On the general question of income tax and surtax, the position is that we have had a consolidation of the income tax code. Indeed, it was the hope, I think, of practically everybody that this would be a prelude to a simplification of the code, that once it had been consolidated the work of simplifying the code would be undertaken. I wonder if the Minister has anything to say in that regard, whether any work is in hand in regard to the simplification of this code.
Finance Bill, 1967 (Certified Money Bill ): Committee and Final Stages.
Question proposed: "That section 1 stand part of the Bill".
Yes. The question of simplifying the income tax code is under examination but I would not be very sanguine as to the result. It is all very well to talk about simplifying the income tax code and making it straightforward so that the man-in-the-street can understand it. I do not think it applies anywhere in the world in our modern, complex society and I do not think it is possible.
I think the Minister should be aware that it has been done elsewhere. The position is that certainly for over ten years now—and I do not know how many years before that—the ordinary wage earner in the USA does not have to fill up an income tax form. He only returns a postcard. He fills in a number of very simple figures on a postcard which he returns. It is only the person who comes well into the ambit of the income tax code who is subject to this form. I would ask the Minister not to give up too easily on this particular problem.
That is very typical of what I am saying. I know from friends of mine in the USA that the ordinary taxpayer there sets aside three days every year to do nothing else except fill up his income tax return. It is easy to pick on a certain section of the people and say that it has nothing to do with this, that and the other. I am talking about the income tax code as a body, as a corpus. In this country the ordinary PAYE taxpayer has to fill in only a very simple form.
That does not mean the code is simple. I should like to speak from personal experience on this. I have filled up income tax forms in the United States, Australia and here. There is distinct room for improvement in our system. If the Minister applied himself to it, I think these simplifications could be made.
There are two points I should like to make. I should like the Minister to tell us something about the work of production of data from the computer in regard to incomes in this country. We have had this PAYE system in operation for a considerable period, and it had been hoped that at an early stage we would, in fact, get information on the distribution of incomes in the nonagricultural sector in Ireland. This is of great importance and it is disturbing that it has taken so long to get information of this kind. Could the Minister tell me when it is expected to be able to produce information on the computer on the distribution of personal incomes and, indeed, adequate information on incomes generally and on company profits?
The Minister will recall that the NIEC Report, No. 11, called for detailed information on company profits, which would also come up out of the income tax system about which we are talking. We have had nothing on that either. There is no real picture of company profits here even as a total, and in any detail as between industries, and it seems a pity that we cannot get this information. I should like to know from the Minister what are the plans and when can we get information of this kind, arising out of the income tax system.
It is hardly possible to get this information on this section.
It is the section which is imposing income tax at 7/- in the £ and it is arising out of the returns of taxation, therefore, that this data becomes available. However, I have concluded my remarks on the point and I would not wish to debate the relevance of it with you at this stage.
The other point I wish to make is that one member of the Government recently threw out some ideas in relation to a general review of social welfare and having a single stamp for various forms of social welfare. Has the Minister given any consideration to integrating the income tax and social welfare systems? We have—and it is true of most countries—a notoriously cumbersome system of taking money off people at one end with one hand and giving it back with the other—and, indeed, talking of one hand and the other hand is to make the whole thing sound simple because the number of hands involved is numerous. It seems to me that we ought to simplify this. The Minister may be familiar with the kind of table produced in Britain, which is the kind I should like to see here also. It is produced and published in Economic Trends in Britain. It shows for all the various levels of income how much people are paying and how much they are getting back. You can see, for example, a man paying £260 in income tax, and possibly surtax, and getting back £250 in benefits, for example, at one particular income level.
It is ludicrous that the State should spend time and money collecting information from people, and handing money back to the same people in the same amount, subject to a deduction for administrative costs en route. This system is highly inefficient. It has happened because of the way our tax system has grown up.
Income tax was introduced several generations ago in order to introduce some element of social justice. It was followed up by social welfare schemes piecemeal, developed bit by bit, so that we now have a most complex system of schemes, all designed to pass money backwards and forwards. The net amount passed very often is even small.
Somebody may get £2 net but this may involve him in up to £250 in a whole series of different kinds of taxation, and getting a similar amount back, subject to a deduction for administrative costs, under a lot of different headings. This is extremely expensive now, and in a computer age could be got over. A lot of the sums of money pass in relation to people's income. We pay income tax and surtax in relation to our incomes. We also get many social welfare benefits on a means test basis in relation to our level of income or in relation to data, for example, in respect of children, which is available in the income tax form. We should be moving to the point where there is in relation to each person one transaction. It is a person's liability to show that for a certain year he is liable for the payment of so much in tax, but he is entitled to get so much back in various social benefits, including possibly those in relation to education, and his net contribution to the State, instead of £250 each way, would be £2, or it might be £20, or £40 or £100, which he could pay or receive over the year as a whole.
This is a small country in which this kind of operation could be undertaken with the aid of computers, and we are sufficiently progressive to be able to look at this possiblity and to a complete dismantling of the enormously complex administration structure we have built up between the Department of Social Welfare and other Departments, like Health and Education, on the one hand giving out the money to the same people we collected it from. Social justice requires distribution. It could be taken off the better-off people and given to the less well-off people. It does not require that we should take money from people to hand it back to them again with a deduction for administrative costs.
Our present system under which the amount of money changing hands is certainly very much greater, perhaps several times greater, than the net transfer. suggests that we need a clearing house system. This system is employed in other walks of life. For example, the international airlines settle their debts every month through a clearing house. Millions of pounds may be due from one airline to another, or from one airline to a number of other airlines; they all owe money to each other and, at the clearing house, these transactions are set against each other and may be settled. Millions of pounds may be settled by the payment of a few thousand pounds net by one company to another, or by certain companies to certain other companies. In this way very great savings are achieved. We should be moving towards this.
I should like to hear from the Minister what are his plans in this respect, plans not only for simplifying the income tax code—which is only a fraction of the problem—but for simplifying the whole redistributive mechanism. Of course, this applies only to the redistributive taxes. Money still has to be raised to administer the country, as distinct from transfer payments. But there are a lot of taxes that are raised on a progressive basis, taking more from the rich than the poor, and there are social welfare payments paid more to the poor than the rich, although in this country, in many cases, the rich actually do better out of them, because of the peculiar structure of our social services.
