Seanad Éireann debate -
Thursday, 18 Mar 1976

Vol. 83 No. 13

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

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

Minister for Finance (Mr. R. Ryan)

This is the last of the triduum of capital taxation measures designed to provide a more equitable and a more acceptable alternative to estate duty, legacy duty and succession duty which were abolished by the Finance Act, 1975, in the case of deaths occurring on or after 1st April, 1975. Senators will, by now, be familiar with the general context of the Capital Acquisitions Tax Bill. The new form of taxation proposed in the Bill differs from estate duty in four main ways. One, it taxes gifts as well as inheritances—albeit at a lesser rate—and thus seals off the former escape route availed of by many wealthy people— legitimately, I might add—whereby gifts made five years prior to death were not liable to death duties. Two, very generous thresholds of £150,000 each are allowed in the case of the immediate family by which I mean the spouse, child or, in certain cases, grandchild or nephew/niece of the disponer. Three, whereas estate duty applied to the whole of the property passing on the death of the deceased, the new tax applies to the portion of the estate acquired by a successor. Thus, if a person divides his estate among, say, five people, five estates come into being each of which is entitled to its own threshold and any other concessions which may be due. Four, estate duty was chargeable on what is known as the "slab" principle, that is to say, the rate of duty applicable to the highest band into which the estate fell was applied to the whole estate. Under the present proposals, however, each successive slice of capital will be charged at its own separate rate thus enabling estates to benefit from the more favourable rates of duty at the lower limits.

Public response to the Bill has been, on the whole, favourable and in so far as the Bill is an alternative to the death duties code, abolished with effect from 1st April last, this favourable response is hardly surprising. Among the many faults of that anachronistic code which we have got rid of were the following:

(a) in so far as it served as a means of redistributing wealth in the community, it did so inefficiently;

(b) since it did not provide for the taxing of gifts given more than five years before death, it allowed wealth to pass from generation to generation free of tax;

(c) because the tax was leviable on the estate left by a deceased and not on the inheritances received from that estate, the tax was often arbitrary in its incidence.

The Bill now before the Seanad will encourage the wider distribution of wealth in a more rational manner than did the death duties code. The lower rate of tax for gifts and the fact that tax will not be payable on the estate, but on the inheritances or gifts received, should encourage the wealthy to distribute their wealth early and widely.

A major fault of the former death duties code was its arbitrariness. A typical example of this is the case of a donee of a gift inter vivos from a wealthy person, who on the death of the donor within five years of the date of the gift, might face a bill for 55 per cent of the amount of the gift, because the rate of tax for each part of the estate was based on the total aggregable estate. In the present Bill the various exemptions provided and the different rates of tax proposed are designed to take account of present social conditions. For instance the very generous thresholds which apply to gifts or inheritances being passed to a spouse, child or to a minor child of a deceased child, will also apply in certain cases to nieces and nephews who receive by way of gift or inheritance a business, including a farm, in which they had worked on a full-time basis for five years or more.

The principal changes in the Bill from the White Paper of February, 1974, are the abolition of one of the five classes of beneficiaries proposed in the White Paper; the proposed classes III and IV have been amalgamated. The scale of rates applying to classes I and II have been altered to eliminate certain anomalies that would have arisen under the scales suggested in the White Paper. The Bill also provides that in determining the rate of gift tax appropriate in any case, gifts received by a donee from a donor in the period from 28th February, 1969, should be aggregated with gifts received from the same donor on or after 28th February, 1974, and with inheritances so received on or after 1st April, 1975, though tax will, of course, be payable only in respect of gifts or inheritances received on or after the commencement dates. Other differences between the proposals in the White Paper and those in the Bill include the treatment of the minor children of a deceased child of a disponer and, in certain circumstances, of a nephew or niece of the disponer, as though they were the child of the disponer. It is also being provided that the tax may be paid in instalments and that certain Government securities be acceptable at par in payment of inheritance tax. Certain Government securities in the hands of persons neither domiciled nor ordinarily resident in the State will also be exempt from the tax. In addition, on Committee Stage in the Dáil, I moved an amendment which makes provision against liability to double taxation, in advance of the negotiation of double taxation agreements with other countries.

It is hardly necessary for me on Second Stage to refer individually to each of the 72 sections in the Bill but I will go briefly through its principal provisions. Section 4 is important in that it creates a charge to gift tax on taxable gifts taken on or after 28th February, 1974. Section 5 in effect defines the term "gift" for the purposes of the Act. The general principle of the section is that a gift will be deemed to have been taken where ownership of property changes, other than for full consideration in money or money's worth, and other than "on a death". The implication of this principle where the interest taken is a limited interest in property or an annuity or other periodic payment is spelled out and the section also provides that gifts or inheritances received on or after 28th February, 1974, on foot of agreements or contracts made before that date, but not fully enforceable, shall be deemed to have been taken after that date.

Section 6 defines the term "taxable gift" so as to provide that where the disponer is domiciled in the State or where the proper law of the disposition under which the gift is taken is the law of the State, the whole property passing, regardless of where it is situated, will be taxable. In other cases, only the property in the State will be taxed. Section 8 is required to prevent tax avoidance by gift-splitting.

Section 9 provides that where a person's liability to tax in respect of gifts or inheritances received from a particular donor is being assessed, gifts received by that person from the same donor in the period between 28th February, 1969 and 27th February, 1974 shall be aggregated with gifts received after that date and with inheritances received on or after 1st April, 1975, for the purpose of determining the rate of tax to be charged on gifts and inheritances received after the commencement dates. There is no element of retrospective taxation in the provision because the gifts taken before 28th February, 1974, are not themselves being taxed. Section 10 is the charging section for the proposed new inheritance tax, while section 12 defines a taxable inheritance in the same way as section 6 defines a taxable gift.

Part IV—sections 15 to 21—deals with the valuation of property for the purposes of the new taxes. The general principle adopted in this part of the Bill, and set out in section 15, is that valuation will be on the basis of current market value. Section 16 deals with the valuation of shares in a private trading company which is controlled by the donee or successor. In valuing the shares, account must be taken of the value that control confers. Where the donee or successor has not got control after taking the gift or legacy, the shares in these companies are valued under section 15.

Section 17 provides that where the donee or successor has control of a private non-trading company after taking a gift or legacy, the shares in the company shall be valued on the basis of what they would be worth if the company were being wound-up.

