Finance Bill, 1964 ( Certified Money Bill )— Committee and Final Stages.

SECTION 1.
Question proposed: "That section 1 stand part of the Bill."

This section deals with income tax. I should like to make a case in relation to Schedule A tax which is now restricted to dwelling houses. That is to say, owner-occupiers of dwelling houses are charged income tax on the valuation of the house. That is surely something which might now disappear. There was an amendment of the law last year whereby people who let houses have to pay tax not on the valuation but on the profit rent. Surely that means that the old-fashioned notion that the valuation is the net rent is gone by the board. This is really a tax on people who own their houses and who live in them, as distinct from people who own houses and let them for profit.

The Income Tax Commission made a recommendation that this tax should be remitted in the case of owner-occupiers whose valuation does not exceed £30. I am sure the Minister will agree that ownership of one's own house is looked upon with favour by everybody. It has a stabilising effect on the State and has very good results. The house is ordinarily kept in good order and it is less of a wasting asset than houses let for profit. All the arguments are in favour of a remission and I think there should be an amendment of the law to remit this tax in the case of owner-occupiers of dwelling houses. Schedule A tax appears to be on its way out anyway. Perhaps the Minister would accelerate its departure.

I should like to support Senator Hayes though it occurs to me this would come up more appropriately on section 10 than it does here. However, perhaps we should pursue it now. The Second Report of the Commission on Income Taxation makes a very strong case against this Schedule A tax. It adduces some very weighty arguments in paragraphs 100 and 101 and, in paragraph 105, it states what is perhaps the really fundamental objection to Schedule A Income Tax.

One of the strongest reasons for not taxing home ownership is that, notwithstanding theory, no income, as normally understood, is derived from it. The asset does not of itself provide a fund of income out of which tax may be paid, as does a salary, dividend, or business profit.

There are a good many other arguments of that kind in the report. I shall content myself now by asking the Minister is there a hope that he will move further in the direction of the recommendations of this Commission?

As one who has had experience of pleading from year to year both with the Minister for Finance and the Revenue Commissioners I should like to join my voice with those who have spoken in support of the abolition of this Schedule A tax. One does not need to be an expert to appreciate that, in essence, this is a tax on thrift. It is, indeed an anachronism and quite outdated in our present society. It has already been abolished in Britain. It is time it was abolished here for the reasons stated, not only in the Report of the Commission which examined into this matter, but also because of the arguments that have been put, as they have been to my knowledge, from time to time before the Revenue Commissioners. There is nothing to justify the retention of this type of imposition. The tax is antiquated. It no longer fulfils the purpose for which it was originally intended. I strongly urge the Minister to give due weight to the appeals which have been made and I add my voice to those of the other Senators who have asked for the abolition of this Schedule A tax.

I am afraid I disagree with my colleagues in this matter. I can see the argument in favour of getting rid of this tax altogether in the case of small dwellings with a rateable valuation under £20. As part of the general theory, it seems to me that, if somebody lives in a house for many years, it is not arguable that that person is not deriving a real income out of that house. The way to look at it is that, if he does not want to live in the house, he would have to rent another house. People who are lucky enough to reside in old houses in Dublin are now paying income tax on a valuation far lower than it would be if the house were revalued today. Frankly, I cannot see any essential distinction between enjoying a house by living in it and enjoying the rent out of that house while having to live in another house.

I should like very briefly to support the appeal made by Senator Hayes for the abolition of Schedule A tax. I think I am correct in saying that the only people who will be liable in future for Schedule A tax will be the resident-occupiers of private houses. Section 10, I think, proposes to abolish Schedule A tax in other cases. At the moment a great many people are inclined to build their own houses. That is a good thing because it relieves local authorities of the obligation to build houses. It also ensures that the houses are better finished and kept in a better state of repair.

As Senator Crowley said, this is a tax on thrift. Let us not forget, too, that some people who are called upon to pay Schedule A tax are already paying income tax under one or other of the Schedules. As we have been told, Schedule A tax has already been abolished in England. I do not know what this particular tax brings in but I am sure if the cost of collection were deducted from the amount there would be no very appreciable sum left. I am sure the amount involved could be raised in some other way, some way which would not impose a tax on thrift and a tax on the growing inclination on the part of people to own their own houses.

Up to a point I agree with Senator O'Brien in that it is impossible to differentiate between a saving effected in purchasing one's house and the notional income one gets from it, as against the saving one may make for some other purpose by investing money in stocks and shares or putting it on deposit in the bank and getting some interest from it. Nevertheless, I strongly support what has been said in making a plea to the Minister for the abolition of Schedule A tax as such. Senator Fitzpatrick said this tax will in future be levied only against owner occupiers. This then is a tax on a most desirable form of saving, the saving made by a man who buys his own house in order to be independent on his own land. If Schedule A tax is only to be levied against that man, then surely it is time we saw an end of it. There may be an intellectual argument that the possession of a house is something which gives a form of direct income to the person who owns the house, but that house is his dwelling place. It is quite different from any form of investment. I welcome the steps taken to reduce in number the types of premises which will be liable to Schedule A tax and I ask the Minister to tell us, as I hope he will, that this is a step towards the complete abolition of Schedule A tax at some future date.

Senators have quoted the findings of the Income Tax Commission. A White Paper issued by the Government in 1961 deals with this matter at pages 8 and 9. The arguments for and against are very fairly set out there. They point out that the Commission arrived at their recommendation for two reasons. First of all, there is the point that real income does not arise from owner occupation and that it is not fair to subject notional income to taxation. The second point is that if there is a charge on notional income it should not be confined to real property but should extend to chattel property also.

With regard to the first point, it may be classed as notional income but certain limitations are recommended by the Commission that it should apply only to houses up to the first £30 valuation and, again, in assessing the income tax due, ground rent is taken into account, and the ground rent being deducted from the valuation leaves the residue subject to tax.

I believe that on this basis the average amount on which income tax is assessed is only about £15. Therefore, it is a small matter as far as the payer is concerned. I think there is a matter of principle both ways. The Government have argued in this White Paper that the principle is still as sound for taxation as it is against it.

The point made by Senator O'Brien, which is also more or less supported by Senator Ross, is very important. For instance, if a person has £2,000 invested in national loan he has to pay income tax on the dividends from that loan. Before he buys the house, he is paying a rent. It is not recommended that he should get any benefit on that rent. Now he buys a house and puts the £2,900 into it and, as a result, he would escape income tax. There does not seem to be any very good reason for that: it is, of course, a form of saving, I know, but we do not exempt all forms of savings. For instance, we do not exempt a man who has £2,000 invested in national loan.

