In examining the Finance Bill the first thing we note is that a change has been made and a new form of taxation has been introduced. We note that the report of the Income Taxation Commission has been used in introducing this. For quite a while I have been worried about the use being made of commissions in this country. We select a commission that is thoroughly representative and then when its report comes in very often major changes are made in the recommendations. I feel worried as to whether it is competence that makes such drastic changes in the report of a commission that has already been regarded as the best possible to investigate such a problem. In the present Income Taxation Commission, we had a vote for the introduction of a turnover tax by a narrow majority of six votes to five, to be offset by some reliefs in income tax. Of course, that is the vote of all commissions that have ever been set up to look into the tax situation. In 1948, there was a similar Commission to get rid of income tax. They suggested three ways by which the same amount could be raised without income tax. That Commission were thanked and now there are the three ways of raising tax, plus income tax, in operation. I do not think we can quarrel too much with the fact that income tax has not been reduced to offset the present sales tax.
I think the Government's departures from the recommendations of the Income Taxation Commission in relation to the sales tax are very dangerous and I believe they are fundamentally wrong, as I hope to show. Nobody I think would quarrel about having to pay for extra services. We did, perhaps, look a little askance on seeing the total go up each year and particularly this year when the jump was rather severe. We may have ideas that sufficient economies are not made in other sectors, especially where government is concerned. Still every section is looking for more and believes it has priorities so we cannot really quarrel there. I think far too much has been said about the turnover tax and the impact it is likely to have on the country.
It seems remarkable that in a Budget of £65 million a tax should be imposed which will yield in a full year only £11 million, of which £3 million has to be handed back by way of a rebate to some of the lower income groups who should not have had to pay it at all. In other words, it is only a matter of about £8 million. I submit it is fantastic to suggest that that tax has so much bearing on the moneys contributed for the running of Government services. If it contributed about £30 million, perhaps, there might be some foundation for the suggestion that it was really making a big contribution towards providing the increased money necessary for Government expenses. But, in the normal run of expenses here for the past four or five years, an increase of 4 per cent means about £20 million in the national income every year. Our tax structure is so designed as to get back about 23 or 24 per cent of the expenses and that provides about £6 million every year.
When you view it that way, you see the exaggeration of presenting this as the wonderful implement that will change the whole face of the country. I submit it is a gross exaggeration. Likewise, I think it an exaggeration to say that this tax, £8 million of it, will have a very marked impact on the standard of living in this country. A sum of £8 million cannot have such an impact. I do believe that the way in which the tax is levied is calculated to give a wrong kind of impact to the standard of living, because a turnover tax, as has been pointed out by the economists who sat on the Income Taxation Commission, is not something we have to cut. That cannot be denied because the difference between a turnover tax and a general road tax which affects everything you buy, or almost everything, is that this tax has a much greater impact on the cost of living index.
Take the case of a married man who is earning £700 a year in wages or salary; he is not liable to income tax. His exemptions just about keep him free so an increase in income tax leaves him unaffected. On the other hand, if he has £2,000 a year and with the same exemptions, a wife and one child, his income tax bill would amount to about £350. Consequently, if you increase the standard rate of income tax by 1/- that man would have to pay an additional £50 which would be a 2½ per cent cut in his income, whereas, the average wage earner with his £700 suffers no cut at all.
A trade union cannot make any case for increased wages based on an increase in income tax or on an increase in selective luxury taxes which contribute very little to the general cost-of-living index. As it is, the full effect of the 2½ per cent will be shown on the cost-of-living index. In fact, the man with £2,000 a year is likely to have a far greater proportion of his salary free of turnover tax than the man with £700 a year. For instance, if the man with £2,000 a year decides to take a holiday abroad and so on, as far as I can read in the Bill, that is totally exempt and so the turnover tax, as designed, tends to be of greater benefit to him than to the person in the lower salaried income group. That is why it is a measure which is likely to create great labour unrest at the time when we can ill afford such unrest. I believe that it will probably give impetus to a new round of wage increases which will have a rather disastrous effect on our economy.
