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Seanad Éireann debate -
Thursday, 22 Jul 1971

Vol. 70 No. 18

Finance Bill, 1971 (Certified Money Bill): Committee Stage (Resumed).

Question proposed: "That section 22 stand part of the Bill."

The areas in the country which are designated as underdeveloped are not really the poorest areas. This is a wonderful concession and is beneficial to the areas concerned. I was recently reading over the Ross Report published in 1969 and if we are to accept those figures—the Government have, I think, accepted the Report—there is no reason why some of the midland counties should not get this investment. In a midland development region, there are only three counties out of five that are not designated I ask the Minister if he, in conjunction with the Government, would consider designating Offaly and Westmeath, so that the midland regional development organisation area would be an entirely designated area for the purposes of concessions such as this one in section 22.

The question of what constitutes a designated area is a matter that has to be decided under other legislation. So far as this provision is concerned, this section applies the investment allowance to areas which have been designated under the Industrial Development Act, 1969. It is not feasible for me on this Bill to discuss the designation procedure of the areas in respect of which it should be applied. I cannot respond to the suggestion made by Senator McDonald.

On this section I wish to refer to a matter which Senator Russell raised with me. He stated he would not be here for this discussion but he asked me to look into a certain matter and I want, therefore, to say in response to what he said in regard to an investment allowance that section 25 provides that—

The investment allowance is to be withdrawn if

(a) the machinery or plant is sold without having been brought into use in a designated area, or

(b) the machinery or plant is sold within two years of having been so brought into use.

If the machinery or plant is used in a designated area for two years or more and is then sold, any balancing charge which may arise will not take account of the investment allowance. The taxpayer will be allowed to retain it.

Arising out of the Minister's reply there are two points I should like to raise. Firstly, I wish to ask the Minister is he consulted under the Industrial Areas Act prior to the designation of areas? If this Bill became law tomorrow morning, what areas would fall under the scope of this section?

The answer is "yes" to the first question. The designation under the Industrial Development Act, 1969, is done by the Minister for Industry and Commerce after consultation with the Minister for Finance. Regarding the second question, I could not specify just off-hand.

Could the Minister cite typical examples?

Yes. The western counties plus Monaghan, Cavan, a portion of West Limerick. Roughly speaking that is it.

Perhaps I was a little over ambitious in asking that the entire midland region would be designated. However, I would settle for Leix if such is possible.

I omitted to say that Clara is already designated and this provision will apply to it, while the designation lasts.

Is this particular provision of this allowance a new departure, or is it a follow-up of a previous enactment?

No, it is completely new.

This was my impression. I was not sure if it was due to my ignorance.

It is to preserve the advantage for the designated areas in view of the fact that we are providing free depreciation in the rest of the country and it had already existed in the designated areas.

Is the Minister satisfied that this provision is compatible with the present and possible future regional policy in the EEC?

I believe it is. The Senator will notice that it is provided that it is to operate only up to the 31st March, 1973, so that I do not think it should present any difficulty even if it does conflict; but there is no reason to think that it would conflict.

We would all hope that 1973 would not be its terminal date quite apart from any question of entry.

I want to make it quite clear that if it is intended to be its terminal date it must be viewed in conjunction with the free depreciation provision in the rest of the country. The object of that provision is to stimulate investment on a special basis at this time of our preparation for entry into the EEC and in the light of the general economic situation. It is generally agreed that we need substantial investment and it is designed specifically to stimulate that.

There is no intention whatsoever of extending it. It is intended only to last for two years. Anybody who wants to avail of it had better get moving. Apart from anything else we do not think we could afford to continue it for any greater length of time. In that connection I would remind the House that the cost to the Exchequer the year after next of the investment allowance and the free depreciation provision is expected to be about £6 million. We could not contemplate its continuance and I would not like anybody to rely on the fact that it might be continued.

I am glad that this point came out because it escaped me on the reading of the Bill. On the face of it it does say that it goes on until 1973 but then we become quite accustomed to various provisions of this type which are continually being extended. I take it that the Minister is absolute in his intention in circumstances as he sees them now?

This makes it even more important that we should be quite clear about the scope of this. The Minister appeared to relate this particular provision in regard to the western seaboard with the provisions in regard to freedom of depreciation. Did I understand him correctly?

Yes, I did.

Could the Minister enlarge on that?

The present position is that there is free depreciation in the designated areas, roughly speaking, the western areas. We are now introducing free depreciation in the rest of the country for a two year period. During that two year period, in order to preserve the advantage of the designated areas, we are applying this special investment allowance.

Perhaps I am anticipating what might come on a later section. Whatever about this particular allowance, I might say right away that I would be worried about the question of free depreciation being limited because free depreciation seems to me to be something desirable of itself, quite apart from any short-term period. Perhaps that will come on the appropriate section.

Might I ask the Minister a question. The free depreciation means, I take it, that if a man spends £10,000 on machinery that is treated as a revenue expense for income tax purposes. If the company is liable for tax for 58 per cent they would have to pay £5,800 less in tax.

That is correct.

One further question. If, for example, having done that, they were unfortunate enough, having spent too much on capital, to be forced into liquidation within two years they lose the free depreciation allowance. Would they be allowed the normal depreciation which then lies at 50 per cent for the first year and thereafter the normal depreciation on machinery?

Perhaps, just to keep the matter in order, Senator Nash might hold that until we come to it. This section deals with the special allowance in investments.

I want to understand Senator Nash's question. Under this, machinery worth £10,000 would get 100 per cent depreciation. That means, in effect, that the income tax and capital gains tax to an amount of 58 per cent would be abated completely. Is that the position?

In the first year?

Yes, if the taxpayer so opts.

Senator Nash goes on to ask the question what happens in subsequent years. Is that correct?

No, not unless it is written back. It has to be written back if a company goes into liquidation. If a company does that and then finds themselves, for some reason, forced into liquidation within two years they lose that.

I wanted to know exactly what the question was.

Question put and agreed to.
SECTION 23.
Question proposed: "That section 23 stand part of the Bill."

What is the purpose of section 23?

This section defines the basis period by reference to which the investment allowance provided for in the previous section of the Bill is to be granted. It ensures that one investment allowance, and only one will be granted in respect of any given amount of capital expenditure on qualifying machinery or plant.

Question put and agreed to.
Sections 24 and 25 agreed to.
SECTION 26.
Question proposed: "That section 26 stand part of the Bill."

I think I am right in understanding that section 26 is the free depreciation section of the Bill.

As the Minister mentioned earlier this extends to the whole country the free depreciation which entitles a person to write off his depreciation in whatever manner he thinks fit. The Minister indicated, when speaking on section 23, that, in fact, this again is a limited provision. I would like to raise here the point that I feel that free depreciation is so economically desirable under our conditions that the Minister is circumscribing himself and the economy unduly in limiting this. I think it was the third report of the Capital Advisory Committee, which is umpteen years ago now, which first raised this question of the free depreciation of capital and pointed out at that time the great advantage that this would have, that the State should be content with the great incentive this should be and in the ultimate the State will not lose money on it. Accordingly, I should be glad if the Minister could give the reasons why he feels that this is something to be done for two years only, as a last preparation for entry to Europe, rather than something that we would hope would be a continued feature of our legislation.

There are two reasons why this should not continue on a permanent basis. The first one I have already indicated: the Exchequer could not afford it. The second one is that already we had been giving very generous depreciation allowances—I think the initial allowance was 60 per cent— up to this. Perhaps it might help to get this in perspective if I remind Senators that in the recent announcement by the British Chancellor of the Exchequer in a context of a massive effort to induce reflation, development and investment, their investment allowances were increased to 80 per cent. That gives some idea of the perspective of what is being done in this section by giving 100 per cent. I doubt if, in principle, it would be a good idea that free depreciation should be provided on a permanent basis. I am not ruling that out in principle completely but I have doubts about it as a principle. I know that the drain on the Exchequer would be extremely substantial if this were to be continued on a permanent basis. It would certainly involve some alternative form of taxation to replace that revenue.

Arising out of that, might I ask the Minister this question? We go back to the hypothetical case of a company which invests £10,000 in a machine. That £10,000 is written off as a revenue expense the first year. We will assume the company have made a profit of only £6,000. Will the company, therefore, for that year be treated as having been run at a loss of £4,000 so that we get an allowance in the next year as against the £4,000 surplus? For how many years would that continue?

Until the sum is exhausted.

In other words, three or four years if necessary.

Which sum?

The £10,000, which has been expended and in respect of which the full 100 per cent claim is exhausted.

It extends now the whole time.

I understand that this provision was introduced in whole or in part because of the fact that industrialists complained of the severe impact of the 58 per cent corporation profits tax. If the Minister tells us now that this provision will be withdrawn in two years time, is there reason to hope that the 58 per cent tax will be reduced or that some other provision will be introduced to lessen the adverse impact on industries of the corporation profits tax?