The person who buys the house gets a good many advantages. If he has not the £2,000 but borrows the money he pays interest to the bank and, to the extent to which he pays interest, he is free from income tax. If he goes to an insurance company to borrow his money he gets relief also on the premium he pays to the insurance company. Therefore, many reliefs are given to a person to encourage him to buy his house. If the argument of the Income Tax Commission were logical, there is no reason why they should stop at £30 valuation. The arguments all apply just as well to the higher valuations as to the lower ones.

This form of taxation is not peculiar to this country. They have it in most European countries. Evidently, they think it is a just tax in all those countries. I am not sure if it is mentioned there but it has often been mentioned that the amount collected in this way is comparatively small. The amount that would be collected on the £30 valuations of owner-occupied houses is not a very big amount—about £250,000—but the amount of Schedule A tax collected is about £1.3 million. Therefore, I cannot argue very well against it, on that basis, that it would be impossible for the Exchequer to meet the point. I think, therefore, I can only argue against it on the principle of the matter that I do not see any good reason why these particular people should be exempt from tax.

Let me read the final paragraph from the White Paper issued by the Government.

In the present circumstances, therefore, the Government are not convinced that owner-occupiers should be relieved of income tax where there is a liability under existing law.

That would go to prove that the Government of the time were not so very positive that they thought the matter should never be taken up again. Since 1962, I have not seen any good reason why we should consider this matter. I do not think it is likely that the Government will consider this in the very near future.

Has this tax been abolished in Britain?

The Minister talked about logic. Anyone who talks logic and our taxation system in the same breath is surely playing with words. It is surely the most illogical thing we have. You would want to be much more than logical. You would want to be a very painstaking scholar to follow some of the qualifications of this Bill. There was a Professor of Metaphysics in University College, Dublin, Professor William McGuinness, who was once a member of this House. One of his favourite remarks was that life was larger than logic.

The arguments for this remission would overweigh any logical arguments. Is it the case—because I have never noticed it in paying my income tax—that one is charged income tax under Schedule A only on one's valuation less one's ground rent?

I never knew that before. I have been missing that for a long time. Surely the argument in favour of encouraging people to have their own houses and to occupy their own houses, on the one hand, and the restriction of the suggested remission to a certain figure such as £30 should weigh with the Minister? The owner-occupier of a house has a great deal of expense in connection with the house. He maintains it. In doing so, and in keeping it in good order, he is not only maintaining an asset for himself but for the local authority and for the State.

Senator O'Brien really came to the conclusion that this should be done to not as high as £30 but should be restricted to a valuation under £20. I am afraid Senator O'Brien has not kept up to date with the kinds of houses people live in now. The standard is certainly going up. The kind of person who lives in a house with a valuation of £30, in a great many cases now, is a worker although perhaps not exactly a manual worker.

The argument that the return is so small and the desirability of encouraging ownership and the preservation of houses is so great that the Minister should at least go back to his 1961 mood and feel it is something that ought to be done if not now then in the future.

I was interested to note that the Minister does not oppose this suggestion on the grounds of expense or on the grounds of the loss of revenue involved. He is against it on principle. It is correct to say, I think, that Schedule A tax as such has been abolished in respect of every sort of building except a building occupied by the owner as a private dwelling-house. If the house is let, it is chargeable under Schedule D.

Under the new section 10 here, other buildings are relieved. It is only the man who owns a house and occupies it who has been caught under this section. The argument there is that if he puts £2,000 into a house he is deemed to be getting an income from that and that if he did not put it into the house but invested it in the National Loan or something else he would be getting an income from that and would be taxed on it.

Suppose that, instead of putting the £2,000 into the house, he puts it into expensive jewellery for his wife. It is stored up there and he pays no tax on it and the country does not get any benefit out of it. Or suppose he collects antique furniture, and amasses thousands of pounds worth of furniture in his house, as some people do, he is not taxed on that. Supposing he buys a much more expensive motor car than is necessary for his use. He could buy a Rolls Royce or, without going into the realms of a Rolls Royce, he could buy a car costing a couple of thousand pounds, and he is not taxed on the capital tied up in it. The country gets no benefit from the capital tied up in it. Neither does it get any benefit from the capital tied up in jewellery or expensive furniture. Indeed, if I had time I could go on quoting examples of capital tied up in non-productive investment, shall I say, from which the State gets no benefit.

I cannot think of any more beneficial type of investment or saving than the provision of a private dwelling house for the owner, because it adds to the wealth of the country and relieves the national Exchequer and local finances of the necessity to provide those houses. I think even on the test of logic a case can be made for abolishing this tax. I know no amendment has been put down and the Minister will not do it this year, but I seriously ask him and his advisers to give the matter further consideration.

I should like to take Senator Fitzpatrick's argument a little further. Supposing a man who has £2,000 does not do any of the things he suggested, but puts it in the bank on deposit and gets a rate of interest. I think he would get a rate of 1¼ per cent at the moment. From that £2,000 he will get an income of £25 per annum, and that income will be exempt from tax. The State will get no benefit from that income. Surely a case under Schedule A can be made in exactly the same way? I mention £2,000 because that is the figure taken by the Minister.

I do not want to prolong the debate but as it has been suggested that there is something wrong in being excessively logical in regard to income tax I should like to say that Schedule A is a very logical form of income tax. Assuming for the moment that the principle of income tax is admitted, the essence of taxing income is that part of the income a person enjoys should be taxed. Income may be enjoyed in two ways, directly by enjoying the flow of income generated by wealth possessed and indirectly in a monetary form.

In regard to the other point made by Senator Fitzpatrick, if the value of antiques and jewellery could be measured to the same extent as a house is valued, they should be taxed also. Of course, they are taxed by death duties. A Rolls Royce car pays a very heavy road tax, so it is not correct to say that it does not pay any tax.

Tá ní eile nár deineadh tagairt dó agus sin í an cháin ghalánta atá le díol ar thithe lena comhairlí chontae agus leis na "corporations" fé mar atá siad i mBaile Átha Cliath.

