Before we take up consideration of the Report Stage of this Bill, I should like to indicate that I have ruled that recommendation No. 13 standing in the name of Senator Yeats is out of order on the ground that it involves a potential charge on the people. The Senator has been notified accordingly.
Wealth Tax Bill, 1975 (Certified Money Bill): Report Stage.
I move recommendation No. 1:
In page 5, lines 12 and 13, to delete "183" and substitute "240".
As recommendations Nos. 1, 2 and 3 are related, it is suggested they be debated together.
I am not sure about No. 3. I would rather take No. 3 separately because it relates to a different matter. Nos. 1 and 2 relate to foreigners who come and get domiciled, and No. 3 relates to an Irishman who leaves the country.
If it is agreed, Nos. 1 and 2 will be taken together and No. 3 separately.
Recommendation No. 1 deals with the provisions of section 3 of the Bill relating to the deeming of domicile, if I may use that phrase. The general theory of domicile, as I understand it, is that a foreigner becomes domiciled in this country if he makes a definite decision to reside here permanently. In the Bill there is a procedure by which a foreigner can be deemed to become domiciled in this country. As the section stands he must be here 183 days, that is, at least half a year, immediately preceding the valuation for the purposes of this Bill, and 183 days in each of six or more of the nine years immediately prior to that year. As this is very much an exception to the universal international rule about domicile, I feel it should be drawn a bit more tightly.
The Minister mentioned that under United Kingdom tax arrangements a person is only deemed to be domiciled there if he has been resident for a considerable period, something like 18 or 19 years. The procedure here would have the effect that if the residence here was for the minimum laid down in the Bill, you could be resident for only three-and-a-half years out of the previous ten and still be deemed to be domiciled. Of course, if you have been three-and-a-half years out of ten here you have been six-and-a-half years somewhere else. Under such circumstances it seems unreasonable and potentially confusing for all concerned in different countries to establish domicile with such ease.
There is the point as to how one is going to prove these facts, but assuming that these matters can be settled, I think there ought to be a somewhat narrower interpretation of this. I have suggested in these two recommendations that instead of 183 days, which is half the year, the figure "240" which is eight months, two-thirds of the year should be inserted, and that instead of it being for six or more out of nine years immediately prior to the valuation year it should be eight out of eleven. The general principle set out in the section has preserved the deeming of a foreigner to be domiciled and so on. There would be a better chance then that the person concerned had really made a conscious decision to become domiciled here. I would suggest to the Minister that he would be wise to provide for this whenever he comes to make changes in this legislation. It is unreasonable to suggest that somebody can be domiciled here when he has only been here for three-and-a-half years out of ten.
I am unable to accept these recommendations. For income tax purposes, six months residence is the qualifying period both here and in Britain and indeed in most other countries with which Irish people have association. I am not aware of any eight-month period for tax purposes in any tax law in any country. That in itself of course would not be sufficient reason for rejecting the suggestion if the suggestion had sufficient merit. But there are obvious advantages when introducing a new tax in not complicating the matter and the problems with which people have to deal by introducing new concepts and new qualifying periods. The Bill as drafted has the effect that the global wealth of a person who might loosely be described as a foreigner is not liable to wealth tax unless he has resided in the State for at least six months in a year ending on the valuation date and, in addition, he has resided here for six months in each of six years or more of the previous nine years. I think, by any standards, that is a very generous provision. It is not unreasonable to treat any person who has spent more than half a year or seven out of ten years as being liable to the same wealth tax as an Irish person. It would be a cause of irritation to Irish people if foreigners who have spent so much of their time here did not pay a comparable amount of wealth tax as an Irish person. In no other European country would a foreigner be treated as favourably as he would be treated under our wealth tax code. The general rule for wealth tax purposes is that an individual, who is resident for income tax purposes, and, accordingly liable on his world income, is also resident for wealth tax purposes and is liable accordingly, to pay wealth tax on his world assets. Residence alone is the criterion for liability and no question of domicile as we understand it arises in other countries. Generally speaking, in Europe, six months' residence in the country qualifies for residence for this purpose and in some cases the period is less.
Apart from these reasons, which show that there is no comparison between our favourable position here and the situation elsewhere, the suggested eight months is unacceptable for the reasons which I mentioned at the beginning, the complexities which it would generate. Foreigners who are liable to income tax and who reside here and in other countries keep their accounts and their diaries very carefully adjusted for these six-month periods, and it would be making life a little more difficult for them and for the Revenue Commissioners if we were to have different qualifying dates and periods for wealth tax.
Really there is not much between the Minister and myself. The Minister in paragraph (a) of subsection (5) has said that people who had resided in the country for these various figures as laid down in the paragraph would be liable to wealth tax. I would not quarrel with that. The problem I have been raising is that he has not merely said they would be liable for tax but that they should be deemed to be domiciled. I am no expert on these matters of nationality and international law, but it seems to me that a basic proposition can be laid down with regard to domicile that you can only be domiciled in one place.
If someone has been resident in this country for the equivalent of three-and-a-half or four years out of the past ten years he is deemed, for the purposes of this Bill, to be domiciled in Ireland. Quite obviously he will remain domiciled in whatever country he comes from because he will have been six or six-and-a-half years back home. As far as the law of that country is concerned he will remain domiciled and would, therefore, be domiciled in two places for tax purposes. This seems to be a clear breach with all the normal tenets of international law with regard to such matters. That is really the burden of my objection to this.
It is not that I feel that it is in any way unjust, leaving aside the economic aspect of it which we have discussed from time to time, to tax foreigners who come here to live for these periods in Ireland. I cannot see why the Minister could not have said : "They shall be liable to wealth tax in this event" and not have gone through this rigmarole of saying that they should be deemed to be domiciled, which does not make sense at all if they are still domiciled somewhere else.
Recommendation, by leave, withdrawn.
Recommendation No. 2 not moved.
I move recommendation No. 3:
In page 5, line 21, to delete "three" and substitute "two".
This deals with the reverse procedure where an Irishman goes abroad. Under the Bill, in section 3, subsection (5), an Irishman who leaves to train or take a job abroad, perhaps in the EEC, is liable to wealth tax for three years after he has left Ireland, notwithstanding that he ceased to be domiciled in the State after that date, he shall be deemed to be domiciled in the State on the three valuation dates next following that valuation date after which he left. Here again we have this deeming of being domiciled. There is the almost non sequitur that notwithstanding that he ceased to be domiciled he shall, in fact, be deemed to be domiciled.
This could, obviously, cause problems with people taking jobs abroad. It could make more difficult the problem of recruiting people for these important positions abroad. It could also involve them in problems with wealth taxes abroad. As the Minister has pointed out in a number of cases you become liable to wealth tax after residence of six months and would, therefore, be liable to wealth tax in these countries, in so far as they have it. You would certainly be liable to other taxes. All the time for three valuation dates, for three years—four years is the maximum—he may be abroad, still be domiciled here and still be liable to wealth tax.
Even though in due course there will be double wealth tax agreements and so on so that it will only have to be paid once, in the interim period there may not be. Even if there are it involves the people concerned in all the paraphernalia of the wealth tax twice over and then they have to try to find out from whom they will get their wealth tax back. It seems unnecessary. I am not proposing in this recommendation to abolish it altogether. Obviously there must be some type of leeway. You cannot have a man leaving on a Monday and ceasing to be liable for wealth tax on a Tuesday, but I suggest that two years is a reasonable compromise— three is too long—and would be quite sufficient as a safeguard to the Commissioners here and would be less actively discouraging for those who are being recruited for jobs abroad.
I would like the Senator to observe that the question of residence has to be looked at as well as that of domicile. Paragraph (5) (a) (ii) provides that:
an individual who was domiciled and ordinarily resident in the State on a valuation date shall, notwithstanding that he ceased to be domiciled in the State after that date, be deemed to be domiciled in the State on the three valuation dates next following that valuation date.
If a person claims to have abandoned his domicile here, but is still ordinarily resident on a valuation date, to say the least of it, some question would arise as to the bone fides of his claim that he had, in fact, abandoned his domicile here. The mere absence of somebody from a country, even for a long period, is not in itself evidence of the abandonment of domicile. I would not go so far as to say that anybody who wished to enjoy the great Irish blessing of bás in Éirinn had not abandoned domicile but it is pretty close to it.
A person could be absent, as the Senator visualises, working on the staff of the EEC in Brussels or elsewhere but still maintain domicile in Ireland. The practice has been for a large number of people at that level to maintain their domicile here and not to effect any change in it. The provision is essentially an anti-avoidance one to discourage the making of insincere claims and, in the circumstances, at least three valuation dates would be necessary to ensure that people would not abuse the position.