Obviously, at this stage, I cannot give any undertaking in that regard as to what will happen in two years time, but, equally, I certainly would not close the door on a change of that nature taking place. I cannot anticipate it but I would point out that the increase in company taxation applied to all companies, not merely to industry, whereas this allowance applies primarily to industry. Certainly it is primarily of benefit to industry. Effectively, what it is doing is channelling to industry a substantial portion of the reveune which will be raised by the increase in company taxation. In that light it can be regarded as favouring industrial companies to the detriment of companies engaged in anything other than industry. I should hope that industrialists would recognise what is happening and would recognise that a serious effort is being made by the Government to benefit industry but in such a way that industry will benefit itself and benefit the economy.

I believe that if industry takes advantage of this free depreciation scheme during the next two years there will be a considerable advantage accruing to industry and to our economy. It could well be that the advantage accruing in that way could of itself provide the economic climate and the money whereby provision of company taxation could well take place.

I am a little disturbed about the thinking behind this. The idea of this being a two year spurt is something which will not be continued. I agree with the Minister it is highly desirable that we should get as much investment in new plant and machinery during the next two years as possible, but I do not think it ends at that. Anticipating that we will be members of the European Community, our industry, under those circumstances, has, above all, to be adaptable. This will mean a continuing adaptation of plant and equipment, continuing investment in new equipment.

I hope the Minister is not setting his face firmly against the continuation of an incentive of this type. The Minister has given as a reason against this that the Exchequer could not bear it. But if one takes this over a decade any losses which the Exchequer might suffer in revenue would be more than offset by the fact that it is acknowledged that this is an extremely powerful incentive.

This is one way in which by possible loss of revenue in this particular regard there is an incentive for investment which by all the evidence is more powerful than other incentives on which the State and the Minister's Department are prepared to spend an equal amount of money. When the Minister talks of the heavy loss to the Exchequer, could he give us some idea of the order of cost involved, any idea of the estimate, of how much this section costs to operate for two years?

If we take the two together, that is, the free depreciation plus the investment allowance in the designated areas, the estimated cost to the Exchequer next year is £3 million and £6 million the following year. One would assume if it were to continue that it would be £6 million per annum thereafter. If I remind the House that the gross yield from the income tax changes made in section 2 is £6 million, one would get an idea of the impact on the Exchequer if we were to continue with these allowances. Alternative means of finding this revenue would have to be devised.

I do not wish to prolong this discussion. I merely wish to reiterate that it is not intended at all to extend these concessions beyond two years. I hope that everybody concerned, particularly industrialists, will recognise that if they want to avail of it they have to avail of it during the course of this or the next financial year. It will not be available to them thereafter.

Question put and agreed to.
SECTION 27.
Question proposed: "That section 27 stand part of the Bill."

There is a point which applies to sections 27 and 28 but we must take them separately. The Minister, earlier in the year, mentioned that on 1st January he is introducing an added value tax. In the countries in which an added value tax pertains at the moment they have a different system from us in imposing taxation on alcoholic beverages. It is not called an excise duty. It may be called an alcohol tax but there is also a certain element of the added tax value too. Will the Minister persist in this excise tax in view of the fact that the added value tax is being designed in the expectation of our getting into the Common Market? If that is assumed, then the excise tax will have to be altered in general. Is that not true?

Firstly, the value added tax would be introduced whether or not we were entering the EEC. Entry into the EEC makes it imperative but even if it were not we would still be introducing the value added tax. On its implementation, it is designed to produce the same revenue as the existing turnover tax and wholesale tax together and they will be abolished. It is not designed to substitute for excise duty. It is probably true, as Senator Belton says, that in the different EEC countries, as a result of the different approach to the methods of taxing alcoholic drink, in the longer term a certain degree of harmonisation of approach will be necessary. That is some way away from us and it would be very difficult to foretell at this stage what form that will take. I think it will end up on the basis of trying to get a common denominator between all other countries in the Community——

I think it varies from country to country even there.

It does and it is going to vary even more on the accession of the four applicants. It will probably end upon on the basis of a common denominator and that can be agreed between the countries. There may be a sort of balancing of one revenue that would be increased against another that would be reduced so it is really impossible to foretell. Senators may take it that until we are much closer to that degree of harmonisation we will still live with the kind of customs and excise duties on alcoholic drink that we have at the moment, or even, conceivably, somewhat bigger duties before that day is reached.

I would be glad if the Minister could say offhand what is the yield from section (1) for last year and what he expects to get this year and the same for section 27 (2)? Has the Minister figures for the expected yield and what was taken in last year?

While the Minister is looking at figures, perhaps, I could ask him a very mundane question? Could he tell us what percentage, or, better still, the amount of the cost of a pint of beer which is absorbed in taxation of this kind?

The increase in revenue from beer in this financial year, 1971-72, is estimated at £1 million. Of this £980,000 is attributable to the increase in excise duty and £20,000 to the increase in customs duty. The yield from beer last year—for the year ending 31st March, 1971—was £33,520,000. That includes customs and excise but, as I have indicated, the bulk of it is excise duty. The estimated yield for the present financial year from beer is £36,300,000.

What does that boil down to in man-in-the-street terms?

Senator Boland wanted to know how much of the cost of the pint was duty or excise. It would be one or the other, depending on where it came from.

Yes. I had the idea that somebody asked this by way of a Parliamentary question some time ago.

7.4 pence on a retail price of 18 pence. This is new pence I am speaking of.

I did not think a pint of beer would cost a great deal more in old pence.

I think the Senator had better take the pledge.

What does that work out at in percentage terms?

40 per cent, a third to the brewer, a third to the publican and a third to the Government.

The Minister takes 40 per cent of the cost of every pint, that is what it amounts to.

It may be less.

Question put and agreed to.
SECTION 28.
Question proposed: "That section 28 stand part of the Bill."

Could I ask the same question in relation to spirits?

The duty content on a glass of whiskey at a retail price of 36 new pence is 16.8 pence, that is at April, 1971. The net receipts of customs and excise duties from spirits for the year ending 31st March, 1971 was approximately £24,153,000 and the estimated yield in the current year is £26,700,000.

Would it be right to say that the yield from spirits is beginning to catch up with the yield from beer?

That would be the natural thing with the rise in price.

That would be an indication of the falling sales of a brewery which provides a great deal of employment in this city and which is thinking of leaving here because of the penal taxation code.

The Senator can rest assured there is no basis whatever for that kind of thinking.

The Minister gave us the duty content which is 16.8p on a glass of whiskey retailing at 36p. That is the figure as of April, 1971. Are those last year's figures or the figures which came into effect after the last Budget imposition?

They were slightly lower the previous year.

Senator Crinion is very expert.

I had to give a talk about three months ago on the Budget.

If I could take it, the pre-Budget duty content on a glass of Irish whiskey was 15.3p and post-Budget 16.8p——

It is not really important but can the Minister easily give a comparison of the duty element now on imported spirits such as Scotch as against Irish whiskey?

Pre-Budget it was 16.9p per glass and post-Budget it was 18.4p.

I suppose there is no breakdown on the total yield between imported and home distilled whiskey?

There is because one is customs and one is excise.

The Minister did not give us the breakdown between customs and excise for spirits. He only gave us the breakdown for beer.

The yield for 1971 on spirits from customs was £8,475,000 and from excise £15,678,000. The estimated figures for the current year are excise £17.1 million, and customs £9.6 million.

I suppose the Minister would not like to give an assurance at this stage that, in view of the adverse affect these increases have on the tourist trade, he is not contemplating increasing the tax on spirits or beer in the next few years?

No, actually I could not give such an undertaking.

Question put and agreed to.
SECTION 29.
Question proposed: "That section 29 stand part of the Bill."

I think those who have occasion to travel in and out of this country will welcome section 29 which will allow the operation of a green channel at the points of entry to the country. There are a few questions I should like to ask the Minister in regard to this. What will be the liability on a person who wishes to use the green channel if the person is carrying in permitted amounts of spirits, wine or tobacco? Is he still entitled to go through the green channel while carrying such items? What is the value of personal presents which a person is entitled to bring into the country free of customs duty at present? Is a person bringing in such personal presents entitled to pass through the green channel without declaring such purchases which are intended either for personal use or for presents for his family and close acquaintances?

Persons using the green channel are declaring that they are not bringing in anything in contravention of the regulations. Therefore, if they are bringing in personal gifts which come within the regulations they are perfectly entitled and expected to use the green channel. The quantities allowed for residents of this country coming back to Ireland are 1 lb of manufactured tobacco, including cigars and cigarettes—that is, 400 normal size cigarettes—one normal size bottle of spirits, one normal size bottle of wine and ½ pint of toilet waters or perfume. This may consist of toilet waters or perfume in any proportions. In relation to adults, they may bring in dutiable goods other than tobacco, spirits, wine, toilet waters or perfume to a total value not exceeding £5 if they are returning from Britain, Northern Ireland or the Continent of Europe. If they are returning from countries outside Britain, Northern Ireland or the Continent of Europe they are permitted to bring in goods with a total value not exceeding £20 per adult and £5 per child. I am not sure if the Senator requires details of the amounts allowed for visitors from other countries who may come here.

No, I was thinking only of our own citizens. I should like to ask the Minister how long that figure of £5 has operated and what the previous figure was?

I want to talk about this too. I have been waiting——

I cannot give the exact date but it is a considerable time which, I think, is the point the Senator has asked about.

