Seanad Éireann debate -
Wednesday, 6 Mar 1968

Vol. 64 No. 11

Finance (Miscellaneous Provisions) Bill, 1967 (Certified Money Bill): Second Stage.

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

Minister for Finance (Mr. Haughey)

The main purpose of this Bill is to provide a new and more precise legislative basis for the taxation of profits from dealing in or developing land. The existing legislation, which was originally enacted as Part VII of the Finance Act, 1965, and is now contained in Chapter VII of Part IV of the Income Tax Act, 1967, starts off by imposing a very wide charge and then excludes from the charge specific types of transactions which could not be regarded as profits-making ventures of a trading nature. There has been criticism of the legislation on the grounds that the exclusions do not cover all the appropriate cases.

Part IV of the Bill approaches the problem in a new way. It confines liability to cases in which a business of dealing in or developing land is carried on. The main provision to this effect is contained in section 17. Briefly, the object of that section is to impose tax on profits on disposals of interests in land in the course of activities which constitute trading but which cannot be regarded as trading under general income tax law because of either or both of two circumstances, namely, that the interest disposed of was not the full interest held by the disponor or that he did not acquire his interest with a view to turning it over at a profit.

I might mention that the new provisions will be fully retrospective in so far as they give relief but they will operate only as from 6th April, 1968, in so far as they may impose an additional charge.

The other provisions contained in Part IV deal, inter alia, with the principles for computing the profits of a business of dealing in or developing land and with the avoidance of liability by devices such as buying land at an artifically high price or selling it at an artificially low price.

As I have said. Part IV is the raison d'etre of the Bill. The other parts of the Bill, however, contain a number of important provisions relating to income tax, surtax, corporation profits tax and stamp duties. I will now deal briefly with the more important of these measures.

Part I is concerned with income tax. In line with the recommendation of the Commission on Income Taxation, sections 1 and 3 provide for the appointment of Appeal Commissioners to carry out functions under the Income Tax Acts at present performed by the Special Commissioners as well as for the transfer of their administrative functions to the Revenue Commissioners. The Appeal Commissioners will, therefore, be an appellate body only.

Section 4 provides for a new time-limit of ten years within which income tax and surtax assessments may be made, subject to the qualification that assessments may not be made for a year earlier than 1961-62. However, these time-limits would not apply in cases involving fraud for neglect and in these cases assessments may be made at any time. Corresponding time-limits for making claims for repayments of income tax and surtax are provided for in section 4.

Another important provision of Part I is contained in section 9 which exempts from Irish tax any foreign pension which is not regarded as income for tax purposes in its country of origin.

Part II of the Bill is concerned with reducing the stamp duties on certain instruments. The duty on a short-term life insurance policy is being reduced to bring it into line with the duty of 6d on an accident policy. The duty on agreements for hire of goods, plant and machinery is being reduced to the fixed rates of 6d and 10s which apply in the case of hire-purchase and credit-sales agreements. The incidence of duty on foreign loan issues by Irish concerns is also being reduced and these will only be chargedable with a duty of 2s 6d per cent on issue.

Part III extends to corporation profits tax the new time-limits for assessments and claims provided in Part I in relation to income tax. It also makes the necessary adjustments arising out of the changes made in the title and functions of the Special Commissioners.

Finally, Part V is a miscellaneous Part which includes provisions in regard to the appointment of and superannuation terms for Appeal Commissioners as well as their replacement of the Special Commissioners for the purpose of the enactments relating to turnover tax and wholesale tax.

If Members wish to have further explanation of any of the Bill's provisions I will be glad to deal with their questions at the Committee Stage.

I recommend the Bill to the House for a Second Reading.

Mr. O'Quigley

I am sure the Members of the House would wish the Minister to give a great deal of explanation so that we would get a proper understanding of what this piece of legislation is all about. I am afraid that the kind of education in tax law that we would require would be such as we could not properly and reasonably request the Minister to give us when the Bill is passing through the House. I think the new position of dealing with these technical amendments to the various taxation codes is very laudable. It provides an opportunity for getting down to the detail of income tax and stamp duty legislation, and so on, in a way that was not possible when we had more lengthy debates on the Finance Bill, when it was introduced, to implement the Budget Resolutions.