Section 18 allows two types of deductions from the market value of a gift or inheritance in the calculation of taxable value. First, "any liabilities, costs and expenses that are payable out of the taxable gift or taxable inheritance" shall be deducted and secondly, "the market value of any bona fide consideration—paid by the donee or successor for the gift or inheritance” shall be deducted. In the case of a gift or inheritance which consists of a limited interest, allowable debts and other liabilities are first deducted from the market value, which is then further reduced according to the age and sex of the donee or successor or the period of time for which the interest is to last, in accordance with the rules in the First Schedule, and finally any consideration given by the donee or successor is to be deducted.

Section 19 deals with the valuation of "agricultural property" which is being taken by a donee or successor who is a farmer as defined in the Bill and also deals with growing trees and underwood. In arriving at the taxable value of such property, its market value will be reduced first by 50 per cent or £100,000, whichever is the lesser, so arriving at "agricultural value". Thereafter the deductions provided for in section 18 will be effected subject to the proviso that only a proportion of the allowable deductions shall be made, being the same proportion that the agricultural value bears to the market value of the property in question.

Part V of the Bill—comprising sections 22 to 34—is rather technical. It applies the general principles of the Bill to specific types of gifts or inheritances and because of this, any detailed discussion on these sections is, I feel, more appropriate on Committee Stage than on Second Stage.

Section 22 deals with discretionary trusts and provides that tax will be payable on beneficial interests in possession taken under such trusts. The section also specifies when a payment is to be treated as a gift or an inheritance. Section 23 deals with cases where successors or donees dispose of a future interest in property not yet in possession. Section 24 deals with cases where a limited interest is terminated before the date or before the occurrence of the event on which the interest was to cease. Section 25 is designed to prevent tax avoidance by a remainderman who settles his interest not yet in possession on himself. Section 26 covers cases where a person who has a life interest in a property acquires, either by gift or inheritance, absolute possession of the property.

Section 27 refers to cases where a general power of appointment or a special power of appointment exists. In the first case—the person with a general power of appointment—the person who has this power will be treated as the disponer. In the latter case, the person creating the special power of appointment shall be deemed to be the disponer. Section 28 refers to cases where persons acquire gifts or inheritance subject to certain liabilities and where these liabilities on the property end. The termination of the liability will be treated as a gift or inheritance as appropriate. Section 29 provides that in the case of persons who take a gift or inheritance from a disponer thereby increasing the value of property already received from the same disponer, tax will be payable on the increased value of the original property taken. Section 30 provides that where a person takes property subject to a power of revocation, tax will not be payable on the value of the property unless and until the power of revocation ends.

Under section 31, tax shall be levied each year on the value of the use of property. The section will apply, for instance, to persons who benefit under discretionary trusts or to persons who have received a gift of property subject to a power of revocation. Under section 32, a life assurance policy, which is the subject of a gift, will be liable to tax only when the benefits under the policy are paid. Section 33 is designed to prevent a double charge to tax arising where a bequest to a testator's child or other issue is preserved from lapse where the legatee predeceases the testator but leaves a child or other issue living at the testator's death. The actual beneficiary under the will, will be taxed on the benefit received from the testator and the estate of the testator's child will not be taxed on the legacy falling into that estate.

Section 34 provides that where a benefit is given or received by a private company, the benefit shall be deemed to have been given or received as the case may be, by the beneficial owners of the shares of the company.

Part VI—sections 35 to 40—deals with returns and assessments. Under section 35, primary liability for payment of tax attaches to the donee or successor and, in certain circumstances, to the transferee mentioned in section 23. Where the person with primary liability defaults, those with secondary liability will be required to pay, but they will have power to recover the sums paid from the person with primary liability. Those who will be secondarily liable include the disponer, the trustees of the disposition under which the gift or inheritance is taken, every trustee, guardian, committee, personal representative, agent or manager who has care of the property or its income and transferees other than purchasers. Section 36 deals with delivery of returns, the persons liable and the time within which they must be submitted.

The remaining sections in this part of the Bill cover such matters as the signing of returns, the contents of the Inland Revenue affidavit and the assessment, and where necessary, the reassessment of tax. Section 40 provides that the amount of tax is to be computed under the provisions of the Second Schedule.

Part VII—sections 41 to 50—deals with the payment and recovery of tax. Section 41 specifies the date on which tax falls due and the circumstances in which simple interest, at the rate of 1½ per cent per month, will be chargeable on unpaid tax. Section 43 authorises the Revenue Commissioners to accept payment of tax in five equal annual instalments, where the property being taxed consists of real estate or of a limited interest in any property. The remaining sections in this part of the Bill cover such matters as the postponement, remission or compounding of tax in cases of hardship and certain other circumstances; the payment of tax by the transfer of certain securities to the Minister for Finance; the repayment, with interest, of overpaid tax; the securing of tax as a charge on the property comprising a gift or inheritance; the issuing of receipts and certificates of various sorts; the recovery of tax as a debt due to the Minister for Finance and the type of evidence which the Commissioners may submit to courts in actions for the recovery of tax.

The next two sections, 51 and 52, deal with appeals and together form Part VIII of the Bill. Section 51 deals with appeals relating to the value of real property, while section 52 relates to all other types of appeals.

Part IX of the Bill, comprising sections 53 to 59, deals with exemptions. The first £250 of gifts received by a donee from one disponer in any year will not be liable to tax. Gifts or inheritances taken for public or charitable purposes and which will be applied within the State or Northern Ireland will be exempt from tax, as will all payments taken by a person in the application of funds by public or charitable bodies. Tax will not be payable in respect of objects of national, scientific, historic or artistic interest, which form part of a gift or inheritance, which are kept in the State and to which reasonable access for viewing is permitted. Subsequent sale of the exempted objects within six years will result in loss of the exemption unless the sale is to the National Gallery, a university or certain other bodies. Bona fide payments to employees under superannuation schemes will be exempt from tax, while similar payments to the dependants of employees will be treated as dispositions by the employee and not by the employer, to the person benefiting by the payment. Certain securities issued by the Government and other public bodies, owned by persons neither ordinarily resident in, nor domiciled in the State, and forming part of a gift or inheritance will, under certain circumstances, be exempt from tax. Payments by way of compensation or damages to a person for injuries or wrongs done him will be exempt, as will similar payments to persons in respect of a wrong or injury which resulted in the death of another. Certain payments in bankruptcy matters, winnings from lotteries etc, and certain normal and reasonable payments for support, maintenance and education are also excluded from liability for tax. Finally, tax will not be payable on a benefit taken by donee or successor under his own disposition.

Part X of the Bill comprising sections 60 to 72, covers miscellaneous matters. Section 60 lays down procedures that will prevent the issue of probate or letters of administration until the Revenue Commissioners are satisfied that payment of inheritance tax will be made. Subsequent sections cover the release of cash from joint bank accounts where one of the depositors dies and where the balance in the account is £5,000 or more; the protection of tax revenue where an estate charged with tax becomes the subject of a court case; penalties for infringements of the legislation and the interpretation of references in documents to "death duties".

