Seanad Éireann debate -
Thursday, 31 Jul 1975

Vol. 82 No. 12

Wealth Tax Bill, 1975 (Certified Money Bill): Second Stage.

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

Minister for Finance (Mr. R. Ryan)

This Bill fulfils the promise made by the parties to the National Coalition in their statement of intent of February, 1973, to replace estate duty by a tax which would be paid by instalments during the lifetime of the owner of the wealth. Estate duty and its associated legacy and succession duties were abolished by the Finance Bill enacted last May in respect of the estates of persons dying on or after 1st April, 1975. In the debate on that Bill Senators have already heard the reasons behind the Government's decision to abolish that system which because of its inherent inequities and injustices had become a real source of grievance for many persons of small or medium substance. The Wealth Tax Bill now before you accordingly provides for an annual tax of 1 per cent on taxable wealth held on the valuation date of 5th April each year in excess of the generous exemption thresholds of £100,000 in the case of a married couple, £90,000 in the case of a widowed person and £70,000 in the case of a single person. An extra taxfree allowance of £2,500 is provided in respect of each minor unmarried child.

Following up the promise contained in the statement of intent an outline of the Government's proposals for an annual wealth tax was contained in the white paper on Capital Taxation published, almost 18 months ago, in February 1974. It was in recognition of the desirability of, and indeed commitment to, consulting the public on major areas of policy reform that the White Paper was published as a consultative document. The broad shape of the new system was of course indicated, but there were many important aspects of the system which merited and indeed greatly benefited from the very full and open discussion and debate which followed publication of the white paper. No one can be in any doubt about the exceptionally wide-ranging and detailed examination to which the scheme of wealth tax enshrined in this Bill has been subjected and this, not alone by the Dáil, where it has spent over 110 hours, but by the industrial, farming, commercial, professional and other sectors of the community who have all contributed both orally and in writing to shaping the form and detail of the Bill now before you. Never before in the history of democracy in this country and, I suspect, any other country, has there been so much debate on proposals affecting so few.

The Government naturally would have preferred that the Seanad would have had an opportunity before now of debating this very important legislation. To achieve that end the Government suggested that the Bill should be taken in Select Committee in the Dáil but the Opposition were, regrettably, not agreeable. The manner in which the Bill was discussed in the Dáil, including as it did speeches which were repetitious of arguments not germane to the issue of taxation of capital, did not help its passage. As you are aware the Government were eventually compelled to table a time motion to bring the debate to an end.

The Government consider that it is imperative that this legislation should pass through the Oireachtas this session. This is vital to the interests both of the taxpayers and the Revenue Commissioners. The Wealth Tax, which is operative from 5th April last, was foreshadowed in February, 1974. In fairness to all, the details must be finalised now so that persons who will be affected by the tax will know exactly where they stand.

As might be expected, it was not possible to satisfy the criticisms and wishes of every individual and every organisation who made representations. No Minister for Finance introducing taxation proposals nor any Government which has the unenviable task of approving such proposals in an effort to balance the relative demands, needs and priorities of what it regards as the best interests of the country need expect universal acclaim. Nevertheless, I think it must be clear from the generous taxfree thresholds, exemptions and reliefs provided, that the Government have removed persons of modest or indeed more than modest wealth-holdings from the scope of the tax altogether. In short they want to impose a fair tax where before there was very often, because of avoidance or evasion, no tax at all, and, to lessen any possible adverse effects of the tax on farming, on industry, on fishing, on tourism and on property generally used in providing employment in the State, they are providing special reliefs above and beyond the thresholds that I mentioned earlier.

To that relatively few and fortunate number who have sufficient property to be liable to pay the wealth tax, let me assure them for the umpteenth time of my own and of the Government's genuine and sincere commitment to maintain the equity and fairness of the tax by regular monitoring and review not alone of the thresholds to take account of inflation, which will take place at 3 yearly intervals, but also of the other aspects of the tax.

Senators have already been supplied with an explanatory memorandum to the Bill. Therefore briefly, so as not to engage in descriptions and explanations which might more appropriately be left to the Committee Stage, I will now direct attention to the main provisions of the Bill.

Section 2 is the main charging section and levies a tax of 1 per cent on the net market value of the taxable wealth of every assessable person on 5th April, 1975 and every subsequent year. There are three separate assessable persons for the purposes of this Bill, namely an individual, a discretionary trust and a private non-trading company.

Section 3 concerns the taxable wealth of an individual, including the wealth of an individual where this consists of a limited interest or an annuity. Where the individual is domiciled and ordinarily resident in the State all the property to which he is beneficially entitled in possession, whether in this country or abroad, enters into his taxable wealth. In the case of any other individual only his property situate in the State enters into his taxable wealth. An individual who has been resident in the State for 183 days in a year ending on a valuation date, and for a similar period in at least six out of the preceding nine years, will be deemed to be both domiciled and ordinarily resident here and an individual who is, in fact, domiciled and ordinarily resident here on a valuation date will even if he ceases to be domiciled here after that date continue nevertheless to be regarded as domiciled here for the three following valuation dates. These extensions of the concept of domicile are essentially anti-avoidance measures which are considered necessary because of the change made in the original white paper proposal that mere residence or domicile alone would be the test of liability on global wealth.

Section 4 provides for the aggregation of the wealth of a husband and wife and minor unmarried children. There is provision for apportionment of tax between the persons whose wealth has been so aggregated but the total tax bill and the liability of the individual primarily liable is unaffected by any such apportionment.

Section 5 applies the tax to discretionary trusts as defined in section 1. In so far as the taxation of a trust on its property situated in the State and outside the State is concerned, the test of liability follows broadly the same lines as those applied in the case of the individual. World property of the trust is taxable if the settlor is alive and is domiciled and ordinarily resident in the State on the valuation date or on the date of establishment of the trust or, if the trust is created by will, the settlor was domiciled here at the date of his death, or if the principal objects of any trust are domiciled and ordinarily resident in the State on the valuation date.

To cater for cases where the taxation of a discretionary trust as a separate entity might give rise to hardship, the section provides that the trust property may be regarded as the property of the individuals concerned (and thus obtain the benefit of the exemption thresholds in section 13) if the sole objects of the trust are children with or without their parents or, if the trust is solely for the benefit of spouses of a marriage. It will also be available for named persons who, because of age, incapacity or improvidence are incapable of managing their own affairs. As a result of suggestions made during the Committee Stage in the Dáil I have extended this last mentioned provision to leave dis-creation to the Revenue Commissioners to grant this concession for reasons analogous to those I have already indicated.

I might mention, in particular in connection with this section which concerns discretionary trusts, that there is much in this Bill that is novel, that had to be worked out from scratch because there were no easy acceptable precedents which could be followed. Discretionary trusts, as anybody who has had experience of them will be well aware, pose difficulties for the Revenue in the taxation field that admit of no ready solution. As was pointed out in the course of the debate in the Dáil we have in this Bill come up with a solution which attempts to deal fairly with these trusts and which at the same time tries to prevent their continued use as vehicles for tax avoidance or tax deferment.

Section 6 applies the tax to the taxable wealth of certain private non-trading companies. Property of such a company situated outside the State will also be included in its taxable wealth if it is incorporated in the State, has its effective centre of management here or is under the control of an Irish individual, discretionary trust or company. The various expressions used in the section such as "company", and "private non-trading company" are defined and the various ways in which "control" of a private non-trading company can arise for the purposes of the Bill are also set out. Under this section, a foreign controlled company whose income is derived wholly or mainly from real property in the State would be taxable as a private non-trading company. Following representations received after publication of the Bill I have in subsection (3) excluded from the scope of the tax a trading company who due to, say, a bad trading year find that their main income temporarily consists of investment income and I have added a new final subsection clarifying the intention of the section as a whole. Under the amended section, a private non-trading company will not be a taxable entity if they are controlled by:

(i) a trading company whether public or private;

(ii) any public company whether trading or non-trading;

(iii) any private company which is not a private non-trading company.

Section 7 sets out the various items of property which are exempt from the tax. These include a principal private residence and contents including grounds of up to one acre, livestock owned by a farmer, bloodstock, rights to certain superannuation benefits and annuities, funds in certain superannuation schemes, property held for charitable purposes, certain Government securities owned by persons who are neither domiciled nor ordinarily resident in the State, certain objects, including gardens, of national, scientific, historic or artistic interest, trees and underwood and shares in private non-trading companies which are themselves liable to the tax under the previous section.

Section 8 defines the market value of property as the price which it would fetch in the open market. Where the Revenue Commissioners require a valuation of property by a person named by them, they will meet the cost of such valuation.

Section 9 deals with the valuation of shares in a private trading company which are under the control of an assessable person. In such cases the control element is taken into account in valuing the shares. Where there is no element of control the normal market value rule in section 8 will apply to the valuation of the shares.

Sections 10 and 11 provide respectively for the determination of the net market value of productive property and of property generally. Section 10 grants concessions for agricultural property including agricultural machinery in the hands of a genuine farmer; for fishing boats and hotel premises; and for other property used in the provision of employment in the State including stocks and shares in an Irish trading company.

In the case of agricultural property in the hands of a farmer, as defined in the section, and in the case of fishing boats and hotel premises, as also defined, a deduction will be made from the market value of 50 per cent or £100,000 whichever is the lesser in proportion of the debts and incumbrances appropriate to the reduced value of such property will also be deducted.

I might mention here that following reconsideration of the definition of a farmer, as set out in the Bill as initiated, I moved an amendment at Committee Stage in the Dáil to remove the reference to time spent in farming. The section now simply requires an individual to hold 75 per cent of his property in agricultural property if he wishes to qualify for genuine farmer status. Agricultural property within a mile of an urban area and which has an enhanced value because it is likely to be used as sites for houses or factories within the following five years will be restricted to a value equal to its agricultural use value plus 25 per cent.

Productive property—other than agricultural property, fishing boats and hotel bedroom accommodation which benefit from the 50 per cent concession already mentioned—including stocks and shares of a trading company will be allowed a 20 per cent deduction from its market value together with a proportion of the debts and incumbrances appropriate to the reduced value. In response to representations made following publication of the Bill I have by Committee Stage amendment in the Dáil increased the percentage relief for stocks and shares of a hotel company from 20 per cent to 30 per cent.

Section 11 provides that the net market value of all property other than that covered by section 10 is the market value less outstanding debts and incumbrances other than those specifically disallowed. Examples of disallowed debts are : debts not incurred for full consideration and debts incurred in the purchase of property exempt from the tax.

Section 12 provides that values of real property or unquoted shares agreed between the accountable person and the Revenue Commissioners for any one valuation date shall hold good for the next two valuation dates, subject, however, to the right of either party to reopen the value in certain circumstances. This acceptance of values for a three-year period ties in with the stated commitment of the Government to review the exemption thresholds set out in section 13 at three-yearly intervals also.

It is also provided that two years after any assessment, an accountable person may apply to the Revenue Commissioners for a determination of the value of any property on a valuation date and the Commissioners' valuation shall be final, subject, of course, to the appeal provisions provided in sections 23 and 24.

Section 14 indicates the persons who are accountable for the payment of the tax. Some persons will be primarily liable, others will have secondary liability. Those with secondary liability are liable only to the extent of the property they have received on behalf of, or from, the assessable person and they are entitled to be reimbursed by the persons primarily liable.

In response to representations made following publication of the Bill I introduced an amendment at Committee Stage in the Dáil to delete the words "and any other person" from the final subsection of this section lest they be construed as referring to persons who could not legitimately be regarded as being in possession of information relevant to the taxable wealth of an assessable person which might be required by the Revenue Commissioners.

Section 15 requires persons primarily liable to furnish a return within three months of every valuation date, that is, by 5th July each year, in respect of the property of the assessable person. In respect of the year 1975 the appropriate deadline for the furnishing of returns has, by a Committee Stage amendment in the Dáil, been changed to 5th October, 1975. Where an individual is concerned a return will not normally be required if the net market value of his taxable wealth is less than 75 per cent of the appropriate exemption threshold set out in section 13 so that in the case of a married couple, a return need be furnished only if their net taxable wealth is over £75,000.

Section 19 provides that wealth tax due shall be a charge on real property comprised in an assessable person's taxable wealth and on that person's personal property while it remains in his ownership. Where real property that is so charged is sold, the charge lapses after a number of years from the date the tax was due. By Committee Stage amendment in the Dáil, the period of years after which the charge so lapses was changed from 12 to six years. In the case of genuine sales not exceeding £50,000, however, the charge on the property is extinguished as against the purchaser. To prevent avoidance by fragmenting sales, the charge remains if the total of all sales between the same parties in a two-year period exceeds £50,000.

Section 21 is a relieving provision in that it limits to 80 per cent the amount of total income which may be taken in income tax and wealth tax combined. If this 80 per cent ceiling is exceeded, the Revenue Commissioners will pay back the excess of wealth tax subject to 50 per cent of the original wealth tax assessment being retained.

Section 22 provides for repayment of any tax overpaid together with interest of 1½ per cent a month from the date of payment to the date of repayment. These provisions do not apply to tax repaid under the provisions of the previous section. Sections 23 and 24 make provision for appeals in relation to the values of real property and in relation to any other aspect of an assessment respectively.

Section 27 provides penalties for failing to furnish returns, information, evidence and so forth, or for fraudulently or negligently furnishing incorrect information. Section 28 empowers the Government by order to enter into arrangements with the Governments of other States to provide relief from double taxation in respect of wealth tax. The draft of every such order must be approved by Dáil Éireann before being made.

Section 30 brings wealth tax within the ambit of the Provisional Collection of Taxes Act, 1927 which will enable a change in the rate of the tax to be made by a financial resolution of the Dáil. It also places on the Revenue Commissioners the same responsibilities to account for wealth tax as are imposed on them in relation to other taxes. I commend this Bill to the House.

Mr. Yeats

I will say straight away that we in this party are totally opposed to the proposed wealth tax in our present economic circumstances. Indeed, even to talk in terms of taxing wealth at present is a ludicrous proposition. The concept that there is a large mass of undistributed wealth here that can be taxed and redistributed is a concept totally lacking in reality.

What is proposed in this Bill is not really a wealth tax at all. It is a convenient type of gimmick designed to convey to the public at large that only the very wealthy millionaire types will be covered by it. Essentially, this is property tax. We have said in recent weeks that we were completely in favour of, and would support, a capital gains tax designed and directed against speculators. As between the ordinary businessman who has, perhaps, spent his life building up a business, and the genuine speculator—the man who buys and sells in short term— we made it absolutely clear that we would be in favour of a much heavier taxation than the Minister proposes to direct against the speculator. We told the Minister this and he did not accept our suggestion in regard to that Bill. I mention this to make it quite clear that we are entirely in favour of taxation of speculators and other such people who may be extremely wealthy and whose wealth can, to use that over-worked cliché "in the public good", be distributed elsewhere. But we are totally opposed to this type of so-called wealth tax.

We are opposed to wealth tax as devised in this Bill because it is completely opposed to the best interests of the country in its present state of development. Indeed, this whole business, not merely the Bill before us but of the Capital Gains Bill that went before it and the Capital Acquisitions Bill that will come after it, has been an incredible waste of time, effort and public money. We deal with these irrelevant, useless Bills—useless from the point of view of either balancing the budget or in any way helping the economy or the living standards here—at a time when facing the Minister are matters that one would have thought he would be far more exercised about, that he would spend more of his valuable time at, a vast budget deficit, enormous-scale foreign borrowing, more than 100,000 people out of work, and what is almost worse than any of these, a universal feeling of public despondency and lack of confidence in the future of the country. We are dealing with this irrelevant and ridiculous Bill in the context of a situation where there is no real effort by the Minister for Finance to deal with the real problems, the state of the economy.

Yet in these conditions we have this complex, dangerous Bill, dangerous from the point of view of the improvement of the state of the economy and the people as a whole—designed after its complexities having been gone through, after all the Minister's time, Parliament's time, civil servants' time, to raise perhaps £1 or £2 million per year. We have the whole of the capital tax measures, the other Bills along with this one, all of them together designed, according to the Minister's concept, to raise, perhaps, 1 per cent of the total present budget revenue.

What is the point of this exercise? The point, it would seem, is simply to enable the Coalition Government to escape from a stupid and reckless promise to abolish death duties. I say stupid not in the political sense of the term: in a political sense you might describe it as astute, if not reckless. It may have won them the election. But I say stupid in the sense that it is a ridiculous concept that millionaires should, as the Minister has provided, be in a position totally to escape death duties.

It has always been clear, and I think we can all agree on this, that death duties were a very grave imposition at the time of death when those left behind were least able to bear it. It was a very grave hardship on people with modest means.

One cannot accept, and no other country has accepted—and the Minister is constantly quoting other countries—the concept that men of many millions should be put in the position totally to avoid death duties. The Government could and should have raised the limits of death duties on farmers and others so that people of moderate means who suffered from these impositions would no longer be liable to them. However, the Government were faced with the position that they had made this reckless promise in the heat of an election, and all this exercise that we have been facing for months past and will be facing again in both Houses throughout the autumn, is designed to get the Government off the hook on which they pegged themselves through that promise.

We have the almost laughable position, if it were not so tragic, that for two years, having been rapidly allowing the wealth of the country to be destroyed, the Government now introduce a wealth tax. One would have thought that in present conditions of crisis here and in other countries, the whole taxation system here should be geared specifically to the economic needs of the people. We have had this talk, and I have no doubt from such Senators as Senator Halligan we will have it again in this debate about the redistribution of wealth in the community. Redistribution? One-and-a-half million pounds per year from this tax—the concept is ridiculous. We have had, particularly from Labour Senators and Deputies and others—I am not sure whether the Minister has perpetrated this effort—the so-called calculations that a very high proportion of wealth in the country is owned by about 2 per cent of the population. These figures, of course, are of no value to anyone.

What is wealth? What is the wealth which is taxed in this Bill? An industrialist-manufacturer, a man of standing in business who earns, perhaps, £50,000 per year and spends it, according to the concept underlined in this Bill, has no wealth. He has a vast income, but he has no wealth.

Consider, on the other hand, the widow who is living in some indigence on the income from investments left to her by her late husband, according to the concept in this Bill she is a woman of wealth. But she has a very much lower standard of living than that to which she was accustomed in her husband's lifetime on the investments built up by him throughout his life and left to her for her old age. According to the Minister, she is a wealthy woman whereas the industrialist with £50,000 a year who spends it it all has no worries at all. It is in the light of this kind of situation that one has to listen to the arguments of those who talk about the wealth of the country being owned by two per cent of the population, and so on.

We had the Minister's White Paper published before these Bills. It was issued on the 28th February, 1974. We have at paragraph 52 this statement.

Continued economic growth in this country will increase its wealth. In the absence of a comprehensive system of capital taxation the bulk of this increase in wealth will accrue to those who are already wealthy.

As an economic concept that is simply rubbish. Over the past ten years the figures show that the proportion of the national income taken by wages has considerably increased. There has been a great increase and, indeed, there continued to be a great increase in wealth until this benighted Government came to office. In the days before they came into office there was a considerable increase in wealth and a very rapid increase in living standards and, contrary to the Minister's proposition in his White Paper that this kind of situation led to the wealthy getting wealthier and, presumably, the poor becoming poorer, the reverse happened. The proportion of national income that went on wages increased. This is the kind of totally faulty statistic on which only too often this White Paper and these Bills are based.

Page 28 of the White Paper, unwittingly or unknowingly, gives the game away and really one must quote the text to underline the utter futility of this Bill. At page 28 the Minister's White Paper said with regard to an annual wealth tax:

An annual wealth tax charged at rates sufficiently low to enable it normally to be paid out of total income will do little to redistribute existing accumulations of wealth and, therefore, cannot be regarded as capable of making a worthwhile contribution to the greater diffusion of wealth.

What is this Bill for? This is the Bill which is supposed to redistribute wealth, to ensure that the wealthy do not batten on the community, to ensure that the rest of the community are able to survive in reasonable comfort. This is the wealth tax that the Minister's own White Paper says cannot be regarded as capable of making a worthwhile contribution to the greater distribution of wealth. Since we have already realised it will not make any contribution at all to the balancing of the budget deficit of anything up to £300 million this year, one wonders what on earth it is for. Is it simply to create alarm and despondency in the entire business community for the fun of it?

This is the Coalition who have been talking about distributing wealth, about helping the workers against those who live on unearned income and so on. What did they do in the income tax code with regard to unearned income? Even the concept—a just concept—that those who earned their incomes should pay less tax than those who did not, the Minister deliberately, in his budget last year, eliminated from the income tax code. From then on those who did not earn their incomes, who lived on investments that had been given to them by other people, paid the same tax as the worker, whereas formerly they paid more tax. That is about the only thing the Minister has done so far in distributing wealth, but he has done it in reverse.

The case for wealth tax has simply not been made. The proposed wealth tax will, as I pointed out, do nothing to redistribute wealth. It will do nothing to help the Minister's enormous budget deficit. He says his budget deficit will be £242 million. One suspects it will be nearer £300 million but, whichever it is, the £1 1/2 million or so that he expects to get from this Bill will do nothing practical to help. Indeed, it will certainly do further damage to the economy because it has already and will continue still further to reduce business confidence at a time when nothing is more needed than a restoration of confidence.

This tax will hit hardest where profits are lowest so risking still further company failures. I would remind the Minister that, since the beginning of this year, somewhere around 127 companies have collapsed. How many it will have collapsed by the end of the year, I do not know. But a company that is in difficulties, is only getting a small return on its capital, is cleary far more damaged by a one per cent or .8 per cent, in the case of this tax, than a company that is more profitable. Where in exceptional cases this Bill does hit the so-called wealthy industrialist, business man and so on, he will, in most cases, not pay. It will be handed on to the general public as all taxes ultimately are handed on to the general public. This concept that a big business man or maufacturer will pay £3,000, £4,000 or £5,000 out of his own pocket is just not on. He will pay it all right but he will make sure he gets it back. It is the public ultimately, in so far as the £1½ million is raised at all, who will pay.

One wonders sometimes what are the priorities of this Government. Like Nero, they fiddle while Rome burns. It seems clear that the Fine Gael party themselves did not want this Bill. The Minister was, one suspects, about the only enthusiast. We had the amusing situation where the Minister for Defence went bounding around the country when this White Paper was first produced saying it was ridiculous to suggest that the Government were going to do anything of this kind. This was a scheme put up by civil servants and propagated by Fianna Fáil cumainn but the good, solid Fine Gael Government were not going to do it. Of course, we know what happened.

We have the almost total neglect of economic problems while the entire country waits for some practical decisions by the Government. We had a few minor practical decisions by the Government in recent weeks only to find that already they have been reversed. We have a situation where there are over 100,000 out of work, a situation which all indications are will grow still worse in this autumn and winter. The indications are—and the CIF believe —that there will be a further decline in home sales in the autumn and winter. Export sales already this year are lagging considerably in volume behind last year and the prospects of an extremely severe period of deflation in Britain, as a result of their economic steps, makes it almost certain that our exports to Britain which after all are still over half our total exports, will fall off simply because there will not be the purchasing power in Britain.

We had the announcement this morning in the newspapers that the expectations of the IDA for new industries this year have had to be cut by 20 per cent. You have the position of the balance of payments which, last year, had an enormous deficit of £300 million on paper. There is a considerable improvement this year simply because public demand has collapsed to such an extent that over the entire range of imports there has been an enormous fall in the volume of imports since last year. I would remind the Minister that the underlying trend is still as dangerous as ever it was. And, at such time as there will be an improvement in the country's economy and particularly in public demand there will immediately be another flood of imports. There is no reason to believe any practical step is being taken to solve the underlying problem of our balance of payments. We are facing the prospect of a budget deficit of anything up to £300 million by the end of the year. We have the complete collapse of the entire budgetary position, as established last January, in the six months after which the Minister sanctioned no less than £86 million worth of expenditure that was not listed in the January budget. We had enormous foreign borrowing which last year amounted to £240 million of which £180 million was State and some £60 million from various public authorities, semi-State companies and so on. This year the Minister says it will be around £276 million with a further £50 million from public bodies. It will be well over £300 million. We have the prospect of this huge burden on the community for years to come. There is very grave danger that at any moment the whole economy may grind to a halt if we are unable to continue to borrow these sums.