The Senator's point is that I think we have made many corrections in this House. The Minister in his capacity as Minister for Finance has made allowances for inflation in very many respects. I have a suspicion that it is high time, indeed, that these allowances were changed. The allowances in regard to the amounts of tobacco were increased somewhat in recent years. Perhaps, I should cite my own case. I have a wife and five children and the expectation is, particularly among the five children, that Daddy will bring home something for everybody. Nowadays the £5 does not allow you any scope with regard to buying presents for the family. Rather than having the position where people returning here would make their own adjustment for inflation on the £5 before going through the green channel, the Minister might consider altering this figure instead.

While I am on the point of the allowances made at present, the Minister said we are allowed to bring into this country one bottle of normal size spirits and one bottle of normal size wine. I do not want to go into a definition of how many fluid ounces are involved in this but I think the intention here was that a person should bring in a bottle of normal size and not a double-sized bottle. There are bottles of particular types of liqueurs and of spirits which are slightly larger than the normal size. I am not sure what the size is. Say, it is 29 fluid ounces. Somebody may find that his favourite liqueur or wine in a tax-free shop in a foreign airport is sold only in a size of 32 fluid ounces. One goes to one of the well-stocked tax-free shops, such as Schipol Airport and sees not just a normal size but a variation of it. We are not talking about an ordinary bottle of spirits, and a bottle of double size. At one time people, perhaps, only tended to drink or bring home from holidays spirits from a narrow range. Nowadays, when one sees a larger variety of liqueurs, people would naturally like to bring in an unusual liqueur, spirit or wine. If the Minister examined this question, he would realise that a 10 per cent or 15 per cent increase in what is now defined as normal size would obviate a difficulty in this regard. It is a problem. I have been in the position of having to consult the card and put a bottle back on the shelf because it was a few fluid ounces above what we are permitted to carry in. One could get over this by taking a small amount out of it, when coming through customs. However, it might be preferable if the Minister could make a slight alteration to the regulations.

I concur with Senator Dooge. I have been waiting for an opportunity to speak on this section since I saw it in the Finance Bill. It is quite ludicrous at present to expect anybody to return from a trip, whether it be a business trip or a holiday, with presents which are to total less than £5.

Unlike Senator Dooge, I have no wife, and consequently no family. Nonetheless, I still find that I am expected to bring home some presents and, quite frankly, the Minister knows as well as I do, that, if I were to arrive back with presents which came to a total value of less than £5, I might as well turn around on the doorstep and leave again for foreign parts on a permanent basis. The last time I came back into the country, the Minister received a present from me of a bottle of Irish and a bottle of Scotch whiskey so I do not know how that will balance his Budget.

I think the Senator had better elaborate on that or it might be misinterpreted.

However, my bottles of whiskey are out there at the airport waiting for him. Quite seriously, I consider that these allowances are hopelessly outdated. The allowance in respect of tobacco is very reasonable. To be allowed to bring in 400 cigarettes is as fair as one might expect. There is not much point really in quibbling about the allowance in respect of spirits but certainly the amount allowed in financial terms is clearly out of date by present day standards. I am afraid that, of late especially, whether it is by accident or design—and I have been told this by others coming through the airport—the customs officers have been unusually diligent in investigating one's purchases and pricing them and querying the price that one tells them has been paid. I agree with Senator Dooge that we should be realistic about this and increase it fairly substantially.

Would the Minister explain why the allowance which one may bring back from outside Britain or continental Europe should, for any reason, be greater than that which one may bring back from inside?

I suppose that somebody on this side may say something. I am inclined to agree that the Minister might take a look at the £5 allowance at some future date because prices everywhere are inflated to such a great extent. The other items, such as tobacco and spirits, are quite reasonable. They are not based on price but on quantity.

I should like to compliment the Commissioners on the leaflet they produced about two years ago. It is a very well set out leaflet giving an explanation of the situation very clearly and is very useful.

Does the Minister intend rolling out the red carpet through the green belt in the event of the Women's Lib. coming back again?

When I was answering Senator Dooge's query about what could be brought in although I mentioned normal sized bottles, I did not mention that these were given as examples. The regulation in relation to spirits is one-sixth of a gallon, in relation to wine it is one-sixth of a gallon and in relation to toilet waters or perfume it is a half pint. These are at least as generous as the internationally recommended allowances for such cases. It is true that the figure of £5 has remained for quite a long time. In that connection I shall ask Senators to remember two things: firstly, we have a land frontier with the six counties and this complicates the issue somewhat. Secondly, I should remind Senators that duties have been falling steadily under the free trade area agreement and this has made an adjustment in relation to the fall in the value of money in the sense that if people have to pay duty on items coming in, the amount of duty they have to pay has gone down very substantially.

The answer to the problems outlined by some Senators is to do what I have done. It is rather ruthless but I have managed to train my family not to expect anything when I come home except myself. I should remind the House that the object of this is to protect our industries and the workers in them against loss by undue imports. We try to balance that by giving a reasonable allowance to people returning from abroad. However, any undue increase in this could have serious effects for some of our industries and I know that no Senator would want to see that happening.

Although it does appear that there has not been any change in regard to the £5, as I have mentioned there has been an adjustment which has not increased the amount the person returning may take in but has reduced the amount of duty which somebody returning would have to pay if he exceeds the allowance I have indicated.

But because of inflation abroad the retail price of the items abroad happened to go up as well.

Well, the money on which the duty is paid has to be inflated too.

Do I understand the Minister to say that he does not intend to look at the question of the £5 limit within the next 12 months?

I do not want to give any impression that it will be increased. I shall look at it but I do not want to make any promises or imply anything more than that I shall look at it.

I would ask the Minister to look at the question of the size of a bottle. It would be difficult for one to go round the airports of Europe looking for a bottle that was one-sixth of an imperial gallon.

In Continental airports the size of bottles which are permitted to be imported into Ireland are listed at the same figure as that for many countries but it is less than that for some countries and less than the normal size of bottles for certain types of liquor. I should be glad if the Minister would examine that point.

Yes. I shall take a look at it.

The Minister said that, in his opinion, we were generous by the general standard. A small movement here would remove what may be a difficulty for some people. Others may take the point of view that our customs officers are not very good at judging what one-sixth of a gallon is. It would be better if the matter were cleared.

Question put and agreed to.
SECTION 30.
Question proposed: "That section 30 stand part of the Bill".

In the second line of this section there is a phrase in brackets: "(whether passed or made before or after the passing of this Act)". I gather the intention of including "or made" is to include in this definition statutory instruments.

That is correct.

This is clearly a retrospective section which is the bad sort of legislation the Minister was bewailing in the House some few hours ago.

I talked about retrospective legislation in terms of imposing a new charge. I said that I could not justify retrospectively applying taxation to people who had heretofore been acting within the law. Clarifying and confirming the meaning of the phrase "death duties" is involved here. The term "death duties" has been used as a general term to cover estate duty, legacy duty and succession duty. It has also been used in various statutory instruments, for example, in relation to the transfer of Government securities in payment of death duties. The term was defined as having this meaning in section 13 (3) of the Finance Act, 1894, but only for the purpose of that section.

Some doubts have arisen as to whether it would necessarily be interpreted in the same sense elsewhere. It is almost certain that it would but to remove any such doubts it is proposed that the term "death duties" be defined for all statutory purposes as having the meaning assigned to it in the 1894 Act.

To the extent that there is any question of retrospection here, it is merely confirming what the position was but it is not imposing any new charge, obligation or duty which did not exist before.

Speaking on this section, Senator Russell had a query which I undertook to look into. In reply to his query I wish to say that it is a fact that there is a shortage of trained staff in the Estate Duty Office. This is due mainly to the leakage of trained personnel which is a problem common to all tax offices, both in this country and abroad.

However, the Estate Duty Office was reorganised over a year ago and recruitment since then has been satisfactory so that the existing problem should right itself in the near future. I want to make it clear that interest on duty is not charged for any period of delay in dealing with cases in the Estate Duty Office.

But "before" is still retrospective confirmation.

It is not retrospective imposition of a new charge, duty or obligation.

It is confirmation though.

As long as we accept the fact that the Minister sees the merit of introducing retrospective legislation in certain cases.

Of course; I do not know if the Senator was listening to what I said.

I am always listening to the Minister.

If the Senator is interested maybe he would look at the record because I do not think he heard what I said.

I did hear what the Minister said. The argument has been made that any piece of retrospective legislation, no matter what it is about, is bad legislation.

Who said that?

The Minister for Local Government and his predecessor consistently argued that both here and in the other House.

That any retrospective legislation of any kind whatsoever is bad?

Especially the Minister's predecessor.

I should very much like to see the quotation which would justify that because I do not believe it.

I shall have it for the Minister on Report Stage.

Question put and agreed to.
SECTION 31.
Question proposed: "That section 31 stand part of the Bill".

Is it in order to take the Schedule at this stage?

In order to avoid duplication of the debate, the Chair would suggest that it might be debated on this section.

We could discuss it now and forego any discussion later on.

