There is one question I should like to ask the Minister on this section. What is the position now under Schedule A income tax? I understand that since the special arrangements for the taxing of rents in the Finance Bill of two years ago, the position is that practically all of the taxation under Schedule A which is not immediately transferred to another Schedule is the taxation on actual domestic self-owned houses. I do not know if that is correct.
Finance Bill, 1965 (Certified Money Bill): Committee and Final Stages.
Question proposed: "That section 1 stand part of the Bill".
The charge is on owner-occupied houses as well as on farm buildings but the charge is also put on factories so that they may be entitled to the allowance available to factories.
Would the Minister have any idea of the amount of tax actually collected under Schedule A under the headings of owner-occupied houses and factory premises?
I understand that the amount of tax collected under these headings is upwards of half a million pounds.
Under both headings? I would ask the Minister in connection with the Finance Bill next year to consider very strongly the recommendation which, I think, was made by the Income Tax Commission, that Schedule A, as such, might well be abolished in the interests of tax simplification. In this case I think there should be a proper arrangement in regard to factory premises and indeed it would be a very good relief, and a relief in the proper direction, if the Minister were to abolish Schedule A completely, thereby abolishing the tax on owner-occupied houses and allowing the tax on factory premises that is necessary to remain under some other heading.
For years, nothing has been done to increase the income tax allowances in respect of a wife and children. It means that the taxation code is becoming more and more discriminatory and unfair to the family as against the unmarried individual. I think that is wrong and I am surprised that no steps have been taken to remedy the situation. Today, the £120 allowance for children is worth only £40 in pre-war terms and has not been altered for many years.
The House is aware that our basic rate of income tax has been reduced considerably over the period the Senator has in mind. Like many an answer a Minister for Finance can give to suggestions of this nature on a Finance Bill generally, one has to take account of the cost of these things. While it would be desirable that we should increase the allowances in respect of children and dependants, the difficulty is that it would involve tremendous cost.
One of the big difficulties I had this year was to ensure, having regard to the desirability of increasing social benefits generally, that I would avoid touching income tax at all because we wanted to maintain income tax at its present level. I had to make strong efforts in many directions in order to ensure that the basic rates were not touched. But, as the Exchequer condition permits, naturally, it would be the desire of any Minister for Finance to give greater benefits in this direction. I am not unmindful of the desirability of doing so. However, at the moment, the cost would be very prohibitive.
But surely what is called for is a readjustment of the scale? If that means increasing the upper rate so that increased allowances can be given in respect of a wife and children, then I think that is only right and proper and should have been done.
Question put and agreed to.
Sections 2 to 13, inclusive, agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill".
I should just like to record here the fact that these proposed increases in duties are undesirable because of their impact on the economy and on costs generally. When this matter was raised in the other House, the Minister was not prepared to make any change in regard to them. The whole question of duty on fuel for transport is something to which consideration needs to be given. One can understand the Minister's concern to tax petrol used for personal purposes and the great difficulty of making any distinction. The desirability of having petrol for pleasure motoring as a source of taxation and the undesirability of taxing fuel used for purposes of transport, for industrial and commercial purposes, are such that it needs to be considered in the long run whether it may not be possible to make some distinction between the two, despite the difficulties involved. This is something we are unhappy about.
Question put and agreed to.
Section 15 agreed to.
SECTION 16.
Question proposed: "That section 16 stand part of the Bill".
Is there any further development in regard to the duty on wine? I understand that, in the Dáil, the Minister left himself open to representations on the question from the trade and was a bit surprised not to have received any representations. Has the Minister's surprise at not receiving any representations, as stated in the Dáil, evoked any representations since then or any constructive suggestions because, in the form proposed, this seems unnecessarily onerous on the cheaper wines?
The whole question of the wine duty and the fact that it falls per gallon rather than ad valorem seems rather contrary to the normal principles applied in this case. I am wondering whether there have been any representations or whether, in the absence of representations, the Minister has had any second thoughts on this general principle or whether, if not, this is something to which he would give further consideration in the future so that we could have a wine duty which would be more in line with the general principles of taxation of taxing luxury goods more heavily than goods which are used by people with lower means. In the case of wine, the flat rate duty means that the percentage of tax on a cheap wine used by people of modest means is extremely heavy, whereas the tax on dearer wines is absurdly low, quite frankly. This is something which, in the general interest, should be looked at. I wonder whether the Minister has had further representations or is thinking of any change now or in the future in this regard.
During the course of the Second Reading of the Bill in the Dáil, I announced that the section contained provision for a flat rate increase, that I recognised there were certain anomalies in the existing situation and, as Senator Garret FitzGerald has said, that the duty applies at the same rate to the cheaper wines as it does to the dearer wines. There are four categories, having regard to the different percentage of proof spirit.
On the Second Reading I suggested that, even before the new rates would operate, the Revenue Commissioners were willing to discuss with representatives of the wine trade suggestions as to changing the incidence of duty. At the same time, I made it clear that it was necessary to get in as much money as the new rates would get in. There was, in fact, an inquiry immediately after that: I understand it was a telephone inquiry. Deputy Sweetman raised it on the Committee Stage and I told him no further communication had been received. Even after that there was no further communication from the wine trade. The Revenue Commissioners are still open and anxious to discuss a change in the system to eliminate what would appear to be anomalies in the present method of the taxation of wine.
I welcome the Minister's openness on this point. It is not simply a question of the interests of the wine trade. It would be undesirable to make a change in the existing system without consulting them to see what impact it might have. But it is really a question of a change in the public interest, taking into account possible interests of the wine trade, rather than a question of waiting to see if the wine trade want a change for their purposes. The fact that the Minister is open to suggestion is a good thing, but it may be necessary for him to take the initiative in reforming this particular aspect of our legislation. It may be desirable even if it does not suit parts of the wine trade. That would not necessarily mean it should not be done. I would ask the Minister, on his own initiative and irrespective of whether he gets any more telephone calls on the matter between now and next year, to see whether some revision in the form of this taxation without any loss of revenue could be undertaken.
I should like to support Senator FitzGerald on that point. At the moment the cheaper type of wine selling at from 5/- to 7/- costs a shilling extra while the dearer wines costing from 17/6 to 25/- also cost a shilling extra. That is not a fair way of allocating the extra taxation. The wine trade are not the people who should be looked after in this, but the general public. I do not see how the general public can bring pressure to bear except through protest in this and the other House.
In case there may be any misunderstanding about this, there are already different rates of duty for different categories. On the first category, 25 per cent proof spirit, which embraces the usual table wines many people are taking nowadays, the rate is 6/-. On the next category, 25 to 30 per cent proof, it is 10/-; and exceeding 30 per cent but not exceeding 42 per cent, 24/-. Then we have sparkling wines in bottles charged at 38/9d. Therefore, there is a graded rate of duty in existence at present. I do admit the new position is a flat rate of 1/-. The Revenue Commissioners are prepared to discuss simplifying this categorisation because I think it needs to be simplified. I certainly will have regard to the points made as to the impact on different sections of the community of the rate of duty and any increases that will take effect.
The Minister will appreciate as well as any of us that the value of wine is not directly related to the alcoholic content. Other factors enter into it. Are there any serious technical difficulties in the way of substituting an ad valorem duty or is it simply that this flat rate on a graded basis is the traditional type of taxation?
I should imagine the simple answer is we are following tradition on the alcoholic content. I do not see any reason why consideration should not be given to ad valorem rates and that will be considered.
Question put and agreed to.
Sections 17 to 19, inclusive, agreed to
SECTION 20.
Question proposed: "That section 20 stand part of the Bill."
I think this is the section on which it is appropriate to raise this question of a differential rate of estate duty for farms. This was discussed in the other House. The Minister's answer, if I recall it correctly, was that in Ireland the fact that farmers do not pay income tax in the ordinary way puts them in a favourable position and this was a kind of opposite factor against the higher rates of estate duty payable. That is not a very satisfactory kind of answer. What the Minister really is saying is that taxation on agriculture in Ireland is doubly anomalous. It is anomalous in that income tax is not paid and in that an excessive rate of estate duty has to be paid, I cannot see two anomalies adding up to a satisfactory situation. A start could be made by trying to remedy one of the anomalies. It seems to me the situation in which the estate duty on agricultural land is higher here than in Britain and Northern Ireland is something undesirable and needs to be looked at.
Strictly, it does not arise on this section. If the Senator would repeat it, I might be able to catch up with it in my notes.
My notes against this section suggest that that matter has arisen in the Dáil in this context. I may be quite wrong. Where should I raise it?
Let us accept the Senator is correct in raising it here. Unfortunately with the change in numbering, I was not able to adjust my brief accordingly. I think I can deal with it in any case.
