FINANCE BILL, 1928—THIRD STAGE.
The Seanad went into Committee.
I move:—
Before Section 2 to insert a new section as follows:
2.—The annual value of lands which were previously subject to a purchase annuity payable under the Land Purchase (Ireland) Acts or any of them, but which annuity has since been redeemed, shall for the purpose of Schedule B be taken to be the first or original annuity payable before redemption, if such original annuity is less than the Poor Law Valuation.
The object of this recommendation is to place tenants who have redeemed their purchase annuities in the same position after as they were before redemption. It is quite clear that the income from a farm is the same after as it was before redemption of the purchase money. In the present state of the law, when the purchase money has been redeemed, the assessment for the purposes of income tax is increased from the figure of the annuity to that of the poor law valuation, which in most cases is a considerable increase. The fact that that is so is a great deterrent to people who might redeem their purchase money, and I think it would be for the benefit of the country to encourage tenants to redeem their purchase money, if only from the fact that it would relieve the Land Commission of the duty of collecting the annuities, would save a good deal of clerical work, cost of postage, and other steps taken for the collection of these annuities. I hope the Minister will look into this matter in a favourable light, and recommend that such an amendment be inserted in the Finance Bill.
This matter has been dealt with in a slightly different aspect previously by the Oireachtas.
A provision was inserted in the Finance Act of 1915 by which land could be assessed on the basis of the land purchase annuity. The Finance Act of 1915 was the Finance Act imposing excess profits duty—that was the real purpose of it—and somebody somehow got an amendment put in to the effect I have stated. It was an amendment for which there could be no justification whatever. I suppose it was accepted, as amendments are sometimes accepted, to get Bills through. It was found after the change of Government that if a man reduced his purchase annuity by redemption to, say, £1 the land was only assessable on £1, although the value might be very considerable indeed. In the 1923 Finance Bill we amended that position to some extent. We amended it where it was chargeable on the original annuity. What Senator Linehan asks us to do is a thing for which there could be really no justification, because it means that certain pieces of land would be for ever put in a more favourable position in regard to taxation than other pieces of land. For instance, the Land Commission can only advance £5,000 for the purposes of the Land Acts. In certain cases a tenant himself advances additional money. If one particular farm was bought for £5,000 the basis of assessment would be the annuity arising out of the advance of £5,000, while if an adjoining farm was bought for £10,000, £5,000 being advanced by the Land Commission and £5,000 being found by the tenant, then presumably that farm would be twice as valuable as the first one, yet if Senator Linehan's amendment were accepted, for ever and ever the farm that was twice as valuable as the first one would be counted as of the same value for income tax purposes. That would continue if it was split up and passed to other owners. It seems to me to be a procedure that is entirely indefensible, that because a tenant purchaser found part of the money himself, perhaps by borrowing, because the farm was bigger than would be covered by an advance from the Land Commission, that that particular land is for ever to receive favourable treatment for income tax. I believe the amendment introduced in 1915 had really no justification, but in any case the effect will pass away ultimately as land purchase advances are redeemed. If Senator Linehan's amendment were passed it would mean that for ever a farm twice as valuable as a neighbouring farm would be simply assessed for the same income-tax. Really on the merits I think that cannot be defended, and that what is in the 1915 Act is a wrong principle, and I do not think we should perpetuate or extend it.
I had not much hope of having the recommendation inserted in the Finance Bill of 1928 unless we had the support of the Minister to carry it through. I wish to point out that I do not think the Minister is correct in stating that if the amendment were adopted it would be a case of fixing an assessment value for ever, because there is a Finance Bill every year, in which any injustice could be remedied when ascertained by the income-tax authorities. As regards the case I quoted of a tenant who paid down portion of his purchase money in cash, in addition to the advance from the Land Commission, at the present time that tenant—if there are any such —is only assessed on a very small amount for income tax. My recommendation if carried would not alter the position in any way. I hope that the matter will be attended to by the Minister in a future Finance Bill and that some encouragement will be given to farmers who would be inclined to redeem the purchase money of their holdings.
It seems to me on general principles that there is no justification for the recommendation. If the Senator has any cases that would show that in practice there is hardship I would look into them to see if there is any way of meeting actual hardship. It might be done in a different way. I would like to know what the cases are, apart from the question of principle.
Recommendation by leave withdrawn.
I move:—
Section 1, sub-section (2). To insert after the sub-section a new sub-section as follows:—
(3) No income tax or super-tax shall be charged in respect of compounded arrears of rent payable under the Land Act, 1923, until such arrears have been actually paid to the person entitled to the same. Any income tax or super-tax that has already been paid on such unpaid compounded arrears of rent, either by direct assessment or by set-off against other moneys due, shall be refunded. Where such arrears are payable in stock, both income tax and super-tax shall be likewise payable in the same stock at parity value.