Finally, we have the real bogey that has only been recognised by the Government in the last few weeks—a 25 per cent rate of inflation which, at last, has been recognised as the greatest single danger that faces us. These are all problems that the Government should be facing. They have not been facing them. They ignored them for as long as possible. They have over the years pretended that they did not exist. They claimed that they were better than they were. Instead of facing them they engaged in this theoretical, ideological exercise of redistributing wealth, wealth which no longer exists.

One wonders how the Government can have the nerve to talk about the redistribution of wealth. There is no more powerful instrument than inflation at 25 per cent for the redistribution of wealth, but in the wrong direction. This type of inflation does more than any other single thing could to make the poor poorer. The important point that the Government should consider is not this puerile envy of the so-called rich. The politics of envy is a very dangerous thing. I put it to the Government and the Minister that they would be better off from all our points of view if they would devote themselves to improving the living standards of wage earners. It is no use putting their finger on so-called rich men and trying to pull them down. On the contrary, the Government should try to raise the living standards of everybody else, particularly in the circumstances of our country where these so-called wealthy people are in most cases the businessmen and manufacturers on whom we rely to provide employment.

The entire question of inflation which ran at 20 per cent last year and 20 to 25 per cent this year marks the greatest single defect of this Bill before us, as it was in the case of the Capital Gains Tax Bill except that, in this case, it is, perhaps, even more serious. The Government tried to suggest that only the rich will be affected. The Minister in his opening speech spoke about the fortunate few who would be in the happy position of having to pay this tax. One is entitled to remember that the trade unions were very careful to ensure that they were excluded from this Bill. They are one group, who would be liable to this tax, who have carefully succeeded in avoiding its imposition on them. While a man in 1975 who owns £100,000 may be relatively well off— whether he is or not would depend on circumstances, but he is certainly well above the average—how much will that £100,000 be worth in five years from now? Inflation is running at a much higher rate than it was in the early years of the seventies but, since 1970, the cost of living has doubled. In other words, the value of money has halved. The rate of inflation is likely to increase in the next five years beyond what it was in the last five years. So £100,000 now will be worth only £50,000 by the year 1980 and, in these conditions, many more people of quite moderate means could be brought within the tax net.

One wonders when ten years have elapsed how people may be covered by this tax. The Minister said today, as he has said on several previous occasions and as he said in the case of the Capital Gains Tax Bill, that he wanted to assure the relatively few and fortunate number who have sufficient property to be liable to pay wealth tax "for the umpteenth time of my own and the Government's genuine and sincere commitment to maintain the equity and fairness of the tax by regular monitoring and review, not alone of the threshold to take account of inflation which will take place at three yearly intervals, but also of other aspects of the tax." It is not really the fortunate few, as he puts it, who have enough to be liable to tax that will need to worry. It is the vast numbers who at the moment are not liable to pay the tax that the Minister should be addressing because these people are liable to be brought in in future years by the on-set of inflation. These are the people the Minister should be talking to, not the so-called few and fortunate number.

One would like to feel that what the Minister has said will happen and that there will be some kind of indexing of the thresholds of the wealth tax. The difficulty is that on the Capital Gains Tax Bill on which we discussed this particular problem, our experience was, that as the Bill progressed, the Minister, having started with this kind of enthusiasm that he expressed here today on the thresholds, grew gradually more and more cautious. We started that particular discussion on the basis that there would be some kind of indexing and that there would be regular adjustments to meet the cost of living. By the time we had finished with the Bill the Minister was telling us in dark tones that it would be ridiculous to suggest that you could do this because, after all, it was not done with income tax: since there was no question of indexing income tax to adjust for the cost of living, why should it be done with the capital gains tax? One feels that this kind of attitude may well occur with the wealth tax.

There is the undoubted fact that on the only occasion on which we have had experience of a ministerial problem of this kind our experience has not been a good one. In the budget of May, 1974, the Minister increased the personal allowances for income tax. He said with the absolute certainty that he used today in his introductory speech that, from then on, he proposed to adjust personal allowances each year in the annual budget in such a way that they would retain their real value even in the face of inflation. In fact, in the budget of last January he increased these allowances by 15 per cent to meet an increase of far more than that in the cost of living. In order to bring them back to the level fixed by him in the budget of next January he would need to raise all income tax allowances by over 30 per cent. It is quite clear he will not be in a position to do this. I have no doubt he intended to do this and I accept his good faith in the matter but the exigencies of politics and, in particular, finance make it impossible to carry out. That is the only example we have of this kind of promise by the Minister, a promise he simply found himself unable to carry out.

One also looks at this whole situation with grave suspicion in view of the wording of the White Paper. It makes interesting reading. He says in paragraph 53:

Allied to the development in income and expenditure taxation is the fact that inflation in recent years has brought more people within the scope of these taxes. At the same time those factors which either bring more people for the first time within the tax net or, alternatively, increase their existing tax burden bring about an increase in the value of capital assets. The object of an effective system of capital taxation would be to ensure that this increase is also brought within the tax net.

Here we have the Minister saying with considerable clarity and candour that, in the light of the increase in inflation, these increases, just as they are reflected as a form of income taxation, should also be brought within the capital taxation net. It is no wonder that people are suspicious of the kind of undertaking that has been repeated today again by the Minister.

There are a variety of points we will be raising on the various sections of this Bill. There is the question, for example, on section 1 under which minors are listed as those who are unmarried and under 21. One wonders why there is this reiterated insistence that children do not attain their majority until they are 21. After all, they can now vote at 18. They can marry, join the Defence Forces and do all kinds of other things. Yet, for taxation purposes, they are still counted as minors and are joined for many purposes with their parents until the age of 21.

Another section says that the wealth of a minor is to be aggregated with that of his father. The whole principle of this is very doubtful. There could well be a case where a minor, say a pop singer, has a large income in his own right. There seems to be little reason in justice or in principle in such a case to aggregate his capital with that of his father.

As with the capital gains tax, we have the archaic principle repeated whereby the wife is treated as a sort of ancillary appendage of her husband. The threshold for a single person is £70,000, for a married couple it is £100,000. One of the things the Minister has done for which one can give him praise is that in the income tax code he has doubled, after many years, the married allowance as against that of a single person. But he has gone back to the good old system and unrealistic principle in this Bill, as in the case of the Capital Gains Tax Bill, that two can live as cheaply as one. It would seem only fair and equitable that the thresholds for a married couple would be double that of a single person. In many ways a married couple have more expenses than single people. There are children, for example, and the allowance for children is so small that, for practical purposes, it might as well not exist. As in the case of the Capital Gains Tax Bill, the Minister is, as usual in these days, encouraging people to live in sin.

There are a great many sections in the Bill which undoubtedly will cause great problems of interpretation as well as a very considerable waste of administrative activity. Questions such as the normal contents of a house —what are the normal contents of a dwelling house? How can one define a standard in a matter like this? Does one have regard to the lifestyle of the inhabitants? How is it to be done? I can see that the possibilities of evasion will be endless. How they will be traced I cannot imagine. I take it all people need to do is, instead of investing in easily traceable stocks and shares, invest in antiques and valuable paintings, and so on, and call them the normal contents of the house. Indeed, they probably are legitimately described as the normal contents of the house. One wonders how the Revenue Commissioners propose to interpret this.

There is the problem of such things as discretionary trusts and non-trading companies where there is no threshold at all and the first £100 is liable to tax. In a great many cases it would seem that these matters will involve a great deal of work for all concerned, involving probably very little from a fiscal point of view.

One wonders at the justice and equity of annuitants and life tenants, in receipt of an income but with no control over the capital, being expected to pay wealth tax on the capital sum. There are a great many other matters of this kind we will have to raise on Committee Stage. It is highly unsatisfactory, to put it mildly, to have to deal with this massive, complex and important Bill at a time when the other House is in recess. I know the Minister will say it is not his fault and I am not blaming anyone in particular. He has already mentioned that the other House wasted time, and so on, and I have no intention in following him down that dangerous path.

An Cathaoirleach

The Chair is glad to hear that.

Mr. Yeats

Nonetheless, in view of the fact that the Minister referred to this question it is justifiable to point out that, in fact, the Dáil in its tortuous course, perhaps, made 30 amendments, or so, to this Bill. In the case of the Capital Gains Tax Bill, which also had a very long and involved passage, there were 30 or 40 amendments made. It should have been possible to organise the legislation of the Government so that this situation did not arise.

We are fixed with this situation. We have to discuss this Bill within a constitutional limit of 21 days at a time when the other House is in recess and at a time when the recommendations that we put down have little chance of being considered by the other House. It is even more unsatisfactory to have to waste time on such completely irrelevant legislation. One would be happy to sit through August if one felt that the legislation before us had some relevance to the needs of the country.

We, in this House, have spent months of involved, complicated, difficult discussion on a Bill to introduce foreign television into the country, a Bill to introduce a completely unworkable system of dealing with violence in the North, a Bill of the Minister's own on capital gains which, again like this one, does nothing to help the state of the country. We will vote against the Second Stage of this Bill because in our view the wealth tax does nothing to reduce inflation, does nothing to help the unemployed, does nothing to balance the budget, and neither does it do anything in any other direction to improve the economy. On the contrary, its passage which, of course, is inevitable will still further reduce public confidence on which any hope for the future depends.

Mr. Alexis FitzGerald

I must confess that I do not share the general pessimism which Senator Yeats expressed with regard to the state of our economy, nor do I think that the measure which is under consideration will necessarily do the harm he alleges or fail to make any contribution to the solution of the problem to which he referred. I am no particular enthusiast, to say the least, for the proposals contained in this measure but if I examine my own conscience in regard to this measure a good deal of my lack of enthusiasm is that of an old dog being asked to learn new tricks. I knew a certain amount about the late, unlamented estate duty code and I resented intensely having to think, as everybody does, about a new system. Nobody who plays chess likes to go on to draughts, someone who likes playing bridge dislikes poker; someone who knew about estate duty resents having to take up wealth tax and capital acquisitions tax. Therefore, I must discount my own lack of enthusiasm for it.

I have been genuinely trying to make a fair assessment of the contribution this measure will make to our affairs. It will make a contribution, that is quite clear. Whether it will be a good consequence or an ill one, it will certainly have an effect. I have tried to put this matter into perspective. First of all, with regard to the wealth tax, there are many people who are unnecessarily worried. I believe that even a wealth tax snobbery has developed. People who will never be paying it like to talk about their fear of the imposition of wealth tax.

Mr. Horgan

Like President Nixon's famous visit to Paris.

Mr. Alexis FitzGerald

That may be an appropriate parallel. I think there are worse things—putting it no further than that—than wealth tax. There are soldiers with red carnations or with Easter lilies in their buttonholes prohibiting people from free expression of opinions. There is nobody in Ireland, at present, threatening to take over Croke Park and turn it into a concentration camp for people who do not agree with the proposals of the Government in this or any other measure. All that can be said against the Wealth Tax Bill— some of these views were well expressed by Senator Yeats in regard to this type of measure—must be set against the possible advantage in terms of an extended sense of social justice.

Perhaps there is a certain element of social cosmetics involved; perhaps there will be no significant redistribution effected by this Wealth Tax Bill but the conviction—however erroneous—seems to be there in an economic, social and political fact. There is some evidence that the Government's general consensus to achieve social homogeneity is having a degree of success. I do not claim any more for it than that; that it is recognised by the men-of-no-property that the Government are prepared to do something about the people-of-property. I do not think we should ever discuss this Wealth Tax Bill, the Capital Gains Tax Bill, the Capital Acquisitions Tax Bill—when the Seanad gets it—without setting them in the context of what they are replacing. If there is an imposition in certain circumstances on some people, as I believe there is, which perhaps is not quite intended—I am going to suggest means whereby something can be done about that—we must remember that impositions have been lifted from a whole host of people who will not, save in the direct kind of situation which I described on the Capital Gains Tax Bill, be affected at all or will not be in situations where they will be caught by the Capital Acquisitions Tax Bill. Many people of property, of no great substance, are and will be far better off than they were in terms of capital taxes with the enactment of this wealth tax with its thresholds and exemptions. That is worth saying.

It is also worth mentioning this point. Senator Yeats complained, if I understood him correctly, about the estate duty code letting millionaires get off scot free because of their ability to avoid it.

Mr. Yeats

No, about the abolition of it, that the Minister took it off the millionaires.

Mr. Alexis FitzGerald

I misunderstood the Senator's point on that so I do not need to relate my next remarks to anything he said although I must say that I do not see how millionaires are being improved by the provisions of this Bill, because— if I may develop this point—the estate duty code was capable of reform, but it was not reformed. It lay there unreformed. It could have been reformed relatively easily. There were various ways in which it could have been changed. The rates of duty in a certain range could have been considerably altered and in a favourable manner. It had not begun to bite too close to the bone in circumstances in which there was no justification for it to do so; while there were forced realisations in unhappy situations it did not bite at all in circumstances where the animal under its clutches was fat enough because he could, by appropriate gifts, give it away in due course because he knew that what he retained would be quite sufficient to provide for himself. He could always make arrangements with his relatives to ensure that he would be looked after. The rich people, for the most part, made these arrangements.

The point I am making with regard to this, as someone who is not very happy with this measure, is the failure to reform the estate duty code just as the failure to reform any defect in our social or economic or fiscal policy leads to a clamant demand for the destruction of something which need not be destroyed. That clamant demand came to be expressed in a strong, angry and extremist form. It was a recognisable political fact during the course of the last election.

The point I am making is that those who are now complaining about the wealth tax should ask themselves the question: were any of them concerned with the abolition of estate duty? We can be sure they were : they were among the voices raised to get it abolished. Instead of an angry call for the abolition of estate duty, there should have been a well-presented case for its improvement. That was not done. The people who are now complaining have cut off the stick with which they themselves are to be beaten.

Senator Yeats said that the promise to abolish death duty was improvidently given or whatever language he used with regard to that. I am sure the words were well chosen and I am not going to object to that particularly but the significant thing about that promise—and it was a matter of considerable political honesty—was that when that promise was made there was coupled with it an assurance that it would be replaced by a new tax in substitution for it. That was in fact a very honest political step to take in the middle of an election and gave some trouble, as I remember well, to those who made it. Let me say immediately I was as unhappy then with that promise to replace it with that tax as I am unhappy now with the tax which is replacing it, though I can merely repeat myself in that matter.

I sometimes think that Governments and their political parties, all political parties when they take office, should remember the words of a political philosopher—a socialist in fact—Godwin, who, when asked why was he doing this when he promised to do something else, said: "Why should my past folly fetter my future wisdom?" I think sometimes that political parties should remind themselves that they should not be fettering their future wisdom by their past folly involved in their promises, just as de Gaulle said when he did the Algerian thing: "I must be true to my party or my country. Which am I going to be true to? My country, of course."

The promise was made and, of course, in this situation the people who are responsive to these political and economic and fiscal developments at the other side of the water thought of the wealth tax. The view with regard to it in these quarters harmonised with certain views elsewhere and, low and behold, we got enough. I feel rather like the character in Damon Runyon who said : "It's only a sucker who speaks his mind in this man's town." That is my position with regard to many of the things that I feel I should say. It is an interesting fact that the theory behind the wealth tax has got respectability : it is a mistake to think that there is not a respectable body arguing in favour of it. But the theoretical justification of the wealth tax seems to me to get totally spoilt once you grant the exemptions which are contained in this Bill.

Senator Yeats talked about the widow with her capital and the man with £50,000 a year. Of course, the widow has capital and it does represent a taxable capacity and she can shift it around. She could realise some of it and reinvest it in something giving a high yield and so on. There is some advantage clearly possessed by the man with property and there is a degree of equity involved. One does not have to follow the thing in its fullest egalitarian aspect at all. There is a degree of equity even in terms of annual payments involved in a tax there. But where you have exemptions which, in fact, respond to political reality, to what is acceptable to people, this idea that you are going to get people to shift from high income-yielding securities or from low income-yielding securities to high-yielding ones, just does not seem to me to make sense. I do not criticise these manifold exemptions on practical grounds but I say that they do not really accord with the theoretical justifications for the wealth tax.

There is one particularly important justification for it, I think. It will be an administrative nuisance of the first order, not merely from the point of view of the tax-gatherers but also from the point of view of the tax-payers. That is certainly true. Recently somebody talked to me on the question of whether he was a whole-time farmer when this code arose. He said, "Until a few weeks ago I thought there was no doubt about it that I was a whole-time farmer but now I spend about 90 per cent of my day discussing my tax position. Does that prevent me from being a whole-time farmer any more because I do not know where I am with these different tax complexities that I have to cope with?" There will be a burden which I hope will not be continuing too long, a burden undoubtedly carried by people who have the administration of property or have to run their affairs. There is one advantage, I think. and that is that it does mean that the Revenue will have a very effective method of preventing avoidance. With the wealth tax returns and, presumably the register of wealth that will emerge from this, they will be able to monitor operations on the capital gains tax side. They will be able to understand better the income tax positions of people. They will be able to follow up the capital acquisitions tax and so on. If in general the judgments as to what the tax code ought to be are right, then if the tax code is as it ought to be, measures to prevent it being avoided are good and sound and I would entirely welcome them. I think that is a rather important point to make with regard to this.

I would like to suggest to the Minister that in this country there are a number of situations which, unlike in the United Kingdom, cannot be easily escaped. There are people who have locked themselves into trust positions or private non-trading company situations for one reason or another. Perhaps that was all due to avoiding another tax which has gone or to avoiding a higher rate of tax which still remains. But whatever the reasons for it, there are human situations of some difficulty. If these existed in the United Kingdom there is a law which assists them which we do not have. Under the United Kingdom law if you have, say, for example a trust position the provisions of which were made long before the present day, and reflected antiquated thinking of one kind or another and adjustments have to be made to suit the interests of beneficiaries under the trust, you can go to the court and get that trust varied because there is a Variation of Trusts Act empowering the court to make variations in trust even though the settlers are dead and gone.

We do not have a variation of trusts code: we must have a variation of trusts code: I think it is absolutely compulsory on us to have it in the new situation where an old tax code has been scrapped and a new one has come in. Otherwise there will be considerable inequity. May I compliment the Minister's advisers and technicians involved in this Bill on producing what I think is the first piece of wealth tax legislation in a common law country. I think that is correct. That is just interesting from a lawyer's point of view and probably not from anybody else's. It is technically a very difficult thing to have done this at all. The British are, of course, proposing to follow.

I understand—I may be wrong; the Minister can correct me—the British do not intend to treat discretionary trusts as assessable persons. I understand the British do not intend to treat a private non-trading company as an assessable person. We have decided to do this. I have the greatest doubt as to the wisdom of this. My reason for doubting it is that I think the Revenue thinking in regard to making these two different kinds of bodies assessable, is that there is no justification in any circumstances for the existence of a discretionary trust other than to avoid tax, that there is no justification for the existence of a private, non-trading company other than to avoid tax. I think both propositions are quite untrue. I think that the Revenue will discover that we are not giving a threshold to discretionary trusts or non-trading companies, that the discretionary trust will not disappear. It will no longer have its tax avoidance usefulness but it will have very considerable other uses.

Take the position of a man who is coughing out his last breath making provision for his young children: he does not know Cain from Abel— probably Cain looks like Abel and Abel looks like Cain at this stage— but he cannot at this stage, looking at the young creatures, decide which will be the one who can be trusted with the money and which is the one who would be ruined by it. The ideal solution for that person will be to create a discretionary trust for these children so that some wise uncle or some trusted person can exercise his discretion as to who is to get what. This could be not merely important to the family, not merely to avoid ruin for a human being who can so very often be more spoiled by the getting of money than by being deprived of it, but it might also be crucially important for the future management of the economic units that may be involved in this. It may be a business or a farm. We know of situations where it was the younger son, who would not normally have been the person given it, who in fact proved he was the man who could take over the farm and actually build up the whole enterprise.

The discretionary trust may have developed as extensively as it did in response to heavy, direct taxation. It did, but it developed out of the very old, legal practice whereby under marriage settlements, when property was put into marriage settlements, interest was given to the wife for her life and then as she might, by deed or will, as the case might be, appoint among the children of the marriage ... failure of appointment and so on. Likewise, with the husband. But the discretion was always given by the father who was putting the money into the settlement to the person who was receiving it as to which of the children would be given it Presumably if that discretion could not be exercised, it was then divided equally or something of that nature.

The discreationary trust as an institution came out of that old form of marriage settlement and it fits a real human need. There are situations where sums under £100,000 are in discretionary trusts, situations where the discreationary trusts will be the appropriate means of dealing with a relatively modest sum where the people concerned will not be within the ambit of the threshold. I know there is some provision in the Bill for particular situations but I suggest to the Minister that they are nothing like sufficient. Nothing can be done about our recommendations; we shall not be coughing out recommendations in anything we say for this round. Next year, the Minister will have an opportunity to pay attention to anything that any of us say that he thinks is worth listening to.

I would ask the Minister to consider the significance of the change which he made on Committee Stage in the case of the treatment of private non-trading companies. I wonder about the logic of his amendment where the private non-trading company is not taxed if it is held by a trading company, public or private, or held by a company which is not a private non-trading company—which is really a delightful concept—and whether the facts which compelled him to make that amendment are not facts which should bring home to us that these private non-trading companies have a role, have a significance, have a usefulness which may be uniquely found in common law countries as methods of administering affairs suitable for actual business situations and are not exclusively always used for tax purposes.

I know a fair number of fairly big international companies where the whole concern is managed by a company in the middle which holds everything and it does an operation of servicing. Many of these companies can get themselves constituted as private non-trading companies by servicing and producing an income in excess of investment. There would be situations where that cannot be done, where, for example, there is a sister who has got a block of shares from her grandfather and who does not know what it is all about or what to do with them, but where her 10 per cent, or whatever it is, of votes may be crucial for her brothers to maintain and the only way they can be sure of her vote is to lock her into a private non-trading company. Now she is locked in, are they going to let her out? Of course not. Now she may have very modest means and that private non-trading company through which she holds her shareholdings will be taxed with wealth tax so she may be a poor woman. It will not be possible to unlock that. There are cases like these. They ought to be dealth with.

I am also frankly worried about the method of valuation which is from the Finance Act of 1894, that tradition of valuing shares. All I can say is that it just did not work all that quickly in far too many cases. If this has to be an annual operation, if we must all have it done by 5th October, between now and 5th October, it seems a very tall order indeed. Have all the private companies of Ireland, all the non-quoted companies of Ireland, their staffs sitting there waiting and are their accountants sitting there waiting? Many of them have not yet seen the Wealth Tax Bill; many of them are on holidays—and they are paying interest after 5th October. I wonder how this will work. All I hope is that the Nelson eye will be turned on this situation for this year and that there will be a degree of non-punitive self-assessment, non-punitive in the sense that their evaluations will not be used against them for capital gains tax purposes until we feel our way to a solution of this problem.

I could say much more but I would suggest very seriously to the Minister that really, in this situation, we are like Alice going through the looking glass; nobody knows the full implications of these three measures, their interlocking effect in all sorts of different situations. But some people know a lot and many of those people are behind the Minister. There are some people in particular professions who know a lot also but I would strongly urge the Minister to consider the appointment of—call it what he likes—a fiscal advisory committee on which the Revenue can be represented, if they so wish—and they ought to be represented. There should be representatives of barristers who know the law, accountants who know the figures and the solicitors who know the human situations.

Mr. Keegan

Will you put farmers in?

