under this section that is denied. I am in some difficulty with regard to this question, inasmuch as while I would like to support the recommendation, I would at the same time have liked to send an alternative recommendation, so that, if you could not get the whole of it, you might at least have some amendment on the lines suggested. I think the wisest thing for the Seanad to do is to make its position clear and support the amendment of Senator Sir John Keane.

I am not quite clear on this. There is one particular aspect of it that I am interested in. I think that an allowance certainly ought to be made to the persons for the houses in which they reside. I have in mind in the City of Dublin that you will have in the very near future thousands of owners of small dwellings who will have these houses on the purchase system. They will be the lessors of the house, and I think that it would be unfair if these people were compelled to pay income tax on their valuation and not get an allowance for repairs. Apart from that, I think that persons ought to get an allowance for repairs to the houses in which they reside, so that the argument put forward that the letting value of houses is far in excess of the valuation of the houses does not apply. I think this ought to be allowed, certainly in respect of houses in which the owners reside.

I wish to support the recommendation of Senator Sir John Keane, not so much from the point of view of the larger houses but from that of the farmers' houses. Farmers generally reside in these houses, that is, they are very seldom let. At present farmers who own their own houses are getting an allowance for repairs, but if this section of the Bill passes they will lose that.

I will deal with the last two points first. In the first place farmers' houses are not affected by this section, and in the second place, even though, as I hope, there will be a great many owners of small houses, it would be a fair question to put: where did they get them. On examination of the Public Accounts it will be discovered that they were provided very considerably from subsidies given by the Government. The question arises: where did the Government get the money? If you deprive us of the means of getting this money I am afraid that the date on which the small owners will commence to flourish will be postponed indefinitely, and then there is the question of how far it is possible to get in sufficient money to enable the revenue of the State to meet the expenditure. In this particular case there will be some hardship, there will be problematical or nominal hardship, by reason of the fact that owners of property, even under this particular clause, may not be so favourably situated as they were. But the facts are that in the overwhelming majority of cases the poor law valuation upon which income tax is charged is considerably less than the actual rental that is paid for any of these properties. In fact most rentals are nowadays what we at one time called rack-rents. I think it was two-thirds where the rental was once and a half of the valuation, and that was looked upon as rack-rent. In quite a large number of cases it will be found, not alone in the country but more particularly in the city, that the valuation bears no relation whatever to the actual rent that is charged.

The valuations of houses were assessed somewhere on an average of about 50 or 60 years ago, and they were assessed upon the then value. Although money has changed its relation compared with the actual value of that period, altogether the rents have increased, but the poor law valuation has remained unchanged. You could except such cases as, say, the city of Dublin, the city of Belfast, and, possibly, in a short time, the city of Waterford. where re-valuations have taken place, but even the last re-valuation in the city of Dublin took place somewhere about the year 1915 or 1916. I think it was 1916, and in those cases where the low valuation has occurred alterations in the assessment in respect of Income Tax did not come into operation. They may come in this year, that is, many years after it has been re-valued. The case for re-valuation goes by the board at once, because demands on the Valuation Office, by reason of the occurrences of the last few years, are such that we will probably reach the year 1927 before the Valuation Office will have kept pace with the ordinary demands coming in for re-valuation from the country. A particular clause in the Finance Bill was introduced last year to enable us to dispense with certain statutory obligations on the Valuation Office to re-value certain property.

In the majority of the cases that have come before me the relation of the valuation to the rental is about 40 per cent. A house for which one would pay £100 a year in the city of Dublin will rarely be found to have a valuation of £40 a year. I think that those who live in the city will bear me out in that. As a matter of fact, it might be only £30 a year. In the country the cases in which the vast majority of people are interested, farm houses, certainly do not come within this measure. Then there is but the one class left, and it may be that there is a case in respect of that. But one can scarcely legislate for a very small number, and I think that if cases of hardship during this year were put to the Minister for Finance who, I know, is very keenly interested in retaining the particular order who inhabit these houses, he would probably consider them. I think there is evidence of that in another part of the Finance Bill where Super Tax has been reduced from a certain figure, and there has been a considerable response even to that measure of relief. I do not subscribe to the theory that has been put forward that a man with a certain income is sufficiently well off to enable him to pay taxes to an unlimited extent. I think people like that perform very useful and very important functions in the State, and the Minister for Finance, in giving the particular relief that there was in that case, had in his mind the particular imposition that he would be putting on, and balancing the two together, he came to the decision that they had the better part of the bargain.