In relation to these taxes and social welfare benefits, we should be attempting to establish a simple offset system, using the computer for this purpose. It would not have been feasible before the computer age; it is now feasible. I would hope the Minister can tell us that the Department of Finance, the Department of Social Welfare and the other Departments are working together to reach this stage of simplification, of reduction of administrative costs and of reducing the burden involved for people in paying out large sums and then going through complicated mechanisms to get the money back, which is what we have at the moment. I shall be glad to hear from the Minister what his plans are on this.
I do not think I could elaborate on my plans in this matter within the rules of order on section 1 but I should like to make one or two comments on what Seanator FitzGerald has said. First of all, the existing computer which the Revenue Commissioners have is fully employed. It is working to a maximum capacity, doing the job for which it was primarily intended—mainly to assess and collect income tax, surtax, corporation profits tax, turnover tax and wholesale tax. It has not got any spare capacity to take on the additional type of work Senator FitzGerald envisages. But we are now installing a new computer and, when it is operative, it will be possible to supply a wider range of income tax statistics than is available at the moment.
On this question of administrative efficiency in the collection and payment of money to and by the State, what Senator FitzGerald says sounds grand in theory but, by and large, one is dealing with different types of people. There are 600,000 income tax payers and, in the main, they are not recipients of social welfare benefits. On the other hand, most of the recipients of social welfare benefits do not come within the income tax net at all. It may well be, when you take everything into consideration, that the most efficient way of doing things is to take money from a person as part of a general system and pay it back to him as part of another general system rather than deal with each individual as a unit. The fact that the State takes money from one person under one system and gives it back to him under another does not necessarily mean that administrative inefficiency is entailed.
On that point, I should like to say that it seems a pity in the first instance to have bought a computer too small to do the job, because it surely must have been foreseen, when the computer was installed, that this would provide us with the opportunity——
It was the best available at the time.
Well, other countries are producing these statistics. This is absolute nonsense; to say that it was the best available at the time is simply not true. The fact is that the British have been producing for years past these statistics from their computer, and to say that we could not get one big enough for this little country, when the British can do so, is simply not the case. There should have been some foresight in this regard —to buy a computer which could produce the data we need—and it should have been foreseen that we could get a computer of the right size.
Computers are improving all the time. We were one of the first people to buy a computer for this purpose, and we bought the best available at that time. There is a far better one available now.
Is the Minister suggesting it was the best available computer in the world at the time it was bought?
It was, for our purposes.
I do not know what that means; it was the largest the Minister's Department would put up money for. That is simply the answer to what the Minister is trying to say, which strengthens my point.
Since we put in the computer, we have introduced two entirely new systems of taxation which were not there at the time it was bought.
Either we should not have introduced these forms of taxation, or, if we did introduce them, we should have foreseen the likelihood of change. This idea that you buy a computer for the present tax system, with no capacity to allow any flexibility in changing the tax system, seems to me to be an extraordinary admission by the Minister.
On the other point, that largely different people are paying income tax and receiving benefits, this again is simply not the case. If the Minister would examine the table of economic trends to which I referred, he will find that at all income levels, there is money moving both ways in some respect or another. Everybody pays tax of some kind.
Nonsense.
They would need to be a very clever people not to be paying tax of some kind, in relation to tobacco, drink, matches and all the other things which are taxed. Everybody is paying tax of some kind, directly or indirectly, and everybody is receiving benefits of some kind, directly or indirectly.
I assumed the Senator was talking about direct taxation; that is the only thing relevant in this context.
It is not the only thing relevant. Some of our indirect taxes are also progressive in their incidence, as was shown by the paper read by Mr. Reason of the Revenue Commissioners to the Statistical Society some years ago, contrary to the widespread belief in that regard.
On the side of social benefits also, virtually everybody is in receipt of them; everybody who has children gets children's allowance. To have a cumbersome system under which all income tax payers are simultaneously getting some allowance for their children under the income tax code, and simultaneously drawing it through the post office or bank under another system, from another Department, is simply an unacceptable complication administratively.
(Longford): Not necessarily.
It is due to the fact that the Departments operate separately and that we have not got an integrated system of income redistribution, but a compartmental system in which different Departments are doing different things.
This section fixes the rate at which income tax will be levied for the year commencing 6th April, 1967. It is on that and the way in which that will be operated I want to say a few words. I hope the Minister will be patient with me for a moment, because it is rather difficult to explain the problem briefly, and it is a trade union problem. Trade unions, in re-organisation of industries, sometimes come up against problems where, as a result of the re-organisation, certain workers may lose extra earnings. It is usual in such circumstances to make some sort of a bargain by way of a lump sum payment. I would ask the Minister just to listen to me because it is a problem and, unless we are able to overcome it, it will affect not alone income tax but the re-organisation of industry.
In a previous Act we provided lump sum payments; I think we were going for what we termed "golden handshakes" at the time. These are covered in section 114 of the Income Tax (Consolidation) Act of 1967 Section 114 says:
This section applies to any payment not otherwise chargeable to income tax.
In other words, they have brought what we termed "golden handshakes" into income tax. Under section 115, we then excluded the first £3,000 of such payments. The amounts I am talking about do not, of course, go to anything like this, but apparently it has been suddenly discovered, or suddenly decided, that this sort of payments should always have been subject to income tax. The result is and inevitably will be that unions will be precluded from making this sort of arrangement because you will now have a situation in which if you enter into a bargain with an employer allowing certain re-organisation to proceed you have no way of dealing with the people who might suffer in their earnings as a result. Previously it was dealt with by way of the best bargain you could make and income tax was not, in practice, charged on that. Now, apparently, the decision of the Revenue Commissioners is that income tax should and will be charged on this sort of sum and naturally the workers concerned are not, therefore, interested in the bargain because immediately they will get a big wallop of income tax on that sum, whereas if the earnings, which they are in a sense being compensated for, were spread out over a few years, they probably might not be subject to income tax on them at all.
Is this where they leave?
