Senator Sir John Keane has asked me to say that if he could not reach the House by 4.30 p.m. he does not wish to move the amendment standing in his name. He may raise the point later in debate but he has authorised me to say that the amendment may be marked "not moved".
Revision of Income-Tax Law—Motion (Resumed).
We will take it that the amendment is not moved. In the circumstances, the debate is now open on the motion.
In view of the exhaustive review made by Senator Douglas on the previous occasion, there is no need for me to make another detailed statement. During the past year, the Federation of Irish Manufacturers, both in deputation to the Minister and in correspondence with the Minister, submitted the views of manufacturers generally. We indicated the avenues in which we felt the Minister might be more accommodating in the matter which is the subject of Senator Douglas' motion. I rise to support very strongly the motion that a commission should be set up to examine the entire matter of the incidence of direct taxation—income-tax, corporation profits tax, and the other forms of direct taxation.
After all, the present system is a hand-me-down from John Bull, and, like most hand-me-downs, it is a misfit as far as this country is concerned. Does anyone suggest that if we started from scratch we would have inflicted on ourselves so unwieldy and complicated a system as the one now under discussion? The mover of the motion and others did not stress one important point, that is, that the existing system is so intricate and puzzling that its administration costs absorbed too great a proportion of the gross yield. A simplified system should reduce the cost of collection. I suggest further that the present system is definitely unfair. People with fixed incomes, shopkeepers and industrialists upon whose morality an implied slur was cast the other day, these people with audited returns, together with the people with fixed incomes, are probably the only sections of the community who do pay their proper share of direct taxation. What of the others? Farmers on a valuation basis, professional men and others who do not submit audited accounts, are assessed by guess work or hit-and-miss methods, and it is common knowledge that in such cases there is wholesale evasion. There should be some ceiling fixed for the amount of direct taxation to be taken from business, or agriculture for that matter. All forms of direct taxation combined should not take more than 10/- in the £ from any activity, and I doubt if the man in the street has any idea of the heavy burden of direct taxation on industry at present. It is no exaggeration to say that industry yields more to the State than to its owners.
British post-war plans already disclosed offer considerable relief to industry, and full details of these are in the hands of the Minister. During the course of this debate we have had reference to capital, and it is well to ask: What is capital? It certainly is more than the original amount paid up on shares. To this must be added all loans, debentures and overdrafts, indeed all moneys needed to run the business. The total of these should be the basis on which taxation would be based. The future of the country depends on high standard efficiency from agriculture and industry. That efficiency will only be attained by ability, enterprise and foresight, and these qualities will be stifled unless we evolve an intelligent and equitable system of direct taxation to suit our peculiar Irish economy. A prosperous and progressive community will yield more revenue than a stagnant and indignant one. Retrospective taxation is bad in principle and cannot be justified. We hope the Minister will not continue it.
The motion before the House does not suggest to the Minister for Finance that he must be content with less revenue, but that he should examine or cause to be examined the present system of direct taxation, with a view to its revision to suit our needs. I hope, therefore, the Minister will find it possible to accept the motion.
Ba mhaith liom roinnt a rá i dtaobh na gceisteanna seo atá luaite sa tairgsint atá os ár gcomhair. Ba mhaith liom admháil go raibh mé sásta go maith leis an óráid a rinne an Seanadóir Douglas le linn do bheith ag cur na tairgseana os ár gcomhair aréir. Bheinn lán-tsásta leis an óráid sin murach roinnt pointí achrannacha a tharraing sé isteach, pointí a bhain de thairbhe na cúise a bhí sé ag iarraidh a phlé. Ní léir domsa go háirithe, cén ghá a bhí leis na sáiteóga a bhí sé ag iarraidh a thabhairt don Aire Airgeadais agus do Rialtas Fhianna Fáil. Níor thráth ná ócáid fheiliúnach an tráth agus an ócáid seo leis sin a dhéanamh. Ar an gcuma chéanna sílim, freisin, go mbfhearr dó gan scéal scaracha an Chomhluchta Iarnróid a tharraingt isteach. Scrúdaíodh an scéal sin ar fad ag binse speisialta, tugadh bhreithiúnas ar an scéal, agus bfhearr é fhágáil marbh.
Is truagh nach bhfuil níos mó ama againn le cur síos a dhéanamh ar an gceist seo. Tá an—spéis agam inti, ó taobh teoiriceach, mar adéarfá, agus ó thaobh na praicticúlachta chomh maith. Tá spéis agam sa scéal seo le fada an lá. Tá roinnt scríofa agam ina thaobh—agus ba mhaith liom go mór an cead a bheith agam é a léamh. Thógfadh an léitheóireacht sin timpeall cúig uaire a chloig—is follas mar sin nach mbeadh sé réasúnach a leitheid do chead a iarraidh. Tuigfidh lucht an tSeanaid uaidh sin chomh deacair agus a bheadh sé orm na pointí éagsamhla atá i gceist a phlé chomh hiomlán agus chom sásúil agus ba mhaith liom. Ní féidir liom ach tagairt a dhéanamh do phointe amháin nó cupla ceann agus déanfad sin chomh gairid agus is féidir liom.
I listened with a great deal of interest to the statement of Senator Douglas last night. I am very interested in this question from different points of view and different angles, from the academic and theoretic points of view and also from the practical. I would like to compliment wholeheartedly Senator Douglas on his presentation of his case, but at the same time there were some matters drawn in by him that I think in good taste would be much better left out—his references to the policy of the Fianna Fáil Government in regard to certain aspects of recent taxation were hardly called for on this occasion. In view of everything I think it would also have been better if his reference to the Great Southern Railways shares were left out altogether. I would like to have a good deal more time than there is available to go into this question. As I mentioned a few minutes ago—I think I frightened the Minister and those Senators who understood me— I could hold forth for a very long time on this question. For a long time I have been interested in the question and I have compiled some views in regard to it generally. I would like very much to have an opportunity of reading my views, following Senator Douglas' example. But that would cover, roughly, about five hours, so Senators will see that any comments I may be able to make on this motion must fall very far short of what I would like to make.