The President said that the farmers were outside the Clause. As a farmer I would like to ask him has a farmer ever been defined. What is a farmer, and what is a farmer's house? Because he went on in the later part of his speech to speak of another class of people, to whom Sir John Keane referred, that unfortunately have large houses and are subject to the operations of this particular clause. But where can a line be drawn, because a great number of these people who had large houses also had large farming interests? Could they be considered as farmers in the sense that they would be outside the application of this Clause?

I do not think the President was quite correct when he said that no farmers' houses will be covered by this section. It operates in cases of assessment upon any house or building except a farmhouse or a building included with the lands in the assessment. I think if the President were to consult his advisers he would be told that a very large number of farmhouses are not included with lands, but are valued separately from the lands. Certainly any farm bought in recent years will be valued separately from the lands, and to these houses this section will apply. Possibly in the case of the very much smaller farms this section would not operate, but these are not liable for income tax at all. I do hope that the House will not be drawn aside by the argument of the President—I hope I am not misinterpreting him—that it will really only be a hardship on a rather small minority who live in biggish houses, and that you cannot legislate for everybody. I do submit that that is hardly a fair way of putting it. I would stress more the fact that those people who live in these big houses are sometimes almost prisoners in them; they have got no capital; they cannot get away, and they cannot sell their houses. They are really very much to be pitied. But it is not on that ground at all. It is far more on the grounds put up by Senator Farren, that small owners who buy their houses, say, on the instalment system through a building society, are now to be assessed on the full value, whereas they have hitherto been allowed a reduction for repairs.

We know how expensive these repairs are. I do not think that the delay in re-valuation ought to justify this if only a limited measure of hardship be involved. The President stressed the city of Dublin. Probably if you were to look into all the rates of the city of Dublin, being a metropolis, they are considerably higher than elsewhere. I think if you will take some of the houses in the smaller country towns or villages you will find a great disparity between the letting value and the valuation, especially houses that have been recently built. I would like very much if the President would say how the Minister for Finance is going to give an administrative concession, because that is what he indicated, to certain property owners after this Bill passes. We know that the power of the Executive is very great, but I do not see how they are going to get over a specific enactment, and I am afraid it will be impossible. The Revenue Commissioners will have to work under the statute. The Minister for Finance will be very nice to them as he always is but when you ask him to do something he will say: "I am sorry, there is the statute and I have got no discretion." I do not therefore get much comfort on the suggestion tentatively put forward by the President. I hope the Seanad will accept this recommendation and I hope the Dáil will also reconsider the clause and that the whole question may be dealt with in a much more scientific and fairer basis.

We are speaking about persons who own their own dwellings, people who are fortunate enough to have houses built for them by the municipality, but there are, to my own personal knowledge, many hundreds of poor people in the city who have struggled to buy houses for themselves. I know of more than one case where people living in these houses are under heavier obligations than they were when they were paying rent to a landlord because they had to go to a bank and get a loan of some capital sum to purchase a house. They have got to pay interest on that and rates and taxes as well and these charges have made their commitments larger than they were when they were paying rent for the house. In addition they have to provide for the upkeep and repair of the house. I think there is a clear case for people living in such dwellings, that they should get a remission of one-sixth.

I think the President was under a misapprehension when he thought that it was largely the case of those who were paying or likely to pay super tax that would be affected. I would not like it to be thought that the Seanad was making this recommendation in the interests of any particular section or class, either poor or rich. I think it is rather that in the interests of the State people should be encouraged to buy their own houses.