No, not where they leave. This is where the re-organisation, like the computer we were talking about a while ago, takes place. One can visualise a situation in which a computer is put into a factory. It may be possible to rationalise the situation but as a result you may have people redundant. That is a separate problem. People still continued in the employment may lose earnings they have an expectation of receiving under the old scheme, overtime, extra payments, things of that sort. You try to enter into a bargain which covers all that. Up to now the trade unions covered that by way of lump sums to the individuals who would suffer as a result, thereby sweetening the bargain.
We now have a difficulty which I am trying to make clear to the Minister. I do not know if I am getting my point across: I hope I am. If this is to be applied in this way, in fact the trade unions cannot do business in such a situation. All they will have to say is that they are opposed to the re-organisation, that their members do not want it. They will not agree to the introduction of the computer because they have no way of dealing with the problem for their members. It is useless making a bargain to give some individuals who might suffer a loss of, say, £1 a week for the rest of their lives, a few hundred pounds, if income tax at the rate of 7/- for each pound is to be taken from them.
Equally, the employer is not interested in upping the sum in order to take account of the amount of income tax people will be paying. This is a new development. I do not know how far to go back; I might only complicate it further. I hope I have made my point. I think it is bad that you should have this situation which would inhibit people from getting on with re-organisation.
I hope the Minister gets my point and will have an opportunity of looking at it as soon as possible.
I certainly shall.
I should like to ask the Minister if, in assessing income, he could include annuities arising from deaths in the case of a widow's pension. I raised this on Second Reading. It seems that the present method of dealing with this is anti-social where it is aggregated based on the life expectation of the receiver. It would seem to be a very simple matter to exempt such widows' pensions from death duties and include them as a special category of income. We have already got earned income and unearned income, and this could be given any name you wished and whatever rate of tax is considered appropriate set on it. It would have the advantage that the person concerned would pay as the money came in and not be faced with a bill for the whole lot within a few months of the death of the husband. If that could be done, the Minister would confer a very great favour on widows, especially young widows whose husbands are cut off at an early age and who are left with a struggling family. It should be possible and it would be a real step in the right direction.
This is a question of estate duty?
Estate duty on futuristic income.
The Senator's suggestion is that it should be exempted from estate duty but should be subject to some type of tax as an income?
Yes, as it arises.
Of course the annuity is liable for income tax and surtax as it is payable year by year.
Yes, but I am suggesting putting on an additional tax so as to give the widow the opportunity of paying the estate tax as the income comes in year by year rather than presenting a bill within a few months of the death of the husband, a bill which is based on the life expectation of the widow.
The difficulty about this sort of thing is that once you introduce a concession with regard to aggregation at all, it would almost certainly be widely availed of by other persons whom you would not wish to include in the exemption. I thought we had treated widows fairly well in regard to estate duty.
Apart from this point.
As the Senator knows there is a special abatement of estate duty in the case of property which is going directly to the widow and children. I have not got the table with me at the moment but I gave it in the Dáil. It shows that a widow with no children is not liable for any estate duty below £8,000. It goes on up from that, depending on the number of children. I feel that is probably the better way to deal with the matter rather than give any sort of general exemption because it would almost certainly be abused. There are many skilled brains continually examining the estate duty code seeking loopholes in it, and if we were to make some provision along the lines suggested by the Senator, I fear it would be availed of by these people.
What I am saying is that if a widow is entitled to £500 per annum for life, if she were 70 years of age, that sum would be multiplied by three, giving a capital of £1,500 and the tax would be taken on that. If she were 35 years of age, she would be regarded as having a life expectation of 30 years and the present value of the sum treated as capital would be based on 15 to 20 years. The £500 would then become £10,000 and tax would be demanded there and then on the £10,000.
What I am asking is that the State should say: "She is getting £500 a year and we will take a certain amount of tax as it comes along each year. Therefore let us take it through the annual method of collecting tax rather than arriving at a notional figure on the basis of how long that widow will live". I am not suggesting the State should lose on it. I am suggesting a pay-as-you-live system with the advantages of the PAYE system for workers.
The State would then have a vested interest in keeping them alive.
That would be a good thing.
I support this point. There are two separate issues. It seems to be contrary to the purpose of the estate duty code to impose any duty in any shape on widows. The purpose of estate duty——
Section 1 has nothing to do with estate duty.
It shows the narrowness of the area in which I am attacking. The purpose should be to ensure that if capital passes at any stage, estate duty will be payable on it. I raised this question in the House two years ago in relation to insurance policies, in relation to an insurance policy I have myself, and the Minister said he would look into it but I have not heard any more about it. I pay £100 a year. I get nothing if I live but if I die, my wife would have an income up to a certain age of—I am not quite sure how much—I think £1,000 a year. If I die I get nothing, of course, and that is why there is such a good return for relatively small annual contribution. A couple of years ago when I went to make my will, believing my net assets to be some small sum, I was horrified to find I was in the third highest estate bracket on the ground that the income I left my wife would be aggregated at a sum of £45,000. Out of what assets? There would not be any assets.
If one insures oneself to provide a pension for one's wife, if the money put aside for that purpose is free of tax anyway, if one gets benefits through the insurance code, the wife should pay tax on the income. One should pay tax only once. What is intolerable is that one is taxed twice or three times. For having made provision for one's wife, sums in the region of £15,000 are demanded because the wife has an income for part of her life. There is confusion between capital and income on the part of the Revenue Commissioners and, I suppose, on the part of the insurance companies, and we should distinguish between the two.
It is possible to pass on a capital sum in the guise of an annuity. That is what the provisions in relation to aggregation are all about.
I do not agree. If the provision is tied down so that money can only be paid out in annual sums during the life of the person concerned, I regard it as income. I contribute £100 a year out of capital. If I die, my wife gets a pension.
She can always sell the annuity——
Anyone who has any income can go along and say: "Give me some money", and sign over the income.
It is quite easy to pass over a large capital sum in the guise of an annuity.
The ingenuity of the Revenue Commissioners must be such as to allow them not to ask people for tens of thousands of pounds when such people have no capital out of which to pay it. The Minister should apply his mind to it. I am as anxious as he is to avoid any evasion, but as I stated earlier, I submit that the estate duty code should not apply at all to widows. If the ingenuity of the Revenue Commissioners is as great as the ingenuity of the people who are trying to evade taxation, they can ensure that widows will get an income without having to pay colossal sums in estate duty.