Sections 66 and 67 relate to relief from double taxation. Section 66 will give power to the Government to implement by an order, which must be approved by the Dáil, a double taxation agreement negotiated with another Government, while under section 67, the Revenue Commissioners will have power to grant relief in advance of the making of a double taxation order by deducting tax paid to a foreign government from tax due in this country. Under section 69, the rate of the taxes may be varied by a financial resolution passed by the Dáil and the rights and duties of the Revenue Commissioners in the administration of taxes generally are applied to them in the administration of capital acquisitions taxes. Section 70 deals with the delivery of forms or notices by the Revenue Commissioners and it also gives them power to extend all time limits specified in the Bill, other than the limits in Part VIII, the part dealing with appeals. The Commissioners are given power to make regulations under section 71, while section 72 puts the tax imposed by the Bill under their care and management.

The First Schedule to the Bill contains rules and tables for valuing limited interests. Table A will be used for valuing life interests and their value will be determined by the age and sex of the donee. Table B will be used for the valuation of limited interests taken for a certain period. The Second Schedule contains the rules and tables for calculating the new taxes. As I mentioned at the beginning, the rates of tax in the tables to the Schedules are based on the so-called "slice" principle rather than the "slab" principle on which estate duties were based. Thus instead of paying tax on the whole taxable value of the inheritance or gift at a uniform rate, tax at the appropriate rate specified in the Tables will be charged on each successive slice of the benefit.

I recommend this Bill to the House.

Mr. Lenihan

First of all, there is a case to be made for this Bill considered in the overall package of capital tax legislation introduced by the Minister over the past 18 months. That case rests on arguments he has advanced and I think there is a case to be advanced against the whole package introduced by the Minister but that is a matter for discussion. I hope to elaborate a little on that aspect of the matter. But, let us cut out the semantics and the nonsense in certain paragraphs of the Minister's speech. I refer in particular to the passage where he talks about the many faults of "that anachronistic code", i.e. the estate duty code as it existed heretofore. Let us get the matter clear and clean: this is another form of death duty. We can argue afterwards whether it is the right or the wrong form of death duty but, basically, this represents another variation of death duties.

There is no point in having a debate in March of 1976 going back on what happened before the last general election. The Minister need not be concerned about that: I do not intend to go into it. The fact is that the Minister and the Government, in my view, have got into a hassle over all this because of the specific provision in the pre-election manifesto to abolish death duties. Let us be practical about it and cut out the semantics. There is no abolition of death duties. This new capital taxation package vis-à-vis gifts and inheritance, linked to the wealth tax—leaving aside the capital gains tax—amounts to a new form of dealing with inherited and accumulated capital assets and the distribution of same whether inter vivos or after death. So that there is no question of talking about an anachronistic tax code in relation to death duties. What we have here is another form of death duty. I propose to make a few remarks on whether or not this is better than the previous type, so let us keep the debate at that level and cut out the political nonsense. It is in the Minister's own document—the White Paper on Capital Taxation, an excellent document setting out the pros and the cons of the whole situation in regard to capital taxation.

I refer to page 17 where there is a summary on the capital taxation position obtaining in the EEC countries. It is under four basic headings: death duties, capital gains, gift and wealth. That is the criterion adopted by the Minister himself. Indeed, on page 20 summarising the position in countries outside the EEC in regard to capital tax, again there are four columns, four criteria—death, capital gains, gift and wealth. Under what column does this come? We at that stage along with every other country in the EEC had death duties, that is, the old estate duty linked with legacy duty and succession duty. The combination of legacy duty, succession duty and estate duty as the major component in the death duty package was, in one way or another, reflected in every other EEC country and, indeed, reflected in every other non-EEC country about which the Minister's Department had information.

Across the world, in countries ranging from the USA, Sweden, Spain, Australia to the EEC countries, every country had death duties. We had death duties that time. We will still have death duties and we will still be in the death duty column. This Bill represents another form of death duty which taken in conjunction with wealth tax, represents a new way of collecting capital tax. Let it be said as such and let us have some honesty in the debate and forget about the political semantics.

In that context I should like to ask the Minister—again, this is an overall point such as is appropriate on Second Stage and I made it on Second Stage in the earlier debate on the Corporation Tax Bill—if all this was really necessary in the sense of balancing out the necessary tax input as against the economic development of the country? I fear the big mistake made by the Government and the Minister has been to overtilt the balance on the tax revenue side as against the incentive economic development side. The balance has been dangerously tilted against incentive, enterprise and economic development. Nowhere is this more evident than on the package— I leave aside the capital gains legislation—embodied in the wealth tax and this legislation.

On the Minister's own word and on what has been expressed in the White Paper, the net effect will be the same. The predictions were that we will have —the Minister might like to elaborate on it—the same revenue accruing from the combination of wealth tax and capital acquisitions tax as that from the previous death duty situation. We have one death duty situation exchanged for another capital tax situation, including death duties. The same revenue will accrue. Was this necessary? Would the Minister elaborate on this because the disincentive aspect involved—I ask the indulgence of the Chair because it is related—in the wealth tax aspects of the package has been so serious and has acted as so great a deterrent that the net effect has been deleterious as far as the economy is concerned. That is not just my view but that of people in accountancy and investment circles.

Again, it shows the futility of any party or group of parties in Opposition embarking on taxation promises prior to an election. I can assure the Minister that, as far as this party are concerned, we will not embark on any taxation promise exercise before the next election, particularly in view of the present state of the Exchequer. The futility of ill-informed people making ill-advised commitments before an election was never more evident as in this particular situation whereby an ill-advised commitment to abolish death duties has resulted in a whole rigmarole of legislative examination of tax measures on the capital side and we are back to square one as far as the revenue is concerned. The Minister has put on record—he can correct me if he wishes—that the net revenue situation will be precisely the same after the passage of the wealth tax legislation and this legislation as it was under the old death duties system. One scheme of death duties has been substituted for another scheme with wealth tax added. The combination of the new scheme of death duties embodied in this legislation, which still exists, despite the electoral commitment, with the wealth tax will yield the same revenue as was there three years ago under the old system of estate duty, legacy duty and succession duty.

The sensible procedure in this situation would have been to raise the threshold levels of estate duty, legacy duty and succession duty as they operated in 1973. This would have been a very simple and practical course of action, that is, quadruple or quintuple the minimum level, raise the allowances for dependants and bring in a gift tax aspect—I agree with the Minister in this because the introduction of a gift tax is desirable —extending over the five-year period which operated prior to now. The gift tax, which the Minister has embodied here, linked with an extension of the existing thresholds which operated in relation to estate duty, legacy duty and succession duty, would have solved the whole problem without any fuss, any three-year debate, any deterrent of investment which has arisen by reason of the introduction of the wealth tax, and the revenue situation could still have remained the same.

