Seanad Éireann debate -
Friday, 8 Aug 1975

Vol. 82 No. 16

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

Question proposed: "That the Bill be returned to the Dáil."

Mr. Yeats

I should like to reiterate that we on this side of the House are opposed to this Bill in present economic circumstances. We are not against this or another kind of taxation in situations where the economic situation of the country justifies it. Indeed, we urged the Government to tax speculators at a higher rate than they intended in the Capital Gains Tax Bill but they refused.

We feel the whole policy of the Government should be to create and preserve jobs and we believe this Bill will do the opposite. Economically speaking we think it is crazy to bring this Bill in at this precise moment. This is the moment chosen in the life of this country to bring in a Bill to tax what is euphemistically called wealth, to which one can only answer "what wealth?" At a time when inflation and unemployment are at an all-time high and confidence is at an all-time low, the provisions of this Bill will undoubtedly further reduce confidence, will do nothing to increase employment and to reduce inflation. The amount of revenue that will be collected will do nothing to fill the enormous budget deficit the Minister faces. In other words, this Bill will do nothing to redistribute wealth which is the ostensible reason for it.

It was admitted by the Minister in his White Paper that this wealth tax will do nothing to redistribute wealth. While the Minister says he has no idea how much money will be collected under it, the universal assumption—an assumption shared by the Minister—is that the amount will be, relatively speaking, so small that it will do nothing to help the budget deficit. When one considers that the budget deficit will be in the region of £300 million this year, this £1½ million or £2½ million the Bill will collect will barely dent that enormous deficit. It will further damage the economy and further reduce business confidence.

One of the most important points one can make against the provisions of the Bill is that it will hit hardest where profits are lowest. In other words, it will hit hardest those very companies, businesses and employment-giving projects which we should try to maintain and support. A business that is making good profits can face a tax such as this with equanimity. A business which is finding it difficult to keep its head above water is the one which is hit most badly by a tax such as this. In certain cases this could be the straw that broke the camel's back. The provisions of this Bill will result in yet further company failures. Even where it hits the so-called wealthy, whether their assets are productive or not, it will be handed on to other people.

Over the past few days we have asked the Minister to produce even one economic argument in favour of the provisions of the Bill. So far he has failed to do so, nor has any Member sitting opposite on the Government side. They have produced a few vaguely political arguments but not one single economic argument has been produced in favour of one single section, subsection or paragraph of this Bill. We have had a totally unjustified allegation that the Bill affects only the very rich and that we on this side of the House are defending their interests.

We are defending the interests of the workers who badly need employment. These workers badly need an economic edifice, a degree of investment to put people to work. We are defending the industrial workers, the jobless, working farmers, workers in the tourist industry and those who are dependent on a high level of prosperous investment. These people are affected by the provisions of the Bill.

There is obviously no objection to taxation of non-productive assets. The circumstances in this country as compared with those in the countries quoted by the Minister—Luxembourg, Germany and Scandinavia— are very different. They are vastly more prosperous and developed than we are. In our circumstances, further burdens on productive and employment-giving assets are crazy. In successive weeks we have dealt with a Bill to provide a premium of £12 for workers restored to employment and now we have a tax on those who will get this premium.

The wealth tax will not be confined to the wealthy. It will be passed on to everybody, and will ultimately be a tax on everyone. Confidence here is at its lowest ebb since the 1950s and the provisions of this Bill will lower that confidence still further. It contains some concessions to employment-giving assets which are reasonably adequate in the case of farming, fishing boats and hotels. In other cases of other productive assets, the 20 per cent relief given is completely inadequate and in no way sufficient to remedy the damage that can be done by this new tax.

Inflation at the moment stands at 25 per cent. The likelihood is that in years to come a higher rate of inflation will prevail, perhaps 10 per cent or 15 per cent more, in other words, it will run at a rate higher than has been the norm in the past. In these circumstances, the thresholds contained in this Bill—which as they stand are relatively adequate and undoubtedly exclude those who are not in reasonably comfortable circumstances—as inflation develops we need have no doubt that the thresholds will be lowered. This Bill, as the years go by, will be applied to a much greater proportion of the population in exactly the same way as income tax affects ever greater proportions of people.

We oppose this Bill not because we are against the concept in principle of taxing the wealthy who own non-productive assets but because of the present economic circumstances we are living in. We have urged the Government to deal more firmly with speculators. They have refused to do this. For purely political reasons they are setting out on a course which they know in their hearts will do further damage to the already shaky economy.

Mr. Lenihan

First of all it is right to say that we have had a valuable debate. The Minister has agreed to look into some points raised by Senators on this side of the House and perhaps incorporate them into future legislation. We have disagreed in principle with the Bill because it applies to productive assets in the same way as it applies to non-productive assets. While we are in favour of a wealth tax on non-productive assets, we have sought to offer constructive suggestions which will help the Minister and the Revenue Commissioners in both the administration of this financial measure and in regard to future legislation designed to improve it.

Fundamentally, there are two issues on which we totally disagree with the Minister in regard to this Bill. First of all there is the issue of the timing of this measure. At present, we are in a serious economic recession. This is the worst time in which to embark on a disincentive measure of this kind. The recession that we have now will continue for the next six to 12 months and Government policy should be geared to helping industries rather than cause a further set-back.

I am not being a prophet of doom. I am sure we have the capacity to pull ourselves out of this recession, but the Government must set the lead. The Government must point the way, particularly to the investing sector.

The real way out of our present situation is to get investment going, to get the investing public to have a degree of confidence in the future of the economy that will enable them to put more money into this community. By saying that I mean Irish money and world money. I am talking about the investment public throughout the world because investment moves where investors, rightly or wrongly, see the climate right. That is a sine qua non so far as investment is concerned. Our paramount need at present is for more investment because as a result of more investment more employment is generated and we can get the economy moving. I am not dealing with inflation here because inflation is not central to the argument that I am making on this Bill. It is, of course, a very serious problem and we have had it in relation to other measures.

There are two problems basically facing the economy. One is to tackle inflation and the other to encourage investment. The problem of tackling inflation lies with the Government but recent actions do not encourage one to the view that it will be tackled seriously. The other problem is the investment problem—to ensure that we have here a climate in which investment feels a certain confidence. It is on this second point that the Bill is a positive discouragement.

In a period when investment is urgently required we have introduced this Bill which, on the Minister's own figures, having regard to his own thresholds as of now and his own exemptions, will yield very little money, something like £1½ million to £2 million on a per annum basis, an infinitesimal figure when one relates it to a total current situation of more than £1,000 million, being the Minister's revenue requirements, a situation where he is already on his own admission in a £240 million budget deficit situation. Probably the real figure is in the region of £300 million. Why this measure at this time? I realise the potential of it in the future when the thresholds come tumbling down and when everybody will be caught in the net but, now, when the yield is so miserable why bring in a measure, the only effect of which is to frighten people away? If this measure were to yield benefit to Revenue, it would be understandable, but it is yielding no appreciable benefit to the Revenue and will frighten people away because of the regressive nature of the taxation involved if the thresholds come tumbling down. This would mean a far wider scope of people being brought within the ambit of the measure.

In our present economic circumstances it is a highly unreal form of legislation. It is totally removed from any aspect of dealing with the current economic situation. It will have the effect of discouraging people from investing in this economy. The Confederation of Irish Industry have completely borne out the point of view that I am putting here. That point of view leads me to the second aspect. The timing is wrong generally but it is particularly wrong when there is no distinction drawn in the Minister's legislation between productive and non-productive assets. I welcome the wealth tax as it will apply to non-productive assets and by non-productive assets I mean non-productive assets in Ireland. I welcome the wealth tax in so far as it applies to dead and dormant assets held in this country. I welcome the wealth tax in so far as it deals with the immoral accumulation of wealth that is not put to any productive use. I welcome the wealth tax in so far as it deals with people who are accumulating wealth in the Bahamas, in the Channel Islands and in any other area of investment where they push their money out of the country. I welcome the wealth tax in so far as it deals with that situation. But I deplore the wealth tax as it stands, a wealth tax that will apply the same standard, the same yardstick, to people who hold productive assets in this country, people who are contributing to employment in this country, be it in agriculture or in industry as will be applied to the people who put their money into some funk hole in the Bahamas. The people who are creating employment in this country have got the same treatment from an Irish Minister for Finance as the people who have accumulated wealth but who are not making any contribution to production in this country.

