I take it that the word "him" in line 11, covers a company.
Finance Bill, 1944, (Certified Money Bill) Committee and Final Stages.
Section 1 agreed to.
Question proposed: "That Section 2 stand part of the Bill."
Yes.
Question put and agreed to.
Section 3 agreed to.
Question proposed: "That Section 4 stand part of the Bill."
I object to the method outlined in this section but from a different angle from that mentioned by Senator Tierney. As a matter of administrative convenience, it seems to me that it would be a great deal simpler if this matter was so worked out as to retain the allowance under the Income Tax Acts at the same figure, provided people did not draw children's allowances. It seems to be an unnecessary administrative method for a person to take an amount with one hand and to give it back with the other. I imagine that it should be possible for the Department of Industry and Commerce to certify, on the request of the taxpayer, that so and so was not claiming children's allowances and that that would be taken into account by the inspector of taxes. I think it should be easier to administer.
That point was fully considered. I had it put up to me by a number of people who did not expect that they would accept children's allowances. I put it to the Minister for Industry and Commerce and he objected to it on principle, and when we examined it, it was not possible to find anything as simple as what was proposed. I would have preferred to have it otherwise.
Question put and agreed to.
Sections 5 to 8 inclusive agreed to.
Question proposed: "That Section 9 stand part of the Bill."
Perhaps the Minister would explain the necessity for this section. Surely the Revenue Commissioners had this power already.
No.
Under what enactment did they previously divide Dublin up into eight districts? I am asking for information partly as a matter of interest. I take it that it does not increase the charge.
Not in any sense, but it enables the Commissioners to re-arrange districts for assessment purposes.
Question put and agreed to.
Sections 10 and 11 agreed to.
Question proposed: "That Section 12 stand part of the Bill."
On the wording of this section there seems to be no differentiation between a person who is a full-time managing director and one who attends a board meeting once a month when dealing with "remuneration".
Why should there be any distinction?
In regard to the amount that may be written back to excess profits tax, there might be a case of a director getting £100 a year while the managing director might get £1,000.
Is there any question of writing back?
Not under this section.
Question put and agreed to.
Question proposed: "That Section 13 stand part of the Bill."
I quite appreciate the Minister's point of view in regard to the date, 31st December, 1943, and that the only way he could deal with it would be to go back to the beginning of the 1941 Act, but I want to put this point to him, that even going back three months from December 31st, 1943, is retrospective legislation. If an Act is passed in certain terms and as a solicitor I am able to find a loophole through it for my client, and we are entitled to take advantage of it, we should not be penalised for taking advantage of any loophole under a previous Act where the intention was not clearly expressed. When I am in this House it is my job to assist the Minister to prevent any evasion, but when I go back to my office, it is my job to try to find a method to evade it. If the Minister put in March 31st, 1943, it would not be retrospective legislation, but by putting December 31st, it brings in the principle of retrospective legislation of three months, although I agree that it will not affect many.
The cases that might come before the Revenue Commissioners after that date will be on record. It will not mean anything to the accounts ending 31st December, 1943, as probably they will not be before the Revenue Commissioners for months.
That would be so in the case of an ordinary continuing business, but in the case of a business started last year it would not be so.
Will it not take many months to prepare the accounts, and take some time to get them before the Minister?
The Minister's Department has been bombarding me for returns of companies that are putting in their accounts up to 31st December in the past two months, so the Department thinks we are more prompt than that.
The fact that they are bombarding the Senator shows they have not got them and are not likely to get them for some months.
In regard to sub-section (1) (c)—
"... the total deduction to be allowed shall not exceed a sum representing three per cent. of the paid up issued capital of the company ..."
—that is, the directors' remuneration allowed before a charge for excess corporation profits tax is made. The remuneration, as defined in Section 12, covers every payment that is made to a person who is a director, whether that person is a full-time managing director or not. In the case of a managing director, who may have the not exorbitant sum of £1,000, a comparatively new company, established in 1938 or 1939, has the substituted standard or the sum of £2,500. The total amount, in accordance with sub-section (c), is 3 per cent. on the total capital. I submit that, in accordance with the strict wording of the section, the £900 will be disallowed from the accounts in the case of the managing director where the £900 would be over and above the 3 per cent.
I think the Senator is not correct in that reading.
That is not intended?
No. The director may hold less than 5 per cent. of the capital.
Is it not clear from the wording?
No.