The Minister has pointed out—of course he is right— that a great many people who go abroad to take jobs in the EEC or elsewhere, particularly if they go abroad for extended training, maintain a domicile here. Then this sub-paragraph does not apply. It says:
an individual who was domiciled and ordinarily resident in the State on a valuation date shall, notwithstanding that he ceased to be domiciled in the State after that date, be deemed to be domiciled in the State on the three valuation dates next following that valuation date.
This implies that he ceased to be domiciled. If he did not cease to be domiciled there would be no problem. So long as he remains domiciled here he can be 20 years abroad and still be liable to a wealth tax. There is no difficulty at all. The problem arises under the Minister's sub-paragraph where he has ceased to be domiciled. Therefore, he does not maintain a house here or anything of that kind. He has ceased to be domiciled but the Minister is deeming him to be domiciled for three successive valuation dates. That is the problem that is raised here. Under these circumstances, where he has cut himself off and has no domicile here, he is specifically recognised, I take it, by the Revenue Commissioners for this purpose to be no longer domiciled but there is this artificial deeming of domicile for three years. I agree that there must be some leeway here. Three is too much, and two would be sufficient. I am not pressing the matter.
Recommendation, by leave, withdrawn.
I move recommendation No. 4:
In page 6, to delete lines 16 to 19.
This recommendation relates to this curious, extraordinarily 19th century —one might almost say 18th century —provision in connection with husband and wives. The Minister who, at an earlier stage on this Bill prided himself on how he was treating women in this Women's International Year, has provided in this part of subsection (2) that in a case where a wife owns all the property of the family—she is a business woman; the husband, on the other hand, has no property or assets at all; he may perhaps own the family dwelling-house but he is exempt as far as taxable assets are concerned, they belong to the wife—the husband can apply to have the tax apportioned as between them. In other words, the tax is completely apportioned on the wife; she is the only one who has taxable assets and all would seem to be well. It is a sensible arrangement as the wife is the businesswoman; she knows where her assets are and is dealing with them every day of the week. Therefore, it is only reasonable that she should be the one liable for wealth tax. But what do we find in the proviso at the end of subsection (2)? It provides that the "individual"—that is the husband; the "person" is the wife; it is curious terminology but that is what it means—shall remain primarily accountable under section 14 for the payment of tax on the taxable wealth aggregated under this section notwithstanding any apportionment made under this subsection.
It says specifically and categorically that even where the wife owns all the property, even where it has been apportioned between them so that she is assessed for her property and the husband has no property to be assessed on, nonetheless, in this International Women's Year, the husband is the person who is primarily accountable, under section 14, for this tax. It also works in the reverse order, but one must think of the position of the wife where she has all the property, the husband has none, yet he is primarily accountable. It is difficult to understand the reasoning behind this provision; it is more 18th century than 19th century. I do not mind how many precedents there are in other taxation law; if there are, which I doubt, it is time they were dropped. I think the Minister would like to be progressive in these matters and he should make up his mind that the time has come to do away with this kind of lunacy and in such a case as I have mentioned, allow the person who has the assets, is assessed for the tax, pays the tax to be primarily accountable also.
This recommendation proposed by Senator Yeats is in line with a number of other recommendations to the section which were put down on Committee Stage. All the recommendations on Committee Stage and this recommendation were put down to emphasise the quality, both in regard to liability and every other aspect of tax payments, which should exist between the sexes in 1975. There are even more glaring examples of inequality than this particular one elsewhere in the section but they were dealt with on Committee Stage. Recommendation No. 4, put down by Senator Yeats, highlights the fact that in this section the Minister for Finance is not in tune with the rightly growing independence of women. In this part of section 4 Fianna Fáil are seeking to avoid the situation where primary accountability still lies with the husband even though the wife may be the person who counts as regards business and assets.
It seems a very strange section, apart from the fact that it is out of tune with modern thinking and that of this particular year in which we are seeking in every aspect of policy to emphasise the importance of women's rights; there is a worldwide drive in this direction in the current year and we should be part of it unless we are merely paying lip service to the principle rather than being realistic; we have seen the Government's failure to face up to the pay issue vis-á-vis women in the public service but I do not want to go into that matter here.
The drafting of these lines which Senator Yeats seeks to delete is symptomatic of an attitude of mind which has not caught up with the fact that, although the whole world is trying to achieve equalisation of rights between the sexes, although lip service is being paid by the Minister for Labour to women's rights in this particular year, not only in this legislation but right through legislation in general the fact has not percolated through to the Government that this equalisation must be brought about. This section is riddled with the feudal, old-fashioned attitudes which regard women as chattels. Nowhere is this attitude seen more clearly than in this subsection which does not link accountability with responsibility and which this recommendation of Senator Yeats seeks to delete. The wife is being discriminated against.
The logical and correct thing to do would be to have an equation between responsibility and accountability. The person primarily accountable should ipso facto be the person primarily responsible and vice versa. Senator Yeats' recommendation is logical and I would ask the Minister to accept it.
I must resist the efforts of the Fianna Fáil Party to break up marriages; it is anti-social and against the interests of married women as well as the husbands and children. The Opposition must live in a very unreal world, or they choose to ignore the fact that property tends to be managed in family situations by the family for and on behalf of the family.
There are some fortunate spouses where each individual spouse has substantial property in his and her own right, but they are not the norm. Even where such cases exist it is necessary, for the purpose of the administration of the wealth tax, to aggregate the property in order to operate the marriage threshold of £100,000 exempted property.
At the rate the Opposition are going now I would expect them to ask that in respect of a married couple they should have exempted not merely one principal private residence but two principal private residences so that each could exercise an individual right to live apart from the other. That might be interpreted as a breach of the marriage obligations but, apparently, the Opposition seem to visualise that spouses in 1975 and in future will want to live apart, to manage their affairs without consultation with one another. I would be sorry to think that that day had arrived. I do not think it has. We prefer to deal with the real situation rather than with imaginary ones which the Opposition are putting forward.
We would like the Minister to come to the recommendation.
I am doing so. Is it suggested that I should follow the bad example offered to me by the other side of the House? What I have said deals with property in family situations. I am not going to pursue the——
The Minister has provided for it to be apportioned.
At the request of any of the persons.
Is the Minister splitting families now?
No, an apportionment may be made of the tax——
That is all it relates to.
——for the purpose of enabling a person who has paid tax on behalf of another to obtain a refund of the tax so paid. The purpose is to enable whoever pays the tax, be it the husband or the wife—it could be the wife who pays it—to know the amount that he or she is paying on behalf of another.
Which other?
The wife could pay all the tax and in the tax she pays it could be a proportion attributable to the property belonging to the husband. If the wife wants to know how much——
That is a strange picture of family life and a new one on me.
We are providing in the Bill that family property is to be aggregated, the property of both spouses and minor children is to be aggregated, and one person will be primarily liable for the payment of that tax. Either the person primarily liable or any one of the other people may be required to pay the tax. It is surely reasonable that any person who pays tax on behalf of another should have a clear picture of how much has been paid.
They can recover tax from each other? That is a lovely picture of family life.
I do not know what the Senator is now suggesting. He seems to be inferring that we are saying something new. The Bill clearly provides, and there has been discussion on this, that a party who pays tax on behalf of another has a right to get a refund.
From the wife or the husband?
That is wrong. It would be unfair not to give a person a right to obtain a refund of tax which he or she paid on behalf of another.
On behalf of a husband or wife?
Yes.
A husband can reclaim tax the wife has paid and the wife can reclaim tax the husband has paid. This is a great picture of family life.
It is not abnormal for——
I should hope it is.
It should not be necessary in most cases to rely upon a statutory right to make appropriate family arrangements. They have been made by normal healthy partners to a marriage among themselves because of the natural love and affection which they bear for one another; they would want to share the burdens as well as the blessings. But, nonetheless, we must provide in a Bill that where people require information in order to correctly arrange their affairs that the Revenue Commissioners would furnish that information to them. The proposals in the Bill for apportionment are for the convenience of the parties themselves. I cannot accept that the Revenue Commissioners should be obliged to make several different applications and collections from different people in respect of a tax which is, as it were, a tax on family wealth.
The Minister told me yesterday that where the wife had all the property that it would be the wife who would have to pay the tax; they would send the assessments to her and she would pay.
So they would.
But the husband is still primarily liable.
There would be no question of apportionment if the wife only is the owner of wealth because one does not apportion 100 per cent of nothing. Apportionment presumes that both parties have individual taxable wealth. There cannot be any apportionment in the case in which one party owns all the wealth.
I will not follow the Minister down these curious family channels that are provided for in this Bill where husband and wife spend their time, apparently, claiming back tax that the other has paid. It raises prospects of family life at which the mind boggles. I will stick to the simple situation I raised in this recommendation, where the wife has all the property or, if the Minister prefers, nine-tenths of the property and the husband one-tenth. If apportionment is made, according to what the Minister said yesterday, the Revenue Commissioners will, in fact, send assessments to the wife. She is a businesswoman. She has the property and she will be the person they will deal with from the point of view of getting the tax from her and sending her the assessments. This proviso, at the end of the subsection says that even in this case the husband, who may be a man of straw in economic terms, he either has no property or very little, is in the true principle of the hierarchy of the male, the man is the boss and so on and so forth, the person who is primarily accountable.
