Seanad Éireann debate -
Wednesday, 16 Dec 1959

Vol. 51 No. 15

Finance (No. 2) Bill, 1959 ( Certified Money Bill )— Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister for Finance (Dr. Ryan)

This Bill provides for the implementation of the scheme for P.A.Y.E. which was described in the White Paper circulated to Senators last month. The scheme is based on the recommendations in the First Report of the Commission on Income Taxation. It has the support both of employers' and employees' organisations. Its purpose is to spread the incidence of income tax more evenly over the year and make easier the discharge of liability.

The Bill does not deal with the scheme in the detail appearing in the White Paper because much of the detail will be covered by regulations.

The Bill is divided into three parts, the third of which, comprising Sections 15 to 18, is of interest to all taxpayers, whether or not they will be affected by the introduction of P.A.Y.E. This part contains proposals for certain general alterations and adjustments in personal reliefs and allowances. These changes are designed to facilitate the administration of P.A.Y.E., but they will apply to all individual taxpayers. This part of the Bill comes into operation on the 6th April, 1960.

Part II, consisting of Sections 3 to 14 contains the provisions directly related to the proposed scheme of P.A.Y.E. and its operation. Part I deals with the Short Title and construction of the Bill and the coming into operation of Part III.

Under Sections 3 and 4 of the Bill the scheme of P.A.Y.E. will in general apply to employed persons who are liable to income tax including directors and pensioners.

It is not, however, applied to three classes. The first of these classes is State employees and employees of four other bodies who already have schemes for deduction of tax from their emoluments and have their own Departmental assessors.

It is obviously not necessary that the new scheme should apply to this class as the existing schemes have operated to the satisfaction of all concerned. However, as stated in the Dáil, I am prepared, if the great majority of persons in any of the excepted bodies wishes to enter the new scheme, to give the matter most careful consideration. If it appears in all the circumstances that such persons should be included, I will introduce legislation in the next Finance Bill to bring them in as from the 6th April, 1961. Furthermore, if any such persons are admitted to P.A.Y.E., a tax remission will be made available to them in the last year of employment, analogous to that provided in Section 14 for persons brought under P.A.Y.E. by the present Bill.

The reason why a half year's tax is remitted for persons now being brought within P.A.Y.E. is that if the scheme were to start in April, 1960, instead of in October, 1960, they would be paying the equivalent of twelve months' tax in the first six months of 1960-61. The tax remission merely secures that, in that period, they will pay only six months' tax.

If persons assessed departmentally were to come under P.A.Y.E. and were to be granted a remission of a half year's tax for 1960-61, it would mean that they would pay no tax at all from the 6th April, 1960, to the 5th October, 1960. In other words, they would secure a six months' tax holiday. I should like to emphasise at this stage, to remove any misconception, that other workers are not being allowed a six months' holiday from tax. They will pay twelve months' tax in 1960-61 and in each succeeding year. Manifestly, persons assessed departmentally cannot be accorded better conditions than other workers.

There is, therefore, no substance in the suggestion that persons assessed departmentally are being offered less favourable treatment than persons brought into P.A.Y.E. by this Bill. On the contrary, if persons assessed departmentally were to be brought in as from 6th October, 1960, and given a half-year's tax remission for 1960-61, they would be put in a much more favourable position than persons brought in by this Bill as it stands. They would get a six months' tax holiday in 1960-61. That is to say, they would only pay six months' Income Tax in 1960-61. On the other hand persons brought in by the Bill —even with the tax remission provided by Section 14—will still have to pay in 1960-61 the equivalent of twelve months' tax. On the 1st July, 1960, they will be billed for the second instalment of tax for the year 1959/60 under the existing basis. Then, as from the 6th October, 1960, tax will be deducted under P.A.Y.E. for the second half of the year 1960-61. They will thus, in that year, bear twelve months' tax in all.

Any benefit from the remission being granted by the Bill to persons coming under P.A.Y.E. will not be felt immediately but will be discernible when the person has ceased to hold his employment. If any body of persons outside the scope of the Bill as it stands wish to avail themselves of my offer and to come in, they will get terms which will put them in the same position as other employees who are now included in the Bill, by giving them appropriate relief in the last year of employment.

The second class excepted from P.A.Y.E. by Section 4 of the Bill comprises cases to which it would not be practicable to extend the scheme. The third exception is where a person is in receipt of earnings chargeable under Schedule D and at the same time has emoluments falling under Schedule E and where, for his convenience, the whole of his earned income is dealt with in a single assessment under Schedule D. This is the usual method of dealing with a professional man who engages in private practice and also holds an appointment related to his profession.

Section 5 embodies the kernel of the new scheme. It provides that, as from the year 1960-61 onwards, Income Tax on emoluments within the scope of P.A.Y.E. is to be computed by reference to the actual earnings of the year of assessment—and not by reference chiefly to earnings of the year preceding the year of assessment, as hitherto. It also provides for the making of the appropriate tax deductions and repayments by employers.

Section 6 empowers the Revenue Commissioners to make the necessary regulations as to the assessment, charge, collection and recovery of Income Tax under P.A.Y.E. The regulations will provide for collection of tax on a cumulative basis, that is the tax will vary week by week—or month by month if the employee is paid monthly —with any fluctuations in earnings. When earnings increase, the deductions for tax increase accordingly. When earnings fall, the tax likewise falls; and the employee, instead of paying tax, becomes entitled to a repayment if earnings fall below a certain amount.

Section 7 contains penalties for neglect in complying with the regulations. It imposes a penalty of £20, together with a continuing penalty of the same amount for every day on which the non-compliance is continued.

Section 8 authorises the charging of interest where an employer does not pay over the tax to the Revenue in due time.

The employer with a small number of employees earning a fixed remuneration and in constant employment is catered for in Section 9. Under a simplified procedure he will be enabled to pay over to the Revenue, by means of stamps to be affixed by him to a stamp book, the tax he has deducted.

The need for Section 10 arises out of the contemplated change over, for 1960-61 and succeeding years, from the previous year's basis of assessment to the basis of the current year. The change will mean that earnings for the year 1959-60 will not constitute a basis of assessment. In order to prevent an improper advantage being taken of this fact, Section 10 secures that, where the emoluments for 1959-60 exceed those for 1958-59, the excess is to be added to the 1959-60 assessment, except where the excess is due to such factors as promotion in the ordinary course of events, increments and overtime.

Under Section 11 the provisions of the Income Tax Acts as to the recovery of Schedule E tax are to apply, with appropriate modifications, to the recovery of any amount of tax which an employer will be liable under P.A.Y.E. to pay to the Revenue Commissioners.

Section 12 makes deductions under P.A.Y.E. rank as preferential payments in cases of bankruptcy or insolvency.