Is cuimhin liomsa nuair a bhí tigh dhá cheannach age daoine gurab iad na rátaí a bhí air sa "Pembroke Union" ná 11/8d. Anois tá sé £2 5 is dócha. Nach bhfuil "tax" go leor sa mhéid sin? Ach níor tagraíodh dó sin sna h-argóintí atá ar siúl. Is dóigh liomsa gur cuid mhór den scéal i leith tithe é sin agus gur ualach trom go maith ar úinéirí tithe an cháin sin agus cánacha eile cun é do shaoradh ó thine, ó bhaol agus ó bhriseadh agus nithe eile agus na tithe do choimeád, ach seans go mbeidh tagairt d'ualach na rátaí agus an t-ardú atá orthu anois— cheithre oiread nó níos mó seachas mar a bhí sé 20 bliain ó shoin.

I am rather intrigued, and, frankly, I am getting a little impatient, with this argument about notional income. It is all very well for Senator O'Brien to refer to people living in old houses in Dublin which are assessed below their real value, but surely the real problem is the position, not only in Dublin, but in other parts of the country, in which there are thousands of people waiting for houses. Those arguments could not apply to people who are about to get married and are waiting for houses. We spend time and quite a lot of money in this and the other House, trying to induce people to build houses and relieve the pressure on the local authority to provide them with houses. There is very little purpose in telling those people that in some mysterious way they are creating income by this peculiar method.

I strongly put it to the Minister that this is an anachronism and that it should be removed so far as that type of housing is concerned. It has been removed in Britain. They are not philanthropists on that side of the Channel, and if justification exists there, it certainly exists here. There is no case that can be made in all honesty for the retention of this tax in its present form.

I was trying to introduce logic into this argument but I must admit that a number of illogical instances have been given since. Some of the matters which were raised could not be taxed. If a man with £2,000 does not build a house but gives it in jewellery to his wife, I should like to tax him, if I knew how. The case mentioned by Senator Ross of the man who puts £2,000 on deposit and has his £25 exempted from income tax is true. That was brought in a few years ago to encourage people to put their money on deposit in the bank rather than keep it in the stocking. It had an object at least even though it may be classed as illogical in our conception of imposing Schedule A tax.

I do know how we can deal with the question raised by Senator Crowley. It is true that we spend a good deal of money to encourage people to build houses and then when they go in we tax them, but that applies in other ways. We spent a good deal of money in recent years encouraging people to go into business, giving them subsidies and so on, and when they get on we tax them and try to get money from them afterwards. I do not think it is anything out of the common if we do help people to get houses and then put taxation on them.

Somebody said that the Government had expressed themselves in favour of this tax but not for the moment. They did not do that. They expressed themselves as absolutely impartial on this tax. They said that in present circumstances they did not think it could be considered. That is still the position.

Before leaving this section, this is the only opportunity we have of dealing with income tax and matters of that sort because it is the section which re-imposes income tax at existing rates and under existing conditions. I would like to repeat the appeal that I made on the Second Stage of this Bill, during the Minister's very short absence from the House, on behalf of the man on a fixed income. I assert that this Bill as it stands is really increasing income tax because it makes no increase in the married allowance, the personal allowance or the child allowance. I am not in a position to say how many years ago those various allowances were fixed at the present rates, but I do know that the value of money has decreased very considerably during that period. It, therefore, follows that although it has not been stated in so many words the present Budget has increased the rate of income tax. Last year we were told that direct taxation could bear no further increase and that the turnover tax when it was introduced would eventually lead to the abolition of direct taxation. Now we have the same people suffering the ill effects of the turnover tax and its consequences and at the same time an increase in the rate of income tax.

I learned just now that it was in 1959 that these rates of allowances were fixed. During that time we have introduced here two separate and distinct Bills to increase the salaries of certain categories of people because the rate of money had decreased. I made that case on the Second Stage and I repeat it now.

I also wish to refer to one other aspect of existing income taxation, and that is the proposal to tax progressive farmers under Schedule D. I refer to the proposal to tax people who produce chickens by way of intensive farming under Schedule D. For many years back we have been encouraging farmers to be progressive, to adopt modern methods, to equip themselves with technical knowledge, in order that we as an agricultural country may be in a position to compete with our competitors on the world market. The old methods of farming are gone. It is not possible any longer to produce chickens for table use in small quantities and compete with the competition inside or outside the country. Therefore, farmers now have gone into chicken rearing and chicken fattening in a big way but they are still farmers and the more intensive they are in my opinion the better farmers they are. But under the law as it is being interpreted at present I fear that a farmer who raises a few thousand chickens will be taxed under Schedule D, and this is nothing new, because I understand that a farmer who went in in the past for market gardening in a big way and produced tomatoes in very considerable quantities was regarded as being in business and not a farmer, being in some type of commercial business and liable to taxation under Schedule D.

This thing is becoming very serious because the day of fattening a few pigs on the farm—four or five or even ten pigs—is out of the question. If a person now is to be in the business at all he must produce or fatten pigs by the hundred. If he does that, according to the interpretation of our income tax code he will be regarded not as a farmer liable to be taxed under Schedule B but as some sort of industrialist liable to be taxed under Schedule D. That is not moving with the times. That is not recognising the fact that old ways of farming are gone and that if a farmer is to be successful as an individual farmer he must adopt progressive methods, going in for intensive production, and if we are to be successful as an agricultural country all the farmers should be encouraged to go in for that type of farming so that we as an agricultural nation will be able to hold our own with our competitors on the world markets.

I may be accused of advocating the abolition of this type of taxation of farmers and not giving any alternative, but with respect I say that it is for the Minister to produce that. I also say that, when the Minister introduced the turnover tax last year, he told us it would be the end of this sort of thing. I would seriously appeal to the Minister to take steps to ensure that progressive farmers will not be taxed. If the Minister's reply to me is that his interpretation of the law is that a farmer rearing chickens or producing pigs on the land is not subject to taxation under Schedule D, then I would be satisfied with an assurance from him that if his interpretation be held to be wrong and if the people in a position to do so hold that under the law as it stands the farmers will be taxed in a manner that is not fair he will take immediate steps to rectify it.

There is one point in this section I would like to raise and that is the cost of collecting income tax and surtax which lies very heavily, particularly from PAYE incomes, on business firms. A large amount of extra work has to be done and very large extra staff has to be taken on to deal with the collection and supply the Government with the collection of the tax. This is surely something that should be borne by the Government. Collecting taxes is surely a Government charge. I think that the Chamber of Commerce put forward a suggestion that some form of discount would be allowed to the firms concerned on sums collected in that way. I should like to hear what the Minister has to say on that point.