I should like to say that I am a farmer pure and simple. I live in a house which is not on a demesne, and yet it is assessed at £20 or £25 a year; the assessment is there although I have no income. I may say that I suffered a loss on the lands for two years, and I applied for a rebate, but I could get no reply to the letters. I have had a big form to fill as regards super tax.

I am quite unable to understand why the circumstances should be different in the case of a person who rents a house and the owner who pays for the upkeep. He has got certain privileges but if the tenant buys the house he has to keep the premises just the same, and he is put in a worse position than the person who owned it and let it to him. That is a thing I cannot understand. A great many people have been forced to buy their houses whether they liked it or not and at once they were put in a worse position than they were before.

An aspect of the case which I do not think has been touched upon up to the present is the consequential effect that failure to allow this remission will have on general appearances. I speak for the City of Dublin. I do not think anybody can say that the City of Dublin is noted for the amount of money expended on the houses. I think the appearance of the streets is shabby, both in the suburbs and main streets, compared with the British cities, and if this allowance is not made to the class of people referred to I am afraid that the repairs and decorations necessary will not take place and therefore there will be a loss of labour which is so badly wanted at the present time, and that the houses will not get the repairs which are sufficient to keep them in good order and condition.

Recommendation put and agreed to.
Question: "That Section 2, as amended, stand part of the Bill"—put and agreed to.
Sections 3, 4 and 5 put and agreed to.
SECTION 6.

In connection with Section 6, I wish to say I am in the position of trustee for a certain person for various small sums of money, and I think there seems to be differential treatment in regard to charges for Income Tax. In some cases I found 9/6 deducted which, to some people, is practically their whole income, and in other cases only 7/3 and 5/-. I think I am correct in saying that there are some securities under which there should be no differential treatment, and I wonder will the time ever come when a poor person will know what he will have to pay.

AN CATHAOIRLEACH

Do you think that ignorance is confined to poor persons?

Principally. The rich people are much more conversant with the facts. I think there is differential treatment, and if I am wrong I would like to be set right. In almost the same kind of security, Colonial Stocks in one case, the deduction was 9/6, and in another case 7/3. I do not understand it; it is rather beyond me.

I believe the Senator has done very well in drawing attention to the great delay which takes place in getting repayment of the extra Income Tax. People with smaller incomes feel this tax all the more.

AN CATHAOIRLEACH

I understood what Senator Bennett called attention to is that in the case of people with small securities they find in some circumstances that they are charged 9/6 in the £, whereas in the case of people better able to pay they are only charged 7/3.

That is so. It is a hardship in several cases, but with the smaller people the matter is more difficult. As I said on Second Reading, where we have just undergone a change in our administrative system, it is difficult to arrange everything at once. There is the question of Colonial Income Tax and Dominion Income Tax, and they are all involved in this. The real way to settle the question is for the two Governments themselves to come to an arrangement. It is not a matter that we can settle. It is a matter for both Governments, and I suggest to the President that the sooner he can come to an understanding with the British Treasury the better both for the Government and for the peace of this country as well. It is a very great hardship for people to have to pay this double income tax and then to have to wait a very long time and to fill up a series of forms or to pay other people to fill them up, for that is what it comes to, in the endeavour to try to get some of this excess taxation back.

I sent an application for a rebate on the 6th May to the income tax authorities. I waited until the other day, and having got no reply I sent a second letter, and still got no reply.

There is no liability here beyond 5s. in the £, but there are those delays which are inevitable after the setting up of a separate fiscal system here. We have endeavoured to come to an accommodation upon these matters, but there are still difficulties in the way, and I understand at present the matter is under consideration, and that it may be possible to get some further facilities, so that these delays may not exist any longer. With regard to the Senator's complaint about not having received replies to his letters, if he sends me information I will have the matter looked into.

I would like to say in this connection that the opinion formed by many people, who have to deal with a great many of those cases as between England and Ireland, is that they get very much better treatment and more courteous treatment in Ireland than from Somerset House.