There has been a good deal of debate on this Bill in the Dáil. From what I can gather from my colleagues in the Law Library, it has been the subject of much scrutiny and examination by a variety of concerns, assisted by various legal advisers. I rather gather that the Minister and the Revenue Commissioners have gone a good distance to meet a variety of perhaps not objections but fears and to clarify a number of matters in various ways. That is very much to the good. One hopes that the end result of all of that will be that the income tax law will be somewhat more intelligible not alone to the ordinary man in the street but to the ordinary run of the mill lawyers than it has been up to the present time.

Codification of the income tax law in this volume was a great step forward in making income tax legislation somewhat more intelligible, though I have heard one person, who is rather an expert on income tax legislation, saying that he knew the old sections so well that he now found it difficult to translate his mind into the new sections contained in the Bill. One can sympathise with that kind of attitude and see how it arises. In that context, I want to congratulate the Minister and the Revenue Commissioners on the new loose-leaf volume of the Income Tax Act of 1967 and the splendid index which has been provided with it. It certainly will make it a great deal easier now to find the various sections of the legislation which pertain to a particular problem, and the new loose-leaf income tax volume with the index has already received widespread commendation among income tax lawyers.

The same thing has already been done in relation to stamp duty, and I hope that with the passage of time, it may be possible to do that in relation to death duties and corporation profits tax. Somebody asked me to inquire from the Minister if there is any word of the codification of the law relating to corporation profits tax, and he might be able to deal with that. I am quite sure that such codification would be welcome.

This Bill, of course, makes redundant almost immediately the new Income Tax Act of 1967, or certainly throws it back into the melting pot. I am wondering whether it would be possible for the Minister to issue as a White Paper, or as an explanatory memorandum to this Bill, those sections of the Income Tax Act 1967 which are amended in a substantial way by this Bill. I readily agree that it would be laborious, and perhaps unduly costly, to take all the amendments made in the Schedule and to weld those into the Income Tax Act 1967, certainly the amendments contained in Part I and Part II, but I wonder whether it would be very costly to take the substantial amendments to section 7 of the 1967 Act and, as happened in the case of the Criminal Procedure Act 1967, and the Rent Restrictions (Amendment) Act 1967, to weld the amendments being made by this Bill into the existing sections of the 1967 Act. I have no doubt that if the Minister were to undertake that——

Mr. Haughey

That will be done in the loose-leaf edition.

Mr. O'Quigley

The Minister will earn the gratitude of many a harassed accountant and lawyer and, I suppose, taxpayer, when that operation has been completed.

Mr. Haughey

In the present Bill we also repeal a whole Part of the 1965 Act and put in a new Part for consistency purposes.

Mr. O'Quigley

I see that, in relation to Part IV, that it is a replacement of what we call Part VII of the 1965 Finance Act. That is easy enough and it stands by itself, but then the amendments in Part I and in Part V— if it were possible to do it without any great expense, it would make for a much readier appreciation of income tax law.

The Minister has referred to a number of amendments being made in relation to the re-opening of assessments. I wonder if I am correct in this, that while the limitation of ten years placed upon the re-opening of assessments which have already been made applies in relation to income tax, the period has been extended from six to ten years in the case of surtax assessments?

Mr. Haughey

No. The same has been done in both cases. What has happened is that up to now, it was a practice of the Revenue Commissioners, not to go back beyond six years. Now we are setting the statutory limits and making the period ten years. Subject to the qualification that assessments may not be made for a year earlier than 1961-62.

Mr. O'Quigley

I see that. To an extent the new statutory provision is continuing the practice.

Mr. Haughey

Except that it is now statutory. The big complaint in the Dáil was that only a practice of the Revenue Commissioners.

Mr. O'Quigley

To that extent, it gives a degree of security, but it would not, in fact, affect anybody who has had an assessment made for surtax up to the present time. Further, the Minister takes power in the Bill, in giving this concession to limit the re-opening of the assessment to a period of ten years back from any particular year. At the same time, when one looks at the definition of neglect, one sees that if it exists in relation to making a return or a statement, the concession almost vanishes. Neglect is defined as negligence or failure to give any notice or make any return, statement or particulars. I can well understand a person being negligent and not giving notice, and their saying: "We will re-open our assessment and have a look at what you were liable for", but if it refers to mere failure or to the case of a person at a particular time being unwell or being bothered by adverse business affairs, that individual kind of case will be caught as if it were guilty of fraud.