Section 13 incorporates various supplemental provisions, such as abolition of the requirement for raising formal assessments under Schedule E save in a small proportion of cases.

As I have already mentioned, Section 14 is intended to ensure that a person will not, by reason of his being brought within the provisions of the P.A.Y.E. scheme, pay more than approximately a year's tax in the year 1960/61 in respect of remuneration. This is done by remitting half the tax on earnings in 1960/61 in appropriate cases. If this were not done, in addition to paying half the tax for 1959/60 in July, 1960, a taxpayer would pay the whole of the 1960/61 tax as well— or tax for a year and a half in all.

Section 15 marks the beginning of Part III which, as I have said, is of interest to all taxpayers. It effects general amendments in the personal allowances so as to facilitate the operation of P.A.Y.E. This section raises the existing unmarried personal allowance from £150 to £234, the married personal allowance from £310 to £394 and the allowance for widows or widowers from £175 to £259. These increases are in compensation for the termination of the reduced rates of tax, which at present are 2s. 9d. in the £ on the first £100 of taxable income and 5s. 6d. in the £ on the next £100. The termination of these reduced rates is provided for in Section 18.

Sections 16 and 17 make certain alterations in the interests of simplification for P.A.Y.E. purposes. Under Section 16 the rate of earned income relief is altered from one-fourth on earnings up to £800, plus one-fifth on earnings from £800 to £1,800, to a uniform rate of one-fourth on earnings up to £1,800. Under Section 17 the life insurance relief is amended by making it allowable as a deduction from income, rather than from tax.

The broad effect of the amendments in this part of the Bill will be that some 57,000 persons who now have to pay £11 11s. a year or less will be relieved entirely from income tax. All other individual taxpayers, about 150,000 in number, will gain some relief. The gross cost of the reliefs is over £1 million a year but this will be largely offset by the increased inflow of revenue resulting from P.A.Y.E.

In conclusion, I would like to say how much I appreciate the goodwill which employers and employees have shown towards the scheme. Its successful operation will, of course, depend on a continuance of the co-operation which has already been forthcoming from them.

Dr. O'Donovan

This Bill implements the recommendation by the Commission on Taxation and in view of the sad fate that has befallen many recommendations by commissions, the Minister is to be congratulated on implementing this recommendation. Apart from the recommendation of the Commission being a basis for these provisions, there is also the well-known fact that the existing system has over the years become increasingly irksome to many salary and wage-earners. This is surely the case if we take the extreme example of the agricultural labourer who has to pay tax when the farmer who employs him, and perhaps three or four other labourers, do not have to pay it at all.

The people who welcome this change are wise to do so for two reasons: first of all, it will make it easier to discharge the liability because it will be spread evenly over the year. A Deputy in the Dáil said he could not see much difference between having the whip applied to you all the time and having it applied twice a year. However, on the whole, I think salaried people would prefer to have the liability deducted evenly and, having been under both systems, I can vouch for the fact that it is much easier, the reason being that people will not spend what they do not get. It is all right to suggest that you should devote your income to different purposes pro rata but that just does not happen to the ordinary person.

There may be a slight difference in the operation of the system but in essence it is the system which has been applied in the Civil Service and large corporations for a considerable time; everybody would agree that the collection of that tax does not give rise to nearly as much trouble as the collection of tax from people who have received the money a year or a year and a half before, particularly where their incomes are reduced. As was pointed out in the Dáil by at least a couple of speakers the welcome now being extended to this system may not be quite so apparent by the middle of the year 1961. There is no doubt that there will be initial difficulties in it but time should iron them out and perhaps in four or five years' time the system will be running smoothly.

Most people would agree that it is a great pity that the Minister for Finance of the day and the Revenue Commissioners of the day did not adopt the system, or something like it, which was first adopted in Britain about 17 or 18 years ago. If there should be a further increase in the cost of living, as certain gentlemen on the London Stock Exchange seem to think so forcibly, you might find complaints about this taxation by the spring of 1961 or, more likely, by the summer of 1961. If the cost of living goes up substantially and the amount which is being received from week to week in wages is reduced, difficulties may arise. Despite that, most people would agree that, from the human point of view, it will be a better system.

Certain questions arise in this connection. I do not understand although the matter was debated in the Dáil, why the cost should go up. I take it that matter has been carefully considered and I notice the Minister in his reply in the Dáil did say that very little of the time of the inspectors of taxes was given to Schedule E tax. That answer has the doubtful merit of appearing slick though I do not suggest it was intended to be slick. The inspectors of taxes are a very small part of the staff engaged in the collection of income tax and anybody would appreciate that a very small part indeed of the time of the higher grade and senior inspectors is given to the collection of Schedule E tax which is the simplest part of the system, complex though that part is. Therefore, I cannot understand why, if you take 57,000 people out of assessment and if some part of the work is to be done by employers, the cost should go up. I can appreciate the fact, set out in the explanatory memorandum, that in the early stages the introduction of the system will cost a good deal of money. We have all seen that in connection with large-scale administrative operations.

There is one other point I should like to make, a point which is running through certain sections of the Bill. Section 5 is, in fact, an increase in taxation in the normal way, that is to say, where people's incomes in an age of inflation increase pro rata or in some relationship with the inflation. Section 5 says that, in the year 1960-61 or any subsequent year, the emoluments shall be computed on the amount of those emoluments for the year. Therefore, there is there an increase in taxation. Let us not forget that this increase will apply to a class in the community who have been the hardest pressed, both by inflation of the currency and taxation of income. I appreciate why this section was put in. It was put in for administrative reasons. At the same time, I do not see why the effective rate of taxation should be increased to enable the system to be administered.

Section 10, as I read it, impacts on a person like the Comptroller and Auditor General who gets an increase now, whatever the amount may be. Unless the Revenue Commissioners interpret that increase under a specific Act of the Oireachtas as being a similar excess of an ordinary character in relation to the year 1959-60, he will have to pay tax this year on the extra money he will receive under the Act we have just passed. The same applies to the legislation for the judges. Subsection (2) of Section 10—where I notice the administrative class is well covered— states that subsection (1) shall not apply to any excess arising from: a promotion in the ordinary course of events, that is to say, an assistant county manager who becomes a county manager—the ordinary application of an incremental scale of emoluments; overtime paid for at ordinary rates— which applies to the wage earner—or to any other similar excess of an ordinary character. Are we to take it that the meaning of that section, as it is in the Bill, is that people who have to wait a great deal longer for an increase related to the cost of living than other people will be penalised again in relation to the manner in which tax will be assessed on them in respect of the current year's income? If that is so, if my interpretation is correct, then it is a fantastic and inequitable change in the present system of taxation. Where a man gets promotion, a new job with, presumably, a much higher salary, it is not to apply at all; but where a man now gets a belated increase in his salary to cover a number of years' increase in the cost of living, my interpretation is that it is to apply.