I offer that to the Minister as a considered view. It is not just my own view because, in the Minister's White Paper on Capital Taxation, prepared by his own civil servants without any recourse to an independent commission, there are various quotations from previous commissions on taxation, in which these matters were raised. The commission in their third report, in 1960, reviewed capital taxation. The difference between this commission's report and the Minister's White Paper is that the former was drawn up as a result of the expertise and advice of independent people outside the Department of Finance and the Revenue Commissioners. They considered the whole question for and against the wealth tax and came down very strongly against it. I quote from page 10 of the Minister's White Paper on Capital Taxation in which he quotes from the report on taxation of 1960. This is a pungent quote and is valid to this debate. It states:

They also observed that——

that is the commission

——"as death duties are not payable during a person's lifetime they cause less loss of satisfaction than a recurring tax on either capital or income".

Paragraph 18 states:

The Commission recommend that a capital gains tax should not be introduced.

I disagree with them on that, I would agree with a Capital Gains Tax. They then go on to reject a wealth tax of any kind. That is the view of considered people who realised the disincentive aspects which would arise from the package of capital taxation which the Minister has introduced. It is water under the bridge now and there is not much point in talking about it but I want to put it on the record, that a simple Bill with a few sections relieving the anomalies which existed under the estate duty code generally three years ago would have rectified this matter. To be honest, Fianna Fáil might have been a bit tardy in not doing just that. All that was needed to be done by the incoming Government in March, 1973, was to raise the thresholds and make more equitable arrangements for dependants. If that was done, together with a gift tax with which I agree, extending back the five-year provision, then the Minister could have had one package of legislation without any wealth tax and could have brought in a taxation measure on capital tax that would have been totally acceptable, instead of going through this tremendous administrative parliamentary wrangle lasting over three years now. The mountain yields a mouse. It has yielded the same amount of revenue as that originally obtained under the estate duty code.

The rational thing to do would have been to raise the estate duty limits and the limits in respect of legacy and succession duties and introduce a gift tax as well. That could have been incorporated into a simple amendment of the existing code, and that was all the Minister had to do. There is a substantial loss of confidence in the economy, loss of confidence in financial circles and, as the Minister knows, that is what finance is all about. It is a highly sensitive area. I would not mind the Minister intruding into this sensitive area if it resulted in a substantial revenue gain. I understand the Minister's desire in the recent budget to increase revenue radically by way of tax on certain items. But grave distrust in the economy and disturbance in financial and banking circles was caused by this package of taxation which will yield only the same revenue as originally came from what the Minister calls an anachronistic code. He is merely substituting one type of death duty code for another.

Thresholds could have been raised, more equitable allowances could have been made and a gift tax could have been introduced, all in one package, as an amendment to the existing death duty code which was there when the Minister took office in the Department of Finance. The Minister knows well that what I am saying is the truth. There is a terrible danger in any democracy in any political party overpromising, over-committing themselves, particularly in the field of taxation. All that this legislation has done is to cause confusion and doubts about the future of the economy and about the whole investment attitude of the Government in encouraging enterprise.

One of the difficulties attaching to this Bill is that it cannot be considered in isolation because it is part of an overall package of capital taxation. But, considering it in isolation, the Bill is acceptable from our point of view. The threshold level is generous. Improvements have been made by way of amendment in the Dáil, and it is an excellent Bill when it is considered in isolation from the entire taxation package. For that reason we will not be opposing it on Second Stage. But it is appropriate at this Stage, since it is part of an overall package, that I should make these remarks. We shall have amendments put down for Committee Stage.

Mr. Alexis FitzGerald

I should like to welcome this Bill wholeheartedly. Taking up what Senator Lenihan said in regard to the necessity for a gift tax, perhaps he is right in the sense that much could have been obtained to remedy the defects in the estate duty code by the introduction of a proper gift tax. But I do not know if that would have satisfied public feeling about the whole capital taxation situation. Most people are now beginning to assess this Bill in the context of two other things. They are discovering the effects where their relatives have died since the repeal of the estate duty code. They are comparing the taxation they now have to pay with what would have been payable under estate duty. The capital transfer tax is much more severe.

In Britain gift tax started off under the 1894 Act under which, if a gift was made by a person three months before he died, it escaped duty. It was then extended to one year. Under a provision in the Finance Bill of 1909-10 it was proposed to extend the period to five years. What is really amusing is to see how the world worked at that time. In the memoirs of Randolph Churchill there is an account of a letter which Winston wrote to his wife telling her of the terrible trouble he was in with his cousin who had settled his affairs three years before. He had given everything over and he was now suffering from a terminal disease. He said if the Government brought in this provision he could not possibly live for the required five years. So the proposal for five years in the Finance Bill of 1909-10 emerges in the Act of that year as three years. His cousin died and the relatives received the entire estate. Randolph Churchill did not know that this letter had resulted in legislation being changed, to the undying discredit of Winston Churchill and the Chancellor of the Exchequer.

I should like to congratulate the Minister for adopting one proposal made by me, and probably by some other people, when the first part of the taxation package was introduced in the House. I described a situation in relation to capital gains tax where a man wanted to give away shares to his employees. It would have been a gift under the capital gains tax code, and it remains as such. I now see that there is an amendment to the original proposal exempting this as a gift. It would not come within the capital acquisition tax code unless it was deemed to be excessive. This seems a reasonable restriction to avoid abuses. There should be a provision for distribution in the right kind of area, such as that between employer and employee in relation to their own company.

I have one question to ask the Minister. I am somewhat reserved about the extreme nature of the proposal in regard to illegitimacy. If the natural father recognises an illegitimate child as being his child, either by rearing him in his own household—as many a man has done in history—or by agreeing to provide for him and support him, or by having accepted, but failed to win, the affiliation order proceedings brought against him by the mother, where, subsequently, he wants to give that child something I think that that illegitimate child ought to have some special treatment instead of being treated as that natural parent's stranger, which he will be, and he will be a stranger to everyone other than his mother and his own children in due course. It would seem simple enough to amend. It might help some human situation where people have gone wrong and might want to do something and where the threshold is quite low in a stranger situation even though I know they are only on the slice system.