I should like to suggest that the time has come to change drastically the basis of levying income tax on agricultural land and to have regard to the recommendations of the Income Tax Commission in that respect. The present idea of basing it on valuation and taking it that the income is only something like twice the valuation is totally unrealistic and underestimates the income. I suggest this should be brought into line with the actual income position which would mean multiplying it by three or four. Allied to that there should be a positive use for this new increased estimate of earnings by bringing home to the agricultural community the position of the family in that there would be so many deductions for a wife and children which would help the family farmer and penalise the bachelor gallant of whom we have so many in agriculture today. At the same time, any realistic system of assessment would make allowance for the labour provided on the farm. That would be another positive instrument in shaping our agricultural policy for the future.

Undoubtedly, we want to reward the farmer who is doing intensive work and fulfilling a patriotic function in developing his land to the fullest and giving as much employment as possible. By all means reward such a man but penalise the man who is largely back to the dog and stick type of farming. Income tax could be used positively in that regard. The Government have been tinkering with the rating system on agricultural land for the past four or five years and they have been compelled to give reliefs. That also is a positive step but the time has come to marry such steps to income tax which should be based on what the land is capable of producing and giving liberal reliefs which would be used to the fullest to ensure that the farmer is encouraged to produce the maximum. If he is not producing the maximum, or producing above average, he should not be allowed to substitute just any record of actual results from the land. The taxation levied on the land should be based on what that land is capable of producing.

The Minister could take a headline from what was done in Australia some years ago where such a system was introduced, coupled with practical reliefs to encourage good farming. I hope that the Minister in looking to the year ahead and the practical application of theSecond Programme for Economic Expansion will seize on this scheme as a means of ensuring that our agricultural targets will be reached.

There is just one other point I should like to mention and that is in regard to the reliefs given to encourage exports. In view of the fact that theSecond Programme for Economic Expansion points out that 90 per cent of the growth is expected from the export of our industrial goods, the Government introduced these reliefs in respect of increased exports over a standard year. I feel that this rather penalises people who already had been engaged in the export trade and seems to relieve those who are new to the export trade. It seems rather unfair to people who have always been exporting goods that they should not receive any relief. I suggest that these reliefs should be granted to all exports regardless of any standard year.

In regard to Senator Fitzpatrick's point about allowances he is right in saying that it is some years since they were fixed. They were raised at the time PAYE was brought in. Various changes were made at the time; the earned income allowance was raised, the personal allowance was raised, and a change was made at the lower end, there was no reduction for the first £100 or the second £100, as there had been. On the whole, there was in the aggregate an extra relief for everyone in the way it was done. Here we are dealing with very big money and it is not like in Schedule A. I was very keen on doing something in this direction and as a matter of fact in the last two or three Budgets I asked what it would cost to give better personal allowances but it was very costly and we could not do anything worthwhile unless we raised the standard rate to make up for it. If we did that then it would not make a lot of difference. Let us take an example. Suppose we raised the marriage allowance, then by raising the standard rate to pay for it it would mean that single people would pay a little more and married people a little less. I did not think it was feasible to take a step of that kind but it is something that I have in mind. If it is ever possible, and Budgetary considerations allowed it, I would feel inclined to do something for the personal allowance.

This chicken business is purely a legal matter. We have not made any change and it is the law as it stands. The Revenue Commissioners were interpreting the law as it stands and the real issue here is whether the profits arising from this business arise from the occupation of land. That is the whole question. Where a person is assessed under Schedule D he can appeal to the Special Commissioners and I understand there are appeals waiting to be heard by the Special Commissioners. I cannot do anything about that because I cannot interfere with the Revenue Commissioners in their administration of the law. They feel they should collect under Schedule D in certain cases and if they feel that is the legal position they must go ahead.

The Special Commissioners may have a different view and, of course, the Revenue Commissioners will then have to change their view or they may not. Of course, when that is over it will be a question of whether the law should be changed or not. I would be very slow to change the law. As we all know, chicken rearing in an intensive way could be done in the middle of Dublin city quite easily and done by people knowing nothing whatever about land. Again, if we want to be logical and say that it is farming and should be exempt then if a farmer started a boot factory he should be exempt from the profits on that business also. That is going a long way, I admit, but it would follow legally, I am afraid, if they were permitted to escape income tax on profits under Schedule D.

Senator Fitzpatrick said—and I am sure I did not say it when I brought in the turnover tax—that the turnover tax would give the Government an opportunity of reducing income tax. I saw plainly at the time that there was no opportunity of doing that. Whatever proceeds we got from the turnover tax would be required to balance the Budget and there was no hope of reducing income tax. As time goes on, things may be better and it may be possible to give some relief on the income tax side.

Senator McGuire raised the question of the cost of collecting PAYE by businessmen generally. When we were bringing in PAYE, naturally we examined how this scheme was working in England. One of the things those in charge in England told us was that businessmen of their own volition preferred that they would not be recompensed for paying this money. They had a feeling if they accepted payment for doing it they would be under the control of the Revenue Commissioners in England. It was one of the things that strengthened us here in our opinion that we could not offer any help to firms for collecting this tax. Personally, I must say I have not heard any complaint recently. In the beginning we were afraid it would be costly and I am sure it takes a lot of time. In a big firm where there are many people employed the amount, comparatively speaking, spent on staff for this purpose would be small.

Senator Quinlan referred to another point in the Report of the Commission on Income Taxation where the basis of the assessment of income tax on land was discussed. Arising out of that, the Senator thought it should be assessed on a more realistic basis. As far as I know, the Commissioners say twice the valuation is not realistic and that six times the valuation should be taken. The Senator said we should allow for children and also allow for labour. These would be allowed for anyway under the income tax code.

An interesting point made by the Senator was that it should be based on the value of the land, in respect of its capability of producing, and not what it actually produced. Is that not actually the basis on which rates are levied? They are levied on the poor law valuation and there is no regard to the production of the farmer in having to pay his rates. It is based on the value of the land and the system is working. The point made by the Senator is an interesting one and I should like to hear more about it. I do not know whether there would be any change in the collection of rates.