Mr. Haughey

There is a proviso for a reasonable excuse.

Mr. O'Quigley

In that context, I suppose it does provide that where a person had a reasonable excuse for not doing anything, he shall be deemed not to have failed. I can only hope in the interests of the taxpayer concerned that the Revenue Commissioners will be reasonably reasonable in their interpretation of "a reasonable excuse".

With regard to the repeal of Part VII of the 1965 Act, which is in effect being done in Part IV, I think that the general view is that the Minister has now succeeded in really getting at the kind of profits from the business of dealing in land that was originally intended. For my part, I commend the attitude that lays down a particular line at a particular time, on the understanding that if it does not work out well, the Minister concerned will have no hesitation in coming back to the Legislature with amending legislation in the light of experience. I have oftentimes in the House suggested that certain amendments be adopted on that basis and that legislation be enacted, particularly where new fields have been gone into. I think it entirely praiseworthy on the part of the previous Minister for Finance, who is now the present Taoiseach, and the present Minister, to have faced up to the real difficulties, some of which might not have existed if more consideration had been given to them, which were shown to arise in the course of the application of the Acts by the Revenue Commissioners.

I am still not satisfied, nor do I think a lot of people are satisfied, that Part II of this Bill gives the security that one would wish. There was a good deal of discussion on section 16 in the Dáil and the Minister now in his own statement says that the object of the section is to impose tax on profits on disposals of interests of land in the course of activities which constitutes trading but which cannot be regarded as trading under general income tax law and I feel that part of the difficulty that has arisen in relation to the taxation of profits arising out of dealing in and developing of land arises from the fact that it was sought to fit this new kind of activity which it was desired to capture into a code which was not really suitable to receive the amendment and it might have been better to face boldly up to the situation and set up a new set of rules analogous to the rules under which it was sought to make this income liable and deal with it in that way. I feel that if that had been done it might be clearer and easier to understand what was being got at but that, in fact, has not been done and I suppose there will still be a good deal of debate and discussion as to what various provisions of this part of the Act means. However, the general opinion does seem to be that the more objectionable, from the point of view of the taxpayer, features of the 1965 Act have been got rid of in sections 16 and 17.

There are a few other matters I should like to refer to and, perhaps, the Minister might be able to deal with them in his reply.

Business suspended at 6.5 p.m. and resumed at 7.15 p.m.

Mr. O'Quigley

Before business was suspended I was about to ask the Minister what the position was in relation to friendly societies. As I understand the position under the Friendly Societies Act of 1898, I think it was, friendly societies are limited certainly for insurance purposes to issuing policies, not exceeding £300. I think it was £200 under the 1898 Act and then that was amended subsequently to £300 in an Act amending that. Under the Credit Union Act, 1966, there was an extension of the maximum amount for which those societies could insure from £300 to £1,000. When the Income Tax Act, 1918, was enacted certain exemptions under various schedules were given to friendly societies which were either limited by their own articles or by statute to this limit of £300 of which I speak.

The purpose of that I take it was to encourage the development of friendly societies and to encourage an expansion of their activities. The £300, of course, is long since out of date. The Credit Union Act, 1966, brought in a more realistic figure. As I understand it, the position now is that the friendly societies are either prevented from extending themselves to the £1,000 limit or if they do extend themselves to that limit the exemptions provided for them under the 1967 Income Tax Act will no longer be available to them.

There is not anything in this Bill dealing with that kind of situation. It seems to me that it is desirable in view of the extensions contained in the Credit Union Act, 1966, to modify the provisions of the Income Tax Act to enable those friendly societies to avail themselves at the same time of the extensions provided by the amendment contained in the Credit Union Act, 1966 and at the same time of the valuable exemptions which were provided for them.

Mr. Haughey

That has been done. The £300 has been increased to £1,000 in the case of the friendly societies under the 1967 Act.

Mr. O'Quigley

In the Finance Act? Those who should know advise me it has not been done.

Mr. Haughey

There may be confusion. In the case of the trade unions it has not been done.

Mr. O'Quigley

It was not the trade unions that my informant was concerned about but, in fact, the ordinary friendly societies.

