Seanad Éireann debate -
Wednesday, 11 Jul 1934

Vol. 18 No. 29

Finance Bill, 1934—Committee Stage.

Section 1 ordered to stand part of the Bill.

SECTION 2

(2) Where the Revenue Commissioners are satisfied, in respect of any house or building of which the annual value ascertained in accordance with Section 187 of the Income Tax Act, 1918, does not exceed five pounds. that—

(a) such house or building is bona fide let to a tenant, and

(b) the cost of the repairs, maintenance, and insurance of such house or building is borne by the landlord or immediate lessor, and

(c) the annual income derived by the said landlord or immediate lessor from such house or building, taking one year with another, after making allowances for the cost to him of the said repairs, maintenance, and insurance is less than the annual value ascertained as aforesaid of such house or building,

the Revenue Commissioners may grant such relief by repayment or otherwise, as in their opinion is just.

Sir John Keane

I move Recommendation No. 1:—

1. Section 2, sub-section (2). To delete the sub-section and to substitute therefor a new sub-section as follows:—

(2) The following Rule shall be added to the said Rules, that is to say—

8A.—(1) If the owner of any land or buildings shows that the annual value is greater than the rent, according to the average of the preceding five years, he shall be entitled, on making a claim for the purpose, to repayment of the amount of tax on the excess.

(2) Rent for the purposes of this Rule shall be taken to be the full amount payable by the occupier, and in arriving at the amount chargeable under this Rule a deduction shall be made for any portion of such rent wholly and irrecoverably lost, for any portion of such rent voluntatrily foregone by agreement with the occupier, and for any sums which the person receiving or entitled to the rent is obliged, by agreement with the occupier, to pay or satisfy out of the rent in respect of any rates or assessments which by law are charged upon the occupier, and for the cost of maintenance, repairs, insurance and management ultimately paid or borne by the person receiving or entitled to such rent.

(3) For the purposes of this Rule numbers (2), (4), (5) and (6) of Rule 8 shall apply.

I am afraid this subject is a little complicated. The position at present is that every owner is permitted an allowance on his valuation for repairs —an allowance of one-sixth in the case of a house and an allowance of one-eighth in the case of lands. That practice, I think, has always prevailed, and it is in line with a similar practice prevailing in England. The Government seek to change that on the grounds that under the Valuation Acts in Ireland—the Griffith Valuation—a hidden or undisclosed allowance for repairs has always been given in arriving at the valuation. At one time, I understand, the amount of that was revealed when cases came into the courts. The valuation was disputed and when the case went to court the valuer said, "Yes, we have allowed this." They have found that inconvenient, and of late years they have ceased to reveal the percentage allowance but I think it is generally known that the percentage allowance is one-sixth in the case of houses. There are two main divisions into which this subject falls. One is the case of the owner-occupier, the man who pays no rent and occupies his own premises, and where the valuation must, of necessity, have been hypothetical or notional. He does not pay a rent; you cannot fix anything but the valuation; you cannot tax him upon anything but the figure that is set on the valuation.

In Great Britain, and here up to the present that owner-occupier has been allowed to set-off, for the purposes of taxation, the full amount of his property repairs. If that exceeded the allowance of one-sixth, he was allowed whatever amount was in excess. It is sought to do away with that practice or concession or whatever it is—I do not trouble the House with the question of whether it is a legal right, or a concession. In practice, it was allowed. It is sought to do so on the ground that the allowance for repair is given under a hidden scheme and not on the amount of repairs themselves, and it is hard to say whether the amount is in excess of the allowance or not. Now the Government are taking up the line that whatever you are spending in repairs you may not set-off. You have one-sixth disclosed, and if you spend ten times that amount on repairs you have still to pay on the valuation. Though it does appear to be a hardship, it only appears to be justified in equity on the ground of the difference between the method hitherto in operation and the method in future. The English method sets off the valuation but did state the figure through the assessment; in the Irish method the whole point is to sweep it away. That, on the face of it, is a very considerable hardship. It is not being challenged, although it does not seem to be just. Now the other division into which the subject falls is very different. You no longer have the hypothetical or notional assessment of what your property would have to be actually valued at, and brings in to the landlord in the form of rents paid and received. Up to the present the same method of set-off applied to let property, as to occupied property, and the owner was allowed to pay—I am speaking very generally and putting it in plain terms—either on the net receipts or on the valuation whichever was the lower. The actual net receipts were taken on an average of five years, that is to say, the owner could not say I have had very heavy repairs this year and need not pay anything. He had to show repairs over a period of five years, and, on the average of five years, he was allowed to set-off the total of his repairs and was allowed the difference between the net rent or the valuation whichever was the lower. That would appear to be eminently just—repairs including management and insurance, in addition of course to actual repairs. Now, the Government seek to cut that away entirely and to tax on the valuation without any regard whatever to repairs or to the net receipts. A small concession was given in the Dáil in the case of cottage property. In the case of property valued £5, and under, the present system is to be continued, not exactly in the same form, but is to be left entirely to the judgment of the Revenue Commissioners. The five years' average is to be swept away, as a statutory measure, and the commissioners are to give whatever allowance they think fit. That appears to be a very arbitrary method and I suggest it is the only method. There is to be no appeal to the special commissioner or to the courts. I think the House will agree that that is very unjust. The mitigation of £5 is very slight, and does not in any way make good the broad principle of equity and justice which is now violated by this clause. And that is that in future owners of property of over £5 valuation where the property is let, going on the valuation, although they may receive rents of even half, or quarter of the valuation after they have allowed for the cost of repairs and management, and now the Government advocate this as a working proposition and as a remedy. The Government contend that if the property is valued too highly you can go to the valuation authority and get the valuation reduced. I think that suggestion might for a moment be examined. I suggest, however, there are two reasons why that would not be fair or practicable. The case to be made to the Valuation Commissioners would be if this Government measure was to apply that an excessive amount was spent on repairs and so the profit rent had decreased. But from the Commissioners' point of view it would seem to be a futile argument that the valuation should be reduced because the property was in a better state than it was before. Naturally, the Commissioners would say this represents the valuation. It would seem that the only course open to the property owners would be to let the property get into a bad state of repair and then before spending any money on it to apply for revaluation. But that surely is not in the public interest. But a house may be old or greatly injured because of storm or dry rot and may require a lot of expenditure to put it in order, and when the repairs have been duly done a very heavy sum may have been spent upon it. The person who pays the taxes might not be the person to get the benefit of that allowance. For certain legal reasons it might not be possible for the owner to do the major repairs. He might not be in a legal position to spend money upon it because of the lease falling in, or because of the bankruptcy of the tenant. There is another reason. The owner might have several houses, some in good and some in bad repair. The valuation might be a fair criterion in regard to a good house but the valuation return, at best, would only result in the bad house being valued at nil. I ask the House to note that especially. The owner would be unable, as he is at present entitled to do, to set-off the minus quality of the bad house against the plus quality of the good houses. Look at the extraordinary repercussions of that on the whole of our rating system. If you applied the equities on the lines as suggested by the Minister, figures could be produced to the Minister and his officials to show that in some cases no rents whatever are received from this class of property. In that case the logical course would be to have no valuation whatever. Is it then suggested that the owners of these houses should pay no rates and make no contribution to the local services, whereas the owners of smaller houses which happened to be in a better state of repair should still pay rates. Is it practicable at all to suggest a method which is going to so grievously complicate local finances? There is the perfectly simple method which has been in operation up to the present: that you pay on the net rents or on the valuation, whichever is the lower. It is impossible to find a reason why that method should be abandoned. It is a perfectly simple and just system. It is a method which is open to the strictest examination and it fulfils all the reasonable calls of justice and equity.

The effect of the recommendation that I have moved is simply this: that in the case of let properties the owner should pay on the net receipts or on the valuation, whichever is the lower. I would plead with the Minister to adopt that system. It is perfectly straightforward. It is understood and it has always prevailed. It is in no way met by the argument that allowances for repairs have already been received. That argument, for what it is worth, only applies to property occupied by the owners where you cannot apply the actual test of income. If the provision in this Bill is persisted in then it means that for the first time, as far as I am aware, you are taxing people on income that they have never received. I propose to give one further illustration which is known. I do not propose to mention the person's name, although the Minister knows it. It is the case of a large landlord in the south. He was so bothered by the burden of the repairs of his cottage property, property of the smaller valuation, but still property by no means confined to the £5 valuation, and with the difficulty of collecting the rents by the process of continually having to have recourse to the courts, that he has made over his property to the occupiers for the nominal sum of 5/- each. He has thus rid himself of the burden of repairs. I am told that he has got rid of an estate staff of 12—perhaps not that number—but certainly of a large number of his estate staff. Does the Government wish to perpetate a system of that kind? I know owners who, if they had not got a sense of public duty, could do the same, but they have refrained from doing so because it would mean throwing a number of people out of employment and would be the means of perpetuating slums in these small towns. I suggest that the only just thing for the Government to do is to accept the recommendation.

Minister for Finance (Mr. MacEntee)

I should like, first of all, to correct the misapprehension which possibly Senator Sir John Keane has created in the minds of Senators: that the proposal contained in his recommendation is merely to restore the status quo. The Senator has implied that in the generality of cases owners at the present moment receive the concession which his proposed recommendation would grant to them. In fact, at the present moment in no case does Rule VIII under the previous finance measures apply except in the case in which the rent is not more than one-sixth above the valuation. In the generality of cases in Ireland the rent is very considerably in excess of the valuation. I can give some instances which have been procured at random from among members of the Civil Service which, I think, will bring home more forcibly to the minds of the Seanad what the actual position in that regard is than any words of mine would do. In one case there is a house let at a rent of £52 a year. The rates in this case are paid by the tenant. The poor law valuation is £12. The landlord receives a net income there of £52 a year, and he is only charged income tax upon £12. In another case the poor law valuation is £20. The rent, inclusive of rates, is £100. Taking the rates at 16/- in the £, the net rent received by the landlord in that case is £84. He pays income tax on £20. In another case the poor law valuation is £21. The rent is £104, inclusive. Again, on the basis that the rates are 16/- in the £, the net income received by the landlord is £87. He pays income tax on the valuation of £21.

Mr. Wilson

Are those houses that had what was known as a rental in 1914?

Mr. MacEntee

I am not in a position to say, but they are all possibly pre-war houses. In another case the poor law valuation is £24, rent £110 inclusive, leaving the landlord a net rent of £90. In another case the poor law valuation is £25 and the rent £120. In another case the poor law valuation is £27 and the rent £104. Senator Sir John Keane referred to the broad principles of equity and justice. What is the broad principle of equity and justice that underlies the income tax law? It is that a man should pay tax on the income which he receives.

Senators

Hear, hear.