On looking at the Second Schedule and the rates, although I am not familiar with what has been in the legislation up to now because I have not had the opportunity of looking back at the 1967 Bill, I think the Minister has gone a little bit far. This section will certainly affect, to a very great degree, farmers in the more arable areas of this country. Any of us who have been keeping an eye on the public Press recently will know that farms of 100 to 200 acres have been fetching from £40,000 to £150,000 consistently over the past few months.

With agricultural income and agricultural profits as they are, I do not think it would be possible for a farmer to be able to pay 41 per cent estate duty on a 200 acre farm unless he was lucky enough to be in the bloodstock business, but that is a different matter altogether.

I am more interested in the ordinary farmer engaged in ordinary crop husbandry be it dairying or tillage. The price of land has appreciated so much in the past two years that the assets of these farmers have skyrocketed but their family farm income has not kept pace with their assets. While agricultural prices remain depressed this will cause hardship to quite a number of the farmers with 200 acres and more. This may not be appreciated by the urban population.

Those who have been looking at farm prices recently, especially in the Leinster area, in the better-off parts of Kildare, in Meath and even in my own county, will find that a farm of 150 acres, if it is well situated, goes on the market for anything over £100,000. In the event of the death of the owner of such a holding—it may be an old holding, the ownership may be changed or the property may be passed on to the son—it is not possible, with the farm economy as it has been for the past ten years and with the not very bright prospects for the immediate future, to pay £41,000 in estate or death duties. The scale of increase here is too steep and until we get the agricultural position ironed out and until the price of land is levelled off many farmers will be in dire trouble.

The Minister, on Second Reading, said that this legislation would only affect 10 per cent of the entire farming population. I must take the Minister up on this figure. In my own county, for example, there are 1,800 farmers whose valuation is in excess of £33, that is, 1,800 farmers who are liable to full rates. These people contributed £452,000 in rates last year, while the rest of the community, which includes over 3,000 small farmers, contributed only £440,000 approximately. There are fewer than half a dozen farms in my county in excess of 400 acres. There may be one or two stud farms and, perhaps, some farms with a limited number of bloodstock or cross breeds but most are ordinary commercial holdings. When the owner of such a farm dies his family will be compelled, under this legislation, mainly because of the appreciation of their assets, to sell out the old holdings, whether they be old family holdings or not, because it will be impossible for them to meet the death duties which this Second Schedule lays out.

If this legislation was left unchanged for one decade, practically every good farm would be scuttled. When Mansholt came over here first, perhaps, the tune has changed somewhat since then, he was talking about larger and more economic units. I believe that even the Land Commission appreciate that the time has come for a change in the size of a viable agricultural holding. The Government have not given sufficient thought to this problem. They should have been dealing with such problems over the past year if they are serious about letting our farmers compete with the European farmers.

The Minister must, as a matter of urgency, consider some way of relieving ordinary agricultural holdings of this imposition. Farmers and their sons are not like other sections of the community in that not many farmers' sons are paid wages or salaries. They are members of a family unit or business. Some of them get pocket money depending on the amount of liquid assets available. They work to improve their lot and their holding. A farmer does not look upon the farm as his own personal property. He looks upon it as a family concern. One seldom hears a farmer say: "This is my land or my horse or my plough", and this is where farmers differ from the rest of the community. Farmers must have some concessions otherwise there will be a number of properties for sale. There are very few farmers in this country who will be able to pay for and compete with the Europeans in the purchase of these holdings.

I should like to warn the Minister that unless Irish farmers are left in their holdings, we will have, in this country, within the next decade a land war which will be fought more intensely than any we have had in the past. The present legislation will adversely affect medium-sized farms. Just because a farmer has what are the remains of a Georaian mansion, be it for good or evil, it has been fashionable to look upon him as a west Briton. This is very far from the case. In every county there are many farmers who have a few hundred acres and a reasonably well preserved house and even though the property has appreciated, they cannot possibly face the death duties and the charges that are in the Second Schedule to this Bill.

Senator McDonald did a good deal of looking over at me when he was speaking. We were both very active in the Young Farmers Association back in the fifties and the cry at that time was to get the father to sign over the farm to the son. This is one of the best incentives for not holding on to the farm for too long. In signing over a portion of the farm he is thereby spreading the load. Under section 41 if the son is getting married the father would have an incentive to sign the farm over to him. It may seem quite a sizeable amount but the number of people who are getting caught are quite few. If one looks at the recent wills which appear in the newspapers one will see very few farmers. One may see the odd retired farmer but they are mostly company directors. I have often been surprised that more of them are not mentioned. The farmer is a wise man and he has a way of spreading the load which very often the businessman has not. He cannot divide his business unless he sets up a company and makes his family directors of it.

As Senator McDonald has stated, even a farmer with 200 acres can go to the Land Commission and get that farm divided into four and if it is under one receivable order the Land Commission will accept four divides on it. If he has four members in his family the farmer can portion it out. Most farmers I know of with farms of that size have got two or three receivable orders because their farms have been built up over the years. Quite a few of those farmers pride themselves on the fact that each generation added a little bit to the farm. Farmers have been able to avoid being caught by death duties by signing over Murphy's farm to Johnny. They usually bear the name of the person from whom they were originally bought. Another farm might go to Mary or some other member of the family and one farm may quite likely be left to the wife, who usually gets the first one. In that way a farmer cuts down his load and he also cuts down the rate of duty he would be assessed on. Instead of having a 200-acre farm a farmer might have only 100 acres or even less depending on the way he divides it out.

As the value goes down so also does the rate of income and the rate of duty payable. We have a provision in this Bill where the widow is cleared of the first £1,500 of duty. That would cover a £17,000 farm for the widow herself and £750 for every dependent child. If you have a few children it can go up to about a £30,000 farm. A farmer can sign over some of the farms to his wife and possibly to the son who will inherit, not necessarily the home farm but a farm adjoining the existing one. If he has bought a big farm of 200 acres that is in one receivable order, which I doubt, he can go to the Land Commission and get it subdivided into several portions. They will always accept a farm of between 50 to 55 acres as an economic holding and will allow it to be subdivided and portions offered to the wife or son. In that way he can save himself from being caught in the higher bracket. This is what farmers have been doing over the years so as to escape the very high death duties.

In assessing a farmer's death duties one must take the debts first but if the farmer was paying a rent, which most farmers are, the rent still owing on the farm is taken off. If he has got land projects or fertilisers under the credit scheme that is all deducted from the value of the farm plus whatever debts he has at the time of his death. They all count. The farmer has debts that are not usually accepted, particularly fertiliser, rent and if he had land improvements done. An ordinary business has not. I feel that the farmer has a fair case and has a chance of spreading his load in the ways I have mentioned.

I have not any farms and if Senator Crinion is in any difficulty he can get in touch with me and I will facilitate him. On the Second Stage I referred, and would like to refer again briefly, to the situation regarding the percentage rate of duty once an estate exceeds £5,000. It is free under £5,000 and there is a measure of duty depending on whether it is just a widow or a widow with one, two or three children. I think I am speaking on behalf of the very large number of people who never become very wealthy but do make the effort to acquire a house of their own. When the time comes for estate duty everybody will admit that today there are very few houses under £5,000 so that the rate of duty is almost automatically coming in.

It would be excellent, of course, if the first £5,000 could be free of duty, but this would probably be a heavy burden on the Exchequer. I would urge the Minister to take a look at the situation bearing in mind the sort of estates that run between the £5,000 and perhaps up to £20,000 or £25,000, with the idea at some future stage of considering stabilising the rate of duty on the first £5,000. By that I mean that the rate of duty starting over £5,000 is 1 per cent. When it reaches over £20,000 it is 14 per cent. That is the thinking I should like to see in relation to this, particularly in view of the fact that the element of the population who provide their own homes must now become assessable almost automatically. If they have saved throughout their lives to buy a home they are now assessable because of the value of their home. If, at some future date, the Minister could consider a situation where the rate of duty up to say, £25,000 on the first £5,000 should not exceed 1 or 2 per cent rather than jumping to the 14 per cent, this would encourage a very large element in the community to buy their own homes and make provision for themselves. They are the element in the community who gives us that sense of confidence in family selfrespect which is very necessary.

The estate duty levels proposed here leave the existing rates unchanged up to £55,000. Above that level the rates are increased rising from a maximum of 55 per cent on estates exceeding £200,000 in value. The current scale with the maximum rate of 40 per cent on estates exceeding £100,000 in value has remained unchanged since 1961. When they were changed at that time the maximum rate was 53 per cent. There was a deliberate policy decision taken to reduce them at that time. The maximum rate here was fixed at half the maximum rate in Britain. This was to test the theory which had been strongly advocated that by reducing or abolishing estate duty we would have a massive inflow of capital into this country. The results of having half the maximum rate of the British rate do not show that that is so. There was no noticeable result from having that rate. However, we are only increasing the rates for estates of £55,000 and upwards.