It is not intended anyway?
Not in all cases.
Question put and agreed to.
Question proposed: "That Section 14 stand part of the Bill."
I indicated yesterday that there was a point here I would like to raise. I am not raising it for the purpose of helping people to evade tax. I an entirely at one with the Minister in making strenuous efforts to keep people from evading tax, but Section 14 seems to contain some new principles. In the first place, Section 14 (9) (b) (i) provides that any shares of a company held by shareholders in another company shall be deemed to be held by that other company—that is to say that, as was pointed out yesterday, when four people have formed a company for a particular purpose, if they also have shares in Messrs. Guinness, the Hibernian Bank or the Bank of Ireland, their company may be regarded as a subsidiary company for the purpose of assessment to excess corporation profits tax.
There is no principle laid down in the section, no direction of any kind given to the Revenue Commissioners, who are given an absolute discretion under sub-section (5), which says:
"... unless the Revenue Commissioners otherwise direct, the following provisions shall apply ..."
Taking the matter generally, everybody is regarded as being guilty until the Revenue Commissioners issue to them a certificate of innocence. Is that not correct? It seems to me there should be some direction to the Revenue Commissioners, such as is found in other Acts—that where in their judgment a subsidiary company has been formed for the purpose of evading tax they would have certain powers. No principle of any kind is laid down and, at the discretion of the Revenue Commissioners, as far as I can see, all people are made guilty of an endeavour to evade tax.
I know, of course, that the Revenue Commissioners are responsible people and do their work without regard to individual interests and that they would endeavour not to be unjust; but surely the section is drafted in a very wide manner and gives them very wide and, as far as I can discover, quite unprecedented powers? I wonder if the Minister could give any precedent for this particular type of provision we find in Section 14? It is not the same at all as the powers given to the Revenue Commissioners under other sections of other Acts. It is not stated in Section 14, as it is in Section 15, that, where the Revenue Commissioners have reason to believe that certain things are happening, they have power to take certain action. There the person who is deemed to come under the section would have some remedy. In Section 14, is there no appeal to the Special Commissioners or from the Special Commissioners to the courts, or is the matter left entirely to the discretion of the Revenue Commissioners?
Senator Sweetman suggested here to-day that he himself could draft provisions which would evade even this Section 14; and I have heard it put by lawyers that they could draft articles of association for a company that would evade this Section 14. I am sure they could do it. I feel they would be less able to do it if the section contained the provision that, where the Revenue Commissioners have reason to believe that steps are being taken for the purpose of evading tax, they could take action. It is for the purpose of preventing any evasion of tax that I am speaking, although the section is drafted in a very drastic way. It would seem to knock out completely any appeal to the courts. I would like to hear what the Minister has to say regarding it.
The section is very widely drawn, but that was done only after a lot of discussion between the Revenue Commissioners and myself. There is more in it than evasion. It deals mainly with evasion, but there are other things that must be considered. A variety of drafts were submitted and this was the one on which I finally agreed. It certainly gives the Revenue Commissioners very wide powers.
Is there any precedent?
In exactly these words, I do not think so. I would ask the Seanad to let us see this work for a year. It may not be successful. I know that the ingenuity of taxpayers and their advisers, legal or otherwise, will be almost certain to find loopholes in it. Probably, I will come back again next year with an amended form. All I can say is that we will do our best to meet the cases that have made this section necessary and which have been brought forcibly to our notice. We have had cases brought to notice where people were not brought within the mesh and this was the best of many drafts to meet the problem with which we were faced. I do not say that this is final; I do not suggest that any such amendment we would bring in would be final, but we would like to have the opportunity to try it for a year.
Is there any possibility of a person who feels aggrieved making an appeal to the courts?
Certainly, there is a right of appeal to the Special Commissioners.
To the Circuit Court and the High Court?
It is curious that there is special provision for appeal in Section 15, but not in Section 14. I am not very skilled in this, but I understand that, when we find an appeal provided for in one section, it does not apply otherwise. Is there really an appeal in this case?
I am advised now there is a doubt about that.
I am sure that there is none.
That is bad.
The position is very bad. I have no sympathy with tax evaders. I myself have to pay every single penny as it is taxed by the Revenue Commissioners and no one can advise me how to get out of it. I am not a manufacturer or a company promoter. This section is so drafted that every single citizen is guilty until the Revenue Commissioners, in their absolute discretion, give a certificate of innocence. Even to accomplish the purpose of preventing evasion, the section is very drastic.