Mr. MacEntee

I notice that some Senators have said "Hear, hear." If that is the case, what should landlords who are in receipt of net rents of £84 pay? Should not they obviously pay on the full valuation, because the poor law valuation here is assessed on the basis that the rates and insurance are paid by the tenant. The Senator said that every owner is given under the Valuation Acts a hidden allowance for repairs by way of a percentage. I think that the Senator is under a misapprehension in that regard. Every hereditament is valued as a separate entity. In striking the valuation the Commissioner for Valuation has to take into consideration the rent at which the property would be let from year to year to a tenant, the tenant himself having to pay the rates, taxes and other public charges: repairs, insurance and everything else that may be necessary to keep the property in such a condition that it will command the rent which he is prepared to pay for it in the first instance.

Previously, in making that valuation the Commissioner of Valuation has to make the allowance for repairs, which is dependent, not upon any mathematical basis, but upon the condition of the property—the actual structural condition, the manner in which the house has been erected, and the condition in which it has been maintained up to the date upon which he is asked to strike the valuation. If at any time an appeal is made to the Commissioner of Valuation by the present owner of the property and he finds that the property has deteriorated in value and that, in consequence, a larger allowance will have to be made for repairs, I feel that the commissioner is statutorily bound to make such an allowance for repairs as will enable that property in its present condition to be maintained in such a way that it will command its present rental. Accordingly, any person who feels that he is aggrieved, that he is paying more than he should in justice pay under the conditions which will exist as soon as this Bill becomes law, has his remedy. He can go to the Commissioner of Valuation and, if the allowance which has already been made to cover repairs in that case is insufficient, the Commissioner of Valuation, as I have said, will be bound to reduce his valuation and thereby to make the amount of income tax which the landlord of that property is called on to pay commensurate with the real annual value to him of the property.

Mr. Douglas

How long would that take? What year will it come into effect?

Mr. MacEntee

I have no reason to believe that a matter of that sort would not be expeditiously dealt with. I have not heard any general complaint about delays in the office of the Commissioner of Valuation.

Mr. Brown

You are very lucky.

Mr. Douglas

It would not apply in the previous year on which the income tax is paid.

Mr. MacEntee

If it can be shown, after the operation of this Act for a year, that a hardship of that kind arises we can consider how we can redress the hardship. At the present moment, we are asking the Seanad to do as the Dáil has already consented to do—to assess income tax in accordance with the broad principles of justice and equity; that is, on the actual income derived from the property.

Mr. Moran

Arising out of that, will the Minister explain why he is charging 25 per cent. on the valuation of business premises? I happen to have built in this city, when some of your friends were destroying property, a considerable amount of business property which I leased for 100 years at possibly six or seven per cent. to me and I am now paying you 25 per cent. You say that a man should pay income tax on the income he receives. Where do I come within that?

Mr. MacEntee

I do not think the Senator has made his point clearly. I hope that he is going to follow me and that he will be a little more precise in his statement, because I really cannot see where the two different percentages come in, except the Senator is in the fortunate position that he is paying income tax at the rate of 5/- in the £.

Mr. Moran

I am paying income tax on 25 per cent. and I make eight per cent. I let my property and there is not more than seven or eight per cent. out of it, and I am paying you on 25 per cent.

Mr. MacEntee

With your permission, Sir, I shall not answer the Senator until he makes his case in the course of the debate. I was dealing with the point, however, that no redress can be secured from an appeal to the Commissioner of Valuation. I think that that contention has not been substantiated by anything that Senator Sir John Keane has said. I still say that if any person is aggrieved in a case of that sort let him go to the Commissioner of Valuation. If, as the Senator says, it is found that an excessive amount has ben spent on repairs then the natural consequence will be that the valuation will be increased. But why will it be increased? Under the Act the commissioner is bound to fix the valuation at the rental, and the rental in the case of the Valuation Acts in Ireland is net rental because, as I have already pointed out, all the expenses are excluded from the figure of valuation. If the valuation is going to be increased, it is going to be increased because the net rental is going to be increased and, therefore, the net income derived from the property is going to be increased. If the net income derived from the property is going to be increased, what claim has the property owner beside any other taxpayer in the country to be treated with special consideration and to be allowed to pay income tax on something less than his net income?

Let us consider the operation of this proposed amendment in relation to a house of which the valuation is, say, £20. Let us take the rent in that case—I think I am perfectly safe in doing that—at £50, the tenant paying the rates. It is an exceedingly favourable case from the property owner's point of view. As I say, it is an exceptional case. The rent is low. One of the common complaints in connection with such a case is the great difficulty which the tenant has in getting the landlord to execute proper repairs. I believe, incidentally, that one of the effects of the proposal now before the Seanad would be to encourage unsatisfactory landlords to postpone the execution of repairs beyond their due season. At any rate, we are considering a hypothetical case. Let us assume that in that case, during a period of 15 years, the landlord has done little or no repairs. It is not an unusual case. Assume that he has spent over the whole period not more than £60 in repairs. The house is let at £50 per annum, and in the 15 years he will have received £750 in rent. He will have spent £60 in repairs, and he will have paid tax on not more than £300—15 times the annual valuation. That is the maximum amount of tax which he may have paid. If he is a small property owner in receipt of family allowance he may have paid nothing. But, whether he is a small or large property owner, a man with a small or a large income, the maximum amount of tax he will have paid during that 15 years will be on an income of £300. In actual fact his income from rent will have been £750, and he may have paid something like £60 in repairs. Let us assume in the 16th year he finds himself obliged to spend £200 on repairs. This gentleman, who has failed to maintain this house in a proper condition, because quite obviously he would not be called upon in the 16th year to spend £200 on repairs unless he had allowed it to get into a state of complete and utter disrepair, could, in the 17th year, if this amendment were passed, come along and claim an adjustment of the Schedule A assessment.

Sir John Keane

On what basis?

Mr. MacEntee

On the basis that in the 16th year he had spent £200, although he had failed in the whole preceding 15 years to keep the place in proper condition.

Mr. Douglas

But the amendment sets out the previous five years.

Mr. MacEntee

It is on the basis of the 16th year that we have to consider it. In the 17th year that gentleman comes along and says that on the basis of the five years for which the average has to be struck he had spent £212 on repairs. We are in this position then, that the average cost of the repairs would be taken at £42 per year, and as the rent is £50 he could claim to have the net assessment reduced from £20 to £8 per annum. He could continue to make that claim for the next four years. It would not be merely in the 17th year that he would get the benefit of the reduction, but in the succeeding four years also he could make the same claim. It may very well happen that this landlord has ten other houses let at the same rent and similarly valued. Under the proposed amendment he could claim the adjustment in respect to the one house on which he incurred a large expenditure, without having regard to the fact that his real income from the remaining nine houses was vastly under-assessed.

Sir John Keane

It has never been the practice of the Revenue Commissioners to work on that basis.

Mr. MacEntee

This is not to restore the old practice of the Revenue Commissioners, and the Senator's amendment does not propose to do that. It proposes to grant as a statutory right the full allowance for repairs irrespective of the rent paid. This allowance could previously only have been claimed in those cases in which the rent received from the property did not exceed the valuation of the property by more than one-sixth. This is to bring within the scope of the previous concession all property irrespective of the relation between its net actual value, as assessed by the Commissioners under the existing Valuation Acts, and its true annual value as indicated by the net rental which the landlord derives from the property. It has been argued, and I think it is really the strongest point in favour of the amendment, that if something of the kind proposed by the Senator is not introduced there will be cases in which a man will be compelled to pay income tax on more than his real income. Apart altogether from the case of the small cottage property, there is no reason whatever to anticipate that that will be the effect of not accepting this recommendation.

We have had only two instances brought under our notice, one being the case of cottage property with which Senator Sir John Keane is familiar, and the other the case of tenement property in Dublin, which was allowed to go into disrepair and which the head landlord took over. In that case there was a repairing covenant in the lease which the landlord failed to enforce. If he had enforced it earlier he would be compelled to put the place into repair, but he did not enforce it and he allowed the leaseholder to continue to secure at the public expense this concession in regard to repairs without fulfilling his obligation to his tenants on the one hand and his head landlord on the other to maintain the property in a state of repair. The tenants were the principal sufferers. During the period when the tenement was being allowed to fall into disrepair the landlord continued to draw rent, knowing eventually that when the property would revert to him he would be compelled to put it into a state of repair and, possibly, would fail to secure any concession under the income tax code, in regard to such expenditure.

I would like to say that, with the exception of the small cottage property which we have covered, I believe, by the amendment introduced in the Dáil, and the case in which property has been allowed improperly to fall into disrepair by negligence on the part of the ground landlord, I do not know of any case in the Saorstát where a person would be compelled to pay income tax on more than his total income from property. In any event, if there is such a case, I say his proper remedy is to go to the Commissioners of Valuation. He can only pay income tax on the valuation where, in effect, the rental which his tenants pay is less than the valuation, and the valuation is based upon the net rent which the tenant would pay, after the tenant, not the landlord, pays all the cost of repairs, insurance, maintenance and other charges, everything necessary to maintain the rent from the property at the figure at which it was when the valuation was first struck.

I say again in connection with the whole of this matter that, if at the end of a period of 12 months, it is found that the law as we now propose it should be has inflicted undue hardship on any class of property owner, I would be prepared to consider such hard cases as may be brought to my notice to see whether anything can be done to ameliorate them. At present we are basing ourselves, in the words of the Senator, on the broad principles of justice and equity in so far as the income-tax code is concerned—that is, that a man should pay on the income which he receives.

Mr. Douglas

The Minister has spent a considerable amount of time in putting up hypothetical cases which he has more or less effectively knocked down. He did not pretend for a moment that his hypothetical case was necessarily the usual case. He also gave us a considerable number of cases, presumably of old houses, of which the valuation is absurdly low in regard to the rent. That I do not dispute. But if the Minister did not mean, as he seems to imply, that that was the rule, I do not know why he quoted the cases. If he did mean that it was the rule, I should certainly join issue with him entirely and claim that it is not the rule. A good deal of his argument was devoted to finding fault with possible flaws in this amendment. It is not my amendment, and I am not going to defend it in detail, but I do not think that the case made for it has been in any way effectively replied to by the Minister.