One thing struck me—it does not in the slightest degree affect me—and certain situations drew my attention to it, and that is why there is a distinction between the minor child of a deceased child who gets treated in Part I and the adult child of a deceased child. The difference in age may be only one year but one gets very much more favourable treatment than the other. I do not see the basis for that. I suppose the general theory is that the very rich will be able to skip generations and divide up that £150,000. But there is this kind of situation. This would be too difficult to amend at this stage but it might be a matter for future thought with regard to some kind of tapering in relation to this kind of situation.

One thing I thought might have been a drafting error is where there is a very welcome recognition of the Irish situation in adopting decisions and representations made in favour of the nephew or niece who has been working the family farm. The Minister said he referred to this in his speech but I could not find it in the amended version of the Bill. It is in paragraph (9) of Part I of the Second Schedule. There seems to be a curious gap that a nephew, for example, who has worked full-time on the farm will be treated as if his uncle was his father. If a deceased child's child worked on the farm for a lengthy period of time he is not so treated. You have a situation where there is a special preferential benefit given to the nephew or the niece but because the poor man lost his daughter or his son, and was left with a child. That would seem to be just that grandchild is put into Category 2 and is certainly not treated as a child because he is a grandchild. It is only a grandchild who is a minor of a predeceased child who is treated as a child. That would seen to be just a matter of two words in paragraph (9). I know it would be a nuisance to go back to the Dáil but there could be situations like that. There could be a daughter with a surviving spouse who having hung up his hat in the house and lo and behold, he works all his life there and his wife dies and a nephew or niece is given preference in that situation over the son-in-law who survives. Obviously he has no rights at all. His only right is if the father wants to give the farm to the son-in-law. No doubt that son-in-law has got minor children as the daughter and he wants the place to continue in that kind of tradition. This is just a drafting suggestion I make to the Minister.

Where I get two letters in a matter of an hour on one topic I imagine the Minister must have received a few hundred. I am looking particularly at the merits of his proposal but, even since this debate began, I have got another letter asking for the preservation in some form of the special treatment in regard to afforestation. If I remember my estate duty law correctly, the position with regard to afforestation was that it was excluded from valuation at the date of death for the purposes of establishing the rate of duty. It was then taxed favourably at the rate established by the rest of the estate whenever it came to be sold, but only when it came to be sold. That was the estate duty code.

I would not know about why they were all so mad about this special treatment for afforestation but this gentleman tells me that the difficulty is located in the length of time required to bring a piece of seeded ground to full potential for timber and he says this is about 60 years. The point is that, if capital taxes are to be levied on immature forests, perhaps 30 years before the potential can be realised, nobody will be bothered to invest in this type of enterprise in the future. I believe somebody else in an earlier letter told me that this is recognised and that woodlands are excluded from the wealth tax code. Here we would be merely adding them to the number of exemptions already there and there are many exemptions. I bear in mind what the Minister said earlier. Any proposals I make they are all costing the taxpayer money and they all have to be financed in some fashion. I recognise all of that but, at the same time, one must try to eliminate anomalies. The English, in their very much more severe capital transfer tax provisions, have preserved the old estate duty principle whereby you are released from the gift tax. I have forgotten the words, but I know I got the benefit of some extraordinary sum of money under covenants in one estate where the Revenue Commissioners allowed it as outside the range of gift even though it took place a few years before death. The five-year or seven-year period did not apply if the gifts were normal and reasonable and regular and the matter was for the final decision of the Commissioners. There was no appeal. It was entirely a matter for their viewing it as being normal and reasonable and so treating it. The British have preserved that and they have also done two other things which might possibly eliminate injustice if applied. Perhaps the Minister might take the view that the slices were so generous they would take care of a fair amount but there are stranger situations than that where well-off chaps are trying to look after their nannies in their last years; these would not be treated as gifts, the nannies would be strangers and would get a notional slice of tax they would not know how to pay and their whole circumstances might change.

I think I am correct in saying that CTT provisions have some transitional thing where death duties had been paid and there was a surviving spouse exemption. When I used to draw up wills I always thought the law ought to have been that the duty would not be paid until the surviving spouse died. The position was that estate duty was paid when the old boy went and there was no further duty paid if but only if he gave her a limited interest. Now we have the situation of people who died before you abolish estate duty, where the creator of the fortune thought that he had provided for the duty payable on that estate and it all went scot free then to his children because he had created a limited interest. I do not know if that was all subject to some kind of abuse but it was the way you did wills anyhow to see that you did not pay a second set of duties. Here we are going to have capital acquisitions tax even if there is death duty paid in respect of someone who died on whatever the date was in April, 1975, and the categories here bring them within the rate of charge. I repeat that the categories are so generous that it may answer a great deal.

There are four other points I want to make. First, speaking to a temporarily retired practitioner, through the Chair, let me say how unreasonable it is to give us three months to get the whole damned thing valued and then to have to pay interest at 18 per cent if we do not have it ready, and to have to get valued what you may not know even exists in certain circumstances, because the old boy may never have told anybody and may have made his own income tax returns. You may have to start off finding out from the Revenue what he returned as his income and that may not be all of it either. You then have to value encumbrances. You must make all these sort of deductions; you must see if there is capital transfer tax payable by virtue of the situation of the property—that might be a difficult thing— and you are asking 18 per cent not allowable against anything as far as I know. Solicitors and accountants are being butchered by their clients anyhow. They do not understand why everything is not being wound up for them. The reason is all of this legislation, trying to understand what it is in the first place. It is all very well if you have a simple situation, but you do not have that very often. I would ask that the period be extended to one year and that there would be a year's freedom from interest. I know it is going to cost 18 per cent on something but it would ease the pressure enormously.

We had a splendid Second Reading debate here this morning on another finance Bill—the Corporation Tax Bill—in which we provided for the close company and that something was not to be treated as an expense but as a distribution. Now we are going to have use of property and the interest free loan to be taxed under section 31 of the Capital Acquisitions Tax Bill. I would like to know if the person is going to be paying income tax as well as capital acquisitions tax if he gets a loan free from somebody whose company it will be, under another section, deemed to be. One or other ought to apply—I do not mind which—but people should not be in the position of having to pay both of them.

The next point I have has been considered and I cannot be too hopeful about it. A difficulty is going to be that under this code, if a person puts money into a discretionary trust it is not a gift, if I understand it correctly. A gift starts coming out when the money is appointed by the trustee. You could very quickly reach that even if you were looking after your children, but if you were looking after your grandchild and if the interest which is required to maintain the child is to be treated as well as the capital from which it comes so that at the end of the day you have got, say, £15,000 with the fruit which grew out of the £15,000 all coming within the acquisition tax, you could move rather rapidly into these bands. I do not know whether it is possible to separate income payments from capital payments. The problem would disappear then. Where the successor is the spouse, if gifts are made to people in contemplation of marriage should such gifts not receive like treatment, or should they be treated as gifts to strangers?