There are two parts to the motion. One calls for the simplification of the income-tax code and with that I do not think anyone will disagree. I would like to see the whole code simplified but I cannot see how it is going to be done. Senator Douglas did not himself show how it was going to be done. As a matter of fact I think, if I remember rightly, towards the end of his statement, he admitted that it is a matter that, to use the common phrase, bristles with difficulties. The difficulty lies in this, as far as I can see, that the income-tax code goes very far in its endeavours to hurt people as little as possible. Therein lies the difficulty. In the code all kinds of allowances may be made and all kinds of reliefs and deductions may be granted in order to ease the burden on particular classes of taxpayers. As long as we agree that special conditions and special circumstances may be taken into account it seems to me that it will be almost impossible to achieve the simplicity that we desire. We can simplify the code by levying your tax at a definite firm rate and having no exceptions. If we make up our minds to do that, then I think we can achieve a good measure of simplicity, but whether the cure would not be very much worse than the disease is a matter on which Senators can come to their own conclusions. For myself, I doubt it. Another point raised by Senator Douglas is one of current interest and importance, that is, the question of taxation of profits. We may argue for a long time as to whether a tax is too heavy or not, but in any case we have accepted the principle of taxation.
I think the principle that we have adopted in taxation is that for all practical purposes profits only may be taxed. Capital may not be taxed. Unless it can be shown that under the system capital as capital is being taxed, that capital as capital is being taken away by the State I do not know that we can agree very much with Senator Douglas' contention. I would like to say that I do not at all agree that it is an ideal thing to attempt to level incomes by means of taxation. In theory, at any rate, that is wrong. At least it is inadvisable. Whether the law is so designed as to take away that part of the national wealth that is capital which is used for the production of that further wealth which is essential if incomes are to be levelled in the way they ought to be, whether that is being done is something that Senator Douglas did not, I think, attempt to prove. If it were true it would be indeed very dangerous.
There is one other point to which I would like to make reference. It is one I think the public would like very much to have some enlightenment about. There is a certain feeling abroad to some extent that in the ordinary course of events taxpayers, unless they employ one of these people generally described as income-tax experts, lose something. There is growing up throughout the country a certain feeling that unless they go out and get somebody who is really an expert to come in to prepare their accounts and then go and deal with the inspector of taxes on their behalf, they are going to pay in taxes something they should not properly have to pay. I do not myself subscribe to that view at all. I think that the inspectors of taxes are among the most reasonable of our civil servants. I think the difficulty has arisen in this way, that very many people fail to fill up their forms when they should be filled up, with the result that there is considerable delay, and then eventually the income-tax inspector must himself make the assessment. Then, because of the delay, and because, perhaps, of the magnitude of the assessment, the people get a fright, and they feel they must go out and get someone in the nature of an expert to prepare their forms and their accounts and present them to the inspector of taxes. Probably this is as good an opportunity as we may get for the purpose, and I think it would be in the public interest if this matter could now be explained publicly and cleared up. I think Senator Douglas will have achieved something worth while, and the community will thank him if as a result of his bringing this motion some assurance can be given that taking things by and large, whether they employ an income-tax expert or not, tax-payers are not mulcted for more than their proper share.
With the idea of a commission, I agree. I would like to see a commission appointed that would investigate this matter. It often occurred to me that it would be a good idea. I think the British appointed a commission a good while ago. How many years ago I do not know.
In 1919.
Correct. Income-tax law was not anything as involved then as it is now, but I think that after that commission had sat for a considerable time investigating the simplification of all forms of the code they eventually came to the conclusion that they could do no better than had been done already. Whether we are now more enlightened than the people were then is another matter. It might be worth while to have the commission to examine the question, as I say. I agree we should have a commission, but the question arises who is to compose it. I have felt for a long time that there is in its own way a permanent commission sitting investigating this matter. I know that certainly in the towns of the west of Ireland the income-tax inspectors and their staffs have to work not an ordinary working day, but considerable overtime in order to keep up with the work that they have to do. I am sure that these men are not at all keen on a more involved system than is necessary. I also feel that the Revenue Commissioners are not people who are keen on retaining an involved system if it can be avoided. I believe from such inquiries I have been able to make that there is an effort on the part of the Revenue authorities in consultation with their staff throughout the country to seek a more simplified system than obtains.
In any case I should like the Minister to assure us that he and his Department are interested in and are watching this matter. However, if we agree that there should be a commission, it seems to me that the only people who can properly compose it would be representatives of the Department of Finance itself and the Revenue Commissioners. The time I allotted myself to devote to the motion has passed. Whether I have said what I wanted to say as effectively as I should have done is another matter. The only thing is that all my thought and all my study of this has been done in the Irish language, and I would rather that I should deal with it in the Irish language, but since Senator Douglas went to such great pains in preparing the case, and was anxious to have it discussed and to hear the views of other people, it was really in deference to him that I spoke in English.
I understand that the Minister has to be in the Dáil at 6.30 p.m. Perhaps he might wish to intervene on this motion now.
I thank the House for allowing me to intervene. In doing so I am sorry, on account of the variety of matters I have had to deal with in the last few days, that I have not been able to give to Senator Douglas' motion, and to his address of last night, the serious consideration that I would like to give them, and that I believe they are worthy of. The motion is a very comprehensive one; it is an all-embracing kind of motion as far as taxation is concerned, and would require a good deal of time, but, elaborate as it is, it would require from anybody who intends to deal with the matter seriously, and more especially from the Minister for Finance, very considerable time to make an adequate reply. Therefore, all I am saying to-day is not to be accepted as an adequate reply. I listened with great attention to Senator Douglas last night. I like to have subjects of that kind brought before this House, and the other House, and dealt with in the objective way that, with one or two exceptions, Senator Douglas dealt with the subject of income tax generally. While I listened with great attention, I must frankly confess that I was a bit irritable towards the end, because in a third of his speech the Senator went into detail on small matters relating to the Budget and the Finance Act of last year which, I humbly suggest to the House, did not add anything to his case, and almost took away some of the good impression that the earlier part of the statement had made on me. There is a time for such discussion when the Finance Bill is before the House. I suggest respectfully that it was not his fault if he was not here last year to make the speech he made last night. Having dealt first of all with the big principle he worthily raised, and that we have discussed, he might easily have left the other matters until the Finance Bill came to this House, when I would be quite willing to meet and to debate with him or with any Senator subjects relating to corporation profits tax and a variety of other questions, judged in the light of discussions that we were going to have, that are of rather less importance.