Reference was made in the Dáil debate to the rebate of estate duty allowable for agricultural land. In Britain since 1925, the agricultural value of agricultural land has been charged at a rate lower than that applicable to any other property. In that year, 1925, the general rate was increased, but it was provided by means of an amendment introduced on the Committee Stage of the Finance Act of 1919 that the lower rate should continue to apply to such agricultural land values. Later Acts left the rate untouched until 1949 when the Finance Act of that year provided that the agricultural value of agricultural property should be charged not under the 1919 scale but under the same scale as any other property with however—and this was the important point. —a reduction of 45 per cent.
The agricultural value of agricultural land means the value it would bear if it were subject to a perpetual covenant prohibiting its use other than as agricultural property. If the actual market value of the land were greater than this, for example, if the land had potential building value, the excess is chargeable at the unreduced general rate. The system in the Six Counties is the same as operates in Britain. There were of course economic and, to an extent, historical reasons for the preferential treatment given to agricultural land in Britain because of the acute depression then existing in agriculture.
As I said in the Dáil, our farmers enjoy certain advantages by way of remission of rates and otherwise. While I will have a look at this between now and the next Finance Bill, I do not think there is anything I could do at present to give further relief to farmers in this regard.
I appreciate the Minister cannot do anything at the moment. I am glad to hear he will look at it between now and next year.
There is one small point. I notice the Minister referred to the "Six Counties". That was the traditional method of referring to Northern Ireland but I think we have started to move away from that. I feel this was a slip of the tongue rather than an intention to continue a practice which we have, I think wisely, decided not to continue.
Of course, I should have mentioned that farmers are chargeable on profits in Britain under Schedule D.
I appreciate that.
Question put and agreed to.
SECTION 21.
Question proposed: "That section 21 stand part of the Bill."
There is a point here. Again, the Minister will forgive me if I am not raising it on the right section. I am glad he was confused by the numbering because I certainly have been. Quite apart from that, there is difficulty in knowing just what is the right point on which to raise matters. Section 21 is the section on discretionary trusts, if we are working from the same version, and there is a point that I should like to raise here. There is an Act in Britain, the Variation of Trusts Act, 1938, which does not exist here and no equivalent of it exists here. I am wondering whether this is something the Minister might give consideration to because the absence of this Act can give rise to difficulties which may be aggravated by some of the clauses, including section 24, of this Bill.
Under the Variation of Trusts Act, where there is a trust with a life tenant, there is power to go to the court to wind up the trust and the life tenant then obtains a share of the value of the estate appropriate to his actuarial share. In a particular instance, this may be, for example, 40 per cent of the value of the estate and if then the estate is wound up and if a period of three—or, now, five— years elapses, then the death duty payable on the death of the life tenant would only be on his 40 per cent that he actually gets, the actuarial valuation of his interest, whereas, under existing legislation here, the whole 100 per cent, if I understand it correctly, would be liable.
The absence of legislation of this kind does seem to be inequitable here and now that the period is being extended to five years, there will be even more cases under section 24 where this problem will arise. I wonder will the Minister give consideration to introducing an Act of this kind to make possible the winding up of trusts in this way because of the increased inequity that will tend to come from this Finance Bill. I am not sure whether it is correct to raise this an the section under discretionary trusts or under section 24. Perhaps the Minister will take it now?
The legislation in Britain to which the Senator has referred, the variation of trusts legislation, I understand, applies in the case of miners, to give power to alter provisions in trusts for the benefit of miners. The short answer for me at this stage—and I should like to take short answers, if I could—is that this would be a matter, not for finance legislation but rather for legislation under the aegis of the Department of Justice.
I appreciate that. I was just wondering whether the Minister would be prepared to draw the attention of the Minister for Justice to the fact that some of the things he is doing in his Finance Bill create an even stronger case for introducing this kind of legislation here.
I will do that.
Thank you.
Question put and agreed to.
SECTION 22.
Question proposed: "That section 22 stand part of the Bill."
I should like to welcome the amendment the Minister introduced on Report to limit the operation of this clause of the Bill to the type of avoidance which it really was directed to deal with. As originally worded, it was too wide and we ought to welcome the fact that when the Minister's attention was drawn to the fact that he was doing more than he wanted or intended to do, he made the necessary amendment to limit it to the case of avoidance in regard to those transactions known as Jersey mortgages. This change is one we all welcome.
Question put and agreed to.
Section 23 agreed to.
SECTION 24.
I move recommendation No. 1:
In subsection (1) to delete paragraph (a).
In the amended section 24, I find it very difficult to see what is the distinction drawn between a non-contributory and any other superannuation scheme. While subsection (1) applies to non-contributory superannuation schemes, subsection (2) applies effectively all the advantages of subsection (1) to other schemes. Why the distinction between the two? I put down the recommendation drawn between a non-contributory is in the mind of the Minister between the two.
It is important to remember that at the moment benefits arising on the death of a person who is a member of a contributory scheme are already liable to estate duty. At the present time, benefits arising on the death of persons who were in non-contributory schemes are not liable to estate duty but they are liable to succession duty at 11½ per cent, which is more onerous than the estate duty provisions. So that, while it appears to be bringing benefits arising on non-discretionary trusts into the ambit of estate duty for the first time and, therefore, might appear to be a new imposition, nevertheless, it is relieving to the extent that they would not be liable for the same rate of duty, that is, 11½ per cent succession duty, to which they are now liable.
What, then, is the difference, if any, between the present taxation levied on benefits arising under a contributory superannuation scheme and under a non-contributory superannuation scheme?
Of course, the estate duty rate depends on the amount of the estate and section 25 will aggregate these benefits where there are a number of benefits applying. I would have to refer to the percentage scales of duty that would apply to the different levels of estates. Under succession duty provisions, 11½ per cent is the flat rate and is much higher than the rates that would be leviable on the moderate estates that will arise in the case of benefits arising on the death of persons who have been members of these superannuation schemes. To give an example, you start at estates exceeding £5,000 and the charge is one per cent estate duty. Before the estate duty impact would exceed the succession duty impact, the estate would have to exceed £17,500. That is the kind of indication the Senator wants. In other words, up to £17,500, the succession duty is much higher and it levels off at £17,500, but estate duty gets higher from there on than succession duty at 11½ per cent. In general, I think in the great bulk of cases the inclusion of non-contributory trust benefits would provide relief rather than create a new charge.
We seem to be on different sections. My only point is that it appears to me that a non-contributory pension scheme is no different from a contributory pension scheme. When a person enters employment, there are provisions for pension there and it does not matter whether the company goes through the formality of either deducting the five per cent from his salary or else paying the five per cent themselves and reducing his salary by that amount. He winds up with the same amount and each scheme has the same ultimate objective, to provide a retirement pension or a death benefit. I cannot see that under section 24 there is any difference between the two when the Minister has made it clear that the non-contributory scheme will be brought within the ambit of estate duty instead of succession duty. There is no difference between the two and if that is so, I welcome it very much.
That is the effect of the section. I should have said that Senator Alton made this point yesterday when I was away and what I said in reply to Senator Quinlan covers the point made by Senator Alton. I think Senator Alton said we should not apply estate duty to death benefits but they are already applied to death benefits arising out of contributory schemes and not to death benefits arising out of non-contributory schemes but now the two will be on the same basis.
I thought the purpose of the amended form was to alleviate some hardship to which attention was drawn in the other House but in fact the changes now proposed are more penal than the original draft. In this case exemption is withdrawn from non-contributory schemes.
Section 24 as such is a relieving section and benefit up to £5,000 is relieved; in other words, the £5,000 estates are relieved, but section 25 makes these things aggregable with the rest of the estate. Up to this, securities, cash in bank, or whatever it was, was one estate for estate duty purposes. The moneys accruing by reason of death benefits were another estate. Section 25 puts these two together, for estate duty purposes. While section 24 is a relieving section, section 25 is a different kettle of fish because it aggregates the estates.
It is a question of how it relieves. I understood the idea was to raise the exemption limit and that is the purpose of the amendment but is it not the case now that in the original draft there was an exemption proposed for non-contributory schemes and this has been withdrawn by the amendment on Report Stage?
No. The new section 24 is a re-draft because as it originally appeared, it created the impression that estate duty was being applied now for the first time to death benefits. There is no change in the import of the section as it appears now and as it appeared originally, except that the provision in its original form gave the wrong impression.
Did I understand the Minister to say earlier —my attention was momentarily distracted and I may have got it incorrectly—that benefits arising from non-contributory schemes are not liable to estate duty at present but are liable to succession duty?
Yes.