I agree with the Minister that family life is not an unending battle, at least it certainly ought not to be. It is a team affair. The family stand together. In real life the property is aggregated. One does not have financial disputes of that kind going on inside the family, certainly one ought not to. I accept that in the vast majority of cases it will probably be the husband who has all or most of the property and the vast majority of cases probably all concerned are perfectly happy that the husband should be the person who is primarily accountable, fills in all the forms, deals with the Revenue Commissioners and so on.
In these cases, which after all are those provided for in this subsection in relation to apportionment and so on, where the wife is the businesswoman, has the property, it seems altogether outrageous that this ancient tradition should remain that even in this case the husband is the boss, the husband is primarily accountable, something that is laid down solemnly in this proviso. The Minister has made no effort at all to deal with the point I raised. He has raised all kinds of other issues, and he appalled me by his interpretation of his own subsection. He should accept this principle; it is not a difficult one to follow. It is perfectly obvious that in 95 per cent of the cases life will go on on the basis that the husband is the person who has the property and fills up the forms. However, in this day and age to say that a wife who has all the property or a greater part of the property, is a businesswoman in her own right, and that she should be in the position to pay the tax, is assessed for the tax, but we still have this statement that the husband is primarily accountable. It just does not make sense.
Recommendation, by leave, withdrawn.
Recommendations Nos. 5 and 6 are related and will be taken together.
I move recommendation No. 5:
In page 11, between lines 19 and 20, to insert the following:
"(g) the right to receive any benefit or any annuity or periodic payment which, when added to any such right, if any, under any of the schemes, provisions or arrangements referred to in any of the subparagraphs of paragraph (e), other than subparagraph (iii), would yield an entitlement equivalent to the superannuation entitlement of a Civil Servant having a similar income and contribution record;
(h) the property of any scheme or arrangement assuring or supporting the right to receive any benefit, annuity or periodic payment referred to in paragraph (g)."
This is another effort to rectify a glaring omission in the provisions of section 7 (1) (e). This paragraph provides exemptions for pensions and annuities and lists a number of situations in which a person in receipt of a pension or superannuation which will not be caught by wealth tax, and the property which funds it, will not be caught for wealth tax. The omission is the self-employed man, the professional man or business man, who is not fortunate enough to be employed by a large firm having a pension scheme, or to be a civil servant, or to be employed by a semi-State body. He is a person who possibly had it hard in the early part of his working life and was not able to make proper arrangements by way of an insurance premium. Let us look at the man who has been in insecure employment for the best part of his working life, has experienced the slings and arrows of outrageous fortune, but in spite of this managed to put aside some money for his retirement. When he reaches retirement age, he has this sum to give him an income, the equivalent of a pension. He does not qualify for exemption under this section.
It is an injustice that provision has not been made for the man who has not had an easy life, who had not the protection of working for a large firm, knowing that at the end of his working life he would have a pension. He had to do everything the hard way, and put away the money for his retirement as I said. This man is not provided for under this section.
I appreciate that it would create administrative difficulties and, in certain circumstances, would be regarded as a loophole, something the Minister is reluctant to allow. Nevertheless, that is not a good excuse for not making an attempt to provide for this situation. Provision should be made for a scheme to allow for it. I am not suggesting that if a man at a certain age said he had a sum of money which is to provide for his retirement that he should automatically be provided for. He would have to make a case and give a few years' notice of his intention to retire and that he wanted to put aside certain sums for his retirement. Naturally, it would have to be a genuine retirement situation.
A case would have to be made and approved by the Revenue Commissioners. Some provision should be put in the Bill to enable the Commissioners to accept such case where they were satisfied that a legitimate case has been made. This is not possible at the moment and it is a serious and glaring omission.
The Minister is to be congratulated on what paragraph (e) provides but the omission I mentioned is very serious and should be rectified. Facing the reality of the position here today, I realise that the Minister is not going to accept this recommendation but, nevertheless, I am asking him to bear it in mind and see whether it can be incorporated in the Act as soon as possible in the future.
We had this recommendation on Committee Stage and the Minister indicated that there was some merit in it. I should like to repeat what Senator Ryan said. It is a matter which should be borne in mind for future legislation. It is a serious omission from the list of exemptions. The recommendation seeks no more than exemption from tax of an annuity, an insurance policy of a self-employed person, a person who has been in a hazardous position all his life, who has not been under the umbrella of a superannuation or pension scheme. We seek to have such person exempted, with a reasonable ceiling— being entitled to the equivalent of a superannuation entitlement of a civil servant with a similar income and contribution record. Whether on the income side or whether it is capitalised, the recommendation seeks that the person in that category should receive the same exemptions as those set out in subparagraph (e). The subparagraph provides for various annuities and benefits being exempted from the provisions of this Bill. It would appear to be a logical sequel to that desirable and proper list of exemptions that the category we are discussing should equally be exempted. The ceiling is a reasonable one. We ask for no more for these people than the exemptions being granted to a civil servant in similar circumstances.
The exemption in the category of self-employed persons bears most heavily on the people who have taken risks in life, people who have not been in a sheltered occupation, people who, through their own energy and enterprise, have made money and have, at an early stage, looked after themselves by taking out an insurance policy or some form of annuity. These people are outside any organised superannuation scheme and have sought to help themselves towards making provision for their retirement. They are in the risk-bearing and risk-taking stratum of our society and should be given every incentive possible. I am sure the Minister will agree with my statements. The omission does not appear to be one of intent; it is just something that appears to have been overlooked. Looking at it on the basis that it is merely an omission, it is one that I would ask the Minister to rectify in his next financial measure. It is one that we feel strongly about. I have had views and representations from outside on this matter. It is one where the Minister could, in his own time, whenever the next financial legislation is prepared insert as an addition to the desirable exemptions which are set out in subparagraph (e).
Many people think that the grass in the next field is always greener, that the lost of the public servant is an easy one and that he has special privileges which are not available to people in the private sector. There is no justification for that view.
That is not the point. We are just merely using their scale or ceiling as the ceiling to be applied. There is no reflection involved as far as civil servants are concerned.
Section 7 (1) (e) (iv) provides for contracts of insurance under which people may obtain pensions. Any private person may arrange this. Under the law, they may be contributing up to £1,500 per annum in order to get them.
It is not possible to get a policy that will provide against inflation. There is no such thing.
There are various sophisticated policies now which a person can take out which, if they have not got an automatic regulator, would certainly provide some protection against inflation. It might be worth while pointing them out to the insurance companies where they have difficulties in producing policies with an automatic regulator to provide against inflation.
It is almost impossible.
I am glad to hear Senator Eoin Ryan say that. I must quote it in defence of the Government's attitude when I am explaining the difficulty of producing a suitable regulator. Of course there are great problems in it. This provision is open to the private individual to make his own arrangements regarding a pension, not dissimilar to what people may get in the public service. We are not exempting the right to a future pension, because that is not taxable. You do not exempt something which is not taxable. The only wealth that is being taxed is a right which is in possession—a present right. The only exemption is the right to receive the benefit when one is qualified to receive it. There is no discrimination against people simply because a public servant or somebody else may have the foresight to arrange an insurance policy.
And the ability, which is not always there.
Perhaps people would be better advised to listen to their insurance adviser and to act upon advice which they receive. People can feel that they are not in a position to pay an insurance premium but in the light of experience people tend to laugh in later years at the small size of the premium which they paid for insurance cover because inflation is inclined to erode the burden of the premium which has to be paid.
I do not accuse Senators, and Senator Ryan in particular, of any sense of envy in moving this recommendation but there has been a great deal of unpleasant and abusive criticism of the public service by people who have put forward ideas similar to the one advanced in the recommendation here. It has been wrongly founded. Every country that has a wealth tax has the exemptions which we are providing here for superannuation schemes. No country allows an alternative exemption to somebody who has not got a superannuation scheme. We live in a free society; people can make their own arrangements and there is no compulsion on anybody to hold his wealth in any particular form. The law may encourage people to hold it in certain forms in the future which they might not have thought of in the past, but they are still free to make their own arrangements. It would be wrong to provide—as the recommendation would provide—an additional benefit or exemption for certain people. I do not think that would be justified.
Of course, there is no intention to reflect on civil servants. They are merely mentioned in this recommendation as a comparison between the pension rights they have and the exemption they have for these, and others who are not lucky enough to be civil servants. I do not suggest that civil servants are not very hard-working and worthy people but the important advantage they have is that they have a very good pension scheme. This is something they can look forward to during their careers, that when they retire they will have this scheme.