Having said so much, I think the main things in Senator Douglas' address to which I listened with attention and interest related first to the fact that we ought to have an Irish system of taxation. I do not think anyone here will object to that. We ought to have one. But that is a very big undertaking and I hesitate to make any remote promise that I am going to tackle it. Frankly it is a very big job, and as Minister for Finance I think I can honestly say that I have two men's work to do in the normal year. I am kept going night and day. I am kept in the Dáil and in the Seanad—I think too frequently—with legislation of one kind or another. One Senator who was very courteous and kindly politely said to me the other night that he wished he could hear me more often in this House. I do not think Senator Baxter would agree with that.
I would not disagree with it.
I like to hear Senator Baxter. I often feel that I am overloaded with work. I have not as big a back as some of my colleagues or as some members of this House have and maybe I am not as young as I was.
But more affable.
As Senator Hayes reminded us in a debate the other night, I try to be. Therefore, when Senator Douglas asks for a new code of law relating to taxation it is a very big job to tackle. The laws of Britain were taken over here holus bolus, a very natural thing to do when the new State was set up. If the circumstances when this State was set up had been different, it is quite possible that after a year or two, if things had run more smoothly—they did not run smoothly for a time—in the normal course probably the Government of the day would gradually have set up a variety of different commissions—it could not be done in a hurry—one to deal with a code of law, based naturally on common law with which we grew up, and taxation laws would probably come in their turn. That was not done. I believe it will have to be done some day. I believe we should have working now expert lawyers starting, if you like, with the system of local government law. I tried to do something by getting that law consolidated. We have passed one or two Acts dealing with local government which consolidates that law. I believe that the time has come when more or less these laws must be taken section by section, and that the best and most competent men we can get on the legal side should be employed to deal with them.
As Minister for Finance, I am talking against myself there because some of these things have been put up to me, and I am fighting them on the question of cost. I believe that this thing should be done and will have to be done. We will have to devise for ourselves a legal code that will suit ourselves. In saying this I do not want to be taken as suggesting that the code of tax here is not suited to us or is out of harmony with our lives. We have grown up with it and it has grown up with us. But I do believe that the people who will have to devise a new code will find it very difficult. They may modify it, there are always changes taking place both in our customs and in our taxation and there are other things, too, that will have to be taken into consideration.
It might be wise, some time, that a commission should be set up to examine the position. I do not know whether that is the best procedure or not. I am just suggesting that without giving it adequate thought or consideration. I do not know whether it would be the best method but, however, I make the suggestion that we might set a number of lawyers to work. You may not get many of the senior men because they would be probably more profitably employed elsewhere but certainly the younger men could be found although some of them too, might prefer pleading in court to this office or chamber work. It may be difficult to get the type of man who will fit into this work. I am just offering these criticisms in passing. I do not know how many of these lawyers would be required, I hope not too many and that the cost will not be too much. Take for instance, the law regarding taxation. These lawyers could be set to consolidate and codify the law first and give it to us as it stands and another group of lawyers might be asked to propose amendments to that law that would suit us best. There are eminent and distinguished lawyers in this House and they appreciate what would be required. I am just offering this suggestion as some day the House may be asked to approve of proposals to bring the laws up to date and, as Senator Douglas suggested, to bring the income-tax law into harmony with our Irish lives and Irish economy. I do not know how long it would take, probably a considerable time, even if one section were put to deal with the tax law and another section put to deal with the local government law. I would not like myself to be faced with the job of piloting through the Dáil and the Seanad the necessary amending Bills. However, if it comes my way, I will do my best, but I do think we should have the lawyers at work even now.
Hear, hear.
I have not suggested this to my colleagues who have already considered this matter on several occasions. I know very well that the Taoiseach has been interested in the subject of revising those laws for a long time. He has not got his way yet, however, either because of finance or other reasons, but at any rate he has been pressing it, and I suppose a beginning will be made, as the supporters of John Redmond used to say about the coming of Home Rule: "At no far distant date." In addition to what I say about the lawyers, they would have to be helped and guided by our experts on income-tax law and customs and excise law, and I may say in passing that I know no set of officials in this State, and goodness knows we have admirable civil servants, no better in the world, especially amongst the senior men, who work harder than the income-tax officials. They are hard-working men.
That is what is worrying Senator Summerfield.
He is a lucky man to have something to worry about. Senator Foran and I do not worry so much. It is easy to reckon our income-tax, and everybody knows what I have. As I said, the lawyers would have to be guided by those experts, and in present conditions it would be difficult to spare them. I assure the House that if I were asked to put at the service of the lawyers revising our income-tax code two or three experienced men, I do not know how I could do it in present circumstances. I know some Senators and some of my own colleagues and particular friends will answer: "Get more staff", but you cannot make this kind of staff in a year or two. Therefore, you can see the difficulty of getting a commission or committee of this kind to work. I was very happy to hear Senator Douglas pay the compliment he did last evening to the staff of the Revenue Commissioners. I know the Senator knows those men and has contact with them and that he realises that in them he has a first rate set of officials despite the jokes made about them. I remember seeing somewhere, I was reminded of it the day before yesterday, a series of cartoons on the rearing and breeding of a revenue officer—a tax inspector. He was seen in a perambulator being fed on vinegar and as he grew up he was fed on various acidulous types of food. Before I became Minister for Finance I had a very slight knowledge of the revenue people. I filled up my forms for my income-tax for years and then I began to get the idea that I was paying too much.