I am informed that this in fact is not the case. A firm which deals in matters of this kind acting as trustee for both schemes in the past 15 years has furnished accounts and paid estate duty under both schemes and there has been no distinction in the way the Estate Duty Office treat the two types of schemes.
That is the result of an arrangement whereby the Revenue Commissioners allow the persons who would be liable to duty arising out of a non-contributory benefit to be chargeable to estate duty rather than succession duty. If they say: "We are not liable to estate duty", the Revenue Commissioners say: "Very well; you will have to pay succession duty."
Also in regard to the exemption of death duties up to £5,000 on superannuation death benefits, I understand this will have a very limited effect and it will be applicable to only about one-fifth of the total superannuation schemes at present in force.
I understand that is not the experience—that the vast majority will be relieved.
My information comes from people who are very much involved in a very wide number of schemes and they say categorically —it is something they have looked up and while there are no accurate statistics a close estimate shows—that only about one-fifth of the cases are relieved.
I had the same information.
They may be the type of schemes which are deliberately organised for tax avoidance.
No.
Means whereby directors of companies can get payments stowed away for the benefit of their successors, which would form a separate estate which they do not provide and therefore not liable to estate duty.
No. I understand that 80 per cent of the schemes under £5,000 are non-contributory.
Could I ask the Minister whether in fact, as we now have it, there is a distinction between the contributory and non-contributory scheme?
There is no distinction under the Bill. Up to now there has been.
Would the Minister be prepared to consider the suggestion that the £5,000 should continue to be free of duty and where the total superannuation scheme death benefit exceeds this amount, the rate of duty should be assessed over the £5,000 superannuation scheme death benefit?
That point was made, too, in the Dáil. Unfortunately, I had to resist it because the same kind of demand could come from people liable to estate duty in which there was no involvement in regard to death benefit.
It is my understanding that whether a person is caught or not depends on the precise amount. If you go over a certain figure you are completely caught and under it, you are completely exempt. Surely there should be some system of grading so that the mere fact that an estate is valued at £5,060 as against £5,000 does not bring in the whole estate but the marginal amount?
The marginal relief covers that. Let me give an example. If an estate of this nature is worth £5,060 and if the assessment of duty would make it liable to say, £100, only the £60 in excess of the £5,000 is assessed. Strictly speaking, once the estate exceeds the limit by even a small amount, it is only the small amount by which the limit is exceeded that will be taken for estate duty and not the full assessment on the estate.
There is one final point. Has it not been the case hitherto that death benefits under a superannuation scheme have been available to people immediately without their having to await the taking out of probate? I always understood that was the position. That was a great advantage to a man's widow because she got her money immediately. Is it the intention now to change that so that, in fact, widows will have to wait, regardless of what provision is made, for probate before they get any funds?
There is no change. If the benefit is paid directly to the nominee probate is not involved; but, if the benefit is payable to a personal representative, payment will have to await the issue of probate.
It is true then that payment will be withheld until the amount of the duty is ascertained.
Not necessarily.
Then what does it mean?
There is no change as compared with the position that obtained hitherto.
Except that things are being tightened up. Surely that is a change.
As far as I know widows, who before would have got their money under the Married Women's Status Act or under a superannuation scheme, will have to wait for probate now and that will take at least a year.
That is not the case.
Recommendation, by leave, withdrawn.
Question proposed: "That section 24 stand part of the Bill".
There is a growing tendency, and it is a very proper one, towards greater concern for the family. Many means are being used to try to ensure that the family of a young man cut off in early life are provided for in some modest way. This cannot be done on a strict actuarial basis because in most cases pension schemes are tied to the number of years' service of the husband and related to the pension he would earn. If I am not mistaken the banks have already a pension scheme for widows on the lines I have adumbrated. Actually, if the husband is cut off through tragedy, the maximum decreases almost to nothing at the end of the normal period of 65 or 70 years, which represent the normal retirement age. In other words, the scheme is devised to provide cover for a widow.
I know of one case in our own staff, though we do not have such a scheme, in which a young widow is involved. The younger the widow is the better because the pension is computed on her life expectancy, and, therefore, the younger she is the greater the value of her pension and the greater the tax the State will levy on that pension; and, incidentally, the greater the bite the solicitors try to take from her for carrying out probate. I regard both of these as absolutely immoral acts. I wonder could the Minister examine this to see if some reliefs might not be given to meet that situation. There could be a maximum number of years put, say ten years, or a little more on the aggregation. The idea would be to try to meet the proper intention of the scheme, which is to ensure that a widow and young children are not left struggling. It is wrong that either the State or the solicitors should profit by the fact that the man was cut off at 35 rather than at 65.
It would be very difficult to provide specifically for such a case. The better way of doing it is, I think, the way I have tried to do it, even though it is an average rate. It, of course, assists the widow with dependent children. She gets a relief of £250 and £150 for each child, and not only each dependent child but for each child attending a course of fulltime educational instruction. That £250 and the £150 is not really from the estate. It is really from the actual amount of estate duty payable. It is a more direct relief and would come to the aid of the person the Senator has in mind. No matter at what age a woman becomes a widow she gets a relief of £250 and an extra relief of £150 for each dependent child. As I should like the Members of the House to know, it is not a relief on all of the amount of the estate that would be assessable but the actual amount of duty that would be payable.
The trouble there is that, as I mentioned yesterday with house property at the present price, it is practically impossible to take out a policy nowadays and not run over the £15,000 level. Once you run over that level all the benefits are gone and so your flat rate does not matter at all. I made the case yesterday that it was not possible for a widow and four children to have the same amount each per week that the State would give to keeping a child in an institution without having over £15,000 of an estate.
Since the Senator referred in particular to a policy, I take it he has in mind insurance policies and we shall be dealing later on with the reliefs that will be given to sums payable on insurance policies that are indefeasibly vested in the beneficiary. It is rather complicated to go into it now. I think it would be better to go into it when we come to the appropriate section.
One further point—how is a widow's pension of, say, £300 computed for estate duty purposes? Does it not depend on the age of the widow? And the younger she is the greater the amount that is charged against the estate?
That is right. There is an actuarial value on that basis.
In other words, a modest pension of even £300 a year —indeed, that would not carry a widow very far these days—provided for a widow if her husband happened to be cut off when they were still in the middle 30s, the present value of that would be regarded as at least a 15 year purchase or, perhaps, even more?
Perhaps, in excess of ten. I am not an actuary and I would not know how they operate.
It would be at least 15, and 15 by £300 gives £4,500. I am just pointing out that the Government this year in bringing in special grants for exceptional cases such as multiple births have recognised that a certain occurrence may mean a hardship or an extra grave demand on a family and in the same way I think, perhaps, in future Finance Acts the Minister might be able to put some ceiling on the number of years used for aggregation.
The case the Senator has mentioned would be exempt.
In what way?
It is under £5,000.
Yes, but she may have other property as well.
That does not matter, even if she has other property.
I do not want to go much further into this but I appeal to the Minister between now and the next Finance Act to see if he can do something that will ensure that the pension computation for a widow where her husband is cut off in early life is not substantially greater than for a widow whose husband is cut off in middle life, at least. In other words, I think in the actuarial calculation of the value of a pension of a widow with dependent children there should be a clear upper limit in the number of years purchase of the annuity that is taken in the calculation.
I am always willing to look at a suggestion although when I say that it does not imply an undertaking to any extent that I will do something about it.
I understand that and I raised the matter because we have had widows on our staff and I am very much aware of the hardships that have accrued due to this.
The more I see of this, the more I read of the Bill and of the debate in the Dáil and Seanad and the more we go through the Bill the more convinced I am that as a method of taxation estate duty is singularly inappropriate, unjust and hazardous. It is unjust because of this hazardous element and it encourages avoidance and it gives rise to the most complex type of legislation. I think we should give some further thought to it. Obviously, taxation of capital is necessary to prevent the accumulation of large fortunes but I am convinced it ought to be possible to provide for this other than by the complex battle of wits that is involved every year leading to more and more complex legislation. The Minister feels it is necessary to tighten up to prevent avoidance and I can understand his desire in that respect but, obviously, the more he tightens up the more marginal people suffer because there are bound to be inequities and hardships as a result. Those who suffer are people who should not be put in that position simply because we have a system of taxation which creates great pressure for avoidance. I think we should give consideration to some system of taxation of capital on a current basis and get away from the whole concept of estate duty.
Question put and agreed to.
Section 25 agreed to.
I want to draw the attention of Senators to the fact that from now on the numbers will be changed. A new section has been inserted in the Bill and from now on section 26 will become section 27 and so on.
The Minister promised to give me an answer under this section.
No, under section 25A. I shall deal with the Senator's point under section 25A.
SECTION 25A
This now becomes section 26.