Senator McGuire also spoke in regard to the relief afforded to encourage exports. He spoke of two categories. When this was brought in first it applied only as an encouragement to exports. Looking at it from that point of view, there would be no point in applying it to existing exports. That was the point of view at the time, before I became Minister for Finance, and it was decided to give it to all firms on their increased exports. When I became Minister for Finance I agreed with that. On the other hand, there was a certain grievance that we afforded a small concession in the case of existing exports. That was given more or less to get over a grievance and was a bit out of line with the reason lying behind this scheme of giving relief from income tax on profits from exports. The Senator is aware, I am sure, that the 25 per cent relief on existing exports is now coming to a close but in last year's Budget, I extended it by reducing the amount each year over a five-year period until it fades out. That is all we can do at the moment in any case.

When I spoke about incentives for exports I had the intention of mentioning the distributive trade. In the retail trade quite a lot of money is spent in advertising exports to America. In addition, the retail trade has the 2½ per cent turnover tax on any goods sold for export. The trade itself raised this point. Could anything be done in regard to this matter? Would it be administratively possible and how? If it could be considered I know the trade would be willing to put forward propositions.

I am not clear on the particular point but I shall look it up. First of all, I think the trader need not pay turnover tax if he is exporting the goods. It may be that you pay your turnover tax and then decide to export but I shall look this matter up.

Question put and agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."

I should like to ask a question on this for my own information. This is a section which gives income tax relief on unearned income to people over 65 years of age. Am I correct in thinking that if a person over 65 years of age already enjoys an earned income to the maximum of £600 he does not gain anything?

That is right.

If he is single he cannot get more than £150.

That is right.

I want to raise a point which may be relevant to either section 2 or section 3. Section 2 is intended, as is section 3, to improve the position of people who are living on unearned income and are not entitled to what is called the earned income allowance. However, there is the position of the widow with young children who is living on unearned income. Her husband dies and she is left with young children. If she has been left an insurance policy and other moneys and invests them the return on the investment is unearned income and she does not qualify for unearned income at all. As a matter of fact, that presses very harshly on that particular kind of person.

I think the whole notion of the difference between earned and unearned income is a little out of date. When money was stable and not falling in value therentier, the man living on investments, was a person to be envied. The situation today is very different. Earned income is apt to keep pace with rises in prices. Take the case of a widow with money invested, endeavouring to rear young children; she is not an expert on the stock exchange; she is nervous and anxious for the security of her income and invests it in, perhaps, State securities; she finds her income steady but her costs rising. It seems to me that the Minister, having adopted this particular principle in sections 2 and 3, might very well extend it to cases of the kind I have mentioned, fixing of course, some limit because, after a certain figure, one would not have the same sympathy. Within certain ranges of income, however, it would be very desirable to take some action of the kind I suggest. I am not sufficiently skilled to put down an amendment. Anyhow I know from experience that one must persuade the Minister for Finance. It is very difficult to coerce him. I am endeavouring now to persuade him.

Section 2 deals with the person over 65 and section 3 with the person under 65. The principle is the same in both cases though it varies in application. Those dealt with under section 2 have been getting benefit for a long time. They get relief on the first £600. They are fairly well done for now, I think, because even if they have an earned income—they might have a pension of £1,000—they get the benefit from both. We have never done anything for the people under 65. I got several letters about this prior to the Budget. Indeed, I think these were the people who made the strongest appeal to me before the Budget. They pointed out what we were doing for all the other classes while we were doing nothing for them. I thought we might do something for widows, but then it was pointed out to me that there were others who had just as good a claim. Take, for instance, the very common case of a daughter who remains with a father or mother until he or she dies.

She is not skilled.

She has no trade or occupation. She may have £400 or £500 income. I thought she was deserving of some consideration. The widow with three children gets quite a good allowance because she has £259 for herself and £120 for each child. She gets fairly substantial relief now we apply the principle to all. Those who have an income from investments and who are under 65 get relief on the first £450. This is a start. We are moving in uncharted seas. We do not know what this will cost and we want to find out before we are too generous. After a year or two we shall know how we stand and we may be able to do a little better.

Will the first £450 of a widow's income be treated as earned income?

There is an improvement for widows to that extent.

I candidly admit I do not absolutely understand section 3. I did not have much time to study it, but it is certainly not an easy section to follow. Am I correct in thinking that the effect of it will be that a person will get relief on one-fourth of his earned income up to £450 no matter what age he is?

It is not quite as good as that. It is not as good as section 2 in that respect. Under section 2, if a person has a very big income from investments, he is relieved on the first £600. That does not apply in the case of section 3. We start in section 3 with people over 65. If they have anything less than £450, or up to £450, they get the full relief, as if it were earned income, but, as it goes up, the relief begins to fall back. A person who would have a substantial unearned income would get no benefit.

No matter what his earned income is, if his unearned income does not exceed £450, he gets one-fourth.

Question put and agreed to.
SECTION 3.
Question proposed: "That Section 3 stand part of the Bill."

I made a serious effort to understand this section but I failed completely. We were talking earlier about logic. I do not know that it would not be more logical to phrase these sections in such manner that one could understand them. No one but an expert could understand this section. I congratulate the Minister on his good intentions. I am sure the section will benefit certain people but there is no form of education known to me which would enable an ordinary citizen, no matter how well educated, to understand this section. I am sure the Minister agrees with me.

There are many things in this that I was not aware of hitherto. Like Senator Hayes, I fail to understand the section. However, I think the Minister should get credit for what he is doing. I know many representations were made to him and I am more than glad that he has been able to do something to meet those representations. He should get due credit for that. May I say he is not being fair to himself because very few people will understand what these two sections are intended to do.

Question put and agreed to.
Sections 4 to 7, inclusive, agreed to.
SECTION 8.
Question proposed: "That Section 8 stand part of the Bill."

I should like to raise a point of information. As I see it, the object of this section is to tax large presents given to people on their retirement. That is the effect of the section.

That is right.

Subsection (6) (a) says if the payment is made in pursuance of an obligation incurred before 14th April, 1964, it is not taxable.

I suppose the logic behind that is that, if it were part of the terms of the person's employment it would not be reasonable to tax it.

He has made his agreement beforehand.

The section would not apply to people who get a year's salary on retirement.

No. Section 9 gives the exceptions and that is one of the exceptions.

Question put and agreed to.
Section 9 agreed to.
SECTION 10.
Question proposed: "That section 10 stand part of the Bill."