Perhaps I ought to say first that this new action of the Government, it seems to me, really ought to be separated into two distinct classes. The first is the case of the house in which a man resides himself, and the second case is that of the valuation in which he receives the rent himself as the landlord. It seems to me that the two cases are different. For the moment I am dealing with the case of the landlord. The Minister says that there might be a case if it could be proved that a person was actually expending, reasonably and properly, more on the property than had been allowed for in the assessment on the valuation, and that therefore he was being asked to pay income tax on more than he actually received. I ask the Minister why will he not put in that proviso to enable it to be dealt with? He answers that he does not think it will often occur except in £5 valuations, and further, he says that in a year or two—the last time he said a year, but now he says a year or two —he would be prepared to reconsider the matter. Possibly, he hopes that there would be no Seanad at that time. At any rate, however, our business here is not to deal with remedies that may be created, possibly, by the Minister or by somebody else in a year or two years, but to endeavour to prevent hardships occurring. If there are no cases of hardship, which I doubt very much, why is there this objection then to putting in a proviso? Why, if a landlord can prove that the rent or income he is receiving, after paying for repairs and other necessary expenditure, and after making reasonable provision for expenses, is less than the valuation, can he not claim repayment on the excess? In accordance with the rules of equity, which the Minister admits, he should only pay on that income.

The Minister went to considerable length to argue against the provision for the five years' average. I do not know why the five years was put in here, but I have a suspicion that it was put in in the hope that the Minister would be more favourable to that than to one year. I will go so far as to meet him in that and say: "Very well, get rid of that, if you like, and deal with the expenditure in that year." Normally that is the way to deal with business premises, and anyone who has had any experience of property knows that the Minister's general argument with regard to doing no repairs for a number of years and then doing a large repair in one year is not fair. Very often it is the case that one is faced in a property with the position in which one can spend £300 or £400 in small repairs separated over five or six years, or that one can save oneself a large percentage of the cost by doing it all in one year. That is a common experience. One is often faced with some serious difficulty in one's property. I am not a landlord myself. I have no experience of it, but I have a good deal of experience of various properties that I have had to deal with and of having to help other people in connection with their properties, and I know that a time does come, particularly in the case of older property, when it is good business to make a substantial expenditure.

I should be quite satisfied if the Minister would agree that if a man can prove that he is being asked to pay income tax on more than he has received, the Revenue Commissioners would adjust it. I should be satisfied with that concession, and if this amendment goes too far, let us have another amendment in which that principle would be accepted. It is not my amendment, as I have said, but I think I can say that Senator Sir John Keane would be very glad to accept such an amendment. However, I do suggest that the Bill, as it stands now, while it partially meets the point with regard to cottage property, does not meet it where this case may arise. The main argument of the Minister is that it will not arise, but the information before me suggests that there are cases where it will arise. If it will not arise, why does the Minister object to the proviso? If it does not arise it will cause none of the officials any difficulty except, perhaps, that in the beginning there may be a few claims. If it does arise then the proviso is equitable and in accordance with the principles the Minister has set out here.

With regard to the other classes of property, both small and large properties, in which the owner resides, I accept the fact that the Minister can make a theoretical argument in favour of the alteration he has put into his Bill, but I say definitely that to introduce that change in this year is one of the meanest things the Government have done in this Finance Act. For years, property owners have received this one-sixth. At a time when expenses are heavier, when nearly all of them are being faced with increased rates and with larger expenditure, and when a great many people with properties are finding it exceedingly difficult to stay in them—and that applies to small properties as well as large properties—and with the valuation increased to 5/—at a time when all these expenses are accumulating the Minister gives this concession of 6d. and virtually takes it away again by taking away this one-sixth. I know that there is a small percentage of difference, but that is about what it amounts to. As far as people living in their own houses are concerned, when, in this year, people are finding it more and more difficult indeed to stay in their property and to keep it in order, to come in now and take away that one-sixth is a mean and very unsatisfactory thing to do, no matter how you may argue about the way it should be done. We have been accused in this House sometimes of taking a different attitude towards this Government from that which we took towards the old Government. In this particular case, however, the Minister certainly cannot accuse us of that. I have a very clear recollection of that because I moved the recommendation myself some seven or eight years ago when the old Government came along with the same proposal, and that was at a time when the income tax was very much lower and when rates were also very much lower. This House unanimously passed a recommendation. It went back to the Dáil, which was not then so hidebound, and the Government were defeated by members of their own supporters who felt that it was just. As a wise and prudent Government they never came back with the proposal again. We had to wait for a new Government, with an absolutely rigid majority, to come along and insert this proposal. It may be equitable according to bare theory, but it is very unwise at this time and unfair generally to householders. There is no use, I know, in trying to reject it. I know that there is a solid majority behind the Minister in the other House and, in view of the Minister's attitude, I know that it would be useless, but this amendment of Senator Sir John Keane's is an effort to try to get it on a basis of equity as stated by the Minister. The Minister says that the amendment goes too far and I am sure that he is right. Well, if so, let him accept, on the Report Stage, the principle that where the income received is less than the valuation of the property the owner shall be entitled to repayment of the amount of tax on the excess, and I would be satisfied as far as I am concerned and I would be inclined to think that the Minister could justify his attitude which I do not think he has done so far.

Mr. Johnson

There is one point on which I should like to have the Minister's views. Notwithstanding all the theories, it is not true to say that houselords always extract the utmost possible rental. It is a fact that in some parts of the country there are small properties from which the landlord receives small rentals. In these cases the landlord would be able to get higher rentals if he endeavoured to get the market price. If, as a result of this change, there is a tendency either to refrain from expending money in repairs or to extract a high rental, the houselord can recoup himself from the occupiers who are in all cases poor people. A certain hardship would be passed on; in that case the income tax would be used to lay a burden upon the poorer tenants of a small property. That is an aspect of the case at which the Minister should look. I would like to know what the effect of a change in the Bill would be in the case of that class of householder.

Sir John Keane

I am very glad to see that Senator Johnson regards householders as human and human, I may say, from both sides, kind when treated well, and inclined to be rather the reverse when they are not. The case the Senator has just touched upon will arise here. Landlords who are indulgent, will, if they feel there is any hardship inflicted on them, be well able to get their own back. The Minister, with his knowledge of administration, knows that a rich man gets it back and if you press him too far he can turn and bite. From my knowledge of business there are many ways in which a rich man can get it back if he does not feel that he is getting a square deal.

This question of the revision of valuation is technical. I put this point to the Minister that the real ground for a revision of valuation is when a district loses its industry; say, when the population runs away from the place. I know one place where there were flourishing mills. These mills are no longer there and the whole valuation has fallen. I am inclined to make this new point that the real ground for the revision of valuation is not the class of property at any time, but the fact that the industries in that district have fallen away or moved away from the place or that there is general depression. That is the major case as a ground for revision of valuation.

The mere fact that certain properties—even the same classes of property—are in bad repair does not make a case for the revision of valuation and goes no way for revision of valuation. It leads to the extraordinary anomaly that if there is a revival of industry there you will have to revalue these properties again. In order to have equity you would restore them to the same character as the adjacent property and you will have to raise the valuation again. The only ground then for raising the valuation is when the conditions are improved and the earning power of the property is increased. There is a revaluation where, say, a mill ceases to operate or where the building is used for a less productive purpose. I do not believe that the Minister is on sound ground at all when he says that the remedy for this loss of property is a revision of valuation. The Minister has dealt with a hypothetical case.

All we are aiming at is to preserve the status quo. If the Minister would accept that principle we would certainly go back and find an amendment to meet it. The Minister has rather gone above the line. He had this amendment of mine examined critically to show that it goes farther than the preservation of the status quo. But that is not my intention. I am quite prepared on the Report Stage to put down an amendment. It is not a question of the status quo here. It is a question of concession. You cannot very well put the preservation of concession in an Act of Parliament. What we ask is to leave the thing as it is and that is what we have striven to do by this amendment. I am unable to see a technical matter like this examined. The grounds on which the Minister takes it are hypothetical and he does not seem to be on sound grounds as far as I can make it out. If a property is highly rented the gross rent is taken as the basis of assessment when the repairs are set-off. But the repairs in practice are not set-off against the valuation. They are set-off against the gross receipts. In the case mentioned by the Minister I was unable to follow him. In that case in the five years the £200 spent on repairs would leave the gross receipts below the valuation. When the report is out I will have it examined in that light.

I would suggest to the Minister that he is acting—I will not say—unfairly. In debate one has to a certain extent to plead specially and play upon the lack of knowledge of one's hearers. In many cases rents are far in excess of the valuation. We know they are and, to that extent, the property-owners have the advantage. But that is no ground for putting an injustice on those owners where the rents are less than the valuation. There are large numbers of favoured people where the rents are largely in excess of the valuation. But that is another matter and it does not arise on this at all. What we are striving to deal with are those cases where the rents are less than the valuation. In those areas where there is a good deal of property mixed up together the Minister will appreciate that it is the practice to take them all together. You cannot select one bad property and say, "That is the property," ignoring the good property. You have to set out the whole good and bad and you then take the gross rents, good and bad, as the basis of calculation. The method that the Minister adopted of separating the good and saying "he has got away with it there" and suggesting that that is not to be brought into calculation at all, is not right.

All the property within the estate is lumped together for the purposes of calculation, and so I suggest that the Minister has not really sustained his case. I think the best plan now, as the matter has been ventilated, would be to withdraw this amendment and to consider an amendment for Report Stage, which will preserve as far as possible the status quo which the Minister has not ever attempted to show is unjust, in respect of let properties. I know it is difficult to interpret a concession in an Act of Parliament, but we will do what we can and, further, one's action on the Report Stage will be influenced by the fate of a subsequent amendment in the names of Senators Brown and Douglas. After the Minister's reply, with the leave of the House, I shall be prepared to withdraw this amendment, and to reconsider the matter in another form before Report Stage.

Mr. Comyn

I am glad that Senator Sir John Keane is withdrawing his amendment, because I think there are some portions of it which would not possibly be accepted. There is, however, a portion of this amendment which I submit to the Minister is deserving of consideration, and an aspect of the case which I think has not been mentioned up to the present and which also requires consideration. I think the suggestion in the last lines of the amendment, allowing for a deduction in respect of cost of maintenance repairs, insurance and management, is deserving of consideration, because, for one thing, it encourages employment. I am told that the point will arise on another amendment and, therefore, I will say nothing further about it now.

Sir John Keane

The Senator realises that management also includes litigation, which is very expensive?

Mr. Comyn

I am sorry that Senator Sir John Keane does not go in very much for litigation.

Mr. Johnson

I want the Minister to give some information as to the effect of the change in the law relating to income tax proposed by this section on local authority property. I have not looked into the matter, and I may be speaking quite ignorantly, but I wonder whether the effect of this change in the law relating to income tax on working class houses owned by local authorities—boards of health, urban councils or town and city councils—is going to impose a considerable burden on local authorities by altering the method of allowance, because we know that the greater part, and almost without any question, the whole, of the working class houses owned by local authorities are let at lower than the market rate.