The entrepreneurs and the enterprisers, the people with the capacity to make the right decisions, the people who want to expand and improve their own situation and the situation of their enterprises so as to give greater employment, are being put into the same category as the collectors of idle wealth. That is the situation which we deplore totally. I do not think this point has been made sufficiently strongly. In so far as the Minister is going ahead with this Bill he is doing a massive disservice to the growth of the economy at a stage when he and the Government should be seeking here, there and everywhere to apply every possible stimulus to get the economy moving again.

It is a complete contradiction in terms to have had the Minister for Labour here a few weeks ago with an employment premium measure designed to give grants to employers in manufacturing industry who are proposing to raise the number in employment over a certain level and to have the Minister for Finance refusing to acknowledge in this measure that the very people whom he wants to expand and invest and create more employment are not being recognised in his Bill. There is a big difference between the idle rich and the productive rich but the Minister has lumped both together in this Bill. That is the situation we sought to remedy in recommendations, both on Committee and on Report Stages. What we want to do is to exclude the productive rich entirely from the provisions of this Bill. The Minister may say that he has given certain exemptions to them as against other categories but they are still within the provisions of the Bill. He has adopted the very same attitude despite recommendations put down by us to the hotel industry, another industry where very obviously by immediate stimulus and help there could be a very rapid increase in employment to deal with largely unused plants and premises that are there already. This industry, even though there are certain concessions, is not excluded from the provisions of this Bill.

In regard to agriculture, we have the same situation, working agriculture is included in this Bill. What we have sought from the Minister to do right through this Bill is to exclude the productive elements in agriculture and industry—in particular, manufacturing industry—and in the services, particularly the hotel industry, where there is need for expansion and increased employment. Individuals who benefit from expansion in these three areas that generate employment should be exempted from wealth tax. We should concentrate on the idle rich who accumulate idle assets both at home and abroad. That is our consistent attitude throughout this Bill. The timing is wrong. No distinction has been drawn between the idle rich and the productive rich. The ordinary people depend to a very great extent on what are called the productive rich and on the brains and the capacity of such people to make decisions, think up ideas for investment, re-investment and expansion, and it is the generation of these ideas by such people that expands the workforce and leads to a greater degree of employment. This should be the main target of any thinking people at the moment. This measure produced by the Government, particularly at this time, when we are at a nadir of recession, when we want to stimulate and get things going, hitting the very people who can make a productive contribution to the economy and so expand its rate of progress and give employment is all wrong and shows a lack of appreciation of the overall economic need. The present economic need surely demands, in so far as you can encapsule what is required in the way of economic policy, encouragement of investment and greater employment parallel with tackling inflation. That is what economic policy should be about at the moment. This Bill, dealing with the productive sector of the community without drawing a distinction between it and the non-productive sector in regard to the imposition of wealth tax, does a great disservice to what ought to be the objective of any sensible Government at this stage of development.

Mr. Dolan

I agree with what has been said by my colleagues, Senator Lenihan and Senator Yeats, so far as this wealth tax is concerned. The Confederation of Irish Industry have a reference to the wealth tax. The Minister may have heard it already, but it is no harm to repeat it:

Ireland depends primarily on the growth of the manufacturing industry for the creation of employment. Investment in manufacturing industry has always been and will remain far below requirements in the foreseeable future.

This is a tremendously important quotation. The CII are very responsible people with an interest in industry. They are anxious to see that industry thrives because if it does well they will naturally do well themselves. They are not in it for the fun of it. They are doing a useful service so far as the citizens of this country are concerned. They are creating employment for the people in their own country. That should be of paramount importance and the yardstick by which we should measure the capabilities of any Government is by the number of people they can put into and sustain in employment.

Using that yardstick in relation to the present Government they fall very short of an adequate measurement because we have now 103,000 people unemployed. We must ensure that the people on the other side of this House are aware of that figure because some of them apparently think we are exaggerating when we mention it. These are the published figures and the Government must understand that they are in existence. This problem must be tackled. The Minister should know that no Government can go on indefinitely paying out pay-related benefits, social welfare and so on, and be able to balance their budget at the end of the year.

We are heading for a £300 million deficit at the end of this year. That is well known. Economists are well aware of it. Some of the industrialists on the other side of the House know it and should be men enough to admit it. It is a very serious situation for any manufacturer or industrialist to find himself in the position that, if he works hard and expands employment, he will be taxed.

An Cathaoirleach

I would just like to intervene. While I appreciate that the Senator is endeavouring to discuss the Bill in the context of the desirability of employment, he should be a little more careful in relating his remarks to the Bill. We are now discussing the contents of the Bill on Fifth Stage.

Mr. Dolan

I was adverting to the situation that exists at present and, in particular, in my own area where the IDA recently issued a report regarding the three or four counties in the north eastern region where unemployment has risen. More than 1,000 people have lost their employment during the last 12 months in that small area. That is a serious situation and one which must affect any elected representative and, indeed, any citizen. Any Minister who introduces a Bill which will ensure that that situation will not alone continue but will escalate out of all proportion is not acting responsibly and we will reach a situation in which we will have not 103,000 unemployed but, perhaps 150,000.

There is another disastrous aspect of this Bill. People are being scared away from small farms and they are coming on to the live register because of the Government's policy regarding the small farmer. They are frightened off because of this Mansholt idea. They believe they will be all wiped out and they are coming on to the labour market now. The Government must be raving mad if they think that this is the right cure for the ills that affect the country.

An Cathaoirleach

I am afraid I must interrupt the Senator again. If he wishes to accuse the Government of being daft he should do so on the basis of what is in this Bill.

Mr. McGlinchey

No problem.

Mr. Hanafin

No problem.

Mr. Dolan

I was trying to point out that, because we had 103,000 people unemployed, it was a very serious situation and the Government should take cognisance of that salient bald fact. It should have sunk in by this time if they read their own published documents. I was respectfully suggesting that while we on this side of the House are in favour of wealth tax, we believe this is the wrong way and the wrong time to introduce legislation such as this because they are frightening off the people upon whom we depend for the establishment of industries. In my constituency we do not have very many wealthy men who would venture to set up an industry. The published figures of the IDA show that it takes about £8,000 to put a man into a job. That is an enormous amount of money. When this is multiplied by 500 people or the 1,000 people in my area who lost employment during the last 12 months the magnitude of the problem will be seen. We must add to that the amount the Government will pay out in pay-related benefits and the amount they are losing in income tax because these people are out of work. A Government concerned about the state of the country would realise that the unemployed are not so foolish as not to know that the day of reckoning is coming. The situation cannot go on as it is. No bank will allow you to overdraw and get into the red year after year. No Government can expect to do that. They are wiping out the confidence foreign investors had in Irish Governments in the past. Not too many people are now saying Fianna Fáil were too long in office.

I would not mind where investors came from so long as they had the necessary capital to invest. If they came to my constituency, I can still guarantee them the extra three years exemption from rates we have given to industrialists already there, so that people will have reasonable prospects of living on the farms in rural Ireland in jobs which enable them to maintain their families and themselves. The Minister seems to be saying he does not like wealthy people, especially foreigners, the sheiks among whom he has travelled so often recently. He comes in here and says he does not want them.

Mr. Lenihan

He wants them.

Mr. McGlinchey

But they do not want him.

Mr. Dolan

They do not want to come in under his conditions and he knows that. There are a few people here who have wealth. If Members of the Opposition looked around their own benches, they would see some wealthy people. I am not being personal.

Mr. McGlinchey

They are not here to vote against the Bill.

Mr. Dolan

They could use a little of their wealth to create some employment. Why should people who could create employment be taxed? Why should they be encouraged to leave the country? A highly-respected Fine Gael Deputy, one who gives employment, was not anxious to go into the lobby and vote for this Bill because it hurts him. If people with wealth are driven out of the country, there will be nobody left to start new industries. If the Minister makes inquiries, he will find that a good deal of money left the country in the past 12 months. There are secret bank accounts in other countries. People know where to go when they have their wealth accumulated and they pay nothing to the State. The Government should encourage these people to remain here and put some of the 103,000 unemployed in productive employment.

The Government are trying to pretend that the Fianna Fáil Party are in favour of rich people. The Minister knows the Fianna Fáil Party were always in favour of a wealth tax.

Mr. R. Ryan

You could have fooled me.