The purpose of this is not to secure a formal amendment, but to raise the matter in the hope that the Minister may give me certain assurances. As the House probably knows I pointed out yesterday that certain arrears that existed at the time of the passing of the Land Act of 1923 took the form of compounded arrears of rent collectable by the Land Commission and payable to the ownérs. About half the arrears have been collected and paid over and presumably tax has been paid on them so that no question arises there. My recommendation is concerned with the uncollected part which, by the Act of 1927, is going to be added in the form of stock to the purchase money, and ultimately will be given to the owners. It has come to my notice that the revenue authorities are actually pressing for income tax to be paid on such compounded arrears which have not yet been paid. They have not yet been paid, and we do not know when they will be paid. Moreover, they are pressing to be paid in cash whereas the actual owner will only receive his money—when he does receive it—in stock. I had a case brought to my notice. I went to the proper authority and was told it was not their policy to press, and I understand no pressure has been put on in the case I refer to. I was surprised that a rather peremptory letter should have been written when I was afterwards told that it was not the policy of the authorities to press. I know also that in cases where compensation is due under the Malicious Injury Acts to the owners, such a tax was in fact deducted from the compensation. If it is not equitable to press for direct payment, I submit that it is equally inequitable to exact such payment by way of set-off. I further say that I doubt even if the liability for tax exists. The liability arises under Schedule A, which involved the contractual ownership of the landlord. The landlord had no power to collect when the tax arose and then came the Land Act of 1923 which wiped out the contractual relationship and he had no power to collect even if he wished to do so. I do not suppose that any owner would go to the expense of taking such a case to the court, but I think it should be left in the hands of the Government for just treatment. They are empowered to give it in the case of direct payment, but they are not giving it in cases where they have power to deduct by way of set-off.
There is a little difficulty about this matter. At present the whole procedure, and the procedure since 1881, is based on administrative concession. Tax is due and is actually assessed on the valuation, and it should be collected irrespective of whether the rents are paid or not, or of what amount of rent has been received. If the rent is lost, or is less than the valuation, then the landlord would be entitled to receive repayment. But when the Land League became vigorous there was a general withholding of rent, and the British Treasury then made it an administrative concession, whereby they did not require payment on the valuation, and the right of the landlord to reclaim repayment, if the rent was lost or was less than the valuation, was met by administrative concession. They only charged when the rents were received and assessed on the amounts actually received. We inherited that particular position, and we applied that concession to the existing situation. Our policy is not to press, and if there was any pressure exerted on an individual it was an accident or was done by mistake or through misunderstanding. There is no intention of pressing anybody for payment of tax in respect of this particular income until it has been received. But repayment of tax actually in the hands of the Government is another matter. The strict legal position is that the Revenue Commissioners could and should, except for this old concession, collect on the valuation and only repay when it was ascertained, as I have said, that the rent received was less or was lost, in compliance with a certain section of the law. It is therefore a big concession not to press, but it is a just concession I admit, particularly in existing circumstances, when the money is not in the hands of the Government. But of course it will be going a definite step further to pay out money in the hands of the Government to those particular people. I do not know whether in any case anything further could be done beyond simply taking care not to press. The position has been altered and made worse from the point of view of those individuals by the Act of 1923. Where compounded arrears are payable in land stock, although the stock has a market value, it is less than the face value, and there is an arrangement whereby that stock is taken at face value in satisfaction of the tax. I think the latter part of Senator Sir John Keane's recommendation is met. I do not know whether a great many very hard cases have arisen, but I feel that we would be getting very far from the law if we added another administrative concession to the present administrative concession, by means of which the revenue authorities have carried on since 1881.
It is one thing not to insist on a tax after it is legally due, but it is going a very considerable step further to pay back to the owner a tax which is in the hands of the Government by way of repayment and which is legally due and was legally due and which could have been legally collected several years ago. I think the Senator will see, when he asks for further administrative concessions on top of those already in existence, that he is asking us to go very far indeed from the strict letter of the law. It seems to me that it really would be too much. I do not know whether, in detail, there is anything that we could do further, but I do assure the Senator that these cases have been dealt with sympathetically, and if there has been pressure that pressure has been accidental and out of line with what is the general policy.
I accept the Minister's assurance about the pressure, but I do not think he quite appreciates my point about the set-off. It is not a question of paying back a tax already collected, and it is not a question of any set-off. This power to set-off is, I understand, restricted. Power, I think, is given to do it under the Malicious Injuries Act. I do not think that the Revenue Authorities are in all cases able to set-off one source of debt against another. But I think it is done under the Damage to Property Act. There is one case of distinct hardship that has come to my notice where the amount of compensation awarded has had very considerable sums deducted from it on account of the tax for compounded arrears. These deductions were made in cash, whereas the Government do not pay all the compensation in cash. I can give the Minister, if he wants them, particulars as regards that one case.
I was referring rather to a case where a person was entitled to the repayment of income tax and where we refused. I take it that the Senator is asking that the full amount of the person's claim for repayment should be admitted, irrespective of the fact that the tax is actually and legally due in regard to compounded arrears which had not been received and would be collectable as soon as the compounded arrears had been received. Perhaps there is some point in his argument when he is not referring to income tax which the Government and the Revenue Commissioners have and which might otherwise be repayable, but when he is referring to money due in respect of compensation, that is a somewhat different matter. It is a matter that I have not personally examined, but I would undertake to look into it.
I ask leave to withdraw the recommendation.
Recommendation, by leave, withdrawn.
I move recommendation No. 2:
Section 1. To add at the end of the section a new sub-section as follows:—
(4) Income tax for any year shall be assessed upon the actual income accruing in the previous year.