It is drastic.
And the only defence the Minister can make is that he would like to try it for a year, to see if it will work, and then patch it up if it does not. Surely, it would be better if the powers were given on some principle? There is no direction of any kind to the Revenue Commissioners. It does not even state in the section, as it does in Section 15:—
"Where the Revenue Commissioners are of opinion that the main purpose for which any transaction or transactions was or were effected was the avoidance or reduction of liability to corporation profits tax ..."
The Commissioners could then take certain action. In Section 14, no such direction is given, so the Revenue Commissioners simply can decide—I am not saying they would decide—that A and B are going to be amalgamated, but C and D are not going to be amalgamated, for the purpose of corporation profits tax. That seems to be an astounding power to have. They seem to have no direction whatever from Parliament. They could properly decide that the profits of Senators Sweetman and Hayes should go together, and that the profits of Senators Quirke and O Buachalla should be treated separately. That is a decision which, I am sure, they would not reach but they have absolute power to reach it under this provision. No matter what confidence one may have in the Revenue Commissioners—I know that they have statutory powers independent of the Minister and I hope they will continue to hold them—this is an astounding power to give them.
I realise the difficulties of administration and the ingenuity of tax evaders, but there are certain principles of legislation to which we ought to hold. One of those is that there should not be arbitrary power over the ordinary citizen. In this case, a person who is paying his tax and who forms a new company for the purpose of helping members of his family or other relations—a company which has no reference whatever to the original company in which he is interested—has to go with his hat in his hand and appeal to the Revenue Commissioners for leave to exercise what ought to be his ordinary right. I know that the Minister will not bring the Dáil back to deal with an amendment to this section, but this is an extraordinary provision. It has no precedent in England. The Chancellor of the Exchequer there would never chance his arm, even in the middle of a war, by bringing in a section of that kind.
I am provided with a precedent in the 1927 Finance Act. I am told that Section 7 of that Act constitutes a precedent for granting these powers to the Revenue Commissioners.
I do not want to be offensive, but I do not believe a word of that. I am perfectly certain that, if there were such a provision in the 1927 Act, somebody would have risen to say: "You are doing a very drastic thing in granting those powers." I have no recollection of that and I have a very good memory.
The section to which the Minister refers might be a precedent for Section 15, not Section 14.
It is, admittedly, a drastic power, but the circumstances require it. I ask the Seanad to let us have the power for this year, at any rate, and we shall see if, in its working, the fears of Senators are justified or if the rights of the ordinary citizens are infringed.
Could the Minister give us any idea as to the principles upon which this section will be worked? In the ordinary way, when passing permanent legislation, a Minister's view as to what it is intended to do is not of very much value because the legislation is there and the courts will interpret it as they find it. In the case of Finance Bills, the Minister's view as to what it is intended to do by particular sections is of very great importance because, when publicly given, it serves as a guide to the Revenue Commissioners. Different Ministers for Finance of different Parties have stood by their declarations in regard to these matters. If the Minister would tell us whether Section 14 is intended for the same purpose as Section 15 and will be worked on the same principle—that is to say, will operate only where there is reason to believe that an attempt is being made to evade payment of tax— it would be of great value. I know that we cannot do anything about this matter at this late hour. I do not want to make any further allusions to swan songs, but this is a remarkable infringement of ordinary principles of government. My experience and, I think, the experience of everybody else is that, when powers of this kind are handed over, they are never given back. There may be some kind of precedent for this section, but there is no precedent for the Revenue Commissioners handling back powers given them by Parliament. I do not think that even the most hardened Revenue Commissioner would suggest that, either in England or here, any power ever granted the commissioners was handed back. If the Revenue Commissioners get this power—a power greater than they ever claimed before —they will never hand it back.
The main reason for this section, as for other sections, is to catch those who are evading tax. It is an attempt to stop companies from escaping tax. I do not ask the House to give us that power for any other reason.
Will the Minister allow an appeal to the Special Commissioners?
We cannot do that now.
If you find that a grave injustice is done to some groups of people or to certain individuals, will you have the matter rectified?
If that should happen, the section will certainly be amended.
Will the persons concerned have a chance of obtaining reparation?
If injustice is proved, the legislation will be made retrospective, if the House agrees.