Of course, I can see that if a Government could get away with a tax that could be used as a wages cut they would like to have such a weapon available for stabilising the economy. I grant they would do that. If at any time it was found that wage increases were out of step with productivity or otherwise, the Government by the simple device of increasing the general purchase tax could automatically impose a cut on wages. But I submit that no democracy in the present age will submit to such a weapon being in the hands of the Government. Consequently, I think the Government were wrong trying to introduce it here, especially following a period of labour unrest and when we are likely to have a good deal more.
I submit that such a general weapon in the hands of the Government to vary the standard of living and to impose wage cuts is unfair to the unorganised sections of the community because, while a very strong trade union may be able to fight and get back a certain amount of the cuts, the unorganised sections have no redress. Consequently, there can result a type of inflationary finance which really is I think an evil in the world and hits back at unorganised and other groups. I submit that this is wrong in principle. It is also wrong in so far as we have not fully explored the range of the tax structure here.
The recommendations of the Income Taxation Commission show how the position could be met. I will just take a few items. For instance, we must be rather unique, I think, in the democratic world in that we have not got a tax on luxuries. We all enjoy some luxuries but I do not think anybody really objects to having to pay a little extra for those. I will take a few items to show what can really be done. We have the unenviable record of being the most dance-conscious or dance-crazed country in the world. Personally I have been shocked in the last couple of years to see the amount of capital which has been put into bigger and bigger dance halls.
I travel the Cork-Mallow road quite frequently and recently I saw an imposing structure going up about two miles from Mallow. I said: "This will be a fine new factory." It looked bigger and better as it went up but, one day, when I was passing I saw the name "Majestic". It was a dancehall. It cost more than a factory would of its size. It cost between £25,000 and £30,000. Another dancehall has gone up in Crosshaven; and I read that, in impoverished Mayo, there are 200. I submit that the unmarried section, the dance-going section, have far too much money at the moment and they could legitimately be required by the State to contribute more to the State. When the dance tax was removed, I protested in the debate on Committee Stage on the Finance Bill on 18th July, 1962. In his reply, the Minister said, as reported at column 643 of the Official Report:
So far as I know, the British never had a dancehall tax. They certainly have not got one now. It would be the only entertainment tax levied now, if we took off the cinema tax. It certainly would not pay to keep the organisation run by the Revenue Commissioners for this purpose of entertainment tax to look after dances alone.
In other words, it was not worth collecting last year. The tax varied on the tickets. I think there was a minimum of 3d on a 2/- ticket. We are now proposing that this turnover tax will apply to dancehalls and that there will be ½d tax on a 2/- ticket, 1½d on a 5/- ticket, and 3d on a 10/- ticket. May I ask, in all sincerity, if it was not worth collecting last year, how is it worth collecting this year at only a fraction of last year's rate?
I submit that the system proposed here could equally well have been applied last year when the tax was remitted, and that there was no foundation for the suggestion that it was too costly to collect. Most people going to a dance have to travel quite a distance by car. Figure out the cost of that, plus the additional expenditure which is quite freely undertaken by those people, and you will see that the cost of admission is only a small part of the cost of the night's entertainment. Consequently, if the Minister imposed a tax of 50 per cent, we would all agree with him, now that this tax is being imposed. It is almost law. We certainly cannot stop it.
I hope the Minister will use the power of exemption very freely and, above all, that he will at an early stage bring in variations of the tax. It is ridiculous to levy 2½ per cent on dancehalls. It should be at least 25 per cent or 50 per cent. That is one of the places where there is money for the picking. According to my calculation, there are something like half a million people going to dances in the country. It should not be an outstanding feat to collect £1 or £2 per head per year from them. There is £1 million to be had there for the asking.
All other entertainments, such as games, are free of the turnover tax. I like to attend the various games and I do not think anyone would object to paying a turnover tax on games. I cannot see any reason for objecting. Even in regard to GAA games, it should be quite feasible. The cost of transport figures very largely in games, too, and a turnover tax on the entrance fee would be a minor item. I do not think anyone could grumble about it. I do not think there is any case for exempting games from the scope of the tax but I think it is ridiculous to charge 2½ per cent on an admission fee of 3/-.