Mr. Dolan

We do not want something which will keep 103,000 people unemployed. There is no confidence in this haywire Government from the Minister for Defence to the Minister for Agriculture and Fisheries. The Minister for Agriculture and Fisheries said today that we should have confidence in the farming industry. We would love to have confidence in it, but how can you have confidence in a Minister for Agriculture and Fisheries who could not prevent the meat factories from using the money coming from intervention which was intended for the farmers last year? He could not do it and he will not be able to do it this year either.

The Government are not doing anything to cure the greatest headache the country has experienced. Some years ago, some member of the Fine Gael Party said that unemployment was not a concern of the Government, but Fianna Fáil are concerned about these people and will not rest until they are back at work.

Mr. Hanafin

Many things have been said on the Bill. Valuable contributions have been made from this side of the House. Recommendations have been put down, but all in vain. It would appear that the Minister's attitude is that he will not accept anything proposed by this side of the House. The Minister is not prepared to say he made a mistake. It would be interesting to know when it was decided to have such a Bill and under what circumstances. Promises were made during the last election. They were hastily made. The Government could, perhaps, be forgiven for not keeping them because they were immature promises, made by irresponsible people who believed at the time that they would never be called upon to fulfil any of these promises. By some freak result, the Coalition Parties found themselves being asked to govern.

One of the promises made dealt with death duties. The Government realised that the promises made were not practical and, as politicians rather than as people who were asked to govern, they decided they must do something to save face. Having examined all the implications of death duties, they decided they would have to come up with something else. At this stage, the junior or the senior partners—I am never sure which role the Labour Party play in Government —said: "You destroyed us in the last Coalition Government. We will not allow you do it this time so we want something, anything will do, so that we can appear on the election platforms at the next election and say `Look what we did."' That is how the wealth tax was conceived. The Labour Party are in a position where they can claim responsibility——

An Cathaoirleach

Unfortunately, I must intervene. We are concerned at this stage with what is in the Bill. Any discussion on the motives for the introduction of the Bill are no longer appropriate for debate. They were properly matters for debate on Second Stage. We are now concerned with the Bill as it stands, as it has left Committee, with the implications of the Bill as is stands. Such comments as have been made are, strictly speaking, not in order.

Mr. Hanafin

Forgive me, but I felt it was necessary to make those points because I was leading up to the reasons why certain sections formed part of the Bill and why the Bill itself was so described. The Bill is described as a wealth tax Bill. A more fitting name for the Bill would have been an achievement tax Bill because that is what it boils down to. We had members of the Labour Party make excellent speeches, one in particular. That particular member's command of the English language was praiseworthy.

I hope I will be forgiven if I attempt to reply to points made by him. Unfortunately, I was not present when he made them. But I would ask him or other people here of the same mind to compare the death duties tax and now the wealth tax or, as I would describe it, achievement tax. Under the previous tax people born in privileged circumstances and who inherited wealth or property created by other people were taxed on that inheritance. I thought that would be the type of tax that would be pleasing to people who claim to be socialists. Instead of that tax we now have what is described by the Minister as the wealth tax, a tax that will be imposed on people who may not have been born in the privileged circumstances I have described, who may have been born in very poor circumstances, who have worked hard all their life, used the talents God gave them, used them well and, all through the earning period paid all sorts of taxes they were required to pay. Rather than squandering his money or spending it in some form, he chooses to build up his business, and, therefore, his resources, and is taxed on them. That is tax on achievement and nothing else. I cannot understand how the members of the Labour Party or the great socialists can say: "Yes, we must tax him rather than the person born in the privileged position and who has inherited wealth; we must tax the person who has worked hard all his life, paid his taxes, built up resources."

In other times there may have been justification for a wealth tax. I do not accept that this is the time. All the time this debate took in the other House and has taken here is merely pure politics and nothing else. The Minister himself said that the number of people it will affect could be seated in the Seanad. I think he said that they would not even fill the Seanad. I do not know by what amount of money the Exchequer will benefit but I am sure it will not be much. I think I heard the Minister say: it may not be a great amount.

That is why I took so much time and went to so much bother to point out the reasons for the tax measures being placed before the Houses, all the time being wasted, all the staff working into the summer. Then we had the Leader of the House, quite irritable at the beginning of the week, blaming the Opposition for delaying business and so on. Let me point out to him that he must have acquired very bad habits when he was on this side of the House. When we were in Government and they in Opposition, they did not take time to do their homework and prepare contributions. That is no reason why the Fianna Fáil Party will do the same. While in Opposition we will protect the interests of all our people. If we see anything that we feel is not for the good of the people, we will at all times oppose it in an intelligent and constructive manner, no matter how it irritates the Leader of the House, and we shall do so particularly dealing with this Bill because it is merely presented for the purpose of platform politics where the Labour people can say: "Look what we did for you; we taxed the rich." But they will not go any further than that. They will never be able to say: "We taxed the rich for the benefit of the poor," because it will be a lie. This Bill will not benefit the poor; in the long run it will do them harm.

All sorts of people may well be taxed under the provisions of this Bill. This year it is one thing to say that the number of people to be taxed under the Bill will or will not fill all the seats in this House but there is next year. In fact, it may not even go to next year, perhaps a few months time. More and more people will come into the net. There will be people with property, perhaps office property, people who have worked hard, invested wisely, saved their money and built office blocks. I am talking of the Irish recession. I am not talking of the world recession about which the Minister and everybody else on that side of the House speaks.

Comdt. Sanfey

What about the Seanad recession?

Mr. Hanafin

I am talking about the recession in this country. That cannot be written off as a world recession or some other kind of recession. You are to be praised for your patience and your gall in regard to the way you keep presenting the matter to the public saying: "This has nothing to do with us at all. This is a world recession. We are not responsible. We cannot do anything about it." It is just amazing how you can have that gall and keep——

An Cathaoirleach

I would remind the Senator that when he uses the word "you" he is attributing his sentiments to the Chair.

Mr. Hanafin

Most certainly I am not. I forgive the Chair for thinking that. I am quite sure that a man with the brilliant mind of the Cathaoirleach is quite fed up with the same thing being trotted out about this world recession over radio, television and through the media in general.

Let us get back to the Irish recession for which the Government are responsible. There is the case I have illustrated of the man who works hard and pays all his taxes. He saves, he borrows and builds his office block. During this Irish recession he cannot get tenants. He will be taxed on that property—an investment without any return. Take the case of the man who has a shop in the best centre. It would be valued highly but he has a small clientele because the customers have not got the money to pay for the goods he tries to sell. He will be taxed under the Bill.

Then there are people with shares in companies. A man may have a large block of shares. He will be taxed on the figure that may be quoted on the stock exchange that morning. If he sold his block of shares, their value would drop immediately, as anybody who understands the working of the exchange would know. Their actual cash value would be less than their share value. If he sells, he will be taxed on what appears to be the value at the time.

It took courage on the part of the Fianna Fáil Party to oppose this Bill because we are as wise, and time will prove how wise, politically as any Member on the other side. We realised, in starting our opposition to this Bill, that we were leaving ourselves open to the charge of being the rich man's party, because we are supporting the rich man. But we felt, as a responsible Opposition, no matter how it may be used or misused against us, that we would have to point out the flaws as we saw them and seek to amend what we believed was unjust and point out at all stages that the timing was so incredibly wrong that it was disastrous.

I heard the Leader of the Opposition, Senator Lenihan, say here that it was the duty of the Government to be unpopular. That was a strange observation but yet when one thinks about it one realises how true it is. When Senator Lenihan made that comment he was thinking of the experience he had with a responsible Cabinet who were prepared to be unpopular for the good of the country. He was right in pointing it out, but he was wrong if he thought anyone would take any heed of it. It is the duty of the Government to be unpopular if harsh measures are called for. If harsh measures are needed, it is the duty of the Government to take an unpopular stand. But the Government are not prepared to do this because they are divided in such a fashion that we cannot expect responsible government.

During the course of the debate Senators spoke about the Minister borrowing at the present time and the sources from which he borrowed. Some flippant and irresponsible remarks were made about the Gulf States where the Minister is seeking money. I congratulate the Minister on having the wisdom to go to the right source. This Government so seldom do what is obviously the right thing that I feel obliged to congratulate the Minister when he does something good. He is dealing with people who are very wise, who have the money, and who are prepared to lend it. But the first thing any banker will examine is the risk content, and this country is a good risk. I commend the Minister for going to the proper source but I will be very critical of him if he fails. The goodwill which exists for this country should make it possible for him to succeed.