Secondly, the rates we are increasing above that value are below the effective British rate introduced this year. If we make any comparison between our rates and those of Britain or any other country which has estate duty one has to allow for our abatements in respect of widows and dependent children referred to by Senator Crinion. This trend of abatements does not exist anywhere and it is, in my view, a very progressive approach to this kind of tax or duty. If we take into account the increase provided for in another section here in widows' and children's abatements, the effect of exemption limits under this Bill would now be as follows: where the widow is the only beneficiary, £15,300, that is an estate up to that would pay no duty at all. Where the estate passes to the widow and two dependent children the effective limit would be £21,429; in the case of a widow and four dependent children, £28,125; in the case of a widow and five dependent children, £33,343. It will be seen from this that the limits are certainly not unreasonable in cases of that nature. The case described by Senator Brugha would probably in the normal way involve a family where the children had grown up and there was only the widow left. In that case the effective limit would be £15,300. I agree that there is a case for considering the threshold at which duty becomes payable. Indeed I have in mind to examine this in the course of the present financial year to see if some improvement can be made in that position.

In regard to the case made relating to the liability of farmers Senator Crinion has indicated some of the ways in which farmers would not become liable for estate duty—he has not indicated them all but he has indicated some of them. I would remind the House that in cases where farmers become liable for estate duty the law provides that for farmland, and not for any other kind of property, the duty may be paid by eight yearly or 16 half-yearly instalments, so that the idea of a farm to the value of £100,000 having to pay 41 per cent straight away, as Senator McDonald envisaged, does not arise. In the rare case where such a farm becomes liable to duty the duty may be paid by instalments over eight years which is a concession which is not available in respect of any other property. There would be interest payable. In view of what was said not alone by Senator McDonald but by other Senators in this context I would like to say that the Revenue Commissioners do not know of any case whatever in which a farm had to be sold solely to pay duty. In all cases in which farms were sold and duty was paid other things were paid too. There was a share out to members of the family or debts were being paid, but they know of no case in which a farm had to be sold solely for the purpose of paying duty. Indeed this is understandable in the light of what I have said about the facilities of being able to pay by instalment.

Senator MacDonald was sceptical about what I said concerning the number of farmers who pay duty. If he listened carefully to Senator Crinion he will have gathered some of the reasons why what I said is true. But let me tell him that an analysis of cases coming before the estate duty office in the years 1966, 1967 and 1968 gave a number of interesting statistics but the ones in which the House would be interested are these. The farmer cases in which duty was paid as a percentage of dutiable cases was 3.6 in 1966, 3.2 in 1967 and 3.6 in 1968. The non-farming cases in which duty was paid as a percentage of dutiable cases also were 96.4 in 1966, 96.8 in 1967 and 96.4 in 1968. There are some other statistics but they all tell the same story. Whatever the reasons, that is the position that has been obtaining. It may be that Senator McDonald would say that with the increase in the value of land in recent years the percentages will change. I will concede to him that this is possible but one can see from these figures that they would have to change enormously and radically before any real impact would be made on the farming community or call for any alteration in the rates of estate duty. This should be borne in mind in any discussion of this or any other section in relation to farmland and its liability for duty.

Unfortunately, I am forced to take a lot of what Senator Crinion says with a grain of salt because he knows right well that it is not possible for a farmer to apportion off or divide his land without the explicit permission of the Land Commission. In addition, it is not possible even for them to create an economic viable holding. Therefore you would want to have a great farm to settle 100 acres on each of half a dozen sons. You would want to have 600 acres because the Land Commission will not divide farms into units of less than 100 acres at the present time. It is with great reluctance that they will even divide a site for a plot. Also I am not surprised at the Minister's figure of 96 per cent of the total who are paying estate duty. I am not surprised at this figure because it is exactly what I expected. The Minister is admitting at last that the farming community are not as wealthy as the urban dwellers would lead us to believe. That is what is frightening.

Senator McDonald is worried about the liability to estate duty of people who are probably worth £100,000 and upwards.

The farmers do not want to move from the places in which their families have lived for generations and they are being forced to squat on the one spot. Unfortunately we do not all live in Kildare and this is the snag. The Minister might look sympathetically at the case of widows of 65 years and over. People in that category are pensionable and if their partner in life dies at that stage perhaps the Government might forego estate duty for a few years so that the widow would have a comfortable income. While I know there is a reasonably generous allowance for widows, would the Minister consider in addition to that giving a special concession from an age point of view? There is not much point in skinning an old widow of 70 years for estate duty and leaving her not so financially well off for the remainder of her closing years. It is something that we might do something about.

The ordinary people who have made a sacrifice and built their own homes, perhaps with the aid of a mortgage over their working years, deserve a little better consideration. The State bends over backwards with regard to the poorer sections of the community. We should give better recognition to those who put their backs into the work and provide decent homes for themselves and their families. In this context I agree with Senator Brugha that the £5,000 is not very generous a figure.

Senator McDonald referred to me with reference to dividing up the farms. From my recollection of big farms, and I know two counties reasonably well, very few of these farms have only one receivable order. It was only the old landlord farms that would have those. Most of the other big farms have been built up over the years by buying a piece of adjoining land here and there or a little bit down the road from them. The percentage under one receivable order would be exceptionally small. For that reason, whether the farm has only 20 acres under the receivable order or 100 you can transfer the one receivable order.

In that way the father is always able to apportion some of the land, usually the piece outside and not the actual receivable order on which the home is built. In that way he can pass on some of it to his wife or to his family. Farmers on the whole have been very conscious of estate duties and death duties over the years and that is why they have all made provision for it.

Another aspect is that when you own property you have a duty as well. The farm provides another job for the successor just by his right of being the son or nephew of the owner of the farm. If a person was in the position of having roughly the same income in a factory or in a business his son would not have the right to succeed to his job. Take the case of a farmer who is getting £1,000 out of his farm. His son or newphew, or whoever he gives it to, automatically gets that. If he were working in industry the son or successor to his estate would not get that job.

An Leas-Chathaoirleach

The Senator is rather slow in relating this to alteration of rates of estate duty.

I am just making the point that there is an obligation on a person who owns property to look to whoever is going to succeed him and in that way few of them are caught in the net. Although some estates have a high valuation many of the people who are liable to be caught in that high net of anything from 33 per cent to 55 per cent still make the provision of passing on part of the farm so as to spread the load. That is why the percentage is small. With 3 or 4 per cent of the amount that is paid, even allowing that it increases a little with the increased value of land, they still have a long way to go to become even 50-50.

Question put and agreed to.
SECTION 32.
Question proposed: "That section 32 stand part of the Bill."

I should like to put two questions. We had the argument about the rather high interest rate and I should like to ask the Minister if the people who opt to pay death duties by instalments are subject to the 9 per cent the whole way, and if so would he not think that this is a rather rough provision?

They are liable to the duty at 9 per cent and I do not think it is a rough provision.

What about the four months provision? We discussed earlier the delays which occur in assessing an estate in the Estate Duty Office. Does the Minister in all seriousness think that four months is a fair length of time in view of that?

I do not know if the Senator realises that this is a new concession. Up to now there was no period of waiting in respect of personal estates. The duty becomes payable as from the date of death with interest. This is a new concession of four months. Any delay which occurs in the Estate Duty Office is a grace period and is not charged to interest.

That is in addition to the four months?

Question put and agreed to.
SECTION 33.
Question proposed: "That section 33 stand part of the Bill."

On a point of explanation, would this section cover the people in trustee property and children for whom trusts have been set up? Is this possible now?

This is a technical section really. Basically what it involves is this, that an executor is liable to account for duty in respect of any assets he has received as executor. There can be assets which he does not receive as executor which go to a trustee as a trustee and so on. If I could take an example: a person is domiciled here and he makes revocable settlements of personal property and appoints a foreign trustee. There is no way of recovering duty on the property except by an action against the Irish executor. If the personalty which comes into the hands of the Irish executor is small he cannot pay, or cannot be expected to pay, any more than he receives. Therefore, he cannot pay the duty. In fact, it is an anti-avoidance measure more than anything else that is dealt with here.

Question put and agreed to.
SECTION 34.
Question proposed: "That section 34 stand part of the Bill".

I merely wanted to ask the Minister, in relation to the six-year period, why he arrived at this length of time?

This six-year period is analogous to a number of other similar periods in the estate duty code. For instance, all property when assessed to duty by the Revenue Commissioners, is, in fact, provisionally assessed, unless there is a special assessment and there is a procedure for that. For six years after the death that assessment can be re-opened by the Revenue Commissioners and increased or decreased. There is also a similar six-year period in respect of the artificial value in relation to agricultural land. It is a kind of common period that runs through the estate duty code.

My reason for asking that question is that six years seems to be a rather long period within which the case can be re-opened. Family circumstances could change very rapidly in less than six years and the family might discover that they were seriously financially embarrassed and had no option but to sell the objects of national, scientific, historic or artistic interest in order to remain solvent. Does the Minister not think, on that account, that the length of time is pretty harsh?

We have to recall that what we are doing here is closing a loophole which has been used to avoid liability. In those circumstances, and having regard to what I said about the six year period in other connections, I do not think it is unreasonable. In the genuine case there is no effort to evade duty. If the property is sold, duty is paid on the value and the person is not complaining because he is not trying to avoid duty. The person who would be complaining is the person who has been using this exemption to try to evade liability for duty.