That was 20 years or more ago. I went to the inspector in my district and showed him my form. I told him what I had signed to pay and what I had paid, and he said: "Let me have a look at it for a day or two." I did so. I was not a Minister at the time; and it was not a case that I was recalcitrant, or one who was not prepared to accept his obligation. Now, so far as that inspector of taxes was concerned, there was no obligation on him to pay any more attention to me than to any ordinary taxpayer. He asked me to come in in a day or two while he could look over my papers covering a few years past, and, when I went back, a considerable sum of money was refunded to me. That is the common practice of the Office of the Revenue Commissioners so far as I know. You have to be frank with them and tell them the whole facts, and, if you do so, you will get a fair and square deal from them and they will not demand from you or from anybody else one fraction of a cent beyond what the law requires. I should like to give the assurance, if it is necessary to give it, to Senator O Buachalla; that where the income-tax payer gives the full facts, the instructions of the Revenue Commissioners to all their staffs is to help the taxpayer and give him the full benefit of every concession or allowance that the law allows, and to see that he gets it. If the taxpayer overlooks it himself, then it is the duty of the officer concerned to see that full justice is done and that every allowance that should be given is allowed to the taxpayer.
Perhaps I might be permitted to say, Sir, that that has always been my opinion.
Now, so much with regard to one important aspect of Senator Douglas's motion and the remarks he delivered to us yesterday on that motion. That aspect was concerned with the reformation of our law, and I do not think it is necessary to say any more on that. Another suggestion, however, was that in the framing of the new law, it should be made simpler. In that connection, I might quote the words of Lord Stamp, a former Revenue official in the British Civil Service, who started life as an income-tax inspector, and who, when he was asked for simplicity in connection with income-tax, said, in effect, that it was "asking for the moon". In the same way, when the Senator asks for a simplifying of this matter he is asking for the moon.
I rather thought that the Minister might quote that.
I am quoting the words of Lord Stamp, as given before a Royal Commission on income-tax, in 1919. Since I could not put the matter as well as he did, I am giving the quotation. What Lord Stamp said, in giving evidence before the commission to which Senator O Buachalla referred, the Royal Commission on Income Tax, in August, 1919, was as follows:——
Was it not the commission held in 1936?
No, it was earlier than that. The commission to which I am referring was held in 1919.
I think there was one after that.
Well, here is what Sir J.C. Stamp, afterwards Lord Stamp, said at the commission that was held in August, 1919.
Oh, yes. I am sorry. I am afraid that I have been confusing two commissions. One was a House of Commons Committee, and the other was the Royal Commission of 1919.
Well, at any rate, in case any Senator should want to look up this matter, I shall give the reference. What I am going to quote is an extract from the evidence-in-chief of the then Sir J.C. Stamp before the Royal Commission on Income-tax on 1st August, 1919. The reference is No. 9581.
Thanks very much.
Here is what he said:—
"It may not be out of place at this point to register a deliberate opinion that the clamour for a simple..."
the word "simple" is underlined;
"...income-tax, which he who runs may read, is an absurd one. In many particulars, not always the most important, the existing chaos of rules can indeed be greatly simplified, but if the tax is to be so highly subjective as to reflect every slight difference in ability, on grounds of aggregate amount of income, marital condition, family responsibility, character of income, elements of capital, origin and source of profits, and all the other differentiae which are now urged, then, unless it is to be reduced to the status of a voluntary offering, it must be a complicated system."
Later, the system was brought in in the United States—I interpolate that remark myself.
"The United States had a full opportunity to get a simple system, having no previous commitments, and the great advantage of a prolonged study of other nations. Within a few months there were widespread complaints that the law and system were ‘irritatingly incomprenensible'. In 1915 I was prompted to write: ‘There is the usual failure to see that modern life and modern commerce are so complex and diversified that to expect a tax form which shall read like a pill advertisement on the railway, and yet close down upon every case, is asking for the moon.' It is almost pathetic to see how reformers propose smooth graduations and curves based upon formulae as a part of their contribution towards ‘simplifying' the tax."
Now, I think that that is as good a piece of evidence against the possibility of supplying this or any other country with simplified income-tax forms as could be found anywhere. Those who have had any acquaintance with the United States of America will remember—I do not know whether it was immediately after the last war or during the war—that income-tax was introduced into the United States for the first time, and, as Lord Stamp has pointed out, they had a full opportunity of getting a simple system, as they had had no previous commitments, and had the advantage of the experience of other nations. They had, for instance, the British code before them; they had the Irish code, which was the British code at that time, before them; and they also had the French code; and, God knows, our system, bad as it is, as compared with the French system would be simple enough for anybody from the primary schools. At any rate, the United States had before them these systems upon which to build their own system and erect an income-tax code for themselves. Notwithstanding that, there have been constant and bitter complaints by tax-payers all over America, reflected almost every year in the Congress of the United States, in regard to their income-tax code and the difficulty that their people find in filling up their forms and complying with the law. Yet, there they had the opportunity of devising a simple code —as simple a code as could be devised —based upon the experience of other countries.
I am afraid, Sir, that I have to go down now to the Dáil to deal with the Committee Stage of the Racing Bill, and there is a large number of amendments that I shall have to look into before I go there. Therefore, I hope I shall be forgiven if I do not say very much more now. I believe that I am as much interested in this matter as anybody in this House, although I have not as much money invested in Irish industries as some members of this House. As a matter of fact, I think I have hardly any money invested in any industry, Irish or otherwise, but I am interested, as a citizen of this country, in the welfare of the country and the welfare of its people and, naturally, for that reason, I am interested in the development of Irish industry—sincerely interested and willing and anxious to help, even as Minister for Finance, in that direction. I think it was this morning I read in the Irish Times an article on taxation wherein the writer—I do not know who he was; there was no name given— referred to the millions that had been retained in Irish industry even since the war despite our very heavy taxation.
Do you believe it?
I do and I know it is true.
Millions?