Mr. Alexis FitzGerald

Of course farmers and industrialists. The practices of farming referred to do not necessarily inform me about wealth tax and capital gains tax. That is all I was referring to—particular knowledge of particular measures. There should be an immediate monitoring of the facts as they emerge so that we see them and can quickly effect any changes. One may ask: why is he talking so much about the wealth tax? If this was a poverty Bill would he be talking so much? "Yes" is the answer. It is the relationship of the Wealth Tax Bill to poverty that interests me. It is the relation of this Bill and the Capital Acquisitions Tax Bill and the Capital Gains Tax Bill to human situations of need that interests me. It is the relationship of our fiscal measures to the provision of employment, the encouragement of productivity, to the accumulation of savings and the rendering of these savings available for our people that interests me. It is because of my interest in these, the economic and social consequences of the fiscal measures that we adopt here, that I urge the Minister to have on that advisory committee people who have not been expressing themselves very much. Economists, who probably are not able to read Bills very well and prefer someone to tell them what various Bills mean might try to work out their economic consequences. I am not claiming any exemption but some body, perhaps the Economic and Social Research Institute, should make a survey of the bloodstock industry, for instance. We talk of the sacred cows of India, but the most sacred cow in Ireland is not a cow at all; it is the horse. It may be justifiable that the horse is treated as a sacred cow. I do not want anybody —least of all my clients—to think I am against the exemption for bloodstock because I do not know whether it is justifiable or not. The economic consequences of the treatment being administered to different types of assets ought to be considered. That type of study should be going on. The Revenue Commissioners are not going to have any spare time for the next 25 years or so, or at least for the next 25 months, so that they would need to employ outsiders to conduct these surveys. There may be problems of secrecy and so on but there must be ways of handling that.

I stress the point to the Minister, that this element of confidence should not be ignored. Some people will say that the amount will be increased to £50,000 next year, that the rate is going to be 2 per cent the following year, and perhaps 10 per cent after that. The political forces that abolished estate duty will certainly prevent these events taking place. These fears are totally unreal. A good deal of political exploitation is involved in the making of such statements. However, a good deal of unhappiness is being experienced by people who do not know just where they stand. While the Minister has been splendid in his reception of the overall criticism of these measures since they were first proposed in the White Paper, he has made numerous adjustments and has given great satisfaction in doing so, at the end of the day, there still remains a little taste in the mouths of some people who did not like the language of the White Paper which could have inferred that one was not a real Irish-man if one had a couple of million pounds, especially if inherited from an Anglo-Irish father. Isolating people in that way is wrong.

People who have specialised knowledge of these measures should be invited to co-operate with the Revenue Commissioners. The position is un-satisfactory in regard to the income tax code. Changes get made but they are done at a pace that does not satisfy. I foresee necessary adjustments being made over the next few years in these measures. It is the first Wealth Tax Bill introduced into a common law country. It will be as often amended as was the Finance Act, 1894. The making of adjustments where necessary should commence as soon as possible to ensure that matters will be settled quickly.

Mr. Horgan

I should like to welcome the Bill more in its theory than in its practice because, while I approve of the principle in the Bill, I feel that in many of its practical aspects it could go very much further to very much greater effect. I wish to underline the two main points made by Senator FitzGerald and to add a third one to them. If I understood him correctly, his first point related to the role of this Bill in the general climate of thinking about the need for social justice in society. That is an important role for the Bill. It is a psychological role and one which should not too easily be underestimated.

The second general point he made was that this Bill, taken in conjunction with the other Bills, could, perhaps, provide a far more efficient screening mechanism through which the real sources of capital in this country could be detected and, hopefully, adequately taxed. I am in entire agreement with him on that, because, whatever about tax avoidance, tax evasion is an unholy and an un-wholesome thing and if this Bill helps to prevent tax evasion nobody can really complain.

There is a third aspect to this Bill which has not been referred to so far and which is relevant to mention, that is, that it may well be a preventive measure. It may—and I hope it will— operate in such a way as to dissuade people from amassing more of the good things of this life than they could possibly need or use. The important thing to remember here is that does not always mean just money. It very often means many of the things that money can buy. Two of the key ones I am thinking of are time and space. It may be said that one cannot buy time but money at a certain level can buy time. You can buy leisure. You can buy the time to do what you want and this is a very precious thing, so precious that the vast majority of our people cannot afford it. The same is true of space. You can buy elbow-room plus. You can buy ten times, a hundred times, a thousand times, the amount of space that any normal human being can normally lay claim to and you can do this without having to think twice about it if you are in a certain income bracket or if you are in a certain wealth bracket.

The point about these various things that money can buy is that their acquisition almost always deprives other people of the same commodity. When we talk about redistribution we tend to talk rather too narrowly about money. A good case can be made at certain levels for the proposition that simply creaming off the top 10 per cent of wealth in the country and redistributing it among the remaining 90 per cent will not mean a very great deal in terms of hard cash. You may slice £300 million off the top of the market but when it is distributed among three million people all they get is £100 each. What effectively difference does that make to the quality of life for these people? Certainly it is nothing very substantial. But there are other areas, as I have said, the areas of time and space which when people amass them inevitably deprive other people. I look on this Bill hopefully as one that will help to prevent people amassing things and help to prevent them, depriving other people of them.

In this sense, I see it in what might be described as a quality of life Bill. "Quality of life" is a very dangerous phrase to use. A great deal of "guff" is talked about the quality of life, usually by people who have far more of it than they need, who are endlessly preaching its virtues to other people but who are totally unable to accept that extending anything like the same quality of life to other people would involve some diminution in their own. One of the hidden messages of this Bill is that the quality of life is a commodity that is in such short supply. It is also a commodity that cannot and should not be amassed because when it is amassed and hoarded it is done at the expense of others.

If one of the psychological effects of this Bill is to persuade people who are already in many cases extremely well off, not just in terms of cash but in terms of elbow room mental and physical, that the urge to amass more of these desirable qualities is not necessarily supreme and that if they manage to fight it off they will ultimately be benefitting the whole community, then I think this Bill will have performed a signal service.

I have some questions about the Bill. Some of the levels seem to me to be quite strange and indeed unduly high. If anybody looks at the average run of wills that are published in the Sunday papers—I suppose we all do this from time to time with a certain amount of interest—he will see that almost every estate which is mentioned there is in the range from about £9,000 to about £12,000. There are, of course, much smaller and much bigger estates. This £9,000 to £12,000 bracket seems to me from a very casual and non-statistical reading of the newspapers to be the average level of wealth at death of these people. To me it suggests that for the majority of people who die their assets comprise no more than a single large insurance policy perhaps for £10,000 and whatever bits and scraps may be coming to them from other sources or perhaps available to them from the sale of furniture or that sort of thing.

When we consider the average wealth in this country the idea that the limits should be pegged at £70,000 for a single person and at £100,000 for a married couple seemed to be wildly generous. How many people in this country are ever going to see £70,000? There will be many people who will go to their graves never having earned that amount of money in the entire total of their working lives. We are proposing in this Bill to exempt people from the wealth tax who may have acquired more money by gift or inheritance or whatever than very many people will acquire in their whole working lives. There may be other taxes which may take bites out of it but in basic terms of the annual wealth tax these people with £70,000 or £100,000, or much more if they have dependent children, will continue to be exempt.

Some of the detailed exemptions in the Bill also strike me as strange. I would go much further than Senator FitzGerald on the question of bloodstock. It seems to me to be totally anomalous to exempt bloodstock. I can see no reason why bloodstock should be exempted from the proceeds of this wealth tax. Bloodstock in Ireland is an industry. It is a very important industry. It is a very valuable industry. It is a very Irish industry but so is Guinness. You might as well tax Guiness as tax bloodstock, or you might as well exempt Guiness as exempt bloodstock. I have yet to hear any rational argument advanced in defence of the decision to exempt bloodstock that could not be applied to several other commodities or to several other industrial areas. For all that bloodstock rearing is usually carried out in the country, it is in effect an industry, a wealth-producing activity on the part of the people who are engaged in it.

Again one of the exemptions is a principal private residence and contents, including grounds of up to one acre. For reasons which I think I have already made clear I am very much in favour of not exempting ground of over one acre. If many of the people who live on spreads of considerably more than one acre and who are not using the spread in any particularly productive way would reduce their holdings to the statutory one acre per person there would be a great deal more space and elbow room left for people who sorely need it.

When we come to the question of exempting totally the contents of a private residence, we are leaving open the door here for very widespread evasion. It is less than a fortnight ago since not indeed the contents but part of the contents of one private residence in this city were sold, with enormous attendant publicity, for £50,000. This staggers me but it does not stagger me quite as much as the fact that presumably if that had amounted to the entire contents of that particular establishment it would still have been totally exempt from this annual wealth tax. At a time when people generally are suffering from the effects of inflation, when many members of the working community are being asked to accept a revision of the national wage agreement, I think that this well-publicised auction was an affront to our moral sensibilities. In one sense it would have been the best possible argument for this wealth tax if we could have known the proceeds of that particular series of transactions would have been liable to it. We are faced with the very sad fact that the proceeds would not have been so liable and, in fact, it comes across finally as an argument not just for the wealth tax but for reducing the thresholds in the wealth tax to a point more commensurate with the type of financial transaction that it seeks to catch.

The amount of money which is supposed to be raised by this wealth tax is not a great deal. We are told it will raise about £1 million in the first year or so. To put it in perspective, it is a fact that £1 million nowadays will buy, if you are lucky, three schools or two very good schools. This is the amount of money we are talking about. We are talking about three schools in 1975-76. It seems to be rather anomalous for some speakers on this side of the House to paint such a gloomy picture of the future and of confidence in this country when the total amount in the first year will pay for three schools.

I would go very much more in the opposite direction. I would suggest that the Minister neither deserved nor really earned the criticism that has been made of him on the score of this Wealth Tax Bill. Perhaps if he had known that the criticism was going to reach such a level of intensity, if he had known that the predictions of doom were going to be so dark and dire, he might have decided to make it worth his while and really to go for a tax that would have made a difference to the people that should be caught in it. While welcoming the principle of the Bill, I only wish that he had.

Mr. Harte

I would like to agree with Senator Alexis FitzGerald in the sense that he said the amount realisable under this particular tax is not very much. Possibly if the total amount were distributed to those in need it would be very little. In that sense I would agree with him. However, both Senator FitzGerald and Senator Yeats missed the point. We are not dealing with the wealth tax on its own, we are dealing with a package. The tax code and new introductions to the code will be noted by the working-class who have always had their income under scrutiny. This is really the point at issue.

Economics is supposed to be a study of people's actions in the ordinary business life, in the sense of the necessity to find out how they acquire money and how it is used. This inquiry has been going on for wage and salary earners but there has been no clear evidence up to this time that other forms of income have been examined in the same way. The evidence is that recently farm incomes have been included in the net, and the legislation regarding the acquisitions tax, capital gains tax and the wealth tax is indicative of a desire by the Government to see that an equitable tax system is introduced.

The Government do not claim that the measures they have taken will work miracles in the first year. Senator FitzGerald in his contribution to some extent claimed that the administrative costs in the first year might not be worth the effort. I do not know whether the Senator put it in those particular terms, I hope I am not misquoting him. If he did put it in those terms I would point out that tax systems must be looked at on an annual basis.

Senator Yeats spoke about the effect it would have but when a tax system is being drawn up it is not possible to confiscate money from people for, say, five or six years ahead. It is impossible to plan in that way because nobody knows what will be the circumstances prevailing in the future. Consequently, the tax code will have to be looked at on an annual basis.

With regard to the workers, as I said earlier on there have always been queries into the methods of taxation for them. In fact, where it was found that the means were not satisfactory, adjustments were made in the system. Prior to PAYE, the Revenue Commissioners saw that there were certain deficiencies and the Government of the day took their advice and altered the system. The people hiring out their labours to posts that are payable on a weekly or salary basis have always been the subject of this particular system that policed their incomes. Anyone outside the net was gradually drawn into it and, quite rightly, the net was tightened.

On the other hand, workers have seen the wealthy, with the help of experienced people, avoiding—if not evading—payment of taxes. I do not wish to get into trouble with Senator FitzGerald about those two terms. In fact, they had the wealth and the means at their disposal to use the brains of the country, to find ways and means where they would be outside the net. The workers who have been policed for many years, who were obliged by the system to live up to their obligations, have been casting envious eyes on other people who were escaping the net.

If a person is in business and is making a profit, he is obliged to live up to his obligations, just as he is entitled to benefits provided by the State. The working class people, for the first time, see that many people who have been outside the tax net are now caught for payment.

I do not want anyone to think for one moment that I think the Wealth Tax Bill in its present state is totally satisfactory. Far from it. However, I think it is a very worthwhile endeavour by the Minister for Finance, supported by the Government, to demonstrate to the rest of society that we can embark on a course of action that will result in an equitable system of taxation. People who are acquiring unequal shares of the national wealth, in many cases unjustified, should be tackled. The Bill in its present state will not do that.

In my opening remarks I included the other forms of taxation that were brought in. In that sense, having regard to all the taxes that are being applied now, it is a step in the right direction, demonstrating more clearly to the working class people that there is a sincere intent on the part of the Government to ensure that all sectors drawing out of the national wealth, whether they make their money by their brains or their hands, can be inquired into and thus live up to their obligations. The workers looked at the people outside the tax net believing that because the tax system was not correct, a privileged social class was allowed to grow up causing a great divide between the workers and people whom they would describe as holders of capital.

In the ranks of the working classes there was cynicism because, while we heard arguments about wage restraints and various other matters, we never heard so much about a restraint on profits or professional fees and so on. We found it difficult to understand how professional people were assessed. It was also a puzzle to workers that no Government, while looking at wages and salaries, did not look at profits. Maybe there was the possibility that there was not a full appreciation that the biggest demand on the economy came from the wage and salary earners. In trying to assist in overcoming that view the Government introduced this taxation. Even though the amount that may be realised from it may not be vast it will help to remove this lack of confidence the working classes have had in any Government to tackle the taxation system, and those whom they felt were escaping the net. It will demonstrate to them that the Government intend to tackle this particular problem. They may not even succeed in the first year.

The administrative cost on one tax may, in the long run, out-weigh what the tax will realise, but, nevertheless, the principle is there and it will be reviewed annually. This should demonstrate to the workers that the indifference that existed for years is gradually being eroded. There is no longer the absence of a social concept to bring society into a situation whereby everybody can feel that while this may not work perfectly, or solve all our problems—maybe it will only make some of our problems less acute—it is an endeavour to see that justice is not only done but seen to be done.

I am not making any apologies for the views I have held over the years because when one is living in a society where the catch phrase is "I'm all right Jack", even the workers become selfish; one group of workers try to gain the upper hand on another because this is the nature of a service society. It creates wants rather than needs and, consequently, a certain amount of selfishness grows up. To some extent they have joined the ball game. As a worker I would be the first to agree that society has helped workers become selfish. It arises from what they believe, from the fact that they have lived in circumstances where they felt those in privileged social positions were allowed to grow in a way in which there was no means by which people could get an equitable share of the national production. In many cases people were getting an unequal share of the wealth created by the physical and mental endeavours of the working classes.

The workers were right when on occasions they used their power to try to redress the balance. I am not saying I advocate that means of doing it in every situation but the leaders of the trade union movement did not adopt that; they made their views known to the Minister, and they set out what they believed the social aim and concept should be. Unfortunately, many of the workers had to resort to means that were not in the best interests of the country to try to redress the balance.

There may be an argument that the class was not that privileged or that it was not a special social class but I have never heard it put forward in such a way that convinced me that this has not happened in society. Therefore, it is a joy to see this tax being introduced. Coupling this tax with capital gains and capital acquisitions tax, and the fact that other people with profits from farm incomes have been brought into the tax net, I am pleased that there is a tendency for the working class to get away from the attitude that they had of, "them and us". They would not be convinced on the basis of the amount of money that can be realised from these taxes but the fact that the Government are prepared to police the incomes of organised groups in society and individuals who have acquired wealth. That in itself is satisfaction to the workers. That should indicate to them that there are developments towards social justice. In the past it could never be said with conviction because the evidence was never there. In this sense, this tax is a joy.

The trade union movement have been trying to develop a social aim and a social concept for many years and trying to steer the workers towards their idea of life and involve them in society. However, because they believed that certain social privileged classes had grown up, the workers confined their activities to arguments about shorter hours and better wages to the neglect of their economic, social and cultural requirements. That was a sad situation. The country might have been a little more advanced had the question of policing people with incomes been tackled earlier and we might not have some of the situations we are meeting today.

This tax is new. Therefore, it has not sunk home yet but it will. The workers, as a result of other people being brought into the tax net, will react to the leadership of the trade union movement; they will develop at a faster rate towards the social concepts that are as important as arguing about better wages and conditions.

Because the problem was never tackled before this, the workers' attitude may not have been an organised one but it was a rejection of the society they lived in. This rejection came because they believed it was a society that was not prepared to take any effective steps to see that the rich did not get richer and that the poor did not get poorer. It was a society in which there was a clear demonstration that people were able to avoid paying taxes; one in which men and women witnessed the evils of chronic unemployment without adequate social services to assist them. It was a society in which education was completely monopolised by those who had the money to see that they, and their children, were looked after in this respect. It appeared to them to be a society where wealth helped people to share in the better things of life. They also looked on it as a society in which the wealthy got the opportunities for themselves and their families to serve their country in a more positive manner because they had been privileged to be able to use their talents to the fullest extent, having their children educated and putting themselves in touch with the sources of society that would help them to develop these talents.

In that sense, workingclass people looked on that society as being suspect in those fields. It was also a society in which workers dismissed by people of great wealth were merely a statistical record although to the workers it was a tragedy for them and their families. Nobody can blame the workers for looking at that society in the way they did. I am not saying that the way the taxes are being tackled will resolve their thinking, but it will help to make the conflict less acute than it is at present. This is a genuine endeavour. It may not meet all the requirements we desire. It may not satisfy our needs or fulfil the needs of the employment situation. However, the task is being undertaken by the Government as a demonstration of their good will to see that all sections of society are treated equitably. This Society, because of the environment and background we were brought up in, did not make us equal. People are not equal anyway. I am saying that in the sense that society was so organised that it kept down workingclass people. The intelligence and ability they are demonstrating now by taking up some highly responsible and onerous positions in various industries is evidence that the intelligence was there but the means by which they could make use of that intelligence was not. It was, to a great extent, denied them by the society they lived in.

Consequently, they were entitled to have a certain amount of antagonism towards anybody who possessed wealth because they believed he was the culprit. To some extent they blamed the Government for not tackling the problem but they cannot blame the Government any more. There will be a good deal of satisfaction with the coming of the wealth tax, the capital gains tax and the general trend towards a more equal distribution of the national income. It will go a lot of the way to remove the frustration that generated the situation I mentioned.

This will go some of the way towards removing the view that the Government upheld or acquiesced in the growth of certain privileged social classes. If it goes that far it has done a lot of good. I am labouring the point to demonstrate to the working classes who have held the view over the years that various Governments have allowed special privileged social classes to grow up by not having the type of inquiry into how they acquired and use their wealth in the same way as there are inquiries into how workers acquired and make use of their wealth.

Workers can see that by these measures we are moving away from the concept of the survival of the fittest. Some people claimed that wealth was created by self-reliance and self-help but workers wondered why, if that was so, such people needed the State to protect them by seeing that legislation was introduced to ensure that some people did not corner the whole market for themselves and that monopolies did not grow to the extent that many were plundered by a few. Workers could not accept the argument that people made their wealth through self-reliance and self-help. They needed State help and protection. Consequently, they had an obligation to the State to pay something out of their wealth.

This tax will demonstrate a genuine desire on the part of the Government to show the working classes that society is turning the corner and this can lead to mutual helpfulness rather than antagonism and conflict as exists. We are no longer pursuing a course of action that helps the marauders who believe in the concept of the survival of the fittest. Good riddance to that kind of thing. We have made a start but it will depend on future events whether the trends the Government, and the Minister for Finance are advocating, can be pursued at a pace suitable to satisfy the needs of the people who hold those views.

People did not live in slums because they were not fit to live anywhere else; they lived there because society dictated that. The wealthy people did not live in handsome and beautiful surroundings because they were more intelligent or anything else; it was because society had not made any endeavour to give people the opportunity to break out of the environment they lived in. The Government's taxation measures, and the fact that some farmers have been brought into the net, is an indication that there is a desire to remove the view that people do not live in bad surroundings because they have not got the intelligence to live anywhere else or that the wealthy live in beautiful surroundings because they are gifted or intelligent. This may manifest itself as life evolves.

I have been struggling, with the indulgence of the Chair to——

An Cathaoirleach

The Senator should not refer to the Chair's indulgence or he might lose it.

Mr. Harte

I hope I kept close enough to wealth tax. I hope workers will put greater emphasis on a social concept and a social aim because it is evident that the Government are determined to see that all people in society play their role by inquiring into how they acquire and use their wealth. Apart from that, they might also understand that this is not the only step the Government are taking. The way the Minister for Industry and Commerce handled the problem of natural resources, coupled with these taxes, demonstrated why I am confident this social concept can grow in the interests of everyone, Irishmen or foreigners. I am confident that the Government are going towards a just society in which people can look forward to the future.

They will know that the Government will take other measures, not only wealth tax, the capital acquisitions tax, the tax on farm income and the capital gains tax, but other measures associated with taxation which would be a necessary part of the package. This would have an influence on those people connected with oil, mining and other natural resources. They would realise that the Government, through their policy of bringing society to an equitable level and through the setting up of ancillary enterprises connected with oil, mining and so on, are making a serious endeavour to redress the inequitable balance. The workers have been complaining about taxes for quite a considerable time.

Everyone will agree that policies which will bring increases and price stabilisation must be linked to a social taxation system. The four main taxes about which I was speaking are the ones which the Minister has introduced. I do not think that the valid criticism expressed by the trade union movement in relation to these taxes exists any more to the same extent as previously. Certainly, there will still be valid criticisms as to whether they were modified or not.

I think this is a very good beginning, and I hope the trend develops. I hope the Government, through their endeavours under those four taxes, help the working classes to realise that the impact of the taxation system on them as individuals will no longer be a cause for complaint because the Government are now pursuing a course of action in which they are inquiring how a wealth is acquired and used and will then take whatever appropriate steps are necessary. To my mind the steps which the Government are taking are not totally adequate. Nevertheless, I welcome the action the Government are taking and I should like to tell the Minister how much I appreciate the hectic struggle he had with these Bills in the other House. I do not think he saw too much sunlight when dealing with the problem. The Bill could have gone further in its terms, but I welcome it anyway.

There are other sections of the community which have a point of view. The Minister, through the process of innovation which he has been engaged in over the past few months, has arrived at the best possible arrangement in present circumstances. I welcome this taxation package and I hope it is the beginning of future developments in this direction, although it will not be perfect in the first year of its operation.

Professor Quinlan

At the outset I should say, as one concerned with the mitigation of the severe impact of death duties, that we should welcome the efforts by the Government to get rid of death duties. The tax package which has emerged as a result, although not to everybody's liking, is not likely to be very severe. The amounts of the wealth tax, especially in the present case, are quite moderate. They are likely to affect only very few. The 1 per cent rate given in the Bill is a very modest one and represents a climb down from the earlier rate which was 2 or 2 ½ per cent. All that is to the benefit of the taxpayer.

As Senator Harte rightly stated, it will demonstrate to the salary and wage-earners and to the working people in general, which includes us all, that this tax code is concerned with equity and justice between the various groups. For all these reasons the Minister and the Government are to be commended on the work they have done.

There is another side to the coin, that is, the question of the provision of employment and of attracting capital and holding it. As the Taoiseach said recently, this is a highly competitive business and capital is very mobile; if other countries offer better terms, the capital, which we need, will go to those countries.

Many of us, in discussions with various people, have been disturbed by reports of capital investment being turned away; on investigation, especially in regard to the present taxation package, that investors decided not to invest here; the implication being that they had gone elsewhere. I am not saying that this is a condemnation of the taxation package because we would want to know if these investments were desirable. I know that the investments were not purely for our benefit, the investors had to make a profit. We must reconcile these two elements. I do not think that the present exemption limits would seriously deter people with capital from investing here and I doubt if they would get better terms anywhere else. After all, the range of countries in which it is possible to invest is quite limited. What is of importance is that an investor would be more concerned with future trends. In other words, accepting the fact that the present limits and rates are very moderate, what is the situation likely to be over the next five or ten years? What is the Irish Government likely to be? That suggests crystal gazing, but it is a question of judging relative stability and relative continuity of policy over the region. It is not helped by the fact that the earlier rates were so much higher than the ones that are now emerging, because there was a great deal of damage done by the excessively high rates at which the measures were introduced. These have undoubtedly done a certain amount to undermine confidence in the future intentions of an Irish Government and on the question as to whether they might substantially increase those rates over the years ahead.