Mr. Douglas

I want to ask the Minister—I forgot it when I was speaking previously—to explain to me a little more clearly his point with regard to valuation, because I think it is a matter of very considerable importance and, particularly, if the Bill passes into law as it is at present. When I was speaking, I meant to give, but I became immersed in other subjects, an actual case, in order to ask him what he thinks should have been done in the matter of valuation. I said previously that I was not a landlord, but I was not quite correct, because my firm had three rooms, valued at £6 10s., and for a period of at least 15 years those were let for 3/- per week. The woman could not pay any more, anyway. At least, an average of £15 was spent on repairs, and I am being on the safe side when I say £15. The valuation is £6 10s., and we asked our solicitor in the course of other appeals in respect of other property which was improved and subject to re-valuation, whether it would be worth while appealing for a reduction, and the answer was: "You will probably get it increased, because you could quite easily get 10/- or 12/6 for those rooms, and the valuation office would not take into consideration the fact that you were foolish enough"—or wise enough, in this instance—"to let them for 3/-." I want the Minister to say if that was correct and, if so, does he consider that case ought to be met?

The market value, because they were in Dublin, was probably 12/6, but the actual value to any poor woman who would live in those three rooms in any kind of social comfort was certainly not over 5/-. I admit that we probably could have got 10/- or 12/6, because it is amazing what you can get in Dublin at present, but with any kind of a decent social standard, 5/- is the most any honourable person could have charged. The Minister says that this difficulty can be got over in regard to small properties by appealing to the Valuation Commissioner.

Mr. MacEntee

I did not say that in regard to the small properties.

Mr. Douglas

The Minister mentioned the £5 case and my case is £6 10s. With great respect, he did say it and I am appealing for the case that is over £5. What I want to know is if there are other properties that exceed this amount and if the landlords appeal, as he suggests, and prove that the total costs are less than the amount which they are charged and if they do not get the reduction, will the Government undertake to make an alteration in the valuation law to ensure that what the Minister suggests will be carried out? If the Minister will give that undertaking definitely and carry it out. it would meet my difficulty. We are in the position that the Minister gives us this assurance while the legal opinion we get says that this is completely wrong. We are faced with that difficulty and the Minister can solve it for us by giving us an assurance—he need not do it now; he can do it on Report Stage—that if he is wrong, he will alter the valuation law. If we accept his word now and find that he is wrong, we can do nothing. He has the advantage of us and I am asking as a fair and reasonable case, that if we take what he has stated here with regard to valuation and if it is proved by any chance, when it comes to be tested, that he is not right, he will put it right, which he will have power to do if his Government is still there. If he does that, it will go a long way towards meeting my difficulty.

Mr. MacEntee

I am sure that Senators Brown and Comyn realise that in a case of this sort I must appeal to the old dictum "Hard cases make bad law." What I am submitting is that this is not a general case——

Mr. Douglas

A lot more than you think.

Mr. MacEntee

——and, therefore, the law should not be determined by that one specific and I would suggest more or less isolated instance. I think the generality of cases is fairly met by sub-section (2) of Section 2, which is:

Where the Revenue Commissioners are satisfied, in respect of any house or building of which the annual value ascertained in accordance with Section 187 of the Income Tax Act, 1918, does not exceed five pounds, that—

(a) such house or building is bona fide let to a tenant, and

(b) the cost of the repairs, main tenance, and insurance of such house or building is borne by the landlord or immediate lessor, and

(c) the annual income derived by the said landlord or immediate lessor from such house or building, taking one year with another, after making allowances for the cost to him of the said repairs, maintenance, and insurance is less than the annual value ascertained as aforesaid of such house or building.

It is obvious that the specific instance to which Senator Douglas refers would not be within the scope of that.

Mr. Douglas

I was not dealing with that; I was dealing with the valuation point in respect of which the Minister said that any case of that kind could be met by appeal.

Mr. MacEntee

I beg the Senator's pardon. I did not say that in a case of the kind he referred to.

Mr. Douglas

I do not want to interrupt the Minister too much, but I thought he said that a case in which it was proved that the amount of income tax which would have to be paid was in excess of the amount received could be met by appealing.

Mr. MacEntee

No, that in any case in which it was proven that the allowance for repairs was not sufficient, an appeal could be made to the Commissioner of Valuation. What I contend is that it is a very exceptional case, where property is let very much below its true annual value. The Senator's case may be an exceptional one, and rather trivial from the point of view of the amount involved, but not trivial from the point of view of the tenant of such property, but I am advised that no case has come before the Revenue Commissioners in which the property is let at a rent less than twice or two and a half times the annual value, even in the case of certain cottage property.

Mr. Douglas

No case?

Mr. MacEntee

No. This is designed to cover such a case. I understand where the rent is twice the annual value of such property the tenants pay for repairs.

Mr. Douglas

There is no case where it is not twice?

Mr. MacEntee

So I am advised.

Mr. Douglas

We will deal on the Report Stage with actual cases. The Minister says there is no case where it is not twice the amount.

Mr. MacEntee

So I am advised. There is no case where, as a general rule, the rent is not twice the annual value, with the exception of very large houses or mansions, for which there is, of course, very little demand, and where the rents rather tend to approach the annual value. In the generality of cases, with which we are concerned, the annual value is very much below the net annual rent. As to the cases to which Senator Douglas referred, it was a common practice for people, who were familiar with the management of property, to defer spending money.

Mr. Douglas

I did not say deferred. I said that it was better pay now, and save over five years. I said that they anticipated.

Mr. MacEntee

Let us take it that they anticipated the net cost of carrying out the necessary repairs in order to maintain the structure in such a condition that it could continue to command the rent being paid. At the moment at which it is undertaken that is an extraordinary expenditure and, if I may put it the other way, by undertaking such extraordinary expenditure they would save from 30 to 40 per cent. of the total aggregate cost of repairs over the period.

Mr. Douglas

I will give an actual case of business premises where the principle is the same. An estimate for repairs to a roof amounted to £60. We were told that we would get a new roof for £170, and that probably we would have to pay £50 or £60 each year on bona fide repairs to the old roof. I said that it was better to have the new roof than to go on repairing the old one. We decided that it was better to spend £170.

Mr. MacEntee

I think the Senator is beginning at the wrong end. We want to get back to the date on which the property was first valued, when the assumption was that the roof would be continuously maintained in perfect condition, and there was made an allowance for repairs on that basis. That is the terms of the Act, that the property must be maintained in such condition as to command the rent on which the valuation was first fixed.

Mr. Douglas

Does the Minister think that a house valued at £20 would be kept in repair each year for £3?

Mr. MacEntee

I do not think that any property owner is going to spend £3 a year in that way; rather would he prefer to defer the expenditure until it becomes an appreciable amount, when he can carry out an appreciable amount of repairs in one year. Normally he would say: "I will spend x pounds this year, and I will not have to spend x pounds again for, say, ten years.” In the meantime, during the ten years, he is incurring no expense, while he is receiving an allowance for repairs. If that person now anticipates an expenditure, as is the Senator's case, of £170, he can save himself continuing expenditure of £40, £50 or £60. Is he to get a dual advantage, first of securing a saving of from 30 to 40 per cent. to be spent, and then of allowing him to go to the Income Tax Commissioners or to the Revenue Commissioners and to ask them to exempt him from income tax on the £160 or £170?

Mr. Douglas

No. I would take the actual amount, the same as on a business premises. If it happened in the case of a business premises it would be allowed as total expenditure one year and the next year nothing. I would treat a man with an income from rent in the same way.

Mr. MacEntee

Can the Senator not see that it is not the same thing? He is talking of repairs to business premises which are assessed under Schedule D. What happens there is that repairs are deducted from the gross profits and he gets an allowance. He continues to make repairs year after year. In the case of a landlord it is assumed that he spends a certain amount on repairs from year to year, and the Schedule A assessment is the basis of the valuation. If a landlord in fact does not carry out the repairs from year to year that should have been carried out for 15 years, are we going to make him an allowance in respect of the state of the disrepair into which the property has got by reason of his own neglect?

Mr. Douglas

I do not mind for how many years if the Minister accepts the principle of equity.

Mr. MacEntee

What the Senator is asking us is in fact to change the whole basis of Schedule A.

Mr. Douglas

You are doing it.

Mr. MacEntee

No. What we are dealing with here is rectification of a mistake which I think crept into the English Income Tax Act of 1894. In that Act it was recited that where the rental was less than one-sixth in excess of the valuation then an allowance for repairs was to be granted. Those who drafted the Act of 1894 forgot that the valuation of property in this country was on a different basis from Great Britain. In England the valuation is on the full rack-rental basis of the property, on the full rent charged for letting from year to year, if the landlord bore the full cost of repairs to maintain the property in a condition to command that rent. In our case, the valuation is based on the rent which the tenant would be prepared to pay if he had to pay for all the repairs or insurance or public charges and for expenditure necessary to maintain the property in the condition in which it was on the particular date on which the valuation was struck. That is the difference. In England the Valuation Acts assumed that the landlord pays for repairs. Here it is assumed that the tenant pays for repairs. If we were to give effect to the Senator's argument, and if we were to concede the position which he wants us to adopt, then we should have, I think, to consider the question of the revaluation of the whole property of this country and put the system on the same basis as in England where the Revenue Commissioners have power to go in and value property from year to year. I wonder would the property owners of this country regard that as a concession, if the Revenue Commissioners were empowered to go in and to assess income tax on the actual rents paid by the tenants as a general rule?

Mr. Douglas

Personally, I would far rather have that, provided all expenses are charged. It would be far more equitable. My case is that where it works that way in any single case, it should be applied.

Mr. MacEntee

Isn't that to allow somebody off? It is an isolated individual who will benefit in that case. We have to deal with the community as a whole, and to be just to the community as a whole. We are not prepared to face at this moment the enormous task of revaluing the country.

Mr. Douglas

I did not say anything about revaluation. What I said was quite different.

Mr. MacEntee

To give effect to the Senator's proposal would entail the re-valuation of the country. We are not prepared to undertake that at this moment. It would be a task of great magnitude. We have not the staff, we have not the experience, and we would require a new Act. Failing that, are we to allow an anomaly to exist, an anomaly which had its origin in the fact that the people who drew up the Income Tax Act of 1894 were unaware that the valuations in this country were on the basis that all repairs and outgoings would be paid by the tenants and not by the landlords?

Cathaoirleach

As some Senators have now spoken seven or eight times on this matter, perhaps they would allow Senator Sir John Keane to withdraw his recommendation at this stage?

Recommendation, by leave, withdrawn.

Mr. Johnson

Perhaps the Minister could give us some information on the section in regard to the points I raised.

Cathaoirleach

We are still on the section.

Mr. MacEntee

The Senator was dealing with the generality of council houses. I believe they will be covered by sub-section (2).

Mr. Johnson

Is that on the ground that the valuation does not exceed £5?

Mr. MacEntee

Yes.

Mr. Johnson

The Minister will know that some of them have been valued at £7, £8 or even up to £10.