I have illustrations to show how very beneficial these three Acts are for the great mass of ordinary small property owners, and I am quite satisfied that a lot of human situations are greatly helped by them. In that sense, though I have expressed criticisms here and there on some of them, overall it is an improvement on what was. Much injustice was done under what was, and it probably irritated many people that others were able to quite easily avoid the imposition of estate duty; the better off you were the less likelihood there was that you paid estate duty. Now if you are very well off things become a little bit more difficult.

I want to make one other point which is not particularly related to this Bill; it is a point I have made in relation to these Bills overall. The Minister could, between now and whenever he has a chance to think about it, realise that there are situations where the private non-trading company has its advantages, and this Bill taken in the context of the Capital Transfer Tax Bill is one which could be advantageous to the Irish Revenue, because if I understand the relieving provisions of a capital transfer tax, it is going to be unilateral relief. I can see the Minister giving money away under that, but if there is a private non-trading company holding UK securities, he will be getting capital acquisitions tax from the gift and there will be no relief provisions in relation to capital transfer tax which costs money. I just wanted to draw the Minister's attention to that.

Mr. Russell

Senator Lenihan, possibly unintentionally, indulged in some semantics himself in the course of his contribution earlier on. I should like to say quite categorically that if the Minister succeeds in getting no more from the new proposed capital taxes than he got under the old estate duties code, I will welcome the new measures, if for no other reason than that they bring in under capital tax legislation a fair and equitable system which was not applicable under the older codes. As the Minister said, under the old system, estate duty was paid on the value of the estate irrespective of the age, conditions or circumstances of the beneficiaries.

Under the inheritance section of this Bill, it is divided. If the donor divides his estate into five, six or ten different sections, each individual beneficiary will be entitled to a rate of tax applicable to his particular conditions. Nothing could possibly be fairer than that. If it does nothing else this new legislation certainly introduces a sense of fairness, taking into consideration all the possible circumstances of the beneficiaries to a deceased's estate. The gift section which Senator Lenihan and I welcome is fair and right. Under the old legislation it was possible, legally and properly, to provide that no tax was payable from generation to generation by keeping outside the limit of five years. That is changed now and, on the whole, the new system is better, fairer and more just and will be seen to be such.

I am sure the Minister, since this Bill was first introduced, received numerous applications and helpful or unhelpful suggestions, depending on how you look at it, as to how the Bill might be improved. With some temerity at this late stage I would like to mention just one or two points that occur to me as being worthy of consideration. I do not want to hold up this Bill. It is the desire of both Houses that this legislation, together with the other capital taxation legislation, be put into effect as soon as possible. The discussions of these three Bills have gone on long enough. It is time they were put into practice. If it is not possible at this stage to deal with the points I mention perhaps the Minister would consider having a look at the proposals before the Committee Stage.

First, I support Senator FitzGerald's appeal that private woodlands receive consideration under the terms of this Bill. He stated his case quite clearly and I do not want to repeat it.

It seems to me that even though they constitute, I understand, quite a small proportion of forestry in the country—around 15 or 20 per cent— they are in the unique position that during the life of a tree, which can be anything from 25 to 100 years, the ownership of the trees could change hands perhaps four or five times from generation to generation and each time a gift tax would have to be paid, whereas under the old code no payment for liability for estate duty would arise until the timber was finally sold. There is an injustice here and I hope the Minister will listen to the appeal put forward by Senator FitzGerald and supported by myself.

Another anomaly is the very generous threshhold included in the Bill, where the donor transfers his property of £150,000 to his wife or children. This is very substantially greater than transfers to any other relation. The Bill provides that in certain circumstances nephews and nieces may be treated as children of the donor. I suggest that an equally strong argument could be made for including in these categories, under certain circumstances, brothers, sisters and grandchildren. If the father leaves property or part of his property to his son in value not exceeding £150,000 there is no tax payable, but if the son should leave it to the father, the threshold drops from £150,000 to £15,000. There may be a very good reason for this. It is a possibility that may arise very seldom, but it is there. It seems to me there is a certain anomaly in it. Also the difference between the threshold of £150,000 and, say, £15,000 is far greater, ten times as much, as between those in the £15,000 category, relations, albeit brothers or sisters, and complete strangers. Somewhere in between there is room for an improvement in the threshold. As I said, I hope the Minister will consider that.

Under the present legislation there is provision for reduced valuation for estate duty purposes in regard to shares in Irish companies. As far as I know, that is not provided for in this Bill. A stronger argument could be made to encourage investment in Irish companies. It might be suggested that the 25 per cent difference between the rate of tax on gifts and inheritance is an adequate incentive to healthy persons to pass on their wealth. In other words, the difference might be greater to encourage people to transfer their property during their lives which, I think, is obviously the idea behind the discount of 25 per cent.

One other point, which is, of course brought up in connection with every Bill that has anything to do with taxation, wealth or property, is the question of inflation. Some provision should be made in this Bill to preserve the viability of the thresholds by making some provision for inflation which, as I said on an earlier Bill, we are going to have to live with for many a long year to come as far as I can see, but hopefully not at the recent current high rate. We and other European countries will have to live with the high rate of inflation. Some provision might be made for this in the Bill to preserve the thresholds, particularly the £150,000 threshold, which is very generous indeed. The other points I wanted to make have already been covered. I congratulate the Minister on bringing in the last of his triduum, as he described it, after many long months of toil and difficulties.

Minister for Finance (Mr. R. Ryan)

I am most grateful to the Seanad for the manner in which they have received this Bill. It is only part of a package which we have been debating at very great length. It appears to be the most acceptable part of the package. The overall reform of taxation has been greatly improved by discussion in both Houses of the Oireachtas and I would like to put that on the record. While we have available to us—by us I mean the Irish nation— a disinterested and highly capable army of experts in this field, both in the Revenue Commissioners and in the Department of Finance, to get the best good out of their very hard work and their undoubted dedication to the public interest, we need to have the leavening which we can get from the parliamentary contribution. I think the package when it is finally wrapped up, as I hope it will be in the not too distant future, will reflect all these very valuable inputs.

Senator Lenihan asked me not to engage in semantics. I am at one with him. I think he indulged in a fair share of it while he was speaking. But the reality of the situation is that at the end of our legislative programme 95 per cent of the people who would have remained liable to death duties had we not effected the reform will not be liable to death duties, to wealth tax or to capital gains tax.