I want to make just one point. We all welcome the Minister's concession in regard to medical expenses but I should like him to look at the question of parents who have mentally and physically handicapped children and who are obliged to hospitalise them, to have them in institutions. This creates a most unequal burden for parents. Some of the children are so severely handicapped that it is essential to have them in institutions and parents will have to pay a very heavy weekly fee, thus carrying a severe financial burden. I ask the Minister to review generously the case of parents with mentally and physically handicapped children. The ideal situation, of course, would be to keep such children at home——
Expenses of this nature are covered by section 12—up to £300 a year.
I am speaking of those who do not come within the scope of that provision.
The people the Senator is talking about come within it.
Question put and agreed to.
SECTION 2.
I move recommendation No. 1:
In page 3, lines 36 and 37, to delete "full-time".
This recommendation seeks to remove the requirement that a married woman not living with her husband should have to be in full-time employment or engaged full-time in some trade or profession in order to secure this benefit in relation to having a housekeeper or relative to look after her children. This point was raised in the Dáil where the Minister said he would look into it before Report Stage, but as far as I can see nothing was said about it. Looking at the Bill in the meantime, and since putting down the amendment, which I had to do in great haste last night to facilitate the Minister, I have come to appreciate that the Opposition in the Dáil did not go far enough. I have been reading section 139 of the 1966 Income Tax Act. It states:
(1) If the claimant proves that he is a widower and that for the year of assessment a person being a female relative of his or of his deceased wife is resident with him for the purpose of having the charge and care of any child of his, or he proves that he has no female relative of his own or of his deceased wife who is able or willing to take such charge and that he has employed some other female person to undertake the same, he shall, subject as hereinafter provided, be entitled to a deduction of £100 in respect of that female relative or other female person:
Subsection (3) says:
This section shall apply to a claimant being a widow as it applies to a claimant being a widower, with the substitution of "her deceased husband" for "his deceased wife".
This means that under existing law if a woman loses her husband by death, she can get this allowance in respect of a housekeeper, whether she works full-time, part-time or any other time, but the section suggests that if a woman loses her husband other than by death, she must not alone work but work full-time. The Minister's defence is unacceptable. He said that if a woman took part-time employment of such a kind that it lasted for only a few hours of the day, it would be regarded as full-time. The example I gave was of a woman taking employment as a doctor's receptionist. The job would be only a morning one. The Revenue Commissioners would regard her as working whole-time. This seems to be splitting hairs. It seems to be an unlikely eventuality in 99 per cent of cases. A woman would have to employ somebody to look after her children while she did such work. Anything that would require such a woman to work full-time is most undesirable. Women who have children can reasonably work part of the day and so long as they are at home when the children arrive in the afternoon, it can have no adverse effect on the children.
It is most undesirable to insist that women must work full-time in order to obtain this particular benefit, encouraging them to be out of the house for the whole day when it is far better socially if they are out of the house only when the children are in school and at home when the children are at home. We should not put pressure on women to work full-time. If you do that, instead of women working part-time, you will find that women who have been left by their husbands will want to get out of the house the whole day. Therefore, it is desirable that this should be put right.
When I put down the recommendation, it seemed to me that there was no case for requiring her to be in full employment. I do not think it is desirable to put a person who has been deserted by her husband into a different category from a widow. In both cases she is alone. Therefore, while I put down the recommendation to delete "full-time", in retrospect I would have preferred to put down the recommendation in the form of deleting any form of employment and putting this person on a par with a widow.
It may be that I have misunderstood the section but on re-reading it it seems to me false and there is a wrong distinction being made between those two categories who have lost their husbands and, therefore, the requirement of employment should be removed. If it should be there, it should not require full-time employment. The Minister's explanation in the Dáil was specious. I would therefore seek the deletion of "full-time". I would like the Minister to delete the employment requirement altogether.
The purpose of this provision is simply to put the deserted wife in the same position as the deserted husband. Up to now this relief was available to a husband whose wife had deserted him. The provision was sensibly conceived because it is based on the idea that if a wife deserted her husband and children, he would have to get somebody in to look after those children in the day time when he was working. It was represented to me that a similar provision should be made in the case of a woman whose husband had deserted her.
I approached this matter on the basis of equity by making the same provision for a deserted wife as already existed for a deserted husband. The whole basis of the relief is that the person who is deserted has children who have to be looked after when that person has to work during the day. The condition of full-time employment is included because the employment should necessitate absence from the home for a substantial part of the day, giving rise to the necessity for the employment of a housekeeper. It is the housekeeper we are concerned with here. This is an allowance for a housekeeper looking after children. The first prerequisite is that there is need for a housekeeper. Genuine need for a housekeeper arises only if the person concerned has to be absent from home for a substantial portion of the day in the course of an employment.
I think it is quite a reasonable provision from that point of view. If Senator FitzGerald wants to introduce a completely new type of income tax allowance, that is all right and he is perfectly entitled to put down a recommendation to that effect. This particular section, however, deals with a particular circumstance, namely, where a person has to have a housekeeper. It is concerned with a housekeeper and the necessity for having to employ a housekeeper. That is why it is phrased as it is.
The Minister has not really answered the point at all. What he says refers to subsection 4. There is no requirement there in regard to employment at all. It simply says that it shall apply to a claimant, being a married man, whose wife is not living with him and who is not entitled to the higher deduction under section 138 (1). Therefore, there is no requirement that the man should have to work to get this. If the man does not have to work and has such a large income that he does not need to work, he gets the allowance. If he has sufficient income, he does not have to work but he gets the extra for the housekeeper. In the case of women, it is proposed that they must work.
Women can get this allowance only if they are working. Therefore, it is not correct to say that this section puts a deserted wife on a par with a deserted husband. The position here is that she can get the benefit only if she is working. She is put in a different category from deserted husbands and widows, in respect of whom there is no employment requirement. I can see no reason to pick on deserted wives and to say that they must work, putting them on a different footing from deserted husbands and widows. The Minister makes no requirements in regard to employment of widows or deserted husbands; it is only the deserted wife who has to work full-time to get a halfpenny of this allowance.