Question proposed: "That section 25A stand part of the Bill".
I do not want to go too far back into this question but it is very difficult, without picking up threads some distance back, to explain that in the 1955 Act certain insurance policies were made aggregable inter se. Up to then certain insurance policies were regarded as not being property in which the deceased held an interest and, therefore, were not taxable, or rather they were taxable, but they were not aggregable. They were made aggregable inter se by the 1955 Act. This Bill proposes to make them aggregable with the rest of the estate but it was represented to me that there was a certain merit in encouraging people to take out policies of insurance that would be indefeasibly vested in their dependants; in other words, there would be no strings attached to it in case something happened in the meantime during the life of the person who took out the policy. As the House is aware, we are introducing this new concept of a five-year period instead of a three-year period for gifts inter vivos to operate. I have decided to use this device in such a way, strangely enough, that it will give relief to the incidence of estate duty on the amount payable under insurance policies and the simplest explanation I can give, even though the figures will not necessarily apply, is to take an example.
Assume that a person takes out a policy for £1,000 indefeasibly vested in his wife. On his death the wife is entitled to the policy of £1,000. Instead of the £1,000 as such forming part of his estate for estate duty purposes, I am adopting the device of taking the five year period in which gifts inter vivos would now be caught for estate purposes and assuming, up to that five year period before the death of the person concerned, that the £1,000 policy at that point by reason of the contributions paid would be valued for £600. In other words, the surrender value would be, say, £600. Therefore, the value of the policy by reason of the contributions made during the five years before the death would be £400. In the Bill, while I am increasing the three years to five years, I am providing for reliefs as to 60 per cent of the value of the property in the fifth year; 30 per cent in the fourth year and 15 per cent in the third year.
To take a better example I should have said £500 would be applicable to the last five years. That £500 instead of being all liable for estate duty was to be split up into separate units of £100 in respect of those five years and 60 per cent would come off the £100 for the fifth year; 30 per cent off the £100 for the fourth year and 15 per cent off the £100 for the third year before death, so that instead of £500 being liable it would be £200 for each of the last two years before death, £100 less 15 per cent or £85 for the third year added to the £200, plus £70 for the fourth and £40 for the fifth year. That would be a very substantial relief by way of liability to estate duty for moneys arising out of these insurance policies.
I appreciate that the Minister has been trying to give relief in various ways but in these sections everything seems to be looked at in reverse. The age group 30 to 40 is the most likely group in which a man will have a young family and on whom he will have insurances. If he dies while he is in this age group he will lose the benefits. The older he gets the more this policy is going to be a gift in free. The sooner he dies after taking out a policy the heavier will be the taxation so we are back to the same principle. If he has a decent house he cannot stay below £15,000 if he dies within a year after taking out the policy, so that it becomes more severe on this particular age group. I realise that in the later age groups the Minister is closing the tax net. Every provision the Minister is making is hitting harder at the man in the 30 to 40 age group with a young family.
Perhaps, it would be fairer for the Senator to say that every relief may be of less value to the younger person. I appreciate that but it is difficult to ensure that you are fair in all circumstances. It is difficult to take account of every separate individual case.
But to exempt policies for those under the age of 40 would be easy.
Of course, as I said before, you have the abatement provision which will help the younger man.
I should like to support Senator Alton's plea for more consideration for the 30 to 40 age group. I believe that the United States tax codes are being slanted quite a bit in this direction and most of their insurance investment is slanted away from strict actuarial calculations and is based on giving maximum assistance where it is needed most. In other words, in the early period when a tragedy does occur it is tapered off. Their tax code, corresponding to estate duty and so on, is so framed as to take account of this. I suggest to the Minister that before the next Fianna Fáil Bill he might have a look at the comparable United States tax codes and, perhaps, he may get some ideas from those as to how to minimise this real hardship. The Minister has admitted that the reliefs given become less in that group than in the older groups.
In connection with insurance policy reliefs.
Yes, in connection with insurance policies. That, in effect, is against the very idea of insurance and it cannot be good legislation which is slanted that way. It is slanted in the wrong direction. Obviously, the relief should be greater for that group and then taper off afterwards.
At the risk of stimulating more speeches I should like to give an example that might, I hope, appease the Senators, or at least relieve the apprehensions they have. If you take a widow of 35 years, with four children, her liability to estate duty begins at £12,600 which is reasonably substantial in circumstances like this. I might point out, too, that such a widow may be obliged to pay a mortgage on the house but she will get an allowance for the mortgage. If she has a house which has a market value of £3,500 or £4,000 she will get an allowance for estate duty purposes in respect of whatever outstanding mortgage she herself will have to pay out.
It is a good example but, unfortunately, that all goes by the board when you touch £15,000. While it may appear to be a substantial sum of money for a widow to have, it will not really get her anywhere and we are back to the same position again.
Arising from the Minister's example, if this widow had taken out a small insurance policy such as the type of policy which for a payment of £6 per annum entitles you to £100 per annum until you reach the age of 60——
May I interrupt the Senator? If she had taken out the policy she would not be liable.
I mean if the husband had taken it out. This is the type of policy that I and many of my friends have. If the man dies at 35 the widow and family are entitled to receive £100 a year for each £6, for the following 25 years. If the husband had taken out a policy for the widow and each child they would receive £500. That policy has to run for 25 years and its value would be reckoned at between 16 and 17 times the value of £500. If it was 16 times the value would be £8,000. If in addition the widow has a house and furniture and other contents, with a value of, say, £3,500, in the case of the house, and £1,000 for household effects, that would bring her up to the £12,500 limit. At that stage she has a mere income of £500 for herself and the four children and probably has to pay rates on the house and so on, so that she is still in a very low income class. This is all caused by the fact that the calculation on the present value of this small insurance is so high. If that had been limited to five or seven years it would at least have kept the value down and have made the limit of £12,500 of some value.
In such a case I do not think that she would pay tax but when I see the record I can go into it.
It is just for next year. I can give the Minister details of some real hardship which was caused in the past two years to at least two families whom I know. This was aggravated by death duties and in one case by extravagant litigation.
The Minister made reference to the fact that if it were the wife's own policy, duty would not be payable. Where the husband takes out a policy and subsequently transfers it to the wife which, I think, can be done, does this save the policy from estate duty after five years?
The same abatement would apply.
Abatement?
If it is indefeasibly vested in the wife.
After five years, there is no death duty payable?
If it is a fully paid up policy at the beginning of the five year period.
Supposing it is not. Supposing it is a policy begun by the husband which is half way through and which the husband hands over to his wife. She continues paying it, perhaps, out of money made available to her by the husband.
If she pays it, the five years would not apply because it would be her property. I take it this arises only if it is the husband who dies.
Quite. The case I am putting is where the husband gives the policy as a gift. If he survives for five years and she goes on paying it out of funds made available to her by the husband——
No duty, unless the premiums are paid as the result of an arrangement.
One other policy now available but which was not ten or 15 years ago is an income policy for the wife under which a husband tries to secure that if he dies the wife will, after a certain period, get an income each year. The income is paid out in annual instalments by the company. That kind of policy has great advantages. A man could take out a policy in his 30s for £100 a year to ensure that his wife will have an income, if he dies, of £1,500, diminishing to, perhaps, £1,000 a year as family responsibilities diminish. Of course, if the husband survives he gets nothing for his £100 a year. This type of policy involves insurance for a very large capital sum because if it is paid on this type of diminishing policy until the husband is 70 years the capital value would be something like £45,000.
What such a husband is ensuring is a contingent protection for his widow on the basis that he will get nothing if he survives. Would such a policy be liable for estate duty? It seems to me that a man paying out £100 a year—it is a reasonable sum for many ordinary people to pay— should not thereby get himself into almost the top bracket in the estate duty code simply because he is trying to ensure his wife will have an income if he dies. I must admit to a certain interest in this type of policy.
The Senator used the notional sum of £45,000. That would not be the basis on which duty would be assessed. It would be assessed on the actuarial value at the date of death. I cannot work it out just now. The Senator is talking about a policy of tremendous value if the husband dies young. Senator Quinlan mentioned the same kind of case.
If you try to ensure your wife will have a not unreasonable income if you die and the sum involved is £45,000, the wife, to get a diminishing income beginning at £1,500 a year, would have to pay an enormous sum of between £5,000 and £10,000 in estate duty. Is the Minister seriously suggesting that is the case?
I repeat that it would be liable to estate duty only on its actuarial value but there is administrative relief over a period of years. Unfortunately, that is the case even under existing law—the estate would be liable to duty.
This is a case the Minister could usefully look into. Would the money, being a capital sum, be exempt from income tax? If you treat the income under this policy as being a capital sum would the instalments paid by the insurance company to the widow be free from income tax?