All that is asked here is that in the case of a person who is self-employed, who builds up a business or who works in a profession and has no provision of that kind built into his employment—perhaps he was not able early in life to take out some kind of insurance annuity scheme— if, towards the end of his life, he has managed to make some money and wants to provide himself with an income when he retires, it should be possible to do so. It should be possible under the Bill to make a case for special schemes, in circumstances which would give such people a pension based on earnings over ten years, to equate that with civil servants. The only reason civil servants are mentioned is to provide a yardstick of the extent of the exemption which should be provided.
The Minister has not yet provided an adequate answer to the case which I have made and which several others have made. I know he is not going to admit that this recommendation is fully justified but he has, in the past, defended himself on occasions in the Seanad and subsequently adopted recommendations made here—at least, adopted them to some extent. I hope that on reflection he will agree that there is some merit in the recommendation I put forward and the case which others put forward and that at some time in the future he will modify the Bill so as to provide something on the lines which is provided for in this recommendation.
Recommendation, by leave, withdrawn.
Recommendation No. 6 not moved.
In the case of recommendation No. 7, a substitute recommendation is being circulated and I propose to accept the substitute recommendation at short notice.
I move recommendation No. 7:
In page 12, between lines 8 and 9, to insert the following paragraph:
"(k) property in the State (other than agricultural property) which is used directly in the provision of employment in the State and stocks and shares of a trading company trading in the State."
I should say straight away that the substitute recommendation which had to be submitted for technical reasons was to ensure that it would be in order to exclude agricultural property. I should make it clear that as far as we are concerned we would believe agriculture ought to be, in practice, included in paragraph (k) that we seek to insert in this section. The purpose of this recommendation is to add to the list of exempted assets property in the State which is used directly in the provision of employment in the State, and the stocks and shares of trading companies trading in the State. This reiterates our belief that in the circumstances of this country it is madness to be taxing productive assets in this way. The essential point in the Irish economy is the provision of employment.
The late Seán Lemass was right when he said the success of any Government must be judged by the number of people they put to work. We have at the moment more than 100,000 unemployed and the employment of thousands of others is threatened. It is obvious that between now and next spring large numbers of additional workers will go on the employment register. There is likely to be an addition of 20,000 to 30,000 between now and February next. Other workers are on short time.
We have the long term situation that the provision of employment in Ireland is not easy. We had for about a century and a half very heavy emigration from Ireland. This flow ceased only in the last five or six years. We have the built-in difficulty of generating sufficient investment in this country to put all our people to work and get the kind of full employment that in normal times exists in other countries.
These difficulties are inherent to a considerable extent in our geographical position, the fact that we are on the fringe of Europe, that communications are long, transport expensive, that we lack the great industrial centres of other countries which attract industry, that we lack capital and industrial expertise. We are heavily dependent on outsiders to come here and set up employment-giving projects.
It is not easy to generate employment in this country. We have had a considerable amount of success, leaving aside the immediate problem of the present crisis but even in our best years the proportion of workers unemployed has been very high by international standards.
For these reasons what the Government ought to be doing is taking every possible conceivable step first of all to help actively the provision of employment and secondly to do nothing in their governmental and financial and taxation policies to discourage in any way the provision of employment. The trouble with this wealth tax is that it is not the rich it will hit. In so far as it does hit the rich they will not lose very much.
We have no objection to the taxation of people who have a great deal of money which they do not use for the provision of employment. The trouble is that this tax will hit the workers of Ireland because it will make it more difficult to provide employment for them. That is the basic objection we must have to this Bill. It is an objection which would be eliminated altogether if the Minister would accept the principle of this recommendation that the property in the State to be taxed is non-productive property and that the property used for the provision of employment should not have this additional taxation imposed on it. Not only do manufacturers, millionaires, farmers and workers pay the highest direct taxation at every level of income in Europe and possibly in the world, but for those whom this Bill affects you have an addition to this very high rate of direct taxation. Including income tax and wealth tax anybody who is affected by this Bill will come off vastly worse than those in other countries.
The people who come under this recommendation are persons who provide employment. We do not want to do anything which would make more difficult the provision of that employment. It is madness to be imposing taxation in this way on productive assets. If the Minister would accept the principle laid down here, 99 per cent of the objection to this Bill would disappear.
The paradox in the Minister's consistent refusal to have an amendment of this kind incorporated in this legislation is that at this time his colleague, the Minister with Labour, in conjunction with the Minister for Finance, is in the course of implementing the employment premium grant scheme which was passed by both Houses of the Oireachtas in the past two weeks. The purpose of that scheme is to provide 10,000 new jobs in the next 12 months. This is a scheme which will involve payment from the Exchequer of £12 per head for each new employee brought into manufacturing industry up to a certain date.
At the same time as the Government brought in this legislation, which is defective in many ways, the Minister refuses to incorporate an exemption under the wealth tax legislation for the same purpose, the maintenance and growth of employment. The purpose of this recommendation is to exclude from the wealth tax property that relates to the provision of employment and to stocks and shares of trading companies trading in this State. The area the Minister for Labour is trying to help with a grant scheme is the area that the Minister refuses to exempt under this Bill. I shall quote from the issue of 29th July, 1975 of the Newsletter of the Confederation of Irish Industry in which they very categorically state the nub of our present economic situation. I quote:
Ireland depends primarily on the growth of manufacturing industry for the creation of employment.
Nobody could disagree with that statement. It is a statement of fact. The next sentence again is fact and I quote:
Investment in manufacturing industry has always been and will remain far below requirement in the foreseeable future.
Private investment is an important source of funds for the development of industry
Again they say and I quote:
The introduction of a Wealth Tax on productive assets at this time is damaging because it reduces the attractiveness of industry for private investment; it forces the withdrawl of private funds from the manufacturing sector; and it discriminates against private Irish investment in favour of foreign company ownership.
The Confederation therefore remains strongly opposed to the application of a Wealth Tax to private investment in manufacturing assets which are essential for the creation of employment.
There is no question about it; the category we want exempted from wealth tax is the same category on which this nation at present depends totally if we are to get the economy moving again. It is ironical, paradoxical, contradictory, call it what you like, to bring in a grant scheme on the one hand to stimulate the creation of employment and on the other hand to refuse to exempt that same category from the provisions of this tax.
I have no objection, in principle, to a wealth tax. I want that made loud, clear and plainly known. A wealth tax that taxes dormant wealth, dead or non-productive wealth, assets that are of no value in this community in the sense of community or productive value and a wealth tax that relates to property that does not make any contribution to the national economy is fair enough. There is no reason why there should not be a wealth tax on dormant property, on dead property, on assets that are making no national contribution, on assets that are solely stacked up for particular private gain without any relevance to the development of the economy or the improvement of the community. I have no objection to wealth tax on foreign assets that may be owned by people here—assets and property held abroad by citizens of this country and making no contribution whatever to the national economy. But I violently and strongly object to a wealth tax on productive assets in this country that at this moment are making a positive contribution to the economy and which represent the only hope the economy has at present in regard to getting out of the unemployment mire. It is people who will be caught in the wealth tax net who are making a contribution of that order to the economy and have an investment of the order that it comes within the wealth tax. People of that category are making a strong contribution at present to the economy. They must be because if they are putting assets of the order to come within the ambit of the wealth tax to productive use and giving employment, they are making a real contribution. That is the sort of contribution that should be encouraged, developed and stimulated further. It is the most enterprising people who are making a contribution of the order to come within the wealth tax who per se because by reason of the fact that it comes within the wealth tax, the investment must be of a substantial enough nature to be giving substantial employment and to be a highly productive utilisation of the asset.
It is the most enterprising, the most able, the most far seeing, the best investors, the best entrepreneurs in this country who will be caught by this provision, precisely the people on whom we depend to make the decisions that will lead to further expansion and greater employment, the very people on whose brains, and capacity to invest and on whose vision we depend to make decisions, to expand their production, to extend their factories, to expand their plant, to take the risks and decisions that are needed. These are the only people who can pull us out of the recession. It is on their decision-making we depend. It is the people who have the capacity to take a chance, invest, reinvest, expand in times of recession who say: “We do not want to know about recession; we want to make plans now to pull out of recession; even though things may appear gloomy, we feel we can expand our plant, our factory space and we can build new factories; we can invest, reinvest and borrow to invest and reinvest; we have hope in this community.”
Is the Minister at this stage, in regard to the individuals of whom I speak, going to say: "Do not expand; we will put this regressive overhead on your business enterprise; we will put this regressive overhead on you as an individual for what you take from your business enterprise and on your investment in Irish stocks and shares; we will discourage you from going into Irish stocks and shares to a greater degree; we will discourage you from investing more in order to draw more from whatever enterprise you are interested in; we will discourage you by cutting a lump sum off your income in Irish industry and employment, an income probably obtained by such a person by reason of his or her investment in Irish industry or Irish stocks and shares?" Every one of us should be glad to have even a percentage of people of that category at present but they are the category who will be affected if this recommendation is not adopted.