We have made the case with regard to Schedule A tax on section 1 though this is the section which actually abolishes the tax in a great many instances. It really does not give away anything.

Because it says to be deductible as an expense.

It is just for convenience of collection. That is all. It would be the same amount.

Question put and agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill."

I should just like to make one small point. This section gives power to the inspector of taxes to enter into an arrangement with a ground landlord under which the ground rent can be paid without deduction of tax. I think that is a fair summary of that section.

Yes, that is right.

I do not know whether the Revenue would lose much if it went the whole hog and permitted a ground landlord to be paid his ground rent without deduction of tax. There are very many very small landlords in the country, elderly people who are collecting a few ground rents and are living on them, maybe, and they are not liable to income tax at all because their income would be only maybe a few hundred pounds a year. Those people are put to the expense, trouble and annoyance of applying for a refund of tax.

I knew of one case in the country where a widow had three or four houses. The tenants used to pay her the ground rent without deduction of income tax. However, she got one smart tenant and he insisted on his rights and deducted the income tax. The other tenants followed suit. Each year, now, she has to apply to the Revenue Commissioners to refund the tax. Would it be any great inconvenience to the Revenue Commissioners or would the Exchequer suffer any loss if they did not insist on ground rents being paid on the deduction of tax.

I am sure the Senator understands what the section means. It is moving in that direction. It is a voluntary matter. If either party agrees, we cannot do it. Take for example, 20 tenants in a row, most of whom are not paying any income tax at all. If one says: "We had better pay it in full and the landlord will pay his tax" usually, I think the people agree. That is all right as far as we are concerned. The Senator is asking if we would bring in a compulsory scheme——

Perhaps we should try it like this for a year or two, to see how this works on a voluntary basis.

It is a move in the right direction.

Question put and agreed to.
Section 12 agreed to.
SECTION 13.
Question proposed: "That section 13 stand part of the Bill."

This section increases the excise duty on beer. Last year, the Minister told us that the tax on beer had reached saturation point, that any further tax would bring the tax to the point of diminishing returns and that it would not be worth while imposing a tax. I think I am not being unfair to the Minister when I say that his case for the turnover tax was largely based on that proposition. I think he did make the case time and time again that the old traditional taxes, the old chestnuts of beer, tobacco and cigarettes, had ceased to bring him in the revenue he wanted. He put through the turnover tax on that argument. Now we have a tax on beer again. I object to that on principle and I object to it on the grounds that the Minister argued last year that such taxes certainly would not be increased. I might even say he led us to believe that they would be reduced.

What I have to say can actually refer to some of the remaining sections. I shall say it now and be finished and not rise again. The increases in taxation which are provided for in this and some of the other sections I have referred to bear little or no relation, I think everybody will agree, to the actual increase in prices for beer, spirits, tobacco and, for that matter, for hydrocarbon oils. These rates of taxation apply uniformly to all the citizens regardless of whether they live in Dublin, Cork, Limerick, Waterford or anywhere else.

There is a tremendous variation at the moment in the prices even of beer and spirits. Just let me take a case in point. During the past week, I had actual experience that the prices, for example, of a glass of whiskey can vary from 6d. to 1/- or even more between, say, two houses in Dublin or Cork. One will experience the same kind of variation in the price of a pint of stout, not necessarily of different brands, in either Dublin or Cork. I refer to that because I think it must be said and should be said here that these are classic examples of nothing less than unbridled profiteering. We know that it is going on. I do not think there is any point in our ignoring the fact that excessive profits are being extracted from many different lines of commodities at present.

The point I want to put to the Minister on the remaining sections is that he and the Government have a serious responsibility to the country in the matter of profits. I think allowance for an increase was actually made in the national agreement on wages and salaries between the employers and trade unions earlier this year. Any increase contemplated in that agreement has, I think, substantially been exceeded in most lines of commodities alluded to. Very serious concern has already been expressed by the Trade Union Congress about the fact.

As I see it, therefore, and as I see the situation generally building up, it appears to me that the Minister is already warned that if there is further deterioration in that position and if some attempt is not made to have some reasonable control of prices effected——

An Leas-Chathaoirleach

The control of prices does not arise on this section.

I am alluding to the increases in taxation. They have, in fact, been quoted as a contributing factor to the increase in prices. In that sense, I submit that they are proper to the section.

The Minister and the Government have a responsibility to the people in this respect. If, as a result of these increases, we are now to witness a collapse of the national agreement on wages and salaries, I am afraid the Minister and the Government will have to accept responsibility for that failure. I would urge him, even at this late stage, to have something effective done about it.

On a previous Bill introduced into this House last year, I referred to what I described as a sort of conspiracy on the part of barmen and publicans in regard to the sale of Irish drink as compared with the sale of foreign drink. I should like to take advantage of this section to ask the Minister——

An Leas-Chathaoirleach

Within the Rules of Order, of course.

It does not arise on this section.

Can the Minister give me any information as to why it is that although the duty on Irish brewed beer is lower than the duty on imported beers, a notable beer manufactured not far from O'Connell Bridge by the people who make that excellent drink sometimes costs more but, on the average, the very same as beer brought from Canada, Sweden and Germany? There must be some reason for it. I wonder has the Minister any idea of what is behind the extraordinary situation in which beers can be brought from all parts of the world and charged for at the same price as beer produced in Ireland. I should imagine that with lower tax, and lower excise duty, Irish beers could be sold for 3d, or 4d, or 5d less.

As Senator Crowley has said, the discrepancy in prices of Irish spirits and beers in hotels and bars is amazing when compared with the price of beers and spirits brought in from abroad. Perhaps the Minister would give us some indication of what is behind it. Is it a conspiracy on the part of anyone to push foreign drinks in preference to Irish drinks, or is it just plain stupidity?

An Leas-Chathaoirleach

I do not think it is the function of the Minister to explain discrepancies in prices. He deals with the level of taxation.

So far as I am aware, the duty on imported beer is the same as the excise on home-made beer, so there is absolutely equal opportunity, if you like, for the two. There may be different costs for importing, but that is a matter for the manufacturers. I do not know very much about the comparative prices of home and foreign beers and if there is a difference I do not know what the explanation is. With regard to beer sold in Dublin, the duty we have put on beer is not the sole cause of the increase in prices, because over the past ten years the pint of stout in a Dublin public-house has gone up from 1/3d to 2/1d, an increase of 10d, while the duty has gone up by 2.68d. The Exchequer has taken less than 3d, and the remainder went somewhere else. That is a point which we must keep in mind.