That would depend on the terms of the policy.
Normally, that would be the case. Some provision should, therefore, be made to turn this thing around and give the option to the wife to have this treated as income on which she would pay income tax instead of having to pay a massive sum in death duties. It is ludicrous that she should have to pay sums running into possibly thousands of pounds in death duties. She might be prepared to pay income tax in the normal way on the income but probably could not pay a huge sum in estate duty. Would the Minister consider the suggestion to have this type of income subject to income tax? Otherwise, there may be many widows who could not accept the benefits from such a policy. They might have to give up the income. The fact that the estate duty could be paid over a period of years does not mean much because the period is too short. A widow might have to pay £2,000 a year in estate duty instalments and how could she do that out of an income of £1,500? Would the Minister, therefore, make it optional for such people to pay income tax?
I shall have a look at the thing generally. I cannot follow every detail of the Senator's case and I should like to point out that the Senator was talking in terms of what an arrangement of this kind would be worth on its face value. Deputy Quinlan mentioned that a sum of £6 would bring in £100 a year. At that rate, the annual premium on a £45,000 policy would be £2,700.
I am talking about a policy on which insurance is made for the payment of a diminishing income to the wife and on which nothing is paid if the person survives. It is an unusual type of policy but many people take it out. The purpose of the insurance is not to accumulate a large sum for children or towards a pension or lump sum on retirement. The person taking out this insurance is trying to ensure that if he dies during his working life and during family commitments his wife will be able to carry on. Such a policy is very inexpensive because the husband gets nothing if he survives. The wife, however, will get good coverage in a policy whose capital value is £45,000. Of course, for the payment of £30 a year, the husband could insure an income of £500 and so on, pro rata. However, the Minister has undertaken to look into it.
If any cases like that arise, I shall certainly look into them.
I shall send the Minister details of particular cases.
There is not any conflict between the figures I have given and those given by Senator Garret FitzGerald. They are the same type of insurance. The case I mentioned involved the payment of £6 a year towards an income of £100 per annum from the date of death until the age of 60 has been reached. If you died within 5 years the £100 would be paid each year between the ages of 40 and 60 years but if you survived beyond 60 years there was no payment made at all. It is exactly the same type of policy that Senator Garret FitzGerald has in mind and on the figures I gave, £100 should produce about £1,600 to £1,700 a year. That would probably not be quite the same figure that Senator FitzGerald gave but it would be something in the order of £45,000. It seems to me, in all equity and fairness, that it is wrong to take an actuarial sum of such payment. If the State insists on its pound of flesh then it should take it bit by bit each year as the payment is made. It would not be very difficult to do this. In other words, if the widow has an annuity of £500 a year it would at least be preferable to her if the State took £50 out of that money each year rather than take it immediately after the death of her husband. This, coming on top of the tragedy and all else, means that the £500 is aggregated to almost £10,000. Therefore, there might be a payment expected of something of the order of £1,000.
That is frightening, impossible and very difficult to manage. When it comes after the death of her husband it has added terrors for the widow. It should be quite possible to forget all about aggregation or computation of present valuations of any annuities and simply take whatever is to be taken year by year after the payment comes along. Of course, with regard to the sum itself, the question of income tax scarcely arises because a widow left in that position with children is not likely to be liable for income tax. There would be a very good case to be made for regarding the annuities as being capital and, therefore, free from income tax but subject, each year, to the appropriate contribution to the estate duty of the husband.
In this connection, I wonder would it be possible for the Revenue Commissioners to ensure that insurance companies would bring that to the notice of people taking out policies.
They do.
Not in all cases.
They do.
It is not my experience that they do.
Question put and agreed to.
SECTION 27.
Question proposed: "That section 27 stand part of the Bill".
An Leas-Chathaoirleach
This was formerly section 26.
There is just one point I want to raise. I am not sure about the word "affect" in subsection (5), line 16, page 21 of the Committee Stage version of the Bill. I have long experience of people writing "effect" when they mean "affect" and "affect" when they mean "effect". The word "effect" would also be good English but would have a completely different meaning from "affect".
The word is "affect".
Question put and agreed to.
Section 28 agreed to.
SECTION 29.
An Leas-Chathaoirleach
Recommendation No. 2 has been ruled out of order.
I move recommendation No. 3:
To delete subsection (6).
This is an extraordinary provision. In other words, if the aggregated estate is under £15,000 then the widow is entitled to the reliefs mentioned, £250 for herself and £150 for each child from the amount of the estate that is being levied. If she passes the £15,000 by as much as 5/- then she loses all claim to relief. The estate duty on the £15,000 would be £1,500. If the widow had four children she would be entitled to relief of £250 for herself and four times £150, that is £600 for the children, making a total of £850. She would then be expected to pay £650. If she had £1 more than £15,000 she would have to pay 10 per cent of that figure, that is £1,500.
I do not need to take up the time of the Seanad to show how absurd that is. When she goes £1 over the £15,000 her taxation has jumped £850. This principle is not accepted in the income tax code because in the income tax code you get this basic allowance no matter what the level of income. This corresponds to the income tax code where, when you pass a certain figure, you lose all allowances. That is absurd. It is equally absurd and indefensible that this should be applied here. Consequently, I ask the Seanad to be unanimous in appealing to the Minister to delete this subsection. It would at least show that the Seanad has some function and has made some contribution to the Finance Act, 1965 if the subsection was deleted.
I should like to support Senator Quinlan on this point. I would like to ask what the position is in regard to marginal reliefs?
It does not apply.
Then, I would like to support Senator Quinlan even more strongly. Surely, it is indefensible by any standards. I do not understand what the purpose of the subsection is. I understand what it is from the point of view of the Revenue Commissioners but I do not understand on what basis it is to be defended. The reliefs to widows are obviously for a good purpose. There is no question of people trying to avoid estate duty on a large scale. I cannot see, if you eliminated this, that it would have any bad effect except a small loss to the Revenue Commissioners. It seems to me, in the absence of marginal relief, an absolutely intolerable subsection.
When one comes to questions of relief one has in mind hardship cases. The intention was to give this relief from estate duty to a widow with dependent children in cases where otherwise she would suffer hardship. This hardship is one which has been determined by amount and the question of time. Some amount and some stage had to be fixed. It was suggested when an estate exceeds £15,000 the amount of hardship relief would not be of great consequence. In other words, £250 to the widow and £150 for each child will not make a lot of difference. It is the same case when you are passing new legislation you have to fix a date on which the legislation will be passed. The person who is in a certain position, which is relieved by the new legislation, on the day before the legislation is passed, may not get relief.
You cannot go on going back and back, or up and up, according as the dates or the amounts have to be fixed. I suggest that the purpose of this section is to provide abatement on specific amounts for widows and dependent children in the case of small estates— £250 for herself and £150 for the children. Once you exceed £15,000 the hardship envisaged in the smaller estates does not arise. I cannot accept the recommendation.
The Minister has now terrified me because if he applies this to income tax, we are all in the soup, and we will be at the stage where above a certain level, personal allowances and children's allowances will disappear.
Senator Quinlan made a distinction between income tax and estate duty.
It would be better if the house were reckoned separately in the estate duty because insurance of £1 per week for the benefit of the family, plus the value of a decent house, would be over £15,000. I feel very strongly that the limit of £15,000 should go.
I should like to press this a little further. I see the logic of the Minister's argument but it is really nonsense, and it is indefensible to say that a widow with a house and a few hundred pounds a year is well able to afford to fork out £850. The marginal relief has no bearing on it. The Minister took a widow with four children as a typical case, but I do not understand his argument that if the estate is worth £14,999, she is entitled to the full relief, and if it is worth £2 more, £850 is payable. A marginal relief is a well accepted principle and the Minister has pointed out on other sections of this Bill that there is a marginal relief as an explanation and a justification and we have accepted it.
As I mentioned before, there is a marginal relief where the estate is £5,000 but not where the estate is £5,010. This is a new relief. We have to start somewhere with reliefs, and try to meet the cases that seem to be most deserving. I think we should accept this as a relief and see how it will work in practice. If serious anomalies or cases of hardship arise, we can look at it again. When we start giving reliefs, the pressure is to give more and more.
This is not a relief.
It is an injustice.
If the Senator regards it as an injustice, we can vote on whether it is an injustice or a relief.
The Minister is suggesting that we can look at it again next year. It will not be changed this year for reasons which we all know. I should like a slightly more explicit assurance that it will be looked at again. I should have thought that what was said in both Houses, about how little £15,000 can represent in the form of a house and income, must have made an impression on the Minister and I hope he will look at this figure again.
I will keep the operation of the relief under review to see how it works.