Again, I am moving this in order to get a declaration of policy from the Minister. The Minister knows that in England now the previous year is definitely adopted as the basis of assessment for income tax. The three years' average has now been abandoned in Great Britain. I know that there are objections to it, but it must have been done for a good reason in England. It has been continually urged by taxpayers and by people who have to handle the taxpayers' business that this should be done. The present method I know is defended very strongly in official quarters, but it is very inconvenient to the taxpayers. It is inconvenient in this way: that you are asked in the month of May or June to send in a return of your total income for the current financial year. Of course, you do not know what your total income for the current financial year will be until the following April, and as one is not a prophet it would be impossible to say in May or June what one's total income would be for that financial year. Therefore, in preparing the return under the present system, a large element of guess-work must inevitably enter into the calculations made. There are certain concessions and practices which have grown from it and which have mitigated the inconvenience somewhat. In the case of dividends it would obviously be impossible for anyone to forecast the amount of the dividends he is likely to receive in a particular year, so that what happens as regards dividends is that in practice the dividends paid in the previous year are taken as the basis.
As regards salaries, very often a taxpayer does not know what his salary is likely to be in a particular year. It may be reduced, or, on the other hand, it may be increased by the payment of a bonus or something of that sort. In the case of foreign securities, the taxpayer is supposed to be able to give an exact figure as to what these are likely to bring him in. Of course, it would be quite impossible for him to do that. In the case of people with mortgages abroad the income from them is continually fluctuating and cannot be ascertained until the year is completed. In the case of bank interest the system is highly absurd. Those who have the misfortune to have to work on a bank overdraft cannot possibly know what their interest charges are likely to be until the year is completed, and yet you are expected in the month of May or June to send in a statement showing your total net income and setting off against it bank interest charges, the amount of which you cannot know until the end of the financial year. As soon as the inspectors get the returns they proceed to make the assessment. In the case of everybody, especially dual residents, this, since the separation of the two countries, has become very complicated. Calculations have to be made, and these have to be re-opened again at the end of the financial year. If any of the figures given require correction, the whole thing has to be re-opened at the end of the financial year. I should think that even in the interests of saving work in the Revenue Department it would be much to their advantage to take the income for the previous year as the basis of income for any given year. At the end of the financial year the whole matter could be re-opened when claims for repayments and adjustments could be dealt with. I fail to see why the Government here should not follow the practice of the British Treasury in this. I think it would be a desirable reform.
Senator Sir John Keane seems to have made a very good case for the recommendation that he has proposed, but I am afraid that if I am to speak on the different schedules I must admit that they are altogether beyond me. Some injustice may creep in under this. Let us take the case of trading concerns which had been making profits and were destroyed in the year 1922. While these concerns were out of business and their buildings flattened to the ground, the three years' average ran against the firms concerned. It would be only fair that when these firms re-established their business and rebuilt their premises that they should have the benefit of the three years' average when commencing business again. If this recommendation be carried, I hope the Minister will make provision for any such cases that have occurred. I have a case that I could bring to his notice. Unfortunately, I myself was associated with two such concerns.
I understood from Senator Sir John Keane that this is not a recommendation that he would press. Obviously, we could not carry out a change such as he suggests by a two-line amendment. It would require probably five or six pages of the Finance Bill to do what he proposes. I think that when the change was carried out in Great Britain that the section embodying it occupied five or six pages of the Finance Bill there, while there was also a schedule of minor alterations and adaptations. So that the change could not possibly be made in this way. To my mind, this amendment goes a great deal further, if it were adopted, than Senator Sir John Keane intends. I think it would introduce a very radical alteration in the charges under Schedule A. if we were to charge on the basis of income that accrued during the preceding year. Our view is that the change that has been made in Great Britain is a wholly desirable change, and our own intention is to follow it. Whether we do that simply, or try to accompany it with certain further changes, I am not yet in a position to say. If we had the opportunity of putting experienced members of the staff, which we have not had owing to the extra pressure up to the present, on a revision of the income tax code, then we could simplify it very considerably. The conditions here are different to what they are in Great Britain. The complexities which are necessary in Great Britain could, I think, to some extent be eliminated here.
We hope to begin the process of simplifying the income tax code to some extent this year. How soon we will be in a position to make substantial changes I cannot say at the moment. I recognise the point that Senator Dowdall has mentioned. The Senator, however, will recognise that it would be very difficult to make the sort of allowance that he suggests, because if we were to change over at all we would be bound to affect some businesses disadvantageously. If we were to change from the system of the three years' average, some businesses are going to be hit and others may gain. I think, when the time comes, if we do decide to do it, we will have to take the plunge. I do not want to say that as a final word, but I want to enter a caveat. The Senator thinks that we could make the change without disadvantage to anyone. If we are going to make the change we will have to make up our minds that on the whole it is desirable, and we will have to try to make it at a time when all the indications point to the likelihood of our being able to make the change smoothly. If we decide to make it, I think we will have to make it with all the consequences of some firms gaining something by it, and others losing by it.
It is only right, I think, that I should give a specific instance. The Gresham Hotel was destroyed in the public interest ostensibly—I do not use the word "ostensibly" in any offensive way— by the forces of the State. That concern was making a number of thousands per year profits for years when it was working, but while the building was flat on the ground, and when it necessarily lost ground rents, considerable running expenses had to be maintained. In that particular case at any rate, the directors became responsible for a very large sum of money in order to re-establish it. A certain amount of compensation was awarded, but in addition to the heavy losses and the heavy interest charges on the money which had to be borrowed to re-establish the hotel, the Minister, while insisting on his pound of flesh while the hotel was down and out as regards the three years' average, coolly proposes now that it should come into the general pool and that no exemption will be made for income tax in the future. That is wholly unjust and, I think, absolutely wrong.