Because of the massive relief which is given—and eaten bread is quickly forgotten—many people are forgetful of the fact that as recently as three years ago people dying could leave their beneficiaries liable to pay estate duty on estates valued at more than £10,000, that rates of from 4 to 55 per cent were applied and that rates of legacy duty also arose up to 20 per cent. Those were confiscatory rates of tax but they operated at levels of £200,000. The top levels operated at those rates. Admittedly there were certain reliefs but they were puny by any comparison with any international standards for widows and dependent children. That is a measure of the inequity which existed in the old system which I think I was very fair in describing as anachronistic. That is the mildest word I could have put on it. We regarded it, as we approached the last general election, as being cruel, extortionist, inefficient and inequitable. We got public backing for that viewpoint. When we said that we so regarded the old system we said also that we considered it should be replaced by a system of taxation which would ensure that people within the immediate family would not have to pay such duties and that wealthy people would be called upon to pay capital taxes by instalments throughout their lives. We have fulfilled our promise in the spirit, in the letter and also in the figure because the 95 per cent of people previously liable to any form of death duties are to be relieved and people who are called on to pay death duties in future will find that these will not be at as high a rate as they would previously have had to pay.

Senator FitzGerald and Senator Russell, too, said quite rightly that death duties were a form of taxation which was easily and legitimately avoidable. It has been said of death duties that they were a form of taxation paid only by persons who detested their relations more than they detested the Revenue Commissioners because people could easily anticipate the liability and, within the law, make arrangements to avoid payment of death duties. Indeed, I will go so far as to say that legal and financial advisers to families considered that they had an obligation to their clients to draw attention to liability for death duties which could be easily avoided. As time went on there was increasing avoidance of death duties. This was perfectly legitimate. The law permitted it. The Legislature had not moved to close up those loopholes and therefore the tax was becoming more and more arbitrary and because, as Senator Lenihan has been generous enough to acknowledge, he and his colleagues in Government were tardy in regard to reforming it, it was becoming more and more confiscatory.

That situation could not have been remedied by the simple adjustment of the thresholds of death duties and by the introduction of a gift tax. This would have brought in a system such as is now operating in Britain, and it will be noted that the amount of criticism that has been levied against our taxation proposals has been much less than has arisen across the water. It would certainly have involved here, in relation to inheritances and to gifts, a rate of capital transfer tax on the scale which is operative in Britain. As Senator FitzGerald pointed out, that rate is much higher and much more penal than is the rate under our tax code. Again, under such a system the tax would have been levied not as we are levying it, and properly levying it, on the amount of the gift received by the donee related to the relationship between the donor and the donee but rather to the value of the total estate which, again, was an anachronism.

To the person who is liable for tax the amount of wealth left by the donor is irrelevant. What is relevant is the amount received by the donee and the donee's particular circumstances. We do not in this legislation seek to look at the circumstances of the donee other than the relationship between the donee and the donor. It has been argued—for instance by the National Economic and Social Council and elsewhere, too—that we should in our acquisition tax look not merely to the amount of money received by a donee from a particular donor but to the amount of gifts received by the donee from anybody. That has relevance to the capacity of the donee to pay the tax. But it would involve a great deal of calculations, of policing and of administrative difficulties both for the taxpayer and for the Revenue Commissioners which I consider would not be warranted.

Senator Lenihan quoted from the Commission Report, 1960, which expressed a view against wealth tax and capital gains tax. But 1960 is not 1973 and certainly not 1976. The circumstances which existed in 1960 have changed radically in the meantime. Since 1960 in our society, which was generating more and more wealth and in which rendering capital gains tax free was becoming a cause of much scandal there was a clear need to consider the taxation of such elements of wealth which in themselves generated a capacity for income.

Mr. Lenihan

I was not talking about capital gains.

Mr. R. Ryan

The Senator was talking about wealth tax. I have made a note of it, too, because the 1960 report had referred to both. But again in 1960 the number of income tax payers in our society was around the 100,000 to 120,000 mark. By 1973 the number of income tax payers had increased to 750,000, although the number working in the country had in the meantime declined. Where very small incomes indeed were being tapped for tax there was clearly a social need to tax capital accumulations as a means of generating further income and wealth out of such capital accumulations. That is the ethos behind the Government's whole approach to this package of taxation proposals. The old system of death duties was somewhat like a sledge hammer thrown around by a man who is blindfolded and which fell indiscriminately on people if they were not wise enough to dodge out of the way. That is not a sensible way to administer a system of taxation. What we have introduced instead is a trimming scissors, very carefully applied whenever the hair gets too long, without drawing any blood. I think that is a proper way of describing the measure——

Mr. Lenihan

It is well put anyway.

Mr. R. Ryan

——and I hope Senator Lenihan will not regard it as semantics.

Senator FitzGerald raised the point about the need to recognise the illegitimate child in the same light as we have regard to the rights of the child born in lawful wedlock. I agree with him that our society ought to regard the illegitimate child as having equal rights with the child born in wedlock so far as succeeding to property is concerned. But it is a good principle of taxation law that it not be used to modify the social and moral attitudes of society.

As yet, our social laws have not recognised the equal rights of the illegitimate child to a child born in wedlock. I regret that this is so and I hope that before too long there will be a reform in this area. Let me just point out, in relation to taxation, that if we were to move in this area before there is a proper recognition of the need in other areas we could well have people who might not regard it as a shameful thing to recognise innumerable illegitimate children if by so doing they could deprive the Revenue of tax to which the Revenue would be legitimately entitled.

Mr. Alexis FitzGerald

Go away with you.

Mr. R. Ryan

I do not think it would bring a blush to many a face. They would be only too happy within the family to recognise certain people as their children if by so doing tax could be avoided. There would certainly be plenty of would-be beneficiaries who would not mind declaring themselves to be the illegitimate relations of donors if they could get the money from them.

Mr. Alexis FitzGerald

The Minister would be a grandiose tax avoider himself.

Mr. R. Ryan

I want to give this public assurance—it will be on the record of the House—that if and when our social laws move in the right direction and if I am Minister for Finance, I will ensure that the immediate subsequent Finance Bill will ensure that the taxation law reflects the general public disposition on this issue.

Senator FitzGerald is right to draw attention to the need to have certain concessions in respect of timber or what is popularly known as afforestation. The old estate duty code granted concessions on the lines which he indicated. I have given a number of concessions here and I brought in an amendment in the other House which gave the agricultural valuation concession in respect of timber not merely to what we call genuine farmers but to anybody who succeeded to a holding of timber. This means that for valuation purposes you take only half of the market value of a particular forest which would allow double its value, as it were, to pass without generating liability to tax.