We must remember, too, that a farm is not like a business. It can be set for the period of time involved and still produce and income.

Neither is a farm a work of art in the sense of section 34.

Yes, but what the Senator has said is true in respect of another section.

Beauty is in the eye of the beholder.

The Minister mentioned the artificial value in relation to agricultural land. I could not find any reference to it in the Bill. I know it must be there somewhere but it does not appear in the memorandum or in the Bill itself.

It appears in section 40 which will be coming up.

Question put and agreed to.
SECTION 35.
Question proposed: "That section 35 stand part of the Bill".

This is very complicated. It concerns the grant and lease back business. Perhaps the Minister could, briefly, explain it or how he envisages it working.

The purpose of this section is to counter a device for avoiding estate duty whereby the property is transferred to a donee and then leased back to the donor by the donee. There were provisions to deal with this kind of operation in different Acts in the past, starting with the Customs and Inland Revenue Act, 1891. Arising out of the various changes that have been made, including those made in the Finance Act, 1961, a situation arose where the effect of section 28 of the 1961 Act was to leave section 2 (1) (b) of the Finance Act, 1894—one which taxed interest ceasing on the death—to operate on the cessor of any interest ceasing on the death of the deceased. Instead of duties being charged on the entire property transferred, duty is chargeable on a slice of the property, the slice being that proportion of the capital value of the porperty which the income derived from the property bears to the total income of the property. I do not know whether that is clear.

If we take an estate which is yielding an income, say, of £5,000 a year, the person who has the interest in which we are concerned is getting from that property an income of £1,000 a year. For the purpose of estate duty he is deemed to have property worth one-fifth. If the capital value was, say, £100,000 of the capital value this would amount to £20,000. This was done on the basis of providing relief but it can be availed of to avoid duty by the grant and lease back device. If A gives property to B and B leases back the property to A for a fixed term and A survives that grant by five years there is no interest limit to cease on the death of A, coming under the 1894 Act and section 28 of the 1961 Act which prevents a claim attaching to the entire property. If, therefore, the owner of the lands conveys them to his son, who then leases them back to the father for ten years, the lands are liable to duty only if the father dies within five years of the original gift. If the father survives the gift by five years he dies possessed of the unexpired period of the lease only and this may have practically no value for estate duty purposes. The man has a valuable property; he is nominally giving it away, but he is having the full use of it for his life and it remains, for all practical purposes, his property. However, when he dies virtually no duty is payable. This is one example, but there are other examples of the kinds of things that are being done in this way. The object of this section is to close that loophole which has emerged, and has been used.

Question put and agreed to.
Section 36 to 38, inclusive, agreed to.
SECTION 39.
Question proposed: "That section 39 stand part of the Bill".

Referring to the abatement in estate duty in the case of dependent children, I presume that these dependent children would be children receiving full-time education. Would a university student qualify as a dependent child in this case?

Dependent children are children who are under 16 years of age or who are receiving full-time education or are training for an occupation, say, an apprentice, or are mentally or physically incapacitated. Therefore, it would include a full-time university student.

Question put and agreed to.
SECTION 40.
Question proposed: "That section 40 stand part of the Bill".

In this particular section the Minister has an opportunity of substantially amending this legislation, which would save us a lot of bother later on. By improving the ceiling on the artificial value and increasing it from the present £2,500 upwards, the Minister would perhaps exclude a number of farmers from the scope of the death duty net altogether. Holdings, the value of which, calculated on the artificial value is less than the figure of £2,500 are not even considered for estate duty at present.

I should like to ask the Minister if he is really serious in continuing this. The rural cottages of his colleague the Minister for Local Government at present are costing in excess of £3,000. What type of a farm, including chattels, goods and assets totalling only £2,500, does the Minister visualise? It is quite obvious that the Minister wants to bring in everything in excess of the value of an agricultural labourer's cottage. Perhaps the Revenue Commissioners want to keep themselves extremely busy and keep their jobs. However, if they are sincere they will dispose of a lot of cases that are obviously cluttering up their desks at present. This artificial value should be drastically increased. There is no point in having highly paid and highly qualified civil servants wasting their time, harassing unfortunate people whose total assets are only slightly in excess of £2,500. The four walls of the house will cost that much, then add goods and chattels to that. If the Minister agrees to multiply that figure by at least four, we might then be able to talk business and he would be bringing the figure in line with 1970 perspective.

I queried this six-year provision in an earlier section and I think it applies again in this section. The Minister had the case made to him by Deputy Clinton in the other House, in relation to a problem that is rather peculiar to County Dublin, and that would be the five-year revisions of the development plan. Land which would have only a very definite value now, by virtue of the action of the local authority in five years time in deciding to redesignate land usages, might be changed in value to a ridiculous degree. Can the Minister see any way around that?

The value in question is the value of the land at the date of death. If something occurs after the death during the six-year period which enhances the value of the land, that does not enhance the amount of duty that has to be paid. The duty has to be related to the value of the land at the date of death.

Even if the land is sold within the six-year period?

Yes. On the general questions raised I should like to point out that this limit—by the way it is £2,000, not £2,500—was fixed in 1969. I should also point out that it is not a question of people having property valued at less than £2,000; it is an artificial valuation and follows the formula of multiplying the Poor Law Valuation by £25, deducting the capitalised value of the Land Commission annuity and also deducting any debts which exceed the value of, say, the stock and so on, or if there was an overdraft, the deficiency in the personalty. If then the end result brings you under £2,000, that is the value of the property for that purpose. However, if it does not bring you under £2,000, the market value of the land comes into play.

I do not wish to delay the House now, but contrary to what Senator McDonald thinks, duty has been evaded. In the discussion on this section in Dáil Éireann I gave them some examples. I shall briefly mention four cases in which I do not think that there was any deliberate attempt at evasion. There may have been, but I do not think there was in these cases; there were others that were more blatant. The first case was one in which lands were sold for £18,800 and the net value of the estate was £17,500 but no duty was paid. In another case estate duty was paid at £98, where the real value of the lands was £22,000. In a further case no duty was paid and the lands were sold, within two years of the death, for £17,050, and in a still further case no duty was paid and the lands were sold within two years of the death for £110,000. In these cases I do not think that there was an effort to avoid duty. The situation is worse where the effort was made to avoid duty, so let us not run away with the idea that this artificial value only applies to very small farms. It is clear that it does not. This, in addition to some of the things mentioned by Senator Crinion earlier, explains why so few farms become liable to death duties. The reason for the proposal in this section to charge duty, if the land is sold within six years of the death, is that this particular artificial valuation has been in the law for a long time with the purpose of helping to preserve the family plan, and to preserve the family on the land. This is a purpose to which we all subscribe and would wish to continue. However, if the land is transferred, say, from a father to a son, and within six years the son sells it then the whole object that was being sought to be achieved—to retain the family on the land—is defeated. The son has sold the land, he has got the proceeds of the sale in his pocket and I do not see why he should not pay duty the same as anybody else.

As long as the object of the exercise is being achieved, that is, that the family are being retained on the land then, by all means, this artificial valuation should apply for that purpose. If that is not being done, there is no reason why the duty should not be paid as in every other case.

I agree with the Minister to a point. Several times he has mentioned Land Commission annuities. At least three-quarters of the Land Commission annuities will be paid in full within this decade. This may sound high but under the older Acts under which the vast majority of the farms are leased from the Land Commission, the 1924 and the 1933 Acts, annuities are petering out in this decade, so that in any one farm the amount outstanding would be only a matter of pounds.

Nevertheless, even if there is a new bungalow on a small farm the valuation on the buildings alone will be in excess of £20. This multiplied by 25 brings it up to almost half the amount and then add the chattels to that, such as a tractor, a few implements and a cow which would command a price in excess of £100 at present. The Minister's figure of £2,000 is inadequate. People are being brought in and being subjected to unnecessary worry.

If the person who inherits the place has no interest in it and wants to live it up, by all means, he should pay his fair share of taxation. It does not matter whether he pays duties or customs and excise, he should not be allowed to spend it free of tax. This figure is altogether too low and it does not take into account improvements and the cost of machinery and the cost of stock.

The number of family farms who do get through on this is amazing. The rent on the older farm is nearing an end but the rent of the Land Commission farms is a very high figure. As I mentioned before quite a number of farmers have got the benefit of the fertiliser scheme and of the land project benefits in recent years. They are all debts.

They have been done away with for 20 years.

It is still there.

There is very little left to be paid back.

Farmers have no debts.

It is on a 50-year basis and it is taken on the full value of what was spent on it. Quite good size farms are able to get through on this. The artificial value is taken first and then all the debts and if one is under £2,000 one will get away with it. If it is over £2,000 then one will have to go for market value.

An Leas-Chathaoirleach

I hesitate to interrupt but it seems to me that the only net point here is whether or not there is a sale within six years and not the precise details of notional valuation.

He was bringing in some of those details. Six years does not really occur.

An Leas-Chathaoirleach

This does not justify getting away from the main point.

If a person is caught out on it he will hold the land for the six years anyway.

Question put and agreed to.
SECTION 41.