It is interesting to observe that one Senator from the Labour benches who devoted some time to speaking about socialism also indulged in making flippant remarks about the Arab States. May I point out to that great socialist that the Arabs were robbed from 1934 up to the 1960's by the British during a period of socialist government in Britain, a government he referred to several times here? They were given no facilities for education——

An Cathaoirleach

I am afraid if the Senator strays much further from the Bill he will end up in Arabia himself. He must devote his remarks to the Bill.

Mr. Hanafin

Arabia is about the only place left to go. I am referring to remarks that were made by Senators in the House.

An Cathaoirleach

I know that, but the point is that the Fifth Stage debate should be devoted to the contents of the Bill and not to the complete preceding debate.

Mr. Hanafin

I accept that. I wish to refer to some remarks that were made. I am not going to deal with them in any detail. It seems to be the popular thing now to clap yourself on the back and say: "I am the great socialist". I know people who may be affected by this Bill, big employers in the town of Thurles, people who are in the mineral water business, and these are the type of people who were criticised by the great socialists. These employers are the real socialists because they took on staff which they did not really need to give work to local people who were in bad circumstances. I do not wish to bring the wrath of the Chair down on me, but one could be forgiven for getting slightly irritated at this talk about socialism as if it were reserved for a small section of the community. I am annoyed with people who say "We are right; everybody else is wrong. We are the great socialists", and so on. One gets tired of it. I know a lot more about what socialism really is than some of the people who are pontificating about it here and who never saw a poor day in their lives. They would not know what to do about it if they did.

The point was made by the Leader of the Opposition that there is a difference between taxing the productive rich and the idle rich. We need people with money, as the Minister well knows. We need people who are prepared to invest their money, people who get great satisfaction from achievement. Sometimes it is no longer necessary for them to make more money to maintain the standard of living they are enjoying at the present time; yet they have this wonderful sense of achievement. Their happiness is in achieving things so that others may benefit.

Mr. Kerrigan

Others will benefit.

Mr. Hanafin

I would like the Senator to point out how anyone could benefit if the people who are capable of achievement stand still. Achievement is a wonderful thing. Some people have this sense of achievement, others have not. It has always been Fianna Fáil policy to help people to help themselves and to help other people. I am dealing with a rare breed and people should appreciate that there are people whose enjoyment is achievement and helping other people. Now they will sit back and say: "Why am I bringing all this responsibility on myself? Why am I bringing all this worry on myself?" It is not because he will make any more money but because there is, apparently, no appreciation of the effort that he is prepared to put into helping the country and the people who need his help.

One thing I would like to mention is that it is the duty of the Government to encourage investment. A considerable amount of money is spent every year trying to encourage investment through the IDA. Promotions by them in trying to influence people to come to this country cost a lot of money, time and effort. All this is being wasted by introducing this tax at this time. All the incentives should be held out to those people, all the encouragement should be given to them. On the one hand, we are inviting them in and on the other hand telling them: "Come by all means but we will take whatever it is you have from you."

I have seen a case of this quite recently where people in an industry outside the country were influenced by the campaign of the IDA to come and set up a factory. They set up a factory. I know it well because it is in my own town It produces calculators and cash registers, yet, not one order has been given to them by the Departments for calculators that are being used in the offices every day. The calculators that have been bought are ones that have been imported. That statement is not mine. It was made by the managing director.

An Leas-Chathaoirleach

I fail to see the relevance of that to the Wealth Tax Bill.

Mr. Hanafin

I am merely stating a fact. I can see how the Leas-Chathaoirleach may have difficulty in understanding the connection but I would point out that I am dealing within the scope of the wealth tax. There are people encouraged to come in here to invest their money. They will be taxed on that. They are getting no help from the Government, even though there is supposed to be a "Buy Irish" campaign in existence.

An Leas-Chathaoirleach

Senator Hanafin is well aware that has nothing to do with the Wealth Tax Bill.

Mr. Hanafin

Forgive me. I thought it was within its scope. I am prepared to admit that I may have been wrong. I may have been wrong in bringing in the "Buy Irish" campaign but seeing that this campaign was started by the Government and this particular factory is producing the goods in Ireland and the Departments are buying similar goods——

An Leas-Chathaoirleach

Senator Hanafin is well aware that he is out of order and I cannot permit him to continue on that line of argument.

Mr. Hanafin

Very good. It has been pointed out that the Government have not got the support of all their members on this Bill. We are aware that two Senators are missing. I forgive them because even if they vote against the Bill, or abstain, they could be forgiven for that because they are the Taoiseach's nominees. After all, I would expect that a Taoiseach's nominee is merely expected to do what the Taoiseach does seeing that the Taoiseach has given the lead, that he does not always vote with the Government.

An Leas-Chathaoirleach

Senator Hanafin should keep to the Fifth Stage of the Wealth Tax Bill.

Mr. Hanafin

I will finish on this note. Incentive is dying for the people of achievement. It is no longer being encouraged. All I ask the Minister to do is not kill it altogether.

Mr. Russell

I have not spoken on this Bill since the Second Stage. I had hoped that, in the interim period of some weeks, we might have got what an Opposition is there to provide, constructive opposition to this Bill. There is plenty of scope in it for an effective opposition, but so many wild irrelevant, exaggerated statements and charges have been made that the whole value of the Opposition is completely lost.

A lot of play has been made about the impact that this wealth tax will have on certain people. It is very interesting to note, and I am sure other Senators have noted, the changing emphasis from the Opposition benches from the Second Stage to this Final Stage. I recall in the earlier speeches the vehement all-out opposition in principle to the Bill. That has been subtly altered because it was very evident to the Senators opposite that they were getting themselves into a very awkward situation of being dubbed the Party of the rich and privileged. It was obvious that some hard thinking was done. A very significant but, nonetheless, subtle change has taken place, particularly in the contributions from the opposite benches today.

As I understand it—if I am wrong I am sure that my fault will be pointed out in subsequent speeches from the other benches—we are all in favour of a wealth tax provided it is a selective wealth tax and that people in various categories are excluded from the list and only people living in the Bahamas and the Channel Islands and those other unworthies who will come under the umbrella of this extraordinary wealth tax, which I understand, is now being favoured on the Fianna Fáil benches will be included.

I do not know what kind of a Bill that would be. I do not know how many gentlemen have amassed their wealth in this country and have deployed it in some unknown bank in the Channel Islands or in the Bahamas. I know—I am repeating what I said on the Second Stage which I think I am entitled to do in the context of this Bill—that whatever else the Government may be accused of, they were not dishonest with the electorate at the last general election.

They said they would abolish death duties and they would replace them by a tax on the wealthier people. That is what they are doing. Whether you agree with the introduction of it or not—there are many arguments that could be made against it; I am not out of sympathy with some of the points put forward, particularly by Senator Lenihan and Senator Yeats being a businessman and probably one of the people who will be affected—the gross exaggeration which has taken place today and on earlier days, has done away with any useful contributions that could have been made from the other side.

As a businessman, an employer, an industrialist, a manufacturer, a wholesaler or retailer over many years who happens to have a family business, who cannot if he wanted to do so, leave the country because everything he has is in bricks and mortar what concerns me is the fact—and this gets to the core of the criticism made: I hope when the Minister is replying that he will repeat what he said already in the Dáil on this point—that the introduction of this Wealth Tax Bill has not discouraged investment in this country and is not responsible for our present high level of unemployment. Statements were made by Members on the front bench opposite—not today, but earlier—that the reason we had 103,000 people unemployed was the introduction of this Bill. That is gross exaggeration. That is irresponsible talk. It may be useful political talk but it has no basis in either honesty or fact and should not be made.

I know of no instance where a potential industrialist, Irish or foreign has been discouraged from coming into this country because of this potential wealth tax. I hope that some of the Senators opposite after this debate can give me such a list: I would be very interested to get it. If I was convinced that there was a definite danger to investment in this country by outsiders or native industrialists, I would oppose this Bill. I remained for this debate today at great inconvenience—I am sure other Senators are in a similar position—to vote for this Bill. I am an industrialist —I suppose I will be called a capitalist in some quarters.

Mr. McGlinchey

Senator Halligan would call you that.

Mr. Russell

I do not believe the cock and bull stories that have been trotted out about the effects this Bill will have. As I said on the Second Stage, everybody is against taxation. I invited any Member to stand up and say he was in favour of any form of tax. Every tax that was introduced since Pitt introduced income tax a good many years ago has been opposed for one reason or another. Taxation is a fact of life whether we like it or not. Whether you tax income or whether you have indirect taxes such as Fianna Fáil brought in on food, or whether you have a wealth tax, to my mind what is essential is to balance your taxation in such a way that you do not do the things that Senator Lenihan and Senator Yeats fear that this Bill will do, create a disincentive to people of enterprise, hard work and initiative.