I can quite see that the Minister is trying to meet a case. When the section was drafted, somebody put in this employment requirement. It is quite understandable that that requirement should be there in the case of everybody but it is not there in the case of deserted husbands. It is only there in the case of deserted wives. I would ask the Minister to eliminate completely this employment requirement in the case of deserted wives.
This makes me despair of introducing an improvement of any sort. I introduced this section, because I was asked to do so, for the benefit of working wives; and Senator FitzGerald accuses me of picking particularly on those people.
I did not accuse the Minister: I accused the people who drafted it.
I accept full responsibility for the existing draft. I was asked to extend this concession to working wives whose husbands have deserted them and it is framed to meet those circumstances. Women whose husbands have deserted them and who have to go to work are necessarily absent most of the day at work and have to employ housekeepers. It is hair-splitting for Senator FitzGerald to suggest that the husband is exactly the same as the wife. In relation to looking after children, a deserted husband is in a different category altogether.
What about the widow?
He is coming to the widow.
If you want me to withdraw the concession in relation to her and put in full employment, I will do it.
That suggests even greater generosity than is at present being given by the Minister.
We must make sure, when we bring in a provision like this, to cater for certain bona fide cases, not to cover people who do not deserve relief.
The fact is that if it applies in those other cases then it applies in every case. Clearly the Minister is not aware of significant abuses or he would have taken steps to deal with them. If it is the case that widows do not abuse this, contrary to the Minister's intentions, why is he so suspicious of deserted wives? The Minister makes no case distinguishing between the deserted wife, on the one hand, and the deserted husband and widow, on the other. I cannot accept his position in the matter. What I intend to do is withdraw the recommendation in order to replace it by one on Report Stage, which will eliminate the employment requirement altogether.
Recommendation, by leave, withdrawn.
Section 2 agreed to.
Sections 3 to 7, inclusive, agreed to.
SECTION 8.
Question proposed: "That section 8 stand part of the Bill".
I should like to draw the Minister's attention to the fact that there is a rather anomalous position here in relation to merchant banks, and I should like to declare my interest as a director of a merchant bank, other than Guinness, Mahon. Under the present legislation, for certain purposes privileges are accorded to commercial banks. This particular merchant bank for good and proper reason at the time the original legislation was introduced was, in fact, the only such establishment. There are a number of, I would hope, equally reputable merchant banks and the Department of Finance and the Revenue Commissioners have hitherto refused to extend to these other establishments the same exemptions as in respect of Guinness, Mahon. It is arguable, although I admit to an interest in the matter, that to maintain a privilege for one institution of this kind as a privilege given by the State and not to extend it to others is inequitable, and I would ask the Minister to look into the matter and consider whether, in establishing a firm criterion as to the reputable nature of this concern, any concern which meets the criterion should have the same privileges and there should not be a distinction as between one such establishment and another.
I have looked at representations from a number of concerns in this regard. Some are borderline cases. What we endeavour to do is to ensure that the savings of our people are utilised for investment here.
I would support the Minister strongly in that. I can speak for only one such organisation in respect of which this is the case, that the amount of money brought into the country far exceeds the amount brought out. I think as the Minister will be aware, he could easily cover that by introducing some requirement as to the manner in which such bodies should carry on their operations in order to be put into this position. But to say that, even if they are, in fact, bringing in more money to the country, there should be a disadvantage to these and other establishments for which no requirements are laid down seems to me to be a bit unfair.
That is a drafting change. These people are already included. They have changed their name and we have to tie the thing up. We will be introducing legislation dealing with banking in general. The control of banking operations will be tightened up generally as well as the conditions under which people operate banks. Perhaps the Senator will have an opportunity of discussing the matter further then.
Question put and agreed to.
Sections 9 and 10 agreed to.
SECTION 11.
I move recommendation No. 2:
In subsection (1), line 23, before ", at" to insert "in the case of machinery or plant other than ships"
This recommendation is one I had to put down without the opportunity of studying the background adequately, and I have to ask the Minister's indulgence in putting it forward to meet him in the timing of this debate. I could not carry out the necessary research on this point. I have been informed, as I hope, correctly, that in the original legislation dealing with this matter, the requirement that machinery and equipment in order to benefit from this depreciation provision, should be unused and not secondhand does not apply to ships. Unfortunately, I cannot give authority for this statement because there has not been time for me to do the research.
That is the position.
If that is the position, it seems to me important that this should be preserved here.
That is the position with regard to the initial allowance.
If it applies to the initial allowance, it could reasonably be applied to this allowance. I mention it because it is not a purely hypothetical case. The Minister will be aware—and indeed it was mentioned in this morning's papers— of the proposal for a ferry service across the River Shannon which will be of inestimable advantage to the tourist industry. I have had occasion to do some studies on the possible traffic for this ferry and I have been impressed by the volume of the traffic potential. It is more than I thought would be available. This service will be initiated, in the first instance, with ships from an existing ferry operation which has been displaced by the building of a bridge. This makes it possible to start in an economic manner until such time as the traffic volume has been established and new ships purchased.
It is a pity if simply through an oversight here this operation should be prejudiced in some respects by not providing the free depreciation provision in respect of ships. With the free depreciation provision, the company concerned would be more likely to be able to replace the ships sooner with new ships. This would be desirable, and I suggest to the Minister that he include in this, as in the original legislation, the provision that ships, even secondhand, can benefit from this depreciation provision. This is a particular instance where this would be beneficial to the country and to the tourist industry.
I do not feel ashamed in confessing that the possibility of a ferry service in the west of Ireland using secondhand ships never occurred to us when we were drafting this section. We were thinking exclusively of plant and machinery which would be installed in factories. Even if we had ships in mind, we would never have conceived that a ship would be used exclusively in the undeveloped areas.
A slightly different point is involved here. The initial allowance, which is there at present, applies to secondhand ships generally. It is being increased to 50 per cent so that if somebody starts a ferry service across the Shannon, using secondhand ships, he will not be too badly placed even as things stand. First of all, he will be entitled to an initial allowance of 50 per cent and then will be entitled to the balance over the estimated life of the ship. A new ship is usually deemed to have a life span of 25 years, so that if a ship is ten years old, the remaining 50 per cent would be written off over 15 years. In all probability, that is as much as anybody would want in those circumstances. He would have to make enormous profits in the first year if the 50 per cent initial allowance were not enough. It is most unlikely that that would be the position. He would almost certainly, between the initial allowance and the remainder of the wear and tear allowance, be able to get the maximum possible advantage.