We are seeking in the recommendation that property in this State which is used directly in the provision of employment in the State and stocks and shares of a trading company trading in the State should be exempted from wealth tax. We are seeking this for the reason given by the Confederation of Irish Industry, that the all-important need at present is to stimulate investment in Irish manufacturing industry, that it is in that precise area we will get the extra jobs in time of recession. In fact, it is the only area where we can get extra jobs in our community at present but the people on whom we depend to give that extra employment are being penalised under the Bill.
The energetic, enterprising people who are investing and will invest in Irish industry and particularly manufacturing industry are being put under this Bill in the same category as the immoral holders of accumulations of dead or dormant wealth in any and every form. These people are being put in the same category as those who are living here and have accumulations of wealth gathered in the Bahamas, the Channel Islands or anywhere else. The people who are investing in Irish industry, giving employment to Irishmen and women, are being put in the same position as far as wealth tax is concerned as those who have escaped with their package to a funk hole in the Bahamas or Channel Islands. We should be making dynamic efforts to encourage people to invest here. What we are doing is proposing to penalise them.
I am not objecting to the wealth tax principle as such, but it is wrong to put people who invest here into the same position as the accumulators of idle wealth who make no contribution to the Irish economy. The Minister is very obtuse if he does not see the logic in this recommendation. Not alone should taxation bring in revenue, not alone should there be a socially valid redistribution of wealth, but taxation must also be used as an economic regulator. It should be used as a mechanism for stimulating the economy, a mechanism for the creation of more wealth to give more employment. The first two objectives should not be allowed impinge on the third. The objective of just collecting for the revenue as such and the objective of the redistribution of wealth for social purposes should not in any way frustrate the basic objective of all, which is to create more investment and more wealth and make the cake bigger so that everyone gets bigger shares. The most important element of all is the proper regulation of this tax, and its operation. As the Bill stands, from the economic point of view it will discourage and deter the people we require from the point of view of investment and reinvestment in Ireland. It is deflationary in the economic sense. It is discouraging people who would make the investment decisions to expand and give more employment if they got the required encouragement. By not agreeing to this recommendation the Minister is, in effect, saying to these people that he regards them in the same category as the idle and immoral accumulators of wealth. We are telling the enterprising people in the community that that is the situation under an Irish Minister for Finance. A Minister for Finance should be exempting these people. These are the people whom we depend on to put the economy on its feet. They are being put in the same category as the idle accumulators of wealth. Nothing is being offered to the people who count in the community. The Confederation of Irish Industry in a cold, calm editorial on 29th July put this matter in perspective.
I support this recommendation. In my constituency there has been an unemployment problem for many years but we were very fortunate in attracting some industries to the area. We are very grateful to the people who established those industries. Cavan County Council, in their wisdom, decided they would give an exemption from rates for three years to people who introduced industries into the county. By law they were allowed seven years' remission and we extended that to ten years because we knew employment was needed. That was away back in the good years. We are now in 1975 with 103,000 unemployed. There is a very serious situation. When many people are unemployed discontent reigns. All they have to look forward to is dole queues and pay-related benefits. They do not want these hand-outs. They would much prefer to be gainfully employed.
This recommendation is a very sensible one. Both Senator Yeats and Senator Lenihan have made strong cases for it. The Confederation of Irish Industry's pronouncement on 29th July is one that should be studied closely and the Minister and the Government should study it carefully.
There would not be many people in my county affected by wealth tax legislation. Perhaps, with the continuing inflation, we may soon be in the net. I certainly like to see people paying their fair share of taxation. At the moment we have our hand in the lion's mouth. We are, on the one hand, encouraging industrialists to come here by issuing grants to them and, on the other, we are imposing a tax on them. One of the methods used to encourage investors was to exempt from taxation people who were using their wealth to provide productive employment. There is a vast difference between them and people who have wealth accumulated in foreign banks where it is of no benefit to the Irish economy.
We now need to try to instil some confidence into the people. We have now reached the month of August and the dole queues are as long as ever. The test of any successful Government is the number of people employed. We see the number of unemployed increasing every day. That should bring home to the people whether or not Fianna Fáil were too long in office. Those who were clamouring for a change then have got their answer now. It is a sad answer, unfortunately, for the country.
The Minister is trying now to tax these industrialists who have provided employment for many people. Many industries are based on native material. That is what we should encourage. It is time enough to tax people when they are well established. The Government would gain if they put people into employment because they would save on the pay-related benefits and in many other areas. They would also gain money from those who would be brought into the income tax net. These are things that should be considered. The Minister thinks he will gain from this Bill but he will lose money because people will not be employed and they will have to be paid pay-related benefits and various types of social benefits.
The majority of the members of the Government never believed in industrial expansion. We in Fianna Fáil have been saying for years that we would like to see industries provided in every area in the country, in every town and village, if possible. We established the Shannon Industrial Estate and various other industries with that object in view.
At a time when we should be expanding in that direction the Minister brings in this Wealth Tax Bill and he will not accept this recommendation. Thus he will frighten and scare off people who are anxious to invest here. We send Industrial Development Authority representatives and people like that overseas. They do not go there on holidays. They go for the sole purpose of trying to meet wealthy people, people with capital who would be willing to come here and avail of the facilities we have here and set up an industry, an industry which would make money for themselves and their shareholders—we have to be realistic about that—an industry which would provide employment for our people rather than asking them to go to America or elsewhere where these millionaires live and where they have the industries. We are not inviting them here to exploit our workers. We have good efficient unions here who have always dealt with those problems. Many of the industrialists who have come here are happy to be here. They find the Irish workers equal to the task. These things should weigh heavily with the Minister and with the Government. If Fine Gael are not too fond of industrial expansion, the Labour elements in the Government should be directing their attention to that sphere.
A Fine Gael Minister set up the IDA.
Against Fianna Fáil opposition.
It was not a Fine Gael Minister who set up the Shannon Industrial Estate or any of the other industrial estates. The Minister is making a hames of the task of creating employment for our people. The dole queues are there to prove it. We should be doing our best to encourage our own people who have money to put it into productive use.
To encourage our own people who have money to sneak that money into foreign banks and, on the other hand, to discourage foreigners from coming in here is a totally irresponsible attitude because of the conditions in which we find ourselves today. There are many industrialists who accumulated money through hard work. These people have to be admired. They had a good national outlook. They had faith in our own people and tried to do something for them.
The Federation of Employers' statement referred to by Senator Lenihan should be read very closely. Without people with wealth, we cannot have factories. The State cannot provide all the employment. Whether we like it or not, we are in the unenviable position of having 103,000 people unemployed. The Government should be crawling out to the capitals of Europe, as they have done already, trying to get sheiks, or Arabs, or anybody else, to invest here and provide employment for our people. That is the way to do it. The Minister for Finance is scrounging around looking for a few pounds from them, by taxing them before they even arrive here. That is not the way to encourage them. Our primary objective is to get these 103,000 people off the dole queues and into employment. The Minister should realise that. He knows the figure is increasing from day to day. He should encourage everybody with money to invest here and set up factories. The Minister should accept this recommendation.
I do not support this recommendation. I would like to say how horrified I was to see in brackets (other than agricultural property). We heard Senator Dolan for many weeks speaking about employment in agriculture.
Could I interrupt the Senator for a moment? I do not know if the Senator was here when I introduced this recommendation. I said it was there for technical reasons only because otherwise it would be out of order, but that we believed agriculture should be included.
It is there in the recommendation.
It would be out of order without that. I specifically stated that we believed it should be included.
People will read it and we will have to refer to it.
I want to make it absolutely clear that we believe agriculture should be included in this recommendation, and it is only put there for purely technical reasons.
People who read this recommendation will say to themselves: "Now we know what Fianna Fáil think of agriculture." Senator Lenihan talked about dormant and dead industries and dead investments. I am glad Senator Yeats believes agriculture is not a dormant industry. Reading this recommendation one would think Senators on the other side of the House think agriculture is a dormant industry. I am glad Senator Yeats explained himself. We believe agriculture is the greatest employer in this country. More people are employed in agriculture than in any other industry. We also believe that there is greater productivity from the agricultural industry than from any other industry. Agriculture is the greatest employer and the greatest industry for productive purposes.
Senator Yeats has helped clear my mind in that he contends that agricultural property should be included in this recommendation.
We have heard much talk of dormant wealth here. I do not believe we have dormant wealth and, if we have, it is so small as to be negligible. Irish people are not fools. They will invest, and have invested, their wealth in this country. We have heard statements to the effect that wealth has been moving out of the country since this Bill was introduced. Wealth has not moved out and there is no proof that it has. There is more wealth here now than before the introduction of this Bill. In the years to come there will be even more wealth here. This Wealth Tax Bill will not prevent people investing because its provisions relate to such a small number. Having read the statements made by the Minister for Finance, people know now that there is no danger to our ordinary men and women investing in companies here.
