I move recommendation No.5:
In page 8, between lines 2 and 3, to insert a new section as follows:
"Where, in any of the provisions of this Chapter and of Part I of the First Schedule, a specific sum is mentioned as a deduction falling to be made from the total income of an individual for the year of assessment 1974-75 such sum shall, for each subsequent year of assessment, be deemed to be increased by such percentage sum as is equal to the percentage sum by which the Consumer Price Index has increased during the twelve months' period ending on the date to which the Consummer price Index is calculated next preceding the commencement of the year of assessment."
This is the recommendation to which I referred already in discussing the earlier section on allowances. Both Senator Brosnahan and the Minister mentioned that the rate of allowance, even though increased under this Bill, would of course, if inflation continues at its present rate, be eroded fairly quickly. The Minister, when replying to Senator Brosnahan, mentioned the importance of regularly adjusting the allowance rates so as to take account of inflation.
In a few brief words on that section, which I shall repeat as being relevant to the amendment itself, I decried the whole notion of depending on a Minister for Finance, or the Department of Finance, the Revenue Commissioners, or the Government of the day—all of whom are, naturally, very concerned about containing revenue and increasing it, and who depend on the State taxation and revenue machine as represented by the Minister for Finance to keep pace, year in year out, with the diminution in the value of allowances—to have a look at it regularly to ensure that this will happen. It will not happen in that way and the Minister knows that as well as I do. It will be years afterwards when it has finally been borne on the Minister for Finance and the Government that inflation and the rise in the cost of living has diminished and eroded totally an allowance that may have been increased the last time the allowances were increased. At that stage, years afterwards and under pressure of public opinion, the Government will bring in a measure again increasing the allowances, as they have been increased under this Bill.
What this recommendation seeks to do is to avoid such a situation. That is, where the taxpayer whose allowances have been eroded by inflation is dependent on the goodwill of whichever Government is in power or the Minister for Finance and what pressure he can exercise, what agitation can be developed by them, to ensure that the scale and rate of allowances is improved. This is the wrong way to do it from the point of view of justice, as far as the taxpayer is concerned. That is the way it will happen, if this recommendation is not accepted.
In X number of years' time the taxpayer will realise that the allowances set out here in this Bill will have disappeared or will have diminished substantially in value, and he will be looking for a better deal. Legitimate agitation and pressure will take place, and eventually some Minister for Finance will yield. That will all have taken place years after the initial erosion of the allowances began. Any improvement eventually initiated by the Minister for Finance will barely catch up with, and probably will not catch up with, the erosion that has taken place. Then the erosion procedure will take place all over again.
I have no faith in the notion that we are not going to have to live with inflation—not, hopefully, in the rampant form that exists at the moment— but we shall have to live with inflation in one form or another. Eventually, when the Minister for Finance gets around to improving the allowances, it will be at a stage when inflation will more than have taken care of the allowances. He will, hopefully, catch up with the erosion that has taken place, in the meantime, and then the whole process will start again.
The recommendation, I suggest, is a more practical way to approach this question. In straightforward terms what it means is that the allowances increase in accordance with the increase in the Consumer Price Index. As the Consumer Price Index increases, the allowances also increase. There is then a direct parallel development between increased allowances and the increase in the cost of living.
If, as was suggested here, that procedure can be written into section 12, it means that any specific sum mentioned as a deduction to be made from the total income of an individual falls to be made from the total income for the year of assessment 1974-75. Such sum shall for the each subsequent year of assessment be deemed to be increased by such percentage sum as is equal to the percentage sum by which the Consumer Price Index increased during the 12-months period ending on the date to which the Consumer Price Index is calculated.
The Minister may criticise the details of this recommendation. Let us not talk about the technical details but the principal details involved. You establish by an amendment of this kind a direct relationship between the diminution in the value of allowances and the increase in the cost of living. The increase in the cost of living will have an automatic in-built statutory effect on the allowances being increasedpari passu in each piece of finance legislation.
If we are serious about dealing with inflation it is fundamental to deal with the people who are hardest hit by it.
These are the people about whom we are talking in this chapter of the Bill. The people who are hit most by inflation are the very classes who are paying income tax with the allowances that they have been allowed,et cetera, under Chapter 1, of this legislation. That is why I put in the amendment at the end of section 12, which is the last section of the chapter. We are dealing now with the chapter that concerns income tax payers. These are the people who are in the forefront as regards inflation impact. All the other sections of the community are hit less hard because there are various “outs” as far as they are concerned.
A person on a fixed income who has no other source of income is hardest hit by inflation. This category is broadly referred to as the middle-class. I do not like the word "class". Formerly many of those people were called the working class. Broadly speaking the working people in the community, regardless of whether they are blue-collar or white-collar workers, do not own property but who do not depend on social welfare are seriously affected by inflation. This is not confined to white-collar workers because there are plenty who were regarded as working people, who used live in public authority houses, who are now in an income bracket where they want to buy their own houses and who are now in the income tax category, and rightly so. How do we help this category who are seriously affected by inflation? Social welfare categories are looked after every year in the budget by way of an automatic rise.
I agree with some of the views expressed by people from the Labour Party, notably Senators Harte and Halligan, that many people in the upper income brackets can look after themselves. I am talking about the people in between, those earning wages and salaries, who have no other sideline or income, and who are totally dependent on their fixed incomes.
The Minister is well aware of the facts and gave an assurance that the scale and level of the allowances will be looked at regularly, with a view to remedying any erosion caused by inflation. I respect that but I know, from some experience, that this is not the way governments work. Long after the actual need to deal with a situation arises, governments will come in with some way to help to level up the rate of allowances and the procedure will start again. I would suggest to the Minister to write into finance legislation some principles which will enable these allowances to be tied to the Consumer Price Index or some other indicator which will ensure that as inflation increases allowances will increase and their real value will not be eroded but will be maintained at a reasonably consistent level. That is the purpose of the recommendation. I propose it to the Seanad on the basis that in this period of very serious inflation it should commend itself to the Minister and to the House.