However, having said all that, I must admit that when we prepared these provisions, we did not advert to the fact that such an enterprise might start. I am quite happy to give an assurance here that if it is necessary, if experience shows that this project might be inhibited from getting under way because of this provision, then we will make whatever change is necessary.
The Minister will appreciate it is not simply a question of being inhibited in getting under way. Quite clearly, the 50 per cent initial allowance will help to get it under way. It was with regard to speeding up the process of replacement that I thought this might make a difference. I put it to the Minister that if the people concerned approach him and can show that the process of modernising the service, when it starts, could be speeded up and facilitated, he might then consider a change.
Recommendation, by leave, withdrawn.
Question proposed: "That section 11 stand part of the Bill".
We welcome very much this liberalisation of our depreciation system, 50 per cent initial allowance applying in the west of Ireland. It will be interesting to see how it operates and whether it does produce beneficial results. It is possible that if it does produce beneficial results, consideration might eventually be given to extending it to other parts of the country. It is a very enlightened move by the Minister.
Question put and agreed to.
SECTION 12.
Question proposed:"That section 12 stand part of the Bill".
I want to welcome this section and the evidence it gives of the Minister's concern for relief for health expenses. This seems to me to be a very important point. The section is carefully framed and the redefinition of some of the circumstances will prove of great benefit to those who come within these provisions.
However, I should like to direct the Minister's attention to something which may be occupying him but which overlaps, perhaps, between his Department and the Department of Health. It is the fact that single persons with no family responsibilities and with yearly means of up to £1,200 a year are entitled to benefit, under the Health Acts, by being classed as persons in the middle income group and that married couples with the same income and with a number of dependants are treated on exactly the same level under the Health Acts.
It is true, of course, that a county manager has the discretionary power in case of hardship to give greater benefit to such people, but the point I should like to make is that this discretionary power and the way in which it is applied can vary from county to county. Some county managers are more generous and liberal in their interpretation of this power than others. It can arise—this is related to the point made by Senator Brosnahan earlier—that the wife of a man in the middle income group might be suffering from some mental disability. He might have to pay the medical expenses for her in a mental institution perhaps for the rest of her life. If, as well as that, he has to bring up children, clearly the burden on him is very heavy.
There is a curious anomaly, that if such a man and wife were separated or, indeed, if they were unmarried though living together, from the point of view of the Health Acts and under the income tax code, they would be treated as separate entities, each with his or her £1,200 a year yearly means test, as it were, and they would be separately allowed for. This seems to be anomalous and it is a point to which I feel the Minister's attention should be drawn and the attention of the Minister for Health. because it seems anomalous to me that a single person with no family responsibilities should be treated in relation to health benefits under the Health Acts, in exactly the same way as a married couple with many children.
It is related, I think, to this question of relief for health expenses and I should welcome the Minister's assurance that this point is under review or is being considered by him, or by his colleagues in the Department of Health.
I have already welcomed the provisions of section 12 of the Bill. Certainly they are very forward-looking and progressive. I mentioned particularly the case of the parent with the moderately or severely mentally handicapped child, where there is an absolute necessity on the parent to have the child hospitalised. Life would be intolerable in the home if a severely mentally handicapped child had to be kept within the home; because it means the mother is tied down, and has practically no freedom whatsoever. Therefore, there is an absolute necessity to have this child sent to hospital. Local authorities do make provision in certain circumstances for the payment of an allowance in respect of such a child.
The provisions of this Bill do, to a certain extent, meet the point but the parent of the mentally handicapped child is in an exceptional position. That parent is carrying a most unequal burden and there is a responsibility on society to see that those children who are, as it were, beaten from the word go, get adequate hospitalisation and care. We think that an exceptional case can be made in respect of the parent of the severely mentally handicapped child. I have already paid tribute to the Minister is this respect. He has a generous approach to these problems. He has come up very generously with these provisions here in relation to health expenses but I would ask him in the years ahead—we know that nothing can be accomplished at just one attempt—to look generously at this problem and make exceptional provision for the parent of the severely mentally handicapped child who has to be hospitalised.
I do not want to delay the House but I do not think I should allow the section to pass without welcoming it and recalling our appreciation that after many years of representation and pressure on behalf of in particular, the white collar workers in relation to this problem, we have at last a provision in the income tax code to allow for medical expenses, expenses which can really be a disaster for people in the categories I am speaking of.
I welcome the section, and I should not like to let the occasion pass without expressing my appreciation to the Minister for putting it in this Bill. I also support what Senator Brosnahan said. I could not add anything to it, because Senator Brosnahan has a background knowledge and does an awful lot of work in connection with this matter. But I should like to support his plea to the Minister on behalf of the parents of mentally handicapped children.
First of all, I will certainly assure Senator Sheehy Skeffington that I will have a word with my colleague, the Minister for Health, about the point which he has raised and which, I think, has some validity. I am not quite sure what Senator Brosnahan's point is with regard to the mentally handicapped. I want to make it clear that, of course, expenses relating to mental handicap are within the scope of section 12: that includes hospitalisation, institutional treatment, and even attendance at clinics. Perhaps the Senator is suggesting that £300 is not enough in these cases. I may consider that on another occasion.
Thank you.
Question put and agreed to.
SECTION 13
I move recommendation No. 3:
Before section 13, but in Part 1, to insert a new section as follows:
"Subsection (1) of section 480 of the Income Tax Act, 1967 is hereby amended by the deletion of ‘and all such other goods and chattels as the Collector is hereby authorised to distrain' in lines 49 and 50"
The point here relates to the provision in the Consolidating Act under which the power of distraint extends beyond the property of the person being distrained. The relevant section is 480, subsection (1) which says that:
If a person neglects or refuses to pay the sum charged, upon demand made by the Collector in accordance with the assessments and warrants delivered to him, the Collector shall, for non-payment thereof, distrain upon the lands, tenements and premises in respect of which the tax is charged, or distrain the person charged by his goods and chattels, and all such other goods and chattels as the Collector is hereby authorised to distrain, without any further authority for that purpose than the warrant delivered to him on his appointment.
