If the Minister or members of the public were asked what was the main feature of the Budget this year, they would say it was the reduction in direct taxation whereby income tax has been reduced by 6d. in the £ and the figure at which surtax becomes payable has been raised. Speaking for people engaged in industry and commerce, we welcome this small but acceptable reduction.
In trade and industry, we regard income tax as the most important factor either for or against the development of industry. The first thing I should like to feel happy about is whether that reduction is the result of a definite policy to reduce income tax as has been advocated as being the most important incentive to development and the prerequisite for development. That has been stressed again and again by economists and by leaders of industry and commerce throughout the country, and this is the first step we have had in this direction for a very long time.
I should like to think this represented a definite policy on the part of the Government, both now and for the future and that this is a token of future policy. Unfortunately — and I do not say this in any nasty way — there is a feeling that it was done on this occasion because of the British Budget. Those of us who know our Catechism will remember — I forget a lot about it but I do remember this — there is a difference between perfect and imperfect contrition. Perfect contrition is sorrow for sin because it offends God and imperfect contrition sorrow for sin because of the fear of hell or the loss of heaven. I would describe the Government's action in relation to income tax as an act of imperfect contrition. It was something they had to do out of shame. I hope I am not right in that. I should prefer to think of it as the beginning of a new policy in relation to direct taxation.
In case my own voice should not be strong enough, being the voice of only one person, I should like to quote the Chamber of Commerce official journal which is the voice of business people in this country. I think not only this Minister but all other Ministers will agree the Chamber of Commerce and the chambers generally have gone out of their way to thank the Government for any concessions that have ever been given and, in my opinion, they have sometimes thanked them for things they never got. In fact, they have been over-polite not only to this Minister but to Ministers of all Governments. The business community at all times have not been kicking up enough row to get justice and the bare necessaries for building up a strong economy upon which this and every other Government have professed to rely.
The Government's White Paper said that we rely upon private enterprise in this country and so on but up to now it has been the "so on and so on" that gets everything. It is these State bodies, including C.I.E., for whom money is made available in unlimited quantities, but very little comes the way of private enterprise. In this connection, I should like to read the comment of the Chamber of Commerce Journal on the Budget of June, 1959. The Chamber of Commerce made certain proposals to which I may refer later on other sections of the Bill. With regard to the proposals generally, the Chamber of Commerce Journal comments as follows: —
To some few of these the Minister has agreed, and with our customary politeness we thanked him for the consideration he has shown. In addition to sixpence off the standard rate of income tax and a higher starting point for surtax, both of which concessions will help to induce certain wealthy taxpayers to stay on his books instead of moving over to Mr. Heathcote Amory's, he has agreed to a 2% wear and tear allowance...
And here is the point —
...but too much that he has done is so trivial that we cannot but look with wonder and anxiety on the Budget as a whole. Is this the product of statesmanship? Is it seriously intended to approach the problems of national survival as matters of urgency?
...we have been given no evidence of any sense of the urgency of concentrating as strongly as possible on stimulating economic growth. More investment, more employment and more rapidly growing national income will do far more to benefit the citizen and the Exchequer than a whole host of these pennyworths of concessions. To get the capital to do the work that is needed we have to remit more and more of the taxes at present levied on industrial profits, so that the concerns may expand.
That is the comment of the Chamber of Commerce and their view may be summarised by saying that we are doing too little and, I hope, not too late. We have definitely shied away from what I regard the main factor in the creation of a strong private enterprise economy in this country. We give subsidies, protection, grants and so on, but we never give to industry the one thing it wants, that is, to be allowed to earn profits, keep them and plough them back. I do not even advocate that income tax should be such that, when people draw high salaries, they should be allowed to spend them wildly. You might maintain the present figure of income tax on distributed profits but there is no excuse for not doing something about undistributed profits which must be ploughed back.
If business people go to a bank — and I know very few who do not — to get an overdraft, there is no way of paying off that overdraft, except by some system of having undistributed profits untaxed or taxed at lower rates. All that happens at present is that you are allowed the interest on your bank overdraft, but what will you do about the capital? There must be a lower income tax rate on undistributed profits, or you can have a reduction in income tax generally on the standard rate which reaches not only beyond the narrow confines of industry itself but out into the spending power of the public and the incentives they get for earning money when they are able to handle it, use it and save it according to their own individual capacities and ideas of thrift and so on.