Of course, the Minister will tell us the kind of case this is intended to cover, the case where some large combination would pay a large sum to one of their employees just before the new system came into existence. I am not concerned with that kind of case. We all know it would be possible, unless some section like Section 10 were put in, that that kind of thing could be done. However, I do not think we can take a better example than the case of the Comptroller and Auditor General, which we have just had. It is not a promotion in this case; it is not the ordinary application of an incremental scale of emoluments; and it is not overtime paid for at ordinary rates. It was not intended, I take it, to apply to that kind of a case, and it is desirable that the Minister should make that quite clear to us. I believe that in the new circumstances, with a large number of people taken out of the system, this section could apply to a substantial number in the community. It does not apply to the Comptroller and Auditor General and the judges and justices alone, though perhaps they are a suitable class to take, in view of the fact that their salaries are borne on the Central Fund.

Section 14, implementing as it does paragraphs 26 to 28 of the White Paper on Income Tax, represents constructive thought in relation to an extremely difficult matter. It seems to me to be about as reasoned and as effective an approach in a theoretical way to this solution of an extremely difficult practical problem in taxation as one could expect. If we might look historically at the famous case when people struck to get back their 11 days, I take it this is one half year which nobody will strike to get back?

The drafting approach to the Bill is to be commended also as it lays down the principles and leaves the administrative details to the regulations. I take it that in any new system the Minister and the Revenue Commissioners will be as anxious to get as much goodwill as possible for the Bill? In the Dáil a Deputy referred to the mechanical ingenuity which the Bill showed in simplifying the British system. It is only fair to the people who were engaged on the preparation of the Bill to say there is a good deal more than mechanical ingenuity shown. The thought that went into it may come out at the other end as a mechanical ingenuity, but there is a good deal more in it than that.

In addition to the main point I make about Section 10, there is also a point in relation to Section 15 and personal allowances. A certain trend was evident in relation to income tax, where the married allowance was increased gradually through the years, whereas the allowance for unmarried persons was not increased. It seems to me that that trend is being reversed in Section 15. Again, I think I can understand the reason for it. When you add it all up, in fact, unmarried persons are getting a bigger proportionate increase in their allowances than are married people. Again, I think that was done for administrative convenience also. I take it it was done primarily to get the agricultural labourers out of the income tax paying class and, of course, to that extent, it is to be commended.

The principle has been accepted that there is some ratio between the allowance for a married person and an unmarried person. Before the war, the allowance for an unmarried person, if you took the basic figure, was £125. In the case of a married person it was £225. The differential widened during the years, a small effort being made by the last Government of £10 but, at least, it showed a commendable approach in the case to ease the burden where it weighed hardest. I should like, perhaps, if the Minister would say something about that section in his reply. I should be grateful if he would advert to the considerations which led to what appears to be a reversal of the trend adopted since the war but if it be the case that, in fact, the differential is narrowed as compared with what it was before the war, I do not know that one could defend it in present circumstances.

Professor O'Brien

I do not think we should exaggerate the importance of this Bill, which really effects only minor administrative changes in the collection of income tax under Schedule E. The changes are, no doubt, good as far as they go. They bring the system here in line with that in Great Britain and Northern Ireland. I think it is well to stress that this Bill does nothing whatsoever to remedy the fundamental injustices of income tax in this country, that the problems which will eventually engage the attention of the Commission on Income Taxation still remain to be solved and that all that has been done at present has been to make certain suggestions with regard to Schedule E and Schedule A and other minor points. In other words, I think what is happening is that an old coat is being patched when what the country wants is a new coat. If enough is spent on patching an old garment, it becomes more difficult to persuade people to purchase a new one.

I am perfectly aware of the difficulties of the Income Tax Commission. I am not for a moment pretending that the difficulties are not very great. But I do want to suggest that this Bill really makes only a very minor administrative change which does nothing whatsoever to meet the case put forward in the Seanad and elsewhere by people who consider that the system of direct taxation in this country is quite unsuitable to the circumstances of the country and is a source of a great deal of hardship and a great deal of injustice.

The increase in the personal allowances for unmarried and married people, widows and widowers is, of course, to be welcomed, and also the simplification of the earned income relief. Anything which simplifies the income tax code is welcome. But, of course, the amount collected will very largely be compensated by the abolition of the reduced rates of tax. It is estimated by the Minister that, when full allowance is made for that, a number of people who now pay tax will pay less and a good many will pay none at all. But, as we are also told that the general yield will be greater after the operation of this Bill than before, the only conclusion we can draw is that another considerable number of people will pay more as a result of this change than if the change had not taken place.

There is one point that has not been made in the debate in the Dáil; that is, that the personal allowances will benefit taxpayers under every Schedule, not only Schedule E, whereas the main provision of this Bill which, presumably, from what the Minister has said, will bring additional revenue, will affect only Schedule E.

I make no secret of the fact that I am speaking on behalf of the Schedule E taxpayers, mainly because most of the people who send me to the Seanad are graduates of the University with salaries—people of that kind—and I consider it my duty to represent them. I am quite certain that the people who pay under Schedule E are the people who are most hardly hit in the income tax code. Everybody knows that a small section of the population pays a quite disproportionate amount of the tax and that large numbers of people in the country—farmers, business people and professional people— escape a good deal of the tax which they should pay if the method of collection were more suitable for the circumstances of this country. So that, as far as I can make out, the main effect of this Bill will be that the Schedule E taxpayers will be more efficiently fleeced than they have been up to this, that more will be extracted from their pockets. That, we are told, is one of the objects of the Bill.

As against that, what benefit does the Schedule E taxpayer derive? The great argument put forward in the Dáil and here is the hardship found by the half-yearly payment, that people find it so difficult to accumulate the sum necessary for the half-yearly payment. Personally, I think that argument is exaggerated. People have to accumulate sums for other nonrecurring payments. They have to pay their telephone bills. They have to pay their E.S.B. accounts, their rent, instalments on hire purchase. All sorts of payments have to be met at irregular intervals and yet people manage to accumulate them. I frankly think that this argument about the extreme hardship of having to accumulate sums to pay income tax twice a year has been rather exaggerated. However, I am prepared to admit that the new method may be a convenience to certain people, in fact, to a great many people, but I think it only fair to state that the price they pay for that convenience is that as a class they pay more and not less.

The reason I think they will pay more is that evasion will become more difficult. When tax is deducted each week, evasion becomes impossible. Another reason is that the tax is collected immediately after a person's income begins and that, immediately after it rises, it is collected at the higher rate.