The "hereby" puzzles me a bit as I cannot find anything else in the section which explains "hereby", but my understanding of this is that any movable property can be distrained, whether or not it is the property of the person being distrained. This is iniquitous and—I hate to use the word again —I suspect, unconstitutional. It is certainly iniquitous. I feel this power should be removed. I have been told that, in fact, some years ago something of this kind happened. The local sheriff and the Revenue Commissioners arrived almost simultaneously. I think it was the Revenue Commissioners who arrived first and went around to the yard to see if they could find something movable to distrain and the sheriff distrained the Revenue Commissioners' car.
I hope he had his income tax paid.
If that happened to the Revenue Commissioners, I wonder that they did not set about amending the law. That makes me think that perhaps it was the other way around and the Revenue Commissioners distrained the sheriff's car.
In any event, this shows the absurdity of the situation. We ought to take steps to remove this and ensure that if a man does not pay his income tax, his property is seized—fair enough —after due warning, but that it must be confined to the property of the man concerned. Obviously, there may be mistakes. In that case it might have been thought that the car was in fact the car of the man living in the house. A mistake could be made, but when it is pointed out, it should be returned and not sold, which is just legalised robbery. I think therefore that the Minister should have a look at this particular point.
Yes; I have no hesitation in giving an assurance to the House that we are looking at this whole body of provisions governing the collection of taxes. They are not very logically put together as they stand. apart from any other implications they have. Therefore we are going to have a comprehensive look at the entire provisions governing collection of taxes and, pershaps, I shall be coming back to the Oireachtas with proposals. I am not, for one moment, suggesting that the proposals we will come back with will be any less draconian, but perhaps they will be a bit more modern in terms and shape. However, we will certainly have a look at it.
(Longford): The whole question of distraint should be looked at having regard to the present time and with commonsense because you can have a situation like that which Senator Garret FitzGerald described. It may be that it really did happen and if it did, something should be done about it because personally I would hate to see a situation where, say, the Minister for Finance would some evening drive up to the domicile of Senator FitzGerald, if Senator FitzGerald were in trouble with the Revenue Commissioners, and the Minister's car could be distrained by the Revenue Commissioners.
It is the only thing that would console me in a distraint.
(Longford): Having an anti-social sort of mind, I suppose the Senator would get a certain amount of consolation from that. Many years ago there was in the west of Ireland that sort of situation where you had two local authorities operating in the one county. You had the poor rate and the county rate, and you had two different rate collectors, both local people, operating against each other in the area of collection. There was a case where the county rate collector was not very friendly with the poor rate collector.
Different Parties perhaps.
It is worse when it is within the same Party.
(Longford): One collector went riding on his horse to investigate the distraining of a particular property and the other collector followed up and seized the horse successfully.
I brought the story up to date.
(Longford): That happened, and I want to assure the House and Senator Garret FitzGerald that the idea is not new at all.
Recommendation, by leave, withdrawn.
Recommendation No. 4 not moved.
I move recommendation No. 5:
Before section 13, but in Part I, to insert a new section as follows:
"Subsection (1) of section 550 of the Income Tax Act, 1967, is hereby amended by inserting before ‘shall' in line 51, page 344, ‘which has become due and payable' and in lines 52 and 53 by the deletion of ‘tax becomes due and payable until payment' and the substitution of ‘amount of the tax liability has been notified to the taxpayer'."
The point here relates to the system of charging interest on arrears. I should like some clarification of it. Section 550, subsection (1) of the Income Tax Act 1967 says:
Subject to the provisions of this section and sections 551 and 552, any tax charged by any assessment to income tax or to sur-tax shall carry interest at the rate of one-half per cent for each month or part of a month from the date when the tax becomes due and payable until payment.
I should like the Minister to explain to me what "due and payable" at the end of the section means. The situation exists in regard to income tax that the liability is not determined at that time when the tax is, as I understand the words, "due and payable", 1st January and 1st July. In fact, it is impossible to determine the tax in many cases because the tax liability will have been related to earnings in the year ended 31st March after 1st January when the tax is due. In some cases there are complications to be sorted out in regard to the liability and the Revenue Commissioners are not able to state what the liability is until after 1st January. The notification to the taxpayer does not occur until after the relevant date, 1st January or 1st July.
It seems to me that the practice is and this may be contrary to the law as set out here, that if, in fact, the liability is not determined and notified to the taxpayer by that date or until some time afterwards, interest is not charged automatically in those cases. If, for example, the liability is determined say on 1st May of that year, the fact that it has not been determined through no fault of the taxpayer, does not mean that the Revenue Commissioners automatically charge interest from 1st January retrospectively when the date 1st April arrives. As far as I understand it, at this stage, what they do is they leave over this interest liability until, in fact, the taxpayer has been notified of how much is due to be paid and at some date thereafter, they decide arbitrarily and without further notice to charge the interest retrospectively from some earlier date,
It seems to me that this practice is not strictly in accordance with the law which requires, rather absurdly, that whether or not the taxpayer or the Revenue Commissioners know what the tax is, interest must be charged on it from a certain date. It seems to me that, in fact, it is impossible to implement the section in its present form. Moreover, hardship can arise and I must again declare my interest in this case because I am in this position at the moment. The taxpayer, having been notified of the amount due, may then find that without further warning interest is charged on arrears if he does not pay in a relatively short time—not three months, but something shorter.
Therefore the Revenue Commissioners, in attempting in an impossible situation to implement this provision, because they cannot do it fully, do it in a half kind of way. They wait until the demand has been determined and then in a period less than three months afterwards, without warning, they charge the interest and then claim payment. I shall read from my letter from the Revenue Commissioners:
I am directed by the Revenue Commissioners to refer to your letter of 20th June on the question of interest charged for 1965-1966, This charge is a mandatory one under the provisions of section 550, Income Tax Act, 1967, and the Commissioners have no power of waiver.