The same applies to dinner dances, to which we all like to go occasionally. I do not see why we should not make a contribution to the Government on our night's outing. Those are all sources of taxation that have not been tapped, and should have been tapped before the Government felt they should throw in the sponge and put a tax on the necessaries of life, as they are doing in this Bill.
As I read the Finance Bill, foreign travel is exempt because transport is exempt. At the moment there is no limit on the amount of money a person may take out of the country. So far as I read the Bill, there is no turnover tax on the £100 or £200 spent on a holiday on the continent, or elsewhere. We are going much too fast in this form of spending. We are subjected to far too much high pressure salesmanship by our airlines, and others, trying to induce us to go for a continental holiday while our own country remains unexplored by many of us. There are many parts of the country that have a great deal to offer.
I think the tax on foreign travel should be five per cent, or ten per cent and, if it cuts down on the volume of money spent on foreign travel, especially for mere amusement, so much the better. It might affect business to a slight extent but, after all, those who travel on business have their expenditure recouped. In that way, there would be a slight additional taxation on business, but it would be infinitesimal and would be justified in an effort to segregate foreign travel for business and foreign travel for pleasure.
While the younger sections have been bitten by the dance bug, the older sections have been bitten by the reception bug. The amount of money squandered on receptions is out of all proportion to the size of the country and the importance of the projects in relation to which the receptions are held. I was glad to see that our President set a very fine headline with the garden party reception for President Kennedy. That garden party was held on a very modest scale. No alcoholic drinks were supplied and the total cost per person must have been very modest. I am not decrying in any way the use of drink. I like a drink as well as anybody else, but not at the expense of the State and certainly not at receptions I have attended where, when you went up for just a glass, those serving had not time to serve a glass and you had to take away a bottle. And the bottle did not contain anything as crude as Irish whiskey or any other Irish product: it had to be the best champagne at a reception in respect of an industry that only yesterday cost the State £1 million.
I do think pressure should be exerted to try to curb this. I do not know whether the Minister for Finance could devise some means of ensuring that, if private enterprises are to squander a great deal of money on receptions, he could attend those functions himself to get his share out of it, even if it is not in the form of tax money. In this respect I submit that while there is still time for us to impose a differential tax structure, we should tax imported wines and spirits. We may have to remove such a structure in a few years if we get into the Common Market, but at least we should try to use the few years we have got to wean our people away from the imported article and get them to consume their own product. That could be done by a certain tax on Scotch whisky.
This turnover tax affects all drink and the 2½ per cent rate is infinitesimal in this respect. It means only a halfpenny on the pint, and on the glass of whiskey, it means only a penny. At the present time, when there is a good deal of free money around the country and when people are living on a somewhat more lavish scale than in recent years, I suggest that the Minister at this stage could profit a bit more from an extra bit on wines and spirits and leave the necessaries of life free.
We like to take examples from England in many things. What I am about to say probably affects most members of the House and myself, but I do not think we could cavil at a purchase tax on luxuries such as cars and so on. Again, 2½ per cent on luxuries is very small. I would prefer to see a little more on those in the interest of the necessaries.
In respect of the income tax code, I do not think the rate at the present time is by any means unbearable. I went on record in this debate last year as suggesting to the Minister that his action then in decreasing the rate was really unnecessary and that he could have made good use of the money lost in that way by improving the part of the income tax code that affects the most people—the allowances section. If there is a necessity to do anything about the income tax code it is to bring the allowances into line with modern money values. I do not think it could be objected to if the amount of the tax were raised and, at the same time, the allowances increased so that the ordinary family man who earns up to £1,500 a year would not be affected —in fact he would gain by such a change in the structure.
There are many alternatives to the present new form of taxation available to the Government, but perhaps in advocating such alternatives I am in the position of the Income Taxation Commission who proposed an alternative and got both. Perhaps next year the Minister will be quoting my advocacy of those as reasons for supporting the introduction of further changes. At any rate, that would be preferable to increasing the 2½ per cent rate and much preferable if it had the effect of removing the turnover tax from the necessaries of life.