Mr. Haughey

The increase in the case of the friendly societies was provided by section 7 of the Finance Act, 1967.

Mr. O'Quigley

That is section 7.

Mr. Haughey

That is not the Consolidation Act.

Mr. O'Quigley

I appreciate it is the ordinary Finance Act.

Mr. Haughey

Section 7 says:

Section 335 of the Income Tax Act, 1967, is hereby amended by the substitution of "£1,000" for "£300."

Mr. O'Quigley

I was surprised that the exemption provisions in the Income Tax Act were not up to date with the limit provided in the Credit Union Act.

I want to refer to the stamp duty provisions in this particular Act. I do not understand why in modern times, when we are dealing in terms of millions of pounds, stamp duty at the rate of 6d. on a short-term life insurance policy should be worth bothering about at all. I do not know that the actual stamping of a particular document gives it any greater validity or sanctity except unless it is stamped that it is not admissible as evidence in a court of justice.

What I am trying to get at it is that small amounts such as 6d and 1s cost more in terms of man-hours on a national scale in paying and collecting them than is really worthwhile as a contribution to the Exchequer. I would rather we did this in the way we got rid of the 2d stamp a few years ago and that all 6d stamps at present required which give no added validity or sanction to agreements and so on should be abolished altogether.

I am also mindful of the position in regard to the number of stamps that have to be affixed to various court documents. Somebody in the Minister's Department or in Revenue should carry out an investigation as to the amount of wholly paid time that is wasted daily and weekly in the stamping of affidavits, motions, and so on in our courts. For instance, one has to get an attested copy of an affidavit, which is an antediluvian process. One has to get an affidavit read over to ensure that the affidavit handed to the judge corresponds with the affidavit originally filed and that affidavit has to be stamped.

Mr. Haughey

Perhaps the Senator is addressing those remarks to the wrong Minister; they come more within the purview of my colleague, the Minister for Justice.

Mr. O'Quigley

The present Minister gets a rake off in the stamp of the attested copy. It is either 2/6 or 3/6.

Mr. Haughey

Any action on this line would have to be initiated by the Minister for Justice.

Mr. O'Quigley

I want to put to the Minister with regard to the amount of money collected in these footling payments of duties that if he insisted on the courts paying them they could easily be collected by levying on successful plaintiffs—or unsuccessful defendants as the case may be—a stamp duty to be paid once and for all. In the case of a High Court action where one has to get 14 documents stamped on 14 different occasions time is wasted getting these things done and the total amount of stamp duty on this is say, £3; it might be more when you have a stamp on a plenary summons. It should be possible to average out over a year what the amount is and then when an order is made the stamp duty should be levied and collected. But the provision in relation to the 6d stamps in Part II seems to me to be ludicrous in modern times.

When one considers that all of these documents have to be stamped by somebody and taken to the stamping office and waited on and collected, the loss in man-hours is disproportionate to the amount of revenue collected by this means. The Minister for Finance the Revenue Commissioners and the Minister for Justice and the rules-making committees of the courts in relation to court work should consider the abolition of these stamp duties altogether or, alternatively, substitution of a single stamp.

In relation to duties dealt with in Part II of the Bill, the Minister should consider seriously getting rid of trifling duties in the same way as the 2d stamp was got rid of in the past ten years. There is another matter in relation to stamp duties which I had hoped to see included in a Bill of this kind. Everybody will agree that the cost of a house at present is sufficiently high for young married couples, or, indeed, single people if they want to buy it, to suggest that when a person is buying a house for the first time or, for employment reasons is transferring from one house to another, he should not have to pay for one of the necessaries of life, a home in which to live, any contribution to the State. It might have been all right in the old days when the Stamp Acts were first introduced and when big wealthy owners had to pay to transfer interest in properties, but it seems to be socially wrong to require people who are put to the pin of their collars to buy houses in order to found families to have to pay this kind of contribution to the State. The Minister for Finance should consider abolishing altogether stamp duty on transfers of properties which are intended to be used and designed to be used as dwellings. That would be a small help to prospective house buyers and I do not think the amount of money lost would be enormous. Perhaps the rate of duty on other property activities could be increased to offset the losses the Minister might have.