On the question of the marginal relief, this is a different matter. In introducing this section, the Minister should have adverted to it. It is something that should not have been overlooked, and I think he should introduce this marginal relief with retrospective effect next year. That might be one piece of retrospective legislation we could accept.
What the Minister has said has no bearing on this. He is introducing a new principle, a most extraordinary principle, that if there is an extra £2 in an estate, the estate is penalised by £850.
It is not a penalisation; it is a relief given on the other side.
Surely the person with an estate of £14,999 and the person with an estate of £15,000 should be treated equally. This cannot be defended and I for one do not think the Seanad should consent to this section. We seem to have very little function indeed in this House. If we could only meet in Committee on Finance, we could meet the people responsible for drafting this section and argue with them across the table. In this case there would be no need for argument because this is a most indefensible suggestion. It is the most indefensible suggestion I heard in my eight years in this House. It is also the most terrifying. I appeal to the Minister to show that he has some faith in this House, and that we are not wasting our time, by indicating even at this late stage that he is prepared to drop the section. It is a poor tribute to this House if we are not capable of changing one comma in the Bill. Why go through the farce of having us assemble here at all?
The Senator described this as an injustice and I call it a relief. We can have a vote on which is which.
This is something that will have to be brought immediately to the attention of every organisation and every group in the country because it is indefensible. It is just as indefensible as the earlier attempt under another section—which happily was amended in the Dáil—to exclude Civil Service pensions from the scope of the Bill on the legal pretext that they were not pensions and that they need not be paid.
Can the Minister tell me is the law at present that a widow with children and with an estate of £4,999 pays no estate duty but if she has more than £5,000, she pays duty?
If her estate is £5,100, estate duty is paid on the whole lot. It is the same principle except it is up to £15,000 now instead of £5,000.
If I understand the Minister correctly, there is a marginal relief on the £5,000. In this case there is not. I can understand the Minister's point of view. He is introducing a relief which has been necessitated by some of the tightening up processes in the Bill. In introducing it, he may not have adverted to the question of marginal relief. Now that his attentioin is drawn to it, he must see it is something that should be considered.
I shall look at the operation of the relief and do something, if it is necessary that it should be done.
I should have thought the Minister would give a more specific assurance to look at the marginal relief.
I shall not say something I may not be able to carry but, but I shall look at the operation of this.
We cannot allow such an injustice to pass without expressing in the strongest possible manner our disagreement.
What is the recommendation?
An Leas-Chathaoirleach
To delete subsection (6) of section 29, formerly section 28.
What the Senator wants would mean that in the case of an estate which would go to one million, the widow would get this £250 relief.
Recommendation put and declared lost.
Votáil.
Can we find out how many support the recommendation?
An Leas-Chathaoirleach
A division has been asked for. Will those Senators in favour of the recommendation please rise?
More than five Senators rose.
The Committee divided: Tá, 7; Níl, 23.
Tá
- Crowley, Patrick.
- Davidson, Mary F.
- Fitzgerald, John.
- McAuliffe, Timothy.
- McDonald, Charles.
- Ó Conalláin, Dónall.
- Quinlan, Patrick M.
Níl
- Ahern, Liam.
- Boland, Gerald.
- Brown, Seán.
- Dolan, Séamus.
- Eachthéirn, Cáit Uí.
- Egan, Kieran P.
- Farrell, Joseph.
- Fitzsimons, Patrick.
- Flanagan, Thomas P.
- Honan, Dermot P.
- McGlinchey, Bernard.
- McGowan, Patrick.
- Martin, James J.
- Ó Donnabháin, Seán.
- Ó Maoláin, Tomás.
- Ormonde, John.
- O'Sullivan, Ted.
- Ryan, James.
- Ryan, Patrick W.
- Ryan, William.
- Sheldon, William A. W.
- Teehan, Patrick J.
- Yeats, Michael.
Tellers: Tá, Senators McDonald and Quinlan; Níl, Senators Brown and Farrell.
Question proposed: "That section 29 stand part of the Bill".
Section 29, subsection (3) says:
Where more than one dependant, including the widow, are entitled to benefits, any estate duty payable in respect of such benefits shall be abated by the following amounts:
(a) in relation to the widow's benefit, by a sum of £150 together with a sum of £100 for each child not entitled to a benefit;
(b) in relation to a child's benefit, by the sum of £100.
I should like to know if there is not a widow, if the wife has predeceased her husband leaving children, are the allowances applicable to the children, provided they are dependent in the sense defined in the section?
Yes, I think the Senator's recommendation has been misconstrued for the purposes of this section.
Under what subsection are they entitled to the allowances? It must be subsection (3).
Yes, it arises under subsection (3).
Reading subsection (3), it appears to me it is operative only when, included in the dependants, there is a widow.
That is what it says.
It does not mean that.
It says "including the widow".
That was why I tried to move the recommendation and make it clear.
How could one read that as covering the case where there is not a widow? It does not seem to me to be good English. At least that is my reading of it. Surely that subsection requires that there must be a widow as one of the dependants?
No, it does not.
Where there is more than one dependant, it ties it down that one of the dependants must be the widow. If the English language means anything at all, that must be what it means.
I can say specifically that it is not the intention of the section, nor is it in the opinion of the draftsmen and others qualified to construe it to ensure that the widow must be one of the dependants. Any one or more of the people can be the dependant who will get relief. It does not mean that the widow must be there also.
It does not seem to me to be very good drafting. It should have gone on to say that where there was more than one dependant, the widow being included for this purpose is a dependant. Certainly as it stands at the moment it is hard to believe that a court could construe it in the way the Minister says.
I can assure the House that it will not be construed in that way. If there is any danger, I will consider a suitable amendment next year.
The other question arising is in the case of an estate where there is a widower left behind. In that case are the husband and children entitled to any reliefs?
The purpose of this relief was to relieve what were obviously going to be the hardship cases—the husband was regarded as being the breadwinner.
Then there is no relief whatsoever for the estate of a wife if she dies leaving a husband and children.
Not under this abatement provision.
Again, there seems to be a great anomaly in it and one which is against all ideas of equality, of treating husbands and wives on the same plane. Admittedly, the cases would be rather rare but it still is an injustice.
I should like to raise a small point on subsection (3) in the interests of the English language. I may be wrong in this but it does seem to me that the parliamentary draftsmen do not apply the same rules in regard to English as others do. I would have thought that subsection (3) should have read:
Where more than one dependant, including the widow, is entitled to benefits...
For example, "more than one person is in the room", not "are", I should have thought. It seems to me to be very odd English.
If one assumes that the husband has died and now the wife is dying, does that mean, in this case, the children will not get the allowance they would have got originally?
Would the Senator mind repeating his point? I am sorry, I was looking for a document and did not catch what he said.
I take it that it means if the husband dies, the widow will get the abatement. But then, supposing something happens the mother. As the Bill reads at present, I see there is only a sum of £100 abatement and nothing for the children because of the fact that it is the widow who died.
The Senator poses the case where the father dies, leaving a widow and children?
Yes. It says only a single abatement of £150.
Yes, if they are still dependent when she dies, the abatement will operate.
In the previous subsection, it must include the widow to get the abatement.
It will not be considered in that fashion. If the widow dies the children will get the abatement as well.
What about the additional abatement for them under subsection (4)?
It specifically says:
(4) In the case where the deceased is a widow, any estate duty payable in respect of a benefit shall be abated by the sum of £150.
We are inquiring about the child's benefit, if she leaves dependent children.
Subsection (4) covers that.
But, in subsection (4), additional to subparagraph (b) of subsection (3)——
Would there be just one abatement in the amended form of £150 regardless of how many children are involved?
Or whether or not there are children.
Subsection (4) says:
(4) In the case where the deceased is a widow, any estate duty payable in respect of a benefit shall be abated by the sum of £150.
There is nothing at all about children involved. This is a flat abatement of estate duty when any widow dies, whether or not there are children.
"Benefit" is described in the definition part of the section as meaning:
"benefit" means all property and all interests in property passing or accruing to a dependant on the death of the deceased in respect of which estate duty is payable;
"Dependant" means the widow or child. Then what happens in the case of the widow dying is that there is one single abatement of £150 regardless of how many children——
For each child.
Subsection (3) says there will be a widow.
In subsection (4) there is no talk of £150 per child: it is £150 flat. Is that the intention?
No, it is not the intention.
Then the section is more badly drafted than it appeared to be.
Subsection (3) and subsection (4), taken together, clearly mean that there could be a child who will benefit by the abatement and it applies also to any child who is entitled to benefit. So there may be more than one £150.
I should like to understand that better.