Recommendation, by leave, withdrawn.
I move Recommendation No. 4:
New section. Before Section 5 to insert a new section, as follows:—
5.—In no case shall both super-tax and surtax be charged on the income of one and the same year.
This is a very important matter, and I should be glad to get an explanation from the Minister as to how it is going to work. I have got my own views about it, and I propose to propound them to the House. The Minister can say whether I am wrong or not. There has been a great deal of interest taken in this on the other side in public correspondence. I do not know whether it is that there are more surtax payers and super-tax payers there than here, or that they are more vigilant. Undoubtedly this new arrangement with regard to surtax and super-tax is going to mean the payment of two taxes for the same period. I know that it is going to work in this way. Take the present year, 1928/29. Anybody with an income of over £2,000 will be liable for super-tax for the year on the basis of his income for 1927/28. He will pay that tax in January, 1929. That was the normal procedure, but now for the same period he becomes liable for the payment of surtax. The way the thing is camouflaged is that the payment is deferred. The double liability arises for the same period, but the payment is deferred. He does not pay until January, 1930. The defenders of this arrangement say that a person will not pay anything that he has not paid before. On the face of it that looks very plausible. You are only paying out in January, and everything seems to be quite nice. I suggest that ought to make one rather suspicious about it. Why should the tax for, say, the year 1928-29 not be payable until 1930? The ordinary tax for 1928-29 is payable in two moieties in January and July. Of course, the whole thing is that you give the whole show away. It applies to the two payments in January, 1929, but one is deferred until January, 1930. The liability is just the same.
In the case of super-tax, where the taxpayer dies during the year his liability to tax is apportioned to the date of his death, but in the case of surtax, by some extraordinary arrangement which no one can discover, the liability applies to the whole year, so that if I were to die to-morrow, and I am unfortunately a super-taxpayer, I should only pay my super-tax for 1928/29 up to the date of my death, and whatever portion is due after that my executors would be liable for it. My executors would be liable for the entire surtax for the year. That is a very good example of the way in which people are taxed twice over in the same year.
In the case of surtax, although a man only lived for one month in a financial year, his executors have got to pay sur-tax for the whole year. In the case of super-tax, he only pays in respect of the portion of the year during which he was alive. I have no doubt that this is a very dull subject for people who have not the good or bad fortune, as the case may be, to pay surtax. I think the Minister, however, should arrange that people would not have to pay this double tax. The Minister may not be able to do it this year, but I would ask him to consider whether, in the case of surtax, he could not make the same concession in the event of death as is made in the case of super-tax. Super-tax is payable up to the date of a person's death. I do not ask this to be done this year, but I do not think that the taxpayer should have to pay twice. I think that the surtax should, as in the case of the super-tax, be apportioned up to the date of a person's death, and should not be payable for the whole of the financial year, as is now going to be the case.
I would like to support everything that has been said by Senator Sir John Keane. He has used precisely the arguments that I had intended to put before the House. There is not the slightest doubt, I think, that for the year 1928-29 anybody who has the privilege to pay super-tax will be called upon to pay, not alone super-tax, but surtax as well. One payment will be made in January, 1929, and, as Senator Sir John Keane has pointed out, the subsequent payment will be made in January, 1930. On the Second Reading of this Bill, when this matter was alluded to, the Minister definitely stated that it was not intended that super-tax and surtax should be paid for one and the same year, but I am afraid that if he examined more closely the section in the Bill dealing with this, which is really a copy of the section in the English Bill, he will find, as Senator Sir John Keane has tried to show, that both will be payable for the year 1928-29.
The British Chancellor of the Exchequer admitted that by the change from one system to another he was going to obtain a sum of not less than £60,000,000. If, as the Minister alleged, there is no money in it, I do not know how the Chancellor of the Exchequer in England is going to get £60,000,000 out of the altered system. He must have some means of doing so which is not known to our Minister for Finance here, but if there is to be a gain of that sort I think it would be well that we should know what our Minister is going to obtain in the way of a windfall under the change proposed in our Bill. I think that undoubtedly a great hardship will be caused by this section. A man's estate will, in the long run, be liable for this additional taxation. The recommendation which I have tabled comes to much the same thing as the recommendation moved by Senator Sir John Keane. It asks that the super-tax payer should be left in the condition that he is in now in relation to his taxation during his lifetime, and that his estate should be left in the same relation in regard to super-tax as hitherto. I do not think that the request is unreasonable. If what the Minister stated be true, that there is to be no double taxation, then I cannot see how he will refuse to give an assurance which would be tantamount to accepting the recommendation so that a man's estate cannot be penalised by the introduction of this clause.