As we are a country very much in need of capital we have to pay great attention to the creation of employment and so on, and I do not think I would need to urge on the Minister— he is probably doing it already—that he should set up a special section in his Department, or indeed probably inter-departmental, to try to monitor very quickly the effects of the introduction of this tax package, above all, to try to ensure that such a unit would receive and ask for reports and evidence of capital that was turned away or supposed to have been turned away by this tax package.

People I have been speaking to, solicitors, investors and some bank people, were quite concerned about it. I have no doubt that those I have spoken to would be very anxious and very glad to put the evidence they have before any such inter-departmental committee. Then the Minister would be able to judge what was the effect, what were the correct measures and so on. I agree with the Minister's expressed regret at the start that we did not have a select committee on this tax package. It was a pity that the Opposition in the Dáil did not accept the challenge to form such a select committee, because if ever there was a situation where a select committee were needed it was on this, because excessive and exaggerated statements made either on one side or on the other—on the side of the workers claiming the rich were not being taxed sufficiently, or on the other side of scaring away capital— are damaging to the society we are trying to build and to national development. They could have been avoided had a select committee been established to work on this.

I would ask the Minister and the Government not to lose heart on this and not to give up—to try in the future to have similar measures referred to select committees. Likewise, the Seanad could, though it is too late at this stage, commit the Committee Stage of this Bill to a committee of the Seanad. But that is asking the impossible at this stage and I will therefore content myself with asking the Minister for action on the inter-Departmental level on that vital development question.

I should like to support very strongly the plea by Senator Alexis FitzGerald for the setting up a special committee, a fiscal committee, to monitor the interactions between the various taxes, the old fiscal system and the economy. That certainly would be a most valuable committee if they could be got going. The committee proposed by Senator FitzGerald should be broadly based and I would hope that if the Minister sets up such a committee he will include a number of Members of the Oireachtas, because, incidentally, we would then be getting away from the foolish and stupid prohibition of Members of the Oireachtas, or indeed intending Members, being put on any committee. We are being treated as though we were lepers; we should not be allowed in to pollute and contaminate such committees. That, of course, is an insult to the Houses of the Oireachtas and is also depriving those committees of a balance which a certain proportion of public representatives on them would ensure. On the question raised by Senator FitzGerald on discretionary trusts and so on, I think the suggestion is worth looking into for the future. At this stage when the Dáil is in recess there is very little hope or very little reality in expecting to get amendments or as it is in this case, recommendations, accepted on this Bill. However, many of the things we might think we should like to amend or to guard against are things that are not of immediate urgency—they can be catered for in amendments over the years.

One thing, of course, which dominates this and capital gains tax, and indeed all the other considerations, is the effect of inflation, which we just do not know how to cope with, except that we do know that unless we can get it down, and fast, we will be in dire trouble. We can look at its impact on the question of wealth tax or capital gains tax and ask how, in the exemptions proposed, in circumstances of rapid inflation, do a Government cope with that. On the one hand, the Government have to get in revenue. Therefore they are at all stages looking at how much they can extract from the various groups; on the other hand they have to guess whether the trade unions or those possessing capital are anxious to try to preserve their positions from year to year—their buying power, the value of money.

Consequently we should be trying to ensure that exemption limits in tax legislation take full account of inflation. I suggest that might not be realistic in times of rapid inflation. Indeed, in regard to any headline we have had, Government efforts to adjust allowances in the income tax code and so on, it has been claimed the Government were doing it remarkably well and better than had been done in any previous years by giving a 15 per cent increase in personal allowances at a time when the inflation rate was more than 20 per cent. That was quite an effort, of course, but it still meant a loss of 5 per cent.

Therefore, what it means in effect is that the present limits as proposed here, though they are exceedingly generous and not likely to affect very many of the community, with the erosion of inflation over, say, a tenyear period and even allowing for the best contribution by the Government at increasing the limits to take some account of inflation I suggest that in ten years' time inflation will have eroded the real value of the limits proposed in this Bill to at least half their present value.

If I am correct in that forecast, and it is a conservative one, it would mean that there would be at least ten times as many people paying wealth in ten years' time than there are this year, with the net effect of the present value of the exemption for married people down to £50,000. Legislation would be needed to change some of the existing provisions of the Bill but that would be a simple matter of financial resolution. Remember, income tax began by being very small and if wealth tax succeeds in providing a reasonable amount of money, it will be seized upon as a revenue producer.

I am concerned about its impact on capital within the country. Apart from that, I look on this as I look on any other tax, as simply a means of spreading the load around. We know our first priority is the creation of employment, the creation of new industries so, therefore, we must give every reasonable inducement to capital to come here. I ask the Minister, if it is at all possible, to set up an inter-departmental committee to study the matter.

I agree with the provisions in the Bill relating to non-productive capital, that which has no yields and yet is indispensable for national development such as agriculture where the average yield on capital has been estimated at between 2 and 3 per cent. The same applies to tourism, which is having such a difficult time. I am glad to see from today's newspapers that the future prospects are good in this field. It also applies to fishing, horse breeding and so on. I do not altogether share Senator Horgan's views on exemption for horse breeding. This is a fickle type of capital investment, one that fluctuates violently but it is giving employment and thus justifies its exemption. Whether this will be the position in five years' time I do not know, but, at present, the exemption is justified.

We will not be able to judge the Government's claim that they have abolished death duties until we deal with the third Bill in this taxation package, that is, the inheritance tax which is concerned with the final disposal of estates. While there are certain exemptions promised, my guess is that that tax will weigh just as heavily on large estates as an amended, updated death duties code. I do not disagree with such duty because when share outs are being made, the State should receive its portion, provided it does not lead to the breaking up of enterprise. Firms should not have to be sold nor denied capital which is needed for urgent development, because this would mean a decrease in employment opportunities.

On Committee Stage we will have an opportunity of studying all this in detail and although we cannot make amendments, I am hopeful that the discussion will serve a useful purpose and that the Minister will approach it in that frame of mind. If the Minister could give us some assurance that it will make a useful contribution to subsequent amending legislation that will necessarily follow on the Wealth Tax Bills and on other Bills, that would compensate us for spending part of August in this House. It would also give us heart to engage in the Committee Stage in a realistic and constructive manner, without being in any way conscious of the fact that the Dáil has gone into recess.

I hope to contribute some individual points on Committee Stage. I welcome the Bill but I regret that so much confidence has been eroded by the high limits that were introduced earlier and by the overprotracted Dáil debate on it which could have been avoided had the Opposition agreed to the setting up of a select committee.

Mr. Russell

Earlier today I listened with hopeful anticipation to Senator Yeats because I thought he would provide some new, fresh and constructive criticism against this Bill where it was perhaps needed. Many of the comments he made reminded me of something I read in the daily papers some months ago as a result of which I looked up the debates in the other House. I discovered that many of the comments made at the beginning of Senator Yeats' speech appear to have been taken verbatim from a speech made by Deputy Colley in the Dáil, even to the extent of referring to Nero fiddling while Rome burned.

This is a Bill that should provide useful and constructive debate, as indeed any Bill which proposes new taxation should provide but so far members of the main Opposition party have been, to say the least of them, disappointing. It has been suggested that the concept of redistribution of wealth in the context of the Wealth Tax Bill is illusory because only between £1 ½ and £2 million will be produced as a result of the imposition of this tax. Almost in the same breath we have the criticism that this Bill will have the result of driving capital out of the country. Statements have been reported in the national Press that millions of pounds have been driven out of the country as a result of this Bill.

It is extremely hard to reconcile statements of this kind. Either the Bill is going to have a significant and serious effect on investment in this country or it is not. I hope, when the Minister is replying to the debate, he will give some attention to this criticism which, I think, is one that has received considerable publicity and is designed to destroy wealth and potential investment. This criticism is one that should be refuted strongly once and for all.

Senator Yeats went on to make the astonishing statement that an industrialist or businesman with an income of £50,000 per year who spends all his income—he must be a very profligate gentleman—paid no wealth tax, whereas a widow with investments would be subject to tax under this Bill. I would love Senator Yeats or any member of the Opposition Party to give us some tangible examples of these two extraordinary instances. A businessman with £50,000 who spends all his income and is not subject to wealth tax: I wonder what the source of his income is? Does he get it out of a business? Does he get it out of investments? Does he get it out of a farm? What is the magic source of income of £50,000 a year that will not be subject to wealth tax? There are many of us here and in other places who would like to know the answer to that question. Perhaps we will hear more about it as the debate goes on.

It is true to say that nobody likes to pay tax. I do not think that Irish people differ from any others in that respect. Whether it is wealth tax or income tax, sur tax, PAYE or indirect taxes people have an inherent inbuilt objection to paying taxes. I would love to hear somebody either during the course of this debate or in some other House or Committee or assembly making the statement that he personally does not object to the payment of tax. The reaction to the introduction of any new tax or package of taxes is predictable among all sections of the community. The fact that there has been understandably certain fears and objections voiced to the introduction of this tax is not unusual. What would have been strange would be if there were no objections. Some very valid and constructive objections most of which I would like to believe have been answered by the Minister, some of which have been quite unsustainable and some of which have obviously been made in the fear that people who would not in any event be affected by these taxes might in some peculiar set of circumstances be affected in the future. One of the peculiarities of the objections is that we hear them voiced not by people who will obviously be affected but rather by those who are not now affected and are never likely to be affected.

No Government can operate without taxable income. That is an unpleasant fact of life. Taxable income fulfils a number of essential objectives. As has been mentioned earlier in this debate, it helps towards a more just distribution of wealth, particularly among the less advantaged sections of the community, the poor and the underprivileged, those who cannot hope to get on by their own initiative, or their own health, for one reason or another—people who are disabled, widows who have families, people who, in the normal course of events, can never hope to make their way in life because of factors outside their control. They rightly are the first charge on taxation or taxable income. Likewise, social services and aids to industry and agriculture. We are talking about the fair distribution of wealth or taxation of taxable incomes. We should not forget that the community described generally as commercial or industrial gets a cut out of taxation too. Industrialists get hand-outs. They get grants. They get tax concessions. They get assistance to train or retrain their employees. All these come from general taxation. Taxation is right across the board. The poorest pays it. Every man who drinks a pint or smokes a cigarette pays his share of taxation and the whole community shares from taxation.

When we are considering this new taxation we should also in fairness consider the people who will benefit from it. When the Government gets in its package of total taxation it does not automatically hand it all out to the poorer sections. It spreads it across the whole board so that even those who, perhaps, do not require it get it in any event in some shape or form. That is true in the case of industries. We all know that industries, whether home or foreign, which could well afford to supply all the necessary capital themselves still get handsome inducements from the Government, and rightly so. I am not objecting to that because it may be the difference between getting an industry to come in here or its going elsewhere. Practically every country in the world, especially in western Europe, is doing the same thing. We must not forget that by encouraging industry through a share of taxation, by hiving off some of the taxation by way of grants or other inducements, we are helping to promote the establishment of new industries and new employment and the people who will be employed in those industries will pay their share of taxes.

Senator Alexis FitzGerald said that the parties who comprise the present Government, Fine Gael and Labour, did state during the last general election campaign that they proposed to do away with estate duties and to replace the income so lost by a tax on wealth. This is, in fact, what they are doing. Nobody objected to it during that election campaign and I was a participant in it and so were others in this House and outside the House. Nobody objected, to my knowledge, to the ending of death duties, as they are more correctly called. The fact that tax was to be levied on wealth was mentioned time and time again during the election campaign and nobody objected. In the discussion that has taken place in the Dáil and elsewhere the abolition of estate duties, has tended to be forgotten as has the fact that the impact of estate duties, due to inflation in particular, was becoming a very serious impact, particularly on landowners and farmers. Death duties, if they continued, would have resulted in very serious social disruption, particularly in the farming community. That should not be forgotten. Farmers now for the first time, and only a limited number, are being brought within the taxation net. Those of us who live in an urban society and have been used to paying taxes for many years realise that this is a justified extension of the tax base and those farmers who are being brought in should realise there is the offset in that estate duties are abolished.

This packet of taxation—and this is an obligation on the Minister—should be seen not only to be fair and just theoretically but to be fair and just in its operation. I do not mean fair and just to one section of the community. I do not think we want injustice in regard to any section of our community. The fact that a man has accumulated wealth, perhaps, through hard work and sacrifices, does not mean that he should be treated unfairly. It means, if anything, that his obligations to the rest of the community are greater. He himself is entitled to just as fair treatment as any sector of our society.

One matter of particular concern that has been validly mentioned by some Opposition speakers is the fear that these new wealth taxes may discourage in themselves the accumulation of wealth per se. All of us, in our time, have quoted the dictum of Goldsmith “Where wealth accumulates and men decay”. I would like to suggest in the present-day society that the opposite is the truth. Unless you have an accumulation of wealth, men, job opportunities and progress will decay. You must have an accumulation of wealth. What we should be concerned about, and what this and the other House are rightly concerned about, is how that wealth is distributed and what use is made of it. It would be unrealistic, to say the least, to assume that by destroying wealth or wealthy people, or wealthy groups or corporations, somehow or another the rest of society will benefit and everybody's standard of living will automatically be raised. That is a pipe dream. It just cannot happen. Wealth is the accumulation of the effort of all the people in our community to progress and to expand, to work, to invest and to create wealth. We have an obligation, particularly those of us who are Members of the Oireachtas to ensure that, while we encourage the accumulation of wealth and the creation of capital, that is used to the best possible advantage to benefit all sectors of our community and to assist those who cannot help themselves.

Another feature of this Bill, which tends to be forgotten, is that a wealth tax is applicable to individuals, not to companies or corporations. It is a personal tax, a tax on the nett assessable value of taxable assets after the very generous deductions the Minister outlined in his introductory speech, which are far better than the original proposals set out in the Government's White Paper some 18 months ago. That White Paper was issued as a discussion document and was taken up as such. As a result of the criticisms and the constructive representations made to the Minister, considerable changes were made in the original proposals, and rightly so. Though I am a member of one of the Government parties, I would have objected most forcefully to the original proposals. By and large, the Minister has acceded fairly to the many representations, not only from individuals, corporations and federations, but also from other sources and from various sectors of our society.

It has also been suggested that, if a person has a certain amount of assets, these would be taxable at certain rates and, unless a change is allowed for inflation, a man will be overtaxed as a result of the effects of inflation, which is, unfortunately, likely to continue for some years although, I believe, at an abated rate. If this is true, investment in a company or shares goes up when industry makes profits, it is also true that the value of the asset diminishes if the investments or the firm is not doing well. This automatically will be reflected in the value of the taxable assets. The Minister stated on Second Stage today that valuations will not be affected in any event by inflation over the next three years when the question of valuations comes up for consideration again. I should like to suggest—I do not think anybody on either side of the House would disagree with me—that the aim of any taxation system, apart from the rightful distribution of wealth, should be to ensure that small family firms and individuals are encouraged to grow and expand in competitive conditions. The progress and prosperity of our society depends in the final analysis— we are a private enterprise society and I hope we will remain so though some may be critical of the fact from time to time—on the dynamism of the individual and that is an essential force for the expansion and progress of our economy and all sections of the community benefit from it. We should ensure in our taxation system that the small man has the opportunity, whether he is a businessman, a tradesman who wants to branch out on his own, or a farmer, whatever he happens to be, to save from his wages, from his farm or small business, to reinvest and expand. That offers the greatest hope for the future expansion of our economy. Indeed, it is the cumulative effect of so many small men working together, investing and showing enterprise, that in the ultimate the future wealth of the country and its people lies.

Conversely, if the enterprising and efficient and progressive are going to be rewarded by a fair system of taxation, those who are lazy, or indolent, or careless, who just want to live on inherited fortuitous wealth, should be penalised. I should like to think that one of the effects of this Bill will, in fact, be to penalise unused assets, and to encourage the use of assets, for personal benefit naturally, in first instance, but also for the benefit of the community as a whole. It has been suggested here and in the other House that the effect of this wealth tax will be to discourage investment, native and foreign, in Irish enterprise. I should like to ask the Minister if it is true that, as a result of this wealth tax and the general package of taxation, foreign investors will be discouraged from investing in this country. Or is the converse true? Is it a fact that there has been a growing investment of outside capital in this country and that, notwithstanding the recession affecting this country and other countries, whose inhabitants would be likely to invest here, the IDA and other agencies, who encourage investment here, are having more and more inquiries with regard to the possibility and desirability of investing here? I believe that is true.

We should also remember that one of the earlier dreads of this wealth tax was, and it was a criticism rightly made, that the total taxation package could in certain instances be more than 100 per cent. That fear is certainly now dissipated with the absolute ceiling of 80 per cent. That is something that should be emphasised when one is talking about this Bill.

One final comment I would like to make is that there are numbers of people who, through ignorance or mis-understanding, perhaps misprepresentation, of the terms of this Bill, believe they will be adversely affected. There is a great necessity for the Minister and his Department clearly to demonstrate to all concerned, the absolute limitations of this Bill in regard to those who will be affected and those who will not be affected under any circumstances.

Part of the unfair climate that has, in certain instances, grown up is due to total ignorance of the implications of the Bill. This should be corrected. It devolves on the Minister and his officials to do this in the same way as, at the time of the introduction of VAT, meetings were held around the country and the full implications of VAT explained to groups of business people, traders and so on. It is very necessary this should be done with this Bill. People are fearful of taxation. The strange thing is that those who fear it most are those who will never be affected.

As a country, our taxation basis has been low by any standards, certainly by European standards, and the fact that we are extending that base now and bringing within the ambit of taxation those who make taxable profits above a certain limit is right and fair but if it is right and fair, then we should tell people who will not be affected that, in fact, they will not be affected and demonstrate to them that their fears of excessive taxation, of inspectors, of form filling and all the 101 things that the ordinary taxpayer has to put up with all his working life are merely fears of something that will never happen. There is a sales job to be done here. I would ask the Minister very sincerely to see this job is done because it is important that everybody should understand the philosophy behind this package of taxation and even more important, its limitations.

Mr. Keegan

The Minister in his opening remarks brought us back to 1973, to the general election campaign, when he referred to the parties now comprising the Coalition Government and referred to their promise to replace estate duty by a tax which would be paid by instalments during the lifetime of the owner of the wealth. It would appear this is a one point Bill out of all the famous 14 points programme the Government promised in 1973. Much has happened since 1973 but they could produce only one point of the famous 14 points. They introduce this Wealth Tax Bill. I am convinced the title of the Bill must have been left to the Labour Party because they, more than anybody else, have been labouring the cliché of the equal distribution of wealth. I assume the title of the Bill was the work of the Labour Party.

This is a small and young State, something over 50 years old. It is not a nation of millionaires or anything of the sort. We have had over the years some successful businessmen, farmers and industrialists prepared to work seven days a week, sometimes 24 hours a day, in order to achieve a certain measure of progress. Those people are now being penalised because of their thrift and because of their creation of new job opportunities for others. Wealth, if properly used, helps to create job opportunities. If we are to have increased job opportunities we must have at the disposal of private enterprise easy access to capital because, without capital, one cannot create jobs. Without capital, one cannot help to boost the economy.

In 1974 when the Minister introduced his White Paper on capital taxation he scared many men of wealth and they decided they should devise ways and means of disposing of their wealth by putting it to work in other countries. This capital taxation is a grave mistake. It is a mistake because this nation has lost millions of capital which would be very useful now in helping us overcome economic difficulties. The Minister in his efforts to abolish estate duties and introduce this wealth tax, oversold the idea. He published his White Paper on capital taxation too soon and he created un-easiness in the minds of people who had wealth and who could command wealth. The result is wealth is no longer available to our starved and much neglected economy because the people with the wealth decided, in their wisdom, it was opportune for them to put their wealth to work in other countries.

I have been reliably informed that even up to a month ago wealth was still leaving the country. This is a disastrous situation because none of us wants to see the economy deteriorate to an extent to which future generations will be unable to revive it. This legislation has already done a great deal of harm. It has created unease and the result of that unease has been a massive movement of capital away from our shores. It has necessitated the adjustment of certain targets on the part of the Industrial Development Authority, that semi-State organisation which has been doing useful work. This morning's papers published a statement in which the IDA say their job targets will have to be lowered because there is so little prospect of achieving the target they set in 1973 and 1974. That has a bearing on this Wealth Tax Bill because potential investors have been steered away from investing in this country. When people decide to invest in a country they carry out research to find out if their investments will be profitable. They like to think that their investments are being invested in sound economy. The statement by the IDA today is a clear indication that there is little hope of inducing new wealth into the country because the inducements will no longer be as good as they are in other countries. I do not believe anybody has a right to hoard wealth but, if a man works hard and is successful in business, and he decides to spread his wealth around then he should be adequately compensated. Is the man who hoards wealth entitled to the same standard of living as the man who is prepared to work seven days a week and 24 hours a day? There is little use in talking about the equal distribution of wealth. It would be more sensible to talk about the equal distribution of wealth for equal effort. That would be a more sensible phrase in these difficult times.

The Irish investor seems to have lost faith. National loans have been under-subscribed recently. Despite the fact that the interest rates were very attractive those people have not invested as many of us would have liked them to. Private enterprise is the most acceptable method of running this nation. The vast majority of people still believe it is the only way to guarantee the future, despite the fact that over the years we have had many successful semi-State enterprises.

This Bill and the White Paper would be acceptable if they dealt only with people who have accumulated wealth and hoarded it. This wealth is of little use to anybody except the individuals concerned. I have no personal objection to asking those people to carry their equitable share of the tax burden. We hear a great deal about the tax burden. We are always hearing about tax evasion, tax dodgers, and such people. People who have accumulated wealth and hoarded it should be called upon to pay their fair share and to make their fair contribution to the Exchequer. If the Government want to run a country, if they want to give aid to any section of the community, they have to raise the capital. The only way they can raise capital is through taxation of some form or other.

I should like to refer to the methods which may have to be employed to collect this money. It has been admitted that the most that can be hoped for from this Bill is £1 million per year. I would venture to say that it will cost possibly £½ million to collect this money through increased administration costs. It is a new area of tax collection and therefore it will have many teething problems and it will be a costly exercise for the Government.

I am disappointed that the Bill does not make adequate provision for inflation. We have a very high inflation rate and we have little evidence of any abatement of that rate. As somebody said here this morning, few people may be caught in this new tax net this year or next year but ten times more will be caught in five years time. That is a fair forecast of the inflation rate we can anticipate in the future. Therefore, I am convinced this will be a costly exercise for the Government. It may be, in certain ways, a face saver for the Government.

I am also convinced that the Bill will not achieve the purpose which the Minister and the Government set out to achieve, that is, to collect the money which is being lost by the abolition of estate duties or death duties. I have been arguing for years for the abolition of death duties. I always felt it was a penal form of taxation. I always felt it was a method of punishing those who remained after a death had occurred. I shed no tears because this tax has been abolished. It should have been abolished many years ago. It created hardship and distress among families and among widows following the sudden or unexpected death of the head of the household.

An effort is being made to have a more equitable method of tax collection. I agree with this. Over the years death duties fell heavily on those least able to bear the burden. The widow who had suffered the death of her husband had to get over the shock of his loss to the home, to herself and to the household. Then she had to devise ways and means of continuing the business, the farm, or whatever the case might be. I have no regrets for the ending of that system of tax collection. It should have been done many years ago. I admit that in by-gone days it did not have the same effect because property values were not reckoned in the same manner as they were in recent years and land values were much lower.

The Bill will not achieve what it has set out to achieve. It has served a purpose which it was not meant to serve. It has encouraged people to dispose of their wealth in other countries and in other areas. This nation is poorer as a result. It will take many years to get this nation back on the road towards full recovery again.