I do not believe this Bill will do that. It has been said, and there is a certain amount of validity in it, that the sort of Wealth Tax Bill we should have is one that would discourage accumulation of non-productive assets and encourage the entrepreneur who is prepared to go out and take chances. I do not believe that will be the outcome of this Bill or that you could devise a Bill that would tax only what are described as “the idle rich” in the Bahamas and elsewhere and exempt all other productive assets. Such a Bill, to my mind, is impossible. We are introducing a Wealth Tax Bill. Wealth taxes are not new; they exist in most of the European countries. The argument has been made that their terms are worse, that they are offsetting advantages in general income taxation. That may be valid. This point should have been developed to a greater extent.

As the Minister has pointed out, this Bill is a mild measure and has been considerably altered since the date of the White Paper due to submissions, not only by professional and commercial bodies but also by members of my own party and of the party opposite. The Minister has gone a long way to meet a number of objections. The Minister can claim that he has been co-operative. This Bill, which began as a Bill which was opposed in principle is now being opposed as not being a selective Wealth Tax Bill. I think that argument fails. I do not believe the measure will have the appalling consequences envisaged by some Members. I do not believe the gloom and doom that has been preached from the opposite benches. When Members opposite are talking about the mass unemployment which is going to follow as a result of this Bill they should be more specific and give us details of how this will come about. They should tell us what industrialists have turned aside from this country because of the Wealth Tax Bill.

The Fine Gael and Labour Parties have done their part in trying to promote industrial development in Ireland. The Industrial Development Authority was set up under the late Gerry Sweetman as Minister for Finance and opposed tooth and nail by the party opposite. We also had the Undeveloped Areas Act, The Industrial Grants Acts and the incentives to mining. All these were brought in when the "terrible Coalition" were in office. I do not believe that the present Minister or Government would bring in a measure that would have the dreadful results that have been suggested from the opposite benches. If that were to happen I cannot imagine a Bill like that being kept on the Statute Book.

Our whole tax system requires radical alteration that I hope will come over the years. Our whole base of taxation up to now has been too small. The number of taxpayers up to recent years has been tiny relative to the working population of the country and small in comparison with tax bases in other countries. That is changing now; with incomes going up, more people are being brought into the tax net. The present Minister, as Senator Hanafin pointed out, did take the first positive steps to ease the burden on the general body of taxpayers.

It was a tentative step: I do not think he intended it to be any more than that. The Minister has tied up a lot of loose ends and made the whole taxation code simpler and he took many people out of the tax net at the time. The whole question of national and local taxation is one that I hope will receive the earnest consideration of the Government over the years so that in the end we will, for our peculiar and particular circumstance, evolve a taxation system that will do what the members opposite want and that is, encourage the man of enterprise, the entrepreneur, the man who is prepared to take a chance and at the same time penalise the person who is prepared to let things slide or slip. I said that on the Second Stage and repeat it now to make it quite clear where I stand on this matter.

I do not believe that the awful effects held out by the Opposition for this Bill will ensue in the months or years ahead. Wealth tax, whether we like it or not, will be a fact of life. Some of us do not like it—I do not like it—but it will be a fact of life. I hope it will introduce a further measure of distributive justice. I hope the funds that accrue from it will be used for social and other desirable purposes. At the same time, I hope we will continue to do as successive Governments have done—let me pay tribute to all Governments in that regard—to encourage the entrepreneur, the hard worker, the skilled man, whether he is Irish or one of the little Arabs Senator Dolan talked about, to invest his money and know-how here and to give employment in the years ahead to Irishmen and women in their own country.

Mr. E. Ryan

Senator Russell is optimistic if he thinks this will encourage anybody. It would be going too far to think that a Bill of this nature would encourage anybody to come here to set up business. The most one could hope for——

Mr. Russell

I did not say encourage; I said not discourage.

Mr. E. Ryan

I would go along with the Senator there. The most one could hope for is that it would not discourage them.

This Bill will raise taxes, a necessary part of the Government's activities, but we are not quite sure how much it will raise. On the one hand, some of the time we are being assured it will raise a lot of taxes because it is being alleged that this will redress the balance and those who are paying income tax and so on will not have to pay as much in the future because of this Bill. If it will make any real contribution to that, it will raise a lot of tax. On the other hand when we talk about the people who will be affected we are told it will not affect anybody very much. In any event, it will raise some taxes. Any tax Bill is designed to do that and in that sense it is achieving what it sets out to do.

The Bill will redress the balance between those who are paying tax on income and those who, under this Bill, will be paying tax on property. In so far as there are any people with a lot of property not already paying quite a lot of income tax—it is difficult to see how that kind of situation exists— and this redresses the balance between those who are paying too much tax on income and those who are paying too little on property, one must accept and approve of the objectives of this Bill.

The Minister made a case on a few occasions that this will force those who have unproductive property to have a look at that property again and ensure that it becomes productive. That is a plus factor in regard to this Bill. If it manages to do that it will be playing a useful purpose. At that stage, one begins to run out of arguments in favour of the Bill. It does a lot of other unfortunate things at present. It is necessary to remind ourselves—in other contexts we are reminded of it very often by the Government—that we are in the middle of an economic crisis and it is in that kind of situation we have to look at this Bill. If we are to be realistic we have got to look at everything done by the Government and the Oireachtas, at every Bill brought before us and ask: is this Bill in the present unusually severe depression going to contribute anything to the situation we are in? Will it help the economy in any way? Will it give one extra job? Will it save one industry or bring back one industry that is gone?

We have been asked by Senator Russell whether we can name a single industry that will be affected by this Bill. All we can say is that many industries have collapsed in the last 12 months and many more are on the brink of collapse. We cannot pinpoint at this stage whether any in the future will collapse as a result of this Bill, but, without trying to make any political point, I believe there are many small industries which are on the point of collapse and for which this Bill will be the final straw. If we debate this Bill again in the future perhaps we will be able to name several industries the collapse of which will be due to this Bill.

If one is willing to ignore what is going on around us, if one is willing to look at this House for a moment as a debating society and look at this Bill as an interesting exercise in tax legislation, it is a very interesting Bill. In most respects, it is a very well drafted Bill and one which has a lot to commend it. In so far as it should have been brought before us at all, it should have been brought before us on the basis of a Bill, which the Minister and his staff having done a lot of work on, would like to go through the motions of having it passed but are then going to put it on the shelf until the time is more appropriate to put it into operation.

The more one looks at the present situation, one is impressed and convinced that the Bill is completely irrelevant at present. It is inappropriate and as time goes on and the depression gets worse, it becomes more and more inappropriate every day. Apart from the harm the Bill will do or the lack of contribution to the present crises it will make, it reflects the Government's attitude to the position here at present. There is a lack of real contact between the Government and the people when we have such a Bill before us. There must be an extraordinary lack of realism that the Government should spend so much time in these two Houses, and so much of their own time, on a Bill of this kind which becomes less and less appropriate every day that passes.

A famous general in the United States many years ago said that strategy was the art of having the most troops in the right place at the right time. This Bill is a lovely example of the exact opposite. There is nothing about this Bill which could be said to be the right Bill in the right place at the right time. It is the wrong Bill at this time. It is making no contribution. It is distracting everybody concerned from getting down to the real problems that face us. It is entirely inappropriate and out of touch with what we need. One cannot help feeling that it is more than a lack of touch on the Government's part, it is more than a lack of reality, it is a deliberate red herring produced by the Government to distract people from the realities of the economic situation, and from the fact that the Government are failing to face up to their problems.

Criticism of the Oireachtas, the Government and politicians has appeared in various journals. It has been said that they have become more and more irrelevant, that the real events are taking place outside Leinster House, outside Government circles. People have been said to take events into their own hands because they have lost faith in the political system. To what extent that is true would lead to a wide discussion on which I will not embark.

The introduction of this Bill at the present time bears out to a very considerable extent the criticism that has been levied by political commentators and by the public that the Oireachtas are inclined to lose touch with the real issues of the day, that they do not face up to them and that they spend a lot of time on things that are irrelevant.