Of course, the other objection to the proposal is that it is calculated to bring in only between £4 million to £5 million in the current year and that that was all that was necessary to balance the Budget. However, here we are imposing £7 million of unnecessary taxation and to my mind we are imposing it so that it will be ready for next year. It is claimed that the reliefs given will completely remove the effect of the turnover tax on families and lower income groups. It will do so in the case of certain lower income groups but not the largest lower income community we have, the small farmers, who are made to bear every burden and are being driven out of existence.
I submit that the present tax will hit those very badly. Most of them are struggling along—just a husband and wife trying to keep on the small farm long after their family have gone. There is no relief in this for them; they will pay the 2½ per cent on the loaf of bread. I submit that is the section who will be hardest hit here. The argument has been advanced that this is a cheap tax to collect. Really, I do not see that as a good reason for its imposition. After all, an extra 2/- in the £ on income tax would probably cost nothing at all to collect because the machinery is already there. An increase on any existing tax costs very little to collect so that is not a real argument.
The real objection against the present tax is the manner in which it is to be collected because here we have general uncertainty. It differs from purchase or sales taxes everywhere else. Senator Nash gave us a very excellent summary of sales taxes in other countries but there are many essential differences between this tax and sales taxes elsewhere. The sales taxes operated in American and Continental countries would be quite acceptable here. In America, the necessaries of life are exempt practically entirely and as well as that the whole thing is done on a marked-up basis. That is the vital difference. Your bill is totted up and at the end there is 2 per cent for the retailer and perhaps 3 per cent for the Government. That ensures there is no overcharging by the shopkeeper. In other words, he is not faced with the dilemma of how to get 2½ per cent on a box of matches. More important still it prevents any unfair competition between shopkeepers because in the past three to four years we have had this inrush by chain stores.
We have seen in Cork city some of our finest and oldest shops taken over and converted into chain stores. We see takeover bids and what not. It is putting a lethal weapon into the hands of those people to levy the tax in the vague way in which it is being done. You can be certain that on the 1st November there will be big newspaper advertisements saying: "We pay your tax; get your bread at the old price and butter at the old price," and the housewives all over the country will fall for this. They will rush to the chain stores, leaving the neighbouring store which cannot afford to pay a 2½ per cent tax. The neighbouring shopkeeper is already operating on a marginal five or six per cent. He cannot afford to give one-half of that up in taxation.
Of course, the chain stores are not acting in good faith by saying they are not charging the tax. They only want to get the store in the neighbourhood out of business. They know they can do that in six months or a year by this policy and after that they will put up their prices. They may choose one or two chain stores for what is called a "lost leader" in American marketing terms. That is something that draws the people in and once they are in, they are subject to the incentive to buy. They see the articles in the shops and they buy them.
A weapon is being put into the hands of the chain stores that should not be put into their hands and I appeal to the Minister to ensure that that is not done. The only way we can prevent that is by a general Government law. The tax will have to figure just as an addition at the end of the bill and it will have to be shown clearly and not left to the shopkeeper to devise a scheme for himself as to how it may be put into operation. Otherwise, we are really completing the elimination of our shopkeepers.
In a country such as we have here, which has had to depend so much on the State and on State enterprise, it is vital to keep as many independent elements as we can in our community, the small farmers in general and, above all, the family shopkeeper. He is the basis of the sturdiness and independence that we hope will always mark our nation.
I for one have a feeling of revulsion every time I pass these new distribution stores. I regard them as total waste of capital at a time when we need capital so badly. I cannot see what they are doing. We will have to pay for the capital put into them. Many of the chain stores and much of the huge modernisations carried out are not necessary at present. There are many more pressing needs. I would much prefer to see the money go into factories any day than into the huge distribution stores that are going up everywhere.
I wonder why advertising is exempt from the scope of the present turnover tax. Again, it seems to me that advertising is a pressure in modern life. I think we would be better off with less of it. Certainly anyone looking at the television screens cannot but feel that if we could eliminate or cut it down we would be all the better for it.