As to the Minister's intention, suppose that Senator Hayes, Senator Quirke and I come together and form a company to undertake a building project. That is No. 1 company. Suppose that Senator Quirke, Senator Baxter and I decide that there is an opening for a glove-making industry. These two things are in no way analogous. But Senator Quirke and I happen to be interested in both of them and have the majority of shares. Is the Minister quite clear that it is only intended to cover analogous undertakings by this provision?
The section covers cases in which it would be obvious that there was a deliberate attempt to evade tax. Such attempts have been made. I have some knowledge of persons who are wealthy enough to be owners of big businesses. These businesses have been handed on from father to son in single companies for generations. There are sections in these businesses. These people have formed these sections into companies in order to evade tax. That is of the class of cases we want to cover. There is no intention to treat new companies established to found new industries as subsidiary companies.
Was it found impossible to express that in any way in the section? The Minister said that there had been a number of drafts of the section. Was it found impossible between the Department of Finance, the Revenue Commissioners, the draftsman's office and the Attorney General to frame something of that kind and put it into the section?
We shall have a shot at it for the next occasion.
I know cases of companies which formed other companies of a similar character for a very good reason. It happens that in the trade with which I am connected a firm which commences to manufacture a particular type of article brands it and advertises that brand. That creates a form of goodwill behind the brand. Due to circumstances created by the war, these companies were unable to get supplies of the character they had been accustomed to. They established separate companies to keep their original business going by marketing a brand of a quality inferior to that of the original brand. These would be subsidiary companies under the law but they were not formed for the purpose of evading corporation profits tax.
I am not so sure in that case.
I agree with the Minister.
I am quite prepared to examine the case but I shall go no further than that.
If the Minister's officials are satisfied that there was no attempt at evasion, the Minister will give such cases favourable consideration?
Any such case will be carefully examined by myself and the Revenue Commissioners.
In the ordinary course, as this section is drafted, if you are proposing to carry out a scheme and you go to the Revenue Commissioners and ask them: "Will this scheme fall within the provisions of such-an-such an Act?" the Revenue Commissioners will say: "Wait and see." I suggest the Minister might give some indication that he would ask the Revenue Commissioners to give an expression of opinion in advance.
I would ask and direct the Revenue Commissioners to give all the help they could.
Beforehand?
Beforehand.
The method I was thinking of was that I would form a company with debentures and I would make the interest on the debentures variable, on a sliding scale with profits, and the Revenue Commissioners could not attack my debenture interest.
They would have a shot at it, I am sure.
That would be very good for trade.
There is no target they would not fire at.
Question put and agreed to.
Progress reported; Committee to sit again to-day.
Business suspended at 1 p.m. and resumed at 2 p.m.
Question proposed: "That Section 15 stand part of the Bill."
Perhaps the Minister will tell us, if there is an appeal here to the Special Commissioners, is there an automatic appeal after that to the Circuit Court?
To the Circuit Court and to the High Court.
One follows from the other.
Question put and agreed to.
Sections 16 to 23, inclusive, the Schedule and the Title, agreed to.
Bill reported without recommendation.
Agreed to take Fourth Stage now.
Question—"That the Bill be received for final consideration"—put and agreed to.
Agreed to take Fifth Stage now.
Question proposed: "That the Bill be returned to the Dáil."
I desire to make a few remarks, merely to repair certain omissions in my statement on the Second Reading. Evidently the Minister felt, and probably rightly so, that a good deal of what I said was irrelevant to the Finance Bill. At the same time, he did not see fit to reply. I accept it as the practice of the House that there is considerable latitude in the debate on a Finance Bill here, for the reason that Senators have not the same opportunity of discussing general policy as the Deputies in the Dáil have. The Minister did not deal with the proposal that we should have White Papers in advance, adumbrating Government policy, so that the public and the members of the Legislature would have some idea of Government schemes which, perhaps, could become the basis of debate by means of a resolution. I suggest that such a proposal would greatly facilitate subsequent legislation.
There is another matter that I feel is very important, and that is the relationship of tariffs to agriculture. I am strongly in favour of the proposal made by Deputy Dillon in the other House. Tariffs should not affect the raw material of agricultural production. I feel it is entirely wrong that we should shelter the makers of agricultural implements at the expense of the agricultural producer. If they compete on open terms with imports, well and good, the margin is very slight; but to put high tariffs on agricultural machinery, to the prejudice ultimately of the consumer, is entirely wrong.