The position is that there should be due notice of this requirement. The Act appears to provide for this due notice in relation to the time it is due but it does not consider the date from which the taxpayer knows he is liable. I do not think it is fair he should be put in the position of being told of the amount and given less than three months to raise it. He is then charged interest retrospectively and the Revenue Commissioners tell him that no matter how good his case is, no matter how badly they think he is being treated, they have no power to waive the interest, though they are in default under the section in not having levied the interest in the period. It may be due to some difficulty. The correct answer may be that the money is due and payable from the date the taxpayer is notified. I should like to be clear as to which is the position. I must admit I have not all the facts but if there is any doubt about it I should like my recommendation to stand.
There is, in fact, no doubt about the statutory position. It is simply that tax becomes due and payable at the time an additional assessment is made, and the taxpayer is given notice of the assessment. If nothing else happens, if he does not appeal the assessment, then that is the operative date, and the interest is due three months after that date. If he appeals the assessment, that date goes by the board and the tax does not become due and payable until the appeal is determined. The date of determination of the appeal then becomes the date and the taxpayer is again aware of that because the appeal is decided in some way of which he has knowledge either before the Special Commissioner or the Circuit Court.
In any event, the words "due and payable" mean the date on which the assessment is either originally made or subsequently decided on appeal, and the taxpayer must be notified of both, and the interest should not start to run until the expiration of three months from that date. However, I will have the practice looked at and I should like Senator FitzGerald to give me the details of the case he mentioned and we will make sure that the practice accords with the statutory position. I can assure the Senator there is no doubt at all that the statutory position is as I have outlined it.
I accept the Minister's assurance. I have not got the relevant documents.
I am not immediately clear about the notification of the result of the appeal, but I am clear that the appeal cannot be decided without the taxpayer being aware of it. If it is before the Special Commissioner, he will be notified that it is being heard before the Special Commissioner and presumably he would be there to hear the decision.
I am not sure it operates like that. Several things may happen. An appeal may be lodged and it may be settled without going before the Special Commissioner. Secondly, many people in this complex situation employ a tax adviser and then rely on the adviser being told. Some notification should come to the taxpayer from the Revenue Commissioners as to when the matter is finally determined or settled and three months should run from the date on which that notification is sent. The taxpayer may have lodged an appeal and the matter might be taken up by the tax adviser and some settlement reached, but unless the taxpayer is notified of the result of that, he may not know the date from which the interest has started to run.
The Revenue Commissioners cannot distinguish between the taxpayer and his adviser.
I accept that, but there must, presumably, be a written notification to the tax consultant or the person concerned that the matter has been determined and that the three months have started to run.
The case cannot go on before the Special Commissioner or the Circuit Court unless the taxpayer or his adviser is there. Therefore, the taxpayer or his representative must be aware of the decision there and then.
There are two matters. What happens is that an appeal is lodged and the matter may then be settled between the tax consultant and the Revenue Commissioners.
Then the taxpayer is aware of it.
After that settlement, when agreement has been reached informally, between the time notice should issue to the adviser or the taxpayer—there may be informal agreement of which there is no record and the taxpayer may be in a position of having the time running in respect of which he is unaware——
In a case where there is an informal settlement——
There must be an assessment levied. You do not pay tax as a result of a chat between the Revenue Commissioners and the consultant.
I will check it out. If the matter were settled across the table the agreement would have to be put in writing. I will make sure that it is.
Because I have not got all the facts, I am prepared to accept that a mistake has been made. As described by the Minister, the system appears to be satisfactory and I do not suggest it has not been operated in this case.
Recommendation, by leave, withdrawn.
Recommendation No. 6 not moved.
Section 13 agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill".
I should like to make two points on the section. Firstly, it is obvious that the Department of Health and the Department of Finance do not see eye to eye on the question of tobacco and its uses. The Department of Health spend a lot of money discouraging people from the use of tobacco and the Department of Finance are concerned to raise money out of those who use tobacco. I should like to ask the Minister has he considered what is the tax on tobacco which would give the optimum yield, and might he not be advised to go beyond this and get less than the optimum yield, thereby giving him a greater yield in public health. If taxation of tobacco were to be raised to the point where in reality it would discourage the use of it this would be a good thing.
The other point is in relation to something that appears on page 19 in the First Schedule. It relates to the customs duty on snuff. It seems to me I could make a lot of money if I could succeed in importing into this country a large quantity of snuff which would contain exactly 13 per cent moisture because anything that contains more than 13 per cent by weight of moisture pays a duty of £4 8s 8.5d and anything which does not contain more than 13 per cent by weight of moisture pays £4 11s 1d. Presumably any snuff containing exactly 13 per cent moisture would pay no duty at all.
I notice that in relation to tobacco, the wording is different. It says at the top of the page "if the tobacco is stripped or stemmed and contains ten per cent or more by weight of moisture". That is the wording there but in the case of snuff at the bottom of page 19 and on page 20, it is treated as if the 13 per cent moisture would guarantee that it could be brought into the country duty-free. I am hoping against hope that I will be able to make a lot of money on this.
I do not think so. I do not think the Senator will get away with a lot here. Exactly 13 per cent is covered in "not containing more than 13 per cent".
Would the Minister like to say something about the disincentive which could be operated by him in relation to smoking?
The only assurance I will give is that I will push the duty on tobacco as far as I possibly can.
Without losing money.
Question put and agreed to.
Sections 15 to 27, inclusive, agreed to.
First, Second and Third Schedules agreed to.
Title agreed to.
Bill reported without recommendation.
An Leas-Chathaoirleach
Next stage?
Now.
I have a recommendation for Report Stage.
If I may make a suggestion about this, it may not be understood that we shall have a Miscellaneous Provisions Bill in the autumn and if the Senator is agreeable to give all Stages of the Bill now, I would undertake to facilitate him in regard to a recommendation, drafted exactly as he wishes on this miscellaneous Provisions Bill. Any recommendation could be still operative for this year.
Yes, that is all right. I had not visualised that possibility in regard to a recommendation of this kind but no doubt the Minister knows how he can do it, so I will accept that.
I cannot say I will accept the recommendation but what I am saying is the Senator will have full facility to draft the recommendation he puts down the way he wants.
An Leas-Chathaoirleach
Is it the position that the Minister is guaranteeing that the recommendation the Senator is interested in will not be outside the scope of the Bill?
I accept that.
Agreed to take remaining Stages today.
Bill received for final consideration and passed.
The Seanad adjourned at 1.10 p.m. sine die.