I do not think that I said on the last occasion that sur-tax and super-tax would not be charged for one and the same year. As far as I remember what I said was that sur-tax and super-tax would not payable in one and the same year. Theoretically, super-tax and sur-tax will be chargeable on the year of transition, but they will be payable at different dates and they will be assessed on the basis of income in two different years. The effect of the change is that every person of the requisite income will, in the course of his life or after his death, pay an additional year's tax. At present if a person comes into an income of £3,000 a year, for the first year he pays no sur-tax or super-tax. He pays no super-tax because his income in the previous year was below the super-tax limit. In the second year in which he enjoyed this income of £3,000 a year he pays super-tax because as I have said the super-tax is based on his income in the preceding year. Having already one year an income of £3,000 he became entitled to pay super-tax the second year so that he really escaped super-tax for one year. The change which transfers the basis of assessment of sur-tax to the actual year of assessment means that for every year that person is entitled to an income of £2,000 or over he is liable to sur-tax, and in the case of death that his estate will pay the sur-tax in respect of the last year. It seems to me to be entirely fair and reasonable. I see no ground at all on which a person should escape the sur-tax for one year any more than he should escape income tax for the first year.
The matter was debated, as the Senator has indicated, in the House of Commons. It was quite clearly shown there that there was no intention of giving way on this point. If we did something to give effect to this particular amendment and the Chancellor of the Exchequer in England stuck to his guns the position would be that we would lose a whole year's surtax of about £500,000, and because people on the other side stood fast—because most of the super-tax payers are doubly resident or liable doubly, and come under the double taxation and under the relief provisions—it would mean we would lose £500,000, and the taxpayers would probably gain—I have not made a close calculation on this— say, £150,000, and the other £350,000 would remain in the British Exchequer, for they would not be liable to make any relief allowance as surtax is not payable here. On that basis alone the thing would be rather absurd. In any case it seems to me that the change is entirely defensible, and the effect of it is that over a period it gives us one extra year's surtax revenue, and it means that every person with an income of over £2,000 a year pays a sur-tax at the appropriate rate in respect of every year that he has that income. That seems to me entirely defensible and correct, and I can see no sound argument against it.
It is quite clear from the statement of the Minister that there will be an extra liability for an extra year's tax on every super-tax payer. That additional burden is being put on.
Will that burden be paid on a person's death by his executors? I cannot see the justice of the Minister's statement. He will not be receiving income; his estate will be divided and income will not be coming in, as his salary and the rest of it will have ceased, and yet his estate is liable for the tax he paid during his life. His executors would have to pay it, but the income on which it is paid is not being received by anybody. The Minister argued that it was not going to be such a severe injury because the super-tax payers, being doubly resident, only £150,000 would come out of the £500,000 as a benefit to the taxpayers, because so many of them came under the provisions of the double taxation reliefs.
What I meant to say was that the taxpayers, in view of the existing position, and of the fact that the change is being made in Great Britain and that they are going to stand over it there, apparently the position would be, if we adopt the principle of this amendment, the taxpayers here would gain only a small proportion of what the Exchequer would lose.
Those of us who are not doubly resident get the whole benefit of it. It is no relief for us to be told that other people are not going to get the full benefit. We who live here, and our executors, when we die, will be injured to the extent of a year's super-tax. What should be made clear without doubt is that the full extent of the change means that in the event of death the estate is to be liable for a year's super-tax for which it was not liable before.
I am not affected by super-tax, but it would appear from the argument of the Minister that you are made to pay when you are dead what you should have to pay when you are alive. I understand that in the first year a person liable to super-tax does not pay that year, but his liability for that year has to be paid out of the estate when he dies. That is quite fair, for a person cannot have it both ways. If I were in the happy position to have to pay surtax I would be quite glad of the Minister's arrangement for I would have the benefit of the money while I was alive, and the payment of it would only be called upon when I was dead and when it would be no use to me.
There are two things suggested to the Minister. One is that double liability should not fall, but I can quite see the difficulty about that. There is the other matter which should be considered, I think, that is, the apportionment to the date of death. Formerly in the case of super-tax, under Section 6 of the Finance Act of 1912 super-tax liability was apportioned up to the day of death. That was a fair arrangement. Why should that arrangement, apart from the transition year, be departed from? In the case of surtax, that seems to me doubly unjustifiable for there is no ground for putting on a tax on an estate that has no legal existence. Once a man is dead the estate has no legal existence, and income tax should not be imposed under those conditions. This surtax proposal seems illogical. If a taxpayer dies before the 3rd April he will have to pay tax only for that year, and if he dies two days after he becomes liable for the 365 days.
No, only for two days' more super-tax and two days' surtax.
If that is a fact a good deal of my argument falls to the ground. Do you mean his estate?
The Minister says the estate is liable if a man lives only two days into the financial year for all taxes both income tax and sur-tax?
That is news to me, from what I thought after studying the complicated provisions of the British Act. There is nothing to be done then. I fully appreciate the point with regard to dual residence, that it would not be good policy to abandon any claim to surtax in the case of dual residence for the British Government would get it all.
If a man lives two days it is two days extra. Of course, there is a year's tax always in arrears that will always have to be paid.
On that question, I have here a leading article from the London "Times" dealing with surtax. It says: "The fact remains that when the inevitable hand of death overtakes him" (that is, the taxpayer) "his estate will be liable for an extra year's instalment which would not have been payable under the old regulation." I take it the gentleman who was qualified to write that, the first leading article in "The Times," had a fair idea of what he was writing about.
That is perfectly correct.
In that case the estate will suffer an additional year's super-tax.