In the White Paper, the Government expressed their intention of relying mainly upon private enterprise for economic expansion. It has been pointed out on all sides by economists that lower taxation is essential, if private enterprise is to prosper. I know the answer which has been given in the past by all Ministers when they were asked to reduce the tax. They all say that it cannot be done this year. The only reason they did it this year was that they were pushed by Great Britain.
The Taoiseach, when Minister for Industry and Commerce, stated, as does the White Paper, that the Government are willing to take any reasonable risks to supply capital and to take monetary, social, and industrial risks in order to build up a strong economy here. I think that many risks have been taken in many fields but very few risks have been taken in remitting 6d. off income tax and the surtax relief. The accommodation which has been made costs only £1,200,000. This is being provided for by extending the figure for errors of estimation from £1,000,000 to £2,500,000. Here we see that the risk taken is one of the order of £1,200,000. Every time we met here during the past few months, we spoke in millions about other things in respect of which it is problematical whether they will be remunerative, not to think of saying they are the things upon which we mainly rely.
I would suggest there is very little risk in making a real gesture on this whole question of the rate of taxation. Might I quote for the House what the Vice-President of the Austrian Federal Chamber of Commerce, Paul Forster, had to say about what happened in Austria when he was speaking recently in New York? Mr. Forster, the document says, pointed out:
......that the income and wages taxes had been reduced in 1958 which left 800 million Schilling per year in the pockets of the taxpayers. These tax reductions — Austria lowered her income and wages taxes three times during the last few years — were always followed by an increase in tax revenue.
Why cannot we do that here? It is a business proposition and it has worked in Austria and why can it not work here?
I could go on quoting but I think it would be rather boring. I think there is nothing more boring than to listen to a man giving continuous quotations. I could, as you know, quote the case of Western Germany where the same thing happened after the last war. They used their taxation system to give an incentive to people at all levels of the economy. In this country we hear it said that private enterprise has failed. How could it succeed when it is throttled? It is weighted down at all angles. Even when businesses do prosper behind the protective barrier, they are throttled by taxation in the end and never able to build up an economic background of capital on which to live and expand.
I shall quote again the case of Sunbeam Wolsey. The Chairman of that company pointed out that in the last ten years they have paid out £1,000,000 in taxation. They have shown that they can make money and use capital, but it is taken from them and given to all sorts of problematical people around the country for businesses which very often we find winding-up after three months and causing disappointment not only to the economy but to the people who are led to believe that, through them, the economy would thrive.
The reason I am stressing this is that I feel it is the biggest thing in our whole life and that we have never tackled it from the time we got self-Government, never put our finger on the basic thing on which the whole economy can be built. Taxation, direct taxation is something which has never been tackled here and that is the reason why our economy is on the downgrade, in spite of the millions we have invested in the home economy. The Minister has undoubtedly taken what was described in one paper as a limited Budget risk on this occasion in order to reduce direct taxation and, as the Central Bank said, it is being taken in the confidence that the national outlook will be improved and the revenue ultimately strengthened.
There are times when you must make a really bold gesture to get a really bold return. You have to make a strong gesture to get strong results, as the Chamber of Commerce says. Fiddling concessions, such as taking sixpence off here and putting on three-pence there—when it should really be 2/6d. or something really dramatic to have an impact on our economy — are not enough.
We need outside people and outside money and we need not be ashamed of that. There is nothing unnational about advocating that we want the know-how and that we cannot generate it ourselves. I have spoken about our home manufacturers and our home people but we want the help of people outside and we want their money, and the only way to get the people here is by having an economy in which taxation is low, and dramatically lower than in England. It is no good saying that taxation here is nine-pence better than it is in England, or that it is no worse than England's. All the big industries in England are whining about taxation but at least they have the background, they have the meed of industrial wealth and industrial knowledge and know-how. We have neither the wealth, the tradition nor the know-how. In order to offset our late start in the field and our lack of raw materials, the only weapon we have is the weapon of taxation, and direct taxation at that.
At this stage, I should like to ask the Minister if it is possible to tell us when we are to get the report of the Income Tax Commission. I do not have any faith in that Commission. I think the Minister has enough date, and his Department has enough date, on which to make changes in the income tax code and I doubt from what I hear—and I have not got any inside knowledge, except for a few leakages—if anything very big will come from that Commission because their terms of reference, first of all, were very limited. I think we should tackle the question of direct taxation and make the taxation code such that it would encourage people to work hard and allow them a large degree of the money they earn. The people in business should be encouraged to keep a large degree of their profits ploughed back into their industries. As that is another aspect of the distributed profits everybody should be prepared to face that fact until we build up our industrial economy, and later on we shall be able to distribute largesse to everybody.