An Leas-Chathaoirleach

Recommendations Nos. 1, 2, 3 and 4 are all related. It is suggested that recommendations Nos. 1 and 3 might be taken together Nos. 2 and 4 together or alternatively all four recommendations might be debated together.

I should prefer to take Nos. 1 and 3 and Nos. 2 and 4 together.

An Leas-Chathaoirleach

Nos. 1 and 3 together.

I move recommendation No. 1:

In subsection (1), line 20, to delete "£5,000" and substitute "£10,000".

In order to expedite the matter, could I ask the Minister whether he considers the figure of £5,000 in section 41 (1) and also in subsection (3) to be an equitable figure?

Would the figure of £4,500 be an inequitable figure?

It might be less equitable than £5,000.

Would it be inequitable?

This is playing with words, I think.

It is not.

One has to look at this in relation to farming cases and non-farming cases. In relation to non-farming cases it is quite generous. In relation to farming cases the artificial valuation that we have been talking about comes in and in that sense I think it is generous also.

I certainly detest the idea of writing solid figures into legislation of this kind. Obviously the commissioners and the civil servants and the draftsmen, the Minister and his Department are all unaware of the high rate of inflation. Inflation for the past couple of years has been running to at least 10 per cent. This time next year that figure, if it is possible to hold it at the present 10 per cent, will only be worth £4,500. The year after that it will only be £4,000. The Minister is cutting things altogether too fine.

I do not know if the Government want to treat the rural and farming population with dire contempt. Even with the explanation we had on the Second Schedule it is still not sufficient to meet the present demand. If this egislation is to serve for even two years, unless the Minister agrees to recommendations Nos. 1 and 3, he will be causing a completely unnecessary burden on a tremendous number of farmers in the Republic.

We would all hope to see Irish agriculture entering the EEC on a reasonably sound basis. Yet the Government have made no effort, good, bad or indifferent to assist farming. We have had no legislation over the past year to bring our policies into line or to assist the industry. The inadequate provisions in section 41 have failed to realise the fast appreciation in the value of land throughout the Republic. This will cause trouble to thousands of farmers during the next couple of years. With a rate of 10 per cent inflation only, this £5,000 will be gone in three years.

As I indicated in my interjection at the beginning I cannot agree to these recommendations. I have indicated very briefly the reason for this. Let me point out that the figure of £5,000 is in line with the general estate duty exemption limit of £5,000 which was fixed under the Finance Act, 1961 and the special exemption limit of £5,000 provided by section 24 of the 1965 Act in respect of death benefits payable to a widow or a dependent child under a superannuation scheme.

This limit here differs from those other limits I have mentioned in one very important respect. If those limits are exceeded, the entire estate or death benefit under superannuation becomes liable to estate duty. If, for example, the total estate is £10,000 or the total death benefit is £10,000, the entire £10,000 becomes liable to duty.

In the case of gifts made in consideration of marriage, it is only the excess over £5,000 which becomes liable. This is a very valuable concession. A gift which is not made in consideration of marriage becomes fully liable to duty and agregatable with the rest of the estate, if it exceeds £500. A gift in consideration of marriage is free from duty and from aggregation, unless it exceeds £5,000. If it does exceed £5,000, the first £5,000 of the gift will be, as I indicated, free from duty and aggregation. This is a very valuable concession.

I should like to make it clear that there are few people in our community who are in a position to make gifts of £5,000 to each of their children on marriage or otherwise, so that we are here concerned with a tiny fraction of our community. Even then we are concerned only with those who make such a gift and who die within five years of making it. That is, if they live for five years, then there is no duty payable. So we are concerned with a tiny minority of a tiny minority. The suggestion that all the farmers will go to the wall because of this is just ludicrous and I hope it will not be repeated.

We have already indicated that estate duty on farmers is minimal, but the impact of this on farmers is far, far less, for the reasons I have mentioned. I suggest we ought to see how this limit of £5,000 operates in practice and if it transpires at a later stage, because of a fall in the value of money or otherwise, that it should be increased, then we can have another look at it. At present the limits imposed here are not ungenerous and I could not agree to accept these recommendations.

The Minister is in cloud cuckooland. There is no point in talking about making a gift of a farm. A person is born on to a farm and if he stays there, he works every day, all his life. Just because it has to be signed over does not make it a gift.

If his father owns a shop and he works there all his life is it not the same thing?

The same should apply, but you will find that the man in the shop has better working hours, and he can take holidays.

He is paying income tax too.

Most farmers would prefer to pay income tax than the iniquitious rates system existing now.

The other people have to pay rates and income tax.

They have money with which to pay them, unlike the farmers.

And very few £100 cows around the stable.

Are you fellows going out of your way to milk them?

The machines might do it for them.

It may be the Meath way of doing it but some of us still have to put some work into it. It is not just a matter of a gift. If you work for 40 years in a place without wages, without a union card and all the other benefits workers usually have, it is a horse of a different colour. You cannot equate a farmer's son with a worker, the way of life and the background is completely different. Farmers have a different outlook on life. They work to improve their holding, to improve their home and the pious hope of most farmers is that when they pass on they will leave their ancestral home in better condition to those following them than it was when they inherited it. This penal clause in unnecessary. As the Minister places little value on it and keeps repeating that so few people are involved why is he bothering with this section of the community at all? I think only 3 per cent of farmers are paying at all.

Not only farmers are supposed to give gifts in consideration of marriage.

We will come to those in the second recommendation.

This applies to all gifts whether of farmland or other property. It does not distinguish between them. The distinction arises because the artificial value can be applied to farm property which cannot be applied to anything else.

I have already made the point that it is not much good applying the artificial value to any type of farm. If the farmer has a roof over his head at all, the value will be more than £2,000. I would ask the Minister to cut out the codding, to look at that figure again and bring it into presentday perspective. The Minister has already conceded that the high rate of inflation will make that figure ridiculously small, even in two years time. We have an opportunity of effecting an improvement here because the Dáil will be sitting for the next two or three weeks and it should be possible for the Minister to have the recommendation agreed to.

Senator McDonald mentioned the farmers' sons staying at home on the farm and getting pocket money. I think that day is gone. He is thinking in the past. If the farmer's son is not getting much the same in wages as his counterpart in industry, he will not stay on the farm. He must have the same facilities as his friends with whom he associates. The farmer will have to make some settlement early on, if he wishes to keep his son on the farm. Speaking of the £5,000 it must be remembered that this pertains to marriage. He can still sign over the farm quite cheaply at the 10s stamp duty. He would have to pay the big stamp duty if he were signing over the farm at another time. The dowries we used to hear about are not so much in evidence now.

The girls are more independent. They go out to work and are not so tied down. The dowry was some compensation for the work that the girl did in the home before she got married. It was a payment. It also made her prospects more attractive if the word got around that there was a certain amount of money there for whoever married her. The dowry also had the function that it would settle a sister or brother living on the farm she was marrying into.

If her father had a bad heart there would be nothing funny about the dowry now.

With modern times it has become more realistic. People want to be independent and have their own life and their own money. You no longer have sons of 24, 25 or 30 asking their father for a few quid and going off somewhere. This would have been more practical about ten or 15 years ago than it is today and it has not the same bearing. Now with the existing high rate of duty the father will have settled some of the land on his son at an earlier age.

Could the Minister indicate how much he envisages getting because of the introduction of this section?

It will be very small?

I would not know.

The Minister will tell us next that it is not worth collecting.

Oh yes, it is very important. I did not deal with this because it was widely known why we were doing it. It is to avoid very wealthy people taking advantage of a situation where a child is getting married. They settle on him a large slice of their property. They know that if they die the very next day no duty will be payable. It is to deal with that situation, but to preserve the status quo, we are doing it. I cannot state how much it will achieve but if there is only one case it is our duty to do it.

The Minister is legislating for a nation of rogues and that is not altogether fair.

I am trying to legislate to get a fair deal as between one taxpayer and another.

Could I quote an extract from the Minister's speech on the Second Reading in relation to this. He said:

Of the bulk of gifts made in consideration of marriage these in three recent years have averaged 81 a year and do not exceed £5,000....

In other words the gifts made in consideration of marriage are averaging 81 a year and they do not exceed £5,000. If that is the case, surely the Minister is anticipating that the gifts made in consideration of marriage which do exceed £5,000 would probably be less than that. If the Minister is able to give us the information that they averaged 81 a year under £5,000 for the past three years, why can he not give us the information as to what they averaged over £5,000?

That is in respect of the three years I quoted earlier in which the survey was made—1966,1967 and 1968. The question asked by the Senator was how much did I expect to get from this in the coming year.

Which is a different year.

Can the Minister answer the question of what he would have got if it were in operation in 1968.

No. Perhaps I could, but to me this is totally irrelevant. If we were only going to get £1 out if it, the point is that we should not allow people to avail of this, which is designed for another purpose, to get out of duty where other people have to pay it. It seems to me to be perfectly obvious that we have this obligation. It is not related to how much money is involved for the Revenue. It is an obligation in justice.

It could be a terrible thing for farmers.

The Minister must think that they are all rogues. I do not believe the Irish public are like that.

I am not talking about the Irish public. I am talking about the few who have been using this to get away with it.