The point raised by Senator Fitzpatrick was made before. I think the Taoiseach and I both made the same point last year when the turnover tax was being introduced, that the traditional taxes had become unreliable so far as revenue was concerned. I have the table here with regard to the consumption of beer, and I think it would prove to any Senator that last year we had reached danger point. About ten years ago a fairly substantial duty was put on beer and there was a reduction in consumption for about four years. The lowest point in consumption was reached in 1958-59, and then it began to go up. It went up regularly until 1961-62, and then there was a fairly substantial drop in consumption.

I have had this examined from the point of view of revenue—not temperance; that is not my business—and I found that if you put a duty on two years in succession you kill consumption and, therefore, you get nothing out of it. Senator Crowley made the point that the turnover tax actually put on an increase. So it did. It was a small increase, if you like, and it would not influence consumption very much. I do not know how this year will work out, but the first quarter shows that there has not been a big decrease in consumption and, therefore, we were right in concluding that we could increase the duty to get an increase in revenue. An increase in revenue was the important point so far as I was concerned. I do not think there is anything inconsistent in saying in a particular year that the traditional sources are not available. It may be the same this year, but I am fairly confident that we will get the increase we budgeted for this year.

Question put and agreed to.
SECTION 14.
Question proposed: "That Section 14 stand part of the Bill."

Is the Minister aware that there is a very serious matter of nomenclature in connection with Irish whiskey. I am credibly informed that in the city of Paris, if you want to ask for Irish whiskey, you have to ask for an "Irish Scotch",un scotch irlandais.

That is true.

I hope the Minister will take it up at the highest diplomatic levels. It seems shocking that Irish whiskey, which is the original whiskey, should be described as Scotch. I hope the Minister will see to it that our Ambassador in Paris will look into this matter, and perhaps he could persuade the Censorship Board to censor all references to it.

Question put and agreed to.
Section 15 agreed to.
SECTION 16.
Question proposed: "That section 16 stand part of the Bill."

A year or so ago I asked the Minister would he consider bringing in tests for Irish petrol. This is a matter of some importance. I still hear complaints that the standard of performance of our Irish petrol is not as high as the performance of petrol in Northern Ireland and Great Britain. We have tests for spirits; and we have tests for food. Why should we not have official tests and checks of the standard of our petrol? That would be highly desirable, especially as the price is now so high, and the duty so considerable. The Government have a genuine responsibility in this matter to see that the quality of our petrol is maintained. I know there are certain difficulties in having these tests. I understand there is no apparatus in the country at the moment for testing petrol, but, if necessary, specimens should be sent outside the country to where they can be tested. A certain amount of public perturbation would be relieved if the Minister gave an undertaking that from time to time he would have spot-tests for Irish petrol.

Apropos this section, and in view of the fact that several times recently rising prices have been attributed to rising profits, I should like to draw the attention of the House to the fact that this is one tax which is a cause of rising prices, because it is a tax on road transport. It can be quite a factor in price costs. I was interested in seeing that the Minister, when questioned on the matter in the Dáil, said that it applies only to road transport on an exclusive basis. Does that mean that the road transport of CIE have to pay this tax and only their passenger buses are excluded?

Yes. It is only passenger traffic that is excluded.

At that rate it takes a bit away from my point that it is private enterprise that really has to pay the piper and pay the tax eventually and at the same time make a profit and stay in business. I gave a litany the other day of the new factors that have come into all price questions in the last year and this is only one of about nine or ten. It is not merely the 12 per cent increase in wages or the 2½ per cent turnover tax.

Question put and agreed to.
Section 17 agreed to.
SECTION 18.
Question proposed: "That Section 18 stand part of the Bill."

I have just a small point on this section, which imposes a duty or tax on firearms. A Bill introduced here last year for the first time controlled airguns and air pistols. Its object was to control those weapons and ensure that they would not get into the hands of very young people, in whose hands they would constitute a danger to others. A tax of a £1 on an airgun is a bit high. It is really going outside the realm of control. A tax of 5/- or 10/- at the very most on an airgun or an air pistol, which is really in the nature of a dangerous toy and nothing more, would be sufficient.

I am afraid that I am not in a position to discuss this. It was discussed when the Bill was brought along by the Minister for Justice. However, I will convey the point to him.

I do not blame the Minister for Justice for the duty or the tax. The Minister for Finance must accept responsibility for that.

I took the Minister's recommendation for all this.

Question put and agreed to.
Sections 19 to 21, inclusive, agreed to.
SECTION 22
Question proposed: "That section 22 stand part of the Bill."

I take it that I might not be in order in discussing death duties in general on this section. A case was made in the Dáil for the imposition of death duties on a basis similar to income tax, in other words, that where a married man died leaving a widow and several young children his estate would not be liable for the same amount of estate duty as a man who left no dependants. I must say that that argument appealed to me as being perfectly reasonable. I know that where a man leaves a big estate and has dependants there is relief from legacy duty and succession duty and that only when the estate exceeds £15,000 does the widow or family become liable for legacy or succession duty and then only at 1 per cent. If a man leaving an estate of £10,000 dies and has not a relative in the world that estate is subject to estate duty at the rate of 8 per cent. If a married man leaves a widow and four or five children his estate is subject to duty at the very same rate without any deduction whatsoever. That follows a very long established and old pattern going back to the introduction of estate duty. This is the age of new and fresh thinking, and the case made by Deputy Paddy Byrne in the Dáil was a very sound one. To go back to the man leaving £10,000 estate and a widow and four children, I think a certain allowance should be made for the widow and each child under sixteen years of age. If for the purposes of argument we take the figure of £1,000 for each of them, then the estate would only be liable to duty at the rate of 8 per cent on £5,000. On the other hand, if the bachelor died with no dependants the State would collect death duties on the full £10,000. I trust that I have made my proposition reasonably clear. It is certainly a thing that should be considered when future Finance Acts are being drafted.

I should like to support the case made by Senator Fitzpatrick. It is one that must commend itself to the Minister and probably one he may be able to effect in the coming Budget. I want to go a little further in that I have had personal experience over the past two years. Some of our staff members died rather suddenly leaving wives and children, rather young children, behind them. We have provision for a widow's insurance to which members of the faculty contribute. In arriving at the amount of the estate for death duties this sum was actually capitalised and was added to the estate which was subject to the increase of taxation from it. This is a very inhuman procedure. It may be strict logic in computing what the man's estate is but it is very inhuman. Probably the best way to get around it might be in the nature of allowances as suggested by Senator Fitzpatrick.