Mr. MacEntee

The local authorities are allowed to deduct the interest which they pay in respect of local loans before the assessment for income tax is made on such houses, and I do not think there will be any great injustice with the £5 limit. However, I shall look into the point that the Senator has raised and see whether it will be necessary to increase the figure of £5. I am advised it will not.

Mr. Douglas

I move recommendation No. 2:—

Section 2, sub-section (2). After the word "Where," in line 1, to insert the words "on an application for relief by a person charged under Schedule A."

This is a formal recommendation. I am informed that it puts the matter in rather better order, but I am not going to waste any time arguing it. If the Minister does not want to accept it I do not mind.

Mr. MacEntee

I do not think it is necessary. I think we may assume that the taxpayer will naturally apply for the benefit of the concession.

Mr. Douglas

I understand that it meant that the obligation is on the Revenue Commissioners, whether he applies or not. If the Minister so prefers it I have no objection to the obligation being on them.

Recommendation, by leave, withdrawn.

Mr. Douglas

I move recommendation No. 3:—

Section 2, sub-section (2). To delete in line 4, the word "five" and to substitute therefor the word "ten."

This is a recommendation which I would certainly press the House to pass. I do not propose at this stage to deal with it at any great length, but I think it will be agreed that the Minister's figure of £5 is not satisfactory. Senator Johnson has mentioned the case of houses under local bodies and houses that are controlled. There are also other houses which would be affected by this proposal. I am not dealing with the main point. My views on that are pretty clear. I am dealing with the question of the desirability of raising the limit of valuation of houses in respect of which relief may be claimed, from £5 to £10. It is not a question of arguing so much for the landlord as for the property itself. It is highly desirable that low-valued cottage property should be kept in as good a condition as possible. We do not want to take any steps that are going to make it more difficult for the landlord or which would tempt him to say: "This thing is costing me more than it is worth and the State is out to get more from me than I am really getting from it; I am finished with it." Senator Sir John Keane has mentioned one case of that kind.

I hold that this concession should be given in the case of properties which require attention where the valuation does not exceed £10. I put down £10 because I believe it meets the point that the Minister is prepared to meet and which he does not meet by limiting the figure to £5. If I were dealing with the matter in my own way I should want the figure to be much higher. If the House will examine the matter, Senators will see that the case that exists for a £5 valuation equally exists for £10. I cannot see what objection there is to making the limit £10. If it is said that only a few cases will be affected, then no harm will be done, though I think there will be quite a number in which the valuation would come up to £7, £8 and £10. That is just the class of property with which the Minister intended to deal when he introduced this amendment.

Mr. MacEntee

The sub-section as it appears in the Bill was introduced to cover one or two specific cases of hardship which were brought to our notice. In the course of the investigation of these cases the Revenue Commissioners were satisfied that the limit of £5 would fully cover cottage property and would fully cover property where as a general rule it might be assumed that the cost of repairs was not commensurate with the rents derived from the property. I should be very slow to increase the limit beyond £5. I have already promised Senator Johnson that I shall look into the question in relation to cottages under local authorities. That matter has already been examined, and in that connection we fixed £5 without making allowance for the fact that the building of many of the houses owned by local authorities was financed out of local loans and the local loans interest charge would be deductable for the purpose of Schedule A assessments. It is, after making that deduction, that we think all the houses owned by local authorities will be brought within the figure of £5. The building of even some of the properties which Senator Douglas has in mind may have been financed in the same way. I am not certain but I shall look into the matter to see whether it is desirable and necessary that we should substitute £10 for £5 in this sub-section. I should not like, however, to leave the Seanad under the impression that I feel it will be necessary. I think I may have possibly to come back on the Report Stage, and resist the amendment, if the Senator puts it down, but I promise to have the matter further considered. In the meantime, I should like the Senator or any other Senator who is interested, to give me a specific instance of the type of property which he thinks we should cover by a concession of this sort.

Mr. Brown

Might I suggest that even if the figure is raised to £10 the kind of property affected will be inhabited by poor people. It is most important that that class of property should be kept in proper repair for the sake of the tenants. If you increase the valuation to £10 you will be going a long way to ensure that that kind of property, let to small tenants, will be kept in proper repair.

Sir John Keane

Will the Minister bear this in mind in considering this particular matter? There is considerable hardship involved, almost amounting to a breach of contract, in certain alteration of terms in regard to controlled property. Property under the Rent Restrictions Act is controlled property, and landlords cannot resume possession. They were allowed in return a certain percentage on rents. These allowances must have been based on a calculation in which repair allowances must have been an item. All this advantage that the landlord had is now swept away. The percentage conditions are increases and I think the landlord is, definitely, in equity, suffering by the removal of the element in the calculation that was in his favour. If the allowance is increased to £10 it will deal with a great amount of the hardship in regard to small property where the rent restriction presses upon the landlords. The landlord finds it more expensive to repair and he is debarred from raising the rents. I ask the Minister to bear that in mind, also, when considering the extension of the figure.

Mr. Douglas

I think the House should pass this recommendation. If the Minister takes the responsibility of confining it to £5 he need not accept the recommendation, and it is not a matter that needs to come back to us again. I have been approached by a lot of people and I am assured that if you keep the figure at £5 it will mean hardship for a great number of people with property on a pretty low valuation. I am not a bit interested in this matter personally. But the information I have got is that fixing the figure of £5 will not do what the Minister wants. I urge the Seanad to pass this recommendation. If the Minister considers that he cannot accept it the responsibility will be upon him. I think there is enough information before him now in favour of the recommendation, and we should insert this recommendation in the Bill.

Mr. MacEntee

I would be sorry if Senator Douglas took that point of view. In fact, with all due respect to the Senator, I must say that there is no information before the House in respect to this matter. We fixed £5 in respect of houses occupied by poor people. I have indicated that if specific instances are brought before me to show that a sufficient number of individuals are affected by this to justify our putting in £10 or any figure less than £10 and higher than £5 that would cover the generality of these cases, I am prepared to consider it. But I suggest that on the plea that we are doing something to benefit the poor, we should not, in fact, enlarge the concession, that I was responsible for asking the Dáil to insert in the Bill, to cover property owners of another kind. I am very anxious to meet the case of property occupied by poor people. If Senators will withdraw their recommendations at this stage, I shall give them timely notice of what my attitude will be on Report Stage in regard to similar recommendations. I suggest that Senators should assist me by putting before me as many specific instances as possible of the kind of case that they want to cover up to £10.

Mr. Johnson

I join in the appeal to Senators not to take action now. If it can be proved that the Bill, as it stands, does not cover a very large number of local authority houses, then the case for increase will be overwhelming. It would be better to deal with the matter when we would have more information available than we have now.

Mr. Douglas

I did not want it to be implied that we do not want to send the recommendation to the Dáil. I do not want it to be assumed that I agree that the local authority houses have a better claim than others. It seems to me the case is exactly the same. I admit that the Government may be more impressed with the case of the local authority houses, but I do not for the moment adopt the view that their claim is any greater than the others. I would like this recommendation to be held over for Report Stage, as suggested by the Minister, and I think we might do the same with the other recommendations—4, 5, 6 and 7.

Recommendation No. 3, by leave, withdrawn, to come up for further consideration on Report Stage.

Mr. Douglas

I formally move recommendation No. 4:—

Section 2, sub-section (2). After the word "maintenance" in line 6 to insert the word "management."

Sir John Keane

I want to make this point on that recommendation. The Minister is, perhaps unintentionally, causing a great hardship by excluding management. The collection of rents, which is included in management, is very expensive. There is a tremendous lot of difficulty in connection with it. There are also overhead charges and office repairs, which are very heavy and, further, there is litigation. I do not think the Minister has any conception of the worry the management of small property causes to the owner. It is a question of hammering away the whole time. Peaceful persuasion has to be followed by a solicitor's letter. Fully half the legal work in my estate work is spent in dealing with small-holders. You have to go into court. The tenant in arrear will plead that he is out of a job, and will ask to be given just a little time, and in the end you find the rent is irrecoverable. I think in equity the cost of management should be allowed, and I will ask the Minister to consider this matter.

Mr. MacEntee

If it is proposed to discuss this with other recommendations on Report, I think I had better reserve what I have to say until then.

Recommendation, by leave, withdrawn. To come up for further consideration on Report Stage.

Recommendations 5, 6 and 7, by leave, withdrawn. To come for consideration on Report Stage.

Sections 2, 3, 4, 5 and 6 agreed to.

SECTION 7.

Mr. Parkinson

I move recommendation No. 8:—

Before Section 7 to insert a new section as follows:—

7. Assessments for income tax arising out of income derived from fees paid for the service of stallions, bulls, boars or breeding stock of any kind kept on a farm for stud or breeding purposes shall be treated as income coming within the terms of Schedule B of the Income Tax Act, 1918, unless the owner of such stallions, bulls, boars or other breeding stock shall claim to be assessed under Schedule D of the said Act.

Up to the year 1918 it was permissible for the owner of a stallion to have his horses or other breeding stock assessed under Schedule B or, alternatively, by keeping accounts, under Schedule D. In that year a decision was given in the Scottish courts in the case of a travelling Clydesdale stallion. It allowed the revenue people to bring in an individual assessment which up to then had not been heard of, namely, to make a stallion a separate entity from the farm and to assess the owner under Schedule D on the net earnings of the sire. In Ireland up till then we had gone on in the old way under English law by which the owner of a stallion if the owner of land, had the permissible right to avail of either section of the Act. Following the decision in the Scottish courts, the revenue people here assessed a stallion as it was being assessed in Scotland, though the stallion in that particular instance was one which stood at his own farm and only covered mares the property of the owner or visiting mares brought there. Mrs. Bailie, the owner, fought the case through the different courts in Ireland and lost in each, except before the Special Commissioners. The result has been that since then stallions have been assessed under Schedule D, not as part of the net profits of the farm, but on the net profits of the stallion itself. I do not think that in any other business or industry a similar tax is levied in that form: that is to say, on a portion of the business.

In 1928 a case relating to this was taken from court to court in England by Lord Glanely until finally in the House of Lords he got a decision reverting to the old practice. Now, I am not going to argue as to whether or not that law ought to apply to the citizens of the Free State. I am not going to say whether it is good or whether it is equitable to levy the tax as it is now being levied, but, in my opinion, it is very bad business. The net result of it will be that irretrievable damage will be done to this great industry which is one of the biggest international industries that the Free State has. The first result of the levy of the tax in Ireland and its easement in England has been that six of the most prominent stallions we had have gone back to England. I am not going to argue either that that is altogether due to this question of income tax. Of course, we know that the tariffs have a good deal to do with it, but even if the tariffs were off to-morrow is there any possibility of getting these famous stallions back to Ireland again? I would like to read an extract from a letter that I had from Mr. Dawson, the owner of Blandford, the leading stallion in the world to-day and an Irish-bred horse. In his letter, which is addressed to me from his place in England, he states that last year he paid in income tax on Blandford's stud fees the sum of £4,150. Even if the tariff were now to come off, he says that because of this enormous tax he would be compelled to keep Blandford in England.