Can we try to tie this down? Under subsection (4), where the deceased is a widow, there is an abatement of the estate duty of £150 irrespective of whether or not she has children. What we want to know is——
No, that is wrong. The definition of the word "benefit" specifically requires that there must be a dependant. Perhaps, the Senator would look at the definition of the word "benefit".
Could I go through this to make sure we understand it because, at the moment, I do not? Under subsection (2) where the widow is the only dependant, something happens. If the position is that the deceased person is a widow, as in subsection (4), then any estate duty payable in respect of a benefit shall be abated by the sum of £150. Then, in subsection (3), we read that where more than one dependant, including the widow, are entitled to benefits, any estate duty payable in respect of such benefits shall be abated by certain amounts. "Deceased" there does not mean the widow and there is a child's benefit. Is it the case that if the deceased is a widow there is a child's benefit accruing for each child under subsection (3) and, additionally, there is a further benefit of £150 under subsection (4)—and, if it does not mean that, what does it mean?
If a person dies leaving a widow and dependent children, the widow and dependent children benefit by the abatement provisions here. If the deceased does not leave a widow but leaves a dependent child or dependent children the dependent children will qualify under subsection (3). If a widow dies leaving dependent children they will qualify under subsection (4).
They will qualify for what?
For abatement of £150.
Each?
Yes, each.
How could the Minister read that into subsection (4)? It says "a benefit" which is defined as meaning all property and all interests in property——
Passing to a dependant. I want to assure the House that what I have said is the case and that the wording of the section provides adequately for these provisions.
We are always told about legislation that it is not what we mean that matters but what the courts will interpret or, in this case, how the Revenue Commissioners will interpret the Bill when it is enacted.
At least I am speaking for the Revenue Commissioners in this respect. I could not speak for the court's interpretation.
But you cannot bind the Revenue Commissioners.
Of course, I can.
Once this Bill passes, the control passes over to the Revenue Commissioners and to the courts.
Yes.
It then depends on the legal interpretation of the Bill, as passed.
Yes. Surely the Minister cannot bind the Revenue Commissioners? Are they not independent in their interpretation of an Act?
I am telling the House what the interpretation of the Revenue Commissioners is: I am speaking for them in this House. If they change in any way—there is no reason to think they will—I can bind them to the extent of changing the law to make sure that what I want them to do is done, and I am satisfied here, according to the wording of the section.
This is unsatisfactory. You legislate to a certain effect. If the Revenue Commissioners understand it to mean something else, you promise they will go on interpreting it in your way and that, if they do not, you will introduce new legislation.
The same applies to a decision of the court.
That is different. We are told that "deceased" means a person dying after the passing of this Act. Under subsection (3), where more than one dependant, including the widow, are entitled to benefits, any estate duty payable is abated by £150 per child, in the amended form. Consider the position on the death of a widow. Is there anything in subsection (3) to exclude the application of subsection (3) to the case of the death of a widow?
Subsection (4) specifically provides that in a case where the deceased is a widow, any estate duty payable in respect of a benefit shall be abated by the sum of £150.
That is so. I am coming to that in a minute. First of all, does subsection (3) apply to a case where a widow has died and left dependants? If not, where does this subsection (3) exclude itself from applying in the case of the death of a widow? Does subsection (3) apply in the case where a widow dies leaving dependants?
No. That applies where a man leaves dependent people, whether dependent children and a widow or dependent children without a widow.
Where does it say "a man"? "Deceased" is defined above as being a person, not a man.
"Deceased" means a person dying after the passing of this Act domiciled in the State. It would not mean the widow or child. It is hardly likely that the deceased will be a female.
Females have children.
If it is a widow or child——
"Dependant" is defined as the widow or child. Therefore, "deceased" cannot mean a widow but this does not follow at all. "Dependant" means the widow or child. If it means a child, that does not exclude "deceased" from meaning a widow. There is nothing here which says that subsection (3) would not apply to a widow. It seems to me that all the Minister may be doing is giving a double relief in the case of widows.
Subsection (1) says:
"widow" except in subsection (4), means the widow of the deceased
and in subsection (4) the deceased is the widow herself.
What has that to do with subsection (3) where the Minister says that words "including the widow" do not mean what they appear to mean?
Surely subsection (4) implies that the husband has died already?
Subsection (4) stands on its own.
It is not clear that subsection (3) cannot apply to a widow.
It looks as if the intention of the drafting is that subsection (3) applies to the case where there are dependants including a widow and that subsection (4) caters for the case where the deceased is a widow and the only dependants she can leave, according to the definition here, is a widow or children. She can only leave children. Therefore, these children qualify as dependants. Under subsection (4), no matter how many of them there are, they are entitled to only one single abatement of £150.
That is not so.
If they are under (b) it means that the normal abatement is one plus the number of dependent children.
I do not agree with Senator Quinlan's interpretation of subsection (4). I think the Minister has explained that under a person as defined each individual dependant is a separate person. Therefore, this applies in respect of each. To me, that makes good sense, good law and good English. What does not seem at all clear is on what grounds the Minister says subsection (3) should not apply to a widow.
I have already referred Senator FitzGerald to the definition of "widow".
I do not see how that helps me. My problem is that the definition of "deceased" means a person dying after the passing of this Act domiciled in the State. We then read subsections (2) and (3) by which this "deceased" suddenly in subsection (3) has become only a man.
For the purposes of definition "dependant" includes the widow.
Or child.
That ipso facto makes the deceased a man.
No. I do not think you can argue that the fact "dependant" means a widow or child requires that "deceased" must mean a man when "deceased" is defined specifically as meaning "a person". You cannot contend that "a person" means only a male person simply because the alternative given is the description of a "dependant" meaning a widow or child.
It says "including the widow". Going back to the definition "widow" means the widow of the deceased.
That could only apply if the deceased were a man. By definition the deceased is a person and, under certain circumstances, could be either a man or a woman. In subsection (3) we have this phrase "including the widow". We were told by the Minister that it did not mean what it said and that we could ignore it. That is what I have been trying to do. I hope I have been helping the Minister by trying to ignore it.
The purpose of including the word "widow" there is to bring it within the definition of "widow".
If the intention is that "deceased" in this section means only a man, why did you not say that? The court will always read a definition section like this as having a purpose. If you say it means a person, they will take it you mean a person and not merely a male person or a female person. Why is it in that form? Why can you not say a man?
Subsection (4) implies that. I want to make it quite clear that the abatement of £250 of the estate duty would be paid if a widow is left plus £150 in respect of each dependent child. If there is no widow but dependent children, then the £150 abatement would apply in respect of all the children. If the widow herself happens to be deceased, the £150 would apply in respect of each one of the dependent children. There will be as many £150s as there are dependent children. Every time I open my mouth we have Senator Quinlan or somebody else getting up. If we go on quibbling like this we will be here all day. I have explained the subsections and I am satisfied they mean what I have said.
We are only doing our duty.
I know you are. But I am doing my duty trying to explain. If you do not accept it you have your remedy. I cannot be hopping up and down saying the same thing over and over again.
We are only trying to do our duty. When legislation passes we are told afterwards that what matters is what is written in the Bill. It seems from the explanation given by the Minister that we were right in our original contention that subsection (3) does not apply in a case where the deceased is a widow but the widow gets her relief under subsection (4). Otherwise, there would be double relief for children under subsection (3) and subsection (4).
May I flatly disagree with Senator Quinlan and say that if I were a practising barrister, which I am not, I would not have much hesitation in advising clients to claim under subsection (3)? We are not talking about how the Revenue Commissioners interpret it. If somebody in these circumstances claims under subsection (3) they would get abatement under that subsection and under subsection (4). It is out job not only to try to ensure the Minister is not tightening up this but that it is not drafted so badly that a double claim may be laid against the Revenue Commissioners. It should be re-drafted to ensure that is not the case. Otherwise, you would have people claiming two sets of abatements.
Question put and agreed to.
Sitting suspended at 1.10 p.m. and resumed at 2.30 p.m.
Sections 30 to 33, inclusive, agreed to.
SECTION 34.
Question proposed: "That section 34 stand part of the Bill".
Could I ask the Minister for clarification of this section? Is it related to the consolidation provisions of the Companies Act, 1963, in some way? This is section 33 of my version of the Bill, section 34 now. The heading is "Cesser of section 14 of Finance Act, 1944."
Yes. That was brought in during the war for the purpose of making excess corporation profits tax liable but it is not necessary.
I see. Thank you very much.
Question put and agreed it.
Sections 35 to 63, inclusive, agreed to.
SECTION 64.
Question proposed: "That section 64 stand part of the Bill".