There is the question of wholesale and retail. I submit that with so many exemptions—and we hope the Minister and the Government will be persuaded to grant others, particularly in regard to bread, butter and so on— it would have been far better if the tax had been taken at the wholesale level. There would be fewer units to deal with and it would be a simpler process in general to acquire the tax rather than involve the small shopkeepers in the extra book-keeping and, perhaps, extra machinery involved. The case was made by the Minister that it would cost the community more to do it at the wholesale level; that the wholesaler would add 2½ per cent and then the percentages to the others would be calculated at cost plus 2½ per cent so that the final product would cost about 4 per cent more. I submit there is no basis for that suggestion. If the tax were kept separate and if the article on sale showed its cost, as it is done in America, the tax would be passed on from the wholesaler, without increase. By that means it would sell at 2½ per cent at the consumer end. I believe it would be far better to levy the tax at the wholesaler level.
There is the question of corporation profits tax. The retrospective angle of this is undoubtedly discouraging. I appeal to the Minister to accept the amendment put down to remove this very objectionable feature. I have heard many stories about the misuse of corporations for the purpose of tax evasion. I expect the Minister is also aware of those and perhaps he may in the future try to tighten up the legislation so as to distinguish between genuine corporations and corporations which are there solely for the purpose of tax dodging.
There is the question of the disclosure of bank interest. Again, that seems to hit at a rather fundamental principle—the undermining of the confidence between the client and the bank. Its worst feature, as far as I can understand it, is that it is likely to encourage people to invest abroad. I believe that if people just simply send money across the Border the interest would be sent back free of tax. The tax is not deducted at source, and nobody here would be aware that such investments were made. If that is the case—and I am sure it is—it is a very serious step for us to cause such an overflow which we cannot control.
We may say people who do that are not patriotic, and so on, but still, facing the facts of life, if it is likely to happen on any grand scale, I submit that the little that will be got by disclosure of bank interest will not compensate for the loss. Most people, I am sure, disclose what their bank interest is and pay tax on that. Therefore, you are really only concerned with getting some tax dodgers. You can be certain that if they are tax dodgers and do not disclose the fact that they have got so much interest from the bank, they are certainly going to take their money elsewhere if they can get a higher rate of interest.
Next year, or the next couple of years, the Minister might undertake a review of the whole basis of land taxation. I do not know whether this can be done in conjunction with the Programme for Economic Development the Government are about to bring in. Properly handled, taxation could be a powerful instrument to encourage good land practices. That would have to be the primary aim. The secondary aim would be that of providing revenue and I hope that that is always regarded as being a very much secondary one. Of course, it could undoubtedly be used as a type of lever by the farming community, those who are farming large acres. We would have no dislike for hitting the farmers, the dog and stick type of farmers who have large acres, fairly heavily by taxation and using the money to help the other sectors of the farming community, the hard-working farmers who are being hit just as much as those who do not work well. I submit that that is a wrong policy in principle and wrong in the national interest. There is no incentive whatsoever in the tax structure to induce good farming practice.
As we are finding it so difficult to get major industries to survive, I submit that we must return to and recognise in the land our main hope of development in the future. An intelligently applied rate of taxation would be the most powerful implement which could be brought to bear in encouraging the intensive use of land and good farming practices.
Finally, I wish to pay tribute to RGDATA. I do it solely from the point of view that I welcome an organised group who are prepared to make their voices heard in the country. The only way a democracy can function is by not having organised groups intimidated by any charges, either political or otherwise. Let them make their case fairly. I was rather shocked at the charges levelled at them by politicians and others. I was especially conscious of this because I have been actively associated with another vigorous campaign against a former inter-Party Government about tillage. We had exerted the maximum pressure we could through assembling, organising and getting as much newspaper publicity as we could. We were greatly assisted by both the Irish Press and the Sunday Press. That did not mean that we were in any way political and we were not intimidated by the Taoiseach of the day. We were fighting against a Department of Agriculture claim. In the same way, I can see the RGDATA pressure and I hope that in the future it will be realised that we have got to do that and will not be intimidated in any way.