I would like to remind the House that Senator Colonel Moore's father in 1860 sent Croaghpatrick to run in England. The horse had to travel most of the way on foot from Liverpool to Goodwood. He there ran in a race in which there were 45 starters, the biggest number that ever ran in a flat race in England. The horse won the race which was a six furlong event. On the following day he won a two mile race at Goodwood. The name and fame of the Irish horse has been known in England and indeed all over the world. Last year Irish thoroughbred horses ran in 23 foreign countries, and in all of them they distinguished themselves. Before the economic trouble started here this industry was worth £2,000,000 a year to the country. It was, in my opinion, only in its infancy. As time went one could easily visualise £4,000,000 or £5,000,000 being paid by other countries for Irish horses. They have everywhere proved themselves to be the best that can be produced. Most countries, unfortunately for themselves, cannot breed the type of horse that we are able to export to them, and they cannot carry on without importing our bloodstock. Now, if we are going to be deprived here of our best stallions, which will be the case if this income tax continues to be levied, it will be very difficult, if not impossible, to keep up the standard of thoroughbred bloodstock that we now have. As I have said, the Irish bred horse has done well in every country in the world. All those foreign countries look to the records of Irish horses in England. For instance, let me take only the three great international contests that have been decided in the present year. The Grand National was won by an Irish horse. The English Derby was won by an Irish bred horse and the Ascot Gold Cup, in which you had American, French and Italian horses in competition with the British, was won by an Irish horse. I do not think I need labour the point that we have the best horses in the world, and we have them still.

I would ask the Minister to make this very small concession. From the financial point of view it does not mean very much. It may relieve a few rich people of the payment of a certain amount of income tax. We do not deny that. But what about the 3,000 owners of thoroughbred mares who are not rich people, who have been able to get some money for their horses because of the prestige that attached to a country in which horses like Blandford, Soldennis and Stratford were at the stud. As far as we can gather from the people who have been paying income tax on stallions in this country, the total sum involved only amounted to £15,000 a year. With the principal stallions gone away the tax derived from that source will probably fall this year to about £4,000, and it will be a diminishing quantity, because economically these horses cannot be replaced. Therefore, in the end we will lose our business and the Government will lose its taxes.

Mr. Farren

I desire to support this recommendation. It is a notorious fact that in recent years most of the stud farms in this country have closed down. The result has been that hundreds of men who had decent employment have lost it. The amount of money involved is comparatively small and, therefore, I think the Minister for Finance ought to accept the recommendation. In the County Kildare, which I know pretty well, a number of these famous stud farms have been closed down in recent years. That has resulted in the loss of a considerable sum of money to the country. It is hardly worth bothering about the amount that is involved by making the assessment under one schedule rather than under another, especially when one takes into consideration the loss sustained by the country by the closing down of stud farms and the departure from it of world famous horses. Ireland has been world famed in that respect. In addition, there is the loss of employment to a big number of people. Others are likely to lose their employment if something is not done to meet the case that has been put forward by Senator Parkinson. In my opinion, the Senator has put forward a very strong case to the Minister. I think that the Minister ought to consider it, and agree to the recommendation. I appeal to him more particularly because of the number of people who have lost their employment—decent employment given by the stud farms throughout the country.

Mr. Comyn

As I said on the last occasion, anything we do here can be nothing more than a recommendation to the Minister, but I think that the arguments which will be put forward in the course of this debate will certainly influence his mind, which I have always found to be a reasonable mind. We have a world reputation for our horses. A great industry has been built up. We have the good horses and we have a reputation for good horses which is world-wide, and which up to the present has been maintained. I submit that ordinary prudence should induce us by all means in our power to keep up the quality of the Irish horse. As we know, the quality can only be kept up if we can keep the best sires in this country. Senator Farren has dwelt on the amount of employment which has been lost or will be likely to be lost. Senator Parkinson has stated that the amount of revenue derived from the taxation of horses in this way was only £15,000 at its peak and will fall to £4,000. You have, on the one side, a possible revenue of £4,000 or £5,000, and as against that you have the possibility that the quality of Irish horses will deteriorate or, at all events, that it will not improve in the same degree as it would improve if the best sires were in this country. As far as I can, I would urge upon the Minister to consider the representations made by Senator Parkinson and from the Labour Benches.

Mr. Brown

I should like very strongly to support this recommendation. I had the honour of being counsel in a very large number of these cases by owners of stud farms. I was counsel for Mrs. Bailey in the case to which Senator Parkinson has referred. I always thought that the decision in that case was entirely wrong. There was at the time not only the Scotch case, but there was the case of Lord Derby on the same point, and we had not the courage at the time, with all these cases against us, to go to the House of Lords, though I myself strongly was of opinion that the law, as decided in Scotland and followed in this country, was wrong. It has now been altered in England, and exactly what we wanted when we were fighting these cases has been granted in England. I would respectfully urge on the Minister that to keep our law as it is at present is handicapping an industry which is in a very serious condition at present, and ought at least to have the same fair play that it has in England.

Colonel Moore

If the profits of what is proposed to be charged now could be kept in this country, I would say no more about it. Then we could do what we liked. But as they can be transferred in 12 hours to the other side and bring into the British all the profits that we had hitherto been making it seems to be a very suicidal thing to propose to suppress an industry which can be suppressed immediately. It is difficult to remove other industries, but the thoroughbred horse industry can be removed across the Channel and bring in all the money at once. As a matter of fact, that is what has happened. Three of the best sires in England had been over here and were taken away—Blandford, Soldennis and Stratford. They were at the top of the list of winning horses in England. Whether through good fortune or better breeding or whatever it was, this industry was bringing into this country large sums of money each year. It was bringing in more and more every year, because people all over Europe and America have been breeding and running race horses more than in former times. It is, therefore, an increasing industry. As to the ordinary thoroughbred horses, it does not very much matter what you do because their fee is only £4 or £5. But when you have fees of £400 or £500 for 20 or 30 sires in this country, it is incredible that it should be done. I do not think it is necessary to say any more. It is quite a clear case. You have only to look at the stud book and you will see Blandford, Soldennis, and Stratford at the top of the list of winning horses in the Derby and other races. These horses are standing at fees of £400 or £500. In addition to that there is the question of sport which makes this country so well known. Horses travel from here to all parts of the world. When I was coming home from South Africa in 1921 racehorse owners there gave me an order to buy horses and send them out to them. I had enough, however, to do at that time without buying racehorses. Still, I would like to have done it if I could. They have been buying Irish horses in South Africa and in India ever since. Now, all that is going to be cut away. I really do appeal to the Minister to consider this matter in the interests of the country.

Mr. Counihan

I want to join in the appeal to the Minister to accept the recommendation of Senator Parkinson. I am sure the Minister and the Government are quite as anxious as anybody else to preserve our thoroughbred horses and keep the best blood in the country. They have shown that by sending our Army jumping team all over the world to take part in competitions. The object of sending them is to advertise our thoroughbreds and the good quality of our horses. If any excuse could be made by previous Ministers for keeping this on, none can be made now after the House of Lords' decision. As Senator Parkinson pointed out, one trainer stated that if he kept his thoroughbred sire Blandford in this country the income tax he would have to pay would be £4,000 per year. That is a big consideration. We all hope that this economic war will finish some time. When it is finished, if we charge this income tax in respect of the keeping of stallions, it will have a very detrimental effect and it will mean that the good stallions will stand in England instead of in this country. We are not very much concerned with those wealthy people who pay income tax in respect of earnings from stallions. My consideration is for all those small farmers who send their thoroughbred mares to these stallions. A farmer may be prepared to pay a considerable fee when he is able to send a mare to a sire in Ireland, but he would never dream of sending that mare across to a sire in England. If we are to maintain the standard of our thoroughbreds, the Minister should consider the recommendation which is now before the House.

Mr. O'Connor

I join in the appeal made to the Minister to give due consideration to the facts of this case and to accept the recommendation put forward by Senator Parkinson. Nobody is more qualified by experience to give a history of the horse-breeding industry than is Senator Parkinson. Personally, I am very much interested in the breeding branch of the industry because we manage for three or four of the principal breeders who have their farms in Kildare. We manage for Lord Furness, Captain Dixon and the Aga Khan in Kildare and we are also concerned as regards the stocking of the National Stud. These account for four of the most important breeding centres in County Kildare. I do not claim to have any inspiration as regards the quality of our thoroughbreds but I do claim that a good deal depends on the grazing of the young horses and the condition in which the land devoted to their rearing is kept. We claim that we have been, to some small extent, responsible indirectly for the success achieved by assisting with advice. Three years ago, owing to a dispute regarding income tax, the points of which I cannot recall at the moment, Lord Furness took his stud away, which meant a substantial loss to this country. He had one of the most up-to-date breeding establishments in the whole of Ireland. A couple of hundred pounds a week were spent in wages. He brought his stud to England owing to this dispute about income tax. The ex-President, Mr. Cosgrave, came down specially to investigate the dispute but the income tax people were so positive in their demands that the dispute was not settled. On two occasions a batch of animals that went to the Doncaster sales from this establishment realised £58,000. That amount has been lost to this country. The whole history of the State in connection with horse-breeding is more or less illustrated by these losses. Everybody is interested in this industry and this country has been regarded as the best country in the world for breeding horses. We have something to be proud of in this connection and I earnestly urge the Minister to accede to the request so ably urged by Senator Parkinson.

Mr. Quirke

In asking the Minister to accept this recommendation, I am voicing the opinions of a large number of farmers in the County Tipperary who, for many years, as Senator Parkinson and others are aware, have been keenly interested in the breeding of thoroughbred stock. The fact stands out that the good sires have gone as the result of this legislation. If this state of affairs is allowed to continue, there will be no use in expecting the farmers to send their mares across to the good sires in England. They will probably keep on breeding, but they will send their mares to horses of an inferior type. The result will be that, in a short time, we shall have second or third rate thoroughbreds. We have been producing in this country the best horses in the world. Every man in Ireland, regardless of what colour of shirt he wears, is proud that Irish horses have won so many big races. As Senator Counihan has pointed out, the Free State Army jumpers have done a great deal for horse breeding in their tours in the different countries. I ask the Minister to consider this recommendation and, if possible, to grant this concession, which does not mean a terrible lot. Senator Parkinson mentioned the number of thoroughbred mares in the country. I did not catch the figure, but I understand that the amount of revenue which would be gained by the levying of this tax would be very small in comparison with what might be lost in another direction. I am not very much concerned with lightening the load of the eight or ten persons who may be directly affected by this legislation. I am more concerned with the numerous people who own thoroughbred mares and who will be seriously affected if this concession is not granted. I am in thorough agreement with the recommendation.