Furthermore—a point on which great emphasis was laid in the Dáil—this Bill provides for a very harsh and drastic collection of arrears. If the Bill is implemented harshly, according to the text as far as I can read it, all outstanding arrears extending over many years could be collected in the first half-year of the operation of this Bill when it comes into law, with the result that numerous Schedule E taxpayers would receive no income at all for six months while the arrears are being collected and, indeed, for a great deal longer. So that, therefore, the benefits which this Bill confers on the Schedule E taxpayer tend to be greatly exaggerated. I admit that there could be a slight convenience in having the tax deducted weekly or monthly but, at the same time, unless I am wrong, in the long run the taxpayers will pay more and, therefore, it is not a matter of great congratulation for the Schedule E taxpayers.

The Bill, of course, is unquestionably burdensome on employers. There is no getting away from that. Employers now become unpaid tax collectors. Very large employers who are able to afford computers, like some of the large British firms, will not find it so difficult; the very small employer will be able to avail himself of the method in the Bill of payment by stamps; but, as was stated in the Dáil, there are a number of medium-sized employers in this country who will find the operation of this Bill very burdensome. In spite of the simple mechanism provided, it will involve them in disputes with their staff from time to time, which must be very unpleasant. It will undoubtedly involve a great deal of additional clerical work. The small employer is entitled to be remunerated for that extra work. To the extent to which he is doing the work of the tax collector, he should be paid. Therefore, I suggest that employers should be allowed to deduct a small percentage of the amount they collect to remunerate them for the onerous services they have to undertake.

On the other side, when the employers fall into arrears under this Bill, they will have to pay interest on the amount withheld at the rate of 12 per cent. per annum. Were it not for the fact that the Minister stated in the Dáil that this was meant to be a penalty, I should have found it hard to believe, because under the ordinary laws relating to usury in this country, anything like 12 per cent. is looked upon as a usurious rate of interest. However, we have been assured that this is meant as a penalty, a penal rate. I suggest that if an employer has to pay a very heavy interest on what he has not paid to the Revenue Commissioners, he is entitled to some relief to remunerate him for the trouble and expense which is involved in the collection of what he does pay.

Some calculations should be made with regard to the saving to the Revenue Commissioners and that, in some way or other, should be transmitted to the employers who are now taking their place. It is being assumed that there will be a great saving as a result of this new system. I hope that will be so in the long run, but so far as I can understand it in the short run, at the moment, the staffs of the Revenue Commissioners have been greatly augmented in recent months. They are working overtime. The result of this Bill is that the staffs of the Revenue Commissioners are working harder than they ever worked before. However, we hope that, as arrears are collected, and as the machinery comes into operation, there will be savings. I suggest, if there are such savings, that the employers who will be doing some of the work previously done by the Revenue Commissioners should receive some compensation.

Therefore, it seems to me that this Bill may confer certain benefits on the Revenue authorities. It makes evasion more difficult; it provides for an extremely efficient method of collection of arrears; but it will not confer any benefits on employers. On the contrary, it will impose burdens on them. As regards Schedule E taxpayers, it is perfectly true that they will get the same additional allowances as everybody else and they will not have to accumulate sums to make half-yearly payments; but in the end, unless I am quite incorrect in my calculations, they will pay more and not less. It seems to me that really what will happen is that they will have their feathers plucked one by one but more feathers will be plucked. If a plebiscite were to be taken in a farmyard amongst birds, I do not know whether they would prefer to have 52 feathers plucked out one a week, or prefer to have perhaps fewer feathers plucked out, twice a year.

That seems to be what will happen. The wretched taxpayer is to have his feathers plucked every week and in the long run, he will suffer a loss because he will pay more instead of less. One of the purposes of this Bill is to render the administration more efficient, to stop evasion, to collect arrears and to close all the gaps in Schedule E. There are not many gaps in Schedule E—I am prepared to admit that—but the few remaining gaps are now being closed. As I said, this leaves the fundamental inequity of the income tax code just exactly where it was before.

There is also the question of the civil servants and other excluded classes. It may be that what the Minister said meets my point but the matter is rather complicated. We are all agreed on that. Therefore, I should like to put on record that there is a case to be met, although, as far as I could follow the Minister, he may have met the point raised by civil servants and other excluded classes. The majority of civil servants, apparently, would like to be included in this scheme. They would have small deductions at more frequent intervals like other people and would like, I suppose, to have their feathers plucked more frequently. They would also like to come in under the scheme to get the apparent remission of one half year's tax which the people under the scheme will apparently get.

As I understood the Minister, he said that if the civil servants, by a vote, determined that they wish to come into the scheme, a similar remission period will be made on their retirement, or death, when their income ceases. That in itself contains two injustices. One is that the young civil servant may have to wait 40 years before he gets the same remission of taxation as the ordinary person under the scheme will get immediately. In that case, when he does get the remission, I think interest should be paid on it by the Minister.

Another point is that it is assumed that it is only six months' remission that P.A.Y.E. taxpayers will enjoy. But, as far as I can understand this extremely complicated measure, it is quite possible that some of them will receive more than six months' remission, so that, even if this scheme should come into operation for civil servants, they would still have a grievance. They would have to wait many years for whatever tax remission they would get and, when they did get it, they would not get what is the uniform and average amount of the other salaried workers but the minimum amount. There would still be a differential treatment of an adverse character.

Éamon Ó Ciosáin

My observations on this measure will be very brief because it is a Bill of a highly technical nature which does not lend itself to a long discussion. First of all, I must say that I welcome the Bill because I believe it provides a more efficient system of income tax collection than has been in operation heretofore. It will make for the more even distribution of income tax among the different sections of the community, that is, in regard to the tax for which they are liable. It will also bring about a position in which evasion of income tax will be more difficult. That is a very important consideration when according to a recent statement, there are arrears outstanding to the amount of £10 millions, some of which, I suppose, will be found to be irrecoverable in respect of income tax and corporation profits tax.

That indeed is a very large sum and if this Bill goes any distance towards obviating a situation of that kind, it will be very welcome. Some people, of course, look upon the evasion of income tax as a normal thing, something which can be justified, but when we consider the effect it can have on the other sections of the community, it is not so harmless as we are given to understand. What happens when there is a certain amount of evasion of income tax is that other people have to bear the burden and that is why I am in favour of a more efficient system, as I think this will be. As Senator O'Donovan said, this is the beginning of the working of the system and no doubt, as time goes on, unforeseen difficulties will arise but if they do, there should be a way of getting over them.

Senator O'Brien mentioned public servants and he seems to regret that public servants have not been brought within the scope of this measure. I do not know that they have any great complaint because I imagine that public servants are subject to a kind of P.A.Y.E. system already as their tax is deducted at the source, monthly in the case of civil servants and quarterly, I think, in the case of teachers, so that they have already in operation for themselves a kind of P.A.Y.E. The fact that they want to come directly under this scheme proves it is very acceptable to them. I think it is acceptable to all sections of the community because it will make for more efficient and equitable collection of income tax.