I hope this Bill, amended in certain respects so as to have more regard to productive assets, will have a relevance in the future. I hope the economy will recover from the present depression which is due partly to world events but, to a very considerable extent, to the lack of action by the Government, to the tendency to talk about irrelevancies, to introduce Bills like this instead of dealing with the depression. When we return to the prosperity which was beginning to emerge in the five years up to 1973, and when sufficient time has elapsed with that kind of prosperity to have real wealth in the country, to have people with sufficient property to justify a Bill like this, then this Bill will be relevant and worth while producing and operating. The unfortunate aspect of it is that by that time—because of the lack of reality about inflation—this Bill will be again subject to criticism because sufficient allowance will not be made for inflation.

My criticism of this Bill is that it is entirely irrelevant to the needs of the country at present. It makes no adequate provision for inflation and makes no adequate allowance for productive assets. I hope the country will return to prosperity which would justify a Bill of this kind. Having regard to the extent to which Government action is irrelevant and to which they do not take any worth while action in important matters, it seems most unlikely that that situation will be reached under the present Government. I hope the country will get back to the kind of situation which would make it appropriate to have a Bill of this kind in operation. When that time comes it will certainly have the wholehearted support of Fianna Fáil.

Mr. Harte

I do not want to repeat what I said on the Second Stage. I will endeavour to stick to the contents of the Bill. In passing, I will try to indicate the attitude of the Labour Party on this wealth tax, in so far as it relates to the Labour Party being part of a Coalition Government.

The Labour Party entered into a bargain with the Fine Gael Party. One of the inducements was that the Government would have aims of reform. The two aims which applied most to us were the guarantee that there would be greater equality in the distribution of wealth. and an endeavour to see that the burden of taxation would be spread more equitably. Neither of those aims could have been realised if the wealth tax had been omitted. We were dealing with a package of taxes and unfortunately they had to be taken one by one—the tax on farmers, capital acquisitions tax, capital gains tax, the wealth tax and so on. In order to demonstrate that a more equitable system of taxation was in existence wealth tax could not be excluded.

When dealing with taxation, we are dealing with a most important source of State income. Because if its confiscatory nature, no matter which section of the community is affected, there is bound to be a certain amount of resentment. At the same time, a Government must take the necessary steps to demonstrate that they are endeavouring to cherish all the people of the nation equally. If the Government had not come into line with other European countries in regard to taxation, I think they could never convince people that they were genuine in their statement of intent which partly induced the Labour Party to join with Fine Gael in Government.

Taxation must be imposed on all people in an acceptable and fair way. I am quite satisfied in the final analysis that Senators Yeats, Lenihan, Russell, A. FitzGerald—the main contributors to this debate—realise that in a society like ours where we are continually endeavouring to try to get away from the tag of a class society it is necessary to have taxes that are seen to be distributed and applied equitably. While they may differ on a lot of points of approach, they may have thought some amendment should be made, in the final analysis I do not think they are really in principle opposed to the idea. There were possibly some fears, and they were mentioned by Senator Hanafin, that the best way to deal with the advocating of socialism is to argue on the basis of class. Of course, this is not correct. The genuine socialist does not talk about the class, he talks about the system. We live in a society where we cannot decide by one Act of Parliament that we are going to convert to socialism. Consequently, the constructive thing for the socialist party is to work within society and with whichever party will come along the road towards reforms in that system, that will make it a more just and equitable sort of society in which to live.

I do not want anyone to take exception to the term "working class". I consider a man who works with his hands and brains, who receives a salary for that is part of the working class. I do not consider the fellow who plays golf in South Africa, who does not know what a company is making except profits, as someone who works with his hands and brain. That is the distinction I would make. Even though the previous Government made some changes, the workers never could see it clearly demonstrated that there was any attempt being made to apply taxation equitably. They could see one group of capitalists trying to put the burden of taxation on to other groups of capitalists and when it became so bad it was necessary for both groups to combine and the real effect of taxation was on the lower working classes. The net result of that in the minds of the workers, whether we like to accept it or not, was a reduction in wages.

If people did back into history far enough, and even in the debates here, they will find that when various measures were introduced over the years, no matter which Government were in power, when certain business people saw they were going to be taxed they found some way of passing it on to someone else and finally they combined to transfer it onto the backs of the workers. Naturally there is going to be great resentment when that happens. Anybody who offers a method of reform will most certainly be welcome. Good socialists should not talk about classes. They should work within the system to see reforms within the system and not talk about pulling down classes. If the country did convert to socialism, the doctor would be paid higher than the labourer, as would the dentist. Let us not get confused. It is the system we are concerned with.

When the Government impose taxation, they have got to see that it is broad and general and that it is not resisted. I do not believe that all the recommendations that were put down by the Opposition were a real attempt to resist it. I think they agreed in principle all along but they had to be seen to be pushed into it rather than going along with it. To that extent I would accuse them of a certain amount of politics. Nevertheless there were some very worth-while and detailed endeavours by them.

We had the argument that the wealth tax may not be remunerative. That may be true taken on its own. Because it may not be remunerative it was said it was not a good measure by the Government, that they were just picking on one particular section of society. If the other taxation packet was not embodied with it, if it was standing alone and was not something that was obtaining in other European countries, I agree it would be wasteful. But I do not think that is the case.

When the Government are looking at a taxation system and trying to make an equitable assessment of how people should be taxed, they cannot overlook the fact that to take £1 from a poor man and £1 from a millionaire has different effects. There is no question about it. That action may diminish the well-being of the worker in some cases, although not in all cases. I am glad to say that some of the workers were caught for the 38 per cent tax. That is a welcome sign and it is indicative of how workers look at taxation. We did not have a "bellyache" on the recent occasion that it was necessary to add the 10 per cent in the recent budget. The "bellyache" was in another area over the national wage agreement. That is indicative of the mentality of the working classes when they see a genuine attempt to spread the burden more evenly across the broad spectrum of society.

I look on this as part of a package and not just a wealth tax on its own. There is no uncertainty because it is clear what it will yield. It is a good sign in the implementation of taxation to know what the tax will yield and what each individual will have to pay. There is no ambiguity about it. When we come to the question of exemptions, I do not think that a man who has a total value of wealth in the region of £815,000, where the effective rate of tax on him is going to be 0.46 per cent, has a lot to complain about. Let us take the example of a farmer with an 800-acre farm who is allowed £100,000 of the market value of his land, £50,000 for machinery and £50,000 for his personal wealth. In a case like that where the man's gross wealth or the total value of the wealth is £850,000, I think the percentage being applied, 0.46 per cent, is not very extravagant. So we can go on down the table. Members have heard them already from the Minister and I do not intend to deal any more with them. The table is worked out and all the exemptions are there.

It has been said that a tax may be unjust. Considering the lengthy discussion that has taken place, the Minister has cleared this point. Every speaker who endeavoured to prove that this tax would be unjust failed to establish it. The Minister quite clearly established the fact that it was not unjust.

I would say to Senator Yeats and the other Senators concerned, including Senator Alexis FitzGerald, that it is possible that a tax could be just one year and not just in another year. Having regard to that, the Minister made it clear that the question of taxation must be subjected to reconsideration from time to time. That was a very fair admission by him and it is a natural one. The Fianna Fáil Government would not have said or done anything different when they had a Minister over here answering the same type of questions. The tax may be productive in one year and not so in another. That is not a reason for not introducing it. Having regard to the other points I mentioned earlier, the case is not defeated in any way by making that point.

The Minister gave the undertaking that it must be admitted to reconsideration from time to time. I do not want to praise that point of view on the one hand and then to say anything that might prejudice that undertaking. It would not be right for me not to say that I consider this is another step in regularising the tax situation. The twin aims of the Coalition Government are being pursued and there is a possibility, by the type of steps that are being taken in the various taxes introduced in the package, that there will be reform in the shape of equality in the distribution of wealth. We are working in that direction. There is a need to police the system of taxation so that the burden is spread more equitably across the board.

The question of the IDA grants was mentioned earlier. Only a couple of weeks ago people on both sides of the House welcomed a measure here and the praises of the IDA were sung very highly, but there was some fear expressed that the nature of the tax would get people to shy off. This has not been the experience of the countries in Europe that have a wealth tax. There may be reasons why people do not invest and it is not necessarily because of the wealth tax. If people do not invest in Germany it is not because of the wealth tax but because of some other reason. In the case of the IDA, we heard in the last few days an announcement that they have projects under way at present that will realise almost 800 jobs. The confidence seems to be there to invest. Those people had approached the IDA and made their endeavours towards generating wealth through the setting up of industries and so on in the lifetime of the debate on the wealth tax, and the arguments that it was something that would pick on one particular class.