Mr. Wilson

If the Minister needs any more convincing arguments, I should point out to him that the success of the Irish Sweepstake, out of which we derive some revenue, is, in some measure, due to the glamour which attaches to Irish horses as a result of winning so many races. People hear so much about the achievements of the Irish horses that they do not hesitate to take a ticket in the Irish Sweepstake. The Minister, having heard all the arguments which have been put forward should, I think, agree to this recommendation.

Mr. MacEntee

The one doubt that this debate has aroused in my mind is whether Irish horses are really so good as their friends say they are. If they are the great racing strain which they are reputed to be, that must be so because of some qualities in our soil and climate which enable us to produce better horses than they do anywhere else. If our soil and climate possess these qualities, a mere flea bite in respect of income tax is not going to prevent the very wealthy people engaged in this type of sport from getting the best horses that money can buy, either from here or from any part of the world. That, I think, is the moral that is to be drawn from the fact that people who can race, independent of any considerations of cost, are sending their horses into this country.

Colonel Moore

But those horses that have been mentioned were absolutely taken away.

Mr. MacEntee

If horses have been taken away, other horses have been sent into this country within the last 12 months.

Colonel Moore

Oh, no.

Mr. MacEntee

According to a memorandum circulated, two sires, both of them valued at £15,000, have been standing here for the first time last year.

Mr. Farren

The one taken away was worth all these—Blandford.

Mr. MacEntee

That may be so, but the point is, was he taken away because of the income tax? People who can afford to get the best horses money can buy will get them in this country if the horses are better in Ireland than anywhere else. That is the great advantage we have. There are disadvantages. I quite admit the horse-breeding industry is labouring under certain disadvantages. I am as anxious as anybody else to foster the horse-breeding industry, but if it has to be fostered it must be fostered in the right way, and it must be fostered in such a way as will not violate the principles of justice as between individual and individual. We are asked to disregard entirely the real income derived from the business of keeping a stallion for service in order to receive fees. Instead of that real income we are asked to take the much lower income which would be represented by the valuation of the farm on which the stallion is kept. We are asked to transfer the assessment on the profits of keeping the stallion from Schedule D to Schedule B. What is the purpose of Schedule B? It was to simplify the assessing of income tax, to make it easier for the income tax payer to be assessed. It was assumed when Schedule B was first drawn up that the profits to be derived from the practice of husbandry were fairly represented by the annual value of the land and a provision was laid down in Rule 4 of case 3 in Schedule D to the effect that in certain occupations, just as intimately associated with the land as the business of keeping a stallion, if the Commissioners found the land was charged under Schedule B on the assessable value, and was occupied by a dealer in cattle or a dealer in milk, so that the assessable value afforded no just estimate of the profits, they could require a statement of the profits to be delivered. The reason I am referring to that rule is in order to put before the Seanad the fact that the legislature originally contemplated that while it might be a good rough and ready rule to take the annual value of the land as representing the profits of the land arising out of the normal practice of husbandry, nevertheless there were cases in which it would not be just to the community as a whole to take that annual value as representing the real income which was derived from the user of the land for a particular purpose.

What the proposal seeks to do here is to see that the person who derives thousands of pounds of income from the business of keeping a stallion is, for income tax purposes, to be put in this happy position, that the great bulk of his income will be disregarded entirely for income tax purposes, and that he will be assessed on a much lower figure, on a figure which in some cases only would be a Schedule B assessment. We have heard references to certain horses. What is the position in regard to some of the horses? We do not know where we would be under the proposal now before the House because in some cases the stallion does not belong to the person who is in occupation of the farm upon which it is kept. How are we going to assess the person who owns the stallion in that case? We are told that under the proposed recommendation that assessment for income tax arising out of the income derived from fees paid for the service of stallions, bulls, boars, etc., shall be treated as income coming within the terms of Schedule B unless the owner shall claim to be assessed under Schedule D. What is the position of the person who has no Schedule B assessment at all? What is the position of the man who, possibly, keeps a stallion on a farm and pays the occupier of the farm a rent for keeping him or a commission on his fees, or pays him in some other way? We cannot assess the owner of the stallion on an assessment that properly relates and can only relate to another individual.

Mr. Brown

You would assess him for carrying on a business under Schedule D, but not as being the occupier of the farm.

Mr. MacEntee

How is that going to cover some of the cases which have been referred to as hard cases? In some of those cases I understand the stallion stood at a farm which did not belong to the owner. Take some of the cases of stallions which have left the country. They would not be covered by the amendment at all. There would be no inducement to them to come back. In point of fact, I think the real weakness in the amendment is that the inducement which it would offer, apart from the fundamental injustice of it, because after all the governing principle in income tax is to levy the tax upon income, would not be very great. If for the purpose of making it convenient to a certain number of taxpayers the system of the Schedule B assessment has been introduced, we should not abuse it to bring inside that Schedule individuals who, upon the income which they admittedly derived from the business which they follow, are clearly not entitled to be inside the Schedule at all. The original purpose of Schedule B was to relieve the ordinary small farmer, with a limited knowledge of accountancy, of the burden of keeping accounts. People who run stud farms are not in that position. They keep very detailed accounts covering every item of their business and they should not be entitled to a concession which was devised to meet the case of the individual in quite different circumstances.

Apart from the fundamental injustice, what are the main disadvantages under which those who keep sires are placed? First of all there is the tariff. The tariff is many times a heavier imposition on the person who keeps a stallion, the average horse breeder, than the income tax is. In addition there is the whole question of convenience. One of the horses referred to, when he was standing here, had a fee of something like £250—it might be less. He served 15 mares in the year. In Great Britain his service fee was almost double and the number of mares served was more than double. That was by contrast, not with the year in which there were tariffs in operation, but by contrast with the year in which there was free traffic in horseflesh between Great Britain and this country. A minor concession of the nature now asked for is not going to cover that great discrepancy. A man's income is increased by, I think, nearly £9,000 or £10,000 by bringing a stallion to England, irrespective of the tariffs at all. Even taking the case of this particular animal, the concession at its best would not have meant more to the owner of that animal than, say, £2,000 or £3,000.

Mr. Counihan

I should like to call the Minister's attention to the fact that that particular horse had made his reputation in Ireland and that is the reason why he is getting the big fees in England.

Mr. MacEntee

That is just the point I was making, Senator. There is such a thing as a horse making a big reputation here and then shifting him over to England and cashing in on his reputation. Possibly, also, it will be found that as in the case of many other horses that left this country with a big reputation in other years, the owner will find that it pays him best in the end to bring him back to Ireland to rehabilitate his reputation again.

Mr. Comyn

To help him back.

Mr. MacEntee

Yes, to help him back, but to help him back in the right way. I have indicated in the Dáil that the Minister for Agriculture is prepare to consider this on a different basis I do not think we should consider this matter under the income tax code. The principle is that a man will be taxed according to his income. It is proposed here to introduce a complete departure from the fundamental principle of the code. For that reason I would have to ask the Seanad not to accept the recommendation. On the other hand, I do concede that there is a case to be made in regard to the tariffs and even possibly in regard to the fact that a man may be charged here for income tax in certain circumstances who may not be chargeable for income tax in Great Britain. That is a factor which would have to be taken into consideration when dealing with the whole matter. The Minister for Agriculture has indicated already in the Dáil that he is prepared to take the whole case into consideration when it is put up and to take all the factors into consideration. I do not think, therefore, that we should try to meet a position which has been created within the past year in regard to Great Britain, in so far as income tax is concerned, which may be dealt with before many years in an Income Tax Act in Great Britain by an amendment to give effect to what is at present the law here in Ireland. It must be admitted that the British do try to operate their income tax code in an equitable way. It is not my business to have hopes or fears one way or the other so far as the English taxpayers are concerned, but at any rate, I am not without belief that within a year or two the Glanely decision will not be allowed to stand but that the income tax code in Great Britain will be modified to bring it back to what it was previously. How ever, that is not our concern. Our concern is the position as it exists here.

I should like to refer, also in regard to the question of horse-breeding, to what was said with regard to a number of, or at any rate two, very eminent or noteworthy persons who have been referred to in a memorandum which is not before the House, but which many Senators are aware of. I do not believe that either of those people are chargeable for income tax at all. One is a ruling Prince and is immune from income tax and, therefore, not likely to be affected by any action we may take or may not take. I do not think that the other person is a resident in this country and, therefore, he does not come into it. I should also like to say that the owner of one of the horses, who is, I believe, in the minds of Senators, is possibly not a resident here either. Consequently, I feel that the Seanad is being rather rushed in this matter into accepting a recommendation which, as I say, is not warranted by the equities of the case and which, I believe, will be quite ineffectual to secure the object, because of which the Seanad, I think, are disposed to support and accept the recommendation.

Mr. Brown

I should like to say just this: That Senator Parkinson's recommendation would not cover all the cases of stallions that are kept in this country. The Minister is perfectly right when he says that even in England, in the case of a stallion that is kept on somebody else's farm, where the owner of the farm is not the owner of the stallion, he does not pay income tax on the profits of the stallion. The same would apply here, and even if Senator Parkinson's recommendation was accepted and carried and made a portion of the Finance Act, the owner of a stallion, who did not own or occupy the farm on which it was standing, would still in this country pay income tax. Senator Parkinson's recommendation was not intended to cover that case, but only the case where Schedule B applies.

Mr. Parkinson

As a matter of explanation I should like to say that the two stallions which I mentioned— I did not mention the names of the owners of these particular stallions— are the property, one of the Aga Khan, and the other of the Maharajah of Rajpipla, both Indian Princes, who, in England, at any rate, are not liable to income tax.

Mr. MacEntee

Nor in Ireland either.

Mr. Parkinson

And I am very glad to hear from the Minister that they are not liable in Ireland. These stallions came over here at my request and are staying at my farm, not at the Aga Khan's farm. The Maharajah has no property here. I am not trying to make a case for either of those owners, but for the owners of the 2,000 or 3,000 thoroughbred mares in this country and I have not heard a word from the Minister as to how the future of this great industry is to go on if we are to be deprived of the best blood we have because of the few miserable thousands to be got from income tax. I am not claiming that we can breed 3,000 Derby winners or 3,000 Gold Cup winners. The majority of the horses, like the majority of the people, will be hewers of wood and drawers of water. We do claim, however, that the country that produced such horses as Windsor Lad, Felicitation, or the very good horse that won the Grand National this year, can produce the best horses still, and if we are not able to produce Grade A thoroughbread horses very shortly the industry will be a thing of the past.