Yes. I know it is true. I have had the advantages as Minister of seeing the results. I do not want to deny that taxation is very heavy and I am not sorry to see that millions have been reserved over the whole industrial and commercial field. Possibly, too, money is reserved now which would normally have been spent during the war if it were possible to spend it on the betterment of materials of industry that are required to improve and extend industry. Many of them will have to spend very large sums to put their industries in a position to develop and extend so that they will be able to meet competitors in the world markets. But bearing that in mind and realising that the taxation now imposed on industry is heavy, it would be wrong, I think, knowing the circumstances as it is given to me as Minister for Finance to know the circumstances, to overstate the claim. In the case of any special industry or commercial undertaking or in the case of any individual I do not look for the names of the people concerned. I do not get any information but sometimes it comes to me officially in a variety of ways when appeals are made. If people ask me what is the income of such and such a body I say I do not know. I do know, taking the figures as a whole, that taxation is very heavy, but it is marvellous how well industry and commerce—certain types of commerce— have thrived under the very heavy load of taxation that is imposed on all sections of the community at present.
I do not want to see that heavy taxation continue, and it cannot continue if we are to develop industry. It cannot continue if we are to make this country industrially sound and developed as I think everybody here would like to see it developed. We cannot give encouragement to our industrialists to give that full employment we want to see, if we do not allow them enough profit to make it worth their while to develop and extend their enterprise, their industry and their ingenuity. I go that far with Senator Douglas. I want to see everybody who has an industrial bent in this country— whether he be a capitalist or a worker, given full opportunity to exploit his ingenuity, his industry and his enterprise. If the load of taxation is too high here, we shall not get the development we would like to see. I should like to see the State encourage that development in industry in every way. It has done so in the past to a very considerable extent. It might be wise, as Senator Douglas suggested, to have that development directed by a system of taxation, but whatever way it be done—by direct tariffs, by quotas, reduction of taxation, grants or subsidies through the medium of the Industrial Credit Organisation, or by helping industrialists by a reduction of taxations to build up their industries—it must be faced and faced soon. Please God, the war will come to an end soon and we shall live, I hope, to see this country as industrially prosperous as I think it is agriculturally prosperous at present with all respect to Senator Baxter. Senators will pardon me if I do not say anything further at present, in view of my pressing engagements elsewhere.
I listened last night to Senator Douglas with great sympathy and great admiration. He was approaching this problem from the point of view of the practical industrialist, the practical business man and the accountant. I am afraid there was more sympathy in some respects in my attitude than understanding because I have always admitted that where figures are concerned, I am the sort of person who if he divided two into an even number without getting a remainder would feel relieved. In so far as I could follow them, I had nothing but sympathy with Senator Douglas's aspirations. It was when I looked at the question from the point of view of a lawyer that I was somewhat appalled because I realise that however necessary, desirable and reasonable were Senator Douglas's suggestions, to embody them in the existing code would involve such an alteration in the structure as almost to cause it to fall to pieces. If we were to have an entirely new code, the consequences of a taxation system, departing as widely as they might have to from what I might call the English system, which is substantially our system now, might involve us in very great difficulty when we came to considerations of double taxation relief and the other interconnections there are between the incomes of people derived from Ireland and from England. Speaking for myself, that is to say, as a lawyer who has occasionally to try to find out what this code means, I could wish that there were much fewer departures from the English code. We are much too apt to wait to see what they do in England and then take that over here, making some slight alterations. The result of that is that English textbooks are misleading, and that English and Irish case law tends to diverge in a number of respects. The differences between the laws are not so great as to call for any real differences in social policy, and departures only make matters more difficult.
I think it is probably unnecessary to give examples of that. I am sure my colleague, Senator Ryan, knows exactly the kind of case I am referring to. First of all, if we are going to make any departure at all, if we consider a departure is necessary, let us do it after skilled and careful consideration. Let us not do it just for the sake of doing it, which I am afraid has occurred even in the case of Finance Acts in the past. That is the first point I should like to make—as far as possible for the sake of simplicity of the laws and for the sake of understanding amongst accountants and for the payers of income-tax, let us keep our code parallel with the existing English code and vice versa. If commissions are set up, either in this country or in England, to consider what modifications are necessary, and what improvements can be made, I think that both countries, as far as possible, ought to try to keep their systems running on parallel lines, because with intercommunications of travel and investments and the way in which the finances of the two countries are interwoven, it may cause very great difficulties if you get a substantial departure.
This code of income-tax started with a series of Acts now about 100 years old. They developed with the years, one after the other, a bit of tinkering here and a bit of tinkering there, just as is done in the modern Finance Acts. In 1918, you had an Act which is frequently referred to as a code, but it is nothing of the sort. It was a consolidation which, with a few alterations, merely took sections from the old Acts. It was merely an attempt to put into one Act the substance of the other Acts, and to remove sections which were inconsistent. It is very likely that the time has come—after all, it is a good stretch from 1918 to 1945—to introduce another Consolidation Act which will introduce other alterations made in the Finance Act, and again, to bring it up to date.
I would very strongly support the view that as much of the principles of Senator Douglas' motion as can be fitted into the framework of the present code should be introduced but I doubt whether it would be possible to introduce as many as all of us would feel to be desirable. If we are going to have a completely new system, speaking for myself, I think that it would take five to ten years' preparation among accountants, lawyers, and Revenue officials, to block out the system. And, when you do get it, you will find that the imagination of man has not kept pace with the possible diversity of facts which human experience will produce, and you will probably have a period then in which you will have to amend, amend, and amend.
In other words, while I sympathise with Senator Douglas in everything he has said, as I understand it at any rate, there will be enormous difficulties in putting it into force, and I suggest that our first policy should be one of caution to avoid mere differences for the sake of differences. Secondly, if we cannot give effect to what Senator Douglas has said, that we should do it in the way he envisages, a commission with at least three elements represented should be set up and if necessary, should take evidence from people outside the country as well as from people inside the country, and, after a full and thorough examination, should make their alterations with prayer and fasting.
When I say evidence from people outside the country, I do not want anyone to misunderstand me. Such a misunderstanding took place the other day. Science and knowledge are international things. Genius is not the perquisite of any geographical entity or of any national State. To a certain degree, these are problems of pure science, combined with experience. There is a mathematical element, a statistical element and a logistical element in it, in which the brain of a Chinese may be capable of giving assistance as valuable as the brain of an Irishman.