Senator Sir John Keane was referring to the broken part of the year. He indicated that if there were a few days or two or three months extra the whole year would be charged in respect of that. I assured him that only two days would be charged if he lived two days, or three months if he lived three months. The position at present is that the person and his estate escape one year's tax on an income in excess of £2,000. In future, for every year for which there is an income in excess of £2,000 the tax will have to paid into the Exchequer. Such tax is payable a year in arrears.
Recommendation, by leave, withdrawn.
Sections 5 to 21, inclusive, put and agreed to.
SECTION 22.
(1) In lieu of the duties of customs chargeable under Section 21 of the Finance Act, 1925 (No. 28 of 1925) there shall be charged, levied, and paid on all articles (other than sugar, confectionery, cocoa preparations, beer, table waters, herb beer, cider, perry, wine, tobacco, spirits and any article on which a duty is imposed by Section 19 (which relates to alteration of duties on sugar) of this Act imported into Saorstát Eireann on or after the 26th day of April, 1928, and made from or containing sugar or other sweetening matter, the following duties of customs, that is to say:—
(a) if the articles are prescribed in the official import lists to be entered on importation by weight, a duty at the rate of one penny and one farthing on the pound;
(b) if the articles are prescribed in the official import lists to be entered on importation by measure, a duty at the rate of one shilling on the gallon.
There are two recommendations which I wish to move in connection with this section. They are:—
(8) Section 22, sub-section (1). To delete in lines 1-2 the words "table waters, herb beer, cider, perry, wine, tobacco, spirits" and to substitute therefor the word "tobacco."
(9), Section 22, sub-section (1). To delete in line 13 the words "one shilling" and to substitute therefor the words "five shillings."
On a point of order, does not recommendation number 9 impose an additional burden on the taxpayer? I think no private member is allowed to propose an additional burden on any taxpayer.
This is only a recommendation.
Standing Orders governing amendments apply equally to recommendations.
LEAS-CHATHAOIRLEACH
Quite. I think I will let the two recommendations be taken together.
I ask for a ruling. Is it in order for any private member to introduce a recommendation or amendment which imposes an additional charge on the taxpayer?
LEAS-CHATHAOIRLEACH
Perhaps I might be permitted to make a suggestion in the matter. If there is a point to which Senator MacKean wishes to call the attention of the Seanad without proceeding to speak to his recommendation—for even if carried here, for over-riding reasons which I need not go into, they could not be carried into effect in the Dáil, as it would require a financial resolution, and therefore could not be inserted in the Bill—I suggest that he could make his point on the section.
These two recommendations are so intimately related that I wish to discuss them together. For some years the country has been passing through a critical period, and we have not yet emerged from it. Agriculture, the principal mainstay of the country, is in a parlous condition, and the Irish farmer who depends on agriculture for his livelihood is finding it difficult to meet his obligations and make ends meet. Our industries, owing to foreign competition, and also owing to the fact that our own people refuse to support home manufactures, are also in a parlous condition. The revenue of the country is falling away. In view of these facts I think any suggestion that would in any way remedy this state of affairs ought to be considered by the Minister. With regard to the first item, table waters in Ireland are excellently produced from the best materials, and they compare quite favourably with any similar article imported, but a certain class of the population here seem to regard anything imported as superior to the home article. As to the mineral water industry here being in a rather precarious condition, I may mention that five mineral water manufacturers in the last year have amalgamated, and the underlying reason of that is to save overhead expenses. In doing that they had necessarily to decrease the number of employees who had rendered faithful service. By putting an additional five shillings on these waters it would materially help the mineral water manufacturers of Ireland. With regard to wines, this section, I suppose, refers only to sweetened wines. These would be rectified wines, and they are produced in this country from the best materials. But the imported article is coming in and knocking them out. I suggest to the Minister that it would be right to put an extra tax on all these articles I have mentioned. With regard to medicated wines, these are flooding the country at present. They are made out of inferior materials, and they pay only the lower class of duty, namely, 5/- per gallon and are sold at 5/6 per bottle. The reason for that is they do not pay any extra duty, which puts them on a level with the home article. It has been proved on analysis that these medicated wines are really trash and are sold on a system of bonuses all over the country, doing great injury to the legitimate wine trade. I therefore hope the Minister will favourably consider putting on an additional tax on these imported mineral waters and medicated wines, and so help the home industry.
I am unable very well to connect medicated wines with home industries. So far as mineral waters are concerned, sweetened mineral waters do enjoy the great advantage of protection. It amounts to, allowing for the tax on sugar, something like about threepence or four-pence a gallon, and on such a comparatively cheap commodity as table water, lemonade and that sort of thing, I think that threepence or threepence halfpenny a gallon is quite sufficient protection. I would not be inclined at any subsequent stage to increase that. The present tariff on mineral waters was fixed knowing that it would have a protective effect, but I would not propose to go beyond that. It might be that there might be some grounds for prohibiting the sale of medicated wines. I think probably they are a fraud on the public, and a very inferior article is sold as possessing a virtue which it has not. Perhaps there is a case for that. I do not know whether the medical profession, for instance, would take that view. Some individual members of the profession are induced to write testimonials as advertisements, but they, perhaps, might represent only a few of the profession. There might be some grounds for considering whether the sale of these so-called medicated wines, which I personally consider are frauds, should not be stopped. If we are stopping it we should go the right way about it and have an examination of the matter and say that they might not be imported, that they might not be advertised and sold. As a matter of public health, as a matter of preventing the public being induced to pay excessive prices for a particular brand of article, that brings us up to the question of patent medicines. It would be very difficult to deal with the question of wines without going further, and you could not deal with all the difficulties in the Bill. It seems to me, if we are dealing with mineral waters or sauces which contain sugar, we should not impose as stiff a rate of duty as 5/- per gallon.