Colonel Moore

The Minister has given us a lot of logic produced by officials. He tells us that the fundamental object of the income tax code is to do justice to everybody. I say that the fundamental object is to collect as much money as possible for the income tax. That is the real object of it. We do not need logic to show that this person must be charged because somebody else must be charged. The point is that we want to get as much money as we can and the way we suggest is the best way of doing it and of helping the country at the same time. The official logic does not go any way in the matter at all. If this were something that would obstruct the roots of anything in this country, then, possibly, it would be a different matter, but it does the opposite. I hope that the Minister will reconsider this matter as it is a very serious one.

Mr. Johnson

I am a juror in this discussion, and I have been listening to every argument, pro and con. I think the Minister has made a sound case as a matter of income tax law. I think he has justified his position completely in the matter of income tax but I wonder whether it was purely on the merits of income tax law and the immediate financial question that he reduced the income tax from 5/- to 4/6? Was is not possibly the fact that the British Government had reduced the income tax to 4/6 that weighed with him somewhat at least? It has not been infrequent that in matters of financial legislation the ulterior or consequential facts have weighed with the Minister for Finance. I think that, on the whole, the argument is distinctly in favour of equalising the income tax law in this country with the income tax law in Britain, so that whatever preference or whatever advantage the present British practice may give to a certain British industry that the position in the Free State will no longer continue to the prejudice of a Free State industry. Purely as a matter of business, on the case made I am in favour of Senator Parkinson's recommendation. It is a sound one. As a matter of fact, on pure income tax law and logic the Minister for Finance is perfectly just. But in weighing those two pieces of pleadings it would be to the economic advantage of the country as a whole, as distinct from the revenue to the Minister for Finance, to accept the recommendation.

Minister for Lands (Mr. Connolly)

I would like to say a few words on this, because the Minister has clearly indicated his sympathy with the horse-breeding industry. It has been made clear to Senator Parkinson by the Minister for Agriculture and the Minister for Finance that we are very much concerned with the future of the horse-breeding industry. At the same time, there is a great deal to be said from the Minister's point of view in holding to the income tax assessment. What I suggest is that Senator Parkinson should try and see that point of view, and from that practical point of view try to build up the horse-breeding industry with which he is so concerned. I suggest to him that he should put some definite plan to the Minister for Finance or to the Minister for Agriculture or both, whereby there should be a subsidy or protection to thoroughbred stock or the provision of the stallions that are necessary to maintain the horse-breeding industry in this country. I think it is fair that we should approach it as an industry. I think the Seanad should agree not to break the whole spirit of the income tax assessments. We have the position that a man may be earning £20,000 a year or £10,000 a year from stallions or, say, from one stallion. It would be absurd to classify him as you classify the ordinary producer, the ordinary farmer who is in a small way in horse breeding. Obviously there would be a wide difference between that and the hard-working farmer who is carrying on a stud with his purely agricultural industry. The horse-breeding industry should be approached in another way rather than in the way in which Senator Parkinson suggests.

Mr. Comyn

I quite agree with Senator Connolly that the Minister has defended his position with his usual sound logic. But my impression of the income tax law is this, that the rigour of the principle was subject to modification for any public purpose. There are exemptions and abatements. There are exemptions in the case of a man who is married, in order to encourage matrimony. There are exemptions and abatements in the case of children in order to provide for the younger generations. I think I have a longer experience of the income tax code probably than anybody on this side of the House because it was the first subject that occupied my attention. The principle of the income tax code, so far as I know it, was this: certain general assessments of income tax subject to modification and subject to exemptions; in cases where there was any greater public advantage, then there was a modification of the code. That was the principle.

I think if the Minister accepts this modification he will not be departing in the slightest degree from the principles of income tax legislation, when first introduced in 1853. He will be following by both the letter and spirit the true law of this question if he adopts this modification.

Mr. MacEntee

I would not like to endeavour in any way to compete with Senator Comyn as an expert on income tax. But I think that he has been much less guileless than usual in the manner in which he has presented the income tax code to the House. He has stated that where any public purpose is to be served concessions might be made in the code. As examples of the concessions he has in mind he cited the allowances which are made to a married couple and the further allowances made to a married couple in respect of their children. He has asked us to conclude that these were offered as an inducement to matrimony on the one hand and child-bearing on the other. In fact, of course, that is not how they came to be introduced into the code at all. The fundamental principle is that a man shall be taxed on his income after having provided for subsistence for himself, his wife and children. The family is regarded as a unit in the income tax code. And it is after a man has been allowed subsistence for his family that he falls due for taxes.

It is quite true that in the course of years the classification of children's allowances by legislators may not on occasions have been quite clearly kept within the category of subsistence allowances. Some people in urging that allowances for children should be increased have used the argument that this would be an inducement to taxpayers to have large families. The authorities on income tax have never accepted that as a valid point of view, because they did not think that income tax is the right way to secure social objects that might be more easily and more practicably secured by other forms of legislation. That is what I am getting at now. We want to encourage the horse-breeding industry in this country. What is the right way in which to do that? The Minister for Lands has indicated one way—by the provision of these sires themselves, that possibly the Government might either become the direct owners of them or subsidise the owners of them. The other is the subsidising of the export of the progeny of these sires. It is quite within the knowledge of everybody that the great difficulty of the owner of Blandford was that when the mares went back they were assessed on the hypothetical value of the foals. That would still remain even under this concession. My great objection to this concession is first that it violates the principle of the income tax code and secondly, that it will be inequitable as between one man and another. As the income tax code stands at present the small owner may by reason of family allowances escape the tax altogether. On the other hand, the person who is the super-taxpayer, the wealthy man, who is quite well able to pay, as the code stands at present has to pay the tax and justifiably has to pay the tax. But if this recommendation is accepted we would put that wealthy man in the same category as the struggling farmer. We put him in the same category as the struggling farmer and I say that we will be conferring on him a concession and a benefit, the result of which will not justify the cost of it to the Exchequer and the injustice we shall do as between one taxpayer and the other.

Mr. Jameson

I think the House is being placed in rather a difficult position. I do not suppose that in all the time I have been in the Seanad I have never heard the Seanad so absolutely unanimous. I think Senator Quirke put the point of view of the ordinary horse owner better than anybody. He is probably a hunting man himself. My hunting days are over, but what we did as long as we hunted, was to look after the mares that were sent to good horses in this country and to get good hunters to ride. That is his point, and out of those came many of the best racehorses which reached the heights which Senator Parkinson talks of. The Minister says that he is very much in favour of horse-racing and that he would like to help us, but at the same time, because of technicalities connected with income tax legislation, he is not able to give us any assistance whatever.

Mr. MacEntee

In this way.

Mr. Jameson

He suggests nothing else.

Mr. MacEntee

In that connection, I understand that the Minister for Agriculture has already been approached by the Irish Horse-Breeders' Association.

Mr. Jameson

Still, the House has in front of it definite proposals. There is the Bill which is going to insist on this income tax being deducted. Senator Connolly suggests subsidies, but of all the infernal curses on this country, subsidies are the worst, and I cannot see Senator Parkinson or anybody like him asking for subsidies for the horse-breeding industry. If that is going to be the alternative, then, we do not want it. What we do want is not to have legislation which compels the people who are keeping our great horses in this country to leave the country. Does the Minister wish me to stop?

Mr. MacEntee

No.

Mr. Jameson

I am only dealing with the situation before the House. The Minister, apparently, would wish us not to pass the recommendation. What have we been talking about for I do not know how long? This House has some position before the country, and this House certainly ought to let it be known outside that, practically unanimously, they object to this tax being put on the horse-racing industry in the Free State. I cannot at all see why Senator Parkinson should withdraw his recommendation. Let the Seanad pass this recommendation. I did hope that the Minister would say, when he said he was interested in the horse-racing industry and knew of its vital importance to this country, that he was going to see if he could find some means of carrying out Senator Parkinson's idea and relieve the industry in such a way as would prevent the great sires and mares leaving this country. If he had given us that undertaking, in any shape or form that we could grasp, I should have said "The Minister has said that he will help us and I am willing to trust him. Do not pass the recommendation," but we have had no such statement whatever and, therefore, I hold that the House is bound, in its own justification, to pass this recommendation.

Colonel Moore

I should like to say a word with regard to this new question of the Government giving assistance. That has been done with regard to depressed industries. Our industries were depressed and required something of that sort to help them, but racing has established itself after free competition with all the world and requires no help. Interference by Ministers or anybody else in what has succeeded so admirably with free trade would be disastrous and would be much worse than anything else.

Mr. Parkinson

In reply to Senator Connolly, I should like to say that the Irish Free State is one of the three great competing countries in horse breeding, the other two countries being France and Great Britain. We are merely asking the Minister to give us the same terms for our stallions that the people who own stallions in France and England have.

Cathaoirleach

Perhaps the Minister would like to say something.

Mr. MacEntee

I should like to say a word on account of what Senator Jameson has said. He said that I have made no offer. I made an offer in the Dáil, and I understand that since then, representatives of the Irish Horse-breeders' Association have been in touch with the Minister for Agriculture. He has mentioned the matter to me and I certainly say that the help which we contemplate being in a position to give to the horse-breeding industry in this country will be much more substantial than would be afforded by the proposal now before the House. Senator Jameson has indicated his objection to subsidies and so has Senator Colonel Moore, but what is this but a concealed subsidy —a subsidy given in the very worst form so that neither the legislature nor anybody else will know what it costs or who gets it or what benefit or advantage it is? If we have to assist the industry, and I quite admit we will have to do something for it, let us at any rate do it in an open way so that the country will know what is being given to the industry, who is getting it and what is the basis of the distribution.

That is the point on which I am at issue with the terms of the recommendation. I do not contest for a moment that something will have to be done but I said in my first speech and in my second, and I say it again, that this is not the right way to do it. Let it be an open subsidy if a subsidy is to be given. I believe there is no difference of opinion between the Minister for Agriculture and myself on that point. He has already spoken to me about it and I understand he has been in communication with Captain Martin, I think. We are discussing a proposal which will go further, I think, to meet the views of the people who are interested in horse breeding industry than this recommendation would go. If this recommendation were to be accepted, I do not know what would happen to the other one. I know that, from the point of view of the generality of horse breeders as a whole, this is a comparative flea-bite, but from our point of view, it is a matter of very vital principle and I would certainly not ask the House to accept this recommendation because they think that if they do not, nothing will be done for the horse-breeding industry. I give them the assurance that we will be in a position within, I think, a few days possibly, and at any rate, before the Horse Show, to announce what we propose to do in regard to the horse-breeding industry.

Recommendation put and declared carried.

Remaining Sections and the Title agreed to.

Bill ordered to be reported.

Fourth Stage ordered for Wednesday, July 18.

The Seanad adjourned at 6.55 p.m. until 3 p.m. on July 12.