On the other side, there is the element of experience. Conditions are changing, and there are the mutable elements which you must consider, the surroundings of the country in which you are, and the mathematical basis of your plans. Let us enlist, on the mathematical side, brains from anywhere in the world, not to supplant our own, but to supplement them. Let us enlist in this, as in all things, experience from outside which will enable us to see how far our problems differ from those of other men because of the circumstances.
If we do that we will go as near to meeting Senator Douglas' motion as we possibly can. But I do not know whether reforms can be carried out immediately at all, and I am torn in two, because I have sympathy with the view of Senator Douglas from the point of view of practical desirability, and appreciation of the difficulties that would be involved in fitting them into the present code without a very lengthy examination which might reveal difficulties none of us at the present moment can conceive.
I regret that I had not the advantage of hearing the speech of Senator Douglas. I happened to be in the country, and, therefore, I am compelled to take into consideration only the wording of the motion itself and the speeches I have already heard to-day. I agree, generally, with the opinions which have been expressed by my colleague, Senator Kingsmill Moore. While everybody feels that the income-tax code is complex and difficult to understand, very few people have been able to find a solution which would enable that code to be simplified with any prospect of practical success.
This income-tax, as has been stated over and over again, is a tax upon income. That may seem to be a truism, but it was necessary to repeat those words from time to time because in the carrying out of the Income Tax Acts, the revenue authorities in England, and in this country, often appeared to overlook the fact that the Income Tax Acts do not empower a taxation on capital. So, therefore, in order to tax income in all its branches, it is necessary to have this rather complicated code. The revolt against the intricacies of the income-tax code is not confined to this country—I am sure it has been very strong in England and that it is still strong. There, up to the present, they have been unable to find a satisfactory solution, and I think myself that it would be unwise for us at the moment to break away from the existing income-tax code and to form a code of our own, unless we see clearly ahead where such a code would lead us.
Now, the Income Tax Acts began with the origin of income-tax, with Pitt, at the beginning of the 19th century. The Acts have been in force for over 100 years, from 1842 until 1853 when they were temporary, and from 1853 until the present day they have been permanent. The English people have found the income-tax code in England to be very complicated. In fact, they have in England Law Reports called "Tax Cases", confined solely to decisions of the courts relating to the Income Tax Acts. They were commenced in the 'eighties and now comprise 25 volumes. We have here our income-tax cases, but they are hidden away in the Law Reports.
I think that about 60 of them have been reprinted by the Revenue Commissioners for their income-tax inspectors, and I suggest that they ought to place those Irish income-tax cases at the disposal of the purchasing public. Some of these cases are, no doubt, supplied to libraries, but I think they should be available generally for purchase by the ordinary taxpayer and the ordinary lawyer as the English cases are available. It would be very easy to bind these cases together and to sell them in one volume or in two volumes as the case may be.
I agree with Senator Kingsmill Moore that our, so to speak, economy, being so bound up with England, requires that we should be slow to depart very far from the basis of taxation at present prevailing there. The Income Tax Acts in England are not very different from our own, even since the setting up of this State, because I think it can be said that when the Revenue Commissioners in this country read the English Finance Acts, they derive from them excellent ideas which were incorporated afterwards in our own Finance Bills.
In the old days we have heard that our legislation often lagged behind English legislation. For example, the English Statute of Frauds was passed in 1677, whereas the Irish Statute of Frauds was not passed until 1695. If we review our Income Tax Acts since 1922, we will find the very same provisions in our various Finance Acts as have been adopted in England in Finance Acts passed a few years previously.
Senator Kingsmill Moore said there was a slight difference between the Income Tax Acts in England and in this country which created a certain difficulty in the use of suitable textbooks. That may be so, but I do not think that it is an insuperable difficulty. This motion presupposes, of course, that the income-tax law or code is very difficult, and is to a certain extent inequitable. I cannot at the moment speak on the latter part, although I can speak on the first part,
And with much feeling.
Income-tax law is probably, with the exception of the death duty law, the most difficult to understand of all laws.
It is worse than the death duty law.
But in any case, it is a law for experts, and I do not agree that all experts are experts on income-tax law. It is very easy for a man to call himself an expert when he has a smattering of the subject and when 99 per cent. of the people he deals with know nothing of the subject. If a law is so difficult that an expert is required, then, of course, something must be done. But, at the moment, I think it would be unwise, until something similar has been done in England to simplify the law here.
As regards the setting up of a commission here to simplify the income-tax law, the Minister for Finance has stated—I think rather optimistically— that this law could be simplified in a different way. That might be, so far as consolidation is concerned, but it might not be sufficient for Senator Douglas or for those who hold with him that the law is in need of simplification.
I think there is a great deal to be said for the simplification of the Acts passed in recent years dealing with corporation profits tax. The Minister for Finance, I think, did not approve of the reference made by Senator Douglas to recent legislation on corporation profits tax, but if income-tax law is difficult, corporation profits tax law is impossible. I think it is so complicated and impossible that the Minister might adopt a suggestion to leave the income-tax code alone and to do our best in the next Finance Bill to simplify the corporation profits tax law.
That is a very good suggestion.
I think it is. I feel that the corporation profits tax law has become impossible to work with any degree of satisfaction. If Senator Douglas had done nothing else by his motion, which, I am informed, he moved with great ability, than to induce the Minister for Finance to consolidate and simplify the law relating to corporation profits tax, he will have done a good day's work for the country.
I have been greatly impressed by what Senator Ryan has said with regard to corporation profits tax. That tax has, I know, been a great source of wealth to the Exchequer, and I suppose it is very badly needed. There is a great danger about it, particularly in the way it affects industries. The older industries had a chance because they could take the best of the years up to 1939.
That is excess profits.
That is what I am dealing with. They could take the best of these three years as a standard year, and it was only the amount of profit on that that was liable to excess corporation profits tax. But new industries had not that advantage, because very often they came in at a time when they were struggling—when they were training workers and incurring a great deal of expense and had no profit for a certain period. The result was they were liable to pay excess profits tax, excess corporation profits tax, I think they call it, on practically all their profits except for the allowance of £2,500 or something more or 9 per cent., I think, of their capital. That was not very much of an advantage, and the result was they had to pay tax on practically every penny they earned. Paying 7/6 in the £ in income-tax and I think 50 per cent. on what was over a certain figure of their profit meant they paid a very large proportion of what they earned to the Exchequer.