I imagine it will also bring about certain economies in the administration because I believe that when income tax is deducted at the source, fewer officials will be required for its collection. That, in itself, is some consideration. I know the Minister would like to effect economies. That is his policy and he has already given earnest of it.

Senator O'Brien finds fault with the existing income tax code. We are now changing the system and if, as he said, the present code is outmoded, then we are breaking new ground with this Bill. I have heard references to the unsuitability of the code here and elsewhere. Some people, when speaking on those lines, give the impression that they want income tax abolished altogether. That would be a good thing if it could be done and all of us would be in favour of it if those who advocated it could show us an alternative source of revenue which is required to keep our social services going. Those who advocate the abolition of income tax are, I think, indulging in wishful thinking; they would be on surer and more practical ground if they advocated a reduction in the standard rate of tax.

We are glad that the Minister for the first time in years has been able to give a reduction in the standard rate of income tax for the present financial year and we hope he will be able to continue on that very desirable course. This measure, I think, will make the task of collecting income tax simpler. If there is one thing more than another needed by the ordinary people, it is a simplification of the regulations governing the assessment of income tax. It is very difficult for the ordinary man to understand the regulations and to know the allowances and reliefs available. The Revenue Commissioners issue an explanatory memorandum with every application they send out but it is still difficult for the ordinary person to grasp the significance of the various reliefs given. In many cases, people must go to an expert or some semi-expert for guidance and advice and that represents an additional tax on them. I am glad that the allowances, the reliefs to be given in the future, will be more generous under the P.A.Y.E. system.

Again, I wish to express my appreciation of what the Minister has done in bringing in this new system. I believe the fears expressed by Senator O'Brien have no foundation. He referred to the relationship between employers and employees in regard to this Bill, but I, for one, cannot see any friction arising between the two groups as a result of the operation of this system. I have seen reports in the Press in connection with the P.A.Y.E. scheme but I have not seen that any employer or group of employers expressed any apprehension about the working of the scheme as between themselves and their employees.

Mr. Burke

I have had some experience in the past of the problem of income tax as related to employers. The system adopted by the Revenue Commissioners for collecting arrears brought the scheme into ill-repute because, in many cases, the amounts which employers were required to collect from their employees was over half their weekly earnings. As far as I know, what happened in practice was that in many cases an employer did not collect the amount due, and he was "stuck" if an employee left his employment before the full amount of arrears was collected. That is the only good reason I can see for the introduction of this system but, allowing employers to collect arrears over a longer period would have removed a great deal of the necessity for the introduction of this cumbersome P.A.Y.E. system.

I suppose we must be realists and accept this measure but I believe that Senator O'Brien has made a case for the type of employer that predominates in this country, the small employer. Anyone who read the Report on Companies a year or so ago will have seen that the vast majority of people who work here in industry, and who will be most affected by P.A.Y.E., are employed in small industries. Now it will be necessary for a small industrialist to employ a very confidential clerk to administer the P.A.Y.E. system. It may mean that the person now in charge of a small mechanical system of bookkeeping may not be suitable for this work and a person of high status in industry, paid a higher remuneration, will be required to do it. It will also mean that, where mechanical bookeeping is employed, larger, more expensive and more comprehensive type of equipment will have to be put into operation. If you like, these are administrative details, but I think Senator O'Brien was right to point out that such burdens are likely to fall on this type of employer.

Many small employers do not have time to make their case before various commissions, such as that inquiring into income tax. They are engaged in the battle for existence in a competitive system, may be on the export market or home market, and their responsibility is to see that their businesses are efficiently managed. Therefore, it is well that we have professors and other people to study these matters and point out the burdens which will be placed upon employers.

If not under this measure, then under some other the Minister for Finance—possibly when he introduces his Finance Act this year—should make some provision to recoup employers for the extra expenses involved in the P.A.Y.E. system which, as is suggested, will be of great benefit in the collection of revenue. The people who collect this revenue will have a heavy burden placed upon them, and at least they ought to be allowed the cost of collecting it.

I have often spoken against the P.A.Y.E. system because in essence I think it is inflationary. During the recent petrol strike a letter appeared in the Press from the trade unions detailing the wages of employees of the petrol companies. These wages were shown less their contributions to a pension fund and less their contributions to social welfare. I have always felt and, indeed, a previous Minister for Finance, Deputy McGilligan, stated in this House that he also had the feeling employees would look on the net amount which they received in their weekly pay packet as the amount that was being paid to them. They would say: "That is what I get for my week's work," and would not say: "That is what I get plus the money that was paid into my pension fund, plus the money that was paid into my social welfare fund to see that my wife, children and myself are looked after in case of illness, plus the amount paid into Revenue for my tax responsibility." For that reason I feel it has an inflationary effect and it may encourage further demands for new rounds of wage increases. I believe that aspect of it should be fully and widely publicised so that its implications may be known.

In conclusion, I again stress the point I made that, this being a country of small industries, the Minister for Finance should include each year in the Finance Act a section which will give the necessary allowances to cover the cost of collecting income tax under the P.A.Y.E. system. In that way I believe he will encourage employers because at present they feel that all the burdens are being placed on them. Many burdens of this nature are a disincentive to industry, a disincentive to enterprise, and if the Minister for Finance in asking employers to collect this money for the good of the country also considers the burden they have to carry, and allows them the cost involved he will receive their co-operation. By doing that, I believe he will get better results in production and enterprise.

Mr. Lenihan

This Bill embodies recommendations set out in the first Report of the Income Tax Commission and, as such, is to be welcomed by the Seanad in so far as those recommendations go. In order to bring a note of reality into this argument about whether we should retain the income tax code or not, it might be no harm to mention a recommendation in the introduction to that first Report in which it is stated:

We have not so far considered fully the possibility of substituting for income tax an alternative form of taxation. All the representations promised us have not yet been received. However, we think it right to say that, from the information so far before us, we do not see any possibility of recommending a form or forms of taxation that could substitute completely for taxation on incomes.

That attitude was criticised in the Dáil and has been criticised here by Senator O'Brien. I think it is a very unrealistic sort of criticism to which Senator O'Brien gave vent. What are the facts and the figures in regard to the matter?

Income tax and Corporation profits tax yield a revenue of £28,000,000 a year. That is practically a quarter of the total revenue got in by the State. In any suggestion as to abolishing income tax, surely there should be the counter, or practical, suggestion of how that £28,000,000 is to be got? People talk about sales tax, purchase tax and expenditure tax, but they are all sides of the one coin. They are a form of indirect taxation. Already in our customs and excise duties we have a very considerable range of goods brought into that form of indirect taxation yielding revenue to the State. When one comes down to analysing the goods which can be made subject to such a purchase tax, I fail to see to what extent the State could profitably enter that field of taxation, remembering the wide range of goods already subject to indirect taxation in the form of customs and excise duties.