AN CATHAOIRLEACH

I do not know whether I am talking on a matter of which I know nothing, but it seems to me it is difficult to understand the phraseology of that sentence:

"Proves to the satisfaction of the Revenue Commissioners...that the total amount of his actual income ... arising from such stocks and shares or rents for that year is less by more than twenty per cent. than the average income which he has, or should have been assessed and charged in respect of such stocks, shares or rents."

How can it be less than the average income on which he should be assessed? I can understand the average income on which he has been assessed.

It is a case in which there is a fluctuation of income, say, in a business. In one year the assessment might be an amount of x-£s, and taking the average it ought, perhaps, to be on eight-ninth or nine-tenth of x-£s, and that equation must be found.

AN CATHAOIRLEACH

Once you get to x and equations I surrender.

I believe there have been cases where Income Tax was levied on no income.

Question—"That Section 6 stand part of the Bill"—put and agreed to.
Sections 7 to 22, inclusive, were agreed to and added to the Bill.
SECTION 23.
(Stamp Duties on Customs Entries.)

I beg to move the recommendation in Section 23, sub-section (1), to delete in line 38 the words "fifteenth day of July" and to substitute therefor the words "1st day of September."

In moving this recommendation, I might point out that Section 23 of the Finance Bill imposes the new duty on Customs Entry Forms known as the "Statistical Tax." This tax is being imposed, not for Revenue purposes, but in order to curtail the present traffic in small consignments across our land and sea frontiers, and to encourage importation in large quantities with a view to developing a retail distributing trade in the Saorstát. The tax is to take the form of a 6d. fee in respect of each item of imported merchandise shown on the Customs Entry Form. The object of the present amendment is to postpone the date of operation of the tax from 16th July, 1924, to 1st September, 1924. The date—16th July 1924—was originally inserted because it was necessary to present the Financial Resolution imposing the tax in a complete form, but it was never expected that it would be possible to bring the tax into operation at so early a date. The tax is to be denoted by means of adhesive stamps on Customs entry forms, and for this purpose it has been necessary to provide a special stamp. The work of cutting the dies, printing the stamps, and arranging for distribution throughout the Saorstát is a lengthy process and cannot be complete much before the 1st September next. It is accordingly proposed that the 1st September should be made the operative date. The postponement will give traders a further breathing space in which to accommodate themselves to the new arrangement. As already explained, the tax is not imposed for Revenue purposes, and the postponement will not affect the estimate of Revenue receipts.

AN CATHAOIRLEACH

I take it the Government approve of this amendment.

Amendment agreed to.
Section 23, as amended, agreed to.
Sections 24 to 31, inclusive, were agreed to and added to the Bill.
PART III.
DEATH DUTIES.
Sections 32 to 35, inclusive, agreed to.
PART IV.
CORPORATION PROFITS TAX.
Sections 36 and 37 agreed to.
PART V.
MISCELLANEOUS AND GENERAL.
Sections 38 to 45 inclusive agreed to.
SCHEDULES.
Schedules were agreed to.
SEANAD RESUMES.
Bill ordered for Report Stage.
LAND ANNUITIES.

AN CATHAOIRLEACH

There is a matter, Senator Moore, that you referred to, and perhaps this would be an appropriate time to mention it again.

I gave notice to the Minister last week of a question about the Estimates. I find that in the Estimates for 1923-24 there is no reference whatever to land annuities. On looking at the Estimates for 1924-25 it is stated, in the column allotted for 1923-24, that there was £2,900,000 expended. When I look at this year's Estimates, 1924-25, nothing at all is expended under that head. The result is that these figures are put down as showing that the country is better off by £2,900,000 than it was last year. It is quite clear that the land purchase annuities were recovered last year and paid over to the English Government. I cannot see how the country is better off by £2,900,000 than it was last year.

I had no notice of this question. I was not aware that the Minister had been asked for information on this particular matter. After leaving the Seanad last week the Minister who was here went immediately to London. I had no notice of the question until now. I think that the matter would come up more properly on the Appropriation Bill which will deal with the Estimates. I hope then to be in a position to explain it.

There is no hurry whatever.