What has occasioned this section? The Minister did say in the Dáil that some offers of money had been made. I was wondering for what purpose and is there any danger of abuse in relation to this section? If, for example, a manufacturer wanted a road built to his factory, could moneys be provided in this way? Could this operate to his advantage and could he be relieved of tax because of it?
No.
It is specified that it must be used for purposes for which public moneys are provided. These are purposes for which public moneys can be provided which could be beneficial to the individual concerned. Is there any danger of abuse by people giving gifts of money and getting tax relief, whereas if they spent the money themselves, they would not get tax relief?
The test is that a gift is not a gift until such time as there is a giver and a receiver. The receiver in this case must be the Minister and, as the section indicates clearly, if the gift, for the purpose of relieving expenditure that would otherwise fall on the Exchequer, is accepted, it would then qualify for relief. The obvious purpose of the section is to benefit those people who are philanthropic enough to offer money gifts of this nature to be applied, for example, to the maintenance of a national monument which otherwise would have to be provided from Exchequer funds. The donor says: "You can have this money, provided I am relieved to that extent of my liability to income tax." In those circumstances only would relief be given. The Senator may be sure the Minister would have full regard, before he accepts the gift, to the requirements of the section and the extent of the relief that would be given.
Would there be any publicity given to this? Would it be possible for the Dáil or Seanad to know of the cases where this has happened?
Not normally, because income tax transactions as between the person liable and the Revenue Commissioners must be secret. However, I take it that if the donor required some form of publicity to satisfy his ego or for some other reason, the Minister would not be averse to giving him due credit.
That is not quite my point. While I welcome the section, I was just wondering whether there was any possibility of abuse that could be met by ensuring publicity for the matter. I see the difficulties of enforcing publicity in these cases. When the section says: "any purposes for or towards the cost of which public moneys are provided," what would be the application of that? Would it have to be something for which public moneys are already being provided or could it be some specific object for which generically public moneys are provided but for which itself no money is provided?
No. It would be an object for which public moneys are provided anyway. For example, if public money is voted for a specific purpose, such as the maintenance of an ancient monument or some other desirable purpose, this is voted money which has to come out of the Exchequer anyway, and if somebody wants to relieve the Exchequer to that extent, that person is entitled to income tax relief. Therefore it must be voted money.
Some Senators could provide for the reconstruction of the Houses of the Oireachtas.
Is the Minister satisfied that, with that safeguard, there is no possibility of abuse? Could it be to people's benefit to act in this way? That is really what I am asking.
I recognise there is a safeguard but would the Minister normally be reluctant to accept money if he thought it was for the benefit of an individual to have acted in this way? Could it operate for the benefit of an individual?
In such an event, the Minister offhand would not be in a position to determine whether it would be creating relief beyond what the person would be entitled to normally, but naturally the Minister must have regard to the extent to which this relief would be forthcoming as compared with the relief he might otherwise be entitled to get. In such an event, there would have to be consultation between the Minister and the Revenue Commissioners to avoid the type of abuse the Senator has in mind, the abuse of a person appearing to be philanthropic but, in effect, relieving himself of tax liability to which he would otherwise be subject. I do not think that can happen.
The Minister does not think it should be something which should be accepted by him after consultation with the Revenue Commissioners or with the approval of the Revenue Commissioners?
It is inherent in the section that the Minister will consult the Revenue Commissioners in a case like that. However, this is again to meet an isolated case that has arisen. It was for that purpose the section was introduced. I take it we will have to wait and see how it operates in practice and, if necessary, suitable amendments can be brought in if any abuse arises.
Would the Minister consider making some similar arrangements in relation to gifts to educational institutions? They would not directly relieve the Exchequer, but gifts would certainly be very welcome. The present reliefs are a little difficult and they do not seem to have induced firms to contribute to educational institutions. These prefer to contribute to golf courses, horse races and so on. I think there is need for considering what might be done to induce firms to make some contributions to educational institutions.
My predecessor introduced such a provision in the 1959 Act where money was covenanted in favour of an educational institution.
But it had to be for a specific number of years. I think it was seven years, or some such period. It has not had the desired result.
On my interpretation, this does make such gifts possible because educational establishments are ones towards the cost of which public moneys are provided. Surely if someone did give a gift, the Minister would be in a position to accept that gift under this section?
We talked at length yesterday about State grants to universities. If in regard to university A, in a particular year in which the State grant worked out at £150,000, someone came along and said: "I will give you £50,000 of that grant, provided you give me relief of income tax in respect of it", in such a case I envisage the section would operate, but, in the other case, under section 5 of the 1959 Act, there would be no relief because that operates by giving relief to covenanted subscriptions to the teaching of natural sciences.
If the Minister got a gift of money towards the university, he would reduce his own grant accordingly.
If the gift were to the Minister for that purpose. If it were to the university, it would not be in relief of the Exchequer.
This could not be used then as a means of giving money to educational establishments?
Not directly, no.
It would operate only if it relieved the Minister, but the university would get nothing out of it.
In such a case, if the Minister had £2 million or £3 million to spend, and if someone said he would give him one-third of that, that would naturally induce the Minister to be more generous.
It is not quite the same thing.
I admit that, but, on the other hand, people could start pouring money into objects of State expenditure which would not be deserving enough to qualify for this very substantial relief. Offhand, I cannot think what these objects might be.
The Minister cannot think of any more deserving object for relief than the teaching institutions. Their condition is parlous at the moment.
Someone might like to pay half a million towards social welfare relief.
Subsection (4) provides that a company gets relief only for corporation profits tax and does not get relief for income tax. Would the Minister consider giving relief for income tax as well as corporation profits tax?
That is provided under subsection (3).
Question put and agreed to.
Sections 65 to 67, inclusive, agreed to.
SECTION 68.
Question proposed: "That section 68 stand part of the Bill."
What is the significance of the amendment introduced on Report Stage?
If the Senator tells me what the subject matter is, I might recognise it.
It is the one dealing with the Short Title and the date of commencement. Section 64 has been added in as well as section 63.
That is purely consequential on the introduction of the section dealing with gifts.
Question put and agreed to.
First, Second and Third Schedules agreed to.
Title agreed to.
Bill reported without recommendation.
Agreed to take the remaining Stages today.
Bill received for final consideration.
Question proposed: "That the Bill do now pass".
We knew this morning coming in here that we could not amend this Bill because it simply had to go through today, but I should like to ask the Minister if he would consider next year the question of the personal allowance for a single man. It is unrealistic at the moment to have that personal allowance standing at £6 per week. Workers in the Arklow factory are at the moment paying £5 5s. a week——
This matter may not be discussed. It is not covered in the Bill.
I am asking the Minister to consider the matter and I would also ask him to consider giving relief to people who are not covered by voluntary health insurance.
Only, the matters contained in the Bill may be discussed at this Stage.
I was just wondering if I could ask the Minister if he would look at the case of the cooperative societies.
Unless it is a matter that arises in the Bill, it may not be referred to or discussed at this stage.
I would not be able to decide whether it does or not. On the Finance Bill last year, the Minister promised to include it in the Budget, but it did not appear in the Budget, and I want to ask him if he would think about it in relation to next year's Budget. I may be entirely out of order.
That is a very involved question but for many years there was agitation about the fact that co-operative societies as such were free of income tax and many of these were trading societies trading in matters of ordinary commerce and involved in the production of goods. The Minister met that point by confining the reliefs given to co-operatives to co-operatives dealing with agriculture and fisheries. It was felt that to give reliefs to other co-operatives dealing with industrial goods and such items would give them an unfair competitive advantage over those with whom they had to compete. I do not think this is in the Bill and I am probably out of order in mentioning it but the Senator may have thought she was entitled to that explanation.
Probably the Minister knows of the particular case I have in mind dealing with printing. The previous Minister said he was full of sympathy for that particular case, that they were actually entitled to the relief but that there was some question of getting a title to describe them, and simply because he could not find a title to describe them, they were left out of the Bill, which appears rather unjust. I should be glad if the Minister would look into this matter.
Question put and agreed to.
I understand that the Seanad have certain difficulties about Bills like this coming up at certain stages and about nor being in a position to amend them. I announced in the Dáil during the passage of this Bill that as a result of my experience, I felt there would need to be an overhaul of the financial business of both Houses and I propose to introduce amending legislation to rationalise the procedure so as to give an opportunity to both Houses to discuss such measures more fully and also to give more background knowledge of the financial position of the country at any particular stage. I am just giving advance information to the Seanad that I expect that in future years they will be in a position to discuss these matters at particular intervals and be given more opportunity of making amendments and recommendations.
I should like to thank the Minister very much and to say that I wish him every success with this form of parliamentary procedure.
I wish to be associated with Senator Dooge's remarks. I look forward to next year and I hope that the Minister will go as far as instituting a Committee of the House.