While it is true that most hardwoods in this country are in private plantations it is a bit unreal to depict the situation as being one in which a forest is seeded today, planted tomorrow and no return is received for 60 years hence. In reality, as we know, the well-worked timber estate will not be planted at the one time, it will not mature at the one time, it will generate an annual income, it will be partly planted and partly cut down annually. It will be a long period. All these factors are taken into account in arriving at valuations. We have already given favourable treatment to timber holdings under the wealth tax code. The new concessions which have been given, taken by and large, and the general operation of the system, ensure that we will have no disincentive to afforestation under the new code any more than we had in the past.

Senator FitzGerald raised the question about normal and reasonable gifts which he said were very properly exempted from estate duty liability if the person represented could prove that a beneficiary had been in receipt of such gifts. There is, in fact, a similar let out in this Bill. Section 58 (2) provides the necessary relief. Senator FitzGerald also mentioned the question of the taxpayer running the risk of paying interest on unpaid tax if the tax were not paid within three months. If I understood him rightly he thought it was three months of death. That is not so. It will be three months from the date of ascertainment of the residue which would, of course, in most cases be long after the date of death.

Mr. Alexis FitzGerald

I completely misread that. It is the valuation date.

Mr. R. Ryan

Of course, at that stage when one would have ascertained the residue the probability would be that it would be on the winding up of the estate and, therefore, the beneficiary should be in a position to receive the gift and to discharge the tax without any undue difficulty at that time.

Senator FitzGerald queried whether income tax liability could arise in respect of an interest free loan. Of course, all we are doing in this Bill is dealing with gifts and no reasonable person can deny that an interest free loan is a very valuable gift indeed and is capable of having its value determined. It would be wrong to disregard the benefit which a donee would receive on getting such a gift. Certainly, liability to other taxes might arise but so be it. It would only arise if income was generated or was deemed to be generated by the person or other persons involved.

Senator Russell has come back to the frequently repeated plea that the legislation should make provision for inflation. The House will be aware that on many occasions I have spoken about the dangers of indexation in respect of inflation because if applied in one area it would have to be applied in others and it could simply fan the flames of inflation. The better thing to do is, of course, to find a cure, and to apply the cure, for inflation even though applying the cure may itself be a painful process.

That is one of the Government's top priorities at present. In so far as there is a need to adjust the thresholds—and there will be a need to adjust the thresholds in the light of all previous experience of mankind and certainly over the last 100 years—I think that Oireachtas Éireann is the proper body to decide on the adjustments of those thresholds in the light of experience. The annual Finance Bill presents an opportunity to have a look at the thresholds.

So far as wealth tax is concerned, we have indicated our intention to have a three-year review of the thresholds, because if you are going to have the thresholds reviewed you have at that time also to review valuations. We all need, the taxpayer, the holder of property, the Revenue Commissioners, the Department of Finance, all the advisers to people of property, some years' experience of the operation of these new taxes. They are very complex and extremely difficult to comprehend. Nobody knows at the moment what the precise results will be.

When I talk about the precise results I mean in relation to individual situations and to the several complex arrangements which can develop by the ordinary behaviour of human beings, on the one hand, and by the application of human intelligence, on the other. In the light of that experience I anticipate that we will be producing amendments to the legislation in the years which are not too far ahead. The generous thresholds which we have deliberately set in this legislation have been criticised by some people as unduly generous. We set them at this level for two reasons. First of all, because we had legitimately given an undertaking that we wanted to respect to relieve the widows and the immediate families of the tremendous confiscatory burden of death duties on the one hand which eroded the ability of many families to provide adequately for minor children.

We also wanted to set thresholds which would enable us to have a few years' experience of the operation of these new laws before making any changes. Hopefully, we have reached the limit of inflation in 1975. Certainly, there is a downturn in inflationary rates throughout the rest of the world. In 1975 we, too, having been on an upward escalator for several years found ourselves fortunately on a movement downwards and that is the way we intend to keep it. The fear people have about inflation might not be as relevant in the years ahead of us as it was in 1974 and 1975 when we introduced these Bills.

I totally repudiate with complete sincerity, and not for the purpose of making a political point, the suggestion Senator Lenihan repeated today that these capital taxation Bills in some way undermined investment confidence in Ireland. The interesting thing is that, while there has been a turn down in investment in Ireland in 1975, it was a lot less than it was in other countries which were not introducing such legislation. Several had such laws decades ago, and others have not yet introduced them. The fall off in investment in Ireland was simply as a result of the cyclical recession which the world was enduring.

I am absolutely confident that nothing could have been worse for our economy in 1974, 1975, and for several years hence, than to have postponed our capital taxation reforms because, the longer we postponed them, the greater was the fear of the unknown and the greater was the mischief the doubting Thomases could generate. Now that the die has been cast and people see what the law really means, now that they are, as Senator Alexis FitzGerald said, having experience of what the changes have actually meant to them, people are seeing that the horrific consequences which some people suggested have not materialised, but very great benefits have accrued to many.

I am quite certain that, in the long run, not only will these measures be regarded as equitable, which they certainly are, but they will also be seen as being incentives to the proper use and management of wealth which is a function of the State, to provide incentives for the proper use of wealth, to recognise the individual's right to and need of private property. These laws respect those fundamental rights while also ensuring that wealth is not left, as it has often been left in the past in Ireland, in an inactive form which did not confer as much benefit on the holders of the wealth as it might have, and deprived the community of the return which could accrue to the community if and when wealth is usefully applied.

Mr. Alexis FitzGerald

Would it be possible to consider making that amendment which would put the grandchild at least in the same category as a nephew or niece who has been working on a farm or in a business? It seems to be an extraordinary situation. Somebody could be 25 or 30 years of age and a nephew or niece could be preferred on the transfer of the business.

Mr. R. Ryan

I am glad Senator FitzGerald reminded me. Sometimes he almost makes me regret having moved an amendment to cater for the nephew and niece in this particular way. It shows the dangers of moving the frontiers of exceptions and concesssions. Once you move an inch, you are asked to move a mile. I will look at it.

Mr. Alexis FitzGerald

It would be an extraordinary social anomaly.

Mr. R. Ryan

There is that danger, of course. You can always quote anomalies. There could be cases where a grandchild might be in that position. A minor child or a minor grandchild is, of course, in the preferred position. Many a child began to work on a farm before he was 21 years of age.

Mr. Lenihan

From a social point of view, grandchildren tend to be nearer and more intimate than nieces and nephews.

Mr. R. Ryan

I am sure the House would be with me in not wanting to extend the frontiers of exemptions to such a level as would make our new code unworkable nor do we want to keep them at such a conservative level that they would be inequitable.

Question put and agreed to.

Committee Stage ordered for Wednesday, 24th March, 1976.

The Seanad adjourned at 4 p.m. until 3 p.m. on Tuesday, 23rd March, 1976.