I withdraw the recommendation, but I ask the Minister does he consider that threepence halfpenny a gallon is sufficient protection for mineral waters?
Recommendation, by leave, withdrawn.
Sections 22 to 25, inclusive, put and agreed to.
SECTION 26.
On and after the 1st day of May, 1928, entertainments duty within the meaning of Section 1 of the Finance (New Duties) Act, 1916, shall not be charged or levied on payments for admission to any entertainment as respects which it is proved to the satisfaction of the Revenue Commissioners that the entertainment consists solely of one or more horse races and that the holding of the entertainment has been authorised either by the Turf Club of Ireland or by the Irish National Hunt Steeplechase Committee or by both the said Turf Club of Ireland and the said Irish National Hunt Steeplechase Committee.
I move:—
"Section 26. To delete all after the word ‘races' in line 13 down to the end of the section."
Under Section 26 of the last Finance Bill this year the entertainment tax on all race meetings has been remitted, but the Seanad will notice that the tax is remitted only in the case of races run either by the Turf Club of Ireland or the Irish National Hunt Steeplechase Committee, or by both. That means that the tax has still to be paid in respect of a number of small race meetings, popularly known as flapper meetings, which are held throughout the country under an organisation known as the Irish Racing Organisation. They are not what one would call, I think, high-class races. They are not run under the same rules as those run by the Turf Club and the National Hunt Steeplechase Committee, but they do afford a certain amount of recreation and amusement in different parts of the country, particularly in the rural areas. I think about 150 of them are held annually. In the majority of cases no entrance fees are charged to people entering the course, and where any charge is made it is small. Some of those meetings are got up for the purpose of raising funds for some local purpose, but on the main they afford a cheap day's sport in the country to the local people. It has been argued by somebody that at these meetings the best horses do not always win. I admit that may be true, but I have yet to know races in which one could guarantee that the best horse would win. Certainly, the frequenters of the Curragh, Punchestown or Baldoyle could not guarantee that the best horse always wins, or even does his best to win, so whatever objection there may be on that ground to remitting the tax it also applies to the big meetings. In view of the fact that the amount of money involved is negligible I think the tax on the whole of those race meetings combined does not realise more than £100 per annum, and it would not pay the cost of collection. At present, there is no money in it. It means a certain amount of trouble and annoyance, and probably militates against the running of these races. It is a tax that is not worth retaining. The Exchequer will lose nothing by it. The effect of the recommendation is to enable the remission of the entertainment tax in respect of race meetings to apply to both the small unofficial meetings and the big official meetings. There will be a good deal of discontent and comment if these little meetings have to pay while the big commercial race meetings are exempt from taxation.
I hope the Minister will see his way to accept this, and that the House will agree to the principle of having the same treatment for all.
I am very frequently in the position of opposing amendments in the Seanad, and, when they are carried, recommending the Dáil to pass them. I am in the opposite position now. I opposed this particular amendment in the Dáil and secured its defeat. I am asking the Seanad to pass it and to let the Dáil have an opportunity of reconsidering the matter. This amendment was proposed by the leader of the Labour Party in the Dáil. I opposed it, but a large number were in favour of it. When the Ceann Comhairle said it was carried I agreed, but a member of another Party challenged it and I succeeded in defeating it. I would ask the Seanad to let the Dáil have an opportunity of considering the matter again. It is a very small matter, and there is absolutely no money in it.
If what Senator O'Farrell says is true, that no payment is charged, I do not see why there should be any relaxation.
It is just extending the principle.
It will only apply to a small number of meetings. I think if the tax were chargeable it would not come to more than £100 a year.
Recommendation put and agreed to.
Question—"That Section 26, as amended, stand part of the Bill"—put and agreed to.
Sections 27,28,29,30 agreed to.
SECTION 31.
(1) Corporation profits tax chargeable on profits of a foreign company arising in an accounting period ending after the 31st day of December, 1928, shall, subject to the provisions of this section, be charged, levied and paid at the rate of seven and one-half per cent. in lieu of the rate of five per cent.
(2) This section shall not apply to corporation profits tax chargeable on profits of a foreign company arising in an accounting period in respect of which such foreign company satisfies the Revenue Commissioners either—
(a) that during the whole of such accounting period all the members of such foreign company were resident outside Saorstát Eireann, or
(b) that—
(i) in the case of the accounting period current on the 1st day of January, 1929, during the whole of the time from the 31st day of December, 1928, to the end of such accounting period, or
(ii) in the case of the accounting period current at the expiration of six months from the day on which such foreign company commenced to carry on business in Saorstát Eireann, during the whole of the time from the expiration of such six months to the end of such accounting period, or
(iii) in the case of any other accounting period, during the whole of such accounting period,
such foreign company maintained in Saorstát Eireann a branch register of its members resident in Saorstát Eireann and that according to the law of the country in which such foreign company is incorporated and the law of Saorstát Eireann all stock and shares registered in such branch register and held by persons domiciled in Saorstát Eireann are or are deemed to be property situate in Saorstát Eireann for the purposes of assessment to death duties in such country and in Saorstát Eireann, or
(c) that such foreign company commenced to carry on trade or business in Saorstát Eireann within six months before the end of such accounting period.