We heard much scare talk from the other side of the House, false propaganda, which might encourage them to remove——
An Leas-Chathaoirleach
If I might interrupt the Senator for a moment, he is straying outside the terms of the recommendation before the House at present.
There were many remarks made by Opposition speakers that were also outside its terms.
An Leas-Chathaoirleach
Not in the opinion of the Chair.
The arguments made for the inclusion of recommendation No. 7 as another exemption were certainly put forward very forcibly. They can only stand or fall on the basis that the non-inclusion of this would be an impediment to people investing in Ireland, particularly our own people, as has been stressed by the opposite side. In recent days the IDA have made announcements of the number of jobs that have been created. This is an indication of confidence in the Government and that non-inclusion of this section would not constitute any impediment to people making investments here. This type of exemption is not included in many Wealth Tax Bills in other countries.
I cannot accept the plea of Senator Yeats that agriculture is exempted from the benefit he seeks to confer for purely technical reasons. The fact is that Fianna Fáil have tabled a recommendation which seeks to grant total exemption from wealth tax for all productive assets in Ireland with the exception of agricultural property. I know that Senator Lenihan has abandoned all hope of obtaining support again in rural Ireland and has transferred his political ambitions to the urban belt of Dublin. But really he does not have to trample on his erstwhile supporters in the midlands by tabling a recommendation which singles out agricultural property for wealth tax and exempts all other forms of productive assets. I am appalled that a Senator, with the backing of his party, could table a recommendation that is so selective.
Agricultural property is treated by the Government in an especially favourable way because of our realisation that the return on investment in agriculture is low and because of the great national need to promote agricultural expansion and efficiency.
The whole approach of Fianna Fáil on this Bill has been to get more and more exemptions, but the least worthy arguments have been advanced in relation to this recommendation. There have been suggestions that the Government's wealth tax will discourage investment from abroad. That is unmitigated rubbish. If anybody took care to study the nature of investment in manufacturing industry from abroad they would know that it has all come in in the form of companies. Why? Because the exemption which is enjoyed from income tax liability on goods manufactured for export is available only to companies, and those companies are still coming. Such diminution as there has been in the rate of investment here is nothing compared with the fall-off in industrial investment in the western world. Notwithstanding the fact that our industries, in many sectors, are working below capacity industrial investment is still proceeding.
Notwithstanding the difficulties which exist in acquiring funds to match the amount of foreign investment coming here the Government, in 1975, are providing more capital for industrial development than was ever provided before. We have to do it because investors from abroad are coming in; we have commitments to them, we are honouring them and will continue to do so.
I have pointed out until I am tired of pointing out that we are the only country with a wealth tax which gives favourable treatment to productive assets. No other country gives any concession to productive assets. Yet we are told by CII and Fianna Fáil that there has been no encouragement for investment in industry. There is every encouragement; if a man wants to get the benefit of the lower rate of tax; if he wants to be paying tax at 0.8 per cent instead of at 1 per cent then he will put his assets into productive forms to provide employment here. The Confederation of Irish Industry pleaded for provisions in the wealth tax that would ensure that foreign companies would not fall off in their investment in Ireland. They did not have to make that plea to us because we were convinced of the necessity to encourage foreign investment in Ireland. Now, having done it, they fault us for having done so. The CII should make up their minds where they stand, should take the trouble to read the Wealth Tax Bill instead of listening to the political, partisan comments of the Fianna Fáil Party.
The recommendation has no merit. It runs against the whole spirit of the Bill and its intention is quite clear— to prevent Ireland having a wealth tax at all. I will conclude by quoting from the Green Paper in Britain on their proposed wealth tax. It says at paragraph 35:
In the Government's view it would be wrong to exempt business assets or farms from the tax or to calculate liabilities on such assets on specially favourable terms. The wealth tax would lose much of its desired social effect if a substantial proportion of those who are among the wealthiest in the country were not to come within its scope. Moreover it is a matter for argument whether the sale of a business or of part of a business would lead to a loss of efficiency from a national point of view or the opposite.
Is Britain a good example for us in the matter of economic viability?
I am not saying that the British approach is the right one; it is not the approach we have taken. The Government have given specially favourable treatment to productive assets. We are the only country to have done this. Therefore, there is no need for this recommendation which is designed obviously to frustrate the wealth tax which Fianna Fáil oppose tooth and nail and have been doing so ever since the White Paper was published in February, 1974.
This last quotation from the Minister shows something of the thinking behind this Bill, in that he is quoting and following on the policies—if one may use that word —of an incompetent, socialist Government in a bankrupt country.
The British Green Paper was published in August, 1974, by a Government which was elected to office after the publication of the Irish White Paper on 20th February, 1974.
The Minister is quoting them with approval.
The Government are following advice which was published after——
What has that got to do with it? If there is any Government, including that of Afghanistan, which the Minister ought not to follow in any way it is our neighbours across the water. If the Minister seeks enlightenment there he will not get it. Our neighbours in Britain are a classic example of a Government who are flying in the face of rational economic thinking, and we know the appalling results which have ensued. Unfortunately, these results are making our own position a great deal more difficult.
I must mention the question of agriculture. As the Minister will be aware—and as I hope Senator Butler will become aware—Senator Lenihan's recommendation No. 7, which is on the main yellow sheet does mention agriculture; indeed, agriculture is included in that recommendation. The Minister and the House will appreciate that these recommendations had to be prepared with great urgency and it was not possible to give them the kind of consideration which would normally be given to recommendations. This proved to be out of order, as we were informed by the officials just as the meeting commenced. They pointed out that the amendment on the white sheet would be in order; therefore, we decided to go ahead with this strictly on the basis that it was needed in this form to enable it to be discussed today. Our real thinking on this question will be found in recommendation No. 7 on the yellow sheet, which includes the question of agriculture. I will leave the matter at that. Nobody is in a position to say that our attitude was to ignore agriculture. That is not so, and I want to make that absolutely clear. We believe that agriculture is the most important productive industry in the country and that, along with the other industries mentioned in the recommendation, it should be excluded from the effects of the Bill.
That is what the recommendation said.
We did not lodge the recommendation on the white paper. We did not even see it until 10.30 this morning. The recommendation we lodged was the one on the yellow paper.
Then the Senator should have withdrawn the second recommendation. The meaning of that is obvious: Fianna Fáil are against agricultural development.
An Leas-Chathaoirleach
Senator Yeats should be allowed to reply.
Senator Russell is well aware that these recommendations were prepared with considerable urgency. The only recommendation we lodged was No. 7 on the yellow paper, but we propose to withdraw the amended one we are now discussing because it does not represent our thinking. I hope that point will be clear and that no Senators will try to misrepresent our position on this question, which is absolutely clear.
On the question of exempting employment-giving assets, including agriculture, from the scope of this Bill, the Minister said that the proposition that foreign investment might be damaged is just rubbish that only children or Fianna Fáil politicians would produce. All I can do is to refer the Minister to the statement of the Confederation of Irish Industry——
On a point of order, is the recommendation withdrawn?
An Leas-Chathaoirleach
Senator Yeats is referring to the debate on the recommendation which is before the House. He indicated what his intentions are, and is entitled to reply.
We will not vote on it because we do not agree with the recommendation in the form in which it emerged this morning. Therefore, it is proposed to withdraw it, but I wish to reply first. I must seek the leave of the House to withdraw it, and that leave has not yet been given, so it is still before the House.
The Minister looks upon the CII apparently as some kind of political hacks to whom he need pay no attention. This is extraordinary language the like of which I have never heard from a person in a principal position in Government. The Minister for Finance is the second most important member of the Government after the Taoiseach; he has the principal control over the economy. To go round suggesting that one ought to ignore the views of the Confederation of Irish Industry, on the grounds, apparently, that they are political hacks, is extraordinary. However I propose to quote——
I said that obviously they had been listening to the wrong people.
The Minister for Finance might give sufficient credit to the principal industrial confederation in this country for knowing their own business, that they do not issue statements on the basis of what they hear from other people, politicians or otherwise. I shall quote from their statement of March 4th last:
The Confederation finds it difficult to understand the introduction of these proposals at a time when unemployment is at almost record levels historically and investment growth needs to be greatly accelerated. The proposed legislation would have three major undesirable effects. It would dissipate the amount of money invested in assets which are used in the provision of employment. It would directly discriminate against Irish family ownership of such assets in favour of foreign company ownership, and it would discourage private foreign investment in Ireland. The Government had said that they would give particular consideration to reliefs for productive investment. The reliefs proposed in the Bill are completely inadequate. Priority should be given to the maintenance of employment through investment in productive assets. The Confederation therefore repeats its earlier recommendation that all assets used in the provision of employment be exempted from the application of the proposed wealth tax.