I know the Government have a bad opinion about the farming community for years back. This is nothing new.

Is the recommendation withdrawn?

The recommendation is pressed.

Recommendation put and declared lost.

We can take recommendations Nos. 2 and 4 together.

I move recommenda-No. 2:

In subsection (2), line 26, to delete "£1,000" and substitute "£2,000."

By and large, the argument in this instance is the same. In this case this should not be a definite figure on account of the inflationary trends and the ridiculous state of the health of our economy. This figure should be related in some way to the galloping inflation we have got. Even if the Minister thinks that £1,000 is all right this year, it certainly is going to be much less next year and in three or four years we are back at square one again. Therefore, this figure should at least be doubled or, alternatively, that figure should be tied to some other scale, either to the value of the £ or find some other vehicle to maintain the concession the Minister says he is giving but which I find very hard to see. It is obvious that the Minister is not going to accept recommendations tonight but, nevertheless, I wish to press this recommendation.

I agree with Senator McDonald that the arguments are the same in relation to this so I will not repeat them.

Recommendation put and declared lost.
Recommendations Nos. 3 and 4 not moved.
Section 41 agreed to.
SECTION 42.
Question proposed: "That section 42 stand part of the Bill."

Does the same definition of "neglect" which we discussed earlier apply to this section?

It is not the same definition but I introduced an amendment in the Dáil to deal with this point. It is slightly different from the other one on income tax. If the Senator will bear with me for a moment I will draw his attention to it.

It is basically the same argument in that the fine is £500. It seems that it could be rather a lot in certain cases of neglect.

The amendment which was introduced and passed in Dáil Éireann is as follows:

Provided that the person shall be deemed not to have acted negligently if he had a reasonable excuse for his action and the incorrect account, return, estimate, statement, information, book, document, record or declaration as the case may be, was corrected by him without unreasonable delay after the excuse had ceased.

That covers the case of a genuine error or mistake.

Who imposes the penalty?

The courts.

Under what section does that appear?

It says that a person, on doing certain things, is guilty of an offence.

Shall be liable to a penalty?

The only method by which a person can be made liable for these penalties is by the courts imposing the penalties on them.

I have to display my abysmal ignorance in these things. Is it not usual for the section to lay down the fact that a penalty of up to this figure may be imposed by the courts on conviction? As the section stands some mythical body is going to impose the penalty. When I read it first I thought the Revenue Commissioners were going to be given the arbitrary power to start imposing penalties in relation to their own cases.

To verify what I have said I would refer the Senator to subsection (8). It says that:

The Revenue Commissioners may in their discretion, mitigate any penalty under this section, or stay or compound any proceedings for the recovery thereof, and may also, after judgment, further mitigate or entirely remit the penalty.

It is a question of proceedings in court that are involved here.

Now that the Minister has referred my attention to that subsection I imagine that it is quite the reverse. Does it not mean that the Revenue Commissioners impose the penalty and then seek the assistance of the courts in the event of the penalty not being paid? It looks as if the Revenue Commissioners have the power to impose their own penalty.

Where does it say they have?

That is what I want to know. The courts have an inherent jurisdiction in all such cases of offences under statutes.

Is it not usual actually to specify where the power to prosecute is and in what type of court the prosecution should be taken?

He cannot be convinced.

The Government's order of priorities again appear to be rather wonky in this case because they provide for penalties of no less an order than of £500. Even in various pieces of criminal legislation we do not have penalties of that magnitude. Money appears to be the only thing that is dear to the Minister's heart and to the heart of the Government. This is a great mistake. Seemingly it is now a much greater offence to delay paying one's death duties—for instance, if a bank manager makes a mistake or is caught off-side in one of these transactions—than it would be to be negligent and contravene the Firearms Act, where the penalties are not as high.

Unless the Minister can find some other Act which lays down how that penalty will actually be levied or by whom it will be levied or imposed then the section is less than complete as it stands. Is it perhaps in that relevant section—section 8 of the Finance Act, 1894?

There are statutes which confer jurisdiction in various kinds of cases on the different courts. They include these kinds of offences.

Why then do other pieces of legislation always set out what courts shall do and to what extent?

These are old offences and very often the others are new and would not have been covered in the legislation governing the courts. But these are offences which have existed for a long time.

The Minister is still not able to indicate from where the authority derives.

Yes, it derives under this statute.

It is a presumption under the Constitution that only a court can do it.

Is this not exactly the type of case which recently has been taking up the time of the courts. It is quite embarrassing to find that the Attorney General is not winning even one of these constitutional cases. The whole lot is going against him. It stems back to the fact that the Bills going through the Oireachtas are not getting adequate examination. When the Members of the Oireachtas endeavour to do that Ministers just sit on their dignity and refuse even to consider amendments. It is high time the public started to surcharge these people because I certainly hope the costs of these constitutional cases in the court do not fall on the people under section 41.

May I intervene to say it is intended to continue with the sitting until we finish this Bill?

Whether the House agrees or not?

If the House agrees, naturally.

Would the Leader of the House agree that if we reach midnight there could be a short adjournment for tea and sandwiches?

The Leader of the House thought he had done his good deed for the day at tea-time when he facilitated Senator Robinson.

Could the Minister agree to have this specific information for us by Report Stage?

I will write to the Senator in due course with the information, if that is what he wants.

It is a rather difficult job for somebody like me to dig up that information.

I have undertaken to write to the Senator.

Question put and agreed to.
SECTION 43.
Question proposed: "That section 43 stand part of the Bill."

What is the purpose of section 43?

This section provides for general exemption from all stamp duties of instruments, including mortgages, relating to the sale, transfer or other disposition of aircraft or any part, share of interest in an aircraft. There has always been a similar exemption applied to ships and vessels. It is proposed to apply it to aircraft now.

Question put and agreed to.
SECTION 44.
Question proposed: "That section 44 stand part of the Bill."

How successfully does the Minister think the provisions relating to the lumpers are operating? I wanted to ask this earlier but the conversation went to such far-flung local authority fields that I decided to wait until later.

Is this in relation to the lumpers?

Just generally. Perhaps the Minister would give an indication as to how successfully the provisions are operated.

As far as I can see they are operating very successfully. As I mentioned earlier many thousands of those who were working as lumpers have now gone back into employment under PAYE and are paying their social welfare contributions and of course getting the benefits of those contributions. I would not like to give an estimate as far as tax is concerned of what has accrued to the Exchequer but I believe it to be quite substantial.

The Minister will remember that last year I suggested that those sub-contractors who continue and do not go back into the PAYE system but who pay the 35 per cent as was defined, ought also be made pay social welfare contributions, if we were ensuring that they will pay taxes just the same as any other citizen. The least we ought to do, especially from the point of view of their families, is to ensure that they enjoy whatever benefits are to be found in the social welfare code. The Minister agreed to look into that at the time.

I cannot undertake to do that in relation to this Bill. It is a somewhat changing situation in that, although there are a number of people from whom tax is being deducted week by week, there are also many thousands who have gone back. I think when it has been operated a little longer it will have settled down to a certain pattern. At that stage I would undertake to suggest to the Minister for Social Welfare that he might look at the possibility of applying this suggestion then, when the scheme is working clearly.

Fair enough.

Question put and agreed to.
Sections 45 to 55, inclusive, agreed to.
First Schedule agreed to.
Second Schedule agreed to.
Third Schedule agreed to.
Title agreed to.

This is an unfair request from the Leader of the House. Since the Minister does not need the Bill until mid-August and the House will meet before then it is unfair to ask not only Members, but also the staff, to work on indefinitely. Since the Minister has three weeks before he needs the Bill, it is unfair to rush it through now.

It is not unfair. I made it quite clear during the past three days that it was intended to complete the business on the Order Paper so that the House would not have to meet next week. I made it quite clear to everybody that the House intended to finish these Bills. The discussion we have had, and its quite wide scope ought to be satisfactory enough and I would suggest that Opposition Members ought to be reasonable in the circumstances.

I think the Leader of the House is being unreasonable. The normal sitting hours on Thursdays are 10.30 a.m. to 5 p.m. and it is now 10.10 p.m. One day is enough for anybody, and for those of us who have to drive back to the country the day has been quite long enough. I am not prepared to stay on indefinitely, as we have done a fair day's work.

It is a matter for the House to decide.

I do not want to delay the House indefinitely. Surely Report and remaining Stages will not occupy that much time?

Is it agreed to take Report Stage now?

I do not propose to remain, and I think this is most unfair. The House knows that Senator Alexis FitzGerald, who is this party's speaker on financial matters, is ill today. We have met the wishes of the Leader of the House by carrying on the business, but Senator Alexis FitzGerald should be given a chance to deal with matters which he raised on Committee Stage and hoped to deal with later. I think the Leader of the House is not being fair to him and I regret it.

I do not like that at all. If there is any Member of the House whom I have gone out of my way to facilitate it is Senator Alexis FitzGerald. If Senator McDonald will ask Senator Alexis FitzGerald whether he is satisfied with the consideration which I have always given to his requests, he will be surprised to find that it does not tally with what he has just said.

Agreed to take remaining Stages today.

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