Mr. Deasy

Seldom have I seen a Bill cause such confusion amongst the community in general. I will confine my remarks mainly to the manner in which it affects the farming community. From discussions I have had with individual farmers and farming groups, it is obvious that many people feel they will be liable to wealth tax and, in fact, they will not be so liable. The bulk of the confusion has been the result of a deliberate campaign on the part of the Opposition, and on the part of certain large property interests who may be affected by the tax, and who wish to create a scare and thereby evoke such an overwhelming movement of public opinion that the Bill will have to be dropped. This is not fair. It is not correct. The Bill is designed to tax the very rich who may not be liable as things stand. Very few farmers will be caught by this new wealth tax. Businesses and property owners may be caught, but they would have to be exceptionally prosperous to be affected by it. When we came into office two-and-a-half years ago we stated quite emphatically that it was our intention to get rid of estate duties but that there would have to be another type of taxation or taxations to substitute for the £11 million which was being received from these estate duties annually. We have done this. Estate duties are gone. This is a blessing because they caused extreme hardship, especially in the farming community. I have seen numerous cases of widows with large young families having to pay exorbitant amounts of money which they could ill-afford. That is no longer the case. Now the people who will be liable are those who can afford to pay and they will pay it in gradual easy stages.

It is not taken into account by the Opposition that we have removed, largely, the health charges from rates and also housing subsidies. If these remained, on present-day rates, with our rate of inflation, the rate burdens of farmers would be huge. The rate per £ would be several £s more than it is at present. There has been a real saving to people who may be caught through the change in the method of rating people and also by the removal of estate duties. This real saving should be appreciated. But I am afraid it is not either by the Opposition or some other vested interests.

Perhaps I might refer to two statements by the Minister in his introductory remarks, firstly, when he said:

The Government consider that it is imperative that this legislation should pass through the Oireachtas this session.

and, secondly:

In fairness to all, the details must be finalised now so that persons who will be affected by the tax will know exactly where they stand.

The sooner the Bill becomes law, the sooner the confusion about which I have spoken will be got rid of. That will be good for everybody. I have not got an exact percentage but the vast majority of people who feel they will be liable for wealth tax will find they are not so liable.

The Minister made some changes in the Bill, for which he has not been given credit. He has given in the Dáil a definite commitment to review the threshold limits every three years. Senator Keegan said that inflation was not going to be taken into account. That is quite untrue. The Minister said in his statement that he would have a review every three years to take into account the effects of inflation. That assurance is very satisfactory.

Land within a mile of an urban area and which would be very valuable for development purposes will not be dealt with at its full value. The Minister will take it at its agricultural value, plus 25 per cent. That is not unduly harsh. He has given a concession in this matter which will be acceptable to most people in the agricultural community. Perhaps the limit of one mile could have been extended to two or three miles because of the tendency nowadays for people to move a little out of the towns when building. But the Minister has given that concession which is reasonably satisfactory.

One thing which causes genuine concern amongst the farming community is the fact that people who are not liable to wealth tax but whose property equates with 75 per cent of the threshold for agricultural land—the threshold is £150,000—have to make returns. Most of those people feel they will be assessed for wealth tax. Of course, this is not the case at all. They must have the full 100 per cent in value. However, once they are asked to make a return they feel they will be caught. This has caused some confusion. It might be well to explain to them that they will not be liable. The Bill of its nature is complicated, and no matter how much one tries some people do not seem able to comprehend the essence of it.

I should like to contradict a point made by Senator Keegan and by a number of other Opposition speakers. That is that there has been a vast outflow of money from the country since this Bill was first mooted. This is untrue.

Mr. Keegan

No, I have some evidence.

Mr. Deasy

I would contradict the Senator on that. I have no evidence of it. I know there have been a few crackpots shouting about it. They may have left and, from my knowledge of them, they are no loss to the country. They never did give any worth-while employment. They complained about any matter that cropped up that might affect them personally. They were of no benefit to the country at large. I do not see why Senator Keegan should object. During the past couple of weeks there has been a £15 million factory announced for a town in his own constituency, Mullingar. I would not call that depression. I would call that a sign of confidence in the country. There is no definite evidence that industrialists, capitalists or whatever one wishes to call them are dissatisfied. The terms of this wealth tax are more favourable than that in any country in the western world. Opposition speakers have not been able to deny that.

I should like to give details of the upper limits at which a person will not be liable to wealth tax, which might help the public understand the situation somewhat better. One would need to have over 240 acres of excellent land to be liable to wealth tax. In addition, one would need to own a good quality house and a wellstocked farm. 240 acres of good land is a sizeable quantity. It is very seldom one gets 240 acres of good land altogether. One might have 400 acres of land, less than half of which would be really good. Therefore, the number of farms which would fall into that category would be extremely small. As well as having 240 acres, an individual—say, a married man and his wife—could also have £15,000 in the bank, plus a house valued at £16,500, plus livestock valued at £48,000. I would consider that to be a fairly sizeable farm. One would not necessarily be very wealthy but one would be well off to own that amount of property. If one were a bachelor one would not be liable unless one had property to the value of £30,000 less, in other words, £214,000. If one is married one's property would not be liable to wealth tax up to a figure of £244,500. In addition, one would be allowed £2,500 for each child. Therefore, the upper limits are very generous in this regard. In round figures, a farmer would need to have property in excess of approximately a quarter of a million pounds before he was liable to wealth tax. Even at that, once he went over that limit, he would be assessed at .8 of 1 per cent only of his taxable assets. While people might think that once one went over £¼ million one would be fleeced left, right and centre, that is not a very high rate of taxation. Such a farmer would get 20 per cent relief because he is a farmer. The upper threshold limit is quite high and the rate at which a farmer would be taxed is not so extreme. These are difficult times for farmers as well as for other sectors of the community. It is unfortunate that the wealth tax had to be introduced at such a time. Farming had a tremendous boom the year prior to our entry into the EEC. However, things have been pretty bad ever since. The Opposition would have us believe that this was due to mismanagement on the part of the Government.

Mr. McGlinchey

It is, yes.

Mr. Deasy

Senator McGlinchey knows as well as I do that that is not the case.

Mr. McGlinchey

The Senator is not a very good mindreader.

Mr. Deasy

The farmers have had a difficult time and they feel that the wealth tax is badly timed. Farming conditions will improve. At present, cattle prices are improving. As the situation improves, the farmers' attitude will also change.

It has been said that in these difficult times to introduce both income tax for farmers whose valuation is over £100 and wealth tax is the wrong thing to do. In view of the difficult times, I am sure the income tax will catch very few people and the wealth tax will catch fewer still. Therefore, I am not as pessimistic as some people. I feel that when this tax is in operation it will be seen to be a fairer proposal than it is considered at present. Consequently, the objections to it will cease. I do not think anyone will suffer hardship as a result of its introduction. It will be seen as an excellent substitute for death duties.

Mr. McGlinchey

In seeking the passing of the Wealth Tax Bill, the Minister for Finance is inviting Members of this House to become accessories to murder—the cold, calculated, cruel, avaracious murder of the goose that lays the golden egg. As a result of the Government's propaganda machine many people appear to be totally unaware of the effect that this Bill may have on them, if not directly then certainly indirectly.

Ireland, in the main, is a country of small industries, small businessmen. Even in Britain, it is estimated that 25 per cent of the people are employed in small industries. While the figures for this country are not available—they are certainly not available to me—I would think that the percentage here is much greater. It would probably be true to say that 40 per cent of the people employed outside of the civil service are employed by small business people, people who saved their money, invested their money and took many risks. As a result of their initiative, they will now find themselves in the wealth tax net. At a time when the Government should be encouraging these people to save and invest their money, they are pursuing the opposite course.

Indeed, in the recent copy of Euroletter issued by the Confederation of Irish Industry on 22nd July, we are told that the EEC Economic and Social Committee recently published a study on the small and medium-sized undertaking in the EEC. An 18-member study group was set up to prepare this study. We learn from that study that it laid particular emphasis on the important role played by small and medium-sized undertakings in the social and economic environment throughout Ireland. The study mentioned the fact that the number of small and medium-sized undertakings had remained fairly constant as evidence of the indispensability of this type of enterprise in the national economy. I would quote briefly one paragraph from this document which states:

The importance of small and medium-sized undertakings in Europe is due to their large number and consequently the number of people they employ to their vital role in the maintenance of competition, to the range of innovations and products of processed developments for which they are responsible, to their social advantages in the provision of employment in small communities, and to the service which they provide in the achievement of an optimum supply to their customers.

The study also believes that they are important because they involve owners of small and medium-sized undertakings in a work of social value. They encourage independence and promote private formation of assets, civic spirit and environmental protection and the quality of life. That study made quite a number of recommendations but I will just quote one, that is, on the fiscal policy. It says:

Fiscal policy should encourage further development. Small and medium-sized undertakings should be given tax concessions to allow a build-up of reserves for adaptation and expansion measures.

So we find that only last week, when a call goes out through Europe for tax concessions for small and medium-sized undertakings, the National Coalition Government are seeking to pass legislation which will have exactly the opposite effect.

The taxes on saving are the taxes that can be avoided by spending. Instead of seeking to get people to pay taxes on investment income, income tax, surtax, capital gains tax and now the wealth tax the Government should, I feel, be attempting to reduce these taxes with greater emphasis on the payment of tax by spending, by value-added tax, excise duties and so forth. Taxes on spending are much lower than taxes on saving. We should ask ourselves this evening if that is the way it should be. It is right that taxes on spending should be lower than taxes on saving? The rate of tax on saving rises from poor to rich to such an extent that saving at the top today, particularly as a result of this legislation and other legislation contemplated by this Government, is impossible.

The Government should once and for all decide on the type of system they want here, the capitalist system or the socialist system. I do not believe that there is in either House of the Oireachtas one member of the Labour Party who could be described as a true socialist. I do not believe that in a country of little more than three million people the socialist system could succeed or survive. Even a year ago the Minister for Industry and Commerce, speaking at the Labour Party Conference, said that socialism was a subject that the Labour Party should talk about in Opposition. I know that at one stage of his life the Minister for Industry and Commerce had radical socialist leanings, but after a very short time in Government it appears that he has realised that in this country it simply is not possible. I feel that, in introducing legislation such as the wealth tax, the Government are trying to placate the radical left in the Labour Party. This talk of redistribution of wealth and the reduction of inequality is purely a gesture and in order to keep them reasonably quiet this measure has been brought in. One of the heaviest burdens imposed on the capitalist system is the adverse treatment of savings and the weight of taxation on capital. It is true to say that the vast majority of the Members of either House of the Oireachtas, irrespective of the party they belong to, believe a mixed economy between capitalist and socialist is the only goal we can achieve. You cannot have capitilist without capital. The measure before us this evening will ensure that in time to come many small business people, who could have acquired capital and who could have put it to good use to stimulate the economy, to provide more employment, simply will not be able to acquire it because of the taxation policy of this Government.

The Government are not providing in the Wealth Tax Bill the incentive to small business people to save, invest and take risks. Instead, because of their completely unrealistic policy, they are providing incentives to retire, to spend, or indeed to emigrate. The increasing of taxes on capital is an important element in the destruction of capitalism.

The case for higher capital taxation is generally presented in terms of social justice and equality. When the National Coalition Government came to office we heard a lot about the redistribution of wealth. Indeed, before the last general election the Labour Party and the supporters of the "Just Society" in Fine Gael appeared to consider it as a top priority that wealth should be redistributed. To the small man down the country who has an ordinary job and who may not consider the dire consequences of this programme this policy of the Government for the moment may please him. The first question that I would like to ask is: Why do we distribute wealth? The answer, I am sure, I will be given is to bring about a reduction of inequality. I submit that inequality cannot be reduced by the redistribution of wealth. If capital taxes at the top were imposed the inequality of wealth would be reduced but the inequality of spending would be increased. The inequality of spending will rise much more than the inequality of wealth will fall and the result will be that the inequality total will rise not just temporarily but permanently.

It is the inequality of spending and not the inequality of wealth that measures the variations in our standards of living. The gap between poverty and luxury and the potential for the relief of poverty is gauged by the amount of money that people spend and not by their savings. What the Government are doing in this legislation is widening the gap between poverty and luxury, between those who have no money to spend and those who feel that it is no longer an economic proposition to become wealthy. This is what will happen. Many people, in order to escape the wealth tax net, will spend more money foolishly, possibly, and so the aim which the Government claim they are seeking to achieve, namely, the reduction in inequality, cannot possibly be achieved. If the Minister for Finance and the Government of the so-called talents really understood the problem of governing this country, if they really wanted to stimulate the economy, if they really wanted to halt inflation, if they really wanted to increase employment, they would be reducing the maximum taxation rates on capital instead of increasing them. They would encourage people to become wealthy and to have wealth instead of spending their money because they must realise that it is these people of modest wealth—and it does not take much today to run a business that will be caught in this wealth tax net particularly in rural Ireland—who were providing whatever employment is available.

This Government have told us that they have declared war on inflation and I submit that in this Bill the Minister is, in fact, encouraging inflation. Everyone will agree that inflation is not caused by saving. Yet, the Minister is increasing the taxes on saving and encouraging inflation as a result. The Minister is encouraging businessmen who may not have a full stake in a company's equity to have more interest in their pension rights than in their company's profits or the value of its shares. He is encouraging them to be more concerned about the taxation of earnings than the taxation of capital and eventually he will leave them in the position that these businessmen will have more in common, economically and financially, with a factory manager in Soviet Russia than with his American counterpart.

The time has come to challenge this Government to tell us what they really mean by the redistribution of wealth. I suggest that in this claim they are deliberately hoodwinking many people who read the headlines but never the small print, who believe what the Government are attempting to do is to take the wealth from the wealthy and give it to the poor. What they are doing, because of their unrealistic policy, is making the rich poor and the poor poorer. The redistribution of wealth is a well-designed engine of socialism, an efficient machine for the destruction of a mixed economy but it is counterproductive. Economic growth and the average standard of living are reduced, not increased, and in this Wealth Tax Bill the same effects will, unfortunately, be seen in the not-too-distant future. Economic growth and the average standard of living will not be increased as a result of this measure; they will be reduced. Inflation and inequality will be increased. To those who claim that the Wealth Tax Bill, which will have the partial effect of redistributing wealth, will reduce inequality, I for one claim that exactly the opposite effect will be shown. The policy of redistribution of wealth is counterproductive for anyone aiming to increase prosperity and reduce inflation and inequality. If the Minister for Finance and this Government of the "Just Society" and so many talents are serious about this matter, if they really want economic growth, if they really want the standard of living to increase, if they really want inflation and inequality to be reduced, the first step should be to scrap this wealth tax. Savings, and this should be the principle of any Government, should not be so heavily taxed in comparison with spending.

I look forward to the day when income tax and rates will be completely abolished, when we have instead taxation on spending, when the business people and workers of Ireland are not forced into the position that they have to pay out of their earnings a penal tax of the type that we have had since the foundation of this State. If this country is to prosper, the workers and the business community should be given the encouragement they deserve, not penalised by cruel taxation.

Taxes on investment income should be reduced and the ownership of wealth should be encouraged, not discouraged. There is a school of thought that wealth is a dirty word, that nobody should be allowed to accumulate money which he would have received through hard work, initiative, risks, spending and through wise investment. Because of the shortsightedness of this Government, because of their obvious desire to be popular with a large section of the people who are convinced that the wealth tax does not affect them but who will find out in the not-too-distant future that indirectly it affects their employment very much, they have introduced this wealth tax. It will reduce economic growth and the average standard of living and it will increase inflation and inequality.

If the Government really believe in the principles of the "Just Society" they should not bring before this House a measure which will encourage people to spend more. As I said earlier, inequality really means not inequality of wealth but inequality of spending. Wealth can help the economy if used properly; it can stimulate growth and can provide more employment. If that is taken away then I feel there are many people who will be discouraged from taking business risks in the future. The business community have lost confidence in this Government.

As I said in my opening remarks, the Minister for Finance is inviting Members of this House to become accessories to murder, the cruel murder of the goose that lays the golden egg. When a murder is committed there is a trial before a jury. It will not be too long until the people will have the opportunity of sitting on a jury to consider the deeds of the National Coalition. When they do, despite the gerrymandering of the constituencies, I have no doubt they will give a verdict of guilty against this Government and express the desire to see once again a Government who understand taxation, who will use taxation legislation to help all the people and not injure them.

Mr. Butler

Nobody, no matter in what part of the world he may live, likes to pay tax but money has to be got because it must be distributed. Those who cannot earn it must get it from the State. The working man who toils all week has to pay his share of taxation so that those who have passed earning their living, like the aged and the feeble can live in some happiness. This wealth tax is good. The death duties have been removed. I did not hear Senator McGlinchey mentioning one word about death duties or the burden death duties caused. Since the National Coalition came into Government we had deputation after deputation from all sections of the community meeting TD's, Senators, and Ministers and asking that something be done about the burden death duties cause. The fear of death duties is removed, and the burden this has caused over the years has gone. Wealth is a good thing and we, on this side of the House, are not opposed to the creation of wealth but we are opposed to the creation of poverty.

The £13 million we had to forego by the removal of death duties has to be found somewhere. If those who are wealthy, as the Opposition speakers say, do not pay that £13 million, the Irish worker will have to carry the biggest burden of it. We have heard a lot about wealth tax over the last few months, even before the Bill was introduced. We heard a lot of talk about the White Paper when it was distributed and the door of the Minister for Finance was open for consultation with all concerned. The Minister received anybody who wanted to discuss the White Paper on wealth tax. He is given credit for that by those who are still opposed to wealth tax. After those concerned were met the Bill was introduced and it was different to the White Paper. We know of the great improvement that has taken place over the months. Those who are not very wealthy have very little to fear; they would have had to pay more in death duties than they will have to pay in their lifetime under this Bill. As a Senator elected on the Agricultural Panel, I have an interest in the farmers' point of view. I have discussed this Bill with farmers at many meetings and explained to them the provisions of the Bill, and how it will affect them. They now understand that the burden will be very light. They also understand what they would have to pay in death duties.

Land is very valuable here. Nobody could put a value on it, but when it is being sold, it is bought for a monetary figure. Land in Munster realises from £500 to £700 per acre. There are not too many farmers in Ireland with a holding of 160 acres, especially west of the Shannon, although there are a number of them in Tipperary. From time to time such farmers had consultation with members of the Fine Gael Party and, of course, even now some of them oppose paying wealth tax because it is something they were not used to. Nobody likes paying tax, but tax has to be paid. The country could not survive without taxation. Having compared what a wife would have to pay after the death of her husband, and given examples of what happened in the past, those farmers now realise that this wealth tax is a good tax. It is better than the tax they had to pay under the death duty code.

A farm of 160 acres in County Tipperary, valued at £600 per acre is worth almost £100,000 and the machinery thereon would be an estimated £10,000. He is a good farmer who would have that type of machinery on the type of farm I am talking about —160 acres valued at £600 an acre. Wealth he may have would total another £10,000, that is, £120,000 for 160 acres. The taxable value of that would be £65,000 and as there is a threshold of £100,000 there would be no wealth tax on that farm. That is not a small farm, but what would that person have to pay in death duties on £120,000? That person would have to pay in the region of £50,000 in death duties.

The death duties on £150,000 would be £67,000 and under the wealth tax the same person would have to pay in the region of £500 per annum. Even if a person lived 50 years after receiving this wealth, he would have paid only £25,000. Under the death duties his widow would have to pay £67,000. We can go further on that. We can go to greater wealth, that is 240 acres of the same type of land, valued at £150,000. Machinery on that land would be a little extra at £15,000, and the wealth would probably be another £15,000. That is £180,000. The threshold is £100,000 leaving £80,000 taxable value. The death duty that would have to be paid there would be in the region of £80,000.

The sooner the farmers get to know this the better for all concerned. They consulted us previous to our getting into Government and shortly afterwards to complain about the burden of death duties. We realised it because we knew people who came under death duties and we made representations to the Exchequer and to the Minister for Finance on behalf of people. We know that farmers' widows had to sell portion, or maybe the whole, of their land to pay off death duties. We know the poverty that it created when that woman had a family to rear, and to educate. We had pity on that type of person and we approached the Minister to remove death duties.

The farming organisations, the IFA and the ICMSA and all concerned in that field, begged and implored us—I am sure they also approached the Minister in the Fianna Fáil Government—to do the same thing as death duties were concerned. Nothing was done. We removed the death duties at a cost of £13 million to the Exchequer and that £13 million had to be found elsewhere because the Government could not carry on with £13 million less. Unless the wealthy people are compelled to pay it, then the poor will have to pay it. The worker would have to suffer and so would the poor They are the people Senator McGlinchey referred to, the socialists as he called them. I can tell him that whichever name he puts on them we have on this side of the House workers and trade unionists in Fine Gael and Labour. If he likes to call the farmer a capitalist we have them also; if he likes to call the person who is in business a capitalist, we have them also.

We have all grades of people in the National Coalition Government and that is why we are a success. We believe in capital and in investment but we also believe in the worker. We believe in the person who is entitled to services from the State, that is, the old age pensioner and those who are not able to work for themselves.

We will have to ensure that Ireland will be a country that we will be proud of, with our people living good and happy lives. We are proud of our country and therefore we must be proud of our people and we must do our people well. If we have to find money and capital for that we cannot get it from those people we are talking about. The worker is paying his fair share. If we have to get this £13 million, we must get it from those who can afford to pay it, and I am not a socialist—I am a white collar worker and I pay my share of taxation. If I had the wealth that I have been talking about, then I would be happy to pay my 1 per cent. I cannot understand why people oppose that type of taxation.

Mr. E. Ryan

One of the questions that occurs to one in reading this Bill and the speeches made by the Minister at the end of it all is what was the purpose of this Bill. There are many possible explanations but it is still difficult to pinpoint the purpose of the Bill. Is it an example? Is it an exercise in doctrinaire socialism? Is it a gesture towards the half-baked socialists in the Coalition Government? Is it merely political pandering to those who think there are too many wealthy people and too much wealth in the country? Is it an effort to redistribute wealth? Or is it quite simply an effort to recoup the money lost in estate duties? These are all possible explanations. If the purpose of the Bill were clear-cut, I do not think we would have to dwell at length and question at length what is the real purpose. It is not an exercise in doctrinaire socialism because, whatever views I may have of the Minister and of his philosophy, I do not think he is a doctrinaire socialist and I do not think he would be foolish enough to draft a Bill with that philosophy in mind.

With regard to it being a gesture towards the half-baked socialists in the Coalition, there is not much doubt that there is a large element of that in the Bill. It is quite clear that there are many of the supporters of the Coalition who are socialists of one kind or another, who believe that wealth is an evil thing and who believe that the wealthy should be taxed as heavily as possible. This is a gesture to them to some extent and, because it is a gesture towards people who have half-baked ideas, the measure itself is to some extent half-baked. That, I suppose, is the reason why we wonder about certain provisions in it.

One of the dilemmas of the country from the economic and political point of view is the conflict between those who hold various socialist points of view, on the one hand, and those who consider that capitalism is, on the other hand, the proper economic system to have. There are those who believe that capitalism can work reasonably well, who hold the view that it has worked quite well in a number of European countries and elsewhere, who believe that capitalism in a modified way can be successful and can bring a measure of prosperity, provided steps are taken to ensure that everybody has a reasonable standard of living. It is clear that the majority of the people are in favour of reasonable capitalism rather than any form of socialism. Nevertheless, the Minister, in particular, and I suppose all of us to some extent, must realise that there are people with other points of view, and certain compromises must be made to meet their points of view if we are to live in peace.

It is reasonable to try to solve this dilemma in a pragmatic and commonsense way but difficulties arise in measures such as this if the compromises are made on a doctrinaire basis or if compromises are made merely to meet doctrinaire points of view rather than to meet the problems in a commonsense way. This is the problem we have and, in particular, the problem that the present Government have in introducing measures of this kind. By and large, although the Bill has a certain indication of doctrinaire socialism, I think the Minister has resisted this urging and has made such compromises as are in the Bill in a reasonably commonsense way. Has the Bill another approach to it? Is the Bill merely political pandering to those who believe that there are far too many wealthy people and too much wealth in the country? Is it merely a gesture to say that we will tax the filthy rich and make those who are not in that category feel a bit better? This kind of popular approach could be the reason.

Some time ago an economist produced figures to show that about 5 per cent of the people owned 50 per cent of the wealth, and so on, as a result of an extremely misleading survey which was based on suppositions which made it entirely unrepresentative. Nevertheless, this figure has been kicked around and it gives people the impression that there is a great deal of wealth in the country and that most of it is owned by a very small percentage of the community. If this is the purpose of the Bill, to pander to that point of view, to give satisfaction to those who mistakenly believe these figures, then it is a very poor reason for introducing a Bill of this kind.