I move:—
Section 31, sub-section (1). To delete in line 58 the words "foreign company" and to substitute therefor the words "company doing business in Saorstát Eireann and not incorporated under the law of Saorstát Eireann."
I put down this amendment in order to give the Minister an opportunity of elucidating certain difficulties that I have in understanding the term foreign companies which are liable to corporation tax. What is a foreign company? There is no definition of foreign company. It appears to me to be a matter of great doubt and might require legal interpretation. I imagine a foreign company is one not registered in the Saorstát but doing business and receiving profits from trade here. That is the definition on which I ventured to put down the recommendation.
Under the Finance Act of 1920 as adapted "Foreign company means a company other than a company registered in Saorstát Eireann." A foreign company is one which is not incorporated by or under the laws of Saorstát Eireann, so that there is an existing definition of a foreign company and it would be inadvisable to have two definitions in relation to one particular matter. I think it would be undersirable to accept the recommendation.
Recommendation, by leave, withdrawn.
I move:—
Section 31, sub-section (2). To delete in line 28 the word "domiciled" and to substitute therefor the word "resident."
This amendment arises on the latter part of the section.
Such foreign company maintained in Saorstát Eireann a branch register of its members resident in Saorstát Eireann and that according to the law of the country in which such foreign company is incorporated...
It goes on to refer to the question of domicile. These words "residence" and "domicile" have very distinct and different meanings and they have been used in a rather promiscuous manner in the section. Would the Minister explain what is the purpose in differentiating between them?
It may be taken that this particular section for all practical purposes affects only companies which are situated in Great Britain. To some extent it may affect other outside companies, but in the main it affects British companies. In Great Britain the law is found in Section 36, paragraph (b) of the Companies Consolidation Act of 1908 which says:—
On the death of a member registered in a colonial register the shares of the deceased member shall, if he died domiciled in the United Kingdom, but not otherwise be deemed so far as relates to British duties to be part of his estate and effects situate in the United Kingdom for or in respect of which probate or letters of administration is or are to be granted or whereof an inventory is accepted and recorded in like manner as if he were registered in the principal register.
That section shows that, really the question of where the shares are deemed to be situated depends not on residence but on domicile, and the effect of Senator Sir John Keane's recommendation would be that we might in effect strike out sub-section (2) of this section, because it would impose a condition which could not be complied with, and none of the companies could escape liability to the higher rate by setting up a colonial register. It really relates to the Companies Consolidation Act of 1908 and is not a promiscuous use of the terms "domicile" and "residence."
May I ask for some further information as I really do not understand the position. But under this new arrangement there is a penalty attached to any foreign company that does not establish a colonial register, and on such register has to be borne the names of shareholders resident, or is it both resident and domiciled?
Resident within the country. Can companies compel shareholders to enter on any particular register? Is not that entirely within the option of shareholders as to which register they choose to be inscribed on? At present I know it is open to shareholders to go on any of the registers which are kept, I understand, by a company. It is outside my knowledge, but I think that is the fact. How can it be made mandatory on the company to compel a shareholder to go on any given register?
It cannot compel the shareholder.
It cannot. If a resident objects to go on any given register is the company then liable to a penalty?
Again that relates to another section of the Companies Consolidation Act—Section 34 (1), which states:—
A company having a share capital whose objects comprise the transaction of business in a colony, may, if so authorised by its Articles, cause to be kept in any colony in which it transacts business a branch register of members resident in that colony (in this Act called a colonial register).
This might have been framed in a different way, but it was thought better to frame it as it is. It is a general section and refers mainly to British companies. It was thought better to frame this section generally rather than with specific reference to any British legislation, and the entire purpose of it is to provide that if a company here—that is a British company—sets up a colonial register in conformity with the provisions of the Companies Consolidation Act of 1908, then that company escapes the higher rate of tax. If the company refuses to set up the register it pays the higher rate of tax, and we justify that provision on the grounds, that where a company which has shareholders resident and domiciled here, and is doing business here, has no colonial register, we are losing death duty to which we are equitably entitled, and which we would obtain if the colonial register were established. In that case they would be liable only to our death duties. It is not intended, and it is not believed, that we will collect extra corporation profits tax as a result of this section. It is believed, and I think it is certain, that we will succeed in getting extra death duties in respect of it, and we will get death duties which all impartial people have admitted we are equitably entitled to. We cannot get them as matters stand, unless colonial registers are set up here by companies which have shareholders domiciled here and are doing business here.
I think I see the point, and I have every sympathy with the Minister's objects. The only point is that there is no provision to compel a resident or person domiciled in the country to inscribe on the colonial register. That was the point I wished to be assured on. But if a person chooses to be obdurate and to remain on the British register is not the object of the clause pro tanto defeated?
Certain companies have recently set up colonial registers and no such difficulty has been raised by shareholders. If that difficulty arises to any great extent we can go further, but we are going as far as seems necessary at the present time.
Recommendation, by leave, withdrawn.
Remaining sections, schedules and title agreed to.
Bill ordered to be reported.