The key to the whole matter can be found by inference from the last sentence of the Commission's report on this matter; they say they can see no possibility of recommending a form of taxation that could substitute completely for taxation on incomes. There is, perhaps, a limited field in which the State might go into the realm of purchase tax, but I do not see that field producing anything like the £28,000,000 revenue which is produced at the moment from income tax and corporation profits tax.

If the State could enter into the field of purchase tax, that would yield a few millions per year; a modest sum of that nature might mean, in turn, the raising of the level of personal allowance and a reduction in the standard rate, but that is the limit of the modest objective at which we could hope to aim in that direction. There is no point in wild talk about abolishing income tax, without, at the same time, making some suggestions of an adequate and practical character for raising alternative revenue to replace the revenue obtained through the medium of income tax and corporation profits tax. There is some scope for reducing the incidence of income tax to a limited extent, but only to a limited extent, by consideration of a purchase tax. Therein lies the reality of the matter.

The principal argument against income tax is that, because of its collection twice yearly on earnings in the previous year, it has proved an irritating, or a disincentive, factor in many cases. Indeed, in reverse, that is the great argument in favour of indirect taxation of every kind. Indirect taxation is paid every time one buys an article and one does not, therefore, feel the impact of it to the same extent. The introduction of P.A.Y.E. is an attempt to meet that weakness in the income tax code—this six-monthly demand which only annoys people, acts as a bar to enterprise and is a constant burden in its bulk sum form.

P.A.Y.E. introduces the principle of painless extraction, the same type of painless extraction as exists in regard to indirect taxation. It is an attempt to meet the weakness in the collection of income tax. In future, income tax will be paid weekly or monthly, as the case may be. To that extent, it will cease to be an irritant and will cease to be a disincentive factor. It will have a certain stabilising influence because it will be paid more or less painlessly. It will have the same anaesthetic effect as indirect taxation. Psychology plays an important part in all this and, from the psychological point of view, a good deal of the grumbling and the complaints so prevalent up to this about income tax will cease to have effect. The antipathy to paying income tax will disappear. By bringing its collection into line with the painless extraction inherent in indirect taxation, adverse criticism, incipient grumbling and complaints will disappear.

The pattern of life to-day is that pretty nearly everything is paid in instalments. Life assurance is paid on a weekly basis. Household commodities, motor cars and so forth, are bought on hire purchase. Whether we like it or not, that is the mood of the age; people dislike saving in order to pay money down. They prefer to pay in instalments. They prefer hire purchase. P.A.Y.E. is an attempt to bring the pattern of taxation into line with the mood of the people.

In addition, this new system will bring considerable benefits to both the taxpayer and the Exchequer. It is pointed out in paragraph 59 of the explanatory memorandum that:—

The loss of revenue from the proposed alterations in the Income tax code is estimated at £1,000,000 in a full year but a system of P.A.Y.E. where Income Tax is deducted by reference to current earnings may be expected to yield an additional £980,000 in a full year.

There will be a shift away from people who may not be in a position to pay income tax towards people who are in a somewhat better position to meet their commitments in that regard. The State will, therefore, get more. In effect, that is what it means. The less well-off sections will get relief to the extent of £1,100,000, whilst those who have hitherto avoided meeting their obligations will be caught in the net to the extent of an additional £980,000. From that point of view, the scheme rationalises the present system inasmuch as the Exchequer will get more from those who are better equipped to pay, whilst those who are less well off will pay less tax or, in some cases, none at all.

Like some of the other speakers, I was concerned at first about the burden this system would place on employers. That burden was a very real consideration having regard to the manner in which the scheme is operated in Britain and the complexity of the code as a whole. The framers of this Bill, however, have done an excellent job in that regard. They have taken the British system and adapted it to suit our circumstances. That is an example we could follow with benefit in many directions. We should study carefully the systems in operation elsewhere and adapt them to our own needs. A small country like ours could do that with great profit, making full use of the research done elsewhere.

The burden which I feared might be too heavy on employers has been reduced considerably by the decision to have a uniform rate of taxation up to £1,800 a year. That should make deduction very simple both from the point of view of the employer and the employee. I suggest that the Revenue Commissioners would do well to issue an explanatory leaflet for the benefit and guidance of employers. Everyone in receipt of a taxable income up to £1,800 a year must pay 5/3d in the £; in the leaflet, details of the deductions to be made, family allowances, insurance policies, and so forth, could be set out. I suggest the Revenue Commissioners should consider that. Such a leaflet should be made available to employers and their office staff in order to assist them in the collection of income tax under the P.A.Y.E. system.

Apart from the effect on employees generally, it is a good thing all round that the code has been simplified. There was a feeling in the country for years that the income tax code was complex and beyond the ken of the ordinary person. This measure does a lot to remove that feeling. It does so, of course, by making a flat rate relief for earned income of one quarter up to £1,800 and by raising the personal allowance by £84 on salaries up to £1,800. Hitherto, there were six different ways of computing six different rates of taxation up to £1,800. Instead of that complex situation, there is now a single rate of computation up to £1,800. That is done by having a flat rate of one quarter for earned income relief and by abolishing certain zones of taxation for the first £100 and £200. The personal allowance compensates for abolishing the reliefs on the £100 and £200.

The increase in the personal allowance is welcome. I agree with Senator O'Donovan in his appeal that the differential should be increased in favour of married persons in respect of that personal allowance. That is a very proper attitude to take. In future, reliefs in regard to the personal allowance level should take cognisance, to a greater extent, of married people and of widows and widowers. This measure gives a flat increase of £84 on the personal allowance all round. To that extent, it is uniform. It is very welcome and it will be appreciated by many people and it is a policy which should be followed in future in any modification of the Bill.

The raising of the lower level will afford immediate relief to the lower paid sections of the community and will not involve Revenue in any great loss. It might be no harm to have an analysis of what extent any gains to the lower paid sections of the community have been offset or negatived by administrative costs of collection. For that reason, an increase in the personal allowance is the proper way to approach any reliefs to be given in the income tax code.

Broadly speaking, this is a measure which should be welcomed by the Seanad because it simplifies a code which was too complex in the past, and because it introduces this psychologically easier way of paying taxation than that operated in the past which was found to be burden some on some of the people who had to pay tax.

Mr. P. Crowley

I rise to welcome this Bill as some of the other speakers have done. All thinking people will undoubtedly welcome the general principles on which the Bill has been designed. I want, however, to refer briefly to two aspects of the Bill, one of which has been referred to by Senator O'Brien. He has spared me the job of going into it in detail, but I wish to elaborate a little further on what he has said.

Senator O'Brien pointed out that quite a substantial number of taxpayers are State employees of one kind or another and they are already paying what is, in effect, current taxation on current income. I want to point out also that in addition to that very large number, we have quite a substantial class of people who, so far as I can see, are, to all intents and purposes, also paying current tax on current income. I am aware that there are a number of what have been described as private enterprise concerns in which, by agreement, or arrangement, or established practice, tax is, in fact, deducted at source from the salaries of the employees concerned.