I do not know if the IDA are coming regularly to the Government but as I understand it the IDA, when the grants exceed a certain figure, must call fairly regularly to the Government to see that they can pass on that type of grant. There does not seem to be any great shying away from that in the sense that the IDA are being pressed. So, while the jobs are not coming up as quickly as they might, the confidence is there and people are prepared to invest money and the wealth tax will not be a factor in whether they come or go.

There was concern about small firms. I would be a fool to stand up here and say that someone in a small firm will not be hurt. I do not know, but when we were going into the EEC and the decision had to be taken in the interest of the country as a whole, it was a known fact that small firms might go to the wall. The trade union movement was very disturbed about this and in particular the motor assembly industry. We were "bellyaching" quite a lot about it and were trying to hold back joining up with Europe, but in the long run the democratic voice of the people won out. It can be admitted now that the cause of our present troubles is not merely because we entered the EEC. There are many other contributing factors throughout the world.

On the question of timing, we had the argument that the business people, the entrepreneurs, are people with vision, imagination and perseverance. These are the qualities that realise wealth. In the mind of a man like that, there is no such thing as a right time. The man makes up his mind and the right time is when he makes up his mind; the time is now. That is the way they operate. I have not got into the minds of any of the wealthy men, despite my close proximity to some of them, but this seems to be what makes them move. The time is right when they say it is right and not any declaration on the part of a Government, particularly if you take the wealth tax and make that an argument. This debate has been going on for many months and all possible arguments have been dug out of the bag. In the Seanad, where Senator Yeats has displayed a very fertile mind and has brought up every avenue it was possible to explore, he has explored it and put it on the floor for debate. When this is coupled with what happened in the other House, and conscious of the activities of many entrepreneurs, particularly those who invest with the IDA, the argument falls down that the wealth tax will discourage people from investing.

Mr. McGlinchey

The architect of industrial Ireland, the late Seán Lemass, must be turning in his grave this evening as he watches an incompetent Minister for Finance and Government deal another death blow to his and Fianna Fáil's achievements so far as the industrial development of this country is concerned.

I listened with interest to what Senator Harte had to say. We hear of the bargain with Fine Gael, of the promises of greater equality and distribution of wealth and that the burden of taxation should be more equitable. As I listened to Senator Harte, I wondered if he is as innocent as he would have us believe. Has he really been fooled by the financial wizards of Fine Gael? Have the Labour Party been fooled by them? Senator Harte talked about a good socialist. I do not believe that Senator Harte is a good socialist. Neither do I believe that he is a bad socialist. I simply do not believe that he is a socialist because any man or party who supports these taxation measures and claims that they are to provide greater equality for the distribution of wealth could not possibly be a socialist.

When one considers that the family of a millionaire, under the inheritance tax, will save £500,000 in taxation, or when one considers that 5 per cent of the Irish people control something like 80 per cent of the nation's wealth, the first question which must be asked is what effect will the Wealth Tax Bill have on them? Will they suffer a lot? Bearing in mind that the Minister for Finance has provided for them adequately under the inheritance tax, bearing in mind that he will save them hundreds of thousands of pounds, is it not very easy for them, the 5 per cent, to pay 1 per cent of their wealth under this Bill? These 5 per cent are not suffering under this measure. If one groups the two tax Bills together, they are benefiting, they are saving money. The great socialist Senator Harte and the Labour Party are helping them to save money.

Who is suffering under this measure —the small businessman whose total business wealth may amount to from £150,000 to £250,000. The small businessman who has already paid his income tax, who has already paid a profit tax on his business is now being asked by Senator Harte and the Labour Party to pay a second tax. That is what the Wealth Tax Bill is all about. If Senator Harte tries to persuade the people that this wealth tax will bring about a greater equality of the distribution of wealth, then he is talking through his hat.

Mr. Harte

I have only one consolation, that is, that people will read both speeches.

Mr. McGlinchey

I hope they will and I hope the people will ask how much money the family of a millionaire will save under the inheritance tax and how much money that family will pay under the wealth tax. They will learn that, taking the two taxes, that family will pay far less in taxation than they are paying at present. If the people go to the trouble of getting the truth, they will then be convinced that the Labour Party and the Coalition Government are trying to fool the Irish people once again.

The small businessman is paying income tax. One would think, listening to Senator Russel and Senator Harte, that they do not pay tax. We were told that this Bill was making a good endeavour to cherish all the people equally. Do the Senators believe that the people are being cherished equally? Should they now be asked to pay a tax on the value of their property, whether it is making a profit or not? Senator Harte told the House that taxation must be imposed in such a way as to be generally accepted as fair. Does the Senator believe that the small businessman, the valuation of whose property may be £150,000—and in these days of inflation it is not too difficult to have a property worth £150,000 —who may work seven days a week, 15 hours a day, should now have to pay a second tax in addition to his normal and proper income tax?

Mr. Harte

He has already had an extension of income tax.

Acting Chairman (Mr. McCartin)

Senator McGlinchey.

Mr. McGlinchey

Senator Harte told the House that a £ off a poor man and a £ off a millionaire has very different effects. I agree with him entirely but in this legislation a businessman with a property valuation of £250,000 will pay the same percentage wealth tax as a businessman with a property valuation of £250 million. Yet Senator Harte tries to justify this legislation.

Great play has been made of the bargain with Fine Gael. We must remember that of the 5 per cent who control the nation's wealth, the vast majority are supporters of Fine Gael. It is understandable that the Minister for Finance and the Fine Gael Party, regardless of any bargain with Labour, would look after the interests of these people. They have done this in a way that seems to have bluffed the so-called socialists of the Labour Party. If one Labour Party member can stand up here and tell me that the family of a man worth £2 million will not pay an inheritance tax worth almost £1 million, then I eat my words. That is the position.

There is a tail to this National Coalition Government. The Labour Party must ride along with it in State cars, driving around the country, and they are prepared to save the really rich millions of pounds in inheritance tax, knowing perfectly well that 1 per cent of wealth tax to a man worth £10 million is only a drop in the ocean while 1 per cent of wealth tax to a man worth £150,000 means an extra taxation of £8 to £10 a week on a small business. That is what this measure is all about. There is no point in the Senator Hartes in this House standing up, with their hands on their hearts, to use a pun, and saying "We are good socialists."

Mr. Harte

I did not say I was a good one. I was saying how a good socialist should think.

Mr. McGlinchey

"I am a good socialist. I am taking only 1 per cent of wealth tax from the small businessmen but the big men, the multimillionaires, I will save them millions in inheritance tax because they support Fine Gael and we must keep the show going." That is what Senator Harte is doing when he supports this legislation. I am sick listening to talk about socialists because there are no socialists in this House or in the other House. There is no such thing as a socialists, thanks be to God. This could be described by the small businessmen as the August budget. We had the July budget. We had the June budget and this Wealth Tax Bill can be described as the August budget. It will not mean a big imposition on the wealthy but it will mean an extra taxation of £10 to £15 a week to the small businessman. For months past, as a result of the taxation policy of this Government, with all their socalled talents, more and more business people have been going to the wall. When they digest this latest budget, the wealth tax, I greatly fear many of them will say: "We have had enough." Many of them will cry "halt, bring in the liquidator". Because if anything has increased since this Government took office it was the visits of the liquidators to the business community of this country.

Today we saw a deputation in this building, not in the Chamber, to the Minister for Finance, trying to save yet another viable business that has had a visit from the liquidator. Only this afternoon I was surprised to learn of yet another business which has cried: "Halt, we have had enough of the Minister for Finance. We have had enough of this Government, who care very little about the economic development of this country." That man has also called for the liquidator. I believe this measure will mean that many businessmen will become more convinced still that the only aim of the National Coalition Government is to bleed them white.

Never, never before in the history of this country was it so necessary to interest the business people in further development. Never before was it so important that the Minister for Finance and his Government should be asking our industrialists: "What can we do to help you? What can we do to encourage you to keep the show on the road?" That is not the story. Every week the Cabinet meet it appears to me that what they are asking is: "How will we hit them this week?" The Minister interrupts one of his many begging trips abroad to come back to this House to bleed the worst paid section of our community and it is not the really wealthy he is hitting. It is the small businessman employing five to ten people. That is the man who is getting it from the Minister for Finance and this National Coalition Government.