75 per cent. on the average.
That is no exaggeration.
That was stated by the Minister.
It seems a startling figure, but it is a true figure. Then these industries made money because they had foresight, and because they did what the Government asked them to do. They got in sufficient raw material to keep them going during the entire period of the emergency, and they were able to give employment during that period. As the House knows very well, a lot of factories did not do that. They did not hearken to the advice that they received, and they did not get their raw material, with the result that in many cases they threw a lot of workers out of employment. The people who had the foresight did not gain anything out of their foresight. They are paying tax, as I say, with the result that if they were manufacturing much less than they are, they would make the same profit. That would be a great disadvantage to the community and to the consumer, and would probably reduce the amount of labour employed. They should get some encouragement for not being idle and lazy and for not producing less. If they were producing less, they would be using less raw material, which will have to be replaced probably at three times the original cost, and in some cases probably four, or five or six times the original cost. They will have no reserve because of the amount taken from them in taxation to meet the stress of times to come and to give them a supply of raw materials and keep industry up to the standard that is required. That is a danger particularly for a new industry. I think that it is a matter the Minister ought to take into consideration very carefully. Perhaps it would be a good thing if the excess corporation profits tax were abolished as early as possible in order that industry would be allowed to develop. Industry does not want to develop if it is to be taxed out of existence. It is a case on the one hand of heads I win, tails you lose, because if there is a profit the profit will go to the Exchequer, and if there is a loss the industry loses. That is the only matter I would like to deal with, but I would ask the Minister to give it very careful consideration.
I would like to thank the members of the House for their references to the remarks that I made, and generally for the response that was given to them. I would like also to thank the Minister for his speech. I did not expect him to deal with mine. He is much too wise a Minister for that, and I would not expect a Minister to deal with a motion of this kind after a few hours unless he thought it was not worth anything at all. I have no complaint on that account. I would like first to deal with one or two of his criticisms, but perhaps first I should like to say that I am in substantial agreement with Senator O'Dea. I would point out that the only criticism I got from the Minister was about the part of my speech which referred to problems mentioned by Senator O'Dea. May I say first that it was suggested with my full consent that the Minister should intervene and should not be present when I was replying?
I want to mention that so that it might not look in any way that there was any discourtesy. I should like to say that the very part of my speech which rather irritated the Minister is the part I put in, because it has been expressed to me and because it is the view of the people whom I think I may say I more or less represent in this House. I did not show the whole of the speech I had prepared to anyone. I kept very closely to it although I did not keep to it exactly. I did show portions of it to a leading accountant and his criticism of it was the exact opposite of that of the Minister. He said that I was taking up far too much time in dealing with the future about which the Government would do nothing, and that it would be very much better to deal with matters which were urgent, on which people felt strongly, because there was some possibility that action might be taken. I agree with almost everything Senator O'Dea has said about corporation profits tax and excess corporation profits tax. Inequities have arisen out of last year's Budget. The Minister thought I was trying to say something which I would not have said a year ago. If I had been here a year ago I could not have said what I said, because I would not have had the knowledge. I felt it was wise not to give details of the cases given to me by accountants and for that reason I dealt in general terms with hardships. Both Senator O'Dea and Senator Ryan seemed to think that corporation profits tax and excess corporation profits tax most need revision. I would be very much inclined to agree and would certainly say that there is very little inequity, there is some but very little, in the administration of income-tax, but a great deal of inequity in corporation profits tax. May I withdraw the word "administration", because that might be taken as suggesting that it was in the operations of the officials? I do not mean that at all, but there is very little inequity in the law and practice of income-tax and there is a good deal of inequity as regards the law and practice of corporation profits tax and excess corporation profits tax, especially in regard to excess corporation profits tax.
I could speak for hours on that, giving details which have been brought to my notice. I have not referred to any personal problem or grievance. Fortunately or unfortunately, I have not made much in the way of excess profits. I was bringing forward matters which had been brought to my notice. They have no political significance of any kind. Ninety-nine out of a hundred of the people concerned may be people with whom I disagree politically. If anybody thinks that, by voting for a particular Party, he is going to get rid of income-tax, he is an extremely foolish person. I cannot see, therefore, that this is likely to influence any election.
A few points have arisen in the course of this debate to which I think it is only right I should refer. I am not at all so impressed with the danger of a difference between the British system and our system as my friend, Senator Kingsmill Moore. I do not think that he knows how different these are at the moment. After he had spoken, I asked him if he had ever tried to fill up a form under the British war-code of income-tax. He said he had not. I have. I have relatives in England and I was surprised at the difficulty I found in helping them. I bought a Daily Mail book, which was not very good. Then, I bought another book and I had three times the difficulty in ascertaining the liability of the relative of mine who asked me to help her than I would have had here—and I have had quite a lot of experience in filling forms for relatives, friends and staff here. I am not an expert, but I do not believe that the ordinary income-tax form is at all as difficult as people think it is. The Minister once spoke about the difficulty he found in filling in the form. I do not think that it is difficult. On the question of the Irish and British codes; there are considerable differences. One of the greatest is that we had a corporation profits tax years after it had been abolished in Great Britain. That does not seem to have caused the lawyers much trouble, I am not sure what the present position is, but I think that the tax has been revived during the war at 5 per cent. When it had been abolished in England, we kept it on with a £10,000 limit. I have a shrewd suspicion that it was kept on to catch one or two firms. However, we did keep it on and it was a source of temptation to the Minister for Finance. The limit was brought down to £2,500 and, now that it is at that figure, the temptation is to tighten it up. I do not quarrel with the tightening up if it is equitable, but I am convinced that it is not.