While this Bill is under examination in this House, we should get our minds quite clear as to what is involved in that point. As I see it, the ordinary taxpayer who pays his tax in two instalments when it is demanded, does so in respect of income earned over the preceding 12 months of employment. Consequently, by the time he has the second instalment paid, he is, in effect, three months, and in some cases, nine months, in arrears. In the case of the people whose tax is deducted at source, it seems to me that they are paying current tax on current income. That is how it appears to my unprejudiced mind.

If we are to understand that there is a concession in this Bill by which the first of these categories of taxpayers is to get a remission of some six months' tax, we shall be doing an obvious injustice to a large number of people if something is not done to give people in a similar category some measure of relief—people who have always paid their tax, so to speak, on the nail.

Perhaps I might quote an example to make it more clear. A firm operates a system under which on 1st January and 1st July each year, it pays an instalment of tax on behalf of each of its employees. In turn, the firm deducts at source, by weekly or monthly instalments, either the weekly equivalent or the monthly equivalent to which they are entitled, from the individual. Over a period of ten months in this case, deductions are made from 1st February to the end of November in each year. In fact, therefore, the employees of that firm this year will, in the normal way, be liable for the tax right to the end of next November. On the introduction of this Bill as I see it they will in addition become liable for taxation, for current tax on current income from 1st October next.

The net effect of that, no matter how one looks at it, seems to be that a substantial number of people will this year be paying, in effect, 15 months' tax in 12 months. To a certain extent, perhaps the Minister might claim that their case will be provided for in the assurance to which he refers by which they will be remitted a half year's tax on termination of employment or on death. I submit that does not meet the case. I think that an injustice will be done to these people, unless the Minister can assure us that by one measure or another these people will be treated in the same way as people who in the normal course will come under the new P.A.Y.E. system.

That also illustrates an aspect of the Bill on which I should like an assurance from the Minister. I hope to hear him on the point and I hope my suspicion is not correct, that, in effect, this Bill will secure additional taxation equivalent to about three months' tax from a very large number of taxpayers for the current year. I wish to hear the Minister on that point and I hope, as I say, that my suspicion is not well founded.

The second point I want to make is that it seems to me that apparently there has been a change, so far as I can judge, somewhere over the period of the past two, three or four years in the method of assessment of taxation. I should like to hear from the Minister whether I am right or wrong in this assumption. It appears that over the period of the past two, three or four years for the purpose of arriving at what is called earned income relief, the Revenue authorities allow only a calculation of the amount of that earned income relief on the net amount of income after deductions have already been made for medical insurance, mortgages, loans, annuities and so on.

If that is so—and it appears to be so from correspondence I have had on the subject—it seems to me that something has happened in the past two, three or four years to change the system. As I and a large number of other people understood it, a person would be entitled to earned income relief in respect of the gross income before these deductions were made. The effect is that the individual taxpayer concerned has, in fact, been assessed for some £14 more of income tax this year than he would have been assessed for some 5, 6 or 7 years ago. I should like, before the new system comes into operation, to have the Minister's assurance that that aspect of this matter will also be given some further consideration.

I welcome the principle of the Bill. I also think the people who drew up the scheme itself are to be complimented upon the simplicity upon which it has been built. I welcome the Bill, subject to hearing the Minister on the two points I mentioned.

Mr. O'Quigley

This Bill is to be commended on a number of grounds but I do not think it is a Bill that anyone can really welcome because it suggests a continuation of the present high level of income tax, particularly upon those who have suffered more under it over the years and who have got fewer reliefs than they were entitled to by reason of the decline in the value of money. I think the Bill is to be welcomed only in the sense that it makes the payment of taxation somewhat easier. It falls somewhat into the category of legislation such as they have in Continental countries which provides that a person who has to undergo a term of imprisonment for three years may do it at weekends. This Bill is that kind of Bill. People will still have to bear the same amount of punishment. The only difference is, as Senator O'Brien said, that it means plucking the feathers 52 times in the year instead of perhaps, four different times.

The Bill is probably welcomed by people who are excluded from its provisions in Section 4 for the reason that it means that those who have not being paying their due share of income tax up to the present will now be called upon to do so. If similar energetic steps are taken in regard to all other sections of the community who are liable to income tax on account of the real income they have, the standard rate of income tax would probably be substantially reduced and at the same time, the personal allowances, which Senator Lenihan advocates should be increased, could also be increased. For that kind of reason, I think this Bill is to be welcomed.

Apart from anything else, there has been a demand by people who are paid weekly salaries and wages and who are liable to income tax that some system such as this should be devised so that they will not find themselves faced at Christmas, or when going away on holidays, with a big bill from the Revenue Commissioners. The P.A.Y.E. system will eliminate much of that kind of hardship. Undoubtedly, there has been real hardship in cases where people were eventually overtaken by the Revenue Commissioners.

As regards the public servants who are excluded from this Bill, it is hardly correct to say that they have the same system of tax deduction as is being provided in this Bill. I understand that considerable hardship exists among public servants even under the present system of deduction at source. That arises from a number of factors. The principal one is one which affects people in the lower income brackets but who are none-the-less liable to income tax.

Oftentimes a person earns overtime. Let us say he earns overtime in 1958-59. He does not earn any overtime in 1959-60 but he has to pay income tax in respect of overtime which he earned in a previous year, in a year when he is on a lower rate of pay. That has caused considerable hardship to public servants. If it is not intended to extend the P.A.Y.E. to public servants, there is no reason that I can see why the present system could not be applied in a manner which would enable people who fall into that category to pay their income tax in more equal deductions than under the present arrangements. Senator Ó Ciosáin made reference to the fact that the Revernue Commissioners had £10 million arrears of income tax which they had to write off as irrecoverable.

Éamon Ó Ciosáin

Income tax and corporation profits tax.

Mr. O'Quigley

If that is the case —and I take it the Senator is correct —it is deplorable that that situation should have arisen because it can arise for only one reason, that is, that sufficient staff was not made available to the Revenue Commissioners to mop up this £10 million which could have been recovered and need never have been lost if a few extra staff had been made available. That outlook in regard to providing sufficient and adequate staff for the Revenue Commissioners illustrates the truth of the saying about spoiling the ship for a ha'porth of tar. For the £10,000 that might have been spent by way of providing additional staff, £10 million was lost to the State. The consequence of that is that the taxpayers who have been paying their tax day in, day out, have to shoulder a greater burden than they need.