Another possible reason, as I said at the beginning, was that the purpose of the Bill was to redistribute wealth. The redistribution of wealth is a very popular catchcry and, I suppose, apart from being a popular catchcry, it is a reasonable ambition that wealth should be redistributed so that nobody has too much and that everybody has a reasonable amount. In so far as the Bill is an effort to redistribute wealth, it does not succeed at all, because there is no redistribution of wealth in the strict sense. If the Bill provided that every farmer with 100 acres had to give one acre away to some of his farm workers each year, and so on, this would be redistributing wealth. If every factory had to give a certain number of its shares away every year, this would be a redistribution of wealth. This measure does not do anything of that kind. The tax that is taken merely goes into the Exchequer to pay day-to-day expenses and no redistribution of wealth is achieved.

The Minister has said on a number of occasions that the purpose of the Bill is to recoup the money lost on estate duties. If that is the only reason for the Bill it is an understandable reason. It is not entirely acceptable but, if the case for it can be fully made, then one would have to accept it. There are three Bills introduced instead of the very limited modifications made in regard to estate duty.

The Minister never loses an opportunity of making the statement that death duties have been abolished. Of course, that is not quite true. Death duties have been abolished within the immediate family but various forms of death duties will still be paid under another name. We are having the capital gains tax and the wealth tax. Is it fair or accurate to say that the sole reason for the introduction of this Bill is to recoup the money lost on estate duty? We have not been told how much money will be raised by the three Bills which were introduced. In particular, we have not been told how much money will be raised by the Bill we are discussing today. It is rather surprising that no effort has been made to give an accurate estimate of the yield from these three Bills.

When the Minister introduces his budget each year, the present Minister and former Ministers, the estimate was always given as to what the taxes in the budget would raise, how much they would amount to, how much had to be spent, and how he proposed to balance the budget or, in present circumstances, what deficit he was allowing. In this case we are being asked to pass three different Bills, all of them raising taxes, and no effort is made to give any accurate estimate of how much will be raised. Until we know how much will be raised, or at least until a reasonable estimate is given, it is difficult for us to say whether the Bill is acceptable, whether it should be passed, whether all the Bills need to be passed, whether it would be sufficient to pass one or two of them.

If the purpose of this Bill—I think it is the purpose which the Minister principally relies on—is merely to recoup the money lost on estate duty, then he should tell us how much he proposes to raise, how much he expects to raise on the other two Bills, and satisfy us as to whether the Bill is really necessary or what extent the various Bills are necessary. One of the questions we have to ask ourselves considering the various possible purposes for introducing this Bill is whether or not it is legitimate to say this Bill is necessary to recoup the Exchequer for money lost on estate duty.

Apart from that, and in view of the fact that that case has not been satisfactorily made, if it was flatly made, if the loss were shown to be £X million and this Bill could be shown to produce exactly the same, then the Minister would have a strong case. In the absence of that, we have to ask ourselves what is the purpose of the Bill and do we really need this Bill at all. Do we need a wealth tax or, more accurately, to call it what it should be called, do we need a property tax? Calling it a wealth tax is, of course, an emotive way of describing it. It is easy to get across the idea that, because this is a wealth tax, only those who are wealthy will be hit by it. Wealthy is, of course, a very relative term. Anybody who has twice as much money as you have is a wealthy person. But if you only have £5 per week, a person with £10 is not really a wealthy person.

We have to ask ourselves whether it is appropriate to have this kind of a Bill. In particular, we must ask ourselves whether it is appropriate to have this Bill at present. There is a certain element of delusions of grandeur about introducing a wealth tax here. Certainly there is, if we call it a wealth tax, whatever about the position if we called it a property tax. We are the poorest country in the European Community. We are at the bottom of the list of every statistic we see about the economic position of the countries in the EEC. We are not the poorest country in Europe but we are certainly very low in the league. Nevertheless, we have had the introduction of a wealth tax in spite of the fact that many countries in Europe, several of them much wealthier than we are, do not have the same kind of tax.

It must be remembered that so long as we have a capitalist economy, whether we approve of it or not, it is necessary to have the environment in which wealth and capital can be built up so that that capital can be invested in industry, in agriculture, in the various services to make the economy a thriving one. Most of the European countries with whom we are associated in the EEC built up their economies in circumstances where taxation was negligible. The industrial revolution which took place in most of these countries, took place in circumstances where there was little or no tax and where capital could be easily accumulated. That capital was invested in industry and you had the industrial revolution. We are trying to catch up with that situation. For historical reasons, the industrial revolution passed us by. We are now in the difficult position of trying to catch up with these countries in much more difficult circumstances, in circumstances where there are ever increasing taxes, in circumstances where because of increased taxes it is more and more difficult to accumulate capital.

It is one of the basic factors and problems in our economic position that there is not enough capital available for investment in industry and agriculture. Because there is a scarcity of capital, we have a slow growth in industry, in agriculture and in the services and in the infrastructure. This, in turn, leads to the employment problem which has now reached massive proportions. Within the past few days in this House we were dealing with the problem of trying to get people back into employment on the Employment Premium Bill. At the same time, we are introducing a Bill which is having the opposite effect. Because of high taxation we have not got enough domestic capital. Most of the money which could be accumulated, which could become capital and be invested in industry and agriculture is taken in taxation. The cause of the trouble, to a very considerable extent, is the taxation system. I recognise that this is not something the Minister can do away with by a wave of a wand. He must get some taxation to run the country. Any measure of this kind, making that situation even more acute than it is, is one which should be looked at very critically indeed.

At present the Government have to offer incentives to bring in capital from abroad. We are spending many millions each year in incentives, encouraging foreign firms to come to this country, to bring in capital and help expand industry here. There is the peculiar situation in which money is taken in taxation, money which could be invested in industry, and is used to attract capital from abroad. It sounds a rather complicated and roundabout way of solving that problem.

This Bill accentuates that position. Certainly it will deprive industry—and there is no question about that—of some funds which it would have otherwise. It will drive, and has driven, a good deal of capital abroad that could have been, and would have been, invested in industry here. Because of that it will slow down economic recovery. There is, of course, doubt about the extent to which this is true. One can argue that not much capital was driven abroad in the last year. One can argue that some, but not all of the money, which will be taken in tax under this Bill would have been invested in industry or agriculture. There is no doubt that this is true to some extent. The only question is to what extent it is true, to what extent am I correct in saying that harm will be done to the development of the economy because of this Bill.

Quite apart from the harm the Bill will do in depriving industry and agriculture of capital, it will have an adverse effect on the entrepreneur. It will to some extent, undermine his initiative, enterprise and dedication to the kind of hard work necessary in building up an industry and continuing to make it work. I do not want to exaggerate the extent of that any more than I want to exaggerate the effect on capital. There are some people in business, some farmers, some people who are built in a certain way, and no matter how hard they are taxed, they will continue to build up their particular business and throw themselves fully into the task, no matter how difficult life is made for them. But there are some people who will regard this Bill as the last straw, having already suffered from the imposition of a heavy income tax and having seen that the capital gains tax is to be effective. The extent of that is difficult to gauge but the fact that the Bill will have that effect, to some extent, cannot be doubted.

In presenting the Bill the Minister was inclined to try to have it both ways. On the one hand, he justified the Bill on the basis that it was unfair that only for those who worked for a living, only those who were subject to income tax should have to pay tax. He justified it on the basis that those who owned property should have to pay tax as well. The Minister spoke about property having its duties as well as its rights, and so on. He suggested that the imposition of tax on property, under this Bill, would greatly ease the burden on those already paying income tax. This was something to be welcomed by those who paid income tax because their burden would be eased when those people who owned property had to make a substantial contribution. That was on one hand. On the other hand, when the Minister was criticised because of the effect of this Bill on those people who owned property, he was at great pains to show that the rate was very low, that the thresholds were very high, that the exemptions were very generous. When he was defending the Bill from this point of view, one was almost led to believe that virtually nobody would be affected by it and that those who would be affected would be affected only in respect of negligible amounts.

Having heard the Minister argue both sides of the case, we are not quite sure whether this measure will bring in sufficient taxation to ease the burden of those who already pay income tax and other kinds of tax or whether, it is merely a gesture to the socialist element in the Coalition Government which will not really cost anybody very much at all.

I do not want to go into the details of the Bill, which can be dealt with on Committee Stage, but there is one aspect of the Bill I should like to mention, that is the valuation of productive assets or assets which are used to give employment. The allowance in the Bill for farms, fishing boats and hotels is not an unreasonable one but there are other categories which should be considered in the same way. It seems quite unreasonable that in the case of other productive assets, property used for productive purposes, property which in the course of its use gives employment, the allowance is only 20 per cent as compared with 50 per cent for the other categories. This is a quite unfair distinction between farms on the one hand and on the other property which is not used productively and which does not give employment. The Minister should have been more liberal and reasonable in allowing, say, 50 per cent, or something approaching that figure, for assets which are used for productive purposes. This is certainly one aspect of the Bill which should be reconsidered and amended.

During the course of the debate in this House we had a good deal of discussion in regard to the effect of inflation on that Bill and on taxes generally. I do not propose to go fully into this question of inflation again, but it is quite clear that the effect of inflation is going to be just as serious and as dangerous in regard to this Bill as it was in regard to the Capital Gains Tax Bill.

The Minister has made and I am sure will make the same point here that, even though inflation exists and even though it will have a serious effect the rate of taxation is low. He will point to the thresholds and exemptions and will, on that basis, argue that the taxpayer will not be seriously affected by inflation because of these low rates, these thresholds and exemptions.

Anybody who is allowed his private residence and a £100,000 over and above that is certainly in a fairly happy position and cannot complain unduly. It si a very large sum now but in a few years time will it be a large sum? Even at the leisurely inflation rate which took place during the years 1965 to 1974 the fall in the purchasing power of the £ was a fall of 50 per cent. That rate of inflation, certainly by present day standards was very low indeed. But at the present rate of inflation and at the projected rates of inflation that drop of 50 per cent in nine years will be very much exceeded. The same kind of drop is likely to take place in something around four to five years. The drop in the purchasing power of the £ means a nominal increase in the value of property, so that a person having property worth £50,000 will, in three or four years be in the net of the wealth tax, not because he has got any wealthier but because inflation will have had that affect on the nominal value of the property. Many people who welcome the Bill at present welcome it in the sense that it has nothing to do with them. They have nothing to fear from it. They will find very quickly indeed that they are within its ambit and will find themselves being liable to property tax.

The Minister has undertaken to have another look at valuations at the end of three years and to make provisions for inflation. Three years is a very long time at the present rate of inflation. At the present rate, as I have said, it will almost double the nominal value of property. Three years is much too long a period for the Minister to wait to take remedial action on inflation. There is no guarantee whatever that at the end of three years the Minister will make a reasonable adjustment on anything like a full adjustment to allow for the affects of inflation.

Inflation is almost certainly going to have the most spectacular and damaging effect on the taxpayer in that many are going to find themselves covered by the Bill who thought they were quite safe and, of course, many who are at present covered by the Bill will find themselves paying a great deal more than they will be paying now. There is also the danger that the rate of 1 per cent, which is not too bad at present, will become two or three, because of the difficult budgetary situation or because for one reason or another, the Minister has to raise extra taxation and finds that the increase in the rate is the least unpopular way of dealing with the problem. We have to look at this Bill not merely on the basis of what is affected by it at present but what the effect of it will be in the future.

Taking all that into consideration I think the really important criticism of this Bill is that it is entirely in-appropriate at the present time. It may have been a good idea two or three years ago. It may have appeared to be something that was necessary or something that was acceptable or for which a case could be made two or three years ago when we had a buoyant economy, when there was a very considerable, steady growth in income, when we had a fair measure of prosperity here. At that time it was certainly something that could reasonably be thought of as something that should be introduced in a matter of a few years but not in present circumstances when we are in such a serious economic crisis—and this is not something which I am saying and the Opposition are saying; the Government keep on telling us we are in a very serious economic crisis, that we are in the most serious economic crisis since the last war or, as some spokesmen have said, since the first war, the thirties or whatever time you like to pick. In any event, we are, according to the Government, apart from what we can see for ourselves, in an extremely serious economic situation with over 100,000 people unemployed, with businesses collapsing all over the country and the farmers having had one of the worst years they ever had. In these circumstances it is incredible that the Government should persist in introducing this Bill. It is understandable that they should have started work on the Bill, that they should have drafted it, that they should, perhaps, have had it ready to introduce if and when we get back to more prosperous times but it is quite incredible that the Government should persist in introducing it at this time.

The Taoiseach, within the last week, when he came back from Brussels, returned without optimism and said that our problem was no longer how to distribute increased wealth but how to spread our reduced resources to minimise hardships. This is certainly a far more realistic assessment of our position, a much more sensible observation on the situation in the country than the case which is being made, or that the Minister is attempting to make, for this Bill. In the circumstances of a serious economic crisis, in the circumstances of over 100,000 people unemployed, we have to ask ourselves will this Bill give even one person back his job? Perhaps I am wrong in putting forward that point of view. The Bill will give a certain amount of employment. It will give employment to those who have to operate it. It will give employment to expand the offices of the Revenue Commissioners, but that scarcely is a justification for introducing the Bill.

Will this Bill help to put back a single industry on its feet? As I said earlier, the contrary is likely to be the case. It will certainly put no industries back on their feet. It will, more than likely, put several more industries into liquidation. Will it help any of the farmers who had such a disastrous year? Again, the contrary is much more likely to be the case. This Bill, to the farmer, who is on the brink of recovery, who needs a certain amount of money to help him to recover, will have, if anything, a contrary effect.

The Minister should have realised, not in the last month or two, but many months ago, that the time was not appropriate for this Bill. He should have put it in cold storage. He should have realised that it was completely irrelevant even when he introduced it at the beginning of this year. As the months went by and as the economic situation got worse and worse, at some stage he should have acknowledged that he was wrong in persisting with it and he should have put it to one side.

In the present circumstances, this Bill is merely distracting public attention, distracting the Government and the machinery of Government, from the real needs of the situation. It is distracting the people, perhaps confusing them and perhaps making some of them fail to realise that the Government are failing utterly to tackle the real problems of the country, un-employment, collapsing industry, and farming, which is in more and more difficulties.

This Bill is merely a distraction. If its purpose is merely to confuse the public and to make them fail to realise the failure of the Government, then that of the various purposes which I have suggested were in the Minister's mind would be the worst reason of all for persisting with this Bill.

Mr. Daly

I wish to welcome this Bill for no other reason but that death duties were abolished last May and that people can now, at least, die in comfort. I am surprised that the Opposition, when they got an opportunity of having a select committee set up by the Dáil, and when they could have contributed to and helped this Bill, regrettably refused it.

There are a few points on which I would like clarification from the Minister when he is replying. In regard to the valuation of Irish company shares, many Irish firms are family controlled. I am concerned that the Bill does not lay down precise rules for valuing shares in a private trading company. It is absolutely vital that such shares be valued on an earning basis rather than on a straight asset basis. There is no indication of the method to be used in valuing shares. This is an important aspect and I ask the Minister to clarify it, when he is replying.

On the question of relief for productive assets, many garages throughout the country, because of historical reasons, are often situated in the centre of urban areas and they provide valuable employment. Because of the low return on capital in the motor trade, if these premises are to be valued on an asset basis, the tax will adversely affect productive assets with consequential anti-social affects. Having regard to the Government's declared support for productive enterprises it is impossible to justify the discriminatory treatment accorded by the Bill to such assets in the industrial sector. Some additional relief, such as the 50 per cent reduction on the market value of hotel premises and agricultural property should, in equity, be introduced. With inflation running at such a high rate an apparent increase in wealth is generally due solely to such inflation. Some mechanism, perhaps related to the consumer price index, should, therefore, be included in the Bill to discount the effects of inflation on the threshold limits. It is important that the reported intention to consider the introduction of some form of adjustment to counteract this situation should be clarified and deemed acceptable.

On threshold allowances it appears to me—there is probably a good explanation for it—that it is inequitable that the proposed allowance for a married couple is less than the combined allowance for two single persons. Also, relief for minors at £2,500 appears to be much too low in relation to the figure of £70,000 for a single person.

In regard to non-trading companies and discretionary trusts—Senator Alexis FitzGerald referred to these today—it is unfair and contrary to good business organisation, that the threshold exemptions do not apply to these areas. The restriction that will be imposed on the formation of holding companies to administer a group of related companies will not be in the best interests of overall efficiency. The Revenue Commissioners may require the declaration, that is the return of wealth, to be made on oath. I am concerned about the possible implications of this particular sentence as it appears to be a fundamental change from the existing situation where a person has an option to swear on appeal. As far as I can ascertain it appears that it is the intention of the Government to use the estate duty office to administer the valuation aspects of this new tax. If this is correct the tradition of delays associated with the estate duty process would not be acceptable to the businessman. That this whole new income tax structure can be administered and checked out within three months, between April 5th and July 5th, would appear virtually impossible and as the tax will be charged on property it must be handled as speedily as possible from a business point of view. The experience of many firms in trying to recover funds does not reassure me that delays will not occur. I would welcome the Minister's assurance on this point.

I welcome the Bill if for no other reason than for the abolishing of death duties. I hope the Minister when replying will cover my points.

Mr. Hanafin

One could offer many comments on this Bill but very few comments that have not already been made. This Bill has been well thrashed out in the other House and any member on the Fianna Fáil side of the House can feel justly proud of the points that were raised and the manner in which they conducted the debate and presented the arguments there. At the same time I also must offer my own observations. The timing of this legislation is incredible. Had anybody else introduced this Bill I might have been more surprised. The timing of the Minister for Finance in every respect has been completely out of step with the mood of the country. At the moment there are in excess of 100,000 unemployed. The exact figure no one can give because from day to day it is rising. Instead of being offered the same reasons day in and day out, that this is a world recession, this is not our fault, that the fault lies in Germany, Kuwait or somewhere else, the Government, instead of blaming everybody else for the problems that exist here should face us to them and tell us what they are going to do about them. At this time when everybody is more than concerned— concerned is under-stating it, alarmed —at the situation we have this legislation being offered to the people and we are being asked to accept it. The only thing that it has achieved is that it has —and my belief is backed up by opinions of people in legal circles and economists and so on—encouraged people to take money out of this country, invest it elsewhere and it has done anything but inspire people to leave money here.

It has deterred people from outside investing money here. It has created a lack of confidence at a time when confidence should be the one thing that people should have in the country and in the manner in which it is being governed. It is the one thing that is completely lacking. It is very difficult to blame people who are deterred from investing their money here, much as I regret it and much as I hate to hear of money leaving the country when it could be used for good purposes and giving employment. It is leaving because of lack of confidence.

As the Government do not appear to have confidence in themselves it is not too difficult to understand why there is a lack of it in business circles. The Minister is mistaken if he believes—he may contradict me if I am wrong— that if he makes the strong weak he will make the weak strong. That is not so. That has been tried before. If you make the strong weak you make everybody weak.

Mr. R. Ryan

The Senator invited me to contradict him and so I shall: that is not my belief.

Mr. Hanafin

Of course, I accept it when the Minister says that is not his belief but what is the purpose of this Bill if that is not his belief? That was a mistaken reason. I accept that it is not the Minister's reason because he says so. At least that would be a positive reason. I can only believe then that he is introducing this Bill because he wants to pander to some half-baked socialists in the Government so that they in turn can say to the workers: "Look, workers, at what we are doing for you" and dress it up in such a fashion that the workers, if they were fools to believe it, might think that they are achieving something in this Bill. In effect, all it is doing is making things worse. It is reducing job opportunities. It is not encouraging people to invest in industry. It is not doing any of the things that would help the workers. Now that the Minister has told me that he does not believe that by making the strong weak he will make the weak strong, I wish he would tell us why he is introducing this Bill because the timing of it—the principle is quite a different thing—is incredible and is disastrous for the country.

If he is pandering to other elements and is doing this against his will for the sake of keeping the Government together and so that he can say: "We have done something for the workers" when in fact they have only done harm, things are bad. God help Ireland if that is the type of governing we are getting. We are not getting proper government at the moment and everybody feels this.

Some time ago the Minister had an ideal opportunity to do something. Everybody was geared for tough measures and even wanted them because they were so convinced that it was necessary. The Minister had the ball right at his foot and did not take it.

Mr. R. Ryan

I think a goal was scored today.

Mr. Hanafin

I think by October that goal will be disallowed. You will be introducing another measure. That was weakness; the Minister had the ball right at his foot and did not take it. It does not give us any satisfaction on this side of the House to believe that we were getting bad government at present: we also want to feel secure and feel that the country is in safe hands. It is out duty to point out that it is not.

Facing up to the real problems should be the duty of the Government. They should have done so before now. They trot out world recession, European recession as reasons why they can do nothing. Then, recently, the Minister said in the other House—and perhaps here too—"Now we are doing something about it. Now, we are going to do something about inflation and the recession." They are facing up to it but not doing anything about it in the long run beyond making statements and saying that there will be tough measures and that they are needed. If a business has no money, if its credit rating is not good enough to borrow any more, if our mineral resources are mortgaged, all our future prospects are mortgaged and our credit is cut off. The Government turn off the lights and close the door.

Before the lights have to be turned off and the door has to be closed, will the Government please go to the country? If they cannot do something about the state of the country, please let somebody in who is prepared to and will do something about it. I heard a figure recently quoted that every family is paying at least £1 per week, towards interest on borrowed money. Our whole future is mortgaged. We on this side have experience of fire brigade operations. We had to do it in 1957, so we know what is facing us when we return in October.

Another reason that may have been in the Minister's mind when introducing this Bill was the recoupment of money lost in estate duty. During the election campaign a solemn pledge was given to people throughout the country when seeking their votes. They were told the present Government would abolish estate duties. However, they were not told the money would be recouped in another form of taxation.

Perhaps there are other reasons the Minister introduced this tax. Perhaps it was to redistribute wealth but the Taoiseach said when he returned from Brussels that our problem was no longer how to distribute increased wealth but how to spread our reduced resources to minimise hardship. There is hardship in the country at the moment and there will be greater hardship. The reason is not because of recessions, it is because people have no confidence. How can the people have confidence when it is not coming from top level? A country is built on confidence and on people's ability to do something and their belief in themselves. They are not at this moment prepared to attempt any risk or adventure, all these things that are important to business. The safe businessman was not the man who built up the country, although he certainly contributed in a large way. The one who was prepared to take the risk was the man who built up the country. Is there anybody prepared to take a risk at the moment in business here? What what reason? A businessman pays his taxes, works hard, manages to save, and he reaches the stage when he has a bit of property on the earnings that were taxed along the line. Now he is taxed on the assets left after it all. I blame the Government for the lack of confidence. The IDA are spending money encouraging people to invest in business here and, at the same time millions of pounds are leaving this country as a result of the statement that was made about the introduction of wealth tax.

People had confidence throughout the 1960s under the late Mr. Seán Lemass and Deputy J. Lynch, in Fianna Fáil administrations. People were prepared to go forward and do something for the country and themselves. That confidence is completely lacking today. One of the reasons is that there is no confidence in the Government is because they lack confidence in themselves. Bills of this kind are being introduced at a time when the Government should be doing something about unemployment. People have not fully suffered from that yet but when it comes to the winter many will be very frightened. There are many frightened people, not just those who are out of work but people who are in what were regarded as safe jobs. They are frightened because they do not know when their firms will go into liquidation. How many firms have gone into liquidation in the last 12 months?

What I am particularly afraid of is that people have reached the stage where instead of trying to save a business when it is in a dangerous position, they are questioning whether they should make the attempt. The businessman is now being described as something other than what he is. He is the man who builds up a country—there is no question or doubt about that—but instead of getting a clap on the back he is being abused from all sides. He has no confidence and has reached the stage where he wonders if he should bother.

I may be forgiven for mentioning that not all members of or people who support the Government parties would agree with the Minister in this. I was quite surprised that in the other House there was just one man reluctant to vote yesterday. I think the message went out loud and clear to Deputies to vote for this or the Government collapse. Did this frighten a number of them into the lobbies? If they had taken time to think they would have realised that the Government are going to collapse anyway——

An Leas-Chathaoirleach

The Senator is aware it is not in order to refer to procedures in the other House.