These are the views the Minister describes as rubbish. These views do not come from Fianna Fáil; they come from people who are directly concerned, through their members, in the provision of employment, jobs and investment here. They say that the Bill should be withdrawn on the ground that it will damage these things.
The problem really is in all these discussions of the Bill that the Minister has quoted other countries. He has quoted socialist Governments in England. He has quoted all kinds of political reasons for bringing in this legislation. He has even contradicted his own White Paper by suggesting that it might lead to the redistribution of assets here, though his White Paper said that it would not. He has never—I asked him to at an earlier stage of this Bill—once produced one single simple coherent economic reason for bringing in this tax at this stage. He cannot. There is no single, simple, economic reason for bringing in this legislation at this stage. The reasons, such as they are, may be political—I do not know—but there are no economic reasons. There are no economic reasons in favour of it and there are a great many economic reasons against it. These people in the Confederation of Irish Industry, not Fianna Fáil, have put some of these reasons.
For the Minister to say that this recommendation is mere rubbish is simply not good enough. You do not answer arguments by saying that they are rubbish. You answer arguments by counter arguments. You answer arguments by saying how in the Minister's view, if he really thinks it, this Bill will encourage investment, will put people into jobs, will reduce inflation. He knows it will not. He knows that, in so far as it has any effect, it will be discouraging rather than encouraging. It will not increase confidence. It will reduce it. It will not create jobs. If it has any effect it will be to increase the number of jobless.
These are the plain facts of the matter. Everybody in the country can see it apparently except the Minister. The Confederation of Irish Industry, the Federated Union of Employers, the Irish Farmers Association, the ICMSA, chambers of commerce all over the country, economists, financial experts of all kinds, all the advice to the Minister is against these proposals. All this advice he discards as rubbish. All I can say is that the Minister is wrong. One hopes that the damage will not be too great. I will withdraw this recommendation.
Recommendation, by leave withdrawn.
I move recommendation No. 8:
In page 12, line 9, after "subsection (1)," to insert "when required by the Commissioners,".
I should say, straight away that, like the other recommendations, this was drafted in very much of a hurry. I would like to explain to the Minister precisely why I put it down. Under the provisions of subsection (2) of section 7 all these exempted items, houses, normal contents of a house, bloodstock, livestock and so on must be returned for wealth tax purposes exactly as if they were not exempt. Had I more time to draft this recommendation in a more detailed form I would have accepted, of course, that there are many things such as for example, superannuation benefits, emoluments of this kind, perhaps bloodstock and livestock, where it is clear they ought to be returned in the fashion suggested by subsection (2). My main reason for putting down this recommendation is to make the point that, at least as regards dwelling-house and the normal contents of a dwelling-house it ought not to be expected of a taxpayer to have to give a detailed valuation of these to the Revenue Commissioners except in cases where they ask for it.
The problem is that under a strict reading of this subsection—of course, one has to read Acts of Parliament strictly—anyone who makes a return for wealth tax purposes ought to get a valuation of the value of his house, a valuation of the contents, list the contents and so on and send them in to the Revenue Commissioners. This, clearly, would place a very great burden of time and considerable expense on the people concerned. It would be a terrible nuisance to the Revenue Commissioners to have endless stuff coming into them which is of no value because, whether a house is worth £20,000, £50,000 or £200,000 is irrelevant. So long as it is a principal private residence it is exempt. I hope that the Revenue Commissioners will adopt the practice that they will not require details beyond the fact that the assessable person had one principal dwelling-house and normal contents. I hope they will accept this and then if they have any reason to believe that the so-called normal contents included vast sums in jewellery, very valuable paintings or investments of that kind, that he might be collecting as investments and not as normal contents, then they can come back and say: "Will you please list these and give us a valuation." Of course, in extremity, they have the power to come along and look at them. I suggest that this ought to be the practice adopted, in spite of the wording of the subsection, so that as a matter of course the assessable person would simply, as I say, write in and say; "I have one house with normal contents."
The recommendation is concerned with subsection (2) which requires that:
such particulars and information in relation to the property referred to in that subsection shall be furnished to the Commissioners as would be required if such property formed part of the taxable wealth of the assessable person.
The subsection which deals with information relevant to the taxable wealth of an assessable person is subsection (6) of section 14. This latter section states that such information shall be disclosed to the Commissioners, as they may require in writing, for the ascertainment of liability to or the collection of tax. The two subsections use respectively the words "required" and "require". The requirement is in writing and, therefore, there is no necessity for the recommendation. The requirements must be made in writing.
I would be happy to think that the Minister was right. I refer him to subsection (1) of section 15 which states:
a person who is primarily accountable for the payment of the tax by virtue of section 14 (1) shall within three months after the valuation date deliver to the Commissioners on a form provided by them a return of all the property comprised in the taxable wealth of the assessable person, stating the market value thereof on that date.
It seems to me that under that subsection you would be liable to give a full valuation of your house and so on.
The Senator should read on.
Yes. You first of all have to make a return of all the property, stating the market value thereof on that date. Then, later on, if you are required in writing, you have to give a statement verifying such particulars together with such evidence, statements, documents and so forth, as they might require. That is merely the documentary evidence, but you have to start off, at least in theory, by valuing your house, the contents and so on, and delivering this to the Revenue Commissioners.
Then, if they want further information, they come back at you, but your initial obligation under section 15 (1) would definitely appear to be that you have got to get your house valued and the contents valued. I know you could write in and say: "I have one house worth £X and contents worth £X" but that will not be any good to anybody. Anyone can do that. If there is to be any validity in this process at all you should get them valued. If people merely write down whatever figure appeals to them then there is no point to it at all. It would be much better to adopt the practice I suggest where you say: "I have one house with contents" and let the commissioners come back if they want more information.
The Revenue Commissioners have a great deal of information about property and they would not, in many cases, require separate valuations to be done. The ordinary stamping branch where deeds are stamped has a system of collecting information. The law requires that when a transaction takes place the vendor must furnish figures to the Revenue Commissioners relating to it. That means that the Valuation Office has perhaps the most up-to-date index in relation to legal persons and property as well as land in the country. They would not require a detailed valuation. It is only when a valuation would be put in which seemed to be extraordinary, having regard to the general pattern of valuation in a particular location for a certain type of property, then additional information would be sought to justify a valuation which appeared to be out of line. We would not expect that there would be many cases of this kind.
I appreciate that, but what concerns me is that a person has to get an initial valuation for his house. A valuer must be brought in to value a house even though such property is exempt. The Minister points out that a check can be carried out on whether a valuation is correct or not, but a valuation must be obtained.
I suspect 95 per cent of people could put a value on their houses which the Revenue Commissioners would accept without dispute.
And the contents?
I think so.
I hope so.
Recommendation, by leave, withdrawn.
Recommendation No. 9 not moved.
Recommendations Nos. 10 and 11 are related and may be taken together.
I move recommendation No. 10:
In page 13, lines 56 and 57, to delete "and which is situated within one mile of an urban area".
This is really a case on which there should not be any basic disagreement between the Minister and ourselves. We feel that the proposals in the Bill are unnecessary complications. The Minister pointed out that it is in ease of the farmer concerned that where a farmer's land has high potential for development so that it thereby becomes more valuable if put on the open market—that instead of raising the market value for tax purposes by four or five times, which could easily happen, the maximum increase sought by the Revenue Commissioners will be only 25 per cent. But there is the limiting factor that it only applies where the land is within one mile of an urban area. There is a rather odd definition of an urban area which says it includes a town or village which are concepts that do not exist in law.
It would be simpler to forget about the one-mile provision. If a man's land is within a mile of an urban area, he gets this concession. If he is a mile-and-a-half away he does not and, at least in theory, the Revenue Commissioners could increase his valuation by 400 per cent, which is obviously not what the Minister wants. It is not correct to say that land will only have high development potential if it is within a short distance of an urban area. Frequently, housing estates are built quite far out—particularly around the Dublin area. They could be built in an area where there was no urban development at the moment and the land concerned would have a high potential value once it became clear that development would take place within five years. In addition, the Minister's concession to farmers does not relate merely to house building. It relates also to the building of factories.
Frequently, a factory could be built away out in the country. It would be known in advance that this was about to happen and consequently land in that area would increase considerably in value. In everyone's interest, including the easing of administration problems, the Minister should consider as soon as reasonably possible abolishing the provision regarding one mile. It involves endless calculations such as the location of the urban area, what constitutes an urban area, what distances are involved. There could be endless complications, and they are quite unnecessary, because all the Minister wants to do is to ensure that where the commissioners are satisfied that a particular farm property has high development potential they will raise the valuation by 25 per cent. It should not cause unnecessary problems once the question of what constitutes an urban area is eliminated. Land could be situated close to an airport and have a high potential for building houses or factories.