I believe that, when the opportunity presents itself, the business people will join the Garda, the Army, the civil servants and the farmers and give their verdict on the record of this Government. I said in my Second Reading speech, to my mind by introducing the Wealth Tax Bill the Minister is in fact killing the goose that lays the golden egg.

Minister for Finance (Mr. R. Ryan)

I am greatful to Senators for this debate. I have become somewhat weary of the wealth tax debate. A great deal of what was said since lunch time today had nothing whatsoever to do with the wealth tax and, on that account, I found it very stimulating. The truth is the wealth tax has no more to do with the present state of our economy than the interlocking of the United States and USSR spaceships has to do with the spate of fine weather we have been experiencing. But the Fianna Fáil Party, true to form, have wallowed in mischief-making and have suggested that Ireland's troubles stem exclusively from the wealth tax. Deputy Haughey is on record in the other House as saying that the economic decline only began on the 28th February, 1974, when the Government published their White Paper on wealth taxation.

Mr. Yeats

But not that it was due exclusively to the wealth tax.

Mr. R. Ryan

It is related to capital taxation. But does this not show the depths to which they sink when they have to make arguments of that kind? We have heard from Fianna Fáil today, and on other occasions. impassioned orations about the need to exclude productive assets from taxation. Did they ever apply the theory about which they now wax so eloquent to income tax and, if not, why not? Did they do it in relation to estate duty and, if not, why not? Did they do it in relation to corporation profits tax and, if not, why not? All those taxes—estate duty, income tax, and corporation profits tax—bear much more heavily on productive assets than the proposed form of wealth tax. The truth is they never even thought of the need to give special treatment to productive assets until they saw the words in the Bill. When they recognised that the Government saw a need to give an incentive to people to switch their investments from non-productive assets to productive assets it suddenly dawned on them that here was a wonderful idea. Senator Russell correctly reminded us today that it was the parties on this side of the House who in Government provided the principal benefits which are enjoyed by Irish industry today. Exempting profits on manufactured goods which were exported from income tax was a decision of the Coalition Government. The encouragement industry gets and which has conferred benefits has come from Coalition Governments. Fianna Fáil's attitude towards industrial development was shown in the Act which kept out billions of pounds of foreign investment for over 30 years. It was not until we showed the folly of the chauvinistic approach of Fianna Fáil to industrial development that we began to develop an industrial arm in a serious way.

Had I closed my eyes throughout this debate I would have thought I was sitting in an 18th-century Parliament before the French Revolution where the princes of wealth and property were convinced they had all virtue and they alone made efforts and that the underdogs were not as worthy members of society as the people of property and substance. That has been the ethos behind the Fianna Fáil comments on wealth taxation. We heard it here today. We have given arguments in favour of excluding assets from wealth tax. Is that argument not equally valid in relation to labour which is productive? The only wealth some people can apply to production is their labour and their skills. If property is to be exempt from wealth tax because it is productively used, surely labour should be exempt on the same grounds.

What would happen to the coffers of the State? They would become impoverished if all effort which was deemed worthy was to be exempt from tax. Notwithstanding our individual inclinations sometimes to be lazy, to take things easy, and go for the soft option and the easy way out, most people are happier when they are working. Most people who have money are happier when they are making more. All the arguments about wealth tax are as valid in relation to other tax. Tax has always been alleged to be a disincentive, but tax has existed ever since man came together in society and man has continued to improve his lot because he has been anxious to make more profit and he has been ready to work. This will continue in Ireland in the future as in the past.

There has not been any fall off in investment as a result of the Government's capital taxes. Why should there be? Senator McGlinchey reminded us of how well off many property owners will be as a result of the new wealth taxes because they will not press as heavily on them as death duties. Death duties were a stupid form of taxation as well as being grossly unfair. The tax applied unevenly. If people were not well up they were caught by it and if they were well up they avoided it. The millionaire class, about which Senator McGlinchey spoke with such vehemence, in the main, have avoided estate duties. This is common knowledge. They have avoided estate duty through the creation of trusts, companies, and a multitude of legal devices which were permissible under the law. Perhaps the anger of those people can be explained by the fact that these avenues of avoidance will not be available to them in the future.

That is the principal reason for the vehemence and the bitterness of the criticism levied against the Government's capital taxes. To anyone who was caught in the past for capital taxes, to wit, estate duty, the Government's new package will bring relief. To those who were fortunate enough to be able to avoid capital taxation in the past, the new taxes will mean that they will pay their fair share in future. That is what we should be endeavouring to achieve. The new taxes will not mean confiscation, but they will mean a better policing of the whole property situation so that taxation will be paid according to the capacity of people to pay and not by reason of caprice.

The Government's capital taxation package is only one of many taxation reforms which this country has experienced since the National Coalition Government took office. As I said when I gave the outlines of the Government's package of taxation reform, taxation reform is not an easy job. It is a thankless one. It is one that is invariably misunderstood by people who are well-disposed, and it is an activity which is misinterpreted by those who are not so well disposed. Of course, there are risks as one goes about changing the taxation system which is known. There are the risks of imperfection. There are the risks of creating possible anomalies and injustices, but we have shown ever since the publication of the White Paper on Capital Taxation, and in the various legislative measures which we have brought before the Oireachtas on taxation, that we can listen to people and we can learn from people. We are humble enough, having listened and learned, to adjust our proposals to take account of good advice when it has been offered.

Mr. Lenihan

Good.

Mr. R. Ryan

We will continue in the same disposition as we apply these laws and if, in the light of experience, they need to be adjusted, we will be only too anxious to make those adjustments. We got rid of estate duties because they were unfair and inefficient and we are anxious to ensure that the new laws will be neither unfair nor inefficient.

The task of reforming taxation has imposed tremendous burdens on many people. Like many of the best heroes in the world, they are unknown and their work is unsung. I would, therefore, crave the indulgence of the House to express my appreciation and, I am sure, theirs, to the officials in the Department of Finance, the Revenue Commissioners, the parliamentary draftsmen, and the staff of the Dáil and Seanad for the tremendous volume of work they have put into the taxation legislation.

Mr. Lenihan

Hear, hear.

Mr. R. Ryan

Whether it is good, bad, or indifferent, it is the product of a great deal of hard labour, genuine heart-searching, and a multitude of meetings between experts and technocrats on the official side with people in the private sector. It has produced a package of legislation of which this country can be proud technically, whatever may be the points of disagreement on the economics or politics of it all.

We are breaking new ground because we are introducing a wealth tax for the first time in a common law country. In countries where wealth tax and other forms of capital tax have existed for over half a century, forms of property holding like trusts and discretionary trusts are unknown. In Ireland we have to make a very deep study of this totally new field. We have produced, in our Capital Gains Tax Bill, in the Wealth Tax Bill and indeed in the Bill yet to be discussed, the Capital Acquisitions Tax Bill, forms of taxation which will be used by many other countries as guidelines in their move towards taxation reform.

I am greateful to the Seanad for the speed with which they are dispatching this Bill and for the manner in which they debated it. The Wealth Tax Bill has now been debated in the Dáil and Seanad for more than 140 hours. No Bill that has gone through the Houses of the Oireachtas, certainly in my 16 years here, has been debated for so long. As I said, at the commencement of this Bill in the Seanad, never were there so many words spoken on a matter which is going to affect so few. But that is parliamentary democracy working. It has its suitable moments and does impose its pressures on many people. I am glad that these pressures are now going to be removed from the people, not least the staff of both Houses of the Oireachtas and the Members. May I wish you all happy holidays and may I wish you also beyond your holidays many prosperous years in which you will all accumulate so much wealth that you will be subject to wealth tax?

Question put.

The Seanad divided: Tá, 26; Níl, 13.

Tá

• Blennerhassett, John.
• Butler, Pierce.
• Codd, Patrick.
• Connolly, Roderic.
• Daly, Jack.
• Deasy, Austin.
• Fitzgerald, Jack.
• Halligan, Brendan.
• Harte, John.
• Horgan, John S.
• Kennedy, Fintan.
• Kerrigan, Patrick.
• Kilbride, Thomas.
• Lyons, Michael Dalgan.
• McAuliffe, Timothy.
• McCartin, John Joseph.
• Mannion, John M.
• O'Brien, Andy.
• O'Brien, William.
• O'Toole, Patrick.
• Owens, Evelyn.
• Prendergast, Michael A.
• Russell, George Edward.
• Sanfey, James W.
• Walsh, Mary.
• Whyte, Liam.

Níl

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

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

Question declared carried.