With regard to the Bill, it may, indeed, incorporate a very simple system of taxation but anybody who reads it will find, as Senator Ó Ciosáin said, that it is a highly technical Bill indeed. I know that by reason of the fact that income tax in arrears is always collectable one cannot codify the existing taxation law, but some serious effort should be made by the Minister to make available to the taxpaying public a booklet—I do not think an explanatory memorandum would be sufficient —setting out people's liabilities.

Section 16 (2) reads as follows:

Section 4 of the Finance Act, 1951, shall be construed and have effect as if a reference to subsection (1) of this section were substituted in subsection (2) for the reference to subsection (1) of section 2 of the Finance Act, 1952.

I do not know what that means. I do not think any person earning £6 or £7 a week, with no legal training but who would have the Finance Act, 1952, available will understand the reliefs to which he is entitled or the liabilities to which he is subject, under that subsection.

I understand that the Income Tax Act, 1918, is not available for purchase in this country. Nevertheless, people are expected to know the law. Even though the Government Publications Sales Office in this country cannot supply people with the text of the law, they are expected to know and observe it. There is an old legal maxim that every man is expected to know the law. Is it not stretching that maxim a bit too far when our citizens have not available to them the main statute governing income tax? That emphasises the absolute and urgent necessity of providing income taxpayers with an up-to-date booklet setting out the provisions of the different Acts intelligibly. I further suggest that such a booklet should be provided to every person liable to income tax, as of right. When any new Finance Act is enacted, amending the income tax law, a loose leaf should be enclosed with the assessment form by the Revenue Commissioners to be inserted into that booklet.

Senator Ó Ciosáin referred to the explanatory memorandum sent by the Revenue Commissioners. We would require several further explanatory memoranda to understand the first one issued. It is quite unfair that people should be asked to take the word of the tax gatherer on trust. They should understand and see clearly, after a certain amount of study, all the allowances to which they are entitled. I am satisfied some people are paying more income tax than that for which they are liable because of their total ignorance of reliefs they are entitled to claim. I ask the Minister seriously to consider the provision of some kind of information for our taxpayers particularly as, if my information is correct, the Income Tax Act, 1918, cannot be purchased in this country.

The six months' assessment granted to persons to be brought in under the P.A.Y.E. scheme has given rise to a certain amount of discontent among people who have paid income tax by way of deduction from their salaries at source over the years. The reasons for the discontent and sense of grievance are twofold. They feel that, being in the same category as those to whom the new P.A.Y.E. system will apply, they should be entitled to the same relief as those who will get it under this Bill. They feel that equality is equity and that that principle should be applied to them. In the second place, they feel that as they have always paid the last halfpenny in income tax—and, as I suspect, some of them have probably paid more than they were liable to pay—if some accommodation and some remission is being provided, some encouragement is due to those who have borne more than their share of the revenue of this country all over the years.

The Minister for Health indicated on the Committee Stage of the Bill in the Dáil that, if those being excluded were brought in at some later stage, the relief provided under this Bill for people brought in under it would not be provided for those people who are now excluded. The Minister for Finance who was here this afternoon can say: "I did not say that. That is what the Minister for Health said." Nevertheless, he ought to give the matter serious consideration. These people have a sense of grievance that they are not getting the benefit which another section of the community in the same standard as regards salary and taxation will get under this Bill.

The position can be put in this way. If two people are paying income tax on the same salary scale and are entitled to the same allowances over a period of thirty years, the man under the P.A.Y.E. system will pay tax for 29½ years and the other man will pay tax for 30 years. It may be that no immediate benefit will accrue to the person brought in under the P.A.Y.E. system but, from the long-term point of view, that benefit will accrue to him. The advantages to people at present paying income tax by deduction at source on entering the scheme as a scheme are somewhat open to debate. I do not think any firm conclusion has been reached by the people excluded as to whether they should opt to come into this scheme and request the Minister to bring them in under it. The present position in relation to people whose income tax is deducted at source is that if a man dies or retires in the middle of an income tax year, say if he dies in October, an assessment is made for the penultimate and the ultimate year of his earnings and in some circumstances that may result in a refund of income tax. The ramifications as to why that is so are more complicated than I could explain clearly to the Seanad but I am quite satisfied from an examination of the position and from information supplied to me that a refund may occur.

I mention that because I would ask the Minister what will be the position of people who retire from employment in the middle of an income tax year. Will there be an adjustment similar to the adjustment I have spoken of and to which the people at present are entitled? Will there be such an adjustment in respect of the people under the P.A.Y.E. system? That would have some bearing upon the attitude of people excluded from the P.A.Y.E. scheme under this Bill.

The changes made under Section 17 in relation to reliefs in respect of life insurance premiums, as I understand the position, will mean in some cases— I do not know to what exent this will arise—that people will be required to pay more than they had to pay before the changes which are made in this part of the Bill. That seems wholly unfair. People who take out insurance premiums invariably calculate their liability to tax and the reliefs they are entitled to obtain by reason of the premiums they are paying. If, on the basis of the law existing at the time they contracted for the insurance, they felt they were to be liable for a certain sum in income tax and they now find that sum increased, it is most unfair to those people.

Reliefs, once given, should not be taken away and I do not know any other provision in relation to income tax where reliefs of the kind given in respect of life insurance premiums have been reduced by any Finance Bill to date. If what I say is correct, that people will get less by way of relief in respect of life insurance premiums under the changes being made in this Bill, it will have an adverse effect upon savings and people will be less disposed in future to take out insurance policies because they will not know with any certainty that the reliefs in operation at the time of taking out the policy will not be reduced. That would be running completely counter to the whole policy of the Government and indeed of all Parties in regard to increasing the volume of savings among all sections of the community.

There is only one other matter to which I should like to refer, that is, the reference by Senator Lenihan to the fact that this Bill followed the pattern of what had been done in Great Britain. My view is that what suits Great Britain is generally not suited to this country because of the disparity in the standard of living and income and because of the different type of economy in Britain. However, it is a most pernicious doctrine to say that we should look around other countries, see what they are doing and then copy what they have been doing. We have sufficient skill, resource and brain-power to devise any schemes we require to meet our problems. We may not always have the finance to match the schemes we devise but it is a most pernicious doctrine to suggest that we should spend our time looking over at Great Britain to see what they are doing and that we should become a nation of imitators of Great Britain.

Tomás Ó Maoláin

I do not think the interpretation Senator O'Quigley has put on what Senator Lenihan said is correct. Senator Lenihan said we could profit by the experience of other countries and benefit from their research. He did not say we should tamely imitate or follow everything which happened in Great Britain or anywhere else. He said we could adapt an efficient system, which worked successfully and effectively in Great Britain or elsewhere, to our own needs.

Business suspended at 6 p.m. and resumed at 7 p.m.

Tomás Ó Maoláin

As there appears to be a general desire not to meet to-morrow, I take it the House will be agreeable to sit later than 10 p.m. to finish the business on the Order Paper?

Agreed.