I did not intend to make any constructive proposals as to how I would aim at getting efficiency in industry, but perhaps I would be allowed now to make three suggestions. One is that there should be a bureau of standards. I understand that idea is accepted by the Federation of Irish Industries— they are pressing for it. There is a general feeling on the part of the public that the first line of those who wish to exploit the public is a deterioration of quality. They can be protected in that connection if the Government would set up a bureau of standards.
Secondly, the Government should consider establishing a gradually diminishing scale of duties. I would say that over a period of years an effort should be made to bring all duties down to 30 per cent. That should be the maximum. There should be no duty in excess of 30 per cent., and if any industry wanted a duty in excess of 30 per cent. it would have to go before some tribunal of experts—I do not think a political tribunal would be at all suitable—and show that it could not compete at that rate and show that it was largely affected by the imports of countries with depreciated currencies or a low standard of living. I do not think any industry should be protected at a figure of more than 30 per cent. against any country which has what I call a respectable currency and a normal standard of living.
The third suggestion I make is that some attempt should be made to give publicity to the difference between internal prices and outside prices for certain articles in general use. The public should know that the higher price or the increased price had arisen out of the policy of protection.
I make these three constructive suggestions. There is one thing I forgot to say. It is in regard to the question of agricultural costings. I brought it up several times. We should know where we stand in the fixing of agricultural prices. Other countries do it and we have very good opportunities, now that several of these co-operative societies—perhaps that is an exaggeration—I know one anyway——
Several is right.
——are running farms on proper methods and are well able and well qualified to keep proper accounts. They should co-operate with the Department of Agriculture in getting out costings. I feel that agricultural prices are fixed with no regard whatever to knowledge of costs. I feel—Senator Baxter may indignantly deny it—that they are fixed in some cases too high. The only way the Government could defend that attitude is by saying: "We know the costs. We know them over a number of counties, different qualities of land, different sizes of farms, and we are fixing the prices on that basis, allowing a fair profit to the producer over and above the ascertained costs." These are my constructive suggestions for the post-war period.
Now that the Minister has handed over the assessment of farmers' income-tax to the tender mercies of Senator Sir John Keane, I should like to ask the Senator a question. Senator Sir John Keane and I fought many battles together in the last 20 years in the interests of farmers but now he has jilted his old love—that is, the farmers—and has gone over to the industrialists and manufacturers. I did not expect that being made a director of Irish Cement Limited would turn him over completely into the hands of Senator Frank Hugh O'Donnell and the other industrialists. It is said that a deserter from a party becomes the most vindictive towards that party. Senator Sir John Keane surprised me when he said that farmers' prices are entirely too high and that the Government are fixing them too high.
I did not say that at all.
I am sorry.
I said that they are fixing them without any knowledge of the costs of production—or any scientific knowledge.
At all events, the question I want to ask the Senator is, does he consider that £300, on a farm of 100 or 120 acres, where a farmer has to pay for labour, is an unreasonable amount to be assessed for income-tax? Now that he is going to be the arbiter in that matter, I should like him to consider that question and to give an answer to it. I consider that it is very reasonable and, in some cases, more than the amount which should be assessed.
Leas-Chathaoirleach
I am afraid Senator Sir John Keane will have to reply to that question on another occasion.
I trespassed, perhaps, too much on the patience of the House this morning. I am sorry if I wearied the House, but I will not delay now. I do not intend to enter into a discussion with anybody in the House on the question of free trade versus protection—not at this stage. Perhaps on some other occasion we may usefully discuss that question. We have not adopted the recent British system of issuing White Papers in regard to the policy of the Government. But I did take occasion in my Budget statement to deal at considerable length with the post-war plans of the Government and I went in some detail into these plans. My remarks on that particular aspect of Government policy, however, did not get a great deal of attention in the Dáil or here, but perhaps they will before the year is out.
Senator Sir John Keane also raised the question of protecting agriculture against the heavy imposts on production. That arises out of the bigger question of free trade versus protection which I do not intend to discuss now. I shall call the attention of the Minister for Industry and Commerce to the constructive suggestions made by Senator Sir John Keane. If he has not already had his attention called to them—I believe he has had his attention called more than once to the question of setting up a bureau of standards—I am sure he will give them consideration. It was not the question of income-tax for farmers that I left to the mercy of Senator Sir John Keane, but Senator Counihan himself, and I think he is in capable hands.
Question put and agreed to.