This appears to be an eminently sensible recommendation. Again, it is in ease of the Revenue Commissioners and it would facilitate easier administration. The limitation of one mile will lead to all sorts of anomalies. There is nothing sacrosanct about one mile from an urban area when urban area is defined further on in the section as meaning a country or other borough, an urban district, a town or a village. When a definition urban area goes down to including a crossroads with a pub at the corner it enters the area of the ridiculous. We know what the Minister wants to do but I think he is merely circumscribing the Revenue Commissioners and going into very dangerous terrain as far as litigation is concerned by quoting one mile. It is not defined as a mile from any particular point. It could be a mile from a village which might consist of a pub on a corner or at a crossroads. Much of this section borders on the ridiculous. In the interests of good administration I would suggest it would be a far cleaner and clearer situation merely to have a person prove to the satisfaction of the Revenue Commissioners that the land had a high development potential. That would be a question of fact and if anybody wished to dispute the commissioners' decision the matter could be assessed by a court.
The variations of this and the many circumstances under which it can happen are innumerable and surely it is an area of definition that should be left open for examination on the facts of a particular situation. There is no legal definition of "town" and certainly no legal definition of "village". The definition in the Bill is vague and unsatisfactory.
I can see the merits of having an enhanced market value placed on land with high development potential. That is perfectly legitimate, but the valuation should depend on the facts of each individual situation.
I would not disagree with many things which have been aired in relation to this recommendation but I would prefer to make a decision on the matter in the light of experience. When we have a year or two of the operation of the tax and of people's use or non-use of the particular option, then we might look at it again. We ought to express it in metric measurement and not in miles and that is a reform we can bring in whenever we are amending the Bill. We have gone some way to meet the points raised by introducing the word "village". Senator Lenihan is right in saying that is not defined. "Town" is well defined in the Interpretations Act, but "village" is not. "Village" has a broad meaning in Ireland, and its understanding can vary from area to area. In some locations scattered houses in a townland might be called a village, whereas in other parts of the country they must all be joining one another.
The presence of a pub is probably the best way.
That tends to attract people. It is an option which is available to a taxpayer. Like any other exemptions or benefits that one confers, one has to put a limit on it or it might be abused. I have no view that a mile is the ideal measurement, but we have put it in and we will see how it operates. If some extraordinary case of hardship or difficulty arises, we will not be unprepared to extend the distance.
I am grateful to the Minister that he will keep it in mind. It is a matter of administration. They would save themselves a lot of trouble. Even if we get a village which everyone agrees is a village because it has a fair number of houses in it or, perhaps, even a small town, as everybody knows at first there are a few houses stuck together, a few more scattered ones and then they get a little more scattered. As to what stage he decides the edge of the village for the mile to begin, I cannot understand. At what stage does one stop and say: "That is the end of the village and from now on we will count the mile." I have a feeling that a section will appear in some future Finance Bill which will eliminate this so as to save the commissioners these esoteric problems.
Recommendation, by leave, withdrawn.
Recommendation No. 11 not moved.
Recommendations Nos. 12, 14 and 15 are related and may be taken together.
Recommendations Nos. 12 and 13 not moved.
I move recommendation No. 14:
In page 15, line 9, to delete "premises" where the word secondly occurs and to substitute "hotel premises, and of guesthouse premises with more than ten bedrooms,".
This is a simple issue on which we had some discussion. The concession given to hotels of 50 per cent or £100,000, whichever is the lesser, covers hotels which are defined as the bedroom part of hotels that are in the register of hotels of Bord Fáilte. Guesthouses, at least those of ten bedrooms or more, are hotels. There is no practical distinction. I can see that the many small guesthouses of three to seven bedrooms are more akin to private houses. In many cases they may be people's principal private dwellings, and therefore, they would be exempt anyway. There are difficulties and, indeed, possibilities of evasion, if the small guesthouses—those under ten bedrooms—were included. I suggest to the Minister that he should look on guesthouses with ten bedrooms or more—and they go up to as many as 88 bedrooms—as hotels, in most cases small or medium hotels. The principle which impelled him to give this concession to hotels, particularly in the light of the difficult tourist seasons we have been having recently, apply equally to guesthouses and he should, therefore, consider including, at least, the larger guesthouses as suggested here.
I trust the Senator would accept that most guesthouse owners would not be in the wealth tax bracket considering that the thresholds of exemption are so large. Large numbers of guesthouses are also probably, in part anyway, the principal private residences of the guesthouse proprietors. What we are arguing about is more a matter of theory than of practical interest. There are certain obligations on hotel owners which do not rest on guesthouse proprietors. They must, for instance, provide meals, they must be open to the public and there are certain standards that they have to maintain, which are far above those of guesthouses, even registered guesthouses. It is because we had regard to the high capital investment that has to be made in hotels, some of which does not yield, directly, a return, but nevertheless, it must be done in order to maintain the overall high standards of hotels, that we gave favourable treatment for hotels. I do not think it would be justified in the case of guesthouses, and in reality, it would not have much practical effect.
Like so many other matters, if in the light of the information collected through the operation of the tax, we find that there are a number of substantial guesthouses making a serious contribution to the tourist industry which have capital difficulties comparable to those of hotels we would be prepared to have a look at it. We would be better to move in the light of knowledge rather than in speculation.
I thank the Minister for his assurance. As I mentioned when I first raised this issue, I was not too clear as to whether they ought to be included or not. The Minister mentioned that very often they do not have restaurants or bars but in the case of hotels it is often those that make the money. Perhaps, it is not so much that they lack this obligation but that they lack this opportunity of making money. That is one point he should consider.
Another thing I notice in the Minister's replies to points on the Bill, is that one cannot look at a single asset, such as a guesthouse, and say this is not going to be beyond the threshold. One has to remember that it will frequently be part of somebody's total assets. In other words, in the case, say, of a guesthouse, one could easily have a farmer whose wife owned a guesthouse, and this could have the effect of bringing the aggregated wealth of the family over a threshold. One cannot look at a single asset and say it, in itself, will not normally go past the threshold. It will not, but frequently, it would be the straw that broke the camel's back or at least brought them beyond the threshold.
I have no strong views on this. I have raised the issue and I am happy to have the assurance of the Minister that he will keep it in mind.
Recommendation, by leave, withdrawn.
Recommendation No. 15 not moved.
I move recommendation No. 16:
In page 16, line 53, to delete "£100,000" and substitute "£140,000".
We have had discussion from time to time on this subject so I will make the point briefly again, that the Minister would have done well to have followed the good example that he has given, after a considerable number of years of effort by various people, in the income tax code.
In the income tax code the Minister has, rightly, provided that a man and wife will have allowances equal to two single people. This is eminently fair because two people not only cannot live more cheaply than one but two people with their family commitments in general, live more expensively than two single people would. If the threshold for a single person is to be £70,000, the threshold for a married couple should, undoubtedly, be £140,000. It is clear that whatever considerations apply in allowing a threshold to a single person of £70,000, those same considerations apply doubly in the case of a married couple. I appreciate that the Minister is not going to accept this now. It would be fairer and more just to have in this legislation the income tax proposal that a married couple have double the single allowance.
In practice a married couple will have a higher threshold than the £100,000 because the principal private residence and its contents will also be exempt. It is not unreasonable to assume that there will be more married people with a residence which will qualify for exemption than bachelors of either sex who, in only a very small number of cases, would have proprietory rights in a house. In most cases they would be living in rented accommodation. When one considers the £100,000 available to a married couple, plus the fact that the dwelling in which they live is also exempt, there will be many cases where the exemption will mean up to £125,000 or £150,000, more than twice what a single person will get. There are no universal rules. Mankind does not operate according to a common pattern. There are variations, some will lose, some will gain. We have given rather exceptional preferential treatment to married couples in Ireland. Most countries with wealth tax, as I pointed out, do not give any additional exemptions to a married couple. We gave them an extra £30,000. A married couple would also get the advantage of a dwelling and its contents, whereas a single person would rarely enjoy that exemption.
As with so many other things in life, there are different ways of looking at things. The Minister pointed out that a married couple will usually have a principal private residence on which they are happy to be able to claim exemption, whereas a single person does not. That is one way of looking at it. The other way is to look at it as I did. A married couple have considerable expenses beyond those of two single people. That is one of the things I had in mind. They had to scrimp and scrape, set aside savings and collect money and borrow money to buy that principal residence. A single person frequently is happily able to spend his income travelling to Majorca and such sunny places. It all depends on which way you look at it.
It is quite obvious that the Minister will not accept this but I can only hope that at some time in the future it will be possible to establish a principle similar to that in the income tax code, that is, that the married allowance should be double the single one.
Recommendation, by leave, withdrawn.
Bill received for final consideration.
Agreed to take remaining Stage today.
Business suspended at 1.05 p.m. and resumed at 2.15 p.m.