Also, those assessing death duties have sometimes been lacking in humanity in their approach to the widows in so far as they very often descend on the homes of those people, who become subjected to an almost third degree type of investigation of what is the property and the valuation of books and so on. I think that we should not come to the widow and family in that way a month or so after a sudden death. There should be some element of humanity that would accept a notional figure from those concerned rather than go in and start checking books one by one, spending days in the house concerned, as though they were almost suggesting that the widow was guilty of some type of concealment. There is a case here for the exercise of commonsense and above all of a little Christian charity to the families where the heads are removed suddenly.

I mentioned this matter on the Second Reading debate and I should like to mention it again because it is a matter on which I feel very strongly, that one weakness there is in the whole system of public finance here is the system of death duties and the way in which they are operated here compared with the corresponding rates in England. We have retained legacy and succession duties which have been abolished entirely in England and we have three rates of death duties—estate duty, legacy duty and succession duty—and in England there is only one, estate duty.

The actual yield from death duties is not very great in relation to the whole Budget. Everybody knows that to a very large extent death duties can be evaded quite legally and within the four walls of the law by making intelligent settlements, and by gifts given within a certain period before the person's death. It has almost reached the point where it is only a foolish man whose estate pays much death duties, the ways of getting out are so great. At the same time, the fact that taxes are taken out of accumulated capital has a very adverse effect on saving and on enterprise.

During the discussion on Schedule A today we were told about the great importance of encouraging people to save and to build houses for themselves, but death duties strike at the root of all accumulation of capital. A man may work all his life, he may scrape together a sum of money as a result of great hardship, and his earning capacity comes to an end with his death, and the State comes in and takes a very considerable proportion of that accumulated capital if the man has not already done something, quite legally, to evade it. The point I want to make is, I may be wrong, that I believe if death duties were either reduced considerably, or if possible abolished, there would be an inward movement of rich people, that the attractions of living in a country where there was not this recurrent capital duty would bring in people who would be a source of income to the Exchequer in other directions and the amount they would pay in income tax or sur-tax would contribute to the Exchequer revenue. The presence of such class of people is very desirable from the financial point of view. I do not wish to delay the Seanad but I would ask the Minister seriously to consider whether the whole death duty system is not inappropriate to our conditions at present.

Senator Fitzpatrick made a point that we should regulate our death duties so that there would be more favour shown to the widows and children than to the people who died without near relatives. That is done in the succession duties. If a man leaves all his estate to his wife and children only one per cent is charged after £15,000. If he left it to a nephew or niece or to a brother or sister it would be 5 per cent and to anybody beyond that it would be 10 per cent, so that it is graded to give the greater benefit to widows and children. Senator Quinlan said that he thought the methods used in investigations were somewhat inhuman. I must say I have not heard that before but naturally I shall keep that in mind. I have come across a fair number of people in recent years who asked me questions about the estate of some relatives and I never heard a complaint that the people were treated inhumanly by the officials. In fact, some of them went to great pains to tell me how kind and considerate the officials had been to them. I hope that was true.

As Senator O'Brien points out, a person can avoid the payment of estate duty by making over his property at least three years before he dies. Of course, if he does that it probably has a good social effect. It is no harm to have that inducement to people who are getting old to get rid of some of their goods and give an opportunity to younger people to make use of that money in development or some other way. I was convinced by the argument put forward by Senator O'Brien some years ago that we could induce people to come in if death duties were lower. We made considerable reductions at the top some years ago and the highest death duties here is 40 per cent while it is more than 78 per cent in England. I do not know what effect it had and we will not know for some years, but it must always be remembered that it is not enough for the person to come, he must bring his assets here before his death otherwise they will not be treated for taxation. That is the difficulty. In some cases a person with large assets might find it difficult first of all to realise them and secondly to find suitable investments here. However, we are trying that out, the experiment of trying to induce people to come here, and I hope we will be successful.

I raised this point of Senator Fitzpatrick's on two occasions before with the Minister, the position of the widow and children of a youngish man who dies and leaves an estate. May I say that it is quite irrelevant to point out that if the man had left his property to his nephew he would be worse off than the children. Surely if a man under 40, who has a wife and three or four children, dies, his property will always go to the widow and children and they are subjected to estate duty. It is feasible to enshrine in the estate duty code what is in the ordinary income tax code, namely, that a man with a wife and children pays less income tax than a man with no wife or children. That could be brought suitably into the estate duty code so that when there is a widow with children they would pay less death duty than other people or than perhaps a widow with no children. The Minister is very pleasant to deal with but when he said that if a man's money were left to his nephew there would be more duty paid than if it were left to his children it does not really cut any ice.

Question put and agreed to.
Sections 23 to 26, inclusive, agreed to.
SECTION 27.
Question proposed: "That section 27 stand part of the Bill."

While the figure for CPT in respect of directors' salaries has been extended from £1,500 to £2,500 and is very welcome, it is still felt that the Minister might have gone the whole hog and made it £3,000. It is generally accepted nowadays that £3,000 is a figure which should be paid to a senior executive in industry and it seems wrong that just for the sake of an extra £500 a company should be penalised. It is only a small point but it is felt that in a matter like this—it could not cost the State very much—and in the present state of development of our industrial wing, anything that can be done in this direction to encourage top management and encourage the proper remuneration of people without throwing back an extra charge on the company, should be done. I just wanted to raise the point as it was mentioned by the chamber of commerce.

It is an arguable point and I shall keep it in mind.

Question put and agreed to.
Sections 28 to 35, inclusive, agreed to.
First to Fifth Schedules, inclusive, agreed to.
Title agreed to.
Bill reported without recommendation.
Agreed to take remaining Stages today.
Question proposed: "That the Bill be received for final consideration."

Is the Minister satisfied with the quality of Irish petrol and, if not, is he prepared to do something about testing it?

I have not had any complaint. I remember the Senator made the complaint before but I have not had any complaint since.

Perhaps if the complaints are directed officially to the Minister, he might look into it.

Question put and agreed to.
Question: "That the Bill be returned to the Dáil" put and agreed to.