There is one further matter which I should be obliged if the Minister clarified. It is contained in section 6. I am not quite certain what is the effect of the section. The explanatory memorandum, I regret to say, is as mean in its information on this section and other sections as one might expect the Revenue Commissioners to be. Of course, this was issued by the Department of Finance who are not giving very much away. The memorandum on section 6 says that subsection (1) repeals sections 167, 168, 171 (3) and 179. It seems to me that what is being done in this case by this section amounts to a worsening of the position of income tax and surtax payers. It appears that where previously a notice to furnish a return was given by the Revenue Commissioners to individual taxpayers, that will not be done any more. I do not know if I am correct in that interpretation. If that be so, I wonder what is the reason for it and what purpose it is intended to serve. I should like to know why it is being done.

Finally, in connection with a Bill of this kind, while it is not easy to spell out in a clear way what is intended to be done by the different Acts, it would be of considerable help to Members of the House, who always have a short time to study the final provisions of the Bill, if we had an explanatory memorandum in a form a lot more ample than the one which accompanied this Bill as introduced. There was no explanatory memorandum with the Bill as passed by Dáil Éireann. I can readily agree that arises because of the brief interval between its passage in the Dáil and the discussion in this House. Our discussion here is limited and it is important, therefore, that the provisions of the more complicated sections should be amplified more fully. In the circumstances of the short time we have to discuss the Bill that would be very welcome.

Mr. Haughey

I am grateful to Senator O'Quigley for what I might describe as the guarded welcome he has given the measure. I shall deal at the outset with his query on section 6. The purpose of the section is to tidy up a number of measures which deal with the obligation to issue notices of one kind or another. The main purpose of the section is to abolish the requirement on the Revenue Commissioners to issue a general notice which could be in conflict with some other provisions of Acts arising out of new developments in our taxation structure generally which require various people like employers to submit specific lists, specific returns, specific information.

The proviso requiring a general notice is no longer appropriate to this type of situation and the main purpose of section 6 is to repeal that proviso and then to make a number of consequential provisions. When Senator O'Quigley was speaking, I mentioned that it seemed to me the questions he raised about stamp duty on court documents were ones which, perhaps, he should raise in the first instance with the Minister for Justice because the Revenue aspects of the items he mentioned are comparatively unimportant. It may be that the law requires stamping of some of these deeds for the purpose of giving them formality which they otherwise would not have. The Senator might raise it on some other occasion with the Minister for Justice. Offhand, I cannot recall if any other point was raised by Senator O'Quigley which I have not dealt with already by way of question and answer.

Mr. O'Quigley

I am glad the Minister is saying that the revenue implications and the stamp duties are very small. I raised the matter with the Minister for Justice on another occasion and was told it was one for the Minister for Finance.

Mr. Haughey

I shall undertake to discuss it.

Question put and agreed to.

An Cathaoirleach

Next Stage?

Mr. O'Quigley

In deference to representations made to me that a number of matters arise on various sections on the Committee Stage, it seems to me that the Bill would require a somewhat longer study than I have been able to give it in the time I have had it. I should be obliged if we could have it this day week. The Minister for Finance will be aware of the widespread interest in his proposals and, notwithstanding the clarification of them in the Dáil, there are still some matters that require elucidation.

Mr. Haughey

The Senator might agree to give the Committee Stage and all Stages on Tuesday, 19th March, 1968. This is a Money Bill.

Mr. O'Quigley

I appreciate that.

An Cathaoirleach

We are limited in time.

Tomás Ó Maoláin

We must dispose of it on or before 20th March.

Mr. Haughey

There are technical difficulties if the House sits on the day following a bank holiday—printing, and so on.

Mr. O'Quigley

Is there any objection to Wednesday next, 13th March?

Tomás Ó Maoláin

It is inconvenient for a number of Senators to be here next Wednesday. The Senator will appreciate the difficulties. If we could be assured of the completion of the Committee and remaining Stages on Wednesday, 20th March, 1968, that would be satisfactory.

Mr. Murphy

Fair enough.

An Cathaoirleach

Is it agreed to take all Stages on Wednesday 20th March, 1968?

Mr. O'Quigley

I cannot forecast what the House will do.

An Cathaoirleach

The House must come to a decision. The Chair understands that the Bill will be taken on Wednesday, 20th March, 1968, and that all Stages of the Bill will be agreed to on that day.

Agreed and ordered accordingly.