Senator O'Dea put his finger on the cause of the greatest sense of grievance. I have attended meetings of manufacturers at which older manufacturers would have no grievance but a new one would feel that he was being taxed at a completely different rate from his competitors because he had not commenced business earlier. Then, there is the case where very small fees were being paid to directors before the war, even though they gave their whole time to the work. That was not because they were not earning larger fees but because they felt that the business needed capital. They were penalised because they left their money in the business whereas I think that they should be rewarded for doing so. Again, as I emphasised in my speech, it is in the national interest that you should make it easier, from the tax point of view, to retain money in a business than to pay it out to individuals. At the moment, the tax is generally less if you pay the money out to individuals. That, I think, is bad.
Another point with which I should like to deal is that made by Senator O Buachalla. I do not think that the Minister replied at all adequately to Senator O Buachalla. I am not in the position of the Minister, but I should say, without the slightest hesitation, that there is no need whatever to go to an income-tax expert to get your tax properly measured. It may be necessary to go to an accountant so as to be able to give the income-tax inspector the correct figures. It is generally advisable to do that, but my experience has been—I have gone on behalf of others to the tax inspectors —that the inspectors and their assistants are always prepared to help and prepared to make suggestions as to where you might be able to avail of one or other of the provisions. I have never yet come across the case of an inspector who took up the attitude that the taxpayer had made a mistake and that he would tax him accordingly. It cannot be emphasised too much that one does not have to go to an income-tax expert to get his tax properly assessed. It is very advisable, nevertheless, to have reasonable assistance, whether expert or not, so as to provide the inspector with the proper facts and figures. A taxpayer may often mistakenly withhold facts or figures which are in favour of himself. I had one such experience.
My father, who was an extremely conscientious person, received back a capital payment. He asked me whether he should return it to the income-tax inspector. I told him that he certainly should not, as it was a capital payment. I went to America and, on my return, I found that my father had some qualms of conscience, that he had returned the payment and paid income-tax in respect of it. I went down to the inspector—this was before I was in public life so that there was no question of influence—and told him what happened. He said: "Are you really coming here to tell me that a man deliberately paid more income-tax than he should have paid?" I said: "You do not know my father". He did not take my word for it but examined the matter and a refund was made. I give that as an instance of what may happen. My experience has been that, so long as one is acting honestly, if bona fide mistakes are made, the income-tax inspector will rectify them. But one must realise that a great many people take up the attitude that, if they can evade income-tax, it is legitimate to evade it. My personal opinion is that I have no more right deliberately to evade payment of what is a legal tax than I have to put my hand in a Senator's pocket.
Legally?
I said "to evade what is a legal tax".
"Legally evade".
I do not think that I said that, and I certainly did not mean to say it. It is perfectly right to get every possible assistance, but I say that you will get that from the average inspector, so that you need not pay anything that you are not legally bound to pay. So far as I am concerned, I am prepared to get the best advice, whether from lawyers, accountants or any other bodies, to secure that I get every allowance and concession to which I am entitled, but I am not prepared to return false figures or to give false information or to withhold information for the purpose of securing those allowances or concessions. The Minister quoted Lord Stamp regarding simplification. The question all depends on what one means by simplification. If one means that income-tax law should be such as could be read by an infant at school, then I say that that cannot be done any more in respect of income-tax law than in respect of any other law. If one means that it is not possible to simplify income-tax as applied to individuals, I respectfully disagree. In my speech, I suggested that one way in which income-tax could be simplified would be to make the tax payable on the taxpayer's actual income in an actual period of 12 months and not have a number of different assessments except where that cannot be avoided. I think that there could be quite a good deal of simplification done in that way. Senator O Buachalla thought that I was trying to make a Party point by referring to Fianna Fáil. I am prepared to make him a gift of that if he thinks that my remark was injudicious. I was puzzled as to why that particular form of taxation was chosen, because it seemed to be most inequitable from the income-tax point of view. I mentioned the Great Southern Railways only because the public mind had been concentrated on very substantial profits which were disclosed. I do not think my friends in business will agree with me at all, but I am not convinced, until you have some way of dealing with profits on capital realisation, that you are dealing with it equitably. If a person buys shares I cannot see how profits made on them differ from the profits I might make earning my livelihood.
What about the losses?
If you tax profits on realisation you must allow losses also but only on realisation. In conclusion, I should like to say a word about the proposed commission. I would like to see a body set up, and I do not mind very much whether it takes one or two years but composed of persons with experience. The Minister thought young lawyers might do the work and young accountants; I presume he would include them, but I think we have men—I will not mention names, obviously—who are retired officials with experience. They are not people who might be expected, having regard to their age, to give the same amount of work as younger men, but they could be willingly and extremely usefully employed at work of this kind. These retired public servants would be a very useful body. By all means have young people as well, but the body should not be very large. The commissioners could not do the work themselves. The reason for that is probably the same reason why the Federation of Irish Manufacturers could not do it themselves. They could not see the wood for the trees; they could not see the position of the Revenue Commissioners, although they could see their own position. Some of them could but, speaking generally, I would not trust them to put up a code that any Minister would accept. In the same way the Revenue Commissioners, trained in a difficult and intricate job, cannot see clearly how it affects trade. The man who could give the most valuable assistance would be a qualified accountant who is a company secretary. That kind of man would be most useful.
I do not think it would be difficult to get such a commission. It is not only that you would have a commission, and it is not only that you would get results from it, but I suggest that the setting up of such a body would have a good effect. There is dissatisfaction—a lot of it reasonable—because of recent changes which have taken place. This is an Irish State and an Irish Parliament, and we have got to a stage, after 20 years, when it would be a very good thing to get the income-tax, surtax, corporation profits tax, and excess profits tax considered by a body set up with the approval of the Minister, and even if there was not much of a change as a result, these codes would be examined by experts and it could be said that they had been examined by Irishmen and were to a large extent Irish codes. What I hope for as a result is an income-tax which would be a tax on the individual's income and a corporation profits tax which, even if higher, would be a tax on business and manufacturers' real profits. I do not know in which tax I would include agriculture, or whether there might not have to be a third. I thank the House for having listened to what I have had to say, and I am hopeful that the discussion here will help to consolidate opinion in favour of a change.
Motion agreed to.
Business suspended at 6.15 p.m. and resumed at 7.15 p.m.