Mr. Hanafin

I hope I will be forgiven for making a forecast about when the vote is taken at the end of the Bill; I am sure there will be some notable absentees from the Government side. They certainly have not been in the House all day. I doubt if the Whip will frighten them. I am very sorry those people are not here. Members on the Opposition side sometimes describe those Senators' seats in this House as "Millionaires' Row". I do not agree with saying things like that about any back bench but I can understand the reason. I am sorry these two very successful business people are not here. Is the reason they do not agree with the Minister? Senators on the other side voted against the Government. They are being congratulated on their stand and the moral courage it took. Why are the other two not in here to vote against this Bill? They are taking the way out but, perhaps, they have given their notice to the Government already. Have they started to run? Why have the Government spent so much time on this ill-timed piece of legislation in the Dáil? A lot of time will be spent in the Seanad also. I have heard Members of the Government side of the House boasting about the number of sittings of the Seanad in the last 12 months. We had a record number of sittings. But anybody who boasted about that on that side of the House never gave the reason which was because of the constructive speeches made from this side of the House. If anybody wants to check the Official Report he will find on any of them——

Mr. McCartin

They were away from the subject like the Senator is now.

An Leas-Chathaoirleach

While referring to constructive speeches it would be a help if the Senator returned to the Wealth Tax Bill.

Mr. Hanafin

Of course. I was making the point that we intend to spend a considerable time dealing with this Bill because it must be pointed out how ridiculous it is to be introducing it and that it is only a red herring to cover up for the state of the economy. This is not the first time we have given time to considering legislation here because we felt people should be aware of the real reason why Bills were being introduced. The record number of sittings was due to the many contributions made from this side of the House and there will be many contributions on this Bill.

On the wealth tax it is a dangerous thought to make the weak strong by making the strong weak. I am glad this is not the view of the Minister and he has said so. But is this view shared by other members of the Cabinet? The Minister was forced into this piece of legislation. The Minister, with his training and the time he has spent dealing with money matters, must be aware of the disastrous consequences of this Bill. It is not to his credit, he being so aware, that he persists in introducing this legislation. To be influenced to such an extent by other members of the Cabinet just to keep that Government rolling along that little bit longer is not to his credit. I am convinced he is of an exceptional mind so, therefore, he is fully aware of the dangers and consequences.

Mr. R. Ryan

It must be the Cavan blood in me.

Mr. Hanafin

Yet, he introduced it because he was told to introduce it by some of the half-baked socialists; smoked-salmon socialists. I like that term.

Mr. Halligan

It was used by another smoked-salmon socialist.

Mr. Hanafin

Some people who claim to be socialists by their acts make little of their claim. I would be wasting my time appealing to the Minister to withdraw this legislation at this stage he having fought for it in the other House, against his own belief. I know it is against his belief but to persist in it is not to his credit. To be forced into this situation by other members of the Cabinet to keep the Government rolling along for another few months until they reach the stage—this is what we are all so afraid of—that they have to go out and all the lights will be switched off completely and the door locked. Let that not happen to this country again.

We have had experience of dealing with such situations. We had to deal with one in 1957 and we will deal with one in October, November or whenever it happens.

Mr. Halligan

Which year?

Mr. R. Ryan

What decade?

Mr. Hanafin

The Minister should keep his Labour colleagues informed as to what is happening. A front bench Member of this House, a very valuable member of the Labour Party, the general secretary, has not been told. He suspects; he is questioning it. The when will be very soon, this summer when there is a head-on confrontation and we will see how that is handled.

This legislation has done more harm to the economy than any other piece of legislation. Money has been chased out and people are deterred from bringing money in. The Minister sits back and smiles and tries to claim that there is some good in it. I await with interest the reason he will give why this legislation is necessary. There cannot be any good reason for introducing it at present except to pander to the members of the Coalition to keep rolling along for another while.

Mr. Halligan

The Bill is offered by way of a replacement tax for estate duties. It is one of a package of capital taxes which the Government have introduced in honouring their pre-election pledge to remove estate duties and to replace them by an alternative form of taxation. The origins of the Bill are important because we will recall the insistent clamour there was two years prior to the election for the removal of estate duties and the fairly legitimate criticisms that were levelled against estate duties on grounds of inequity and of inefficiency as a means of raising revenue. It will be recalled that the parties comprising the National Coalition Government gave this undertaking in their pre-election programme and it is also worth recording that as a result of having put such an agreed programme before the people they now are in Government and the previous Government find themselves in Opposition.

It is an important principle in politics that if one makes a pledge or a commitment one should honour it. This pledge was honoured, in the first place, through the publication of a White Paper and subsequently in the circulation of the various pieces of capital tax legislation before us now. I understand that Fianna Fáil were latter day converts to the idea that estate duties were inequitable and inefficient as a means of raising revenue. They, therefore, opposed estate duties. If they are in favour of the continuance of estate duties as a means of taxation I have not heard them say so very loudly. They do not want the replacement tax. In other words, they are opposed to both forms of tax, estate duties and the wealth tax. This is quite typical of an Opposition which characterises itself as responsible but which, by its very actions and antics, is the epitome of irresponsibility, for, on the one hand, they load the Minister for Finance and various other Minister with motions and pleas that expenditure be increased and, on the other hand, damn him with demands that revenue be decreased. Whatever may be the grounds upon which Fianna Fáil have argued in terms of the adequacy of this form of taxation as a means of raising revenue and whatever their arguments may be against the timing of the introduction of this taxation, I want to make it clear that their chief spokesman on finance, Deputy Colley, has on his Second Reading speech, made it clear that they are opposed in principle to the introduction of a wealth tax. He said at column 1505 on 5th March, 1975, in the Official Report that "We are opposed in principle to wealth tax in our economic circumstances". He said again in the same column "We are totally opposed to the wealth tax because it is so opposed to the best interests of the country at this stage of development". They are opposed in principle to this form of taxation. I hope this message goes out loud and clear to the tens of thousands of people who support that party and who have believed that in its past it was a party founded on ordinary people and their interests. I want them to take into account the statement of their chief spokesman on finance—they have many others—and I quote again "We are opposed in principle to a wealth tax in our economic circumstances".

Mr. Yeats

In our economic circumstances they are the important words.

Mr. Halligan

Indeed they are. It reminds me of St. Augustine "Lord make me pure but not now"—Lord make me pure but not in my present personal circumstances. Let us have this tax, but not now. In reality, "not now" means never. In this debate, whatever may be the use of the phrase "in our present economic circumstances", the true philosophy of Fianna Fáil has been shown up, particularly in the Dáil where the debate was protracted and probably the longest on any piece of legislation introduced in the House, as being that of a party which has now totally succumbed to a right-wing conservative philosophy. The contribution which Deputy Barry Desmond made to that effect two days ago was absolutely correct. It is of little use and benefit for those Opposition speakers who represent working class areas to proclaim that their opposition to the wealth tax is not one of principle but are based on economic pragmatism. It is, in fact, opposition in principle. That is what we have heard here today.

In a passing reference to the Minister's speech, might I say that I hope the Government, in dealing with legislation of similar complexity, will not permit the Opposition in future to run the business of either the Dáil or the Seanad. The Minister said he regretted that this Bill was not taken in special committee because the Opposition, regrettably, were not agreeable. Through their subsequent tactics Parliament has been brought into disrepute particularly, by the use to which it has been put by the defenders of property, who used it as a forum for frustrating the efforts of the Government to raise revenue and to introduce a more equitable system of capital taxation. In the future I trust the Government will govern Parliament as they govern the country and when the Government parties see fit to put pieces of legislation into special committees, that I trust, is where they will go. It is essential that this Parliament, and particularly this House, be reformed so that legislation of this sort should go into special committee so that we do not continue the present system of dealing with Bills which is completely unacceptable and which is, on occasions, scandalously inefficient, a bad use of the Minister's time and of the Parliament's time. It is a national scandal that he was subjected to the spoiling tactics of the Opposition these past five months. This parliamentary position must never be permitted to arise again.

I am ambivalent about this Bill because, while I welcome it in principle, I regret that the rates and the exemption limits are far too generous to those who have property, to those who are in the happy position, as the Minister has said, of actually coming within the ambit of this taxation. They will be very few indeed; far fewer than I would have wished; far fewer than the members of my party would want; far fewer than the Labour movement in general would desire. The Bill is not enough, it is no more than a start. Those who characterise the Minister as being one who has been in some way infatuated and bewitched by socialist philosophy, do both him and socialism an injustice. No man ever less earned the tag of "Red Richie" than the present Minister.

As a socialist, I want to see an egalitarian society. As a representative of the great mass of people who have no wealth, I wish to see wealth shared equitably throughout society. As a democrat, I am prepared at all times to accept the verdict of the people about the organisation of society. I accept the verdict that they do not, at this stage in our development, wish to support the creation of a socialist society. As a democratic socialist, I must be prepared to accept a compromise between socialism and democracy because that is the wish of the people. I am prepared, therefore, in these circumstances, to support the Bill and to defend it, even though the tax rate of 1 per cent is far too low and even though I believe the exemption limits are far too high. I must say quite unequivocally that the Labour Party support this legislation as a fundamental taxation reform, as a major social advance without parallel and as one of the most important and significant pieces of legislation ever to be introduced into the Oireachtas.

While the Parliamentary Labour Party and the Labour Party in general are dissatisfied with the rates and with the exemption limits, we regard the Bill as a significant victory for social equality. I want to place on record our admiration for the resilience with which the Minister has withstood what must have been the greatest lobby ever mounted against a piece of legislation in the history of this State.

Mr. Yeats

The certainty is that nobody wants it.

Mr. Halligan

It is most certainly true that the people whom Senator Yeats represents and supports, can, through their wealth, mount great pressure against society and oppose social reform; they can command resources which nobody else can. They can employ people skilled in the art of Press relations and public relations. They can mount skilful, vociferous and clamorous campaigns against any measure. I do not believe any group has mounted a more intense and sustained campaign against any piece of legislation or any Government proposal as those who have wealth and who have mounted in the past year a vicious campaign against this Bill in order to defend what they have. They have resorted both to overt and covert tactics in their attempt to frustrate the Government's intention, as now embodied in this Bill. They have exerted behind the scenes pressure on various Ministers and on the parties. Professional bodies have lobbied using all their skills and prestige. They have resorted to the scare tactics we have heard repeated here today. Capital is leaving the country they say. The economy is ruined they say in a vicious campaign of fear, misrepresentation and exaggeration. Their view is that few who have wealth must be permitted to use and accumulate it in whatever way they want, otherwise the many will suffer.

This view of society is at the very heart and root of capital, based on the principle that it is to the benefit of those who have no capital that those who have should continue to keep it. Those who have wealth, have power and, because they have both wealth and power, they will continue to argue in favour of keeping both. They will not argue that they should keep wealth simply because they have it. They will not argue they are the people best fitted to have it either by birth or by training or by virtue of the fact they have wrested it from someone else. That would be giving the game away. They will argue on the more subtle principle that it is best for society in general that they should be permitted to have what they have and that without their holding on to wealth, society will somehow flounder, the economy will grind to a halt, and wealth will evaporate like water in the sun; the wealth of the country will dribble away through the sand. Without us, they claim, the economy will crash and society will collapse. Those too are the arguments which have been employed here today against this Bill. The Almighty has somehow endowed a certain number of men and women to run society according to the opponents of this Bill and we should be grateful they exist. This, of course, is a view held explicitly by some people with elitist political philosophies. It has, fortunately, been a social philosophy and a form of social organisation which has been progressively destroyed in western society through the universalisation of the franchise and through the growth of working-class movements. But it is a view of society which still exists in many parts of the world. It is not, however a view openly held in a democracy where men are believed to be equal and where we are supposed to cherish all the children of the nation equally. We do not, in fact, cherish everybody equally. Some are believed to be more equal than others. Some are believed to be better fitted to run society than others and must be rewarded for it, rewarded in a way that should not be questioned by the rest of society. They should not be asked to account to society or be imposed upon in their enjoyment of the benefits they derive from their position, power and privilege.

I do not believe any man is better than any other man whether it be by virtue of birth, accident of opportunity or social status. For that reason, I do not believe there should be in society these gross inequalities in wealth which currently exist. Is anyone pretending, in his defence of this Bill, that inequalities do not exist in Irish society? Is somebody trying to tell me we have reached the Valhalla in which there is no social injustice, that there are not at this moment tens of thousands of Irish children suffering from all sorts of social deprivation, inequality and injustice? Nobody would so dare. The opponents of this Bill do not deny these evils exist. But they also say those who have wealth and are using it for their own benefit should be permitted to do so and, additionally, should be permitted to accumulate even greater wealth which incidentally will only add to the injustice in society. They claim this process will in some mysterious way eliminate injustice. A most convoluted piece of logic.

So insidious is this propaganda that those who have been the victims of injustice, those who have themselves suffered, parrot the principles of those who are extorting from society more than is their just reward. This is the case with many of those speaking for the Opposition. They, no less than I, have suffered from the injustices of an unequal society. They, no less than the children alive today, have suffered from the inequalities within our society. I repudiate the propaganda to which I have referred. I do not accept it is to the benefit of those without wealth, without social power or privilege, that those who have wealth should continue to enjoy it on the principle that this is the only way a society can continue to operate. I do not accept it is just or correct that an itinerant child on crutches, living in a field should, as I saw such a child two days ago, lie sick on the side of the road waiting for an ambulance while another child can benefit from the fact that his father has a position in society enabling him to purchase a 350 acre estate and from which that child will be driven to school quite a distance in luxury each day. Maybe there are those who are in favour of such a society. I have read of such people. I have occasionally heard them, but I do not agree with them. I agree even less with their agents, whether they be conscious or unconscious agents. We have them in this House and in the other House in the opponents to this Bill. The agents of the rich, willing or unwilling, are Fianna Fáil.

It has been to our credit as a people and as a community that. coming as we do out of the same sort of historical injustice, we have been spared great disparities in wealth, privilege and position. It is ominous however that, since the fifties, we have begun to develop our own bourgeoisie, our own nouveau riche, who are no better or worse than their social counterparts in other societies. They are exemplifying the same greed and vulgar ostentation which has damned them in other societies and caused social unrest, chaos and disorder. This process must be ended and ended soon. That is why the principle enshrined in this Bill is so important and why its passage will be so significant.

We must remember here we are discussing wealth. Wealth is capital. Capital is accumulated unconsumed income. If one man has income it means some other man has not. Capitalism was developed throughout the 19th Century by virtue of the operation of the iron law of wages. Significantly, of course, there was no iron law of interest, no iron law of profit, no iron law of rent. But there was an iron law of wages and that was the return to the great mass of ordinary people. Destitution was their reward. That was the return to that "factor of production". The ordinary people were kept at a level of bare existence so that capitalism could prosper. Those who owned the means of production were allowed accumulate income which they could not possibly consume and, therefore, invested. The accumulation of capital was carried out on the backs of tens of millions of people who lived in the most appalling conditions and under the most degrading circumstances and it was out of those circumstances that trade unions and socialist parties were born all over the world.

It was in circumstances of similar social depravity that people lived in this city well into this century. We know that the circumstances in which they lived, for example, in the time of the Great Strike were as appalling as those obtaining in other capitalist societies. Those inequalities have been carried over into present-day society and it is with those inequalities that the principle behind this Bill is intended to deal. No one can deny that the inequalities in wealth generated through the injustices of 19th century capitalism have been transmitted into 20th century society and are at the root of present-day injustice and inequality. Inequality in wealth persists.

One can refer to the most recent study on the distribution of wealth in Irish society by Professor Paddy Lyons. I do not think Professor Lyons, who has recently updated his original study, would claim that it gives an accurate reflection of the actual distribution of wealth in our society. It is difficult to carry out such research to the point one can say with absolute certainty that the results are 100 per cent accurate. But what we do have is an order of magnitude and it is significant that this order of magnitude in Ireland is no different from the order of magnitude in the United Kingdom, the United States, or any other country where similar surveys have been carried out. What we know is that somewhere between 3 to 5 per cent of the population own approximately 75 per cent of the wealth in our society.

Now inequality of wealth means inequality of opportunity. Inequality of opportunity means social injustice. Deputy Colley, said as reported, at column 1508 on 5th March, 1975:

I hope no one will try to inflict on us here the old clap-trap about the redistribution of wealth.

I regret that I cannot inflict that clap-trap on him. I would like the opportunity to do so. In his absence I will have to inflict this "clap-trap" on his colleagues. We must redistribute wealth because it is patently clear and obvious that injustice is based on inequality in terms of ownership, position and privelege will not be tolerated in society today, whether it is in this society, or the society of our largest neighbour, or in continental Europe or in the United States. It is at the future risk of social anarchy and chaos that we continue with gross and patent inequalities in terms of wealth.

At the moment with no wealth at all, the great generality of people, are being asked to take cuts in income in order to maintain the stability of the economy. The Irish Congress of Trade Unions today at their special conference voted overwhelmingly in favour of their Executive Council recommendation which will effectively continue the national wage agreement in a way which the Government desire from the point of view of ensuring economic stability.

Mr. Yeats

What does the Minister think of that?

Mr. Halligan

The great mass of workers have shown, as I said they would last week on the Finance Bill, their sense of social responsibility. They have shown their great experience and intelligence in dealing with matters which affect society in general. Are they the only people to be asked to make sacrifices? Most of them are being asked to pay PAYE. All of them are paying VAT. None of them has the income to employ tax consultants or lawyers so as to avoid taxation. They are not supported by those who have been opposing this Bill. They would be the first to be upbraided if they stepped out one inch beyond the limits of what others class as social responsibility.

Mr. Yeats

Does the Minister agree with all of this?

Mr. Halligan

They are being asked to accept cuts in their income——

Mr. Yeats

The Minister would not agree.

Mr. Halligan

——while others are using people like Senator Yeats to try to avoid paying any tax at all, whether it is wealth tax, income tax, corporation profits tax or sur tax. We are damned with a class of people whom Senator Yeats and his party, Fianna Fáil, represent who do not want to pay any tax at all, good, bad or indifferent, while the great mass of workers and the ordinary people are battened down for every penny that counts.

But there will be one significant distribution of wealth as a result of this Bill, as I was reminded by a colleague today. It will be in favour of those whose job it is to ensure that people pay no tax at all. Certainly, they will benefit, as a profession, from the passage of this Bill. We can be absolutely sure that a very voluminous case law will be built in by people who will come before the Revenue Commissioners in an attempt not to pay this tax, or any tax if they can get away with it, while the great mass of ordinary people are being asked to shoulder burdens so that society can keep going. If society is to be kept going by sacrifices, those sacrifices must be equitably shared throughout society. This Bill is an essential component of such a programme. So is the capital gains tax and the capital acquisitions tax. The Labour Party and the trade union movement——

Mr. Yeats

£1 million a year.

Mr. Halligan

——will not be put off by the scare tactics of Fianna Fáil and the——

Mr. Yeats

Or the Minister.

Mr. Halligan

——hidden people they support who say the economy is suffering because of the passage of this legislation. We do not want the continuation of social inequality as the price of progress; in other words, that these people have to be freed from all forms of taxation so that we can benefit. If that is the type of society offered, we do not want it. That is the type of society Senator Yeats, the Fianna Fáil Senators, and his colleagues in the other House are offering, and we are not having it. It is just not on. There must be a real and meaningful redistribution of wealth——

Mr. Yeats

£1 million a year from this Bill.

Mr. Halligan

The Minister has been over-generous in the tax rates and in the exemption limits contained in this Bill. Unless the Bill means that some people will pay more than 100 per cent of their income, then there will be no redistribution of wealth. What is the point in having a wealth tax added on to other taxes when somebody can avoid paying more than 100 per cent of his income? Otherwise there is no redistribution of wealth in society. If there is no redistribution of wealth in society, there will not be equality or justice. Neither will there be the continued growth which my friends—I was going to say comrades—opposite want.

I have made the point many times that those who benefit from society always defend their special position in society on the basis of the common good, that it is to the common good that they should be permitted to occupy the position in society which they currently hold, that they should be permitted to enjoy the wealth they currently possess. They always put themselves forward as philanthropists. I trust that the debate on this Bill will have helped to some small extent to unmask them for what they are. Capitalism is a form of society which has been built on the rapaciousness of individuals, those who have been able to exert the greatest strength in the greedy chase after the wealth of society, those who have been least sensitive to the sufferings of others, those who have been deaf to the cries of the poor, the aged, and the ill, and it is not a society we in the Labour Party want to see continued in Ireland today.

In exoneration of the Minister I should like to say that he should bear lightly the appellation of "socialist". I wish that he were. If he were I would gladly welcome him into our party. His party are not a socialist party whereas the Labour Party is. We in the Labour Party are committed to a programme with our partners in Government which we entered into openly and freely before the general election. We are proud and happy to be in that partnership. I assure Senator Hanafin that the passage of this Bill, and similar type of legislation, and the opposition which has been offered to it by Fianna Fáil, have cemented that partnership, not only as far as I am concerned but also as far as the great generality of the Labour Party are concerned. Senator Hanafin can take his holidays with ease. He can fly off to Kuwait if he wishes in the absolute certainty that there will be no general election this summer or next summer either. When there is another election he can fly off to Kuwait again because he will not be very busy with the business of Government. This Government will be carrying out the business of the country as they have been doing for the past 2½ years.

The Labour Party welcome this legislation in terms of the principles it incorporates. We see this legislation and the legislation in the capital taxation package as being the most important reform of the taxation code which has been undertaken in half a century. Again I wish to compliment the Minister on the personal resilience with which he withstood the concerted, conscious and deliberate attack of Fianna Fáil in their attempts to wear him down. They did not succeed, any more than they diverted him from the very necessary business of running the economy which is his responsibility also. He has not only our admiration but also our support and he will continue to have them.

Mr. Yeats

That speech would have been out of date 50 years ago.

Mr. Dolan

I do not intend to delay the House very long. Certainly, I would encourage Senator Halligan to enjoy his holidays in Kuwait or wherever he intends to go.

Mr. Halligan

I am going to Kenmare.

Mr. Dolan

Let me express the wish that when he goes out there he will meet some of his rich sheik friends who might be able to give him a few pounds to be used in some way to balance this £230 million deficit on our budget at present and which will be £300 million by the end of the year.

His heart bleeds for the poor of Ireland. Anyone listening to Senator Halligan would think our people were living in squalor, muck and poverty and he was their great saviour. Of course he would certainly not tell the workers that he comes across from Liberty Hall, from that £11 million building erected in the centre of our city by contributions from the Labour Party supporters throughout the country, of all shades of opinion; nor that his party represents only one-fifth of our electorate, irrespective of all his pontifications as to what he can and will do in Government. Let me tell him it was the people on this side of the House who introduced the legislation, and successfully piloted it through Dáil Éireann, that lifted the workers off their knees, gave them decent working hours and a decent wage. They introduced almost all the social legislation that helped our poor and destitute.

Senator Halligan is for breaking the link with sterling. He is one of those men who pretends he knows nothing about high finances, but when he gets a chance in a Sunday newspaper no banker or anybody else in this country would have a look in with his ability. One does not acquire such ability without hob-nobbing with a lot of those people who have plenty of money.

Anyone would know that Senator Halligan was merely putting this on as an act. I hear also that they are even going to change the colour of the pound notes. They are that destitute at present even the green £ is going and I think they are introducing a brown £ later on or perhaps even a yellow one. It might be more appropriate. Senator Halligan's photograph will probably replace that fine lady who did appear on the pound note.

An Leas-Chathaoirleach

Senator Dolan, the Chair has been terribly patient. The Senator has been speaking for five minutes and still has not come to the Wealth Tax Bill.

Mr. Dolan

The amusing thing about Senator Halligan's contribution is that he contends that, when the much-desired Coalition parties assumed office, the country was treated to an experience with which it will have to live for generations. In 1950 it crumbled because there were thousands of our people unemployed and the emigrant ships were packed. In 1956 and 1957 the same thing happened. I am pointing out to my learned friend on the other side that he has not demonstrated to our people in any way whatever that the Coalition are the salvation of all their ills and troubles because our people never enjoyed a high standard of living whenever a Coalition Government were in office.

An Leas-Chathaoirleach

On the Wealth Tax Bill, please Senator.

Mr. Dolan

With all due respect I thought that Senator——

(Interruptions.)

An Leas-Chathaoirleach

The Chair has been very lenient with the Senator.

Mr. Dolan

Remember 1913 when James Larkin bled for the workers in Dublin streets and followed the line right up the whole way. However, I shall not go down that avenue. I want to say emphatically that I have no doubt whatever, in so far as the ordinary people are concerned, that it was a Fianna Fáil Government, on every occasion, who increased their standard of living, their social welfare payments, and provided the jobs. We were the people who built the houses and brought in the industries. We built up Shannon Airport and provided work for our people. That is contributing to the economy of the country. This Bill, in the varnished way in which it was presented——

Mr. M.J. O'Higgins

Which Bill is it?

Mr. Dolan

I do not think the Leader of the House, with a deficit of £230 million, should be asking me any such question. Senator Halligan will surely explain to him—that is, if they are on talking terms and I am not sure after the performances of today and yesterday whether any of that crowd on the other side are on talking terms——

Mr. M.J. O'Higgins

It is a test question.

Mr. Dolan

The legacy left by them on all occasions was unemployment. That happened because the people who had money, who would invest in industry here, the people who came into Shannon Airport and established the industries there and our own people who had money do not lightly put their hard-won pennies into industry. They are hardheaded businessmen just as is Senator Halligan who built up Liberty Hall, who collected the little pennies from the workers and used them to build up those premises instead of erecting factories here, putting our workers into them, showing them how to run them and paying them a decent wage. No, he did not dream of doing that. No, he invested in it and rented out the halls to the big insurance companies, foreign capitalists and so on. Remember he has many bed-fellows over there who are very high up in the millionaire class. I do not see many of them around me on this side. This man says he is bleeding for the workers and associates with a very different type of person and has taken them, under his umbrella, into this House. Let there be no doubt about it. These are hardheaded business people. I wonder will they like this wealth tax. Some of them funked the voting in the other House the other day, because they know quite well they will not get a return for their money. Industrialists and people with a reasonable amount of money will not invest it here but quietly shove it across the Border, over to England or take it somewhere else. Who can stop them? Senator Halligan should remember that if he was trying to establish an industry in Dublin or any other part of Ireland, the first thing needed is capital. While they had the capital in Liberty Hall, why did they not use it to start a new industry here, show us how a factory should be run and how they would treat workers.

What must be instilled into our people is confidence. That is the first requirement of any investor or any man embarking on any worth-while project. Of course, he will be doing so for the benefit of himself, his family, shareholders and those who will invest money. We are not so foolish as not to believe that. But remember that that will not happen unless our people have confidence in the Government in office. Let there be no mistake about it, there is no confidence whatever in the outfit at the helm at present. If one uses as a yardstick the 103,000 people un-employed where are our poor and destitute now? Are they not in the bread queues and dole queues? Is that not the record of the Coalition Government?

Why does Senator Halligan, who knows it all, not come up with solutions to all these things now that he is in Government? He has his Cabinet behind him. What are they doing? Some of them are ratting on their colleagues in Government. Five or six members of the Labour Party who claimed the plums of office are holding separate meetings of their own. They are not working as a team so far as the Government are concerned. Five minutes ago the Minister had to sit there embarrassed. God knows I pitied him because I know the Minister and knew his family, he is a decent man; he has Cavan blood in his veins. I was sorry for him having to listen to one of his colleagues talking about the fine show they were putting on at such-and-such a meeting to try to cut the Minister's and his colleagues' throats and back-tracking on all the agreements they made with them. These are the colleagues with whom the Minister finds himself associating. I know they let him and his party down on a few occasions and will do it again. I will forecast this: the Labour Party got one-fifth of the vote of the electorate at the last election, but when Fine Gael are finished with them, they will not even get one-tenth of it at the next election because of their performance.

The experts say that all this will contribute to the Exchequer is approximately the sum of £1 million. That will be at the expense of driving from this country many of the people who have wealth. The Minister for Finance visited almost every country in Europe but he did not bring back any money with him. He even went to see the Arabs. He was knocking on the rich men's doors looking for money. I repeat, all that will be got from this tax is about £1 million. The Coalition prepared a 14-point programme and presented it to the people before the last election. They promised if they were elected they would fulfil the promises of this programme. They abolished estate duty but they put this Wealth Tax Bill in its place. This Bill is already having the effect of siphoning any worth-while capital that was in this country out of it. It was announced this evening that there would be another 200 people out of employment in Tullamore. This situation will continue right up to Christmas because we are now in mid-summer and there is no sign of an improvement in the employment position. That is the glorious record of Senator Halligan and his colleagues on the other side.

Mr. Kilbride

I suppose I may be repeating what previous speakers already said but this is a hazard for those of us who come last. I have not been here for many of the contributions. As one who is classified as a relatively small farmer and coming from a part of the country in which I am sure there will not be a single person caught under this wealth tax. I want to say I welcome the Bill. I do not welcome it because the people in my area will be immune but because taxation must be borne equally by every section of the community. If we consider the lower paid employees, those who work only a few days in the week but yet have extracted from them a portion of their earnings in income tax, we see the justification for taxing those at the other end of the scale. It is most unfair that a situation should exist where incomes exceeding £250,000 per annum can escape taxation. It is on these incomes that a wealth tax will be imposed.

The threshold is very high and Senator Yeats says the amount to be obtained by the Exchequer from this tax is approximately £1 million per annum, which would be a small amount in a national budget. In essence, what Senator Yeats is saying is that those who enjoy wealth of over £250,000 are entitled to escape tax free. I do not wish to dwell on the rights and wrongs of how people obtain wealth. Under our Constitution there is a right to hold private property and accepting that such wealth is obtained lawfully, fairly and by personal ability and energy, we have the obligation of placing a fair tax on it. I would be averse to the thinking of anybody who suggested that a company or a person, because of immense wealth, should be able to use a portion of this £1 million to boost the political party of their choice. They could use the weapon of, say, £100,000 to restore that particular party to office in the expectation that tax might not be imposed on them or that they might escape the just demands of this nation.

The Government would not be facing up to their responsibilities if they closed their eyes to expensive wealth without making the possessors of it bear the just burden that such wealth entails. The Government must impose tax that society demands for the building up of the nation, for the remedying of social injustices, for advances in our hospital programme, for improvements in social benefits, for the provision of local government schemes, houses and so on. The sum of £1 million could be put to good use towards achieving some of these things by supplementing the amount obtained from the ordinary taxpayer.

Perhaps the previous threshold level was rather high, but relatively it was low for the imposition of tax. In consequence some people in this country had reason to think in terms of there being anomalies. In fairness to the Minister and the Government we have had amendments introduced to remove these anomalies. These are things that the Minister and the Government should be commended for.

The Government's responsibility to society is that one section of the community is entitled to be treated as equal with all the people of the nation, in other words the concept that because a person is poor he has a right to the same standard of justice as a person who may be wealthier. The same concept holds good when we come to look at the very wealthy having the same obligations as the ordinary person who would never come under this tax. The vast majority of people will not come under it.

We know that the Government set about the task of removing death duties. One of the things which was a severe impediment to families was where the relatives of the breadwinner or the owner of a property or farm of any reasonable size were burdened with considerable death duties. In certain circumstances the property had to be sold to meet a very high percentage of its value, which was assessed by the Revenue Commissioners arbitrarily as a figure to be paid after the death of a property owner and caused severe hardship. The Government have removed this severe burden that was placed on the widow, the family or near relatives subsequent to the death of a landowner. In consequence of this the Government are entitled to see in what way they can justly impose on the community generally the sort of taxation that will make up for the discrepancies consequent on such action in respect of the budgetary provisions in regard to the running of the country.

The people who got off without paying tax are wealthy and can afford to pay it and they are for the first time being asked to pay it in this Bill. It is something for which the Government deserve the greatest commendation. So far as the people are concerned the inheritance that Senator Dolan referred to as coming to the people when this National Coalition Government came together is certainly something that we expect and hope will remain with him for 50 years. For removing the serious imposition that this Bill does remove the Government will be looked upon as being the Government responsible for the most just social act since this State was founded. It will be so looked on in generations to come. It will be a great benefit to the ordinary person, the widow, and the family of the man who has just died. They will know that the Government removed the terrible imposition that obtained in relation to their circumstances after the death of a near relative, a father, brother or a breadwinner who possessed some property.

The Government generally have steadfastly adhered to keeping their programme for social reform and justice. They have removed the serious health charges off the people and consequently rates have been reduced. This is another thing the Government, in consequence of their adjustment of taxation, have brought about. If we were to look at this Government and at the Minister's efforts in regard to social justice and general benefits for the people in regard to taxation we would have to look under ten or 15 different headings to find one where we would say that very good work had not been done. The burden of taxation has been made lighter, and has been shifted from the people it was most severe on. In this Bill the imposition of a tax, unwelcome though it may be, is a tax that is due in justice and equality and in fairness applies to the section of the community for which it is intended. I wish the Minister every success and I commend him on his approach to this matter.

Minister for Finance (Mr. R. Ryan)

I am grateful to the House for the manner in which Senators debated the Bill. That expression of appreciation goes to those who criticised the measure as much as to those who supported it very generously. It is interesting that an overwhelming number of speakers were, in fact, in favour of the Bill, including the Senators who are not associated with any particular party. I think that is significant.

(Interruptions.)

Mr. R. Ryan

I was very glad to hear from Senator Dolan that he was speaking on the Bill. I accept his word, being a decent Cavan man otherwise I might have had some difficulties.

Mr. Yeats

He was nearer to it than Senator Halligan. He went away down to the 19th century to the highways and byeways of socialism.

Mr. Halligan

That is where it started.

Mr. Hanafin

It must be hard for the Minister to prove he is a socialist.

Mr. R. Ryan

Senator FitzGerald, Senator Butler and others spoke about the removal of death duties. There is a very pertinent factor that I would like people never to forget, that is that the Fianna Fáil Party four years ago this month increased the top rate of estate duty from 40 to 55 per cent. That is only four years ago this month. My predecessor, now Deputy Colley, was so concerned about capitalism in Ireland, about the encouragement of investment in Ireland that he increased estate duty from 40 to 55 per cent. That was a confiscatory tax. There is no other way of describing it. It is because of that atrociously ill-advised measure that the people necessarily rose up in anger when they saw the very means by which families could earn a livelihood——

Mr. Hanafin

How many were unemployed in Deputy Colley's time?

Mr. R. Ryan

I must send copies of the debate in this House and the other House to the European Economic Community, to the Organisation for Economic Co-operation and Development, to the World Bank and all these great international organisations, because they will know then that the cause for the economic slump in the world, apparently, is wealth taxation.

Mr. Alexis FitzGerald

In Dublin?

Mr. R. Ryan

Yes. All, this nonsense of course overlooks the fact that wealth taxation existed in several European countries in the 19th century. Perhaps there is a relationship between the more just and efficient forms of taxation in successful European countries and perhaps, we might not be suffering as many economic financial difficulties in 1975, even in the years up to 1975, if we had had a more efficient and equitable form of taxation. The countries where the greatest social strains exist in Europe are those countries that do not have an equitable form of taxation, a form of taxation which is not only fair, but is seen to be fair, and is operated properly. Senator FitzGerald and a number of other Senators very properly drew attention to the importance of having a system of taxation that the people respected and saw as one which was designed to collect tax from those who were best in the position to pay tax.

It is true that one of the great virtues of the new package of taxation is that taxation will be more difficult to avoid or evade. The Revenue Commissioners will be able to monitor income and property accumulation. That is a good thing. It might, for instance help to correct some of the mis-statements that have been made about property holdings in this country. A number of erroneous calculations have been made. The trouble is that we do not know what the full picture is. Estate duty could be avoided by prudent people, who if they had not the skill themselves, could easily employ people to advise them how legitimately to avoid estate duties. The result therefore is that the only information the Revenue Commissioners had of property accumulation here is what came to light in the course of the administration of estates which bore estate duty.

It is interesting to look at these statistics. We will see just how few people, on the basis of the information which we have, will be affected by wealth taxation in Ireland. Senator Russell suggested that it might be useful if the Revenue Commissioners were to conduct seminars to advise people about the workings of the capital taxation and the wealth taxation in particular. You could collect into one hall, and not a very large hall at that, the number of people who will be affected annually by the wealth taxation. There will be no need for a series of seminars.

Mr. Hanafin

It is the wealthy who are leaving the country.

Mr. R. Ryan

Of course, that is not so.

Mr. Hanafin

It is so, they are not coming in.

Mr. R. Ryan

In the year ending 31st March, 1974, the report of the Revenue Commissioners disclosed that the number of persons with estates over £100,000 was 68. That is 68 persons out of 3,400 whose estates were liable for estate duty in the year ending 31st March, 1974.

Mr. Yeats

That is 68 out of the number of people who died that year. There was a fair number alive.

Mr. R. Ryan

It is 68 of 3,400, yes. Let us consider another matter. Those property holdings included assets which will be exempt under the wealth tax. They included private houses and their contents, livestock, all the other articles which are exempt under the wealth tax system, so that the more appropriate figure would probably be to take the number of people whose estates in 1974 were over £150,000 and then you get the figure of only 32 out of 3,400 people who paid estate duty in that year.

To get the total number of people who will be affected you multiply that number by 30, because estate duty is, on average, paid once every 30 years or so. That gives you the number of people who, under the available statistics, will be caught for wealth tax. If the number turns out to be greater it will reflect exactly the number of wealthy people who avoided paying estate duty in the past. We are asked to put a figure on what returns we expect to get from wealth tax. We cannot do it until those statistics are available, until we can ascertain from returns the number of estates which, because they were legally set up in a certain way, avoided payment of estate duty in the past.

Senator Yeats said the wealth tax is a property tax. Fair enough, but it is a softer tax than the Fianna Fáil property tax, the tax which they were proposing to replace rates. This would have meant national taxation on every home in the country, a nationally imposed tax on every private residence to replace the millions of pounds that were being lost by their last minute, pre-election promise to abolish rates. There is no taxation on private residences under the wealth tax, none whatsoever. It will apply only——

Mr. Yeats

There are still rates——

Mr. R. Ryan

——when it affects a person on such portions of his property as exceed £100,000 and the home and its contents, and all the other exempted items.

Mr. Yeats

How would the tax have been compensated for if they were not paying rates now?

Mr. M.J. O'Higgins

You would have had a national house tax plus estate duty, at 55 per cent.

Mr. R. Ryan

Exactly—at 55 per cent.

Mr. Yeats

For people with £200,000. Senator Halligan weeps for them now.

Mr. R. Ryan

No. If Senator Yeats wanted to be reminded of the estate duty which his Government operated, it began to operate when we went into power on estates of £5,000 and upwards——

Mr. Yeats

Not at 55 per cent.

Mr. R. Ryan

It operated at 10 per cent when the estate amounted to £15,000. Remember every humble home and its contents, the motor car, the money in the bank, the insurance policy and all, were brought in. You paid 10 per cent at £15,000, 21 per cent at £40,000, 27 per cent at £50,000, 37 per cent at £75,000, 41 per cent at £100,000, 50 per cent over £150,000 and 55 per cent over £200,000.

Mr. Yeats

Which is precisely what I said, the people with £200,000.

Mr. R. Ryan

All items of property were included. Several of the other points raised by Senator Yeats can be taken up on Committee Stage because there are specific sections which deal with them and I need not pursue them now. I would like to answer his complaint about not having thresholds of exemption for private non-trading companies and discretionary trusts. You cannot have them, because if you did, the simplest avenue of avoidance would be available. People would simply create a multiplicity of companies or discretionary trusts, earning for each of them thresholds of exemption. As a result, the tax could be avoided completely. This Government, of which I am privileged to be a member, will not put on the statute books any tax law which can be conveniently avoided.

If we design our tax laws properly then the rate of tax to be borne by individual citizens will be less than it is at present. Because we have such large-scale methods of avoidance we have some of the highest rates of tax in Europe. If the load were more evenly spread then the high rate would not apply to those who are caught.

Senator FitzGerald was quite right when he spoke about people being afraid of unfamiliar things, as being particularly fearful of a tax which they did not see working. The reason the Government have considered it necessary, in this section of the Oireachtas, that this Bill should become law is because there has been a frightful amount of mischief deliberate and accidental, in the course of the debate on wealth taxation over the last couple of years. I think Senator FitzGerald has misled himself.

Mr. Alexis FitzGerald

It frequently happens.

Mr. R. Ryan

I do not blame him in this instance because a number of commentators have misled themselves and the people in recent weeks. The National Coalition Government made a pledge to introduce a wealth tax. They published their White Paper on wealth tax before the present British Government went into office. It is not a question of the Irish Government following the British example.

Mr. Alexis FitzGerald

Could I be allowed to lead the Minister into a more correct interpretation of what I said? The views which were being expressed in action by the British Government were expressed in publications long before that Government were formed.

Mr. R. Ryan

Their ideas were not formulated with the precision with which we formulated ours in the White Paper and, with all respect, I think there certainly was not sufficient guidance or inspiration in anything they said. There was no certainly that the party who are now in power in Britain would achieve power and we had made our commitment long before they were in a position to give a lead in this matter.

Mr. Yeats

The two most bankrupt Governments in Europe are following each other apace.

Mr. R. Ryan

That is not so. Senator FitzGerald applauded the drafting of this legislation and let me say that I accept his commendations on behalf of the technical experts who are the first in common law countries to design a wealth tax. This tax is not only unique in that it is the major taxation reform measure in our history; it is a major break from the British system as it has existed up to now but it is also unique in being the first common law wealth tax in the world. We have, therefore, every reason to be proud of our achievement because we have produced, in circumstances totally different from those which exist in countries that have wealth tax at the moment, a system of taxation which is fair and workable.

We do not think for one moment that we have designed the last word in capital taxation. Those countries who have wealth taxes were obliged, in the light of experience, to modify their taxes. They also had to tailor them according to changing circumstances. The same will apply in Ireland and we will most carefully monitor all the information which is received under these capital taxes so as to ensure that no cases of hardship arise. If they do arise, then there will be no hesitation in bringing in legislation to correct any hardship and to make such correction retrospective if the circumstances of a particular case warrant it.

So far as furnishing returns this year is concerned, the 5th October is the appropriate date. The Revenue Commissioners are all-seeing and have no Nelson eye but I think persons may be assured that there will be a practical and pragmatic approach to the problems which are bound to arise in the initial stages and there will be no merciless hunting of people. As long as they come forward and cooperate with the Revenue Commissioners, the commissioners will cooperate with them and will not be oppressive.

Senator Fitzgerald suggested the establishment of a fiscal advisory committee. This matter has been engaging my attention for some time and I have had some discussions with the professional organisations involved. I have not been able to accede to the suggestion up to now for the very reason that technical experts on the State side who could be of assistance to such a committee have been exhaustively involved in the preparation of this legislation and in having ad hoc meetings with organisations and persons who had a particular interest in this new tax code. I accept it would be a desirable thing to have and when the dust and excitement of the preparations of this capital package settles down then I think we might consider this for the future.

Senator FitzGerald mentioned the difficulties that could arise where you could have what he called "locked in" situations in discretionary trusts. We have tried in section 5 to deal with specific problems which could arise under the discretionary trusts by allowing us to look through them where the beneficiaries of the trust were people who would not be in a position to manage their own affairs. Again, it is an area where quite clearly we would have to thread very carefully and to observe the situation as it unfolds itself. If further adjustment is needed in this area we will be ready to make it, while not permitting discretionary trusts to be used in the future for the purpose of tax avoidance or tax deferment. If tax is due we want it to be paid and not avoided. If Parliament decides that a certain rate of tax is to be paid then Parliament must see to it that it is paid and must close off any methods which would be available to people to avoid it.

Once again in this debate there has been criticism that the Bill does not contain what is called an automatic indicator or some regulator to deal with inflation both in relation to the rates of tax and the thresholds and exemptions and so forth. I am a strong believer in parliamentary democracy and I believe it is the Houses of the Oireachtas who have the right to say in any year what is the appropriate rate of tax, what are the types of income or property that should be taxed and what the thresholds or exemptions should be. It would be wrong now for us to presume to set forever more and a day what the rates of tax would be or the thresholds. I certainly do not visualise any change in the rate of tax. Those countries that have introduced wealth taxes have tended to stay with the rate of tax which they introduced because it is obviously undesirable that the rate should increase. We have given the most careful consideration to the striking of the rate which will be 1 per cent above the exempted levels on non-productive assets but will operate at only 8 per cent on productive assets themselves.

Senator FitzGerald raised a number of points which perhaps I could best deal with when we come to Committee Stage but there was one he mentioned and it was taken up subsequently by another speaker—I think it was Senator Horgan. He queried why bloodstock was the sacred cow of Ireland. Bloodstock moves fast, not only on the race track but also internationally. As they are such moveable objects they could easily be shifted out of the country on the annual valuation date. Secondly, because a very large proportion of the bloodstock in this country is owned internationally, if we were to tax bloodstock the probability would be that it would move elsewhere with consequential unemployment amongst the very large number of people who are engaged in managing the bloodstock industry. The interesting thing is that the approach to the Government to exempt bloodstock came from the workers in the bloodstock industry rather than from the owners of bloodstock, most of whom are sophisticated in international finance and property holding and knew how they could avoid wealth tax on bloodstock in Ireland, if we had decided to impose it.

Mr. Hanafin

The Minister would not be hit if we taxed bloodstock.

Mr. R. Ryan

Senator Horgan, and other Senators, agreed with the social equity and anti-avoidance and evasion aspects of the Bill. They said it would discourage too great accumulations and, of course, in that, they were right. If persons want to avoid the wealth tax they can do so by distributing their property and to that extent it may be socially advantageous. There are other points I can take up when we come to Committee Stage. There has been certain criticism that some of the exemptions are too high and too generous but we make no apology for the particular exemptions which we have granted because we want to provide incentives for investment in Ireland.

Mr. Hanafin

The Minister is killing it.

Mr. R. Ryan

Ireland, under this wealth tax code, will have the easiest wealth tax in all Europe. The facts are that capital is flowing into Ireland at a rate never previously experienced. The Irish Government is able to sell more securities to people who are investing in Government stocks than ever before. International confidence has never been greater. These facts speak for themselves. I want to say to those who have suggested that capital is going out of the country that there is no point in sending it out of the country because under the Bill, Irish people who are domiciled and resident here would pay wealth tax on the wealth no matter where it may be, so there is nothing to be gained unless they follow the money they send out. The tax havens of the world are getting very crowded indeed. They even have quotas now on the number of people they will admit. I suggest to those who might be contemplating that, that they would be better off at home where they will have one of the most benign capital taxation systems in the world. If they do that and put the money into productive assets instead of leaving it, as many of them have done in the past, in forms of wealth that yielded no return, they will be helping the economy and helping themselves as well.

Question put.

The Seanad divided: Tá, 19; Níl, 12.

Tá

• Boland, John.
• Butler, Pierce.
• Codd, Patrick.
• Daly, Jack.
• Deasy, Austin.
• FitzGerald, Alexis.
• Halligan, Brendan.
• Harte, John.
• Kilbride, Thomas.
• McAuliffe, Timothy.
• McCartin, John Joseph.
• O'Brien, Andy.
• O'Brien, William.
• O'Higgins, Michael J.
• O'Toole, Patrick.
• Owens, Evelyn.
• Sanfey, James W.
• Walsh, Mary.
• Whyte, Liam.

Níl

• Brennan, John J.
• Browne, Patrick (Fad).
• Dolan, Séamus.
• Eachthéirn, Cáit Uí.
• Garrett, Jack.
• Hanafin, Des.
• Keegan, Seán.
• Lenihan, Brian.
• McGlinchey, Bernard.
• Ryan, Eoin.
• Ryan, William.
• Yeats, Michael B.

Tellers: Tá, Senators Sanfey and Halligan; Níl, Senators W. Ryan and Garrett.

Committee Stage ordered for Tuesday, 5th August, 1975.

The Seanad adjourned at 10.15 p.m. until 3 p.m. on Tuesday, 5th August, 1975.